1st Federal Savings Bank of SC : Audited Financials 12-31-2021

1st Federal Savings Bank of SC, Inc.

A wholly owned subsidiary of First Carolina Bancshares, MHC

Report on Financial Statements

As of and for the years ended December 31, 2021 and 2020

1st Federal Savings Bank of SC, Inc.

Contents

Page

Independent Auditor's Report .............................................................................................................................. 1‐2

Financial Statements

Balance Sheets ............................................................................................................................... ...................... 3

Statements of Operations .................................................................................................................................... 4

Statements of Comprehensive Income ............................................................................................................... 5

Statements of Changes in Stockholders' Equity .................................................................................................. 6

Statements of Cash Flows .................................................................................................................................... 7

Notes to Financial Statements ....................................................................................................................... 8‐31

This statement has not been reviewed, or confirmed for accuracy or relevance, by the Federal Deposit Insurance Corporation.

Independent Auditor's Report

Board of Directors

1st Federal Savings Bank of SC, Inc. Walterboro, South Carolina

Report on the Financial Statements

We have audited the financial statements of 1st Federal Savings Bank of SC, Inc. (the "Bank"), a wholly owned subsidiary of First Carolina Bancshares, MHC, which comprise the balance sheets as of December 31, 2021 and 2020, and the related statements of operations, comprehensive income, changes in stockholders' equity and cash flows for the years then ended and the related notes to the financial statements.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Bank as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Bank and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Bank's ability to continue as a going concern within one year after the date that the financial statements are issued, or within one year after the date that the financial statements are available to be issued.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

Independent Auditor's Report, Continued

In performing an audit in accordance with GAAS, we:

•  Exercise professional judgment and maintain professional skepticism throughout the audit.

•  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

•  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank's internal control. Accordingly, no such opinion is expressed.

•  Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

•  Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Bank's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

Charleston, South Carolina April 22, 2022

1st Federal Savings Bank of SC, Inc.

Balance Sheets

As of December 31, 2021 and 2020

2021

2020

Assets

Cash and cash equivalents:

Cash and due from banks Interest‐bearing balances

Total cash and cash equivalents

Time deposits with other banks Equity investments, at fair value Securities available‐for‐sale Nonmarketable equity securities, at cost

Loans receivable

Less allowance for loan losses

$ 1,386,844 $ 1,731,822 21,226,542 28,211,885 22,613,386 29,943,707 2,750,000 2,000,000

538,980

23,732,782

143,400

77,037,413

873,649

‐ 7,468,389 172,400 74,784,674 916,653

• Loans receivable, net 76,163,764 73,868,021

• Premises, furniture and equipment, net 1,902,795 2,030,890

• Accrued interest receivable 262,424 231,489

• Deferred tax asset 183,039 153,910

Other real estate Other assets

Total assets

Liabilities

Deposits:

Noninterest‐bearing transaction accounts

‐ 160,774 1,240,396 330,175 $ 129,530,966 $ 116,359,755

$ 18,601,547 $ 15,576,904

• Interest‐bearing transaction accounts 35,814,928 32,346,050

• Savings and money market 41,467,952 29,597,405

• Time deposits 21,725,817 26,274,631

• Total deposits 117,610,244 103,794,990

Advances from Federal Home Loan Bank Accrued interest payable

‐ 2,000,000 5,605 9,840

Other liabilities 770,764 324,194

• Total liabilities 118,386,613 106,129,024

  Commitments and contingencies ‐ Note 9

  Stockholders' Equity

  Common stock, $1.00 par value, 8,000,000 shares authorized,

• 1,012,755 issued and outstanding 1,012,755 1,012,755

• Capital surplus 1,111,298 1,111,298

• Retained earnings 9,189,469 7,970,649

Accumulated other comprehensive (loss) income

Total stockholders' equity

Total liabilities and stockholders' equity

See Notes to Financial Statements

(169,169) 11,144,353

136,029 10,230,731

$ 129,530,966 $ 116,359,755

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