United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2023

☐ 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

Bank of South Carolina Corporation

(Exact name of registrant as specified in its charter)

South Carolina		57-1021355
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)

256 Meeting Street, Charleston, SC		29401
(Address of principal executive offices)		(Zip Code)

(843) 724-1500

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock	BKSC	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 ☒ No ☐

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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “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 ☐ No ☒

As of May 1, 2023, there were 5,552,351 Common Shares outstanding.

Part I. Financial Information	Page

Item 1. Financial Statements	3
Consolidated Balance Sheets – March 31, 2023 and December 31, 2022	3
Consolidated Statements of Income – Three months ended March 31, 2023 and 2022	4
Consolidated Statements of Comprehensive Income (Loss) – Three months ended March 31, 2023 and 2022	5
Consolidated Statements of Shareholders’ Equity – Three months ended March 31, 2023 and 2022	6
Consolidated Statements of Cash Flows – Three months ended March 31, 2023 and 2022	7

Notes to Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3. Quantitative and Qualitative Disclosures About Market Risk	26

Item 4. Controls and Procedures	26

Part II. Other Information

Item 1. Legal Proceedings	26
Item 1A. Risk Factors	26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3. Defaults Upon Senior Securities	26
Item 4. Mine Safety Disclosure	26
Item 5. Other Information	26
Item 6. Exhibits	26

Signatures	27
Certifications	28

Part I. Financial Information

Item 1. Financial Statements

BANK OF SOUTH CAROLINA CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	March 31,			December 31,
	2023			2022
ASSETS
Cash and due from banks	$	7,099,250		$	14,772,564
Interest-bearing deposits at the Federal Reserve		14,885,733			12,999,135
Investment securities available for sale		267,439,924			271,172,226
Mortgage loans to be sold		1,278,158			866,594
Loans		333,789,455			330,981,782
Less: Allowance for credit losses		(3,688,503	)		(4,291,221	)
Net loans		330,100,952			326,690,561
Premises, equipment and leasehold improvements, net		4,005,565			3,988,607
Right of use asset		13,275,236			13,433,692
Accrued interest receivable		1,842,995			2,145,522
Other assets		7,433,816			7,276,708

Total assets	$	647,361,629		$	653,345,609

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Non-interest bearing demand	$	211,238,078		$	223,117,903
Interest bearing demand		149,605,230			195,143,514
Money market accounts		102,387,646			100,014,125
Time deposits $250,000 and over		52,635,553			5,303,509
Other time deposits		11,919,031			11,266,099
Other savings deposits		59,806,921			63,825,108
Total deposits		587,592,459			598,670,258

Accrued interest payable and other liabilities		2,986,116			2,430,272
Lease liability		13,275,236			13,433,692
Total liabilities		603,853,811			614,534,222

Shareholders' equity
Common stock - no par 12,000,000 shares authorized; Issued 5,852,325 shares at both March 31, 2023 and December 31, 2022. Shares outstanding 5,552,351 at both March 31, 2023 and December 31, 2022.		—			—
Additional paid in capital		48,058,836			48,028,689
Retained earnings		14,647,449			14,002,571
Treasury stock: 299,974 shares at March 31, 2023 and December 31, 2022		(2,817,392	)		(2,817,392	)
Accumulated other comprehensive loss, net of income taxes		(16,381,075	)		(20,402,481	)
Total shareholders' equity		43,507,818			38,811,387

Total liabilities and shareholders' equity	$	647,361,629		$	653,345,609

See accompanying notes to consolidated financial statements.

BANK OF SOUTH CAROLINA CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


	Three Months Ended
	March 31,
	2023		2022
Interest and fee income
Loans, including fees	$	4,668,099	$	3,551,875
Taxable securities		690,324		559,670
Tax-exempt securities		161,444		109,129
Other		111,967		34,286
Total interest and fee income		5,631,834		4,254,960

Interest expense
Deposits		931,101		36,797
Total interest expense		931,101		36,797

Net interest income		4,700,733		4,218,163
Provision for credit losses		45,000		(75,000	)
Net interest income after provision for credit losses		4,655,733		4,293,163

Other income
Service charges and fees		327,073		307,593
Mortgage banking income		112,160		258,896
Gain on sales of securities		—		61,780
Other non-interest income		9,968		6,285
Total other income		449,201		634,554

Other expense
Salaries and employee benefits		1,966,523		1,812,155
Net occupancy expense		654,062		620,942
Other operating expenses		305,181		294,733
Professional fees		167,777		139,642
Data processing fees		156,818		149,090
Total other expense		3,250,361		3,016,562

Income before income tax expense		1,854,573		1,911,155
Income tax expense		265,794		447,049

Net income	$	1,588,779	$	1,464,106

Weighted average shares outstanding
Basic		5,552,351		5,544,546
Diluted		5,640,313		5,688,619

Basic income per common share	$	0.29	$	0.26
Diluted income per common share	$	0.28	$	0.26

See accompanying notes to consolidated financial statements.

BANK OF SOUTH CAROLINA CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)


	Three Months Ended
	March 31,
	2023		2022
Net income	$	1,588,779	$	1,464,106
Other comprehensive income
Unrealized gain (loss) on securities arising during the period		3,928,218		(12,152,716	)
Reclassification adjustment for securities gains realized in net income		—		(61,780	)
Other comprehensive income (loss) before tax		3,928,218		(12,214,496	)
Income tax effect related to items of other comprehensive income before tax		93,188		2,565,043
Other comprehensive income (loss) after tax		4,021,406		(9,649,453	)
Total comprehensive income (loss)	$	5,610,185	$	(8,185,347	)

See accompanying notes to consolidated financial statements.

BANK OF SOUTH CAROLINA CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022 (UNAUDITED)


	Shares Outstanding		Additional Paid in Capital		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Total
December 31, 2022	-	5,552,351	$	48,028,689	$	14,002,571		$	(2,817,392	)	$	(20,402,481	)	$	38,811,387
Adoption of ASU 2016-13		—		—		—			—			—			—
Net income	-	—		—		1,588,779			—			—			1,588,779
Other comprehensive income		—		—		—			—			4,021,406			4,021,406
Stock-based compensation expense		—		30,147		—			—			—			30,147
Cash dividends ($0.17 per common share)		—		—		(943,901	)		—			—			(943,901	)
March 31, 2023	-	5,552,351	$	48,058,836	$	14,647,449		$	(2,817,392	)	$	(16,381,075	)	$	43,507,818


	Shares Outstanding		Additional Paid in Capital		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Total
December 31, 2021	-	5,541,266	$	47,745,285	$	11,122,710		$	(2,817,392	)	$	(2,132,970	)	$	53,917,633
Net income	-	—		—		1,464,106			—			—			1,464,106
Other comprehensive loss		—		—		—			—			(9,649,453	)		(9,649,453	)
Stock option exercises, net of surrenders		9,210		141,618		—			—			—			141,618
Stock-based compensation expense		—		27,989		—			—			—			27,989
Cash dividends ($0.17 per common share)		—		—		(943,580	)		—			—			(943,580	)
March 31, 2022	-	5,550,476	$	47,914,892	$	11,643,236		$	(2,817,392	)	$	(11,782,423	)	$	44,958,313

See accompanying notes to consolidated financial statements.

BANK OF SOUTH CAROLINA CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Three Months Ended
	March 31,
	2023			2022
Cash flows from operating activities:
Net income	$	1,588,779		$	1,464,106
Adjustments to reconcile net income net cash provided by operating activities:
Depreciation expense		85,157			97,694
Gain on sale of investment securities		—			(61,780	)
Provision for credit losses		45,000			(75,000	)
Stock-based compensation expense		30,147			27,989
Deferred income taxes and other assets		(63,922	)		(344,938	)
Net amortization of unearned discounts on investment securities available for sale		198,522			214,931
Origination of mortgage loans held for sale		(8,412,515	)		(17,582,370	)
Proceeds from sale of mortgage loans held for sale		8,000,951			17,729,759
Decrease (increase) in accrued interest receivable		302,527			(68,881	)
(Decrease) increase in accrued interest payable and other liabilities		(44,156	)		302,580
Net cash provided by operating activities		1,730,490			1,704,090

Cash flows from investing activities:
Proceeds from calls and maturities of investment securities available for sale		7,462,000			2,718,000
Proceeds from sale of investment securities available for sale		—			15,120,000
Purchase of investment securities available for sale		—			(75,764,462	)
Net increase in loans		(2,855,391	)		(8,271,231	)
Purchase of premises, equipment, and leasehold improvements, net		(102,115	)		(31,563	)
Net cash provided by (used in) investing activities		4,504,494			(66,229,256	)

Cash flows from financing activities:
Net decrease in deposit accounts		(11,077,799	)		(5,420,096	)
Dividends paid		(943,901	)		(942,015	)
Stock options exercised, net of surrenders		—			141,618
Net cash use

SEC Form 10-Q filed by Bank of South Carolina Corp.