Bank of South Carolina Corporation

What they do

The Bank of South Carolina is a state-chartered commercial bank founded in 1987 and headquartered in Charleston. It operates six banking offices in Charleston, North Charleston, Summerville, Mt. Pleasant, James Island, and the West Ashley community. It provides commercial, commercial real estate, and consumer loans, funding itself primarily through interest-bearing and non-interest-bearing deposits.

Revenue drivers

• Net interest income from loans — Interest on loans is a primary income source; total loans were $331.8 million at year-end 2022, with commercial real estate the largest category.
• Investment securities — Interest on investment securities is another major income source; securities available for sale totaled $271.2 million at year-end 2022.
• Commercial loans — Commercial loans were $45.1 million, or 13.6% of the loan portfolio, as of December 31, 2022.
• Fees and other income — The bank charges fees and other expenses to customers, contributing to noninterest income, though specific amounts are not detailed in the excerpts.

Recent performance

For the second quarter of 2023, net income was $1,277,717, or $0.23 per diluted share, down 17.19% from $1,542,982, or $0.27 per diluted share, in the second quarter of 2022. For the six months ended June 30, 2023, net income was $2,866,496, a 4.68% decrease from $3,007,088 for the same period in 2022. Annualized returns on average assets and average equity for the first half of 2023 were 0.89% and 13.61%, respectively, compared to 0.90% and 12.57% for the first half of 2022. Total assets were $648.4 million at June 30, 2023, down from $655.5 million a year earlier.

Strategy

Management aims to operate as a full-service community bank emphasizing personal service, responsiveness, and attention to detail to foster long-standing relationships. The bank opened a sixth office on James Island and has a future location at 1730 Maybank Highway expected to open in June 2023. It declared another quarterly cash dividend and announced a stock repurchase program. Management states it remains focused on asset quality, expense control, and customer service.

Risks

• Deposit competition and rising funding costs — Intense competition for deposits from other sectors is increasing deposit expense and pressuring net interest margin.
• Interest rate risk — Changes in interest rates, the shape of the yield curve, and deposit rates could adversely affect net interest income and the economic value of equity.
• Credit risk — Rising interest rates and borrower financial performance could lead to increased loan losses and require higher provisions.
• Recent banking industry failures — High-profile bank failures could impact customer confidence, liquidity, and lead to increased regulatory response or costs.

Outlook

Management stated that the second quarter fell behind the 2023 profit plan and 2022 earnings to date due to continued increases in deposit expense. They noted that further Federal Reserve rate increases are unclear, but the possibility of rates remaining higher for longer is increasing. Management said they will use this as an opportunity to rebalance income from the portfolio of loans, investments, and daily liquidity, and they remain steadfast in asset quality, expense control, and customer service.