GrandSouth Bancorporation : reports third quarter 2022 results - Form 8-K

GrandSouth Bancorporation reports third quarter 2022 results

GREENVILLE, SC, October 17, 2022

GrandSouth Bancorporation (GRRB:OTCQX) (the "Company" or "GrandSouth"), the holding company for GrandSouth Bank announced today that net income for the third quarter of 2022 was $4.4 million.

The Board of Directors declared a quarterly cash dividend of $0.13 per common share ($0.1365 per Series A preferred share) payable on November 18, 2022 to shareholders of record on November 4, 2022.

Third Quarter 2022 Highlights - For and during the quarter ended September 30, 2022:

·	Net Income was $4.4 million, an increase of $0.6 million, or 15.26%, from the same quarter in 2021.

·	Basic and diluted earnings per share were $0.80 and $0.77, respectively.

·	The annualized returns on average assets and average equity were 1.38% and 17.69%, respectively.

·	Total assets remained flat at $1.3 billion.

·	Gross loans increased by $42.2 million, or an annualized rate of 17.59%, to $995.1 million.

·	Total deposits decreased $1.1 million, or an annualized rate of 0.39%, to $1.1 billion.

·	Cost of funds increased by 18 basis points, or 40.00%, from the same quarter in 2021.

·	0.01% of Core Bank loans (gross loans excluding specialty floor plan loans) were 30 days past due as of September 30, 2022. The annualized net charge off ratio for the quarter was 0.24%.

·	The efficiency ratio was 55.12%, down from 64.38% in the prior quarter and 58.81% in the same quarter in 2021.

JB Schwiers, the Company's President, said, "We are proud to report to you our results for the third quarter of 2022. Our net income of $4.4 million is a 15% improvement from the third quarter of 2021. We continue to focus on the quickly changing economic environment we all find ourselves in this year, and believe the Company is well positioned to continue our favorable financial performance. The net interest margin has expanded to 4.75% for the third quarter of 2022 when compared to 4.44% for the third quarter of 2021. Thirty-two percent of the loan balances are variable rate loans and seventy-eight percent of the fixed rate portfolio matures prior to September 30, 2027. Our credit quality remains strong with non-performing assets at 0.11% and a year-to-date annualized net charge off loss of 0.09%. The core bank carried two loans for $54 thousand past due over 30 days on a total loan portfolio that exceeds $995 million.

We began this mission with a commitment to building the best credit, service, and sales culture in SC. This commitment also included a goal to recruit and hire the best banking talent we could find in each market. This combination has delivered quality growth and outstanding profits. I am especially proud of what our team has produced over the last five years. We have grown total assets 101%, or $629 million, since September 30, 2017 to $1.3 billion as of September 30, 2022. This represents a 15% compound annual growth rate over this five-year period. During this time, we have been able to decrease our nonperforming assets from 1.30% to 0.11%. We have continued to focus on improving our efficiency and net income results with returns on average assets in excess of 1.30% for the full year of 2021 and year to date through September 30, 2022. Our efficiency ratios were 59.18% and 57.99% for the years to date through September 30, 2022 and December 31, 2021, respectively. We believe these results are excellent and are representative of the hard work and commitment of our incredible team.

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As previously announced on June 21st, 2022, GrandSouth has agreed to a proposed merger with First Bancorp that is expected to close during the first quarter of 2023. We are excited about the prospect of joining the First Bancorp team."

Specialty Floor Plan Loans

Specialty floor plan loans finished the quarter ended September 30, 2022 at $111.8 million, up from $107.7 million at June 30, 2022 and up from $98.3 million at December 31, 2021. The average balance of such loans outstanding for the quarters ending September 30, 2022 and 2021 were $110.0 million and $92.1 million, respectively. The 2020 pandemic-related negative trends have reversed and average outstanding balances increased by 19.43% in the third quarter of 2022 when compared to the third quarter of 2021. The losses from specialty floor plan loan defaults resulted in a 2.07% annualized net charge off rate in the third quarter of 2022, up from a 0.25% annualized net charge off rate for the second quarter of 2022 and a 0.20% annualized net recovery rate in the third quarter of 2021. However, the rate for the third quarter of 2022 is consistent with the average historical annualized net charge off rate of 2.53% for the twenty quarters before the COVID-19 pandemic.

Net Interest Income

Net interest income was $14.7 million for the quarter ended September 30, 2022, up $1.9 million, or 15.01%, from the same period in 2021. For the nine months ended September 30, 2022, net interest income increased $4.2 million, or 11.25%, to $41.1 million from $37.0 million during the same period in 2021. These increases were primarily driven by increases in interest and fees on loans and investments, partially offset by increases in deposit interest expense.

Noninterest Income

Noninterest income was $0.7 million for the third quarter of 2022, an increase of less than $0.1 million, or 1.82%, from the third quarter of 2021. This change was primarily driven by an increase in service charges on deposit accounts partially offset by a decrease in other noninterest income. Year to date through September 30, 2022, noninterest income decreased $0.1 million, or 3.40%, from in the same period in 2021. These changes were primarily driven by a decrease in other noninterest income partially offset by an increase in service charges on deposit accounts.

Noninterest Expense

Noninterest expense increased $0.6 million, or 7.18%, in the third quarter of 2022 when compared to the same period in 2021. For the year to date through September 30, 2022, noninterest expense increased $2.5 million, or 10.92%, over the same period in 2021. The increases were primarily attributable to increases in compensation and employee benefits expenses, merger expenses and other noninterest expenses, partially offset by decreases in professional and advisory fees. Merger expenses relate to the Company's pending merger with First Bancorp.

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Loan Portfolio

The Company's gross loan portfolio increased $42.2 million, or an annualized rate of 17.59%, during the third quarter of 2022 and $61.6 million, or an annualized rate of 8.82%, for the year to date through September 30, 2022. Specialty floor plan loans increased by $4.1 million, or an annualized rate of 15.16% for the quarter and increased $13.5 million, or an annual rate of 18.37%, for the year to date through September 30, 2022. Core Bank loans grew by $38.1 million, or an annual rate of 17.90%, and $48.7 million, or an annual rate of 7.81%, during the same periods, respectively.

Following our sale of $24.6 million of the purchased student loans during the fourth quarter of 2021, as of December 31, 2021, our balance of purchased student loans was $0.7 million, which decreased to zero as of June 30, 2022.

The composition of the loan portfolio consisted of the following on September 30, 2022, June 30, 2022 and December 31, 2021:

		September 30,			June 30,			December 31,
		2022			2022			2021
		(Dollars in thousands)
Commercial, financial and agricultural		$	144,612			$	143,549			$	135,438
Specialty floor plan loans			111,833				107,718				98,324
Commercial PPP loans			-				-				1,274
Real estate - construction, land development and other			121,922				118,272				114,100
Real estate - mortgage			610,069				576,875				577,083
Purchased student loans			-				-				651
Installment loans to individuals			6,625				6,399				6,605
Loans, gross			995,061				952,813				933,475
Allowance for loan losses			(14,579	)			(14,100	)			(13,723	)
Loans, net		$	980,482			$	938,713			$	919,752

Loan Loss Provision and Asset Quality

For the quarter ended September 30, 2022, the provision for loan losses was $1.1 million, an increase of $0.6 million, or 114.57%, from the same quarter a year ago. Year to date through September 30, 2022, the provision for loan losses was $1.5 million, an increase of $0.4 million, or 42.30%, over the same period a year ago. Net charge offs for the third quarter of 2022 were $0.6 million compared to less than $0.1 million for the same period in 2021. Net charge offs for the year to date through September 30, 2022 were $0.6 million compared to net recoveries of $0.1 million during the same period in 2021.

The allowance for loan losses as a percentage of total gross loans was 1.47% at September 30, 2022, down from 1.48% at June 30, 2022 and consistent with 1.47% at December 31, 2021. The Company's management believes the allowance is adequate to absorb losses that are inherent in the loan portfolio as of September 30, 2022, and management will continue to closely monitor credit quality and activity.

Other real estate owned was $0.7 million at September 30, 2022, down from $0.8 million at June 30, 2022 and December 31, 2021. Nonaccrual loans increased to $0.7 million at September 30, 2022 from $0.3 million at June 30, 2022 and decreased from $1.3 million at December 31, 2021.

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Securities Portfolio

Investment securities available-for-sale were $108.3 million at September 30, 2022, down $7.9 million, or 6.78%, from $116.1 million at June 30, 2022 and down $3.7 million, or 3.31%, from $112.0 million at December 31, 2021.

Investment securities held to maturity, were $6.0 million at September 30, 2022, a balance consistent with that at June 30, 2022 and up from zero at December 31, 2021.

Securities in the investment portfolio as of September 30, 2022 were as follows:

·	asset backed securities totaling $2.1 million;

·	residential government-sponsored mortgage-backed securities totaling $25.6 million;

·	collateralized mortgage obligations totaling $21.8 million;

·	taxable municipal bonds totaling $10.0 million;

·	nontaxable municipal bonds totaling $10.2 million;

·	corporate debt securities totaling $13.4 million; and

·	treasury securities totaling $31.2 million.

Deposits

Total deposits decreased $1.1 million, or an annual rate of 0.39%, during the third quarter of 2022 and increased $51.0 million, or an annual rate of 6.43%, for the year to date through September 30, 2022 to $1.1 billion at quarter end. Noninterest bearing deposits increased $17.7 million, or an annual rate of 23.30%, during the quarter and $38.5 million, or an annual rate of 18.35%, for the year to date through September 30, 2022. During the quarter and year to date through September 30, 2022, combined demand deposit, money market, and savings accounts grew, respectively, by $8.8 million, or an annual rate of 3.77%, and $86.1 million, or an annualized rate of 13.54% to $936.2 million, respectively. This growth offset the decrease during the same periods in certificate of deposit, IRAs and CDARS of $9.9 million, or an annual rate of 21.40%, and $35.1 million, or an annual rate of 22.47%, respectively, to $173.8 million.

Borrowings

As of September 30, 2022, the Company had $5.0 million of Federal Home Loan Bank advances and $36.0 million of junior subordinated notes outstanding.

Shareholders' Equity

Shareholders' equity was $96.5 million at September 30, 2022, an increase of $0.4 million, or 0.39%, for the quarter and a decrease of $0.9 million, or 0.93%, for the year to date through September 30, 2022. The balance was increased by the normal retention of earnings and exercise of stock options. Offsetting the increase were declines in the fair value of investments due to rising interest rates.

Tier 1 Risk Based Capital Ratios were 10.62% and 12.62% for the Company and the Bank, respectively, at September 30, 2022.

About GrandSouth Bancorporation

GrandSouth Bancorporation is a bank holding company with assets of $1.3 billion at September 30, 2022. GrandSouth Bank provides a range of financial services to individuals and small and medium sized businesses. GrandSouth Bank has eight branches in South Carolina, located in Greenville, Fountain Inn, Anderson, Greer, Columbia, Orangeburg and Charleston.

Press contact: JB Schwiers 864-770-1000

Website: www.grandsouth.com

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Non-GAAP Measures

This press release includes financial information determined by methods other than in accordance with generally accepted accounting principles ("GAAP"). This financial information includes certain operating performance measures. Such measures include: "Tangible book value per common share, outstanding," "Tangible book value per share, adjusted for the conversion of Series A preferred stock," "Tangible book value, adjusted for the conversion of Series A preferred stock," and "Common tangible book value."

Management has included these non-GAAP measures because it believes these measures may provide useful supplemental information for evaluating the Company's underlying performance trends. Further, management uses these measures in managing and evaluating the Company's business and intends to refer to them in discussions about our operations and performance. Operating performance measures should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP, and are not necessarily comparable to non-GAAP measures that may be presented by other companies.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that relate to future events or the future performance of the Company, including statements related to the expected timing of the closing of the proposed merger with First Bancorp. Forward-looking statements are not guarantees of performance or results. These forward-looking statements are based on the current beliefs and expectations of the Company's management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond management's control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the anticipated results discussed or implied in these forward-looking statements because of numerous possible uncertainties. Words like "may," "plan," "contemplate," "anticipate," "believe," "intend," "future," "continue," "expect," "project," "predict," "estimate," "could," "should," "would," "will," and similar expressions, should be considered as identifying forward-looking statements, although other phrasing may be used. Such forward-looking statements involve risks and uncertainties beyond the Company's control and may not be realized due to a variety of factors. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (2) the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations may be different than expected; (3) the rate of delinquencies and amounts of charge-offs, the level of allowance for loan loss, the rates of loan growth, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (4) changes in legislation, regulation, policies, or administrative practices, whether by judicial, governmental, or legislative action; (5) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) could have a negative impact on the Company; (6) changes in interest rates, which may affect the Company's net income, interest expense, prepayment penalty income, and other future cash flows, or the market value of the Company's assets, including its investment securities; (7) changes in accounting principles, policies, practices, or guidelines; (8) that the proposed merger may not be timely completed, if at all; (9) that prior to completion of the merger or thereafter, the parties' respective businesses may not perform as expected due to transaction-related uncertainties or other factors; (10) that the parties are unable to implement successful integration strategies; (11) that the required regulatory, shareholder, or other closing conditions are not satisfied in a timely manner, or at all; (12) reputational risks and the reaction of the parties' customers to the proposed merger; (13) diversion of management time to merger-related issues; and (14) deposit attrition, operating costs, customer losses and business disruption following the merger, including adverse effects on relationships with employees, may be greater than expected. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed by the Company with the SEC and available at the SEC's internet site (https://www.sec.gov). You should consider such factors and not place undue reliance on such forward-looking statements. No obligation is undertaken by the Company to update such forward-looking statements to reflect events or circumstances occurring after the issuance of this press release.

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Additional Information and Where to Find It

With respect to the proposed merger of the Company and First Bancorp, this communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the merger, First Bancorp has filed with the SEC a registration statement on Form S-4 that includes a proxy statement/prospectus for the Company's shareholders. The Company and First Bancorp also plan to file other documents with the SEC regarding the merger. The Company has mailed the final proxy statement/prospectus to its shareholders. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND SHAREHOLDERS ARE URGED TO READ THE ENTIRE REGISTRATION STATEMENT AND THE PROXY STATEMENT/PROSPECTUS REGARDING THE MERGER AND ANY OTHER RELEVANT DOCUMENTS CAREFULLY IN THEIR ENTIRETY, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. The proxy statement/prospectus, as well as other filings containing information about the Company and First Bancorp, are available without charge, at the SEC's website (http://www.sec.gov). Copies of the proxy statement/prospectus and other documents filed with the SEC in connection with the merger can also be obtained, without charge, from the Company's website (https://www.grandsouth.com/) and First Bancorp's website (http://www.localfirstbank.com).

Participants in the Merger Solicitation

The Company and certain of its directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from the shareholders of the Company in respect of the merger. Information regarding the directors and executive officers of the Company and other persons who may be deemed participants in the solicitation of the Company's shareholders in connection with the merger are included in the proxy statement/prospectus for the Company's special meeting of shareholders, which has been filed by First Bancorp with the SEC. Information about the Company's directors and executive officers can also be found in the Company's definitive proxy statement in connection with its 2022 annual meeting of shareholders, as filed with the SEC on April 11, 2022, and other documents subsequently filed by the Company with the SEC. Additional information regarding the interests of such participants is included in the proxy statement/prospectus and other relevant documents regarding the merger filed with the SEC.

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GrandSouth Bancorporation and Subsidiary

Greenville, SC

Condensed Consolidated Balance Sheets

		(Unaudited)			(Unaudited)			(Audited)
		September 30,			June 30,			December 31,
		2022			2022			2021
		(Dollars in thousands)
Assets
Cash and due from banks		$	2,559			$	5,036			$	2,522
Interest-earning deposits			102,986				136,041				120,602
Federal funds sold			2,670				1,859				977
Cash and cash equivalents			108,215				142,936				124,101
Investments - available for sale			108,261				116,137				111,962
Investments - held to maturity			5,991				5,990				-
Other investments, at cost			1,911				2,626				2,984
Loans receivable, net of deferred fees and costs			995,061				952,813				933,475
Allowance for loan losses			(14,579	)			(14,100	)			(13,723	)
Loans, net of allowance for loan losses			980,482				938,713				919,752
Premises and equipment, net			17,614				17,655				17,783
Other real estate owned			732				842				842
Accrued interest receivable			5,335				4,746				4,808
Bank owned life insurance			15,014				14,935				14,778
Net deferred tax asset			6,381				5,342				2,968
Goodwill			737				737				737
Other assets			3,294				3,373				3,007
Total assets		$	1,253,967			$	1,254,032			$	1,203,722
Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing		$	319,193			$	301,487			$	280,665
Interest-bearing			790,814				809,614				778,376
Total deposits			1,110,007				1,111,101				1,059,041
Federal Home Loan Bank advances			5,000				5,000				5,000
Junior subordinated notes			35,955				35,924				35,864
Accrued interest payable			653				254				383
Accrued expenses and other liabilities			5,855				5,632				6,029
Total liabilities			1,157,470				1,157,911				1,106,317
Shareholders' equity
Preferred stock - Series A - no par value			-				-				-
Common stock - no par value			-				-				-
Additional paid in capital			45,825				45,424				44,570
Retained earnings			61,727				58,026				51,649
Accumulated other comprehensive income (loss)			(11,055	)			(7,329	)			1,186
Total shareholders' equity			96,497				96,121				97,405
Total liabilities and shareholders' equity		$	1,253,967			$	1,254,032			$	1,203,722

NOTE: Certain amounts in the prior year's financial statements may have been reclassified to conform to the current year's presentation. The reclassifications had no effect on results of operations or financial condition as previously reported.

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GrandSouth Bancorporation and Subsidiary

Greenville, SC

Condensed Consolidated Statements of Income (Unaudited)

		For the three months ended September 30,			For the nine months ended September 30,
		2022			2021			2022			2021
		(Dollars in thousands)
Interest income		$	16,548			$	14,010			$	45,317			$	40,930
Interest expense			1,842				1,223				4,181				3,955
Net interest income			14,706				12,787				41,136				36,975
Provision for loan losses			1,060				494				1,487				1,045
Net interest income after provisionfor loan losses			13,646				12,293				39,649				35,930
Noninterest income
Service charges on deposit accounts			380				320				1,082				910
Loss on sale of investmentsecurities available for sale			(27	)			-				(27	)			-
Bank owned life insurance			80				84				237				261
Net gain on sale of premises andequipment			30				6				65				90
Other			207				248				576				740
Total noninterest income			670				658				1,933				2,001
Noninterest expenses
Compensation and employee benefits			5,771				5,367				16,986				15,428
Net occupancy			574				584				1,730				1,732
Net cost of operation of other realestate owned			1				11				38				140
Data processing			579				509				1,593				1,536
Merger expenses			143				-				1,039				-
Other expenses			1,407				1,436				4,101				4,141
Total noninterest expenses			8,475				7,907				25,487				22,977
Income before income taxes			5,841				5,044				16,095				14,954
Income tax provision			1,422				1,210				3,875				3,563
Net income			4,419				3,834				12,220				11,391
Deductions for amounts not availableto common shareholders:
Dividends declared or accumulatedon preferred stock			(39	)			(30	)			(116	)			(90	)
Net income available to commonshareholders		$	4,380			$	3,804			$	12,104			$	11,301
Per common share
Earnings per common share, basic		$	0.80			$	0.71			$	2.22			$	2.09
Earnings per common share, diluted		$	0.77			$	0.68			$	2.14			$	2.04

NOTE: Certain amounts in the prior year's financial statements may have been reclassified to conform to the current year's presentation. The reclassifications had no effect on results of operations or financial condition as previously reported.

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GrandSouth Bancorporation and Subsidiary

Greenville, SC

Net Interest Margin Analysis (Unaudited)

		For the three months ended
		September 30, 2022			September 30, 2021
		Average						Average			Average						Average
		balance			Interest			Yield			balance			Interest			Yield
		(Dollars in thousands)
Interest earning assets
Investments
Certificates of deposit			901				6				2.70	%			2,175				10				1.89	%
US agency securities and treasuries			31,986				139				1.73	%			7,547				24				1.29	%
Mortgage backed securities			27,602				129				1.86	%			40,873				83				0.81	%
CMO and asset backed securities			24,935				131				2.10	%			53,049				143				1.07	%
Municipals (a)			22,389				158				2.90	%			20,884				135				2.59	%
Corporate debt security			14,352				157				4.38	%			8,264				92				4.47	%
Federal Home Loan Bank stock			789				11				5.80	%			1,225				13				4.08	%
Other investments			862				1				0.64	%			747				1				0.80	%
Subtotal, investments			123,816				732				2.38	%			134,764				501				1.49	%
Cash equivalents
Due from banks and fed funds sold			130,887				654				1.98	%			81,085				26				0.13	%
Subtotal, cash equivalents			130,887				654				1.98	%			81,085				26				0.13	%
Total investments and cash equivalents			254,703				1,386				2.18	%			215,849				527				0.98	%
Loans
Consumer single pay, installment, revolving term and line of credit loans			6,361				55				3.44	%			6,945				61				3.50	%
Consumer FFELP student loans			-				-				0.00	%			26,452				299				4.48	%
Consumer residential and equity loans			73,704				812				4.37	%			71,569				711				3.94	%
Commercial single pay, installment and revolving term loans			130,189				1,502				4.58	%			114,246				1,216				4.22	%
Commercial real estate loans			653,473				7,509				4.56	%			606,745				6,192				4.05	%
Commercial specialty floor plan loans			110,010				5,291				19.08	%			92,110				4,754				20.48	%
Commercial SBA loans			490				6				5.19	%			9,861				269				10.82	%
Total loans			974,227				15,175				6.18	%			927,928				13,502				5.77	%
Total interest earning assets			1,228,930				16,561				5.35	%			1,143,777				14,029				4.87	%
Interest bearing funds
Interest-bearing deposits
Interest-bearing transaction accounts			60,057				28				0.18	%			68,525				45				0.26	%
Money market accounts			554,991				1,185				0.85	%			453,974				487				0.43	%
Regular savings accounts			17,631				4				0.10	%			13,437				3				0.10	%
Certificates of deposit, IRAs and CDARS			176,577				144				0.32	%			234,642				221				0.37	%
Total interest bearing deposits			809,256				1,361				0.67	%			770,578				756				0.39	%
Other interest bearing liabilities
Other borrowings			5,000				5				0.41	%			16,000				36				0.89	%
Junior subordinated debentures			35,936				476				5.26	%			35,816				431				4.78	%
Total other interest bearing liabilities			40,936				481				4.67	%			51,816				467				3.58	%
Total interest bearing funds			850,192				1,842				0.86	%			822,394				1,223				0.59	%
Tax-equivalent net interest rate spread											4.49	%											4.28	%
Non-interest bearing funds
Demand deposit accounts			312,123												260,396
Total funds and cost of funds			1,162,315				1,842				0.63	%			1,082,790				1,223				0.45	%
Tax-equivalent net interest rate spread on funds											4.72	%											4.42	%
Tax-equivalent net interest margin							14,719				4.75	%							12,806				4.44	%

(a)	Tax exempt investments are calculated giving effect to a 21% federal tax rate.

NOTE: Certain amounts in the prior year's financial statements may have been reclassified to conform to the current year's presentation. The reclassifications had no effect on results of operations or financial condition as previously reported.

9

GrandSouth Bancorporation and Subsidiary

Greenville, SC

Net Interest Margin Analysis (Unaudited)

		For the nine months ended
		September 30, 2022			September 30, 2021
		Average						Average			Average						Average
		balance			Interest			Yield			balance			Interest			Yield
		(Dollars in thousands)
Interest earning assets
Investments
Certificates of deposit			1,090				15				1.90	%			3,056				46				2.03	%
US agency securities and treasuries			26,814				323				1.60	%			4,610				44				128.00	%
Mortgage backed securities			29,553				335				1.51	%			38,300				219				0.76	%
CMO and asset backed securities			26,803				290				1.44	%			55,309				385				0.93	%
Municipals (a)			23,909				491				2.74	%			20,810				408				2.61	%
Corporate debt security			14,537				453				4.16	%			6,217				224				4.81	%
Federal Home Loan Bank stock			771				29				4.95	%			1,315				38				3.88	%
Other investments			826				4				0.66	%			747				4				0.67	%
Subtotal, investments			124,303				1,940				2.08	%			130,364				1,368				1.40	%
Cash equivalents
Due from banks and fed funds sold			133,897				911				0.91	%			71,678				69				0.13	%
Subtotal, cash equivalents			133,897				911				0.91	%			71,678				69				0.13	%
Total investments and cash equivalents			258,200				2,851				1.47	%			202,042				1,437				0.95	%
Loans
Consumer single pay, installment, revolving term and line of credit loans			6,313				165				3.50	%			6,871				177				3.45	%
Consumer FFELP student loans			214				(8	)			-5.08	%			27,176				901				4.43	%
Consumer residential and equity loans			72,816				2,231				4.10	%			69,056				2,135				4.13	%
Commercial single pay, installment and revolving term loans			126,084				4,003				4.24	%			116,894				3,680				4.21	%
Commercial real estate loans			635,554				20,262				4.26	%			585,452				17,809				4.07	%
Commercial specialty floor plan loans			108,988				15,802				19.38	%			87,504				13,879				21.21	%
Commercial SBA loans			696				66				12.71	%			14,728				968				8.79	%
Total loans			950,665				42,521				5.98	%			907,681				39,549				5.83	%
Total interest earning assets			1,208,865				45,372				5.02	%			1,109,723				40,986				4.94	%
Interest bearing funds
Interest-bearing deposits
Interest-bearing transaction accounts			57,162				78				0.18	%			66,654				130				0.26	%
Money market accounts			540,039				2,271				0.56	%			427,296				1,401				0.44	%
Regular savings accounts			16,966				13				0.10	%			12,301				9				0.10	%
Certificates of deposit, IRAs and CDARS			190,608				444				0.31	%			252,665				1,012				0.54	%
Total interest bearing deposits			804,775				2,806				0.47	%			758,916				2,552				0.45	%
Other interest bearing liabilities
Other borrowings			5,000				15				0.41	%			16,135				107				0.89	%
Junior subordinated debentures			35,907				1,360				5.06	%			35,787				1,296				4.84	%
Total other interest bearing liabilities			40,907				1,375				4.49	%			51,922				1,403				3.61	%
Total interest bearing funds			845,682				4,181				0.66	%			810,838				3,955				0.65	%
Tax-equivalent net interest rate spread											4.36	%											4.29	%
Non-interest bearing funds
Demand deposit accounts			295,465												241,491
Total funds and cost of funds			1,141,147				4,181				0.49	%			1,052,329				3,955				0.50	%
Tax-equivalent net interest rate spread on funds											4.53	%											4.44	%
Tax-equivalent net interest margin							41,191				4.56	%							37,031				4.46	%

(a)	Tax exempt investments are calculated giving effect to a 21% federal tax rate.

NOTE: Certain amounts in the prior year's financial statements may have been reclassified to conform to the current year's presentation. The reclassifications had no effect on results of operations or financial condition as previously reported.

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GrandSouth Bancorporation and Subsidiary

Greenville, SC

Financial Highlights (Unaudited)

		For the three months ended September 30,			For the nine months ended September 30,
		2022			2021			2022			2021
		(Dollars in thousands, except per share)
Per share data:
Book value per common share (GAAP)		$	18.24			$	17.77			$	18.24			$	17.77
Tangible book value per common share, outstanding (non-GAAP) (a)		$	18.10			$	17.63			$	18.10			$	17.63
Tangible book value per share, adjusted for the conversion of Series A preferred stock (non-GAAP) (b)		$	17.39			$	16.93			$	17.39			$	16.93
Weighted average common shares outstanding, basic			5,219,863				5,141,214				5,201,524				5,158,816
Weighted average common shares outstanding, diluted			5,454,164				5,292,142				5,409,966				5,270,138
Common shares outstanding at end of period			5,225,042				5,148,681				5,225,042				5,148,681
Common shares outstanding at end of period, adjusted for conversion of Series A preferred stock			5,507,870				5,431,968				5,507,870				5,431,968
Selected performance ratios and other data:
Annualized return on average assets			1.38	%			1.29	%			1.31	%			1.33	%
Annualized return on average equity			17.69	%			16.52	%			16.61	%			17.14	%
Annualized net interest margin			4.75	%			4.44	%			4.56	%			4.46	%
Efficiency ratio			55.12	%			58.81	%			59.18	%			58.95	%
Annualized charge-offs (recoveries), net to average loans			0.24	%			0.04	%			0.09	%			-0.02	%
Book value (GAAP)		$	96,497			$	92,719			$	96,497			$	92,719
Series A preferred stock additional paid-in capital			(1,204	)			(1,212	)			(1,204	)			(1,212	)
Book value excluding Series A preferred stock			95,293				91,507				95,293				91,507
Goodwill			(737	)			(737	)			(737	)			(737	)
Common tangible book value (non-GAAP) (c)		$	94,556			$	90,770			$	94,556			$	90,770
Book value (GAAP)		$	96,497			$	92,719			$	96,497			$	92,719
Goodwill			(737	)			(737	)			(737	)			(737	)
Tangible book value, adjusted for the conversion of Series A preferred stock (non-GAAP) (d)		$	95,760			$	91,982			$	95,760			$	91,982

		As of
		September 30,			December 31,			September 30,
		2022			2021			2021
		(Dollars in thousands)
Shareholders' equity to total assets			7.70	%			8.09	%			7.71	%
Tier 1 risk-based capital ratio			10.62	%			10.29	%			10.10	%
Other real estate owned		$	732			$	842			$	1,395
Nonaccrual loans			687				1,349				1,153
Loans past due 90 days and accruing interest (e)			-				55				33
Total nonperforming assets		$	1,419			$	2,246			$	2,581
Allowance for loan losses to loans, gross			1.47	%			1.47	%			1.47	%

(a)	Calculated by dividing the common tangible book value by the number of common shares outstanding at the end of the period.

(b)	Calculated by dividing the tangible book value, adjusted for the conversion of Series A preferred stock on a one for one basis, by the number of common shares outstanding at the end of the period, adjusted for conversion of the Series A preferred stock.

(c)	Calculated by subtracting Series A preferred stock additional paid-in capital and goodwill from book value.

(d)	Calculated by subtracting goodwill from book value.

(e)	Amount represents the net of the loans wholly or partially guaranteed by the US Government.

NOTE: Certain amounts in the prior year's financial statements may have been reclassified to conform to the current year's presentation. The reclassifications had no effect on results of operations or financial condition as previously reported.

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