South Atlantic Bancshares, Inc. Reports Earnings of $0.33 per Diluted Common Share For the Three Months Ended June 30, 2023

MYRTLE BEACH, S.C., July 25, 2023 /PRNewswire/ -- South Atlantic Bancshares, Inc. ("South Atlantic" or the "Company") (OTCQX: SABK), parent of South Atlantic Bank (the "Bank"), reported consolidated net income of $2.5 million, or $0.33 per diluted common share, for the three months ended June 30, 2023, a slight increase compared to the three months ended June 30, 2022.

Second Quarter 2023 Financial Highlights:

• Net income for the quarter was $2.5 million, representing a 11.0 percent return on average equity
• Year-to-date net income totaled $5.6 million, a 24.9 percent increase over the same period in 2022
• Total deposits grew $21.2 million for the quarter to $1.3 billion, and have increased $61.3 million year-to-date
• Interest income increased $5.5 million or 48.8 percent compared to the second quarter of 2022
• Total assets increased $47.6 million during the quarter to $1.5 billion, a 12.9 percent annualized increase
• Total loans increased $46.8 million during the quarter, a 17.8 percent annualized increase
• Year-to-date tangible book value per share has increased by $0.81 or 7.2%

Commenting on the second quarter 2023 results, the Company's Chairman and Chief Executive Officer, K. Wayne Wicker, remarked, "The second quarter of 2023 was another successful quarter for our Company. We experienced strong loan and deposit growth during the quarter. Our deposits grew by $21.2 million during the quarter, despite intense competition in the market. While our net interest margin contracted in the second quarter due to rising cost of funds as a result of the continued rising market interest rate environment, our strong loan growth continues to boost earning asset yields to partially offset increased interest expense. We grew loans by $46.8 million during the quarter, bringing our total loan growth year-to-date to $92.7 million. Demand has remained high in all of our markets. Our credit quality and risk indicators remain excellent, despite uncertain forecasted economic conditions due to the continued rising interest rate environment and persistent inflation in the U.S. As we move forward in 2023, we are focused on achieving operating efficiencies, identifying opportunities for expense reductions, and delivering appropriately margined growth through strong underwriting and our conservative credit culture."

Earnings Summary

Net interest income decreased $156 thousand, or 1.5 percent, to $10.3 million in the three months ended June 30, 2023, when compared to $10.5 million in the three months ended June 30, 2022. The decrease during the period was driven by a $5.7 million increase in deposit-related interest expense due to competition from bank and non-bank alternatives, and the migration of a portion of the Company's deposit balances from noninterest and low interest bearing deposits to higher cost savings, money market, and time deposits during the period. The Company also experienced reduced interest income quarter-over-quarter of $235.0 thousand from the recognition of deferred fees from the Bank's then-remaining Paycheck Protection Program loans, the remainder of which were forgiven by the Small Business Administration or otherwise paid off during the second quarter of 2022. The decrease in net interest income during the second quarter of 2023 was partially offset by a $5.1 million increase in interest income on the Company's loan portfolio due to increased yields and volume, as well as an increase of $440 thousand from the Company's investment securities portfolio.

Noninterest income declined $13.0 thousand, or 0.9 percent, to $1.5 million for the three months ended June 30, 2023 when compared to the three months ended June 30, 2022, primarily due to a market driven reduction in secondary mortgage fee income of $389.0 thousand, partially offset by an increase in service charges of $244.1 thousand. The increase in service charges during the period was related to a one-time recognition of an early withdrawal penalty on a certificate of deposit.

Noninterest expense decreased $24.5 thousand, or 0.6 percent, to $8.4 million for the quarter ended June 30, 2023, when compared to $8.5 million for the quarter ended June 30, 2022. An expense savings of $238.3 thousand, or 4.4 percent, was recognized for salary and employee benefits for the second quarter of 2023 versus the second quarter of 2022. Other noninterest expense during the period, including public relations and business development activities, audit expense with the implementation of applicable audit and reporting requirements under the Federal Deposit Insurance Corporation Improvement Act of 1991, and check fraud losses, increased $224.1 thousand, or 11.2 percent.

Balance Sheet Activity

Total assets increased $115.8 million to $1.53 billion as of June 30, 2023, compared to $1.41 billion as of December 31, 2022 and $1.40 billion as of June 30, 2022. The increase in total assets during the six months ended June 30, 2023 was driven primarily by an increase in net loans of $92.3 million and an increase in cash and cash equivalents of $22.2 million, offset by a reduction in investment securities of $4.3 million. Total loans increased 9.2 percent during the six months ended June 30, 2023, compared to 21.0 percent for six months ended June 30, 2022.

Total deposits increased $61.3 million during the six months ended June 30, 2023, and total deposits have increased $11.1 million year-over-year since June 30, 2022.

Shareholders' equity totaled $96.6 million as of June 30, 2023, an increase of $6.0 million from December 31, 2022, driven by a positive $1.6 million adjustment for unrealized losses in the Bank's available-for-sale securities portfolio since December 31, 2022, in addition to $5.6 million in earnings during the six months ended June 30, 2023, partially offset by the payment of the Company's first cash dividend on its shares of common stock in the first half of 2023.

The Company reported 7,596,779 total shares of common stock outstanding as of June 30, 2023. The increase of 581 shares of common stock outstanding during the six months ended June 30, 2023 is due to the exercise of stock options granted.