Exhibit 99.2

STATE CAPITAL CORP.

AND SUBSIDIARIES

Consolidated Financial Statements

March 31, 2020 (Unaudited)

December 31, 2019

STATE CAPITAL CORP. AND SUBSIDIARIES

GREENWOOD, MISSISSIPPI

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except for Share Data)

A S S E T S

	March 31, 2020			December 31, 2019
	Unaudited
Cash and due from banks	$	42,181		$	29,277
Federal funds sold		31,378			6,573
Cash and cash equivalents		73,559			35,850
Interest bearing deposits in other banks		1,755			11,668
Securities available-for-sale		98,070			104,719
Loans		899,539			905,654
Less allowance for loan losses		(7,281	)		(7,887	)
Loans, net		892,258			897,767
Bank premises and equipment, net		31,884			32,104
Accrued interest receivable		3,665			3,830
Other assets		83,080			77,878
Total Assets	$	1,184,271		$	1,163,816

The accompanying notes are an integral part of these consolidated financial statements.

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L I A B I L I T I E S    A N D    S T O C K H O L D E R S’    E Q U I T Y

	March 31, 2020		December 31, 2019
	Unaudited
LIABILITIES
Non-interest bearing deposits	$	139,347	$	130,238
Interest bearing deposits		876,567		868,077
Notes payable		13,979		15,366
Subordinated debentures		15,465		15,465
Accrued interest payable		2,859		2,807
Other liabilities		26,757		17,864
Total liabilities		1,074,974		1,049,817
COMMITMENTS AND CONTINGENCIES		—		—
STOCKHOLDERS’ EQUITY
Common stock—authorized 5,000,000 shares:
Class A voting common stock of $1.25 par value; 3,504,503 and 3,506,815 shares issued and outstanding		4,381		4,384
Class B non voting common stock of $1.25 par value; 26,502 shares issued and outstanding		33		33
Additional paid-in capital		58,026		58,117
Retained earnings		46,580		51,824
Accumulated other comprehensive income (loss), net		277		(359	)
Total stockholders’ equity		109,297		113,999
Total Liabilities and Stockholders’ Equity	$	1,184,271	$	1,163,816

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STATE CAPITAL CORP. AND SUBSIDIARIES

GREENWOOD, MISSISSIPPI

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except for Share Data)

	(Unaudited)
	Three Months Ended
	March 31
	2020		2019
INTEREST INCOME
Interest and fees on loans	$	11,849	$	11,161
Taxable investment income		535		847
Tax-exempt investment income		39		40
Federal funds sold		106		377
Interest bearing deposits		28		23
Total interest income		12,557		12,448
INTEREST EXPENSE
Deposits		2,775		2,807
Short-term borrowings		—		1
Other borrowings		227		357
Total interest expense		3,002		3,165
NET INTEREST INCOME		9,555		9,283
Provision for loan losses		27		292
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		9,528		8,991
OTHER OPERATING INCOME
Service charges and fees on deposit accounts		823		801
Other income		829		1,047
		1,652		1,848

The accompanying notes are an integral part of these consolidated financial statements.

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STATE CAPITAL CORP. AND SUBSIDIARIES

GREENWOOD, MISSISSIPPI

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except for Share Data)

	(Unaudited) Three Months Ended March 31
	2020			2019
OTHER OPERATING EXPENSE
Salaries and employee benefits	$	11,713		$	5,283
Net occupancy expenses		940			897
Equipment and data processing expenses		5,725			641
Other operating expenses		2,878			1,582
		21,256			8,403
INCOME BEFORE INCOME TAX EXPENSE		(10,076	)		2,436
Income tax expense (benefit)		(5,452	)		577
NET INCOME (LOSS)	$	(4,624	)	$	1,859
Earnings (loss) per share
Basic	$	(1.31	)	$	0.53
Diluted	$	(1.31	)	$	0.53

The accompanying notes are an integral part of these consolidated financial statements.

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STATE CAPITAL CORP. AND SUBSIDIARIES

GREENWOOD, MISSISSIPPI

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands, Except for Share Data)

	(Unaudited) Three Months Ended March 31
	2020			2019
NET INCOME	$	(4,624	)	$	1,859
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gains (losses) on securities:
Unrealized holdings losses arising during the period, net of tax of $211 and $324, respectively		635			975
Less: reclassification adjustments for gains included in net income, net of tax of $0 in 2020		1			—
Total other comprehensive income (loss)		636			975
TOTAL COMPREHENSIVE INCOME	$	(3,988	)	$	2,834

The accompanying notes are an integral part of these consolidated financial statements.

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STATE CAPITAL CORP. AND SUBSIDIARIES

GREENWOOD, MISSISSIPPI

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

(In Thousands, Except for Share Data)

	Class A Common Stock						Class B Common Stock				Additional Paid-in Capital			Retained Earnings			Unallocated ESOP Shares			Accumulated Other Comprehensive Loss			Total
	Shares			Amount			Shares		Amount
Balance at January 1, 2019		3,514,671		$	4,393			26,502	$	33	$	58,340		$	46,226		$	(19	)	$	(1,962	)	$	107,011
Net income		—			—			—		—		—			1,859			—			—			1,859
ASU 2016-01 cumulative effect of equity securities adjusted to market		—			—			—		—		—			(61	)		—			—			(61	)
Other comprehensive income (loss), net of tax $ 324		—			—			—		—		—			—			—			975			975
Cash dividends declared:
Class A common stock ($.15 per share)		—			—			—		—		—			(526	)		—			—			(526	)
Class B common stock ($ .2125 per share)		—			—			—		—		—			(6	)		—			—			(6	)
Unallocated ESOP shares		—			—			—		—		3			—			19			—			22
Balance at March 31, 2019		3,514,671		$	4,393			26,502	$	33	$	58,343		$	47,492		$	—		$	(987	)	$	109,274
Balance at January 1, 2020		3,506,815		$	4,384			26,502	$	33	$	58,117		$	51,824		$	—		$	(359	)	$	113,999
Net income		—			—			—		—		—			(4,624	)					—			(4,624	)
Other comprehensive income (loss), net of tax $ 211		—			—			—		—		—			—						636			636
Repurchase of stock		(2,312	)		(3	)		—		—		(91	)		—						—			(94	)
Cash dividends declared:
Class A common stock ($.175 per share)		—			—			—		—		—			(614	)					—			(614	)
Class B common stock ($ .2375 per share)		—			—			—		—		—			(6	)					—			(6	)
Balance at March 31, 2020		3,504,503		$	4,381			26,502	$	33	$	58,026		$	46,580		$	—		$	277		$	109,297

The accompanying notes are an integral part of these consolidated financial statements.

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STATE CAPITAL CORP. AND SUBSIDIARIES

GREENWOOD, MISSISSIPPI

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands, Except for Share Data)

	(Unaudited) Three Months Ended March 31
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	(4,624	)	$	1,859
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment		383			397
Provision for loan losses		27			292
Amortization of intangible assets		52			51
Net investment amortization		181			147
Realized gain on sales of investments		(1	)		—
Net gain on marketable equity securities		(12	)		(2	)
Net (gain) loss on sales of ORE		(10	)		(5	)
Write-down of repossessed assets		42			—
Release of unallocated ESOP shares		—			22
Deferred income taxes		4,228			(274	)
Change in:
Accrued interest receivable		165			14
Cash value of life insurance		(182	)		(177	)
Change in:
Accrued interest payable		52			68
Deferred compensation		2,955			(150	)
Other, net		(4,174	)		386
Net cash provided by operating activities		(918	)		2,628
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available-for-sale		(30,136	)		(11,948	)
Sales and maturities of securities available-for-sale		37,452			3,574
Net (increase) decrease in:
Interest bearing bank balances		9,913			295
Loans		5,314			3,450
Premises and equipment		(163	)		(144	)
Proceeds from sales of other real estate		87			35
Federal Home Loan Bank stock transactions		(12	)		(17	)
Other stock transactions		674			(2	)
Net cash used in investing activities		23,129			(4,757	)

The accompanying notes are an integral part of these consolidated financial statements.

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STATE CAPITAL CORP. AND SUBSIDIARIES

GREENWOOD, MISSISSIPPI

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands, Except for Share Data)

	(Unaudited) Three Months Ended March 31
	2020			2019
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in:
Non-interest bearing deposits	$	9,109		$	(4,976	)
Money market, NOW and savings deposits		13,386			(17,714	)
Certificates of deposits		(4,896	)		6,042
Short-term borrowings		—			154
Federal Home Loan Bank advances		(1,387	)		(1,365	)
Dividends paid		(620	)		(532	)
Repurchase of common stock		(94	)		—
Net cash provided by financing activities		15,498			(18,391	)
Net increase (decrease) in cash and cash equivalents		37,709			(20,520	)
Cash and cash equivalents—beginning of period		35,850			91,199
Cash and cash equivalents—end of period	$	73,559		$	70,679
Supplemental disclosures of cash flow information:
Interest paid	$	3,167		$	3,179
Income taxes paid	$	248		$	—
Acquisition of other real estate in noncash foreclosures	$	168		$	110

The accompanying notes are an integral part of these consolidated financial statements.

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STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Basis of Presentation and Accounting Estimates

State Capital Corp. (the “Company”) is a bank holding company whose business is conducted by its wholly-owned subsidiary, State Bank & Trust Co. (the “Bank”). The Bank is a state-chartered commercial bank headquartered in Greenwood, Leflore county, Mississippi and provides a full range of banking services to individual and corporate customers through its offices in Mississippi, Louisiana, and Alabama. As a state-chartered bank, the Bank is subject to the regulations of certain Federal and State agencies and undergoes periodic examinations by these regulatory agencies.

The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. All adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods reported have been included in the accompanying unaudited consolidated financial statements, and all adjustments are of a normal recurring nature. It is suggested that these interim consolidated financial statements and notes be read in conjunction with the audited financial statements.

Unaudited Interim Consolidated Financial Information

The accompanying consolidated balance sheet as of March 31, 2020, the consolidated statements of operations, comprehensive income and cash flows for the three months ended March 31, 2020 and 2019 and the consolidated statement of changes in stockholders’ equity for the three months ended March 31, 2020 are unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position as of March 31, 2020 and its results of operations and cash flows for the three months ended March 31, 2020 and 2019. The financial data and the other information disclosed in these notes to the consolidated financial statements related to these three month periods are unaudited.

Critical Accounting Policies

The most significant accounting policies are presented in the notes to the audited consolidated financial statements presented elsewhere. Certain accounting policies require management to make significant estimates and assumptions that have a material effect on the carrying value of certain assets and liabilities, and these are considered to be critical accounting policies. The estimates and assumptions used are based on historical experience and other factors that management believes to be reasonable under the circumstances. Actual results could differ significantly from these estimates and assumptions, which could have a material impact on the carrying value of assets and liabilities at the balance sheet dates on the results of operations for the reporting periods.

Earnings Per Share

Basic earnings (loss) per share represents income available to common shareholders computed by dividing net earnings (losses) by the weighted average number of shares outstanding during the period (both Class A and Class B shares). Unallocated (pledged) ESOP shares are not considered as outstanding shares for the purpose of basic earnings (loss) per share. Diluted earnings (loss) per share are computed by dividing net earnings (loss) by the weighted average number outstanding shares during the period that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares outstanding during the reporting period.

	March 31, 2020			March 31, 2019
Net income (loss)	$	(4,624	)	$	1,859
Weighted average shares outstanding		3,532,592			3,540,809
Diluted shares outstanding		3,532,592			3,541,173
Basic earnings (loss) per share	$	(1.31	)	$	0.53
Diluted earnings (loss) per share	$	(1.31	)	$	0.53

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STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Securities

The following is a summary of the amortized cost and fair value of securities available-for-sale:

	Amortized Cost		Gross Unrealized				Fair Value
			Gains		Losses
March 31, 2020:
U. S. Government agencies	$	10,286	$	22	$	38	$	10,270
Mortgage-backed investments		66,315		1,049		140		67,224
States and political subdivisions		5,427		133		1		5,559
Corporate obligations		15,673		—		656		15,017
Total debt securities	$	97,701	$	1,204	$	835	$	98,070
December 31, 2019:
U. S. Government agencies	$	12,605	$	1	$	71	$	12,535
Mortgage-backed investments		71,018		209		551		70,676
States and political subdivisions		5,440		105		—		5,545
Corporate obligations		16,135		7		179		15,963
Total debt securities	$	105,198	$	322	$	801	$	104,719

The Company routinely conducts periodic reviews to identify and evaluate investment securities to determine whether an other-than-temporary impairment has occurred on these securities. Default rates, discount rates, and recovery percentages are used to determine if an unrealized loss is other-than-temporary. There was no amount included in earnings related to the credit loss for which an other-than-temporary impairment was not previously recognized for the three months ended March 31, 2020 or 2019. Following is a summary of available-for-sale securities which were in an unrealized loss position and the length of time that individual securities have been in a continuous loss position.

	Less Than 12 Months							12 Months or More							Total
	Number of Securities		Fair Value		Unrealized Losses			Number of Securities		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
March 31, 2020:
U.S Government agencies		—	$	—	$	—			3	$	4,042	$	(38	)	$	4,042	$	(38	)
Mortgage-backed investments		2		5,254		(62	)		10		11,555		(78	)		16,809		(140	)
States and political subdivisions		1		353		(1	)		—		—		—			353		(1	)
Corporate obligations		5		8,871		(280	)		3		6,146		(376	)		15,017		(656	)
		8	$	14,478	$	(343	)		16	$	21,743	$	(492	)	$	36,221	$	(835	)
December 31, 2019:
U.S Government agencies		1	$	2,363	$	(8	)		5	$	8,266	$	(63	)	$	10,629	$	(71	)
Mortgage-backed investments		6		9,173		(35	)		30		39,674		(516	)		48,847		(551	)
States and political subdivisions		—		—		—			1		1,004		—			1,004		—
Corporate obligations		7		14,977		(179	)		—		—		—			14,977		(179	)
		14	$	26,513	$	(222	)		36	$	48,944	$	(579	)	$	75,457	$	(801	)

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STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Securities (continued)

The amortized cost and fair value of available for sale securities as of March 31, 2020, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with, or without, call or prepayment penalties.

	Amortized Cost		Fair Value
One year or less	$	2,427	$	2,440
After one through five years		68,275		68,788
After five through ten years		21,969		21,607
After ten years		5,030		5,235
	$	97,701	$	98,070

The fair value of securities available-for-sale which were pledged to secure public deposits, short-term borrowings and for other purposes required or permitted by law, totaled $160,628 and $152,697 at March 31, 2020 and December 31, 2019, respectively.

The following is a summary of gross realized gains and losses on sales of available-for-sale securities during the three-month periods ended March 31, 2020 and March 31, 2019:

	March 31, 2020		March 31, 2019
Gross realized gains	$	1	$	—
Gross realized losses		—		—
	$	1	$	—

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STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Loans

The Bank’s loan portfolio includes commercial, consumer, agricultural and real estate loans primarily in the Bank’s market areas throughout the states of Mississippi, Louisiana, and Alabama. Although the Bank has a diversified loan portfolio, the Bank has a concentration of credit risks related to the real estate market, the agricultural market, and general economic conditions in the Bank’s market areas. The composition of the loan portfolio at March 31, 2020 and December 31, 2019 follows.

	2020		2019
Secured by real estate:
One to four family residential	$	205,528	$	210,541
Multifamily residential		22,861		26,616
Commercial		398,674		392,009
Farmland		67,893		69,480
Construction and land development		106,636		111,022
Agricultural loans		15,176		12,873
Consumer loans		21,197		21,864
Commercial		59,787		58,970
Other		1,787		2,279
	$	899,539	$	905,654

The Bank has an established methodology to determine the adequacy of the allowance for loan losses that assesses the risks and losses inherent in the Bank’s portfolio. For purposes of determining the allowance for loan losses, the Bank segments loans in its portfolio by class code. The models and assumptions the Bank uses to determine the allowance are reviewed to ensure that their theoretical foundation, assumptions, data integrity, computational processes, reporting practices, and end-user controls are appropriate and properly documented.

The Bank’s Estimation Process

The Bank estimates loan losses using 5-year, 3-year, and single year average historical loss percentages for all loans, which are based on historical loss percentages and estimated losses on individually evaluated impaired loans. Management then applies judgment to develop its own view of loss probability using external and internal parameters with the objective of establishing an allowance for the losses inherent for these portfolios as of the reporting date.

Substantially all of the Bank’s consumer loans are secured by collateral. In order to track and measure the risk of nonperformance for these loans, the Bank periodically obtains updates of the credit scores for all loans and considers local economic factors which may affect collateral values.

Reflected in the portions of the allowance previously described is an amount for uncertainty inherent in estimates used for the allowance, which may change from period to period. This amount is the result of management’s judgment of risks inherent in the portfolios, economic uncertainties, historical loss experience and other subjective factors, including industry trends, calculated to better reflect the Bank’s view of risk in the loan portfolio. No single statistic or measurement determines the adequacy of the allowance for loan loss. Changes in the allowance for loan loss and the related provision expense can materially affect net income.

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STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Loans (continued)

Loans by Segment

The total allowance reflects management’s estimate of loan losses inherent in the loan portfolio at the balance sheet date. The Bank considers the allowance for loan losses of $7,281 adequate to cover loan losses inherent in the loan portfolio at March 31, 2020. The following table presents by loan segment, the changes in the allowance for loan losses and the recorded investment in loans

Allowance for Loan Losses and Recorded Investment in Loans

For the Three Months Ended March 31, 2020

	Construction									Commercial								One to
	& Land						Commercial			&								Four Family
	Development			Multifamily			Real Estate			Industrial			Agricultural		Farmland			Residential			Consumer			Other			Unallocated			Total
Allowance for Loan Losses:
Beginning balance	$	1,658		$	213		$	1,780		$	348		$	113	$	598		$	1,729		$	185		$	6		$	1,257		$	7,887
Charge-offs		(122	)		(124	)		(95	)		(42	)		—		—			(204	)		(33	)		—			(48	)		(668	)
Recoveries		—			—			—			6			—		6			6			17			—			—			35
Provision		(330	)		15			450			61			18		(27	)		(16	)		16			(1	)		(159	)		27
Ending balance	$	1,206		$	104		$	2,135		$	373		$	131	$	577		$	1,515		$	185		$	5		$	1,050		$	7,281
Ending allowance balance,
Individually evaluated for impairment	$	6		$	—		$	4		$	54		$	—	$	8		$	184		$	16		$	—		$	—		$	272
Collectively evaluated for impairment		1,200			104			2,131			319			131		569			1,331			169			5			1,050			7,009
	$	1,206		$	104		$	2,135		$	373		$	131	$	577		$	1,515		$	185		$	5		$	1,050		$	7,281
Ending loan balance,
Individually evaluated for impairment	$	262		$	94		$	860		$	72		$	37	$	1,474		$	3,223		$	59		$	—		$	—		$	6,081
Collectively evaluated for impairment		106,374			22,767			397,814			59,715			15,139		66,419			202,305			21,138			1,787			—			893,458
	$	106,636		$	22,861		$	398,674		$	59,787		$	15,176	$	67,893		$	205,528		$	21,197		$	1,787		$	—		$	899,539

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STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Loans (continued)

Loans by Segment (continued)

The following table presents by loan segment, the changes in the allowance for loan losses and the recorded investment in loans.

Allowance for Loan Losses and Recorded Investment in Loans

For the Year Ended December 31, 2019

	Construction									Commercial								One to
	& Land						Commercial			&								Four Family
	Develpment			Multifamily			Real Estate			Industrial			Agricultural			Farmland		Residential			Consumer			Other			Unallocated			Total
Allowance for Loan Losses:
Beginning balance	$	1,206		$	1,082		$	1,892		$	297		$	171		$	595	$	2,090		$	148		$	10		$	1,126		$	8,617
Charge-offs		(20	)		—			(606	)		(116	)		—			—		(692	)		(208	)		—			(172	)		(1,814	)
Recoveries		16			—			2			5			2			—		548			55			—			—			628
Provision		456			(869	)		492			162			(60	)		3		(217	)		190			(4	)		303			456
Ending balance	$	1,658		$	213		$	1,780		$	348		$	113		$	598	$	1,729		$	185		$	6		$	1,257		$	7,887
Ending allowance balance,
Individually evaluated for impairment	$	131		$	104		$	152		$	64		$	3		$	10	$	321		$	21		$	—		$	—		$	806
Collectively evaluated for impairment		1,527			109			1,628			284			110			588		1,408			164			6			1,257			7,081
	$	1,658		$	213		$	1,780		$	348		$	113		$	598	$	1,729		$	185		$	6		$	1,257		$	7,887
Ending loan balance,
Individually evaluated for impairment	$	398		$	220		$	1,497		$	87		$	106		$	1,481	$	3,337		$	80		$	—		$	—		$	7,206
Collectively evaluated for impairment		110,624			26,396			390,512			58,883			12,767			67,999		207,204			21,784			2,279			—			898,448
	$	111,022		$	26,616		$	392,009		$	58,970		$	12,873		$	69,480	$	210,541		$	21,864		$	2,279		$	—		$	905,654

Credit Quality Information

All loans are subject to individual risk assessments using the following factors: ability of the borrower to pay, financial condition of the borrower, management ability of the borrower, collateral and guarantors, loan structure, and industry and economics.

The Bank uses the following risk rating definitions during the three months ended March 31, 2020, to assess risk within its loan portfolio. These risk rankings have been enhanced from the prior year but not substantially changed.

Grade 1 - Virtually No Risk - Credits in this category are virtually risk-free. Credits are secured by assignment of certificates of deposit issued by the Bank, U.S. Treasury Notes, or properly margined, readily marketable securities. In all cases, positive control of the collateral must be maintained by the Bank. The repayment program is well-defined and achievable, and repayment sources are numerous. No material documentation deficiencies or exceptions exist.

- 14 -

STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Loans (continued)

Credit Quality Information (continued)

Grade 2 - Minimal Credit Risk - This grade is reserved for new loans that are within guidelines and where the borrowers have documented significant overall financial strength and a liquid financial statement. These loans have multiple and excellent sources of repayment, with no significant identifiable risk of collection, and conform in all respects to policy, guidelines, underwriting standards, and federal and state regulations (no exceptions of any kind).

Grade 3 - Satisfactory Credit Risk - This grade is reserved for loans which exhibit satisfactory credit risk. These loans have excellent sources of repayment, with no significant identifiable risk of collection. Generally, loans assigned this risk grade will demonstrate the following characteristics: (a) conformity in all respects with policy, guidelines, underwriting standards, and federal and state regulations (no exceptions of any kind), (b) documented historical and/or expected operational cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources to cover all required principal payments on term debt plus provide any funds required for working capital growth or fixed asset acquisition, and (c) adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor.

Grade 4 - Marginal Credit Risk - This grade is given to acceptable loans. These loans have adequate sources of repayment, with little identifiable risk of collection. Loans assigned this risk grade will demonstrate the following characteristics: (a) general conformity to the Bank’s underwriting requirements, with limited exceptions to policy, product or underwriting guidelines, (b) documented historical and/or expected operational cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources to cover all required principal payments on term debt plus provide any funds required for working capital growth or fixed asset acquisition, and (c) adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor.

Grade 5 - Weak Pass - This grade is given to loans that show signs of weakness in either adequate sources of repayment or collateral, but have demonstrated mitigating factors that minimize the risk of delinquency or loss.

Grade 6 - Special Mention - Loans with underwriting guideline tolerances and/or exceptions and with no mitigating factors. Loans assigned to this category are currently protected but are potentially weak. While concerns exist, the Bank is currently protected and loss is unlikely. These loans constitute an undue and unwarranted credit risk but not to the point of justifying a classification of Substandard. They have potential weaknesses that may, if not checked or corrected, weaken the asset or inadequately protect the Bank’s credit position at some future date.

Grade 7 - Substandard - A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Loans in this category are characterized by deterioration in quality exhibited by any number of well-defined weaknesses requiring corrective action.

- 15 -

STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Loans (continued)

Credit Quality Information (continued)

Grade 8 - Doubtful - Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. The possibility for loss is high, but because of certain pending factors that may work to the advantage of the Bank, classification of a loss is deferred until a more exact status is determined.

Grade 9 - Loss - Loans classified Loss are considered uncollectable and of such little value that their continuance as assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be affected in the future.

The table below presents classes of outstanding loans by risk category:

Credit Quality Indicators

Credit Risk Profile by Creditworthiness Category by Class of Loan

For the Three Months Ended March 31, 2020

	Construction & Land Development		Multifamily		Commercial Real Estate		Commercial & Industrial		Agricultural		Farmland		One to Four Family Residential		Consumer		Other
Grade 1	$	—	$	—	$	—	$	5,837	$	20	$	—	$	210	$	5,653	$	—
Grade 2		—		—		52		14		—		—		—		—		—
Grade 3		9,663		1,005		34,141		16,801		840		9,116		12,949		4		—
Grade 4		49,895		12,957		271,807		29,816		4,020		45,105		169,790		15,481		1,787
Grade 5		46,816		1,867		88,959		7,115		10,258		11,905		19,405		—		—
Grade 6		—		6,938		2,855		135		—		293		5		—		—
Grade 7		262		94		860		69		38		1,474		3,169		59		—
Total	$	106,636	$	22,861	$	398,674	$	59,787	$	15,176	$	67,893	$	205,528	$	21,197	$	1,787

- 16 -

STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Loans (continued)

Credit Quality Information (continued)

The table below present classes of outstanding loans by risk category:

Credit Quality Indicators

Credit Risk Profile by Creditworthiness Category by Class of Loan

For the Year Ended December 31, 2019

	Construction & Land Development		Multifamily		Commercial Real Estate		Commercial & Industrial		Agricultural		Farmland		One to Four Family Residential		Consumer		Other
Grade 1	$	—	$	—	$	—	$	5,576	$	97	$	—	$	211	$	5,930	$	—
Grade 2		—		—		—		15		—		—		—		—		—
Grade 3		9,430		715		30,816		14,075		672		8,156		12,838		7		—
Grade 4		57,562		16,816		273,991		31,186		6,567		47,190		174,385		15,846		2,279
Grade 5		43,633		1,903		82,947		7,897		5,431		12,290		19,763		—		—
Grade 6		—		6,961		3,017		135		—		363		7		—		—
Grade 7		398		220		1,238		87		106		1,481		3,337		80		—
Total	$	111,023	$	26,615	$	392,009	$	58,971	$	12,873	$	69,480	$	210,541	$	21,863	$	2,279

- 17 -

STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Loans (continued)

Troubled Debt Restructurings

The following table includes loans modified as TDRs by portfolio class at March 31, 2020:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Construction & Land Development		2	$	573	$	183
Commercial Real Estate		1		207		141
Farmland		1		276		15
One to Four Family Residential		7		972		775
Total		11	$	2,028	$	1,114

The modification of the terms of such construction and land development loan included a reduction of loan payments and a stated rate of interest lower than the current market rate. The modification of the terms of such commercial real estate loan included an extension of the maturity date. The modification of the terms of the farmland loan included a modification in payment terms to principal only payments. The modification of the terms of such one to four family residential loans included an extension of the maturity date at a stated rate of interest lower than the current market rate, a modification in payment terms to interest only payments, extending the existing amortization, a 90-day waiver of principal payments and modification in payment terms in accordance with bankruptcy proceedings of borrowers.

The following table includes loans modified as TDRs by portfolio class at December 31, 2019:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial & Industrial		2	$	573	$	310
Commercial Real Estate		1		207		185
Farmland		1		276		15
One to Four Family Residential		8		1,045		836
Total		12	$	2,101	$	1,346

The modification of the terms of such construction and land development loan included a reduction of loan payments and a stated rate of interest lower than the current market rate. The modification of the terms of such commercial real estate loan included an extension of the maturity date. The modification of the terms of the farmland loan included a modification in payment terms to principal only payments. The modification of the terms of such one to four family residential loans included an extension of the maturity date at a stated rate of interest lower than the current market rate, a modification in payment terms to interest only payments, a 90-day waiver of principal payments and modification in payment terms in accordance with bankruptcy proceedings of borrowers.

- 18 -

STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Loans (continued)

Age Analysis of Past Due Loans by Class

Following are tables which includes an aging analysis of the recorded investment of past due loans as of March 31, 2020 and December 31, 2019.

Credit Quality Information

Age Analysis of Past Due Loans by Class of Loan

As of March 31, 2020

	Current		30-59 Days Past Due		60-89 Days Past Due		Greater than 90 days Past Due		Total Nonaccrual Loans		Total Receivables
Construction & land development	$	106,439	$	—	$	14	$	—	$	183	$	106,636
Multifamily		22,767		—		—		—		94		22,861
Commercial real estate		397,557		538		—		—		579		398,674
Commercial & industrial		59,467		312		6		—		2		59,787
Agricultural		15,138		—		—		—		38		15,176
Farmland		66,443		1,294		51		—		105		67,893
One to four family residential		203,320		466		—		—		1,742		205,528
Consumer		21,070		100		11		—		16		21,197
Other		1,787		—		—		—		—		1,787
Ending balance	$	893,988	$	2,710	$	82	$	—	$	2,759	$	899,539

Credit Quality Information

Age Analysis of Past Due Loans by Class of Loan

As of December 31, 2019

	Current		30-59 Days Past Due		60-89 Days Past Due		Greater than 90 days Past Due		Total Nonaccrual Loans		Total Receivables
Construction & land development	$	110,966	$	14	$	32	$	—	$	10	$	111,022
Multifamily		26,396		—		—		—		220		26,616
Commercial real estate		390,914		544		—		—		551		392,009
Commercial & industrial		58,801		108		48		—		13		58,970
Agricultural		12,767		—		—		—		106		12,873
Farmland		69,067		291		18		—		104		69,480
One to four family residential		207,684		1,066		126		—		1,665		210,541
Consumer		21,761		72		—		—		31		21,864
Other		2,279		—		—		—		—		2,279
Ending balance	$	900,635	$	2,095	$	224	$	—	$	2,700	$	905,654

- 19 -

STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Loans (continued)

Nonaccrual Loans

Generally, consumer loans not secured by real estate or autos are placed on nonaccrual status only when part of the principal has been charged off. These loans are charged off or charged down to the net realizable value of the collateral when deemed uncollectible, due to bankruptcy or other factors.

The Bank places a loan on nonaccrual status, until it qualifies for return to accrual status. Generally, the Bank returns a loan to accrual status when (a) all delinquent interest and principal become current under the terms of the loan agreement or (b) the loan is both well-secured and in the process of collection and collectability is no longer doubtful.

The Bank has determined that the entire balance of a loan is contractually delinquent for all classes if the minimum payment is not received by the specified due date on the borrower’s statement. Interest and fees continue to accrue on past due loans until the date the loan goes into nonaccrual status, if applicable.

Impaired Loans

The Bank considers a loan to be impaired when, based on current information and events, the Bank determines that the Bank will not be able to collect all amounts due according to the loan contract, including scheduled interest payments. Determination of impairment is treated the same across all classes of loans. When the Bank identifies a loan as impaired, the Bank measures the impairment based on the current fair value of the collateral, less selling costs when foreclosure is probable, instead of discounted cash flows. If the Bank determines that the value of the impaired loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), the Bank recognizes impairment through an allowance estimate or a charge-off to the allowance.

When the ultimate collectability of the total principal of an impaired loan is in doubt and the loan is on nonaccrual status, all payments are applied to principal, under the cost recovery method. When the ultimate collectability of the total principal of an impaired loan is not in doubt and the loan is on nonaccrual status, contractual interest is credited to interest income when received, under the cash basis method.

The amount of interest not accrued on impaired loans did not have a significant effect on earnings for the three months ended March 31, 2020 and the year ended December 31, 2019. The Bank is not committed to lend additional funds to debtors whose loans have been modified.

- 20 -

STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Loans (continued)

Impaired Loans (continued)

The following tables include the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable. The Bank determined the specific allowance based on the current fair value of the collateral, less selling costs.

Impaired loans information

Impaired loans by class with no related allowance recorded

As of March 31, 2020

	Recorded investment		Unpaid principal balance		Related allowance		Interest income recognized
Construction & land development	$	248	$	248	$	—	$	—
Multifamily		94		94		—		—
Commercial real estate		834		832		—		2
Commercial & industrial		19		18		—		1
Agricultural		38		38		—		—
Farmland		1,436		1,423		—		12
One to four family residential		2,580		2,576		—		4
Consumer		26		26		—		—
Ending Balance	$	5,275	$	5,255	$	—	$	19

Impaired loans information

Impaired loans by class with an allowance recorded

As of March 31, 2020

	Recorded investment		Unpaid principal balance		Related allowance		Interest income recognized
Construction & land development	$	14	$	14	$	6	$	—
Multifamily		—		—		—		—
Commercial real estate		28		28		4		—
Commercial & industrial		54		54		54		—
Agricultural		—		—		—		—
Farmland		51		51		8		—
One to four family residential		647		647		184		2
Consumer		34		33		16		—
Ending Balance	$	828	$	827	$	272	$	2

- 21 -

STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Loans (continued)

Impaired Loans (continued)

Impaired loans information

Impaired loans by class with no related allowance recorded

As of December 31, 2019

	Recorded investment		Unpaid principal balance		Related allowance		Interest income recognized
Construction & land development	$	76	$	76	$	—	$	1
Multifamily		—		—		—		—
Commercial real estate		738		737		—		1
Commercial & industrial		23		22		—		1
Agricultural		—		—		—		—
Farmland		1,439		1,428		—		10
One to four family residential		2,200		2,195		—		6
Consumer		39		39		—		—
Ending Balance	$	4,515	$	4,497	$	—	$	19

Impaired loans information

Impaired loans by class with an allowance recorded

As of December 31, 2019

	Recorded investment		Unpaid principal balance		Related allowance		Interest income recognized
Construction & land development	$	324	$	323	$	131	$	1
Multifamily		220		220		104		—
Commercial real estate		761		760		152		1
Commercial & industrial		68		68		64		—
Agricultural		105		105		3		—
Farmland		53		53		10		—
One to four family residential		1,144		1,142		321		2
Consumer		41		41		21		—
Ending Balance	$	2,716	$	2,712	$	806	$	4

- 22 -

STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Loans (continued)

In the ordinary course of business, the Bank makes loans to its (and the Company’s) executive officers and directors and to companies in which these officers and directors are principal owners. In the opinion of management, these loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons.

The following is a summary of loans made to such borrowers at March 31, 2020 and December 31, 2019.

	2020			2019
Beginning balance	$	519		$	603
Advances		10			212
Repayments		(184	)		(296	)
Ending balance	$	345		$	519

The Bank had loan commitments to these related parties of $1,785 at March 31, 2020 and at December 31, 2019.

- 23 -

STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Regulatory Capital and Dividend Restrictions

The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions, by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the maintenance of minimum amounts and ratios of Total Capital, Tier I Capital and Common Equity Tier 1 Capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I Capital (as defined) to average assets (as defined). Management believes, as of March 31, 2020 and December 31, 2019, that all capital adequacy requirements have been met.

The most recent notification by the Federal Deposit Insurance Company, as of December 31, 2019 categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To remain as well capitalized the Bank must maintain the ratios as set forth in the following tables. There are no conditions or events since that notification that management believes have changed the institution’s category.

- 24 -

STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Regulatory Capital and Dividend Restrictions (continued)

The Company’s and Bank’s actual capital amounts and ratios as of March 31, 2020 and December 31, 2019, were as set forth in the following tables.

	Actual					Minimum Capital					Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
March 31, 2020:
Company:
Total capital (to risk weighted assets)	$	103,631		11.0	%	$	75,684		8.0	%		Not applicable
Tier I capital (to risk weighted assets)		96,349		10.2	%		56,763		6.0	%		Not applicable
Tier I capital (to average assets)		96,349		8.4	%		45,699		4.0	%		Not applicable
Common Equity Tier 1 capital (to risk weighted assets)		81,350		8.6	%		42,572		4.5	%		Not applicable
Bank:
Total capital (to risk weighted assets)	$	106,652		11.3	%	$	75,626		8.0	%	$	94,533		10.0	%
Tier I capital (to risk weighted assets)		99,370		10.5	%		56,720		6.0	%		75,626		8.0	%
Tier I capital (to average assets)		99,370		8.7	%		45,671		4.0	%		57,088		5.0	%
Common Equity Tier 1 capital (to risk weighted assets)		99,370		10.5	%		42,540		4.5	%		61,446		6.5	%
December 31, 2019:
Company:
Total capital (to risk weighted assets)	$	109,962		11.8	%	$	74,810		8.0	%		Not applicable
Tier I capital (to risk weighted assets)		102,064		10.9	%		56,107		6.0	%		Not applicable
Tier I capital (to average assets)		102,064		9.1	%		44,928		4.0	%		Not applicable
Common Equity Tier 1 capital (to risk weighted assets)		87,019		9.3	%		42,080		4.5	%		Not applicable
Bank:
Total capital (to risk weighted assets)	$	112,502		12.1	%	$	74,518		8.0	%	$	93,148		10.0	%
Tier I capital (to risk weighted assets)		104,604		11.2	%		55,889		6.0	%		74,518		8.0	%
Tier I capital (to average assets)		104,604		9.3	%		44,782		4.0	%		55,978		5.0	%
Common Equity Tier 1 capital (to risk weighted assets)		104,558		11.2	%		41,916		4.5	%		60,546		6.5	%

Dividends paid by the Bank are the primary source of funds available to the Company for payment of dividends to its shareholders and other cash needs. Applicable Federal and State statutes and regulations impose restrictions on the amounts of dividends that may be declared by the Bank. In addition to the formal statutes and regulations, regulatory authorities also consider the adequacy of the Bank’s total capital in relation to its assets, deposits and other such items and, as a result, capital adequacy considerations could further limit the availability of dividends from the Bank. The ability of the Company to pay dividends on its common stock is restricted by state banking laws, the FDIA, and FDIC regulations.

- 25 -

STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Fair Value of Financial Instruments

In accordance with the Fair Value Measurements and Disclosure topic of the FASB ASC, disclosure of fair value information about financial instruments, whether or not recognized in the balance sheets, is required. Fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instruments. Therefore, the aggregate fair value amounts presented do not represent the underlying value of the Company.

The fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

Fair Value Hierarchy

In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1 - Valuation is based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 - Valuation is based on inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly. The valuation may be based on 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 asset or liability.

Level 3 - Valuation is based on 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 determination of fair value requires significant management judgment or estimation.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:

- 26 -

STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Fair Value Instruments (continued)

Investments and mortgage-backed securities - Where quoted prices are available in an active market, we classify the securities within level 1 of the valuation hierarchy. Securities are defined as both long and short positions. Level 1 securities include highly liquid government bonds and exchange-traded equities.

If quoted market prices are not available, we estimate fair values using pricing models and discounted cash flows that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, and credit spreads. Examples of such instruments, which would generally be classified within level 2 of the valuation hierarchy, include GSE obligations, corporate bonds, and other securities. Mortgage-backed securities are included in level 2 if observable inputs are available. In certain cases where there is limited activity or less transparency around inputs to the valuation, we classify those securities in level 3.

Cash and due from banks and interest-bearing deposits in other banks - For those short-term instruments, the carrying amount is a reasonable estimate of fair value.

Federal funds sold/purchased and securities sold under repurchase agreements - The carrying amount approximates fair value.

Loans - For variable-rate loans that re-price frequently and with no significant change in credit risk, fair value is based on carrying values. Fair values for certain mortgage loans (for example, one-to-four family residential), credit card loans, and other consumer loans are based on quoted market prices of similar sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. Fair values for other loans (for example, commercial real estate and investment property mortgage loans, commercial and industrial loans) are estimated using discounted cash flow analyses, using market interest rates for comparable loans. Fair values for nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

Deposit liabilities - The fair values disclosed for demand deposits (for example, interest and noninterest checking, pass book savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates on comparable instruments to a schedule of aggregated expected monthly maturities on time deposits.

Short-term borrowings - The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings maturing within ninety days approximate their fair values. Fair values of other short-term borrowings are estimated using discounted cash flow analyses based on current market rates for similar types of borrowing arrangements.

Accrued interest - The carrying amounts of accrued interest approximate fair value.

Notes payable - The fair value of advances from the FHLB are based on the discounted value of contractual cash flows, using current rates for discounting purposes.

Subordinated debentures payable to subsidiary trusts - The fair value of these instruments is based on the discounted value of contractual cash flows, using current rates for discounting purposes.

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STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Fair Value Instruments (continued)

Commitments to extend credit - Fair values for such commitments are typically based on fees currently charted to enter into similar agreements, taking into account the remaining terms of the agreements and the parties’ credit standing. Due to the effort and difficulty in implementing a valuation mode necessary to estimate the fair value of commitments to extend credit, the Bank does not consider this disclosure to be practicable. However, in the opinion of management, the fair value of commitments to extend credit would not be material.

Fair Value of Assets Measured on a Recurring Basis

The Company’s securities are measured on a recurring basis through a model used by the investment custodian. Many of the bond price adjustments meet level 2 criteria. Prices are derived from a model which uses actively quoted rates, prepayment models and other underlying credit and collateral data.

The Company’s interest rate swap is measured on a recurring basis through methodology utilized by our swap accounting provider. This valuation meets level 2 criteria. Prices are derived by the model which uses actively quoted market rates, prepayment projections and other underlying credit and collateral data that is observable by market participants.

The following table presents for each of the fair-value hierarchy level the Company’s financial assets and liabilities that are measured at fair value (in thousands) on a recurring basis at March 31, 2020 and December 31, 2019.

	Level 1		Level 2		Level 3
March 31, 2020:
U.S. Government agencies	$	—	$	10,270	$	—
Mortgage-backed investments		—		67,224		—
State and political subdivisions		—		5,559		—
Corporat obligations		—		15,017		—
	$	—	$	98,070	$	—
December 31, 2019:
U.S. Government agencies	$	—	$	12,535	$	—
Mortgage-backed investments		—		70,676		—
State and political subdivisions		—		5,545		—
Corporat obligations				15,963
	$	—	$	104,719	$	—

Fair Value Assets Measured on a Nonrecurring Basis

Certain assets are measured at fair value on a non-recurring basis and therefore are not included in the table above. Impaired loans are level 2 assets measured using appraisals from external parties of the collateral less any prior liens and the estimated cost of holding and selling the collateral. The Bank did not record any liabilities

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STATE CAPITAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars In Thousands, Except Share Data)

Fair Value Instruments (continued)

at fair value for which measurement of the fair value was made on a nonrecurring basis during the three months ended March 31, 2020 and the year ended December 31, 2019.

The estimated fair values of the Company’s financial instruments at March 31, 2020, were as follows:

	Carrying Amount		Fair Value
Financial assets:
Cash and due from banks and interest bearing deposits in other banks	$	75,314	$	75,314
Securities available-for-sale		98,070		98,070
Loans , net of allowances for loan losses		892,258		890,085
Accrued interest receivable		3,665		3,665
Financial liabilities:
Noninterest bearing deposits		139,347		139,347
Interest bearing deposits		876,567		808,649
Short term borrowings and notes payable		13,979		13,684
Debentures		15,465		15,465
Interest payable		2,859		2,859

The estimated fair values of the Company’s financial instruments at December 31, 2019, were as follows:

	Carrying Amount		Fair Value
Financial assets:
Cash and due from banks and interest bearing deposits in other banks	$	47,518	$	47,518
Securities available-for-sale		104,719		104,719
Loans , net of allowances for loan losses		897,767		899,636
Accrued interest receivable		3,830		3,830
Financial liabilities:
Noninterest bearing deposits		130,238		130,238
Interest bearing deposits		868,077		820,764
Short term borrowings and notes payable		15,366		15,426
Debentures		15,465		15,465
Interest payable		2,807		2,807

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