GrandSouth Bancorporation : Announces 86% Increase in Year Over Year Net Income and Fourth Quarter 2021 Results

GrandSouth Bancorporation Announces 86% Increase in Year Over Year Net Income and Fourth Quarter 2021 Results

GREENVILLE, SC, January 18, 2022

GrandSouth Bancorporation (GRRB:OTCQX) (the "Company" or "GrandSouth"), the holding company for GrandSouth Bank announced today that net income was $16.1 million and $4.7 million for the year and quarter ended December 31, 2021, respectively, representing a 86.40% and a 47.13% increase over the same periods in 2020.

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

Fourth Quarter 2021 Highlights - For and during the quarter ended December 31, 2021:

• Net Income was $4.7 million, an increase of $1.5 million, or 47.13%, from the same quarter in 2020.
• Basic and diluted earnings per share were $0.86 and $0.84, respectively.
• A 30% increase in the quarterly cash dividend.
• The annualized returns on average assets and average equity were 1.55% and 19.53%, respectively.
• Total assets increased $1.1 million, or 0.09%, to $1.2 billion.
• Gross loans excluding purchased student loans increased by $21.4 million, or an annualized rate of 9.29%, to $932.8 million.
• Total deposits increased $7.3 million, or an annualized rate of 2.76%, to $1.1 billion.
• Cost of funds decreased by 22 basis points, or 34.38%, from the same quarter in 2020.
• Of gross loans excluding specialty floor plan and purchased student loans ("Core Bank loans"), 0.01% were 30 days past due as of December 31, 2021. The annualized net charge off ratio for the quarter was 0.10%.
• The efficiency ratio was 55.45%, improving from 58.81% in the prior quarter and 63.69% in the same quarter in 2020.

JB Schwiers, the Company's President, said, "GrandSouth Bancorporation achieved record earnings of $16.1 million in 2021, which is an 86% increase over 2020. Our Board of Directors has approved a 30% increase in the quarterly cash dividend as a result of these exceptional earnings. This is our way of sharing our success with our investors. During the fourth quarter, we made the strategic decision to sell our student loan portfolio purchased in previous years. We also paid off our most costly FHLB advances (at a penalty) and sold investments in our portfolio that were below market rates and as a result in an unrealized loss position. The gain from the sale of purchased student loans allowed us to more than offset these prepayment penalties and investment security losses. We believe making these balance sheet changes will position us for better earnings in the future. We also made excellent progress in the forgiveness of PPP loans to our customers with $49 million forgiven during 2021. Excluding the PPP loans, the core bank loan portfolio grew at an annualized rate of 12%. Our credit quality metrics continue to be very strong. Nonperforming assets as a percentage of total assets ratio was 0.19% at the end of 2021. We

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carried two Core bank loans past due over 30 days in the amount of $103 thousand on a total loan portfolio that exceeds $933 million.

I am extremely proud of these results but not surprised. We began a journey in 2015 to rebuild our sales and credit culture. There has been a careful and well thought out investment in people and new markets. We avoided trying to be all things to all people and instead focused on what we do best. The three‐legged stool approach of taking care of customers, employees, and shareholders has served us well. GrandSouth Bank is now known as a high performing community bank with a commercial focus that operates in the three major markets of our state. I believe we have an exceptional franchise because of the strength of our people, our commercial focus, an efficient branch network, and a strong specialty lending division in CarBucks."

COVID‐19 Impact through December 31, 2021

Management continues to focus on the economic impact resulting from the COVID‐19 pandemic. To assist small businesses in need, the Bank processed 367 Paycheck Protection Program ("PPP") loans for a total of $51.0 million in loans funded and $2.0 million in lender fees collected. As of December 31, 2021, 354 of these loans totaling $49.7 million have been forgiven and lender fee income totaling $2.0 million has been recognized, leaving a remaining loan balance of $1.3 million as of December 31, 2021.

Specialty floor plan loans finished the quarter ended December 31, 2021 at $98.3 million, up from $83.0 million at December 31, 2020. The average balances of such loans outstanding for the quarters ending December 31, 2021 and 2020 were $95.5 million and $79.2 million, respectively. The 2020 pandemic related negative trends have reversed and average outstanding balances increased by 20.65% in the fourth quarter of 2021 when compared to the fourth quarter of 2020. The losses due to specialty floor plan loan defaults remain low resulting in a 0.75% annualized net charge off rate in the fourth quarter of 2021, as compared to a 0.20% annualized net charge off rate in the third quarter of 2021 and a 0.17% annualized net recovery rate in the fourth quarter of 2020.

Net Interest Income

Net interest income was $12.9 million for the quarter ended December 31, 2021, up $1.3 million, or 10.87%, from the same period in 2020. For the year ended December 31, 2021, net interest income increased $8.2 million, or 19.60%, to $49.9 million from $41.7 million during 2020. These increases were primarily driven by an increase in interest and fees on loans and a decrease in deposit interest expense.

Noninterest Income

Noninterest income was $1.8 million for the fourth quarter of 2021, an increase of $1.2 million, or 205.41%, from the fourth quarter of 2020. For the year ended December 31, 2021, noninterest income increased $1.3 million, or 49.26% to $3.8 million from that in 2020. For both periods, these changes were primarily driven by a net gain of $1.2 million from the sale of the student loan portfolio and a net gain on the settlement of litigation of $0.8 million. These were partially offset by a loss on sale of investment securities available for sale in the amount of $0.8 million.

Noninterest Expense

Noninterest expense increased $0.4 million, or 4.71%, in the fourth quarter of 2021 when compared to the same period in 2020. The increase was primarily attributable to an increase in compensation expense. For the year ended December 31, 2021, noninterest expense increased $1.1 million, or 3.64%, over that in 2020. The increases were primarily attributable to increases in compensation and employee benefits,

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data processing and other noninterest expenses, partially offset by a decrease in professional and advisory expenses and the net costs of operation of other real estate owned.

Loan Portfolio

The Company's gross loans portfolio contracted by $3.6 million, or an annualized rate of 1.53%, during the fourth quarter of 2021 and grew by $54.9 million, or an annualized rate of 6.25%, for the year ended December 31, 2021. Specialty floor plan loans increased by $7.2 million, or an annualized rate of 31.31% for the quarter and $15.3 million, or an annualized rate of 18.42%, for the year ended December 31, 2021. Core Bank loans grew by $14.2 million, or an annualized rate of 6.85%, and $67.2 million, or an annualized rate of 8.75%, during the same periods, respectively. The growth of Core Bank loans was impacted by the forgiveness of $5.4 million of PPP loans during the fourth quarter of 2021 and by the forgiveness of $48.6 million offset by the origination of $12.0 million in PPP loans during the year ended December 31, 2021. Core Bank loans, excluding PPP loans, grew by $19.6 million, or an annualized rate of 9.57%, for the quarter ended December 31, 2021 and $88.4 million, or an annualized rate of 11.87%, for the year ended December 31, 2021.

During the quarter, $24.6 million of the purchased student loan portfolio was sold which, along with the continued paydowns, decreased the balance during the fourth quarter of 2021 by $25.0 million, and $27.5 million for the year ended December 31, 2021. As of December 31, 2021, the remaining balance was $0.7 million.

The composition of the loan portfolio consisted of the following on December 31, 2021, September 30,

2021 and December 31, 2020:

	December 31,		September 30,		December 31,
		2021			2021			2020
		(Dollars in thousands)
Commercial, financial and agricultural	$	135,438	$	127,934	$	138,149
Specialty floor plan loans		98,324			91,132			83,027
Commercial PPP loans		1,274			6,744			22,521
Real estate ‐ construction, land development
and other		114,100			107,613			99,124
Real estate - mortgage		577,083			571,246			500,285
Purchased student loans		651			25,623			28,195
Installment loans to individuals		6,605			6,801			7,244
Loans, gross		933,475			937,093			878,545
Allowance for loan losses		(13,723)			(13,730)			(12,572)
Loans, net	$	919,752	$	923,363	$	865,973

Loan Loss Provision and Asset Quality

For the quarter ended December 31, 2021, the provision for loan losses was $0.2 million, a decrease of $0.3 million, or 58.02%, from the same quarter a year ago. For the year ended December 31, 2021, the provision for loan losses was $1.3 million, a decrease of $1.8 million, or 58.67%, over that in 2020. Net charge offs for the fourth quarter of 2021 were $0.2 million and net charge offs for the year ended December 31, 2021 were $0.1 million, as compared to net recoveries of less than $0.1 million and net charge offs of $0.8 million for the same periods in 2020, respectively.

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The allowance for loan losses as a percentage of total gross loans was 1.47% at December 31, 2021, consistent with the ratio at September 30, 2021 of 1.47% and up from 1.43% at December 31, 2020. The Company's management believes the allowance is adequate to absorb losses that are inherent in the loan portfolio as of December 31, 2021 and will continue to closely monitor credit ratios and activity.

Other real estate owned fell to $0.8 million at December 31, 2021, a decrease of $0.6 million, or 39.64%, from September 30, 2021 and a decrease of $1.1 million, or 56.42%, from $1.9 million at December 31, 2020. Nonaccrual loans increased to $1.3 million at December 31, 2021 from $1.2 million at September 30, 2021 and $0.5 million at December 31, 2020.

Securities Portfolio

Investment securities available‐for‐sale were $112.0 million at December 31, 2021, down $15.3 million, or 12.02%, from $127.3 million at September 30, 2021, and up $1.3 million, or 1.13%, from $110.7 million at December 31, 2020.

Securities in the investment portfolio as of December 31, 2021 were as follows:

• asset backed securities totaling $2.6 million;
• residential government‐sponsored mortgage‐backed securities totaling $33.5 million;
• collateralized mortgage obligations totaling $27.4 million;
• taxable municipal bonds totaling $14.1 million;
• nontaxable municipal bonds totaling $12.6 million;
• corporate debt securities totaling $12.4 million; and
• treasury securities totaling $9.4 million.

During the fourth quarter of 2021, 18 securities totaling $19.4 million were purchased and 10 securities totaling $28.2 million were sold.

Deposits

Total deposits increased $7.3 million, or an annualized rate of 2.76%, during the fourth quarter of 2021 and $112.6 million, or an annualized rate of 11.89%, for the year ended December 31, 2021 to $1.1 billion at quarter end. Noninterest bearing deposits increased $11.8 million, or an annualized rate of 17.42%, during the quarter and $77.2 million, or an annualized rate of 37.92%, for the year ended December 31, 2021 to $280.7 million as of December 31, 2021 compared to December 31, 2020. During the quarter, combined demand deposit, money market, and savings accounts grew by $20.4 million, or an annualized rate of 9.76%, to $850.1 million. This growth offset the decrease during the same period in certificate of deposit, IRAs and CDARS of $13.1 million, or an annualized rate of 23.41%, to $208.9 million.

Borrowings

As of December 31, 2021, the Company had $5.0 million of Federal Home Loan Bank advances and $35.9 million of junior subordinated notes outstanding. During the fourth quarter, four Federal Home Loan Bank advances totaling $11.0 million were paid off. The Bank incurred a $0.1 million expense associated with the prepayment.

Shareholders' Equity

Shareholders' equity was $97.4 million at December 31, 2021, an increase of $4.7 million, or 5.05%, for the quarter and $10.9 million, or 12.57%, for the year ended December 31, 2021. The balance was increased by the normal retention of earnings, changes in the fair value of investments, exercise of stock

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options and expense of stock option grants. Offsetting the increase was payment of dividends and repurchases of common and preferred shares.

Tier 1 Risk Based Capital Ratios were 10.29% and 12.24% for the Company and the Bank, respectively, at December 31, 2021.

About GrandSouth Bancorporation

GrandSouth Bancorporation is a bank holding company with assets of $1.2 billion at December 31, 2021. 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

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. 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," "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, including, but not limited to, due to the continuing negative impacts and disruptions resulting from the novel coronavirus, or COVID‐19, on the economies and communities the Company serves, which may have an adverse impact on the Company's business, operations and performance, and could have a negative impact on the Company's credit portfolio, share price, borrowers, and on the economy as a whole, both domestically and globally; (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, including, but not limited to, the Coronavirus Aid, Relief, and Economic Security Act, or the "CARES Act";

1. 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, prepayment penalty income, and other future cash flows, or the market value of the Company's assets, including its investment securities; and (7) changes in

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