Southern BancShares N C : Quarterly Report – June 2022

SOUTHERN BANCSHARES (N.C.), INC.

QUARTERLY REPORT

JUNE 2022

Mission

Founded in 1901, Southern Bank is a customer-focused community bank serving eastern North Carolina and southeastern Virginia. Our mission is to be the bank of preference for consumers and businesses in the markets that we serve.

Genuine concern for the customer is our top priority, striving to create and deliver superior value in the financial services we provide by exceeding the expectations of our customers.

We are dedicated to the communities we serve, both in spirit and support. We provide a progressive and rewarding working environment for our employees that encourages the investment of their time, energy, and talents to the betterment of their communities.

We embrace sound banking

philosophies that incorporate dedication to relationships, strong business values, and financial integrity while advocating the maintenance of quality assets and reasonable return on shareholder investment.

Southern Bank is a wholly owned subsidiary of Southern BancShares (N.C.), Inc.

Southern BancShares (N.C.), Inc. and Subsidiaries		For the Quarter Ended		As of or Year to Date	Percent
Financial Highlights (Unaudited)		June 30,			June 30,	Change
(Dollars in thousands, except per share data)		2022		2021		2022		2021	YTD
SUMMARY BALANCE SHEET
ASSETS					$	195,490	$	273,497	-29%
Cash, due from banks and overnight funds sold
Investments						1,736,328		1,542,713	13%
Loans less allowance for loan loss of $32,846 and $28,425						2,575,720		2,333,676	10%
Other assets						196,275		166,894	18%
Total assets					$	4,703,813	$	4,316,780	9%
LIABILITIES
Deposits:
Noninterest-bearing deposits					$	1,480,751	$	1,311,994	13%
Interest-bearing deposits						2,667,198		2,309,988	15%
Total deposits						4,147,949		3,621,982	15%
Borrowings						237,759		182,962	30%
Other liabilities						17,347		63,420	-73%
Total liabilities						4,403,055		3,868,364	14%
SHAREHOLDERS' EQUITY
Preferred stock						1,782		1,802	-1%
Common stock						393		398	-1%
Surplus						27,043		27,043	0%
Retained earnings						427,908		417,186	3%
Accumulated other comprehensive (loss) income						(156,368)		1,987	NM
Total shareholders' equity						300,758		448,416	-33%
Total liabilities and shareholders' equity					$	4,703,813	$	4,316,780	9%
EARNINGS PERFORMANCE
Interest income	$	33,914	$	29,200	$	66,313	$	59,138	12%
Interest expense		1,382		1,123		2,551		2,279	12%
Net interest income		32,532		28,077		63,762		56,859	12%
Provision (recovery) for loan losses		2,940		(1,277)		3,434		(1,818)	289%
Noninterest income (loss)		4,252		7,507		(23,074)		71,653	-132%
Noninterest expense		23,769		22,113		47,423		43,736	8%
Income (loss) before income taxes		10,075		14,748		(10,169)		86,594	-112%
Income tax expense (benefit)		1,603		2,992		(3,261)		19,048	-117%
Net income (loss)	$	8,472	$	11,756	$	(6,908)	$	67,546	-110%
Earnings (loss) per share	$	107.06	$	145.98	$	(89.04)	$	841.81
Return (loss) on average assets		0.70%		1.12%		-0.29%		3.32%
Return (loss) on average equity		8.87%		10.62%		-3.61%		31.87%

ADDITIONAL DISCLOSURE - ACCOUNTING FOR INVESTMENTS IN MARKETABLE EQUITY SECURITIES

In January 2016, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2016-01: Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). One of the requirements of the ASU is that equity investments must be measured at fair value with changes in fair value recognized in net income. For the quarters ended June 30, 2022 and 2021, unrealized gains (losses) on equity investments of ($3.6) million and ($676) thousand, respectively were included in noninterest income, and ($766) thousand and ($153) thousand, respectively in deferred tax expense (benefit) were included in income tax expense (benefit) related to the change in fair value of equity investments. For the six months ended June 30, 2022 and 2021, unrealized gains (losses) on equity investments of ($37.9) million and $55.9 million, respectively were included in noninterest income, and ($8.0) million and $12.8 million, respectively in deferred tax expense

(benefit) were included in income tax expense (benefit) related to	the change in fair value of equity investments. While the ASU has no impact on the book value per common share,
the impact on net income is as follows:		For the Quarter Ended		Year to Date
		June 30,				June 30,
		2022		2021		2022		2021
Net income (loss) as reported	$	8,472	$	11,756	$	(6,908)	$	67,546
Plus (less): impact of ASU 2016-01		2,880		523		29,964		(43,083)
Net income excluding the impact of ASU 2016-01	$	11,352	$	12,279	$	23,056	$	24,463
Return on average assets excluding the impact of ASU 2016-01		0.93%		1.17%		0.97%		1.20%
Return on average equity excluding the impact of ASU 2016-01		13.94%		11.09%		12.06%		11.54%

ADDITIONAL DISCLOSURE - REPURCHASE OF THE COMPANY'S COMMON AND PREFERRED STOCK

On January 18, 2022, the Company's Board of Directors approved a stock repurchase program that expires on March 31, 2023 and authorizes the repurchase of up to 4,000 shares of the Company's outstanding common stock. The repurchase program stipulates that the aggregate dollar amount paid during any consecutive twelve-month period to repurchase shares of common stock, through open market and privately negotiated transactions, and shares of preferred stock, through privately negotiated transactions, shall not equal or exceed 3% of the Company's consolidated shareholders' equity. The following table indicates the number of shares of each class and the amount paid to repurchase shares during the three- and

six-month periods ended June 30, 2022.	For the Quarter Ended		Year to Date
		June 30,			June 30,
	# Shares		Amount Paid	# Shares	Amount Paid
Common		8	$	42	837	$	4,638
Series B preferred		-		-	733		12
Series C preferred		-		-	1,210		19

Quarterly Report

General Board of Directors

DREW M. COVERT, Chairman Mount Olive, NC

The Bank's and our Chief Executive Officer and Board Chairman

JULIAN R. AYCOCK

Fremont, NC

President, Marr's, Inc., (farming operations)

WILLIAM H. BRYAN

Mount Olive, NC

Executive Chairperson, Mount Olive Pickle Company, Inc. (manufacturer of pickle and pepper products)

HOPE H. BRYANT

Raleigh, NC

Vice Chairperson, First Citizens BancShares, Inc.; Corporate Sales Executive, First-Citizens Bank & Trust Company

JOEL K. BUTLER Grimesland, NC

Retired; formerly President, Vidant Health Foundation (health care)

MICHAEL L. CHESTNUTT

Clinton, NC

Managing Partner, Black, Chestnutt and Johnson, PA (public accounting)

OLIVIA B. HOLDING

Raleigh, NC

President and Director, Twin States Farming, Inc.;

President and Director, E&F Properties, Inc.

G. ROUSE IVEY

Mount Olive, NC

Self-employed farmer

J. GREY MORGAN Mount Olive, NC

Retired; formerly the Bank's and our Chief Executive Officer and Board Chairperson

JOHN C. PEGRAM, JR.

Chapel Hill, NC

Retired; formerly the Bank's and our Chief Executive Officer and Board Chairman

THOMAS R. SALLENGER

Wilson, NC

Attorney; general partner, Sallenger Law, LLP (law firm)

MALCOLM R. SULLIVAN, JR.

Goldsboro, NC

Chief Executive Officer of Feelgoodz Holdings NC, LLC

Director Emeritus

M.J. McSORLEY

Rocky Mount, NC

Formerly the Bank's and Our Vice Chairman, President,

and Chief Executive Officer

June 2022

Southern Bank

Senior Management Team

DREW M. COVERT

Board Chairman and Chief Executive Officer

L. TAYLOR HARRELL III

President

JERRY C. ALEXANDER

Executive Vice President

Northeast Region

MICHAEL T. BRYANT

Executive Vice President

Legacy Region

EDWARD I. COLTRAIN

Executive Vice President and Chief Operating Officer

W. TRENT DUDLEY

Senior Vice President

Hampton Roads Region

SONDRA F. MCCORQUODALE

Executive Vice President and Chief Digital Officer

VALERIE W. ROBERSON

Senior Vice President and Human Resources Manager

DAVID L. SAULS, JR.

Executive Vice President, Chief Financial Officer,

and Corporate Secretary

W. JASON WAUGHTEL

Senior Vice President

Coastal Region

ROBERT E. WOOD

Executive Vice President and Chief Credit Officer

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Quarterly Report

Local Boards of Directors

Ahoskie

Dr. Joselito S. Almario, William T. Fretwell, Darlene P. Fritz,

James R. Harrell, Jr., Teresa F. Jenkins, Robert N. Riddick,

Edgar L. Swain, Jr.

Director Emeriti - Howard C. Brown, L. M. Brinkley, Jr.,

Joe Henry Jenkins

Belhaven

Gary L. Respess, William M. Tankard, Charles F. Williams

Director Emeritus - Douglas B. Clark

Duplin County

Gregory Millard Bounds, Marion Dean Brown, Jr.,

Ernest Clegg Grady, Jr., J. Garrett Ludlum, G. Haywood Quinn, Jr., John C. Smith, Jr.

Director Emeriti - Richard Harrell, James McGowan, Dr. Mary Wood

Edenton

Ronald J. Andronowitz, Horace Beasley, Charles A. Britton,

Steve Brown, Franklin S. Edmondson III, A. Travis Ellis

Director Emeritus - Dr. Richard Hines, Jr.

Farmville

John O. Moore, Charles A. Rice, CPA., Dr. Bert B. Warren, Jr.

Gatesville

Dan M. Askew, George M. Miller

Director Emeriti - Charles Sherwood Eason, Robert P. Hollowell, Jr.,

John A. Lane, Jr.

Greenville

Dr. Jim Casey, Dr. Johnathan P. Earp, Dr. Mary Helen Hutchinson

Director Emeritus - Greenville Banks

Hampton Roads

Stephen B. Ballard, Michael E. Barney, Richard A. Beskin,

Richard E. Biemiller, Judy Boone, Lisa F. Chandler, Rev. Harold J. Cobb, Jr., Lydia G. Duke, Lindsey Riddle Elliott, Steve C. Frazier,

John L. Gibson, III, Thomas C. Gifford, Michael Goodove, Robert L. Gutterman, Claus Ihlemann, James J. Izard, II, Thomas G. Johnson, III, Kal Kassir, John Katsias, Michael P. Kellam, Linda S. Laibstain, William A. Lascara, Kirk B. Levy, Gary C. Mah, Charles R. Malbon, Jr., Robert F. Mann, M.D., Paul Michels, Thaddeus J. Nowak, Charles S. Nusbaum, Jeanette L. Ojeda, Chirag Patel, Terry J. Penn, William L. Perkins, II, Donna Phaneuf, Albert H. Poole, Roger L. Porter, John W. Rachels, Louis F. Ryan, Robert L. Schick, Jr., Gary K. Shepherd, W. Kevin Stewart,

Ann K. Sullivan, Anthony M. Thiel, Philip R. Trapani, Jr. Bryan M. Whitehurst, Benjamin J. Willis, III

La Grange

Robert Bland, Henry Edwards, Craig A. Jones, Roger M. Sutton,

G. Lynn Taylor

Lewiston-Woodville

John M. Griffin, Sr., Carl A. Lee, Sr., Joe G. Whitehead, Jr.

Cynthia I. Vaughan

Director Emeritus - Richard N. Hoggard

Mount Olive

James Douglas Best, Carol Gainey Carrere, Ph.D., John T. Davis, Jr., Gregory Eloshway, B. Hain Ficken,Jr., David H. Overman,

Dr. James M. Sasser, Ronald G. Sloan, Dr. Robert K. Talton, Robert E. Williams

June 2022

Murfreesboro

Sylvia F. Anderson, Wayne Brown, Brock E. Felton,

John M. Jenkins, Jr., Ben McLean, Charles L. Revelle, III,

John P. Revelle, Jr., Jayne H. Wolfskill

Director Emeritus - Bynum R. Brown

Outer Banks

Jill G. Bennett, Michael C. Casey, Timothy L. Crank,

Jeffrey B. Dowdy, Paddison P. Hudspeth, Theresa "Tess" Judge, Joy E. Lige, Richard B. Mizelle, Jr.

Director Emeritus - Cashar W. Evans, Jr.

Roanoke Rapids

Mark D. Dickinson, Paul W. Heaton, Jr., Grady W. "Phil" Hux,

Donald R. Lynch

Sampson County

Steven J. Bass, Dr. Jeffrey G. Bell, Ralph C. Carter, Jr.,

Robert A. Fann

Wilson County

Derrick Creech, Milo L. Gibbs, Jr., Elizabeth Howard, John Lee, James A. Miller, Eldon S. Newton, III, Elizabeth "Beth" Searcy, Ralph M. Smith, Jr., Terri Stutts, Charles A. Thomas,

William H. Vaughan, Jr., Sheila Vick

Director Emeriti - Janet P. Barnes, Willie Williams

Windsor

Ricky Ryan Clough, Moses B. Gillam, III, Crystal Godwin, Carla Rascoe

Director Emeriti - Wayne P. Attkisson, James F. Hoggard, III,

Revonne W. Hoggard, John L. Pierce, Jr., William Pittman, Edward E. Rawls, Joseph S. Roberson

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