United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One)
For the quarterly period ended March 31, 2021 Commission file number: 0-27702 Bank of South Carolina Corporation (Exact name of registrant issuer as specified in its charter) 256 Meeting Street, Charleston, SC 29401 (Address of principal executive offices) (843) 724-1500 (Registrant’s telephone number) Indicate by check mark whether the Yes ☒ No☐ Indicate by check mark whether the registrant has submitted electronically Yes ☒ No☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 ☒ Securities registered pursuant to Section 12(b) of the Act: As of BANK OF SOUTH CAROLINA CORPORATION AND SUBSIDIARY (Unaudited) September 30, (Audited) December 31, 2016 See accompanying notes to consolidated financial statements. BANK OF SOUTH CAROLINA CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) See accompanying notes to consolidated financial statements. BANK OF SOUTH CAROLINA CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) See accompanying notes to consolidated financial statements. BANK OF SOUTH CAROLINA CORPORATION AND SUBSIDIARY ADDITIONAL PAID IN CAPITAL RETAINED EARNINGS TREASURY STOCK ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) TOTAL See accompanying notes to consolidated financial statements. BANK OF SOUTH CAROLINA CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) See accompanying notes to consolidated financial statements. BANK OF SOUTH CAROLINA CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Organization: The Bank of South Carolina (the “Bank”) was organized on October 22, 1986 and opened for business as a state-chartered financial institution on February 26, 1987, in Charleston, South Carolina. The Bank was reorganized into a wholly-owned subsidiary of Bank of South Carolina Corporation (the “Company”), effective April 17, 1995. At the time of the reorganization, each outstanding share of the Bank was exchanged for two shares of Bank of South Carolina Corporation Stock. Principles of Consolidation: The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, the Bank. References to “we”, “us”, “our”, “the Bank”, or “the Company” refer to the parent and its subsidiary that are consolidated for financial purposes. Basis of Presentation: The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or (“GAAP”), for the interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, our interim consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March Accounting Estimates and Assumptions: The Reclassification: Certain amounts in the prior years’ financial statements have been reclassified to conform to the current period’s presentation. Such reclassifications had no effect on shareholders’ equity or Income per share: Basic income per share Subsequent Events: Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. We have reviewed events occurring through the date the financial statements were available to be issued and no subsequent events occurred requiring accrual or disclosure. Recent Accounting Pronouncements: The following is a summary of recent authoritative pronouncements that could impact the accounting, reporting and/or disclosure of financial information by the Company. In In In In In In March Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on our financial position, results of operations or cash flows. The amortized cost AMORTIZED COST GROSS UNREALIZED GAINS GROSS UNREALIZED LOSSES FAIR VALUE AMORTIZED COST GROSS UNREALIZED GAINS GROSS UNREALIZED LOSSES VALUE The amortized cost and estimated fair value of investment securities available for sale as of AMORTIZED FAIR AMORTIZED FAIR The tables below summarize gross unrealized losses on investment securities and the fair market value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2017 Available for sale December 31, 2016 Available for sale Major classifications of loans (net of deferred loan fees of We had On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law, which established the Paycheck Protection Program (“PPP”) and allocated $349.0 billion of loans to be issued by financial institutions. Under the program, the Small Business Administration (“SBA”) will forgive loans, in whole or in part, made by approved lenders to eligible borrowers for payroll and other permitted purposes in accordance with the requirements of the program. These loans carry a fixed rate of 1.00% and a term of two years, if not forgiven, in whole or in part. The loans are 100% guaranteed by the SBA and as long as the borrower submits its loan forgiveness application within ten months of completion of the covered period, the borrower is not required to make any payments until the forgiveness amount is remitted to the lender by the SBA. The Bank received a processing fee ranging from 1% to 5% based on the size of the loan from the SBA. The fees are deferred and amortized over the life of the loans in accordance with ASC 310-20. The Bank received $1.4 million of processing fees related to the first round of PPP. The Bank recognized $0.6 million during the year ended December 31, 2020. The Paycheck Protection Program and Health Care Enhancement Act (“PPP/ HCEA Act”) was signed into law on April 24, 2020. The PPP/HCEA Act authorized additional funding under the CARES Act of $310.0 billion for PPP loans to be issued by financial institutions through the SBA. The Bank provided $37.8 million in funding to 266 customers through the PPP as of March 31, 2021. Because these loans are 100% guaranteed by the SBA and did not undergo the Bank’s typical underwriting process, they are not graded and do not have an associated reserve. On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (“Economic Aid Act”) was enacted, which reauthorized lending under the PPP program through March 31, 2021, with an additional $325 billion. On March 31, 2021, the PPP Extension Act of 2021 was signed into law, which formally changed the PPP application deadline from March 31, 2021 to May 31, 2021. Under the Economic Aid Act, the SBA will forgive loans, in whole or in part, made by approved lenders to eligible borrowers for payroll and other permitted purposes in accordance with the requirements of the program. These loans carry a fixed rate of 1.00% and a term of five years, if not forgiven, in whole or in part. The loans are 100% guaranteed by the SBA and as long as the borrower submits its loan forgiveness application within ten months of completion of the covered period, the borrower is not required to make any payments until the forgiveness amount is remitted to the lender by the SBA. The Bank will receive a processing fee based on the size of the loan from the SBA, and a tiered structure. For loans up to $50,000 in principal, the lender processing fee will be the lesser of 50% of the principal amount or $2,500. For loans between $50,000 and $350,000 in principal, the lender processing fee will be 5% of the principal amount. For loans $350,000 and above, the lender processing fee will be 3% of the principal amount. For loans of at least $2.0 million, the lender processing fee will be 1% of the principal amount. The fees are deferred and amortized over the life of the loans in accordance with ASC 310-20. As of March 31, 2021, the Bank received 193 applications with a total loan amount of $16.1 million. Of those 193 applications, the SBA approved 184 applications in the aggregate amount of $15.7 million. The Bank funded 176 loans in the aggregate amount of $15.5 million. The Bank received $0.8 million of processing fees related to the second round of PPP. During the three months ended March 31, 2021, the Bank recognized $0.6 million in PPP processing fees for the first and second round of PPP. Our portfolio grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled. Our internal credit risk grading system is based on experience with similarly graded loans, industry best practices, and regulatory guidance. Our portfolio is graded in its Our internally assigned grades pursuant to the Board-approved lending policy are as follows: The following tables illustrate credit quality by class and internally assigned grades Commercial Real Estate Construction Commercial Real Estate Other Real Estate Commercial Real Estate Construction Commercial Real Estate Other The following tables include an aging analysis of the recorded investment in loans segregated by The following table summarizes the balances of non-accrual The following tables set forth the changes in the allowance for loan losses and an allocation of the allowance for loan losses by Commercial Real Estate-Other Consumer Real Estate Consumer Other Commercial Real Estate-Other Consumer Real Estate Consumer Other Three Months Ended September 30, 2016 Commercial Real Estate-Other Consumer Real Estate Consumer Other Commercial Real Estate-Other Consumer Real Estate Consumer Other The following tables present, by Commercial Real Estate-Other Consumer Other Total Loans Receivable Commercial Real Estate-Other Consumer Other As of The following As of March 31, 2021 and December 31, 2020, the Company had operating right of use (“ROU”) assets of $12.6 million and $12.7 million, respectively, and operating lease liabilities of $12.6 million and $12.7 million, respectively. The Company maintains operating leases on land, branch facilities, and parking. Most of the leases include one or more options to renew, with renewal terms extending up to 20 years. Leases with an initial term of 12 months or less are not recorded on the balance sheet and are recognized in lease expense. The weighted average remaining lease term is 17.31 years. The weighted average incremental borrowing rate is 4.35%. The table below shows lease expense components for the three months ended March 31, 2021 and 2020. Total rental expense was $301,537 and $233,959 for the three months ended March 31, 2021 and 2020, respectively and was included in net occupancy expense within the consolidated statements of income. As of March 31, 2021, and December 31, 2020, we did not maintain any finance leases, and we determined that the number and dollar amount of equipment leases was immaterial. As of March 31, 2021, and December 31, 2020, we have no additional operating leases that have not yet commenced. Fair value measurements apply whenever GAAP requires or permits assets or liabilities to be measured at fair value either on a recurring or nonrecurring basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or The fair value hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The fair value hierarchy is broken down into three levels based on the reliability of inputs as follows: Level 2: valuation is based upon quoted market prices for similar instruments traded in active markets, quoted market prices for identical or similar instruments traded in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by market data. Fair value estimates are made at a specific point of time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale our entire holdings of a particular financial instrument. Because no active market exists for a significant portion of our financial instruments, fair value estimates are based on judgements regarding future expected loss experience, current economic conditions, current interest rates and prepayment trends, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and therefore cannot be determined with precision. Changes in any of these assumptions used in calculating fair value also would affect significantly the estimates. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of these estimates. The following paragraphs describe the valuation methodologies used for assets and liabilities recorded at fair value on a recurring Investment Securities Available for Sale Investment securities are recorded at fair value on a recurring basis and are based upon quoted prices if available. If quoted prices are not available, fair value is measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, or by dealers or brokers in active over-the counter markets. Level 2 securities include mortgage backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets. Derivative Instruments Derivative instruments include interest rate lock commitments and forward sale commitments. These instruments are valued based on the change in the value of the underlying loan between the commitment date and the end of the period. We classify these instruments as Level 3. We Assets and liabilities measured at fair value on a recurring basis at There were no liabilities recorded at fair value on a recurring basis as of The following table reconciles the changes in assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three ended March 31, 2021 and There were no transfers between fair value levels during the three The following paragraphs describe the valuation methodologies used for assets and liabilities recorded at fair value on a nonrecurring Impaired Loans Impaired loans are carried at the lower of recorded investment or fair value. The fair value of the collateral less estimated costs to sell is the most frequently used method. Typically, we review the most recent appraisal and if it is over 12 to 18 months old, we may request a new third party appraisal. Depending on the particular circumstances surrounding the loan, including the location of the collateral, the date of the most recent appraisal and the value of the collateral relative to the recorded investment in the loan, we may order an independent appraisal immediately or, in some instances, may elect to perform an internal analysis. Specifically, as an example, in situations where the collateral on a nonperforming commercial real estate loan is out of our primary market area, we would typically order an independent appraisal immediately, at the earlier of the date the loan becomes nonperforming or immediately following the determination that the loan is impaired. However, as a second example, on a nonperforming commercial real estate loan where we are familiar with the property and surrounding areas and where the original appraisal value far exceeds the recorded investment in the loan, we may perform an internal analysis whereby the previous appraisal value would be reviewed considering recent current conditions, and known recent sales or listings of similar properties in the area, and any other relevant economic trends. This analysis may result in the call for a new appraisal. These valuations are reviewed and updated on a quarterly basis. In accordance with ASC 820,Fair Value Measurement, impaired loans, where an allowance is established based on the fair value of collateral, require classification in the fair value hierarchy. Mortgage Loans Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The following tables present information about certain assets Quoted Market Price in active markets (Level 1) Significant (Level 2) Significant Unobservable Inputs (Level 3) Total Quoted Market Price in active markets (Level 1) Significant (Level 2) Significant Unobservable Inputs (Level 3) There were no liabilities measured at fair value on a nonrecurring basis as of The following table provides information describing the unobservable inputs used in Level 3 fair value measurements at Under the accounting standard, fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated future business and the value of the assets and liabilities that are not financial instruments. Accordingly, the aggregate fair value amounts of existing financial instruments do not represent the underlying value of those instruments on our books. The following paragraphs describe the methods and assumptions we use in estimating the fair values of financial The carrying value approximates fair value. All mature within 90 days and do not present unanticipated credit concerns. The For The estimated fair value of deposits with no stated maturity is equal to the carrying amount. The fair value of time deposits is estimated by discounting contractual cash flows, using interest rates currently being offered on the deposit products. The fair value estimates for deposits do not include the benefit that results from the low cost funding provided by the deposit liabilities as compared to the cost of alternative forms of funding (deposit base intangibles). Since these financial instruments will typically be received or paid within three months, the carrying amounts of such instruments are deemed to be a reasonable estimate of fair value. Estimates of the fair value of these off-balance sheet items are not made because of the short-term nature of these arrangements and the credit standing of the counterparties. The following tables present the carrying amount, fair value, and placement in the fair value hierarchy of our financial instruments as of Carrying Amount Estimated Fair Value Level 1 Level 2 Level 3 Carrying Amount Estimated Fair Value Level 1 Level 2 Level 3 Basic income per share is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted earnings per share is computed by dividing net income by the weighted-average number of common shares and potential common shares outstanding. Potential common shares consist of dilutive stock options determined using the treasury stock method and the average market price of common stock. The following Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This ● ● Ability to compete in our industry and competitive pressures among depository and other financial institutions ● ● ● Pandemic risk, including COVID-19, and related quarantine and/or stay-at home policies and restrictions Impact of COVID-19 on the collectability of loans Changes in legislation as related to PPP loans We will undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made to reflect the occurrence of unanticipated events. In addition, certain statements in future filings with the SEC, in our press releases, and in oral and written statements, which are not statements of historical fact, constitute forward-looking statements. Overview Bank of South Carolina Corporation (the “Company”) is a financial institution holding company headquartered in Charleston, South Carolina, with We derive most of our income from interest on loans and investments A consequence of lending activities is that we may incur credit losses. The amount of such losses will vary depending upon the risk characteristics of the loan and lease portfolio as affected by economic conditions such as rising interest rates and the financial performance of borrowers. The reserve for credit losses consists of the allowance for loan losses (the “allowance”) and a reserve for unfunded commitments (the “unfunded reserve”). The allowance provides for probable and estimable losses inherent in our loan portfolio while the unfunded reserve provides for potential losses related to unfunded lending commitments. In addition to earning interest on loans and investments, we earn income through fees and other expenses we charge to the customer. The various components of non-interest income as well as non-interest expense are described in the following discussion. The discussion and analysis also COVID-19 On March 11, 2020, the World Health Organization (“WHO”) declared COVID-19 a pandemic. Due to orders issued by the governor of South Carolina and in an abundance of caution for the health of our customers and employees, on March 23, 2020 the Bank closed lobbies to all 5 offices but remained fully operational. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law, which established the Paycheck Protection Program (“PPP”) and allocated $349.0 billion of loans to be issued by financial institutions. Under the program, the Small Business Administration (“SBA”) will forgive loans, in whole or in part, made by approved lenders to eligible borrowers for payroll and other permitted purposes in accordance with the requirements of the program. These loans carry a fixed rate of 1.00% and a term of two years, if not forgiven, in whole or in part. The loans are 100% guaranteed by the SBA and as long as the borrower submits its loan forgiveness application within ten months of completion of the covered period, the borrower is not required to make any payments until the forgiveness amount is remitted to the lender by the SBA. The Bank received a processing fee ranging from 1% to 5% based on the size of the loan from the SBA. The fees are deferred and amortized over the life of the loans in accordance with ASC 310-20. The Paycheck Protection Program and Health Care Enhancement Act (“PPP/ HCEA Act”) was signed into law on April 24, 2020. The PPP/HCEA Act authorized additional funding under the CARES Act of $310.0 billion for PPP loans to be issued by financial institutions through the SBA. The Bank provided $37.8 million in funding to 266 customers through the first round of PPP as of March 31, 2021. Because these loans are 100% guaranteed by the SBA and did not undergo the Bank’s typical underwriting process, they are not graded and do not have an associated reserve. Borrowers must submit a forgiveness application within ten months of the completion of the covered period. Once the borrower has submitted the application, the Bank has 60 days to review, issue a lender decision, and submit the decision and application to the SBA. Once the application is submitted, the SBA has 90 days to review and remit the appropriate forgiveness amount to the Bank plus any interest accrued through the date of payment. The SBA began accepting PPP Forgiveness Applications on August 10, 2020. As of March 31, 2021, the Bank received 215 PPP forgiveness applications, in the amount of $34.3 million in principal, and submitted 209 applications and decisions to the SBA, in the amount of $26.6 million in principal. Of the 209 PPP submissions, 200 loans, in the amount of $25.2 million, were forgiven as of March 31, 2021. Upon forgiveness the Bank will recognize the deferred fee income in accordance with ASC 310-20. The Bank received processing fees of $1.4 million related to the first round of PPP. The Bank recognized $0.6 million during the year ended December 31, 2020. The Bank recognized $0.6 million during the three months ended March 31, 2021. Regulatory agencies, as set forth in the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (initially issued on March 22, 2020 and revised on April 7, 2020), have encouraged financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19. In this statement, the regulatory agencies expressed their view of loan modification programs as positive actions that may mitigate adverse effects on borrowers due to COVID-19 and that the agencies will not criticize institutions for working with borrowers in a safe and sound manner. Moreover, the revised statement provides that eligible loan modifications related to COVID-19 may be accounted for under section 4013 of the CARES Act or in accordance with ASC 310-40. Under Section 4013 of the CARES Act, banks may elect not to categorize loan modifications as TDRs if the modifications are related to COVID-19, executed on a loan that was not more than 30 days past due as of December 31, 2020, and executed between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the date of termination of the National Emergency. All short term loan modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not considered TDRs. Beginning in March 2020, the Bank provided payment accommodations to customers, consisting of 60-day principal deferral to borrowers negatively impacted by COVID-19. The Bank processed approximately $0.8 million in principal deferments to 84 loans, with an aggregate loan balance of $29.7 million, during year ended December 31, 2020. The principal deferments represent 0.24% of our total loan portfolio as of December 31, 2020. In accordance with the FDIC guidance, borrowers who were current prior to becoming affected by COVID-19, that received payment accommodations as a result of the pandemic, generally should not be reported as past due. There were no interest deferments granted and all loans given payment accommodations are still paying interest. The Bank has examined the payment accommodations granted to borrowers in response to COVID-19 and classified 8 loans, with an aggregate loan balance of $3.9 million, that were granted payment accommodations as TDRs given the continued financial difficulty of the customer, associated industry risk, and multiple deferral requests. All other borrowers were current prior to relief, were not experiencing financial difficulty prior to COVID-19, and the Bank. As of March 31, 2021, 6 loans remain classified as TDRs with an aggregate balance of $3.5 million. Additionally, of the 75 loans that received payment accommodations that are not classified as TDRs, 22 loans, with an aggregate loan balance of $5.1 million, have paid their loan in full, 7 loans, with an aggregate loan balance of $0.8 million, are past due less than 30 days, and 46 loans, with an aggregate loan balance of $21.6 million, have commenced paying as agreed as of March 31, 2021. There are no loans that received payment accommodation past due greater than 30 days. The Bank will continue to examine payment accommodations as requested by our borrowers. The Bank will continue to examine payment accommodations as requested by our borrowers. On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (“Economic Aid Act”) was enacted, which reauthorized lending under the PPP program through March 31, 2021, with an additional $325 billion. On March 31, 2021, the PPP Extension Act of 2021 was signed into law, which formally changed the PPP application deadline from March 31, 2021 to May 31, 2021. Under the Economic Aid Act, the SBA will forgive loans, in whole or in part, made by approved lenders to eligible borrowers for payroll and other permitted purposes in accordance with the requirements of the program. These loans carry a fixed rate of 1.00% and a term of five years, if not forgiven, in whole or in part. The loans are 100% guaranteed by the SBA and as long as the borrower submits its loan forgiveness application within ten months of completion of the covered period, the borrower is not required to make any payments until the forgiveness amount is remitted to the lender by the SBA. The Bank will receive a processing fee based on the size of the loan from the SBA, and a tiered structure. For loans up to $50,000 in principal, the lender processing fee will be the lesser of 50% of the principal amount or $2,500. For loans between $50,000 and $350,000 in principal, the lender processing fee will be 5% of the principal amount. For loans $350,000 and above, the lender processing fee will be 3% of the principal amount. For loans of at least $2.0 million, the lender processing fee will be 1% of the principal amount. The fees are deferred and amortized over the life of the loans in accordance with ASC 310-20. As of March 31, 2021, the Bank received 193 applications with a total loan amount of $16.1 million. Of those 193 applications, the SBA approved 184 applications in the aggregate amount of $15.7 million. The Bank funded 176 loans in the aggregate amount of $15.5 million. The Bank received $0.8 million in processing fees related to the second round of PPP. During the three months ended March 31, 2021, the Bank recognized $0.6 million in PPP processing fees for the first and second round of PPP. While the effects of COVID-19 have impacted all industries to varying degrees, the Bank believes the retail and/or service, food and beverage, and short term rental industries in our geographic area are considered a higher risk due to the primary source of repayment. These industries are dependent upon the hospitality industry and were affected by the mandates issued by the Governor of South Carolina to limit occupancy or close for a period of time. The table below shows the total loans receivable for these segments as a percentage of total gross loans as of March 31, 2021. These loans have been temporarily downgraded to our "Watch" category, the Bank is continuing to monitor the effects of COVID-19 on these segments of our loan portfolio. During the second quarter of 2020, the Bank granted payment accommodations of approximately $0.1 million to loans with an aggregate balance of $6.0 million, or 33.59% of the loan portfolio segment, of these loans. As of March 31, 2021, the loans in these segments that received payment accommodations are paying as agreed. Effects of COVID-19 may negatively impact management assumptions and estimates, such as the allowance for loan losses. However, it is difficult to assess or predict how, and to what extent, COVID-19 will affect the Bank in the future. Critical Accounting Policies Our critical accounting policies, which involve significant Balance Sheet Cash and Cash Equivalents Total cash and cash equivalents increased Investment Securities Available for Sale Our primary objective in managing the investment portfolio is to maintain a portfolio of high quality, highly liquid investments yielding competitive returns. We are required under federal regulations to maintain adequate liquidity to ensure safe and sound operations. We maintain investment balances based on continuing assessment of cash flows, the level of current and expected loan production, current interest rate risk strategies and the assessment of potential future direction of market interest rate changes. Investment securities differ in terms of default, interest rate, liquidity and expected rate of return risk. We use the investment securities portfolio for several purposes. It serves as a vehicle to manage interest rate and prepayment risk, to generate interest and dividend income from investment of funds, to provide liquidity to meet funding requirements, and to provide collateral for pledging of public funds. As of Loans We focus our lending activities on small and middle market businesses, professionals and individuals in our geographic markets. Substantially all of our loans Net loans increased In January 2020, the Bank began originating 30-year, fixed rate consumer mortgage loans in excess of the conforming loan amount which are held for investment rather than for sale in the secondary market. Prior to January, all consumer mortgage loans made by the Bank were originated for the purpose of sale and reflected on the consolidated balance sheet as mortgage loans held for sale. This new mortgage product has been well-received by the Bank’s customers, and the associated volume of originations through the year has contributed to the increase in The following table is a summary of our loan portfolio composition (net of deferred fees and costs of The increase in the deferred fees is directly associated with the processing fees the Bank received from the SBA for the PPP loans. The fees are deferred and amortized over the life of the loans in accordance with ASC 310-20. Nonperforming Nonperforming The following table is a summary of our On March 18, 2020, in recognition of the difficulties of COVID-19, the Chief Justice of South Carolina declared a statewide moratorium on evictions and foreclosures until directed by subsequent order of the Chief Justice. The South Carolina Supreme Court lifted its moratorium effective May 15, 2020. On August 8, 2020, the President of the United States of America issued an executive order that allows the Secretary of Housing and Urban Development to take action, as appropriate and consistent with applicable law, to promote the ability of renters and homeowners to avoid foreclosure and eviction resulting from financial hardships related to COVID-19. On August 27, 2020, the Federal Housing Finance Authority and Department of Housing and Urban Development announced it would extend its foreclosure and eviction moratorium through the end of 2020, benefiting homeowners who have mortgages guaranteed by Fannie Mae and Freddie Mac. On March 29, 2021, the federal eviction moratorium was extended again through June 30, 2021. Allowance for Loan Losses The allowance for loan losses was At During the three months ended Deposits Deposits remain our primary source of funding for loans and investments. Average The breakdown of total deposits by type and the respective percentage of total deposits are as follows: Deposits increased At Comparison of Three Months Ended Net income increased Net Interest Income Net interest income is affected by the size and mix of our balance sheet components as well as the spread between interest earned on assets and interest paid on liabilities. Net interest margin is a measure of the difference between interest income on earning assets and interest paid on interest bearing liabilities relative to the amount of The average balance of interest bearing deposits at the Federal Reserve Provision for Loan Losses We have established an allowance for loan losses through a provision for loan losses charged as an expense on our consolidated statements of income. We review our loan portfolio periodically to evaluate our outstanding loans and to measure both the performance of the portfolio and the adequacy of our allowance for loan losses. For the three months ended Non-Interest Income Other income Non-Interest Expense Non-interest expense increased Income Tax Expense We incurred income tax expense of 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 and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained if deemed necessary by the Company upon extension of credit is based on our credit evaluation of the borrower. Collateral held varies but may include accounts receivable, negotiable instruments, inventory, property, plant and equipment, and real estate. Commitments to extend credit, including unused lines of credit, amounted to Standby letters of credit represent our obligation to a We originate certain fixed rate residential loans and commit these loans for sale. The commitments to originate fixed rate residential loans and the sales commitments are freestanding derivative instruments. We had forward sales commitments Once we sell certain fixed rate residential loans, the loans are no longer reportable on our balance sheet. With most of these sales, we have an obligation to repurchase the loan in the event of a default of principal or interest on the loan. This recourse period ranges from three to nine months. Misrepresentation or fraud carries unlimited time for recourse. The unpaid principal balance of loans sold with recourse was Historically, we have maintained our liquidity at levels believed We manage our assets and liabilities to ensure there is sufficient liquidity to enable management to fund deposit withdrawals, loan demand, capital expenditures, reserve requirements, operating expenses, dividends and to manage daily operations on an ongoing basis. Funds are primarily provided by the Bank through customer deposits, principal and interest payments on loans, mortgage loan sales, the sale or maturity of securities, temporary investments and earnings. Proper liquidity management is crucial to ensure that we are able to take advantage of new business opportunities as well as meet the credit needs of our existing customers. Investment securities are an important tool in our liquidity management. Our primary liquid assets are cash and due from banks, interest-bearing deposits in other banks, federal funds sold, investments available for sale, other short-term investments and mortgage loans held for sale. Our primary liquid assets accounted for During the second quarter of 2020, we established an agreement with the Federal Reserve through the Paycheck Protection Program Liquidity Facility (“PPPLF”). Under this facility, the Bank can borrow from this arrangement on a non-recourse basis, using PPP loans as collateral. There have been no loans pledged and borrowings under this arrangement. Our core deposits consist of Our capital needs have been met to date through the On March 26, 2020, the Board of Directors of the Company approved a stock repurchase of up to $1.0 million through March 2021. This plan expired in March 2021. On July 2, 2013, the Federal Reserve Board approved the final rules implementing the Basel Committee on Banking Supervision’s (“BCBS”) capital guidelines for US banks (“Basel III”). Following the actions by the Federal Reserve, the FDIC also approved regulatory capital requirements on July 9, 2013. The FDIC’s We are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory – and possibly additional discretionary – actions by regulators that, if undertaken, could have a material effect on the financial statements. We must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Current and previous quantitative measures established by regulation to ensure capital adequacy require that we maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets and to average assets. Management expects that the capital and leverage ratios for the Company and the Bank under Item 3. Quantitative and Qualitative Disclosures About Market Risk Not required. Item 4. Controls and Procedures Evaluation of disclosure controls and procedures and internal controls and procedures for financial reporting An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities and Exchange Act of 1934 as amended (the “Act”) was carried out as of The Company’s management is responsible for establishing and maintaining adequate internal controls over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of published financial statements in accordance with generally accepted accounting principles. Under the supervision and with the participation of management, including the President/Chief Executive Officer and the Chief Financial Officer/ Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of The Audit and Compliance Committee, composed entirely of independent Directors, meets periodically with management, the Bank’s Audit and Compliance In our opinion, there are no other legal proceedings pending other than routine litigation incidental to our business involving amounts which are not material to our financial condition. Not required. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Average Price Paid Per Share (1) On March 26, 2020, the Company adopted a $1.0 million stock repurchase program. Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosure None. None. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 32 ☒ Quarterly☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 ☐ ForTransition report pursuant to Section 13 or 15(d) of the quarterly period endedSeptember 30, 2017Securities Exchange Act of 1934☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934South Carolina 57-1021355 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) issuerregistrant (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.and posted on its Company Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).or 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 (Check one):Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☒ (Do not check if a smaller reporting company) Emerging growth company ☐ Title of each class Trading symbol(s) Name of each exchange on which registered Common stock BKSC NASDAQ November 9, 2017April 15, 2021, there were 4,984,4795,524,616 Common Shares outstanding.Bank of South Carolina Corporation and SubsidiaryTable of Contents2
2017 ASSETS Cash and due from banks $ 8,009,824 $ 8,141,030 Interest-bearing deposits at the Federal Reserve Bank 22,159,373 18,101,300 Investment securities available for sale 126,496,884 119,978,944 Mortgage loans to be sold 3,117,830 4,386,210 Loans 269,132,631 260,576,115 Less: Allowance for loan losses (3,886,959 ) (3,851,617 ) Net loans 265,245,672 256,724,498 Premises, equipment and leasehold improvements, net 2,252,832 2,296,624 Other real estate owned 566,632 521,943 Accrued interest receivable 1,328,542 1,614,002 Other assets 2,296,720 2,185,085 Total assets $ 431,474,309 $ 413,949,636 LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities Deposits: Non-interest-bearing demand $ 124,661,171 $ 126,034,478 Interest-bearing demand 99,066,299 96,260,589 Money market accounts 84,417,700 77,307,662 Time deposits over $250,000 17,695,869 17,822,136 Other time deposits 25,993,812 26,019,121 Other savings deposits 34,712,187 29,078,865 Total deposits 386,547,038 372,522,851 Accrued interest payable and other liabilities 1,217,803 813,811 Total liabilities 387,764,841 373,336,662 Shareholders’ equity Common stock-no par, 12,000,000 shares authorized; 5,225,875 and 5,197,535 shares issued at September 30, 2017 and December 31, 2016, respectively; 4,984,479 and 4,956,139 shares outstanding at September 30, 2017 and December 31, 2016, respectively — — Additional paid in capital 37,172,768 36,824,022 Retained earnings 8,558,442 6,643,476 Treasury stock: 241,396 shares at September 30, 2017 and December 31, 2016 (2,247,415 ) (2,247,415 ) Accumulated other comprehensive income (loss), net of income taxes 225,673 (607,109 ) Total shareholders’ equity 43,709,468 40,612,974 Total liabilities and shareholders’ equity $ 431,474,309 $ 413,949,636 See accompanying notes to consolidated financial statements.3 BANK OF SOUTH CAROLINA CORPORATION AND SUBSIDIARYCONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) THREE MONTHS ENDED
SEPTEMBER 30, 2017 2016 Interest and fee income Loans, including fees $ 3,364,293 $ 3,360,151 Taxable securities 409,055 379,039 Tax-exempt securities 251,172 255,231 Other 92,512 35,722 Total interest and fee income 4,117,032 4,030,143 Interest expense Deposits 110,625 96,467 Short-term borrowings — — Total interest expense 110,625 96,467 Net interest income 4,006,407 3,933,676 Provision for loan losses 20,000 210,000 Net interest income after provision for loan losses 3,986,407 3,723,676 Other income Service charges and fees 278,204 265,769 Mortgage banking income 149,379 409,674 Gains on sales of securities 45,820 — Other non-interest income 8,479 11,143 Total other income 481,882 686,586 Other expense Salaries and employee benefits 1,487,207 1,485,621 Net occupancy expense 399,534 377,075 Other operating expenses 597,797 721,572 Net other real estate owned expenses — — Total other expenses 2,484,538 2,584,268 Income before income tax expense 1,983,751 1,825,994 Income tax expense 543,098 399,656 Net income $ 1,440,653 $ 1,426,338 Weighted average shares outstanding Basic 4,978,515 4,931,185 Diluted 5,067,561 5,054,723 Basic income per common share $ 0.29 $ 0.29 Diluted income per common share $ 0.28 $ 0.28 (Unaudited) (Audited) March 31, December 31, 2021 2020 ASSETS Cash and due from banks $ 6,211,365 $ 5,977,896 Interest-bearing deposits at the Federal Reserve 53,223,741 42,348,085 Investment securities available for sale 142,667,417 134,819,818 Mortgage loans to be sold 13,230,017 12,965,733 Loans 322,283,229 320,802,673 Less: Allowance for loan losses (4,296,165 ) (4,185,694 ) Net loans 317,987,064 316,616,979 Premises, equipment and leasehold improvements, net 3,976,342 4,053,533 Right of use asset 12,605,156 12,730,151 Accrued interest receivable 1,375,181 1,595,629 Other assets 2,823,077 1,386,775 Total assets $ 554,099,360 $ 532,494,599 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Deposits: Non-interest bearing demand $ 189,574,996 $ 169,170,751 Interest bearing demand 143,753,923 140,602,723 Money market accounts 81,912,767 84,681,783 Time deposits over $250,000 5,046,943 4,493,189 Other time deposits 15,168,276 16,205,942 Other savings deposits 49,189,107 47,043,243 Total deposits 484,646,012 462,197,631 Accrued interest payable and other liabilities 3,839,142 2,586,461 Lease liability 12,605,156 12,730,151 Total liabilities 501,090,310 477,514,243 Shareholders' equity Common stock - no par 12,000,000 shares authorized; Issued 5,823,533 shares at March 31, 2021 and 5,818,935 shares at December 31, 2020. Shares outstanding 5,524,616 and 5,520,469 at March 31, 2021 and December 31, 2020, respectively. — — Additional paid in capital 47,467,455 47,404,869 Retained earnings 9,011,948 8,693,519 Treasury stock: 298,917 and 298,466 shares at March 31, 2021 and December 31, 2020, respectively. (2,796,242 ) (2,787,898 ) Accumulated other comprehensive loss, net of income taxes (674,111 ) 1,669,866 Total shareholders' equity 53,009,050 54,980,356 Total liabilities and shareholders' equity $ 554,099,360 $ 532,494,599 4 NINE MONTHS ENDED
SEPTEMBER 30, 2017 2016 Interest and fee income Loans, including fees $ 9,727,886 $ 9,603,030 Taxable securities 1,147,811 992,658 Tax-exempt securities 778,259 734,716 Other 187,782 102,472 Total interest and fee income 11,841,738 11,432,876 Interest expense Deposits 313,929 283,588 Short-term borrowings — 7 Total interest expense 313,929 283,595 Net interest income 11,527,809 11,149,281 Provision for loan losses 52,500 395,000 Net interest income after provision for loan losses 11,475,309 10,754,281 Other income Service charges and fees 835,643 792,036 Mortgage banking income 825,003 1,058,438 Gains on sales of securities 45,820 348,327 Other non-interest income 23,769 23,385 Total other income 1,730,235 2,222,186 Other expense Salaries and employee benefits 4,457,778 4,481,067 Net occupancy expense 1,157,442 1,133,784 Other operating expenses 1,884,928 1,928,994 Net other real estate owned expenses 46,143 13,450 Total other expenses 7,546,291 7,557,295 Income before income tax expense 5,659,253 5,419,172 Income tax expense 1,606,127 1,484,989 Net income $ 4,053,126 $ 3,934,183 Weighted average shares outstanding Basic 4,969,617 4,929,977 Diluted 5,058,958 5,058,837 Basic income per common share $ 0.82 $ 0.80 Diluted income per common share $ 0.80 $ 0.78 Three Months Ended March 31, 2021 2020 Interest and fee income Loans, including fees $ 4,106,171 $ 3,670,982 Taxable securities 453,457 363,439 Tax-exempt securities 69,606 124,625 Other 11,881 142,380 Total interest and fee income 4,641,115 4,301,426 Interest expense Deposits 54,524 94,072 Total interest expense 54,524 94,072 Net interest income 4,586,591 4,207,354 Provision for loan losses 120,000 — Net interest income after provision for loan losses 4,466,591 4,207,354 �� Other income Service charges and fees 288,224 275,590 Mortgage banking income 645,895 346,083 Other non-interest income 5,795 5,958 Total other income 939,914 627,631 Other expense Salaries and employee benefits 1,799,006 1,771,781 Net occupancy expense 612,268 525,307 Other operating expenses 280,416 239,173 Professional fees 176,591 160,876 Data processing fees 162,434 159,384 Total other expense 3,030,715 2,856,521 Income before income tax expense 2,375,790 1,978,464 Income tax expense 565,715 457,333 Net income $ 1,810,075 $ 1,521,131 Weighted average shares outstanding Basic 5,521,707 5,530,256 Diluted 5,685,151 5,585,622 Basic income per common share $ 0.33 $ 0.28 Diluted income per common share $ 0.32 $ 0.27 5 THREE MONTHS ENDED
SEPTEMBER 30, 2017 2016 Net income $ 1,440,653 $ 1,426,338 Other comprehensive income: Unrealized gain on securities arising during the period (339,956 ) — Reclassification adjustment for securities gains realized in net income 45,820 (387,289 ) Other comprehensive income, before tax (294,136 ) (387,289 ) Income tax effect related to items of other comprehensive income 100,006 104,687 Other comprehensive income, after tax (194,130 ) (282,602 ) Total comprehensive income $ 1,246,523 $ 1,143,736 NINE MONTHS ENDED
SEPTEMBER 30, 2017 2016 Net income $ 4,053,126 $ 3,934,183 Other comprehensive income: Unrealized gain on securities arising during the period 1,242,599 — Reclassification adjustment for securities gains realized in net income 45,820 944,314 Other comprehensive income, before tax 1,288,419 944,314 Income tax effect related to items of other comprehensive income (455,637 ) (388,005 ) Other comprehensive income, after tax 832,782 556,309 Total comprehensive income $ 4,885,908 $ 4,490,492 Three Months Ended March 31, 2021 2020 Net income $ 1,810,075 $ 1,521,131 Other comprehensive (loss) income Unrealized (loss) gain on securities arising during the period (2,967,059 ) 760,779 Other comprehensive income before tax (2,967,059 ) 760,779 Income tax effect related to items of other comprehensive (loss) income before tax 623,082 (159,763 ) Other comprehensive income after tax (2,343,977 ) 601,016 Total comprehensive income $ (533,902 ) $ 2,122,147 6
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2017March 31, 2021 AND 2016 (UNAUDITED)2020 December 31, 2015 $ 36,341,744 $ 4,064,834 $ (2,247,415 ) $ 992,549 $ 39,151,712 Net income — 3,934,183 — — 3,934,183 Other comprehensive income — — — 556,309 556,309 Exercise of stock options 333,704 — — — 333,704 Stock-based compensation expense 58,112 — — — 58,112 Cash dividends ($0.40 per common share) — (1,974,529 ) — — (1,974,529 ) September 30, 2016 $ 36,733,560 $ 6,024,488 $ (2,247,415 ) $ 1,548,858 $ 42,059,491 December 31, 2016 $ 36,824,022 $ 6,643,476 $ (2,247,415 ) $ (607,109 ) $ 40,612,974 Net income — 4,053,126 — — 4,053,126 Other comprehensive income — — — 832,782 832,782 Exercise of stock options 294,342 — — — 294,342 Stock-based compensation expense 54,404 — — — 54,404 Cash dividends ($0.43 per common share) — (2,138,160 ) — — (2,138,160 ) September 30, 2017 $ 37,172,768 $ 8,558,442 $ (2,247,415 ) $ 225,673 $ 43,709,468 Shares Outstanding Additional Paid in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) Total December 31, 2020 5,520,469 $ 47,404,869 $ 8,693,519 $ (2,787,898 ) $ 1,669,866 $ 54,980,356 Net income — — 1,810,075 — — 1,810,075 Other comprehensive loss — — — — (2,343,977 ) (2,343,977 ) Stock option exercises, net of surrenders 4,147 39,589 — (8,344 ) — 31,245 Stock-based compensation expense — 22,997 — — — 22,997 Cash dividends ($0.27 per common share) — — (1,491,646 ) — — (1,491,646 ) March 31, 2021 5,524,616 $ 47,467,455 $ 9,011,948 $ (2,796,242 ) $ (674,111 ) $ 53,009,050 Shares Outstanding Additional Paid in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) Total December 31, 2019 5,530,001 $ 47,131,034 $ 5,879,409 $ (2,325,225 ) $ 482,814 $ 51,168,032 Net income — — 1,521,131 — — 1,521,131 Other comprehensive income — — — — 601,016 601,016 Stock option exercises, net of surrenders 362 4,489 — — — 4,489 Stock-based compensation expense — 16,418 — — — 16,418 Cash dividends ($0.16 per common share) — — (884,859 ) — — (884,859 ) March 31, 2020 5,530,363 $ 47,151,941 $ 6,515,681 $ (2,325,225 ) $ 1,083,830 $ 52,426,227 7 Three Months Ended March 31, 2021 2020 Cash flows from operating activities: Net income $ 1,810,075 $ 1,521,131 Adjustments to reconcile net income net cash provided by operating activities: Depreciation expense 106,414 104,638 Provision for loan losses 120,000 — Stock-based compensation expense 22,997 16,418 Deferred income taxes and other assets (813,220 ) (476,772 ) Net amortization of unearned discounts on investment securities available for sale 96,917 40,898 Origination of mortgage loans held for sale (48,008,560 ) (23,150,204 ) Proceeds from sale of mortgage loans held for sale 47,744,276 22,859,558 Decrease in accrued interest receivable 220,448 76,188 Increase in accrued interest payable and other liabilities 699,515 377,465 Net cash provided by operating activities 1,998,862 1,369,320 Cash flows from investing activities: Proceeds from calls and maturities of investment securities available for sale 4,817,000 8,754,000 Purchase of investment securities available for sale (15,728,575 ) — Net increase in loans (1,490,085 ) (4,292,645 ) Purchase of premises, equipment, and leasehold improvements, net (29,223 ) (78,537 ) Net cash (used in) provided by investing activities (12,430,883 ) 4,382,818 Cash flows from financing activities: Net increase in deposit accounts 22,448,381 53,189,878 Dividends paid (938,480 ) (884,800 ) Stock options exercised 31,245 4,489 Net cash provided by financing activities 21,541,146 52,309,567 Net increase in cash and cash equivalents 11,109,125 58,061,705 Cash and cash equivalents at the beginning of the period 48,325,981 49,094,419 Cash and cash equivalents at the end of the period $ 59,435,106 $ 107,156,124 Supplemental disclosure of cash flow data: Cash paid during the period for: Interest $ 75,231 $ 96,973 Income taxes $ 231,375 $ — Supplemental disclosures for non-cash investing and financing activity: Change in unrealized gain on securities available for sale, net of income taxes $ 2,343,977 $ (601,016 ) Change in dividends payable $ 553,166 $ 59 Change in right of use assets and lease liabilities $ (124,995 ) $ 117,917 AND SUBSIDIARYCONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED) NINE MONTHS ENDED
SEPTEMBER 30, 2017 2016 Cash flows from operating activities: Net income $ 4,053,126 $ 3,934,183 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 142,859 140,276 Gain on sale of securities (45,820 ) (446,041 ) Loss on sale of other real estate — 13,450 Valuation and other adjustments to other real estate 46,143 — Provision for loan losses 52,500 395,000 Stock-based compensation expense 54,404 58,112 Deferred income taxes (567,272 ) — Net amortization of unearned discounts on investment securities 293,080 223,272 Origination of mortgage loans held for sale (43,420,076 ) (57,759,783 ) Proceeds from sale of mortgage loans held for sale 44,688,456 58,617,055 Decrease (increase) in accrued interest receivable and other assets 285,460 (721,562 ) Increase in accrued interest payable and other liabilities 350,649 744,530 Net cash provided by operating activities 5,933,509 5,198,492 Cash flows from investing activities: Proceeds from calls and maturities of investment securities available for sale 4,380,870 4,728,518 Proceeds from sale of available for sale securities 20,231,265 26,113,400 Purchase of investment securities available for sale (30,088,916 ) (24,759,858 ) Proceeds from sale of other real estate — 85,000 Net increase in loans (8,664,506 ) (23,828,667 ) Purchase of premises, equipment and leasehold improvements, net (99,067 ) (69,303 ) Net cash used in investing activities (14,240,354 ) (17,730,910 ) Cash flows from financing activities: Net increase in deposit accounts 14,024,187 6,687,942 Dividends paid (2,084,817 ) (1,920,866 ) Stock options exercised 294,342 333,704 Net cash provided by financing activities 12,233,712 5,100,780 Net increase (decrease) in cash and cash equivalents 3,926,867 (7,431,638 ) Cash and cash equivalents at beginning of period 26,242,330 29,194,786 Cash and cash equivalents at end of period $ 30,169,197 $ 21,763,148 Supplemental disclosure of cash flow data: Cash paid during the year for: Interest $ 365,558 $ 308,857 Income taxes $ 2,055,063 $ 1,669,840 Supplemental disclosure for non-cash investing and financing activity: Change in unrealized gain on securities available for sale, net of income taxes $ 832,782 $ 556,309 Change in dividends payable $ 53,343 $ 53,663 Transfer of loans to other real estate owned $ 90,832 $ — See accompanying notes to consolidated financial statements.8 BANK OF SOUTH CAROLINA CORPORATIONNote 1: Nature of Business and Basis of Presentation1. NATURE OF BUSINESS AND BASIS OF PRESENTATION DuringIn consolidation, all significant intercompany balances and transactions have been eliminated.3, 2017.5, 2021. In the opinion of management, these interim financial statements present fairly, in all material respects, the Company’s consolidated financial position and results of operations for each of the interim periods presented. Results of operations for interim periods are not necessarily indicative of the results of operations that may be expected for a full year or any future period. preparation of the consolidated financial statements requiresare prepared in conformity with GAAP, which require management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ significantly from these estimates and assumptions. Material estimates generally susceptible to significant change are related to the determination of the allowance for loan losses, impaired loans, other real estate owned, deferred tax assets, the fair value of financial instruments and other-than-temporary impairment of investment securities.the net income as previously reported.representsis computed by dividing net income available to shareholders divided by the weighted-average number of common shares outstanding during the period. Dilutive income per share reflects additionalis computed by dividing net income by the weighted-average number of common shares that would have been outstanding if dilutiveand potential common shares had been issued. The only potentialoutstanding. Potential common share equivalents are those related toshares consist of dilutive stock options. Stock options that are anti-dilutive are excluded from the calculation of diluted net income per share. The dilutive effect of options outstanding under our stock compensation plan is reflected in diluted earnings per share by the application ofdetermined using the treasury stock method.method and the average market price of common stock. Retroactive recognition has been given for the effects of all stock dividends.9 BANK OF SOUTH CAROLINA CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTSMay 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09,Revenue from Contracts with Customers, Topic 606.The core principle of the new standard is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. This guidance also includes expanded disclosure requirements that result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. In August 2015, the FASB deferred the effective date of the amendments. As a result of the deferral, the guidance will be effective for the Company for reporting periods beginning after December 15, 2017. We will apply this guidance using a modified retrospective approach. Because the amendment does not apply to revenue associated with financial instruments, such as loans and investment securities available for sale, we do not expect this amendment to have a material effect on our consolidated financial statements. We are still evaluating the effects of the amendment regarding its applicability and related impact on credit card fees and deposit service charges.In January 2016, the FASB issued ASU 2016-01,Financial Instruments – Overall (Subtopic 825-10); Recognition and Measurement of Financial Instruments and Financial Liabilities.This update addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We will apply the guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values will be applied prospectively to equity investments that exist as of the date of adoption of the amendments. The Company does not expect this amendment to have a material effect on its financial statements.In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842),which revises certain aspects of recognition, measurement, presentation, and disclosure of leasing transactions. The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the effect that implementation of the new standard will have on our results of operations and cash flows but expect the effect on the financial position to be considerable due to the fact that substantially all operating lease commitments will be recognized as right of use assets and lease liabilities based on the present value of unpaid lease payments as of the date of adoption.In March 2016, the FASB issued ASU 2016-08,Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), to clarify the implementation guidance on principal versus agent considerations and address how an entity should assess whether it is the principal or the agent in contracts that include three or more parties. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect this amendment to have a material effect on its financial statements.In March 2016, the FASB issued ASU 2016-09,Compensation – Stock Compensation (Topic 718): Improvements to Employee Share – Based Payment Accounting, to simplify several aspects of the accounting for share-based payment award transactions including the income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows. Additionally, the guidance simplifies two areas specific to entities other than public business entities allowing them apply a practical expedient to estimate the expected term for all awards with performance or service conditions that have certain characteristics and also allowing them to make a one-time election to switch from measuring all liability-classified awards at fair value to measuring them at intrinsic value. The amendments became effective for the Company on January 1, 2017 and this amendment did not have a material effect on its financial statements.10 BANK OF SOUTH CAROLINA CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTSIn April 2016, the FASB issued ASU 2016-10,Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, to clarify guidance related to identifying performance obligations and accounting for licenses of intellectual property. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.In May 2016, the FASB issued ASU 2016-12,Revenue from Contracts with Customers (Topic 606): Narrow- Scope Improvements and Practical Expedients, to clarify guidance related to collectability, noncash consideration, presentation of sales tax, and transition. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.In June 2016, the FASB issued ASU 2016-13,Financial instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, to change the accounting for credit losses and modify the impairment model for certain debt securities. The amendmentsIn May 2019, the FASB issued guidance to provide entities with an option to irrevocably elect the fair value option, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of ASU 2016-13, Measurement of Credit Losses on Financial Instruments. In October 2019, the FASB voted to extend the implementation date for smaller reporting companies, non-SEC public companies, and private companies. On March 27, 2020, the Board of Governors of the Federal Reserve, FDIC, and Office of the Comptroller of Currency announced the interim final rule allowing banks to delay the effects of CECL until 2022 for filers scheduled to implement in 2020 and 2023 for all other filers. This amendment will bebecome effective for the Company for reporting periods beginning after December 15, 2019. Early adoption is permitted for all organizations for periods beginning after December 15, 2018.on January 1, 2023. The Company is currently evaluating the effect that implementation of the new standard will have on its financial position, results of operations, and cash flows. It will be influenced by the quality, composition, and characteristics of our loan and investment portfolios, as well as the expected economic conditions and forecasts at the time of enactment and future reporting periods. August 2016,December 2019, the FASB issued ASU 2016-15,2019-12, Statement of Cash FlowsIncome Taxes (Topic 230)740): Classification of Certain Cash Receipts and Cash Payments,Simplifying the Accounting for Income Taxes, which provides guidance to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows.simply accounting for income taxes by removing specific technical exceptions that can produce information investors do not understand. The amendments will beimprove and simplify the application of GAAP for other areas of Topic 740 by clarifying and amending the existing guidance. The amendments are effective for the Company for fiscal years beginning after December 15, 20172020, including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect these amendments to have a material effect on itsthe financial statements.December 2016,January 2020, the FASB issued ASU 2016-20,Technical Correctionsguidance to address accounting for the transition into and Improvements to Topic 606, Revenue from Contracts with Customers. These corrections make a limited number of revisions to several piecesout of the revenue recognition standard issued in 2014.equity method and measuring certain purchased options and forward contracts to acquire investments. The effective date and transition requirements for the technical corrections will beamendments are effective for the Company for reporting periodsfiscal years beginning after December 15, 2017.2020, and interim periods within those fiscal years. Early adoption is permitted, including early adoption in an interim period. The Company will continue to evaluate the impact of this ASU and does not expect these amendments to have a material effect on its financial statements.January 2017,February 2020, the FASB issued ASU 2017-01,Clarifying the Definition of a Business, which provided guidance to assist with evaluating whether transactions should be accounted for as acquisitions (or disposals)add and amend SEC paragraphs in the Accounting Standards Codification to reflect the issuance of assets or businesses. The update is intendedSEC Staff Accounting Bulletin No. 119 related to address concerns that the existing definitionnew credit losses standard and comments by the SEC staff related to the revised effective date of a business has been applied too broadly and has resulted in many transactions being recorded as business acquisitions that in substance are more akin to asset acquisitions.the new leases standard. The amendments arewere effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The amendments should be applied prospectively on or after the effective date.upon issuance. The Company does not expect this amendmentthese amendments to have a material effect on its financial statements.February 2017,March 2020, the FASB issued ASU 2017-05,Clarifyingguidance that makes narrow-scope improvements to various aspects of the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, to clarifyfinancial instrument guidance, including the scope of establishedcurrent expected credit losses (CECL) guidance on nonfinancial asset derecognition, issued as part of ASU 2014-09,Revenue from Contracts with Customers, as well as accounting for partial sales of nonfinancial assets.in 2016. The amendments conformrelated to conforming amendments. For public business entities, the derecognition guidance on nonfinancial assets withamendments are effective upon issuance of this final ASU. The effective date of the modelamendments to ASU 2016-01 is for transactions in the new revenue standard. This amendment is effective for annual periodsfiscal years beginning after December 15, 2017.2019, including interim periods within those fiscal years. For the amendments related to ASU 2016-13, public business entities that meet the definition of an SEC filer, excluding eligible smaller reporting companies (SRCs) as defined by the SEC, should adopt the amendments in ASU 2016-13 during 2020. Early adoption will continue to be permitted. For entities that have not yet adopted the guidance in ASU 2016-13, the effective dates and the transition requirements for these amendments are the same as the effective date and transition requirements in ASU 2016-13. The Company does not expect this amendmentthese amendments to have a material effect on its financial statements.11 BANK OF SOUTH CAROLINA CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS2017,2020, the FASB issued ASU 2017-08,Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortizationguidance to provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The amendments are effective as of Purchased Callable Debt Securities, which shortens the amortization period for the premium to the earliest call date. The amendment will be effective for the Company for interim and annual periods beginning afterMarch 12, 2020 through December 15, 2018. Early adoption is permitted.31, 2022. The Company does not expect this amendmentthese amendments to have a material effect on its financial statements.Note 2: Investment Securities2. Investment Securities AVAILABLE FOR SALE gross unrealized gains and losses, and fair value of investment securities available for sale are summarized as follows: SEPTEMBER 30, 2017 March 31, 2021 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value U.S. Treasury Notes $ 26,112,531 $ 24,169 $ (39,199 ) $ 26,097,501 $ 35,238,051 $ 294,776 $ (203,727 ) $ 35,329,100 Government-Sponsored Enterprises 59,497,890 179,426 (307,911 ) 59,369,405 96,551,696 979,928 (2,240,264 ) 95,291,360 Municipal Securities 40,561,715 765,902 (297,639 ) 41,029,978 11,730,974 330,229 (14,246 ) 12,046,957 Total $ 126,172,136 $ 969,497 $ (644,749 ) $ 126,496,884 $ 143,520,721 $ 1,604,933 $ (2,458,237 ) $ 142,667,417 DECEMBER 31, 2016
FAIR December 31, 2020 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value U.S. Treasury Notes $ 24,148,295 $ 41,153 $ (250,385 ) $ 23,939,063 $ 20,036,549 $ 374,001 $ — $ 20,410,550 Government-Sponsored Enterprises 51,737,930 129,482 (833,321 ) 51,034,091 96,614,182 1,398,884 (160,260 ) 97,852,806 Municipal Securities 45,056,390 765,813 (816,413 ) 45,005,790 16,055,332 501,130 — 16,556,462 Total $ 120,942,615 $ 936,448 $ (1,900,119 ) $ 119,978,944 $ 132,706,063 $ 2,274,015 $ (160,260 ) $ 134,819,818 September 30, 2017March 31, 2021 and December 31, 2016,2020, by contractual maturity are as follows:in the following table. SEPTEMBER 30, 2017 DECEMBER 31, 2016
COST
VALUE
COST
VALUE March 31, 2021 December 31, 2020 Amortized Cost Estimated Fair Value Amortized Cost Estimated Fair Value Due in one year or less $ 8,561,255 $ 8,586,020 $ 3,343,347 $ 3,350,205 $ 31,687,606 $ 31,945,118 $ 32,245,646 $ 32,622,890 Due in one year to five years 70,669,406 71,024,994 82,848,411 82,682,901 46,328,992 47,178,658 40,022,194 41,258,370 Due in five years to ten years 43,799,734 43,853,008 29,662,030 29,169,228 64,994,527 63,048,291 50,438,223 50,968,288 Due in ten years and over 3,141,741 3,032,862 5,088,827 4,776,610 509,596 495,350 10,000,000 9,970,270 Total $ 126,172,136 $ 126,496,884 $ 120,942,615 $ 119,978,944 $ 143,520,721 $ 142,667,417 $ 132,706,063 $ 134,819,818 Investment securitiesSecurities pledged to secure public deposits and for other purposes required or permitted by law at September 30, 2017both March 31, 2021 and December 31, 2016,2020, had a fair value of $54.2$41.4 million and $47.6$42.4 million, respectively.12 BANK OF SOUTH CAROLINA CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2017March 31, 2021 and December 31, 2016.2020. We believe that all unrealized losses have resulted from temporary changes in the interest rates and currentrate market conditions and not as a result of credit deterioration. We do not intend to sell and it is not likely that we will be required to sell any of the securities referenced in the table below before recovery of their amortized cost. March 31, 2021 Less Than 12 Months 12 Months or Longer Total # Fair Value Gross Unrealized Loss # Fair Value Gross Unrealized Loss # Fair Value Gross Unrealized Loss U.S. Treasury Notes 3 $ 15,008,785 $ (203,727 ) — $ — $ — 3 $ 15,008,785 $ (203,727 ) Government-Sponsored Enterprises 7 49,216,630 (2,240,264 ) — — — 7 49,216,630 (2,240,264 ) Municipal Securities 1 495,350 (14,246 ) — — — 1 495,350 (14,246 ) Total 11 $ 64,720,765 $ (2,458,237 ) — $ — $ — 11 $ 64,720,765 $ (2,458,237 ) December 31, 2020 Less Than 12 Months 12 Months or Longer Total # Fair
Value Gross Unrealized Loss # Fair
Value Gross Unrealized Loss # Fair
Value Gross Unrealized Loss U.S. Treasury Notes — $ — $ — — $ — $ — — $ — $ — Government-Sponsored Enterprises 4 29,839,740 (160,260 ) — — — 4 29,839,740 (160,260 ) Municipal Securities — — — — — — — — — Total 4 $ 29,839,740 $ (160,260 ) — $ — $ — 4 $ 29,839,740 $ (160,260 ) Less Than 12 Months 12 Months or Longer Total Gross Gross Gross Unrealized Unrealized Unrealized # Fair Value Loss # Fair Value Loss # Fair Value Loss U.S. Treasury notes 3 $ 15,146,094 $ (39,199 ) — $ — $ — 3 $ 15,146,094 $ (39,199 ) Government-sponsored enterprises 4 17,620,585 (129,779 ) 2 5,347,950 (178,132 ) 6 22,968,535 (307,911 ) Municipal securities 11 3,541,927 (50,316 ) 20 8,246,598 (247,323 ) 31 11,788,525 (297,639 ) Total 18 $ 36,308,606 $ (219,294 ) 22 $ 13,594,548 $ (425,455 ) 40 $ 49,903,154 $ (644,749 ) U.S. Treasury notes 4 $ 17,968,594 $ (250,385 ) — $ — $ — 4 $ 17,968,594 $ (250,385 ) Government-sponsored enterprises 8 30,136,720 (833,321 ) — — — 8 30,136,720 (833,321 ) Municipal securities 54 22,606,430 (816,413 ) — — — 54 22,606,430 (816,413 ) Total 66 $ 70,711,744 $ (1,900,119 ) — $ — $ — 66 $ 70,711,744 $ (1,900,119 ) We received proceeds and gross realized gains and losses fromThere were no sales of investment securities available for sale as follows: For the Three Months Ended
September 30, 2017 2016 Gross proceeds $ 20,231,265 $ 4,902,286 Gross realized gains 154,692 97,714 Gross realized losses 108,872 — For the Nine Months Ended
September 30, 2017 2016 Gross proceeds $ 20,231,265 $ 25,667,359 Gross realized gains 154,692 446,041 Gross realized losses 108,872 — For the three months ended September 30, 2017March 31, 2021 and 2016, the tax provision related to these gains was $15,578 and $36,154, respectively. For the nine months ended September 30, 2017 and 2016, the tax provision related to these gains was $15,578 and $165,035, respectively.2020.13 3. LOANS AND ALLOWANCE FOR LOAN LOSSES BANK OF SOUTH CAROLINA CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTSNote 3: Loans and Allowance for Loan Losses$149,640$830,945 at September 30, 2017March 31, 2021 and $136,446$676,155 at December 31, 2016)2020, respectively) are as follows:shown in the table below.: September 30, December 31, March 31, 2021 December 31, 2020 2017 2016 Commercial loans $ 53,348,364 $ 52,262,209 Commercial $ 42,201,186 $ 51,041,397 Commercial real estate: Construction 1,842,668 1,208,901 10,373,102 14,813,726 Other 134,779,206 122,968,126 156,377,427 146,187,886 Consumer: Real Estate 74,254,387 77,131,816 Real estate 81,231,579 71,836,041 Other 4,908,006 7,005,063 4,163,221 4,480,491 Paycheck Protection Program 27,936,714 32,443,132 269,132,631 260,576,115 322,283,229 320,802,673 Allowance for loan losses (3,886,959 ) (3,851,617 ) (4,296,165 ) (4,185,694 ) Loans, net $ 265,245,672 $ 256,724,498 $ 317,987,064 $ 316,616,979 $101.1$91.0 million and $101.2$76.0 million of loans pledged as collateral to secure funding with the Federal Reserve Bank (“FRB”) Discount Window at September 30, 2017March 31, 2021 and at December 31, 2016,2020, respectively.entirety.entirety, with the exception of the PPP loans.● Excellent(1) The borrowing entity has no overdrafts, more than adequate cash flow, unquestionable strength, strong earnings and capital and, where applicable.applicable, no overdrafts.● Good(2) The borrowing entity has dependable cash flow, better than average financial condition, good capital and usually no overdrafts. ● Satisfactory(3) The borrowing entity has adequate cash flow, satisfactory financial condition, and explainable overdrafts (if any). ● Watch(4) The borrowing entity has generally adequate, yet inconsistent cash flow, cyclical earnings, weak capital, loan to/from stockholders, and infrequent overdrafts. The borrower has consistent yet sometimes unpredictable sales and growth. ● OAEM(5) The borrowing entity has marginal cash flow, occasional past dues, and frequent and unexpected working capital needs. ● Substandard(6) The borrowing entity has a cash flow barely sufficient to service debt, deteriorated financial condition, and bankruptcy is a possiblility.possible. The borrowing entity has declining sales, rising costs, and may need to look for secondary source of repayment.● Doubtful(7) The borrowing entity has negative cash flow. Survival of the business is at risk, full repayment is unlikely, and there are frequent and unexplained overdrafts. The borrowing entity shows declining trends and no operating profits. 14 BANK OF SOUTH CAROLINA CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS● Loss(8) The borrowing entity has negative cash flow with no alternatives. Survival of the business is unlikely. as of September 30, 2017at March 31, 2021 and December 31, 2016.2020. “Pass” includes loans internally graded as excellent, good and satisfactory.September 30, 2017 Commercial
Consumer Consumer Other Total March 31, 2021 March 31, 2021 Commercial Commercial
Real Estate Construction Commercial
Real Estate
Other Consumer
Real Estate Consumer
Other Paycheck Protection Program Total Pass $ 49,209,010 $ 1,453,646 $ 129,338,835 $ 73,172,945 $ 4,665,789 $ 257,840,225 $ 37,770,275 $ 9,915,067 $ 136,296,189 $ 80,012,464 $ 3,762,913 $ 27,936,714 $ 295,693,622 Watch 2,260,670 389,022 2,942,987 587,005 208,110 6,387,794 2,030,528 458,035 14,155,587 346,231 314,336 — 17,304,717 OAEM 49,164 — 291,128 — — 340,292 710,385 — 1,248,150 623,127 44,237 — 2,625,899 Sub-Standard 1,829,520 — 2,206,256 494,437 34,107 4,564,320 Substandard 1,689,998 — 4,677,501 249,757 41,735 — 6,658,991 Doubtful — — — — — — — — — — — — — Loss — — — — — — — — — — — — — Total $ 53,348,364 $ 1,842,668 $ 134,779,206 $ 74,254,387 $ 4,908,006 $ 269,132,631 $ 42,201,186 $ 10,373,102 $ 156,377,427 $ 81,231,579 $ 4,163,221 $ 27,936,714 $ 322,283,229 December 31, 2016 Commercial
Consumer
Real Estate Consumer Other Total December 31, 2020 December 31, 2020 Commercial Commercial
Real Estate Construction Commercial
Real Estate
Other Consumer
Real Estate Consumer
Other Paycheck Protection Program Total Pass $ 48,289,944 $ 798,884 $ 116,490,396 $ 74,115,426 $ 6,728,367 $ 246,423,017 $ 44,903,134 $ 14,349,065 $ 125,111,378 $ 70,454,909 $ 4,171,858 $ 32,443,132 $ 291,433,476 Watch 1,004,957 410,017 2,625,079 899,306 147,992 5,087,351 3,415,408 464,661 15,200,992 467,163 219,954 — 19,768,178 OAEM 1,666,048 — 995,549 630,957 28,939 3,321,493 1,039,647 — 1,784,296 623,226 46,783 — 3,493,952 Sub-Standard 1,301,260 — 2,857,102 1,486,127 99,765 5,744,254 Substandard 1,683,208 — 4,091,220 290,743 41,896 — 6,107,067 Doubtful — — — — — — — — — — — — — Loss — — — — — — — — — — — — — Total $ 52,262,209 $ 1,208,901 $ 122,968,126 $ 77,131,816 $ 7,005,063 $ 260,576,115 $ 51,041,397 $ 14,813,726 $ 146,187,886 $ 71,836,041 $ 4,480,491 $ 32,443,132 $ 320,802,673 class:class.September 30, 2017 March 31, 2021 March 31, 2021 30-59 Days Past Due 60-89 Days Past Due Greater Than 90 Days Total Past Due Current Total Recorded Investment > 90 Days and Accruing 30-59 Days Past Due 60-89 Days Past Due Greater than 90 Days Total Past Due Current Total Loans Receivable Recorded Investment ≥
90 Days and Accruing Commercial $ 78,271 $ 150,000 $ 13,902 $ 242,173 $ 53,106,191 $ 53,348,364 $ 13,902 $ 11,000 $ 19,681 $ — $ 30,681 $ 42,170,505 $ 42,201,186 $ — Commercial Real Estate - Construction — — — — 1,842,668 1,842,668 — Commercial Real Estate - Other 675,000 — 1,415,738 2,090,738 132,688,468 134,779,206 — Commercial Real Estate Construction — — — — 10,373,102 10,373,102 — Commercial Real Estate Other 900,000 — 921,580 1,821,580 154,555,847 156,377,427 — Consumer Real Estate 153,112 564,877 — 717,989 73,536,398 74,254,387 — — — — — 81,231,579 81,231,579 — Consumer Other 11,547 — — 11,547 4,896,459 4,908,006 — 5,092 14,580 — 19,672 4,143,549 4,163,221 — Paycheck Protection Program — — — — 27,936,714 27,936,714 — Total $ 917,930 $ 714,877 $ 1,429,640 $ 3,062,447 $ 266,070,184 $ 269,132,631 $ 13,902 $ 916,092 $ 34,261 $ 921,580 $ 1,871,933 $ 320,411,296 $ 322,283,229 $ — December 31, 2020 30-59 Days Past Due 60-89 Days Past Due Greater than 90 Days Total Past Due Current Total Loans Receivable Recorded Investment ≥
90 Days and Accruing Commercial $ 144,999 $ 27,855 $ — $ 172,854 $ 50,868,543 $ 51,041,397 $ — Commercial Real Estate Construction — — — — 14,813,726 14,813,726 — Commercial Real Estate Other 61,597 — 923,828 985,425 145,202,461 146,187,886 — Consumer Real Estate — — 40,893 40,893 71,795,148 71,836,041 — Consumer Other — — — — 4,480,491 4,480,491 — Paycheck Protection Program — — — — 32,443,132 32,443,132 — Total $ 206,596 $ 27,855 $ 964,721 $ 1,199,172 $ 319,603,501 $ 320,802,673 $ — 15 BANK OF SOUTH CAROLINA CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2016 30-59 Days Past Due 60-89 Days Past Due Greater Than 90 Days Total Past Due Current Total Recorded Investment > 90 Days and Accruing Commercial $ 438,159 $ — $ — $ 438,159 $ 51,824,050 $ 52,262,209 $ — Commercial Real Estate - Construction — — — — 1,208,901 1,208,901 — Commercial Real Estate - Other 6,363 — 1,501,153 1,507,516 121,460,610 122,968,126 89,908 Consumer Real Estate 415,457 — — 415,457 76,716,359 77,131,816 — Consumer Other 56,784 — 33,322 90,106 6,914,957 7,005,063 33,322 Total $ 916,763 $ — $ 1,534,475 $ 2,451,238 $ 258,124,877 $ 260,576,115 $ 123,230 As of September 30, 2017 and December 31, 2016, thereThere were one and twono loans over 90 days past due and still accruing respectively.as of March 31, 2021 and December 31, 2020.loans:loans. Loans Receivable on Non-Accrual Loans Receivable on Non-Accrual September 30,
2017 December 31,
2016 March 31, 2021 December 31, 2020 Commercial $ 46,899 $ 61,781 $ 178,975 $ 178,975 Commercial Real Estate - Construction — — Commercial Real Estate - Other 1,554,368 1,678,876 Commercial Real Estate Construction — — Commercial Real Estate Other 921,580 923,828 Consumer Real Estate — — — 40,893 Consumer Other — 964 11,609 12,234 Paycheck Protection Program — — Total $ 1,601,267 $ 1,741,621 $ 1,112,164 $ 1,155,930 classloan category for the three and nine months ended September 30, 2017March 31, 2021 and September 30, 2016.2020. The allowance for loan losses consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers non-impaired loans and is based on historical loss experience adjusted for current economic factors.Three Months Ended September 30, 2017 Commercial Commercial Real Estate-Construction Total Allowance for Loan Losses Beginning Balance $ 1,628,672 $ 52,763 $ 1,382,919 $ 771,853 $ 91,308 $ 3,927,515 Charge-offs — — — (80,787 ) (2,489 ) (83,276 ) Recoveries — — — 21,000 1,720 22,720 Provisions 403,920 (7,235 ) (209,108 ) (150,697 ) (16,880 ) 20,000 Ending Balance $ 2,032,592 $ 45,528 $ 1,173,811 $ 561,369 $ 73,659 $ 3,886,959 Three Months Ended March 31, 2021 Commercial Commercial Real Estate Construction Commercial Real Estate Other Consumer Real Estate Consumer Other Paycheck Protection Program Total Allowance for Loan Losses: Beginning balance $ 1,029,310 $ 199,266 $ 1,909,121 $ 925,077 $ 122,920 $ — $ 4,185,694 Charge-offs — — — — (8,152 ) (6,479 ) (14,631 ) Recoveries — — — — 4,812 290 5,102 Provisions (126,428 ) (54,721 ) 168,648 127,083 (771 ) 6,189 120,000 Ending balance $ 902,882 $ 144,545 $ 2,077,769 $ 1,052,160 $ 118,809 $ — $ 4,296,165 Three Months Ended March 31, 2020 Commercial Commercial Real Estate Construction Commercial Real Estate Other Consumer Real Estate Consumer Other Paycheck Protection Program Total Allowance for Loan Losses: Beginning balance $ 1,429,917 $ 109,235 $ 1,270,445 $ 496,221 $ 697,940 $ — $ 4,003,758 Charge-offs — — — — (39,592 ) — (39,592 ) Recoveries 15,500 — — — 34,547 — 50,047 Provisions (29,150 ) 13,834 (57,798 ) 65,779 7,335 — — Ending balance $ 1,416,267 $ 123,069 $ 1,212,647 $ 562,000 $ 700,230 $ — $ 4,014,213 16 BANK OF SOUTH CAROLINA CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTSNine Months Ended September 30, 2017 Commercial Commercial Real Estate-Construction Total Allowance for Loan Losses Beginning Balance $ 1,545,188 $ 51,469 $ 1,374,706 $ 726,391 $ 153,863 $ 3,851,617 Charge-offs — — — (80,786 ) (4,863 ) (85,649 ) Recoveries — — — 63,000 5,491 68,491 Provisions 487,404 (5,941 ) (200,895 ) (147,236 ) (80,832 ) 52,500 Ending Balance $ 2,032,592 $ 45,528 $ 1,173,811 $ 561,369 $ 73,659 $ 3,886,959 Commercial Commercial Real Estate-Construction Total Allowance for Loan Losses Beginning Balance $ 1,490,327 $ 57,374 $ 1,186,524 $ 629,773 $ 148,448 $ 3,512,446 Charge-offs — — — — — — Recoveries 1,500 — 20,000 — 1,165 22,665 Provisions 4,512 524 98,398 119,044 (12,478 ) 210,000 Ending Balance $ 1,496,339 $ 57,898 $ 1,304,922 $ 748,817 $ 137,135 $ 3,745,111 Nine Months Ended September 30, 2016 Commercial Commercial Real Estate-Construction Total Allowance for Loan Losses Beginning Balance $ 896,854 $ 59,861 $ 1,345,094 $ 941,470 $ 174,548 $ 3,417,827 Charge-offs (33,045 ) — — (82,015 ) (1,591 ) (116,651 ) Recoveries 2,784 — 44,000 — 2,151 48,935 Provisions 629,746 (1,963 ) (84,172 ) (110,638 ) (37,973 ) 395,000 Ending Balance $ 1,496,339 $ 57,898 $ 1,304,922 $ 748,817 $ 137,135 $ 3,745,111 17 BANK OF SOUTH CAROLINA CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTSclassportfolio segment and reserving methodology, the allocation of the allowance for loan losses and the gross investment in loans.loans, for the periods indicated.September 30, 2017 March 31, 2021 Commercial Commercial Real Estate-Construction Consumer
Real Estate Total Commercial Commercial Real Estate Construction Commercial Real Estate Other Consumer Real Estate Consumer Other Paycheck Protection Program Total Allowance for Loan Losses Individually evaluated for impairment $ 1,621,074 $ — $ 268,347 $ 43,119 $ 34,107 $ 1,966,647 $ 338,237 $ — $ — $ — $ 41,735 $ — $ 379,972 Collectively evaluated for impairment 411,518 45,528 905,464 518,250 39,552 1,920,312 564,645 144,545 2,077,769 1,052,160 77,074 — 3,916,193 Total Allowance for Losses $ 2,032,592 $ 45,528 $ 1,173,811 $ 561,369 $ 73,659 $ 3,886,959 Total Allowance for Loan Losses $ 902,882 $ 144,545 $ 2,077,769 $ 1,052,160 $ 118,809 $ — $ 4,296,165 Loans Receivable Individually evaluated for impairment $ 1,829,520 $ — $ 2,224,537 $ 494,437 $ 34,107 $ 4,582,601 $ 1,978,615 $ — $ 5,479,899 $ 249,758 $ 41,735 $ — $ 7,750,007 Collectively evaluated for impairment 51,518,844 1,842,668 132,554,669 73,759,950 4,873,899 264,550,030 40,222,571 10,373,102 150,897,528 80,981,821 4,121,486 27,936,714 314,533,222 $ 53,348,364 $ 1,842,668 $ 134,779,206 $ 74,254,387 $ 4,908,006 $ 269,132,631 $ 42,201,186 $ 10,373,102 $ 156,377,427 $ 81,231,579 $ 4,163,221 $ 27,936,714 $ 322,283,229 December 31, 2016 December 31, 2020 Commercial Commercial Real Estate-Construction Consumer
Real Estate Total Commercial Commercial Real Estate Construction Commercial Real Estate Other Consumer Real Estate Consumer Other Paycheck Protection Program Total Allowance for Loan Losses Individually evaluated for impairment $ 1,051,219 $ — $ 324,587 $ 43,119 $ 89,047 $ 1,507,972 $ 357,657 $ — $ 36,747 $ 9,111 $ 41,896 $ — $ 445,411 Collectively evaluated for impairment 493,969 51,469 1,050,119 683,272 64,816 2,343,645 671,653 199,266 1,872,374 915,966 81,024 — 3,740,283 Total Allowance for Losses $ 1,545,188 $ 51,469 $ 1,374,706 $ 726,391 $ 153,863 $ 3,851,617 Total Allowance for Loan Losses $ 1,029,310 $ 199,266 $ 1,909,121 $ 925,077 $ 122,920 $ — $ 4,185,694 Loans Receivable Individually evaluated for impairment $ 1,301,259 $ — $ 3,225,351 $ 1,286,127 $ 89,047 $ 5,901,784 $ 2,298,120 $ — $ 5,174,841 $ 290,743 $ 41,896 $ — $ 7,805,600 Collectively evaluated for impairment 50,960,950 1,208,901 119,742,775 75,845,689 6,916,016 254,674,331 48,743,277 14,813,726 141,013,045 71,545,298 4,438,595 32,443,132 312,997,073 Total Loans Receivable $ 52,262,209 $ 1,208,901 $ 122,968,126 $ 77,131,816 $ 7,005,063 $ 260,576,115 $ 51,041,397 $ 14,813,726 $ 146,187,886 $ 71,836,041 $ 4,480,491 $ 32,443,132 $ 320,802,673 18 BANK OF SOUTH CAROLINA CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2017March 31, 2021 and December 31, 2016,2020, loans individually evaluated for impairment and the corresponding allowance for loan lossesconsidered impaired are presented in the following table:table. September 30, 2017 December 31, 2016 Unpaid Principal Balance Recorded Investment Related Allowance Unpaid Principal Balance Recorded Investment Related Allowance With no related allowance recorded: Commercial $ 161,880 $ 161,880 $ — $ 250,040 $ 250,040 $ — Commercial Real Estate-Construction — — — — — — Commercial Real Estate-Other 1,283,137 1,283,137 — 2,174,770 2,174,770 — Consumer Real Estate 451,318 451,318 — 1,243,008 1,243,008 — Consumer Other — — — — — — $ 1,896,335 $ 1,896,335 $ — $ 3,667,818 $ 3,667,818 $ — With an allowance recorded: Commercial $ 1,667,640 $ 1,667,640 $ 1,621,074 $ 1,051,219 $ 1,051,219 $ 1,051,219 Commercial Real Estate- Construction — — — — — — Commercial Real Estate-Other 941,400 941,400 268,347 1,050,581 1,050,581 324,587 Consumer Real Estate 43,119 43,119 43,119 43,119 43,119 43,119 Consumer Other 34,107 34,107 34,107 89,047 89,047 89,047 $ 2,686,266 $ 2,686,266 $ 1,966,647 $ 2,233,966 $ 2,233,966 $ 1,507,972 Total Commercial $ 1,829,520 $ 1,829,520 $ 1,621,074 $ 1,301,259 $ 1,301,259 $ 1,051,219 Commercial Real Estate-Construction — — — — — — Commercial Real Estate-Other 2,224,537 2,224,537 268,347 3,225,351 3,225,351 324,587 Consumer Real Estate 494,437 494,437 43,119 1,286,127 1,286,127 43,119 Consumer Other 34,107 34,107 34,107 89,047 89,047 89,047 $ 4,582,601 $ 4,582,601 $ 1,966,647 $ 5,901,784 $ 5,901,784 $ 1,507,972 19 BANK OF SOUTH CAROLINA CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Impaired Loans as of March 31, 2021 December 31, 2020 Unpaid Principal Balance Recorded Investment Related Allowance Unpaid Principal Balance Recorded Investment Related Allowance With no related allowance recorded: Commercial $ 1,511,021 $ 1,511,021 $ — $ 1,721,818 $ 1,721,818 $ — Commercial Real Estate Construction — — — — — — Commercial Real Estate Other 5,479,899 5,479,899 — 4,831,757 4,831,757 — Consumer Real Estate 249,758 249,758 — 249,850 249,850 — Consumer Other — — — — — — Paycheck Protection Program — — — — — — Total 7,240,678 7,240,678 — 6,803,425 6,803,425 — With an allowance recorded: Commercial 467,594 467,594 338,237 576,302 576,302 357,657 Commercial Real Estate Construction — — — — — — Commercial Real Estate Other — — — 343,084 343,084 36,747 Consumer Real Estate — — — 40,893 40,893 9,111 Consumer Other 41,735 41,735 41,735 41,896 41,896 41,896 Paycheck Protection Program — — — — — — Total 509,329 509,329 379,972 1,002,175 1,002,175 445,411 Commercial 1,978,615 1,978,615 338,237 2,298,120 2,298,120 357,657 Commercial Real Estate Construction — — — — — — Commercial Real Estate Other 5,479,899 5,479,899 — 5,174,841 5,174,841 36,747 Consumer Real Estate 249,758 249,758 — 290,743 290,743 9,111 Consumer Other 41,735 41,735 41,735 41,896 41,896 41,896 Paycheck Protection Program — — — — — — Total $ 7,750,007 $ 7,750,007 $ 379,972 $ 7,805,600 $ 7,805,600 $ 445,411 tables presenttable presents average investment in impaired loans and the related interest income recognized on those impaired loans, by class segment, for the periods indicated. For the Three Months Ended
September 30, Three Months Ended March 31, 2017 2016 2021 2020 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized With no related allowance recorded: Commercial $ 165,274 $ 2,429 $ 380,933 $ 4,674 $ 1,563,106 $ 25,815 $ 1,345,166 $ 20,499 Commercial Real Estate-Construction — — — — Commercial Real Estate-Other 1,276,906 9,999 2,253,994 19,738 Commercial Real Estate Construction — — — — Commercial Real Estate Other 5,482,702 49,760 2,093,392 16,136 Consumer Real Estate 451,318 5,972 1,243,008 16,205 249,833 3,491 879,753 3,580 Consumer Other — — — — — — — — Paycheck Protection Program — — — — $ 1,893,498 $ 18,400 $ 3,877,935 $ 40,617 7,295,641 79,066 4,318,311 40,215 With an allowance recorded: Commercial $ 1,685,930 $ 26,484 $ 1,085,201 $ 19,406 472,422 7,519 707,965 7,147 Commercial Real Estate-Construction — — — — Commercial Real Estate-Other 933,243 2,792 1,068,622 5,330 Commercial Real Estate Construction — — — — Commercial Real Estate Other — — 246,884 — Consumer Real Estate 43,119 462 71,963 770 — — — — Consumer Other 34,579 463 95,367 473 41,848 672 49,758 783 $ 2,696,871 $ 30,201 $ 2,321,153 $ 25,979 Paycheck Protection Program — — — — 514,270 8,191 1,004,607 7,930 Total Commercial $ 1,851,204 $ 28,913 $ 1,466,134 $ 24,080 2,035,528 33,334 2,053,131 27,646 Commercial Real Estate-Construction — — — — Commercial Real Estate-Other 2,210,149 12,791 3,322,617 25,068 Commercial Real Estate Construction — — — — Commercial Real Estate Other 5,482,702 49,760 2,340,276 16,136 Consumer Real Estate 494,437 6,434 1,314,971 16,975 249,833 3,491 879,753 3,580 Consumer Other 34,579 463 95,367 473 41,848 672 49,758 783 Paycheck Protection Program — — — — $ 4,590,369 $ 48,601 $ 6,199,088 $ 66,596 $ 7,809,911 $ 87,257 $ 5,322,918 $ 48,145 For the Nine Months Ended
September 30, 2017 2016 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized With no related allowance recorded: Commercial $ 173,964 $ 7,416 $ 392,826 $ 15,393 Commercial Real Estate-Construction — — — — Commercial Real Estate-Other 1,275,402 23,084 2,263,927 69,962 Consumer Real Estate 451,025 16,938 1,242,373 43,220 Consumer Other — — — — $ 1,900,391 $ 47,438 $ 3,899,126 $ 128,575 With an allowance recorded: Commercial $ 1,711,259 $ 76,544 $ 1,095,411 $ 49,770 Commercial Real Estate-Construction — — — — Commercial Real Estate-Other 930,420 5,367 1,070,048 12,008 Consumer Real Estate 43,119 1,296 72,025 1,776 Consumer Other 36,056 1,419 99,864 3,777 $ 2,720,854 $ 84,626 $ 2,337,348 $ 67,331 Total Commercial $ 1,885,223 $ 83,960 $ 1,488,237 $ 65,163 Commercial Real Estate-Construction — — — — Commercial Real Estate-Other 2,205,822 28,451 3,333,976 81,970 Consumer Real Estate 494,144 18,234 1,314,398 44,996 Consumer Other 36,056 1,419 99,864 3,777 $ 4,621,245 $ 132,064 $ 6,236,474 $ 195,906 20 BANK OF SOUTH CAROLINA CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTSRestructured loans, also known asIn general, the modification or restructuring of a loan is considered a troubled debt restructuringsrestructuring (“TDR”), are loans, still accruing interest, which have been renegotiated at below-market interest rates if we, for economic or have been granted other concessions.legal reasons related to a borrower’s financial difficulties, grant a concession to the borrower that we would not otherwise consider. As of September 30, 2017 andMarch 31, 2021, there were 12 TDRs with a balance of $5.3 million compared to 14 TDRs with a balance of $5.8 million as of December 31, 2016, there were $33,300 (1 loan) and $378,392 (2 loans) in restructured loans, respectively. Our restructured loans2020. These TDRs were granted extended payment terms with no principal or rate reductions.reduction. The structure of two of the loans changed to interest only. All TDRs were performing as agreed as of September 30, 2017 and DecemberMarch 31, 2016, respectively. There were no additional loans identified as a TDR during the three or nine months ended September 30, 2017 or 2016.2021. No TDRs defaulted during the three or nine months ended September 30, 2017March 31, 2021 and 2016,2020, which were modified within the previous twelve months.Note 4: Fair ValueRegulatory agencies, as set forth in the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (initially issued on March 22, 2020 and revised on April 7, 2020), have encouraged financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of Financial Instrumentsthe effects of COVID-19. In this statement, the regulatory agencies expressed their view of loan modification programs as positive actions that may mitigate adverse effects on borrowers due to COVID-19 and that the agencies will not criticize institutions for working with borrowers in a safe and sound manner. Moreover, the revised statement provides that eligible loan modifications related to COVID-19 may be accounted for under section 4013 of the CARES Act or in accordance with ASC 310-40. Under Section 4013 of the CARES Act, banks may elect not to categorize loan modifications as TDRs if the modifications are related to COVID-19, executed on a loan that was not more than 30 days past due as of December 31, 2019, and executed between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the date of termination of the National Emergency. All short-term loan modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not considered TDRs. Beginning in March 2020, the Bank provided payment accommodations to customers, consisting of 60-day principal deferral to borrowers negatively impacted by COVID-19. The Bank processed approximately $0.7 million in principal deferments to 84 loans, with an aggregate loan balance of $25.9 million, during the year ended December 31, 2020. The principal deferments represent 0.24% of our total loan portfolio as of December 31, 2020. The Bank has examined the payment accommodations granted to borrowers in response to COVID-19 and classified 8 loans, with an aggregate loan balance of $3.9 million, that were granted payment accommodations as TDRs given the continued financial difficulty of the customer, associated industry risk, and multiple deferral requests. As of March 31, 2021, 6 loans remain classified as TDRs with an aggregate balance of $3.5 million. All other borrowers were current prior to relief, were not experiencing financial difficulty prior to COVID-19, and the Bank determined they were not considered TDRs. Additionally, of the 75 loans that received payment accommodations that are not classified as TDRs, 22 loans, with an aggregate loan balance of $5.1 million, have paid their loan in full, 7 loans, with an aggregate loan balance of $0.8 million, are past due less than 30 days, and 46 loans, with an aggregate loan balance of $21.6 million, have commenced paying as agreed as of March 31, 2021. There are no loans that received payment accommodation past due greater than 30 days. The Bank will continue to examine payment accommodations as requested by borrowers. 4. LEASES March 31, 2021 March 31, 2020 Operating lease expense $ 301,537 $ 233,959 Short-term lease expense — — Total lease expense $ 301,537 $ 233,959 5. DISCLOSURE REGARDING FAIR VALUE OF FINANCIAL INSTRUMENTS the most advantageous market in an orderly transaction between market participants at the measurement date. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction. GAAPThe fair value standard establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs, which are developed based on market data we have obtained from independent sources, are ones that market participants would use in pricing an asset or liability. Unobservable inputs, which are developed based on the best information available in the circumstances, reflect our estimate of assumptions that market participants would use in pricing an asset or liability.● Level 1: valuation is based upon unadjusted quoted market prices for identical instruments traded in active markets. ● ● Level 3: valuation is derived from other valuation methodologies, including discounted cash flow models and similar techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in determining fair value. basis:basis.21 BANK OF SOUTH CAROLINA CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS The fair value of these commitments was not significant at September 30, 2017 or December 31, 2016.havehad no embedded derivative instruments requiring separate accounting treatment. We havehad freestanding derivative instruments consisting of fixed rate conforming loan commitments as interest rate locks and commitments to sell fixed rate conforming loans on a best efforts basis. We do not currently engage in hedging activities. Based on the short term fair value of the mortgage loans held for sale (derivative contract), our derivative instruments were immaterial to our consolidated financial statements as of September 30, 2017March 31, 2021 and December 31, 2016.2020.September 30, 2017March 31, 2021 and December 31, 20162020 are as follows:September 30, 2017 March 31, 2021 Quoted Market Price in active markets
(Level 1) Significant Other Observable Inputs
(Level 2) Significant Unobservable Inputs
(Level 3) Total Level 1 Level 2 Level 3 Total U.S. Treasury Notes $ 26,097,501 $ — $ — $ 26,097,501 $ 35,329,100 $ — $ — $ 35,329,100 Government Sponsored Enterprises — 59,369,405 — 59,369,405 Government-Sponsored Enterprises — 95,291,360 — 95,291,360 Municipal Securities — 29,120,850 11,909,128 41,029,978 — 10,078,081 1,968,876 12,046,957 Total $ 26,097,501 $ 88,490,255 $ 11,909,128 $ 126,496,884 $ 35,329,100 $ 105,369,441 $ 1,968,876 $ 142,667,417 December 31, 2016 December 31, 2020 Quoted Market Price in active markets
(Level 1) Significant Other Observable Inputs
(Level 2) Significant Unobservable Inputs
(Level 3) Total Level 1 Level 2 Level 3 Total U.S. Treasury Notes $ 23,939,063 $ — $ — $ 23,939,063 $ 20,410,550 $ — $ — $ 20,410,550 Government Sponsored Enterprises — 51,034,091 — 51,034,091 Government-Sponsored Enterprises — 97,852,806 — 97,852,806 Municipal Securities — 31,027,933 13,977,857 45,005,790 — 10,872,532 5,683,930 16,556,462 Total $ 23,939,063 $ 82,062,024 $ 13,977,857 $ 119,978,944 $ 20,410,550 $ 108,725,338 $ 5,683,930 $ 134,819,818 September 30, 2017March 31, 2021 or December 31, 2016.2020.22 BANK OF SOUTH CAROLINA CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTSnine months ended September 30, 2017 and 2016:2020: Three Months Ended
September 30, 2017 2016 Beginning balance $ 12,488,995 $ 7,704,814 Total gains or (losses) (realized/unrealized) Included in earnings — — Included in other comprehensive income 13,852 (27,965 ) Purchases, issuances and settlements, net of maturities (593,719 ) 3,717,482 Transfers in and/or out of Level 3 — — Ending balance $ 11,909,128 $ 11,394,331 Nine Months Ended
September 30, Three Months Ended March 31, 2017 2016 2021 2020 Beginning balance $ 13,977,857 $ 5,217,678 $ 5,683,930 $ 11,954,451 Total gains or (losses) (realized/unrealized) Included in earnings — — Included in other comprehensive income 254,990 5,171 (78,054 ) 28,269 Purchases, issuances and settlements, net of maturities (2,323,719 ) 6,171,482 Transfers in and/or out of Level 3 — — Purchases, issuances, and settlements net of maturities (3,637,000 ) (5,579,000 ) Ending balance $ 11,909,128 $ 11,394,331 $ 1,968,876 $ 6,403,720 or nine months ended September 30, 2017March 31, 2021 or September 30, 2016.2020.basis:basis.Other Real Estate Owned (“OREO”)Loans secured by real estate are adjusted to the lower of the recorded investment in the loan or the fair value of the real estate upon transfer to OREO. Subsequently, OREO is carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral, or our estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraisal, we record the asset as nonrecurring Level 2. When an appraised value is not available or we determine the fair value of the collateral is further impaired below the appraised value and there is no observable market price, we record the asset as nonrecurring Level 3.23 BANK OF SOUTH CAROLINA CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTSAt September 30, 2017 and December 31, 2016, substantially all of the impaired loans were evaluated based on the fair value of the collateral. These impaired loans are classified as Level 3. Impaired loans measured using discounted future cash flows are not deemed to be measured at fair value.Held for Saleto be SoldLoans held for sale include mortgageMortgage loans andto be sold are carried at the lower of cost or market value. The fair values of mortgage loans held for saleto be sold are based on current market rates from investors within the secondary market for loans with similar characteristics. Carrying value approximates fair value. These loans are classified as Level 2. and liabilities measured at fair value on a nonrecurring basis at September 30, 2017March 31, 2021 and December 31, 2016:2020.September 30, 2017
Other
Observable
Inputs Impaired loans $ — $ — $ 2,407,508 $ 2,407,508 Other real estate owned — — 566,632 566,632 Loans held for sale — 3,117,830 — 3,117,830 Total $ — $ 3,117,830 $ 2,974,140 $ 6,091,970 March 31, 2021 Level 1 Level 2 Level 3 Total Impaired loans $ — $ — $ 5,729,657 $ 5,729,657 Mortgage loans to be sold — 13,230,017 — 13,230,017 Total $ — $ 13,230,017 $ 5,729,657 $ 18,959,674 December 31, 2016
Other
Observable
Inputs Total Impaired loans $ — $ — $ 4,143,772 $ 4,143,772 Other real estate owned — — 521,943 521,943 Loans held for sale — 4,386,210 — 4,386,210 Total $ — $ 4,386,210 $ 4,665,715 $ 9,051,925 December 31, 2020 Level 1 Level 2 Level 3 Total Impaired loans $ — $ — $ 5,419,726 $ 5,419,726 Mortgage loans to be sold — 12,965,733 — 12,965,733 Total $ — $ 12,965,733 $ 5,419,726 $ 18,385,459 September 30, 2017March 31, 2021 or December 31, 2016.24 BANK OF SOUTH CAROLINA CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS2020.September 30, 2017:March 31, 2021 and December 31, 2020: Inputs
Valuation Technique
Unobservable Input General Range of Inputs Impaired Loans Discounted AppraisalsCollateral Discounts0 – 35%Other Real Estate Owned Appraisal Value/ Comparison Sales/Other Estimates Appraisals and/or Sales of Comparable Properties Appraisals Discounted 10% to 20% for Sales Commissions and Other Holding Costs GAAP requiresAccounting standards require disclosure of fair value information for all of our assets and liabilities that are considered financial instruments, whether or not recognized on the balance sheet, for which it is practicable to estimate fair value.instruments that have not been previously discussed:instruments:a.Cash and due from banks, interest-bearing deposits at the Federal Reserve Banka. Cash and due from banks, interest-bearing deposits at the Federal Reserve b. Investment securities available for sale b.LoansInvestment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions.c. Loans, net carrying valuesfair value of the Company’s loan portfolio includes a credit risk assumption in the determination of the fair value of its loans. This credit risk assumption is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. The Company’s loan portfolio is initially fair valued using a segmented approach. The Company divides its loan portfolio into the following categories: variable rate consumer and commercialloans, impaired loans and consumer and commercial loans with remaining maturitiesall other loans. The results are then adjusted to account for credit risk as described above. However, under the new guidance, the Company believes a further credit risk discount must be applied through the use of three months or less, approximate fair value. The fair values of fixed rate consumer and commercial loans with maturities greater than three months are determined using a discounted cash flow analysismodel to compensate for illiquidity risk, based on certain assumptions included within the discounted cash flow model, primarily the use of discount rates that better capture inherent credit risk over the lifetime of a loan. Additionally, in accordance with ASU 2016-01, Recognition and assumeMeasurement of Financial Assets and Liabilities, this consideration of enhanced credit risk provides an estimated exit price for the rate being offered on these types of loans at September 30, 2017 and December 31, 2016, approximate market.Company’s loan portfolio.linesvariable-rate loans that reprice frequently and have no significant change in credit risk, fair values approximate carrying values. Fair values for impaired loans are estimated based on the fair value of credit, the carrying value approximatesunderlying collateral. Impaired loans measured using discounted future cash flows are not deemed to be measured at fair value.c.Depositsd. Deposits d.Accrued interest receivable and payablee. Accrued interest receivable and payable e.Loan commitmentsf. Loan commitments 25 BANK OF SOUTH CAROLINA CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2017March 31, 2021 and December 31, 2016.2020.Fair Value Measurements at September 30, 2017 Financial Assets: Cash and due from banks $ 8,009,824 $ 8,009,824 $ 8,009,824 $ — $ — Interest-bearing deposits at the Federal Reserve 22,159,373 22,159,373 22,159,373 — — Investment securities available for sale 126,496,884 126,496,884 26,097,501 88,490,255 11,909,128 Mortgage loans to be sold 3,117,830 3,117,830 — 3,117,830 — Net loans 265,245,672 264,645,984 — — 264,645,984 Accrued interest receivable 1,328,542 1,328,542 — 1,328,542 — Financial Liabilities: Demand deposits 342,857,357 342,857,357 — 342,857,357 — Time deposits 43,689,681 43,577,033 — 43,577,033 — Accrued interest payable 76,360 76,360 — 76,360 — Fair Value Measurements at December 31, 2016 Fair Value Measurements at March 31, 2021 Carrying Amount Estimated Fair Value Level 1 Level 2 Level 3 Financial Assets: Cash and due from banks $ 8,141,030 $ 8,141,030 $ 8,141,030 $ — $ — $ 6,211,365 $ 6,211,365 $ 6,211,365 $ — $ — Interest-bearing deposits at the Federal Reserve 18,101,300 18,101,300 18,101,300 — — 53,223,741 53,223,741 53,223,741 — — Investment securities available for sale 119,978,944 119,978,944 23,939,063 82,062,024 13,977,857 142,667,417 142,667,417 35,329,100 105,369,441 1,968,876 Mortgage loans to be sold 4,386,210 4,386,210 — 4,386,210 — 13,230,017 13,230,017 — 13,230,017 — Net loans 256,724,498 256,555,052 — — 256,555,052 Loans, net 317,987,064 309,683,584 — — 309,683,584 Accrued interest receivable 1,614,002 1,614,002 — 1,614,002 — 1,375,181 1,375,181 — 1,375,181 — Financial Liabilities: Demand deposits 328,681,594 328,681,594 — 328,681,594 — 464,430,793 464,430,793 — 464,430,793 — Time deposits 43,841,257 43,856,383 — 43,856,383 — 20,215,219 19,953,662 — 19,953,662 — Accrued interest payable 51,629 51,629 — 51,629 — 19,088 19,088 — 19,088 — Note 5: Income Per Common Share Fair Value Measurements at December 31, 2020 Carrying
Amount Estimated
Fair Value Level 1 Level 2 Level 3 Financial Assets: Cash and due from banks $ 5,977,896 $ 5,977,896 $ 5,977,896 $ — $ — Interest-bearing deposits at the Federal Reserve 42,348,085 42,348,085 42,348,085 — — Investment securities available for sale 134,819,818 134,819,818 20,410,550 108,725,338 5,683,930 Mortgage loans to be sold 12,965,733 12,965,733 — 12,965,733 — Loans, net 316,616,979 308,721,680 — — 308,721,680 Accrued interest receivable 1,595,629 1,595,629 — 1,595,629 Financial Liabilities: Demand deposits 441,498,500 441,498,500 — 441,498,500 — Time deposits 20,699,131 20,294,852 — 20,294,852 — Accrued interest payable 20,707 20,707 — 20,707 — 6. INCOME PER COMMON SHARE 26 BANK OF SOUTH CAROLINA CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTStables aretable is a summary of the reconciliation of weighted average shares outstanding:outstanding for the three months ended March 31: Three Months Ended
September 30, 2017 2016 Net income $ 1,440,653 $ 1,426,338 Weighted average shares outstanding - basic 4,978,515 4,931,185 Effect of dilutive shares 89,046 123,538 Weighted average shares outstanding - diluted 5,067,561 5,054,723 Earnings per share - basic $ 0.29 $ 0.29 Earnings per share - diluted $ 0.28 $ 0.28 Nine Months Ended
September 30, 2017 2016 Net income $ 4,053,126 $ 3,934,183 Weighted average shares outstanding - basic 4,969,617 4,929,977 Effect of dilutive shares 89,341 128,860 Weighted average shares outstanding - diluted 5,058,958 5,058,837 Earnings per share - basic $ 0.82 $ 0.80 Earnings per share - diluted $ 0.80 $ 0.78 Three Months Ended March 31, 2021 2020 Net income $ 1,810,075 $ 1,521,131 Weighted average shares outstanding 5,521,707 5,530,256 Effect of dilutive shares 163,444 55,366 Weighted average shares outstanding - diluted 5,685,151 5,585,622 Earnings per share - basic $ 0.33 $ 0.28 Earnings per share - diluted $ 0.32 $ 0.27 27 The following discussion and analysis is designed to provide a better understanding of various factors related to the Company’s consolidated financial condition, results of operations, liquidity, and capital resources. It should be read in conjunction with the Company’s audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10k for the year ended December 31, 2016 and other financial information appearing elsewhere in this report.report,Quarterly Report on Form 10-Q, including information included or incorporated by reference in this document, contains statements which constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1934. We desire to take advantage of the safe harbor“safe harbor” provisions of the Private Securities Litigation Reform Act of 1996 and are including this statement for the express purpose of availing the Company of protections of such safe harbor with respect to all “forward-looking statements” contained in this Form 10-Q. Forward-looking statements may relate to, among other matters, the financial condition, results of operations, plans, objectives, future performance, and business of our Company. Forward-looking statements are based on many assumptions and estimates and are not guarantees of future performance. Our actual results may differ materially from those anticipated in any forward-looking statements, as they will depend on many factors about which we are unsure, including many factors that are beyond our control. The words “may,” “would,” “could,” “should,” “will,” “expect,” “anticipate,” “predict,” “project,” “potential,” “continue,” “assume,” “believe,” “intend,” “plan,” “forecast,” “goal,” and “estimate,” as well as similar expressions, are meant to identify such forward-looking statements. Potential risks and uncertainties that could cause our actual results to differ materially from those anticipated in our forward-looking statements include, without limitations, those described under the heading “Risk Factors” in“Cautionary Statement Regarding Forward-Looking Statements” section of Part 1 of our Annual Report on Form 10-K for the year ended December 31, 20162020 as filed with the SEC and the following:● Risk from changes in economic, monetary policy, and industry conditions ● Changes in interest rates, shape of the yield curve, deposit rates, the net interest margin and funding sources ● Market risk (including net income at risk analysis and economic value of equity risk analysis) and inflation ● Risk inherent in making loans including repayment risks and changes in the value of collateral ● Loan growth, the adequacy of the allowance for loan losses, provisions for loan losses, and the assessment of problem loans ● Level, composition, and re-pricing characteristics of the securities portfolio ● Deposit growth, change in the mix or type of deposit products and services ● Continued availability of senior management and ability to attract and retain key personnel ● Technological changes Increased cybersecurity risk, including potential business disruptions or financial losses●Ability to control expenses ● Changes in compensation ● Risks associated with income taxes and deferred tax assets including potential for adverse adjustments● Changes in accounting policies and practices ● Changes in regulatory actions, including the potential for adverse adjustments ● Recently enacted or proposed legislation and changes in political conditions ● Reputational risk ● Credit risks, determination of deficiency, or complete loss if SBA denies PPP loans These risks are exacerbated by the developments over the last ten years in national and international markets. Sweeping reform has entered our industry yet we are unable to fully predict its impact and perhaps its unintentional consequences. There can be no assurance that these changes will not materially and adversely affect our business, financial condition and results of operation.28 $431.5$554.1 million in assets as of September 30, 2017 and net income of $1.4 million and $4.1 million for the three and nine months ended September 30, 2017.March 31, 2021. The Company offers a broad range of financial services through its wholly-owned subsidiary, The Bank of South Carolina (the “Bank”). The Bank is a state-chartered commercial bank which operates primarily in the Charleston, Dorchester and Berkeley counties of South Carolina. The Bank’s original and current concept is to be a full servicefull-service financial institution specializing in personal service, responsiveness, and attention to detail to foster long standing relationships.(interest bearing(interest-earning assets). The primary source of funding for making these loans and investments is our interest and non-interest bearingnon-interest-bearing deposits. Consequently, one of the key measures of our success is the amount of net interest income, or the difference between the income on our interest bearinginterest-earning assets and the expense on our interest bearinginterest-bearing liabilities, such as deposits. Another key measure is the spread between the yield we earn on these interest bearinginterest-earning assets and the rate we pay on our interest bearinginterest-bearing liabilities.identifiesidentify significant factors that have affected our financial position and operating results as of September 30, 2017and for the periods ending March 31, 2021 and December 31, 2016,2020, and should be read in conjunction with the financial statements and the related notes included in this report. In addition, a number of tables have been included to assist in the discussion. March 31, 2021 Amount Percent Retail and/or Service $ 1,514,473 0.47 % Food and Beverage 1,148,218 0.36 % Short Term Rental 8,598,889 2.67 % $ 11,261,580 3.50 % judgementsjudgments and assumptions that have a material impact on the carrying value of certain assets and liabilities, and used in the preparation of the Consolidated Financial Statements as of September 30, 2017,March 31, 2021, have remained unchanged from the disclosures presented in our Annual Report on Form 10-K for the year ended December 31, 2016.2020.14.96%22.99% or $3.9$11.1 million to $30.2$59.4 million as of September 30, 2017,March 31, 2021, from $26.2$48.3 million as of December 31, 2016. This2020. The increase was primarilyin total cash and cash equivalents is due to an increase in deposit balancesdeposits of $22.4 million offset by purchases of investment securities available for both new and existing customers. Funds are placed in interest bearing deposits at the Federal Reserve Bank until opportunities arise for investment in higher yielding assets.sale.29 September 30, 2017,March 31, 2021, our available for sale investment portfolio included U. S.U.S. Treasury Notes, Government-Sponsored Enterprises and Municipal Securities with a fair market value of $126.5$142.7 million and an amortized cost of $126.2$143.5 million for a net unrealized gain of $324,748.approximately $0.8 million. As of September 30, 2017March 31, 2021, and December 31, 2016,2020, our investment securities portfolio represented approximately 29.32%25.75% and 28.98%loss of our total assets, respectively. The average yield on our investment securities was 2.03%1.49% and 1.99%1.59% at September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively.We had eight Municipal Securities with an approximate total book value of $3.4 million that matured and three Municipal Securities with an approximate total book value of $1.0 million that were called in the nine months ended September 30, 2017. Additionally, we sold five investment securities issued by Government Sponsored Enterprises and one US Treasury Note, with a total ending book value of $20.2 million, resulting in a net gain of $45,820 during the nine months ended September 30, 2017. We also purchased five investment securities issued by Government Sponsored Enterprises and one US Treasury Note, with a total face value of $30.1 million during the nine months ended September 30, 2017.wereare to borrowers located in our market area of Charleston, Dorchester and Berkeley Countiescounties of South Carolina.$8.5$1.4 million, or 3.31%0.43%, to $265.2$318.0 million at September 30, 2017as of March 31, 2021 from $256.7$316.6 million atas of December 31, 2016. We attribute2020. The increase is primarily related to the growth in Commercial Real Estate Other and Consumer Real Estate offset by a decrease in PPP and Commercial loans.net loans to multiple large loans originated late in the quarter as well as an increase in the usage of lines of credit. Early payoffs of real estate loans continued, which we attribute to Charleston’s strong real estate market and national popularity.Consumer Real Estate lending. $149,640$830,945 at September 30, 2017March 31, 2021 and $136,446$676,155 at December 31, 2016)2020, respectively) and the corresponding percentage of total loans as of the dates indicated. September 30, 2017 December 31, 2016 Amount Percent Amount Percent Commercial loans $ 53,348,364 19.82 % $ 52,262,209 20.06 % Commercial real estate – construction 1,842,668 0.68 % 1,208,901 0.46 % Commercial real estate – other 134,779,206 50.08 % 122,968,126 47.19 % Consumer real estate 74,254,387 27.59 % 77,131,816 29.60 % Consumer other 4,908,006 1.83 % 7,005,063 2.69 % Total 269,132,631 100.00 % 260,576,115 100.00 % Allowance for loan loss (3,886,959 ) (3,851,617 ) Total loans, net $ 265,245,672 $ 256,724,498 March 31, 2021 December 31, 2020 Amount Percent Amount Percent Commercial $ 42,201,186 13.09 % $ 51,041,397 15.91 % Commercial Real Estate Construction 10,373,102 3.22 % 14,813,726 4.62 % Commercial Real Estate Other 156,377,427 48.52 % 146,187,886 45.57 % Consumer Real Estate 81,231,579 25.21 % 71,836,041 22.39 % Consumer Other 4,163,221 1.29 % 4,480,491 1.40 % Payroll Protection Program 27,936,714 8.67 % 32,443,132 10.11 % Total loans 322,283,229 100.00 % 320,802,673 100.00 % Allowance for loan losses (4,296,165 ) (4,185,694 ) Total loans, net $ 317,987,064 $ 316,616,979 assetsAssetsassetsAssets include real estate acquired through foreclosure or deedsdeed taken in lieu of foreclosure and loans on nonaccrual status and TDRs.status. Generally, a loan is placed on nonaccrual status when it becomes 90 days past due as to principal or interest, or when we believe, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of the contractual principal or interest on the loan is doubtful. A payment of interest on a loan that is classified as nonaccrual is recognized as a reduction in principal when received. Our policy with respect to nonperforming loans requires the borrower to make a minimum of six consecutive payments in accordance with the loan terms and to show capacity to continue performing into the future before that loan can be placed back on accrual status. As of September 30, 2017, we had one loanMarch 31, 2021, there were no loans 90 days past due still accruing interest.We consider a loan to be a TDR when the debtor experiences financial difficulties and we provide concessions such that we will not collect all principal and interest in accordance with the original terms of the agreement. Concessions can relate to the contractual interest rate, maturity date, or payment structure of the note. As part of our workout plan for individual loan relationships, we may restructure loan terms to assist borrowers facing challenges. As of September 30, 2017, we determined that we had one loan totaling $33,300 that we considered a TDR. As of December 31, 2016, we had two loans totaling $378,382 that we considered TDRs.Nonperforming loans include all loans past due 90 days and over, certain impaired loans (some of which may be contractually current), and TDR loans that have not yet established a satisfactory period of payment performance (some of which may be contractually current). Nonperforming assets include other real estate owned, which increased $44,689 from $521,943 as of December 31, 2016 to $566,632 as of September 30, 2017. The increase is attributed to the transfer of one loan to OREO. This balance represents two properties.30 nonperforming assets:Nonperforming Assets: September 30, 2017 December 31, 2016 Commercial loans $ 46,899 $ 61,781 Commercial real estate - other 1,554,368 1,678,876 Consumer other — 964 Total nonaccrual loans 1,601,267 1,741,621 Other real estate owned 566,632 521,943 Total nonperforming assets $ 2,167,899 $ 2,263,564 March 31, 2021 December 31, 2020 Commercial $ 178,975 $ 178,975 Commercial Real Estate Other 921,580 923,828 Consumer Real Estate — 40,893 Consumer Other 11,609 12,234 Total nonaccruing loans 1,112,164 1,155,930 Total nonperforming assets $ 1,112,164 $ 1,155,930 $3.9$4.3 million as of September 30, 2017March 31, 2021 and $4.2 million as of December 31, 2020, or 1.46% and 1.45% of outstanding loans, net of PPP loans, for each respective period. Because PPP loans are 100% guaranteed by the SBA and did not undergo the Bank’s typical underwriting process, they are not graded and do not have an associated reserve. At March 31, 2021 and December 31, 2016, or 1.44% and 1.48% of outstanding loans, respectively. At September 30, 2017 and December 31, 2016,2020, the allowance for loan losses represented 179.30%386.29% and 170.16%362.11% of the total amount of nonperforming assets,loans, respectively. Based on the level of coverage on nonperforming loans and analysis of our loan portfolio, we believe the allowance for loan losses at September 30, 2017March 31, 2021 is adequate.September 30, 2017,March 31, 2021, impaired loans totaled $4.6$7.8 million, for which $2.7$0.5 million of these loans had a reserve of approximately $2.0$0.4 million allocated in the allowance for loan losses. Included in impaired loans, the Bank classified 8 loans, with an aggregate loan balance of $3.9 million, that were granted payment accommodations as TDRs given the continued financial difficulty of the customer, associated industry risk, and multiple deferral requests. Comparatively, impaired loans totaled $5.9$7.8 million atas of December 31, 2016,2020, and $2.2$1.0 million of these loans had a reserve of approximately $1.5$0.4 million allocated in the allowance for loan losses.September 30, 2017,March 31, 2021, we recorded $83,276 of$14,631 in charge-offs and $22,720$5,102 of recoveries on loans previously charged-off, resulting infor net charge-offs of $60,556. Comparatively, we recorded $22,665 of recoveries on loans previously charged-off and no charge-offs, resulting in net recoveries of $22,665 during the three months ended September 30, 2016. During the nine months ended September 30, 2017, we recorded $85,649 of charge-offs and $68,491 of recoveries on loans previously charged-off, resulting in net charge-offs of $17,158. Comparatively, during the same period in 2016, we recorded $116,651 of charge-offs and $48,935 of recoveries on loans previously charged-off, resulting in net charge-offs of $67,716 for the nine months ended September 30, 2016.$9,529.interest bearinginterest-bearing deposits provided funding for 61.17%56.60% of average earning assets for the ninethree months ended September 30, 2017,March 31, 2021, and 65.70%59.04% for the twelvethree months ended DecemberMarch 31, 2016.2020. The Company encounters strong competition from other financial institutions as well as consumer and commercial finance companies, insurance companies and brokerage firms located in the primary service area of the Bank. However, the percentage of funding provided by deposits has remained stable. September 30, 2017 December 31, 2016 Amount Percent Amount Percent Deposits: Non-interest-bearing demand $ 124,661,171 32.25 % $ 126,034,478 33.83 % Interest-bearing demand 99,066,299 25.63 % 96,260,589 25.84 % Money market accounts 84,417,700 21.84 % 77,307,662 20.75 % Time deposits over $250,000 17,695,869 4.58 % 17,822,136 4.78 % Other time deposits 25,993,812 6.72 % 26,019,121 6.98 % Other savings deposits 34,712,187 8.98 % 29,078,865 7.81 % Total deposits $ 386,547,038 100.00 % $ 372,522,851 100.00 % March 31, 2021 December 31, 2020 Amount Percent Amount Percent Deposits Non-interest bearing demand $ 189,574,996 39.12 % $ 169,170,751 36.60 % Interest bearing demand 143,753,923 29.66 % 140,602,723 30.42 % Money market accounts 81,912,767 16.90 % 84,681,783 18.32 % Time deposits over $250,000 5,046,943 1.04 % 4,493,189 0.97 % Other time deposits 15,168,276 3.13 % 16,205,942 3.51 % Other savings deposits 49,189,107 10.15 % 47,043,243 10.18 % Total deposits $ 484,646,012 100.00 % $ 462,197,631 100.00 % 3.76%4.90% or $14.0$22.4 million from December 31, 20162020 to September 30, 2017. These increases were primarilyMarch 31, 2021 due to larger balances in existing customer accounts as well as the additiona combination of new accounts during the period.various government stimulus programs and decreased consumer spending.September 30, 2017March 31, 2021 and December 31, 2016,2020, deposits with an aggregate deficit balance of $16,947$11,743 and $24,963,$100,304, respectively, were re-classified as other loans.31 September 30, 2017March 31, 2021 to Three Months Ended September 30, 2016March 31, 2020$14,315$0.3 million or 1.00%19.00% to $1.4$1.8 million, or basic and diluted earnings per share of $0.29$0.33 and $0.28,$0.32, respectively, for the three months ended September 30, 2017,March 31, 2021, from $1.4$1.5 million, or basic and diluted earnings per share of $0.29$0.28 and $0.28,$0.27, respectively, for the three months ended September 30, 2016.March 31, 2020. Our annualized returns on average assets and average equity for the three months ended September 30, 2017March 31, 2021 were 1.32%1.37% and 13.01%13.26%, respectively, compared with 1.39%1.38% and 13.74%11.70%, respectively, for the three months ended September 30, 2016.March 31, 2020.interest bearinginterest-bearing assets. Net interest income increased $72,731$0.4 million or 1.85%9.01% to $4.0$4.6 million for the three months ended September 30, 2017March 31, 2021 from $3.9$4.2 million for the three months ended September 30, 2016.March 31, 2020. This increase was primarily due to higher ratesPPP processing fees. Interest and fee income on loans and our cash balances tied to the Federal Funds target rate, which increased 25 basis points in March 2017 and an additional 25 basis points in June 2017. Meanwhile, average loans decreased $10.7 million or 3.88% to $264.0$0.4 million for the three months ended September 30, 2017, comparedMarch 31, 2021 to $274.8$4.1 million from $3.7 million for the three months ended September 30, 2016. However,March 31, 2020. Average loans increased $52.8 million or 19.02% to $330.9 million for the three months ended March 31, 2021, compared to $278.1 million for the three months ended March 31, 2020. The yield on average loans (including fees) was 5.29%5.52% and 4.86%5.63% for the three months ended September 30, 2017March 31, 2021 and September 30, 2016,March 31, 2020, respectively. Interest income on loans increased $4,142 for the three months ended September 30, 2017 to $3.4 million from $3.4 million for the three months ended September 30, 2016.Bank increased $1.2$2.7 million or 4.50%5.91% to $28.5$47.5 million for the three months ended September 30, 2017,March 31, 2021, with a yield of 1.30%0.10% as compared to $27.3$44.8 million for the three months ended September 30, 2016,March 31, 2020, with a yield of 0.52%1.29%. The increase in the average balance of interest-bearing deposits is due to an increase in deposits of $22.4 million offset by purchases of investment securities available for sale.September 30, 2017,March 31, 2021, we hadrecognized a $120,000 provision of $20,000loan losses compared to ano provision of $210,000 for the same period in the prior year. The decreaseincrease in the provision for loan losses was supported bybased on our analysis of the adequacy of the allowance for loan losses.decreased $204,704increased $0.3 million or 29.81%49.76 % to $481,882 for the three months ended September 30, 2017, from $686,586 for the three months ended September 30, 2016. This reduction was primarily due to less income derived from mortgage banking activities but was partially offset by increases in service charges and fees, as well as gains realized on the sale of investment securities.Non-Interest ExpenseNon-interest expense decreased $99,730 or 3.86% to $2.5$0.9 million for the three months ended September 30, 2017March 31, 2021, from $2.6$0.6 million for the three months ended September 30, 2016. This decrease was primarily due to a reduction in other operating expenses of $123,775, largely comprised of a lower FDIC assessment and other miscellaneous operating expenses. This was partially offset by increases in net occupancy expenses.Income Tax ExpenseWe incurred income tax expense of $543,098 for the three months ended September 30, 2017 as compared to $399,656 during the same period in 2016. Our effective tax rate was 27.38% and 21.89% for the three months ended September 30, 2017 and 2016, respectively. The effective tax rate for both periods was directly related to our investment in a South Carolina Rehabilitation Tax Credit in 2016.Comparison of Nine Months Ended September 30, 2017 to Nine Months Ended September 30, 2016Net income increased $118,943 or 3.02% to $4.1 million, or basic and diluted earnings per share of $0.82 and $0.80, respectively, for the nine months ended September 30, 2017, from $3.9 million, or basic and diluted earnings per share of $0.80 and $0.78, respectively, for the nine months ended September 30, 2016. Our return on average assets and average equity for the nine months ended September 30, 2017 were 1.28% and 12.66%, respectively, compared with 1.29% and 12.73%, respectively, for the nine months ended September 30, 2016.32 Net Interest IncomeNet interest income increased $378,528 or 3.40% to $11.5 million for the nine months ended September 30, 2017 from $11.1 million for the nine months ended September 30, 2016.March 31, 2020. This increase was primarily due to improved mortgage banking activity. Rates have remained consistently low, fueling demand for refinancing and new home purchases. Accordingly, mortgage banking income increased income derived from investment securities. Additionally, the increase in interest and fees on loans was primarily due to higher rates on loans and our cash balances tied to the Federal Funds target rate, which increased 25 basis points in March 2017 and an additional 25 basis points in June 2017. Average loans decreased $2.4$0.3 million or 0.91% to $262.086.63% from $0.3 million for the ninethree months ended September 30, 2017, comparedMarch 31, 2020 to $264.4$0.6 million for the ninethree months ended September 30, 2016. However, the yield on average loans (including fees) was 5.33% and 4.85% for the nine months ended September 30, 2017 and September 30, 2016, respectively. Interest income on loansMarch 31, 2021.$124,856 for the nine months ended September 30, 2017$0.1 million or 6.10% to $9.7 million from $9.6$3.0 million for the ninethree months ended September 30, 2016.The average balance of interest bearing deposits at the Federal Reserve Bank decreased $3.5 million or 13.08% to $23.0March 31, 2021 from $2.9 million for the ninethree months ended September 30, 2017, with a yield of 1.09% as comparedMarch 31, 2020. This increase was related to $26.5 million for the nine months ended September 30, 2016, with a yield of 0.52%.an increase in net occupancy expense.Provision for Loan LossesFor the nine months ended September 30, 2017, we had a provision of $52,500 compared to a provision of $395,000 for the same period in the prior year. The decrease in the provision for loan losses was supported by our analysis of the adequacy of the allowance for loan losses.Non-Interest IncomeOther income decreased $491,951 or 22.14% to $1.7 million for the nine months ended September 30, 2017, from $2.2 million for the nine months ended September 30, 2016. This reduction is primarily due to less income derived from the sale of investment securities and mortgage banking activities. For the nine months ended September 30, 2017, we realized gains on the sale of investment securities of $45,820 compared to realized gains on the sale of investment securities of $348,327 during the same period in 2016.Non-Interest ExpenseNon-interest expense decreased $11,004 or 0.15% to $7.5 million for the nine months ended September 30, 2017 from $7.6 million for the nine months ended September 30, 2016. This decrease was primarily due to a reduction in other operating expenses of $44,066, largely comprised of a lower FDIC assessment. This was offset by a write-down of OREO in the amount of $46,143 as well as increases in net occupancy expenses.$1.6$0.6 million for the ninethree months ended September 30, 2017March 31, 2021 as compared to $1.5$0.5 million during the same period in 2016.2020. Our effective tax rate was 28.38%23.81% and 27.40%23.12% for the ninethree months ended September 30, 2017March 31, 2021 and 2016,2020, respectively. The effective tax rate for both periods was directly related to our investment in a South Carolina Rehabilitation Tax Credit in 2016.Off BalanceOff-Balance Sheet Arrangements$96.7$127.0 million and $85.4$122.8 million at September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively.third partythird-party contingent upon the failure of our customer to perform under the terms of an underlying contract with the third party or obligates us to guarantee or stand as surety for the benefit of the third party. The underlying contract may entail either financial or nonfinancial obligations and may involve such things as the shipment of goods, performance of a contract, or repayment of an obligation. Under the terms of a standby letter, generally drafts will be drawn only when the underlying event fails to occur as intended. We can seek recovery of the amounts paid from the borrower. The majority of these standby letters of credit are unsecured. Commitments under standby letters of credit are usually for one year or less. The maximum potential amount of undiscounted future payments related to standby letters of credit at September 30, 2017March 31, 2021 and December 31, 20162020 was $969,644$0.9 million and $793,992,$0.8 million, respectively.33 totaling $2.3 million at September 30, 2017, to sellon mortgage loans held for sale of $3.1totaling $13.2 million compared to forward sales commitments of $4.4and $13.0 million at March 31, 2021 and December 31, 2016, to sell loans held for sale of $4.4 million.2020, respectively. The fair value of these commitments was not significant at September 30, 2017March 31, 2021 or December 31, 2016.2020. We had no embedded derivative instruments requiring separate accounting treatment.$44.7$48.0 million at September 30, 2017March 31, 2021 and $18.1$57.2 million at December 31, 2016.2020. For the three and nine months ended September 30, 2017March 31, 2021 and September 30, 2016,March 31, 2020, there were no loans repurchased. by management to be adequate to meet requirements of normal operations, potential deposit outflows and strong loan demand and still allow for optimal investment of funds and return on assets.37.03%38.86% and 36.38%36.83% of total assets at September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively. Securities classified as available for sale, which are not pledged, may be sold in response to changes in interest rates and liquidity needs. All of the securities presently owned are classified as available for sale. Net cash provided by operations and deposits from customers have been the primary sources of liquidity. At September 30, 2017,March 31, 2021, we had unused short-term lines of credit totaling approximately $23$24.0 million (which can be withdrawn at the lender’s option). Additional sources of funds available to us for additional liquidity needs include borrowing on a short-term basis from the Federal Reserve System, increasing deposits by raising interest rates paid and liquidationsale of mortgage loans held for sale. We haveestablished a Borrower-In-Custody arrangement with the Federal Reserve. This arrangement permits us to retain possession of assets pledged as collateral to secure advances from the Federal Reserve Discount Window. At September 30, 2017,March 31, 2021, we could borrow up to $78$72.0 million. There have been no borrowings under this arrangement during the reporting periods.arrangement.non-interest bearingnon-interest-bearing accounts, NOW accounts, money market accounts, time deposits and savings accounts. We closely monitor our level of certificates of deposit greater than $250,000 and other large deposits. We maintain a Contingency Funding Plan (“CFP’) that identifies liquidity needs and weighs alternate courses of action designed to address these needs in emergency situations. We perform a quarterly cash flow analysis and stress test the CFP to evaluate the expected funding needs and funding capacity during a liquidity stress event. We believe our liquidity sources are adequate to meet our operating needs and do not know of any trends, events or uncertainties that may result in a significant adverse effect on our liquidity position. At September 30, 2017March 31, 2021 and December 31, 2016,2020, our liquidity ratio was35.08% 41.32% and 38.27%38.63%, respectively.$10.6$10.0 million in capital raised in our initial offering, the retention of earnings less dividends paid and the exercise of stock options to purchase.purchase stock. Total shareholders’ equity at September 30, 2017as of March 31, 2021 was $43.7$53.0 million. The rate of asset growth since our inception has not negatively impacted this capital base.34 rules arerule is identical in substance to the final rules issued by the Federal Reserve Bank.Basel III becameOn November 4, 2019, the federal banking agencies jointly issued a final rule on an optional, simplified measure of capital adequacy for qualifying community banking organizations called the community bank leverage ratio (“CBLR”) framework effective on January 1, 2015.2020. A qualifying community banking organization is defined as having less than $10 billion in total consolidated assets, a leverage ratio greater than 9%, off-balance sheet exposures of 25% or less of total consolidated assets, and trading assets and liabilities of 5% or less of total consolidated assets. Additionally, the qualifying community banking institution must be a non-advanced approaches FDIC supervised institution. The purpose is to improve the quality and increase the quantity of capital for all banking organizations. The minimum requirements for the quantity and quality of capital were increased. Thefinal rule includes a new common equityadopts Tier 1 capital to risk-weighted assets ratio of 4.5% and a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets. The rule also raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6% and requires a minimumexisting leverage ratio into the CBLR framework. The Bank adopted this rule as of 4%. In addition,March 31, 2021 and will no longer be subject to other capital and leverage requirements. A bank meeting CBLR qualifying criteria is deemed to have met the rule also implements strict eligibility criteria for regulatory capital instruments“well capitalized” ratio requirements and improves the methodology for calculating risk-weighted assets to enhance risk sensitivity. Fullbe in compliance with all of the final rule requirements will be phased in over a multi-year schedule.generally applicable capital rule. The Bank’s total risk-based capital ratio at September 30, 2017CBLR as of March 31, 2021 and December 31, 20162020, was 16.13%10.18% and 15.36%10.19%, respectively.At September 30, 2017, As of March 31, 2021, the Company and the Bank were categorized as “well capitalized” under Basel III. To be categorized as “well capitalized” the Company and the Bank must maintain minimum total risk based, Tier 1 risk based, common equity Tier 1 risk based capital and Tier 1 leverage ratios of 10%, 8.0%, 6.5% and 5%, respectively, and to be categorized as “adequately capitalized,capitalized.” the Company and the Bank must maintain minimum total risk based, Tier 1 risk based, common equity Tier 1 risk based capital, and Tier 1 leverage ratios of 8%, 6%, 4.5%, and 4.0%, respectively.Basel IIICBLR will enable each of the Company and the Bank to continue to exceed the well-capitalized minimum capital requirements.The Company had no material commitments for capital expendituresbe categorized as of September 30, 2017 and December 31, 2016, respectively.“well capitalized.”September 30, 2017March 31, 2021 under the supervision and with the participation of the Bank of South Carolina Corporation’s management, including its President/Chief Executive Officer and the Chief Financial Officer/SeniorExecutive Vice President and several other members of the Company’s senior management. Based upon that evaluation, Bank of South Carolina Corporation’s management, including the President/Chief Executive Officer and the Chief Financial Officer/SeniorExecutive Vice President concluded that, as of September 30, 2017,March 31, 2021, the Company’s disclosure controls and procedures were effective in ensuring that the information the Company is required to disclose in the reports filed or submitted under the Act has been (i) accumulated and communicated to management (including the President/Chief Executive Officer and Chief Financial Officer/SeniorExecutive Vice President) to allow timely decisions regarding required disclosure, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.35 SeniorExecutive Vice President, the Company’s management has evaluated the effectiveness of its internal control over financial reporting as of September 30, 2017,March 31, 2021, based on the 2013 framework established in a report entitled“Internal Control-Integrated Framework”issued by the Committee of Sponsoring Organizations of the Treadway Commission.September 30, 2017.March 31, 2021. Based on this assessment, management believes that as of September 30, 2017,March 31, 2021, the Company’s internal control over financial reporting was effective. There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended September 30, 2017,March 31, 2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Officer, Risk Management Officer, and Elliott Davis, LLC (separately and jointly) to discuss audit, financial and related matters. Elliott Davis, LLC the Compliance Officer, and the Risk ManagementAudit and Compliance Officer have direct access to the Audit and Compliance Committee.None.The Company’s repurchases of its common stock during the first quarter of 2021 were as follows:Period Total Number of Shares Purchased Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Value of Shares that May Yet Be Purchased Under the Plans or Programs(1) January 1 – March 31, 2021 — $ — — $ 601,132 Total — $ — 25,067 $ 601,132 1. The Consolidated Financial Statements are included in this Form 10-Q and listed on pages as indicated. Page (1) Consolidated Balance Sheets 3 (2) Consolidated Statements of Income 4 (3) Consolidated Statements of Comprehensive Income 5 (4) Consolidated Statements of Shareholders’ Equity 6 (5) Consolidated Statements of Cash Flows 7 (6) Notes to Consolidated Financial Statements 8-21 Exhibits 1.The Consolidated Financial Statements are included in this Form 10-Q and listed on pages as indicated.36 Exhibits2.0 Plan of Reorganization (Filed with 1995 10-KSB) 3.0 Articles of Incorporation of the Registrant (Filed with 1995 10-KSB) 3.1 By-laws of the Registrant (Filed with 1995 10-KSB) 3.2 Amendments to the Articles of Incorporation of the Registrant (Filed with Form S on JuneSeptember 23, 2011)4.0 20162020 Proxy Statement (Filed with 20152019 10-K)10.0 Lease Agreement for 256 Meeting Street (Filed with 1995 10-KSB) 10.1 Sublease Agreement for Parking Facilities at 256 Meeting Street (Filed with 1995 10-KSB) 10.2 Lease Agreement for 100 N. Main Street, Summerville, SC (Filed with 1995 10-KSB) 10.3 Lease Agreement for 1337 Chuck Dawley Blvd., Mt. Pleasant, SC (Filed with 1995 10-KSB) 10.4 Lease Agreement for 1071 Morrison Drive, Charleston, SC (Filed Withwith 2010 10-K) Lease Agreement for 1071 Morrison Drive, Charleston, SC (Filed with September 30, 20142013 10-Q)10.5 1998 Omnibus Stock Incentive Plan (Filed with 2008 10-K/A) 10.6 Employee Stock Ownership Plan (Filed with 2008 10-K/A) Employee Stock Ownership Plan, Restated (Filed with 2011 Proxy Statement) Employee Stock Ownership Plan, Restated (Filed with 2016 10-K)10-K10.7 2010 Omnibus Incentive Stock Option Plan (Filed with 2010 Proxy Statement) 10.8 Lease Agreement for Highway 78 Ingleside Boulevard North Charleston, SC (Filed with 2013 10-K) 10.9 Assignment and Assumption of Lease Agreement for Highway 78 Ingleside Boulevard North Charleston, SC (Filed with 2015 10-K) 10.10 First Amendment to Lease Agreement for Highway 78 Ingleside Boulevard North Charleston, SC (Filed with 2015 10-K) 10.11 Second Amendment to Lease Agreement for Highway 78 Ingleside Boulevard North Charleston, SC (Filed with 2015 10-K) 10.12 Extension to Lease Agreement for 256 Meeting Street (Filed within)with September 30, 2017 10-Q)10.13 North Charleston Lease Agreement (Filed with JuneSeptember 30, 2017 10Q)10-Q)10.14 Sublease Amendment for Parking Facilities at 256 Meeting Street (Filed within)with September 30, 2017 10-Q)10.15 2020 Stock Incentive Plan (Filed with 2020 Proxy Statement) 10.16 2021 Stock Incentive Plan for Independent Directors (filed with 2021 Proxy Statement) 14.0 Code of Ethics (Filed with 2004 10-KSB) 21.0 List of Subsidiaries of the Registrant (Filed with 1995 10-KSB) The Registrant’s only subsidiary is The Bank of South Carolina (Filed with 1995 10-KSB) 31.1 Certification pursuant to Rule 13a-14(a)/15d-14(a) by Chief Executive Officer 31.2 Certification pursuant to Rule 13a-14(a)/15d-14(a) by Chief Financial Officer 32.1 Certification pursuant to Section 135032.2Certification pursuant to Section 1350 32.2 Certification pursuant to Section 1350 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document 37 Bank of South Carolina Corporation November 9, 2017May 4, 2021 By: /s/Fleetwood S. Hassell Fleetwood S. Hassell President/Chief Executive Officer By: /s/Eugene H. Walpole, IV Eugene H. Walpole, IV Chief Financial Officer/ SeniorExecutive Vice President38