, /PRNewswire/ -- The Bank of South Carolina Corporation (OTCQX:Â BKSC) announced unaudited earnings of $2,143,640, or $0.40 basic and $0.38 diluted earnings per share, for the quarter ended September 30, 2025 – an increase of $341,777, or 18.97%, from earnings for the quarter ended September 30, 2024 of $1,801,863, or $0.33 basic and diluted earnings per share. Unaudited earnings for the nine months ended September 30, 2025 increased $962,352, or 19.51%, to $5,893,809 compared to $4,931,457 for the nine mo ...

Core Points - Bank of South Carolina Corporation declared a quarterly cash dividend of $0.23 per share, payable on October 31, 2025, to shareholders of record on October 7, 2025, marking the 144th quarterly cash dividend [1] - The company has raised its cash dividend for the second consecutive quarter, a first in its history, with a total increase of $0.06 per share, or 35%, over the past twelve months [2] - The Bank of South Carolina has been in continuous operation since 1987 and operates multiple branches in South Carolina [2] Financial Performance - The Bank of South Carolina Corporation reported unaudited earnings of $1,956,155, translating to $0.36 basic and $0.35 diluted earnings per share for the second quarter [4]

CHARLESTON, S.C., July 22, 2025 /PRNewswire/ -- The Bank of South Carolina Corporation (OTCQX: BKSC), parent company of The Bank of South Carolina, is proud to announce the Bank has been named one of the nation's Top 100 publicly traded community banks with assets under $2 billion by American Banker magazine. Ranked 66th on the 2025 list, The Bank of South Carolina is the only South Carolina-based bank to be recognized this year. The ranking was published by American Banker on July 3, 2025, and developed by ...

Core Viewpoint - The Bank of South Carolina Corporation reported strong financial performance for the second quarter of 2025, achieving record earnings driven by improved net interest margins and robust loan demand [1][2]. Financial Performance - The unaudited net income for the quarter ended June 30, 2025, was $1,956,155, representing an increase of $202,357 or 11.54% compared to $1,753,798 for the same quarter in 2024 [1]. - For the first six months of 2025, unaudited earnings rose to $3,750,169, an increase of $620,575 or 19.83% from $3,129,594 in the same period of 2024 [1]. - The annualized return on average assets for the six months ended June 30, 2025, was 1.33%, up from 1.04% a year earlier, while the return on average equity increased to 13.73% from 13.21% [1]. Revenue and Expenses - Total interest and fee income for the quarter was $7,202,647, compared to $6,702,792 in the same quarter of 2024 [2]. - Net interest income after provision for credit losses was $5,798,353 for the quarter, reflecting a strong performance in interest income generation [2]. - Total other income was $421,104, while total other expenses amounted to $3,663,556, leading to an income before income tax expense of $2,555,901 [2]. Key Ratios and Metrics - The net interest margin for the quarter was 4.33%, marking the second consecutive quarter above 4% [2]. - The efficiency ratio improved to 57.97%, indicating better cost management [2]. - The percentage of loans past due over 30 days was low at 0.29%, demonstrating strong asset quality [2]. Company Overview - The Bank of South Carolina Corporation is a state-chartered financial institution operating since 1987, with multiple locations in South Carolina [3]. - The company trades its common stock on the OTCQX Best Market under the symbol "BKSC" [3].

Part I. Financial Information [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements, including balance sheets, income statements, comprehensive income, equity, and cash flows, with detailed notes on accounting policies and financial instruments [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets%20%E2%80%93%20June%2030%2C%202023%20and%20December%2031%2C%202022) Total assets slightly decreased from $653.3 million to $648.4 million, driven by lower investment securities and deposits, offset by increased loans and short-term borrowings Consolidated Balance Sheet Highlights | Metric | June 30, 2023 | December 31, 2022 | | :---------------------------------- | :-------------- | :---------------- | | Total Assets | $648,405,848 | $653,345,609 | | Total Liabilities | $605,834,496 | $614,534,222 | | Total Shareholders' Equity | $42,571,352 | $38,811,387 | | Net Loans | $337,649,010 | $326,690,561 | | Total Deposits | $564,753,262 | $598,670,258 | | Short-term borrowings | $25,000,000 | $0 | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20%E2%80%93%20Three%20and%20Six%20months%20ended%20June%2030%2C%202023%20and%202022) Net income decreased for both three and six-month periods ending June 30, 2023, primarily due to a significant rise in interest expense despite increased total interest and fee income Three Months Ended June 30, 2023 vs 2022 | Metric | 2023 | 2022 | Change (YoY) | | :----------------------------- | :----------- | :----------- | :----------- | | Net income | $1,277,717 | $1,542,982 | -17.19% | | Basic income per common share | $0.23 | $0.28 | -17.86% | | Diluted income per common share | $0.23 | $0.27 | -14.81% | | Total interest and fee income | $6,027,060 | $4,583,251 | +31.50% | | Total interest expense | $1,420,080 | $37,824 | +3652.9% | | Net interest income | $4,606,980 | $4,545,427 | +1.35% | | Total other income | $437,121 | $593,698 | -26.37% | | Total other expense | $3,386,022 | $3,138,415 | +7.89% | | Income tax expense | $380,362 | $457,728 | -16.90% | Six Months Ended June 30, 2023 vs 2022 | Metric | 2023 | 2022 | Change (YoY) | | :----------------------------- | :----------- | :----------- | :----------- | | Net income | $2,866,496 | $3,007,088 | -4.68% | | Basic income per common share | $0.52 | $0.54 | -3.70% | | Diluted income per common share | $0.51 | $0.53 | -3.77% | | Total interest and fee income | $11,658,894 | $8,838,212 | +31.93% | | Total interest expense | $2,351,181 | $74,621 | +3040.1% | | Net interest income | $9,307,713 | $8,763,591 | +6.21% | | Provision for credit losses | $45,000 | $(75,000) | N/A | | Total other income | $886,322 | $1,228,252 | -27.84% | | Total other expense | $6,636,383 | $6,154,978 | +7.82% | | Income tax expense | $646,156 | $904,777 | -28.58% | [Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20%E2%80%93%20Three%20and%20Six%20months%20ended%20June%2030%2C%202023%20and%202022) Total comprehensive income significantly improved for both periods ending June 30, 2023, primarily due to a substantial reduction in unrealized losses on available-for-sale securities Total Comprehensive Income (Loss) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $1,277,717 | $1,542,982 | $2,866,496 | $3,007,088 | | Other comprehensive loss (after tax) | $(1,241,481) | $(3,991,447) | $2,779,925 | $(13,640,900) | | Total comprehensive income (loss) | $36,236 | $(2,448,465) | $5,646,421 | $(10,633,812) | [Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity%20%E2%80%93%20Three%20and%20Six%20months%20ended%20June%2030%2C%202023%20and%202022) Total shareholders' equity increased from $38.8 million to $42.6 million, driven by net income and a positive change in accumulated other comprehensive loss Shareholders' Equity Changes (Six Months Ended June 30, 2023) | Item | Amount | | :------------------------------------ | :----------- | | Beginning balance (Dec 31, 2022) | $38,811,387 | | Net income | $2,866,496 | | Other comprehensive income | $2,779,925 | | Stock-based compensation expense | $57,935 | | Repurchase of common shares | $(57,290) | | Cash dividends | $(1,887,801) | | Ending balance (June 30, 2023) | $42,571,352 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20%E2%80%93%20Six%20months%20ended%20June%2030%2C%202023%20and%202022) Net cash from operating activities increased, while net cash used in financing activities decreased, and investing activities significantly improved due to security maturities and reduced purchases Cash Flow Summary (Six Months Ended June 30) | Metric | 2023 | 2022 | | :------------------------------------ | :----------- | :----------- | | Net cash provided by operating activities | $2,264,547 | $1,674,515 | | Net cash provided by (used in) investing activities | $6,204,884 | $(86,014,076) | | Net cash used in financing activities | $(10,862,087) | $(13,125,371) | | Net decrease in cash and cash equivalents | $(2,392,656) | $(97,464,932) | | Cash and cash equivalents at end of period | $25,379,043 | $42,647,056 | - Proceeds from calls and maturities of investment securities available for sale increased significantly to **$17.4 million in 2023** from $3.5 million in 2022[19](index=19&type=chunk) - Purchases of investment securities available for sale were **$0 in 2023**, compared to $94.7 million in 2022[19](index=19&type=chunk) - Net decrease in deposit accounts was **$(33.9) million in 2023**, compared to $(11.4) million in 2022[19](index=19&type=chunk) - The Company reported **$25.0 million in net increase in short-term borrowings in 2023**, compared to $0 in 2022[19](index=19&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations for the financial statements, covering business, accounting policies, investment securities, loans, leases, fair value, and earnings per share [Note 1. Nature of Business and Basis of Presentation](index=9&type=section&id=Note%201.%20NATURE%20OF%20BUSINESS%20AND%20BASIS%20OF%20PRESENTATION) This note outlines the Company's operations, basis of interim financial statement presentation, use of accounting estimates, and adoption of ASU 2016-13 (CECL) on January 1, 2023 - The Company adopted ASU 2016-13 (CECL) on January 1, 2023, resulting in an increase in the allowance for unfunded commitments of **$600,000** and a decrease in the allowance for credit losses of **$600,000**, with no adjustment to retained earnings[31](index=31&type=chunk) - The CECL methodology utilizes a lifetime 'expected credit loss' measurement objective for the recognition of credit losses for loans, held-to-maturity securities, and other receivables at the time the financial asset is originated or acquired[30](index=30&type=chunk) - The Company uses the Loss Rate Approach for collective loan evaluations and the fair value of collateral for individually impaired loans[38](index=38&type=chunk)[41](index=41&type=chunk) [Note 2. Investment Securities](index=11&type=section&id=Note%202%3A%20Investment%20Securities) The investment securities portfolio, primarily available for sale, had a net unrealized loss of approximately $23.5 million, considered temporary, and $35.0 million in securities were pledged for funding Investment Securities Available for Sale (Fair Value) | Date | Fair Value | | :---------------- | :----------- | | June 30, 2023 | $255,698,103 | | December 31, 2022 | $271,172,226 | Net Unrealized Loss on Investment Securities | Date | Gross Unrealized Losses | | :---------------- | :---------------------- | | June 30, 2023 | $(23,469,236) | | December 31, 2022 | $(25,828,434) | - Securities pledged to secure funding from the Bank Term Funding Program at amortized cost were **$35.0 million** at June 30, 2023[52](index=52&type=chunk) - There was no allowance for credit losses on available for sale securities at June 30, 2023[50](index=50&type=chunk) [Note 3. Loans and Allowance for Credit Losses](index=13&type=section&id=Note%203%3A%20Loans%20and%20Allowance%20for%20Credit%20Losses) Net loans increased by $11.0 million to $337.7 million, while the allowance for credit losses decreased to $3.7 million, representing 1.08% of outstanding loans, with nonaccrual loans totaling $625,677 Loans and Allowance for Credit Losses | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------- | :-------------- | :---------------- | | Net Loans | $337,649,010 | $326,690,561 | | Allowance for credit losses | $3,689,863 | $4,291,221 | | Nonaccrual loans | $625,677 | $631,453 | Allowance for Credit Losses as % of Outstanding Loans | Date | Percentage | | :---------------- | :----------- | | June 30, 2023 | 1.08% | | December 31, 2022 | 1.30% | Loan Portfolio Composition (June 30, 2023) | Loan Type | Amount | Percent | | :----------------------------- | :----------- | :----------- | | Commercial Real Estate Other | $174,739,069 | 51.19% | | Consumer Real Estate | $92,895,470 | 27.22% | | Commercial | $46,173,490 | 13.53% | | Commercial Real Estate Construction | $23,752,103 | 6.96% | | Consumer Other | $3,778,741 | 1.10% | - Net charge-offs for the six months ended June 30, 2023, were **$46,358**, resulting from $48,318 in charge-offs and $1,960 in recoveries[70](index=70&type=chunk)[136](index=136&type=chunk) - Loans modified for borrowers experiencing financial difficulty totaled **$815,086** (amortized cost basis) at June 30, 2023, primarily in Commercial Real Estate Other, with concessions including term extensions and interest-only periods[81](index=81&type=chunk) [Note 4. Leases](index=22&type=section&id=Note%204%3A%20Leases) The Company holds operating leases for land, branch facilities, and parking, with right-of-use assets and lease liabilities both at $13.1 million and a weighted average remaining lease term of 15.1 years Operating Lease Balances | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------- | :-------------- | :---------------- | | Operating ROU assets | $13,116,779 | $13,433,692 | | Operating lease liabilities | $13,116,779 | $13,433,692 | - Weighted average remaining lease term was **15.1 years** at June 30, 2023[83](index=83&type=chunk) Total Lease Expense (Six Months Ended June 30) | Year | Amount | | :--- | :----------- | | 2023 | $612,017 | | 2022 | $597,335 | [Note 5. Disclosures Regarding Fair Value of Financial Statements](index=23&type=section&id=Note%205%3A%20Disclosures%20Regarding%20Fair%20Value%20of%20Financial%20Statements) The Company measures financial instruments at fair value using a three-level hierarchy, with investment securities primarily Level 1 and 2, and individually assessed loans as Level 3 - The fair value hierarchy prioritizes unadjusted quoted market prices (Level 1), followed by observable inputs (Level 2), and then unobservable inputs (Level 3)[89](index=89&type=chunk)[91](index=91&type=chunk) Investment Securities Available for Sale by Fair Value Level (June 30, 2023) | Security Type | Level 1 | Level 2 | Level 3 | Total | | :-------------------------- | :----------- | :----------- | :----------- | :----------- | | U.S. Treasury Notes | $169,341,280 | $0 | $0 | $169,341,280 | | Government-Sponsored Enterprises | $0 | $52,593,496 | $0 | $52,593,496 | | Municipal Securities | $0 | $16,273,594 | $17,489,733 | $33,763,327 | | Total | $169,341,280 | $68,867,090 | $17,489,733 | $255,698,103 | Assets Measured at Fair Value on a Nonrecurring Basis (June 30, 2023) | Asset Type | Level 1 | Level 2 | Level 3 | Total | | :-------------------------- | :--- | :----------- | :----------- | :----------- | | Individually assessed loans | $0 | $0 | $1,428,036 | $1,428,036 | | Mortgage loans to be sold | $0 | $2,868,776 | $0 | $2,868,776 | - For Level 3 individually assessed loans, valuation uses appraisal values/comparable sales, with appraisals discounted **10% to 20%** for sales commissions and other holding costs[103](index=103&type=chunk) [Note 6. Income Per Common Share](index=27&type=section&id=Note%206%3A%20Income%20Per%20Common%20Share) Basic and diluted income per common share decreased for both the three and six months ended June 30, 2023, consistent with the overall decrease in net income Income Per Common Share (Three Months Ended June 30) | Metric | 2023 | 2022 | | :----------------------------- | :--- | :--- | | Basic income per common share | $0.23 | $0.28 | | Diluted income per common share | $0.23 | $0.27 | Income Per Common Share (Six Months Ended June 30) | Metric | 2023 | 2022 | | :----------------------------- | :--- | :--- | | Basic income per common share | $0.52 | $0.54 | | Diluted income per common share | $0.51 | $0.53 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, highlighting key trends, significant changes, and critical accounting policies [Overview](index=28&type=section&id=Overview) Bank of South Carolina Corporation, with $648.4 million in assets, focuses on personal service, with primary income from interest on loans and investments, while facing economic, interest rate, and competition risks - Total assets of Bank of South Carolina Corporation were **$648.4 million** as of June 30, 2023[117](index=117&type=chunk) - The primary source of income is interest on loans and investments, with net interest income being a key measure of success[120](index=120&type=chunk) - Potential risks include changes in economic, monetary policy, and industry conditions; interest rate fluctuations; competition for deposits; and recent adverse developments in the banking industry[118](index=118&type=chunk) [Critical Accounting Policies](index=30&type=section&id=Critical%20Accounting%20Policies) The Company's critical accounting policies involve significant judgments and assumptions, primarily related to the allowance for credit losses, with the adoption of ASC 326 (CECL) being the only significant change - Critical accounting policies involve significant judgments and assumptions that materially impact the carrying value of certain assets and liabilities[123](index=123&type=chunk) - The only significant change to critical accounting policies was the adoption of **ASC 326 (CECL)** as of January 1, 2023[123](index=123&type=chunk) [Balance Sheet Analysis](index=30&type=section&id=Balance%20Sheet) The balance sheet analysis reveals decreased cash and deposits, offset by increased loans and new short-term borrowings, with investment securities remaining a significant asset portion [Cash and Cash Equivalents](index=30&type=section&id=Cash%20and%20Cash%20Equivalents%20(including%20interest-bearing%20deposits%20at%20the%20Federal%20Reserve)) Total cash and cash equivalents decreased by 8.7% to $25.4 million, primarily due to lower deposits and increased loans, partially offset by short-term borrowings and investment securities maturities - Total cash and cash equivalents decreased by **$2.4 million (8.7%)** to **$25.4 million** at June 30, 2023, from $27.8 million at December 31, 2022[124](index=124&type=chunk) - The decrease was primarily due to a net decrease in deposit accounts of **$33.9 million** and a net increase in loans of **$11.0 million**[124](index=124&type=chunk) - This was partially offset by short-term borrowings of **$25.0 million** and net proceeds from maturities of investment securities of **$17.4 million**[124](index=124&type=chunk) [Investment Securities Available for Sale](index=30&type=section&id=Investment%20Securities%20Available%20for%20Sale) The available-for-sale investment portfolio decreased in fair market value to $255.7 million, representing 39.43% of total assets, with a net unrealized loss of approximately $23.5 million due to interest rate changes - Fair market value of available for sale investment portfolio was **$255.7 million** at June 30, 2023, with an amortized cost of $279.2 million, resulting in a net unrealized loss of approximately **$23.5 million**[127](index=127&type=chunk) - Investment securities represented **39.43% of total assets** at June 30, 2023, down from 41.5% at December 31, 2022[127](index=127&type=chunk) - The average yield on investment securities was **1.13%** at June 30, 2023, compared to 1.18% at December 31, 2022[127](index=127&type=chunk) [Loans](index=30&type=section&id=Loans) Net loans increased by $11.0 million, or 3.35%, to $337.7 million, driven by growth in Consumer and Commercial Real Estate loans, with the Bank continuing to originate 30-year, fixed-rate consumer mortgage loans for investment - Net loans increased by **$11.0 million (3.35%)** to **$337.7 million** at June 30, 2023, from $326.7 million at December 31, 2022[128](index=128&type=chunk) - The increase is primarily related to growth in Consumer and Commercial Real Estate loans[128](index=128&type=chunk) Loan Portfolio Composition (June 30, 2023) | Loan Type | Amount | Percent | | :----------------------------- | :----------- | :----------- | | Commercial Real Estate Other | $174,739,069 | 51.19% | | Consumer Real Estate | $92,895,470 | 27.22% | | Commercial | $46,173,490 | 13.53% | | Commercial Real Estate Construction | $23,752,103 | 6.96% | | Consumer Other | $3,778,741 | 1.10% | [Nonperforming Assets](index=31&type=section&id=Nonperforming%20Assets) Total nonperforming assets, solely nonaccruing loans, decreased slightly to $625,677, primarily from Commercial Real Estate Other loans, with no loans 90 days past due still accruing interest Total Nonperforming Assets | Date | Amount | | :---------------- | :----------- | | June 30, 2023 | $625,677 | | December 31, 2022 | $631,453 | - Nonperforming assets consist entirely of nonaccruing loans, with Commercial Real Estate Other being the largest component[133](index=133&type=chunk) - As of June 30, 2023, there were no loans 90 days past due still accruing interest[132](index=132&type=chunk) [Allowance for Credit Losses](index=31&type=section&id=Allowance%20for%20Credit%20Losses) The allowance for credit losses decreased to $3.7 million, representing 1.08% of outstanding loans and 589.74% coverage for nonperforming loans, with net charge-offs of $46,358 Allowance for Credit Losses | Date | Amount | | :---------------- | :----------- | | June 30, 2023 | $3,689,863 | | December 31, 2022 | $4,291,221 | Allowance for Credit Losses Metrics | Metric | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :-------------- | :---------------- | | % of outstanding loans | 1.08% | 1.30% | | % of total nonperforming loans | 589.74% | 679.58% | - Net charge-offs for the six months ended June 30, 2023, totaled **$46,358** ($48,138 in charge-offs and $1,960 in recoveries)[136](index=136&type=chunk) [Deposits](index=31&type=section&id=Deposits) Total deposits decreased by 5.67% or $33.9 million to $564.8 million, primarily due to brokered time deposit maturities and increased competition, partially offset by new brokered time deposits - Total deposits decreased by **$33.9 million (5.67%)** to **$564.8 million** at June 30, 2023, from $598.7 million at December 31, 2022[138](index=138&type=chunk) - The decrease was primarily due to scheduled maturities of brokered time deposits (**$23.0 million**) and increased competition for deposits[138](index=138&type=chunk) Deposit Composition (June 30, 2023) | Deposit Type | Amount | Percent | | :----------------------------- | :----------- | :----------- | | Non-interest bearing demand | $206,034,702 | 36.49% | | Interest bearing demand | $154,348,295 | 27.33% | | Money market accounts | $104,930,669 | 18.58% | | Time deposits $250,000 and over | $30,596,097 | 5.42% | | Other time deposits | $11,106,990 | 1.97% | | Other savings deposits | $57,736,509 | 10.21% | | Total deposits | $564,753,262 | 100.00% | - Brokered time deposits increased to **4.36% of total deposits** at June 30, 2023, from 0% at December 31, 2022, due to **$24.6 million** in new brokered time deposits acquired to meet short-term liquidity needs[138](index=138&type=chunk) [Comparison of Three Months Ended June 30, 2023 to Three Months Ended June 30, 2022](index=32&type=section&id=Comparison%20of%20Three%20Months%20Ended%20June%2030%2C%202023%20to%20Three%20Months%20Ended%20June%2030%2C%202022) Net income decreased by 17.19% to $1.3 million, with basic and diluted EPS at $0.23, driven by a substantial rise in interest expense and lower non-interest income despite a slight increase in net interest income - Net income decreased by **$0.2 million (17.19%)** to **$1.3 million** for the three months ended June 30, 2023[140](index=140&type=chunk) - Basic and diluted earnings per share were **$0.23** for the three months ended June 30, 2023, down from $0.28 and $0.27, respectively, in the prior year[140](index=140&type=chunk) [Net Interest Income](index=32&type=section&id=Net%20Interest%20Income_3M) Net interest income increased by 1.35% to $4.6 million, driven by a 31.50% increase in total interest and fee income from loans, but offset by a surge in total interest expense due to higher deposit rates and new borrowings - Net interest income increased by **$0.1 million (1.35%)** to **$4.6 million**[141](index=141&type=chunk) - Total interest and fee income increased by **$1.3 million (31.50%)** to **$6.0 million**, with loan interest income rising by $1.3 million[11](index=11&type=chunk)[141](index=141&type=chunk) - Total interest expense dramatically increased from **$37,824 in 2022** to **$1,420,080 in 2023**, primarily due to higher deposit rates and short-term borrowings[11](index=11&type=chunk)[143](index=143&type=chunk) - The yield on average loans increased to **6.07%** from 5.07%[141](index=141&type=chunk) [Provision for Credit Losses](index=32&type=section&id=Provision%20for%20Credit%20Losses_3M) No provision for credit losses was recognized during the three months ended June 30, 2023, or 2022 - No provision for credit losses was recognized for the three months ended June 30, 2023, or 2022[144](index=144&type=chunk) [Non-Interest Income](index=33&type=section&id=Non-Interest%20Income_3M) Other income decreased by 26.37% to $0.4 million, primarily due to a $0.1 million decrease in mortgage banking income, reflecting a lower volume of mortgage loans sold - Other income decreased by **$0.2 million (26.37%)** to **$0.4 million**[145](index=145&type=chunk) - This decrease was primarily due to a **$0.1 million decrease in mortgage banking income**[145](index=145&type=chunk) - Mortgage loans held for sale decreased to **$12.2 million sold in 2023** from $21.5 million in 2022[145](index=145&type=chunk) [Non-Interest Expense](index=33&type=section&id=Non-Interest%20Expense_3M) Non-interest expense increased by 7.89% to $3.4 million, mainly due to higher salaries and employee benefits and net occupancy expense, partly attributable to a new branch opening - Non-interest expense increased by **$0.3 million (7.89%)** to **$3.4 million**[146](index=146&type=chunk) - The increase was primarily due to increases in salaries and employee benefits and net occupancy expense[146](index=146&type=chunk) - The Bank opened its new James Island location in the second quarter of 2023[146](index=146&type=chunk) [Income Tax Expense](index=33&type=section&id=Income%20Tax%20Expense_3M) Income tax expense decreased to $0.4 million, maintaining a stable effective tax rate of approximately 22.94% - Income tax expense was **$0.4 million in 2023**, compared to $0.5 million in 2022[147](index=147&type=chunk) - The effective tax rate was **22.94% in 2023**, similar to 22.88% in 2022[147](index=147&type=chunk) [Comparison of Six Months Ended June 30, 2023 to Six Months Ended June 30, 2022](index=33&type=section&id=Comparison%20of%20Six%20Months%20Ended%20June%2030%2C%202023%20to%20Six%20Months%20Ended%20June%2030%2C%202022) Net income decreased by 4.68% to $2.9 million, with basic and diluted EPS at $0.52 and $0.51, respectively, due to significantly higher interest expense and lower non-interest income despite increased net interest income - Net income decreased by **$0.1 million (4.68%)** to **$2.9 million** for the six months ended June 30, 2023[148](index=148&type=chunk) - Basic and diluted earnings per share were **$0.52 and $0.51**, respectively, for the six months ended June 30, 2023, down from $0.54 and $0.53 in the prior year[148](index=148&type=chunk) [Net Interest Income](index=33&type=section&id=Net%20Interest%20Income_6M) Net interest income increased by 6.21% to $9.3 million, driven by a 31.93% increase in total interest and fee income from loans, but offset by a surge in total interest expense due to higher deposit rates and new borrowings - Net interest income increased by **$0.5 million (6.21%)** to **$9.3 million**[149](index=149&type=chunk) - Total interest and fee income increased by **$2.4 million (31.93%)** to **$11.7 million**, with loan interest income rising by $2.4 million[14](index=14&type=chunk)[149](index=149&type=chunk) - Total interest expense dramatically increased from **$74,621 in 2022** to **$2,351,181 in 2023**, primarily due to higher deposit rates and short-term borrowings[14](index=14&type=chunk)[151](index=151&type=chunk) - The yield on average loans increased to **5.97%** from 5.03%[149](index=149&type=chunk) [Provision for Credit Losses](index=33&type=section&id=Provision%20for%20Credit%20Losses_6M) The Company recorded a $45,000 increase to the allowance for credit losses in 2023, a change from a $75,000 reduction in the prior year, reflecting an analysis of the allowance's adequacy - A **$45,000 increase** to the allowance for credit losses was recorded in 2023, compared to a $75,000 reduction in 2022[152](index=152&type=chunk) [Non-Interest Income](index=33&type=section&id=Non-Interest%20Income_6M) Other income decreased by 27.84% to $0.9 million, primarily due to a $0.3 million decrease in mortgage banking income and a $0.1 million decrease in gains on sales of investment securities - Other income decreased by **$0.3 million (27.84%)** to **$0.9 million**[153](index=153&type=chunk) - This decrease was primarily due to a **$0.3 million decrease in mortgage banking income** and a **$0.1 million decrease in gains on sales of investment securities**[153](index=153&type=chunk) - Mortgage loans held for sale decreased to **$20.2 million sold in 2023** from $39.2 million in 2022[153](index=153&type=chunk) [Non-Interest Expense](index=33&type=section&id=Non-Interest%20Expense_6M) Non-interest expense increased by 7.82% to $6.6 million, mainly due to higher salaries and employee benefits and net occupancy expense, partly attributable to a new branch opening - Non-interest expense increased by **$0.4 million (7.82%)** to **$6.6 million**[154](index=154&type=chunk) - The increase was primarily due to increases in salaries and employee benefits and net occupancy expense[154](index=154&type=chunk) - The Bank opened its new James Island location in the second quarter of 2023[154](index=154&type=chunk) [Income Tax Expense](index=33&type=section&id=Income%20Tax%20Expense_6M) Income tax expense decreased to $0.6 million, with the effective tax rate falling to 18.40% from 23.13% in the prior year, attributed to the prior year's tax provision calculation - Income tax expense was **$0.6 million in 2023**, compared to $0.9 million in 2022[155](index=155&type=chunk) - The effective tax rate was **18.40% in 2023**, down from 23.13% in 2022, due to the prior year tax provision calculation[155](index=155&type=chunk) [Off-Balance Sheet Arrangements](index=34&type=section&id=Off-Balance%20Sheet%20Arrangements) The Company has off-balance sheet arrangements including commitments to extend credit ($138.4 million) and standby letters of credit ($1.7 million), and retains recourse obligations on certain sold loans Off-Balance Sheet Commitments | Metric | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :-------------- | :---------------- | | Commitments to extend credit | $138.4 million | $145.4 million | | Standby letters of credit | $1.7 million | $2.5 million | | Forward sales commitments on mortgage loans held for sale | $2.9 million | $0.9 million | - The unpaid principal balance of loans sold with recourse was **$11.7 million** at June 30, 2023[160](index=160&type=chunk) [Liquidity](index=34&type=section&id=Liquidity) The Company maintains adequate liquidity through deposits, loan payments, and security sales, with primary liquid assets at 43.79% of total assets, utilizing short-term lines of credit and the Federal Reserve's Bank Term Funding Program - Primary liquid assets accounted for **43.79% of total assets** at June 30, 2023, compared to 45.89% at December 31, 2022[163](index=163&type=chunk) - The Company had unused short-term lines of credit totaling approximately **$41.0 million** at June 30, 2023[163](index=163&type=chunk) - A **$35.0 million credit line** was established under the Federal Reserve's Bank Term Funding Program, with **$25.0 million in borrowings** at June 30, 2023[164](index=164&type=chunk) Liquidity Ratio | Date | Ratio | | :---------------- | :------ | | June 30, 2023 | 47.75% | | December 31, 2022 | 48.09% | [Capital Resources](index=35&type=section&id=Capital%20Resources) Total shareholders' equity was $42.6 million, and the Company and Bank are categorized as "well capitalized" under the CBLR framework, with the Bank's CBLR at 9.35% - Total shareholders' equity was **$42.6 million** as of June 30, 2023[166](index=166&type=chunk) - The Company and the Bank are categorized as **"well capitalized"** under the Community Bank Leverage Ratio (CBLR) framework[169](index=169&type=chunk) - The Bank's CBLR was **9.35%** as of June 30, 2023[169](index=169&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the registrant is not required to provide detailed quantitative and qualitative disclosures about market risk - Smaller reporting companies are not required to provide the information for this item[171](index=171&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated disclosure controls and procedures as effective as of June 30, 2023, with no material changes in internal control over financial reporting during the quarter - The Company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2023[172](index=172&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023[173](index=173&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The Company reports no legal proceedings pending other than routine litigation incidental to its business, involving amounts not material to its financial condition - No legal proceedings are pending that are material to the Company's financial condition, other than routine litigation incidental to its business[176](index=176&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, the registrant is not required to provide detailed risk factor disclosures - Smaller reporting companies are not required to provide the information for this item[177](index=177&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company had no unregistered sales of equity securities but repurchased 4,112 common shares under a new $2.0 million repurchase program authorized in May 2023 - No unregistered sales of equity securities occurred[178](index=178&type=chunk) - The Company repurchased **4,112 common shares** during the second quarter of 2023 at an average price of **$13.93 per share**[179](index=179&type=chunk) - A new stock repurchase program was authorized on May 25, 2023, for up to **$2.0 million of common stock** through May 2026[179](index=179&type=chunk) [Item 3. Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities - No defaults upon senior securities were reported[180](index=180&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The Company reported no mine safety disclosures - No mine safety disclosures were reported[180](index=180&type=chunk) [Item 5. Other Information](index=36&type=section&id=Item%205.%20Other%20Information) The Company reported no other information requiring disclosure under this item - No other information was reported under this item[181](index=181&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL taxonomy documents - Exhibits include certifications (31.1, 31.2, 32.1, 32.2) and XBRL Taxonomy Extension documents (101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[181](index=181&type=chunk) [Signatures](index=38&type=section&id=Signatures) The report is duly signed on August 4, 2023, by Fleetwood S. Hassell, President/Chief Executive Officer, and Eugene H. Walpole, IV, Chief Financial Officer/Executive Vice President - The report was signed by Fleetwood S. Hassell (President/Chief Executive Officer) and Eugene H. Walpole, IV (Chief Financial Officer/Executive Vice President) on August 4, 2023[185](index=185&type=chunk) [Certifications](index=34&type=section&id=Certifications) This section contains the certifications required by Rule 13a-14(a)/15d-14(a) and Section 1350, confirming the accuracy and completeness of the financial statements and other information in the report - Certifications pursuant to Rule 13a-14(a)/15d-14(a) by the Chief Executive Officer and Chief Financial Officer are included as exhibits[181](index=181&type=chunk) - Certifications pursuant to Section 1350 are also included as exhibits[181](index=181&type=chunk)

Part I. Financial Information Presents the Company's financial statements and management's discussion and analysis for the reporting period [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited consolidated financial statements for Q1 2023 and 2022, covering balance sheets, income, equity, cash flows, and detailed accounting notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets%20%E2%80%93%20March%2031%2C%202023%20and%20December%2031%2C%202022) Presents the consolidated balance sheets for March 31, 2023, and December 31, 2022, detailing assets, liabilities, and equity Key Balance Sheet Metrics | Metric | March 31, 2023 | December 31, 2022 | Change ($) | Change (%) | | :-------------------------------- | :------------- | :---------------- | :--------- | :--------- | | Total assets | $647,361,629 | $653,345,609 | $(5,983,980) | -0.92% | | Total liabilities | $603,853,811 | $614,534,222 | $(10,680,411) | -1.74% | | Total shareholders' equity | $43,507,818 | $38,811,387 | $4,696,431 | 12.08% | | Total deposits | $587,592,459 | $598,670,258 | $(11,077,799) | -1.85% | | Time deposits $250,000 and over | $52,635,553 | $5,303,509 | $47,332,044 | 892.46% | - Total shareholders' equity increased by **$4.70 million** (**12.08%**) primarily due to a decrease in accumulated other comprehensive loss[8](index=8&type=chunk) [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income%20%E2%80%93%20Three%20months%20ended%20March%2031%2C%202023%20and%202022) Details the consolidated income statements for Q1 2023 and 2022, highlighting net income, interest income, and expenses Key Income Statement Metrics | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change ($) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Net income | $1,588,779 | $1,464,106 | $124,673 | 8.52% | | Net interest income | $4,700,733 | $4,218,163 | $482,570 | 11.44% | | Interest expense (Deposits) | $931,101 | $36,797 | $894,304 | 2430.88% | | Basic income per common share | $0.29 | $0.26 | $0.03 | 11.54% | | Diluted income per common share | $0.28 | $0.26 | $0.02 | 7.69% | | Total other income | $449,201 | $634,554 | $(185,353) | -29.21% | - Total other income decreased primarily due to lower mortgage banking income and no gain on sales of securities in Q1 2023[10](index=10&type=chunk) [Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20%E2%80%93%20Three%20months%20ended%20March%2031%2C%202023%20and%202022) Outlines comprehensive income and loss for Q1 2023 and 2022, including net income and other comprehensive income Key Comprehensive Income Metrics | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change ($) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | | Net income | $1,588,779 | $1,464,106 | $124,673 | | Other comprehensive income (loss) after tax | $4,021,406 | $(9,649,453) | $13,670,859 | | Total comprehensive income (loss) | $5,610,185 | $(8,185,347) | $13,795,532 | - The significant improvement in total comprehensive income (loss) was driven by an unrealized gain on securities of **$3.93 million** in Q1 2023, contrasting with a loss of **$(12.15) million** in Q1 2022[11](index=11&type=chunk) [Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity%20%E2%80%93%20Three%20months%20ended%20March%2031%2C%202023%20and%202022) Presents changes in shareholders' equity for Q1 2023 and 2022, reflecting net income, comprehensive income, and dividends Key Shareholders' Equity Metrics | Metric | December 31, 2022 | March 31, 2023 | Change ($) | Change (%) | | :--------------------------------- | :---------------- | :------------- | :--------- | :--------- | | Total Shareholders' Equity | $38,811,387 | $43,507,818 | $4,696,431 | 12.08% | | Net income | — | $1,588,779 | $1,588,779 | N/A | | Other comprehensive income | — | $4,021,406 | $4,021,406 | N/A | | Cash dividends | $(943,901) | $(943,901) | $0 | 0.00% | | Accumulated other comprehensive loss | $(20,402,481) | $(16,381,075) | $4,021,406 | -19.71% | - The increase in total shareholders' equity was primarily due to net income and other comprehensive income, partially offset by cash dividends[13](index=13&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20%E2%80%93%20Three%20months%20ended%20March%2031%2C%202023%20and%202022) Details cash flows from operating, investing, and financing activities for Q1 2023 and 2022, showing changes in cash Key Cash Flow Metrics | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change ($) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | | Net cash provided by operating activities | $1,730,490 | $1,704,090 | $26,400 | | Net cash provided by (used in) investing activities | $4,504,494 | $(66,229,256) | $70,733,750 | | Net cash used in financing activities | $(12,021,700) | $(6,220,493) | $(5,801,207) | | Net decrease in cash and cash equivalents | $(5,786,716) | $(70,745,659) | $64,958,943 | | Cash and cash equivalents at end of period | $21,984,983 | $69,366,329 | $(47,381,346) | - Net cash provided by investing activities significantly improved due to no purchase of investment securities in Q1 2023, compared to substantial purchases in Q1 2022[16](index=16&type=chunk) - Net cash used in financing activities increased due to a larger net decrease in deposit accounts[16](index=16&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed disclosures and explanations for the consolidated financial statements, covering accounting policies and specific items [1. Nature of Business and Basis of Presentation](index=9&type=section&id=1.%20NATURE%20OF%20BUSINESS%20AND%20BASIS%20OF%20PRESENTATION) Describes the Company's business, subsidiary, and basis of financial statement presentation, including recent accounting changes - The Bank of South Carolina was established in 1986 and became a wholly-owned subsidiary of Bank of South Carolina Corporation in 1995[18](index=18&type=chunk) - The Company adopted ASU 2016-13 (CECL methodology) on January 1, 2023, leading to a **$0.60 million** increase in the allowance for unfunded commitments and a **$0.60 million** decrease in the allowance for credit losses[27](index=27&type=chunk) - Under CECL, credit losses for available-for-sale securities and loans are recognized earlier, with specific methodologies for each asset type[26](index=26&type=chunk)[29](index=29&type=chunk)[32](index=32&type=chunk) [2. Investment Securities](index=12&type=section&id=Note%202%3A%20Investment%20Securities) Provides details on the Company's investment securities portfolio, including amortized cost, fair value, and unrealized losses Investment Securities Summary | Metric | March 31, 2023 | December 31, 2022 | | :--------------------------------- | :------------- | :---------------- | | Amortized Cost | $289,337,630 | $296,998,150 | | Estimated Fair Value | $267,439,924 | $271,172,226 | | Net Unrealized Loss | $(21,897,706) | $(25,825,924) | - The Company believes all unrealized losses are temporary and due to interest rate changes, with no intent to sell before recovery of amortized cost[50](index=50&type=chunk) - Securities pledged to secure deposits totaled **$30.6 million**, and an additional **$25.0 million** were pledged for the Federal Reserve's Bank Term Funding Program at March 31, 2023[48](index=48&type=chunk) [3. Loans and Allowance for Credit Losses](index=14&type=section&id=Note%203%3A%20Loans%20and%20Allowance%20for%20Credit%20Losses) Details the loan portfolio composition, changes in the allowance for credit losses, and nonaccrual loan balances Loans and Allowance for Credit Losses Summary | Metric | March 31, 2023 | December 31, 2022 | Change ($) | Change (%) | | :--------------------------------- | :------------- | :---------------- | :--------- | :--------- | | Loans, net | $330,100,952 | $326,690,561 | $3,410,391 | 1.04% | | Allowance for credit losses | $3,688,503 | $4,291,221 | $(602,718) | -14.04% | | Nonaccrual loans | $627,927 | $631,453 | $(3,526) | -0.56% | - The adoption of CECL on January 1, 2023, resulted in an initial adjustment of **$(0.60) million** to the allowance for credit losses[67](index=67&type=chunk) - Net charge-offs for the three months ended March 31, 2023, were **$47,718**[67](index=67&type=chunk) [4. Leases](index=23&type=section&id=Note%204%3A%20Leases) Presents information on operating lease assets and liabilities, including weighted average lease terms and borrowing rates Lease Metrics | Metric | March 31, 2023 | December 31, 2022 | | :--------------------------------- | :------------- | :---------------- | | Operating right of use (ROU) assets | $13,275,236 | $13,433,692 | | Operating lease liabilities | $13,275,236 | $13,433,692 | | Weighted average remaining lease term | 15.3 years | N/A | | Weighted average incremental borrowing rate | 4.18% | N/A | - Total lease expense for Q1 2023 was **$0.30 million**, a slight increase from **$0.30 million** in Q1 2022[81](index=81&type=chunk) [5. Disclosures Regarding Fair Value of Financial Statements](index=23&type=section&id=Note%205%3A%20Disclosures%20Regarding%20Fair%20Value%20of%20Financial%20Statements) Explains the fair value hierarchy and provides fair value measurements for financial instruments, including investment securities and loans - Fair value measurements are categorized into a three-level hierarchy based on input observability: Level 1 (quoted prices), Level 2 (observable inputs), and Level 3 (unobservable inputs)[85](index=85&type=chunk) Fair Value of Financial Instruments | Asset Type | Fair Value (March 31, 2023) | Level 1 | Level 2 | Level 3 | | :--------------------------------- | :-------------------------- | :---------- | :---------- | :---------- | | Investment securities available for sale | $267,439,924 | $170,236,530 | $74,654,094 | $22,549,300 | | Individually assessed loans | $1,438,744 | — | — | $1,438,744 | | Mortgage loans to be sold | $1,278,158 | — | $1,278,158 | — | - The fair value of loans, net, was estimated at **$305.60 million** at March 31, 2023, compared to a carrying value of **$330.10 million**, with the fair value primarily derived from Level 3 inputs[110](index=110&type=chunk) [6. Income Per Common Share](index=29&type=section&id=Note%206%3A%20Income%20Per%20Common%20Share) Details basic and diluted income per common share calculations and weighted average shares outstanding Income Per Common Share Metrics | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Basic income per common share | $0.29 | $0.26 | | Diluted income per common share | $0.28 | $0.26 | | Weighted average shares outstanding (basic) | 5,552,351 | 5,544,546 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's perspective on financial condition and results, including balance sheet analysis and performance comparison [Cautionary Statement Regarding Forward-Looking Statements](index=30&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) Highlights that the report contains forward-looking statements subject to various risks and uncertainties, with no update obligation - The report contains forward-looking statements subject to various risks and uncertainties, including economic, monetary policy, interest rate, and regulatory changes[112](index=112&type=chunk)[114](index=114&type=chunk) - The Company disclaims any obligation to update forward-looking statements[113](index=113&type=chunk) [Overview](index=31&type=section&id=Overview) Provides a general overview of Bank of South Carolina Corporation's business, assets, and primary income sources - Bank of South Carolina Corporation, headquartered in Charleston, SC, had **$647.4 million** in assets as of March 31, 2023, offering financial services primarily in Charleston, Dorchester, and Berkeley counties[115](index=115&type=chunk) - The Company's main income sources are interest on loans and investments, funded by deposits, with net interest income and spread being key performance indicators[116](index=116&type=chunk) [Critical Accounting Policies](index=32&type=section&id=Critical%20Accounting%20Policies) Discusses critical accounting policies involving significant judgments and assumptions, noting the adoption of the CECL methodology - Critical accounting policies involve significant judgments and assumptions impacting asset and liability carrying values[119](index=119&type=chunk) - Except for the adoption of ASC 326 (CECL) on January 1, 2023, critical accounting policies remain unchanged from the 2022 Annual Report on Form 10-K[119](index=119&type=chunk) [Balance Sheet Analysis](index=32&type=section&id=Balance%20Sheet) Analyzes key balance sheet components: cash, investments, loans, nonperforming assets, allowance for credit losses, and deposits [Cash and Cash Equivalents](index=32&type=section&id=Cash%20and%20Cash%20Equivalents) Examines changes in cash and cash equivalents, attributing decreases to deposit outflows and increases to investment maturities Cash and Cash Equivalents Summary | Metric | March 31, 2023 | December 31, 2022 | Change ($) | Change (%) | | :--------------------------------- | :------------- | :---------------- | :--------- | :--------- | | Total cash and cash equivalents | $7,099,250 | $14,772,564 | $(7,673,314) | -51.94% | - The decrease was primarily due to a net decrease in deposit accounts, partially offset by net proceeds from investment securities maturities and cash generated from operations[120](index=120&type=chunk) [Investment Securities Available for Sale](index=32&type=section&id=Investment%20Securities%20Available%20for%20Sale) Reviews the investment securities portfolio, focusing on fair market value, unrealized losses, and portfolio objectives Investment Securities Available for Sale Summary | Metric | March 31, 2023 | December 31, 2022 | | :--------------------------------- | :------------- | :---------------- | | Fair market value | $267.4 million | $271.2 million | | Net unrealized loss | $(21.9) million | $(25.8) million | | % of total assets | 41.35% | 41.5% | | Average yield | 1.15% | 1.18% | - The investment portfolio's primary objective is to maintain high quality, highly liquid investments yielding competitive returns, while managing interest rate and prepayment risk[121](index=121&type=chunk)[122](index=122&type=chunk) [Loans](index=32&type=section&id=Loans) Analyzes the loan portfolio composition and growth, emphasizing lending activities to small and middle market businesses Loan Portfolio Composition | Loan Type | March 31, 2023 (Amount) | March 31, 2023 (Percent) | December 31, 2022 (Amount) | December 31, 2022 (Percent) | | :--------------------------------- | :------------------------ | :----------------------- | :------------------------- | :------------------------ | | Commercial | $46,212,003 | 13.84% | $45,072,059 | 13.62% | | Commercial Real Estate Construction | $20,146,368 | 6.04% | $17,524,260 | 5.29% | | Commercial Real Estate Other | $174,860,808 | 52.39% | $172,897,387 | 52.24% | | Consumer Real Estate | $88,962,556 | 26.65% | $91,636,538 | 27.69% | | Consumer Other | $3,607,720 | 1.08% | $3,851,538 | 1.16% | | Total loans, net | $330,100,952 | N/A | $326,690,561 | N/A | - Net loans increased by **$3.41 million** (**1.04%**) to **$330.10 million** at March 31, 2023, primarily due to growth in Commercial and Commercial Real Estate loans[125](index=125&type=chunk) - The Bank focuses lending activities on small and middle market businesses, professionals, and individuals within its geographic markets[124](index=124&type=chunk) [Nonperforming Assets](index=34&type=section&id=Nonperforming%20Assets) Details nonperforming assets, specifically nonaccruing loans, and confirms the absence of 90-day past due accruing loans Nonperforming Assets Summary | Asset Type | March 31, 2023 | December 31, 2022 | | :--------------------------------- | :------------- | :---------------- | | Total nonaccruing loans | $627,927 | $631,453 | | Total nonperforming assets | $627,927 | $631,453 | - All nonaccruing loans were classified under Commercial Real Estate Other[130](index=130&type=chunk) - There were no loans 90 days past due and still accruing interest as of March 31, 2023[129](index=129&type=chunk) [Allowance for Credit Losses](index=34&type=section&id=Allowance%20for%20Credit%20Losses) Discusses the allowance for credit losses, its adequacy, and the impact of the CECL adoption on its balance Allowance for Credit Losses Summary | Metric | March 31, 2023 | December 31, 2022 | | :--------------------------------- | :------------- | :---------------- | | Allowance for credit losses | $3.7 million | $4.3 million | | % of outstanding loans | 1.11% | 1.30% | | % of nonperforming loans | 587.41% | 679.58% | | Net charge-offs (Q1 2023) | $47,718 | N/A | - Management believes the allowance for credit losses at March 31, 2023, is adequate based on coverage of nonperforming loans and portfolio analysis[131](index=131&type=chunk) [Deposits](index=34&type=section&id=Deposits) Examines changes in deposit balances by type, noting decreases in demand deposits and increases in brokered time deposits Deposit Composition | Deposit Type | March 31, 2023 (Amount) | March 31, 2023 (Percent) | December 31, 2022 (Amount) | December 31, 2022 (Percent) | | :--------------------------------- | :------------------------ | :----------------------- | :------------------------- | :------------------------ | | Non-interest bearing demand | $211,238,078 | 35.95% | $223,117,903 | 37.26% | | Interest bearing demand | $149,605,230 | 25.46% | $195,143,514 | 32.60% | | Money market accounts | $102,387,646 | 17.42% | $100,014,125 | 16.71% | | Time deposits $250,000 and over | $52,635,553 | 8.96% | $5,303,509 | 0.89% | | Total deposits | $587,592,459 | 100.00% | $598,670,258 | 100.00% | - Total deposits decreased by **$11.1 million** (**1.85%**) due to a net decrease in demand deposit accounts, partially offset by a significant increase in brokered time deposits (**$47.8 million**)[136](index=136&type=chunk) - Total assets decreased by **$5.98 million** (**0.92%**) to **$647.36 million** at March 31, 2023, from **$653.35 million** at December 31, 2022[8](index=8&type=chunk) - Net loans increased by **$3.41 million** (**1.04%**) to **$330.10 million** at March 31, 2023, driven by growth in Commercial and Commercial Real Estate loans[125](index=125&type=chunk) - Total deposits decreased by **$11.08 million** (**1.85%**) to **$587.59 million** at March 31, 2023, primarily due to decreases in demand deposits, partially offset by a significant increase in time deposits[136](index=136&type=chunk) [Comparison of Q1 2023 to Q1 2022 Financial Performance](index=35&type=section&id=Comparison%20of%20Three%20Months%20Ended%20March%2031%2C%202023%20to%20Three%20Months%20Ended%20March%2031%2C%202022) Compares financial performance for Q1 2023 and Q1 2022, analyzing net interest income, non-interest income, and expenses [Net Interest Income](index=35&type=section&id=Net%20Interest%20Income) Analyzes changes in net interest income, highlighting the impact of rising interest rates on loan yields and deposits Net Interest Income Performance | Metric | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :--------------------------------- | :------ | :------ | :--------- | :--------- | | Net interest income | $5.6 million | $4.2 million | $1.4 million | 32.36% | | Yield on average loans | 5.86% | 4.99% | 0.87% | 17.43% | | Interest income on loans | $4.7 million | $3.6 million | $1.1 million | 30.56% | | Average balance of interest-bearing deposits at Federal Reserve | $10.0 million | $70.9 million | $(60.9) million | -85.87% | | Yield on Federal Reserve deposits | 4.53% | 0.20% | 4.33% | 2165.00% | - The increase in net interest income was driven by higher yields on average loans due to rising interest rates on variable-rate loans and new originations[139](index=139&type=chunk) [Provision for Credit Losses](index=35&type=section&id=Provision%20for%20Credit%20Losses) Discusses the provision for credit losses, noting the impact of the CECL methodology on the allowance for credit losses Provision for Credit Losses Summary | Metric | Q1 2023 | Q1 2022 | | :--------------------------------- | :------ | :------ | | Provision for credit losses | $45,000 | $(75,000) | - The Company recorded a **$45,000** increase to the allowance for credit losses in Q1 2023, compared to a **$(75,000)** reduction in the prior year, reflecting analysis under the new CECL methodology[141](index=141&type=chunk) [Non-Interest Income](index=35&type=section&id=Non-Interest%20Income) Examines the decrease in non-interest income, primarily due to lower mortgage banking income and no securities sales gains Non-Interest Income Performance | Metric | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :--------------------------------- | :------ | :------ | :--------- | :--------- | | Total other income | $0.4 million | $0.6 million | $(0.2) million | -29.21% | | Mortgage banking income | $112,160 | $258,896 | $(146,736) | -56.68% | | Gain on sales of securities | $0 | $61,780 | $(61,780) | -100.00% | - The decrease in non-interest income was primarily due to lower mortgage banking income and the absence of gains on sales of investment securities[142](index=142&type=chunk) [Non-Interest Expense](index=35&type=section&id=Non-Interest%20Expense) Analyzes the increase in non-interest expense, driven by higher salaries, employee benefits, and net occupancy costs Non-Interest Expense Performance | Metric | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :--------------------------------- | :------ | :------ | :--------- | :--------- | | Total other expense | $3.2 million | $3.0 million | $0.2 million | 7.75% | | Salaries and employee benefits | $1,966,523 | $1,812,155 | $154,368 | 8.52% | | Net occupancy expense | $654,062 | $620,942 | $33,120 | 5.33% | - The increase in non-interest expense was primarily driven by higher salaries and employee benefits and net occupancy expense, with plans to open a new branch[143](index=143&type=chunk) [Income Tax Expense](index=36&type=section&id=Income%20Tax%20Expense) Discusses income tax expense and the effective tax rate, noting the impact of prior year tax provision calculations Income Tax Expense Summary | Metric | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :--------------------------------- | :------ | :------ | :--------- | :--------- | | Income tax expense | $0.3 million | $0.4 million | $(0.1) million | -22.50% | | Effective tax rate | 14.33% | 23.39% | -9.06% | -38.73% | - The lower effective tax rate in Q1 2023 was a result of the prior year's tax provision calculation[144](index=144&type=chunk) Overall Financial Performance | Metric | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :--------------------------------- | :------ | :------ | :--------- | :--------- | | Net income | $1.6 million | $1.5 million | $0.1 million | 8.52% | | Basic EPS | $0.29 | $0.26 | $0.03 | 11.54% | | Diluted EPS | $0.28 | $0.26 | $0.02 | 7.69% | | Annualized ROAA | 1.00% | 0.89% | 0.11% | 12.36% | | Annualized ROAE | 15.73% | 11.40% | 4.33% | 37.98% | [Off-Balance Sheet Arrangements](index=36&type=section&id=Off-Balance%20Sheet%20Arrangements) Details off-balance sheet arrangements, including credit commitments, standby letters of credit, and forward sales commitments Off-Balance Sheet Arrangements Summary | Arrangement | March 31, 2023 | December 31, 2022 | | :--------------------------------- | :------------- | :---------------- | | Commitments to extend credit | $141.1 million | $145.4 million | | Standby letters of credit (max potential payment) | $1.7 million | $2.5 million | | Forward sales commitments on mortgage loans | $1.3 million | $0.9 million | | Unpaid principal balance of loans sold with recourse | $8.5 million | N/A | - The Company had no repurchases of loans sold with recourse during the three months ended March 31, 2023[150](index=150&type=chunk) [Liquidity](index=37&type=section&id=Liquidity) Discusses the Company's liquidity management, primary liquid assets, and available credit lines, including the BTFP Liquidity Metrics | Metric | March 31, 2023 | December 31, 2022 | | :--------------------------------- | :------------- | :---------------- | | Primary liquid assets (% of total assets) | 44.95% | 45.89% | | Unused short-term lines of credit | ~$41.0 million | N/A | | Federal Reserve Discount Window borrowing capacity | Up to $107.9 million | N/A | | Bank Term Funding Program credit line | $25.0 million | N/A | | Liquidity ratio | 57.82% | 48.09% | - The Company manages liquidity to meet operational requirements, deposit outflows, and loan demand, utilizing customer deposits, loan payments, and securities sales as primary sources[152](index=152&type=chunk) - The Bank established a **$25.0 million** credit line under the Federal Reserve's Bank Term Funding Program in Q1 2023, with no borrowings as of March 31, 2023[154](index=154&type=chunk) [Capital Resources](index=37&type=section&id=Capital%20Resources) Reviews the Company's capital resources, including total shareholders' equity and compliance with 'well capitalized' requirements Capital Resources Summary | Metric | March 31, 2023 | | :--------------------------------- | :------------- | | Total shareholders' equity | $43.5 million | | Community Bank Leverage Ratio (CBLR) | 9.42% | - Both the Company and the Bank were categorized as 'well capitalized' as of March 31, 2023, meeting all applicable capital adequacy requirements[159](index=159&type=chunk) - The Bank adopted the CBLR framework as of September 30, 2020, which simplifies capital adequacy measurement for qualifying community banking organizations[159](index=159&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the Company is exempt from providing quantitative and qualitative disclosures about market risk - Smaller reporting companies are exempt from providing disclosures about market risk[162](index=162&type=chunk)[168](index=168&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated disclosure controls and procedures, concluding they were effective, with no material internal control changes - The Company's disclosure controls and procedures were evaluated and deemed effective as of March 31, 2023[163](index=163&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2023[164](index=164&type=chunk) - The Audit and Compliance Committee, composed of independent Directors, periodically reviews audit, financial, and related matters[165](index=165&type=chunk) Part II. Other Information Presents other required information, including legal proceedings, risk factors, equity sales, defaults, and exhibits [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The Company reports no material legal proceedings pending other than routine litigation incidental to its business - No material legal proceedings are pending, only routine litigation incidental to the Company's business[167](index=167&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, the Company is exempt from providing specific risk factor disclosures in this quarterly report - Smaller reporting companies are exempt from providing risk factor disclosures[168](index=168&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company reports no unregistered sales of equity securities or use of proceeds for the period - No unregistered sales of equity securities or use of proceeds occurred during the period[169](index=169&type=chunk) [Item 3. Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reports no defaults upon senior securities for the period - No defaults upon senior securities were reported[170](index=170&type=chunk) [Item 4. Mine Safety Disclosure](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) The Company reports no mine safety disclosures for the period - No mine safety disclosures were reported[171](index=171&type=chunk) [Item 5. Other Information](index=26&type=section&id=Item%205.%20Other%20Information) The Company reports no other information for the period - No other information was reported[171](index=171&type=chunk) [Item 6. Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL taxonomy documents - Exhibits include certifications (31.1, 31.2, 32.1, 32.2) and XBRL Taxonomy Extension documents[172](index=172&type=chunk) - Certifications pursuant to 18 U.S.C. Section 1350 are furnished, not filed, and not incorporated by reference[173](index=173&type=chunk) - XBRL-related information is deemed not filed for liability purposes under specific sections of the Securities Act and Exchange Act[173](index=173&type=chunk) [Signatures](index=27&type=section&id=Signatures) The report is duly signed by the President/CEO and CFO of Bank of South Carolina Corporation on May 11, 2023 - The report was signed by Fleetwood S. Hassell (President/CEO) and Eugene H. Walpole, IV (CFO/EVP) on May 11, 2023[176](index=176&type=chunk) [Certifications](index=28&type=section&id=Certifications) This section refers to the certifications required by the Securities Exchange Act of 1934, provided as exhibits - Certifications are required by the Securities Exchange Act of 1934[6](index=6&type=chunk) - The actual certifications are provided as exhibits 31.1, 31.2, 32.1, 32.2[172](index=172&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 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: 000-27702 (Address of principal executive offices) (Zip Code) Issuer's telephone number: (843) 724-1500 Securities registered pu ...