10-Q - USCB - Equibles

uscb-20220930p1i0

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

September 30, 2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____to_____

Commission File Number:

001-41196

USCB Financial Holdings, Inc.

(Exact name of registrant as specified in its charter)

Florida

87-4070846

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2301 N.W. 87th Avenue

Miami

33172

(Address of principal executive offices) (zip code)

Registrant’s telephone number, including area code:

(

305

)

715-5200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, $1.00 par value per share

USCB

The Nasdaq Stock Market LLC

Indicate by check

mark whether the

registrant (1) has

filed all reports

required to be

filed by Section

13 or 15(d)

of the Securities

Exchange

Act of 1934 during the preceding 12 months

(or for such shorter period that the registrant was

required to file such reports), and (2) has

been subject to such filing requirements for the past 90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data

File required to be submitted pursuant

to Rule 405

of Regulation S-T

(§232.405 of this

chapter) during the

preceding 12 months

(or for such

shorter period that

the registrant

was required to submit such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting

company

emerging

growth

company.

See

the

definitions

“large

accelerated

filer,”

“accelerated

filer,”

“non-accelerated

filer,”

“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

If an

emerging growth

company, indicate by

check mark

if the

registrant has elected

not to

use the

extended transition

period for

complying

with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes

☐

☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of November 1, 2022, the registrant had

20,000,753

shares of Class

common stock outstanding.

uscb-20220930p2i0

FORM 10-Q

September 30, 2022

TABLE OF CONTENTS

PART I

Item 1.

Financial Statements

Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 (Unaudited)

Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021

(Unaudited)

Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September

30, 2022 and 2021 (Unaudited)

Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September

30, 2022 and 2021 (Unaudited)

Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (Unaudited)

Notes to the Consolidated Financial Statements (Unaudited)

Item 2.

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

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART II

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibit Index

Signatures

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

PART I

Item 1.

Financial Statements

USCB FINANCIAL HOLDINGS, INC.

Consolidated Balance Sheets - Unaudited

(Dollars in thousands,

except share data)

September 30, 2022

December 31, 2021

ASSETS:

Cash and due from banks

5,975

6,477

Interest-bearing deposits in banks

67,351

39,751

Total cash and cash equivalents

73,326

46,228

Investment securities held to maturity (fair value $

159,739

and $

120,157

, respectively)

178,865

122,658

Investment securities available for sale, at fair value

248,571

401,542

Federal Home Loan Bank stock, at cost

1,902

2,100

Loans held for investment, net of allowance of

16,604

and $

15,057

, respectively

1,414,909

1,175,024

Accrued interest receivable

6,568

5,975

Premises and equipment, net

4,923

5,278

Bank owned life insurance

42,514

41,720

Deferred tax assets, net

43,928

34,929

Lease right-of-use asset

13,484

14,185

Other assets

8,463

4,300

Total assets

2,037,453

1,853,939

LIABILITIES:

Deposits:

Demand deposits

662,808

$605,425

Money market and savings accounts

851,727

703,856

Interest-bearing checking

63,721

55,878

Time deposits

218,386

225,220

Total deposits

1,796,642

1,590,379

Federal Home Loan Bank advances

26,000

36,000

Lease liability

13,484

14,185

Accrued interest and other liabilities

23,910

9,478

Total liabilities

1,860,036

1,650,042

Commitments and contingencies (See Notes 5

and 10)

STOCKHOLDERS' EQUITY:

Preferred stock - Class C; $

1.00

par value; $

1,000

per share liquidation preference;

52,748

authorized;

and

issued and outstanding as of September 30, 2022

and December 31, 2021

Preferred stock - Class D; $

1.00

par value; $

5.00

per share liquidation preference;

12,309,480

authorized;

and

issued and outstanding as of September 30, 2022

and December 31, 2021

Preferred stock - Class E; $

1.00

par value; $

1,000

per share liquidation preference;

3,185,024

authorized;

and

issued and outstanding as of September 30, 2022

and December 31, 2021

Common stock - Class A Voting; $

1.00

par value;

45,000,000

shares authorized;

20,000,753

and

19,991,753

issued and outstanding as of September 30, 2022

and December 31, 2021

20,001

19,992

Common stock - Class B Non-voting; $

1.00

par value;

8,000,000

shares authorized;

and

issued and

outstanding as of September 30, 2022 and

December 31, 2021

Additional paid-in capital on common stock

311,156

310,666

Accumulated deficit

(108,538)

(124,245)

Accumulated other comprehensive loss

(45,202)

(2,516)

Total stockholders' equity

177,417

203,897

Total liabilities and stockholders' equity

2,037,453

1,853,939

The accompanying notes are an integral part of

these unaudited consolidated financial statements.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

Consolidated Statements of Operations - Unaudited

(Dollars in thousands,

except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Interest income:

Loans, including fees

15,954

12,538

42,989

35,944

Investment securities

2,201

1,858

7,040

5,670

Interest-bearing deposits in financial institutions

322

474

Total interest income

18,477

14,434

50,503

41,691

Interest expense:

Interest-bearing checking

Money market and savings accounts

1,141

501

2,307

1,572

Time deposits

363

306

893

1,239

Federal Home Loan Bank advances

180

140

456

415

Total interest expense

1,703

963

3,708

3,271

Net interest income before provision for

credit losses

16,774

13,471

46,795

38,420

Provision for credit losses

910

1,615

(160)

Net interest income after provision for

credit losses

15,864

13,471

45,180

38,580

Non-interest income:

Service fees

934

856

2,917

2,648

(Loss) gain on sale of securities available for

sale, net

(558)

(70)

(540)

179

Gain on sale of loans held for sale, net

330

532

686

1,519

Loan settlement

2,500

161

2,500

Other non-interest income

1,083

399

2,127

1,208

Total non-interest income

1,789

4,217

5,351

8,054

Non-interest expense:

Salaries and employee benefits

6,075

5,313

17,863

15,804

Occupancy

1,281

1,192

3,802

3,990

Regulatory assessment and fees

269

317

708

690

Consulting and legal fees

604

357

1,519

915

Network and information technology services

488

358

1,323

1,198

Other operating expense

1,415

1,470

4,080

3,761

Total non-interest expense

10,132

9,007

29,295

26,358

Income before income tax expense

7,521

8,681

21,236

20,276

Income tax expense

1,963

2,088

5,529

4,849

Net income

5,558

6,593

15,707

15,427

Less: Preferred stock dividend

542

2,077

Less: Exchange and redemption of preferred shares

89,585

Net income (loss) available to common stockholders

5,558

(83,534)

15,707

(76,235)

Per share information:

(1)

Class A common stock

Net income (loss) per share, basic

0.28

(5.11)

0.79

(8.57)

Net income (loss) per share, diluted

0.28

(5.11)

0.78

(8.57)

Class B common stock

Net loss per share, basic

(1.02)

(1.71)

Net loss per share, diluted

(1.02)

(1.71)

(1)

For further details on the allocation of net

income available to common stockholders and per

share information, see Note 9 "Earnings per Share".

The accompanying notes are an integral part of

these unaudited consolidated financial statements.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

Consolidated Statements of Comprehensive Income

(Loss) - Unaudited

(Dollars in thousands)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2022

2021

2022

2021

Net income

5,558

6,593

15,707

15,427

Other comprehensive income (loss):

Unrealized gain (loss) on investment securities

(11,679)

1,210

(57,577)

(4,627)

Amortization of net unrealized gains on securities

transferred from

available-for-sale to held-to-maturity

(52)

(177)

Reclassification adjustment for loss (gain) included in

net income

558

540

(179)

Tax effect

2,832

(324)

14,528

1,167

Total other comprehensive income (loss), net of tax

(8,341)

999

(42,686)

(3,596)

Total comprehensive (loss) income

(2,783)

7,592

(26,979)

11,831

The accompanying notes are an integral part of

these unaudited consolidated financial statements.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

Consolidated Statements of Changes in Stockholders’

Equity - Unaudited

(Dollars in thousands,

except per share data)

Preferred Stock

Common Stock

Additional Paid-in

Capital on

Common Stock

Accumulated

Deficit

Accumulated Other

Comprehensive

Income (Loss)

Par Value

Total

Stockholders'

Equity

Balance at July 1, 2022

20,000,753

20,001

311,024

(114,096)

(36,861)

180,068

Net income

5,558

Other comprehensive loss

(8,341)

Stock-based compensation

132

Balance at September 30, 2022

20,000,753

20,001

311,156

(108,538)

(45,202)

177,417

Balance at July 1, 2021

12,343,379

24,616

10,010,521

10,010

177,852

(46,362)

186

166,302

Net income

6,593

Other comprehensive income

999

Dividends - preferred stock

(542)

Issuance of Class A common stock,

net of offering

costs of $

6,048

4,600,000

4,600

35,352

39,952

Exchange of preferred sock

(11,109,025)

(22,154)

10,278,072

10,279

92,503

(80,628)

Redemption of preferred stock

(1,234,354)

(2,462)

(8,958)

(11,420)

Stock-based compensation

Balance at September 30, 2021

24,888,593

24,889

305,741

(129,897)

1,185

201,918

Preferred Stock

Common Stock

Additional Paid-

in Capital on

Common Stock

Accumulated

Deficit

Accumulated

Other

Comprehensive

Income (Loss)

Par Value

Total

Stockholders'

Equity

Balance at January 1, 2022

19,991,753

19,992

310,666

(124,245)

(2,516)

203,897

Net income

15,707

Other comprehensive loss

(42,686)

Exercise of stock options

9,000

102

Stock-based compensation

397

Balance at September 30, 2022

20,000,753

20,001

311,156

(108,538)

(45,202)

177,417

Balance at January 1, 2021

12,350,879

32,077

25,568,147

25,568

162,197

(53,622)

4,781

171,001

Reverse stock split 1 for 5 Common A

(15,557,626)

(15,558)

15,558

Adjusted balance at January 1, 2021

12,350,879

32,077

10,010,521

10,010

177,755

(53,622)

4,781

171,001

Net income

15,427

Other comprehensive income

(3,596)

Dividends - preferred stock

(2,077)

Issuance of Class A common stock,

net of offering

costs of $

6,048

4,600,000

4,600

35,352

39,952

Exchange of preferred sock

(11,109,025)

(22,154)

10,278,072

10,279

92,503

(80,628)

Redemption of preferred stock

(1,241,854)

(9,923)

(8,997)

(18,920)

Stock-based compensation

131

Balance at September 30, 2021

24,888,593

24,889

305,741

(129,897)

1,185

201,918

The accompanying notes are an integral

part of these unaudited consolidated financial

statements.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

Consolidated Statements of Cash Flows - Unaudited

(Dollars in thousands)

Nine Months Ended September 30,

2022

2021

Cash flows from operating activities:

Net income

15,707

15,427

Adjustments to reconcile net income

to net cash provided by operating activities:

Provision for credit losses

1,615

(160)

Depreciation and amortization

530

844

Amortization of premiums on securities, net

412

402

Accretion of deferred loan fees, net

(1,364)

(2,893)

Stock-based compensation

397

131

Loss (gain) on sale of available for sale securities

540

(179)

Gain on sale of loans held for sale

(686)

(1,519)

Increase in cash surrender value of bank owned

life insurance

(794)

(499)

Decrease in deferred tax assets

5,529

4,849

Net change in operating assets and liabilities:

Accrued interest receivable

(593)

(530)

Other assets

(4,163)

(2,724)

Accrued interest and other liabilities

14,432

10,499

Net cash provided by operating activities

31,562

23,648

Cash flows from investing activities:

Purchase of investment securities held

to maturity

(2,432)

(31,919)

Proceeds from maturities and pay-downs of investment

securities held to maturity

9,689

645

Purchase of investment securities available

for sale

(49,808)

(158,333)

Proceeds from maturities and pay-downs of investment

securities available for sale

35,502

41,966

Proceeds from sales of investment securities

available for sale

45,647

48,939

Net increase in loans held for investment

(177,916)

(55,451)

Purchase of loans held for investment

(70,175)

(93,677)

Additions to premises and equipment

(175)

(314)

Proceeds from the sale of loans held for sale

8,641

15,606

Proceeds from the redemption of Federal

Home Loan Bank stock

2,250

611

Purchase of Federal Home Loan Bank stock

(2,052)

Net cash used in investment activities

(200,829)

(231,927)

Cash flows from financing activities:

Proceeds from issuance of Class A common

stock, net

102

39,952

Dividends paid

(2,077)

Redemption of Preferred stock Class C

(5,275)

Redemption of Preferred stock Class D

(6,145)

Redemption of Preferred stock Class E

(7,500)

Net increase in deposits

206,263

211,187

Proceeds from Federal Home Loan Bank advances

60,000

Repayments on Federal Home Loan Bank advances

(70,000)

Net cash provided by financing activities

196,365

230,142

Net increase in cash and cash equivalents

27,098

21,863

Cash and cash equivalents at beginning

of period

46,228

47,734

Cash and cash equivalents at end of period

73,326

69,597

Supplemental disclosure of cash flow

information:

Interest paid

3,675

3,329

Supplemental schedule of non-cash investing

and financing activities:

Transfer of loans held for investment to loans held

for sale

7,955

14,087

Transfer of investment securities from available-for-sale

to held-to-maturity

74,444

68,667

Transfer of premises and equipment to assets held

for sale

652

Lease liability arising from obtaining right-of-use

assets

1,550

666

Exchange of Preferred stock Class C for

Class A common stock

47,473

Exchange of Preferred stock Class D for

Class A common stock

55,308

The accompanying notes are an integral

part of these unaudited consolidated financial

statements.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES

Overview

USCB Financial Holdings, Inc., a

Florida corporation incorporated

in 2021, is a bank holding

company with one wholly

owned subsidiary,

U.S. Century Bank (the

“Bank”), together referred to

as “the Company”. The Bank,

established in 2002,

is a Florida

state-chartered, non-member financial institution providing financial

services through its banking

centers located

in South Florida.

During the year ended December 31,

2021, the Bank completed an initial

public offering (“IPO”) and

its Class A voting

common shares began

trading on the

Nasdaq Stock

Market in July

In December

2021, the Bank

exchanged all the

outstanding

Class

non-voting

common

stock

for

Class

voting

common

stock

one

five

exchange. Shortly thereafter,

the Company acquired all issued and

outstanding shares of Class A voting

common stock of

the Bank

in connection with

the reorganization

of the

Bank into

the holding company

form of

structure.

For further information

on the IPO and the exchange and redemption of shares

see Note 8 “Stockholders’ Equity”.

The Company’s

Consolidated Financial

Statements consist

of USCB

Financial Holdings,

Inc. and

U.S. Century

Bank

as of

September 30, 2022 and

December 31, 2021 and for

the three and

nine months ended

September 30, 2022 compared

to only U.S. Century Bank as of September 30, 2021

and for the three and nine months ended September

30, 2021.

Basis of Presentation

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

Form 10-Q and

do not include all

the information and

footnotes required by U.S.

generally accepted accounting

principles

(“U.S.

GAAP”)

for

complete

financial

statements.

All

adjustments

consisting

normally

recurring

accruals

that,

the

opinion

management,

are

necessary

for

fair

presentation

the

financial

position

and

results

operations

for

the

periods presented

have been

included. These

unaudited consolidated

financial statements

should be

read in

conjunction

with

the

Company’s

consolidated

financial

statements

and

notes

appearing

in the

Company’s

Annual

Report

Form 10-K for the year ended December 31, 2021.

Principles of Consolidation

The

Company

consolidates

entities

which

has

controlling

financial

interest.

Intercompany

transactions

and

balances are eliminated in consolidation.

Use of Estimates

To prepare

financial statements in conformity with U.S. GAAP,

management makes estimates and assumptions based

on available

information. These

estimates and

assumptions

affect

the amounts

reported in

the financial

statements. The

most significant

estimates impacting

the Company’s

consolidated financial

statements are

the allowance

for credit

losses

and income taxes.

Reclassifications

Certain

amounts

the

Consolidated

Financial

Statements

have

been

reclassified

conform

the

current

presentation. Reclassifications had no impact on the net income

or stockholders’ equity of the Company.

Recently Issued Accounting Standards

Issued and Not Yet Adopted

Measurement of Credit Losses on Financial Instruments

In June

2016, the FASB issued

ASU 2016-13, Financial

Instruments - Credit

Losses (Topic 326); Measurement of

Credit

Losses on Financial Instruments. This accounting standard update (“ASU” or “Update”)

on accounting for current expected

credit

losses

financial

instruments

(“CECL”)

will

replace

the

current

probable

incurred

loss

impairment

methodology

under U.S. GAAP

with a methodology

that reflects the

expected credit losses.

The Update is

intended to provide

financial

statement

users

with

decision-useful

information

about

expected

credit

losses.

This

Update

applicable

the

Company

a modified

retrospective

basis

for

interim

and

annual

periods

fiscal

years

beginning

after

December 15,

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Early adoption is permitted for fiscal years beginning after December 15, 2019, including interim periods within those

fiscal

years.

The

Company

expects

adopt

this

ASU

January 1,

2023.

The

impact

adoption

the

Company’s

financial statements

will depend on

the composition

of the loan

and investment

securities portfolio

as of January

1, 2023,

general economic conditions,

and other factors that

are not known at

this time. Although

management is in the

process of

evaluating the impact of

adoption of this ASU on

its consolidated financial statements,

management does believe that

this

ASU will lead to significant changes

in accounting policies and disclosures

related to, and the methods used

in estimating,

the

ACL.

The

Company

has

developed

detailed

implementation

plan

through

the

date

adoption

that

includes

the

implementation of a software solution to assist

with the CECL implementation process and is developing

measurements in

parallel

with

the

current

methodology.

date,

the

Company

has

initiated

policy

discussion

with

key

stakeholders,

completed a data

gap analysis

and retained the

services of a

third-party consulting

firm to perform

an independent model

validation prior to adoption.

Reference Rate Reform

March

2020,

the

FASB

issued

ASU

2020-04,

Reference

Rate

Reform

(Topic

848),

Facilitation

the

Effects

Reference Rate Reform

on Financial Reporting.

In January 2021,

the FASB

clarified the scope

of this guidance

with ASU

2021-01 which provides optional

guidance for a limited

period of time to

ease the burden in

accounting for (or

recognizing

the effects of)

reference rate reform on

financial reporting. This ASU

is effective from March 12,

2020 through December 31,

Company is

evaluating the

impact of

this ASU

and has

not yet

determined whether

LIBOR transition

and this

ASU will have a material effect on our business operations

and consolidated financial statements.

Trouble Debt Restructuring

March

2022,

the

FASB

issued

ASU

2022-02,

Financial

Instruments—Credit

Losses

(Topic

326):

Troubled

Debt

Restructurings and Vintage Disclosures.

This ASU eliminates the recognition and measurement guidance on troubled debt

restructurings for

creditors and

aligns it

with existing

guidance to

determine whether

a loan

modification results

in a

new

loan

continuation

existing

loan.

The

new

guidance

also

requires

enhanced

disclosures

about

certain

loan

modifications by

creditors

when a

borrower is

experiencing financial

difficulty.

This ASU

is effective

in periods

beginning

after

December

15,

2022,

using

either

prospective

modified

retrospective

transition

approach.

Early

adoption

permitted for entities that have already adopted CECL.

The Company is in the process of reviewing this

ASU, as part of its

CECL implementation efforts,

to determine

whether it would

have a material

impact on

the Company’s consolidated financial

statements when adopted.

INVESTMENT SECURITIES

The following

tables present

a summary

of the amortized

cost, unrealized

or unrecognized

gains and

losses,

and fair

value of investment securities at the dates indicated (in

thousands):

September 30, 2022

Available-for-sale:

Amortized

Cost

Unrealized

Gains

Unrealized

Losses

Fair Value

U.S. Government Agency

10,400

(1,372)

9,028

Collateralized mortgage obligations

121,760

(21,712)

100,048

Mortgage-backed securities - residential

92,649

(15,942)

76,707

Mortgage-backed securities - commercial

30,818

(3,883)

26,935

Municipal securities

25,104

(6,475)

18,629

Bank subordinated debt securities

14,503

(969)

13,562

Corporate bonds

4,039

(377)

3,662

299,273

(50,730)

248,571

Held-to-maturity:

U.S. Government Agency

45,243

(5,804)

39,439

Collateralized mortgage obligations

70,424

(6,773)

63,651

Mortgage-backed securities - residential

40,574

(4,844)

35,730

Mortgage-backed securities - commercial

11,483

(516)

10,967

Corporate bonds

11,141

(1,189)

9,952

178,865

(19,126)

159,739

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

December 31, 2021

Available-for-sale:

Amortized

Cost

Unrealized

Gains

Unrealized

Losses

Fair Value

U.S. Government Agency

10,564

(50)

10,520

Collateralized mortgage obligations

160,506

(3,699)

156,829

Mortgage-backed securities - residential

120,643

228

(2,029)

118,842

Mortgage-backed securities - commercial

49,905

820

(608)

50,117

Municipal securities

25,164

(894)

24,276

Bank subordinated debt securities

27,003

1,418

(13)

28,408

Corporate bonds

12,068

482

12,550

405,853

2,982

(7,293)

401,542

Held-to-maturity:

U.S. Government Agency

34,505

(615)

33,904

Collateralized mortgage obligations

44,820

(1,021)

43,799

Mortgage-backed securities - residential

26,920

(568)

26,352

Mortgage-backed securities - commercial

3,103

(90)

3,013

Corporate bonds

13,310

(221)

13,089

122,658

(2,515)

120,157

During the

quarter ended

September 30, 2022

and year

ended December 31,

2021, the

Company transferred,

at fair

value, $

63.8

million and $

68.7

million, respectively, of securities from available-for-sale (“AFS”) to held-to-maturity (“HTM”).

The

net

unrealized

losses

10.6

million

and

net

unrealized

gains

1.1

million,

respectively,

remained

accumulated

other

comprehensive

income

(“AOCI”)

and

are

being

amortized

over

the

remaining

life

the

transferred

securities.

gains or losses were recognized to income at the transfer

date.

Gains and losses on

the sale of securities are

recorded on the trade date

and are determined on a

specific identification

basis. The following table presents the proceeds, realized

gross gains and realized gross losses on sales and

calls of AFS

debt securities for the three and nine months ended September

30, 2022 and 2021 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Available-for-sale:

2022

2021

2022

2021

Proceeds from sale and call of securities

13,809

5,674

45,647

48,939

Gross gains

218

510

Gross losses

(560)

(142)

(758)

(331)

Net realized gain (loss)

(558)

(70)

(540)

179

The amortized

cost

and

fair

value of

investment

securities,

by contractual

maturity,

are shown

below

as of

the date

indicated (in thousands).

Actual maturities may

differ from contractual

maturities because borrowers

may have the right

call or prepay

obligations with or

without call or

prepayment penalties. Securities not

due at a

single maturity date are

shown

separately.

Available-for-sale

Held-to-maturity

September 30, 2022:

Amortized

Cost

Fair Value

Amortized

Cost

Fair Value

Due within one year

1,522

1,472

Due after one year through five years

4,039

3,662

9,619

8,480

Due after five years through ten years

15,503

14,362

Due after ten years

24,104

17,829

U.S. Government Agency

10,400

9,028

45,243

39,439

Collateralized mortgage obligations

121,760

100,048

70,424

63,651

Mortgage-backed securities - residential

92,649

76,707

40,574

35,730

Mortgage-backed securities - commercial

30,818

26,935

11,483

10,967

299,273

248,571

178,865

159,739

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

At September 30,

2022, there

were

securities held

in the

portfolio from

any one

issuer,

in an

amount greater

than

10% of total stockholders’

equity other than the United States Government and

Government Agencies. All the collateralized

mortgage

obligations

and

mortgage-backed

securities

are

issued

United

States

category

and

length of

time that

those

individual securities

have been

in a

continuous

loss position,

are presented

as of

the following

dates (in thousands):

September 30, 2022

Less than 12 months

12 months or more

Total

Fair Value

Unrealized

Losses

Fair Value

Unrealized

Losses

Fair Value

Unrealized

Losses

U.S. Government Agency

27,684

(3,810)

20,784

(4,726)

48,468

(8,536)

Collateralized mortgage obligations

58,660

(9,750)

105,038

(23,488)

163,698

(33,238)

Mortgage-backed securities - residential

38,911

(6,510)

73,524

(17,019)

112,435

(23,529)

Mortgage-backed securities - commercial

21,508

(2,715)

16,395

(3,194)

37,903

(5,909)

Municipal securities

800

(200)

17,829

(6,275)

18,629

(6,475)

Bank subordinated debt securities

12,533

(970)

12,533

(970)

Corporate bonds

13,614

(1,045)

13,614

(1,045)

173,710

(25,000)

233,570

(54,702)

407,280

(79,702)

December 31, 2021

Less than 12 months

12 months or more

Total

Fair Value

Unrealized

Losses

Fair Value

Unrealized

Losses

Fair Value

Unrealized

Losses

U.S. Government Agency

25,951

(254)

15,477

(516)

41,428

(770)

Collateralized mortgage obligations

155,668

(3,223)

38,459

(1,497)

194,127

(4,720)

Mortgage-backed securities - residential

88,772

(1,178)

37,373

(1,274)

126,145

(2,452)

Mortgage-backed securities - commercial

25,289

(318)

7,507

(309)

32,796

(627)

Municipal securities

11,292

(395)

11,978

(499)

23,270

(894)

Bank subordinated debt securities

4,487

(13)

4,487

(13)

311,459

(5,381)

110,794

(4,095)

422,253

(9,476)

As of

September 30,

2022,

the unrealized

losses

associated

with

116.2

million

of investment

securities

transferred

from

the

AFS

portfolio

the

HTM

portfolio

represent

unrealized

losses

since

the

date

purchase,

independent

the

impact associated with changes in the cost basis of the

securities upon transfer between portfolios.

The Company performs a review

of the investments that have

an unrealized loss to determine

whether there have been

any changes in the

economic circumstance of the security

issuer to indicate that

the unrealized loss is

impaired on an other-

than-temporary

(“OTTI”) basis. Management

considers several factors in

their analysis including

(i) the severity

and duration

of the impairment,

(ii) the

credit rating

of the

security including

any downgrade,

(iii) the

intent to

sell the security,

or if

it is

more likely than

not that it

will be required

to sell the

security before recovery,

(iv) whether

there have been

any payment

defaults and (v) the underlying guarantor of the securities.

The Company does not consider these

investments to be OTTI as the

decline in market value is attributable

to changes

in market

interest rates

and not

credit quality,

and because

the Company

does not

intend to

sell the

investments before

recovery of

its amortized

cost basis,

which may

be at

maturity,

and it is

more likely than

not that the

Company will

not be

required to sell the securities before maturity.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Pledged Securities

The Company

maintains a

master repurchase

agreement with

a public

banking institution

for up

to $

20.0

million fully

guaranteed with investment

securities upon withdrawal.

Any amounts borrowed

would be at a

variable interest rate

based

on prevailing rates

at the time

funding is

requested. As

of September 30,

2022, the

Company did

t have

any securities

pledged under this agreement.

The Company is a Qualified

Public Depositor (“QPD”) with

the State of Florida. As

a QPD, the Company has

the legal

authority to maintain public deposits from cities, municipalities, and

the State of Florida. These public deposits are secured

by securities

pledged to

the State

of Florida

at a

ratio of

% of

the outstanding

uninsured deposits.

The Company

must

also maintain a minimum amount of pledged securities to be

in the public funds program.

As of September 30,

2022, the Company

had a total of

141.7

million in deposits

under the public funds

program and

pledged

the

State

Florida

for

these

public

funds

were

seventeen

corporate

bonds

with

aggregate

fair

value

39.1

million.

As of

December 31,

2021, the

Company had

a total

of $

37.3

million in

deposits under

the public

funds program

and

pledged

the

State

Florida

for

these

public

funds

were

eleven

corporate

bonds

with

aggregate

fair

value

20.4

million.

LOANS

The following table is a summary of the distribution of loans

held for investment by type (in thousands):

September 30, 2022

December 31, 2021

Total

Percent of

Total

Percent of

Total

Residential Real Estate

186,551

13.0

201,359

16.9

Commercial Real Estate

928,531

64.9

704,988

59.2

Commercial and Industrial

121,145

8.5

146,592

12.3

Foreign Banks

94,450

6.6

59,491

5.0

Consumer and Other

100,845

7.0

79,229

6.6

Total

gross loans

1,431,522

100.0

1,191,659

100.0

Less: Deferred fees (cost)

1,578

Total

loans net of deferred fees (cost)

1,431,513

1,190,081

Less: Allowance for credit losses

16,604

15,057

Total

net loans

1,414,909

1,175,024

At September 30,

2022 and

December 31, 2021,

the Company

had $

253.9

million and $

185.1

million respectively,

commercial

real estate and residential

mortgage loans pledged as

collateral for lines of

credit with the

FHLB and the

Federal

Reserve Bank of Atlanta.

The Company was a participant

in the Small Business

Administration’s (“SBA”) Paycheck

Protection Program (“PPP”)

loans. These

loans were

designed to

provide a

direct incentive

for small

businesses to

keep their

workers on

payroll and

the funds had to be used towards payroll cost, mortgage interest, rent, utilities and other costs related to COVID-19. These

loans are forgivable under specific criteria as determined by the SBA.

The Company had PPP loans totaling $

1.4

million at

September 30, 2022

and $

42.4

million at

December 31, 2021,

which are

categorized as

commercial and

industrial loans.

These PPP loans had deferred loan fees of $

thousand at September 30, 2022 and $

1.5

million at December 31, 2021.

The Company

recognized $

1.6

million and

3.5

million in

PPP loan

fees and

interest income

during the

nine months

ended September 30, 2022

and 2021, respectively,

which is reported

under loans, including

fees, within the

Consolidated

Statements of Operations.

The

Company

segments

the

portfolio

pools

grouping

loans

that

similar

risk

characteristics

and

employing

collateral type

and lien

position to

group loans

according to

risk. The

Company determines

historical

loss rates

for each

loan

pool

based

its

own

loss

experience.

estimating

credit

losses,

the

Company

also

considers

qualitative

and

environmental factors that may cause estimated credit losses

for the loan portfolio to differ from historical

losses.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Changes in

the allowance

for credit

losses for

the three

and nine

months ended

September 30, 2022

and 2021

were

as follows (in thousands):

Residential

Real Estate

Commercial

Real Estate

Commercial

and Industrial

Foreign

Banks

Consumer

and Other

Total

Three Months Ended September 30, 2022

Beginning balance

2,366

9,290

2,671

651

808

15,786

Provision for credit losses

(1,009)

695

1,126

910

Recoveries

Charge-offs

(88)

(5)

(93)

Ending Balance

1,358

9,985

3,709

725

827

16,604

Nine Months Ended September 30, 2022

Beginning balance

2,498

8,758

2,775

457

569

15,057

Provision for credit losses

(1,157)

1,227

1,011

268

266

1,615

Recoveries

Charge-offs

(16)

(88)

(11)

(115)

Ending Balance

1,358

9,985

3,709

725

827

16,604

Residential

Real Estate

Commercial

Real Estate

Commercial

and Industrial

Foreign

Banks

Consumer

and Other

Total

Three Months Ended September 30, 2021

Beginning balance

2,540

8,752

2,467

554

535

14,848

Provision for credit losses

(787)

719

277

(29)

(180)

Recoveries

Charge-offs

(2)

Ending Balance

1,801

9,471

2,747

525

356

14,900

Nine Months Ended September 30, 2021

Beginning balance

3,408

9,453

1,689

348

188

15,086

Provision for credit losses

(1,434)

904

177

175

(160)

Recoveries

154

215

Charge-offs

(229)

(12)

(241)

Ending Balance

1,801

9,471

2,747

525

356

14,900

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Allowance for

credit losses

and the

outstanding balances

in the

specified

loan categories

as of

September 30,

2022

and December 31, 2021 are as follows (in thousands):

Residential

Real Estate

Commercial

Real Estate

Commercial

and Industrial

Foreign

Banks

Consumer

and Other

Total

September 30, 2022:

Allowance for credit losses:

Individually evaluated for impairment

160

101

309

Collectively evaluated for impairment

1,198

9,985

3,661

725

726

16,295

Balances, end of period

1,358

9,985

3,709

725

827

16,604

Loans:

Individually evaluated for impairment

7,257

586

203

8,138

Collectively evaluated for impairment

179,294

927,945

121,053

94,450

100,642

1,423,384

Balances, end of period

186,551

928,531

121,145

94,450

100,845

1,431,522

December 31, 2021:

Allowance for credit losses:

Individually evaluated for impairment

178

111

360

Collectively evaluated for impairment

2,320

8,758

2,704

457

458

14,697

Balances, end of period

2,498

8,758

2,775

457

569

15,057

Loans:

Individually evaluated for impairment

9,006

696

141

224

10,067

Collectively evaluated for impairment

192,353

704,292

146,451

59,491

79,005

1,181,592

Balances, end of period

201,359

704,988

146,592

59,491

79,229

1,191,659

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Credit Quality Indicators

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

loan agreement based

on relevant information

which may include:

current financial information

on the borrower,

historical

payment

experience,

credit

documentation

and

other

current

economic

trends.

Internal

credit

risk

grades

are

evaluated

periodically.

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

Pass

– Loans indicate different levels of satisfactory

financial condition and performance.

Special Mention

– Loans classified as special mention have a potential weakness

that deserves management’s

close attention. If left uncorrected, these potential weaknesses

may result in deterioration of the repayment

prospects for the loan or of the institution’s

credit position at some future date.

Substandard

– Loans classified as substandard are inadequately protected

by the current net worth and paying

capacity of the obligator or of the collateral pledged, if

any. Loans so classified

have a well-defined weakness or

weaknesses that jeopardize the liquidation of the debt.

They are characterized by the distinct possibility that the

institution will sustain some loss if the deficiencies are

not corrected.

Doubtful

– 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.

Loss

– Loans classified as loss are considered uncollectible.

Loan credit exposures by internally assigned grades are

presented below for the periods indicated (in thousands):

As of September 30, 2022

Pass

Special

Mention

Substandard

Doubtful

Total Loans

Residential real estate:

Home equity line of credit and other

723

1-4 family residential

129,240

Condo residential

56,588

186,551

Commercial real estate:

Land and construction

35,977

Multi-family residential

155,018

Condo commercial

55,451

400

55,851

Commercial property

681,685

928,131

400

928,531

Commercial and industrial:

(1)

Secured

115,444

339

115,783

Unsecured

5,362

120,806

339

121,145

Foreign banks

94,450

Consumer and other loans

100,642

203

100,845

Total

1,430,580

942

1,431,522

(1)

All outstanding PPP loans were internally graded

pass.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

As of December 31, 2021

Pass

Special

Mention

Substandard

Doubtful

Total Loans

Residential real estate:

Home equity line of credit and other

701

1-4 family residential

130,840

4,581

135,421

Condo residential

65,237

196,778

4,581

201,359

Commercial real estate:

Land and construction

24,581

Multi-family residential

127,489

Condo commercial

41,983

417

42,400

Commercial property

509,189

1,222

510,411

Leasehold improvements

107

703,349

1,222

417

704,988

Commercial and industrial:

(1)

Secured

97,605

536

98,141

Unsecured

48,434

48,451

146,039

553

146,592

Foreign banks

59,491

Consumer and other loans

79,005

224

79,229

Total

1,184,662

1,222

5,775

1,191,659

(1)

All outstanding PPP loans were internally graded

pass.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Loan Aging

The Company

also considers the

performance of loans

in grading

and in

evaluating the

credit quality

of the

loan portfolio.

The Company

analyzes credit

quality and

loan grades

based on

payment performance

and the

aging status

of the

loan.

The following

tables include

an aging

analysis of

accruing loans

and total

non-accruing

loans as

of September 30,

2022

and December 31, 2021 (in thousands):

Accruing

As of September 30, 2022:

Current

Past Due 30-

89 Days

Past Due 90

Days or >

and Still

Accruing

Total

Accruing

Non-Accrual

Total Loans

Residential real estate:

Home equity line of credit and other

723

1-4 family residential

128,703

537

129,240

Condo residential

55,911

677

56,588

185,337

1,214

186,551

Commercial real estate:

Land and construction

35,977

Multi-family residential

155,018

Condo commercial

55,851

Commercial property

679,058

2,627

681,685

925,904

2,627

928,531

Commercial and industrial:

Secured

115,783

Unsecured

4,324

1,038

5,362

120,107

1,038

121,145

Foreign banks

94,450

Consumer and other

100,845

Total

1,426,643

4,879

1,431,522

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Accruing

As of December 31, 2021:

Current

Past Due

30-89 Days

Past Due 90

Days or >

and Still

Accruing

Total

Accruing

Non-Accrual

Total Loans

Residential real estate:

Home equity line of credit and other

701

1-4 family residential

133,942

289

134,231

1,190

135,421

Condo residential

64,243

994

65,237

198,886

1,283

200,169

1,190

201,359

Commercial real estate:

Land and construction

24,581

Multi-family residential

127,053

436

127,489

Condo commercial

42,400

Commercial property

510,411

Leasehold improvements

107

704,552

436

704,988

Commercial and industrial:

Secured

98,141

Unsecured

48,041

410

48,451

146,182

410

146,592

Foreign banks

59,491

Consumer and other

78,969

260

79,229

Total

1,188,080

2,389

1,190,469

1,190

1,191,659

There was

interest income recognized

attributable to nonaccrual

loans outstanding during

the three months

ended

September 30, 2022 and 2021. Interest income on these loans for the three

months ended September 30, 2022 and 2021,

would

have

been

approximately

and

thousand,

respectively,

had

these

loans

performed

accordance

with

their

original terms.

Impaired Loans

The following table includes

the unpaid principal balances

for impaired loans with

the associated allowance amount,

applicable, on the basis of impairment methodology at

the dates indicated (in thousands):

September 30, 2022

December 31, 2021

Unpaid

Principal

Balance

Net

Investment

Balance

Valuation

Allowance

Unpaid

Principal

Balance

Net

Investment

Balance

Valuation

Allowance

Impaired Loans with No Specific Allowance:

Residential real estate

3,574

3,567

5,021

5,035

Commercial real estate

586

696

695

4,160

4,153

5,717

5,730

Impaired Loans with Specific Allowance:

Residential real estate

3,683

3,653

160

3,985

3,950

178

Commercial and industrial

141

Consumer and other

203

101

224

111

3,978

3,948

309

4,350

4,315

360

Total

8,138

8,101

309

10,067

10,045

360

Net investment balance is the unpaid principal balance

of the loan adjusted for the remaining net deferred loan

fees.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

The following

table presents

the average

recorded

investment

balance

on impaired

loans for

the dates

indicated

(in

thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Residential real estate

7,282

7,980

7,732

8,738

Commercial real estate

590

709

619

611

Commercial and industrial

177

116

187

Consumer and other

207

248

214

262

Total

8,174

9,114

8,681

9,798

Interest

income

recognized

impaired

loans

for

the

three

months

ended

September 30,

2022

and

2021

was

thousand and $

thousand, respectively.

Interest

income

recognized

impaired

loans

for

the

nine

months

ended

September 30,

2022

and

2021

was

271

thousand and $

313

thousand, respectively.

Troubled Debt Restructuring

A troubled

debt

restructuring

(“TDR”)

occurs

when

the

Company

has agreed

a loan

modification

the

form

concession

for

borrower

who

experiencing

financial

difficulty.

Modifications

loans

can

made

for

rate,

term,

payment, conversion of

loan to interest

only for a

limited period of

time or a

combination to include

more than one

type of

modification.

The following table presents performing and non-performing

TDR loans at the dates indicated (in thousands):

September 30, 2022

December 31, 2021

Accrual Status

Non-Accrual

Status

Total TDRs

Accrual Status

Non-Accrual

Status

Total TDRs

Residential real estate

7,257

7,815

Commercial real estate

586

696

Commercial and industrial

141

Consumer and other

203

224

Total

8,138

8,876

The Company had allocated $

309

thousand and $

360

thousand of specific allowance for

TDR loans at September 30,

2022 and

December 31,

2021, respectively.

There were

charge-offs

on TDR

loans during

the three

and nine

months

ended September

30, 2022

and 2021.

There were

commitments

outstanding to

lend additional

funds to

any of

these

TDR loan customers as of September 30, 2022.

During the

quarter ended

September 30, 2022

and 2021,

there were

defaults on

loans which

were modified

as a

TDR within

the prior

12 months.

The Company

also did

t have

any new

TDR

loans during

the three

and nine

months

ended September 30, 2022 and 2021.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

INCOME TAXES

The Company’s provision for income taxes is presented

in the following table for the dates indicated (in thousands):

Nine Months Ended September 30,

2022

2021

Current:

Federal

State

Total

current

Deferred:

Federal

4,342

3,962

State

1,187

887

Total

deferred

5,529

4,849

Total

tax expense

5,529

4,849

The actual income tax expense for the nine months

ended September 30, 2022 and 2021 differs

from the statutory tax

expense

for the

period (computed

by applying

the

U.S.

federal

corporate

tax rate

for

2022

and

2021 to

income

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

Nine Months Ended September 30,

2022

2021

Federal taxes at statutory rate

4,460

4,258

State income taxes, net of federal tax benefit

923

710

Bank owned life insurance

(202)

(122)

Other, net

348

Total

tax expense

5,529

4,849

The Company’s deferred tax assets and deferred

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

September 30, 2022

December 31, 2021

Deferred tax assets:

Net operating loss

23,580

28,819

Allowance for credit losses

4,208

3,816

Lease liability

3,418

3,595

Unrealized losses on available for sale securities

15,345

817

Deferred loan fees

400

Depreciable property

146

361

Stock option compensation

332

241

Accruals

467

600

Other, net

Deferred tax assets:

47,520

38,651

Deferred tax liability:

Lease right of use asset

(3,418)

(3,595)

Deferred expenses

(174)

(127)

Deferred tax liability

(3,592)

(3,722)

Net deferred tax assets

43,928

34,929

The Company

has approximately

89.1

million of

federal and

111.9

million of

state net

operating loss

carryforwards

expiring in various amounts between

2031 and 2036 and which are

limited to offset, to the

extent permitted, future taxable

earnings of the Company.

In assessing the realizability of deferred tax assets, management considers

whether it is more likely than not that some

portion or

all of

the deferred

tax assets

will not

be realized.

The ultimate

realization

of deferred

tax assets

is dependent

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

upon the generation of

future taxable income

during the periods

in which those temporary

differences become deductible.

Management considers the scheduled reversal

of deferred tax liabilities, projected future taxable

income, and tax planning

strategies in making this assessment.

The major tax

jurisdictions where the

Company files income

tax returns are

the U.S. federal

jurisdiction and

the State

of Florida. With few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax

authorities for years before 2018.

For the three months ended

September 30, 2022 and

2021, the Company did

t have any unrecognized

tax benefits

as a result of

tax positions taken during a prior

period or during the current period. Additionally,

interest or penalties were

recorded as a result of tax uncertainties.

OFF-BALANCE SHEET ARRANGEMENTS

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business in order to

meet the financial

needs of

its customers

and to reduce

its own

exposure to

fluctuations in

interest rates.

These financial

instruments include

unfunded commitments

under lines

of credit,

commitments to

extend credit,

standby and

commercial

letters of

credit. Those

instruments involve,

to varying

degrees, elements

of credit

and interest

rate risk

in excess

of the

amount recognized in the Company’s Consolidated Balance Sheets. The Company uses the

same credit policies in making

commitments and conditional obligations as it does for on-balance

sheet instruments.

The Company's

exposure to credit

loss in the

event of nonperformance

by the other

party to the

financial instruments

for unused lines of credit, and standby letters of credit

is represented by the contractual amount of these commitments.

summary

the

amounts

the

Company's

financial

instruments

with

off-balance

sheet

risk

are

shown

below

September 30, 2022 and December 31, 2021 (in thousands):

September 30, 2022

December 31, 2021

Commitments to grant loans and unfunded lines of credit

119,830

134,877

Standby and commercial letters of credit

5,413

6,420

Total

125,243

141,297

Commitments to

extend credit

are agreements

to lend

to a

customer as

long as

there is

no violation

of any

condition

established in the contract. Commitments generally have

fixed expiration dates or other termination clauses.

Unfunded lines of

credit and revolving

credit lines are

commitments for possible

future extensions

of credit to

existing

customers. These lines of

credit are uncollateralized and

usually do not contain

a specified maturity date

and ultimately may

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

committed.

Standby

and

commercial

letters

credit

are

conditional

commitments

issued

the

Company

guarantee

the

performance of a

customer to

a third

party. Those letters of

credit are

primarily issued to

support public and

private borrowing

arrangements. Essentially all letters of credit have fixed maturity dates and since

many of them expire without being drawn

upon, they do not generally present a significant liquidity

risk to the Company.

DERIVATIVES

The Company utilizes interest rate swap agreements

as part of its asset liability management strategy

to help manage

its interest rate risk exposure

The notional amount of

the interest rate swaps

do not represent actual

amounts exchanged

by the

parties.

The amounts

exchanged

are determined

by reference

to the

notional amount

and the

other

terms

of the

individual interest rate swap agreements.

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

and

interest rate swaps

with

loan

customers

with

aggregate

notional

amount

34.6

million

and

39.2

million

September 30,

2022

and

December 31, 2021,

respectively.

These interest

rate swaps

mature between

2025 and

Company entered

into

corresponding

and

offsetting

derivatives

with

third

parties.

The

fair

value

liability

these

derivatives

requires

the

Company to provide the counterparty

with funds to be held as collateral

which the Company reports as other

assets under

the Consolidated

Balance Sheets.

While these

derivatives represent

economic hedges,

they do

not qualify

as hedges

for

accounting purposes.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

The following table reflects the Company’s customer-related

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

Fair Value

Notional

Amount

Collateral

Amount

Balance Sheet Location

Asset

Liability

September 30, 2022:

Derivatives not designated as hedging instruments:

Interest rate swaps related to customer loans

34,635

1,260

Other assets/Other liabilities

5,254

December 31, 2021:

Derivatives not designated as hedging instruments:

Interest rate swaps related to customer loans

39,156

1,260

Other assets/Other liabilities

1,434

FAIR VALUE

MEASUREMENTS

Determination of Fair Value

The Company

uses

fair value

measurements

to record

fair-value

adjustments

to certain

assets

and liabilities

and to

determine fair value

disclosures. In accordance

with the fair

value measurements

accounting guidance, the

fair value of

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

between market

participants

at the

measurement

date.

Fair value

is best

determined based

upon quoted

market prices.

However, in

many instances, there

are no quoted

market prices for the

Company's various financial

instruments. In cases

where quoted

market prices

are not

available, fair

values are

based on

estimates using

present value

or other

valuation

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

of future cash flows. Accordingly, the fair value estimates may not be realized in

an immediate settlement of the instrument.

The fair

value guidance provides

a consistent definition

of fair

value, which focuses

on exit

price in

an orderly transaction

(that is,

not a

forced

liquidation

or distressed

sale) between

market participants

at the

measurement

date

under current

market conditions.

If there

has been

a significant

decrease

in the

volume

and level

of activity

for the

asset

or liability,

change in

valuation technique or

the use

of multiple

valuation techniques may

be appropriate.

In such

instances, determining

the

price

which

willing

market

participants

would

transact

the

measurement

date

under

current

market

conditions

depends on the facts

and circumstances and

requires the use of

significant judgment. The fair

value is a reasonable

point

within the range that is most representative of fair value under

current market conditions.

Fair Value Hierarchy

In accordance with

this guidance, the

Company groups its

financial assets

and financial liabilities

generally measured

at fair

value in

three

levels, based

on the

markets

in which

the assets

and liabilities

are traded,

and the

reliability

of the

assumptions used to determine fair value.

Level 1

Valuation

is based

on quoted

prices in

active markets

for identical

assets or

liabilities that

the reporting

entity has

the ability

to access

at the measurement

date. Level

1 assets

and liabilities

generally include

debt and

equity securities that

are traded in

an active exchange

market. Valuations are obtained from

readily available pricing

sources for market transactions involving identical assets

or liabilities.

Level 2

Valuation

is based on inputs other

than quoted prices included

within Level 1 that are

observable for the

asset

liability,

either

directly

indirectly.

The

valuation

may

based

quoted

prices

for

similar

assets

liabilities; quoted

prices in

markets that are

not active;

or other inputs

that are observable

or can be

corroborated

by observable market data for substantially the full term of the

asset or liability.

Level 3

Valuation

is based on

unobservable inputs that

are supported

by little or

no market activity

and that are

significant

the

fair

value

the

assets

liabilities.

Level

assets

and

liabilities

include

financial

instruments

whose value

is determined

using pricing

models, discounted

cash

flow

methodologies,

or similar

techniques,

well as instruments for which determination of fair value

requires significant management judgment or estimation.

financial

instrument's

categorization

within

the

valuation

hierarchy

based

upon

the

lowest

level

input

that

significant to the fair value measurement.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Items Measured at Fair Value

on a Recurring Basis

AFS investment securities:

When instruments are traded in

secondary markets and quoted market

prices do not exist

for such securities,

management generally relies

on prices obtained

from independent vendors

or third-party broker-dealers.

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

observable market information is being utilized. Securities measured with pricing provided by independent vendors or

third-

party broker-dealers

are classified within

Level 2 of

the hierarchy and

often involve using

quoted market

prices for similar

securities, pricing models or discounted cash flow analyses

utilizing inputs observable in the market where available.

Derivatives:

The

fair

value

derivatives

are

measured

with

pricing

provided

third-party

participants

and

are

classified within Level 2 of the hierarchy.

The

following

table

represents

the

Company's

assets

and

liabilities

measured

fair

value

recurring

basis

September 30, 2022 and December 31, 2021 for each

of the fair value hierarchy levels (in thousands):

September 30, 2022

December 31, 2021

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Investment securities available for sale:

U.S. Government Agency

9,028

10,520

Collateralized mortgage obligations

100,048

156,829

Mortgage-backed securities - residential

76,707

118,842

Mortgage-backed securities - commercial

26,935

50,117

Municipal securities

18,629

24,276

Bank subordinated debt securities

13,562

28,408

Corporate bonds

3,662

12,550

Total

248,571

401,542

Derivative assets

5,254

1,434

Total assets at fair value

253,825

402,976

Derivative liabilities

5,254

1,434

Total liabilities at fair value

5,254

1,434

Items Measured at Fair Value

on a Non-recurring Basis

Impaired Loans:

At September 30, 2022

and December 31, 2021,

in accordance with

provisions of the

loan impairment

guidance, individual loans with

a carrying amount of approximately

4.0

million and $

4.4

million, respectively,

were written

down to

their

fair value

approximately

3.7

million

and $

4.0

million,

respectively,

resulting

an impairment

charge

309

thousand and

360

thousand, respectively,

which was

included in

the allowance

for credit

losses at

September 30,

2022

and

December 31,

2021,

respectively.

Loans

subject

write-downs,

impaired

loans,

are

estimated

using

the

present value

of expected

cash flows

or the

appraised value

of the

underlying collateral

discounted as

necessary due

management's estimates of changes in economic conditions

are considered a Level 3 valuation.

Other Real

Estate:

Other

real estate

owned

is valued

at the

lesser of

the third-party

appraisals less

management's

estimate of

the costs to

sell or the

carrying cost of

the other

real estate

owned. Appraisals generally

use the market

approach

valuation technique

and use

market observable

data to

formulate an

opinion of

the fair

value of

the properties.

However,

the appraiser

uses professional

judgment in

determining the

fair value

of the

property and

the Company

may also

adjust

the value for changes in

market conditions subsequent

to the valuation date

when current appraisals

are not available. As

a consequence of the carrying cost or the

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

considered a Level 3 valuation.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

The following table represents the Company’s assets measured at

fair value on a non-recurring basis

at September 30,

2022 and December 31, 2021 for each of the fair value

hierarchy levels (in thousands):

Level 1

Level 2

Level 3

Total

September 30, 2022:

Impaired loans

3,669

December 31, 2021:

Impaired loans

3,990

The following table presents

quantified information about

Level 3 fair value

measurements for assets measured

at fair

value on a non-recurring basis at September 30, 2022

and December 31, 2021 (in thousands):

Fair Value

Valuation Technique(s)

Unobservable Input(s)

September 30, 2022:

Residential real estate

3,523

Sales comparison approach

Adj. for differences between comparable sales

Commercial and industrial

Discounted cash flow

Adj. for differences in net operating income expectations

Consumer and other loans

102

Discounted cash flow

Adj. for differences in net operating income expectations

Total

impaired loans

3,669

December 31, 2021:

Residential real estate

3,807

Sales comparison approach

Adj. for differences between comparable sales

Commercial and industrial

Discounted cash flow

Adj. for differences in net operating income expectations

Consumer and other loans

113

Discounted cash flow

Adj. for differences in net operating income expectations

Total

impaired loans

3,990

There

were

financial

liabilities

measured

fair

value

non-recurring

basis

September 30,

2022

and

December 31, 2021.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Items Not Measured at Fair Value

The following table

presents the carrying

amounts and estimated

fair values of

financial instruments

not carried at fair

value as of September 30, 2022 and December 31, 2021 (in

thousands):

Fair Value Hierarchy

Carrying

Amount

Level 1

Level 2

Level 3

Fair Value

Amount

September 30, 2022:

Financial Assets:

Cash and due from banks

5,975

Interest-bearing deposits in banks

67,351

Investment securities held to maturity

178,865

159,739

Loans held for investment, net

1,414,909

1,366,891

Accrued interest receivable

6,568

1,278

5,290

6,568

Financial Liabilities:

Demand deposits

662,808

Money market and savings accounts

851,727

Interest-bearing checking accounts

63,721

Time deposits

218,386

212,450

FHLB advances

26,000

24,505

Accrued interest payable

129

December 31, 2021:

Financial Assets:

Cash and due from banks

6,477

Interest-bearing deposits in banks

39,751

Investment securities held to maturity

122,658

120,157

Loans held for investment, net

1,175,024

1,189,191

Accrued interest receivable

5,975

1,222

4,753

5,975

Financial Liabilities:

Demand deposits

605,425

Money market and savings accounts

703,856

Interest-bearing checking accounts

55,878

Time deposits

225,200

224,688

FHLB advances

36,000

36,479

Accrued interest payable

STOCKHOLDERS’ EQUITY

Common Stock

The rights

of the

holders of

Class A

common stock

and Class

B common

stock are

the same,

except for

voting and

conversion rights.

Holders of

Class A

common stock

are entitled

to voting

rights, while

holders of

Class B

common stock

have no

voting rights.

Shares of

Class

B common

stock

are convertible

into shares

of Class

A common

stock

if sold

transferred.

In June 2021, the Bank effected a 1 for 5

reverse stock split of all the Class A common

stock $

1.00

par value. Each five

shares of

the Bank’s Class

A common

stock was combined

into

one

fully paid

share of Class

A common

stock. Any fractional

resulting from

this

reverse

stock

split were

rounded

up to

one whole

share.

The

Bank has

adjusted

the Class

common stock, earnings per share and stock

options for this 1 for 5 reverse stock

split for all periods in 2021. The Class

common stock was not adjusted but if sold or exchanged would be converted

at the 1 for 5 reverse stock split of

share of

Class

common

stock

for

Class

common

stock.

Any

dividends

declared

the

Board

Directors

(the

“Board”) to include

Class B common

stock would also

be paid as if

the Class B common

stock had converted.

The 1 for 5

reverse stock

split resulted

in adjustments

to Consolidated

Balance Sheets,

Consolidated Statements

of Operations,

and

Consolidated Statements of Changes in Stockholders’

Equity.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

In July 2021,

the Bank completed

the IPO of

its Class A

common stock, in

which it issued

and sold

4,600,000

Class

common

stock

price

10.00

per

share.

The

Bank

received

total

net

proceeds

40.0

million

after

deducting underwriting discounts and expenses.

In December 2021,

the Bank entered

into agreements with

the Class B

shareholders to exchange

all outstanding shares

of Class

B common

stock for

shares of

Class A

common stock

at a

ratio of

one share

of Class

A common

stock for

ever

five shares of

Class B common

stock. As

a result, a

total of

6,121,052

shares of

Class B common

stock were

exchanged

for

1,224,212

shares of Class A common stock.

In December 2021, the

Company acquired all

the issued and outstanding

shares of the Class

A voting common

stock

of the Bank, which at

the time were the only issued

and outstanding shares of the Bank’s capital stock,

in a share exchange

(the “Reorganization”)

effected under

the Florida

Business Corporation

Act. Each

of the outstanding

shares of

the Bank’s

Class A common stock, par value $

1.00

per share, formerly held by its shareholders was converted into and exchanged for

one newly

issued share

of the

Company’s

Class A

common stock,

par value

1.00

per share,

and the

Bank became

the

Company’s wholly owned subsidiary.

In the

Reorganization,

each

shareholder

of the

Bank

received securities

the same

class,

having

substantially

the

same designations,

rights,

powers, preferences,

qualifications,

limitations

and restrictions,

as those

that the

shareholder

held

the

Bank,

and

the

Company’s

current

shareholders

own

the

same

percentages

its

common

stock

they

previously owned of the Bank’s common stock.

Preferred Stock

In April 2021,

the Board

authorized and

approved the

offer to

repurchase all

outstanding shares

of Class

E preferred

stock at

the liquidation

value of

7.5

million along

with declared

dividends of

103

thousand.

All Class

E preferred

stock

shareholders approved the repurchase which the Bank

completed in April 2021.

The

Bank

offered

the

Class

and

Class

preferred

stockholders

the

ability

exchange

their

for

Class

common stock. The offer

to exchange was voluntary

and the preferred stockholders

were given the option to

convert

their

preferred

for

Class

common

stock

with

the

remaining

redeemed

the

form

cash.

The

exchange ratio for the

shares of Class A

common stock issued in

the preferred stock exchange transaction

was based upon

the IPO price for shares of Class A common stock.

During the year ended December 31, 2021,

47,473

shares of Class C preferred stock

and

11,061,552

shares of Class

D preferred stock converted into an aggregate of

10,278,072

shares of Class A common stock. The exchange of the Class

C and Class D preferred shares had

a total liquidation value of $

102.8

million. The remaining unconverted shares of

Class

C preferred stock

and Class

D preferred stock

totaling

1,234,354

shares were subsequently

redeemed at their

liquidation

value for $

11.4

million.

The fair value of consideration

on the preferred stock

exchange and redemption of

the Class C and

Class D preferred

exceeded

the

book

value

causing

one-time

reduction

net

income

available

common

stockholders

89.6

million.

September 30,

2022

and

December 31,

2021,

there

were

preferred

outstanding

and

outstanding dividends to be paid.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Dividends

The following dividend amounts were paid on the preferred shares for the three

and nine months ended September 30,

2022 and 2021 (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

2022

2021

2022

2021

Preferred stock - Class C: Non-voting, Non-cumulative, Perpetual:

1.00

par value; $

1,000

per share liquidation preference; annual

dividend rate of

% of liquidation preference paid quarterly. Quarterly

dividend of $

10.00

per share.

440

1,494

Preferred stock - Class D: Non-voting, Non-cumulative, Perpetual:

1.00

par value; $

5.00

per share liquidation preference; annual

dividend rate of

% of par value paid quarterly. Quarterly dividend of

0.01

per share.

102

348

Preferred stock - Class E: Non-voting, Partially Cumulative,

Perpetual: $

1.00

par value; $

1,000

per share liquidation preference;

annual dividend rate of

% of liquidation preference paid quarterly.

Quarterly dividend of $

17.50

per share.

235

Total

dividends paid

542

2,077

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

dividends were approved by

the Board for

the common stock classes

for the three

months ended September 30, 2022

and 2021. Additionally, there were

dividends declared and unpaid as of September 30,

2022 and 2021.

The

Company

and

the

Bank

exceeded

all

regulatory

capital

requirements

and

remained

significantly

above

“well-

capitalized”

guidelines.

September 30,

2022,

the

total

risk-based

capital

ratios

for

the

Company

and

the

Bank

were

13.65

% and

13.58

%, respectively.

EARNINGS PER SHARE

Earnings

per

(“EPS”)

for

common

stock

calculated

using

the

two-class

method

required

for

participating

securities. Basic EPS

is calculated by

dividing net income

(loss) available to

common stockholders by the

weighted-average

number of common shares outstanding for

the period, without consideration for common

stock equivalents. Diluted EPS is

computed by

dividing net

income (loss)

available to

common stockholders

by the

weighted-average

number

of common

shares outstanding for

the period and

the weighted-average number

of dilutive common

stock equivalents outstanding

for

the period determined using the treasury-stock method. For

purposes of this calculation, common stock equivalents include

common stock options and are only included in the calculation

of diluted EPS when their effect is dilutive.

calculate

EPS

for

the

three

and

nine

months

ended

September 30,

2022,

net

income

available

common

stockholders was

not allocated between

Class A and

Class B common

stock since

there were

issued and outstanding

shares of Class B common stock as of September 30, 2022.

calculate

EPS

for

the

three

and

nine

months

ended

September 30,

2021,

net

income

available

common

stockholders was allocated as if all the income for

the period were distributed to common stockholders.

The allocation was

based on the

outstanding shares per

common share class to

the total

common shares outstanding during

each period giving

effect for the 1 for

5 reverse stock split.

The Company’s Articles

of Incorporation require that

the distribution of net

income

to Common B

stockholders be

adjusted to

give effect

for Class

A stock splits.

Therefore, the

income allocated

to Class

common shares was calculated based on their

% per share equivalent to Class A common shares.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

The

following

table

reflects

the

calculation

net

income

available

common

stockholders

for

the

three

and

nine

months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

2022

2021

2022

2021

Net Income

5,558

6,593

15,707

15,427

Less: Preferred stock dividends

542

2,077

Less: Exchange and redemption of preferred shares

89,585

Net income (loss) available to common stockholders

5,558

(83,534)

15,707

(76,235)

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

The following table reflects the calculation of basic and diluted earnings per common share class for the three and nine

months ended September 30, 2022 and 2021 (in thousands,

except per share amounts):

Three Months Ended September 30,

2022

2021

Class A

Class B

Class A

Class B

(1)

Basic EPS

Numerator:

Net income (loss) available to common shares before allocation

5,558

(83,534)

Multiply: % allocated on weighted avg. shares outstanding

100.0%

92.5%

7.5%

Net income (loss) available to common shares after allocation

5,558

(77,278)

(6,256)

Denominator:

Weighted average shares outstanding

20,000,753

15,121,460

6,121,052

Earnings (loss) per share, basic

0.28

(5.11)

(1.02)

Diluted EPS

Numerator:

Net income (loss) available to common shares before allocation

5,558

(83,534)

Multiply: % allocated on weighted avg. shares outstanding

100.0%

92.5%

7.5%

Net income (loss) available to common shares after allocation

5,558

(77,278)

(6,256)

Denominator:

Weighted average shares outstanding for basic EPS

20,000,753

15,121,460

6,121,052

Add: Dilutive effects of assumed exercises of stock options

147,455

Weighted avg. shares including dilutive potential common shares

20,148,208

15,121,460

6,121,052

Earnings (loss) per share, diluted

0.28

(5.11)

(1.02)

Anti-dilutive stock options excluded from diluted EPS

15,000

95,602

(1)

Net loss available to common shares between Class

A and Class B common stock was allocated based

on the weighted average number of shares

outstanding. The allocation also assumes that

Class B shares had converted to Class

A shares which is equivalent to

0.20

per share of Class B or

1,224,212

shares of Class A shares.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Nine Months Ended September 30,

2022

2021

Class A

Class B

Class A

Class B

(1)

Basic EPS

Numerator:

Net income (loss) available to common shares before allocation

15,707

(76,235)

Multiply: % allocated on weighted avg. shares outstanding

100.0%

86.2%

13.8%

Net income (loss) available to common shares after allocation

15,707

(65,747)

(10,488)

Denominator:

Weighted average shares outstanding

19,998,841

7,674,609

6,121,052

Earnings (loss) per share, basic

0.79

(8.57)

(1.71)

Diluted EPS

Numerator:

Net income (loss) available to common shares before allocation

15,707

76,235

Multiply: % allocated on weighted avg. shares outstanding

100.0%

86.2%

13.8%

Net income (loss) available to common shares after allocation

15,707

(65,747)

(10,488)

Denominator:

Weighted average shares outstanding for basic EPS

19,998,841

7,674,609

6,121,052

Add: Dilutive effects of assumed exercises of stock options

179,248

Weighted avg. shares including dilutive potential common shares

20,178,089

7,674,609

6,121,052

Earnings (loss) per share, diluted

0.78

(8.57)

(1.71)

Anti-dilutive stock options excluded from diluted EPS

15,000

168,709

(1)

Net loss available to common shares between Class

A and Class B common stock was allocated based

on the weighted average number of shares

outstanding. The allocation also assumes that

Class B shares had converted to Class

A shares which is equivalent to

0.20

per share of Class B or

1,224,212

shares of Class A shares.

See Note 8 “Stockholders’ Equity” for further discussion

of the reverse stock split effected in 2021.

10.

LOSS CONTINGENCIES

Loss contingencies,

including claims

and legal actions

may arise in

the ordinary

course of

business. In

the opinion

management, none

of these

actions, either

individually or

in the aggregate,

is expected

to have

a material

adverse effect

on the Company’s Consolidated Financial Statements.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Item 2.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

The

following

discussion

and

analysis

designed

provide

better

understanding

the

consolidated

financial

condition

and

results

operations

of the

Company

and the

Bank,

its wholly

owned subsidiary,

for

the quarter

and nine

months ended

September 30, 2022. This

discussion and analysis

is best

read in

conjunction with

the unaudited consolidated

financial

statements

and

footnotes

included

this

quarterly

report

Form

10-Q

and

the

audited

consolidated

financial statements

and related

footnotes

included in

the Annual

Report filed

on the

Form 10-K

(“2021 form

10-K”) filed

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

the year ended December 31, 2021.

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

actual results to differ materially

from management's expectations. Factors that could cause

such differences are discussed

in the

sections entitled

"Forward-Looking Statements"

and Item

1A “Risk Factors"

below and

in the

2021 Form

10-K filed

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

Throughout

this

document,

references

“we,”

“us,”

“our,”

and

“the

Company”

generally

refer

USCB

Financial

Holdings, Inc.

Forward-Looking Statements

This Quarterly Report

on Form 10-Q

(“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 1934, as amended (Exchange Act”). The words “may,”

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

“believe,”

“contemplate,”

“expect,”

“aim,”

“plan,”

“estimate,”

“continue,”

and

“intend,”

well

other

similar

words

and

expressions of

the future,

are intended

to identify

forward-looking statements.

These forward-looking

statements include,

but

are

not

limited

to,

statements

our

projected

growth,

anticipated

future

financial

performance,

and

management’s long-term performance

goals, as

well as

statements relating

to the

anticipated effects on

results of

operations

and

financial

condition

from

expected

developments

events,

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

materially from those anticipated in such statements.

Potential risks and uncertainties include, but are not

limited to:

•

the strength of the United States economy

in general and the strength of the local

economies in which we conduct

operations;

•

the continuation

of COVID-19

pandemic and

its impact

on us,

our employees,

customers and

third-party

service

providers, and the ultimate extent of the impacts of the

pandemic and related government stimulus programs;

•

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 environment;

•

our ability

to comply

with the

extensive laws

and regulations

to which

we are

subject, including

the laws

for each

jurisdiction where we operate;

•

legislative or regulatory

changes and changes

in accounting

principles, policies,

practices or guidelines,

including

the effects of the forthcoming implementation

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

•

the effects

of our

lack of

a diversified

loan portfolio

and concentration

in the

South Florida

market, including

the

risks

of geographic,

depositor,

and

industry concentrations,

including our

concentration

loans secured

by real

estate;

•

the concentration of ownership of our Class A common

stock;

•

fluctuations in the price of our Class A common stock;

•

our ability to fund or access the capital markets at attractive

rates and terms and manage our growth, both organic

growth as well as growth through other means, such as

future acquisitions;

•

continuing high

levels of

inflation, changes

in market

interest rates,

the unemployment

rate, as

well as

monetary

fluctuations, in particular in reaction to inflation and changes

in interest rates

•

increased competition and its effect on the pricing

of our products and services as well as our margin;

•

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

employee, or third-party fraud and security breaches; and

•

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

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

All

forward-looking

statements

are

necessarily

only

estimates

future

results,

and

there

can

assurance

that

actual results will

not differ

materially from expectations.

Therefore, you are

cautioned not to

place undue reliance

on any

forward-looking statements.

Further,

forward-looking statements

included in

this Form

10-Q are

made only

as of the

date

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

hereof, and we undertake

no obligation to update

or revise any forward-looking

statement to reflect events

or circumstances

occurring after the date

on which the statement

is made or to

reflect the occurrence of

unanticipated events, unless required

to do

so under

the federal

securities laws.

You

should also

review the

risk factors

described in

the reports

the Company

filed or

will file

with the SEC

and, for

periods prior

to the

completion of

the bank

holding company reorganization

in December

2021, U.S. Century Bank (“Bank”) filed with the Federal

Deposit Insurance Corporation (“FDIC”).

Non-GAAP Financial Measures

This Form 10-Q

includes financial information determined by

methods other than in

accordance with generally accepted

accounting principles (“GAAP”). This financial information

includes certain operating performance measures.

Management

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

managing and

evaluating

the

Company’s

business

and

intends

refer

them

discussions

about

our

operations

and

performance.

Operating performance measures

should be viewed in

addition to, and not

as an alternative to

or substitute for,

measures

determined in accordance with GAAP,

and are not necessarily comparable to non-GAAP measures that may

be presented

by other companies. To the extent applicable, reconciliations of these

non-GAAP measures to the most

directly comparable

GAAP

measures

can

found

the

section

“Reconciliation

and

Management

Explanation

Non-GAAP

Financial

Measures” included in this Form 10-Q.

Overview

The Company,

the holding company of

the Bank, reported

net income of

$5.6 million or

$0.28 per diluted

share for Class

A common stock for the three

months ended September 30,

2022, compared with

net income of $6.6

million or $5.11 loss

and $1.02

loss per

diluted

share for

Class A and

Class B

common stock,

respectively, for

the same

period in

losses per share for the Class

A and Class

B common stock for the quarter ended September 30, 2021 reflected the effects

of the exchange and redemption

of the Bank’s preferred

shares. In December 2021,

the Company agreed to

exchange all

the outstanding

of Class

B common

stock for

Class A common

stock at

a ratio

of one

share of

Class A common

stock for

each five shares

of Class B

common stock. As

of September 30,

2022 and

December 31, 2021,

the Company’s

only class of securities issued and outstanding was Class A common stock.

During the

first quarter

of 2022,

the Board

of Directors

(the “Board”)

approved a

share repurchase

program of

up to

750,000 shares of Class A common stock.

Under the repurchase program,

the Company may

purchase shares of Class A

common stock

on a

discretionary basis

from time

to time. As

of September 30,

2022, the

Company had

not repurchased

any shares.

evaluating

our

financial

performance,

consider

the

level

and

trends

net

interest

income,

the

net

interest

margin, the cost of deposits,

levels and composition of

non-interest income and non-interest

expense, performance ratios,

asset quality ratios, regulatory capital ratios, and any significant

event or transaction.

Unless

otherwise

stated,

all

period

comparisons

the

bullet

points

below

are

calculated

for

the

quarter

ended

September 30, 2022 compared to the quarter ended September

30, 2021 and annualized where appropriate:

•

Net

interest

income

increased

$3.3

million

24.5%

$16.8 million

from

$13.5

million

for

the

quarter

ended

September 30, 2021.

•

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

for the third quarter of 2021.

•

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

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

•

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

or 20.3%, compared to December 31, 2021.

•

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

billion from $1.6 billion at December 31, 2021.

•

Annualized return on average assets was 1.09% compared

to 1.50% at September 30, 2021.

•

Annualized return on average stockholders’ equity was 11.90% compared to

13.41% at September 30, 2021.

•

The

allowance

for

credit

losses

total

loans

ratio

decreased

1.16%

September 30,

2022

from

1.27%

September 30, 2021.

•

Non-performing loans to total loans was 0.00% at September

30, 2022 and September 30, 2021.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

•

At September 30, 2022, the

total risk-based capital ratio for

the Company and the

Bank was 13.65%

and 13.58%,

respectively.

•

Tangible book

value

per common

share (a

Non-GAAP

financial measure)

was $8.87

as of

September 30,

2022,

compared

$10.10

September 30,

2021.

The

decline

was

primarily

driven

unrealized

security

losses

accumulated

other

comprehensive

income

September 30,

2022.

See

“Reconciliation

and

Management

Explanation for Non-GAAP Financial Measures” for a reconciliation of

this non-GAAP financial measure.

Critical Accounting Policies and Estimates

The

consolidated

financial

statements

are

prepared

based

the

application

U.S.

GAAP,

the

most

significant

which are described in Note 1 “Summary of Significant Accounting Policies” in the Company’s 2021 Form 10-K. To prepare

financial

statements

conformity

with

GAAP,

management

makes

estimates,

assumptions,

and

judgments

based

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

in the

financial statements.

In particular,

management

has identified

accounting

policies that,

due to

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

Management has presented the application of these policies

to the Audit and Risk Committee of our Board.

Allowance for Credit Losses

The allowance for credit

losses (“ACL”) is

a valuation allowance that

is established through charges

to earnings in the

form of

a provision for

credit losses. The

amount of the

ACL is

affected by the

following: (i) charge-offs

of loans that

decrease

the allowance;

(ii) subsequent

recoveries on

loans previously

charged off

that increase

the allowance;

and (iii)

provisions

for credit losses charged to

income that increase the allowance.

Management considers the policies

related to the ACL as

the most critical to

the financial statement

presentation. The total

ACL includes activity

related to allowances

calculated in

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

Receivables, and ASC 450, Contingencies.

Throughout the year,

management estimates the probable

incurred losses in the loan portfolio

to determine if the ACL

is adequate to absorb such losses. The ACL

consists of specific and general components.

The specific component relates

to loans that

are individually classified

as impaired. We

follow a loan

review program to

evaluate the credit

risk existing in

the loan

portfolio. Loans

that have

been identified

as impaired

are reviewed

on a

quarterly basis

to determine

whether a

specific reserve is required. The general component covers non-impaired loans

and is based on our specific historical loan

loss experience,

volume, growth and

composition of the

loan portfolio,

the evaluation

of our

loan portfolio

through our

internal

loan review

process, general

current economic

conditions both

internal and

external to

us that

may affect

the borrower’s

ability to pay, value of collateral and

other qualitative relevant risk factors. Based on a review of these estimates,

we adjust

the ACL to a level determined by management to be adequate.

Estimates of credit losses are inherently subjective as they

involve an exercise of judgment.

Income Taxes

Deferred tax

assets and

liabilities are

recognized for

the future

tax consequences

attributable to

differences

between

the financial statement carrying amounts of

existing assets and liabilities and their

respective tax bases and operating loss

and tax credit carryforwards. Deferred tax

assets and liabilities are measured

using enacted tax rates expected

to apply to

taxable income

in the

years in

which those

temporary differences

are expected

to be

recovered or

settled. The

effect

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

date.

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

based on the

consideration of

all available evidence

using a more

likely than not

standard. In its

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

strategies.

The Company recognizes positions taken

or expected to be

taken in a tax

return in accordance with existing accounting

guidance on

income taxes

which prescribes

a recognition threshold

and measurement

process. Interest

and penalties

tax liabilities, if any, would

be recorded in interest expense and other operating non-interest

expense, respectively.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Segment Reporting

Management monitors the revenue streams for all its various

products and services. The identifiable segments are not

material

and

operations

are

managed

and

financial

performance

evaluated

overall

Company-wide

basis.

Accordingly, all

the financial service

operations are

considered by management

to be

aggregated in one

reportable operating

segment.

Results of Operations

General

The following

tables present

selected balance

sheet, income

statement, and

profitability ratios

for the

dates indicated

(in thousands, except ratios):

September 30, 2022

December 31, 2021

Consolidated Balance Sheets:

Total

assets

2,037,453

1,853,939

Total

loans

(1)

1,431,513

1,190,081

Total

deposits

1,796,642

1,590,379

Total

stockholders' equity

177,417

203,897

(1)

Loan amounts include deferred fees/costs.

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Consolidated Statements of Operations:

Net interest income before provision for credit losses

16,774

13,471

46,795

38,420

Total

non-interest income

1,789

4,217

5,351

8,054

Total

non-interest expense

10,132

9,007

29,295

26,358

Net income

5,558

6,593

15,707

15,427

Net income (loss) available to common stockholders

5,558

(83,534)

15,707

(76,235)

Profitability:

Efficiency ratio

54.58%

50.92%

56.18%

56.72%

Net interest margin

3.47%

3.19%

3.36%

3.22%

The Company’s results

of operations

depend substantially on

net interest income

and non-interest income.

Other factors

contributing

the

results

operations

include

our

provision

for

credit

losses,

non-interest

expenses,

and

provision

for

income taxes.

Three months ended September 30, 2022 compared to the three months

ended September 30, 2021

Net income decreased

to $5.6 million

for the three

months ended

September 30, 2022

from $6.6

million for the

same

period

2021.

Net

income

available

common

stockholders

increased

$89.0

million

for

the

three

months

ended

September 30, 2022 compared

to the

same period

in 2021

primarily because the

2021 period

reflected the

effect of

preferred

dividends paid and the $89.6 million exchange and redemption

of the Bank’s preferred shares.

Nine months ended September 30, 2022 compared to nine months ended

September 30, 2021

Net income increased to $15.7

million for the nine months

ended September 30, 2022

from $15.4 million for the

same

period in

Net income

available to

common stockholders increased

$91.9 million for

the September 30, 2022

compared

to the same

period in

2021 primarily

because of

an increase

in net interest

income in 2022

and the 2021

period reflected

the effect of preferred dividends paid and the $89.6 million

exchange and redemption of the Bank’s preferred shares.

Net Interest Income

Net

interest

income

the

difference

between

interest

earned

interest-earning

assets

and

interest

incurred

interest-bearing liabilities and

is the

primary driver of

core earnings. Interest

income is generated

from interest and

dividends

interest-earning

assets,

including

loans,

investment

securities

and

other

short-term

investments.

Interest

expense

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

incurred

from

interest

paid

interest-bearing

liabilities,

including

interest-bearing

deposits,

FHLB

advances

and

other

borrowings.

To evaluate net

interest income, we

measure and monitor

(i) yields on

loans and other

interest-earning assets, (ii)

the

costs of deposits

and other funding

sources, (iii) net

interest spread, and

(iv) net interest margin.

Net interest spread is

equal

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

margin is

equal to

the annualized

net interest

income

divided by

average interest

-earning assets.

Because

non-interest-

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

and stockholders’ equity, also fund

interest-earning assets,

net interest margin includes the indirect benefit of these

non-interest-bearing sources.

Changes in

the market

interest rates

and interest

rates we

earn on

interest-earning assets

or pay on

interest-bearing

liabilities, as well

as the volume

and types of

interest-earning assets and interest-bearing

and non-interest-bearing liabilities,

are usually the

largest drivers

of periodic changes

in net interest

spread, net interest

margin and net

interest income.

Our

asset liability committee

(“ALCO”) has

in place asset-liability

management techniques

to manage major

factors that

affect

net interest income and net interest margin.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

The following table contains information related

to average balance sheet, average yields

on assets, and average costs

of liabilities for the periods indicated (in thousands):

Three Months Ended September 30,

2022

2021

Average

Balance

(1)

Interest

Yield/Rate

(2)

Average

Balance

Interest

Yield/Rate

(2)

Assets

Interest-earning assets:

Loans

(3)

1,398,761

15,954

4.53

1,144,275

12,538

4.29

Investment securities

(4)

450,514

2,201

1.94

399,745

1,858

1.86

Other interest earnings assets

70,540

322

1.81

109,639

0.14

Total

interest-earning assets

1,919,815

18,477

3.82

1,653,659

14,434

3.43

Non-interest earning assets

106,976

87,764

Total

assets

2,026,791

1,741,423

Liabilities and stockholders' equity

Interest-bearing liabilities:

Interest-bearing checking

66,585

0.11

55,621

0.11

Money market and savings accounts

823,521

1,141

0.55

627,654

501

0.32

Time deposits

217,023

363

0.66

229,055

306

0.53

Total

interest-bearing deposits

1,107,129

1,523

0.55

912,330

823

0.36

Borrowings and repurchase agreements

43,935

180

1.63

36,000

140

1.52

Total

interest-bearing liabilities

1,151,064

1,703

0.59

948,330

963

0.40

Non-interest bearing demand deposits

655,853

564,928

Other non-interest-bearing liabilities

34,586

33,156

Total

liabilities

1,841,503

1,546,414

Stockholders' equity

185,288

195,009

Total

liabilities and stockholders' equity

2,026,791

1,741,423

Net interest income

16,774

13,471

Net interest spread

(5)

3.23

3.03

Net interest margin

(6)

3.47

3.19

(1)

Average balances - Daily average balances are used

to calculate yields/rates.

(2)

Annualized.

(3)

Average loan balances include non-accrual loans. Interest income

on loans includes accretion of deferred

loan fees, net of deferred loan costs.

(4)

At fair value except for securities held to maturity. Includes FHLB stock.

(5)

Net interest spread is the average yield on

total interest-earning assets minus the average

rate on total interest-bearing liabilities.

(6)

Net interest margin is the ratio of net interest

income to average total interest-earning assets.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Nine Months Ended September 30,

2022

2021

Average

Balance

(1)

Interest

Yield/Rate

(2)

Average

Balance

(1)

Interest

Yield/Rate

(2)

Assets

Interest-earning assets:

Loans

(3)

1,302,909

42,989

4.41

1,101,782

35,944

4.30

Investment securities

(4)

484,489

7,040

1.94

374,318

5,670

2.02

Other interest-earnings assets

76,655

474

0.83

96,561

0.11

Total

interest-earning assets

1,864,053

50,503

3.62

1,572,661

41,691

3.50

Non-interest earning assets

105,914

86,407

Total

assets

1,969,967

1,659,068

Liabilities and stockholders' equity

Interest-bearing liabilities:

Interest-bearing checking

65,798

0.11

50,971

0.12

Money market and savings accounts

780,564

2,307

0.40

601,550

1,572

0.35

Time deposits

221,504

893

0.54

237,633

1,239

0.70

Total

interest-bearing deposits

1,067,866

3,252

0.30

890,154

2,856

0.43

Borrowings and repurchase agreements

38,788

456

1.57

36,000

415

1.52

Total

interest-bearing liabilities

1,106,654

3,708

0.45

926,154

3,271

0.47

Non-interest bearing demand deposits

642,396

528,035

Other non-interest-bearing liabilities

29,608

26,954

Total

liabilities

1,778,658

1,481,143

Stockholders' equity

191,309

177,925

Total

liabilities and stockholders' equity

1,969,967

1,659,068

Net interest income

46,795

38,420

Net interest spread

(5)

3.17

3.03

Net interest margin

(6)

3.36

3.22

(1)

Average balances - Daily average balances are used

to calculate yields/rates.

(2)

Annualized.

(3)

Average loan balances include non-accrual loans. Interest income

on loans includes accretion of deferred loan

fees, net of deferred loan costs.

(4)

At fair value except for securities held to maturity. Includes FHLB stock.

(5)

Net interest spread is the average yield on

total interest-earning assets minus the average

rate on total interest-bearing liabilities.

(6)

Net interest margin is the ratio of net interest

income to average total interest-earning assets.

Three months ended September 30, 2022 compared to the three months

ended September 30, 2021

Net interest income before the provision

for credit losses was $16.8 million

for the three months ended

September 30,

2022, an

increase

$3.3 million

24.5%,

from

$13.5 million

for

the same

period in

This

increase

was

primarily

attributable to higher income from larger loan and investment portfolios

combined with an increase in the weighted average

loan yield.

Included with loan interest income are PPP interest and loan fees totaling $145

thousand and $1.1 million for the three

months ended

September 30,

2022 and

2021, respectively

PPP loan

fees are

recognized upon

loan forgiveness

by the

SBA.

Net interest margin

increased to 3.47%

for the quarter

ended September 30,

2022 from 3.19%

for the same

period in

This increase was primarily due to the yields

for loans and other interest-earning assets increasing.

Nine Months Ended September 30, 2022 compared to nine months ended

September 30, 2021

Net interest income before the provision for credit losses

was $46.8 million for the nine months

ended September 30, 2022,

an increase of $8.4 million

or 21.8%, from $38.4 million

for the same period in

This increase was

primarily attributable

to higher income from larger loan and investment portfolio

Included with loan interest income are

PPP interest and loan fees totaling $1.6

million and $3.5 million for the

nine months

ended September 30, 2022 and 2021, respectively. PPP loan fees are recognized

upon loan forgiveness by the SBA.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Net interest

margin increased to

3.36% at September 30,

2022 from 3.22%

for the

same period in

yield on interest

earnings assets increased 12 bps, with a decrease of

2 bps in interest-bearing liability rates.

Provision for Credit Losses

The ACL

represents probable incurred losses in our portfolio. We maintain an adequate ACL

that can mitigate probable

losses inherent

in the

loan portfolio.

The ACL is increased

by the

provision for

credit losses

and is

decreased by

charge-

offs,

net

recoveries

prior

loan

charge-offs.

There

are

multiple

credit

quality

metrics

that

use

base

our

determination of

the amount

of the

ACL and

corresponding

provision for

credit losses.

These credit

metrics evaluate

the

credit

quality

and

level

credit

risk

inherent

our

loan

portfolio,

assess

non-performing

loans

and

charge-offs

levels,

considers statistical and historical trends and economic conditions

and other applicable factors.

Three months ended September 30, 2022 compared to the three months

ended September 30, 2021

The

provision

for

credit

loss

was

$910

thousand

for

the

three

months

ended

September 30,

2022

compared

provision

recorded

for

the

same

period

2021.

The

primary

driver

the

provision

expense

the

2022

period

was

attributable to loan growth.

Nine Months Ended September 30, 2022 compared to nine months ended

September 30, 2021

The provision for

credit loss was

$1.6 million for

the nine months

ended September 30, 2022

compared to a

net recovery

of $160 thousand for the same period in 2021. The primary driver of the provision expense was attribut

able to loan growth.

The ACL as a percentage of total loans decreased

to 1.16% at September 30,

2022 compared to 1.27%

at September 30,

2021 due to the growth of the loan portfolio.

See “Allowance for Credit Losses” below for further discussion

on how the ACL is calculated.

Non-Interest Income

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

accounts. We also generate

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

programs. In addition, we own and are beneficiaries of the life

insurance policies

on some

of our

employees and

generate income

on the

increase in

the cash

surrender value

of these

policies.

The following table presents the components of non-interest

income for the dates indicated (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Service fees

934

856

2,917

2,648

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

(558)

(70)

(540)

179

Gain on sale of loans held for sale, net

330

532

686

1,519

Loan settlement

2,500

161

2,500

Other non-interest income

1,083

399

2,127

1,208

Total

non-interest income

1,789

4,217

5,351

8,054

Three months ended September 30, 2022 compared to the three months

ended September 30, 2021

Non-interest income

for the

three months

ended September 30,

2022 decreased

$2.4 million

or 57.7%,

compared to

the same period in

This decrease was

primarily driven by a

non-recurring $2.5 million

default interest recovery

from

a prior

lending customer

of the Bank.

The loan

was originated

in 2008

and subsequently

went through

many iterations

credit collection. This payment reflects the final payment and settlement

of lien judgements against the customer.

Nine Months Ended September 30, 2022 compared to nine months ended

September 30, 2021

Non-interest income for the nine months ended September 30, 2022 decreased $2.7 million or

33.6%, compared to the

same period

in 2021.

This decrease

was primarily

driven by

a non-recurring

$2.5 million

default interest

recovery from

prior lending customer of the Bank, as discussed above.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Non-Interest Expense

The following table presents the components of non-interest

expense for the dates indicated (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Salaries and employee benefits

6,075

5,313

17,863

15,804

Occupancy

1,281

1,192

3,802

3,990

Regulatory assessment and fees

269

317

708

690

Consulting and legal fees

604

357

1,519

915

Network and information technology services

488

358

1,323

1,198

Other operating

1,415

1,470

4,080

3,761

Total

non-interest expense

10,132

9,007

29,295

26,358

Three months ended September 30, 2022 compared to the three months

ended September 30, 2021

Non-interest expense

for the

three months

ended September 30,

2022 increased

$1.1 million

or 12.5%,

compared to

the same period in 2021. The increase

was primarily driven by higher salaries

and employee benefits expense

due to new

hires and increased salary compensation.

Nine Months Ended September 30, 2022 compared to nine months ended

September 30, 2021

Non-interest expense for the nine months

ended September 30, 2022 increased $2.9 million or

11.1%, compared to the

same period in 2021.

The increase was primarily driven by

higher salaries and employee benefits expense

due to new hires

and increased salary compensation.

Provision for Income Tax

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

and expenses for

income tax purposes.

Therefore, future

decisions on the

investments we choose

will affect our

effective

tax rate.

The cash

surrender value

of bank-owned

life insurance

policies covering

key employees,

purchasing municipal

bonds, and overall levels of taxable income will be important

elements in determining our effective tax rate.

Three months ended September 30, 2022 compared to the three months

ended September 30, 2021

Income tax

expense for

the three

months ended

September 30, 2022

decreased to

$2.0 million

from $2.1 million

for

the same period

in 2021. The

effective tax

rate for the

three months

ended September 30,

2022 was

26.1% compared

24.1% for the same period in 2021.

Nine Months Ended September 30, 2022 compared to nine months ended

September 30, 2021

Income tax expense for the

nine months ended September 30,

2022 increased to $5.5

million from $4.8 million for

the

same period

in 2021.

The Company’s

effective tax

rate was

26.0% for

the 2022

period compared

to 23.9%

for the

same

period in 2021.

For

further

discussion

income

taxes,

see

Note

“Income

Taxes”

the

unaudited

Consolidated

Financial

Statements in this Form 10-Q.

Analysis of Financial Condition

Total

assets at September 30,

2022 were $2.0 billion,

an increase of $183.5

million, or 9.9%, over

total assets of $1.9

billion

December 31,

2021.

Total

loans

increased

$241.4

million,

20.3%,

$1.4

billion

September 30,

2022

compared

$1.2

billion

December 31,

2021.

Total

deposits

increased

$206.3

million,

13.0%,

$1.8

billion

September 30, 2022 compared to December 31, 2021.

Investment Securities

The investment portfolio

is used and

managed to provide

liquidity through cash

flows, marketability

and, if necessary,

collateral for

borrowings. The

investment portfolio

is also

used as

a tool

to manage

interest rate

risk and

the Company’s

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

capital

market

risk

exposure.

The

philosophy

the

portfolio

maximize

the

Company’s

profitability

taking

into

consideration the Company’s

risk appetite and

tolerance, manage

the asset composition

and diversification,

and maintain

adequate risk-based capital ratios.

The

investment

portfolio

managed

accordance

with

the

Asset

and

Liability

Management

(“ALM”)

policy,

which

includes

investment

guidelines,

approved

the

Board.

Such

policy

reviewed

least

annually

frequently

deemed necessary,

depending on

market

conditions

and/or

unexpected

events.

The investment

portfolio

composition

subject to change

depending on the

funding and liquidity

needs of

the Company, and the interest

risk management objective

directed

the

ALCO.

The

portfolio

investments

also

can

used

modify

the

duration

the

balance

sheet.

The

allocation of cash into securities takes into consideration anticipated

future cash flows (uses and sources) and all available

sources of credit.

Our investment portfolio consists

primarily of securities issued

by U.S. government-sponsored agencies,

U.S.

agency

mortgage-backed securities,

collateralized mortgage

obligation securities,

municipal securities,

and other

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. Some

of these

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,

Treasurer,

and the ALCO

of the Company

to ensure an

appropriate risk and

return profile as

well as for

adherence to the

investment policy.

During the

quarter ended

September 30, 2022

and year

ended December 31,

2021, the

Company transferred,

at fair

value, $63.8 million and $68.7 million, respectively, of securities from available-for-sale (“AFS”) to held-to-maturity (“HTM”).

The

net

unrealized

losses

$10.6

million

and

net

unrealized

gains

$1.1 million,

respectively,

remained

accumulated

other

comprehensive

income

(“AOCI”)

and

are

being

amortized

over

the

remaining

life

the

transferred

securities. No gains or losses were recognized to income at

transfer date.

The book value of the AFS securities is adjusted monthly

for unrealized gain or loss as a valuation allowance,

and any

gain

loss

reported

after-tax

basis

component

other

comprehensive

income

stockholders’

equity.

Periodically,

may

need

assess

whether

there

have

been

any

events

unexpected

economic

circumstances

indicate that

a security

on which

there is

an unrealized

loss is

impaired on

an other-than-temporary

basis (“OTTI”).

If the

impairment

deemed

permanent,

analysis

then

made

considering

many

factors,

including

the

severity

and

duration of the impairment, the severity

of the event, our intent and

ability to hold the security for a

period of time sufficient

for a

recovery in

value, recent

events specific

to the

issuer or

industry,

any related

credit events,

and for

debt securities,

external

credit

ratings

and

recent

downgrades

deterioration

credit

quality.

Securities

which

there

unrealized loss

that is

deemed to

be OTTI

are written

down to

fair value,

with the

write-down recorded

as a

realized loss

under line item

“Gain (loss) on

sale of securities

available-for-sale,

net” of the Consolidated

Statements of Operations.

of September 30,

2022, there

are no

securities

which management

has classified

as OTTI.

For further

discussion

of our

analysis

impaired

investment

securities

for

OTTI,

see

Note 2

“Investment

Securities”

the

unaudited

Consolidated

Financial Statements in this Form 10-Q.

AFS and

HTM investment

securities decreased

$96.8 million or

18.5% to

$427.4 million at

September 30, 2022

from

$524.2 million

at December

31, 2021.

Investment

securities

decreased

due to

payments received

and

higher unrealized

losses.

Management

reinvested

excess

cash

balances

into

high

credit

quality

investments

increase

the

Company’s

profitability

and

modify

the

Company’s

balance

sheet

duration

according

the

ALM

policy.

September 30,

2022,

corporate

bond

securities

with

market

value

$39.1 million

were

pledged

secure

public

deposits.

The

investment

portfolio does not have any tax-exempt securities.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

The

following

table

presents

the

amortized

cost

and

fair

value

investment

securities

for

the

dates

indicated

(in

thousands):

September 30, 2022

December 31, 2021

Available-for-sale:

Amortized

Cost

Fair Value

Amortized

Cost

Fair Value

U.S. Government Agency

10,400

9,028

10,564

10,520

Collateralized mortgage obligations

121,760

100,048

160,506

156,829

Mortgage-backed securities - residential

92,649

76,707

120,643

118,842

Mortgage-backed securities - commercial

30,818

26,935

49,905

50,117

Municipal securities

25,104

18,629

25,164

24,276

Bank subordinated debt securities

14,503

13,562

27,003

28,408

Corporate bonds

4,039

3,662

12,068

12,550

299,273

248,571

405,853

401,542

Held-to-maturity:

U.S. Government Agency

45,243

39,439

34,505

33,904

Collateralized mortgage obligations

70,424

63,651

44,820

43,799

Mortgage-backed securities - residential

40,574

35,730

26,920

26,352

Mortgage-backed securities - commercial

11,483

10,967

3,103

3,013

Corporate bonds

11,141

9,952

13,310

13,089

178,865

159,739

122,658

120,157

The following

table shows

the weighted

average yields,

categorized by

contractual maturity,

for investment

securities

as of September 30, 2022 (in thousands,

except ratios):

Within 1 year

After 1 year through

5 years

After 5 years through

10 years

After 10 years

Total

Amortized

Cost

Yield

Amortized

Cost

Yield

Amortized

Cost

Yield

Amortized

Cost

Yield

Amortized

Cost

Yield

Available-for-sale:

U.S. Government Agency

0.00%

10,400

2.03%

10,400

2.03%

U.S. Treasury

0.00%

Collateralized mortgage obligations

0.00%

121,760

1.50%

121,760

1.50%

MBS - residential

0.00%

92,649

1.62%

92,649

1.62%

MBS - commercial

0.00%

30,818

1.90%

30,818

1.90%

Municipal securities

0.00%

1,000

2.05%

24,104

1.72%

25,104

1.73%

Bank subordinated debt securities

0.00%

14,503

4.57%

0.00%

14,503

4.57%

Corporate bonds

0.00%

4,039

2.50%

0.00%

4,039

2.50%

4,039

15,503

279,731

299,273

1.78%

Held-to-maturity:

U.S. Government Agency

0.00%

7,896

1.03%

20,342

1.45%

17,005

2.03%

45,243

1.59%

Collateralized mortgage obligations

0.00%

70,424

1.66%

70,424

1.66%

MBS - residential

0.00%

1,337

2.98%

9,204

1.61%

30,033

1.72%

40,574

1.74%

MBS - commercial

0.00%

3,092

1.62%

8,391

1.69%

11,483

1.67%

Corporate bonds

1,522

2.25%

9,619

2.79%

0.00%

11,141

2.71%

1,522

18,852

32,638

125,853

178,865

1.73%

Loans

Loans are the

largest category of

interest-earning assets

on the unaudited

Consolidated Balance

Sheets, and usually

provide

higher

yields

than

the

remainder

the

interest-earning

assets.

Higher

yields

typically

carry

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.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

The following table shows the loan portfolio composition

as of the dates indicated (in thousands):

September 30, 2022

December 31, 2021

Total

Percent of

Total

Percent of

Total

Residential Real Estate

186,551

13.0

201,359

16.9

Commercial Real Estate

928,531

64.9

704,988

59.2

Commercial and Industrial

121,145

8.5

146,592

12.3

Foreign Banks

94,450

6.6

59,491

5.0

Consumer and Other

100,845

7.0

79,229

6.6

Total

gross loans

1,431,522

100.0

1,191,659

100.0

Less: Deferred fees (cost)

1,578

Total

loans net of deferred fees (cost)

1,431,513

1,190,081

Less: Allowance for credit losses

16,604

15,057

Total

net loans

1,414,909

1,175,024

Total

loans

increased

$241.4 million

20.3%

September 30,

2022

compared

December 31,

2021.

The

commercial real estate

and to

a lesser

extent, foreign banks

and consumer and

other loan

segments had the

most significant

growth partially offset

by declines in

the commercial and

industrial and residential

real estate loan

segments. Commercial

and industrial loans declined primarily because of continuing

PPP loan forgiveness.

Our

loan

portfolio

continues

grow,

with

commercial

real

estate

lending

the

primary

focus

which

represented

approximately 64.9% of the total

gross loan portfolio as of

September 30, 2022. We do

not expect any significant changes

over the foreseeable

future in

the composition

of our

loan portfolio

or in

our emphasis

on commercial

real estate

lending.

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

in which we operate and of our strategic plan as

approved by the Board.

Most of the

commercial real estate

exposure represents

loans to commercial

businesses secured

by owner-occupied

real estate.

The growth

experienced in

recent years

is primarily

due to

implementation of

our relationship-based

banking

model and

the success

of our

relationship managers

in competing

for new

business

in a

highly competitive

metropolitan

area. Many

of our

larger loan

clients have

long-term relationships

with members

of our

senior management

team or

our

relationship managers that date back to former institutions.

From a

liquidity perspective,

our loan

portfolio provides

us with

additional

liquidity due

to repayments

or unexpected

prepayments.

The

following

table

shows

maturities

and

sensitivity

interest

rate

changes

for

the

loan

portfolio

September 30, 2022 (in thousands):

Due in 1 year or

less

Due in 1 to 5

years

Due after 5 to 15

years

Due after 15

years

Total

Residential Real Estate

10,603

12,527

82,484

80,937

186,551

Commercial Real Estate

39,073

204,811

672,940

11,707

928,531

Commercial and Industrial

12,219

26,366

41,570

40,990

121,145

Foreign Banks

94,450

Consumer and Other

2,522

2,552

6,480

89,291

100,845

Total

gross loans

158,867

246,256

803,474

222,925

1,431,522

Interest rate sensitivity:

Fixed interest rates

130,707

162,789

151,089

115,904

560,489

Floating or adjustable rates

28,160

83,467

652,385

107,021

871,033

Total

gross loans

158,867

246,256

803,474

222,925

1,431,522

The information

presented

in the

table above

is based

upon the

contractual

maturities of

the individual

loans, which

may be

subject to

renewal at

their contractual

maturity.

Renewals will

depend on

approval by

our credit

department and

balance sheet

composition at the

time of

the analysis,

as well

as any

modification of terms

at the

loan’s maturity. Additionally,

maturity

concentrations,

loan

duration,

prepayment

speeds

and

other

interest

rate

sensitivity

measures

are

discussed,

reviewed, and analyzed by the ALCO. Decisions on term

rate modifications are discussed as well.

As of

September 30, 2022,

approximately 60.8%

of the

loans have

adjustable/variable

rates and

39.2% of

the loans

have fixed rates. The adjustable/variable rate loans re-price to different benchmarks

and tenors in different periods of time.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

By contractual characteristics,

there are no material concentrations

on anniversary repricing. Additionally,

it is important to

note that

most of

our loans have

interest rate floors.

This embedded option

protects the Company

from a decrease

in interest

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

rates.

Asset Quality

Our asset quality grading

analysis estimates the capability of

the borrower to repay

the contractual obligation of

the loan

agreement as scheduled or at all. The Company’s internal credit risk grading system is based on experiences with similarly

graded loans. Internal credit

risk grades are reviewed

at least once a

year, and

more frequently as

needed. Internal credit

risk ratings

may change

based on

management’s

assessment of

the results

from the

annual review,

portfolio monitoring,

and other developments observed with borrowers.

The internal credit risk grades used by the Company to

assess the credit worthiness of a loan are shown below:

Pass

– Loans indicate different levels of satisfactory

financial condition and performance.

Special Mention

– Loans classified as special mention have a potential weakness

that deserves management’s

close attention. If left uncorrected, these potential weaknesses

may result in deterioration of the repayment

prospects for the loan or of the institution’s

credit position at some future date.

Substandard

– Loans classified as substandard are inadequately protected

by the current net worth and paying

capacity of the obligator or of the collateral pledged, if

any. Loans so classified

have a well-defined weakness or

weaknesses that jeopardize the liquidation of the debt.

They are characterized by the distinct possibility that the

institution will sustain some loss if the deficiencies are

not corrected.

Doubtful

– 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.

Loss

– Loans classified as loss are considered uncollectible.

Loan credit exposures by internally assigned grades are

as follows for the dates indicated (in thousands):

September 30, 2022

Pass

Special Mention

Substandard

Doubtful

Total

Residential Real Estate

186,551

Commercial Real Estate

928,131

400

928,531

Commercial and Industrial

120,806

339

121,145

Foreign Banks

94,450

Consumer and Other

100,642

203

100,845

1,430,580

942

1,431,522

December 31, 2021

Pass

Special Mention

Substandard

Doubtful

Total

Residential Real Estate

196,778

4,581

201,359

Commercial Real Estate

703,349

1,222

417

704,988

Commercial and Industrial

146,039

553

146,592

Foreign Banks

59,491

Consumer and Other

79,005

224

79,229

1,184,662

1,222

5,775

1,191,659

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Non-Performing Assets

The following table presents non-performing assets as

of the dates shown (in thousands,

except ratios):

September 30, 2022

December 31, 2021

Non-accrual loans, less non-accrual TDR loans

1,190

Non-accrual TDRs

Loans past due over 90 days and still accruing

Total

non-performing loans

1,190

Other real estate owned

Total

non-performing assets

1,190

Asset quality ratios:

Allowance for credit losses to total loans

1.16%

1.27%

Allowance for credit losses to non-performing loans

1,265%

Non-performing loans to total loans

0.10%

Non-performing

assets include

all loans

categorized as

non-accrual or

restructured,

impaired securities,

non-accrual

troubled debt restructuring

(“TDRs”), other real

estate owned (“OREO”)

and other repossessed

assets. Problem

loans for

which the collection

or liquidation

in full

is reasonably

uncertain are

placed on

a non-accrual

status. This

determination is

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

the borrower. When the collection of

the full contractual

balance is unlikely,

the loan is

placed on non-accrual

to avoid overstating

the Company’s

income for a

loan with increased credit risk.

If the

principal or

interest on

a commercial

loan becomes

due and

unpaid for

90 days

or more,

the loan

is placed

non-accrual status as of

the date it becomes

90 days past due

and remains in non-accrual

status until it meets

the criteria

for restoration to accrual status.

Residential loans, on

the other hand, are placed

on non-accrual status when

the principal

or interest

becomes due

and unpaid

for 120

days or

more and

remains in

non-accrual status

until it

meets the

criteria for

restoration

accrual

status.

Restoring

loan

accrual

status

possible

when

the

borrower

resumes

payment

all

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.

A TDR is

a debtor

that is experiencing

financial difficulties

and to whom

the Company grants

a loan concession.

This

determination is performed during the annual review process

or whenever problems surface regarding the client’s ability

repay in

accordance with

the original

terms of

the loan

or line

of credit.

In general,

a borrower

that can

obtain funds

from

sources other than the Company at market interest rates at or near those for non-troubled debt is not involved in a troubled

debt restructuring.

The concessions

are given

to the

debtor in

various

forms,

including interest

rate reductions,

principal

forgiveness,

extension

maturity

date,

waiver,

deferral

payments

and

other

concessions

intended

minimize

potential losses.

The following tables present performing and non-performing

TDRs at the dates indicated (in thousands):

September 30, 2022

December 31, 2021

Accrual Status

Non-Accrual

Status

Total TDRs

Accrual Status

Non-Accrual

Status

Total TDRs

Residential real estate

7,257

7,815

Commercial real estate

586

696

Commercial and industrial

141

Consumer and other

203

224

Total

8,138

8,876

The Company allocated $309 thousand and $360

thousand of specific allowance for TDR loans

at September 30, 2022

and December 31, 2021, respectively. There was no commitment to lend additional funds to these TDR

customers at either

date.

During

the

quarter

ended

September 30,

2022

and

2021,

there

were

defaults

TDR

loans

within

the

prior

months. Additionally,

the Company did

not have any

new TDR loans

during the three

months ended September

30, 2022

and 2021.

For further discussion

on non-performing loans,

see Note 3

“Loans” to the

unaudited Consolidated Financial Statements

on this Form 10-Q.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Allowance for Credit Losses

determining

the

balance

the

allowance

account,

loans

are

pooled

product

segments

with

similar

risk

characteristics and management

evaluates the ACL on

each segment and on

a regular basis to maintain

the allowance at

adequate

level

based

factors

which,

management’s

judgment,

deserve

current

recognition

estimating

credit

losses.

Such

factors

include

changes

prevailing

economic

conditions,

historical

loss

experience,

delinquency

trends,

changes in the composition and size of the loan portfolio

and the overall credit worthiness of the borrowers.

Additionally,

qualitative adjustments

are made to

the ACL when,

based on management’s

judgment, there are

factors

impacting the allowance estimate not considered by the

quantitative calculations.

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

type for the periods indicated (in thousands):

Residential

Real Estate

Commercial

Real Estate

Commercial

and Industrial

Foreign

Banks

Consumer

and Other

Total

Three Months Ended September 30, 2022

Beginning balance

2,366

9,290

2,671

651

808

15,786

Provision for credit losses

(1,009)

695

1,126

910

Recoveries

Charge-offs

(88)

(5)

(93)

Ending Balance

1,358

9,985

3,709

725

827

16,604

Average loans

190,757

887,000

119,993

94,628

106,382

1,398,761

Net charge-offs to average loans

0.00%

0.29%

0.00%

0.02%

0.03%

Nine Months Ended September 30, 2022

Beginning balance

2,498

8,758

2,775

457

569

15,057

Provision for credit losses

(1,157)

1,227

1,011

268

266

1,615

Recoveries

Charge-offs

(16)

(88)

(11)

(115)

Ending Balance

1,358

9,985

3,709

725

827

16,604

Average loans

195,863

809,411

128,625

77,237

91,773

1,302,909

Charge-offs

-0.02%

0.00%

0.12%

0.00%

0.02%

0.01%

Residential

Real Estate

Commercial

Real Estate

Commercial

and Industrial

Foreign

Banks

Consumer

and Other

Total

Three Months Ended September 30, 2021

Beginning balance

2,540

8,752

2,467

554

535

14,848

Provision for credit losses

(787)

719

277

(29)

(180)

Recoveries

3.00

Charge-offs

(2)

Ending Balance

1,801

9,471

2,747

525

356

14,900

Average loans

218,295

690,923

170,874

51,538

12,645

1,144,275

Net charge-offs to average loans

-0.09%

0.00%

-0.01%

0.00%

-0.03%

-0.02%

Nine Months Ended September 30, 2021

Beginning balance

3,408

9,453

1,689

348

188

15,086

Provision for credit losses

(1,434)

904

177

175

(160)

Recoveries

154

215

Charge-offs

(229)

(12)

(241)

Ending Balance

1,801

9,471

2,747

525

356

14,900

Average loans

217,511

648,692

156,985

49,974

28,620

1,101,782

Net charge-offs to average loans

0.16%

0.00%

-0.20%

0.00%

0.05%

0.00%

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Bank-Owned Life Insurance

As of September 30,

2022, the combined

cash surrender

value of all

bank-owned life

insurance (“BOLI”)

policies was

$42.5

million.

Changes

cash

surrender

value

are

recorded

non-interest

income

the

unaudited

Consolidated

Statements of Operations. The Company had BOLI policies with five insurance carriers. The Company is the beneficiary of

these policies.

Deposits

Customer deposits are the

primary funding source for

the Bank’s growth.

Through our network of

banking centers, we

offer a competitive array of deposit

accounts and treasury management services designed

to meet our customers’ business

needs.

Our

primary

deposit

customers

are

small-to-medium

sized

businesses

(“SMBs”),

and

the

personal

business

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

relationships of the employees of these businesses.

The following table

presents the daily

average balance and

average rate paid

on deposits by

category for

the periods

presented (in thousands, except ratios):

Three Months Ended September 30,

2022

2021

Average Balance

Average Rate

Paid

Average Balance

Average Rate

Paid

Non-interest-bearing checking

655,853

0.00%

564,928

0.00%

Interest-bearing checking

66,585

0.11%

55,621

0.11%

Money market and savings deposits

823,521

0.55%

627,654

0.32%

Time deposits

217,023

0.66%

229,055

0.53%

Total

1,762,982

0.34%

1,477,258

0.22%

The

uninsured

deposits

are

estimated

based

the

FDIC

deposit

insurance

limit

$250 thousand

for

all

deposit

accounts

the

Bank

per

account

holder.

Total

estimated

uninsured

deposits

were

$1.1 billion

and

$897.8 million

September 30, 2022 and December 31, 2021, respectively.

The following table shows

scheduled maturities of uninsured time deposits as of September

30, 2022 (in thousands):

September 30, 2022

Three months or less

23,451

Over three through six months

27,044

Over six though twelve months

27,134

Over twelve months

24,555

102,184

Other Liabilities

The Company collects from commercial loan customers

funds which are held in escrow for future payment of

real

estate taxes and insurance. These escrow funds are disbursed

by the Company directly to the insurance companies

and

taxing authority of the borrower.

Escrow funds are recorded as other liabilities.

As of September 30, 2022 escrow balances totaled $15.3 million

compared to $4.0 million at December 31, 2021.

Borrowings

As a member

of the FHLB,

we are eligible

to obtain

advances with

various terms

and conditions.

This accessibility

additional funding allows us to efficiently and timely meet both expected

and unexpected outgoing cash flows and collateral

needs without adversely affecting either daily operations

or the financial condition of the Company.

As of

September 30,

2022, we

had $26.0

million

of fixed-rate

advances

outstanding

from the

FHLB with

a weighted

average rate of 1.39%.

Maturity dates for the

advances are between

third quarter 2023

and third quarter

2025 as detailed

in the table below.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

The following table presents the FHLB fixed rate advances

as of September 30, 2022 (in thousands):

Interest Rate

Type of Rate

Maturity Date

Amount

2.05%

Fixed

March 27, 2025

10,000

1.07%

Fixed

July 18, 2025

6,000

1.04%

Fixed

July 30, 2024

5,000

0.81%

Fixed

August 17, 2023

5,000

26,000

have

also

established

Fed

Funds

lines

credit

with

our

upstream

correspondent

banks

manage

temporary

fluctuations in our daily cash balances. As of September 30, 2022, there were no outstanding balances with the Fed Funds

lines of credit.

Off-Balance Sheet Arrangements

We engage

in various financial

transactions in

our operations

that, under GAAP,

may not be

included on

the balance

sheet. To

meet the financing needs

of our customers we may

include commitments to extend

credit and standby

letters of

credit. To

a varying

degree, such

commitments involve

elements of

credit, market,

and interest

rate risk

in excess

of the

amount recognized

in the

balance sheet.

We use

more conservative

credit and

collateral policies

in making

these credit

commitments than

we do

for on-balance

sheet items.

We are

not aware

of any accounting

loss to

be incurred

by funding

these commitments;

however,

maintain

allowance

for

off-balance

sheet

credit

risk

which

is recorded

under

other

liabilities on the unaudited Consolidated Balance Sheets.

Since commitments associated with letters of

credit and commitments to extend

credit may expire unused, the

amounts

shown

not

necessarily

reflect

actual

future

cash

funding

requirements.

The

following

table

presents

lending

commitments outstanding as of the dates indicated (in thousands

September 30, 2022

December 31, 2021

Commitments to grant loans and unfunded lines of credit

119,830

134,877

Standby and commercial letters of credit

5,413

6,420

Total

125,243

141,297

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

established

the

contract,

for

specific

purpose.

Commitments

generally

have

variable

interest

rates,

fixed

expiration

dates or

other

termination

clauses

and

may require

payment

a fee.

Since many

of the

commitments

are

expected to

expire without being

fully drawn, the

total commitment

amounts disclosed

above do not

necessarily represent

future cash

requirements.

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

in credit risk in our portfolio. Lines

of credit generally have variable interest

rates. The maximum potential amount

of future

payments we could

be required to

make is represented

by the contractual

amount of the

commitment, less

the amount of

any advances made.

Letters of credit are

conditional commitments issued

by us to guarantee

the performance of a

client to a third

party.

the event of nonperformance by

the client in accordance with the

terms of the agreement with the

third party,

we would be

required to fund

the commitment.

If the commitment

is funded, we

would be entitled

to seek recovery

from the client

from

the underlying collateral,

which can include

commercial real estate,

physical plant and

property, inventory, receivables, cash

or marketable securities.

Asset and Liability Management Committee

Members

senior

management

and

our

Board

make

the

asset

and

liability

management

committee,

ALCO.

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.

ALCO

oversees

the

establishment,

approval,

implementation,

and

review

interest

rate

risk,

management,

and

mitigation strategies, ALM related policies, ALCO procedures

and risk tolerances and appetite.

While some degree

of IRR (“Interest

Rate Risk”) is

inherent to the banking

business, we

believe our ALCO

has put in

place sound risk management practices to identify,

quantify, monitor,

and limit IRR exposures.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

When assessing

the scope

of IRR

exposure

and

impact on

the consolidated

balance

sheet, cash

flows and

income

statement,

management

considers

both

earnings

and

economic

impacts.

Asset

price

variations,

deposit

volatility

and

reduced earnings or outright losses could adversely affect

the Company’s liquidity,

performance, and capital adequacy.

Income simulations

are used

to assess

the impact

of changing

rates on

earnings under

different rates

scenarios and

time horizons.

These simulations

utilize both

instantaneous and

parallel changes

in the

level of

interest rates,

as well

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

twists of the yield curve.

Static simulation models are

based on current exposures and

assume a constant balance sheet with

no new growth. Dynamic simulation analysis

is also

utilized to have a

more comprehensive assessment

on IRR. This simulation

relies on detailed

assumptions outlined in

our

budget and strategic plan, and in assumptions regarding changes in

existing lines of business, new business, management

strategies and client expected behavior.

have

complete

picture

IRR,

the

Company

also

evaluates

the

economic

value

equity

(“EVE”).

This

assessment

allows

measure

the

degree

which

the

economic

values

will

change

under

different

interest

rate

scenarios (parallel and non-parallel). The economic value approach focuses on a longer-term time horizon and captures all

future cash flows expected

from existing assets and

liabilities. The economic value

model utilizes a static

approach in that

the analysis

does not

incorporate new

business; rather,

the analysis

shows a

snapshot in

time of

the risk

inherent in

the

balance sheet.

Market and Interest Rate Risk Management

According to our last

ALCO model run as

of September 30, 2022,

we are net interest

income neutral for year

one and

asset-sensitive

for

year

two. This

indicates

that for

year

one,

our net

interest

income

fluctuations

will be

minimal due

changes

in interest

rates

and

for year

two,

that

our assets

generally reprice

faster

than our

liabilities,

which

results

favorable impact to

net interest income

when market

interest rates increase.

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 rate drivers.

Because of the inherent use

of these estimates and

assumptions in the model,

our actual results may,

and most likely

will, differ from static measures results.

In addition, static measures like EVE

do not include actions that management

may

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

ALM strategy

and

policy,

management

has the

ability

to modify

the

balance sheet

either increase

asset

duration

and

decrease liability

duration to reduce

asset sensitivity,

or to decrease

asset duration and

increase liability duration

in order

to increase asset sensitivity.

According to

our model,

as of

September 30, 2022,

NIM will

remain mostly

flat for

year one

and should

increase for

year

two

under

static

rate

scenarios

(-400

basis

points

+400

basis

points).

For

the

static

forecast

year

one,

the

estimated NIM

will remain

stable from

the base

case scenario

a +400

basis points

scenario. Additionally,

utilizing an

EVE

approach,

analyze

the

risk

capital

from

the

effects

various

interest

rate

scenarios

through

long-term

discounted cash

flow model.

This measures

the difference

between the

economic

value of

our assets

and the

economic

value

our

liabilities,

which

proxy

for

our

liquidation

value.

According

our

balance

sheet

composition,

and

expected, our model stipulates

that an increase of

rates will have a

negative impact on

the EVE. Results and

analysis are

presented quarterly to the Board, and strategies are defined.

Liquidity

Liquidity is defined

as a Company’s

capacity to meet

its cash and

collateral obligations at

a reasonable cost.

Maintaining

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

efficiently meet both expected and unexpected cash flow

and collateral needs without adversely affecting

either daily operations or the financial condition of the

Company.

Liquidity risk

is the

risk that

we will

be unable

to meet

our short-term

and long-term

obligations as

they become

due

because of an inability

to liquidate assets or

obtain relatively adequate funding. The

Company’s obligations, and the funding

sources

used

meet

them,

depend

significantly

our

business

mix,

balance

sheet

structure

and

composition,

credit

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

and off-balance sheet obligations.

In managing

inflows and

outflows,

management

regularly

monitors situations

that can

give rise

to increased

liquidity

risk. These

include funding

mismatches, market

constraints on

the ability

to convert

assets (particularly

investments) into

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

and contingent liquidity events.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Changes in macroeconomic conditions, as well as exposure

to credit, market, operational, legal and reputational

risks,

such as

cybersecurity risk,

could have

an unexpected

impact on

the Company’s

liquidity risk

profile and

are factored

into

the assessment of liquidity and the ALM framework.

Management has established

a comprehensive and

holistic management process for

identifying, measuring, monitoring

and

mitigating

liquidity

risk.

Due

its

critical

importance

the

viability

the

Company,

liquidity

risk

management

integrated into our risk management processes,

Contingency Funding Plan and ALM policy.

Critical elements of our liquidity

risk management include: effective corporate governance consisting of

oversight by the

Board and active

involvement of senior

management; appropriate strategies, policies,

procedures, and limits

used to identify

and mitigate liquidity risk; comprehensive liquidity risk measurement and

monitoring systems (including assessments of the

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

business

activities of

the Company;

active management

of intraday

liquidity and

collateral; an

appropriately diverse

mix of

existing

and

potential

future

funding

sources;

adequate

levels

highly

liquid

marketable

securities

free

legal,

regulatory,

operational

impediments,

that

can

used

meet

liquidity

needs

stressful

situations;

comprehensive

contingency

funding plans

that sufficiently address

potential adverse liquidity

events and emergency

cash flow

requirements; and internal

controls

and

internal

audit

processes

sufficient

determine

the

adequacy

the

institution’s

liquidity

risk

management

process.

expect

funds

available

from

several

basic

banking

activity

sources,

including

the

core

deposit

base,

the

repayment and maturity of loans and investment security

cash flows. Other potential funding sources include

federal funds

purchased, brokered certificates

of deposit, listing

certificates of deposit,

and borrowings

from the FHLB.

Accordingly,

our

liquidity

resources

were

adequate

fund

loans

and

meet

other

cash

needs

necessary.

not

expect

liquidity

resources to be compromised at this time.

Capital Adequacy

As of

September 30,

2022, the

Bank was

well capitalized

under the

FDIC’s

prompt corrective

action framework.

also follow the capital conservation buffer framework, and

as of September 30, 2022, we exceeded the

capital conversation

buffer in all capital ratios,

according to our actual ratios. The

following table presents the capital ratios

for both the Company

and the Bank at the dates indicated (in thousands,

except ratios):

Actual

Minimum Capital

Requirements

To be Well Capitalized

Under Prompt Corrective

Action Provisions

Amount

Ratio

Amount

Ratio

Amount

Ratio

September 30, 2022:

(1)

Total

risk-based capital:

USCB Financial Holdings, Inc.

210,887

13.65

123,613

8.00

154,517

10.00

U.S. Century Bank

209,784

13.58

123,613

8.00

154,517

10.00

Tier 1 risk-based capital:

USCB Financial Holdings, Inc.

194,036

12.56

92,710

6.00

123,613

8.00

U.S. Century Bank

192,933

12.49

92,710

6.00

123,613

8.00

Common equity tier 1 capital:

USCB Financial Holdings, Inc.

194,036

12.56

69,532

4.50

100,436

6.50

U.S. Century Bank

192,933

12.49

69,532

4.50

100,436

6.50

Leverage ratio:

USCB Financial Holdings, Inc.

194,036

9.48

81,829

4.00

102,286

5.00

U.S. Century Bank

192,933

9.43

81,829

4.00

102,286

5.00

December 31, 2021:

(1)

Total

risk-based capital

186,735

14.92

100,125

8.00

125,157

10.00

Tier 1 risk-based capital

171,484

13.70

75,094

6.00

100,125

8.00

Common equity tier 1 capital

171,484

13.70

56,321

4.50

81,352

6.50

Leverage ratio

171,484

9.55

71,825

4.00

89,781

5.00

(1)

As of December 31, 2021, the regulatory capital

ratios for both USCB Financial Holdings, Inc. and

U.S. Century Bank were the same since there

was no activity between both of these entities.

The Company is not subject to regulatory capital

requirements as a small bank holding

company.

Accordingly, the Company's capital ratios are provided for informational purposes

only.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Impact of Inflation

Our

Consolidated

Financial

Statements

and

notes

have

been

prepared

accordance

with

U.S.

GAAP,

which require the measurement of financial

position and operating results in terms

of historical dollars, without considering

the changes in the

relative purchasing power

of money over time

due to inflation. The

impact of inflation is

reflected in the

increased cost of operations.

Unlike most industrial companies,

nearly all our assets and

liabilities are monetary in

nature.

As a result,

interest rates have a

greater impact on our

performance than do the

effects of general levels

of inflation. Periods

of high inflation

are often accompanied

by relatively higher

interest rates, and

periods of low

inflation are accompanied

relatively lower interest rates.

As market interest rates

rise or fall in relation

to the rates earned

on loans and investments,

the

value

these

assets

decreases

increases

respectively.

Inflation

can

also

impact

core

non-interest

expenses

associated with delivering the Company’s services.

Recently Issued Accounting Pronouncements

Recently issued accounting

pronouncements are discussed

in Note 1 “Summary

of Significant Accounting Policies”

the unaudited Consolidated Financial Statements in this

Form 10-Q.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Reconciliation and Management Explanation of Non

-GAAP Financial Measures

Management

has

included

these

non-GAAP

measures

because

believes

these

measures

may

provide

useful

supplemental information

for evaluating

the Company’s

underlying performance

trends. Further,

management uses

these

measures

managing

and

evaluating

the

Company’s

business

and

intends

refer

them

discussions

about

our

operations and performance.

Operating performance

measures should be

viewed in addition

to, and not

as an alternative

to or

substitute

for,

measures

determined

accordance

with

GAAP,

and

are

not

necessarily

comparable

to non-GAAP

measures that may be presented by other

companies. The following table reconciles the non-GAAP financial measurement

of operating net income available

to common stockholders for the periods presented (in thousands,

except per share data):

As of or For the Three Months Ended

9/30/2022

6/30/2022

3/31/2022

12/31/2021

9/30/2021

Pre-Tax Pre-Provision ("PTPP") Income:

Net income

5,558

5,295

4,854

5,650

6,593

Plus: Provision for income taxes

1,963

1,708

1,858

1,751

2,088

Plus: Provision for credit losses

910

705

PTPP income

8,431

7,708

6,712

7,401

8,681

PTPP Return on Average Assets:

PTPP income

8,431

7,708

6,712

7,401

8,681

Average assets

2,026,791

1,968,381

1,913,484

1,828,037

1,741,423

PTPP return on average assets

(1)

1.65%

1.57%

1.42%

1.61%

1.98%

Operating Net Income:

Net income

5,558

5,295

4,854

5,650

6,593

Less: Net gains (losses) on sale of

securities

(558)

(3)

(70)

Less: Tax effect on sale of securities

141

(5)

(9)

Operating net income

5,975

5,297

4,838

5,624

6,646

Operating PTPP Income:

PTPP income

8,431

7,708

6,712

7,401

8,681

Less: Net gains (losses) on sale of

securities

(558)

(3)

(70)

Operating PTPP Income

8,989

7,711

6,691

7,366

8,751

Operating PTPP Return on Average Assets:

Operating PTPP income

8,989

7,711

6,691

7,366

8,751

Average assets

2,026,791

1,968,381

1,913,484

1,828,037

1,741,423

Operating PTPP return on average assets

(1)

1.76%

1.57%

1.42%

1.60%

1.99%

Operating Return on Average Assets:

Operating net income

5,975

5,297

4,838

5,624

6,646

Average assets

2,026,791

1,968,381

1,913,484

1,828,037

1,741,423

Operating return on average assets

(1)

1.17%

1.08%

1.03%

1.22%

1.51%

(1)

Annualized.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

As of or For the Three Months Ended

9/30/2022

6/30/2022

3/31/2022

12/31/2021

9/30/2021

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

(1)

Total stockholders' equity

177,417

180,068

192,039

203,897

201,918

Less: Intangible assets

Less: Preferred stock

Tangible stockholders' equity

177,417

180,068

192,039

203,897

201,918

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

(2)

Class A common shares

20,000,753

19,991,753

18,767,541

Class B common shares

1,224,212

Total common shares issued and outstanding

20,000,753

19,991,753

Tangible book value per common share

(3)

8.87

9.00

9.60

10.20

10.10

Operating net income available to common stockholders:

(1)

Net income

5,558

5,295

4,854

5,650

6,593

Less: Preferred dividends

542

Less: Exchange and redemption of preferred shares

(2)

89,585

Net income (loss) available to common stockholders

5,558

5,295

4,854

5,650

(83,534)

Add back: Exchange and redemption of preferred

89,585

Operating net income avail. to common stock

5,558

5,295

4,854

5,650

6,051

Allocation of operating net income per common

stock class:

Class A common stock

5,558

5,295

4,854

5,650

5,598

Class B common stock

453

Weighted average shares outstanding:

Class A common stock

Basic

20,000,753

19,994,953

18,913,914

15,121,460

Diluted

20,148,208

20,171,261

20,109,783

19,023,686

15,121,460

Class B common stock

Basic

6,121,052

Diluted

6,121,052

Diluted EPS:

(4) (5)

Class A common stock

Net income (loss) per diluted share

0.28

0.26

0.24

0.30

(5.11)

Add back: Exchange and redemption of preferred

5.48

Operating net income per diluted share

0.28

0.26

0.24

0.30

0.37

Class B common stock

Net loss per diluted share

(1.02)

Add back: Exchange and redemption of preferred

1.09

Operating net income per diluted share

0.07

(1)

The Company believes these non-GAAP measurements are

a key indicator of the ongoing earnings power

of the Company.

(2)

During the quarter ended September 30, 2021,

47,473 shares of Class C preferred stock and

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

converted into 10,278,072 shares of Class A common

stock. Additionally, the Bank completed its initial public offering of its Class

A common stock on

July 27, 2021, in which it issued 4,600,000 shares

of Class A common stock. As such, the total

shares issued and outstanding of Class A common stock

was 18,767,541 shares at September 30, 2021.

(3) Excludes the dilutive effect, if any, of shares of common stock issuable

upon exercise of outstanding stock options.

(4)

During the quarter ended September 30, 2021,

basic net loss per share is the same as

diluted net loss per share as the inclusion of all

potential

common shares outstanding would have been antidilutive.

(5)

During the quarter ended December 31, 2021,

the Company entered into agreements with

the Class B shareholders to exchange all

outstanding

Class B non-voting common stock for Class A

voting common stock at a ratio of 1 share of Class

A common stock for each 5 shares of Class B non-

voting common stock. In calculating net income

(loss) per diluted share for the prior quarters

presented, the allocation of operating net income

available

to common stockholders was based on the weighted

average shares outstanding per common share

class to the total weighted average shares

outstanding during each period. The operating net

income allocation was calculated using the weighted

average shares outstanding of Class B common

stock on an as-converted basis.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company,

we are not required to provide the information required

by this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the

supervision and with

the participation of

our management, including

our President and

Chief Executive Officer

and our

Chief Financial

Officer,

we evaluated

the effectiveness

of the

design and

operation of

the Company’s

disclosure

controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under

the Exchange Act) as of September 30, 2022.

Based on that

evaluation, management believes

that the Company’s

disclosure controls and

procedures were effective

collect, process, and disclose the information required to be

disclosed in the reports filed or submitted under the Exchange

Act within the required time periods as of the end of the

period covered by this Form 10-Q.

Changes in Internal Control Over Financial Reporting

There has been

no change in

our internal control

over financial reporting

(as defined in

Rules 13a-15(f) and

15d-15(f)

under the Exchange Act) during the period covered by this Form 10-Q that has

materially affected, or is reasonably likely to

materially affect, our internal control over financial

reporting.

Limitations on Effectiveness of Controls and Procedures

designing

and

evaluating

the

disclosure

controls

and

procedures,

management

recognizes

that

any

controls

and

procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving

the desired control objectives.

In addition, the design

of disclosure controls and

procedures must reflect the

fact that there

are resource constrains and that

management is required to apply

judgment in evaluating the

benefits of possible controls

and procedures relative to their costs.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

PART II

Item 1.

Legal Proceedings

We are not currently subject to any material legal proceedings. We are from time to time subject to claims and litigation

arising

the

ordinary

course

business.

These

claims

and

litigation

may

include,

among

other

things,

allegations

violation of banking and other applicable regulations, competition

law, labor laws and consumer

protection laws, as well as

claims or

litigation

relating

to intellectual

property,

securities, breach

of contract

and tort.

intend to

defend ourselves

vigorously against any pending or future claims and litigation.

Item 1A. Risk Factors

For detailed information about certain risk factors that could materially affect our business, financial

condition, or future

results, see

“Part I,

Item 1A

– Risk

Factors” of

the 2021

Form 10-K.

There have

been no

material changes

from the

risk

factors previously disclosed in the 2021 Form 10-K.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a) None.

(b) Not applicable.

(c)

previously

described

The

Board

adopted

stock

repurchase

program

covering

750,000

Class

common stock.

No shares

were purchased

pursuant to

such program

by the

Company during

the three

and nine

months

ended September 30, 2022.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

Item 6. Exhibits

Exhibit No.

Description of Exhibit

2.1

Agreement and Plan of Share Exchange, dated December 27, 2021, by and between U.S. Century Bank and USCB

Financial Holdings, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K (File No.

001-41196) filed with the Securities and Exchange Commission on December 30, 2021).

3.1

Articles of Incorporation of USCB Financial Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s

Current Report on Form 8-K (File No. 001-41196) filed with the Securities and Exchange Commission on December 30,

2021).

3.2

Amended and Restated Bylaws of USCB Financial Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s

Current Report on Form 8-K (File No. 001-41196) filed with the Securities and Exchange Commission on December 30,

2021).

4.1

Side Letter Agreement, dated December 30, 2021, between USCB Financial Holdings, Inc., U.S. Century Bank, Priam

Capital Fund II, LP, Patriot Financial Partners II, L.P. and Patriot Financial Partners Parallel II, L.P. (incorporated by

reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File No. 001-41196) filed with the Securities and

Exchange Commission on December 30, 2021).

4.2

Registration Rights Agreement, dated March 17, 2015, between U.S. Century Bank, Priam Capital Fund II, LP, Patriot

Financial Partners II, L.P., Patriot Financial Partners Parallel II, L.P., and certain other shareholders of U.S. Century Bank

(incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (File No. 001-41196) filed with the

Securities and Exchange Commission on December 30, 2021).

4.3

Assignment and Assumption of Agreement, dated December 30, 2021, between U.S. Century Bank and USCB Financial

Holdings, Inc. (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K (File No. 001-41196)

filed with the Securities and Exchange Commission on December 30, 2021).

4.4

Description of USCB Financial Holdings, Inc.’s securities (incorporated by reference to Exhibit 4.4 to the Registrant's Annual

Report on Form 10-K (File No. 001-41196) filed with the Securities and Exchange Commission on March 24, 2022)

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

101

The following financial

statements from

the Company’s Quarterly

Report on

Form 10-Q for

the quarter ended

September 30,

2022 formatted

in Inline

XBRL: (i)

Consolidated Balance

Sheets (unaudited),

(ii) Consolidated

Statements of

Operations

(unaudited), (iii) Consolidated

Statements

of Comprehensive

Income (unaudited), (iv)

Consolidated Statements

of Changes

in Stockholders’

Equity (unaudited),

(v) Consolidated

Statements of

Cash Flows

(unaudited), (vi)

Notes to

Consolidated

Financial Statements (unaudited).

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Filed herewith.

Table of Contents

USCB Financial Holdings, Inc.

Q3 2022 Form 10-Q

SIGNATURES

Pursuant to the

requirements of

the Securities

Exchange Act of

1934, the registrant

has duly caused

this report to

signed on its behalf by the undersigned thereunto duly authorized.

USCB FINANCIAL HOLDINGS, INC.

(Registrant)

Signature

Title

Date

/s/ Luis de la Aguilera

President, Chief Executive Officer,

and Director

November 10, 2022

Luis de la Aguilera

(Principal Executive Officer)

/s/ Robert Anderson

Chief Financial Officer

November 10, 2022

Robert Anderson

(Principal Financial Officer and Principal

Accounting Officer)

exhibit311

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act

of 2002

I, Luis de la Aguilera, certify that:

I have reviewed this Quarterly Report on Form

10-Q of USCB Financial Holdings, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact

necessary

make

the

statements

made,

light

the

circumstances

under

which

such

statements

were

made,

not

misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all

material respects

the financial

condition, results

of operations

and cash

flows of

the registrant

as of,

and for,

the periods

presented in this report;

The

registrant’s

other

certifying

officer

and

are

responsible

for

establishing

and

maintaining

disclosure

controls

and

procedures (as defined in Exchange Act Rules 13a-15(e)

and 15d-15(e)) and have:

designed

such

disclosure

controls

and

procedures,

caused

such

disclosure

controls

and

procedures

designed

under

our

supervision,

ensure

that

material

information

relating

the

registrant,

including

its

consolidated subsidiaries, is

made known

to us by

others within those

entities, particularly during

the period in

which

this report is being prepared;

evaluated the effectiveness

of the registrant’s

disclosure controls and

procedures and presented

in this report our

conclusions about the effectiveness of the

disclosure controls and procedures, as of the

end of the period covered

by this report based on such evaluation; and

disclosed in this

report any

change in the

registrant’s internal

control over

financial reporting

that occurred

during

the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that

has

materially

affected,

reasonably

likely

materially

affect,

the

registrant’s

internal

control

over

financial

reporting; and

The registrant’s

other certifying

officer

and I

have disclosed,

based on

our most

recent evaluation

of internal

control over

financial

reporting,

the

registrant’s

auditors

and

the

audit

committee

the

registrant’s

board

directors

(or

persons

performing the equivalent functions):

All

significant

deficiencies

and

material

weaknesses

the

design

operation

internal

control

over

financial

reporting which are

reasonably likely

to adversely affect

the registrant’s ability

to record, process,

summarize and

report financial information; and

Any fraud, whether or not material,

that involves management or other employees who

have a significant role in

the

registrant’s internal control over financial reporting.

/s/ Luis de la Aguilera

Luis de la Aguilera

President and Chief Executive Officer

Date: November 10, 2022

exhibit312

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act

of 2002

I, Robert Anderson, certify that:

I have reviewed this Quarterly Report on Form 10-Q of

USCB Financial Holdings, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact

necessary

make

the

statements

made,

light

the

circumstances

under

which

such

statements

were

made,

not

misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all

material respects

the financial

condition, results

of operations

and cash

flows of

the registrant

as of,

and for,

the periods

presented in this report;

The

registrant’s

other

certifying

officer

and

are

responsible

for

establishing

and

maintaining

disclosure

controls

and

procedures (as defined in Exchange Act Rules 13a-15(e)

and 15d-15(e)) and have:

designed

such

disclosure

controls

and

procedures,

caused

such

disclosure

controls

and

procedures

designed

under

our

supervision,

ensure

that

material

information

relating

the

registrant,

including

its

consolidated subsidiaries, is

made known

to us by

others within those

entities, particularly during

the period in

which

this report is being prepared;

evaluated the effectiveness

of the registrant’s

disclosure controls and

procedures and presented

in this report our

conclusions about the effectiveness of the

disclosure controls and procedures, as of the

end of the period covered

by this report based on such evaluation; and

disclosed in this

report any

change in the

registrant’s internal

control over

financial reporting

that occurred

during

the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that

has

materially

affected,

reasonably

likely

materially

affect,

the

registrant’s

internal

control

over

financial

reporting; and

The registrant’s

other certifying

officer

and I

have disclosed,

based on

our most

recent evaluation

of internal

control over

financial

reporting,

the

registrant’s

auditors

and

the

audit

committee

the

registrant’s

board

directors

(or

persons

performing the equivalent functions):

All

significant

deficiencies

and

material

weaknesses

the

design

operation

internal

control

over

financial

reporting which are

reasonably likely

to adversely affect

the registrant’s ability

to record, process,

summarize and

report financial information; and

Any fraud, whether or not material, that involves

management or other employees who have a significant role

in the

registrant’s internal control over financial reporting.

/s/ Robert Anderson

Robert Anderson

Chief Financial Officer

Date: November 10, 2022

exhibit321

Exhibit 32.1

Certification of Chief Executive Officer Pursuant to

18 U.S.C. Section 1350

as Adopted Pursuant to Section 906 of the Sarbanes

-Oxley Act of 2002

In connection with the Quarterly

Report of USCB Financial Holdings, Inc. (the

“Company”) on Form 10-Q for the

quarter

ended September 30, 2022, as filed

with the Securities and Exchange

Commission on the date hereof

(the “Report”), I, Luis

de la Aguilera, as President

and Chief Executive Officer

of the Company,

certify, to

the best of my knowledge,

pursuant to

18 U.S.C. §1350, as adopted pursuant to Section 906

of the Sarbanes-Oxley Act of 2002, that:

The

Report

fully

complies

with

the

requirements

Section 13(a) or

15(d),

applicable,

the

Securities

Exchange Act of 1934; and

The

information

contained

the

Report

fairly

presents,

all

material

respects,

the

financial

condition

and

results of operations of the Company.

/s/ Luis de la Aguilera

Luis de la Aguilera

President and Chief Executive Officer

Date: November 10, 2022

exhibit322

Exhibit 32.2

Certification of Chief Financial Officer Pursuant to

18 U.S.C. Section 1350

as Adopted Pursuant to Section 906 of the Sarbanes

-Oxley Act of 2002

In connection with the Quarterly

Report of USCB Financial Holdings, Inc. (the

“Company”) on Form 10-Q for the

quarter

ended September

30,

2022,

as filed

with

the

Securities

and

Exchange

Commission

the

date

hereof

(the

“Report”), I,

Robert Anderson,

as Chief

Financial Officer

of the

Company,

certify,

to the

best of

my knowledge,

pursuant to

18 U.S.C.

§1350, as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002, that:

The

Report

fully

complies

with

the

requirements

Section 13(a) or

15(d),

applicable,

the

Securities

Exchange Act of 1934; and

The

information

contained

the

Report

fairly

presents,

all

material

respects,

the

financial

condition

and

results of operations of the Company.

/s/ Robert Anderson

Robert Anderson

Chief Financial Officer

Date: November 10, 2022