false FY 0001090009

 2023-06-30

 2024-03-01

 SFST:FederalReserveBankMember

 SFST:FederalReserveBankMember

 us-gaap: CorporateBondSecuritiesMember

 us-gaap: USTreasurySecuritiesMember

 us-gaap: AgencySecuritiesMember

 us-gaap: USStatesAndPoliticalSubdivisionsMember

 us-gaap: AssetBackedSecuritiesMember

 us-gaap: FederalHomeLoanBankCertificatesAndObligationsFHLBMember

 us-gaap: FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember

 us-gaap: GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember

 us-gaap: SecuritiesInvestmentMember

 us-gaap: CorporateBondSecuritiesMember

 us-gaap: USTreasurySecuritiesMember

 us-gaap: AgencySecuritiesMember

 us-gaap: USStatesAndPoliticalSubdivisionsMember

 us-gaap: AssetBackedSecuritiesMember

 us-gaap: FederalHomeLoanBankCertificatesAndObligationsFHLBMember

 us-gaap: FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember

 us-gaap: GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember

 us-gaap: SecuritiesInvestmentMember

 SFST:CorporateBondsMember

 SFST:USTreasuresMember

 us-gaap: FederalHomeLoanMortgageCorporationCertificatesAndObligationsFHLMCMember

 us-gaap: FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember

 us-gaap: GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember

 SFST:TotalInvestmentSecuritiesMember

 SFST:CorporateBondsMember

 SFST:USTreasuresMember

 us-gaap: FederalHomeLoanMortgageCorporationCertificatesAndObligationsFHLMCMember

 us-gaap: FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember

 us-gaap: GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember

 SFST:TotalInvestmentSecuritiesMember

 SFST:NonOwnerOccupiedLoansMember

 SFST:CommercialConstructionLoansMember

 SFST:OneConsumerRealEstateLoanMember
 SFST:PreModificationAndPostModificationMember

 SFST:TwoCommercialBusinessLoansMember
 SFST:PreModificationAndPostModificationMember

 SFST:BusinessLoanMember

 SFST:BusinessLoanMember

 SFST:BusinessLoanMember

 SFST:BusinessLoanMember

 SFST:OtherConsumerMember

 SFST:OtherConsumerMember

 SFST:OtherConsumerMember

 SFST:OtherConsumerMember

 us-gaap: LandMember

 us-gaap: LandMember

 us-gaap: BuildingMember

 us-gaap: BuildingMember

 us-gaap: LeaseholdImprovementsMember

 us-gaap: LeaseholdImprovementsMember

 SFST:FurnitureAndEquipmentMember

 SFST:FurnitureAndEquipmentMember

 SFST:SoftwareMember

 SFST:SoftwareMember

 us-gaap: ConstructionInProgressMember

 us-gaap: ConstructionInProgressMember

 us-gaap: OtherAssetsMember

 SFST:FurnitureAndEquipmentMember
 srt: MinimumMember

 SFST:FurnitureAndEquipmentMember
 srt: MaximumMember

 us-gaap: LeaseholdImprovementsMember
 srt: MinimumMember

 us-gaap: LeaseholdImprovementsMember
 srt: MaximumMember

 SFST:BuildingsMember

 SFST:FederalHomeLoanBankAdvancesAndOtherBorrowingsMember

 us-gaap: FederalHomeLoanBankAdvancesMember

 us-gaap: FederalHomeLoanBankAdvancesMember

 us-gaap: FederalHomeLoanBankAdvancesMember

 SFST:FederalHomeLoanBankAdvancesOneMember

 SFST:FederalHomeLoanBankAdvancesOneMember

 SFST:FederalHomeLoanBankAdvancesOneMember

 SFST:FederalHomeLoanBankAdvancesTwoMember

 SFST:FederalHomeLoanBankAdvancesTwoMember

 SFST:FederalHomeLoanBankAdvancesTwoMember

 SFST:FederalHomeLoanBankAdvancesThreeMember

 SFST:FederalHomeLoanBankAdvancesThreeMember

 SFST:FederalHomeLoanBankAdvancesThreeMember

 SFST:FederalHomeLoanBankAdvancesFourMember

 SFST:FederalHomeLoanBankAdvancesFourMember

 SFST:FederalHomeLoanBankAdvancesFourMember

 SFST:FederalHomeLoanBankAdvancesFiveMember

 SFST:FederalHomeLoanBankAdvancesFiveMember

 SFST:FederalHomeLoanBankAdvancesFiveMember

 SFST:FederalHomeLoanBankAdvancesSixMember

 SFST:FederalHomeLoanBankAdvancesSixMember

 SFST:FederalHomeLoanBankAdvancesSixMember

 SFST:FederalHomeLoanBankAdvancesSevenMember

 SFST:FederalHomeLoanBankAdvancesSevenMember

 SFST:FederalHomeLoanBankAdvancesSevenMember

 SFST:GreenvilleFirstStatutoryTrustOneMember

 2003-06-01
 2003-06-26

 SFST:GreenvilleFirstStatutoryTrustOneMember

 SFST:GreenvilleFirstStatutoryTrustOneMember

 SFST:GreenvilleFirstStatutoryTrustTwoMember

 2005-12-01
 2005-12-22

 SFST:GreenvilleFirstStatutoryTrustTwoMember

 SFST:GreenvilleFirstStatutoryTrustTwoMember

 SFST:SubordinateDebtMember

 2019-09-30

 SFST:SubordinateDebtMember

 2019-09-01
 2019-09-30

 us-gaap: SecuritiesInvestmentMember

 us-gaap: LineOfCreditMember

 SFST:PayFixedPortfolioMember

 2023-06-30

 us-gaap: DesignatedAsHedgingInstrumentMember

 us-gaap: InterestRateSwapMember

 SFST:FixedRateAssetMember

 us-gaap: SwapMember

 us-gaap: SwapMember

 us-gaap: InterestRateLockCommitmentsMember

 us-gaap: InterestRateLockCommitmentsMember

 us-gaap: SecuritiesSoldNotYetPurchasedMember

 us-gaap: SecuritiesSoldNotYetPurchasedMember

 us-gaap: DerivativeMember

 us-gaap: InterestRateLockCommitmentsMember

 us-gaap: InterestRateLockCommitmentsMember

 us-gaap: SecuritiesSoldNotYetPurchasedMember

 us-gaap: SecuritiesSoldNotYetPurchasedMember

 us-gaap: DerivativeMember

 srt: MinimumMember

 srt: MaximumMember

 srt: ChiefExecutiveOfficerMember

 SFST:DirectorsAffiliatesAndExecutiveOfficersMember

 SFST:DirectorsAffiliatesAndExecutiveOfficersMember

 SFST:ProfitSharingAndFourHundredOneKPlanMember

 SFST:ProfitSharingAndFourHundredOneKPlanMember

 SFST:ProfitSharingAndFourHundredOneKPlanMember

 SFST:TwoThousandTenIncentivePlanMember

 SFST:TwoThousandSixteenEquityIncentivePlanMember

 2016-03-15

 SFST:TwoThousandTwentyEquityIncentivePlanMember

 2020-03-17

 SFST:TwoThousandTwentyEquityIncentivePlanMember

 2020-03-01
 2020-03-17

 SFST:TwoThousandTwentyEquityIncentivePlanMember

 us-gaap: StockCompensationPlanMember

 us-gaap: StockCompensationPlanMember

 SFST:TwoThousandSixteenEquityIncentivePlanMember

 2016-05-17

 SFST:TwoThousandTwentyEquityIncentivePlanMember

 2020-05-12

 SFST:RestrictedStockPlanMember

 SFST:RestrictedStockPlanMember

 SFST:WellCapitalizedMember

 SFST:BankMember

 SFST:CompanyMember

 SFST:BankMember

 SFST:CompanyMember

 SFST:Integer

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

FORM 10-K

 x Annual
Report Pursuant To Section 13 Or 15(d) of The Securities Exchange Act of 1934
 For The Fiscal Year December 31, 2023.

 Or

 o Transition Report Pursuant To Section 13 Or 15(d) of The Securities Exchange Act of 1934

 For the Transition Period from ___________ to ________________

Commission file number 000-27719

 (Exact
 name of registrant as specified in its charter)

 South Carolina

 58-2459561

 (State or other jurisdiction of incorporation or organization)

 (I.R.S. Employer Identification No.)

 6 Verdae Boulevard, Greenville, SC

 29607

 (Address of principal executive offices)

 (Zip Code)

 864 - 679-9000

 (Registrant's telephone number, including area code)

 Securities registered pursuant to Section 12(b) of the
Act:

 Title of class

 Trading Symbol

 Name of each exchange on which registered

 Common Stock

 SFST

 The NASDAQ Global Market

 Securities registered pursuant to Section 12(g) of the
Act: None

 Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

 Indicate by check mark if the registrant is not required
to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No x

 Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes x No o

 Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 Yes x No o

 Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions
of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging
growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer x Non-accelerated filer o Smaller reporting company o Emerging
growth company o

 If an emerging growth company, indicate by check mark if
the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. o

 Indicate by check mark whether the registrant has filed
a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report. Yes x No o

 If securities are registered pursuant to Section 12(b)
of the Act, indicate by check mark whether the financial statements

 of the registrant included in the filing reflect the correction
of an error to previously issued financial statements. o

 Indicate by check mark whether any of those error corrections
are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive
officers during the relevant recovery period pursuant to §240.10D-1(b). o

 Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 The aggregate market value of the common equity held
by non-affiliates of the registrant as of June 30, 2023 (based on the average bid and ask price of the Common Stock as quoted on the NASDAQ
Global Market on June 30, 2023), was $ 186,359,362.

 8,156,109 shares of the registrant's common stock
were outstanding as of March 1, 2024.

 DOCUMENTS INCORPORATED BY REFERENCE

 Portions of the registrant's Proxy Statement relating
to the Annual Meeting of Shareholders to be held on May 21, 2024 are incorporated by reference into Part III of this Annual Report on
Form 10-K where indicated.

Index to Form 10-K

 Page

 Item 1.

 Item 1A.

 Risk Factors

 Item 1B.

 Unresolved Staff Comments

 Item 1C.

 Cybersecurity

 Item 2.

 Properties

 Item 3.

 Legal Proceedings

 Item 4.

 Mine Safety Disclosures

 Item 5.

 Market for Registrant's Common Equity, Related Shareholder Matters and Issuer
 Purchases of Equity Securities

 Item 6.

 [Reserved]

 Item 7.

 Management's Discussion and Analysis of Financial Condition and Results of Operations

 Item 7A.

 Quantitative and Qualitative Disclosures about Market Risk

 Item 8.

 Financial Statements and Supplementary Data

 Item 9.

 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 Item 9A.

 Controls and Procedures

 Item 9B.

 Other Information

 Item 9C.

 Disclosures Regarding Foreign Jurisdictions that Prevent Inspections

 Item 10.

 Directors, Executive Officers and Corporate Governance

 Item 11.

 Executive Compensation

 Item 12.

 Security Ownership of Certain Beneficial Owners and Management and Related Shareholder
 Matters

 Item 13.

 Certain Relationships and Related Transactions, and Director Independence

 Item 14.

 Principal Accounting Fees and Services

 Item 15.

 Exhibits, Financial Statement Schedules

 SIGNATURES

 CAUTIONARY NOTE REGARDING

FORWARD-LOOKING STATEMENTS

 This Annual Report on Form 10-K contains statements
which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements may relate to our financial condition, results
of operation, plans, business strategy, objectives, or future performance. These statements are based on many assumptions and estimates
and are not guarantees of future performance. Our actual results may differ materially from those anticipated in any forward-looking statements,
as they will depend on many factors about which we are unsure, including many factors which are beyond our control. The words "may,"
"would," "could," "should," "will," "seek to," "strive," "focus,"
"expect," "anticipate," "predict," "project," "potential," "believe,"
"continue," "assume," "intend," "plan," and "estimate," as well as similar
expressions, are meant to identify such forward-looking statements. Potential risks and uncertainties that could cause our actual results
to differ from those anticipated in any forward-looking statements include, but are not limited to, those described below under Item 1A.
Risk Factors and the following:

 Restrictions or conditions imposed by our regulators on our operations;

 Increases in competitive pressure in the banking and financial services industries;

 Changes in access to funding or increased regulatory requirements with regard to funding, which could impair our liquidity;

 Changes in deposit flows, which may be negatively affected by a number of factors, including rates paid by competitors, general interest rate levels, regulatory capital requirements, returns available to clients on alternative investments and general economic or industry conditions;

 Credit losses as a result of declining real estate values, increasing interest rates, increasing unemployment, changes in payment behavior or other factors;

 Credit losses due to loan concentration;

 Changes in the amount of our loan portfolio collateralized by real estate and weaknesses in the real estate market;

 Our ability to successfully execute our business strategy;

 Our ability to attract and retain key personnel;

 The success and costs of our expansion into the Charlotte, North Carolina, Greensboro, North Carolina and Atlanta, Georgia markets and into potential new markets;

 Risks with respect to future mergers or acquisitions, including our ability to successfully expand and integrate the businesses and operations that we acquire and realize the anticipated benefits of the mergers or acquisitions;

 Changes in the interest rate environment which could reduce anticipated or actual margins;

 Changes in political conditions or the legislative or regulatory environment, including new governmental initiatives affecting the financial services industry;

 Changes in economic conditions resulting in, among other things, a deterioration in credit quality;

 Changes occurring in business conditions and inflation;

 Increased cybersecurity risk, including potential business disruptions or financial losses;

 Changes in technology;

 The adequacy of the level of our allowance for credit losses and the amount of loan loss provisions required in future periods;

 Examinations by our regulatory authorities, including the possibility that the regulatory authorities may, among other things, require us to increase our allowance for credit losses or write-down assets;

 Changes in U.S. monetary policy, the level and volatility of interest rates, the capital markets and other market conditions that may affect, among other things, our liquidity and the value of our assets and liabilities;

 Any increase in FDIC assessments which will increase our cost of doing business;

 Risks associated with complex and changing regulatory environments, including, among others, with respect to data privacy, artificial intelligence, information security, climate change or other environmental, social and governance matters, and labor matters, relating to our operations;

 The rate of delinquencies and amounts of loans charged-off;

 The rate of loan growth in recent years and the lack of seasoning of a portion of our loan portfolio;

 Our ability to maintain appropriate levels of capital and to comply with our capital ratio requirements;

 Adverse changes in asset quality and resulting credit risk-related losses and expenses;

 Changes in accounting standards, rules and interpretations and the related impact on our financial statements;

 Risks associated with actual or potential litigation or investigations by customers, regulatory agencies or others;

 Adverse effects of failures by our vendors to provide agreed upon services in the manner and at the cost agreed;

 The potential effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as epidemics and pandemics, war or terrorist activities, such as the war in Ukraine, the Middle East conflict, and the conflict between China and Taiwan, disruptions in our customers' supply chains, disruptions in transportation, essential utility outages or trade disputes and related tariffs; and

 Other risks and uncertainties detailed in this Annual Report on Form 10-K and, from time to time, in our other filings with the Securities and Exchange Commission ("SEC").

 If any of these risks or uncertainties materialize,
or if any of the assumptions underlying such forward-looking statements proves to be incorrect, our results could differ materially from
those expressed in, implied or projected by, such forward-looking statements. For information with respect to factors that could cause
actual results to differ from the expectations stated in the forward-looking statements, see "Risk Factors" under Part I,
Item 1A of this Annual Report on Form 10-K. We urge investors to consider all of these factors carefully in evaluating the forward-looking
statements contained in this Annual Report on Form 10-K. We make these forward-looking as of the date of this document and we do not intend,
and assume no obligation, to update the forward-looking statements or to update the reasons why actual results could differ from those
expressed in, or implied or projected by, the forward-looking statements, except as required by applicable law.

 Item 1. Business

 General

 Southern First Bancshares, Inc. (the
"Company") was incorporated in March 1999 under the laws of South Carolina and is a bank holding company registered under
the Bank Holding Company Act of 1956 (the "BHCA"). Our primary business is to serve as the holding company for Southern First
Bank (the "Bank"), a South Carolina state bank. The Bank is a commercial bank with eight retail offices located in the Greenville,
Columbia, and Charleston markets of South Carolina, three retail offices in the Raleigh, Greensboro, and Charlotte markets of North Carolina
and one retail office in Atlanta, Georgia. In addition, we opened our Dream Mortgage Center, a loan production office, located in Columbia,
South Carolina during 2023.

 The Bank is primarily engaged in the business of accepting
demand deposits and savings deposits insured by the Federal Deposit Insurance Corporation (the "FDIC"), and providing commercial,
consumer and mortgage loans to the general public.

 Unless the context requires otherwise, references to
the "Company," "we," "us," "our," or similar references mean Southern First Bancshares,
Inc. and its subsidiaries.

 Our Competitive Strengths

 We believe that the following business strengths have
been instrumental to the success of our core operations. We believe these attributes will enable us to continue profitable growth, while
remaining fundamentally sound and driving value to our shareholders.

 Simple and Efficient ClientFIRST Model.
We operate our Bank using a simple and efficient style of banking that is focused on providing core banking products and services to our
clients through a team of talented and experienced bankers. We refer to this model as "ClientFIRST" and it is structured to
deliver superior client service via "relationship teams," which provide each client with a specific banker contact and a consistent
support team responsible for all of the client's banking needs. We believe this model results in a consistent and superior level
of professional service that provides us with a distinct competitive advantage by enabling us to build and maintain long-term relationships
with desirable clients, enhancing the quality and stability of our funding and lending operations and positioning us to take advantage
of future growth opportunities in our existing markets. We also believe that this client focused culture has led to our successful expansion
into new markets in the past, and will enable us to be successful if we seek to expand into new markets in the future.

 Our ClientFIRST model focuses on achieving cost efficiencies
by diligently managing the growth of our number of employees and banking offices. We believe that the identification of talented bankers
will drive our growth strategy, as opposed to a more general desire to enter a specific geography or market. This strategy translates
into a smaller number of brick and mortar offices relative to our size and compared to peer banks, but larger overall deposit balances
in our offices as compared to peers. As a result, our offices average approximately $250.0 million in total deposits. We believe this
style of banking allows us to deliver exceptional client service, while achieving lower efficiency ratios relative to certain of our local
competitors, as evidenced by our 78.7% efficiency ratio for the year ended December 31, 2023.

 We continue to make significant investments in our
IT systems and technology offerings to our clients that we believe will continue to drive low-cost deposit growth. We believe that our
current mobile banking, on-line banking and cash management offerings are industry-leading solutions amongst community banks, and we plan
to continue to invest in the latest technology solutions to enable us to meet the evolving needs of our clients and maintain this competitive
advantage over other community banks.

 Attractive South Carolina, North Carolina, and
Georgia Markets. We have eight banking offices located in Greenville, Columbia and Charleston, South Carolina, which are the three
largest markets in South Carolina; three banking offices located in Charlotte, Raleigh and Greensboro, North Carolina, which are the three
largest markets in North Carolina; and one banking office located in Atlanta, Georgia, which is the largest market in Georgia. The following
table illustrates our market share, by insured deposits as of the dates indicated, in these seven markets:

 Market (1)

 Total Offices

 Our Market Deposits at
 June 30, 2023

 Total Market
 Deposits (2)

 (Dollars in thousands)

 Greenville

 $ 1,805,698

 $
 25,986,729

 Charleston

 584,246

 20,966,984

 Columbia

 346,513

 26,491,208

 Atlanta

 410,350

 237,133,603

 Raleigh

 151,885

 81,588,132

 Greensboro

 102,946

 17,522,165

 Charlotte

 49,807

 382,301,783

 (1)

 Represents the metropolitan statistical area ("MSA") for each market.

 (2)

 The total market deposits data displayed are as of June 30, 2023 as reported by the FDIC.

 Greenville. The city of Greenville is located
in Greenville County, South Carolina approximately midway between Atlanta and Charlotte on the heavily traveled I-85 business corridor.
The Greenville-Anderson MSA is the most populous market in South Carolina with an estimated population of 958,958 as reported for2022.
The median household income for the Greenville-Anderson-Mauldin MSA was $65,681 for 2022. A large and diverse metropolitan area, the Greenville-Anderson
MSA is one of the southeast region's premier areas for business, serving as headquarters for Michelin and Current Lighting (formerly
Hubbell Lighting) as well as hosting significant operations for BMW and Lockheed Martin.

 Charleston. The city of Charleston is located
in Charleston County, South Carolina. The Charleston-North Charleston MSA is the third most populous market in the state with an estimated
population of 830,529 for 2022. Charleston is home to the deepest port in the Southeast and boasts top companies in the aerospace, biomedical
and technology fields such as Boeing, the Medical University of South Carolina (MUSC) and Blackbaud. The median household income for the
Charleston-North Charleston MSA was approximately $78,927 for 2022. One of our retail offices in the Charleston market is located in the
city of Mount Pleasant, which is located just north of Charleston in Charleston County and ranks as the fourth largest city in South Carolina.

 Columbia. The city of Columbia is located in
Richland County, South Carolina and its surrounding suburban areas expand into adjoining Lexington County. Columbia is the state capital,
the largest city in the state and the home of the University of South Carolina and Fort Jackson, the Army's largest Initial Entry
Training Center. The Columbia MSA is the second most populous market in the state with an estimated population of 847,804 for 2022. The
median household income for the Columbia MSA was $63,933 for 2022.

 Raleigh. The city of Raleigh is the second largest
city in the state of North Carolina and is located in Wake County, North Carolina. The Raleigh-Cary MSA is one of the most populous markets
in the state with an estimated population of 1.48 million for 2022. Raleigh is the state capital and is home to North Carolina State University
and is part of the Research Triangle area, together with Durham, North Carolina (home of Duke University) and Chapel Hill, North Carolina
(home of the University of North Carolina at Chapel Hill). The median household income for the Raleigh-Cary MSA was approximately $92,739
for 2022.

 Greensboro. The city of Greensboro is the third
largest city in North Carolina and is located in Guilford County, North Carolina. The Greensboro-High Point MSA is one of the most populous
markets in the state of North Carolina with an estimated population of 784,101 for 2022. Greensboro has traditionally been a fixture in
the textiles, tobacco and furniture industries while also moving towards an increased presence of high-tech, aviation and transportation/logistics
sectors. Greensboro, along with Winston-Salem and High Point, is commonly referred to as the Triad region of North Carolina and is home
to companies such as Honda Aircraft, Lincoln Financial Group and Volvo Trucks of North America. The median household income for the Greensboro-High
Point MSA was approximately $60,271 for 2022.

 Charlotte. The city of Charlotte is the largest
city in the state and is located in Mecklenburg County, North Carolina. The Charlotte-Concord-Gastonia MSA is the most populous market
in the state of North Carolina with an estimated population of 2.75 million for 2022. Charlotte is the second largest banking city in
the United States after New York and is home to the corporate headquarters of Bank of America, Truist Financial, and the east coast headquarters
of Wells Fargo. Charlotte is also home to many Fortune 500 companies including Duke Energy, Honeywell and Lowe's. The median household
income for the Charlotte-Concord-Gastonia MSA was approximately $77,154 for 2022.

 Atlanta. The Atlanta-Sandy Springs-Alpharetta
MSA has the eighth largest population in the U.S. estimated at 6.22 million for 2022. Atlanta is the state capital of, and largest city
in, Georgia and is the world headquarters of corporations such as

 Coca-Cola, Home Depot, UPS, Delta Airlines
and Turner Broadcasting. The median household income for the Atlanta-Sandy Springs-Alpharetta MSA is $84,876 for 2022.

 We believe that the demographics and growth characteristics
of these seven markets will provide us with significant opportunities to further develop existing client relationships and expand our
client base.

 Data related to the estimated population and median
household income for each of the markets presented above is from the Federal Reserve Economic Data ("FRED") online database.

 Experienced Management Team, Dedicated Board
of Directors and Talented Employees. Our senior management team is led by R. Arthur Seaver, Jr., Calvin C. Hurst, D. Andrew Borrmann,
William M. Aiken, and Silvia T. King, and whose biographies are included below. These executives lead a team of 28 additional senior team
members which we believe compares favorably to any community bank management team assembled in South Carolina.

 R. Arthur "Art" Seaver, Jr. has
served as the Chief Executive Officer of our Company and our Bank since 1999. He has over 35 years of banking experience. From 1986 until
1992, Mr. Seaver held various positions with The Citizens & Southern National Bank of South Carolina. From 1992 until February 1999,
he was with Greenville National Bank, which was acquired by Regions Bank in 1998. He was the Senior Vice President in lending and was
also responsible for managing Greenville National Bank's deposit strategies prior to leaving to form the Bank. Mr. Seaver is a 1986
graduate of Clemson University with a bachelor's degree in Financial Management and a 1999 graduate of the BAI Graduate School of
Community Bank Management.

 Calvin C. Hurst has served as Chief Banking
Officer of our Company and our Bank since March 2019 and as President since August 2022. Mr. Hurst has over 15 years of banking experience.
From 2006 to 2008, Mr. Hurst served as a commercial underwriter for RBC Bank, and from 2008 to 2015 he served as commercial relationship
manager for PNC Bank. Before joining Southern First, Mr. Hurst served as regional vice president for TD Bank. Mr. Hurst is a 2005 graduate
of Furman University, with a Bachelor's degree in Business Administration and Economics.

 D. Andrew Borrmann has served as an Executive Vice
President and the Chief Financial Officer of our Company and our Bank since April 2023. From August 2021 to February 2023, Mr.
Borrmann was employed with Colony Bank where he served most recently as Chief Financial Officer and Chief Strategy Officer. Prior to
Colony Bank, Mr. Borrmann worked at SouthCrest Bank as Chief Financial Officer for 10 years until it merged with Colony Bank in
August 2021. Mr. Bormann has further experience as a bank analyst and raising capital in the community banking industry. Mr.
Borrmann is a 1996 graduate of Arizona State University with a degree in Finance. On February 27, 2024, the Company announced Mr.
Borrmann was resigning effective March 29, 2024.

 William M. Aiken, III has served as a Senior
Executive Vice President and Chief Risk officer of our Company and our Bank since 2021 and previously served as an executive credit risk
officer since 2020. He has over 25 years in the banking industry. Mr. Aiken has served in various roles at several banks during his career
including most recently as a Chief Commercial Credit officer at a regional bank. He is a 1996 graduate of Clemson University, with a degree
in Financial Management.

 Silvia T. King has served as Chief Human Resources
Officer of our Company and our Bank since March 2018. Ms. King has over 20 years of Human Resources leadership experience. From 2003 to
2009, Ms. King served in various human resource and senior management roles with Monsanto Company and Select Comfort Corporation. From
2009 to 2016, Ms. King served as senior human resources consultant for FGP International, a professional staffing firm in Greenville,
South Carolina, and most recently as a human resources instructor with e-Cornell University. Ms. King holds degrees in Psychology and
International Marketing from Clemson University and a Master of Human Resources degree from the University of South Carolina.

 In addition to Messrs. Seaver, Hurst, Borrmann, Aiken
and Ms. King, our executive management team consists of 14 individuals who bring an average of 28 years of experience in the banking industry.

 The management team is complemented by our dedicated
board of directors with extensive local market knowledge and a wide range of experience including accounting, business, banking, manufacturing,
insurance, management and finance. We believe that our management's and board's incentives are closely aligned with our shareholders
through the ownership of a substantial amount of our stock. As of December 31, 2023, our executive officers and board of directors owned
an aggregate of 646,142 shares of our common stock, including options to purchase shares of our common stock, which represented approximately
8.00% of the fully-diluted amount of our common stock outstanding. We believe that

 our officers' and directors'
experience and local market knowledge are valuable assets and will enable them to guide us successfully in the future.

 In addition, we believe that we have assembled a group
of highly talented employees by being an employer of choice in the markets we serve. We employed a total of 296 FTE employees as of December
31, 2023. Our employees are skilled in the areas of banking, information technology, management, sales, advertising and marketing, among
others. We strive to provide an "umbrella for great talent," characterized by a culture of transparency and collaboration
which permeates all levels of the organization. To drive our culture of transparency and collaboration, our employees engage in a series
of weekly meetings to understand the goals and plan for each week. These meetings are intended to remind our employees of our vision,
strategy and ClientFIRST service, and provide our employees with information regarding monthly and quarterly goals and client or prospect
needs. In addition, each week is started with a meeting of all Senior and Executive Vice Presidents so that all team members are informed
on the latest developments of our Company. Our employees and their ClientFIRST approach to service have been instrumental to our success.

 Our Business Strategy

 We are focused on growing business relationships and
building core deposits, profitable loans and noninterest income. We believe that we have built a dynamic franchise that meets the financial
needs of our clients by providing an array of personalized products and services delivered by seasoned banking professionals with knowledge
of our local markets. Our overall strategic goal is to provide the highest level of service to our clients while achieving high-performance
metrics within the community banking market that drive franchise and shareholder value. Our specific business strategies include:

 Focus on Profitable and Efficient Growth.
Our executive management team and board of directors are dedicated to producing profits and returns for our shareholders. We actively
manage the mix of assets and liabilities on our balance sheet to optimize our net interest margin while also maintaining expense controls
and developing noninterest income streams. By continually striving to build a well-structured balance sheet, we seek to increase profitability
and improve our return on average assets, return on average equity and efficiency ratio. We believe that, as the economy continues to
improve, our focus on maximizing our net interest margin and minimizing our efficiency ratio while maintaining credit quality controls
will translate into continued and improved profitability and shareholder returns. We are committed to enhancing these levels of profitability
by focusing on our core competencies of commercial lending and core deposit gathering. We believe that we have the infrastructure currently
in place, such as technology, support staff and administration, to support expansion with limited associated noninterest expense increases.

 Provide a Distinctive Client Experience.
Our markets have been subject to consolidation of local community banks primarily by larger, out-of-state financial institutions. We believe
there is a large client base in our markets that prefers doing business with a local institution and may be dissatisfied with the service
offered by national and larger regional banks. We believe that the exceptional level of professional service provided to our clients as
a result of our ClientFIRST model provides us with a distinct competitive advantage over our local competitors. We also believe that technology
innovation will continue to play a critical role in retaining clients and winning new business. We believe that our current mobile banking,
on-line banking and cash management offerings are industry-leading solutions amongst community banks. During 2023, 68% of deposits were
acquired through our office network, 24% came through the commercial remote deposit capture channel and the remaining 8% came through
consumer mobile deposits. We believe that the volume in remote deposit capture and mobile deposit channels will continue to increase over
time as more clients become acquainted with the convenience these services provide. By delivering superior professional service through
our ClientFIRST model, coupled with our deep understanding of our markets and our commitment to providing the latest technology solutions
to meet our clients' banking needs, we believe that we can attract new clients and expand our total loans and deposits.

 Maintain a Rigorous Risk Management Infrastructure.
As we grow, one of our top priorities is to continue to build a robust enterprise risk management infrastructure. We believe effective
risk management requires a culture of risk management and governance throughout the Company. The legislative and regulatory landscape
continues to quickly evolve, so we are continually performing risk assessments throughout the organization and re-allocating resources
where appropriate. We will continue to add new resources and technology investments to help enhance all of our risk management processes
throughout the Bank. Our risk management success is exemplified by our historic credit risk management and disciplined underwriting practices,
which have enabled us to successfully grow our balance sheet while maintaining strong credit quality metrics. We do not reduce our credit
standards or pricing discipline to generate new loans. In addition, we are heavily focused on compliance risk and cybersecurity risk,
as both of these risks have increased since our inception. Our management team continually analyzes emerging fraud and security risks
and utilizes tools, strategies and policies to manage risk while delivering an optimal and appropriate client experience. We believe our
risk management structure allows our board and senior management to maintain effective oversight of our risks to ensure

 that our personnel are following prudent
and appropriate risk management practices resulting in strong loan quality and minimal credit losses.

 Attract Talented Banking Professionals With A
"ClientFIRST" Focus. We believe that our ability to attract and retain banking professionals with strong community
relationships and significant knowledge of our markets will continue to drive our success and grow our business in an efficient manner.
By focusing on experienced, established bankers who deliver exceptional client service through our ClientFIRST model, we believe we can
enhance our market position and add profitable growth opportunities. We believe that the strength of our exceptional client service and
relationship banking approach will continue to help us attract these established bankers. In recent years, we have invested in our internal
infrastructure, including support and back office personnel, and we believe that we can continue to add experienced frontline bankers
to our existing markets, which will drive our efficient growth.

 We will continue to expand our franchise, but only
in a controlled manner and as permitted by our regulators. We may choose to open new locations, but only after rigorous due diligence
and substantial quantitative analysis regarding the financial and capital impacts of such investments. We may also seek to enter new metropolitan
markets contiguous to, or nearby, our current South Carolina footprint, such as our recently opened expansions in Greensboro and Charlotte,
North Carolina, but only after careful study and the identification and vetting of a local, senior level banking team with significant
experience and reputational strength in that market and receipt of any applicable regulatory approvals. We have not yet supplemented our
historic strategy of organic deposit and loan growth with traditional mergers or acquisitions. We evaluate potential acquisition opportunities
that we believe would be complementary to our business as part of our growth strategy. However, we have not yet identified any specific
acquisition opportunity that meets our strict requirements and do not have any immediate plans, arrangements or understandings relating
to any acquisition. Furthermore, we do not believe an acquisition is necessary to successfully drive our growth and execute our ClientFIRST
model.

 Lending Activities

 General. We offer a full complement of loan
services to businesses and individuals. This includes commercial, real estate, and consumer loans. Our underwriting standards vary for
each type of loan, as described below. Because loans typically provide higher interest yields than other types of interest-earning assets,
we invest a substantial percentage of our earning assets in our loan portfolio. At December 31, 2023, we had net loans of $3.56 billion,
representing 87.8% of our total assets.

 We focus our lending to businesses and individuals
that reside in the markets that we serve. By focusing on this client base and by serving each client with a consistent relationship team
of bankers, we have generated a loan portfolio with larger average loan amounts than we believe is typical for a community bank. As of
December 31, 2023, our average loan size was approximately $375,000. At the same time, we have strived to maintain a diversified loan
portfolio and limit the amount of our loans to any single client. As of December 31, 2023, our ten largest client loan relationships represented
approximately $314.1 million, or 8.72%, of our loan portfolio.

 In October 2023, we announced the opening of the Dream
Mortgage Center in Columbia, South Carolina. The Dream Mortgage Center is a loan production center designed to create space for opportunities
for homebuyer education, community events, and mortgage lending experts equipped with a variety of loan products.

 Loan Approval. Certain credit risks are inherent
in making loans. These include prepayment risks, risks resulting from uncertainties in the future value of collateral, risks resulting
from changes in economic and industry conditions, and risks inherent in dealing with individual borrowers. We attempt to mitigate repayment
risks by adhering to internal credit policies and procedures. These policies and procedures include officer and client lending limits,
a multi-layered approval process for larger loans, documentation examination, and follow-up procedures for any exceptions to credit policies.
Our loan approval policies provide for various levels of officer lending authority. When the amount of aggregate loans to a single borrower
exceeds an individual officer's lending authority, the loan request will be considered for approval by a team of officers led by
a senior lender, or by the voting members of the Credit Approval Support Team ("CAST") committee, based on the loan amount.
The CAST committee, which is comprised of a group of our senior commercial lenders, senior credit administrators, chief risk officer,
president, and chief executive officer, has pre-determined lending limits, and any loans in excess of this lending limit will be submitted
for approval by our full board. We do not make any loans to any director or executive officer of the Bank unless the loan is approved
by the board of directors of the Bank and all loans to directors, officers and employees are on terms not more favorable to such person
than would be available to a person not affiliated with the Bank, consistent with federal banking regulations.

 Management monitors exposure to credit risk from potential
concentrations of loans to particular borrowers or groups of borrowers, industries and geographic regions, as well as concentrations of
lending products and practices such as loans

 that subject borrowers to substantial payment increases (e.g., principal deferral periods,
loans with initial interest-only periods, etc.), and loans with high loan-to-value ratios. These types of loans are subject to strict
underwriting standards and are more closely monitored than a loan with a low loan-to-value ratio. Furthermore, there are industry practices
that could subject us to increased credit risk should economic conditions change over the course of a loan's life. For example,
we make variable rate loans and fixed rate principal-amortizing loans with maturities prior to the loan being fully paid (i.e. balloon
payment loans). The various types of loans are individually underwritten and monitored to manage the associated risks.

 Credit Administration and Loan Review. We maintain
a continuous loan review system. We also apply a credit grading system to each loan, and we use an independent process to review the loan
files on a test basis to assess the grading of each loan. We periodically review performance benchmarks established by management in the
areas of nonperforming assets, charge-offs, past dues, and loan documentation. Each loan officer is responsible for each loan he or she
makes, regardless of whether other individuals or committees joined in the approval. This responsibility continues until the loan is repaid
or until the loan is officially assigned to another officer.

 Lending Limits. Our lending activities are subject
to a variety of lending limits imposed by federal and state laws and regulations. In general, the Bank is subject to a legal limit on
loans to a single borrower equal to 15% of the Bank's capital and unimpaired surplus. Based upon the capitalization of the Bank
at December 31, 2023, the maximum amount we could lend to one borrower was $58.5 million. However, to mitigate concentration risk, our
internal lending limit at December 31, 2023 was $41.0 million and may vary based on our assessment of the lending relationship. The board
of directors will adjust the internal lending limit as deemed necessary to continue to mitigate risk and serve our clients. The Bank's
legal lending limit will increase or decrease in response to increases or decreases in the Bank's level of capital. We are able
to sell participations in our larger loans to other financial institutions, which allow us to manage the risk involved in these loans
and to meet the lending needs of our clients requiring extensions of credit in excess of these limits.

 Loan Portfolio Segments. Our loan portfolio
is comprised of commercial and consumer loans made to small businesses and individuals for various business and personal purposes. While
our loan portfolio is not concentrated in loans to any single borrower or a relatively small number of borrowers, the principal component
of our loan portfolio is loans secured by real estate mortgages on either commercial or residential property. These loans will generally
fall into one of the following six categories: commercial owner occupied real estate, commercial non-owner occupied real estate, commercial
construction, consumer real estate, consumer construction, and home equity loans. We obtain a security interest in real estate whenever
possible, in addition to any other available collateral, in order to increase the likelihood of the ultimate repayment of the loan. At
December 31, 2023, loans secured by first or second mortgages on commercial and consumer real estate made up approximately 84.8% of our
loan portfolio. In addition to loans secured by real estate, our loan portfolio includes commercial business loans and other consumer
loans which comprised 13.9% and 1.4%, respectively, of our total loan portfolio at December 31, 2023.

 Interest rates for all real estate loan categories
may be fixed or adjustable, and will more likely be fixed for shorter-term loans. We generally charge an origination fee for each loan
which is taken into income over the life of the loan as an adjustment to the loan yield. Other loan fees consist primarily of late charge
fees. Real estate loans are subject to the same general risks as other loans and are particularly sensitive to fluctuations in the value
of real estate. Fluctuations in the value of real estate, as well as other factors arising after a loan has been made, could negatively
affect a borrower's cash flow, creditworthiness, and ability to repay the loan. Although, the loans are collateralized by real estate,
the primary source of repayment may not be the sale of real estate.

 The following describes the types of loans in our loan
portfolio.

 Commercial Real Estate
 Loans (Commercial Owner Occupied and Commercial Non-owner Occupied Real Estate Loans). At December 31, 2023, commercial owner
 occupied and non-owner occupied real estate loans (other than construction loans) amounted to $1.57 billion, or 43.7% of our loan
 portfolio. Of our commercial real estate loan portfolio, $942.5 million in loans were non-owner occupied properties, representing
 42.4% of our commercial loan portfolio and 26.2% of our total loan portfolio. The remainder of our commercial real estate loan
 portfolio, $631.7 million in loans or 28.4% of the commercial loan portfolio, were owner occupied. Owner occupied loans represented
 17.5% of our total loan portfolio. At December 31, 2023, our individual commercial real estate loans ranged in size from
 approximately $15,000 to $21.0 million, with an average loan size of approximately $850,000. These loans generally have terms of
 five years or less, although payments may be structured on a longer amortization basis. We evaluate each borrower on an individual
 basis and attempt to determine the business risks and credit profile of each borrower. We attempt to reduce credit risk in the commercial real estate portfolio by emphasizing loans on owner-occupied office and retail buildings where the loan-to-value ratio, established by independent appraisals, does not exceed 85%. We also generally require that

 a borrower's cash flow exceeds 115% of monthly debt service obligations. As of December 31, 2023, $215.9 million, or 6.0% of our total loan portfolio, was collateralized by office properties, $173.9 million, or 4.8%, was collateralized by retail properties, $146.3 million, or 4.1%, was collateralized by hotels, and $100.4 million, or 2.8% was collateralized by multifamily properties. In order to seek to ensure secondary sources of payment and liquidity to support a loan request, we typically review all of the personal financial statements of the principal owners and require their personal guarantees.

 Construction Real Estate Loans. We offer adjustable and fixed rate construction real estate loans for commercial and consumer projects, typically to builders and developers and to consumers who wish to build their own homes. At December 31, 2023, total commercial and consumer construction loans amounted to $214.0 million, or 5.9% of our loan portfolio. Commercial construction loans represented $150.7 million, or 4.2%, of our total loan portfolio, while consumer construction loans represented $63.3 million, or 1.7% of our total loan portfolio. At December 31, 2023, our commercial construction real estate loans ranged in size from approximately $15,000 to $13.0 million, with an average loan balance of approximately $2.1 million. At December 31, 2023, our consumer or residential construction loans ranged in size from approximately $18,000 to $3.2 million, with an average loan size of approximately $705,000. The duration of our construction loans generally is limited to 18 months, although payments may be structured on a longer amortization basis. Commercial construction loans generally carry a higher degree of risk than long-term financing of existing properties because repayment depends on the ultimate completion of the project and sometimes on the sale of the property. Specific risks include:

 cost overruns;

 mismanaged construction;

 inferior or improper construction techniques;

 economic changes or downturns during construction;

 a downturn in the real estate market;

 rising interest rates which may prevent sale of the property; and

 failure to sell completed projects in a timely manner.

 We attempt to reduce the risk associated with construction loans by obtaining personal guarantees where possible and by keeping the loan-to-value ratio of the completed project at or below 80%.

 Commercial Business Loans. We make loans for commercial purposes in various lines of businesses, including the manufacturing, service industry, and professional service areas. At December 31, 2023, commercial business loans amounted to $500.2 million, or 13.9% of our loan portfolio, and ranged in size from approximately $1,000 to $12.4 million, with an average loan size of approximately $282,000. Commercial loans are generally considered to have greater risk than first or second mortgages on real estate because commercial loans may be unsecured, or if they are secured, the value of the collateral may be difficult to assess and more likely to decrease than real estate.

 We are eligible to offer small business loans utilizing government enhancements such as the Small Business Administration's ("SBA") 7(a) program and SBA's 504 programs. These loans typically are partially guaranteed by the government, which helps to reduce their risk. Government guarantees of SBA loans do not exceed, and are generally less than, 80% of the loan. As of December 31, 2023, we had originated seven loans utilizing government enhancements and over 30 loans engaged in state-based small business partnerships.

 Real Estate Loans and Home Equity Loans. At December 31, 2023 consumer real estate loans (other than construction loans)
 amounted to $1.27 billion, or 35.1% of our loan portfolio. Included in the consumer real estate loans was $1.08 billion, or 30.0% of
 our loan portfolio, in first and second mortgages on individuals' homes, while home equity loans represented $183.0 million,
 or 5.1% of our total loan portfolio. At December 31, 2023, our individual residential real estate loans ranged in size from $3,000
 to $5.6 million, with an average loan size of approximately $472,000. Generally, we limit the loan-to-value ratio on our consumer
 real estate loans to 85%. We offer fixed and adjustable rate consumer real estate loans with terms of up to 30 years. We also offer
 home equity lines of credit. At December 31, 2023, our individual home equity lines of credit ranged in size from $1,000 to $1.8
 million, with an average of approximately $86,000. Our underwriting criteria and the risks associated with home equity loans and
 lines of credit are generally the same as those for first mortgage loans. Home equity lines of credit typically have terms of ten years or less. We generally limit the extension of credit to 90% of the market value of each property, although we may extend up to 100% of the market value.

 Other Consumer Loans. We make a variety of loans to individuals for personal and household purposes, including secured and unsecured installment loans and revolving lines of credit. These consumer loans are underwritten based on the borrower's income, current debt level, past credit history, and the availability and value of collateral. Consumer rates are both fixed and variable, with negotiable terms. At December 31, 2023, consumer loans other than real estate amounted to $48.8 million, or 1.4% of our loan portfolio, and ranged in size from $1,000 to $17.2 million, with an average loan size of approximately $35,000. Our installment loans typically amortize over periods up to 60 months. We will offer consumer loans with a single maturity date when a specific source of repayment is available. We typically require monthly payments of interest and a portion of the principal on our revolving loan products. Consumer loans are generally considered to have greater risk than first or second mortgages on real estate because they may be unsecured, or, if they are secured, the value of the collateral may be difficult to assess and more likely to decrease in value than real estate.

 Deposit Services

 Our principal source of funds is core deposits. We
offer a full range of deposit services, including checking accounts, commercial checking accounts, savings accounts, and other time deposits
of various types, ranging from daily money market accounts to long-term certificates of deposit. At December 31, 2023, we had $379.4 million
in out-of-market, or wholesale, certificates of deposits. In an effort to obtain lower cost deposits, we have focused on expanding our
retail deposit program. We currently have 12 retail offices which assist us in obtaining low cost transaction accounts that are less affected
by rising rates. Deposit rates are reviewed regularly by our senior management. We believe that the rates we offer are competitive with
those offered by other financial institutions in our area. We focus on client service and our ClientFIRST culture to attract and retain
deposits.

 Other Banking Services

 In addition to deposit and loan services, we offer
other bank services such as internet banking, cash management, safe deposit boxes, direct deposit, automatic drafts, bill payment and
mobile banking services. We earn fees for most of these services, including debit and credit card transactions, sales of checks, and wire
transfers. We also receive ATM transaction fees from transactions performed by our clients. We are associated with the NYCE, Pulse, STAR,
and Cirrus networks, which are available to our clients throughout the country. Since we outsource our ATM services, we are charged related
transaction fees from our ATM service provider. We have contracted with Fidelity National Information Systems, an outside computer service
company, to provide our core data processing services and our ATM processing. By outsourcing these services, we believe we are able to
reduce our overhead by matching the expense in each period to the transaction volume that occurs during the period, as a significant portion
of the fee charged is directly related to the number of loan and deposit accounts and the related number of transactions we have during
the period. We believe that by being associated with a shared network of ATMs, we are better able to serve our clients and are able to
attract clients who are accustomed to the convenience of using ATMs, although we do not believe that maintaining this association is critical
to our success. We also offer Internet banking services, bill payment services, and cash management and mobile banking services.

 Competition

 The banking business is highly competitive, and we
experience competition in our market from many other financial institutions. Competition among financial institutions is based upon interest
rates offered on deposit accounts, interest rates charged on loans, other credit and service charges relating to loans, the quality and
scope of the services rendered, the convenience of banking facilities, and, in the case of loans to commercial borrowers, relative lending
limits. We compete with commercial banks, credit unions, savings and loan associations, mortgage banking firms, consumer finance companies,
securities brokerage firms, insurance companies, money market funds, and other mutual funds, as well as other super-regional, national,
and international financial institutions that operate offices in Greenville, Columbia and Charleston, South Carolina; Charlotte, Raleigh
and Greensboro, North Carolina; Atlanta, Georgia and elsewhere.

 As of June 30, 2023, the most recent date for which
market data is available, there were 39 financial institutions in our primary market of Greenville County, 26 financial institutions in
the Columbia market, 35 financial institutions in the Charleston market, 36 financial institutions in the Raleigh market, 24 financial
institutions in the Greensboro market, 49 financial institutions in the Charlotte market, and 82 financial institutions in the Atlanta
market. We compete with other financial institutions in our market areas both in
attracting deposits and in making loans. In addition, we have to attract our client base from other existing financial institutions and
from new residents. Many of our competitors are well-established, larger financial institutions with substantially greater resources and
lending limits, such as, Bank of America, Wells Fargo, and Truist. These institutions offer some services, such as extensive and established
branch networks and trust services that we do not provide. In addition, many of our non-bank competitors are not subject to the same extensive

 federal regulations that govern bank holding companies and federally insured banks. We believe the financial services industry will likely
continue to become more competitive as further technological advances enable more financial institutions to provide expanded financial
services without having a physical presence in our markets. Because larger competitors have advantages in attracting business from larger
corporations, we do not generally compete for that business. Instead, we concentrate our efforts on attracting the business of individuals
and small and medium-size businesses. With regard to such accounts, we generally compete on the basis of client service and responsiveness
to client needs, the convenience of our offices and hours, and the availability and pricing of our products and services.

 We believe our commitment to quality and personalized
banking services through our ClientFIRST culture is a factor that contributes to our competitiveness and success.

 Employees

 At December 31, 2023, we employed a total of 296 full-time
equivalent employees. We provide our full-time employees and certain part-time employees with a comprehensive program of benefits, including
medical benefits, life insurance, long-term disability coverage and a 401(k) plan. Our employees are not represented by a collective bargaining
agreement. Management considers its employee relations to be excellent.

 Available Information

 We file Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K with the SEC which are accessible electronically at the
SEC's website at www.sec.gov. We maintain an Internet website at www.southernfirst.com where these reports can also
be accessed free of charge. No information contained on our website is intended to be included as part of, or incorporated by reference
into, this Annual Report on Form 10-K.

 SUPERVISION AND REGULATION

 Both the Company and the Bank are subject to extensive
state and federal banking laws and regulations that impose specific requirements or restrictions on and provide for general regulatory
oversight of virtually all aspects of our operations. These laws and regulations are generally intended to protect depositors, not shareholders.
Changes in applicable laws or regulations may have a material effect on our business and prospects.

 The following discussion is not intended to be a complete
list of all the activities regulated by the banking laws or of the impact of such laws and regulations on our operations. It is intended
only to briefly summarize some material provisions. The following summary is qualified by reference to the statutory and regulatory provisions
discussed.

 Legislative and Regulatory Developments

 Although the 2008 financial crisis has now passed,
two legislative and regulatory responses – the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank
Act") and the Basel III-based capital rules – will continue to have an impact on our operations.

 In addition, newer regulatory developments implemented
in response to the COVID-19 pandemic, including the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and
the Consolidated Appropriations Act, 2021, which enhanced and expanded certain provisions of the CARES Act, have had and will continue
to have an impact on our operations.

 The Dodd-Frank Wall Street Reform and Consumer Protection
Act

 The Dodd-Frank Act was signed into law in July 2010
and impacts financial institutions in numerous ways, including:

 The creation of a Financial Stability Oversight Council responsible for monitoring and managing systemic risk,

 Granting additional authority to the Board of Governors of the Federal Reserve (the "Federal Reserve") to regulate certain types of nonbank financial companies,

 Granting new authority to the FDIC as liquidator and receiver,

 Changing the manner in which deposit insurance assessments are made,

 Requiring regulators to modify capital standards,

 Establishing the Consumer Financial Protection Bureau (the "CFPB"),

 Capping interchange fees that banks charge merchants for debit card transactions,

 Imposing more stringent requirements on mortgage lenders, and

 Limiting banks' proprietary trading activities.

 There are many provisions in the Dodd-Frank Act mandating
regulators to adopt new regulations and conduct studies upon which future regulation may be based. While some have been issued, many remain
to be issued. Governmental intervention and new regulations could materially and adversely affect our business, financial condition and
results of operations.

 The Economic Growth, Regulatory Relief, and Consumer
Protection Act

 On May 24, 2018, President Trump signed into law the
first major financial services reform bill since the enactment of the Dodd-Frank Act. The Economic Growth, Regulatory Relief, and Consumer
Protection Act (the "Reform Law") modified or eliminated certain requirements on community and regional banks and nonbank
financial institutions. For instance, under the Reform Act and related rule making:

 banks that have less than $10 billion in total consolidated assets and total trading assets and trading liabilities of less than five percent of total consolidated assets is excluded from Section 619 of the Dodd-Frank Act, known as the "Volcker Rule", which prohibits "proprietary trading" and the ownership or sponsorship of private equity or hedge funds that are referred to as "covered funds";

 the asset threshold for bank holding companies to qualify for treatment under the "Small Bank Holding Company and Savings and Loan Holding Company Policy Statement" was raised from $1 billion to $3 billion, which exempts these institutions from certain regulatory requirements including the Basel III capital rules;

 a "community bank leverage ratio" was adopted, which is applicable to certain banks and bank holding companies with total assets of less than $10 billion (as described below under "Basel Capital Standards"); and

 banks with up to $3 billion in total consolidated assets may be examined by their federal banking regulator every 18 months (as opposed to every 12 months).

 Basel Capital Standards

 Regulatory capital rules known as Basel III impose
minimum capital requirements for bank holding companies and banks. The Basel III rules apply to all national and state banks and savings
and loan associations regardless of size and bank holding companies and savings and loan holding companies other than "small bank
holding companies," generally holding companies with consolidated assets of less than $3 billion. More stringent requirements are
imposed on "advanced approaches" banking organizations-those organizations with $250 billion or more in total consolidated
assets, $10 billion or more in total foreign exposures, or that have opted into the Basel II capital regime.

 The Basel III rules require the Company and the Bank
to maintain the following minimum capital requirements:

 a common equity Tier 1 ("CET1") risk-based capital ratio of 4.5%;

 a Tier 1 risk-based capital ratio of 6%;

 a total risk-based capital ratio of 8%; and

 a leverage ratio of 4%.

 Under Basel III, Tier 1 capital includes two components:
CET1 capital and additional Tier 1 capital. The highest form of capital, CET1 capital, consists solely of common stock (plus related surplus),
retained earnings, accumulated other comprehensive income, otherwise referred to as AOCI, and limited amounts of minority interests that
are in the form of common stock. Additional Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock, Tier 1 minority
interests and grandfathered trust preferred securities (as discussed below). Tier 2 capital generally includes the allowance for credit
losses up to 1.25% of risk-weighted assets, qualifying preferred stock, subordinated debt and qualifying tier 2 minority interests, less
any deductions in Tier 2 instruments of an unconsolidated financial institution. Cumulative perpetual preferred stock is included only
in Tier 2 capital, except that the Basel III rules permit bank holding companies with less than $15 billion in total consolidated assets
to continue to include trust preferred securities and cumulative perpetual preferred stock issued before May 19, 2010 in Tier 1 Capital
(but not in CET1 capital), subject to certain restrictions. AOCI is presumptively included in CET1 capital and often would operate to
reduce this category of capital. When implemented, Basel III provided a one-time opportunity at the end of the first quarter of 2015 for
covered banking organizations to opt out of much of this treatment
of AOCI. We made this opt-out election and, as a result, retained our pre-existing treatment for AOCI.

 In addition, in order to avoid restrictions on capital
distributions or discretionary bonus payments to executives, under Basel III, a banking organization must maintain a 2.5% "capital
conservation buffer" on top of its minimum risk-based capital requirements. This buffer must consist solely of CET1 capital, but
the buffer applies to all three risk-based measurements (CET1, Tier 1 capital and total capital). The 2.5% capital conservation buffer
effectively results in the

 following minimum capital ratios (taking into account the capital conservation buffer): (i) a CET1 capital
ratio of 7.0%, (ii) a Tier 1 risk-based capital ratio of 8.5%, and (iii) a total risk-based capital ratio of 10.5%.

 Proposed new rules for U.S. implementation of capital
requirements under Basel IV rules, more recently referred to as the "Basel III Endgame", were issued by the U.S. federal banking
agencies on July 27, 2023. These proposed rules include broad-based changes to the risk-weighting framework for various credit exposures
and operational risk capital requirements. However, the proposed rules generally apply only to large banking organizations with total
assets of $100 billion or more, and are expected to not be applicable to us.

 As part of its response to the impact of the COVID-19
pandemic, in the first quarter of 2020, U.S. federal regulatory authorities issued an interim final rule that provided banking organizations
that adopted the credit impairment model, the Current Expected Credit Loss, or CECL, during the 2020 calendar year with the option to
delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred
loss methodology, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during
the initial two-year delay (i.e., a five-year transition in total). In connection with our adoption of CECL on January 1, 2022, we did
not elect to utilize the five-year CECL transition.

 In November 2019, the federal banking regulators published
final rules under the Reform Law (discussed above) implementing a simplified measure of capital adequacy for certain banking organizations
that have less than $10 billion in total consolidated assets. Under the final rules, which went into effect on January 1, 2020, depository
institutions and depository institution holding companies that have less than $10 billion in total consolidated assets and meet other
qualifying criteria, including a leverage ratio of greater than 9%, off-balance-sheet exposures of 25% or less of total consolidated assets
and trading assets plus trading liabilities of 5% or less of total consolidated assets, are deemed "qualifying community banking
organizations" and are eligible to opt into the "community bank leverage ratio framework." A qualifying community banking
organization that elects to use the community bank leverage ratio framework and that maintains a leverage ratio of greater than 9% is
considered to have satisfied the generally applicable risk-based and leverage capital requirements under the Basel III rules and, if applicable,
is considered to have met the "well capitalized" ratio requirements for purposes of its primary federal regulator's
prompt corrective action rules, discussed below. We do not have any immediate plans to elect to use the community bank leverage ratio
framework but may make such an election in the future.

 As of December 31, 2023, the Bank was well-capitalized,
as defined by FDIC regulations. As of December 31, 2023, the Company had regulatory capital in excess of the Federal Reserve's requirements
and met the Basel III rule requirements to be well-capitalized.

 Acquisition Activity

 The primary purpose of a bank holding company is to
control and manage banks. The BHCA generally requires the prior approval of the Federal Reserve for any merger involving a bank holding
company or any acquisition by a bank holding company of another bank or bank holding company. In addition, the prior approval of the FDIC
is required for a bank to merge with another bank or purchase the assets or assume the deposits of another bank. In determining whether
to approve a proposed bank acquisition, federal bank regulators will consider, among other factors, the effect of the acquisition on competition,
the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis,
and the acquiring institution's record of addressing the credit needs of the communities it serves, including the needs of low and
moderate income neighborhoods, consistent with the safe and sound operation of the bank, under the Community Reinvestment Act ("CRA").

 On July 9, 2021, President Biden issued an Executive
Order on Promoting Competition in the American Economy. Among other initiatives, the Executive Order encouraged the federal banking agencies
to review their current merger oversight practices under the BHCA and the Bank Merger Act and adopt a plan for revitalization of such
practices. In December 2021, the U.S. Department of Justice ("DOJ") (in consultation with the Federal Reserve, the Office
of the Comptroller of the Currency (the "OCC"), and FDIC announced that it was seeking additional public comments on whether
and how the DOJ should revise the 1995 Bank Merger Competitive Review Guidelines. The comment period closed on February 15, 2022. In March
2022, the FDIC published a Request for Information seeking information and comments regarding the laws, practices, rules, regulations,
guidance, and statements of policy that apply to merger transactions involving one or more insured depository institutions, including
the merger between an insured depository institution and a noninsured institution. In a May 2022 speech, the acting head of the OCC announced
that he had asked his staff to work with DOJ and other federal banking agencies to review the agency's frameworks to analyze bank
mergers. In May 2022, the CFPB announced the establishment of an Office of Competition and Innovation. Additionally, the Federal Trade
Commission and DOJ jointly released the 2023 Draft Merger Guidelines for public comment to strengthen the agencies' oversight over
mergers that would violate the federal antitrust laws. If adopted as proposed in draft form, the Merger Guidelines would

 substantially
modify the existing regulatory framework for merger enforcement. It is not yet clear what effect, if any, the draft Merger Guidelines
will have on the federal banking agencies as they consider revising the requirements for mergers involving banks and bank holding companies.
On January 29, 2024, the OCC released a notice of proposed rulemaking to (i) amend its existing procedural regulation that provides for
expedited review of a limited set of business combinations involving a national bank or federal savings association and (ii) adopt a new
policy statement summarizing the OCC's substantive approach to evaluating Bank Merger Act applications. Comments on the OCC notice
of proposed rulemaking are due no later than 60 days following publication of the proposal in the Federal Register.

 There are many steps
that must be taken by the agencies before any final changes to the framework for evaluating bank mergers can be implemented and the prospects
for such action continue to be uncertain at this time however, the adoption of more expansive or prescriptive standards may have
an impact on any acquisition activities.

 Proposed Legislation and Regulatory Action

 From time to time, various legislative and regulatory
initiatives are introduced in Congress and state legislatures, as well as by regulatory agencies. Such initiatives may include proposals
to expand or contract the powers of bank holding companies and depository institutions or proposals to substantially change the financial
institution regulatory system. Such legislation could change banking statutes and the operating environment of the Company in substantial
and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible
activities or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. We cannot
predict whether any such legislation will be enacted, and, if enacted, the effect that it, or any implementing regulations, would have
on the financial condition or results of operations of the Company. A change in statutes, regulations or regulatory policies applicable
to the Company or the Bank could have a material effect on the business of the Company.

 We own 100% of the outstanding capital stock of the
Bank, and therefore we are considered to be a bank holding company under the federal Bank Holding Company Act of 1956. As a result, we
are primarily subject to the supervision, examination and reporting requirements of the Federal Reserve under the BHCA and its regulations
promulgated thereunder. Moreover, as a bank holding company of a bank located in South Carolina, we also are subject to the South Carolina
Banking and Branching Efficiency Act.

 Permitted Activities. Under the BHCA,
a bank holding company is generally permitted to engage in, or acquire direct or indirect control of more than 5% of the voting shares
of any company engaged in, the following activities:

 banking or managing or controlling banks;

 furnishing services to or performing services for our subsidiaries; and

 any activity that the Federal Reserve determines to be so closely related to banking as to be a proper incident to the business of banking.

 Activities that the Federal Reserve has found to be
so closely related to banking as to be a proper incident to the business of banking include:

 factoring accounts receivable;

 making, acquiring, brokering or servicing loans and usual related activities;

 leasing personal or real property;

 operating a non-bank depository institution, such as a savings association;

 trust company functions;

 financial and investment advisory activities;

 conducting discount securities brokerage activities;

 underwriting and dealing in government obligations and money market instruments;

 providing specified management consulting and counseling activities;

 performing selected data processing services and support services;

 acting as agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions; and

 performing selected insurance underwriting activities.

 As a bank holding company we also can elect to be treated
as a "financial holding company," which would allow us to engage in a broader array of activities. In summary, a financial
holding company can engage in activities that are financial in nature or incidental or complimentary to financial activities, including
insurance underwriting, sales and brokerage activities, providing financial and investment advisory services, underwriting services and
limited merchant banking activities. We have not sought financial holding company status, but may elect such status in the future as our
business matures. If we were to elect financial holding company status, each insured depository institution we control would have to be
well capitalized, well managed and have at least a satisfactory rating under the CRA as discussed below.

 The Federal Reserve has the authority to order a bank
holding company or its subsidiaries to terminate any of these activities or to terminate its ownership or control of any subsidiary when
it has reasonable cause to believe that the Bank holding company's continued ownership, activity or control constitutes a serious
risk to the financial safety, soundness or stability of it or any of its bank subsidiaries.

 Change in Control. Two statutes, the
BHCA and the Change in Bank Control Act, together with regulations promulgated under them, require some form of regulatory review before
any company may acquire "control" of a bank or a bank holding company. Under the BHCA, control is deemed to exist if a company
acquires 25% or more of any class of voting securities of a bank holding company; controls the election of a majority of the members of
the board of directors; or exercises a controlling influence over the management or policies of a bank or bank holding company. On January
30, 2020, the Federal Reserve issued a final rule (which became effective September 30, 2020) that clarified and codified the Federal
Reserve's standards for determining whether one company has control over another. The final rule established four categories of
tiered presumptions of noncontrol that are based on the percentage of voting shares held by the investor (less than 5%, 5-9.9%, 10-14.9%
and 15-24.9%) and the presence of other indicia of control. As the percentage of ownership increases, fewer indicia of control are permitted
without falling outside of the presumption of noncontrol. These indicia of control include nonvoting equity ownership, director representation,
management interlocks, business relationship and restrictive contractual covenants. Under the final rule, investors can hold up to 24.9%
of the voting securities and up to 33% of the total equity of a company without necessarily having a controlling influence. State laws
generally, including South Carolina law, require state approval before an acquirer may become the holding company of a state bank.

 Under the Change in Bank Control Act, a person or company
is required to file a notice with the Federal Reserve if it will, as a result of the transaction, own or control 10% or more of any class
of voting securities or direct the management or policies of a bank or bank holding company and either if the bank or bank holding company
has registered securities or if the acquirer would be the largest holder of that class of voting securities after the acquisition. For
a change in control at the holding company level, both the Federal Reserve and the subsidiary bank's primary federal regulator must approve
the change in control; at the bank level, only the bank's primary federal regulator is involved. Transactions subject to the BHCA are
exempt from Change in Control Act requirements. For state banks, state laws, including that of South Carolina, typically require approval
by the state bank regulator as well.

 Source of Strength. There are a number
of obligations and restrictions imposed by law and regulatory policy on bank holding companies with regard to their depository institution
subsidiaries that are designed to minimize potential loss to depositors and to the FDIC insurance funds in the event that the depository
institution becomes in danger of defaulting under its obligations to repay deposits. Under a policy of the Federal Reserve, a bank holding
company is required to serve as a source of financial strength to its subsidiary depository institutions and to commit resources to support
such institutions in circumstances where it might not do so absent such policy. Under the Federal Deposit Insurance Corporation Improvement
Act of 1991, to avoid receivership of its insured depository institution subsidiary, a bank holding company is required to guarantee the
compliance of any insured depository institution subsidiary that may become "undercapitalized" within the terms of any capital
restoration plan filed by such subsidiary with its appropriate federal banking agency up to the lesser of (i) an amount equal to 5% of
the institution's total assets at the time the institution became undercapitalized, or (ii) the amount which is necessary (or would
have been necessary) to bring the institution into compliance with all applicable capital standards as of the time the institution fails
to comply with such capital restoration plan.

 The Federal Reserve also has the authority under the
BHCA to require a bank holding company to terminate any activity or relinquish control of a nonbank subsidiary (other than a nonbank subsidiary
of a bank) upon the Federal Reserve's determination that such activity or control constitutes a serious risk to the financial soundness
or stability of any subsidiary depository institution of the bank holding company. Further, federal law grants federal bank regulatory
authorities' additional discretion to require a bank holding company to divest itself of any bank or nonbank subsidiary if the agency
determines that divestiture may aid the depository institution's financial condition.

 In addition, the "cross guarantee" provisions
of the Federal Deposit Insurance Act (the "FDIA") require insured depository institutions under common control to reimburse
the FDIC for any loss suffered or reasonably anticipated by the FDIC as a result of the default of a commonly controlled insured depository
institution or for any assistance provided by the FDIC to a commonly controlled insured depository institution in danger of default. The
FDIC's claim for damages is superior to claims of shareholders of the insured depository institution or its holding company, but
is subordinate to claims of depositors, secured creditors and holders of subordinated debt (other than affiliates) of the commonly controlled
insured depository institutions.

 The FDIA also provides that amounts received from the
liquidation or other resolution of any insured depository institution by any receiver must be distributed (after payment of secured claims)
to pay the deposit liabilities of the institution prior to payment of any other general or unsecured senior liability, subordinated liability,
general creditor or shareholder. This provision would give depositors a preference over general and subordinated creditors and shareholders
in the event a receiver is appointed to distribute the assets of our Bank.

 Any capital loans by a bank holding company to any
of its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. In
the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency
to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.

 Capital Requirements. The Federal Reserve
imposes certain capital requirements on the bank holding company under the BHCA, including a minimum leverage ratio and a minimum ratio
of "qualifying" capital to risk-weighted assets. These requirements are essentially the same as those that apply to the Bank
and are described above under "Basel III Capital Standards." Subject to certain restrictions, we are able to borrow money
to make a capital contribution to the Bank, and these loans may be repaid from dividends paid from the Bank to the Company. Our ability
to pay dividends depends on, among other things, the Bank's ability to pay dividends to us, which is subject to regulatory restrictions
as described below in "Southern First Bank—Dividends."

 We are also able to raise capital for contribution
to the Bank by issuing securities without having to receive regulatory approval, subject to compliance with federal and state securities
laws.

 Dividends. Since the Company is a bank
holding company, its ability to declare and pay dividends is dependent on certain federal and state regulatory considerations, including
the guidelines of the Federal Reserve. The Federal Reserve has issued a policy statement regarding the payment of dividends by bank holding
companies. In general, the Federal Reserve's policies provide that dividends should be paid only out of current earnings and only
if the prospective rate of earnings retention by the bank holding company appears consistent with the organization's capital needs,
asset quality and overall financial condition. The Federal Reserve's policies also require that a bank holding company serve as
a source of financial strength to its subsidiary banks by standing ready to use available resources to provide adequate capital funds
to those banks during periods of financial stress or adversity and by maintaining the financial flexibility and capital-raising capacity
to obtain additional resources for assisting its subsidiary banks where necessary. Further, under the prompt corrective action regulations,
the ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. These regulatory
policies could affect the ability of the Company to pay dividends or otherwise engage in capital distributions.

 In addition, since the Company is a legal entity separate
and distinct from the Bank and does not conduct stand-alone operations, its ability to pay dividends depends on the ability of the Bank
to pay dividends to it, which is also subject to regulatory restrictions as described below in "Southern First Bank – Dividends."

 South Carolina State Regulation. As a
South Carolina bank holding company under the South Carolina Banking and Branching Efficiency Act, we are subject to limitations on sale
or merger and to regulation by the South Carolina Board of Financial Institutions (the "S.C. Board"). We are not required
to obtain the approval of the S.C. Board prior to acquiring the capital stock of a national bank, but we must notify them at least 15
days prior to doing so. We must receive the S.C. Board's approval prior to engaging in the acquisition of a South Carolina state
chartered bank or another South Carolina bank holding company.

 Southern First Bank

 As a South Carolina bank, deposits in the Bank are
insured by the FDIC up to a maximum amount, which is currently $250,000 per depositor. The S.C. Board and the FDIC regulate or monitor
virtually all areas of the Bank's operations, including;

 security devices and procedures;

 adequacy of capitalization and loss reserves;

 loans;

 investments;

 borrowings;

 deposits;

 mergers;

 issuances of securities;

 payment of dividends;

 interest rates payable on deposits;

 interest rates or fees chargeable on loans;

 establishment of branches;

 corporate reorganizations;

 maintenance of books and records; and

 adequacy of staff training to carry on safe lending and deposit gathering practices.

 These agencies, and the federal and state laws applicable
to the Bank's operations, extensively regulate various aspects of our banking business, including, among other things, permissible
types and amounts of loans, investments and other activities, capital adequacy, branching, interest rates on loans and on deposits, the
maintenance of reserves on demand deposit liabilities, and the safety and soundness of our banking practices.

 All insured institutions must undergo regular on-site
examinations by their appropriate banking agency. The cost of examinations of insured depository institutions and any affiliates may be
assessed by the appropriate federal banking agency against each institution or affiliate as it deems necessary or appropriate. Insured
institutions are required to submit annual reports to the FDIC, their federal regulatory agency, and state supervisor when applicable.
The FDIC has developed a method for insured depository institutions to provide supplemental disclosure of the estimated fair market value
of assets and liabilities, to the extent feasible and practicable, in any balance sheet, financial statement, report of condition or any
other report of any insured depository institution. The FDIC and the other federal banking regulatory agencies also have issued standards
for all insured depository institutions relating, among other things, to the following:

 internal controls;

 information systems and audit systems;

 loan documentation;

 credit underwriting;

 interest rate risk exposure; and

 asset quality.

 Prompt Corrective Action. As an insured
depository institution, the Bank is required to comply with the capital requirements promulgated under the FDIA and the prompt corrective
action regulations thereunder, which set forth five capital categories, each with specific regulatory consequences. Under these regulations,
the categories are:

 Well Capitalized — The institution exceeds the required minimum level for each relevant capital measure. A well-capitalized institution (i) has a total risk-based capital ratio of 10% or greater, (ii) has a Tier 1 risk-based capital ratio of 8% or greater, (iii) has a common equity Tier 1 risk-based capital ratio of 6.5% or greater, (iv) has a leverage capital ratio of 5% or greater, and (v) is not subject to any order or written directive to meet and maintain a specific capital level for any capital measure.

 Adequately Capitalized — The institution meets the required minimum level for each relevant capital measure. No capital distribution may be made that would result in the institution becoming undercapitalized. An adequately capitalized institution (i) has a total risk-based capital ratio of 8% or greater, (ii) has a Tier 1 risk-based capital ratio of 6% or greater, (iii) has a common equity Tier 1 risk-based capital ratio of 4.5% or greater, and (iv) has a leverage capital ratio of 4% or greater.

 Undercapitalized — The institution fails to meet the required minimum level for any relevant capital measure. An undercapitalized institution (i) has a total risk-based capital ratio of less than 8%, (ii) has a Tier 1 risk-based capital ratio of less than 6%, (iii) has a common equity Tier 1 risk-based capital ratio of less than 4.5% or greater, or (iv) has a leverage capital ratio of less than 4%.

 Significantly Undercapitalized — The institution is significantly below the required minimum level for any relevant capital measure. A significantly undercapitalized institution (i) has a total risk-based capital ratio of less than 6%, (ii) has a Tier 1 risk-based capital ratio of less than 4%, (iii) has a common equity Tier 1 risk-based capital ratio of less than 3% or greater, or (iv) has a leverage capital ratio of less than 3%.

 Critically Undercapitalized — The institution fails to meet a critical capital level set by the appropriate federal banking agency. A critically undercapitalized institution has a ratio of tangible equity to total assets that is equal to or less than 2%.

 If the FDIC determines, after notice and an opportunity
for hearing, that the Bank is in an unsafe or unsound condition, the regulator is authorized to reclassify the Bank to the next lower
capital category (other than critically undercapitalized) and require the submission of a plan to correct the unsafe or unsound condition.

 If a bank is not well capitalized, it cannot accept
brokered deposits without prior regulatory approval. Even if approved, rate restrictions will govern the rate a bank may pay on brokered
deposits. In addition, a bank that is not well capitalized cannot offer an effective yield in excess of 75 basis points over interest
paid on deposits of comparable size and maturity in such institution's normal market area for deposits accepted from within its
normal market area, or national rate paid on deposits of comparable size and maturity for deposits accepted outside the bank's normal
market area. Moreover, the FDIC generally prohibits a depository institution from making any capital distributions (including payment
of a dividend) or paying any management fee to its parent holding company if the depository institution would thereafter be categorized
as undercapitalized. Undercapitalized institutions are subject to growth limitations (an undercapitalized institution may not acquire
another institution, establish additional branch offices or engage in any new line of business unless determined by the appropriate federal
banking agency to be consistent with an accepted capital restoration plan, or unless the FDIC determines that the proposed action will
further the purpose of prompt corrective action) and are required to submit a capital restoration plan. The agencies may not accept a
capital restoration plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed
in restoring the depository institution's capital. In addition, for a capital restoration plan to be acceptable, the depository
institution's parent holding company must guarantee that the institution will comply with the capital restoration plan. The aggregate
liability of the parent holding company is limited to the lesser of an amount equal to 5.0% of the depository institution's total
assets at the time it became categorized as undercapitalized or the amount that is necessary (or would have been necessary) to bring the
institution into compliance with all capital standards applicable with respect to such institution as of the time it fails to comply with
the plan. If a depository institution fails to submit an acceptable plan, it is categorized as significantly undercapitalized.

 Significantly undercapitalized categorized depository
institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become categorized
as adequately capitalized, requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks. The appropriate
federal banking agency may take any action authorized for a significantly undercapitalized institution if an undercapitalized institution
fails to submit an acceptable capital restoration plan or fails in any material respect to implement a plan accepted by the agency. A
critically undercapitalized institution is subject to having a receiver or conservator appointed to manage its affairs and for loss of
its charter to conduct banking activities.

 An insured depository institution may not pay a management
fee to a bank holding company controlling that institution or any other person having control of the institution if, after making the
payment, the institution would be undercapitalized. In addition, an institution cannot make a capital distribution, such as a dividend
or other distribution, that is in substance a distribution of capital to the owners of the institution if following such a distribution
the institution would be undercapitalized. Thus, if payment of such a management fee or the making of such would cause a bank to become
undercapitalized, it could not pay a management fee or dividend to the bank holding company.

 As of December 31, 2023, the Bank was deemed to be
"well capitalized."

 Standards for Safety and Soundness. The FDIA
also requires the federal banking regulatory agencies to prescribe, by regulation or guideline, operational and managerial standards
for all insured depository institutions relating to: (i) internal controls, information systems and internal audit systems; (ii)
loan documentation; (iii) credit underwriting; (iv) interest rate risk exposure; and (v) asset growth. The agencies also must
prescribe standards for asset quality, earnings, and stock valuation, as well as standards for compensation, fees and benefits. The
federal banking agencies have adopted regulations and Interagency Guidelines
Prescribing Standards for Safety and Soundness to implement these required standards. These guidelines set forth the safety and soundness
standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes
impaired. Under the regulations, if the FDIC determines that the Bank fails to meet any standards prescribed by the guidelines, the agency
may require the Bank to submit to the agency an acceptable plan to achieve compliance with the standard, as required by the FDIC. The
final regulations establish deadlines for the submission and review of such safety and soundness compliance plans.

 Insurance of Accounts and Regulation by the FDIC.
The Bank's deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. The Dodd-Frank Act permanently
increased the maximum amount of deposit

 insurance for banks to $250,000 per account. As insurer, the FDIC imposes deposit insurance premiums
and is authorized to conduct examinations of and to require reporting by FDIC insured institutions. It also may prohibit any FDIC insured
institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the insurance fund.

 As an FDIC-insured bank, the Bank must pay deposit
insurance assessments to the FDIC based on its average total assets minus its average tangible equity. The Bank's assessment rates
are currently based on its risk classification (i.e., the level of risk it poses to the FDIC's deposit insurance fund). Institutions
classified as higher risk pay assessments at higher rates than institutions that pose a lower risk. In addition to ordinary assessments
described above, the FDIC has the ability to impose special assessments in certain instances.

 In addition to the ordinary assessments described above,
the FDIC has the ability to impose special assessments in certain instances. For example, in November 2023, the FDIC implemented a special
assessment to recover the approximately $16.3 billion loss to the Deposit Insurance Fund associated with protecting uninsured depositors
following the closures of Silicon Valley Bank and Signature Bank earlier in the year. However, the assessment was limited to banks with
in excess of $5 billion uninsured deposits as of December 31, 2022, so we did not receive any assessment.

 The FDIC may terminate the deposit insurance of any
insured depository institution, including the Bank, if it determines after a hearing that the institution has engaged in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or
condition imposed by the FDIC. It also may suspend deposit insurance temporarily during the hearing process for the permanent termination
of insurance if the institution has no tangible capital. If insurance of accounts is terminated, the accounts at the institution at the
time of the termination, less subsequent withdrawals, shall continue to be insured for a period of six months to two years, as determined
by the FDIC. Management is not aware of any practice, condition or violation that might lead to termination of the Bank's deposit
insurance.

 Transactions with Affiliates and Insiders.
The Company is a legal entity separate and distinct from the Bank and its other subsidiaries. Various legal limitations restrict the Bank
from lending or otherwise supplying funds to the Company or its non-bank subsidiaries. The Company and the Bank are subject to Sections
23A and 23B of the Federal Reserve Act and Federal Reserve Regulation W.

 Section 23A of the Federal Reserve Act places limits
on the amount of loans or extensions of credit by a bank to any affiliate, including its holding company, and on a bank's investments
in, or certain other transactions with, affiliates and on the amount of advances to third parties collateralized by the securities or
obligations of any affiliates of the bank. Section 23A also applies to derivative transactions, repurchase agreements and securities lending
and borrowing transactions that cause a bank to have credit exposure to an affiliate. The aggregate of all covered transactions is limited
in amount, as to any one affiliate, to 10% of the Bank's capital and surplus and, as to all affiliates combined, to 20% of the Bank's
capital and surplus. Furthermore, within the foregoing limitations as to amount, each covered transaction must meet specified collateral
requirements. The Bank is forbidden to purchase low quality assets from an affiliate.

 Section 23B of the Federal Reserve Act, among other
things, prohibits an institution from engaging in certain transactions with certain affiliates unless the transactions are on terms substantially
the same, or at least as favorable to such institution or its subsidiaries, as those prevailing at the time for comparable transactions
with nonaffiliated companies. If there are no comparable transactions, a bank's (or one of its subsidiaries') affiliate transaction
must be on terms and under circumstances, including credit standards, that in good faith would be offered to, or would apply to, nonaffiliated
companies. These requirements apply to all transactions subject to Section 23A as well as to certain other transactions.

 The affiliates of a bank include any holding company
of the bank, any other company under common control with the bank (including any company controlled by the same shareholders who control
the bank), any subsidiary of the bank that is itself a bank, any company in which the majority of the directors or trustees also constitute
a majority of the directors or trustees of the bank or holding company of the bank, any company sponsored and advised on a contractual
basis by the bank or an affiliate, and any mutual fund advised by a bank or any of the bank's affiliates. Regulation W generally
excludes all non-bank and non-savings association subsidiaries of banks from treatment as affiliates, except to the extent that the Federal
Reserve decides to treat these subsidiaries as affiliates.

 The Bank is also subject to certain restrictions on
extensions of credit to executive officers, directors, certain principal shareholders, and their related interests. Extensions of credit
include derivative transactions, repurchase and reverse repurchase agreements, and securities borrowing and lending transactions to the
extent that such transactions cause a bank to have credit exposure to an insider. Any extension of credit to an insider (i) must be made
on substantially the same terms, including interest rates and collateral requirements, as those prevailing at the time for comparable

 transactions with unrelated third parties and (ii) must not involve more than the normal risk of repayment or present other unfavorable
features.

 On December 22, 2020, the federal banking agencies
issued an interagency statement extending the temporary relief from enforcement action against banks or asset managers, which become principal
shareholders of banks, with respect to certain extensions of credit by banks that otherwise would violate Regulation O, provided the asset
managers and banks satisfy certain conditions designed to ensure that there is a lack of control by the asset manager over the bank. On
December 22, 2022, the federal banking agencies issued a revised interagency statement extending the temporary relief from such enforcement,
which was set to expire on January 1, 2024; however, on December 15, 2023, the federal banking agencies again issued a revised interagency
statement extending the temporary relief from such enforcement which will expire the sooner of January 1, 2025, or the effective date
of a final Federal Reserve rule having a revision to Regulation O that addresses the treatment of extensions of credit by a bank to fund
complex-controlled portfolio companies that are insiders of a bank.

 Dividends. The Company's principal
source of cash flow, including cash flow to pay dividends to its shareholders, is dividends it receives from the Bank. Statutory and regulatory
limitations apply to the Bank's payment of dividends to the Company. As a South Carolina chartered bank, the Bank is subject to
limitations on the amount of dividends that it is permitted to pay. Unless otherwise instructed by the S.C. Board, the Bank is generally
permitted under South Carolina state banking regulations to pay cash dividends of up to 100% of net income in any calendar year without
obtaining the prior approval of the S.C. Board. The FDIC also has the authority under federal law to enjoin a bank from engaging in what
in its opinion constitutes an unsafe or unsound practice in conducting its business, including the payment of a dividend under certain
circumstances. The Bank must also maintain the CET1 capital conservation buffer of 2.5% to avoid becoming subject to restrictions on capital
distributions, including dividends, as described above.

 Branching. Under current South Carolina
law, the Bank may open branch offices throughout South Carolina with the prior approval of the S.C. Board. In addition, with prior regulatory
approval, the Bank is able to acquire existing banking operations in South Carolina. Furthermore, federal legislation permits interstate
branching, including out-of-state acquisitions by bank holding companies, interstate branching by banks, and interstate merging by banks.
The Dodd-Frank Act removes previous state law restrictions on de novo interstate branching in states such as South Carolina. This change
permits out-of-state banks to open de novo branches in states where the laws of the state where the de novo branch to be opened would
permit a bank chartered by that state to open a de novo branch.

 Community Reinvestment Act. The CRA requires
that the FDIC evaluate the record of the Bank in meeting the credit needs of its local community, including low and moderate income neighborhoods.
These factors are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility. Failure to adequately
meet these criteria imposes additional requirements and limitations on our Bank. On June 1, 2022, the date of the most recent examination
report, the Bank received a Needs to Improve CRA rating.

 In December 2019, the FDIC and the Office of the Comptroller
of the Currency (the "OCC") issued a notice of proposed rulemaking intended to (i) clarify which activities qualify for
CRA credit; (ii) update where activities count for CRA credit; (iii) create a more transparent and objective method for measuring
CRA performance; and (iv) provide for more transparent, consistent, and timely CRA-related data collection, recordkeeping, and
reporting. However, the Federal Reserve did not join the proposed rulemaking. In May 2020, the OCC issued its final CRA rule, which
was later rescinded in December 2021, replacing it with a rule based on the rules adopted jointly by the federal banking agencies in
1995, as amended. On the same day that the OCC announced its plans to rescind the CRA final rule, the OCC, the FDIC, and the Federal
Reserve announced that they are working together to "strengthen and modernize the rules implementing the CRA." On May 5,
2022, the OCC, FDIC, and Federal Reserve released a notice of proposed rulemaking regarding the CRA and invited public comment on
the proposed rules. The comment period closed on August 5, 2022. On October 24, 2023, the OCC, the FDIC, and the Federal Reserve
issued the final rule to strengthen and modernize regulations implementing the CRA. The final rule will take effect on April 1,
2024; however, compliance with the majority of the final rule's provisions will not be required until January 1, 2026, and the
data reporting requirements of the final rule will not take effect until January 1, 2027. The final rules, among other things,
include: (i) applying four new performance tests to evaluate the CRA performance of large banks (assets of $2 billion or more): the
Retail Lending Test, Retail Services and Products Test, Community Development Financing Test, and Community Development Services
Test; (ii) retaining a strategic plan option, with modifications to reflect the new performance tests and updates to the approval
standards; (iii) clarifying community development activities by updating the definition of community development, providing a
process by which banks may request confirmation that an activity is eligible for community development consideration, and providing
for a publicly available interagency illustrative list of qualifying community development activities; (iv) updating delineation
requirements for facility-based assessment areas and establishing new retail lending assessment areas for certain large banks; (v)
updating data collection, maintenance, and reporting requirements for large banks, tailoring those requirements

 based on large bank asset size and leveraging existing data where possible, while not imposing new data collection and reporting
requirements for small and intermediate banks; and (vi) continuing public file and public notice disclosure requirements and creating
a new public comment process to facilitate public engagement. Management has and will continue to evaluate any changes to the CRA's
regulations and their impact to the Bank.

 Fair Lending Requirements. We are subject
to certain fair lending requirements and reporting obligations involving lending operations. A number of laws and regulations provide
these fair lending requirements and reporting obligations, including, at the federal level, the Equal Credit Opportunity Act ("ECOA"),
as amended by the Dodd-Frank Act, and Regulation B, as well as the Fair Housing Act ("FHA") and regulations implementing the
FHA. ECOA and Regulation B prohibit discrimination in any aspect of a credit transaction based on a number of prohibited factors, including
race or color, religion, national origin, sex, marital status, age, the applicant's receipt of income derived from public assistance
programs, and the applicant's exercise, in good faith, of any right under the Consumer Credit Protection Act. ECOA and Regulation
B include lending acts and practices that are specifically prohibited, permitted, or required, and these laws and regulations proscribe
data collection requirements, legal action statute of limitations, and disclosure of the consumer's ability to receive a copy of
any appraisal(s) and valuation(s) prepared in connection with certain loans secured by dwellings. In January 2023, the OCC revised its
"Fair Lending" booklet of the Comptroller's Handbook to incorporate clarified details and risk factors for a variety
of examination scenarios addressing fair lending and to update references to supervisory guidance, sound risk management practices, and
applicable legal standards. While this OCC guidance does not apply to the Bank explicitly, it represents best practices guidance for the
Bank. FHA prohibits discrimination in all aspects of residential real-estate related transactions based on prohibited factors, including
race or color, national origin, religion, sex, familial status, and handicap.

 In addition to prohibiting discrimination in credit
transactions on the basis of prohibited factors, these laws and regulations can cause a lender to be liable for policies that result in
a disparate treatment of or have a disparate impact on a protected class of persons. If a pattern or practice of lending discrimination
is alleged by a regulator, then the matter may be referred by the agency to the DOJ for investigation. In December 2012, the DOJ and CFPB
entered into a Memorandum of Understanding under which the agencies have agreed to share information, coordinate investigations, and have
generally committed to strengthen their coordination efforts.

 In addition to substantive penalties and corrective
measures that may be required for a violation of certain fair lending laws, the federal banking agencies may take compliance with fair
lending requirements into account when regulating and supervising other activities of the bank, including in acting on expansionary proposals.

 Consumer Protection Regulations. The
activities of the Bank are subject to a variety of statutes and regulations designed to protect consumers. This includes Title X of the
Dodd-Frank Act, which prohibits engaging in any unfair, deceptive, or abusive acts or practices ("UDAAP"). UDAAP claims involve
detecting and assessing risks to consumers and to markets for consumer financial products and services. Interest and other charges collected
or contracted for by the Bank are subject to state usury laws and federal laws concerning interest rates. The loan operations of the Bank
are also subject to federal laws applicable to credit transactions, such as:

 the Truth-In-Lending Act ("TILA") and Regulation Z, governing disclosures of credit and servicing terms to consumer borrowers and including substantial requirements for mortgage lending and servicing, as mandated by the Dodd-Frank Act;

 the Home Mortgage Disclosure Act and Regulation C, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the communities they serve;

 ECOA and Regulation B, prohibiting discrimination on the basis of race, color, religion, or other prohibited factors in any aspect of a credit transaction;

 the Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act and Regulation V, as well as the rules and regulations of the FDIC governing the use of consumer reports, provision of information to credit reporting agencies, certain identity theft protections and certain credit and other disclosures;

 the Fair Debt Collection Practices Act and Regulation F, governing the manner in which consumer debts may be collected by collection agencies and intending to eliminate abusive, deceptive, and unfair debt collection practices;

 the Real Estate Settlement Procedures Act ("RESPA") and Regulation X, which governs various aspects of residential mortgage loans, including the settlement and servicing process, dictates certain disclosures to be provided to consumers, and imposes other requirements related to compensation of service providers, insurance escrow accounts, and loss mitigation procedures;

 The Secure and Fair Enforcement for Mortgage Licensing Act ("SAFE Act") which mandates a nationwide licensing and registration system for residential mortgage loan originators. The SAFE Act also prohibits

 individuals from engaging in the business of a residential mortgage loan originator without first obtaining and maintaining annually registration as either a federal or state licensed mortgage loan originator;

 The Homeowners Protection Act, or the PMI Cancellation Act, provides requirements relating to private mortgage insurance on residential mortgages, including the cancelation and termination of PMI, disclosure and notification requirements, and the requirement to return unearned premiums;

 The Fair Housing Act prohibits discrimination in all aspects of residential real-estate related transactions based on race or color, national origin, religion, sex, and other prohibited factors;

 The Servicemembers Civil Relief Act and Military Lending Act, providing certain protections for servicemembers, members of the military, and their respective spouses, dependents and others; and

 Section 106(c)(5) of the Housing and Urban Development Act requires making home ownership available to eligible homeowners.

 The deposit operations of the Bank are also subject
to federal laws, such as:

 the Federal Deposit Insurance Act ("FDIA"), which, among other things, limits the amount of deposit insurance available per insured depositor category to $250,000 and imposes other limits on deposit-taking;

 the Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

 the Electronic Funds Transfer Act and Regulation E, which governs the rights, liabilities, and responsibilities of consumers and financial institutions using electronic fund transfer services, and which generally mandates disclosure requirements, establishes limitations on liability applicable to consumers for unauthorized electronic fund transfers, dictates certain error resolution processes, and applies other requirements relating to automatic deposits to and withdrawals from deposit accounts;

 The Expedited Funds Availability Act and Regulation CC, setting forth requirements to make funds deposited into transaction accounts available according to specified time schedules, disclose funds availability policies to customers, and relating to the collection and return of checks and electronic checks, including the rules regarding the creation or receipt of substitute checks; and

 the Truth in Savings Act and Regulation DD, which requires depository institutions to provide disclosures so that consumers can make meaningful comparisons about depository institutions and accounts.

 In light of the growing concern by regulators about
relationships between chartered financial institutions and their third-party service providers, the FDIC joined the other federal supervisory
agencies in passing the Interagency Guidance on Third-Party Relationships: Risk Management. This new guidance provided risk management
oversight guidelines for financial institutions to incorporate in their ongoing relationships with third party vendors.

 The CFPB is an independent regulatory authority housed
within the Federal Reserve. The CFPB has broad authority to regulate the offering and provision of consumer financial products and
services. The CFPB has the authority to supervise and examine depository institutions with more than $10 billion in assets for
compliance with federal consumer laws. The authority to supervise and examine depository institutions with $10 billion or less
in assets, such as us, for compliance with federal consumer laws remains largely with those institutions' primary regulators.
However, the CFPB may participate in examinations of these smaller institutions on a "sampling basis" and may refer
potential enforcement actions against such institutions to their primary regulators. As such, the CFPB may participate in
examinations of the Bank. In addition, states are permitted to adopt consumer protection laws and regulations that are stricter than
the regulations promulgated by the CFPB, and state attorneys general are permitted to enforce consumer protection rules adopted by
the CFPB against certain institutions.

 The CFPB has issued a number of significant rules that
impact nearly every aspect of the lifecycle of consumer financial products and services, including rules regarding residential mortgage
loans. These rules implement Dodd-Frank Act amendments to ECOA, TILA and RESPA. The CFPB continued its scrutiny of so called "pay-to-pay"
and "junk fee" regimes, proposing rules related to credit card penalties. Further, the CFPB proposed rulemaking related to
Residential Property Assessed Clean Entergy Financing, quality control standards for automated valuation models, and personal financial
data rights (discussed in more detail above). The CFPB's focus on fees was emphasized through its ongoing enforcement activity,
including a notable enforcement action taken against Bank of America that required the payment of more than $100 million to customers,
with similar size fines paid to both the CFPB and the OCC.

 The Office of Foreign Assets Control. The Office
of Foreign Assets Control ("OFAC"), which is a division of the U.S. Treasury, is responsible for helping to insure that U.S.
entities do not engage in transactions with "enemies" of the U.S., as defined by various Executive Orders and Acts of Congress.
OFAC has sent, and will send, our banking regulatory agencies lists of names of persons and organizations suspected of aiding, harboring
or engaging in terrorist acts. If the Bank finds a name on any transaction, account or wire transfer that is on an OFAC list, it must
freeze such account, file

 a suspicious activity report and notify the FBI. The Bank has appointed an OFAC compliance officer to oversee
the inspection of its accounts and the filing of any notifications. The Bank actively checks high-risk OFAC areas such as new accounts,
wire transfers and customer files. The Bank performs these checks utilizing software, which is updated each time a modification is made
to the lists provided by OFAC and other agencies of Specially Designated Nationals and Blocked Persons.

 Anti-Money Laundering and the USA Patriot Act.
 Financial institutions must maintain anti-money laundering programs that include established internal policies, procedures, and controls;
a designated compliance officer; an ongoing employee training program; and testing of the program by an independent audit function. The
program must comply with the anti-money laundering provisions of the Bank Secrecy Act ("BSA"). The Company and the Bank are
also prohibited from entering into specified financial transactions and account relationships and must meet enhanced standards for due
diligence and "knowing your customer" in their dealings with foreign financial institutions, foreign customers, and other
high risk customers. Financial institutions must take reasonable steps to conduct enhanced scrutiny of account relationships to guard
against money laundering and to report any suspicious transactions, and certain laws provide law enforcement authorities with increased
access to financial information maintained by banks. Financial institutions must comply with requirements regarding risk-based procedures
for conducing ongoing customer due diligence, which requires the institutions to take appropriate steps to understand the nature and purpose
of customer relationships and identify and verify the identity of the beneficial owners of legal entity customers.

 Anti-money laundering obligations have been substantially
strengthened as a result of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
Act (which we refer to as the "USA PATRIOT Act"). Bank regulators routinely examine institutions for compliance with these
obligations and are required to consider compliance in connection with the regulatory review of applications. The regulatory authorities
have been active in imposing cease and desist orders and money penalty sanctions against institutions that have not complied with these
requirements.

 The USA PATRIOT Act amended the Bank Secrecy Act and
provides, in part, for the facilitation of information sharing among governmental entities and financial institutions for the purpose
of combating terrorism and money laundering by enhancing anti-money laundering and financial transparency laws, as well as enhanced information
collection tools and enforcement mechanics for the U.S. government, including: (i) requiring standards for verifying customer identification
at account opening; (ii) rules to promote cooperation among financial institutions, regulators, and law enforcement entities in identifying
parties that may be involved in terrorism or money laundering; (iii) reports by nonfinancial trades and businesses filed with the U.S.
Treasury Department's Financial Crimes Enforcement Network for transactions exceeding $10,000; (iv) filing suspicious activities
reports if a bank believes a customer may be violating U.S. laws and regulations; and (v) requires enhanced due diligence requirements
for financial institutions that administer, maintain, or manage private bank accounts or correspondent accounts for non-U.S. persons.
Bank regulators routinely examine institutions for compliance with these obligations and are required to consider compliance in connection
with the regulatory review of applications.

 Under the USA PATRIOT Act, the regulators can provide
lists of the names of persons suspected of involvement in terrorist activities. The Bank can be requested, to search its records for any
relationships or transactions with persons on those lists. If the Bank finds any relationships or transactions, it must file a suspicious
activity report and contact the applicable governmental authorities.

 On January 1, 2021, Congress overrode former President
Trump's veto and thereby enacted the National Defense Authorization Act for Fiscal Year 2021 ("NDAA"). The NDAA provides
for one of the most significant overhauls of the BSA and related anti-money laundering laws since the USA Patriot Act. Notably, changes
include:

 expansion of coordination and information sharing efforts among the agencies tasked with administering anti-money laundering and countering the financing of terrorism requirements, including the Financial Crimes Enforcement Network ("FinCEN"), the primary federal banking regulators, federal law enforcement agencies, national security agencies, the intelligence community, and financial institutions;

 providing additional penalties with respect to violations of BSA and enhancing the powers of FinCEN;

 significant updates to the beneficial ownership collection rules and the creation of a registry of beneficial ownership which will track the beneficial owners of reporting companies which may be shared with law enforcement and financial institutions conducting due diligence under certain circumstances;

 improvements to existing information sharing provisions that permit financial institutions to share information relating to SARs with foreign branches, subsidiaries, and affiliates (except those located in China, Russia, or certain other jurisdictions) for the purpose of combating illicit finance risks; and

 enhanced whistleblower protection provisions, allowing whistleblower(s) who provide original information which leads to successful enforcement of anti-money laundering laws in certain judicial or administrative actions resulting in certain monetary sanctions to receive up to 30% of the amount that is collected in monetary sanctions as well as increased protections.

 In August 2023, the FFIEC revised and updated the examination
procedures in the FFIEC's Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual to provide greater transparency into
the examination process and support risk-based examination work. The FFIEC, OCC, and the FDIC also continued their emphasis on the importance
of oversight of third-party vendors in the BSA/AML process through updated guidance, as well as continued examine and enforcement activity
against financial institutions who failed to properly supervise their third-party service providers' BSA/AML activity.

 Following the enactment of the Anti-Money Laundering
Act of 2020, FinCEN began publishing rules pursuant to the Corporate Transparency Act which establishes a regime for many corporate entities
to file a form with FinCEN disclosing their beneficial owners. The first of these rules, the "Reporting Rule," sets forth
which entities are required to disclose their beneficial ownership information to FinCEN and the date for compliance. Companies that qualify
as either a "domestic reporting company" or a "foreign reporting company" must file with FinCEN unless one of
the 23 exemptions (such as the exemptions for select banks and credit unions) apply.

 Following Russia's invasion of Ukraine, OFAC
took several sanctions related actions related to the Russian financial services sector pursuant to Executive Order 14024 beginning in
February 2022 including: (i) a determination by the Secretary of the Treasury with respect to the financial services sector of the Russian
Federation that authorizes sanctions against persons determined to operate or to have operated in that sector; (ii) correspondent or payable-through
account and payment processing prohibitions on certain Russian financial institutions; (iii) the blocking of certain Russian financial
institutions; (iv) expanding sovereign debt prohibitions to apply to new issuances in the secondary market; (v) prohibitions related to
new debt and equity for certain Russian entities; and (vi) a prohibition on transactions involving certain Russian government entities,
including the Central Bank of the Russian Federation. In March 2022, FinCEN issued an alert advising increased vigilance for potential
Russian Sanctions Evasion Attempts. Increased FinCEN scrutiny and sanctions against Russian entities continued in 2023. The Financial
Action Task Force ("FATF") continues to revise the list of high-risk jurisdictions. In October 2023, FATF removed Albania,
Cayman Islands, Jordan, and Panama from its lists of Jurisdictions under Increased Monitoring and added Bulgaria.

 Under the USA PATRIOT Act, the FinCEN can send our
banking regulatory agencies lists of the names of persons suspected of involvement in terrorist activities. The Bank can be requested,
to search its records for any relationships or transactions with persons on those lists. If the Bank finds any relationships or transactions,
it must file a suspicious activity report and contact FinCEN.

 Privacy, Data Security and Credit Reporting.
Under privacy protection provisions of the Gramm-Leach-Bliley Act of 1999 ("GLBA") and related regulations, we are
limited in our ability to disclose non-public information about consumers to nonaffiliated third parties. Financial institutions are
required to disclose their policies for collecting and protecting confidential information. Customers generally may prevent
financial institutions from sharing nonpublic personal financial information with nonaffiliated third parties except under narrow
circumstances, such as the processing of transactions requested by the consumer or if the Bank is jointly sponsoring a product or
service with a nonaffiliated third party. Additionally, financial institutions generally may not disclose consumer account numbers
to any nonaffiliated third party for use in telemarketing, direct mail marketing or other marketing to consumers. It is the
Bank's policy not to disclose any personal information unless required by law.

 Consumers must be notified in the event of a data breach
under applicable state laws. Multiple states and Congress are considering laws or regulations which could create new individual privacy
rights and impose increased obligations on companies handling personal data. For example, on November 18, 2021, the federal financial
regulatory agencies published a final rule that will impose upon banking organizations and their service providers new notification requirements
for significant cybersecurity incidents. Specifically, the final rule requires banking organizations to notify their primary federal regulator
as soon as possible and no later than 36 hours after the discovery of a "computer-security incident" that rises to the level
of a "notification incident" within the meaning attributed to those terms by the final rule. Banks' service providers
are required under the final rule to notify any affected bank to or on behalf of which the service provider provides services "as
soon as possible" after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely
to materially disrupt or degrade, covered services provided to such bank for as much as four hours. The final rule took effect on April
1, 2022 and banks and their service providers must have complied with the requirements of the rule by May 1, 2022. Effective December
9, 2022, the Federal Trade Commission's amendments to GLBA's

 Safeguards Rule went into effect and financial institutions are
continuing to implement this rule including its ongoing monitoring and risk assessment protocols.

 In February 2023, Congress introduced a new bill which
would expand personal information protections that currently apply to customers and expand the notice requirements that apply to the collection
of individual data. Under the bill, financial institutions must (1) inform individuals for what purpose their data is collected and how
the data will be used, and (2) give individuals the opportunity to opt out of data collection. An individual may also end the sharing
of the individual's data with third parties, as well as demand the deletion of the individual's data. While this bill has
not been passed yet, it demonstrates ongoing activity in Congress and a desire to pass more stringent privacy laws. In 2023 alone, at
least six bills related to consumer privacy were introduced in Congress. At the state level, seven additional states passed some form
of consumer privacy protection laws, only some of which include an exemption for entities regulated under GLBA.

 The CFPB also took additional action related to consumer
privacy, At the beginning of the year, the CFPB issued a request for information about data brokers and invited public comment in order
to understand brokers' data collection practices and the commercial uses of personal data. The CFPB also began rulemaking to implement
section 1033 of the Consumer Financial Protection Act of 2010 (CFPA). CFPA section 1033 provides that, subject to rules prescribed by
the CFPB, a covered entity (for example, a bank) must make available to consumers, upon request, transaction data and other information
concerning a consumer financial product or service that the consumer obtained from the covered entity.

 In addition, pursuant to the Fair and Accurate Credit
Transactions Act of 2003 (the "FACT Act") and the implementing regulations of the federal banking agencies and Federal Trade
Commission, the Bank is required to have in place an "identity theft red flags" program to detect, prevent and mitigate identity
theft. The Bank has implemented an identity theft red flags program designed to meet the requirements of the FACT Act and the joint final
rules. Additionally, the FACT Act amends the Fair Credit Reporting Act to generally prohibit a person from using information received
from an affiliate to make a solicitation for marketing purposes to a consumer, unless the consumer is given notice and a reasonable opportunity
and a reasonable and simple method to opt out of the making of such solicitations.

 Federal Home Loan Bank System.
The Bank is a member of the Federal Home Loan Bank ("FHLB") of Atlanta, which is one of 12 regional FHLBs that administer home
financing credit for depository institutions. Each FHLB serves as a reserve or central bank for its members within its assigned region.
It is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans or advances
to members in accordance with policies and procedures established by the Board of Directors of the FHLB, which are subject to the oversight
of the Federal Housing Financing Board. All advances from the FHLB, which are subject to the oversight of the Federal Housing Finance
Board. All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB.

 Effect of Governmental Monetary Policies. Our
earnings are affected by domestic economic conditions and the monetary and fiscal policies of the U.S. government and its agencies.
The Federal Reserve's monetary policies have had, and are likely to continue to have, an important impact on the operating
results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation
or combat a recession. The monetary policies of the Federal Reserve have major effects upon the levels of bank loans, investments
and deposits through its open market operations in U.S. government securities and through its regulation of the discount rate on
borrowings of member banks and the reserve requirements against member bank deposits. It is not possible to predict the nature or
impact of future changes in monetary and fiscal policies. In response to the COVID-19 pandemic, in 2020, the Federal Open Market
Committee ("FOMC") reduced the targeted federal funds interest rate range to 0.0% to 0.25%; however, due in part to
rising inflation, throughout 2022 the target federal funds rate increased to between 4.25% and 4.50%. Throughout 2023, the target
federal funds rate increased to 5.50%.

 Incentive Compensation.
In addition to the potential restrictions on discretionary bonus compensation under the Basel III rules, the federal bank regulatory agencies
have issued guidance on incentive compensation policies (the "Incentive Compensation Guidance") intended to ensure that the
incentive compensation policies of financial institutions do not undermine the safety and soundness of such institutions by encouraging
excessive risk-taking. The Incentive Compensation Guidance, which covers all employees that have the ability to materially affect the
risk profile of an institution, either individually or as part of a group, is based upon the key principles that a financial institution's
incentive compensation arrangements should comply with the following principles: (i) provide employees incentives that appropriately balance
risk and reward; (ii) be compatible with effective controls and risk-management; and (iii) be supported by strong corporate governance,
including active and effective oversight by the organization's board of directors.

 The scope and content of federal
bank regulatory agencies' policies on executive compensation are continuing to develop and are likely to continue evolving in the
near future. In 2016, federal agencies proposed regulations which could

 significantly change the regulation of incentive compensation
programs at financial institutions. The proposal would create four tiers of institutions based on asset size. Institutions in the top
two tiers would be subject to rules much more detailed and proscriptive than are currently in effect. If interpreted aggressively by the
regulators, the proposed rules could be used to prevent, as a practical matter, larger institutions from engaging in certain lines of
business where substantial commission and bonus pool arrangements are the norm. In the 2016 proposal, the top two tiers included institutions
with more than $50 billion of assets, which would not currently apply to us. We cannot predict what final rules may be adopted, nor how
they may be implemented and, therefore, it cannot be determined at this time whether compliance with such policies will adversely affect
our ability to hire, retain and motivate our key employees.

 Corporate Governance.
The Dodd-Frank Act addressed many investor protection, corporate governance and executive compensation matters that affect most U.S. publicly
traded companies. The Dodd-Frank Act (i) grants stockholders of U.S. publicly traded companies an advisory vote on executive compensation
and so-called "golden parachute" payments, (ii) enhances independence requirements for compensation committee members, (iii)
requires the SEC to adopt rules directing national securities exchanges to establish listing standards requiring all listed companies
to adopt incentive-based compensation clawback policies for executive officers, and (iv) provides the SEC with authority to adopt proxy
access rules that would allow stockholders of publicly traded companies to nominate candidates for election as a director and have those
nominees included in a company's proxy materials. The SEC has completed the bulk (although not all) of the rulemaking necessary
to implement these provisions. However, on October 14, 2021, the SEC signaled a renewed interest in this rulemaking initiative by re-opening
the comment period on a proposed rule issued originally in 2015 regarding clawbacks of incentive-based executive compensation. On October
26, 2022, the SEC adopted final rules implementing the incentive-based compensation recovery (clawback) provisions of the Dodd-Frank Act.
The final rules directed the stock exchanges to establish listing standards requiring listed companies to develop and implement a policy
providing for the recovery of erroneously awarded incentive-based compensation received by current or former executive officers and to
satisfy related disclosure obligations. As of December 1, 2023, the final clawback rules from The NASDAQ Stock Market were effective.
The Company's updated clawback policies were effective November 21, 2023.

 Concentrations in Commercial Real Estate.
Concentration risk exists when FDIC-insured institutions deploy too many assets to any one industry or segment. A concentration in
commercial real estate is one example of regulatory concern. The interagency Concentrations in Commercial Real Estate Lending, Sound
Risk Management Practices guidance ("CRE Guidance") provides supervisory criteria, including the following numerical
indicators, to assist bank examiners in identifying banks with potentially significant commercial real estate loan concentrations
that may warrant greater supervisory scrutiny: (i) commercial real estate loans exceeding 300% of capital and increasing 50% or more
in the preceding three years or (ii) construction and land development loans exceeding 100% of capital. The CRE Guidance does not
limit banks' levels of commercial real estate lending activities, but rather guides institutions in developing risk management
practices and levels of capital that are commensurate with the level and nature of their commercial real estate concentrations. On
December 18, 2015, the federal banking agencies issued a statement to reinforce prudent risk-management practices related to
commercial real estate lending, having observed substantial growth in many commercial real estate asset and lending markets,
increased competitive pressures, rising commercial real estate concentrations in banks, and an easing of commercial real estate
underwriting standards. The federal bank agencies reminded FDIC-insured institutions to maintain underwriting discipline and
exercise prudent risk-management practices to identify, measure, monitor and manage the risks arising from commercial real estate
lending. In addition, FDIC-insured institutions must maintain capital commensurate with the level and nature of their commercial
real estate concentration risk.

 Based on the Bank's loan portfolio
as of December 31, 2023, it did not exceed the 300% and 100% guidelines for commercial real estate loans or construction and land development
loans. The Bank will continue to monitor its portfolio to manage this increased risk.

 Item 1A. Risk Factors.

 The following risk factors and other information included
in this Annual Report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only ones we
face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may adversely impact our
business operations. If any of the following risks occur, our business, financial condition, operating results, and cash flows could be
materially adversely affected.

 Risks Related to Economic Conditions

 Our business may be adversely affected by conditions
in the financial markets and economic conditions generally.

 Our financial performance generally, and in particular
the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of collateral securing those loans,
as well as demand for loans and other products and services we offer and whose success we rely on to drive our growth, is highly dependent
upon the business environment in the primary markets where we operate and in the United States as a whole. Unlike larger banks that are
more geographically diversified, we are a regional bank that provides banking and financial services to customers primarily in Greenville,
Columbia, Charleston, and Summerville, South Carolina; Raleigh, Greensboro and Charlotte, North Carolina; and Atlanta, Georgia. The economic
conditions in these local markets may be different from, and in some instances worse than, the economic conditions in the United States
as a whole.

 Some elements of the business environment that affect
our financial performance include short-term and long-term interest rates, the prevailing yield curve, inflation and price levels, monetary
and trade policy, unemployment and the strength of the domestic economy and the local economy in the markets in which we operate. Unfavorable
market conditions can result in a deterioration in the credit quality of our borrowers and the demand for our products and services, an
increase in the number of loan delinquencies, defaults, charge-offs, foreclosures, additional provisions for credit losses, adverse asset
values of the collateral securing our loans and an overall material adverse effect on the quality of our loan portfolio. Unfavorable or
uncertain economic and market conditions can be caused by declines in economic growth, business activity or investor or business confidence
limitations on the availability or increases in the cost of credit and capital increases in inflation or interest rates high
unemployment natural disasters epidemics and pandemics (such as COVID-19); or a combination of these or other factors.

 As economic conditions relating to the COVID-19 pandemic
have improved, the Federal Reserve has shifted its focus to limiting inflationary and other potentially adverse effects of the extensive
pandemic-related government stimulus, which signals the potential for a continued period of economic uncertainty even though the pandemic
has subsided. In addition, there are continuing concerns related to, among other things, the level of U.S. government debt and fiscal
actions that may be taken to address that debt, a potential resurgence of economic and political tensions with China, the Russian invasion
of Ukraine, and the Middle East conflict, all of which may have a destabilizing effect on financial markets and economic activity. Economic
pressure on consumers and overall economic uncertainty may result in changes in consumer and business spending, borrowing and saving habits.
These economic conditions and/or other negative developments in the domestic or international credit markets or economies may significantly
affect the markets in which we do business, the value of our loans and investments, and our ongoing operations, costs and profitability.
Declines in real estate values and sales volumes and high unemployment or underemployment may also result in higher than expected loan
delinquencies, increases in our levels of nonperforming and classified assets and a decline in demand for our products and services. These
negative events may cause us to incur losses and may adversely affect our capital, liquidity and financial condition.

 A significant portion of our loan portfolio is
secured by real estate, and events that negatively affect the real estate market could hurt our business.

 As of December 31, 2023, approximately 85% of our loans
had real estate as a primary or secondary component of collateral. The real estate collateral in each case provides an alternate source
of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. A weakening
of the real estate market in our primary market areas could result in an increase in the number of borrowers who default on their loans
and a reduction in the value of the collateral securing their loans, which in turn could have an adverse effect on our profitability and
asset quality. Deterioration in the real estate market could cause us to adjust our opinion of the level of credit quality in our loan
portfolio. If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values,
our earnings and capital could be adversely affected. Acts of nature, including hurricanes, tornados, earthquakes, fires and floods, which
may cause uninsured damage and other loss of value to real estate that secures these loans, may also negatively affect our financial condition.

 Risks Related to Lending Activities

 Our loan portfolio contains a number of real
estate loans with relatively large balances.

 Because our loan portfolio contains a number of real
estate loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in nonperforming
loans, which could result in a net loss of earnings, an increase in the provision for credit losses and an increase in loan charge-offs,
all of which could have a material adverse effect on our financial condition and results of operations.

 Commercial real estate loans increase our exposure
to credit risk.

 At December 31, 2023, 47.9% of our loan portfolio was
secured by commercial real estate. Loans secured by commercial real estate are generally viewed as having more risk of default than loans
secured by residential real estate or consumer loans because repayment of the loans often depends on the successful operation of the property,
the income stream of the borrowers, the accuracy of the estimate of the property's value at completion of construction, and the
estimated cost of construction. Such loans are generally riskier than loans secured by residential real estate or consumer loans because
those loans are typically not secured by real estate collateral. An adverse development with respect to one lending relationship can expose
us to a significantly greater risk of loss compared with a single-family residential mortgage loan because we typically have more than
one loan with such borrowers. Additionally, these loans typically involve larger loan balances to single borrowers or groups of related
borrowers compared with single-family residential mortgage loans. Therefore, the deterioration of one or a few of these loans could cause
a significant decline in the related asset quality. A return of recessionary conditions could result in a sharp increase in loans charged-off
and could require us to significantly increase our allowance for credit losses, which could have a material adverse impact on our business,
financial condition, results of operations, and cash flows.

 Imposition of limits by the bank regulators on
commercial and multi-family real estate lending activities could curtail our growth and adversely affect our earnings.

 In 2006, the FDIC, the Federal Reserve and the OCC
issued joint guidance entitled "Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices" (the "CRE
Guidance"). Although the CRE Guidance did not establish specific lending limits, it provides that a bank's commercial real
estate lending exposure could receive increased supervisory scrutiny where total non-owner occupied commercial real estate loans, including
loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution's
total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during
the preceding 36 months. Our level of commercial real estate and multi-family loans represents 271.4% of the Bank's total risk-based
capital at December 31, 2023.

 In December 2015, the regulatory agencies released
a new statement on prudent risk management for commercial real estate lending (the "2015 Statement"). In the 2015 Statement,
the regulatory agencies, among other things, indicate the intent to continue "to pay special attention" to commercial real
estate lending activities and concentrations going forward. If the FDIC, our primary federal regulator, were to impose restrictions on
the amount of commercial real estate loans we can hold in our portfolio, for reasons noted above or otherwise, our earnings would be adversely
affected.

 Repayment of our commercial business loans is
often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in
value.

 At December 31, 2023, commercial business loans comprised
13.9% of our total loan portfolio. Our commercial business loans are originated primarily based on the identified cash flow and general
liquidity of the borrower and secondarily on the underlying collateral provided by the borrower and/or repayment capacity of any guarantor.
The borrower's cash flow may be unpredictable, and collateral securing these loans may fluctuate in value. Although commercial business
loans are often collateralized by equipment, inventory, accounts receivable, or other business assets, the liquidation of collateral in
the event of default is often an insufficient source of repayment because accounts receivable may be uncollectible and inventories may
be obsolete or of limited use. In addition, business assets may depreciate over time, may be difficult to appraise, and may fluctuate
in value based on the success of the business. Accordingly, the repayment of commercial business loans depends primarily on the cash flow
and credit worthiness of the borrower and secondarily on the underlying collateral value provided by the borrower and liquidity of the
guarantor. If these borrowers do not have sufficient cash flows or resources to pay these loans as they come due or the value of the underlying
collateral is insufficient to fully secure these loans, we may suffer losses on these loans that exceed our allowance for credit losses.

 We may have higher credit losses than we have
allowed for in our allowance for credit losses.

 Our actual loans losses could exceed our allowance
for credit losses and therefore our historic allowance for credit losses may not be adequate. As of December 31, 2023, 47.9% of our loan
portfolio was secured by commercial real estate. Repayment of such loans is generally considered more subject to market risk than residential
mortgage loans. Industry experience shows that a portion of loans will
become delinquent and a portion of loans will require partial or entire charge-

 off. Regardless of the underwriting criteria utilized,
losses may be experienced as a result of various factors beyond our control, including among other things, changes in market conditions
affecting the value of loan collateral, the cash flows of our borrowers and problems affecting borrower credit. If we suffer credit losses
that exceed our allowance for credit losses, our financial condition, liquidity or results of operations could be materially and adversely
affected.

 Our decisions regarding allowance for credit
losses and credit risk may materially and adversely affect our business.

 Making loans and other extensions of credit is an essential
element of our business. Although we seek to mitigate risks inherent in lending by adhering to specific underwriting practices, our loans
and other extensions of credit may not be repaid. The risk of nonpayment is affected by a number of factors, including:

 the duration of the credit;

 credit risks of a particular client;

 changes in economic and industry conditions; and

 in the case of a collateralized loan, risks resulting from uncertainties about the future value of the collateral.

 We attempt to maintain an appropriate allowance for
credit losses to provide for probable losses in our loan portfolio. We periodically determine the amount of the allowance based on consideration
of several factors, including but not limited to:

 an ongoing review of the quality, mix, and size of our overall loan portfolio;

 our historical loan loss experience;

 evaluation of economic conditions;

 regular reviews of loan delinquencies and loan portfolio quality;

 ongoing review of financial information provided by borrowers; and

 the amount and quality of collateral, including guarantees, securing the loans.

 The determination of the appropriate level of the allowance
for credit losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks
and future trends, all of which may undergo material changes. A deterioration in economic conditions affecting borrowers, new information
regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require
an increase in the allowance for credit losses. In addition, regulatory agencies periodically review our allowance for credit losses and
may require an increase in the provision for credit losses or the recognition of further loan charge-offs, based on judgments different
than those of management. In addition, if charge-offs in future periods exceed the allowance for credit losses, we will need additional
provisions to increase the allowance for credit losses. Any increases in the allowance for credit losses will result in a decrease in
net income and, possibly, capital, and may have a material adverse effect on our financial condition and results of operations.

 A percentage of the loans in our portfolio currently
include exceptions to our loan policies and supervisory guidelines.

 All of the loans that we make are subject to written
loan policies adopted by our board of directors and to supervisory guidelines imposed by our regulators. Our loan policies are designed
to reduce the risks associated with the loans that we make by requiring our loan officers to take certain steps that vary depending on
the type and amount of the loan, prior to closing a loan. These steps include, among other things, making sure the proper liens are documented
and perfected on property securing a loan, and requiring proof of adequate insurance coverage on property securing loans. Loans that do
not fully comply with our loan policies are known as "exceptions." We categorize exceptions as policy exceptions, financial
statement exceptions and document exceptions. As a result of these exceptions, such loans may have a higher risk of loan loss than the
other loans in our portfolio that fully comply with our loan policies. In addition, we may be subject to regulatory action by federal
or state banking authorities if they believe the number of exceptions in our loan portfolio represents an unsafe banking practice.

 Risks Related to Capital and Liquidity

 Liquidity needs could adversely affect our financial
condition and results of operations.

 Dividends from the Bank provide the primary source
of funds for the Company. The primary sources of funds of the Bank are client deposits and loan repayments. While scheduled loan repayments
are a relatively stable source of funds, they are subject to the ability of borrowers to repay the loans. The ability of borrowers to
repay loans can be adversely affected by a number of factors, including changes in economic conditions, adverse trends or events affecting
business industry groups, reductions in real estate values or markets, business closings or lay-offs, inclement weather, natural disasters
and international instability.

 Additionally, deposit levels may be affected by a number
of factors, including rates paid by competitors, general interest rate levels, regulatory capital requirements, returns available to clients
on alternative investments and general economic

 conditions. Accordingly, we may be required from time to time to rely on secondary sources
of liquidity to meet withdrawal demands or otherwise fund operations. Such sources include proceeds from FHLB advances, sales of investment
securities and loans, and federal funds lines of credit from correspondent banks, as well as out-of-market time deposits. While we believe
that these sources are currently adequate, there can be no assurance they will be sufficient to meet future liquidity demands, particularly
if we continue to grow and experience increasing loan demand. We may be required to slow or discontinue loan growth, capital expenditures
or other investments or liquidate assets should such sources not be adequate.

 The Company is a stand-alone entity with its own liquidity
needs to service its debt or other obligations. Other than dividends from the Bank, the Company does not have additional means of generating
liquidity without obtaining additional debt or equity funding. If we are unable to receive dividends from the Bank or obtain additional
funding, we may be unable to pay our debt or other obligations.

 Legal, Accounting, Regulatory and Compliance
Risks

 We are subject to extensive regulation that has
limited the conduct of our business, and could impose financial requirements, each of which could have an adverse impact on our operations.

 We operate in a highly regulated industry and are subject
to examination, supervision, and comprehensive regulation by various regulatory agencies. We are subject to regulation by the Federal
Reserve. The Bank is subject to extensive regulation, supervision, and examination by our primary federal regulator, the FDIC, the regulating
authority that insures client deposits, and by our primary state regulator, the S.C. Board. Also, as a member of the Federal Home Loan
Bank, the Bank must comply with applicable regulations of the Federal Housing Finance Board and the Federal Home Loan Bank. Regulation
by these agencies is intended primarily for the protection of our depositors and the deposit insurance fund and not for the benefit of
our shareholders. The Bank's activities are also regulated under consumer protection laws applicable to our lending, deposit, and
other activities. A sufficient claim against us under these laws could have a material adverse effect on our results of operations.

 Failure to comply with laws, regulations or policies
could also result in heightened regulatory scrutiny and in sanctions by regulatory agencies (such as a memorandum of understanding, a
written supervisory agreement or a cease and desist order), civil money penalties and/or reputation damage. Any of these consequences
could restrict our ability to expand our business or could require us to raise additional capital or sell assets on terms that are not
advantageous to us or our shareholders and could have a material adverse effect on our business, financial condition and results of operations.
While we have policies and procedures designed to prevent any such violations, such violations may occur despite our best efforts.

 We are subject to federal and state fair lending
laws, and failure to comply with these laws could lead to material penalties.

 Federal and state fair lending laws and regulations,
such as the Equal Credit Opportunity Act and the Fair Housing Act, impose nondiscriminatory lending requirements on financial institutions.
The Department of Justice, CFPB and other federal and state agencies are responsible for enforcing these laws and regulations. A finding
by these regulators of noncompliance with these laws could result in a wide variety of sanctions, including the required payment of damages
and civil money penalties, injunctive relief, and imposition of restrictions on expansion activity. Private parties may also have the
ability to challenge an institution's performance under fair lending laws in private class action litigation, which if successful could
adversely impact our rating under the CRA.

 As of our most recent examination report, the Bank
received a "Needs to Improve" CRA rating, which results in restrictions on certain expansionary activities, including certain
mergers and acquisitions and the establishment and relocation of bank branches. This rating will also result in a loss of expedited processing
of applications to undertake certain activities, and requires the Bank to receive prior regulatory approval for certain activities, including
to issue or prepay certain subordinated debt obligations, and open or relocate bank branches. A "Needs to Improve" rating
could have an impact on our relationships with certain states, counties, municipalities or other public agencies to the extent applicable
law, regulation or policy limits, restricts or influences whether such entity may do business with a company that has a below "Satisfactory"
rating and, in general, could negatively affect our reputation, business, financial condition and results of operations. These restrictions,
among others, will remain in place at least until the Bank's next CRA rating is publicly released by the FDIC. The FDIC may take
additional enforcement action, including a possible informal or formal enforcement action and/or civil monetary penalties. As a result
of these limitations and conditions, we may be unable or may fail to pursue, evaluate or complete
transactions that might have been strategically or competitively significant.

 We face risks related to the adoption of future
legislation and potential changes in federal regulatory agency leadership, policies, and priorities.

 In 2023, Republicans gained control of the U.S. House
of Representatives, while Democrats retained control of the U.S. Senate. However slim the majorities, though, the net result was a split
Congress, which in the past leads to less sweeping policy changes. However, Congressional committees with jurisdiction over the banking
sector have pursued oversight and legislative initiatives in a variety of areas, including addressing climate-related risks, promoting
diversity and equality within the banking industry and addressing other Environmental, Social, and Governance matters, improving competition
in the banking sector and enhancing oversight of bank mergers and acquisitions, establishing a regulatory framework for digital assets
and markets, and oversight of pandemic responses and economic recovery. The prospects for the enactment of major banking reform legislation
remain unclear at this time.

 Moreover, turnover of the presidential administration
in 2020 resulted in certain changes in the leadership and senior staffs of the federal banking agencies, the CFPB, CFTC, SEC, and the
Treasury Department, with certain significant leadership positions yet to be permanently filled, including the Comptroller of the Currency.
These changes have impacted the rulemaking, supervision, examination and enforcement priorities and policies of the agencies and likely
will continue to do so over the next several years. The potential impact of the 2024 election on additional changes in agency personnel,
policies and priorities on the financial services sector, including the Company and the Bank, cannot be predicted at this time. Regulations
and laws may be modified at any time, and new legislation may be enacted that will affect us. Any future changes in federal and state
laws and regulations, as well as the interpretation and implementation of such laws and regulations, could affect us in substantial and
unpredictable ways, including those listed above or other ways that could have a material adverse effect on our business, financial condition
or results of operations.

 We face a risk of noncompliance and enforcement
action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.

 The federal Bank Secrecy Act, the USA Patriot Act and
other laws and regulations require financial institutions, among other duties, to institute and maintain effective anti-money laundering
programs and file suspicious activity and currency transaction reports as appropriate. The federal Financial Crimes Enforcement Network,
established by the U.S. Treasury to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations
of those requirements and has engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the
U.S. Department of Justice, Drug Enforcement Administration and Internal Revenue Service. There is also increased scrutiny of compliance
with the rules enforced by OFAC. Federal and state bank regulators also focus on compliance with Bank Secrecy Act and anti-money laundering
regulations. If our policies, procedures and systems are deemed deficient or the policies, procedures and systems of the financial institutions
that we have already acquired or may acquire in the future are deficient, we would be subject to liability, including fines and regulatory
actions such as restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain
aspects of our business plan, including our acquisition plans, which would negatively affect our business, financial condition and results
of operations. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have
serious reputational consequences for us.

 Federal, state and local consumer lending laws
may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase
our cost of doing business.

 Federal, state and local laws have been adopted that
are intended to eliminate certain lending practices considered "predatory." These laws prohibit practices such as steering
borrowers away from more affordable products, selling unnecessary insurance to borrowers, repeatedly refinancing loans and making loans
without a reasonable expectation that the borrowers will be able to repay the loans irrespective of the value of the underlying property.
Loans with certain terms and conditions and that otherwise meet the definition of a "qualified mortgage" may be protected
from liability to a borrower for failing to make the necessary determinations. In either case, we may find it necessary to tighten our
mortgage loan underwriting standards in response to the CFPB rules, which may constrain our ability to make loans consistent with our
business strategies. It is our policy not to make predatory loans and to determine borrowers' ability to repay, but the law and related
rules create the potential for increased liability with respect to our lending and loan investment activities. They increase our cost
of doing business and, ultimately, may prevent us from making certain loans and cause us to reduce the average percentage rate or the
points and fees on loans that we do make.

 The Federal Reserve may require us to commit
capital resources to support the Bank.

 The Federal Reserve requires a bank holding company
to act as a source of financial and managerial strength to a subsidiary bank and to commit resources to support such subsidiary bank.
Under the "source of strength" doctrine, the Federal Reserve may require a bank holding company
to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound
practices for failure to commit resources to such a subsidiary bank. In addition, the Dodd-Frank Act directs the federal bank regulators
to require that all companies that directly or indirectly control an insured depository institution serve as a source of strength for
the institution. Under these

 requirements, in the future, we could be required to provide financial assistance to the Bank if the Bank
experiences financial distress.

 A capital injection may be required at times when we
do not have the resources to provide it, and therefore we may be required to borrow the funds. In the event of a bank holding company's
bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the
capital of a subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority
of payment over the claims of the holding company's general unsecured creditors, including the holders of its note obligations. Thus,
any borrowing that must be done by the holding company in order to make the required capital injection becomes more difficult and expensive
and will adversely impact the holding company's cash flows, financial condition, results of operations and prospects.

 The CECL accounting standard
resulted in a significant change in how we recognize credit losses and may continue to have a material impact on our financial condition
or results of operations.

 In June 2016, the Financial
Accounting Standards Board ("FASB") issued an accounting standard update, "Financial Instruments-Credit Losses (Topic
326), Measurement of Credit Losses on Financial Instruments," which replaces the current "incurred loss" model for recognizing
credit losses with an "expected loss" model referred to as the Current Expected Credit Loss ("CECL") model. While
the new CECL standard became effective on January 1, 2023 and for interim periods within that year, we early adopted CECL as of January
1, 2022.

 Under the CECL model, we are
required to present certain financial assets carried at amortized cost, such as loans held for investment and held-to-maturity debt
securities, at the net amount expected to be collected. The measurement of expected credit losses is based on information about past events,
including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported
amount. This measurement will take place at the time the financial asset is first added to the balance sheet and periodically thereafter.
This differs significantly from the "incurred loss" model required under current generally accepted accounting principles
("GAAP"), which delays recognition until it is probable a loss has been incurred. Accordingly, the adoption of the CECL model
materially affected how we determine our allowance for credit losses and required us to increase our allowance. Moreover, the CECL model
may create more volatility in the level of our allowance for credit losses. If we are required to materially increase our level of allowance
for credit losses for any reason, such increase could adversely affect our business, financial condition and results of operations.

 Risks Related to Our Operations

 Competition with other financial institutions
may have an adverse effect on our ability to retain and grow our client base, which could have a negative effect on our financial condition
or results of operations.

 The banking and financial services industry is very
competitive and includes services offered from other banks, savings and loan associations, credit unions, mortgage companies, other lenders,
and institutions offering uninsured investment alternatives. Legal and regulatory developments have made it easier for new and sometimes
unregulated competitors to compete with us. The financial services industry has and is experiencing an ongoing trend towards consolidation
in which fewer large national and regional banks and other financial institutions are replacing many smaller and more local banks. These
larger banks and other financial institutions hold a large accumulation of assets and have significantly greater resources and a wider
geographic presence or greater accessibility. In some instances, these larger entities operate without the traditional brick and mortar
facilities that restrict geographic presence. Some competitors have more aggressive marketing campaigns and better brand recognition,
and are able to offer more services, more favorable pricing or greater customer convenience than the Bank. In addition, competition has
increased from new banks and other financial services providers that target our existing or potential clients. As consolidation continues
among large banks, we expect other smaller institutions to try to compete in the markets we serve. This competition could reduce our net
income by decreasing the number and size of the loans that we originate and the interest rates we charge on these loans. Additionally,
these competitors may offer higher interest rates, which could decrease the deposits we attract or require us to increase rates to retain
existing deposits or attract new deposits. Increased deposit competition could adversely affect our ability to generate the funds necessary
for lending operations which could increase our cost of funds.

 The financial services industry could become even more
competitive as a result of legislative, regulatory and technological changes and continued consolidation. Banks, securities firms and
insurance companies can merge as part of a financial holding company, which can offer virtually any type of financial service, including
banking, securities underwriting, insurance (both agency and underwriting)
and merchant banking. Technological developments have allowed competitors, including some non-depository institutions, to compete more
effectively in local markets and have expanded the range of financial products, services and capital available to our target clients.
If we are unable to implement, maintain and use such technologies effectively, we may not be able to offer products or achieve cost-efficiencies
necessary to compete in the industry. In addition, some of these competitors have fewer regulatory constraints and lower cost structures.

 We are subject to environmental risks that could
result in losses.

 In the course of business, the Bank may acquire, through
foreclosure, or deed in lieu of foreclosure, properties securing loans it has originated or purchased which are in default. Particularly
in commercial real estate lending, there is a risk that hazardous substances could be discovered on these properties. In this event, the
Bank may be required to remove these substances from the affected properties at our sole cost and expense. The cost of this removal could
substantially exceed the value of affected properties. We may not have adequate remedies against the prior owner or other responsible
parties and could find it difficult or impossible to sell the affected properties. These events could have a material adverse effect on
our business, results of operations and financial condition.

 In addition, we are subject to the growing risk of
climate change. Among the risks associated with climate change are more frequent severe weather events. Severe weather events such as
hurricanes, tropical storms, tornados, winter storms, freezes, flooding and other large-scale weather catastrophes in our markets subject
us to significant risks and more frequent severe weather events magnify those risks. Large-scale weather catastrophes or other significant
climate change effects that either damage or destroy residential or multifamily real estate underlying mortgage loans or real estate collateral,
or negatively affects the value of real estate collateral or the ability of borrowers to continue to make payments on loans, could decrease
the value of our real estate collateral or increase our delinquency rates in the affected areas and thus diminish the value of our loan
portfolio. Such events could also cause downturns in economic and market conditions generally, which could have an adverse effect on our
business and financial results. The potential losses and costs associated with climate change related risks are difficult to predict and
could have a material adverse effect on our business, financial condition and results of operation.

 We rely on other companies to provide key components
of our business infrastructure.

 Third parties provide key components of our business
operations such as data processing, recording and monitoring transactions, online banking interfaces and services, internet connections
and network access. While we have selected these third-party vendors carefully, we do not control their actions. Any problem caused by
these third parties, including poor performance of services, data breaches, failure to provide services, disruptions in communication
services provided by a vendor and failure to handle current or higher volumes, could adversely affect our ability to deliver products
and services to our clients and otherwise conduct our business, and may harm our reputation. Financial or operational difficulties of
a third-party vendor could also hurt our operations if those difficulties interfere with the vendor's ability to serve us. Replacing
these third-party vendors could also create significant delay and expense. Accordingly, use of such third parties creates an unavoidable
inherent risk to our business operations.

 We may be adversely affected by the soundness
of other financial institutions.

 Financial services institutions are interrelated as
a result of trading, clearing, counterparty, or other relationships. We have exposure to many different industries and counterparties,
and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers,
investment banks, and other institutional clients. Many of these transactions expose us to credit risk in the event of a default by a
counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by the Bank cannot be realized upon or
is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to the Bank. Any such losses
could have a material adverse effect on our financial condition and results of operations.

 We are subject to losses due to errors, omissions
or fraudulent behavior by our employees, clients, counterparties or other third parties.

 We are exposed to many types of operational risk, including
the risk of fraud by employees and third parties, clerical recordkeeping errors and transactional errors. Our business is dependent on
our employees as well as third-party service providers to process a large number of increasingly complex transactions. We could be materially
and adversely affected if employees, clients, counterparties or other third parties caused an operational breakdown or failure, either
as a result of human error, fraudulent manipulation or purposeful damage to any of our operations or systems.

 In deciding whether to extend credit or to enter into
other transactions with clients and counterparties, we may rely on information furnished to us by or on behalf of clients and counterparties,
including financial statements and other financial information, which we do not independently verify. We also may rely on representations
of clients and counterparties as to the accuracy and completeness
of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to
extend credit to clients, we may assume that a client's audited financial statements conform with GAAP and present fairly, in all
material respects, the financial condition, results of operations and cash flows of the client. Our financial condition and results of
operations could be negatively affected to the extent we rely on financial statements that do not comply with GAAP or are materially misleading,
any of which could be caused by errors, omissions, or fraudulent behavior by our employees, clients, counterparties, or other third parties.

 In addition, criminals committing fraud increasingly
are using more sophisticated techniques and in some cases are part of larger criminal rings, which allow them to be more effective. This
type of fraudulent activity has taken many forms, ranging from check fraud, mechanical devices attached to ATM machines, social engineering
and phishing attacks to obtain personal information or impersonation of our clients through the use of falsified or stolen credentials.
Additionally, an individual or business entity may properly identify themselves, particularly when banking online, yet seek to establish
a business relationship for the purpose of perpetrating fraud. Further, in addition to fraud committed against us, we may suffer losses
as a result of fraudulent activity committed against third parties. Increased deployment of technologies, such as chip card technology,
defray and reduce aspects of fraud; however, criminals are turning to other sources to steal personally identifiable information, such
as unaffiliated healthcare providers and government entities, in order to impersonate the consumer to commit fraud. Many of these data
compromises are widely reported in the media.

 As a result of the increased sophistication of fraud
activity, we have increased our spending on systems and controls to detect and prevent fraud. This will result in continued ongoing investments
in the future. Nevertheless, these investments may prove insufficient and fraudulent activity could result in losses to us or our customers;
loss of business and/or customers; damage to our reputation; the incurrence of additional expenses (including the cost of notification
to consumers, credit monitoring and forensics, and fees and fines imposed by the card networks); disruption to our business; our inability
to grow our online services or other businesses; additional regulatory scrutiny or penalties; or our exposure to civil litigation and
possible financial liability any of which could have a material adverse effect on our business, financial condition and results of operations.

 Our operational or security systems may experience
an interruption or breach in security, including as a result of cyber-attacks.

 We rely heavily on communications and information systems
to conduct our business. Any failure, interruption or breach in security of these systems, including as a result of cyber-attacks, could
result in failures or disruptions in our client relationship management, deposit, loan, and other systems and also the disclosure or misuse
of confidential or proprietary information. While we have systems, policies and procedures designed to prevent or limit the effect of
the failure, interruption or security breach of our information systems, there can be no assurance that any such failures, interruptions
or security breaches will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures, interruptions
or security breaches of our information systems could damage our reputation, result in a loss of client business, subject us to additional
regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect
on our business, financial condition and results of operations.

 Furthermore, information security risks for financial
institutions have increased in recent years in part because of the proliferation of new technologies, the use of the Internet and telecommunications
technologies to conduct financial transactions, and the increasing sophistication and activities of organized crime, hackers, terrorists,
activists, and other external parties. Our technologies, systems, networks, and our customers' devices may become the target of
cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction
of our or our customers' confidential, proprietary and other information, or otherwise disrupt our or our customers' or other
third parties' business operations. As cyber threats continue to evolve, we may also be required to expend significant additional
resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.

 While we have not experienced any material losses relating
to cyber-attacks or other information security breaches to date, we may suffer such losses in the future and any information security
breach could result in significant costs to us, which may include fines and penalties, potential liabilities from governmental or third
party investigations, proceedings or litigation, legal, forensic and consulting fees and expenses, costs and diversion of management attention
required for investigation and remediation actions, and the negative impact on our reputation and loss of confidence of our customers
and others, any of which could have a material adverse impact on our business, financial condition and operating results.

 Our enterprise risk management framework may
not be effective in mitigating risk and reducing the potential for losses.

 Our enterprise risk management framework seeks to mitigate
risk and loss to us. We have established comprehensive policies and procedures and an internal control framework designed to provide a
sound operational environment for the types of risk to which we are subject, including credit risk, market risk (interest rate and price
risks), liquidity risk, operational risk, compliance risk, legal risk, strategic risk, and reputational risk. However, as with any risk
management framework, there are inherent limitations to our current and future risk management strategies, including risks that we have
not appropriately anticipated or identified. In addition, our businesses and the markets in which we operate are continuously evolving.
We may fail to adequately or timely enhance our enterprise risk framework to address those changes. If our enterprise risk framework is
ineffective, either because it fails to keep pace with changes in the financial markets, regulatory requirements, our businesses, our
counterparties, clients or service providers or for other reasons,

 we could incur losses, suffer reputational damage or find ourselves
out of compliance with applicable regulatory or contractual mandates. In addition to our executive committee, the Risk Committee of the
Board, the Audit Committee of the Board, as well as the Company's Chief Risk Officer are all responsible for the "risk management
framework" of the Company. These committees each meet regularly, with the authority to convene additional meetings, as circumstances
require.

 Our interest rate risk is overseen by the Risk Committee
which monitors our compliance with regulatory guidance in the formulation and implementation of our interest rate risk program. The Risk
Committee reviews the results of our interest rate risk modeling quarterly to assess whether we have appropriately measured our interest
rate risk, mitigated our exposures appropriately and any residual risk is acceptable. In addition to our annual review of this policy,
our Board of Directors reviews the interest rate risk policy limits at least annually.

 Our controls and procedures may fail or be circumvented.

 We regularly review and update our internal controls,
disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and
operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the
system are met. Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls
and procedures could have a material adverse effect on our business, results of operations and financial condition.

 Failure to keep pace with technological change
could adversely affect our business.

 The financial services industry is continually undergoing
rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology
increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends, in
part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer
demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources
to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be
successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting
the financial services industry could have a material adverse impact on our business and, in turn, our financial condition and results
of operations.

 Our profitability is dependent on our banking
activities.

 Because we are a bank holding company, our profitability
is directly attributable to the success of the Bank. Our banking activities compete with other banking institutions on the basis of products,
service, convenience and price, among others. Due in part to both regulatory changes and consumer demands, banks have experienced increased
competition from other entities offering similar products and services. We rely on the profitability of the Bank and dividends received
from the Bank for payment of our operating expenses and satisfaction of our obligations. As is the case with other similarly situated
financial institutions, our profitability will be subject to the fluctuating cost and availability of funds, changes in the prime lending
rate and other interest rates, changes in economic conditions in general, and other factors.

 Risks Related to Our Industry

 We are subject to interest rate risk, which could
adversely affect our financial condition and profitability.

 A significant portion of our banking assets
are subject to changes in interest rates. As of December 31, 2023, approximately 84% of our loan portfolio was in fixed rate loans,
while only 16% was in variable rate loans. Like most financial institutions, our earnings significantly depend on our net interest
income, the principal component of our earnings, which is the difference between interest earned by us from our interest-earning
assets, such as loans and investment securities, and interest paid by us on our interest-bearing liabilities, such as deposits and
borrowings. We expect that we will periodically experience "gaps" in the interest rate sensitivities of our assets and
liabilities, meaning that either our interest-bearing liabilities will be more sensitive to changes in market interest rates than
our interest-earning assets, or vice versa. In either event, if market interest rates should move contrary to our position, this
"gap" will negatively impact our earnings. Many factors beyond our control impact interest rates, including economic
conditions, governmental monetary policies, inflation, recession, changes in unemployment, the money supply, and disorder and
instability in domestic and foreign financial markets. Changes in monetary policies of the various government agencies could
influence not only the interest we receive on loans and securities and the interest we pay on deposits and borrowings, but such
changes could also affect our ability to originate loans and obtain deposits, the fair value of our financial assets and
liabilities, and the average duration of our assets and liabilities.

 In a declining interest rate environment, there may
be an increase in prepayments on loans as borrowers refinance their loans at lower rates. In a rising interest rate environment, the interest
rate increases often result in larger payment requirements for our floating interest rate borrowers, which increases the potential for
default. At the same time, the

 marketability of the property securing a loan may be adversely affected by any reduced demand resulting
from higher interest rates. An increase (or decrease) in interest rates also requires us to increase (or decrease) the interest rates
that we pay on our deposits. Changes in interest rates also can affect the value of loans, securities and other assets. An increase in
interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans may lead to increases in nonperforming
assets, charge-offs and delinquencies, further increases to the allowance for credit losses, and a reduction of income recognized, among
others, which could have a material adverse effect on our results of operations and cash flows. Further, when we place a loan on non-accrual
status, we reverse any accrued but unpaid interest receivable, which decreases interest income. At the same time, we continue to have
a cost to fund the loan, which is reflected as interest expense, without any interest income to offset the associated funding expense.
Thus, an increase in the amount of nonperforming assets could have a material adverse impact on our net interest income.

 In March 2020, in response to the COVID-19 pandemic,
the Federal Reserve reduced the target Federal Funds rate to between zero and 0.25%; however, due in part to rising inflation, throughout
2022 the target Federal Funds rate increased to between 4.25% and 4.50%. Throughout 2023, the target Federal Funds rate increased to between
5.25% and 5.50%. Rapid changes in interest rates make it difficult for us to balance our loan and deposit portfolios, which may adversely
affect our results of operations by, for example, reducing asset yields or spreads, creating operating and system issues, or having other
adverse impacts on our business. When short-term interest rates are low for a prolonged period and assuming longer-term interest rates
fall further, we could experience net interest margin compression as our interest-earning assets would continue to reprice downward while
our interest-bearing liability rates could fail to decline in tandem, which would have an adverse effect on our net interest income and
could have an adverse effect on our business, financial condition and results of operations. When interest-earning assets mature or reprice
more quickly, or to a greater degree than interest-bearing liabilities, falling interest rates could reduce net interest income. When
interest-bearing liabilities mature or reprice more quickly, or to a greater degree than interest-earning assets in a period, an increase
in interest rates could reduce net interest income.

 In addition, our mortgage operations provide a portion
of our noninterest income. We generate mortgage revenues primarily from gains on the sale of residential mortgage loans pursuant to programs
currently offered by Fannie Mae, Ginnie Mae or Freddie Mac. In this rising or higher interest rate environment, our originations of mortgage
loans have decreased, resulting in fewer loans that are available to be sold to investors, which has decreased mortgage revenues in noninterest
income. In addition, our results of operations are affected by the amount of noninterest expenses associated with mortgage activities,
such as salaries and employee benefits, other loan expense, and other costs. During periods of reduced loan demand, our results of operations
may be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in loan originations.

 Inflationary pressures and rising prices may
affect our results of operations and financial condition.

 In 2021 through 2022, inflation rose to levels not
seen for over 40 years, reaching 7% and 6.5%, respectively. In 2023, the annual inflation rate decreased to 3.4% but inflationary pressures
are currently expected to remain elevated throughout 2024. Inflation could lead to increased costs to our customers, making it more difficult
for them to repay their loans or other obligations increasing our credit risk. Sustained higher interest rates by the Federal Reserve
may be needed to tame persistent inflationary price pressures, which could push down asset prices and weaken economic activity. A deterioration
in economic conditions in the United States and our markets could result in an increase in loan delinquencies and non-performing assets,
decreases in loan collateral values and a decrease in demand for our products and services, all of which, in turn, would adversely affect
our business, financial condition and results of operations.

 The Federal Reserve has implemented significant
economic strategies that have affected interest rates, inflation, asset values, and the shape of the yield curve.

 In 2020, in response to economic disruption
associated with the COVID-19 pandemic, the Federal Reserve quickly reduced short-term rates to extremely low levels and acted to
influence the markets to reduce long-term rates as well. During 2021, the Federal Reserve significantly reduced such
"easing" actions that held down long-term rates. During 2022, the Federal Reserve switched to a tightening policy. It
raised short-term rates significantly and rapidly throughout the year. Those actions triggered a significant decline in the values
of most categories of U.S. stocks and bonds; significantly raised recessionary expectations for the U.S.; and inverted the yield
curve in the U.S. for much of the last two quarters of 2022.

 Effects on the yield curve often are most pronounced
at the short end of the curve, which is of particular importance to us and other banks. Among other things, easing strategies are intended
to lower interest rates, expand the money supply, and stimulate economic activity, while tightening strategies are intended to increase
interest rates, discourage borrowing, tighten the money supply, and restrain economic activity. However, in 2022, short term rates rose
faster than long term rates to the point that the yield curve inverted for much of the final two quarters of 2022. This sort of phenomenon—where
short term rates rise more strongly and rapidly than long-term rates can follow—is relatively uncommon.

 It is unclear how long it will take for long-term rates
to catch up. Many external factors may interfere with the effects of these plans or cause them to be changed, sometimes quickly. Such
factors include significant economic trends or events as well as significant international monetary policies and events. These economic
strategies have had, and will continue to have, a significant impact on our business and on many of our clients. As exemplified by the
2023 bank failures in the U.S., such strategies also can affect the U.S. and world-wide financial systems in ways that may be difficult
to predict.

 Negative public opinion surrounding the Company
and the financial institutions industry generally could damage our reputation and adversely impact our earnings.

 Reputation risk, or the risk to our business, earnings
and capital from negative public opinion surrounding the Company and the financial institutions industry generally, is inherent in our
business. Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending practices,
corporate governance and acquisitions, and from actions taken by government regulators and community organizations in response to those
activities. Negative public opinion can adversely affect our ability to keep and attract clients and employees and can expose us to litigation
and regulatory action. Although we take steps to minimize reputation risk in dealing with our clients and communities, this risk will
always be present given the nature of our business.

 Adverse developments affecting the financial
services industry, such as recent bank failures or concerns involving liquidity, may have a material adverse effect on the Company's
operations.

 The high-profile bank failures in 2023 involving Silicon
Valley Bank, Signature Bank, and First Republic Bank caused general uncertainty and concern regarding the liquidity adequacy of the banking
sector. Although we were not directly affected by these bank failures, the resulting speed and ease in which news, including social media
commentary, led depositors to withdraw or attempt to withdraw their funds from these and other financial institutions, which then caused
the stock prices of many financial institutions to become volatile. Additional bank failures could have an adverse effect on our financial
condition and results of operations, either directly or through an adverse impact on certain of our customers.

 In response to these bank failures and the resulting
market reaction, the Secretary of the Treasury approved actions enabling the FDIC to complete its resolutions of the failed banks in a
manner that fully protects depositors by utilizing the Deposit Insurance Fund, including the use of Bridge Banks to assume all of the
deposit obligations of the failed banks, while leaving unsecured lenders and equity holders of such institutions exposed to losses.. With
the risk of any additional bank failures, we may face the potential for reputational risk, deposit outflows, increased costs and competition
for liquidity, and increased credit risk which, individually or in the aggregate, could have a material adverse effect on our business,
financial condition and results of operations.

 Consumers may decide not to use banks to complete
their financial transactions.

 Technology and other changes are allowing parties to
complete financial transactions through alternative methods that historically have involved banks. For example, consumers can now maintain
funds that would have historically been held as bank deposits in brokerage accounts, mutual funds or general-purpose reloadable prepaid
cards. Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks.
The process of eliminating banks as intermediaries, known as "disintermediation," could result in the loss of fee income,
as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the
lower cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations.

 Our reliance on brokered deposits could adversely
affect our liquidity and operating results.

 Among other sources of funds, in 2023, we
relied on brokered deposits to provide funds with which to make loans and provide other liquidity needed. Our brokered deposits were
$379.4 million, representing 11.2% of our total deposits at December 31, 2023 and included fixed-rate time deposits with maturities
through October 2028. Brokered deposits are utilized, along with other wholesale funding sources, to fund loan growth and offset
core deposit outflows. Generally, these deposits may not be as stable as other types of deposits. In the future, these depositors
may not replace their deposits with us as they mature, or we may have to pay a higher rate of interest to keep those deposits or to
replace them with other deposits or sources of funds. Not being able to maintain or replace these deposits as they mature could
affect our liquidity. Paying higher deposit rates to maintain or replace these types of deposits could adversely affect our net
interest margin and operating results.

 Risks Related to Our Strategic Plans

 We are dependent on key individuals and the loss
of one or more of these key individuals could curtail our growth and adversely affect our prospects.

 R. Arthur Seaver, Jr., our chief executive officer,
and Calvin C. Hurst, our president, each have extensive and long-standing ties within our primary market area and substantial experience
with our operations, and each has contributed

 significantly to our growth. If we lose the
services of any of these individuals, they would be difficult to replace, and our business and development could be materially and adversely
affected. We may not be successful in retaining key personnel, and the unexpected loss of services of one or more of our key personnel
could have a material adverse effect on our business because of their skill, knowledge of our primary markets, years of industry experience
and the difficulty of promptly finding qualified replacement personnel. In particular, D. Andrew Borrmann, our chief financial officer,
announced his resignation on February 27, 2024. Leadership transitions can be inherently difficult to manage, and an inadequate transition
to a permanent successor may cause disruptions to our business due to, among other things, diverting management's attention or
causing a deterioration in morale.

 Our success also depends, in part, on our continued
ability to attract and retain experienced loan originators, as well as other management personnel, including other executive vice presidents.
Competition for personnel is intense, and the process of locating key personnel with the combination of skills and attributes required
to execute our business strategy may be lengthy.

 If the services of any of our other key personnel should
become unavailable for any reason, we may not be able to identify and hire qualified persons on terms acceptable to the Company, or at
all, which could have a material adverse effect on our business, results of operation, financial condition, and future prospects. The
departure of any of our other personnel could also have a material adverse impact on our business, results of operations and growth prospects.

 The success of our growth strategy depends on
our ability to identify and retain individuals with experience and relationships in the markets in which we intend to expand.

 To expand our franchise successfully, we must identify
and retain experienced key management members with local expertise and relationships in these markets. We expect that competition for
qualified management in the markets in which we may expand will be intense and that there will be a limited number of qualified persons
with knowledge of and experience in the community banking industry in these markets. Even if we identify individuals that we believe could
assist us in establishing a presence in a new market, we may be unable to recruit these individuals away from more established financial
institutions. In addition, the process of identifying and recruiting individuals with the combination of skills and attributes required
to carry out our strategy requires both management and financial resources and is often lengthy. Our inability to identify, recruit, and
retain talented personnel to manage new offices effectively would limit our growth and could materially adversely affect our business,
financial condition, and results of operations.

 We will face risks with respect to future expansion.

 We routinely evaluate opportunities to expand into
new markets, as we did in Columbia, South Carolina in 2007, Charleston, South Carolina in 2012, Raleigh, North Carolina in 2017, Atlanta,
Georgia in 2017, Summerville, South Carolina and Greensboro, North Carolina in 2018 and Charlotte, North Carolina in 2021. We may also
expand our lines of business or offer new products or services as well as seek to acquire other financial institutions or parts of those
institutions. Any merger and acquisition activities could be material and could require us to use a substantial amount of common stock,
cash, other liquid assets, and/or incur debt. Moreover, these types of expansions involve various risks, including:

 the time and costs of evaluating new markets, hiring or retaining experienced local management, and opening new offices and the time lags between these activities and the generation of sufficient assets and deposits to support the costs of the expansion;

 the incurrence and possible impairment of goodwill associated with an acquisition and possible adverse effects on our results of operations;

 the potential inaccuracy of the estimates and judgments used to evaluate credit, operations, management, and market risks with respect to a target institution;

 incurring the time and expense associated with identifying and evaluating potential merger or acquisition targets and other expansion opportunities and negotiating potential transactions, resulting in management's attention being diverted from the operation of our existing business;

 the possibility that the expected benefits of a transaction may not materialize in the timeframe expected or at all, or may be costlier to achieve;

 the risk that we may be unsuccessful in attracting and retaining deposits and originating high quality loans in new markets;

 difficulty or unanticipated expense associated with converting the operating systems of an acquired or merged company into ours;

 delay in completing a merger, acquisition or other expansion activities due to litigation, closing conditions or the regulatory approval process; and

 the risk of loss of key employees and clients of the Company or the acquired or merged company.

 There is no assurance that existing branches or future
branches, if any, will maintain or achieve deposit levels, loan balances or other operating results necessary to avoid losses or produce
profits. Our growth may entail an increase in overhead expenses if we add new branches and staff. There are considerable costs involved
in opening branches, and new branches generally do not generate sufficient revenues to offset their costs until they have been in operation
for at least a year or more. Accordingly, any new branches established can be expected to negatively impact earnings for some period of
time until they reach certain economies of scale. Our historical results may not be indicative of future results or results that may be
achieved, particularly if we continue to expand.

 Failure to successfully address these and other issues
related to any expansion could have a material adverse effect on our business, financial condition and results of operations, including
short-term and long-term liquidity, and could adversely affect our ability to successfully implement our business strategy.

 New lines of business or new products and services
may subject us to additional risk.

 From time to time, we may implement new lines of business
or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these
efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or
new products and services, we may invest significant time and resources. Initial timetables for the introduction and development of new
lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible. External
factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful
implementation of a new line of business and/or a new product or service. Furthermore, any new line of business and/or new product or
service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these
risks in the development and implementation of new lines of business and/or new products or services could have a material adverse effect
on our business and, in turn, our financial condition and results of operations.

 Risks Related to Our Common Stock

 Our ability to pay cash dividends is limited,
and we may be unable to pay future dividends even if we desire to do so.

 The Federal Reserve has issued a policy statement regarding
the payment of dividends by bank holding companies. In general, the Federal Reserve's policies provide that dividends should be
paid only out of current earnings and only if the prospective rate of earnings retention by the bank holding company appears consistent
with the organization's capital needs, asset quality and overall financial condition. The Federal Reserve's policies also
require that a bank holding company serve as a source of financial strength to its subsidiary banks by standing ready to use available
resources to provide adequate capital funds to those banks during periods of financial stress or adversity and by maintaining the financial
flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks where necessary. Further, under
the prompt corrective action regulations, the ability of a bank holding company to pay dividends may be restricted if a subsidiary bank
becomes undercapitalized. These regulatory policies could affect the ability of the Company to pay dividends or otherwise engage in capital
distributions.

 Statutory and regulatory limitations apply to the
Bank's payment of dividends to the Company. As a South Carolina chartered bank, the Bank is subject to limitations on the
amount of dividends that it is permitted to pay. Unless otherwise instructed by the S.C. Board, the Bank is generally permitted
under South Carolina state banking regulations to pay cash dividends of up to 100% of net income in any calendar year without
obtaining the prior approval of the S.C. Board. The FDIC also has the authority under federal law to enjoin a bank from engaging in
what in its opinion constitutes an unsafe or unsound practice in conducting its business, including the payment of a dividend under
certain circumstances. If the Bank is not permitted to pay cash dividends to the Company, it is unlikely that we would be able to
pay cash dividends on our common stock. Moreover, holders of our common stock are entitled to receive dividends only when, and if
declared by our board of directors.

 Our stock price may be volatile, which could result
in losses to our investors and litigation against us.

 Our stock price has been volatile in the past and several
factors could cause the price to fluctuate substantially in the future. These factors include but are not limited to: actual or anticipated
variations in earnings, changes in analysts' recommendations or projections, our announcement of developments related to our businesses,
operations and stock performance of other companies deemed to be peers, new technology used or services offered by traditional and non-traditional
competitors, news reports of trends, irrational exuberance on the part of investors, new federal banking regulations, and other issues
related to the financial services industry. Our stock price may fluctuate significantly in the future, and these fluctuations may be unrelated
to our performance. General market declines or market volatility in the future, especially in the financial institutions sector, could
adversely affect the price of our common stock, and the current market price may not be indicative of future market prices. Stock price
volatility may make it more difficult for you to resell

 your common stock when you want and at prices you find attractive. Moreover, in
the past, securities class action lawsuits have been instituted against some companies following periods of volatility in the market price
of its securities. We could in the future be the target of similar litigation. Securities litigation could result in substantial costs
and divert management's attention and resources from our normal business.

 Future sales of our stock by our shareholders
or the perception that those sales could occur may cause our stock price to decline.

 Although our common stock is listed for trading on
The NASDAQ Global Market, the trading volume in our common stock is lower than that of other larger financial services companies. A public
trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing
buyers and sellers of our common stock at any given time. This presence depends on the individual decisions of investors and general economic
and market conditions over which we have no control. Given the relatively low trading volume of our common stock, significant sales of
our common stock in the public market, or the perception that those sales may occur, could cause the trading price of our common stock
to decline or to be lower than it otherwise might be in the absence of those sales or perceptions.

 Economic and other circumstances may require
us to raise capital at times or in amounts that are unfavorable to us. If we have to issue shares of common stock, they will dilute the
percentage ownership interest of existing shareholders and may dilute the book value per share of our common stock and adversely affect
the terms on which we may obtain additional capital.

 We may need to incur additional debt or equity financing
in the future to make strategic acquisitions or investments or to strengthen our capital position. Our ability to raise additional capital,
if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside of our control and our
financial performance. We cannot provide assurance that such financing will be available to us on acceptable terms or at all, or if we
do raise additional capital that it will not be dilutive to existing shareholders.

 If we determine, for any reason, that we need to raise
capital, subject to applicable NASDAQ rules, our board generally has the authority, without action by or vote of the shareholders, to
issue all or part of any authorized but unissued shares of stock for any corporate purpose, including issuance of equity-based incentives
under or outside of our equity compensation plans. Additionally, we are not restricted from issuing additional common stock or preferred
stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or
preferred stock or any substantially similar securities. The market price of our common stock could decline as a result of sales by us
of a large number of shares of common stock or preferred stock or similar securities in the market or from the perception that such sales
could occur. If we issue preferred stock that has a preference over the common stock with respect to the payment of dividends or upon
liquidation, dissolution or winding-up, or if we issue preferred stock with voting rights that dilute the voting power of the common stock,
the rights of holders of the common stock or the market price of our common stock could be adversely affected. Any issuance of additional
shares of stock will dilute the percentage ownership interest of our shareholders and may dilute the book value per share of our common
stock. Shares we issue in connection with any such offering will increase the total number of shares and may dilute the economic and voting
ownership interest of our existing shareholders.

 Provisions of our articles of incorporation and
bylaws, South Carolina law, and state and federal banking regulations, could delay or prevent a takeover by a third party.

 Our articles of incorporation and bylaws could delay,
defer, or prevent a third party takeover, despite possible benefit to the shareholders, or otherwise adversely affect the price of our
common stock. Our governing documents:

 authorize a class of preferred stock that may be issued in series with terms, including voting rights, established by the board of directors without shareholder approval;

 authorize 10,000,000 shares of common stock and 10,000,000 shares of preferred stock that may be issued by the board of directors without shareholder approval;

 classify our board with staggered three year terms, preventing a change in a majority of the board at any annual meeting;

 require advance notice of proposed nominations for election to the board of directors and business to be conducted at a shareholder meeting;

 grant the board of directors the discretion, when considering whether a proposed merger or similar transaction is in the best interests of the Company and our shareholders, to take into account the effect of the transaction on the employees, clients and suppliers of the Company and upon the communities in which offices of the Company are located, to the extent permitted by South Carolina law;

 provide that the number of directors shall be fixed from time to time by resolution adopted by a majority of the directors then in office, but may not consist of fewer than five nor more than 25 members; and

 provide that no individual who is or becomes a "business competitor" or who is or becomes affiliated with, employed by, or a representative of any individual, corporation, or other entity which the board of directors, after

 having such matter formally brought to its attention, determines to be in competition with us or any of our subsidiaries (any such individual, corporation, or other entity being a "business competitor") shall be eligible to serve as a director if the board of directors determines that it would not be in our best interests for such individual to serve as a director (any financial institution having branches or affiliates within Greenville County, South Carolina is presumed to be a business competitor unless the board of directors determines otherwise).

 In addition, the South Carolina business combinations
statute provides that a 10% or greater shareholder of a resident domestic corporation cannot engage in a "business combination"
(as defined in the statute) with such corporation for a period of two years following the date on which the 10% shareholder became such,
unless the business combination or the acquisition of shares is approved by a majority of the disinterested members of such corporation's
board of directors before the 10% shareholder's share acquisition date. This statute further provides that at no time (even after the
two-year period subsequent to such share acquisition date) may the 10% shareholder engage in a business combination with the relevant
corporation unless certain approvals of the board of directors or disinterested shareholders are obtained or unless the consideration
given in the combination meets certain minimum standards set forth in the statute. The law is very broad in its scope and is designed
to inhibit unfriendly acquisitions but it does not apply to corporations whose articles of incorporation contain a provision electing
not to be covered by the law. Our articles of incorporation do not contain such a provision. An amendment of our articles of incorporation
to that effect would, however, permit a business combination with an interested shareholder even though that status was obtained prior
to the amendment.

 Finally, the Change in Bank Control Act and the BHCA
generally require filings and approvals prior to certain transactions that would result in a party acquiring control of the Company or
the Bank.

 Our common stock is not an insured deposit and
is not guaranteed by the FDIC.

 Shares of our common stock are not a bank deposit and,
therefore, losses in value are not insured by the FDIC, any other deposit insurance fund or by any other public or private entity. Investment
in shares of our common stock is inherently risky for the reasons described herein and our shareholders will bear the risk of loss if
the value or market price of our common stock is adversely affected.

 General Risk Factors

 We may be subject to claims and litigation asserting
lender liability.

 From time to time, clients and others make claims and
take legal action pertaining to our performance of fiduciary responsibilities. These claims are often referred to as "lender liability"
claims and are sometimes brought in an effort to produce or increase leverage against us in workout negotiations or debt collection proceedings.
Lender liability claims frequently assert one or more of the following allegations: breach of fiduciary duties, fraud, economic duress,
breach of contract, breach of the implied covenant of good faith and fair dealing, and similar claims. Whether customer claims and legal
action related to the performance of our responsibilities are founded or unfounded, if such claims and legal actions are not resolved
in a favorable manner, they may result in significant financial liability and/or adversely affect our market reputation, products and
services, as well as potentially affecting customer demand for those products and services. Any financial liability or reputation damage
could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition,
results of operations and liquidity.

 From time to time, we are, or may become, involved
in suits, legal proceedings, information-gatherings, investigations and proceedings by governmental and self-regulatory agencies that
may lead to adverse consequences.

 Many aspects of the banking business involve a substantial
risk of legal liability. From time to time, we are, or may become, the subject of information-gathering requests, reviews, investigations
and proceedings, and other forms of regulatory inquiry, including by bank regulatory agencies, self-regulatory agencies, the SEC and law
enforcement authorities. The results of such proceedings could lead to significant civil or criminal penalties, including monetary penalties,
damages, adverse judgements, settlements, fines, injunctions, restrictions on the way we conduct our business or reputational harm.

 Item 1B. Unresolved Staff Comments.

 None.

 Item 1C. Cybersecurity.

 We depend heavily on various information systems and
electronic resources to conduct our business operations. Additionally, a majority of our clients, service providers, and other business
partners on whom we rely, including providers of our online banking, mobile banking, and accounting systems, utilize their own electronic
information systems. Any of these systems are susceptible to compromise, whether by employees, clients, or other authorized individuals,
as well as

 by malicious actors employing sophisticated and continuously evolving software, tools, and strategies. Given our status as
a financial services provider and our relative size, we and our business partners are considered high-value targets for such malicious
actors. For further details, please refer to the "Risks Related to Information Security and Business Interruption" section of
the Risk Factors outlined in Item 1A of this Form 10-K.

 As a result, we have devoted significant resources
to assessing, identifying, and managing cybersecurity risks and threats, including:

 Maintaining policies and procedures regarding security operations and governance through the implementation of an Information Security Program;

 Establishing a committee responsible for security administration, including regular assessments of our systems, existing controls, vulnerabilities, and potential improvements;

 Implementing multi-layered controls to avoid reliance on single controls;

 Utilizing both preventative and detective tools to monitor and block suspicious activity and to alert of potential threats;

 Keeping abreast of new technology and evaluating tools to help respond to threats to cybersecurity in real time;

 Managing and maintaining cybersecurity controls utilizing available people, processes and technology;

 Utilizing a third-party risk management program for purposes of identifying, assessing and managing risks involved with external service providers;

 Conducting thorough due diligence concerning our third-party service providers, including evaluating their cybersecurity practices;

 Collaborating with third-party cybersecurity consultants, who perform regular penetration testing, vulnerability assessments, and other procedures to identify potential weaknesses in our systems and processes;

 Providing regular cybersecurity training for both our employees and Board of Directors.

 The Information Security Program, overseen by our Executive Project
and Technology Risk Committee ("EPTRC"), plays a vital role in our overall risk management system. It encompasses administrative,
technical, and physical measures aimed at safeguarding the security and confidentiality of client records and information. We also have
an Incident Response Plan which is continually updated in response to an ever-changing threat landscape to provide long-term strategies
for remediation, prevention of future incidents and resiliency to all types of threats. The incident response team (i) includes subject
matter experts to address cyber threats and (ii) includes members of management responsible to monitor threat escalation and identify
events that may warrant Board notification and a Form 8-K cybersecurity notice.

 Occasionally, we have encountered cybersecurity threats
necessitating adjustments to our procedures and the integration of extra safeguards. Although these specific threats or incidents haven't
significantly impacted us thus far, it is possible that future threats and incidents we detect could potentially have a material adverse
effect on our business strategy, results of operations, and financial condition.

 Our management team is tasked with the daily management of
the cybersecurity risks we encounter and supervises the EPTRC. Our EPTRC, in turn, oversees the assessment of information security,
the creation of policies, standards, and procedures, as well as testing, training, and security reporting processes for our Company.
The EPTRC is comprised of management with the appropriate expertise and authority to ensure effective oversight of the Information
Security Program.

 Furthermore, our Board of Directors, both collectively
and through its Risk Committee, holds responsibility for overseeing risk management, including cybersecurity risks. In this capacity,
the Board and the Risk Committee, supported by management and third-party cybersecurity advisors, ensure that the risk management processes
devised and executed by management are adequate and operational as intended. Annually, the Board reviews and approves our information
security program, vendor management policy (including third-party service providers), acceptable use policy, incident response policy,
and business continuity planning policy. These policies are developed and implemented by our management team. To fulfill their duties,
the Board receives regular updates from the Risk Committee regarding cybersecurity risks and management's endeavors to prevent,
detect, mitigate, and address any cybersecurity incidents, at least quarterly.

 Item 2. Properties.

 Our principal executive offices and the Bank's main
office are located at 6 Verdae Boulevard, Greenville, South Carolina 29607. In addition, we currently operate eight additional offices
located in Greenville, Columbia, Summerville and Charleston, South Carolina, one office in Raleigh, North Carolina, one office in Greensboro,
North Carolina, one office in

 Charlotte, North Carolina, and one office in Atlanta, Georgia. We lease eight of our offices and own the
remaining five locations.

 Item 3. Legal Proceedings.

 In the ordinary course of operations, we may be a party
to various legal proceedings from time to time. We do not believe that there is any pending or threatened proceeding against us, which,
if determined adversely, would have a material effect on our business, results of operations, or financial condition.

 Item 4. Mine Safety Disclosures.

 None.

 Item 5. Market for Common Equity, Related Shareholder
Matters and Issuer Purchases of Equity Securities.

 Market Information and Holders of Record

 Our common stock is currently traded on the NASDAQ
Global Market under the symbol "SFST." We had approximately 2,900 shareholders of record on February 5, 2024.

 Dividends

 We have not declared or paid any cash dividends on
our common stock since our inception. For the foreseeable future, we do not intend to declare cash dividends. We intend to retain earnings
to grow our business and strengthen our capital base. Our ability to pay cash dividends depends primarily on the ability of our subsidiary,
the Bank to pay dividends to us. As a South Carolina chartered bank, the Bank is subject to limitations on the amount of dividends that
it is permitted to pay. Unless otherwise instructed by the S.C. Board, the Bank is generally permitted under South Carolina state banking
regulations to pay cash dividends of up to 100% of net income in any calendar year without obtaining the prior approval of the S.C. Board.
The FDIC also has the authority under federal law to enjoin a bank from engaging in what in its opinion constitutes an unsafe or unsound
practice in conducting its business, including the payment of a dividend under certain circumstances.

 Equity Compensation Plan Information

 The following table sets forth information regarding
equity compensation plans approved by security holders at December 31, 2023. We had no equity compensation plans that were not approved
by security holders at December 31, 2023. The number of shares and the exercise prices for options have been adjusted for the 10% stock
dividends in 2006, 2011, 2012, and 2013.

 Plan Category

 Number of securities
 to be issued upon
 exercise of
 outstanding options,
 warrants and rights (a)

 Weighted-average
 exercise price of
 outstanding options,
 warrants and rights

 (b) (3)

 Number of securities
 remaining available for
 future issuance under
 equity compensation
 plans (c) (excluding
 securities reflected in
 column(a))

 Equity compensation plans approved by security holders

 2010 Stock Incentive Plan – options (1)

 78,802

 $
 26.18

 -

 2016 Equity Incentive Plan – options (1)

 245,047

 37.99

 -

 2020 Equity Incentive Plan (2)

 7,500

 52.85

 319,058

 Total

 331,349

 $
 35.51

 319,058

 (1)

 Under the terms of the 2010 and 2016 Plans no further incentive stock option awards may be granted; however, the Plans will remain in effect until all awards have been exercised or forfeited and we determine to terminate the Plans.

 (2)

 The 2020 Equity Incentive Plan provides for shares to be issued as either stock options or restricted stock grants.

 (3)

 The weighted-average exercise prices in this column are based on outstanding options and do not take into account unvested awards of restricted stock as these awards do not have an exercise price.

 Stock Performance Graph

 The performance graph below compares the Company's
cumulative total return over the most recent five-year period with the SNL Southeast Bank Index, a banking industry performance index
for the southeastern United States, and the Russell 2000 Index, a small-cap stock market index which the Company was added to in June
2016. Returns are shown on a total return basis, assuming the reinvestment of dividends and a beginning stock index value of $100 per
share. The following performance graph does not constitute soliciting material and should
not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange
Act of 1934, except to the extent that we specifically incorporate the performance graphs by reference therein.

 Period Ending

 12/31/2018

 12/31/2019

 12/31/2020

 12/31/2021

 12/31/2022

 12/31/2023

 Southern First Bancshares

 100.00

 132.49

 110.23

 194.86

 142.66

 115.68

 S&P US BMI Banks – Southeast Bank Index

 100.00

 140.94

 126.37

 180.49

 146.81

 151.44

 Russell 2000 Index

 100.00

 125.52

 150.58

 172.90

 137.56

 160.85

 Sales of Unregistered Equity Securities

 None

 Stock Repurchases

 The Company does not have a current repurchase plan
and, as such, future repurchases will require additional approval of our Board of Directors and the Federal Reserve.

 Item 6. [Reserved]

 Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations

 The following discussion and analysis identifies significant
factors that have affected our financial position and operating results during the periods included in the accompanying financial statements.
We encourage you to read this discussion and analysis in conjunction with the financial statements and the related notes and the other
statistical information also included in this Annual Report on Form 10-K.

 OVERVIEW

 Our business model continues
to be client-focused, utilizing relationship teams to provide our clients with a specific banker contact and support team responsible
for all of their banking needs. The purpose of this structure is to provide a consistent and superior level of professional service, and
we believe it provides us with a distinct competitive advantage. We consider exceptional client service to be a critical part of our culture,
which we refer to as "ClientFIRST."

 At December 31, 2023, we had total assets of $4.06
billion, a 9.9% increase from total assets of $3.69 billion at December 31, 2022. The largest components of our total assets are loans
which were $3.60 billion and $3.27 billion at December 31, 2023 and 2022, respectively. Our liabilities and shareholders' equity
at December 31, 2023 totaled $3.74 billion and $312.5 million, respectively, compared to liabilities of $3.40 billion and shareholders'
equity of $294.5 million at December 31, 2022. The principal component of our liabilities is deposits which were $3.38 billion and $3.13
billion at December 31, 2023 and 2022, respectively.

 Like most community banks, we derive the majority of
our income from interest received on our loans and investments. Our primary source of funds for making these loans and investments is
our deposits, on which we pay interest. Consequently, one of the key measures of our success is our amount of net interest income, or
the difference between the income on our interest-earning assets, such as loans and investments, and the expense on our interest-bearing
liabilities, such as deposits and borrowings. Another key measure is the difference between the yield we earn on these interest-earning
assets and the rate we pay on our interest-bearing liabilities, which is called our net interest spread. In addition to earning interest
on our loans and investments, we earn income through fees and other charges to our clients.

 Our net income available to common shareholders for
the years ended December 31, 2023 and 2022 was $13.4 million and $29.1 million, or diluted earnings per share ("EPS") of $1.66
and $3.61 for the years ended December 31, 2023 and 2022, respectively. The decrease in net income resulted primarily from a decrease
in net interest income and an increase in noninterest expenses, partially offset by a decrease in the provision for credit losses. In
addition, our net income available to shareholders was $46.7 million, or EPS of $5.85 for the year ended December 31, 2021.

 SELECTED FINANCIAL DATA

 The following table
sets forth our selected historical consolidated financial information for the periods and as of the dates indicated. We derived our balance
sheet and income statement data for the years ended December 31, 2023, 2022, and 2021 from our audited consolidated financial statements.
You should read this information together with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our audited consolidated financial statements and the related notes thereto, which are included elsewhere in this
Annual Report on Form 10-K.

 Years Ended December 31,

 (dollars in thousands, except per share data)

 2023

 2022

 2021

 BALANCE SHEET DATA

 $
 4,055,789

 3,691,981

 2,925,548

 Investment securities

 154,641

 104,180

 124,302

 Loans (1)

 2,489,877

 Allowance for credit losses

 40,682

 3,379,564

 3,133,864

 2,563,826

 FHLB advances and other borrowings

 275,000

 -

 36,214

 36,106

 Common equity

 277,901

 Preferred stock

 -

 -

 -

 Shareholders' equity

 277,901

 SELECTED RESULTS OF OPERATIONS DATA

 Interest income

 $
 177,598

 117,662

 93,167

 Interest expense

 99,944

 20,041

 5,435

 Net interest income

 77,654

 97,621

 87,732

 1,260

 6,155

 (12,400
)

 Net interest income after provision for credit losses

 76,394

 91,466

 100,132

 Noninterest income

 9,860

 9,580

 17,101

 Noninterest expenses

 68,827

 62,933

 56,430

 Income before income tax expense

 17,427

 38,113

 60,803

 Income tax expense

 4,001

 8,998

 14,092

 Preferred stock dividends

 -

 -

 -

 Net income available to common shareholders

 $

 PER COMMON SHARE DATA

 Basic

 $
 1.67

 3.66

 5.96

 Diluted

 1.66

 3.61

 5.85

 Book value

 38.63

 36.76

 35.07

 Weighted average number of common shares outstanding:

 Basic, in thousands

 8,047

 7,958

 7,844

 Diluted, in thousands

 8,078

 8,072

 7,989

 SELECTED FINANCIAL RATIOS

 Performance Ratios:

 Return on average assets

 0.34
 %

 0.90
 %

 1.75
 %

 Return on average equity

 4.44
 %

 10.20
 %

 18.64
 %

 Return on average common equity

 4.44
 %

 10.20
 %

 18.64
 %

 Net interest margin, tax equivalent (2)

 2.07
 %

 3.19
 %

 3.45
 %

 Efficiency ratio (3)

 78.65
 %

 58.71
 %

 53.83
 %

 Asset Quality Ratios:

 Nonperforming assets to total loans (1)

 0.11
 %

 0.08
 %

 0.20
 %

 Nonperforming assets to total assets

 0.10
 %

 0.07
 %

 0.17
 %

 Net charge-offs to average total loans

 0.00
 %

 (0.05
 %)

 0.06
 %

 Allowance for credit losses to nonperforming loans

 1,026.58
 %

 1,470.74
 %

 625.16
 %

 Allowance for credit losses to total loans

 1.13
 %

 1.18
 %

 1.22
 %

 Holding Company Capital Ratios:

 Total risk-based capital ratio

 12.57
 %

 12.91
 %

 14.90
 %

 Tier 1 risk-based capital ratio

 10.60
 %

 10.88
 %

 12.65
 %

 Leverage ratio

 8.14
 %

 9.17
 %

 10.19
 %

 Common equity tier 1 ratio (4)

 10.19
 %

 10.44
 %

 12.09
 %

 Tangible common equity (5)

 7.70
 %

 7.98
 %

 9.50
 %

 Growth Ratios:

 Change in assets

 9.85
 %

 26.20
 %

 17.84
 %

 Change in loans

 10.06
 %

 31.47
 %

 16.19
 %

 Change in deposits

 7.84
 %

 22.23
 %

 19.65
 %

 Change in net income to common shareholders

 -53.89
 %

 -37.67
 %

 154.86
 %

 Change in earnings per common share - diluted

 -54.02
 %

 -38.29
 %

 150.00
 %

 Footnotes to table:

 (1)

 Excludes loans held for sale.

 (2)

 The tax-equivalent adjustment to net interest income adjusts the yield for
 assets earning tax-exempt income to a comparable yield on a taxable basis.

 (3)

 Noninterest expense divided by the sum of net interest income and noninterest
 income.

 (4)

 The common equity tier 1 ratio is calculated as the sum of common equity divided
 by risk-weighted assets.

 (5)

 The common equity ratio is calculated as total equity less preferred stock divided
 by total assets.

 CRITICAL ACCOUNTING ESTIMATES

 We have adopted various accounting policies that govern
the application of accounting principles generally accepted in the U.S. and with general practices within the banking industry in the
preparation of our financial statements. Our significant accounting policies are described in Note 1 to our Consolidated Financial Statements
as of December 31, 2023.

 Certain accounting policies inherently involve a greater
reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be
materially different than originally reported, which could have a material impact on the carrying values of our assets and liabilities
and our results of operations. We consider these accounting policies and estimates to be critical accounting policies. We have identified
the determination of the allowance for credit losses, the fair valuation of financial instruments and income taxes to be the accounting
areas that require the most subjective or complex judgments and, as such, could be most subject to revision as new or additional information
becomes available or circumstances change, including overall changes in the economic climate and/or market interest rates. Therefore,
management has reviewed and approved these critical accounting policies and estimates and has discussed these policies with the Company's
Audit Committee.

 Allowance for Credit Losses

 The allowance for credit losses
("ACL") is management's current estimate of expected credit losses that will result from the inability of our borrowers
to make required loan payments, with particular applicability on our balance sheet to loans and unfunded loan commitments. Estimating
the amount of the ACL requires significant judgment and the use of estimates related to historical experience, current conditions, reasonable
and supportable forecasts, and the value of collateral on collateral-dependent loans. Credit losses are charged against the allowance,
while recoveries of amounts previously charged off are credited to the allowance. A provision for credit losses is charged to operations
based on management's periodic evaluation of the factors previously mentioned, as well as other pertinent factors.

 There are many factors affecting
the ACL; some are quantitative while others require qualitative judgment. Although management believes its process for determining the
allowance adequately considers all the potential factors that could potentially result in credit losses, the process includes subjective
elements and is susceptible to significant change. To the extent actual outcomes are worse than management estimates, additional provision
for credit losses could be required that could adversely affect our earnings or financial position in future periods.

 See Note 1 – Summary
of Significant Accounting Policies and Activities for further detailed descriptions of our estimation process and methodology related
to the ACL. See also Note 4 – Loans and Allowance for Credit Losses and "Provision for Credit Losses" in this MD&A.

 Fair Valuation of Financial Instruments

 Certain assets and liabilities are measured at fair
value on a recurring basis, including securities and derivative instruments. Assets and liabilities carried at fair value inherently include
subjectivity and may require the use of significant assumptions, adjustments and judgment including, among others, discount rates, rates
of return on assets, cash flows, default rates, loss rates, terminal values and liquidation values. A significant change in assumptions
may result in a significant change in fair value, which in turn, may result in a higher degree of financial statement volatility and could
result in significant impact on our results of operations, financial condition or disclosures of fair value information.

 The fair value hierarchy requires
use of observable inputs first and subsequently unobservable inputs when observable inputs are not available. Our fair value measurements
involve various valuation techniques and models, which involve inputs that are observable (Level 1 or Level 2 in fair value hierarchy),
when available. The level of judgment required to determine fair value is dependent on the methods or techniques used in the process.
Assets and liabilities that are measured at fair value using quoted prices in active markets (Level 1) do not require significant judgment
while the valuation of assets and liabilities
when quoted market prices are not available (Levels 2 and 3) may require significant

 judgment to assess whether observable or unobservable
inputs for those assets and liabilities provide reasonable determination of fair value. See Note 12 to the Consolidated Financial Statements
for additional information regarding the fair values measured at each level of the fair value hierarchy, additional discussion regarding
fair value measurements, and a brief description of how fair value is determined for categories that have unobservable inputs.

 Income Taxes

 The financial statements have been prepared on the
accrual basis. When income and expenses are recognized in different periods for financial reporting purposes versus for the purposes of
computing income taxes currently payable, deferred taxes are provided on such temporary differences. Deferred tax assets and liabilities
are recognized for the expected future tax consequences of events that have been recognized in the consolidated financial statements or
tax returns. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be realized or settled.

 RESULTS OF OPERATIONS

 Net Interest Income and Margin

 Our level of net interest income is determined by the
level of earning assets and the management of our net interest margin. For the years ended December 31, 2023, 2022, and 2021, our net
interest income was $77.7 million, $97.6 million, and $87.7 million, respectively. The $20.0 million, or 20.5%, decrease in net interest
income during 2023, compared to 2022, was driven by a $79.9 million increase in interest expense, primarily related to our interest-bearing
deposits, partially offset by a $59.9 million increase in interest income. During 2022, our net interest income increased $9.9 million,
or 11.3%, compared to 2021, while average interest-earning assets increased $525.0 million and average interest-bearing liabilities increased
$401.0 million.

 Interest income for the years ended December 31, 2023,
2022, and 2021 was $177.6 million, $117.7 million, and $93.2 million, respectively. A significant portion of our interest income relates
to our strategy to maintain a large portion of our assets in higher earning loans compared to lower yielding investments and federal funds
sold. As such, 93.5% of our interest income related to interest on loans during 2023, compared to 97.1% during 2022 and 98.3% during 2021.
Also, included in interest income on loans was $1.7 million related to the net amortization of loan fees and capitalized loan origination
costs for the year ended December 31, 2023, compared to $1.7 million and $1.4 million for the years ended December 31, 2022 and 2021,
respectively. The increase in interest income during 2023 was driven by an increase in average interest-earning assets, combined with
higher yields on those assets.

 Interest expense was $99.9 million, $20.0 million,
and $5.4 million for the years ended December 31, 2023, 2022, and 2021, respectively. Interest expense on deposits for 2023 represented
91.4% of total interest expense, compared to 90.3% for 2022, and 71.9% for 2021, while interest expense on borrowings represented 8.6%
of total interest expense for 2023, compared to 9.7% for 2022, and 28.1% for 2021. The increase in interest expense on deposits during
2023 resulted primarily from an increase in the rate paid on deposit balances which relates to the Federal Reserve's 525 basis point
increase in the federal funds rate over the past two years.

 We have included a number of tables to assist in our
description of various measures of our financial performance. For example, the "Average Balances, Income and Expenses, Yields and
Rates" table shows the average balance of each category of our assets and liabilities as well as the yield we earned or the rate
we paid with respect to each category during 2023, 2022, and 2021. Similarly, the "Rate/Volume Analysis" table demonstrates
the effect of changing interest rates and changing volume of assets and liabilities on our financial condition during the periods shown.
We also track the sensitivity of our various categories of assets and liabilities to changes in interest rates, and we have included tables
to illustrate our interest rate sensitivity with respect to interest-earning and interest-bearing accounts.

 The following table sets forth information related
to our average balance sheet, average yields on assets, and average costs of liabilities at December 31, 2023, 2022 and 2021. We derived
these yields or costs by dividing income or expense by the average balance of the corresponding assets or liabilities. We derived average
balances from the daily balances throughout the periods indicated. During the same periods, we had no securities purchased with agreements
to resell. All investments were owned at an original maturity of over one year. Nonaccrual loans are included in earning assets in the
following tables. Loan yields have been reduced to reflect the negative impact on our earnings of loans on nonaccrual status. The net
of capitalized loan costs and fees are amortized into interest income on loans.

 Average Balances, Income and Expenses, Yields and
Rates

 For the Year Ended December 31,

 2023

 2022

 2021

 Income/
 Expense

 Yield/
 Rate

 Income/
 Expense

 Yield/
 Rate

 Income/
 Expense

 Yield/
 Rate

 Interest-earning assets

 Federal funds sold and interest-bearing deposits with banks

 $
 134,495

 $
 6,998

 5.20
 %

 $
 88,077

 $
 1,439

 1.63
 %

 $
 123,379

 $

 0.19
 %

 Investment securities, taxable

 121,739

 4,296

 3.53
 %

 97,328

 1,793

 1.84
 %

 92,812

 1,110

 1.20
 %

 Investment securities, nontaxable (1)

 7,941

 2.73
 %

 10,604

 2.41
 %

 11,331

 2.58
 %

 Loans (2)

 3,497,623

 166,137

 4.75
 %

 2,870,733

 114,233

 3.98
 %

 2,314,257

 91,599

 3.96
 %

 Total interest-earning assets

 3,761,798

 177,648

 4.72
 %

 3,066,742

 117,721

 3.84
 %

 2,541,779

 93,234

 3.67
 %

 Noninterest-earning assets

 162,771

 157,380

 126,654

 $
 3,924,569

 $
 3,224,122

 $
 2,668,433

 Interest-bearing liabilities

 NOW accounts

 $
 299,703

 2,254

 0.75
 %

 $
 374,956

 0.22
 %

 $
 306,669

 0.07
 %

 Savings & money market

 1,708,874

 61,241

 3.58
 %

 1,364,961

 13,138

 0.96
 %

 1,176,820

 2,454

 0.21
 %

 Time deposits

 631,967

 27,878

 4.41
 %

 301,793

 4,148

 1.37
 %

 176,301

 1,251

 0.71
 %

 Total interest-bearing deposits

 2,640,544

 91,373

 3.46
 %

 2,041,710

 18,102

 0.89
 %

 1,659,790

 3,909

 0.24
 %

 FHLB advances and other borrowings

 169,963

 6,382

 3.75
 %

 19,614

 1.07
 %

 1.56
 %

 Subordinated debt

 36,265

 2,189

 6.04
 %

 36,156

 1,730

 4.78
 %

 36,049

 1,515

 4.20
 %

 Total interest-bearing liabilities

 2,846,772

 99,944

 3.51
 %

 2,097,498

 20,041

 0.96
 %

 1,696,543

 5,435

 0.32
 %

 Noninterest-bearing liabilities

 775,116

 841,233

 721,267

 Shareholders' equity

 302,681

 285,409

 250,623

 Total liabilities and shareholders' equity

 $
 3,924,569

 $
 3,224,122

 $
 2,668,433

 Net interest spread

 1.21
 %

 2.88
 %

 3.35
 %

 Net interest income(tax equivalent)/margin

 $
 77,704

 2.07
 %

 $
 97,680

 3.19
 %

 $
 87,799

 3.45
 %

 Less: tax-equivalent adjustment (1)

 (50
)

 (59
)

 (67
)

 Net interest income

 $
 77,654

 $
 97,621

 $
 87,732

 (1)

 The tax-equivalent adjustment to net interest income adjusts the yield for assets earning
 tax-exempt income to a comparable yield on a taxable basis.

 (2)

 Includes loans held for sale and nonaccrual loans.

 Our net interest margin,
on a tax-equivalent basis (TE), was 2.07%, 3.19% and 3.45% for the years ended December 31, 2023, 2022 and 2021, respectively. Our net
interest margin (TE) decreased 112 basis points in 2023, compared to 2022, driven by higher costs on our interest-bearing liabilities,
partially offset by an increase in yield on our interest-earning assets. During 2022, our net interest margin decreased 26 basis points,
compared to 2021, due to higher costs on our interest-bearing liabilities, partially offset by an increase in yield on our interest-earning
assets.

 Our average interest-earning assets increased by $695.1
million during the year ended December 31, 2023, compared to 2022, while the related yield on our interest-earning assets increased by
88 basis points. The increase in average interest-earning assets was driven by a $626.9 million increase in average loan balances and
a $46.4 million increase in federal funds sold and interest-bearing deposits with banks. In addition, the increase in yield on our interest
earning assets was driven by a 357 basis point increase in the yield on our federal funds sold and other interest-bearing deposits which
repriced as the Federal Reserve increased the federal funds rate by 100 basis points during 2023.

 Our average interest-bearing liabilities increased
by $749.3 million during 2023 while the cost of our interest-bearing liabilities increased by 255 basis points. The increase in average
interest-bearing liabilities was driven primarily by a $598.8 million increase in average interest-bearing deposits at an average rate
of 3.46%. During 2022, our average interest-bearing liabilities increased by $401.0 million, compared to 2021, while the cost of our interest-bearing
liabilities increased by 64 basis points.

 During the year ended December 31, 2022, our average
interest-earning assets increased by $525.0 million, compared to 2021, while the yield on our interest-earning assets increased by 17
basis points. The increase in average interest-earning assets was driven primarily by a $556.5 million increase in average loan balances
combined with an $35.3 million decrease in federal funds sold and interest-bearing deposits with banks. In addition, the increase in yield
on our interest earning assets was driven by a 144 basis point increase in the yield on our federal funds sold and other interest-bearing
deposits which repriced as the Federal Reserve increased the federal funds rate by 425 basis points during 2022.

 Our net interest spread was
1.21% for the year ended December 31, 2023, compared to 2.88% for the same period in 2022 and 3.35% for 2021. The net interest spread
is the difference between the yield we earn on our interest-earning assets and the rate we pay on our interest-bearing liabilities. The
255 basis point increase in the cost of our interest-

 bearing liabilities, partially
offset by an 88 basis point increase in yield on our interest-earning assets resulted in a 167 basis point decrease in our net interest
spread for the 2023 period. We anticipate continued pressure on our net interest spread and net interest margin in future periods
as our deposits continue to reprice immediately with increases in the fed funds rate, compared to our loan portfolio which reprices as
loans are originated or renewed.

 Rate/Volume Analysis

 Net interest income can be analyzed in terms of the
impact of changing interest rates and changing volume. The following tables set forth the effect which the varying levels of interest-earning
assets and interest-bearing liabilities and the applicable rates have had on changes in net interest income for the periods presented.

 Years Ended

 December 31, 2023 vs. 2022

 December 31, 2022 vs. 2021

 Increase (Decrease) Due to Change in

 Increase (Decrease) Due to Change in

 Volume

 Rate

 Rate/
 Volume

 Total

 Volume

 Rate

 Rate/
 Volume

 Total

 income

 Loans

 $
 24,945

 22,127

 4,832

 51,904

 $
 22,025

 22,634

 Investment
 securities

 1,725

 2,473

 Federal
 funds sold

 3,144

 1,657

 5,559

 (67
)

 1,782

 (509
)

 1,206

 Total
 interest income

 26,104

 26,996

 6,836

 59,936

 22,007

 2,858

 (370
)

 24,495

 expense

 3,371

 58,928

 10,972

 73,271

 10,997

 2,358

 14,193

 FHLB
 advances and other borrowings

 1,602

 4,044

 6,174

 (3
)

 (94
)

 Subordinated
 debt

 Total
 interest expense

 4,978

 59,908

 15,017

 79,903

 1,136

 11,205

 2,265

 14,606

 Net
 interest income

 $
 21,126

 (32,912
)

 (8,181
)

 (19,967
)

 $
 20,871

 (8,347
)

 (2,635
)

 9,889

 Net interest income, the largest component of our
income, was $77.7 million for the year ended December 31, 2023, a $20.0 million decrease from net interest income of $97.6 million for
the year ended December 31, 2022. The decrease in net interest income was driven by a $79.9 million increase in interest expense, partially
offset by a $59.9 million increase in interest income. The 257 basis point increase in deposit costs drove the increase in interest expense
while the $626.9 million increase in average loan balances combined with the 77 basis point increase in loan yield drove the increase
in interest income.

 Net interest income was $97.6 million for the year
ended December 31, 2022, a $9.9 million increase from net interest income of $87.7 million for the year ended December 31, 2021. The increase
in net interest income was driven by a $24.5 million increase in interest income, partially offset by a $14.6 million increase in interest
expense. The $556.5 million increase in average loan balances was the primary driver of the increase in interest income, while the 65
basis point increase in deposit costs drove the increase in interest expense.

 Provision for Credit Losses

 The provision for credit losses, which includes a
provision for losses on unfunded commitments, is a charge to earnings to maintain the allowance for credit losses and reserve for unfunded
commitments at levels consistent with management's assessment of expected losses in the loan portfolio at the balance sheet date.
On January 1, 2022, we adopted the Current Expected Credit Loss (CECL) methodology for estimating credit losses, which resulted in an
increase of $1.5 million in our allowance for credit losses and an increase of $2.0 million in our reserve for unfunded commitments. The
tax-effected impact of these two items amounted to $2.8 million and was recorded as an adjustment to our retained earnings as of January
1, 2022. We review the adequacy of the allowance for credit losses on a quarterly basis. Please see the discussion below under "Results
of Operations – Allowance for Credit Losses" for a description of the factors we consider in determining the amount of the
provision we expense each period to maintain this allowance.

 There was a $1.3 million provision for credit losses
for the year ended December 31, 2023, compared to a provision of $6.2 million and a reversal of $12.4 million for the years ended December
31, 2022 and 2021, respectively. The $1.3 million provision during 2023 included a $2.2 million provision for credit losses and a reversal
of $949,000 for unfunded commitments. The $2.2 million provision was driven primarily by $329.3 million in loan growth during the year,
while the $949,000 reversal was driven by a $153.7 million decrease in unfunded commitments. The $6.2 million provision during 2022, which
included a $780,000 provision for unfunded commitments, was driven primarily by $783.5 million in loan growth during the year, combined
with a $259.6 million increase in unfunded commitments. In addition, to loan growth,

 the provision for credit losses was impacted by slightly
lower expected loss rates due to historically low charge-offs during the 12 months ended December 31, 2022 while minor adjustments to
two internal qualitative factors increased the qualitative component of the allowance and related provision expense. The $12.4 million
reversal of provision during 2021 related to a reduction in qualitative adjustment factors driven by the overall improvement in economic
conditions as well as improvement in the credit quality of our portfolio following the pandemic.

 Following is a summary of the activity in the allowance
for credit losses.

 2023

 2022

 2021

 Balance,
 beginning of period

 $

 44,149

 Adjustment
 for CECL

 -

 1,500

 -

 Provision
 for (reversal of) credit losses

 2,209

 5,375

 (12,400
)

 Loan charge-offs

 (761
)

 (485
)

 (2,166
)

 Loan
 recoveries

 1,841

 Net
 loan (charge-offs) recoveries

 (166
)

 1,356

 (1,341
)

 Balance,
 end of period

 $
 40,682

 As of December 31, 2023, the allowance for credit
losses totaled $40.7 million, or 1.13% of gross loans. In comparison, the allowance for credit losses totaled $38.6 million as of December
31, 2022, or 1.18% of gross loans, and $30.4 million as of December 31, 2021, or 1.22% of gross loans.

 During the year ended December 31, 2023, we had net
charge-offs of $166,000, consisting of $761,000 of loans charged-off in the current year, partially offset by $595,000 of recoveries on
loans previously charged-off. Net charge-offs were 0.00% of the average outstanding loan portfolio for 2023. In addition, nonperforming
assets increased to 0.10% of total assets while our level of classified assets decreased to 4.25% at December 31, 2023.

 We reported net recoveries of $1.4 million and net
charge-offs of $1.3 million for the years ended December 31, 2022 and 2021, respectively, including charge-offs of $485,000 and recoveries
of $825,000 in 2022 and 2021, respectively. The net recoveries of $1.4 million and charge-offs of $1.3 million during 2022 and 2021, respectively,
represented 0.05% and 0.06% of the average outstanding loan portfolios for 2022 and 2021, respectively. In addition, nonperforming assets
were 0.07% and 0.17% of total assets for 2022 and 2021, respectively, and classified assets were 4.72% and 12.61% at December 31, 2022
and 2021, respectively.

 Noninterest Income

 The following table sets forth information related
to our noninterest income.

 Year
 ended December 31,

 2023

 2022

 2021

 Mortgage
 banking income

 $
 4,036

 4,198

 11,376

 Service
 fees on deposit accounts

 1,382

 1,265

 1,174

 ATM and
 debit card income

 2,245

 2,163

 2,037

 Income from
 bank owned life insurance

 1,379

 1,289

 1,231

 Net lender
 fees on PPP loan sale

 -

 -

 Gain (loss)
 on disposal of fixed assets

 -

 (394
)

 Gain on
 sale of securities

 -

 (3
)

 Other
 income

 1,047

 1,008

 Total
 noninterest income

 $
 9,860

 9,580

 17,101

 Noninterest income was $9.9 million for the year ended
December 31, 2023, a $280,000, or 2.9%, increase compared to noninterest income of $9.6 million for the year ended December 31, 2022.
The increase in noninterest income during 2023, compared to 2022, resulted primarily from a loss on disposal of assets during the prior
year. Offsetting the increases in noninterest income were decreases in mortgage banking income and other income. Other income decreased
due to a decrease in loan fee income during 2023 as compared to 2022 due to fewer loan originations.

 Noninterest income was $9.6 million for the year ended
December 31, 2022, a $7.5 million, or 44.0%, decrease compared to noninterest income of $17.1 million for the year ended December 31,
2021. The decrease in noninterest income during 2022, compared to 2021, resulted primarily from the following:

 Mortgage banking income decreased $7.2 million, or 63.1%, driven by low inventory in
 the housing market, lower refinance volumes, and a decrease in margin on loan sales. During 2022, purchase transactions accounted
 for approximately 84% of our mortgage volume compared to 40% in 2021 as refinance transactions diminished due to the higher
 mortgage rates in 2022.

 Offsetting these decreases in noninterest income were
increases in service fees on deposit accounts and ATM and debit card income due to growth in our client base and transaction volume.

 Noninterest Expenses

 The following table sets forth information related
to our noninterest expenses.

 Years ended December 31,

 2023

 2022

 2021

 Compensation
 and benefits

 $
 40,275

 38,790

 36,103

 Occupancy

 10,255

 9,105

 6,956

 Other real
 estate owned expenses, net

 -

 -

 Outside
 service and data processing costs

 7,078

 6,112

 5,468

 Insurance

 3,766

 1,686

 1,149

 Professional
 fees

 2,496

 2,635

 2,589

 Marketing

 1,357

 1,216

 Other

 3,600

 3,389

 2,875

 Total
 noninterest expenses

 $
 68,827

 62,933

 56,430

 Noninterest expenses were $68.8 million for the year
ended December 31, 2023, a $5.9 million, or 9.4%, increase from noninterest expense of $62.9 million for 2022.

 The increase in total noninterest expenses during
2023, compared to 2022, resulted primarily from the following:

 Compensation and benefits expense increased $1.5 million, or 3.8%, during 2023 relating
 primarily to an increase in salaries and incentive compensation.

 Occupancy expenses increased $1.2 million, or 12.6%, driven by increased depreciation, insurance,
 property taxes and maintenance expenses primarily related to our new headquarters building.

 Outside service and data processing costs increased $966,000, or 15.8%, primarily due to increased
 electronic banking, software licensing costs and debit card related expenses.

 Insurance expenses increased $2.1 million, or 123.4%, related to higher FDIC insurance premiums.

 Marketing expenses increased $141,000, or 11.6%, driven by an increase in community sponsorships
 and business development.

 Other noninterest expenses increased $211,000, or 6.2%, due primarily to an increase in telephone
 expense and deposit account and fraud losses.

 Partially offsetting the above increases was a decrease
in professional of $139,000, or 5.3% due to less legal fees and consulting expenses.

 Noninterest expenses were $62.9 million for the year
ended December 31, 2022, a $6.5 million, or 11.5%, increase from noninterest expense of $56.4 million for 2021.

 The increase in total noninterest expenses during
2022, compared to 2021, resulted primarily from the following:

 Compensation and benefits expense increased $2.7 million, or 7.4%, during 2022 relating
 primarily to a $5.2 million increase in salaries and incentive compensation, partially offset by a $2.4 million decrease in mortgage
 commissions paid on sales activity. During 2022, we grew by 15 employees who were hired primarily to grow our footprint in each of
 our South Carolina, North Carolina, and Georgia markets.

 Occupancy expenses increased $2.1 million, or 30.9%, driven by increased depreciation, insurance,
 property taxes and maintenance expenses primarily related to our new headquarters building.

 Outside service and data processing costs increased $644,000, or 11.8%, primarily due to increased
 electronic banking, software licensing costs and ATM card related expenses.

 Insurance expenses increased $537,000, or 46.7%, related to higher FDIC insurance premiums.

 Marketing expenses increased $311,000, or 34.4%, driven by an increase in community sponsorships
 and business development.

 Other noninterest expenses increased $514,000, or 17.9%, due primarily to an increase in travel expenses
 between our eight markets, deposit account losses, and staff related expenses.

 Partially offsetting the above increases was a decrease
in other real estate owned expenses of $385,000 due to the sale of one commercial property in 2021.

 Our efficiency ratio was 78.7% for 2023 compared to
58.7% for 2022. The efficiency ratio represents the percentage of one dollar of expense required to be incurred to earn a full dollar
of revenue and is computed by dividing noninterest expense by the sum of net interest income and noninterest income. The increase during
the 2023 period relates primarily to the decrease in net interest income compared to the prior year.

 Income Taxes

 Income tax expense was $4.0 million, $9.0 million
and $14.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. Our effective tax rate was 23.0% for the year ended
December 31, 2023, compared to 23.6% for 2022, and 23.2% for 2021. The fluctuation in the effective rate for each of the periods is driven
by to the impact of tax-exempt income and equity compensation transactions that occurred during the respective periods in relation to
pre-tax income.

 Investment Securities

 At December 31, 2023 and 2022, our investment securities
portfolio was $154.6 million and $104.2 million, respectively, and represented approximately 3.8% and 2.8% of our total assets, respectively.
Our available for sale investment portfolio included corporate bonds, US treasuries, US agency securities, SBA securities, state and political
subdivisions, asset-backed securities, and mortgage-backed securities with a fair value of $134.7 million and amortized cost of $149.1
million for an unrealized loss of $14.4 million at December 31, 2023 compared to a fair value of $93.3 million and amortized cost of $110.3
million for an unrealized loss of $17.0 million at December 31, 2022.

 The amortized costs and the fair value of our investments
are as follows.

 2023

 2022

 2021

 Cost

 Fair
 Value

 Cost

 Fair
 Value

 Cost

 Fair
 Value

 Available
 for Sale

 $
 2,147

 1,910

 2,172

 1,883

 2,198

 2,188

 9,495

 9,394

 20,594

 13,007

 14,504

 14,169

 SBA securities

 -

 -

 -

 -

 22,642

 22,910

 24,887

 25,176

 33,450

 6,435

 6,229

 10,136

 10,164

 Mortgage-backed
 securities

 60,730

 64,800

 54,841

 68,065

 67,154

 Total

 $
 149,058

 110,323

 121,218

 120,281

 Contractual maturities and yields on our investments
are shown in the following table. Expected maturities may differ from contractual maturities because issuers may have the right to call
or prepay obligations with or without call or prepayment penalties.

 Less Than One Year

 One to Five Years

 Five to Ten Years

 Over Ten Years

 Total

 Yield

 Yield

 Yield

 Yield

 Yield

 Available
 for Sale

 Corporate
 bonds

 $
 -

 -

 $
 -

 -

 $
 1,910

 2.01
 %

 $
 -

 -

 $
 1,910

 2.01
 %

 8,497

 5.42
 %

 1.27
 %

 -

 -

 -

 -

 9,394

 5.02
 %

 US government
 agencies

 0.45
 %

 2,385

 1.00
 %

 15,301

 4.41
 %

 -

 -

 3.77
 %

 State and
 political subdivisions

 -

 -

 1.94
 %

 5,769

 1.89
 %

 13,066

 2.15
 %

 2.06
 %

 Asset-backed
 securities

 -

 -

 (6.13
 %)

 -

 -

 32,940

 6.63
 %

 6.57
 %

 Mortgage-backed
 securities

 -

 -

 4,795

 1.15
 %

 5,400

 1.59
 %

 41,570

 2.00
 %

 1.87
 %

 Total

 $
 9,467

 4.91
 %

 $
 9,279

 0.98
 %

 $
 28,380

 3.20
 %

 $
 87,576

 3.76
 %

 $

 3.55
 %

 Other investments are comprised of the following and
are recorded at cost which approximates fair value.

 2023

 2022

 Federal
 Home Loan Bank stock

 $
 16,063

 9,250

 Other investments

 3,473

 1,180

 Investment
 in Trust Preferred subsidiaries

 Total

 $

 Loans

 Since loans typically provide higher interest yields
than other types of interest-earning assets, a substantial percentage of our earning assets are invested in our loan portfolio. Average
loans for the years ended December 31, 2023 and 2022 were $3.50 billion and $2.87 billion, respectively. Before allowance for credit losses,
total loans outstanding at December 31, 2023 and 2022 were $3.60 billion and $3.27 billion, respectively.

 The principal component of our loan portfolio is loans
secured by real estate mortgages. As of December 31, 2023, our loan portfolio included $3.05 billion, or 84.8%, of real estate loans,
compared to $2.78 billion, or 84.8%, as of December 31, 2022. Most of our real estate loans are secured by residential or commercial property.
We obtain a security interest in real estate, in addition to any other available collateral, in order to increase the likelihood of the
ultimate repayment of the loan. Generally, we limit the loan-to-value ratio on loans to coincide with the appropriate regulatory guidelines.
We attempt to maintain a relatively diversified loan portfolio to help reduce the risk inherent in concentration in certain types of collateral
and business types. In addition to traditional residential mortgage loans, we issue second mortgage residential real estate loans and
home equity lines of credit. Home equity lines of credit totaled $183.0 million as of December 31, 2023, of which approximately 46% were
in a first lien position, while the remaining balance was second liens, compared to $179.3 million as of December 31, 2022, of which approximately
48% were in first lien positions and the remaining balance was in second liens. The average home equity loan had a balance of approximately
$85,000 and a loan to value of approximately 73% as of December 31, 2023, compared to an average loan balance of $84,000 and a loan to
value of approximately 73% as of December 31, 2022. Further, 0.8% and 0.6% of our total home equity lines of credit were over 30 days
past due as of December 31, 2023 and 2022, respectively.

 Following is a summary of our loan composition for
each of the last three years ended December 31, 2023. Of the $329.3 million in loan growth in 2023, $171.7 million of growth was in commercial
related loans, while $157.6 million of growth was in consumer related loans, specifically consumer real estate mortgages which grew by
$151.2 million during 2023. The increase in consumer real estate loans is related to our focus to continue to originate high quality 1-4
family consumer real estate loans. Our average consumer real estate loan currently has a principal balance of $469,000, a term of 23 years,
and an average rate of 4.10%.

 2023

 2022

 2021

 %of

Total

 %of

Total

 %of

Total

 Owner

 $

 17.5
 %

 $

 18.7
 %

 $
 488,965

 19.6
 %

 26.2
 %

 862,579

 26.3
 %

 666,833

 26.8
 %

 4.2
 %

 3.4
 %

 64,425

 2.6
 %

 13.9
 %

 468,112

 14.3
 %

 333,049

 13.4
 %

 Total
 commercial loans

 2,225,027

 61.8
 %

 2,053,318

 62.7
 %

 1,553,272

 62.4
 %

 Real

 30.0
 %

 931,278

 28.4
 %

 694,401

 27.9
 %

 Home

 5.1
 %

 5.5
 %

 154,839

 6.2
 %

 1.7
 %

 2.5
 %

 59,846

 2.4
 %

 Other

 1.4
 %

 29,052

 0.9
 %

 27,519

 1.1
 %

 Total
 consumer loans

 1,377,600

 38.2
 %

 1,220,045

 37.3
 %

 936,605

 37.6
 %

 Total
 gross loans, net of deferred fees

 100.0
 %

 100.0
 %

 2,489,877

 100.0
 %

 Less
 – allowance for credit losses

 (40,682
)

 (38,639
)

 (30,408
)

 Total
 loans, net

 $
 3,561,945

 $
 3,234,724

 $
 2,459,469

 Maturities and Sensitivity of Loans to Changes in
Interest Rates

 The information in the following table is based on
the contractual maturities of individual loans, including loans which may be subject to renewal at their contractual maturity. Renewal
of such loans is subject to review and credit approval, as well as modification of terms upon maturity. Actual repayments of loans may
differ from the maturities reflected below because borrowers have the right to prepay obligations with or without prepayment penalties.

 The following table summarizes the composition and
maturities of the loan portfolio.

 One year
 or less

 After one
 but within
 five years

 After five

 but within

 fifteen years

 After
 fifteen
 years

 Total

 Owner

 $
 17,358

 177,203

 395,130

 41,966

 68,601

 517,622

 331,727

 24,579

 26,762

 64,432

 59,486

 -

 114,432

 194,416

 186,927

 4,386

 Total
 commercial loans

 227,153

 953,673

 973,270

 70,931

 2,225,027

 Real

 10,593

 51,956

 301,095

 718,785

 Home

 2,716

 27,578

 147,855

 4,855

 -

 39,459

 23,637

 Other

 11,157

 33,592

 3,265

 Total
 consumer loans

 24,466

 113,378

 491,674

 748,082

 1,377,600

 Total
 gross loan, net of deferred fees

 $
 251,619

 1,067,051

 1,464,944

 819,013

 The following table summarizes the loans due after one
year by category.

 Interest Rate

 Fixed

 Floating or
 Adjustable

 Owner

 $
 605,199

 9,100

 768,048

 105,880

 81,326

 42,592

 293,920

 91,809

 Total
 commercial loans

 1,748,493

 249,381

 Real

 1,071,836

 -

 Home

 11,441

 168,847

 -

 Other

 11,525

 26,137

 Total
 consumer loans

 1,158,150

 194,984

 Total
 gross loan, net of deferred fees

 $
 2,906,643

 444,365

 Nonperforming Assets

 Nonperforming assets include real estate acquired
through foreclosure or deed taken in lieu of foreclosure and loans on nonaccrual status. The following table shows the nonperforming assets
and the related percentage of nonperforming assets to total assets and gross loans for the five years ended December 31, 2023. Generally,
a loan is placed on nonaccrual status when it becomes 90 days past due as to principal or interest, or when we believe, after considering
economic and business conditions and collection efforts, that the borrower's financial condition is such that collection of the
loan is doubtful. A payment of interest on a loan that is classified as nonaccrual is recognized as a reduction in principal when received.
Our policy with respect to nonperforming loans requires the borrower to make a minimum of six consecutive payments in accordance with
the loan terms before that loan can be placed back on accrual status. Further, the borrower must show capacity to continue performing
into the future prior to restoration of accrual status.

 31,

 2023

 2022

 2021

 $
 1,423

 -

 Real

 Home

 1,236

 Nonaccruing
 troubled debt restructurings (TDRs)

 -

 1,796

 2,952

 Total
 nonaccrual loans, including nonaccruing TDRs

 3,963

 2,627

 4,864

 Total
 nonperforming assets

 $
 3,963

 2,627

 4,864

 Asset
 Quality Ratios:

 Nonperforming
 assets/total assets

 0.10
 %

 0.07
 %

 0.17
 %

 loans/gross loans

 0.11
 %

 0.08
 %

 0.20
 %

 Total
 loans over 90 days past due (1)

 $
 1,300

 Loans
 over 90 days past due and still accruing

 -

 -

 -

 troubled debt restructurings

 -

 4,503

 3,299

 (1)

 Loans over 90 days are included in nonaccrual loans

 At December 31, 2023, nonperforming assets were $4.0
million, or 0.10% of total assets and 0.11% of gross loans, compared to $2.6 million, or 0.07% of total assets and 0.08% of gross loans
at December 31, 2022. Nonaccrual loans increased $1.3 million to $4.0 million at December 31, 2023 from $2.6 million at December 31, 2022.
During 2023, we added eight new loans totaling $2.0 million to nonaccrual, two loans totaling $283,000 were returned to accruing status,
one loan totaling $30,000 was charged off, while paydowns on nonaccrual loans totaled $388,000. The amount of foregone interest income
on the nonaccrual loans as of December 31, 2023 and 2022 was approximately $73,000 and $28,000, respectively, for the twelve-month periods.

 A significant portion, or 95.1%, of nonaccrual loans
at December 31, 2023 were secured by real estate. We have evaluated the underlying collateral on these loans and believe that the collateral
on these loans is sufficient to minimize future losses. As a result of this level of coverage on nonaccrual loans, we believe the allowance
for credit losses of $40.7 million for the year ended December 31, 2023 is adequate.

 As a general practice, most of our commercial loans
and a portion of our consumer loans are originated with relatively short maturities of less than ten years. As a result, when a loan reaches
its maturity, we frequently renew the loan and thus extend its maturity using similar credit standards as those used when the loan was
first originated. Due to these loan practices, we may, at times, renew loans which are classified as nonaccrual after evaluating the loan's
collateral value and financial strength of its guarantors. Nonaccrual loans are renewed at terms generally consistent with the ultimate
source of repayment and rarely at reduced rates. In these cases, we will generally seek additional credit enhancements, such as additional
collateral or additional guarantees to further protect the loan. When a loan is no longer performing in accordance with its stated terms,
we will typically seek performance under the guarantee.

 In addition, approximately 85% of our loans are collateralized
by real estate and approximately 96% of our individually evaluated loans are secured by real estate. Individual loan evaluations are generally
performed for individually evaluated loans, which includes nonaccrual loans and certain loans not meeting the risk characteristics of
the pool, whether on accrual or nonaccrual status. We use third party appraisers to determine the fair value of collateral dependent loans.
Our current loan and appraisal policies require us to review individually evaluated loans at least annually and determine whether it is
necessary to obtain an updated appraisal, either through a new external appraisal or an internal appraisal evaluation. We review each
of our individually evaluated loans on a quarterly basis to determine the level of impairment. As of December 31, 2023, we do not have
any individually evaluated loans carried at a value in excess of the appraised value. We typically charge-off a portion or create a specific
reserve for individually evaluated loans when we do not expect repayment to occur as agreed upon under the original terms of the loan
agreement.

 At December 31, 2023, individually evaluated loans
totaled approximately $4.8 million for which $3.7 million of these loans have a reserve of approximately $688,000 allocated in the allowance.
At December 31, 2022, individually evaluated loans totaled approximately $7.1 million for which $6.8 million of these loans had a reserve
of approximately $1.3 million allocated in the allowance.

 We adopted Accounting Standards Update ("ASU")
2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02")
effective January 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measurement of troubled debt restructurings and
enhanced disclosures for loan modifications to borrowers experiencing financial difficulty. During the 12 months ended December 31, 2023,
we had two commercial business loans that were modified due to the borrowers experiencing financial difficulty. The amortized cost basis
of the two loans was $319,000 at December 31, 2023.

 Prior to adopting ASU 2022-02,
we considered a loan to be a TDR when the debtor experienced financial difficulty and we provided concessions such that we would not collect
all principal and interest in accordance with the original terms of the loan agreement. Concessions related to the contractual interest
rate, maturity date, or payment structure of the note. As part of our workout plan for individual loan relationships, we restructured
loan terms to assist borrowers facing challenges in the economic environment. As of December 31, 2022, we had $6.3 million in loans that
we considered TDRs. As permitted by the CARES Act, we did not consider loan modifications to borrowers affected by COVID-19 to be TDRs
unless the borrower was 30 days or more past due as of December 31, 2019, (ii) the modifications were related to COVID-19, and (iii) the
modification occurred between March 1, 2020 and January 1, 2022. See Notes 1 and 4 to the Consolidated Financial Statements for additional
information on loan modifications and TDRs.

 Allowance for Credit Losses

 At December 31, 2023 and December 31, 2022, the allowance
for credit losses was $40.7 million and $38.6 million, respectively, or 1.13% and 1.18% of outstanding loans, respectively. The allowance
for credit losses as a percentage of our outstanding loan portfolio decreased from the prior year primarily due to historically low loan
charge-offs which factors into the expected loss rate on our current loan portfolio. In addition, our nonperforming assets increased to
0.10% compared to 0.07%, as a percentage of total assets, at December 31, 2023 and 2022, respectively. Our classified assets decreased
to 4.25% of capital as of December 31, 2023, compared to 4.72% of capital as of December 31, 2022. See Note 4 to the Consolidated Financial
Statements for more information on our allowance for credit losses.

 The following table summarizes the net charge-off
detail as a percentage of average loans by loan composition for the three years ended December 31, 2023.

 Year ended December 31,

 2023

 2022

 2021

 %

 %

 %

 Net
 charge-offs:

 Owner

 $
 -

 -

 $
 -

 -

 $

 0.00
 %

 (57
)

 0.00
 %

 1,540

 0.05
 %

 (573
)

 0.03
 %

 0.01
 %

 0.01
 %

 (943
)

 0.04
 %

 Total
 commercial

 0.01
 %

 1,693

 0.06
 %

 (1,422
)

 0.06
 %

 Real

 -

 0.00
 %

 -

 0.00
 %

 0.00
 %

 Home

 (373
)

 (0.01
 %)

 (247
)

 0.01
 %

 0.00
 %

 Other

 (15
)

 0.00
 %

 (90
)

 0.00
 %

 0.00
 %

 Total
 consumer

 (388
)

 (0.01
 %)

 (337
)

 0.00
 %

 0.00
 %

 Net
 loan (charge-offs) recoveries

 $
 (166
)

 $
 1,356

 $
 (1,341
)

 Net
 loan (charge-offs) recoveries as a % of average loans

 0.00
 %

 (0.05
 %)

 0.06
 %

 The following
table summarizes the allocation of the allowance for credit losses among the various loan categories.

 Year ended December 31,

 2023

 2022

 % (1)

 % (1)

 Owner

 $
 6,118

 17.5
 %

 $
 5,867

 18.7
 %

 11,167

 26.2
 %

 10,376

 26.3
 %

 1,594

 4.2
 %

 1,292

 3.4
 %

 7,385

 13.9
 %

 7,861

 14.3
 %

 Total
 commercial

 26,264

 61.8
 %

 25,396

 62.7
 %

 Real

 10,647

 30.0
 %

 9,487

 28.4
 %

 Home

 2,600

 5.1
 %

 2,551

 5.5
 %

 1.7
 %

 2.5
 %

 Other

 1.4
 %

 0.9
 %

 Total
 consumer

 14,418

 38.2
 %

 13,243

 37.3
 %

 Total
 allowance for credit losses

 $
 40,682

 100.0
 %

 $

 100.0
 %

 (1)

 Percentage
 of loans in each category to total loans

 Deposits and Other Interest-Bearing Liabilities

 Our primary source of funds for loans and investments
is our deposits and advances from the FHLB. In the past, we have chosen to obtain a portion of our certificates of deposits from areas
outside of our market in order to obtain longer term deposits than are readily available in our local market. Our internal guidelines
regarding the use of brokered CDs limit our brokered CDs to 30% of total deposits. These guidelines allow us to take advantage of the
attractive terms that wholesale funding can offer while mitigating the related inherent risk.

 Our retail deposits represented $3.00 billion, or
88.8% of total deposits at December 31, 2023. At December 31, 2022, retail deposits represented $2.90 billion, or 92.5% of our total deposits.
Brokered deposits were $379.4 million, representing 11.2% of our total deposits at December 31, 2023 and are included in time deposits
greater than $250,000 in the following table. Our loan-to-deposit ratio was 107%, 104%, and 97% at December 31, 2023, 2022, and 2021,
respectively.

 The following table shows the average balance amounts
and the average rates paid on deposits held by us.

 2023

 2022

 2021

 Rate

 Rate

 Rate

 Noninterest
 bearing demand deposits

 $
 717,275

 -%

 $
 788,960

 -%

 $
 671,223

 -
 %

 bearing demand deposits

 299,703

 0.75
 %

 374,956

 0.22
 %

 306,669

 0.07
 %

 Money market
 accounts

 1,672,550

 3.66
 %

 1,323,487

 0.99
 %

 1,143,904

 0.21
 %

 Savings
 accounts

 36,324

 0.11
 %

 41,474

 0.05
 %

 32,916

 0.05
 %

 Time deposits
 less than $250,000

 106,169

 3.88
 %

 81,664

 1.17
 %

 78,487

 0.80
 %

 Time
 deposits greater than $250,000

 525,798

 4.52
 %

 220,192

 1.45
 %

 97,814

 0.59
 %

 Total
 deposits

 $
 3,357,819

 2.72
 %

 $
 2,830,733

 0.64
 %

 $
 2,331,013

 0.17
 %

 During the 12 months ended December 31, 2023, our
average transaction account balances increased by $197.0 million, or 7.8%, while our average time deposit balances increased by $330.1
million, or 109.4%. Core deposits exclude out-of-market deposits and time deposits of $250,000 or more and provide a relatively stable
funding source for our loan portfolio and other earning assets. Our core deposits were $2.81 billion, $2.76 billion, and $2.48 billion
at December 31, 2023, 2022 and 2021, respectively.

 All of our time deposits are certificates of deposits.
The maturity distribution of our time deposits of $250,000 or more is as follows:

 2023

 2022

 Three
 months or less

 $
 169,419

 235,216

 Over three
 through six months

 86,342

 76,778

 Over six
 through twelve months

 58,293

 35,681

 Over
 twelve months

 254,011

 27,076

 Total

 $
 568,065

 374,751

 Time deposits that meet or exceed the FDIC insurance
limit of $250,000 at December 31, 2023 and December 31, 2022 were $568.1 million and $374.8 million, respectively, including wholesale
deposits.

 At December 31, 2023 and
2022, the Company estimates that it has approximately $1.3 billion and $1.4 billion, respectively, in uninsured deposits including related
interest accrued and unpaid. Since it is not reasonably practicable to provide a precise measure of uninsured deposits, the amounts above
are estimates and are based on the same methodologies and assumptions used for the bank's regulatory reporting requirements by the
FDIC for the Call Report.

 Liquidity and Capital Resources

 Liquidity is our ability to fund operations, to meet
depositor withdrawals, to provide for customers' credit needs, and to meet maturing obligations and existing commitments. Our liquidity
principally depends on our cash flows from operating activities, investment in and maturity of assets, changes in balances of deposits
and borrowings, and our ability to borrow funds. The bank failures in the first five months of 2023 exemplify the potential serious results
of the unexpected inability of insured depository institutions to obtain needed liquidity to satisfy deposit withdrawal requests, including
how quickly such requests can accelerate once uninsured depositors lose confidence in an institutions ability to satisfy its obligations
to depositors. We seek to ensure our funding needs are met by maintaining a level of liquidity through asset and liability management.
Liquidity management involves monitoring our sources and uses of funds in order to meet our day-to-day cash flow requirements while maximizing
profits. Liquidity management is made more complicated because different balance sheet components are subject to varying degrees of management
control. For example, the timing of maturities of our investment portfolio is fairly predictable and subject to a high degree of control
at the time investment decisions are made. However, net deposit inflows and outflows are far less predictable and are not subject to the
same degree of control.

 At December 31, 2023 and 2022, our cash and cash equivalents
amounted to $156.2 million and $170.9 million, or 3.9% and 4.6% of total assets, respectively. Our investment securities at December 31,
2023 and 2022 amounted to $154.6 million and $104.2 million, or 3.8% and 2.8% of total assets, respectively. Investment securities traditionally
provide a secondary source of liquidity since they can be converted into cash in a timely manner.

 Our ability to maintain and expand our deposit base
and borrowing capabilities serves as our primary source of liquidity. We plan to meet our future cash needs through the liquidation of
temporary investments, the generation of deposits, and from additional borrowings. In addition, we will receive cash upon the maturity
and sale of loans and the maturity of investment securities. We maintain five federal funds purchased lines of credit with correspondent
banks totaling $108.5 million to meet short-term liquidity needs. There were no borrowings against the lines at December 31, 2023.Further,
in July 2023, we enrolled in the Federal Reserve's Bank Term Funding Program which offers loans of up to one year in length if we
pledge collateral eligible for purchase by the Federal Reserve Banks in open market operations, such as U.S. Treasuries, U.S. agency securities,
and U.S. agency mortgage-backed securities. At December 31, 2023, we had $13.0 million of marketable investment securities pledged in
the Federal Reserve's Bank Term Funding Program. At December 31, 2023, we had $227.1 million pledged and available with the Federal
Reserve Discount Window.

 We are also a member of the FHLB of Atlanta, from
which applications for borrowings can be made. The FHLB requires that securities, qualifying mortgage loans, and stock of the FHLB owned
by the Bank be pledged to secure any advances from the FHLB. The unused borrowing capacity currently available from the FHLB at December
31, 2023 was $542.8 million, based on the Bank's $16.1 million investment in FHLB stock, as well as qualifying mortgages available
to secure any future borrowings. However, we are able to pledge additional securities to the FHLB in order to increase our available borrowing
capacity. In addition, at December 31, 2023 we had $388.3 million of letters of credit outstanding with the FHLB to secure client deposits.

 We have a relationship with IntraFi Promontory Network,
allowing us to provide deposit customers with access to aggregate FDIC insurance in amounts exceeding $250,000. This gives us the ability,
as and when needed, to attract and retain large deposits from insurance conscious customers. With IntraFi, we have the option to keep
deposits on balance sheet or sell them to other members of the network. Additionally, subject to certain limits, the Bank can use IntraFi
to purchase cost-effective funding without collateralization and in lieu of generating funds through traditional brokered CDs or the FHLB.
In this manner, IntraFi can provide us with another funding option. Thus, it serves as a deposit-gathering tool and an additional liquidity
management tool. Under the Economic Growth, Regulatory Relief, and Consumer Protection Act, a well capitalized bank with a CAMELS rating
of 1 or 2 may hold reciprocal deposits up to the lesser of 20% of its total liabilities or $5 billion without those deposits being treated
as brokered deposits.

 We also have a line of credit with another financial
institution for $15.0 million, which was unused at December 31, 2023. The line of credit was issued on December 28, 2023 at an interest
rate of the U.S. Prime Rate plus 0.25% and a maturity date of February 28, 2025.

 We believe that our existing stable base of core deposits,
federal funds purchased lines of credit with correspondent banks, availability with the Federal Reserve's Bank Term Funding Program
and Discount Window, and borrowings from the FHLB will enable us to successfully meet our long-term liquidity needs. However, as short-term
liquidity needs arise, we have the ability to sell a portion of our investment securities portfolio should we be required to meet those
needs.

 Total shareholders' equity was $312.5 million
at December 31, 2023 and $294.5 million at December 31, 2022. The $18.0 million increase during 2023 is due primarily to net income to
common shareholders of $13.4 million, stock option exercises and expenses of $2.5 million and $2.1 million gain in other comprehensive
income.

 The following table shows the return on average assets
(net income divided by average total assets), return on average equity (net income divided by average equity), equity to assets ratio
(average equity divided by average assets), and tangible common equity ratio (total equity less preferred stock divided by total assets)
for the three years ended December 31, 2023. Since our inception, we have not paid cash dividends.

 2023

 2022

 2021

 Return
 on average assets

 0.34
 %

 0.90
 %

 1.75
 %

 Return on
 average equity

 4.44
 %

 10.20
 %

 18.64
 %

 Return on
 average common equity

 4.44
 %

 10.20
 %

 18.64
 %

 equity to average assets ratio

 7.71
 %

 8.85
 %

 9.39
 %

 Tangible
 common equity to assets ratio

 7.70
 %

 7.98
 %

 9.50
 %

 Under the capital adequacy guidelines, regulatory
capital is classified into two tiers. These guidelines require an institution to maintain a certain level of Tier 1 and Tier 2 capital
to risk-weighted assets. Tier 1 capital consists of common shareholders' equity, excluding the unrealized gain or loss on securities
available for sale, minus certain intangible assets. In determining the amount of risk-weighted assets, all assets, including certain
off-balance sheet assets, are multiplied

 by a risk-weight factor of 0% to 100% based on the
risks believed to be inherent in the type of asset. Tier 2 capital consists of Tier 1 capital plus the general reserve for credit losses,
subject to certain limitations. We are also required to maintain capital at a minimum level based on total average assets, which is known
as the Tier 1 leverage ratio.

 Regulatory capital rules, which we refer to as Basel
III, impose minimum capital requirements for bank holding companies and banks. The Basel III rules apply to all national and state banks
and savings associations regardless of size and bank holding companies and savings and loan holding companies other than "small
bank holding companies," generally holding companies with consolidated assets of less than $3 billion. In order to avoid restrictions
on capital distributions or discretionary bonus payments to executives, a covered banking organization must maintain a "capital
conservation buffer" on top of our minimum risk-based capital requirements. This buffer must consist solely of common equity Tier
1, but the buffer applies to all three measurements (common equity Tier 1, Tier 1 capital and total capital). The capital conservation
buffer consists of an additional amount of CET1 equal to 2.5% of risk-weighted assets.

 To be considered "well-capitalized" for
purposes of certain rules and prompt corrective action requirements, the Bank must maintain a minimum total risked-based capital ratio
of at least 10%, a total Tier 1 capital ratio of at least 8%, a common equity Tier 1 capital ratio of at least 6.5%, and a leverage ratio
of at least 5%. As of December 31, 2023, our capital ratios exceed these ratios and we remain "well capitalized."

 The following table summarizes the capital amounts and
ratios of the Bank and the regulatory minimum requirements. See Note 21 to the Consolidated Financial Statements for ratios of the Company.

 Actual

 For capital
 adequacy purposes
 minimum (1)

 To be well capitalized
 under prompt
 corrective
 action provisions
 minimum

 Ratio

 Ratio

 Ratio

 As of December 31, 2023

 $
 390,197

 12.28
 %

 $

 8.00
 %

 $
 317,847

 10.00
 %

 11.03
 %

 190,708

 6.00
 %

 8.00
 %

 Common Equity Tier 1 (to risk weighted assets)

 11.03
 %

 143,031

 4.50
 %

 206,601

 6.50
 %

 8.47
 %

 165,414

 4.00
 %

 206,767

 5.00
 %

 As of December 31, 2022

 $
 366,988

 12.45
 %

 $

 8.00
 %

 $
 294,865

 10.00
 %

 11.20
 %

 176,919

 6.00
 %

 8.00
 %

 Common Equity Tier 1 (to risk weighted assets)

 11.20
 %

 132,689

 4.50
 %

 191,662

 6.50
 %

 9.43
 %

 140,040

 4.00
 %

 175,050

 5.00
 %

 As of December 31, 2021

 $
 331,052

 14.36
 %

 $
 184,418

 8.00
 %

 $
 230,522

 10.00
 %

 302,217

 13.11
 %

 138,313

 6.00
 %

 184,418

 8.00
 %

 Common Equity Tier 1 (to risk weighted assets)

 302,217

 13.11
 %

 103,735

 4.50
 %

 149,839

 6.50
 %

 302,217

 10.55
 %

 114,537

 4.00
 %

 143,172

 5.00
 %

 (1)

 Ratios do not include the capital conservation buffer of 2.5%.

 On September 30, 2019, the Company sold and issued $23.0
million in aggregate principal amount of its 4.75% Fixed-to-Floating Rate Subordinated Notes due 2029 to eligible purchasers in a
private offering. The Company used the proceeds from the offering, which were approximately $22.5 million, for general corporate
purposes, including providing capital to the Bank and supporting organic growth. The Notes rank junior in right to payment to the
Company's current and future senior indebtedness. The Notes are intended to qualify as Tier 2 capital for regulatory capital
purposes for the Company and are subject to certain limitations. See Note 9 to the Consolidated Financial Statements for more information on
our subordinated debentures.

 The ability of the
Company to pay cash dividends is dependent upon receiving cash in the form of dividends from the Bank. The dividends that may be paid
by the Bank to the Company are subject to legal limitations and regulatory capital requirements.

 Effect of Inflation and Changing Prices

 The effect of relative purchasing power over time
due to inflation has not been taken into account in our consolidated financial statements. Rather, our financial statements have been
prepared on an historical cost basis in accordance with generally accepted accounting principles.

 Unlike most industrial companies, our assets and liabilities
are primarily monetary in nature. Therefore, the effect of changes in interest rates will have a more significant impact on our performance
than will the effect of changing prices and inflation in general. In addition, interest rates may generally increase as the rate of inflation
increases, although not necessarily in the same magnitude. As discussed previously, we seek to manage the relationships between interest
sensitive assets and liabilities in order to protect against wide rate fluctuations, including those resulting from inflation.

 Off-Balance Sheet Risk

 Commitments to extend credit are agreements to lend
to a client as long as the client has not violated any material condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require the payment of a fee. At December 31, 2023, unfunded commitments to extend
credit were approximately $724.6 million, of which $145.6 million were at fixed rates and $579.0 million were at variable rates. At December
31, 2022, unfunded commitments to extend credit were $878.3 million, of which approximately $318.9 million were at fixed rates and $559.4
million were at variable rates. A majority of the unfunded commitments related to commercial business lines of credit and home equity
lines of credit. Based on historical experience, we anticipate that a significant portion of these lines of credit will not be funded.
We evaluate each client's credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by us
upon extension of credit, is based on our credit evaluation of the borrower. The type of collateral varies but may include accounts receivable,
inventory, property, plant and equipment, and commercial and residential real estate.

 At December 31, 2023 and 2022, there were $16.1 million
and $14.3 million of commitments under letters of credit, respectively. The credit risk and collateral involved in issuing letters of
credit is essentially the same as that involved in extending loan facilities to clients. Since most of the letters of credit are expected
to expire without being drawn upon, they do not necessarily represent future cash requirements.

 Except as disclosed in this Annual Report, we are
not involved in off-balance sheet contractual relationships, unconsolidated related entities that have off-balance sheet arrangements
or transactions that could result in liquidity needs or other commitments that significantly impact earnings.

 Market Risk and Interest Rate Sensitivity

 Market risk is the risk of loss from adverse changes
in market prices and rates, which principally arises from interest rate risk inherent in our lending, investing, deposit gathering, and
borrowing activities. Other types of market risks, such as foreign currency exchange rate risk and commodity price risk, do not generally
arise in the normal course of our business.

 We actively monitor and manage our interest rate risk
exposure to seek to control the mix and maturities of our assets and liabilities utilizing a process we call asset/liability management.
The essential purposes of asset/liability management are to seek to ensure adequate liquidity and to maintain an appropriate balance between
interest sensitive assets and liabilities in order to minimize potentially adverse impacts on earnings from changes in market interest
rates. Our asset/liability management committee ("ALCO") monitors and considers methods of managing exposure to interest rate
risk. We have both an internal ALCO consisting of senior management that meets no less than quarterly and a board risk committee that
meets quarterly. These committees are responsible for maintaining the level of interest rate sensitivity of our interest sensitive assets
and liabilities within board-approved limits.

 As of December 31, 2023, the following table summarizes
the forecasted impact on net interest income using a base case scenario given upward and downward movements in interest rates of 100,
200, and 300 basis points based on forecasted assumptions of prepayment speeds, nominal interest rates and loan and deposit repricing
rates. Estimates are based on current economic conditions, historical interest rate cycles and other factors deemed to be relevant. However,
underlying assumptions may be impacted in future periods which were not known to management at the time of the issuance of the Consolidated
Financial Statements. Therefore, management's assumptions may or may not prove valid. No assurance can be given that changing economic
conditions and other relevant factors impacting our net interest income will not cause actual occurrences to differ from underlying assumptions.
In addition, this analysis does not consider any strategic changes to our balance sheet which management may consider as a result of changes
in market conditions.

 rate scenario

 Change
 in net interest
 income from base

 Up 300 basis points

 (12.68
)%

 Up 200 basis points

 (8.45
)%

 Up 100 basis points

 (4.26
)%

 Base

 -

 Down 100 basis points

 5.85
 %

 Down 200 basis points

 10.64
 %

 Down 300 basis points

 15.29
 %

 Contractual Obligations

 We have commitments with various investment partners
under the Small Business Investment Company ("SBIC") and the Rural Business Investment Company ("RBIC") programs
for which we have committed to make capital contributions from time to time. As of December 31, 2023, $1.4 million remained outstanding
under these commitments.

 We utilize a variety of short-term and long-term borrowings
to supplement our supply of lendable funds, to assist in meeting deposit withdrawal requirements, and to fund growth of interest-earning
assets in excess of traditional deposit growth. Certificates of deposit, structured repurchase agreements, FHLB advances, and subordinated
debentures serve as our primary sources of such funds.

 Obligations under noncancelable operating lease agreements
are payable over several years with the longest obligation expiring in 2032. We do not feel that any existing noncancelable operating
lease agreements are likely to materially impact our financial condition or results of operations in an adverse way. Contractual obligations
relative to these agreements are noted in the table below. Option periods that we have not yet exercised are not included in this analysis
as they do not represent contractual obligations until exercised.

 The following table provides payments due by period
for obligations under long-term borrowings and operating lease obligations as of December 31, 2023.

 Payments
 Due by Period

 Within

 One Year

 Over
 One
 to Two
 Years

 Over
 Two
 to Three
 Years

 Over
 Three
 to Four
 Years

 After

 Five
 Years

 Total

 Certificates of deposit

 $
 494,392

 45,190

 100,308

 118,282

 758,232

 -

 -

 -

 -

 Operating lease obligations

 2,099

 2,157

 2,210

 2,267

 22,202

 30,935

 Total

 $
 496,490

 47,347

 102,518

 2,327

 176,807

 825,489

 Accounting, Reporting, and Regulatory Matters

 See Note 1 – Summary of Significant Accounting
Policies and Activities in our "Notes to Consolidated Financial Statements" for a discussion on the effects of recently issued
accounting pronouncements.

 Item 7A. Quantitative and Qualitative Disclosures
about Market Risk

 See Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations – Market Risk and Interest Rate Sensitivity and – Liquidity and Capital Resources.

 Item 8. Financial Statements and Supplementary
Data

 MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING

 Management of Southern First Bancshares, Inc. is responsible
for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Securities Exchange
Act of 1934, as amended. The Company's internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the U.S. The Company's internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records, that in reasonable detail, accurately and fairly reflect the transactions
and disposition of the Company's assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit
the preparation of the financial statements in accordance with generally accepted accounting principles and that receipts and expenditures
of the Company are being made only in accordance with the authorizations of the Company's management and directors; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets
that could have a material impact on the financial statements.

 Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate due to changes in conditions, or that the degree of compliance with the policies
and procedures may deteriorate.

 Management conducted an evaluation of the effectiveness
of the internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in 2013. Based on this evaluation under the
COSO criteria, management concluded that the internal control over financial reporting was effective as of December 31, 2023.

 The effectiveness of the internal control structure
over financial reporting as of December 31, 2023 has been audited by Elliott Davis, LLC, an independent registered public accounting
firm, as stated in their report included in this Annual Report on Form 10-K, which expresses an unqualified opinion on the effectiveness
of the Company's internal control over financial reporting as of December 31, 2023.

 /s/ R. Arthur Seaver, Jr.

 /s/ D. Andrew Borrmann

 Chief Executive Officer

 Chief Financial Officer

 Report of Independent Registered Public Accounting
Firm

 To the Shareholders and Board of Directors of

 Southern First Bancshares, Inc. and Subsidiary

 Opinion on the Internal Control Over Financial
Reporting

 We have audited Southern First Bancshares, Inc. and
Subsidiary's (the "Company") internal control over financial reporting as of December 31, 2023, based on criteria established
in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission in 2013.

 We have also audited, in accordance with the standards
of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December
31, 2023 and 2022 and the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 2023 of the Company and our report dated March 5, 2024 expressed an unqualified
opinion.

 Basis for Opinion

 The Company's management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express
an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We conducted our audit in accordance with the standards
of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.

 Definition and Limitations of Internal Control
Over Financial Reporting

 A company's internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition
of the company's assets that could have a material effect on the financial statements.

 Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

 /s/ Elliott Davis, LLC

 Greenville, South Carolina

 Report of Independent Registered Public Accounting
Firm (PCAOB ID 149)

 To the Shareholders and Board of Directors of

 Southern First Bancshares, Inc. and Subsidiary

 Opinion on the Financial Statements

 We have audited the accompanying consolidated balance
sheets of Southern First Bancshares, Inc. and Subsidiary (the "Company") as of December 31, 2023 and 2022, the related consolidated
statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December
31, 2023, and the related notes to the consolidated financial statements (collectively, the "financial statements"). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023
and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity
with accounting principles generally accepted in the United States of America.

 We have also audited, in accordance with the standards
of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial
reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 5, 2024, expressed an unqualified
opinion on the effectiveness of the Company's internal control over financial reporting.

 Basis for Opinion

 These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our
audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We conducted our audits in accordance with the standards
of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation
of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 Critical Audit Matters

 The critical audit matters communicated below are
matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the
audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions
on the critical audit matters or on the accounts or disclosures to which they relate.

 Allowance for Credit Losses

 As described in Note 4 to the Company's financial
statements, the Company has a gross loan portfolio of $3.6 billion and related allowance for credit losses of $40.7 million as of December
31, 2023. As described by the Company in Note 1, the Company calculates lifetime probability of default and loss given default rates based
on historical loss experience, which is used to calculate expected losses based on the pool's loss rate and the age of loans in
the pool. Management also considers further adjustments to historical loss information for current conditions and reasonable and supportable
forecasts that differ from the conditions that exist for the period over which historical information is evaluated as well as other changes
in qualitative factors not inherently considered in the quantitative analyses. The qualitative categories and the measurements used to
quantify the risks within each of these categories are subjectively selected by management but measured by objective measurements

 period
over period. The data for each measurement may be obtained from internal or external sources. These adjustments are based upon quarterly
trend assessments in certain economic factors as well as associate retention and turnover, portfolio concentrations, and growth characteristics.

 We identified the Company's estimate of the
allowance for credit losses as a critical audit matter. The principal considerations for our determination of the allowance for credit
losses as a critical audit matter related to the high degree of subjectivity in the Company's judgments in determining the qualitative
factors. Auditing these complex judgments and assumptions by the Company involves especially challenging auditor judgment due to the nature
and extent of audit evidence and effort required to address these matters, including the extent of specialized skill or knowledge needed.

 The primary procedures we performed to address this
critical audit matter included the following:

 We tested the design and operating
effectiveness of controls relating to the Company's determination of the allowance for credit losses, including controls over qualitative
factors.

 We tested the design and operating
effectiveness of controls relating to management's review of reliability and accuracy of data used to calculate and estimate the
various components of the allowance for credit losses, including accuracy of the calculation and validation procedures over the models.

 We evaluated the relevance and
the reasonableness of assumptions related to evaluation of the loan portfolio, current and forecasted economic conditions, and other risk
factors used in development of the qualitative factors.

 We evaluated the reasonableness
of assumptions and data used by the Company in developing the qualitative factors by comparing these data points to internally developed
and third-party sources, and other audit evidence gathered.

 We assessed the overall trends
in credit quality, including adjustments for the qualitative factors by comparing the overall allowance for credit losses to those recorded
by the Company's peer institutions.

 We evaluated subsequent events
and transactions and considered whether they corroborated or contradicted the Company's conclusion.

 /s/ Elliott Davis, LLC

 We have served as the Company's
auditor since 1999.

 Greenville, South Carolina

CONSOLIDATED BALANCE SHEETS

 31,

 (dollars in thousands, except share data)

 2023

 2022

 ASSETS

 Cash and cash equivalents:

 Cash and due from banks

 $
 28,020

 18,788

 Federal funds sold

 119,349

 101,277

 Interest-bearing deposits with banks

 8,801

 50,809

 Total cash and cash equivalents

 156,170

 170,874

 Investment securities:

 Investment securities available for sale

 Other investments

 Total investment securities

 154,641

 104,180

 Mortgage loans held for sale

 7,194

 3,917

 Loans

 Less allowance for credit losses

 ( 40,682
)

 ( 38,639
)

 Loans, net

 3,561,945

 3,234,724

 Bank owned life insurance

 52,501

 51,122

 Property and equipment, net

 94,301

 99,183

 Deferred income taxes, net

 12,200

 12,522

 16,837

 15,459

 $
 4,055,789

 3,691,981

 LIABILITIES

 $
 3,379,564

 3,133,864

 Federal Home Loan Bank advances and other borrowings

 275,000

 36,214

 Other liabilities

 52,436

 52,391

 Total liabilities

 3,743,322

 3,397,469

 SHAREHOLDERS' EQUITY

 Preferred stock, par value $.01 per share, 10,000,000 shares authorized

 -

 -

 Common stock, par value $.01 per share, 10,000,000 shares authorized, 8,088,186 and 8,011,045 shares issued and outstanding at December 31, 2023 and 2022, respectively

 Nonvested restricted stock

 ( 3,596
)

 ( 3,306
)

 Additional paid-in capital

 121,777

 119,027

 Accumulated other comprehensive loss

 ( 11,342
)

 ( 13,410
)

 Retained earnings

 205,547

 192,121

 Total shareholders' equity

 Total liabilities and shareholders' equity

 $
 4,055,789

 3,691,981

 See notes to consolidated financial statements that are
an integral part of these consolidated statements.

CONSOLIDATED STATEMENTS OF INCOME

 For
 the years ended December 31,

 in thousands, except per share data)

 2023

 2022

 2021

 Interest income

 Loans

 $
 166,137

 114,233

 91,599

 Investment securities

 4,463

 1,990

 1,335

 Federal funds sold and interest-bearing deposits with banks

 6,998

 1,439

 Total interest income

 177,598

 117,662

 93,167

 Interest expense

 91,373

 18,102

 3,909

 Borrowings

 8,571

 1,939

 1,526

 Total interest expense

 99,944

 20,041

 5,435

 Net interest income

 77,654

 97,621

 87,732

 Provision for (reversal of) credit losses

 1,260

 6,155

 ( 12,400
)

 Net interest income after provision for credit losses

 76,394

 91,466

 100,132

 Noninterest income

 Mortgage banking income

 4,036

 4,198

 11,376

 Service fees on deposit accounts

 1,382

 1,265

 1,174

 ATM and debit card income

 2,245

 2,163

 2,037

 Income from bank owned life insurance

 1,379

 1,289

 1,231

 Net lender fees on PPP loan sale

 -

 -

 Gain (loss) on disposal of fixed assets

 -

 ( 394
)

 Gain (loss) on sale of securities

 -

 ( 3
)

 Other income

 1,047

 1,008

 Total noninterest income

 9,860

 9,580

 17,101

 Noninterest expenses

 Compensation and benefits

 40,275

 38,790

 36,103

 Occupancy

 10,255

 9,105

 6,956

 Other real estate owned expenses, net

 -

 -

 Outside service and data processing costs

 7,078

 6,112

 5,468

 Insurance

 3,766

 1,686

 1,149

 Professional fees

 2,496

 2,635

 2,589

 Marketing

 1,357

 1,216

 Other

 3,600

 3,389

 2,875

 Total noninterest expenses

 68,827

 62,933

 56,430

 Income before income tax expense

 17,427

 38,113

 60,803

 Income tax expense

 4,001

 8,998

 14,092

 Net income available to common shareholders

 $

 Earnings per common share

 Basic

 $
 1.67

 3.66

 5.96

 Diluted

 $
 1.66

 3.61

 5.85

 Weighted average common shares outstanding

 Basic

 8,046,633

 7,958,294

 7,843,692

 Diluted

 8,078,454

 8,071,690

 7,988,980

 See notes to consolidated financial statements that are
an integral part of these consolidated statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 For the
 years ended December 31,

 2023

 2022

 2021

 $

 Other comprehensive income (loss):

 Unrealized gain (loss) on securities available for sale:

 Unrealized holding gain (loss) arising during the period, pretax

 2,620

 ( 16,027
)

 ( 2,232
)

 Tax (expense) benefit

 ( 552
)

 3,367

 Reclassification of realized (gain) loss

 -

 ( 12
)

 Tax expense (benefit)

 -

 ( 1
)

 Other comprehensive income (loss)

 2,068

 ( 12,670
)

 ( 1,763
)

 Comprehensive income

 $
 15,494

 16,445

 44,948

 See notes to consolidated
financial statements that are an integral part of these consolidated statements.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

 Accumulated other comprehensive income (loss)

 Common
 stock

 Preferred
 stock

 Nonvested

 restricted

 Additional

 paid-in

 Accumulated

 other
 comprehensive
 income

 Retained

 in thousands, except share data)

 stock

 capital

 (loss)

 Earnings

 Total

 December 31, 2020

 7,772,748

 $

 -

 $
 -

 $
 ( 698
)

 $
 108,831

 $
 1,023

 $
 119,060

 $
 228,294

 Net income Common stock

 -

 -

 -

 -

 -

 -

 -

 Proceeds from exercise of stock options Preferred stock

 127,871

 -

 -

 -

 3,011

 -

 -

 3,012

 Issuance of restricted stock, net of forfeitures

 25,200

 -

 -

 -

 ( 1,236
)

 1,236

 -

 -

 -

 Compensation expense related to restricted stock, net of tax

 -

 -

 -

 -

 -

 -

 -

 Compensation expense related to stock options, net of tax

 -

 -

 -

 -

 -

 1,148

 -

 -

 1,148

 Other comprehensive loss

 -

 -

 -

 -

 -

 -

 ( 1,763
)

 -

 ( 1,763
)

 December 31, 2021

 7,925,819

 $

 -

 $
 -

 $
 ( 1,435
)

 $
 114,226

 $
 ( 740
)

 $
 165,771

 $
 277,901

 Adoption of ASU 2016-13

 -

 -

 -

 -

 -

 -

 -

 ( 2,765
)

 ( 2,765
)

 Net income Additional paid-in capital

 -

 -

 -

 -

 -

 -

 -

 Proceeds from exercise of stock options

 32,375

 -

 -

 -

 -

 -

 Issuance of restricted stock, net of forfeitures

 52,851

 -

 -

 -

 ( 2,970
)

 2,970

 -

 -

 -

 Compensation expense related to restricted stock, net of tax

 -

 -

 -

 -

 1,099

 -

 -

 -

 1,099

 Compensation expense related to stock options, net of tax Retained
 Earnings

 -

 -

 -

 -

 -

 -

 -

 Other comprehensive loss

 -

 -

 -

 -

 -

 -

 ( 12,670
)

 -

 ( 12,670
)

 8,011,045

 $

 -

 $
 -

 $
 ( 3,306
)

 $
 119,027

 $
 ( 13,410
)

 $
 192,121

 $

 -

 -

 -

 -

 -

 -

 -

 Proceeds from exercise of stock options

 26,250

 -

 -

 -

 -

 -

 -

 Issuance of restricted stock, net of forfeitures

 50,891

 -

 -

 ( 1,705
)

 1,704

 -

 -

 -

 Compensation expense related to restricted stock, net of tax

 -

 -

 -

 -

 1,415

 -

 -

 -

 1,415

 Compensation expense related to stock options, net of tax

 -

 -

 -

 -

 -

 -

 -

 Other comprehensive income

 -

 -

 -

 -

 -

 -

 2,068

 -

 2,068

 8,088,186

 $

 -

 $
 -

 $
 ( 3,596
)

 $
 121,777

 $
 ( 11,342
)

 $
 205,547

 $

 See notes to consolidated financial statements that are
an integral part of these consolidated statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 2023

 2022

 2021

 Operating activities

 $

 Adjustments to reconcile net income to cash provided by operating activities:

 Provision for (reversal of) credit losses

 1,260

 6,155

 ( 12,400
)

 Depreciation and other amortization

 4,816

 3,698

 2,319

 Accretion and amortization of securities discounts and premiums, net

 Loss on sale of other real estate owned

 -

 -

 (Gain) loss on sale of investment securities available for sale

 -

 ( 12
)

 (Gain) loss on sale of fixed assets

 -

 ( 10
)

 Net change in operating leases

 Compensation expense related to stock options and restricted stock grants

 1,943

 2,026

 1,647

 Gain on sale of loans held for sale

 ( 3,790
)

 ( 2,914
)

 ( 13,676
)

 Loans originated and held for sale

 ( 147,040
)

 ( 165,698
)

 ( 486,145
)

 Proceeds from sale of loans held for sale

 147,553

 178,251

 546,522

 Increase in cash surrender value of bank owned life insurance

 ( 1,379
)

 ( 1,289
)

 ( 1,231
)

 (Increase) decrease in deferred tax asset

 ( 230
)

 ( 22
)

 1,589

 (Increase) decrease in other assets, net

 ( 1,378
)

 ( 5,047
)

 2,126

 Increase (decrease) in other liabilities, net

 2,178

 4,082

 ( 11,302
)

 Net cash provided by operating activities

 17,653

 50,305

 78,069

 Investing activities

 Increase (decrease) in cash realized from:

 Increase in loans, net

 ( 329,431
)

 ( 782,130
)

 ( 348,718
)

 Purchase of property and equipment

 ( 1,242
)

 ( 13,950
)

 ( 26,509
)

 Purchase of investment securities:

 ( 63,224
)

 ( 13,048
)

 ( 49,393
)

 Other investments

 ( 51,642
)

 ( 27,751
)

 ( 2,250
)

 Proceeds from maturities, calls and repayments of investment securities:

 7,928

 20,673

 Other investments

 42,536

 20,939

 1,861

 Proceeds from maturities of investment securities available for sale

 16,500

 12,429

 -

 Purchase of bank owned life insurance policies

 -

 -

 ( 7,500
)

 Proceeds from sale of fixed assets

 -

 Proceeds from sale of other real estate owned

 -

 -

 1,159

 Net cash used for investing activities

 ( 378,575
)

 ( 792,583
)

 ( 410,627
)

 Financing activities

 Increase (decrease) in cash realized from:

 Increase in deposits, net

 245,700

 570,038

 421,068

 Increase (decrease) in Federal Home Loan Bank advances and other borrowings

 100,000

 ( 25,000
)

 Proceeds from the exercise of stock options

 3,012

 Net cash provided by financing activities

 346,218

 745,943

 399,080

 Net increase (decrease) in cash and cash equivalents

 ( 14,704
)

 3,665

 66,522

 Cash and cash equivalents, beginning of year

 170,874

 167,209

 100,687

 Cash and cash equivalents, end of year

 $
 156,170

 $
 170,874

 167,209

 Supplemental information

 Cash paid for

 $
 93,351

 18,877

 6,402

 Income taxes

 1,514

 11,828

 21,652

 Schedule of non-cash transactions

 Foreclosure of other real estate

 -

 -

 Unrealized gain (loss) on securities, net of income taxes

 2,068

 ( 12,660
)

 ( 1,765
)

 Right-of-use assets obtained in exchange for lease obligations:

 Operating leases

 10,221

 See notes to consolidated financial statements that are
an integral part of these consolidated statements.

 NOTE 1 – Summary of Significant
Accounting Policies and Activities

(the "Company") is a South Carolina corporation that owns all of the capital stock of Southern First Bank (the "Bank")
and all of the stock of Greenville First Statutory Trust I and II (collectively, the "Trusts"). The Trusts are special purpose
non-consolidated entities organized for the sole purpose of issuing trust preferred securities. The Bank's primary federal regulator is
the Federal Deposit Insurance Corporation (the "FDIC"). The Bank is also regulated and examined by the South Carolina Board
of Financial Institutions. The Bank is primarily engaged in the business of accepting demand deposits and savings deposits insured by
the FDIC, and providing commercial, consumer and mortgage loans to the general public.

 Basis of Presentation

 The accompanying consolidated financial
statements include the accounts of the Company and its wholly owned subsidiary, Southern First Bank. In consolidation, all significant
intercompany transactions have been eliminated. The accounting and reporting policies conform to accounting principles generally accepted
in the United States of America. In accordance with guidance issued by the Financial Accounting Standards Board ("FASB"),
the operations of the Trusts have not been consolidated in these financial statements.

 Business Segments

 The Company, through the Bank, provides
a broad range of financial services to individuals and companies in South Carolina, North Carolina, and Georgia. These services include
demand, time and savings deposits; lending services; ATM processing and mortgage banking services. While the Company's management
periodically reviews limited production information for these revenue streams, that information is not complete as it does not include
a full allocation of revenue, costs and capital from key corporate functions. Management will continue to evaluate these lines of business
for separate reporting as facts and circumstances change. Accordingly, the Company's various banking operations are not considered
by management to constitute more than one reportable operating segment.

 Use of Estimates

 The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the
date of the consolidated financial statements and the reported amount of income and expenses during the reporting periods. Actual results
could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate
to the determination of the allowance for credit losses, derivatives, real estate acquired in settlement of loans, fair value of financial
instruments, evaluating investment securities for credit impairment and valuation of deferred tax assets.

 Risks and Uncertainties

 In the normal course of its business, the
Company encounters two significant types of risks: economic and regulatory. There are three main components of economic risk: interest
rate risk, credit risk and market risk. The Company is subject to interest rate risk to the degree that its interest-bearing liabilities
mature or reprice at different speeds, or on different bases, than its interest-earning assets. Credit risk is the risk of default within
the Company's loan portfolio that results from borrowers' inability or unwillingness to make contractually required payments.
Market risk reflects changes in the value of collateral underlying loans receivable and the valuation of real estate held by the Company.
There were three significant bank failures in the first five months of 2023, primarily due to the failed banks' lack of liquidity
as depositors sought to withdraw their deposits. Due to rising interest rates, the failed banks were unable to sell investment securities
held to meet liquidity needs without realizing substantial losses. As a result of the recent bank failures and in an effort to strengthen
public confidence in the banking system and protect depositors, regulators announced that any losses to the Deposit Insurance Fund to
support uninsured depositors will be recovered by a special assessment on banks, as required by law, which has and could continue to increase
the cost of our FDIC insurance assessments. The continued impact of these bank failures on the economy, financial institutions and their
depositors, as well as any governmental regulatory responses or actions resulting from the same, is difficult to predict at this time.

 The Company is subject to the regulations
of various governmental agencies. These regulations can and do change significantly from period to period. The Company also undergoes
periodic examinations by the regulatory agencies, which may subject it to changes with respect to valuation of assets, amount of required
credit loss allowance and operating restrictions resulting from the regulators' judgments based on information available to them
at the time of their examinations.

 The Bank makes loans to individuals and
businesses in the Upstate, Midlands, and Lowcountry regions of South Carolina as well as the Triangle, Triad and Charlotte regions of
North Carolina and Atlanta, Georgia for various personal and commercial purposes. The Bank's loan portfolio has a concentration
of real estate loans. As of December 31, 2023 and 2022, real estate loans represented 84.8 % of total loans. However, borrowers'
ability to repay their loans is not dependent upon any specific economic sector.

 As of December 31, 2023, the Company's
and the Bank's capital ratios were in excess of all regulatory requirements. While management believes that we have sufficient capital
to withstand an extended economic recession, our reported and regulatory capital ratios could be adversely impacted by future credit losses.

 The Company maintains access to multiple
sources of liquidity, including a $ 15.0 million holding company line of credit with another bank which could be used to support capital
ratios at the subsidiary bank. As of December 31, 2023, the $ 15.0 million line was unused.

 Subsequent Events

 Subsequent events are events or transactions
that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions
that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the
process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did
not exist at the date of the balance sheet but arose after that date. Management performed an evaluation to determine whether there have
been any subsequent events since the balance sheet date and determined that no subsequent events occurred requiring accrual or disclosure.

 Reclassifications

 Certain amounts, previously reported, have
been reclassified to state all periods on a comparable basis and had no effect on shareholders' equity or net income.

 Cash and Cash Equivalents

 Cash and cash equivalents include cash
and due from banks, interest bearing deposits and federal funds sold. Cash and cash equivalents have original maturities of three months
or less, and federal funds sold are generally purchased and sold for one-day periods. Accordingly, the carrying value of these instruments
is deemed to be a reasonable estimate of fair value. At December 31, 2023 and 2022, included in cash and cash equivalents was $ 5.1
million and $ 5.8 million, respectively, on deposit with the Federal Reserve Bank.

 Investment Securities

 We classify our investment securities as
held to maturity securities, trading securities and available for sale securities as applicable.

 Investment securities are designated as
held to maturity if we have the intent and the ability to hold the securities to maturity. Held to maturity securities are carried at
amortized cost, adjusted for the amortization of any related premiums or the accretion of any related discounts into interest income using
a methodology which approximates a level yield of interest over the estimated remaining period until maturity.

 Investment securities that are purchased
and held principally for the purpose of selling in the near term are reported as trading securities. Trading securities are carried at
fair value with unrealized holding gains and losses included in earnings.

 We classify investment securities as available
for sale when at the time of purchase we determine that such securities may be sold at a future date or if we do not have the intent or
ability to hold such securities to maturity. Securities designated as available for sale are recorded at fair value. Changes in the fair
value of available for sale debt securities are included in shareholders' equity as unrealized gains or losses, net of the related
tax effect. Realized gains or losses on available for sale securities are computed on the specific identification basis.

 Other Investments

 Other investments include stock acquired
for membership and regulatory purposes, such as Federal Home Loan Bank of Atlanta ("FHLB") stock, investments in unconsolidated
subsidiaries and other nonmarketable securities. FHLB stock is

 generally pledged against any borrowings
from the FHLB and cash dividends on our FHLB stock are recorded in investment income. Other nonmarketable securities consist of investments
in funds related to the Small Business Investment Company ("SBIC") and Rural Business Investment Company ("RBIC")
programs, as well as an investment in a South Carolina not-for-profit corporation. No ready market exists for these stocks and they have
no quoted market value. As a result, these securities are carried at cost and are periodically evaluated for impairment.

 Loans

 Loans are stated at the principal balance
outstanding. Unamortized net loan fees and the allowance for possible credit losses are deducted from total loans on the balance sheets.
Interest income is recognized over the term of the loan based on the principal amount outstanding. The net of loan origination fees received
and direct costs incurred in the origination of loans is deferred and amortized to interest income over the contractual life of the loans
adjusted for actual principal prepayments using a method approximating the interest method.

 Nonaccrual and Past Due Loans

 Loans are generally placed on nonaccrual
status when principal or interest becomes 90 days past due, or when payment in full is not anticipated. When a loan is placed on nonaccrual
status, interest accrued but not received is generally reversed against interest income. Cash receipts on nonaccrual loans are not recorded
as interest income, but are used to reduce the loan's principal balance. A nonaccrual loan is generally returned to accrual status
and accrual of interest is resumed when payments have been made according to the terms and conditions of the loan for a continuous six
month period. Our loans are considered past due when contractually required principal or interest payments have not been made on the due
dates.

 Nonperforming Assets

 Nonperforming assets include real estate
acquired through foreclosure or deed taken in lieu of foreclosure, loans on nonaccrual status and loans past due 90 days or more and still
accruing interest. Loans are placed on nonaccrual status when, in the opinion of management, the collection of additional interest is
uncertain. Thereafter no interest is taken into income until such time as the borrower demonstrates the ability to pay both principal
and interest.

 Individually Evaluated Loans

 Our individually evaluated loans include
loans on nonaccrual status and certain loans modified to borrowers experiencing financial difficulty, whether on accrual or nonaccrual
status. For loans that are classified as individually evaluated, an allowance is established when the fair value (discounted cash flows,
collateral value, or observable market price) of the individually evaluated loan less costs to sell, are lower than the carrying value
of that loan. A loan is considered individually evaluated when, based on current information and events, it is probable that the Company
will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.
Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting
scheduled principal and interest payments when due, among other factors. Loans that experience insignificant payment delays and payment
shortfalls generally are not classified as individually evaluated. Management determines the significance of payment delays and payment
shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including,
without limitation, the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall
in relation to the principal and interest owed. The allowance for credit loss is measured on a loan by loan basis for commercial and consumer
loans by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable
market price, or the fair value of the collateral if the loan is collateral dependent.

 Loan Charge-off Policy

 For commercial loans, we generally fully
charge off or charge collateralized loans down to net realizable value when management determines the loan to be uncollectible; repayment
is deemed to be projected beyond reasonable time frames; the loan has been classified as a loss by either our internal loan review process
or our banking regulatory agencies; the client has filed bankruptcy and the loss becomes evident owing to a lack of assets; or the loan
is 120 days past due unless both well-secured and in the process of collection. For consumer loans, we generally charge down to net realizable
value when the loan is 180 days past due.

 Loan Modifications to Borrowers Experiencing
Financial Difficulty

 Loans that are
modified are reviewed by the Company to identify if the modification was due to a borrower experiencing financial difficulty. Terms may
be modified to fit the ability of the borrower to repay in line with its current financial status. The modification of the terms of such
loans includes one or a combination of the following: a reduction of the stated interest rate of the loan, an extension of the maturity
date, a permanent reduction of the recorded investment of the loan, or an other-than-insignificant payment delay. The adoption of Accounting
Standards Update ("ASU") 2022-02 on January 1, 2023 eliminated the recognition and measurement of troubled debt restructurings
("TDRs") and enhanced disclosures for modifications to loans related to borrowers experiencing financial difficulties.

 Other Real Estate Owned ("OREO")

 Real estate acquired through foreclosure
is initially recorded at the lower of cost or estimated fair value less selling costs. Subsequent to the date of acquisition, it is carried
at the lower of cost or fair value, adjusted for net selling costs. Fair values of real estate owned are reviewed regularly and write-downs
are recorded when it is determined that the carrying value of real estate exceeds the fair value less estimated costs to sell. Costs relating
to the development and improvement of such property are capitalized, whereas those costs relating to holding the property are expensed.

 Property and Equipment

 Property and equipment are stated at cost.
Major repairs are charged to operations, while major improvements are capitalized. Depreciation is computed using the straight-line method
over the estimated useful lives of the related assets. Upon retirement, sale, or other disposition of property and equipment, the cost
and accumulated depreciation are eliminated from the accounts, and gain or loss is included in income from operations.

 Construction in progress is stated at cost,
which includes the cost of construction and other direct costs attributable to the construction. No provision for depreciation is made
on construction in progress until such time as the relevant assets are completed and put into use.

 Operating Leases

 The Company maintains operating leases
on land and buildings for various office spaces. The operating right-of-use asset is included in property and equipment and the operating
right-of-use liability is included in other liabilities on the balance sheet. The right-of-use asset and lease liability are recognized
at lease commencement by calculating the net present value of the lease payments over the lease term.

 Bank Owned Life Insurance Policies

 Bank owned life insurance policies represent
the cash value of policies on certain officers of the Company.

 Comprehensive Income

 Comprehensive income (loss) consists of
net income and net unrealized gains (losses) on securities and is presented in the statements of shareholders' equity and comprehensive
income. The statement requires only additional disclosures in the consolidated financial statements; it does not affect our results of
operations.

 Revenue from Contracts with Customers

 The Company records revenue from contracts
with customers in accordance with Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers" ("Topic
606"). Under Topic 606, the Company must identify the contract with a customer, identify the performance obligations in the contract,
determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue
when (or as) the Company satisfies a performance obligation. Significant revenue has not been recognized in the current reporting period
that results from performance obligations satisfied in previous periods.

 The Company's primary sources of
revenue are derived from interest and dividends earned on loans, investment securities, and other financial instruments that are not within
the scope of Topic 606. The Company has evaluated the nature of its contracts with customers and determined that further disaggregation
of revenue from contracts with customers into more granular categories beyond what is presented in the Consolidated Statements of Income
was not necessary. The Company generally fully satisfies its performance obligations on its contracts with customers as services are rendered
and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance

 obligations are satisfied as services are
rendered and the transaction prices are fixed, the Company has made no significant judgments in applying the revenue guidance prescribed
in Topic 606 that affect the determination of the amount and timing of revenue from contracts with customers.

 Income Taxes

 The financial statements have been prepared
on the accrual basis. When income and expenses are recognized in different periods for financial reporting purposes versus for the purposes
of computing income taxes currently payable, deferred taxes are provided on such temporary differences. Deferred tax assets and liabilities
are recognized for the expected future tax consequences of events that have been recognized in the consolidated financial statements or
tax returns. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be realized or settled. The Company believes that its income tax filing positions
taken or expected to be taken on its tax returns will more likely than not be sustained upon audit by the taxing authorities and does
not anticipate any adjustments that will result in a material adverse impact on the Company's financial condition, results of operations,
or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded. The Company's federal and state income
tax returns are open and subject to examination from the 2020 tax return year and forward.

 Stock-Based Compensation

 The Company has a stock-based employee
compensation plan. Compensation cost is recognized for all stock options granted and for any outstanding unvested awards as if the fair
value method had been applied to those awards as of the date of grant.

 Adoption of New Accounting Standard

 In June 2016, the FASB issued ASU 2016-13,
Financial Instruments – Credit Losses (Topic 326). The ASU introduced a new credit loss methodology, the Current Expected Credit
Loss ("CECL") methodology, which requires earlier recognition of credit losses, while also providing additional transparency
about credit risk. Since its original issuance in 2016, the FASB has issued several updates to the original ASU.

 The CECL methodology utilizes a lifetime
"expected credit loss" measurement objective for the recognition of credit losses for loans, held-to-maturity securities,
and other receivables at the time the financial asset is originated or acquired. It also applies to off-balance sheet credit exposures,
such as unfunded commitments to extend credit. The expected credit losses are adjusted each period for changes in expected lifetime credit
losses. The methodology replaces the multiple existing impairment methods in current GAAP, which generally require that a loss be incurred
before it is recognized. For available-for-sale securities where fair value is less than cost, credit-related impairment, if any, is recognized
through an allowance for credit losses and adjusted each period for changes in credit risk.

 On January 1, 2022, the Company adopted
the guidance prospectively with a cumulative adjustment to retained earnings. Results for reporting periods beginning after January 1,
2022 are presented under CECL while prior period amounts continue to be reported in accordance with the previously applicable incurred
loss accounting methodology. The transition adjustment for the adoption of CECL included an increase in the allowance for credit losses
on loans of $ 1.5 million and an increase in the reserve for unfunded loan commitments of $ 2.0 million, which is recorded within
other liabilities. The adoption of CECL had an insignificant impact on the Company's investment securities portfolio. The Company recorded
a net decrease to retained earnings of $ 2.8 million as of January 1, 2022 for the cumulative effect of adopting CECL, which reflects
the transition adjustments noted above, net of the applicable deferred tax assets recorded. Federal banking regulatory agencies provided
optional relief to delay the adverse regulatory capital impact of CECL at adoption. The Company did not elect to use this optional relief.

 In January 2023, the Company adopted ASU
2022-02, "Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures" ("ASU
2022-02"), which eliminated the accounting guidance for troubled debt restructurings ("TDRs") while enhancing disclosure
requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. In addition,
for public business entities, the guidance requires disclosure of current-period gross write-offs by year of origination for financing
receivables and net investments in leases within the scope of Subtopic 326-20. The Company adopted the guidance using the modified retrospective
method. Upon adoption of this guidance, the Company no longer establishes a specific reserve for modifications to borrowers experiencing
financial difficulty. Instead, these modifications are included in their respective cohort and a historical loss rate is applied to the
current loan balance to arrive at the quantitative baseline portion of the allowance. The difference

 between the allowance previously determined
and the current allowance was not material to the Company's financial statements.

 In January 2023, the Company adopted ASU
2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method", which intended to better
align hedge accounting with an organization's risk management strategies. The ASU became applicable to the Company in the second
quarter of 2023 when we entered into a fair value hedge using the portfolio layer method.

 Significant Accounting Policy Changes

 Upon adoption of Topic 326, the Company
revised the accounting policy for the Allowance for Credit Losses as detailed below.

 Allowance for Credit Losses –
Investment Securities

 For available for sale debt securities
in an unrealized loss position, the Company first assesses whether it intends to sell, or if it is more likely than not that it will be
required to sell the security before recovery of the amortized cost basis. If either of the criteria regarding intent or requirement to
sell is met, the security's amortized cost basis is written down to fair value through income with the establishment of an allowance under
CECL compared to a direct write down of the security under Incurred Loss. For debt securities available for sale that do not meet the
aforementioned criteria, the Company evaluates whether any decline in fair value is due to credit loss factors. In making this assessment,
management considers any changes to the rating of the security by a rating agency and adverse conditions specifically related to the security,
among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected
from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected
is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited
by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance
for credit losses is recognized in other comprehensive income.

 Changes in the allowance for credit losses
under CECL are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management
believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement
to sell is met. At December 31, 2023 and 2022, there was no allowance for credit losses related to the available-for-sale portfolio.
In addition, the Company had no held to maturity securities at December 31, 2023 and 2022.

 Accrued interest receivable on available
for sale debt securities totaled $ 530,000 and $ 382,000 at December 31, 2023 and December 31, 2022, respectively, and was excluded from
the estimate of credit losses.

 Allowance for Credit Losses - Loans

 Under the current expected credit loss
model, the allowance for credit losses on loans is a valuation allowance estimated at each balance sheet date in accordance with GAAP
that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans.

 Management assesses the adequacy of the
allowance on a quarterly basis. This assessment includes procedures to estimate the allowance and test the adequacy and appropriateness
of the resulting balance. The level of the allowance is based upon management's evaluation of historical default and loss experience,
current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may
affect the borrowers' ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio, industry
and peer bank loan quality indications and other pertinent factors, including regulatory recommendations. Management believes the level
of the allowance for credit losses is adequate to absorb all expected future losses inherent in the loan portfolio at the balance sheet
date. The allowance is increased through provision for credit losses and decreased by charge-offs, net of recoveries of amounts previously
charged-off.

 The allowance for credit losses is measured
on a collective basis for pools of loans with similar risk characteristics. The Company has identified the following pools of financial
assets with similar risk characteristics for measuring expected credit losses:

 Commercial loans

 Owner
 occupied real estate - Owner occupied commercial mortgages consist of loans to purchase
 or re-finance owner occupied nonresidential properties. This includes office buildings, other
 commercial facilities, and

 farmland. Commercial mortgages secured
by owner occupied properties are primarily dependent on the ability of borrowers to achieve business results consistent with those projected
at loan origination. While these loans and leases are collateralized by real property in an effort to mitigate risk, it is possible the
liquidation of collateral will not fully satisfy the obligation.

 occupied real estate - Non-owner occupied commercial mortgages consist of loans to purchase
 or refinance investment nonresidential properties. This includes office buildings and other
 facilities rented or leased to unrelated parties, as well as farmland and multifamily properties.
 The primary risk associated with income producing commercial mortgage loans is the ability
 of the income-producing property that collateralizes the loan to produce adequate cash flow
 to service the debt. While these loans are collateralized by real property in an effort to
 mitigate risk, it is possible the liquidation of collateral will not fully satisfy the obligation.

 - Construction loans consist of loans to finance land for development of commercial
 or residential real property and construction of multifamily apartments or other commercial
 properties. These loans are highly dependent on the supply and demand for commercial real
 estate as well as the demand for newly constructed residential homes and lots acquired for
 development. Deterioration in demand could result in decreased collateral values, which could
 make repayments of outstanding loans difficult for customers.

 business - Commercial business loans consist of loans or lines of credit to finance
 accounts receivable, inventory or other general business needs, business credit cards, and
 lease financing agreements for equipment, vehicles, or other assets. The primary risk associated
 with commercial and industrial and lease financing loans is the ability of borrowers to achieve
 business results consistent with those projected at origination. Failure to achieve these
 projections presents risk the borrower will be unable to service the debt consistent with
 the contractual terms of the loan.

 Consumer loans

 Real
 estate - Residential mortgages consist of loans to purchase or refinance the borrower's
 primary dwelling, second residence or vacation home and are often secured by 1-4 family residential
 property. Significant and rapid declines in real estate values can result in borrowers having
 debt levels in excess of the current market value of the collateral.

 Home
 equity – Home equity loans consist of home equity lines of credit and other lines
 of credit secured by first or second liens on the borrower's primary residence. These
 loans are secured by both senior and junior liens on the residential real estate and are
 particularly susceptible to declining collateral values. This risk is elevated for loans
 secured by junior lines as a substantial decline in value could render the junior lien position
 effectively unsecured.

 - Construction loans consist of loans to construct a borrower's primary or secondary
 residence or vacant land upon which the owner intends to construct a dwelling at a future
 date. These loans are typically secured by undeveloped or partially developed land in anticipation
 of completing construction of a 1-4 family residential property. There is risk these construction
 and development projects can experience delays and cost overruns exceeding the borrower's
 financial ability to complete the project. Such cost overruns can result in foreclosure of
 partially completed and unmarketable collateral.

 Other
 - Consumer loans consist of loans to finance unsecured home improvements, student loans,
 automobiles and revolving lines of credit that can be secured or unsecured. The value of
 the underlying collateral within this class is at risk of potential rapid depreciation which
 could result in unpaid balances in excess of the collateral.

 For all loan pools, the Company uses a
lifetime probability of default and loss given default modeling approach to estimate the allowance for credit losses on loans. This method
uses historical correlations between default experience and the age of loans to forecast defaults and losses, assuming that a loan in
a pool shares similar risk characteristics such as loan product type, risk rating and loan age, and demonstrates similar default characteristics
as other loans in that pool, as the loan progresses through its lifecycle. The Company calculates lifetime probability of default and
loss given default rates based on historical loss experience, which is used to calculate expected losses based on the pool's loss
rate and the age of loans in the pool. Management believes that the Company's historical loss experience provides the best basis
for its assessment of expected credit losses to determine the allowance for credit losses. The Company uses its own internal data to measure
historical credit loss experience within the pools with similar risk characteristics over an economic cycle. The probability of default
and loss given default method also includes assumptions of observed migration over the lifetime of the underlying loan data.

 Management also considers further adjustments
to historical loss information for current conditions and reasonable and supportable forecasts that differ from the conditions that exist
for the period over which historical information is evaluated as well as other changes in qualitative factors not inherently considered
in the quantitative analyses. The Company generally utilizes a four-quarter forecast period in evaluating the appropriateness of the reasonable
and supportable forecast scenarios which are incorporated through qualitative adjustments. There is immediate reversion to historical
loss rates. The qualitative categories and the measurements used to quantify the risks within each of these categories are subjectively
selected by management but measured by objective measurements period over period. The data for each measurement may be obtained from internal
or external sources. The current period measurements are evaluated and assigned a factor commensurate with the current level of risk relative
to past measurements over time. The resulting qualitative adjustments are applied to the relevant collectively evaluated loan pools. These
adjustments are based upon quarterly trend assessments in certain economic factors such as labor, inflation, consumer sentiment and real
disposable income, as well as associate retention and turnover, portfolio concentrations, and growth characteristics. The qualitative
analysis increases or decreases the allowance allocation for each loan pool based on the assessment of factors described above.

 Loans that do not share similar risk characteristics
with the collectively evaluated pools are evaluated on an individual basis and are excluded from the collectively evaluated loan pools.
Individual loan evaluations are generally performed for nonaccrual loans and other loans as considered necessary. Such loans are evaluated
for credit losses based on either discounted cash flows or the fair value of collateral. The Company has elected the practical expedient
under ASC 326 to estimate expected credit losses based on the fair value of collateral, which considers selling costs in the event sale
of the collateral is expected. Loans for which terms have been modified are evaluated using these same individual evaluation methods.
In the event the discounted cash flow method is used for a loan modification, the original interest rate is used to discount expected
cash flows.

 While the Company's policies and
procedures used to estimate the allowance for credit losses, as well as the resulting provision for credit losses charged to income, are
considered adequate by management and are reviewed periodically by regulators, model validators and internal audit, they are necessarily
approximate and imprecise. There are factors beyond the Company's control, such as changes in projected economic conditions, real
estate markets or particular industry conditions which may materially impact asset quality and the adequacy of the allowance for credit
losses and thus the resulting provision for credit losses.

 Accrued Interest Receivable

 Accrued interest receivable related to
loans totaled $ 11.6 million and $ 8.9 million at December 31, 2023 and December 31, 2022, respectively, and was reported in other
assets on the consolidated balance sheets. The Company elected not to measure an allowance for credit losses for accrued interest receivable
and instead elected to reverse interest income on loans or securities that are placed on nonaccrual status, which is generally when the
instrument is 90 days past due, or earlier if the Company believes the collection of interest is doubtful. The Company has concluded that
this policy results in the timely reversal of uncollectable interest.

 Unfunded Commitments

 Effective with the adoption of CECL, the
Company estimates expected credit losses on commitments to extend credit over the contractual period in which the Company is exposed to
credit risk on the underlying commitments, unless the obligation is unconditionally cancelable by the Company. The allowance for off-balance
sheet credit exposures, which is reflected within other liabilities on the consolidated balance sheets, is adjusted for as an increase
or decrease to the provision for credit losses. The estimate includes consideration of the likelihood that funding will occur and an estimate
of expected credit losses on commitments expected to be funded over its estimated life. The allowance is calculated using the same aggregate
reserve rates calculated for the funded portion of loans at the portfolio level applied to the amount of commitments expected to fund.

 The Company's CECL allowances will fluctuate
over time due to macroeconomic conditions and forecasts as well as the size and composition of the loan portfolios.

 Newly
Issued, But Not Yet Effective Accounting Standards

 In
December 2022, the FASB issued amendments to defer the sunset date of the Reference Rate Reform Topic of the Accounting Standards Codification
from December 31, 2022 to December 31, 2024, because the current relief in Reference

 Rate
Reform Topic may not cover a period of time during which a significant number of modifications may take place. The amendments were effective
upon issuance. The Company does not expect these amendments to have a material effect on its financial statements.

 In
December 2023, the FASB amended the Income Taxes topic in the Accounting Standards Codification to improve the transparency of income
tax disclosures. The amendments are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual
financial statements that have not yet been issued or made available for issuance. The Company does not expect these amendments to have
a material effect on its financial statements.

 NOTE 2 – Investment Securities

 The amortized costs and fair value of investment
securities are as follows:

 Schedule of amortized costs and fair value of investment securities

 Asset-backed
 securities [Member]

 Gross Unrealized

 Fair

 Cost

 Gains

 Losses

 Value

 Corporate bonds Corporate bonds [Member]

 $
 2,147

 -

 1,910

 US treasuries US treasuries [Member]

 9,495

 9,394

 US government agencies US government agencies [Member]

 20,594

 -

 1,938

 State and political subdivisions State and political
 subdivisions [Member]

 22,642

 2,912

 33,450

 Mortgage-backed securities Mortgage-backed securities [Member]

 FHLMC FHLMC [Member]

 23,070

 -

 3,492

 19,578

 FNMA FNMA [Member]

 32,667

 -

 4,778

 27,889

 GNMA GNMA [Member]

 4,993

 -

 4,298

 Total mortgage-backed securities

 60,730

 -

 8,965

 Total

 $
 149,058

 14,370

 Gross Unrealized

 Fair

 Cost

 Gains

 Losses

 Value

 $
 2,172

 -

 1,883

 -

 13,007

 -

 2,390

 22,910

 -

 4,004

 6,435

 -

 6,229

 Mortgage-backed securities

 FHLMC

 24,086

 -

 3,745

 20,341

 FNMA

 35,141

 -

 5,520

 29,621

 GNMA

 5,573

 -

 4,879

 Total mortgage-backed securities

 64,800

 -

 9,959

 54,841

 Total

 $
 110,323

 -

 16,976

 During 2023, $ 16.5 million of investment
securities matured. No gain or loss was recognized on the maturity of the investment securities. During 2022, approximately $ 12.6 million
of investment securities were either sold or called, resulting in a gross gain on sale of investment securities of $ 83,000 and a gross
loss on sale of investment securities of $ 71,000. During 2021, approximately $ 770,000 of investment securities were either sold or called,
resulting in a gross gain on sale of investment securities of $ 6,000 and a gross loss on sale of investment securities of $ 9,000.

 The amortized costs and fair values of
investment securities available for sale at December 31, 2023 and 2022, by contractual maturity, are shown below. Expected maturities
may differ from contractual maturities because issuers have the right to prepay the obligations.

 Schedule of amortized costs and fair values of investment securities available for sale by contractual maturity

Cost

 Fair
 Value

 Cost

 Fair
 Value

 Due within one year

 $
 9,503

 9,467

 $
 -

 -

 Due after one through five years

 10,222

 9,279

 9,398

 8,277

 Due after five through ten years

 32,159

 28,380

 24,436

 20,043

 Due after ten years

 97,174

 87,576

 76,489

 65,027

 $
 149,058

 $
 110,323

 The tables below summarize gross unrealized
losses on investment securities and the fair market value of the related securities, aggregated by investment category and length of time
that individual securities have been in a continuous unrealized loss position, at December 31, 2023 and 2022.

 Schedule of gross unrealized losses on investment securities and fair market value of related securities

 2023

 Less
 than 12 months

 months or longer

 Total

 #

 Fair

 value

 #

 Fair

 value

 #

 Fair

 value

 As of December 31, 2023

 -

 $
 -

 $
 -

 $
 1,910

 $

 $
 1,910

 $

 -

 -

 -

 7,533

 11,123

 1,888

 1,938

 -

 -

 -

 18,964

 2,912

 18,964

 2,912

 Asset-backed

 26,746

 4,866

 31,612

 Mortgage-backed

 FHLMC

 2,869

 16,709

 3,456

 19,578

 3,492

 FNMA

 -

 -

 -

 27,889

 4,778

 27,889

 4,778

 GNMA

 -

 -

 -

 4,298

 4,298

 $
 37,148

 $

 $
 86,656

 $
 14,139

 $
 123,804

 $
 14,370

 Less than 12 months

 12 months or longer

 Total

 #

 Fair

 value

 #

 Fair

 value

 #

 Fair

 value

 As of December 31, 2022

 -

 $
 -

 $
 -

 $
 1,883

 $

 $
 1,883

 $

 -

 -

 -

 -

 -

 -

 2,390

 2,390

 5,101

 13,805

 3,241

 4,004

 Asset-backed

 4,291

 1,938

 6,229

 Mortgage-backed

 FHLMC FHLMC

 [Member]

 3,712

 16,629

 3,590

 20,341

 3,745

 FNMA Mortgage-backed securities [Member]

 2,208

 27,413

 5,319

 29,621

 5,520

 GNMA

 4,776

 4,879

 $
 15,415

 $
 1,261

 $
 77,932

 $
 15,715

 $

 $
 16,976

 At December 31, 2023, the Company had 123
individual investments that were in an unrealized loss position. The unrealized losses were primarily attributable to changes in interest
rates, rather than deterioration in credit quality. The individual securities are each investment grade securities. The Company considers
factors such as the financial condition of the issuer including credit ratings and specific events affecting the operations of the issuer,
volatility of the security, underlying assets that collateralize the debt security, and other industry and macroeconomic conditions. The
Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell these securities
before recovery of the amortized cost.

 Other investments are comprised of the following and
are recorded at cost which approximates fair value:

 Schedule of other investments

 2023

 2022

 Federal Home Loan Bank stock

 $
 16,063

 $
 9,250

 Other nonmarketable investments

 3,473

 1,180

 Investment in Trust Preferred subsidiaries

 Total other investments

 $

 $

 The Company has evaluated other investments
for impairment and determined that the other investments are not impaired as of December 31, 2023 and ultimate recoverability of the par
value of this investment is probable. All of the FHLB stock is used to collateralize advances with the FHLB.

 At December 31, 2023 and 2022, there were
no securities pledged as collateral for repurchase agreements from brokers.

 NOTE 3 – Mortgage Loans Held
for Sale

 Mortgage loans originated and intended
for sale in the secondary market are reported as loans held for sale and carried at fair value under the fair value option with changes
in fair value recognized in current period earnings. Loans held for sale include mortgage loans which are saleable into the secondary
mortgage markets and their fair values are estimated using observable quoted market or contracted prices or market price equivalents,
which would be used by other market participants. At the date of funding of the mortgage loan held for sale, the funded amount of the
loan, the related derivative asset or liability of the associated interest rate lock commitment, less direct loan costs becomes the initial
recorded investment in the loan held for sale. Such amount approximates the fair value of the loan. At December 31, 2023, mortgage loans
held for sale totaled $ 7.2 million compared to $ 3.9 million at December 31, 2022.

 Mortgage loans held for sale are considered
de-recognized, or sold, when the Company surrenders control over the financial assets. Control is considered to have been surrendered
when the transferred assets have been isolated from the Company, beyond the reach of the Company and its creditors; the purchaser obtains
the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets; and
the Company does not maintain effective control over the transferred assets through an agreement that both entitles and obligates the
Company to repurchase or redeem the transferred assets before their maturity or the ability to unilaterally cause the holder to return
specific assets.

 Gains and losses from the sale of mortgage
loans are recognized based upon the difference between the sales proceeds and carrying value of the related loans upon sale and are recorded
in mortgage banking income in the statement of income. Mortgage banking income also includes the unrealized gains and losses associated
with the loans held for sale and the realized and unrealized gains and losses from derivatives.

 Mortgage loans sold to investors by the
Company, and which were believed to have met investor and agency underwriting guidelines at the time of sale, may be subject to repurchase
or indemnification in the event of specific default by the borrower or subsequent discovery that underwriting standards were not met.
The Company may, upon mutual agreement, agree to repurchase the loans or indemnify the investor against future losses on such loans. In
such cases, the Company bears any subsequent credit loss on the loans. As appropriate, the Company establishes mortgage repurchase reserves
related to various representations and warranties that reflect management's estimate of losses. As of December 31, 2023, the repurchase
reserve was immaterial to the financial statements.

 NOTE 4 – Loans and Allowance
for Credit Losses

 The Company makes loans to individuals
and small businesses for various personal and commercial purposes primarily in the Upstate, Midlands, and Lowcountry regions of South
Carolina, the Triangle, Triad, and Charlotte regions of North Carolina as well as Atlanta, Georgia. The Company's loan portfolio
is not concentrated in loans to any single borrower or a relatively small number of borrowers. The Company focuses its lending activities
on businesses and individuals that reside in the markets that we serve. The principal component of the loan portfolio is loans secured
by real estate mortgages which account for 84.8 % of total loans at December 31, 2023. Commercial loans comprise 56.5 % of total real estate
loans and consumer loans account for 43.5 %. Commercial real estate loans are further categorized into owner occupied which represents
 17.5 % of total loans and non-owner occupied loans which represents 26.2 %. Commercial construction loans represent only 4.2 % of the total
loan portfolio.

 In addition to monitoring potential concentrations
of loans to particular borrowers or groups of borrowers, industries and geographic regions, management monitors exposure to credit risk
from concentrations of lending products and practices

 such as loans that subject borrowers to
substantial payment increases (e.g. principal deferral periods, loans with initial interest-only periods, etc.), and loans with high loan-to-value
ratios. Additionally, there are industry practices that could subject the Company to increased credit risk should economic conditions
change over the course of a loan's life. For example, the Company makes variable rate loans and fixed rate principal-amortizing
loans with maturities prior to the loan being fully paid (i.e. balloon payment loans). The various types of loans are individually underwritten
and monitored to manage the associated risks.

 Loan Portfolio Composition

 The following table summarizes the composition
of our loan portfolio. Total gross loans are recorded net of deferred loan fees and costs, which totaled $ 7.0 million and $ 7.3 million
as of December 31, 2023 and December 31, 2022, respectively.

 Schedule of composition of our loan portfolio

 in thousands) Commercial [Member]

 2023

 2022

 Owner occupied RE Owner
 occupied RE [Member]

 $

 17.5
 %

 18.7
 %

 Non-owner occupied RE Non-owner occupied RE [Member]

 26.2
 %

 862,579

 26.3
 %

 Construction Construction [Member]

 4.2
 %

 3.4
 %

 Business Business [Member]

 13.9
 %

 468,112

 14.3
 %

 Total commercial loans Consumer [Member]

 2,225,027

 61.8
 %

 2,053,318

 62.7
 %

 Real estate Real estate [Member]

 30.0
 %

 931,278

 28.4
 %

 Home equity Home equity [Member]

 5.1
 %

 5.5
 %

 Construction Construction [Member]

 1.7
 %

 2.5
 %

 Other Other [Member]

 1.4
 %

 29,052

 0.9
 %

 Total consumer loans

 1,377,600

 38.2
 %

 1,220,045

 37.3
 %

 Total gross loans, net of deferred fees

 100.0
 %

 100.0
 %

 Less – allowance for credit losses

 ( 40,682
)

 ( 38,639
)

 Total loans, net

 $
 3,561,945

 3,234,724

 The composition of gross loans by rate type is as follows:

 Schedule of composition of gross loans by rate type

 2023

 2022

 Floating rate loans

 $
 574,352

 439,287

 Fixed rate loans

 3,028,275

 2,834,076

 $

 At December 31, 2023, approximately $ 1.25
billion of the Company's mortgage loans were pledged as collateral for advances from the FHLB, as set forth in Note 8.

 Credit Quality Indicators

 The Company tracks credit quality based
on its internal risk ratings. Upon origination, a loan is assigned an initial risk grade, which is generally based on several factors
such as the borrower's credit score, the loan-to-value ratio, the debt-to-income ratio, etc. After loans are initially graded, they
are monitored regularly for credit quality based on many factors, such as payment history, the borrower's financial status, and
changes in collateral value. Loans can be downgraded or upgraded depending on management's evaluation of these factors. Internal
risk-grading policies are consistent throughout each loan type.

 A description of the general characteristics
of the risk grades is as follows:

 Pass—
 A pass loan ranges from minimal to average credit risk; however, still has acceptable credit
 risk.

 Watch—
 A watch loan exhibits above average credit risk due to minor weaknesses and warrants closer
 scrutiny by management.

 Special
 mention—A special mention loan has potential weaknesses that deserve management's
 close attention. If left uncorrected, these potential weaknesses may result in deterioration
 of the repayment prospects for the loan or the institution's credit position at some
 future date.

 Substandard—
 A substandard loan is inadequately protected by the current sound worth and paying capacity
 of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined
 weakness, or weaknesses, which may jeopardize the liquidation of the debt. A substandard
 loan is characterized by the distinct possibility that the Bank will sustain some loss if
 the deficiencies are not corrected.

 Doubtful—
 A doubtful loan has all of the weaknesses inherent in one classified as substandard with
 the added characteristic that the weaknesses make collection or liquidation in full, on the
 basis of the currently existing facts, conditions and values, highly questionable and improbable.

 The following table presents loan balances classified
by credit quality indicators by year of origination as of December 31, 2023.

 Schedule of classified by credit quality indicators by year of origination

 2023

 2022

 2021

 2020

 2019

 Prior

 Revolving

 Revolving
 Converted to Term

 Total

 Pass

 $
 42,846

 180,654

 138,549

 64,818

 59,880

 110,502

 597,500

 Watch

 -

 3,460

 15,997

 3,525

 6,616

 -

 -

 30,058

 -

 -

 -

 -

 3,057

 -

 -

 3,238

 -

 -

 -

 -

 -

 -

 -

 Total Owner occupied RE

 42,846

 184,295

 139,009

 80,815

 63,405

 121,036

 Pass

 84,617

 298,063

 162,697

 107,364

 59,260

 163,990

 9,249

 -

 885,240

 Watch

 1,007

 3,260

 9,914

 5,545

 10,630

 -

 -

 30,889

 -

 -

 7,759

 -

 8,252

 -

 -

 16,890

 -

 -

 -

 8,088

 1,109

 -

 -

 9,510

 Total Non-owner occupied RE

 85,624

 301,323

 180,683

 107,897

 81,145

 176,608

 9,249

 -

 Pass

 27,262

 86,161

 24,399

 11,459

 -

 -

 -

 -

 149,281

 Watch

 -

 1,399

 -

 -

 -

 -

 -

 -

 1,399

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Total Construction

 27,262

 87,560

 24,399

 11,459

 -

 -

 -

 -

 Pass

 48,705

 134,999

 48,557

 18,868

 17,292

 47,708

 146,745

 1,431

 464,305

 Watch

 15,867

 1,833

 1,010

 3,584

 7,570

 31,339

 3,035

 -

 -

 -

 1,195

 -

 -

 1,482

 Total Business

 49,073

 151,827

 50,643

 20,735

 18,450

 52,934

 154,465

 2,034

 Total Commercial loans

 204,805

 725,005

 394,734

 220,906

 163,000

 350,578

 163,799

 2,200

 2,225,027

 Pass

 144,179

 273,585

 278,138

 176,395

 66,087

 105,383

 -

 -

 1,043,767

 Watch

 5,658

 8,230

 3,917

 2,051

 3,890

 -

 -

 24,236

 2,499

 1,657

 1,291

 2,220

 3,360

 -

 -

 11,170

 -

 -

 1,486

 -

 -

 3,256

 Total Real estate

 144,812

 281,742

 288,660

 182,420

 70,676

 114,119

 -

 -

 Pass

 -

 -

 -

 -

 -

 -

 171,003

 -

 171,003

 Watch

 -

 -

 -

 -

 -

 -

 6,393

 -

 6,393

 -

 -

 -

 -

 -

 -

 4,283

 -

 4,283

 -

 -

 -

 -

 -

 -

 1,325

 -

 1,325

 Total Home equity

 -

 -

 -

 -

 -

 -

 -

 Pass

 14,339

 39,893

 9,116

 -

 -

 -

 -

 -

 Watch

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Total Construction

 14,339

 39,893

 9,116

 -

 -

 -

 -

 -

 Other

 Pass

 1,278

 2,551

 2,361

 1,457

 2,604

 36,549

 -

 47,603

 Watch

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Total Other

 1,320

 2,913

 2,784

 1,457

 2,849

 36,655

 -

 Total Consumer loans

 160,471

 324,548

 300,560

 183,877

 71,517

 116,968

 219,659

 -

 1,377,600

 Total loans

 $
 365,276

 1,049,553

 695,294

 404,783

 234,517

 467,546

 383,458

 2,200

 Current period gross write-offs

 -

 ( 200
)

 -

 ( 28
)

 -

 ( 42
)

 ( 469
)

 ( 22
)

 ( 761
)

 The following table presents loan balances classified
by credit quality indicators and loan categories as of December 31, 2022.

 2022

 2021

 2020

 2019

 2018

 Prior

 Revolving

 Revolving

 Converted

 to Term

 Total

 Pass

 $
 169,083

 122,654

 85,867

 66,299

 36,718

 93,915

 -

 -

 574,536

 Watch

 14,648

 9,339

 3,658

 -

 6,792

 -

 -

 34,916

 -

 -

 -

 -

 2,960

 -

 -

 3,160

 -

 -

 -

 -

 -

 -

 -

 Total Owner occupied RE

 183,931

 123,133

 95,206

 69,957

 37,007

 103,667

 -

 -

 Pass

 281,890

 169,599

 113,264

 59,550

 79,722

 106,967

 811,733

 Watch

 1,061

 9,491

 -

 10,683

 1,408

 11,660

 -

 -

 34,303

 -

 -

 6,087

 -

 -

 -

 7,219

 -

 -

 7,992

 -

 -

 9,324

 Total Non-owner occupied RE

 282,951

 179,426

 113,264

 84,312

 81,457

 120,428

 862,579

 Pass

 48,420

 55,129

 4,811

 -

 -

 -

 -

 108,607

 Watch

 1,119

 -

 -

 -

 -

 -

 -

 -

 1,119

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Total Construction

 49,539

 55,129

 4,811

 -

 -

 -

 -

 Pass

 136,489

 57,804

 29,864

 21,807

 35,249

 28,914

 136,337

 447,174

 Watch

 3,186

 2,058

 1,318

 1,282

 3,074

 3,783

 15,319

 1,137

 -

 3,002

 -

 -

 2,617

 Total Business

 141,310

 60,122

 31,756

 23,533

 35,743

 33,151

 140,707

 1,790

 468,112

 Total Commercial loans

 657,731

 417,810

 245,037

 178,049

 154,207

 257,246

 141,311

 1,927

 2,053,318

 Pass

 243,589

 269,565

 189,075

 72,499

 39,042

 76,172

 -

 -

 889,942

 Watch

 6,196

 8,256

 3,847

 2,278

 3,671

 -

 -

 24,742

 3,114

 1,938

 2,644

 2,258

 2,639

 -

 -

 13,548

 -

 1,422

 -

 -

 3,046

 Total Real estate

 252,899

 280,407

 195,793

 77,376

 40,899

 83,904

 -

 -

 931,278

 Pass

 -

 -

 -

 -

 -

 -

 165,847

 -

 165,847

 Watch

 -

 -

 -

 -

 -

 -

 7,226

 -

 7,226

 -

 -

 -

 -

 -

 -

 4,055

 -

 4,055

 -

 -

 -

 -

 -

 -

 2,172

 -

 2,172

 Total Home equity

 -

 -

 -

 -

 -

 -

 -

 Pass

 41,138

 34,039

 4,923

 -

 -

 -

 -

 -

 80,100

 Watch

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Total Construction

 41,138

 34,039

 4,923

 -

 -

 -

 -

 Other

 Pass

 3,894

 3,038

 1,702

 1,534

 3,015

 14,465

 -

 27,989

 Watch

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Total Other

 4,034

 3,405

 1,717

 1,588

 3,213

 14,663

 -

 29,052

 Total Consumer loans

 298,071

 317,851

 202,433

 79,279

 41,331

 87,117

 193,963

 -

 1,220,045

 Total loans

 $
 955,802

 735,661

 447,470

 257,328

 195,538

 344,363

 335,274

 1,927

 Current period gross write-offs

 -

 ( 91
)

 -

 ( 23
)

 -

 ( 32
)

 ( 339
)

 -

 ( 485
)

 The following tables present loan balances by payment
status.

 Schedule of loan balances by payment status

 30-59

days past due

 60-89

days past due

days or more

past due

 loans

 current

 Total

 $

 -

 -

 -

 631,583

 8,102

 -

 -

 1,423

 933,004

 -

 -

 -

 -

 -

 -

 499,275

 1,750

 -

 -

 1,079,694

 -

 1,236

 181,137

 -

 -

 -

 -

 Other

 -

 -

 48,769

 Total loans

 $
 11,119

 -

 3,963

 3,587,490

 30-59

days past due

 60-89

days past due

 days or more

past due

 loans

 current

 Total

 $
 -

 -

 -

 -

 -

 861,456

 862,579

 -

 -

 -

 -

 -

 467,905

 468,112

 -

 -

 1,099

 929,849

 931,278

 -

 -

 1,099

 178,151

 -

 -

 -

 -

 Other

 -

 -

 -

 28,964

 29,052

 Total loans

 $

 -

 2,627

 3,269,367

 As
of December 31, 2023 and December 31, 2022, loans 30 days or more past due represented 0.37 % and 0.11 % of the Company's total loan
portfolio, respectively. Commercial loans 30 days or more past due were 0.27 % and 0.03 % of the Company's total loan portfolio as
of December 31, 2023 and December 31, 2022, respectively. Consumer loans 30 days or more past due were 0.09 % and 0.08 % of total loans
as of December 31, 2023 and December 31, 2022, respectively. The increase in accruing 30-59 days past due at December 31, 2023 primarily
relates to one commercial relationship totaling $ 8.1 million.

 Nonperforming assets

 The following table shows the nonperforming
assets and the related percentage of nonperforming assets to total assets and gross loans. Generally, a loan is placed on nonaccrual status
when it becomes 90 days past due as to principal or interest, or when we believe, after considering economic and business conditions and
collection efforts, that the borrower's financial condition is such that collection of the contractual principal or interest on
the loan is doubtful. A payment of interest on a loan that is classified as nonaccrual is recognized as a reduction in principal when
received.

 Schedule of nonperforming assets, including nonaccruing TDRs

 31,

 2023

 2022

 Nonaccrual loans

 $
 3,963

 Nonaccruing TDRs

 -

 1,796

 Total nonaccrual loans, including nonaccruing TDRs

 3,963

 2,627

 Other real estate owned

 -

 -

 Total nonperforming assets

 $
 3,963

 2,627

 Nonperforming assets as a percentage of:

 0.10
 %

 0.07
 %

 Gross loans

 0.11
 %

 0.08
 %

 Total loans over 90 days past due

 $
 1,300

 Loans over 90 days past due and still accruing

 -

 -

 Accruing troubled debt restructurings

 -

 4,503

 The table below
summarizes nonaccrual loans by major categories for the periods presented.

 Schedule nonaccrual loans by major categories

 loans

 with no
 allowance

 loans

 with an
 allowance

 Total

 nonaccrual

 loans

 loans

 with no
 allowance

 loans

 with an
 allowance

 Total

 nonaccrual

 loans

 $
 -

 -

 -

 $
 -

 -

 -

 1,423

 -

 -

 -

 -

 -

 -

 -

 Total commercial

 1,742

 -

 -

 1,099

 1,099

 1,236

 1,099

 -

 -

 -

 -

 -

 -

 Other

 -

 -

 -

 -

 -

 -

 Total consumer

 1,878

 2,221

 2,004

 2,198

 Total nonaccrual loans

 $
 1,160

 2,803

 3,963

 $

 2,319

 2,627

 Foregone interest income on the nonaccrual
loans for the year ended December 31, 2023 was approximately $ 73,000 and approximately $ 28,000 for the same period in 2022. Interest income
recognized on nonaccrual loans was insignificant during the years ended December 31, 2023 and 2022.

 Modifications to Borrowers Experiencing
Financial Difficulty

 The Company adopted Accounting Standards
Update ("ASU") 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures
("ASU 2022-02") effective January 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measurement of troubled
debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.

 The allowance for credit losses incorporates
an estimate of lifetime expected credit losses and is recorded on each asset upon origination or acquisition. The starting point for the
estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to
borrowers experiencing financial difficulty. The

 Company uses a probability of default/loss
given default model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty
is made on the date of a modification. Because the effect of most modifications made to borrowers experiencing financial difficulty is
already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change
to the allowance for credit losses is generally not recorded upon modification.

 The following table shows the amortized
cost basis of the loans modified to borrowers experiencing financial difficulty during the twelve months ended December 31, 2023, disaggregated
by class of loans and type of concession granted and describes the financial effect of the modifications made to borrowers experiencing
financial difficulty.

 Schedule of amortized cost basis
of loans

 Term Extension

 Amortized Cost Basis

 % of Total Loan Type

 Financial Effect

 Commercial Business

 $

 0.06
 %

 Added a 1-year term to both of the loans modified. One loan was granted an extended amortization due to the inability to pay on a 3-year amortization. The other loan was given an interest only period due to the ability to pay only interest to get the loan renewed.

 Neither of the two loans modified had a
payment default during the period. The Company closely monitors the performance of the loans that are modified for borrowers experiencing
financial difficulty to understand the effectiveness of its modification efforts. Both loans are in current payment status since the loan
modification occurred in the third quarter of 2023. There have been no commitments to lend additional funds to the borrowers experiencing
financial difficulty as of December 31, 2023.

 Prior to the adoption
of ASU 2022-02, the Company considered a loan to be a TDR when a debtor experienced financial difficulty and the Company granted a concession
to the debtor that it would not normally consider. Concessions related to the contractual interest rate, maturity date, or payment structure
of the note. As part of our prior workout plan for individual loan relationships, we restructured loan terms to assist borrowers facing
challenges in the current economic environment.

 At December 31, 2022, our TDRs included
 13 loans totaling $ 6.3 million with a specific allowance for credit losses of $ 1.2 million. One consumer real estate loan with a pre-modification
and post-modification balance of $ 885,000 and two commercial business loans with a pre-modification and post-modification balance totaling
$ 1.1 million were considered new TDRs during the twelve months ended December 31, 2022.

 As of December 31, 2022, there were no loans
modified as a TDR for which there was a payment default (60 days past due) within 12 months of the restructuring date.

 Allowance for Credit Losses

 The following table summarizes the activity related
to the allowance for credit losses for the year ended December 31, 2023 and December 31, 2022 under the CECL methodology. On January
1, 2022, we adopted the CECL methodology for estimating credit losses, which resulted in an increase of $ 1.5 million in our allowance
for credit losses. The $ 2.2 million provision for credit losses for the 12 months ended December 31, 2023 was driven primarily by $ 329.3
million in loan growth for the year combined with lower expected loss rates due to historically low charge-offs during the year. The $ 5.4
million provision for credit losses for the 12 months ended December 31, 2022 was driven primarily by $ 783.5 million in loan growth for
the year, as well as slightly lower expected loss rates and minor adjustments to two internal qualitative factors which increased the
qualitative component of the allowance and related provision expense in 2022.

 Schedule of activity related to the allowance for credit losses

 Twelve months ended December 31, 2023

 Owner

RE

RE

 Real

 Estate

 Home

Equity

 Other

 Total

 Balance, beginning of period

 $
 5,867

 10,376

 1,292

 7,861

 9,487

 2,551

 ( 755
)

 1,160

 ( 216
)

 2,209

 Loan charge-offs

 -

 ( 242
)

 -

 ( 65
)

 -

 ( 438
)

 -

 ( 16
)

 ( 761
)

 Loan recoveries

 -

 -

 -

 -

 Net loan recoveries (charge-offs)

 -

 ( 57
)

 -

 -

 ( 373
)

 -

 ( 15
)

 ( 166
)

 Balance, end of period

 $
 6,118

 11,167

 1,594

 7,385

 10,647

 2,600

 40,682

 Net charge-offs to average loans (annualized)

 0.00
 %

 Allowance for credit losses to gross loans

 1.13
 %

 Allowance for credit losses to nonperforming loans

 1026.55
 %

 Twelve months ended December 31, 2022

 Owner

RE

RE

 Real

Estate

 Home

Equity

 Other

 Total

 Balance, beginning of period

 $
 4,700

 10,518

 4,887

 7,083

 1,697

 Adjustment for CECL

 ( 313
)

 1,057

 ( 294
)

 ( 5
)

 1,500

 1,480

 ( 2,015
)

 1,764

 2,698

 5,375

 Loan charge-offs

 -

 -

 -

 ( 55
)

 -

 ( 339
)

 -

 ( 91
)

 ( 485
)

 Loan recoveries

 -

 1,540

 -

 -

 -

 1,841

 Net loan recoveries (charge-offs)

 -

 1,540

 -

 -

 ( 247
)

 -

 ( 90
)

 1,356

 Balance, end of period

 $
 5,867

 10,376

 1,292

 7,861

 9,487

 2,551

 Net recoveries to average loans (annualized)

 ( 0.05
 %)

 Allowance for credit losses to gross loans

 1.18
 %

 Allowance for credit losses to nonperforming loans

 1470.84
 %

 Prior to the adoption of ASC 326 on January 1, 2022,
the Company calculated the allowance for loan losses under the incurred loss methodology. The following table summarizes the activity
related to the allowance for loan losses in prior periods under this methodology.

 Twelve months ended December 31, 2021

 Owner

RE

RE

 Real

Estate

 Home

Equity

 Other

 Total

 Balance, beginning of period

 $
 8,092

 12,050

 1,154

 7,870

 10,482

 3,248

 44,149

 ( 3,486
)

 ( 958
)

 ( 529
)

 ( 2,041
)

 ( 3,417
)

 ( 1,613
)

 ( 168
)

 ( 188
)

 ( 12,400
)

 Loan charge-offs

 -

 ( 837
)

 -

 ( 1,181
)

 -

 ( 139
)

 -

 ( 9
)

 ( 2,166
)

 Loan recoveries

 -

 -

 Net loan recoveries (charge-offs)

 ( 574
)

 -

 ( 942
)

 -

 ( 1,341
)

 Balance, end of period

 $
 4,700

 10,518

 4,887

 7,083

 1,697

 Collateral dependent loans are loans for
which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing
financial difficulty. The Company reviews individually evaluated loans for designation as collateral dependent loans, as well as other
loans that management of the Company designates as having higher risk. These loans do not share common risk characteristics and are not
included within the collectively evaluated loans for determining the allowance for credit losses.

 Under CECL, for collateral dependent loans,
the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The
allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan's collateral,
which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost,
no allowance is required.

 The following table presents an analysis of collateral-dependent
loans of the Company as of December 31, 2023 and December 31, 2022.

 Schedule of analysis of collateral-dependent loans

 Real

 assets

 Other

 Total

 $
 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Total commercial

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Other

 -

 -

 -

 -

 Total consumer

 -

 -

 Total

 $
 1,393

 -

 -

 1,393

 Real

 assets

 Other

 Total

 $
 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Total commercial

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Other

 -

 -

 -

 -

 Total consumer

 -

 -

 Total

 $

 -

 -

 Allowance for Credit Losses - Unfunded Loan Commitments

 The allowance for credit losses for unfunded
loan commitments was $ 1.8 million and $ 2.8 million at December 31, 2023 and 2022, respectively, and is separately classified on the
balance sheet within other liabilities. Prior to the adoption of CECL, the Company's reserve for unfunded commitments was not material. The
following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the twelve months
ended December 31, 2023 and December 31, 2022.

 Schedule of allowance for credit losses for unfunded loan commitments

 Twelve months ended

 Twelve months ended

 Balance, beginning of period

 $
 2,780

 -

 Adjustment for adoption of CECL

 -

 2,000

 ( 949
)

 Balance, end of period

 $
 1,831

 2,780

 Unfunded Loan Commitments

 724,606

 878,324

 Reserve for Unfunded Commitments to Unfunded Loan Commitments

 0.25
 %

 0.32
 %

 NOTE 5 – Property and Equipment

 Property and equipment are stated at cost
less accumulated depreciation. Components of property and equipment included in the consolidated balance sheets are as follows:

 Schedule of components of property and equipment

 2023

 2022

 Land

 $
 11,244

 11,244

 Buildings Buildings [Member]

 54,630

 54,454

 Leasehold improvements Leasehold improvements [Member]

 5,762

 5,545

 Furniture and equipment Furniture and equipment [Member]

 21,863

 20,422

 Software

 Construction in process Construction in process [Member]

 Accumulated depreciation and amortization

 ( 21,907
)

 ( 17,219
)

 Property and equipment, excluding ROU assets

 72,131

 75,597

 ROU assets

 22,170

 23,586

 Total property and equipment

 $
 94,301

 99,183

 Construction in process at December 31,
2023 consisted primarily of costs associated with information technology projects that will be complete in 2024. Construction in process
at December 31, 2022 consisted primarily of costs associated with the new bank headquarters building located in Greenville, South Carolina
which was officially opened in June 2022. The move into the new building, and subsequent disposal of assets, resulted in a $ 439,000 loss
for the twelve months ended December 31, 2022. The loss is reported in other noninterest income on the consolidated statements of income.
Depreciation and amortization expense for the years ended December 31, 2023 and 2022 was $ 4.8 million and $ 3.7 million, respectively.
Depreciation and amortization are charged to operations utilizing a straight-line method over the estimated useful lives of the assets.
The estimated useful lives for the principal items follow:

 Schedule of estimated useful lives of property and equipment

 Type of Asset

 Life in Years

 Software

 Furniture and equipment

 5 to 7

 Leasehold improvements

 5 to 15

 Buildings

 NOTE 6 – Leases

 The Company had operating right-of-use assets,
included in property and equipment, of $ 22.2 million and $ 23.6 million as of December 31, 2023 and 2022, respectively. The Company
had lease liabilities, included in other liabilities, of $ 24.6 million and $ 25.8 million as of December 31, 2023 and 2022, respectively.
We maintain operating leases on land and buildings for various office spaces. The lease agreements have maturity dates ranging from April
2025 to February 2032, some of which include options for multiple five-year extensions. The weighted average remaining life of the lease
term for these leases was 5.91 years and 6.89 years as of December 31, 2023 and 2022, respectively. The ROU asset and lease
liability are recognized at lease commencement by calculating the present value of lease payments over the lease term. The ROU assets
also include any initial direct costs incurred and lease payments made at or before commencement date and are reduced by any lease incentives.

 The discount rate used in determining the
lease liability for each individual lease was the FHLB fixed advance rate which corresponded with the remaining lease term as of January
1, 2019 for leases that existed at adoption of ASC 842 and as of the lease commencement date for leases subsequently entered into. The
weighted average discount rate for leases was 2.94 % and 2.86 % as of December 31, 2023 and 2022, respectively.

 Total operating lease costs were $ 2.4
million and $ 2.7 million for the years ended December 31, 2023 and 2022, respectively.

 Maturities of lease liabilities as of December 31, 2023
were as follows:

 Schedule of maturities of lease liabilities

 Operating

 Leases

 2024

 $
 2,099

 2025

 2,157

 2026

 2,210

 2027

 2,267

 2028

 2,015

 Thereafter

 20,187

 Total undiscounted lease payments

 30,935

 Discount effect of cash flows

 6,291

 Total lease liability

 $
 24,644

 NOTE 7 – Deposits

 The following is a detail of the deposit
accounts:

 Schedule of detail in deposit accounts

 31,

 2023

 2022

 Noninterest bearing

 $
 674,167

 804,115

 Interest bearing:

 NOW accounts

 310,218

 318,030

 Money market accounts

 1,605,278

 1,506,418

 Savings

 31,669

 40,673

 Time deposits

 758,232

 464,628

 Total deposits

 $
 3,379,564

 3,133,864

 At December 31, 2023 and 2022, time deposits
greater than $250,000 were $ 568.1 million and $ 374.8 million, respectively.

 Also, at December 31, 2023, the Company
had $ 379.4 million deposits in brokered deposits, or deposits that were obtained outside the Company's primary market, while at
December 31, 2022 the Company had $ 236.2 million deposits in brokered deposits. Interest expense on time deposits greater than $250,000
was $ 23.8 million for the year ended December 31, 2023, $ 3.2 million for the year ended December 31, 2022, and $ 786,000 for the year ended
December 31, 2021.

 At December 31, 2023 the scheduled maturities of time
deposits are as follows:

 Schedule of maturities certificates of deposit

 2024

 $
 494,392

 2025

 45,190

 2026

 100,308

 2027

 2028

 118,282

 $
 758,232

 NOTE 8 – Federal Home Loan Bank Advances and
Other Borrowings

 At December 31, 2023 and 2022, the Company
had $ 275.0 million and $ 175.0 million in FHLB Advances, respectively.

 Listed below is a summary of the terms
and maturities of the advances outstanding at December 31, 2023 and 2022. Of the $ 275.0 million outstanding at December 31, 2023, $ 35.0
million was at a variable rate and $ 240.0 million was at fixed rates. The $ 275.0 million was secured with approximately $ 1.25 billion
of mortgage loans and $ 16.1 million of stock in the FHLB at December 31, 2023. The $ 175.0 million outstanding at December 31, 2022 was
at a variable rate and was secured with approximately $ 1.05 billion of mortgage loans and $ 9.3 million of stock in the FHLB at December
31, 2022.

 Schedule of terms and maturities of advances outstanding

 2023

 2022

 Maturity

 Rate

 Rate

 February 16, 2023

 $
 -

 -
 %

 $

 4.57
 %

 February 29, 2024

 35,000

 5.57
 %

 -

 -
 %

 April 28, 2028

 40,000

 3.51
 %

 -

 -
 %

 May 15, 2028

 35,000

 3.13
 %

 -

 -
 %

 June 28, 2028

 40,000

 3.54
 %

 -

 -
 %

 July 10, 2028

 45,000

 3.78
 %

 -

 -
 %

 July 10, 2028

 40,000

 3.87
 %

 -

 -
 %

 July 10, 2028

 40,000

 3.96
 %

 -

 -
 %

 $
 275,000

 3.89
 %

 $

 4.57
 %

 NOTE 9 – Subordinated Debentures

 On June 26, 2003, Greenville First Statutory
Trust I (a non-consolidated subsidiary) issued $ 6.0 million floating rate trust preferred securities with a maturity of June 26, 2033.
At December 31, 2023, the interest rate was 8.72 % and is indexed to the 3-month LIBOR rate plus 3.10 % and adjusted quarterly. The Company
received from the Trust the $ 6.0 million proceeds from the issuance of the securities and the $ 186,000 initial proceeds from the capital
investment in the Trust, and accordingly has shown the funds due to the Trust as $ 6.2 million junior subordinated debentures.

 On December 22, 2005, Greenville First
Statutory Trust II (a non-consolidated subsidiary) issued $ 7.0 million floating rate trust preferred securities with a maturity of December
22, 2035. At December 31, 2023, the interest rate was 7.03 % and is indexed to the 3-month LIBOR rate plus 1.44 % and adjusted quarterly.
The Company received from the Trust the $ 7.0 million proceeds from the issuance of the securities and the $ 217,000 initial proceeds from
the capital investment in the Trust, and accordingly has shown the funds due to the Trust as $ 7.2 million junior subordinated debentures.

 The current regulatory rules allow certain
amounts of junior subordinated debentures to be included in the calculation of regulatory capital. However, provisions within the Dodd-Frank
Act prohibit institutions that had more than $15 billion in assets on December 31, 2009 from including trust preferred securities as Tier
1 capital beginning in 2013, with one-third phased out over the two years ending in 2015. Financial institutions with less than $15 billion
in total assets, such as the Bank, may continue to include their trust preferred securities issued prior to May 19, 2010 in Tier 1 capital,
but cannot include in Tier 1 capital trust preferred securities issued after such date.

 On September 30, 2019, the Company entered
into Subordinated Note Purchase Agreements (collectively, the "Purchase Agreement") with certain qualified institutional buyers
and accredited investors (the "Purchasers") pursuant to which the Company sold and issued $ 23.0 million in aggregate principal
amount of its 4.75 % Fixed-to-Floating Rate Subordinated Notes due 2029 (the "Notes"). The Notes were offered and sold by the
Company to eligible purchasers in a private offering in reliance on the exemption from the registration requirements of Section 4(a)(2)
of the Securities Act of 1933, as amended (the "Securities Act") and the provisions of Regulation D promulgated thereunder
(the "Private Placement").

 The Notes have a 10 ten-year term and, from
and including the date of issuance to but excluding September 30, 2024, will bear interest at a fixed annual rate of 4.75 %, payable semi-annually
in arrears, for the first five years of the term. From and including September 30, 2024 to but excluding the maturity date or early redemption
date, the interest rate shall reset quarterly to an interest rate per annum equal to a benchmark rate (which is expected to be Three-Month
Term SOFR) plus 340.8 basis points, payable quarterly in arrears. As provided in the Notes, the interest rate on the Notes during the
applicable floating rate period may be determined based on a rate other than Three-Month Term SOFR.

 The Notes are redeemable, in whole or in
part, on September 30, 2024, on any interest payment date thereafter, and at any time upon the occurrence of certain events. The Purchase
Agreement contains certain customary representations, warranties and covenants made by the Company, on the one hand, and the Purchasers,
severally and not jointly, on the other hand.

 On September 30, 2019, in connection with
the sale and issuance of the Notes, the Company entered into a Registration Rights Agreement (the "Registration Rights Agreement")
with the Purchasers. Under the terms of the Registration Rights Agreement, the Company has agreed to take certain actions to provide for
the exchange of the Notes for subordinated notes that are registered under the Securities Act and have substantially the same terms as
the Notes (the "Exchange

 Notes"). Under certain circumstances,
if the Company fails to meet its obligations under the Registration Rights Agreement, it would be required to pay additional interest
to the holders of the Notes.

 The Notes were issued under an Indenture,
dated September 30, 2019 (the "Indenture"), by and between the Company and UMB Bank, National Association, as trustee. The
Notes are not subject to any sinking fund and are not convertible into or, other than with respect to the Exchange Notes, exchangeable
for any other securities or assets of the Company or any of its subsidiaries. The Notes are not subject to redemption at the option of
the holder. The Notes are unsecured, subordinated obligations of the Company only and are not obligations of, and are not guaranteed by,
any subsidiary of the Company. The Notes rank junior in right to payment to the Company's current and future senior indebtedness.
The Notes are intended to qualify as Tier 2 capital for regulatory capital purposes for the Company; however, the amount that is eligible
to be included in Tier 2 capital will be reduced by 20% each year during the last five years before the maturity date of the Notes beginning
in the quarter ended December 31, 2024.

 NOTE 10 – Unused Lines of Credit

 At December 31, 2023, the Company had five
lines of credit to purchase federal funds that totaled $ 108.5 million which were unused at December 31, 2023. The lines of credit are
available on a one to 14 day basis for general corporate purposes of the Company. The lenders have reserved the right to withdraw the
line at their option. The Company has an additional line of credit with the FHLB to borrow funds, subject to a pledge of qualified collateral.
The Company has collateral that would support approximately $ 542.8 million in additional borrowings with the FHLB at December 31, 2023.

 The Company is also enrolled in the Federal
Reserve's Bank Term Funding Program which offers loans of up to one year in length if we pledge collateral eligible for purchase
by the Federal Reserve Banks in open market operations, such as U.S. Treasuries, U.S. agency securities, and U.S. agency mortgage-backed
securities. At December 31, 2023, the Company had $ 13.0 million of marketable investment securities pledged in the Federal Reserve's
Bank Term Funding Program. At December 31, 2023, we had $ 227.1 million pledged and available with the Federal Reserve Discount Window.

 The Company also has an unsecured, interest
only line of credit for $ 15 million with another financial institution which was unused at December 31, 2023. The line bears interest
at the U.S. Prime Rate plus 0.25 % and matures on February 28, 2025. The loan agreement contains various financial covenants related to
capital, earnings and asset quality.

 NOTE 11 – Derivative Financial
Instruments

 The Company utilizes derivative financial
instruments primarily to hedge its exposure to changes in interest rates. All derivative financial instruments are recognized as either
assets or liabilities and measured at fair value.

 The Company enters into commitments to
originate residential mortgage loans held for sale, at specified interest rates and within a specified period of time, with clients who
have applied for a loan and meet certain credit and underwriting criteria (interest rate lock commitments). These interest rate lock commitments
("IRLCs") meet the definition of a derivative financial instrument and are reflected in the balance sheet at fair value with
changes in fair value recognized in current period earnings. Unrealized gains and losses on the IRLCs are recorded as derivative assets
and derivative liabilities, respectively, and are measured based on the value of the underlying mortgage loan, quoted mortgage-backed
securities ("MBS") prices and an estimate of the probability that the mortgage loan will fund within the terms of the interest
rate lock commitment, net of estimated commission expenses.

 The Company manages the interest rate and
price risk associated with its outstanding IRLCs and mortgage loans held for sale by entering into derivative instruments such as forward
sales of MBS. These derivatives are free- standing derivatives and are not designated as instruments for hedge accounting. Management
expects these derivatives will experience changes in fair value opposite to changes in fair value of the IRLCs and mortgage loans held
for sale, thereby reducing earnings volatility. The Company takes into account various factors and strategies in determining the portion
of the mortgage pipeline (IRLCs and mortgage loans held for sale) it wants to economically hedge. The gain or loss resulting from the
change in the fair value of the derivative is recognized in the Company's statement of income during the period of change.

 The Company entered into a pay-fixed portfolio
layer method fair value swap, designated as a hedging instrument, with a total notional amount of $ 200.0 million in the second quarter
of 2023. The hedging instrument matures on May 25, 2028. The Company is designating the fair value swap under the portfolio layer method
("PLM"). Under this method, the hedged item is designated as a hedged layer of a closed portfolio of financial loans that
is anticipated to remain outstanding for the designated hedged period. Adjustments are made to record the swap at fair value on the consolidated
balance sheets, with changes in fair value recognized in interest income. The carrying value of the fair value swap on the consolidated

 balance sheets will also be adjusted through
interest income, based on changes in fair value attributable to changes in the hedged risk.

 The following table represents the carrying
value of the portfolio layer method hedged instrument and the cumulative fair value hedging adjustment included in the carrying value
of the hedged instrument as of December 31, 2023.

 Schedule of carrying value of hedged asset and cumulative fair value hedging adjustment

 Carrying

 Hedged Liability

 Fixed Rate Liability 1

 $
 199,518

 $

 These amounts included the amortized cost basis of closed portfolios of fixed rate loans
used to designate hedging relationships in which the hedged item is the stated amount of the assets in the closed portfolio anticipated
to be outstanding for the designated hedged period. As of December 31, 2023, the amortized cost basis of the closed portfolio used in
this hedging relationship was $ 718.8
 million, the cumulative basis adjustment associated with this hedging relationship was $ 511,000,
and the amount of the designated hedged item was $ 200.0
 million.

 The following table summarizes the Company's
outstanding financial derivative instruments at December 31, 2023 and December 31, 2022.

 Schedule of outstanding financial derivative instruments

 2023

 Fair
 Value

 Notional

 Sheet

Location

 Asset/(Liability)

 Derivatives designated as hedging instruments:

 Fair value swap Fair
 value swap [Member]

 $
 200,000

 Other liabilities

 $
 ( 482
)

 Derivatives not designated as hedging instruments:

 Mortgage loan interest rate lock commitments Mortgage loan
 interest rate lock commitments [Member]

 12,973

 MBS forward sales
 commitments MBS forward sales commitments [Member]

 10,000

 Other liabilities

 ( 68
)

 Total derivative financial instruments Total derivative financial instruments [Member]

 $
 222,973

 $
 ( 391
)

 Fair
 Value

 Notional

 Sheet

Location

 Asset/(Liability)

 Derivatives not designated as hedging instruments:

 Mortgage loan interest rate lock commitments

 $
 6,793

 $

 MBS forward sales commitments

 5,750

 Total derivative financial instruments

 $
 12,543

 $

 Accrued interest receivable related to
the interest rate swap as of December 31, 2023 totaled $ 285,000 and is excluded from the fair value presented in the table above.

 The Company assesses the effectiveness
of the fair value swap hedge with a regression analysis that compares the changes in forward curves to determine the value. The effective
portion of changes in fair value of derivatives designated as fair value hedges is recorded through interest income. The Company does
not offset derivative assets and derivative liabilities for financial statement presentation purposes.

 The following table summarizes the effect
of the fair value hedging relationship recognized in the consolidated statements of income for the twelve months ended December 31, 2023.

 Schedule
 of summarize the effect of fair value hedging relationship recognized in consolidated statement of income

 Twelve months ended

 Gain (loss) on fair value hedging relationship:

 Hedged liability

 ( 482
)

 Fair value derivative designated as hedging instrument

 Total gain (loss) recognized in interest income on loans

 NOTE 12 – Fair Value Accounting

 FASB ASC 820, "Fair Value Measurement
and Disclosures Topic," defines fair value as the exchange price that would be received for an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. FASB ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be
used to measure fair value:

 Level 1 – Quoted market price in active markets

 Quoted prices in active markets for identical assets or liabilities.
 Level 1 assets and liabilities include certain debt and equity securities that are traded in an active exchange market.

 Level 2 – Significant other observable inputs

 Observable inputs other than Level 1 prices such as quoted
 prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can
 be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities
 include fixed income securities and mortgage-backed securities that are held in the Company's available-for-sale portfolio
 and valued by a third-party pricing service, as well as certain individually evaluated loans.

 Level 3 – Significant unobservable inputs

 Unobservable inputs that are supported by little or no market activity and that are significant to
 the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined
 using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination
 of fair value requires significant management judgment or estimation. These methodologies may result in a significant
 portion of the fair value being derived from unobservable data.

 Fair Value of Financial Instruments

 Financial instruments require disclosure
of fair value information, whether or not recognized in the consolidated balance sheets, when it is practical to estimate the fair value.
A financial instrument is defined as cash, evidence of an ownership interest in an entity or a contractual obligation which requires the
exchange of cash. Certain items are specifically excluded from the disclosure requirements, including the Company's common stock,
premises and equipment and other assets and liabilities.

 The following is a description of valuation
methodologies used to estimate fair value for assets recorded at fair value. Fair value approximates carrying value for the following
financial instruments due to the short-term nature of the instrument: cash and due from banks, federal funds sold, other investments,
federal funds purchased, and securities sold under agreement to repurchase.

 Investment Securities

 Securities available for sale are valued
on a recurring basis at quoted market prices where available. If quoted market prices are not available, fair values are based on
quoted market prices of comparable securities. Level 1 securities include those traded on an active exchange, such as the New York
Stock Exchange or U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds.
Level 2 securities include mortgage-backed securities and debentures issued by government sponsored entities, municipal bonds and corporate
debt securities. In certain cases where there is limited activity or less transparency around inputs to valuations, securities are
classified as Level 3 within the valuation hierarchy. Securities held to maturity are valued at quoted market prices or dealer quotes
similar to securities available for sale. The carrying value of Other Investments, such as Federal Reserve Bank and FHLB stock,
approximates fair value based on their redemption provisions.

 Mortgage Loans Held for Sale

 Loans held for sale include mortgage loans
which are saleable into the secondary mortgage markets and their fair values are estimated using observable quoted market or contracted
prices or market price equivalents, which would be used by other market participants. These saleable loans are considered Level 2.

 Individually Evaluated Loans

 The Company does not record loans at fair
value on a recurring basis. However, from time to time, a loan may be considered individually evaluated and an allowance for credit losses
may be established. Loans for which it is probable

 that payment of interest and principal
will not be made in accordance with the contractual terms of the loan agreement are considered individually evaluated. Once a loan is
identified as individually evaluated, management measures the impairment in accordance with FASB ASC 326. The fair value of individually
evaluated loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value,
liquidation value and discounted cash flows. Those individually evaluated loans not requiring an allowance represent loans for which
the fair value of the expected repayments or collateral exceed the recorded investments in such loans. In accordance with FASB ASC
820, "Fair Value Measurement and Disclosures," individually evaluated loans where an allowance is established based on the
fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an
observable market price or a current appraised value, the Company considers the individually evaluated loan as nonrecurring Level 2. The
Company's current loan and appraisal policies require the Company to obtain updated appraisals on an "as is" basis at
renewal, or in the case of an individually evaluated loan, on an annual basis, either through a new external appraisal or an appraisal
evaluation. When an appraised value is not available or management determines the fair value of the collateral is further impaired below
the appraised value and there is no observable market price, the Company considers the individually evaluated loan as nonrecurring Level
3. The fair value of individually evaluated loans may also be estimated using the present value of expected future cash flows to be realized
on the loan, which is also considered a Level 3 valuation. These fair value estimates are subject to fluctuations in assumptions about
the amount and timing of expected cash flows as well as the choice of discount rate used in the present value calculation.

 Other Real Estate Owned

 OREO, consisting of properties obtained
through foreclosure or in satisfaction of loans, is reported at the lower of cost or fair value, determined on the basis of current appraisals,
comparable sales, and other estimates of value obtained principally from independent sources, adjusted for estimated selling costs (Level
2). At the time of foreclosure, any excess of the loan balance over the fair value of the real estate held as collateral is treated
as a charge against the allowance for credit losses. Gains or losses on sale and generally any subsequent adjustments to the value
are recorded as a component of real estate owned activity. When an appraised value is not available or management determines the fair
value of the collateral is further impaired below the appraised value and there is no observable market price, the Company considers the
OREO as nonrecurring Level 3.

 Derivative Financial Instruments

 The Company estimates the fair value of
IRLCs based on the value of the underlying mortgage loan, quoted MBS prices and an estimate of the probability that the mortgage loan
will fund within the terms of the IRLC, net of commission expenses (Level 2). The Company estimates the fair value of forward sales commitments
based on quoted MBS prices (Level 2). The Company estimates the fair value of the derivative liability based on changes in the benchmark
interest rate component of the hedged loans. The estimated variable rate cash inflows were compared to the fixed rate outflows and such
difference was discounted to a present value to estimate the fair value of the interest rate swaps. The components of the valuation were
observable or could be corroborated by observable market data and, therefore, were classified within Level 2 of the valuation hierarchy.

 Assets and Liabilities Recorded at Fair Value on a
Recurring Basis

 The tables below present the recorded amount
of assets and liabilities measured at fair value on a recurring basis.

 Schedule of assets and liabilities measured at fair value on a recurring basis

 Level 1

 Level 2

 Level 3

 Total

 Securities available for sale:

 Corporate bonds Level 1 [Member]

 $
 -

 1,910

 -

 1,910

 US treasuries Level 2 [Member]

 -

 9,394

 -

 9,394

 US government agencies Level 3 [Member]

 -

 -

 -

 -

 -

 -

 Mortgage-backed securities

 -

 -

 Mortgage loans held for sale

 -

 7,194

 -

 7,194

 Mortgage loan interest rate lock commitments

 -

 -

 Total assets measured at fair value on a recurring basis

 $
 -

 142,055

 -

 142,055

 Liabilities

 Derivative liability

 $
 -

 -

 MBS forward sales commitments

 -

 -

 Total liabilities measured at fair value on a recurring basis

 $
 -

 -

 Level 1

 Level 2

 Level 3

 Total

 Securities available for sale:

 $
 -

 1,883

 -

 1,883

 -

 -

 -

 -

 -

 -

 -

 6,229

 -

 6,229

 Mortgage-backed securities

 -

 54,841

 -

 54,841

 Mortgage loans held for sale

 -

 3,917

 -

 3,917

 Mortgage loan interest rate lock commitments

 -

 -

 MBS forward sales commitments

 -

 -

 Total assets measured at fair value on a recurring basis

 $
 -

 97,340

 -

 97,340

 The Company had no liabilities recorded at fair value
on a recurring basis as of December 31, 2022.

 Assets and Liabilities Recorded at Fair Value on a
Nonrecurring Basis

 The Company is predominantly an asset based
lender with real estate serving as collateral on approximately 85 % of loans as of December 31, 2023. Loans which are deemed to be individually
evaluated are valued net of the allowance for credit losses, and other real estate owned is valued at the lower of cost or net realizable
value of the underlying real estate collateral. Such market values are generally obtained using independent appraisals, which the Company
considers to be level 2 inputs. The tables below present the recorded amount of assets and liabilities measured at fair value on a nonrecurring
basis.

 Schedule of assets and liabilities measured at fair value on a nonrecurring basis

 Level

 Level

 Level

 Total

 Individually
 evaluated loans

 $
 -

 1,160

 2,976

 4,136

 measured at fair value on a nonrecurring basis

 $
 -

 1,160

 2,976

 4,136

 Level

 Level

 Level

 Total

 Individually
 evaluated loans

 $
 -

 4,071

 4,500

 measured at fair value on a nonrecurring basis

 $
 -

 4,071

 4,500

 The
Company had no liabilities carried at fair value or measured at fair value on a nonrecurring basis.

 For
Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of December 31, 2023 and 2022, the significant
unobservable inputs used in the fair value measurements were as follows:

 Schedule of unobservable inputs used in the fair value measurements

 Valuation Technique

 Significant Unobservable Inputs

 Range of Inputs

 Individually evaluated loans

 Appraised Value/ Discounted Cash Flows

 Discounts to appraisals or cash flows for estimated holding and/or
 selling costs or age of appraisal

 0 - 25
 %

 Fair Value of Financial Instruments

 Financial instruments require disclosure
of fair value information, whether or not recognized in the consolidated balance sheets, when it is practical to estimate the fair value.
A financial instrument is defined as cash, evidence of an ownership interest in an entity or a contractual obligation which requires the
exchange of cash. Certain items are specifically excluded from the disclosure requirements, including the Company's common stock,
premises and equipment and other assets and liabilities.

 The following is a description of valuation
methodologies used to estimate fair value for certain other financial instruments.

 Fair value approximates carrying value
for the following financial instruments due to the short-term nature of the instrument: cash and due from banks, federal funds sold, other
investments, federal funds purchased, and securities sold under agreement to repurchase.

 Loans – The valuation of loans
held for investment is estimated using the exit price notion which incorporates factors, such as enhanced credit risk, illiquidity risk
and market factors that sometimes exist in exit prices in dislocated markets. This credit risk assumption is intended to approximate the
fair value that a market participant would realize in a hypothetical orderly transaction. The Company's loan portfolio is initially
fair valued using a segmented approach, using the eight categories as disclosed in Note 4 – Loans and Allowance for Credit Losses.
Loans are considered a Level 3 classification.

 Deposits – Fair value for
demand deposit accounts and interest-bearing accounts with no fixed maturity date is equal to the carrying value. The fair value of certificate
of deposit accounts are estimated by discounting cash flows from expected maturities using current interest rates on similar instruments.

 FHLB Advances and Other Borrowings –
 Fair value for FHLB advances and other borrowings are estimated by discounting cash flows from expected maturities using current interest
rates on similar instruments.

 Subordinated debentures –
Fair value for subordinated debentures are estimated by discounting cash flows from expected maturities using current interest rates on
similar instruments.

 The Company has used management's
best estimate of fair value based on the above assumptions. Thus, the fair values presented may not be the amounts that could be realized
in an immediate sale or settlement of the instrument. In addition, any income taxes or other expenses, which would be incurred in an actual
sale or settlement, are not taken into consideration in the fair value presented.

 The estimated fair values of the Company's financial
instruments at December 31, 2023 and 2022 are as follows:

 Schedule of estimated fair values of the company's financial instruments

 Carrying

 Fair

 Value

 Level

 Level

 Level

 Financial Assets:

 Other investments, at cost

 $

 -

 -

 Loans (1)

 3,557,120

 3,337,768

 -

 -

 3,337,768

 Financial Liabilities:

 3,379,564

 2,961,182

 -

 2,961,182

 -

 40,712

 -

 40,712

 -

 Carrying

 Fair

 Value

 Level

 Level

 Level

 Financial Assets:

 Other investments, at cost

 $

 -

 -

 Loans (1)

 3,227,455

 3,057,891

 -

 -

 3,057,891

 Financial Liabilities:

 3,133,864

 2,717,900

 -

 2,717,900

 -

 36,214

 39,885

 -

 39,885

 -

 (1)
 Carrying amount
is net of the allowance for credit losses and individually evaluated loans.

 NOTE
13 – Earnings Per Common Share

 The following schedule reconciles the numerators
and denominators of the basic and diluted earnings per share computations for the years ended December 31, 2023, 2022 and 2021. Dilutive
common shares arise from the potentially dilutive effect of the Company's stock options and warrants that are outstanding. The assumed
conversion of stock options and warrants can create a difference between basic and dilutive net income per common share.

 At December 31, 2023, 2022 and 2021, options
totaling 269,072, 131,433, and 9,000, respectively, were anti-dilutive in the calculation of earnings per share as their exercise price
exceeded the fair market value. These options were therefore excluded from the diluted earnings per share calculation.

 Schedule of earnings per share calculation

 (dollars in thousands, except share data)

 2023

 2022

 2021

 Numerator:

 $

 Net income available to common shareholders

 $

 Denominator:

 Weighted-average common shares outstanding - basic

 8,046,633

 7,958,294

 7,843,692

 Common stock equivalents

 31,821

 113,396

 145,288

 Weighted-average common shares outstanding - diluted

 8,078,454

 8,071,690

 7,988,980

 Earnings per common share:

 Basic

 $
 1.67

 3.66

 5.96

 Diluted

 $
 1.66

 3.61

 5.85

 NOTE 14 – Commitments and Contingencies

 The Company has entered into a three year
employment agreement with its chief executive officer and a two year employment agreement with its president and 13 other members of senior
management. These agreements also include a) an incentive program, b) a stock option plan, c) a one-year non-compete agreement upon termination
and a severance payment equal to one year of compensation. The total estimated aggregate salary commitment is approximately $ 4.2 million.

 The Company has an agreement with a data
processor which expires in 2028 to provide certain item processing, electronic banking, and general ledger processing services. Components
of this contract vary based on transaction and account volume, monthly charges and certain termination fees.

 The Company has commitments with various
investment partners under the Small Business Investment Company ("SBIC") and the Rural Business Investment Company ("RBIC")
programs for which we have committed to make capital contributions from time to time. These commitments totaled approximately $ 1.4 million
at December 31, 2023.

 The Company may be subject to litigation
and claims in the normal course of business. As of December 31, 2023, management believes there is no material litigation pending.

 NOTE 15 – Income Taxes

 The components of income tax expense were
as follows:

 Schedule of components of income tax expense

 2023

 2022

 2021

 Current income taxes:

 Federal

 $
 3,769

 8,482

 10,414

 State

 1,273

 2,088

 Total current tax expense

 4,229

 9,755

 12,502

 Deferred income tax expense (benefit)

 ( 228
)

 ( 757
)

 1,590

 Income tax expense

 $
 4,001

 8,998

 14,092

 The following is a summary of the items
that caused recorded income taxes to differ from taxes computed using the statutory tax rate:

 Schedule of taxes computed using the statutory tax rate

 2023

 2022

 2021

 Tax expense at statutory rate

 $
 3,660

 8,004

 12,768

 Effect of state income taxes, net of federal benefit

 1,006

 1,649

 Exempt income

 ( 27
)

 ( 43
)

 Effect of stock-based compensation

 ( 115
)

 Other

 ( 163
)

 ( 27
)

 ( 167
)

 Income tax expense

 $
 4,001

 8,998

 14,092

 The components of the deferred tax assets and liabilities
are as follows:

 Schedule of components of the deferred tax assets and liabilities

 2023

 2022

 Deferred tax assets:

 Allowance for credit losses

 $
 8,543

 8,114

 Reserve for unfunded commitments

 Unrealized loss on securities available for sale

 3,015

 3,565

 Net deferred loan fees

 1,475

 1,537

 Deferred compensation

 1,458

 1,762

 Lease liabilities

 5,175

 5,424

 Other

 20,529

 21,379

 Deferred tax liabilities:

 Property and equipment

 3,334

 3,561

 Hedging transactions

 Prepaid expenses

 ROU assets

 4,656

 4,953

 Other

 -

 8,329

 8,857

 Net deferred tax asset

 $
 12,200

 12,522

 The Company has analyzed the tax positions
taken or expected to be taken in its tax returns and concluded it has no liability related to uncertain tax positions.

 NOTE 16 – Related Party Transactions

 Certain directors, executive officers,
and companies with which they are affiliated, are clients of and have banking transactions with the Company in the ordinary course of
business. These loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with persons not related to the lender.

 A summary of loan transactions with directors
and executive officers, including their affiliates is as follows:

 Schedule of loan transactions with directors and executive officers, including their affiliates

 2023

 2022

 Balance, beginning of year

 $
 17,217

 8,790

 New loans

 17,455

 21,010

 Less loan payments

 ( 9,420
)

 ( 12,583
)

 Balance, end of year

 $
 25,252

 17,217

 Deposits by executive officers and directors
and their related interests at December 31, 2023 and 2022, were $ 6.4 million and $ 6.5 million, respectively.

 The Company has a land lease with a director
on the property for a branch office, with monthly payments of $ 9,120. In addition, the Company periodically enters into various consulting
agreements with the director for development, administration and advisory services related to the purchase of property and construction
of current and future branch office sites, including the development of the new bank headquarters in Greenville, South Carolina. There
were no payments to the director for these services during 2023 or 2022.

 The Company received rent payments from
a company of which a director is a private investor and chairman of the board. Rent received totaled $ 88,000 and $ 79,000 for the twelve
months ended December 31, 2023 and December 31, 2022, respectively. As part of the lease agreement with the company, $ 86,000 was paid
to the company for a tenant upfit allowance during the twelve months ended December 31, 2022.

 The Company is of the opinion that the
lease payments and consulting fees represent market costs that could have been obtained in similar "arms length" transactions.

 NOTE 17 – Financial Instruments
With Off-Balance Sheet Risk

 In the ordinary course of business, and
to meet the financing needs of its clients, the Company is a party to various financial instruments with off-balance sheet risk. These
financial instruments, which include commitments to extend credit and standby letters of credit, involve, to varying degrees, elements
of credit and interest rate risk in excess of the amounts recognized in the balance sheets. The contract amount of those instruments reflects
the extent of involvement the Company has in particular classes of financial instruments.

 The Company's exposure to credit
loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters
of credit is represented by the contractual amounts of those instruments. The Company uses the same credit policies in making commitments
and conditional obligations as it does for on-balance sheet instruments.

 Commitments to extend credit are agreements
to lend to a client as long as there is no violation of any material condition established in the contract. Commitments generally have
fixed expiration dates or other termination clauses and may require the payment of a fee. At December 31, 2023, unfunded commitments to
extend credit were approximately $ 724.6 million, of which $ 145.6 million is at fixed rates and $ 579.0 million is at variable rates. At
December 31, 2022, unfunded commitments to extend credit were approximately $ 878.3 million, of which $ 318.9 million is at fixed rates
and $ 559.4 million is at variable rates. The Company evaluates each client's credit-worthiness on a case-by-case basis. The amount
of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation
of the borrower. Collateral varies but may include accounts receivable, inventory, property, plant and equipment, and commercial and residential
real estate. See Note 4 – Loans and Allowance for Credit Losses for additional information on unfunded commitments.

 At December 31, 2023 and 2022, there was
a $ 16.1 million and $ 14.3 million commitment, respectively, under letters of credit. The credit risk involved in issuing letters of credit
is essentially the same as that involved in extending loan facilities to clients. Collateral varies but may include accounts receivable,
inventory, equipment, marketable securities and property. Since most of the letters of credit are expected to expire without being drawn
upon, they do not necessarily represent future cash requirements. The fair value of off balance sheet lending commitments are based on
fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties
credit standing. The total fair value of such instruments is not material.

 NOTE 18 – Employee Benefit Plan

 On January 1, 2000, the Company adopted
the Southern First Bancshares, Inc. Profit Sharing and 401(k) Plan for the benefit of all eligible employees. The Company contributes
to the Plan annually upon approval by the Board of Directors. Contributions made to the Plan for the years ended December 31, 2023, 2022,
and 2021 amounted to $ 1.1 million, $ 995,000, and $ 905,000, respectively.

 The Company also provides a nonqualified
deferred compensation plan for 20 executive officers in the form of a Supplemental Executive Retirement Plan ("SERP"). The
SERP provides retirement income for these officers. As of December 31, 2023 and 2022, the Company had an accrued benefit obligation of
$ 6.9 million and $ 8.4 million, respectively. The Company had a $ 1.1 million and $ 284,000 reversal of expenses related to this plan for
the twelve months ended December 31, 2023 and December 31, 2022, respectively, and incurred expenses related to this plan of $ 1.0 million
in 2021.

 NOTE 19 – Stock-Based Compensation

 Compensation cost is recognized for stock
options and restricted stock awards issued to employees and non-employee directors. Compensation cost is measured as the fair value of
these awards on their date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price
of the Company's common stock at the date of grant is used as the fair value of restricted stock awards. Compensation cost is recognized
over the required service period, generally defined as the vesting period for stock option and restricted stock awards.

 The Company's stock incentive programs
are long-term retention programs intended to attract, retain, and provide incentives for key employees and non-employee directors in the
form of incentive and non-qualified stock options and restricted stock.

 Stock-based compensation expense was recorded as follows:

 Schedule of stock-based compensation expense

 For
 the years ended December 31,

 2023

 2022

 2021

 Stock option expense

 $

 1,148

 Restricted stock grant expense

 1,415

 1,099

 Total stock-based compensation expense

 $
 1,943

 2,026

 1,647

 Stock Options

 The Company's 2010 Incentive Plan,
as amended, had available for issuance a total of 566,025 shares (adjusted for the 10 % stock dividends in 2013, 2012, and 2011). The Plan
expired on March 16, 2020 and no further shares may be issued from the plan.

 On March 15, 2016, the Company adopted
the 2016 Equity Incentive Plan, making available for issuance 400,000 of common stock either as stock options or restricted stock grants.
The Plan expired on March 15, 2021 and no further shares may be issued from the plan.

 On March 17, 2020, the Company adopted
the 2020 Equity Incentive Plan, making available for issuance up to 450,000 stock options. The options may be exercised at an exercise
price per share based on the fair market value and determined on the date of grant and expire 10 years from the grant date. As of December
31, 2023, there were 319,058 shares available for grant under the 2020 Equity Incentive Plan.

 A summary of the status of the stock option
plan and changes for the period is presented below:

 Schedule of the status of the stock option plan and changes

 For
 the years ended December 31,

 2023

 2022

 2021

 average
 exercise
 price

Remaining

Contractual

Life

 average
 exercise
 price

Remaining

Contractual

Life

 average
 exercise
 price

Remaining

Contractual

Life

 Outstanding at beginning of year

 427,224

 $
 34.32

 464,724

 $
 33.97

 495,195

 $
 29.93

 Granted

 -

 -

 -

 -

 121,000

 40.45

 Exercised

 ( 27,250
)

 20.18

 ( 32,375
)

 27.94

 ( 127,871
)

 23.56

 Forfeited or expired

 ( 68,625
)

 34.15

 ( 5,125
)

 43.14

 ( 23,600
)

 38.88

 Outstanding at end of year

 331,349

 $
 35.51

 4.9 years

 427,224

 $
 34.32

 5.7 years

 464,724

 $
 33.97

 6.6 years

 Options exercisable at year-end

 267,376

 $
 34.48

 4.5 years

 287,902

 $
 32.35

 4.8 years

 239,340

 $
 29.68

 5.0 years

 Weighted average fair value of options granted during the year

 $
 -

 $
 -

 $
 16.40

 Shares available for grant

 319,058

 370,824

 422,550

 The aggregate intrinsic value (the difference
between the Company's closing stock price on the last trading day of the year and the exercise price, multiplied by the number of
in-the-money options) of 331,349 and 427,224 stock options outstanding at December 31, 2023 and 2022 was $ 1.3 million and $ 4.9 million,
respectively. The aggregate intrinsic value of 267,376 and 287,902 stock options exercisable at December 31, 2023 and 2022 was $ 1.3 million
and $ 3.9 million, respectively. Stock Compensation Plan [Member]

 The fair value of the option grant is estimated
on the date of grant using the Black-Scholes option-pricing model. The following assumptions were used for grants:

 Schedule of assumptions used

 2023

 2022

 2021

 Dividend yield -

 - n/a

 n/a

 -

 Expected life

 n/a

 n/a

 7 years

 Expected volatility

 n/a

 n/a

 38.48
 %

 Risk-free interest rate

 n/a

 n/a

 0.74
 %

 At December
31, 2023, there was $ 408,000 of total unrecognized compensation cost related to nonvested stock option grants. The cost is expected to
be recognized over a weighted-average period of 1.1 years. The fair value of stock option grants that vested during 2023, 2022, and 2021
was $ 846,000, $ 1.1 million and $ 1.1 million, respectively.

 Restricted Stock Grants

 On May 17, 2016, the Company adopted the
2016 Equity Incentive Plan which included a provision for the issuance of 50,000 shares of common stock to be issuable as restricted stock
grants. The Plan expired on March 17, 2021 and no further shares may be issued from the plan.

 On May 12, 2020, the Company adopted the
2020 Equity Incentive Plan which included a provision for the issuance of 450,000 shares of common stock to be issuable as either stock
options or restricted stock grants. As of December 31, 2023, there were 319,058 shares available for grant under the 2020 Equity Incentive
Plan.

 Shares of restricted stock granted to employees
under the stock plans are subject to restrictions as to continuous employment for a specified time period following the date of grant.
During this period, the holder is entitled to full voting rights and dividends.

 A summary of the status of the Company's nonvested
restricted stock and changes for the years ended December 31, 2023, 2022, and 2021 is as follows:

 Schedule of the status of the company's nonvested restricted stock and changes

 31,

 2023

 2022

 2021

 Restricted

 Grant-Date
 Fair Value

 Restricted

 Grant-Date
 Fair Value

 Restricted

 Grant-Date
 Fair Value

 Nonvested at beginning of year

 80,337

 $
 52.53

 41,699

 $
 44.71

 26,099

 $
 38.05

 Granted

 69,880

 37.12

 53,376

 56.25

 26,450

 48.56

 Vested

 ( 21,695
)

 48.95

 ( 14,213
)

 43.26

 ( 9,600
)

 38.03

 Forfeited

 ( 18,989
)

 46.83

 ( 525
)

 61.14

 ( 1,250
)

 38.56

 Nonvested at end of year

 109,533

 $
 44.40

 80,337

 $
 52.53

 41,699

 $
 44.71

 At December
31, 2023, there was $ 3.6 million of total unrecognized compensation cost related to nonvested restricted stock grants. The cost is expected
to be recognized over a weighted-average period of 2.7 years.

 NOTE 20 – Dividends

 The ability of the Company to pay cash
dividends is dependent upon receiving cash in the form of dividends from the Bank. The dividends that may be paid by the Bank to the Company
are subject to legal limitations and regulatory capital requirements.

 Also, the payment of cash dividends on
the Company's common stock by the Company in the future will be subject to certain other legal and regulatory limitations (including the
requirement that the Company's capital be maintained at certain minimum levels) and will be subject to ongoing review by banking
regulators. The Federal Reserve has issued a policy statement regarding the payment of dividends by bank holding companies. In general,
the Federal Reserve's policies provide that dividends should be paid only out of current earnings and only if the prospective rate
of earnings retention by the bank holding company appears consistent with the organization's capital needs, asset quality and overall
financial condition.

 NOTE 21 – Regulatory Matters

 The Bank is subject to various regulatory
capital requirements administered by the federal banking agencies. The capital rules require banks and bank holding companies to maintain
a minimum total risked-based capital ratio of at least 8%, a total Tier 1 capital ratio of at least 6%, a minimum common equity Tier 1
capital ratio of at least 4.5%, and a leverage ratio of at least 4%. Bank holding companies and banks are also required to hold a capital
conservation buffer of common equity Tier 1 capital of 2.5% to avoid limitations on capital distributions and discretionary executive
compensation payments. The capital conservation buffer was phased in incrementally over time, becoming fully effective on January 1, 2019,
and consists of an additional amount of common equity equal to 2.5% of risk-weighted assets.

 To be considered "well-capitalized"
for purposes of certain rules and prompt corrective action requirements, the Bank must maintain a minimum total risked-based capital ratio
of at least 10%, a total Tier 1 capital ratio of at least 8%, a common equity Tier 1 capital ratio of at least 6.5%, and a leverage ratio
of at least 5%. As of December 31, 2023, our capital ratios exceed these ratios and we remain "well capitalized."

 The following table summarizes the capital amounts and
ratios of the Bank and the Company and the regulatory minimum requirements at December 31, 2023 and 2022.

 Schedule of capital amounts and ratios of the Bank and the Company and the regulatory minimum requirements

 Actual

 For capital
 adequacy purposes
 minimum

 To be well
 capitalized
 under prompt
 corrective action

provisions minimum

 Ratio

 Ratio

 Ratio

 As of December 31, 2023

 The Bank

 $
 390,197

 12.28
 %

 $

 8.00
 %

 $
 317,847

 10.00
 %

 11.03
 %

 190,708

 6.00
 %

 8.00
 %

 Common Equity Tier 1 Capital (to risk weighted assets)

 11.03
 %

 143,031

 4.50
 %

 206,601

 6.50
 %

 8.47
 %

 165,414

 4.00
 %

 206,767

 5.00
 %

 The Company

 399,551

 12.57
 %

 8.00
 %

 n/a

 n/a

 336,809

 10.60
 %

 190,708

 6.00
 %

 n/a

 n/a

 Common Equity Tier 1 Capital (to risk weighted assets)

 323,809

 10.19
 %

 143,031

 4.50
 %

 n/a

 n/a

 336,809

 8.14
 %

 165,436

 4.00
 %

 n/a

 n/a

 Actual

 For capital
 adequacy purposes
 minimum

 To be well
 capitalized
 under prompt
 corrective action

provisions minimum

 Ratio

 Ratio

 Ratio

 As of December 31, 2022

 The Bank

 $
 366,988

 12.45
 %

 $

 8.00
 %

 $
 294,865

 10.00
 %

 11.20
 %

 176,919

 6.00
 %

 8.00
 %

 Common Equity Tier 1 Capital (to risk weighted assets)

 11.20
 %

 132,689

 4.50
 %

 191,662

 6.50
 %

 9.43
 %

 140,040

 4.00
 %

 175,050

 5.00
 %

 The Company (1)

 380,802

 12.91
 %

 8.00
 %

 n/a

 n/a

 320,922

 10.88
 %

 176,919

 6.00
 %

 n/a

 n/a

 Common Equity Tier 1 Capital (to risk weighted assets)

 307,922

 10.44
 %

 132,689

 4.50
 %

 n/a

 n/a

 320,922

 9.17
 %

 140,057

 4.00
 %

 n/a

 n/a

 (1)
 Under
the Federal Reserve's Small Bank Holding Company Policy Statement, in 2021, the Company was not subject to the minimum capital adequacy
and capital conservation buffer capital requirements at the holding company level. Although the minimum regulatory capital requirements
were not applicable to the Company in 2021, we calculated these ratios for our own planning and monitoring purposes.

 NOTE 22 – Parent Company Financial Information

 Following is condensed financial information
of Southern First Bancshares, Inc. (parent company only):

 Condensed Balance Sheets

 Schedule of condensed balance sheets

 31,

 2023

 2022

 Cash and cash equivalents

 $
 9,408

 13,882

 Investment in subsidiaries

 339,516

 317,102

 $
 349,070

 331,005

 Liabilities and Shareholders' Equity

 Accrued expenses

 $

 36,214

 Shareholders' equity

 Total liabilities and shareholders' equity

 $
 349,070

 331,005

 Condensed Statements of Income

 Schedule of condensed statements of income

 For the
 years ended December 31,

 2023

 2022

 2021

 Revenues

 Interest income

 $

 Total revenue

 Expenses

 Interest expense

 2,197

 1,730

 1,523

 Other expenses

 Total expenses

 2,446

 1,970

 1,808

 Income tax benefit

 Loss before equity in undistributed net income of subsidiaries

 ( 1,920
)

 ( 1,541
)

 ( 1,415
)

 Equity in undistributed net income of subsidiaries

 15,346

 30,656

 48,126

 $

 Condensed Statements of Cash Flows

 Schedule of condensed statements of cash flows

 2023

 2022

 2021

 Operating activities

 $

 Adjustments to reconcile net income to cash provided by operating activities

 Equity in undistributed net income of subsidiaries

 ( 15,346
)

 ( 30,656
)

 ( 48,126
)

 Compensation expense related to stock options and restricted stock grants

 1,943

 2,026

 1,647

 (Increase) decrease in other assets

 ( 125
)

 -

 Increase in accrued expenses and subordinated debentures

 Net cash provided by operating activities

 Investing activities

 Investment in subsidiaries, net

 ( 5,000
)

 -

 -

 Net cash used for investing activities

 ( 5,000
)

 -

 -

 Financing activities

 Issuance of common stock

 -

 -

 -

 Proceeds from the exercise of stock options and warrants

 3,012

 Net cash provided by financing activities

 3,012

 Net increase (decrease) in cash and cash equivalents

 ( 4,474
)

 1,503

 3,360

 Cash and cash equivalents, beginning of year

 13,882

 12,379

 9,019

 Cash and cash equivalents, end of year

 $
 9,408

 13,882

 12,379

 Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure

 None.

 Item 9A. Controls and Procedures

 Evaluation of Disclosure Controls
and Procedures

 Based on our management's evaluation
(with the participation of our principal executive officer and principal financial officer), as of the end of the period covered by this
report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the "Exchange Act")) are
effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated
and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow
timely decisions regarding required disclosure.

 For management's report on internal
control over financial reporting and the attestation report thereon issued by our independent registered public accounting firm, see Item
8. Financial Statements and Supplementary Data.

 Internal Control over Financial Reporting

 There was no change in our internal control
over financial reporting during our fourth quarter of fiscal 2023 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

 Item 9B. Other Information

 None

 Item
9C. Disclosures Regarding Foreign Jurisdictions that Prevent Inspections

 Not applicable

 Item 10. Directors, Executive Officers
and Corporate Governance.

 In response to this Item, this information
is contained in our Proxy Statement for the Annual Meeting of Shareholders to be held on May 21, 2024 and is incorporated herein by reference.

 Item 11. Executive Compensation.

 In response to this Item, this information
is contained in our Proxy Statement for the Annual Meeting of Shareholders to be held on May 21, 2024 and is incorporated herein by reference.

 Item 12. Security Ownership of
Certain Beneficial Owners and Management and Related Shareholder Matters.

 In response to this Item, the information
required by Item 201(d) is contained in Item 5 of this report. The other information required by this item is contained in our Proxy Statement
for the Annual Meeting of Shareholders to be held on May 21, 2024 and is incorporated herein by reference.

 Item 13. Certain Relationships
and Related Transactions, and Director Independence.

 The information is contained in our Proxy
Statement for the Annual Meeting of Shareholders to be held on May 21, 2024 is incorporated herein by reference.

 Item 14. Principal Accounting Fees
and Services.

 In response to this Item, this information
is contained in our Proxy Statement for the Annual Meeting of Shareholders to be held on May 21, 2024 and is incorporated herein by reference.

 Item 15. Exhibits, Financial Statement
Schedules

 (a)

 (1)

 Financial Statements

 The following consolidated financial statements are located in Item 8 of this report.

 Management's Report on Internal Control Over Financial Reporting

 Report of Independent Registered Public Accounting Firm

 Consolidated Balance Sheets as of December 31, 2023 and 2022

 Consolidated Statements of Income for the years ended December 31, 2023, 2022 and 2021

 Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021

 Consolidated Statements of Shareholders' Equity for the years ended December 31, 2023, 2022 and 2021

 Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021

 Notes to the Consolidated Financial Statements

 (2)

 Financial Statement Schedules

 These schedules have been omitted because they are not required, are not applicable or have been included in our consolidated financial statements.

 (3)

 Exhibits

 See the "Exhibit Index" immediately following the signature page of this report.

 EXHIBIT INDEX

 3.1

 Amended and Restated Articles of Incorporation, effective May 19, 2023 (incorporated by reference to Exhibit 3.1 of the Company's Form 10-Q filed on August 1, 2023).

 3.2

 Amended and Restated Bylaws dated March 18, 2008 (incorporated by reference to Exhibit 3.4 of the
 Company's Form 10-K filed March 24, 2008).

 3.3

 Amendment to Amended and Restated Bylaws dated March 18, 2008 (incorporated by reference to Exhibit
 3.1 of the Company's Form 10-Q filed on November 2, 2020).

 4.1

 Description of the Company's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.1 of the Company's Form 10-K filed on March 2, 2020).

 4.2

 Form of certificate of common stock (incorporated by reference to Exhibit 4.2 of the Company's
 Registration Statement on Form SB-2, File No. 333-83851).

 4.3

 Indenture dated as of September 30, 2019 between Southern First Bancshares, Inc. and UMB Bank, National
 Association, as trustee (incorporated by reference to Exhibit 4.1 of the Company's Form 8-K filed on September 30, 2019).

 4.4

 Form of 4.75% Fixed-to-Floating Subordinated Note due 2029 of Southern First Bancshares, Inc. (incorporated
 by reference to Exhibit 4.2 of the Company's Form 8-K filed on September 30, 2019).

 4.5

 Form of Global 4.75% Fixed-to-Floating Subordinated Note due 2029 of Southern First Bancshares, Inc.
 (incorporated by reference to the Exhibit 2 to Exhibit 4.1 of the Company's Form 8-K filed on September 30, 2019).

 10.1

 Southern First Bancshares, Inc. 2010 Stock Incentive Plan (incorporated by reference to Appendix A
 of the Company's Proxy Statement on Schedule 14A filed April 6, 2010).*

 10.2

 Amendment to Southern First Bancshares, Inc. 2010 Stock Incentive Plan (incorporated by reference
 to Appendix A of the Company's Proxy Statement on Schedule 14A filed on April 15, 2014).*

 10.3

 Amendment to Southern First Bancshares, Inc. 2010 Stock Incentive Plan (incorporated by reference
 to Appendix A of the Company's Proxy Statement on Schedule 14A filed on April 14, 2015).*

 10.4

 Form of Award Agreement for Stock Options (incorporated by reference to Exhibit 4.6 of the Company's
 Form S-8 filed on August 12, 2010).*

 10.5

 Form of Award Agreement for Restricted Stock (incorporated by reference to Exhibit 4.7 of the Company's
 Form S-8 filed on August 12, 2010).*

 10.6

 Sublease Agreement between Greenville First Bank, N.A. and Augusta Road Holdings, LLC dated February
 26, 2004 (incorporated by reference to Exhibit 10.6 of the Company's Form 10-QSB for the period ended June 30, 2004).

 10.7

 R. Arthur Seaver, Jr. Amended and Restated Employment Agreement (incorporated by reference to Exhibit
 10.5 of the Company's Form 8-K filed October 3, 2013).*

 10.8

 Calvin C. Hurst Employment Agreement (incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q filed on August 1, 2023).*

 10.9

 Form of Split Dollar Agreement between certain executives and Southern First Bancshares, Inc. (incorporated
 by reference to Exhibit 10.1 of the Company's Form 8-K filed February 18, 2009).*

 10.10

 Form of Southern First Bank, N.A. Salary Continuation Agreement dated December 17, 2008 (incorporated
 by reference to Exhibit 10.1 of the Company's Form 8-K filed December 23, 2008).*

 10.11

 Form of First Amendment to Southern First Bank, N.A. Salary Continuation Agreement dated December
 17, 2008 (incorporated by reference to Exhibit 10.2 of the Company's Form 8-K filed December 23, 2008).*

 10.12

 Michael D. Dowling Salary Continuation Agreement (incorporated by reference to Exhibit
 10.1 of the Company's Form 8-K filed October 3, 2013).*

 10.13

 R. Arthur Seaver, Jr. Second Amendment to Salary Continuation Agreement (incorporated by reference
 to Exhibit 10.4 of the Company's Form 8-K filed October 3, 2013).*

 10.14

 Southern First Bancshares, Inc. 2016 Equity Incentive Plan (incorporated by reference to Appendix
 A of the Company's Proxy Statement on Schedule 14A filed on April 12, 2016).*

 10.15

 Form of Award Agreement for Stock Options (incorporated by reference to Exhibit 4.6 of the Company's
 Form S-8 filed on August 18, 2016).*

 10.16

 Form of Award Agreement for Restricted Stock (incorporated by reference to Exhibit 4.7 of the Company's
 Form S-8 filed on August 18, 2016).*

 10.17

 Amendment dated as of January 31, 2019 to R. Arthur Seaver, Jr. Amended and Restated Employment Agreement
 (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K filed on February 6, 2019).*

 10.18

 William Marion Aiken, III Employment Agreement (incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q filed on May 2, 2023).*

 10.19

 Form of Subordinated Note Purchase Agreement dated as of September 30, 2019 by and among Southern First Bancshares, Inc. and certain qualified institutional buyers and accredited investors (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K filed on September 30, 2019).

 10.20

 Form of Registration Rights Agreement dated as of September 30, 2019 by and among Southern First Bancshares, Inc. and certain qualified institutional buyers and accredited investors (incorporated by reference to Exhibit 10.2 of the Company's Form 8-K filed on September 30, 2019).

 10.21

 D. Andrew Borrmann Employment Agreement (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on April 3, 2023).*

 10.22

 Loan Agreement, dated as of December 28, 2023, by and between Southern First Bancshares, Inc. and TIB, National Association (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on January 3, 2024).

 10.23

 Promissory Note, dated as of December 28, 2023, by and between Southern First Bancshares, Inc. and TIB, National Association (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed on January 3, 2024).

 10.24

 Pledge Agreement, dated as of December 28, 2023, by and between Southern First Bancshares, Inc. and TIB, National Association (incorporated by reference to Exhibit 10.3 of the Company's Current Report on Form 8-K filed on January 3, 2024).

 Subsidiaries.

 Consent of Independent Public Accountants.

 Power of Attorney (contained herein as part of the signature pages).

 31.1

 Rule 13a-14(a) Certification of the Principal Executive Officer.

 31.2

 Rule 13a-14(a) Certification of the Principal Financial Officer.

 Section 1350 Certifications of the Principal Executive Officer and Principal Financial Officer.

 Incentive Compensation Recovery Policy, effective November 21, 2023

 The following materials from the Company's Annual Report on Form 10-K for the year ended December
 December 31, 2022, (ii) Consolidated Statements of Income for the years ended December 31, 2023, 2022, and 2021, (iii) Consolidated
 Statements of Changes in Shareholders' Equity and Comprehensive Income for the years ended December 31, 2023, 2022, and 2021,
 (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022, and 2021, and (iv) Notes to Consolidated
 Financial Statements.

 *

 Management
contract or compensatory plan or arrangement

 SIGNATURES

 Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

 SOUTHERN FIRST BANCSHARES, INC.

 Date: March 5, 202 4

 By:

 /s/R. Arthur Seaver, Jr.

 Chief Executive Officer

 KNOW ALL MEN BY THESE PRESENTS, that each
person whose signature appears below constitutes and appoints R. Arthur Seaver, Jr., his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all
amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto the attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that the attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

 Pursuant to the requirements of the securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on
the dates indicated.

 Signature

 Title

 Date

 /s/R. Arthur Seaver, Jr.

 Director, Chief Executive Officer

 R. Arthur Seaver, Jr.

 (Principal Executive Officer)

 /s/D. Andrew Borrmann

 Chief Financial Officer, Chief Operating Officer

 March

 D. Andrew Borrmann

 (Principal Financial and Accounting Officer)

 /s/Andrew B. Cajka, Jr.

 March

 Andrew B. Cajka, Jr.

 /s/Mark A. Cothran

 March

 Mark A. Cothran

 /s/Leighton M. Cubbage

 March

 Leighton M. Cubbage

 /s/David G. Ellison

 March

 David G. Ellison

 /s/Anne S. Ellefson

 March

 Anne S. Ellefson

 /s/ Terry Grayson-Caprio

 Terry Grayson-Caprio

 /s/Tecumseh Hooper, Jr.

 Tecumseh Hooper, Jr.

 /s/Rudolph G. Johnstone, III M.D.

 Rudolph G. Johnstone, III, M.D.

 /s/ Ray A. Lattimore

 Ray A. Lattimore

 /s/Anna T. Locke

 Anna T. Locke

 /s/ William A. Maner, IV

 William A. Maner, IV

 /s/James B. Orders, III

 Director, Chairman

 James B. Orders, III