10-Q - USCB - Equibles

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

March 31, 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 May 1, 2022, the registrant had

20,000,753

shares of Class A common stock outstanding.

FORM 10-Q

MARCH 31, 2022

TABLE OF CONTENTS

PART I

Item 1.

Financial Statements

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

Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 (Unaudited)

Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2022 and

2021 (Unaudited)

Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2022 and

2021 (Unaudited)

Consolidated Statements of Cash Flows for the three months ended March 31, 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.

Q1 2022 Form 10-Q

PART I

Item 1.

Financial Statements

USCB FINANCIAL HOLDINGS, INC.

Consolidated Balance Sheets - Unaudited

(Dollars in thousands,

except share data)

March 31, 2022

December 31, 2021

ASSETS:

Cash and due from banks

13,764

6,477

Interest-bearing deposits in banks

80,349

39,751

Total cash and cash equivalents

94,113

46,228

Investment securities held to maturity (fair value $

112,690

and $

120,157

, respectively)

122,361

122,658

Investment securities available for sale, at fair value

392,214

401,542

Federal Home Loan Bank stock, at cost

2,277

2,100

Loans held for investment, net of allowance of

15,074

and $

15,057

, respectively

1,243,314

1,175,024

Accrued interest receivable

6,303

5,975

Premises and equipment, net

5,245

5,278

Bank owned life insurance

41,986

41,720

Deferred tax asset, net

38,860

34,929

Lease right-of-use asset

13,441

14,185

Other assets

7,138

4,300

Total assets

1,967,252

1,853,939

LIABILITIES:

Deposits:

Demand

656,622

$605,425

Money market and savings accounts

772,022

703,856

Interest-bearing checking accounts

61,619

55,878

Time deposits over $250,000

118,069

119,401

Time deposits $250,000 or less

104,962

105,819

Total deposits

1,713,294

1,590,379

Federal Home Loan Bank advances

36,000

Lease liability

13,441

14,185

Accrued interest and other liabilities

12,478

9,478

Total liabilities

1,775,213

1,650,042

Commitments and contingencies (See Notes 6

and 12)

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 March 31, 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 March 31, 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 March 31, 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 March 31, 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 March 31, 2022 and December

31, 2021

Additional paid-in capital on common stock

310,887

310,666

Accumulated deficit

(119,391)

(124,245)

Accumulated other comprehensive loss

(19,458)

(2,516)

Total stockholders' equity

192,039

203,897

Total liabilities and stockholders' equity

1,967,252

1,853,939

The accompanying notes are an integral part of

these consolidated financial statements.

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

Consolidated Statements of Operations - Unaudited

(Dollars in thousands,

except per share data)

Three Months Ended March 31,

2022

2021

Interest income:

Loans, including fees

12,982

11,868

Investment securities

2,329

1,844

Interest-bearing deposits in financial institutions

Total interest income

15,342

13,728

Interest expense:

Interest-bearing deposits

Money market and savings accounts

551

548

Time deposits

259

554

Federal Home Loan Bank advances

137

Total interest expense

963

1,253

Net interest income before provision for

credit losses

14,379

12,475

Provision for credit losses

(160)

Net interest income after provision for

credit losses

14,379

12,635

Non-interest income:

Service fees

900

889

Gain on sale of securities available for sale, net

Gain on sale of loans held for sale, net

334

964

Loan settlement

161

Other non-interest income

529

406

Total non-interest income

1,945

2,321

Non-interest expense:

Salaries and employee benefits

5,875

5,278

Occupancy

1,270

1,387

Regulatory assessment and fees

213

178

Consulting and legal fees

517

185

Network and information technology services

387

508

Other operating

1,350

1,141

Total non-interest expense

9,612

8,677

Net income before income tax expense

6,712

6,279

Income tax expense

1,858

1,498

Net income

4,854

4,781

Less: Preferred stock dividend

781

Net income available to common stockholders

4,854

4,000

Per share information:

(1) (2)

Class A common stock

Net income per share, basic

0.24

0.78

Net income per share, diluted

0.24

0.78

Class B common stock

Net income per share, basic

0.16

Net income per share, diluted

0.16

(1)

For further details on the allocation of net

income available to common stockholders and per

share information, see Note 10 "Earnings per

Share".

(2)

For the three months ended March 31, 2021,

the common stock outstanding, weighted average shares

and net income per share for the Class A

common stock were adjusted to reflect the 1

for 5 reverse stock split effected in June of 2021.

The accompanying notes are an integral part of

these consolidated financial statements.

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

Consolidated Statements of Comprehensive Income

(Loss) - Unaudited

(Dollars in thousands)

Three Months Ended March 31,

2022

2021

Net income

4,854

4,781

Other comprehensive income (loss):

Unrealized loss on investment securities

(22,775)

(6,070)

Amortization of net unrealized gains on securities

transferred from available-for-sale to held-to-maturity

Reclassification adjustment for gain included in net

income

(21)

(62)

Tax effect

5,789

1,503

Total other comprehensive loss, net of tax

(16,942)

(4,629)

Total comprehensive (loss) income

(12,088)

152

The accompanying notes are an integral part of

these consolidated financial statements.

Table of Contents

USCB Financial Holdings, Inc.

Q1 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 January 1, 2022

19,991,753

19,992

310,666

(124,245)

(2,516)

203,897

Net income

4,854

Other comprehensive loss

(16,942)

Exercise of stock options

9,000

102

Stock based compensation

128

Balance at March 31, 2022

20,000,753

20,001

310,887

(119,391)

(19,458)

192,039

Balance at January 1, 2021

(1)

12,350,879

32,077

10,010,521

10,010

177,755

(53,622)

4,781

171,001

Net income

4,781

Other comprehensive loss

(4,629)

Dividends - preferred stock

(781)

Stock based compensation

Balance at March 31, 2021

12,350,879

32,077

10,010,521

10,010

177,808

(49,622)

152

170,425

(1)

For the three months ended March 31, 2021,

common stock shares, par value, and additional paid-in

capital for common stock for 2021 was adjusted

to reflect the 1 for 5 reverse stock split. See

Note 9 "Stockholders' Equity" for further details.

The accompanying notes are an integral part of

these consolidated financial statements.

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

USCB FINANCIAL HOLDINGS, INC.

Consolidated Statements of Cash Flows - Unaudited

(Dollars in thousands)

Three Months Ended March 31,

2022

2021

Cash flows from operating activities:

Net income

4,854

4,781

Adjustments to reconcile net income to net

cash provided by operating activities:

Provision for credit losses

(160)

Depreciation and amortization

188

329

Amortization of premiums on securities, net

169

Accretion of deferred loan fees, net

(807)

(1,249)

Stock based compensation

128

Gain on sale of available for sale securities

(21)

(62)

Gain on sale of loans held for sale

(334)

(964)

Increase in cash surrender value of bank owned

life insurance

(266)

(170)

Decrease in deferred tax asset

1,858

1,498

Net change in operating assets and liabilities:

Accrued interest receivable

(328)

(462)

Other assets

(2,838)

(1,660)

Accrued interest and other liabilities

3,000

2,071

Net cash provided by operating activities

5,603

4,059

Cash flows from investing activities:

Purchase of investment securities held to maturity

(2,432)

Proceeds from maturities and pay-downs of investment

securities held to maturity

2,626

Purchase of investment securities available for

sale

(42,794)

(41,094)

Proceeds from maturities and pay-downs of investment

securities available for sale

14,788

13,699

Proceeds from sales of investment securities available

for sale

14,558

14,248

Net increase in loans held for investment

(617)

(72,969)

Purchase of loans held for investment

(70,175)

Additions to premises and equipment

(155)

(184)

Proceeds from the sale of loans held for

sale

3,643

9,788

Proceeds from the redemption of Federal Home Loan

Bank stock

611

Purchase of Federal Home Loan Bank stock

(177)

Net cash used in investment activities

(80,735)

(75,901)

Cash flows from financing activities:

Proceeds from issuance of Class A common stock,

net

102

Dividends paid

(781)

Net increase in deposits

122,915

130,829

Net cash provided by financing activities

123,017

130,048

Net increase in cash and cash equivalents

47,885

58,206

Cash and cash equivalents at beginning of period

46,228

47,734

Cash and cash equivalents at end of period

94,113

105,940

Supplemental disclosure of cash flow information:

Interest paid

961

1,042

Supplemental schedule of non-cash investing and financing

activities:

Transfer of loans held for investment to loans held for

sale

3,309

8,824

The accompanying notes are an integral part of

these consolidated financial statements.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 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

began

trading

the

Nasdaq

Stock

Market

July

2021.

December

2021,

the

Bank

exchanged

all

outstanding shares

of Class

B non-voting

common stock

into shares

of Class

A voting

common stock.

Shortly thereafter,

USCB Financial Holdings, Inc. acquired all issued and outstanding shares of the 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 9 “Stockholders’ Equity”.

The Company’s

Consolidated Financial

Statements consist

of USCB

Financial Holdings,

Inc. and

U.S. Century

Bank

as of or for the period ended March 31, 2022 and December

31, 2021 compared to only U.S. Century Bank as of or for the

period ended March 31, 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 information and

footnotes required by U.S.

generally accepted accounting principles

(“U.S.

GAAP”) for comple

te financial

statements. All

adjustments consisting

of normally

recurring accruals that,

in 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 related notes

appearing in the Company’s

Annual Report on 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.

Concentration of Credit Risks

Credit

risk

represents

the

accounting

loss

that

would

recognized

the

reporting

date

counterparties

failed

perform as contracted and any collateral or security proved to be insufficient

to cover the loss. Concentrations of credit risk

(whether on or off-balance sheet) arising from financial instruments exist in relation to certain

groups of customers. A group

concentration arises when

a number of

counterparties have

similar economic characteristics

that would cause

their ability

to meet contractual obligations to be similarly affected by changes in economic or other conditions. The Company does not

have a significant exposure to any individual customer

or counterparty.

At March

31, 2022

and

December 31,

2021, the

Company

had

a concentration

of risk

with loans

outstanding

to the

Company’s

top

ten

lending

relationships

totaling

187.1

million

and

156.4

million,

respectively,

such

dates.

This

concentration accounted for

14.9

% of net loans outstanding at March 31, 2022 and

13.1

% at December 31, 2021.

At March 31, 2022 and December 31, 2021, the

Company also had a concentration of credit

risk with loans outstanding

to foreign banks in Ecuador, Honduras, and El

Salvador totaling $

61.4

million and $

47.9

million, respectively, at such dates.

These foreign banks maintained deposits

with right of offset totaling

30.3

million and $

28.9

million at March 31, 2022 and

December 31, 2021, respectively.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

At various times during

the year,

the Company has maintained

deposits with other

financial institutions. The exposure

to the Company from

these transactions is solely

dependent upon daily balances

and the financial strength

of the respective

institutions.

Bank Owned Life Insurance

Bank owned

life insurance

(“BOLI”) is

carried at

the amount

that could

be realized

under the

contract at

the balance

sheet date, which is typically

cash surrender value. Changes

in cash surrender value are recorded

in non-interest income.

At March 31,

2022, the

Company

maintained

BOLI policies

with

five

insurance

carriers with

a combined

cash

surrender

value of $

42.0

million. The Company is the beneficiary of

these policies which covers certain present

and former executives

and officers.

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 Adopted

The Company adopted no

new accounting pronouncements as of

or for the three

months ended March 31, 2022. There

were

newly-issued

accounting

pronouncements

that

believe

may

have

significant

impact

the

Company’s

consolidated financial statements or internal controls.

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,

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.

date, the

Company has

executed a

detailed implementation

plan through

the adoption

date, implemented

software solution to assist with the CECL estimation process,

and has completed a data gap analysis.

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

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 operatio

ns and consolidated financial statements.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

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):

March 31, 2022

Available-for-sale:

Amortized

Cost

Unrealized

Gains

Unrealized

Losses

Fair Value

U.S. Government Agency

28,197

(764)

27,433

U.S. Treasury

2,463

Collateralized mortgage obligations

163,382

(12,653)

150,738

Mortgage-backed securities - residential

114,655

(8,617)

106,038

Mortgage-backed securities - commercial

46,280

(2,069)

44,237

Municipal securities

25,144

(3,163)

21,981

Bank subordinated debt securities

27,003

476

(184)

27,295

Corporate bonds

12,066

(128)

12,029

419,190

602

(27,578)

392,214

Held-to-maturity:

U.S. Government Agency

34,465

(2,802)

31,663

Collateralized mortgage obligations

42,567

(3,535)

39,032

Mortgage-backed securities - residential

28,981

(2,327)

26,654

Mortgage-backed securities - commercial

3,099

(282)

2,817

Corporate bonds

13,249

(725)

12,524

122,361

(9,671)

112,690

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 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

year ended

December 31,

2021, a

total of

investment securities

with an

amortized cost

basis and

fair

value of

67.6

million and

68.7

million, respectively,

were transferred

from

available-for-sale

(“AFS”) to

held-to-maturity

(“HTM”). These securities had a net unrealized gain

of $

1.1

million on the date of transfer,

with no immediate impact to net

income

the

transfer

date.

The

unrealized

gain

loss

the

date

transfer

was

retained

accumulated

other

comprehensive income (“AOCI”)

and in

the carrying value

of the

HTM securities. The

net unrealized gains

that were

retained

in AOCI

are being

amortized over

the remaining

life of

the securities.

For the

three months

ended March

31, 2022,

total

amortization out of AOCI for net unrealized gains on securities

transferred from AFS to HTM was $

thousand.

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 months ended March 31,

2022 and 2021 (in thousands):

Three Months Ended March 31,

Available-for-sale:

2022

2021

Proceeds from sale and call of securities

14,558

14,248

Gross gains

158

Gross losses

(137)

(13)

Net realized gains

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

The

amortized

cost

and

fair

value

investment

securities,

contractual

maturity,

are

shown

below

for

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

March 31, 2022:

Amortized

Cost

Fair Value

Amortized

Cost

Fair Value

Due within one year

1,995

2,014

2,007

2,003

Due after one year through five years

10,518

10,509

11,242

10,521

Due after five years through ten years

29,019

29,131

Due after ten years

25,144

22,114

U.S. Government Agency

28,197

27,433

34,465

31,663

Collateralized mortgage obligations

163,382

150,738

42,567

39,032

Mortgage-backed securities - residential

114,655

106,038

28,981

26,654

Mortgage-backed securities - commercial

46,280

44,237

3,099

2,817

419,190

392,214

122,361

112,690

At March 31,

2022, there

were no

securities to

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 by United States

sponsored entities at March 31, 2022 and December

31, 2021.

Information pertaining

to investment

securities with

gross unrealized

losses, aggregated

by investment

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):

March 31, 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

35,156

(1,909)

16,223

(1,769)

51,379

(3,678)

U.S. Treasury

2,463

Collateralized mortgage obligations

131,069

(10,567)

52,672

(5,621)

183,741

(16,188)

Mortgage-backed securities - residential

80,981

(5,493)

46,780

(5,109)

127,761

(10,602)

Mortgage-backed securities - commercial

27,614

(1,619)

6,835

(665)

34,449

(2,284)

Municipal securities

6,812

(802)

15,169

(2,361)

21,981

(3,163)

Bank subordinated debt securities

6,316

(184)

6,316

(184)

Corporate bonds

12,953

(247)

12,953

(247)

303,364

(20,821)

137,679

(15,525)

441,043

(36,346)

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 March 31, 2022, the unrealized losses associated with $

66.0

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 upon transfer

between portfolios.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

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) severity and duration of

the impairment, (ii) credit

rating of the security

including any downgrade,

(iii) 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) 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

maturity,

and

is more

likely

than not

that

the Company

will not

required to sell the securities before maturity.

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 March 31, 2022,

the Company did

not 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 authority

to legally 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 March 31, 2022,

the Company had a

total of $

63.7

million in deposits under

the public funds program

and pledged

to these public funds were

eleven

Corporate Bonds with a fair value of $

19.6

million to the state of Florida.

As of

December 31,

2021, the

Company had

a total

of $

37.3

million in

deposits under

the public

funds program

and

pledged to these public funds were

eleven

Corporate Bonds with a fair value of $

20.4

million to the state of Florida.

LOANS

The following table is a summary of the distribution of

loans held for investment by type (in thousands):

March 31, 2022

December 31, 2021

Total

Percent of

Total

Percent of

Total

Residential Real Estate

204,317

16.2

201,359

16.9

Commercial Real Estate

782,072

62.1

704,988

59.2

Commercial and Industrial

134,832

10.7

146,592

12.3

Foreign Banks

63,985

5.1

59,491

5.0

Consumer and Other

73,765

5.9

79,229

6.6

Total

gross loans

1,258,971

100.0

1,191,659

100.0

Less: Unearned income

583

1,578

Total

loans net of unearned income

1,258,388

1,190,081

Less: Allowance for credit losses

15,074

15,057

Total

net loans

1,243,314

1,175,024

March 31,

2022

and

December 31,

2021,

the

Company

had

171.4

million

and

185.1

million,

respectively,

commercial real estate

and residential mortgage loans

pledged as collateral

on lines of

credit with the

FHLB and the

Federal

Reserve Bank of Atlanta.

The Company was a participant

of 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

determined

by the

SBA.

The

Company

had

PPP

loans

24.6

million

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

March 31, 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 $

590

thousand at March 31, 2022 and $

1.5

million at December 31, 2021.

The Company recognized

1.0

million and $

1.5

million in PPP

loan fees and

interest income during

the three months

ended

March 31,

2022

and

2021,

respectively,

which

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.

Changes in

the allowance

for credit

losses for

the three

months ended

March 31, 2022

and 2021

were as

follows (in

thousands):

Residential

Real Estate

Commercial

Real Estate

Commercial

and Industrial

Foreign

Banks

Consumer

and Other

Total

March 31, 2022:

Beginning balance

2,498

8,758

2,775

457

569

15,057

Provision for credit losses

(157)

425

(426)

124

Recoveries

Charge-offs

(16)

(5)

(21)

Ending Balance

2,357

9,183

2,355

491

688

15,074

March 31, 2021:

Beginning balance

3,408

9,453

1,689

348

188

15,086

Provision for credit losses

(325)

(133)

229

(160)

Recoveries

Charge-offs

(9)

Ending Balance

3,087

9,320

2,005

407

190

15,009

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

Allowance for credit losses and the outstanding balances in

loans as of March 31, 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

March 31, 2022:

Allowance for credit losses:

Individually evaluated for impairment

160

108

335

Collectively evaluated for impairment

2,197

9,182

2,289

491

580

14,739

Balances, end of period

2,357

9,183

2,355

491

688

15,074

Loans:

Individually evaluated for impairment

7,357

603

132

217

8,309

Collectively evaluated for impairment

196,960

781,469

134,700

63,985

73,548

1,250,662

Balances, end of period

204,317

782,072

134,832

63,985

73,765

1,258,971

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.

Q1 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 March 31, 2022

Pass

Special

Mention

Substandard

Doubtful

Total Loans

Residential real estate:

Home equity line of credit ("HELOC") and other

716

1-4 family residential

134,373

3,180

137,553

Condo residential

66,048

201,137

3,180

204,317

Commercial real estate:

Land and construction

31,454

Multi family residential

129,217

Condo commercial

42,315

414

42,729

Commercial property

577,364

1,210

578,574

Leasehold improvements

780,448

1,210

414

782,072

Commercial and industrial:

(1)

Secured

103,668

508

104,176

Unsecured

30,656

134,324

508

134,832

Foreign banks

63,985

Consumer and other loans

73,548

217

73,765

Total

1,253,442

1,210

4,319

1,258,971

(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.

Q1 2022 Form 10-Q

As of December 31, 2021

Pass

Special

Mention

Substandard

Doubtful

Total Loans

Residential real estate:

Home equity line of credit ("HELOC") 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.

Q1 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 March 31,

2022 and

December 31, 2021 (in thousands):

Accruing

As of March 31, 2022:

Current

Past Due 30-

89 Days

Past Due >

90 Days and

Still

Accruing

Total

Accruing

Non-Accrual

Total Loans

Residential real estate:

Home equity line of credit and other

716

1-4 family residential

136,793

760

137,553

Condo residential

64,760

1,288

66,048

202,269

2,048

204,317

Commercial real estate:

Land and construction

31,454

Multi family residential

129,217

Condo commercial

42,729

Commercial property

576,451

2,123

578,574

Leasehold improvements

779,949

2,123

782,072

Commercial and industrial:

Secured

104,058

118

104,176

Unsecured

30,598

30,656

134,656

176

134,832

Foreign banks

63,985

Consumer and other

73,485

280

73,765

Total

1,254,344

4,627

1,258,971

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

Accruing

As of December 31, 2021:

Current

Past Due

30-89 Days

Past Due >

90 Days 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 March 31, 2022

and 2021.

Interest

income

these

loans

for

the

three

months

ended

March 31,

2022

and

2021,

would

have

been

approximately

thousand and $

thousand, respectively,

had these loans performed in 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 for the dates

indicated (in thousands):

March 31, 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

3,621

3,614

5,021

5,035

Commercial real estate

189

190

696

695

3,810

3,804

5,717

5,730

Impaired Loans with Specific Allowance:

Residential real estate

3,737

3,702

160

3,985

3,950

178

Commercial real estate

413

Commercial and industrial

132

141

Consumer and other

217

108

224

111

4,499

4,464

335

4,350

4,315

360

Total

8,309

8,268

335

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.

Q1 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 March 31,

2022

2021

Residential real estate

8,181

9,494

Commercial real estate

649

727

Commercial and industrial

137

197

Consumer and other

220

276

Total

9,187

10,694

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

and 2021 was $

thousand

and $

109

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 time or

a combination to

include more than

one type of

modification.

The following table presents performing and non-performing

TDRs at the dates indicated (in thousands):

March 31, 2022

December 31, 2021

Accrual Status

Non-Accrual

Status

Total TDRs

Accrual Status

Non-Accrual

Status

Total TDRs

Residential real estate

7,357

7,815

Commercial real estate

603

696

Commercial and industrial

132

141

Consumer and other

217

224

Total

8,309

8,876

The Company had allocated $

335

thousand and $

360

thousand of specific allowance for TDR loans at March 31, 2022

and December 31, 2021,

respectively. There were

charge-offs on TDR loans for

the three months

ended March 31, 2022

and 2021. There was

commitment to lend additional funds to these TDR customers

as of March 31, 2022.

During the

quarter ended

March 31, 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 for the three

months ended March 31, 2022

and 2021.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 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):

Three Months Ended March 31,

2022

2021

Current:

Federal

State

Total

current

Deferred:

Federal

1,442

1,235

State

416

263

Total

deferred

1,858

1,498

Total

tax expense

1,858

1,498

The actual

income

tax

expense

for the

three

months

ended March

31,

2022 and

2021 differs

from

the

statutory

tax

expense for the year (computed by applying the U.S. federal corporate tax rate of

% for 2022 and 2021 to income before

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

Three Months Ended March 31,

2022

2021

Federal taxes at statutory rate

1,409

1,319

State income taxes, net of federal tax benefit

289

220

Bank owned life insurance

(67)

(42)

Other, net

227

Total

tax expense

1,858

1,498

The Company’s deferred tax assets and deferred

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

March 31, 2022

December 31, 2021

Deferred tax assets:

Net operating loss

27,731

28,819

Allowance for credit losses

3,820

3,816

Lease liability

3,407

3,595

Unrealized loss on available for sale securities

6,606

817

Deferred loan fees

148

400

Depreciable property

106

361

Stock option compensation

264

241

Accruals

195

600

Other, net

142

Deferred tax asset

42,419

38,651

Deferred tax liability:

Lease right of use asset

(3,407)

(3,595)

Deferred expenses

(152)

(127)

Deferred tax liability

(3,559)

(3,722)

Net deferred tax asset

38,860

34,929

The Company has approximately

105.5

million of federal and $

128.2

million of state net operating

loss carryforwards

expiring in various amounts between 2031 and 2036 and are

limited to future taxable earnings of the Company.

In assessing the

realizability of deferred

tax assets, management considered

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.

Q1 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

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

March 31, 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.

STOCK OPTIONS

The Company’s Amended and Restated 2015 Equity Incentive Plan (the “2015 Option Plan”) is used to issue shares of

common

stock

employees

and

the

Board

Directors.

See

Note

the

Company’s

audited

consolidated

financial

statements on the Form 10-K for more information on the 2015

Option Plan.

March 31,

2022,

there

were

1,391,667

available

for

stock

option

grants.

March 31,

2021,

there

were

557,667

shares available for grant under the 2015 Option Plan

after the 1 for 5 reverse stock split.

Stock option balances,

weighted average

exercise price, and

weighted average fair

value of options

granted for three

months

ended March

31,

2021 were

adjusted

to reflect

the 1

for 5

reverse

stock

split on

Class

A common

stock.

Stock

options issued are only

exercisable to Class A

common stock. See Note

9 “Stockholders’ Equity”

for further discussion on

the stock split.

The Company recognizes compensation expense based

on the estimated grant date

fair value method using the

Black-

Scholes

option

pricing

model and

accounts

for this

expense

using

a prorated

straight-line

amortization

method over

the

vesting

period

the

option.

Stock

based

compensation

expense

based

awards

that

the

Company

expects

will

ultimately vest,

reduced by estimated forfeitures.

Estimated forfeitures consider the voluntary

termination trends as well as

actual option forfeitures.

The

compensation

expense

reported

within

salaries

and

employee

benefits

the

accompanying

Consolidated

Statements

Operations.

Compensation

expense

totaling

128

thousand

was

recognized

for

the

three

months

ended

March 31, 2022 and $

thousand for the three months ended March 31, 2021.

Cash

flows

resulting

from

excess

tax

benefits

are

required

classified

part

cash

flows

from

operating

activities. Excess tax benefits

are realized tax benefits

from tax deductions for

exercised options in

excess of the deferred

tax asset

attributable to

the compensation

cost for

such options.

There were

related tax

benefits for

the three

months

ended March 31, 2022 and 2021.

Unrecognized

compensation

cost

remaining

stock-based

compensation

was

1.2

million

and

145

thousand

March 31, 2022 and 2021, respectively.

The fair value of options granted was determined using

the following weighted-average assumptions as of:

Assumption

March 31, 2022

Risk-free interest rate

2.19%

Expected term

years

Expected stock price volatility

Dividend yield

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

The following table presents a summary of stock options

for the three months ended March 31, 2022 and 2021:

Stock Options

Weighted Average

Exercise Price

Weighted Average

Remaining

Contractual Years

Aggregate Intrinsic

Value

Balance at January 1, 2022

959,667

10.87

8.4

Granted

10,000

14.12

Exercised

9,000

11.35

Balance at March 31, 2022

960,667

10.90

8.1

Exercisable at March 31, 2022

322,667

9.08

5.8

1,693

Balance at January 1, 2021

(1)

339,667

9.37

7.1

Granted

64,000

8.91

Balance at March 31, 2021

403,667

9.29

7.1

Exercisable at March 31, 2021

243,666

8.73

6.3

208

(1)

For the three months ended March 31, 2021,

Class A common stock outstanding and additional

paid-in-capital were adjusted to reflect the

1 for 5

reverse stock split. See Note 9 "Stockholders' Equity"

for further discussion on the stock split.

The aggregate intrinsic value in

the table above represents

the total pre-tax intrinsic

value (the difference between

the

valuation of the Company’s stock and the exercise price, multiplied by

the number of options considered in-the-money) that

would have been received by the option holders had all option

holders exercised their options.

The weighted average

fair value of

options granted was

3.35

and $

1.85

for the three

months ended March

31, 2022

and 2021

, respectively.

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

March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022

December 31, 2021

Commitments to grant loans and unfunded lines of credit

125,484

134,877

Standby and commercial letters of credit

5,552

6,420

131,036

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 is committed.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

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 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

position. The

notional amount

of the

interest rate

swaps do

not represent

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

36.5

million

and

39.2

million

March 31,

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,

it does

not qualify

as hedges

for

accounting purposes.

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

March 31, 2022:

Derivatives not designated as hedging instruments:

Interest rate swaps related to customer loans

36,513

1,260

Other assets/Other liabilities

2,277

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.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

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.

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 measured

at fair

value on

a recurring

basis at

March 31, 2022

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

levels (in thousands):

March 31, 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

27,433

10,520

U.S. Treasury

2,463

Collateralized mortgage obligations

150,738

156,829

Mortgage-backed securities - residential

106,038

118,842

Mortgage-backed securities - commercial

44,237

50,117

Municipal Securities

21,981

24,276

Bank subordinated debt securities

27,295

28,408

Corporate bonds

12,029

12,550

Total

392,214

401,542

Derivative assets

2,277

1,434

Total assets at fair value

394,491

402,976

Derivative liabilities

2,277

1,434

Total liabilities at fair value

2,277

1,434

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

Items Measured at Fair Value

on a Non-recurring Basis

Impaired Loans:

At March

31, 2022

and December

31, 2021,

in accordance

with

provisions of

the loan

impairment

guidance, individual loans with

a carrying amount of approximately

4.5

million and $

4.4

million, respectively,

were written

down to

their

fair value

approximately

4.2

million

and $

4.0

million,

respectively,

resulting

an impairment

charge

335

thousand and $

360

thousand, respectively,

which was included

in the allowance

for credit losses

at March 31, 2022

and December 31, 2021, respectively.

Loans applicable to write-downs, or impaired loans, are estimated using the present

value

expected

cash

flows

the

appraised

value

the

underlying

collateral

discounted

necessary

due

management's estimates of changes in economic conditions

are considered a Level 3 valuation.

Other Real Estate:

Other real

estate owned are

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.

The following table

represents the Company’s assets

measured at fair

value on a

non-recurring basis at

March 31, 2022

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

levels (in thousands):

Level 1

Level 2

Level 3

Total

March 31, 2022:

Impaired loans

4,164

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 March 31, 2022 and

December 31, 2021 (in thousands):

Fair Value

Valuation Technique(s)

Unobservable Input(s)

March 31, 2022:

Residential real estate

3,576

Sales comparison approach

Adj. for differences between comparable sales

Commercial real estate

413

Sales comparison approach

Adj. for differences between comparable sales

Commercial and industrial

Discounted cash flow

Adj. for differences in net operating income expectations

Other

109

Discounted cash flow

Adj. for differences in net operating income expectations

Total

impaired loans

4,164

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

Other

113

Discounted cash flow

Adj. for differences in net operating income expectations

Total

impaired loans

3,990

There were

financial liabilities measured at fair value on a non-recurring basis at March 31, 2022 and

December 31,

2021.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 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 March 31, 2022 and December 31, 2021 (in

thousands):

Fair Value Hierarchy

Carrying

Amount

Level 1

Level 2

Level 3

Fair Value

Amount

March 31, 2022:

Financial Assets:

Cash and due from banks

13,764

Interest-bearing deposits in banks

80,349

Investment securities held to maturity

122,361

112,690

Loans held for investment, net

1,243,314

1,276,299

Accrued interest receivable

6,303

1,681

4,622

6,303

Financial Liabilities:

Demand deposits

656,622

Money market and savings accounts

772,022

Interest-bearing checking accounts

61,619

Time deposits

223,031

220,103

FHLB advances

36,000

36,100

Accrued interest payable

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 B

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”)

include

Class

common

stock

will

also

paid

converted.

The

1 for 5

reverse

stock

split

resulted

adjustments

Consolidated

Balance

Sheets,

Consolidated

Statements

Operations,

and

Consolidated

Statements

Changes in Stockholders’ Equity.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 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 Class

B common stock for Class A common stock at

a ratio of 5 to 1. 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,

USCB Financial Holdings,

Inc. (the “Company”)

acquired all the

issued and outstanding

shares of

the Class A voting

common stock of

U.S. Century Bank

(the “Bank”), which are

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 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 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

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 liquidation value

for $11.4 million.

The fair value of

consideration on the exchange and redemption of

the Class C and Class

D preferred shares exceeded

the

book

value

causing

one-time

reduction

net

income

available

common

stockholders

89.6

million.

March 31, 2022 and December 31, 2021, there were

preferred shares and

outstanding dividends to be paid.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

Dividends

The following

dividend amounts

were paid

on the

preferred shares

for the

three

months ended

March 31,

2022 and

2021 (in thousands):

Three Months Ended March 31,

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.

527

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.

123

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

preferences paid quarterly. Quarterly dividend of $

17.50

per share.

131

Total

dividends paid

781

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

dividends were approved by

the Board for the common stock classes for the three months ended March 31, 2022 and 2021.

Additionally, there were

dividends declared and unpaid as of March 31, 2022 and

2021.

10.

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 stockho

lders 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 months

ended March 31, 2022

net income available

to common stockholders

was not

allocated between Class A and Class

B common stock since there

was no issued and outstanding Class

B common stock

as of March 31, 2022.

calculate

EPS

for

the

three

months

ended

March 31,

2021,

net

income

available

common

stockholders

was

allocated

as if

all

the

income

for

the

period

were

distributed

common

stockholders.

The

allocation

was

based

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

stockholders

adjusted

give

effect

for

Class

stock

splits.

Therefore,

the

income

allocated

Class

common

shares was calculated based on their

% per share equivalent to Class A common shares.

The following

table reflects

the calculation

of net

income

available to

common

stockholders

for three

months

ended

March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

2022

2021

Net Income

4,854

4,781

Less: Preferred stock dividends

781

Net income available to common stockholders

4,854

4,000

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

The following table reflects

the calculation of basic and

diluted earnings per common

share class for the

three months

ended March 31, 2022 and 2021 (in thousands, except

per share amounts):

Three Months Ended March 31,

2022

2021

Class A

Class B

Class A

Class B

(1)

Basic EPS

Numerator:

Net income available to common shares before allocation

4,854

4,000

Multiply: % allocated on weighted avg. shares outstanding

100.0%

76.0%

24.0%

Net income available to common shares after allocation

4,854

3,040

960

Denominator:

Weighted average shares outstanding

19,994,953

3,889,469

6,121,052

Earnings per share, basic

0.24

0.78

0.16

Diluted EPS

Numerator:

Net income available to common shares before allocation

4,854

4,000

Multiply: % allocated on weighted avg. shares outstanding

100.0%

76.0%

24.0%

Net income available to common shares after allocation

4,854

3,040

960

Denominator:

Weighted average shares outstanding for basic EPS

19,994,953

3,889,469

6,121,052

Add: Dilutive effects of assumed exercises of stock options

114,830

23,810

Weighted avg. shares including dilutive potential common shares

20,109,783

3,913,279

6,121,052

Earnings per share, diluted

0.24

0.78

0.16

Anti-dilutive stock options excluded from diluted EPS

77,000

(1)

Net income 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 are converted to Class A which is

equivalent to

0.20

per share of Class B or

1,224,212

shares of Class A shares.

See Note 9 “Stockholders’ Equity” for further discussion

on the stock split.

11.

REGULATORY

MATTERS

The Bank is

subject to the

rules of the

Basel III regulatory capital

framework and related Dodd-Frank

Wall Street Reform

and Consumer Protection

Act. The rules include

the implementation of

2.5

% capital conservation

buffer that is

added to

the minimum requirements

for capital adequacy

purposes. Failure

to maintain the

required capital conservation

buffer will

limit

the

ability

the

Bank

pay

dividends,

repurchase

pay

discretionary

bonuses.

March 31,

2022

and

December 31, 2021, the capital ratios for the Bank were

sufficient to meet the conservation buffer.

At March 31, 2022, the most recent notification from the regulatory authorities

categorized the Bank as well capitalized

under the regulatory framework for prompt corrective action.

Table of Contents

USCB FINANCIAL HOLDINGS, INC.

Notes to the Consolidated Financial Statements - Unaudited

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

Actual and required capital

amounts and ratios are

presented below for both

the Company and the

Bank at March 31,

2022

and

December 31,

2021

(in

thousands,

except

ratios).

The

required

amounts

for

capital

adequacy

shown

not

include the capital conservation buffer previously

discussed.

Actual

Minimum Capital

Requirements

To be Well Capitalized

Under Prompt Corrective

Action Provisions

Amount

Ratio

Amount

Ratio

Amount

Ratio

March 31, 2022:

Total

risk-based capital:

USCB Financial Holdings, Inc.

194,564

14.49

107,425

8.00

134,281

10.00

U.S. Century Bank

193,462

14.41

107,425

8.00

134,281

10.00

Tier 1 risk-based capital:

USCB Financial Holdings, Inc.

179,243

13.35

80,568

6.00

107,425

8.00

U.S. Century Bank

178,141

13.27

80,568

6.00

107,425

8.00

Common equity tier 1 capital:

USCB Financial Holdings, Inc.

179,243

13.35

60,426

4.50

87,282

6.50

U.S. Century Bank

178,141

13.27

60,426

4.50

87,282

6.50

Leverage ratio:

USCB Financial Holdings, Inc.

179,243

9.47

75,681

4.00

94,601

5.00

U.S. Century Bank

178,141

9.42

75,681

4.00

94,601

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.

Effective December

2021, the Company

acquired the Bank

in a merger

and reorganization

through the formation

of a

bank holding company. Pursuant to this transaction, each of the outstanding shares of the Bank’s $

1.00

par value common

stock held by its

shareholders was converted

into and exchanged for

one newly issued share

of the Company’s

1.00

par

value common stock,

and the Bank

became the wholly

owned subsidiary of

the Company. See Note

9 “Stockholders’ Equity”

for further details.

12.

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.

Q1 2022 Form 10-Q

Item 2.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

The

following

discussion

and

analysis

are

designed

provide

better

understanding

the

consolidated

financial

condition

and

results

operations

the

Company

and

the

Bank,

its

wholly

owned

subsidiary,

for

the

quarter

ended

March 31, 2022. This

discussion and

analysis are best

read in conjunction

with the consolidated

financial statements

and

related footnotes included in

this Form 10-Q and the

2021 Form 10-K filed with

the 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 of

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

contains statements

that are

not historical

in nature

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

1934,

amended.

The

words

“may,”

“will,”

“anticipate,”

“should,”

“would,”

“believe,”

“contemplate,”

“expect,” “aim,” “plan,” “estimate,” “continue,” and “intend,” as well as 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

related to our projected growth, anticipated future financial performance,

and management’s long-term performance goals,

well

statements

relating

the

anticipated

effects

results

operations

and

financial

condition

from

expected

developments or events, or business and growth strategies,

including anticipated internal growth.

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

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 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;

•

inflation, interest rate, unemployment rate, market, and monetary

fluctuations;

•

increased competition and its effect on pricing

of our products and services as well as our margins;

•

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 and other

filings we

make with the

Securities and

Exchange Commission

(“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

hereof, and we undertake

no obligation to update

or revise any forward-looking

statement to reflect events

or circumstances

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

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

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,

the Bank filed with the FDIC.

Non-GAAP Financial Measures

This Quarterly

Report on

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

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

presented

other

companies.

the

extent

applicable,

reconciliations

these

non-GAAP

measures to the most directly

comparable GAAP measures can be found

in the ‘Non-GAAP Reconciliation Tables’ included

in this Form 10-Q.

Overview

USCB Financial

Holdings, Inc.

(the “Company”),

the holding

company for

U.S. Century

Bank, reported

net income

$4.9

million

or $0.24

per diluted

for the

three

months

ended

March 31,

2022, compared

with

net

income

$4.8

million or

$0.78 and

$0.16 per

diluted share

for Class A and

Class B

common stock,

respectively, for

the same

period in

In December 2021, the Company agreed to exchange all the outstanding shares

of Class B common stock for Class

A common stock at a ratio of 5 to 1. As of March 31, 2022 and December 31,

2021, the Company’s only class of securities

issued and outstanding was Class A common stock.

During the quarter ended

March 31, 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 March 31, 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 comparisons in

the bullet points below are

calculated for the quarter ended March 31, 2022

versus the quarter ended March 31, 2021 and annualized where

appropriate:

•

Net interest income increased $1.9 million or 15.3% to

$14.4 million from $12.5 million at March 31, 2021.

•

Net interest margin (“NIM”) decreased to 3.22% from 3.35%

for the first quarter of 2021.

•

Total assets grew to $2.0 billion, an increase of $333.9

million or 20.4%, compared to March 31, 2021.

•

Total loans grew to $1.3 billion, an increase of $154.4 million

or 14.0%, compared to March 31, 2021.

•

Total deposits increased $309.1 million or 22.0% to $1.7

billion from $1.4 billion at March 31, 2021.

•

Annualized return on average assets was 1.03% compared

to 1.23%

at March 31, 2021.

•

Annualized return on average stockholders’ equity was 9.75% compared to 11.30%

at March 31, 2021.

•

The allowance for credit losses to total loans ratio decreased to

1.20% from 1.36% at March 31, 2021.

•

Non-performing loans to total loans was 0.00% compared to

0.06% at March 31, 2021.

•

The Company and

the Bank

exceeded all regulatory

capital requirements

and remained

significantly above

“well-

capitalized” guidelines.

At March 31, 2022,

total risk-based capital

ratio for the

Company and the

Bank were 14.49%

and 14.41%, respectively.

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

•

Tangible book value per

common share was

$9.60 as of

March 31, 2022, compared

to $27.05 at March

31, 2021.

The decline was primarily driven by an increase in issued and outstanding Class A common shares as result of the

exchange and redemption of

preferred shares combined with

the completion of

the IPO in

See “Tangible book

value per common share” 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” of

the Company’s 2021 Annual Report on

Form

10-K.

prepare

financial

statements

conformity

with

GAAP,

management

makes

estimates,

assumptions,

and

judgments based

on available

information. These

estimates, assumptions,

and judgments

affect the

amounts reported

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

the

financial

statements.

particular,

management

has

identified

accounting

policies

that,

due

the

estimates,

assumptions

and

judgments

inherent

those

policies,

are

critical

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 in the loan

portfolio. Loans

that have

been identified

as impaired

are reviewed

on a

quarterly basis

in order

to determine

whether a

specific reserve is

required. The general

component covers

non-impaired loans

and is based

on industry and

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.

The

CARES

Act,

amended

the

Consolidated

Appropriations

Act,

2021,

specified

that

COVID-19

loan

modifications executed

between March 1,

2020 and

the earlier

of (i)

60 days

after the

date of

termination

of the

national

emergency declared by President Trump and (ii) January 1, 2022, on

loans that were current as of

December 31, 2019, are

not TDRs. Additionally,

under guidance from the federal banking agencies,

other short-term modifications made on a good

faith basis

in response

to COVID-19

to borrowers

that were

current prior

to any

relief are

not TDRs

under ASC

Subtopic

310-40,

“Troubled

Debt

Restructurings

Creditors.”

These

modifications

include

short-term

(i.e.,

six

months)

modifications

such

payment

deferrals,

fee

waivers,

extensions

repayment

terms,

delays

payment

that

are

insignificant. The Company’s charge-off policy is to continuously

review all impaired loans to monitor the Company’s ability

to collect them in full at the applicable maturity date and/or in accordance

with terms of any restructurings. For loans which

are collateral dependent,

or deemed to

be uncollectible, any

shortfall in the

fair value of

the collateral relative to

the recorded

investment in the loan is charged off. The amount charged

-off conforms to the amount necessary

to comply with GAAP.

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

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

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.

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):

March 31, 2022

December 31, 2021

Consolidated Balance Sheets:

Total

assets

1,967,252

1,853,939

Total

loans

(1)

1,258,388

1,190,081

Total

deposits

1,713,294

1,590,379

Total

stockholders' equity

192,039

203,897

(1)

Loan amounts include deferred fees/costs.

Three Months Ended March 31,

2022

2021

Consolidated Statements of Operations:

Net interest income before provision for credit losses

14,379

12,475

Total

non-interest income

1,945

2,321

Total

non-interest expense

9,612

8,677

Net income

4,854

4,781

Net income available to common stockholders

4,854

4,000

Profitability:

Efficiency ratio

58.88%

58.64%

Net interest margin

3.22%

3.35%

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.

Net income slightly increased to $4.9 million for the three months ended March 31, 2022 from $4.8 million for the same

period

2021.

Net

income

available

common

stockholders

increased

$854

thousand

for

the

three

months

ended

March 31, 2022

compared to

the same

period in

2021 primarily because

there were no

dividend payments made

to preferred

shareholders.

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

incurred

from

interest

paid

interest-bearing

liabilities,

including

interest-bearing

deposits,

FHLB

advances

and

other

borrowings.

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

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 rates

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 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.

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 March 31,

2022

2021

Average

Balance

Interest

Yield/Rate

(1)

Average

Balance

Interest

Yield/Rate

(1)

Assets

Interest-earning assets:

Loans

(2)

1,211,432

12,982

4.35

1,071,782

11,868

4.43

Investment securities

(3)

510,257

2,329

1.85

337,434

1,844

2.19

Other interest-earnings assets

90,137

0.14

78,568

0.08

Total

interest-earning assets

1,811,826

15,342

3.43

1,487,784

13,728

3.69

Non-interest earning assets

101,658

86,097

Total

assets

1,913,484

1,573,881

Liabilities and stockholders' equity

Interest-bearing liabilities:

Interest-bearing demand deposits

64,436

0.10

44,549

0.13

Saving and money market deposits

736,134

551

0.30

568,595

548

0.39

Time deposits

223,274

259

0.47

248,156

554

0.91

Total

interest-bearing deposits

1,023,844

826

0.33

861,300

1,116

0.53

Borrowings and repurchase agreements

36,011

137

1.54

36,000

137

1.52

Total

interest-bearing liabilities

1,059,855

963

0.37

897,300

1,253

0.57

Non-interest bearing demand deposits

626,400

482,376

Other non-interest-bearing liabilities

25,369

22,629

Total

liabilities

1,711,624

1,402,305

Stockholders' equity

201,860

171,576

Total

liabilities and stockholders' equity

1,913,484

1,573,881

Net interest income

14,379

12,475

Net interest spread

(4)

3.06

3.12

Net interest margin

(5)

3.22

3.35

(1)

Annualized.

(2)

Average loan balances include non-accrual loans. Interest income

on loans includes accretion of deferred

loan fees, net of deferred loan costs.

(3)

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

(4)

Net interest spread is the average yield on

total interest-earning assets minus the average

rate on total interest-bearing liabilities.

(5)

Net interest margin is the ratio of net interest

income to total interest-earning assets.

Net interest income before the provision

for credit losses was $14.4 million for

the three months ended March 31, 2022,

an increase of $1.9 million or

15.3%, from $12.5 million for

the same period in 2021.

This increase was primarily attributable

to higher income from investment securities and loan fees as well as lower costs for interest-bearing liabilities because of a

lower interest rate environment.

Included with

loan interest

income are

PPP fees

totaling $917

thousand and

$1.2

million for

the three

months ended

March 31, 2022 and 2021, respectively.

PPP loan fees are recognized upon forgiveness by the SBA.

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

Net interest

margin decreased

to 3.22%

at March 31,

2022 from

3.35% in

the same

period in

overall and

individual yields for interest-bearing assets and interest-bearing

liabilities both decreased.

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 trends and economic conditions and other

applicable factors.

There

was

provision

for

credit

loss

for

the

three

months

ended

March 31,

2022

compared

net

reduction

$160 thousand

for

the

same

period

primary

driver

the

decrease

was

the

improvement

the

credit

risk

associated with

the COVID-19 pandemic.

The ACL as a percentage

of total loans

decreased to 1.20%

at March 31,

2022

compared to 1.36%

at March 31, 2021.

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

policy

on some

of our

employees

and

generate

income

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 March 31,

2022

2021

Service fees

900

889

Gain on sale of securities available for sale, net

Gain on sale of loans held for sale, net

334

964

Loan settlement

161

Other non-interest income

529

406

Total

non-interest income

1,945

2,321

Non-interest income for the three months ended March 31, 2022 decreased $376 thousand or 16.2%, compared to the

same period in 2021. This decrease was primarily driven by fewer

loan sales resulting in reduced gains.

Non-Interest Expense

The following table presents the components of non-interest

expense for the dates indicated (in thousands):

Three Months Ended March 31,

2022

2021

Salaries and employee benefits

5,875

5,278

Occupancy

1,270

1,387

Regulatory assessment and fees

213

178

Consulting and legal fees

517

185

Network and information technology services

387

508

Other operating

1,350

1,141

Total

non-interest expense

9,612

8,677

Non-interest expense for the three months ended March 31, 2022 increased

$935 thousand or 10.8%, compared to the

same period in 2021. The increase

was primarily driven by higher salaries

and employee benefits due to

new hires, salary

compensation, and seasonal payroll taxes.

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

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. Surrender value of

bank-owned life insurance policies

covering key employees, purchasing

municipal bonds, and

overall taxable income will be important elements in determining

our effective tax rate.

Income

tax

expense

for

the

three

months

ended

March 31,

2022

increased

$1.9

million

from

$1.5 million

for the

same period

in 2021.

The Company’s

effective tax

rate was

27.7% primarily

because the

Company recorded

a one-time

adjustment of $300 thousand to deferred tax assets which

increased the income tax provision.

For a further discussion

on income taxes, see

Note 4 “Income Taxes” to

the Consolidated Financial

Statements in this

Form 10-Q.

Analysis of Financial Condition

Total assets at March 31, 2022 were $2.0

billion, an increase

of $333.9 million,

or 20.4%, over

total assets of $1.6

billion

at March 31, 2021.

Total loans increased $150.8 million, or 13.6%, to

$1.3 billion at March 31,

2022 compared to

$1.1 billion

at March 31,

Total

deposits

increased

by $309.1

million,

or 22.0%,

to $1.7

billion at

March 31,

2022

compared to

March 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

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 an

investment guideline,

approved by

the Board.

Such policy

is reviewed

at least

annually or

more 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 by the ALCO. The portfolio of investments can be used to modify the duration of 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

securities

issued

U.S.

government-sponsored

agencies,

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,

ALCO

the

Company

ensure

appropriate

risk

and

return

profile

well

for

adherence

the

investment policy.

As of March 31, 2022, the

investment portfolio consisted of available-for-sale (“AFS”) and held-to-maturity

(“HTM”) debt

securities. During the year ended December 31, 2021,

there were 28 investment securities that were transferred from AFS

to HTM with an

amortized cost basis

and fair value amount

of $67.6 million and

$68.7 million, respectively.

On the date of

transfer, these securities had a total net unrealized gain of $1.1

million. The transfer of debt securities from the AFS

to HTM

category was

made at

fair value

at the

date of

transfer.

The unrealized

gain or

loss

at the

date of

transfer is

retained in

accumulated other

comprehensive income

and in

the carrying

value of

the HTM

securities. Such

amounts are

amortized

over the remaining life of the security.

There was no immediate impact to net income on

the date of transfer.

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 is

deemed to

be permanent,

an analysis

would be

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

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

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 March 31, 2022, there are no

securities which management has classified as OTTI.

For further discussion of our

analysis

on impaired investment securities for OTTI, see Note 2 “Investment Securities”

to the Consolidated Financial Statements in

this Form 10-Q.

AFS

and

HTM

investment

securities

increased

$173.2 million

50.7%

$514.6 million

March 31,

2022

from

$341.3 million

March 31,

Investment

securities

increased

over

the

past

year

due

higher

than

expected

cash

balances. Management

reinvested excess

cash balances

into high

credit quality

investments to

increase the

Company’s

profitability and modify the

Company’s balance sheet duration according

to the ALM

policy. As of March 31, 2022, corporate

bond securities with a market value

of $19.6 million were pledged to

secure public deposits. The investment

portfolio does

not have any tax-exempt securities.

The

following

table

presents

the

amortized

cost

and

fair

value

investment

securities

for

the

dates

indicated

(in

thousands):

March 31, 2022

December 31, 2021

Available-for-sale:

Amortized

Cost

Fair Value

Amortized

Cost

Fair Value

U.S. Government Agency

28,197

27,433

10,564

10,520

U.S. Treasury

2,463

Collateralized mortgage obligations

163,382

150,738

160,506

156,829

Mortgage-backed securities - residential

114,655

106,038

120,643

118,842

Mortgage-backed securities - commercial

46,280

44,237

49,905

50,117

Municipal securities

25,144

21,981

25,164

24,276

Bank subordinated debt securities

27,003

27,295

27,003

28,408

Corporate bonds

12,066

12,029

12,068

12,550

419,190

392,214

405,853

401,542

Held-to-maturity:

U.S. Government Agency

34,465

31,663

34,505

33,904

Collateralized mortgage obligations

42,567

39,032

44,820

43,799

Mortgage-backed securities - residential

28,981

26,654

26,920

26,352

Mortgage-backed securities - commercial

3,099

2,817

3,103

3,013

Corporate bonds

13,249

12,524

13,310

13,089

122,361

112,690

122,658

120,157

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

The following

table shows

the weighted

average yields,

categorized by

contractual maturity,

for investment

securities

as of March 31, 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%

4,800

2.76%

2,015

2.84%

21,382

1.37%

28,197

1.71%

U.S. Treasury

0.00%

2,463

2.32%

0.00%

2,463

2.32%

Collateralized mortgage obligations

0.00%

163,382

1.38%

163,382

1.38%

MBS - residential

0.00%

114,655

1.45%

114,655

1.45%

MBS - commercial

0.00%

46,280

1.67%

46,280

1.67%

Municipal securities

0.00%

1,000

2.05%

24,144

1.72%

25,144

1.73%

Bank subordinated debt securities

0.00%

26,003

5.02%

1,000

6.13%

27,003

5.02%

Corporate bonds

1,995

3.38%

8,055

3.74%

2,016

2.79%

0.00%

12,066

3.52%

1,995

15,318

31,034

370,843

419,190

1.78%

Held-to-maturity:

U.S. Government Agency

0.00%

7,884

1.03%

18,533

1.30%

8,048

1.58%

34,465

1.32%

Collateralized mortgage obligations

0.00%

42,567

1.45%

42,567

1.45%

MBS - residential

0.00%

2,727

2.98%

9,244

1.60%

17,010

2.04%

28,981

1.98%

MBS - commercial

0.00%

3,099

1.62%

0.00%

3,099

1.62%

Corporate bonds

2,007

3.06%

11,242

2.71%

0.00%

13,249

2.76%

2,007

21,853

30,876

67,625

122,361

1.67%

Loans

Loans are

the largest

category of

interest-earning assets

on the

Consolidated

Balance Sheets,

and usually

provides

higher yields

than the

rest of

the interest-earning

assets. Higher

yields typically

carry inherent

credit and

liquidity risks

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.

The following table shows the loan portfolio composition

as of the dates indicated (in thousands):

March 31, 2022

December 31, 2021

Total

Percent of

Total

Percent of

Total

Residential Real Estate

204,317

16.2

201,359

16.9

Commercial Real Estate

782,072

62.1

704,988

59.2

Commercial and Industrial

134,832

10.7

146,592

12.3

Foreign Banks

63,985

5.1

59,491

5.0

Consumer and Other

73,765

5.9

79,229

6.6

Total

gross loans

1,258,971

100.0

1,191,659

100.0

Less: Unearned income

583

1,578

Total

loans net of unearned income

1,258,388

1,190,081

Less: Allowance for credit losses

15,074

15,057

Total

net loans

1,243,314

1,175,024

Total

gross

loans

increased

$67.3 million

5.6%

March 31,

2022

compared

December 31,

2021.

The

commercial

real

estate

and

lesser

extent,

foreign

banks

and

residential

real

estate

loan

segments

had

the

most

significant

growth

partially

offset

declines

the

commercial

and

industrial

and

consumer

and

other

loan

segments.

During

the

three

months

ended,

the

Company

purchased

$57.2

million

and

$12.9

million

commercial

real

estate

and

residential

loans,

respectively.

Commercial

and

industrial

loans

declined

primarily

because

continuing

PPP

loan

forgiveness.

Our

loan

portfolio

continues

grow,

with

commercial

real

estate

lending

the

primary

focus

which

represented

approximately 62.1% of the total gross loan

portfolio as of March 31, 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

our strategic

plan

approved by the Board.

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

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

our

larger

loan

clients

have

lengthy

relationships

with

members

our

senior

management

team

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 to

interest rate changes for the

loan portfolio at March 31,

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

3,002

27,512

81,030

92,773

204,317

Commercial Real Estate

22,358

218,552

536,837

4,325

782,072

Commercial and Industrial

18,010

44,725

30,771

41,326

134,832

Foreign Banks

63,985

Consumer and Other

2,330

3,075

2,468

65,892

73,765

Total

gross loans

109,685

293,864

651,106

204,316

1,258,971

Interest rate sensitivity:

Fixed interest rates

85,107

216,592

137,043

86,568

525,310

Floating or adjustable rates

24,578

77,272

514,063

117,748

733,661

Total

gross loans

109,685

293,864

651,106

204,316

1,258,971

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

March 31, 2022,

approximately 58.3%

of the

loans have

adjustable/variable rates

and 41.7%

of the

loans have

fixed

rates.

The

adjustable/variable

loans

re-price

different

benchmarks

and

tenors

different

periods

time.

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.

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

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):

March 31, 2022

Pass

Special Mention

Substandard

Doubtful

Total

Residential Real Estate

201,137

3,180

204,317

Commercial Real Estate

780,448

1,210

414

782,072

Commercial and Industrial

134,324

508

134,832

Foreign Banks

63,985

Consumer and Other

73,548

217

73,765

1,253,442

1,210

4,319

1,258,971

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

Non-Performing Assets

The following table presents non-performing assets as

of the dates shown (in thousands,

except ratios):

March 31, 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

1.20%

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

TDRs, other

real estate owned

(“OREO”) and other

repossessed assets. Problem

loans for

which the

collection or liquidation

full

reasonably

uncertain

are

placed

non-accrual

status.

This

determination

based

current

existing

facts

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

concerning collateral values

and the paying capacity

of the borrower.

When the collection of

the full contractual balance

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 the Company

grants a concession.

This determination

is performed during the annual review process or whenever problems

are surfacing regarding the client’s ability to 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

the

debtor

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 for the dates indicated (in thousands):

March 31, 2022

Accruing

Non-Accruing

Total

Residential Real Estate

7,357

Commercial Real Estate

603

Commercial and Industrial

132

Consumer and Other

217

8,309

December 31, 2021

Accruing

Non-Accruing

Total

Residential Real Estate

7,815

Commercial Real Estate

696

Commercial and Industrial

141

Consumer and Other

224

8,876

The Company allocated $335 thousand and $360 thousand of specific allowance for TDR loans at March 31, 2022 and

December 31, 2021, respectively.

There was no commitment to lend additional funds to

these TDR customers.

During the quarter

ended March 31,

2022 and 2021,

there were no

defaults on TDR

loans within the

prior 12 months.

Additionally, the Company

did not have any new TDR loans during the three months

ended March 31, 2022 and 2021.

The

Company

provided

financial

relief

borrowers

impacted

COVID-19

and

provided

modifications

include

interest

only

deferral

principal

and

interest

deferral.

These

modifications

are

excluded

from

TDR,

classification

under

Section 4013 of the CARES Act or under applicable interagency

guidance of the federal banking regulators.

For further

discussion on

non-performing loans,

see Note

3 “Loans”

to the Consolidated

Financial Statements

on this

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.

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

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

March 31, 2022:

Beginning balance

2,498

8,758

2,775

457

569

15,057

Provision for credit losses

(157)

425

(426)

124

Recoveries

Charge-offs

(16)

(5)

(21)

Ending Balance

2,357

9,183

2,355

491

688

15,074

Average loans

198,162

739,732

139,781

59,667

74,090

1,211,432

Net charge-offs to average loans

(0.03)%

(0.02)%

0.03%

(0.01)%

March 31, 2021:

Beginning balance

3,408

9,453

1,689

348

188

15,086

Provision for credit losses

(325)

(133)

229

(160)

Recoveries

Charge-offs

(9)

Ending Balance

3,087

9,320

2,005

407

190

15,009

Average loans

231,185

625,849

166,925

42,267

5,555

1,071,782

Net charge-offs to average loans

(0.01)%

(0.21)%

0.58%

(0.03)%

Bank-Owned Life Insurance

As of March 31, 2022, the combined

cash surrender value of all bank-owned

life insurance (“BOLI”) policies

was 42.0.

Changes in cash

surrender value are

recorded to non-interest

income in the

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 March 31,

2022

2021

Average Balance

Average Rate

Paid

Average Balance

Average Rate

Paid

Non-interest bearing demand deposits

626,400

0.00%

482,376

0.00%

Interest-bearing demand deposits

64,436

0.10%

44,549

0.13%

Saving and money market deposits

736,134

0.30%

568,595

0.39%

Time deposits

223,274

0.47%

248,156

0.91%

1,650,244

0.20%

1,343,676

0.34%

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

$1.0 billion

and

$897.8 million

March 31,

2022

and

December 31,

2021,

respectively.

Time

deposits

with

balances

$250

thousand

totaled

$147.6 million and $119.4

million at March 31, 2022 and December 31, 2021, respectively.

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

The following table shows scheduled maturities of uninsured

time deposits as of March 31, 2022 (in thousands):

March 31, 2022

Three months or less

10,111

Over three through six months

25,531

Over six though twelve months

24,122

Over twelve months

43,342

103,106

Borrowings

As a

member of

the FHLB, we

are eligible for

advances with various

terms and conditions.

This accessibility of

additional

funding allows

us to

efficiently

and timely

meet both

expected and

unexpected outgoing

cash flows

and collateral

needs

without adversely affecting either daily operations

or the financial condition of the Company.

As of March 31, 2022 and December 31, 2021, we had $36.0 million of fixed rate advances outstanding from the FHLB

with a weighted average rate of 1.52%. Most of the advances

are due in the first two calendar quarters of 2025.

The following table presents the FHLB fixed rate advances

as of March 31, 2022 (in thousands):

Interest Rate

Type of Rate

Maturity Date

Amount

0.81%

Fixed

August 17, 2023

5,000

1.04%

Fixed

July 30, 2024

5,000

2.05%

Fixed

March 27, 2025

10,000

1.91%

Fixed

March 28, 2025

5,000

1.81%

Fixed

April 17, 2025

5,000

1.07%

Fixed

July 18, 2025

6,000

36,000

have

also

established

Fed

Funds

lines

credit

with

our

upstream

correspondent

banks

manage

temporary

fluctuations in our daily cash balances. As of

March 31, 2022, there were no outstanding

balances with the Fed Funds line

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

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 as we do

for on-balance sheet items.

We are not

aware of any accounting

loss to be

incurred by funding

these

commitments; however,

we maintain an allowance

for off-balance sheet

credit risk which is

recorded under other liabilities

on the Consolidated Balance Sheets.

Since commitments associated with letters of

credit and commitments to extend

credit may expire unused, the

amounts

shown do not necessarily

reflect the actual

future cash funding requirements

The following table

presents lending related

commitments outstanding as of the dates indicated (in thousands

March 31, 2022

December 31, 2021

Commitments to grant loans and unfunded lines of credit

125,484

134,877

Standby and commercial letters of credit

5,552

6,420

131,036

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

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

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

(“Internal Rate

of Return”)

is inherent to

the banking

business, our

ALCO has

put in place

sound risk management practices to identify,

quantify,

monitor, and limit IRR exposures.

When assessing

the scope

of IRR

exposure

and

impact on

the co

nsolidated

balance sheet,

cash

flows and

income

statement,

management

considers

both

earnings

and

economic

impacts.

Asset

price

variations,

deposits

volatility

and

reduced earnings or outright losses could adversely affect

the Company’s

liquidity, performa

nce, 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 ALCO

model,

we are

an asset-sensitive

company.

This indicates

that our

assets generally

reprice

faster than

our liabilities,

which results

in a

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

EVEs 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 March 31, 2022, NIM should increase for static rate scenarios (-400 basis points or +400

basis points). For the static forecast in year

one, the estimated NIM will increase from

3.17% base case scenario to 3.28%

under a +400

basis points scenario.

Additionally,

utilizing an economic

value of equity,

or EVE, approach,

we 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

of our

liabilities, which

is a

proxy for our liquidation value.

According to our balance sheet

composition, and as expected,

our model stipulates that an

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

increase of rates

will have

a negative impact

on the EVE.

Results and analysis

are presented

quarterly to the

Board, and

strategies are defined.

have

also

been

reducing

asset

sensitivity

extending

asset

duration,

which

has

lowered

our

NII

volatility

and

allowed us to keep the NII consistent with the ALCO objectives.

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.

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 and ALM

policy.

Critical elements of our liquidity

risk management include: effective corporate governance consisting of

oversight by the

Board and

active involvement

by 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.

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

Capital Adequacy

As of

March 31, 2022,

the Bank

was well

capitalized

under the

FDIC’s

prompt corrective

action framework.

We also

follow the capital conservation buffer framework, and as of March 31, 2022, we exceeded the capital conversation buffer

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

March 31, 2022:

Total

risk-based capital:

USCB Financial Holdings, Inc.

194,564

14.49

107,425

8.00

134,281

10.00

U.S. Century Bank

193,462

14.41

107,425

8.00

134,281

10.00

Tier 1 risk-based capital:

USCB Financial Holdings, Inc.

179,243

13.35

80,568

6.00

107,425

8.00

U.S. Century Bank

178,141

13.27

80,568

6.00

107,425

8.00

Common equity tier 1 capital:

USCB Financial Holdings, Inc.

179,243

13.35

60,426

4.50

87,282

6.50

U.S. Century Bank

178,141

13.27

60,426

4.50

87,282

6.50

Leverage ratio:

USCB Financial Holdings, Inc.

179,243

9.47

75,681

4.00

94,601

5.00

U.S. Century Bank

178,141

9.42

75,681

4.00

94,601

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.

Impact of Inflation

Our Consolidated

Financial Statements

and related

notes have been

prepared in

accordance with

U.S. GAAP,

which

require the

measurement

of financial

position and

operating results

in terms

of historical

dollars,

without considering

the

changes

the

relative

purchasing

power

money

over

time due

inflation.

The

impact

inflation

reflected

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 Consolidated Financial Statements on this Form 10-Q.

Table of Contents

USCB Financial Holdings, Inc.

Q1 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

3/31/2022

12/31/2021

9/30/2021

6/30/2021

3/31/2021

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

Net income

4,854

5,650

6,593

4,053

4,781

Plus: Provision for income taxes

1,858

1,751

2,088

1,263

1,498

Plus: Provision for (recovery of) credit losses

(160)

PTPP income

6,712

7,401

8,681

5,316

6,119

PTPP Return on Average Assets:

PTPP income

6,712

7,401

8,681

5,316

6,119

Average assets

1,913,484

1,828,037

1,741,423

1,660,060

1,573,881

PTPP return on average assets

(1)

1.42%

1.61%

1.98%

1.28%

1.58%

Operating Net Income:

Net income

4,854

5,650

6,593

4,053

4,781

Less: Net gains (losses) on sale of

securities

(70)

187

Less: Tax effect on sale of securities

(5)

(9)

(46)

(15)

Operating net income

4,838

5,624

6,646

3,912

4,734

Operating PTPP Income:

PTPP income

6,712

7,401

8,681

5,316

6,119

Less: Net gains (losses) on sale of

securities

(70)

187

Operating PTPP Income

6,691

7,366

8,751

5,129

6,057

Operating PTPP Return on Average Assets:

Operating PTPP income

6,691

7,366

8,751

5,129

6,057

Average assets

1,913,484

1,828,037

1,741,423

1,660,060

1,573,881

Operating PTPP Return on average assets

(1)

1.42%

1.60%

1.99%

1.24%

1.56%

Operating Return on Average Assets:

Operating net income

4,838

5,624

6,646

3,912

4,734

Average assets

1,913,484

1,828,037

1,741,423

1,660,060

1,573,881

Operating return on average assets

(1)

1.03%

1.22%

1.51%

0.95%

1.22%

(1) Annualized.

Table of Contents

USCB Financial Holdings, Inc.

Q1 2022 Form 10-Q

As of or For the Three Months Ended

3/31/2022

12/31/2021

9/30/2021

6/30/2021

3/31/2021

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

(1)

Total stockholders' equity (GAAP)

192,039

203,897

201,918

166,302

170,425

Less: Intangible assets

Less: Preferred stock

24,616

32,077

Tangible stockholders' equity (non-GAAP)

192,039

203,897

201,918

141,686

138,348

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

(2)

Class A common shares

20,000,753

19,991,753

18,767,541

3,889,469

Class B common shares

1,224,212

Total common shares issued and outstanding

20,000,753

19,991,753

5,113,681

Tangible book value per common share (non-GAAP)

9.60

10.20

10.10

27.71

27.05

Operating net income available to common stockholders:

(1)

Net income (GAAP)

4,854

5,650

6,593

4,053

4,781

Less: Preferred dividends

542

754

781

Less: Exchange and redemption of preferred shares

89,585

Net income (loss) available to common stockholders

4,854

5,650

(83,534)

3,299

4,000

Add back: Exchange and redemption of preferred

89,585

Operating net income avail. to common stock (non-GAAP)

4,854

5,650

6,051

3,299

4,000

Allocation of operating net income per common

stock class:

Class A common stock

4,854

5,650

5,598

2,509

3,042

Class B common stock

453

790

958

Weighted average shares outstanding:

Class A common stock

Basic

19,994,953

18,913,914

15,121,460

3,889,469

Diluted

20,109,783

19,023,686

15,187,729

3,933,636

3,913,279

Class B common stock

Basic

6,121,052

Diluted

6,121,052

Diluted EPS:

(3) (4)

Class A common stock

Net income (loss) per diluted share (GAAP)

0.24

0.30

(5.11)

0.64

0.78

Add back: Exchange and redemption of preferred

5.48

Operating net income per diluted share (non-GAAP)

0.24

0.30

0.37

0.64

0.78

Class B common stock

Net income (loss) per diluted share (GAAP)

(1.02)

0.13

0.16

Add back: Exchange and redemption of preferred

1.09

Operating net income per diluted share (non-GAAP)

0.07

0.13

0.16

(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

exchanged for an aggregate of 10,278,072 shares

of Class A common stock. Additionally, the Bank completed the 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)

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.

(4)

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 stock for Class A voting common

stock at a ratio of 5 to 1. 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 a as-converted basis.

Table of Contents

USCB Financial Holdings, Inc.

Q1 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

March 31,

2022.

Based

that

evaluation,

management

believes

that

the

Company’s

disclosure controls and procedures were effective to 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.

Q1 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 Annual

Report on

Form 10-K,

for the

year ended

December 31, 2021.

There have been no material changes from the risk factors

previously disclosed in the Form 10-K.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

On February

28, 2022,

stock options

previously granted

to a

former Board

member of

the Company,

pursuant to

the

Amended and Restated

2015 Equity

Incentive Plan

covering 9,000

shares of

Class A common

stock at

an exercise

price

per share of $11.35

of the Company were

exercised for an aggregate

amount of $102 thousand.

The options were issued

while the former Board member was

still serving as a director and

prior to the issuer becoming a

reporting company under

the Securities

Exchange Act

of 1934.

The shares

of Class

A common stock

subject to

the exercised

options were

issued

pursuant to the exemption provided by Rule 701 of the

Securities Act of 1933.

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.

Q1 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

March 31,

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.

Q1 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

May 12, 2022

Luis de la Aguilera

(Principal Executive Officer)

/s/ Robert Anderson

Chief Financial Officer

May 12, 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: May 12, 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: May 12, 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 March 31, 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: May 12, 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 March 31, 2022,

as filed with the

Securities and Exchange

Commission on 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: May 12, 2022