Summary of BANK OF SOUTH CAROLINA CORP

MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION Management's discussion and analysis is included to assist shareholders in understanding the Company's financial condition, results of operations, and cash flow. This discussion should be reviewed in conjunction with the consolidated financial statements (unaudited) and notes included in this report and the supplemental financial data appearing throughout this report. Since the primary asset of the Company is its wholly-owned subsidiary, most of the discussion and analysis relates to the Bank.
Management's Discussion and Analysis of Financial Condition and Results of Operations and other portions of this quarterly report contain certain "forward-looking statements" concerning the future operations of the Bank of South Carolina Corporation. Management desires to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1996 and is including this statement for the express purpose of availing the Company of protections of such safe harbor with respect to all "forward-looking statements" contained in this Form 10-Q. We have used "forward-looking statements" to describe future plans and strategies including our expectations of the Company's future financial results. The following are cautionary statements. Management's ability to predict results or the effect of future plans or strategies is inherently uncertain. A variety of factors may affect the operations, performance, business strategy and results of the Company including, but not limited to the following:
Х Risk from changes in economic, monetary policy, and industry conditions,

Х Changes in interest rates, shape of the yield curve, deposit rates, the net interest margin and funding sources,

Х Market risk (including net income at risk analysis and economic value of equity risk analysis) and inflation,

Х Risk inherent in making loans including repayment risks and changes in the value of collateral,

Х Loan growth, the adequacy of the allowance for loan losses, provisions for loan losses, and the assessment of problem loans,

Х Level, composition, and re-pricing characteristics of the securities portfolio,

Х Deposit growth, change in the mix or type of deposit products and services,

Х Continued availability of senior management,

Х Technological changes,

Х Ability to control expenses,

Х Changes in compensation,

Х Risks associated with income taxes including potential for adverse adjustments,

Х Changes in accounting policies and practices,

Х Changes in regulatory actions, including the potential for adverse adjustments,

Х Recently enacted or proposed legislation,

Х Current disarray in the financial service industry.

Such forward looking statements speak only as of the date on which such statements are made and shall be deemed to be updated by any future filings made by the Company with the SEC. The Company will undertake no obligation to update any forward looking statement to reflect events or circumstances after the date on which such statement is made to reflect the occurrence of unanticipated events. In addition, certain statements in future filings by the Company with the SEC, in press releases, and in oral and written statements made by or with the approval of the Company, which are not statements of historical fact, constitute forward looking statements.

Table of Contents

Overview
Bank of South Carolina Corporation (the Company) is a financial institution holding company headquartered in Charleston, South Carolina, with $246.9 million in assets as of March 31, 2009 and net income of $774,902 for the three months ended March 31, 2009. The Company offers a broad range of financial services through its wholly-owned subsidiary, The Bank of South Carolina (the Bank). The Bank is a state-chartered commercial bank which operates principally in the Charleston, Dorchester and Berkeley, counties of South Carolina. The Bank's original and current concept is to be a full service financial institution specializing in personal service, responsiveness, and attention to detail. The following is a discussion of the Company's financial condition as of March 31, 2009 as compared to December 31, 2008 and the results of operations for the three months ended March 31, 2009 as compared to March 31, 2008. The discussion and analysis identifies significant factors that have affected the Company's financial position and operating results and should be read in conjunction with the financial statements and the related notes included in this report.
The Company derives most of its income from interest on loans and investments (interest bearing assets). The primary source of funding for making these loans and investments is the Company's deposits (interest bearing liabilities). One of the key measures of the Company's success is the net interest spread which depends upon the volume and rates associated with interest earning assets and interest bearing liabilities.
There are risks inherent in all loans; therefore, the Company maintains an allowance for loan loss to absorb estimated losses on existing loans that may become uncollectible. For a detailed discussion on the allowance for loan losses see "provision for loan losses".
The Company's results of operations depend not only on the level of its net interest income from loans and investments, but also on its non-interest income and its operating expenses. Net interest income depends upon the volumes, rates and mix associated with interest earning assets and interest bearing liabilities which result in the net interest spread. The Company's net interest margin for the three months ended March 31, 2009 was 4.24%, compared to 5.02 % for the three months ended March 31, 2008. Non-interest income includes fees and other expenses charged to customers. A more detailed discussion of interest income, non-interest income and operating expenses follows.
For the three months ended March 31, 2009, the Bank has paid $440,000 to the Company for dividend payments. The continuation by the Company of payment of a $.16 per share quarterly dividend to its shareholders will be evaluated and a dividend will be paid as justified by the earnings of the Bank.
CRITICAL ACCOUNTING POLICIES
The Company's significant accounting policies are discussed in Note 1 to the Consolidated Financial Statements for the year ended December 31, 2008. Of the significant accounting policies, the Company considers its policies regarding the allowance for loan losses to be its most subjective accounting policy due to the significant degree of management judgment. The Company has developed what it believes to be appropriate policies and procedures for assessing the adequacy of the allowance for loan losses, recognizing that this process requires a number of assumptions and estimates with respect to its loan portfolio. The Company's assessments may be impacted in future periods by changes in economic conditions, the impact of regulatory examinations and the discovery of information with respect to borrowers which were not known by management at the time of the issuance of the consolidated financial statements. For additional discussion concerning the Company's allowance for loan losses and related matters, see "Allowance for Loan Losses."

Table of Contents

BALANCE SHEET
LOANS
The Company focuses its lending activities on small and middle market businesses, professionals and individuals in its geographic markets. At March 31, 2009 outstanding loans (less deferred loan fees of $56,122) totaled $190,771,544 which equaled 88.23% of total deposits and 77.25% of total assets. The major components of the loan portfolio were commercial loans and commercial real estate loans totaling 24.28% and 52.18%, respectively of total loans. Substantially all loans were to borrowers located in the Company's market areas in the counties of Charleston, Dorchester and Berkeley in South Carolina. The breakdown of total loans by type and the respective percentage of total loans are as follows: