Carolina Trust BancShares, Inc. (Form: 8-K/A, Received: 03/19/2019 17:02:34)

Exhibit 99.2

Clover Community Bankshares, Inc.

and Subsidiary

Unaudited Consolidated Interim Financial Statements

As of September 30, 2018 (Unaudited) and December 31, 2017

Clover Community Bankshares, Inc. and Subsidiary

Contents

		Page

Unaudited Consolidated Interim Financial Statements

	Consolidated Balance Sheets as of September 30, 2018 (Unaudited) and December 31, 2017	1

	Consolidated Statements of Operations for the nine months ended September 30, 2018 and 2017 (Unaudited)	2

	Consolidated Statements of Comprehensive Income for the nine months ended September 30, 2018 and 2017 (Unaudited)	3

	Consolidated Statements of Changes in Shareholders’ Equity for the nine months ended September 30, 2018 and 2017 (Unaudited)	4

	Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017 (Unaudited)	5-6

	Notes to Unaudited Consolidated Interim Financial Statements	7-20

Unaudited Consolidated Interim Financial Statements

Clover Community Bankshares, Inc. and Subsidiary

Consolidated Balance Sheets

	September 30, 2018			December 31, 2017
	(Unaudited)
Assets
Cash and cash equivalents:
Cash and due from banks	$	6,723,247		$	5,673,434
Interest-earning deposits in other banks		1,399,487			765,153
Federal funds sold		2,673,825			679,628
Total cash and cash equivalents		10,796,559			7,118,215
Bank term deposits		4,790,512			2,964,947
Investment securities:
Securities available for sale		37,829,398			38,082,932
Securities held to maturity		1,000,000			1,000,000
Nonmarketable equity securities		182,200			181,400
Total investment securities		39,011,598			39,264,332
Loans receivable		68,736,442			72,018,997
Less allowance for loan losses		(1,332,205	)		(1,352,371	)
Loans receivable, net		67,404,237			70,666,626
Premises, furniture and equipment, net		1,915,952			1,925,049
Accrued interest receivable		481,030			556,574
Other real estate owned		960,210			1,217,705
Bank owned life insurance		3,486,907			3,426,268
Other assets		668,255			668,340
Total assets	$	129,515,260		$	127,808,056

Liabilities
Deposits:
Noninterest-bearing	$	32,312,155		$	25,728,458
Interest-bearing		82,665,666			87,040,046
Total deposits		114,977,821			112,768,504
Accrued interest payable		25,465			50,528
Note payable		111,675			436,705
Other liabilities		1,015,023			1,109,181
Total liabilities		116,129,984			114,364,918

Shareholders' Equity
Series A Preferred stock, no par value; 10,000,000 shares authorized; 113,125 shares issued and outstanding		1,131			1,131
Common stock, par value $.01 per share, 10,000,000 shares authorized; 863,776 shares issued and outstanding		8,638			8,638
Capital surplus		2,683,888			2,683,888
Retained earnings		11,441,659			10,635,552
Accumulated other comprehensive income (loss)		(750,040	)		113,929
Total shareholders' equity		13,385,276			13,443,138
Total liabilities and shareholders' equity	$	129,515,260		$	127,808,056

See Notes to Consolidated Financial Statements

Clover Community Bankshares, Inc. and Subsidiary

Consolidated Statements of Operations (Unaudited)

For the nine months ended September 30, 2018 and 2017

	2018			2017
Interest income
Loans, including fees	$	2,952,565		$	3,164,056
Investment securities:
Taxable		364,783			351,612
Tax-exempt		364,225			336,261
Nonmarketable equity securities		57,393			59,753
Bank term and interest-earning deposits		117,250			73,829
Federal funds sold		36,742			13,539
Total interest income		3,892,958			3,999,050

Interest expense
Deposits		125,641			114,026
Other borrowed funds		10,989			37,035
Total interest expense		136,630			151,061
Net interest income		3,756,328			3,847,989

Provision for loan losses		-			-

Net interest income after provision for loan losses		3,756,328			3,847,989

Noninterest income
Service charges on deposit accounts		806,417			828,790
Gain on sale of securities available for sale		-			51,585
Other income		85,786			123,337
Total noninterest income		867,403			1,003,712

Noninterest expense
Salaries and employee benefits		1,962,032			1,963,636
Net occupancy		146,242			154,701
Furniture and equipment		317,797			297,176
Printing, postage and stationery		86,703			77,785
Professional services		270,341			110,036
Data processing		161,822			190,394
ATM/Debit card		259,974			241,006
Directors’ fees		57,600			59,250
Net (gain) loss on sales of other real estate owned		(90,860	)		-
Net cost of operation of other real estate owned		(3,352	)		19,996
Other operating		486,119			529,346
Total noninterest expense		3,632,970			3,623,330

Income before income taxes		990,761			1,228,371
Income tax expense		184,654			305,158

Net Income		806,107			923,213
Preferred stock dividends		-			-
Net income available to common shareholders	$	806,107		$	923,213

Earnings per common share
Weighted average number of common shares outstanding		863,776			863,776
Earnings per common share	$	0.93		$	1.07

See Notes to Consolidated Financial Statements

Clover Community Bankshares, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income (Unaudited)

For the nine months ended September 30, 2018 and 2017

	2018			2017

Net Income	$	806,107		$	923,213
Other comprehensive income (loss)
Investment securities available for sale:
Unrealized holding gains (losses)		(1,150,617	)		469,301
Tax effect		286,648			(168,949	)
Reclassification of gains recognized in net income		-			(51,585	)
Tax effect		-			18,571
Other comprehensive income (loss)		(863,969	)		267,338
Comprehensive income (loss)	$	(57,862	)	$	1,190,551

See Notes to Consolidated Financial Statements

Clover Community Bankshares, Inc. and Subsidiary

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

For the nine months ended September 30, 2018 and 2017

	Series A Preferred Stock		Common Stock		Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total

Balance, December 31, 2016	$	1,131	$	8,638	$	2,683,888	$	9,917,207	$	(9,961	)	$	12,600,903
Net income		-		-		-		923,213		-			923,213
Other comprehensive income		-		-		-		-		267,338			267,338
Balance, September 30, 2017	$	1,131	$	8,638	$	2,683,888	$	10,840,420	$	257,377		$	13,791,454

Balance, December 31, 2017	$	1,131	$	8,638	$	2,683,888	$	10,635,552	$	113,929		$	13,443,138
Net income		-		-		-		806,107		-			806,107
Other comprehensive loss		-		-		-		-		(863,969	)		(863,969	)
Balance, September 30, 2018	$	1,131	$	8,638	$	2,683,888	$	11,441,659	$	(750,040	)	$	13,385,276

See Notes to Consolidated Financial Statements

Clover Community Bankshares, Inc. and Subsidiary

Consolidated Statements of Cash Flows (Unaudited)

For the nine months ended September 30, 2018 and 2017

	2018			2017
Cash flows from operating activities:
Net income	$	806,107		$	923,213
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		98,709			110,911
Decrease (increase) in deferred loan fees and costs, net		(3,674	)		4,545
Discount accretion and premium amortization, net		221,549			224,810
Decrease in deferred income tax expense		24,214			-
Gain on sale of securities available for sale		-			(51,585	)
Gain on sale of other real estate owned		(90,860	)		-
Increase in bank owned life insurance		(60,639	)		(64,420	)
Write-downs of other real estate owned		-			1,000
Decrease in accrued interest receivable		75,544			18,805
Increase (decrease) in accrued interest payable		(25,063	)		16,348
Increase in other assets		(24,129	)		(48,011	)
Increase in other liabilities		192,490			160,502
Net cash provided by operating activities		1,214,248			1,296,118
Cash flows from investing activities:
Decrease (increase) in bank term deposits		(1,825,565	)		2,610,193
Purchases of securities available for sale		(2,968,871	)		(3,844,906	)
Purchase of non-marketable equity securities		(800	)		800
Proceeds from maturities, calls, and principal repayments of securities available for sale		1,850,239			1,701,137
Proceeds from sale of available for sale securities		-			3,264,938
Net decrease (increase) in loans made to customers		3,266,063			(2,285,005	)
Proceeds from sale of other real estate owned		348,355			-
Purchase of premises, furniture and equipment		(89,612	)		(11,031	)
Net cash provided by investing activities		579,809			1,436,126
Cash flows from financing activities:
Net increase in deposits		2,209,317			5,934,168
Net decrease in federal funds purchased		-			(806,542	)
Repayment of note payable		(325,030	)		(310,925	)
Net cash provided by financing activities		1,884,287			4,816,701
Net increase in cash and cash equivalents		3,678,344			7,548,945
Cash and cash equivalents:
Beginning of period		7,118,215			3,025,617
End of period	$	10,796,559		$	10,574,562

See Notes to Consolidated Financial Statements

Clover Community Bankshares, Inc. and Subsidiary

Consolidated Statements of Cash Flows (Unaudited)

For the nine months ended September 30, 2018 and 2017

Cash paid during the period for
Interest	$	161,693		$	134,713
Income taxes	$	106,500		$	457,000

Supplemental disclosures of noncash investing and financing activities
Change in unrealized gain (loss) on securities available for sale, net of tax	$	(863,969	)	$	267,338

See Notes to Consolidated Financial Statements

Clover Community Bankshares, Inc. and Subsidiary

Notes to Unaudited Consolidated Interim Financial Statements

Note 1.

Nature of Business and Basis of Presentation

Summary of significant accounting principles:

A summary of significant accounting principles is included in the Clover Community Bankshares, Inc. and Subsidiary’s (the “Company”) 2017 audited consolidated financial statements, which were filed as part of Amendment No. 1 to the Registration Statement on Form S-4 (File No. 333-227302) filed by Carolina Trust BancShares, Inc. with the Securities and Exchange Commission on October 24, 2018.

Principles of consolidation and basis of presentation:

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Clover Community Bank (the “Bank”) after elimination of all significant intercompany balances and transactions.

Management opinion:

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) and are unaudited. They do not contain all of the disclosures required for annual audited financial statements. In the opinion of management, all adjustments necessary to present a fair statement of the results for the interim period have been made. Such adjustments are of a normal and recurring nature. The results of operations for any interim period are not necessarily indicative of the results to be expected for an entire year. These interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements and notes thereto contained in the Company’s consolidated financial statements.

Use of estimates:

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as well as amounts of income and expenses during the reporting period. Actual results could differ significantly from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for losses on loans, including valuation allowances for impaired loans, and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the allowances for losses on loans and foreclosed real estate, management obtains independent appraisals for significant properties. Management must also make estimates in determining the estimated useful lives and methods for depreciating premises and equipment.

While management uses available information to recognize losses on loans and foreclosed real estate, future additions to the allowances may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowances for losses on loans and foreclosed real estate. Such agencies may require the Company to recognize additions to the allowances based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the allowances for losses on loans and foreclosed real estate may change materially in the near term.

Clover Community Bankshares, Inc. and Subsidiary

Notes to Unaudited Consolidated Interim Financial Statements

Note 1.

Nature of Business and Basis of Presentation, Continued

Subsequent events:

In accordance with the accounting standard regarding subsequent events, management performed an evaluation to determine whether or not there have been any subsequent events since the balance sheet date that would be required to be included in these consolidated financial statements. See Note 10 for more information regarding subsequent events.

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 times, or on different bases, than its interest-earning assets. Credit risk is the risk of default on the Company's loan and investment securities portfolios that results from a borrower's 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.

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 further changes with respect to asset valuations, amounts of required loss allowances and operating restrictions from the regulators' judgments based on information available to them at the time of their examination.

Concentrations of credit risk:

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of loans receivable, investment securities, federal funds sold and amounts due from banks.

The Company makes loans to individuals and small businesses for various personal and commercial purposes primarily in the upstate region of South Carolina. The Company’s loan portfolio is not concentrated in loans to any single borrower or a relatively small number of borrowers. Additionally, management is not aware of any concentrations of loans to classes of borrowers or industries that would be similarly affected by economic conditions.

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. Management has determined that there is no concentration of credit risk associated with its lending policies or practices. 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). These loans are underwritten and monitored to manage the associated risks. Therefore, management believes that these particular practices do not subject the Company to unusual credit risk.

Clover Community Bankshares, Inc. and Subsidiary

Notes to Unaudited Consolidated Interim Financial Statements

Note 1.

Nature of Business and Basis of Presentation , Continued

Concentrations of credit risk, continued:

The Company’s investment portfolio consists principally of obligations of the United States, its agencies or its corporations and general obligation municipal securities. In the opinion of management, there is no concentration of credit risk in its investment portfolio. The Company places its deposits and correspondent accounts with and sells its federal funds to high quality institutions. Management believes credit risk associated with correspondent accounts is not significant.

Note 2.

Securities Available for Sale

The amortized cost and estimated fair values of securities available for sale at September 30, 2018 and December 31, 2017 were as follows:

	Amortized		Gross unrealized					Estimated
	cost		Gains		Losses			fair value
September 30, 2018
Government-sponsored enterprises	$	10,480,205	$	2,050	$	(440,320	)	$	10,041,935
State, county and municipal		17,849,385		325,414		(421,131	)		17,753,668
Mortgage-backed securities		10,499,415		-		(465,620	)		10,033,795
Total	$	38,829,005	$	327,464	$	(1,327,071	)	$	37,829,398

	Amortized		Gross unrealized					Estimated
	cost		Gains		Losses			fair value
December 31, 2017
Government-sponsored enterprises	$	11,466,804	$	19,192	$	(172,361	)	$	11,313,635
State, county and municipal		17,968,660		611,252		(163,335	)		18,416,577
Mortgage-backed securities		8,496,458		1,014		(144,752	)		8,352,720
Total	$	37,931,922	$	631,458	$	(480,448	)	$	38,082,932

The following tables present gross unrealized losses and related fair values, aggregated by investment category, and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2018 and December 31, 2017.

	Less than twelve months				Twelve months or more				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
September 30, 2018
Government sponsored enterprises	$	2,973,894	$	50,690	$	6,365,232	$	389,630	$	9,339,126	$	440,320
State, county and municipal		5,530,919		143,422		3,569,301		277,709		9,100,220		421,131
Mortgage-backed securities		4,378,477		111,661		5,562,139		353,959		9,940,616		465,620
Total	$	12,883,290	$	305,773	$	15,496,672	$	1,021,298	$	28,379,962	$	1,327,071

Clover Community Bankshares, Inc. and Subsidiary

Notes to Unaudited Consolidated Interim Financial Statements

Note 2.

Securities Available for Sale, Continued

	Less than twelve months				Twelve months or more				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
December 31, 2017
Government-sponsored enterprises	$	2,362,666	$	13,282	$	6,203,803	$	159,079	$	8,566,469	$	172,361
State, county and municipal		507,488		1,890		3,707,634		161,445		4,215,122		163,335
Mortgage-backed securities		4,280,701		36,285		3,759,318		108,467		8,040,019		144,752
Total	$	7,150,855	$	51,457	$	13,670,755	$	428,991	$	20,821,610	$	480,448

Securities classified as available for sale are recorded at fair market value. The Company believes that the deterioration in value is attributable to changes in market interest rates and not in credit quality and considers these losses to be temporary. The Company has the ability and intent to hold these securities until such time as the value recovers.

There were twenty-eight government-sponsored enterprises, twenty-two state, county and municipal, and thirty-one mortgage-backed securities in an unrealized loss position at September 30, 2018, and twenty-two government-sponsored enterprises, ten state, county and municipal, and twenty-four mortgage-backed securities in an unrealized loss position at December 31, 2017.

At September 30, 2018 and December 31, 2017, the Company had one corporate bond with an amortized cost and fair value of $1,000,000 classified as held to maturity. The security matures in August 2026.

The amortized cost and fair value of securities available for sale by contractual maturity at September 30, 2018 are as follows. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

	Amortized Cost		Estimated Fair Value

Due in less than one year	$	3,354,576	$	3,346,473
Due after one through five years		11,600,322		11,684,724
Due after five through ten years		11,839,588		11,204,823
Due after ten years		1,535,104		1,559,583
Mortgage-backed securities		10,499,415		10,033,795
Total	$	38,829,005	$	37,829,398

At September 30, 2018 and December 31, 2017, securities with a carrying amount of $6,052,254 and $7,758,186, respectively, were pledged as collateral to secure public deposits.

During the nine months ended September 30, 2018, no securities were sold. During the nine months ended September 30, 2017, gross proceeds from the sale of securities were $3,264,938. For the nine months ended September 30, 2017, gross realized gains amounted to $62,132 and gross realized losses amounted to $10,547.

Clover Community Bankshares, Inc. and Subsidiary

Notes to Unaudited Consolidated Interim Financial Statements

Note 3.

Nonmarketable Equity Securities

Nonmarketable equity securities at September 30, 2018 and December 31, 2017 consist of:

	2018		2017

Federal Home Loan Bank (FHLB) stock	$	115,100	$	114,300
Community Bankers’ Bank Stock		67,100		67,100
Total	$	182,200	$	181,400

The Bank, as a member institution, is required to own certain stock investments in the FHLB. The FHLB stock is generally pledged against any borrowings from the FHLB. No ready market exists for the FHLB stock and it has no quoted market value; however, redemption of this stock has historically been at par value.

Note 4.

Loans Receivable and Allowance for Loan Losses

Major classifications of loans receivable at September 30, 2018 and December 31, 2017 are summarized as follows:

	2018			2017
Commercial and industrial	$	6,251,777		$	7,627,155
Real estate:
Construction		5,545,395			6,201,105
Mortgage - residential		17,403,068			19,226,155
Mortgage - commercial		32,053,403			30,502,195
Consumer and other		7,409,724			8,373,648
Gross loans		68,663,367			71,930,258
Deferred costs, net		73,075			88,739
Less allowance for loan losses		(1,332,205	)		(1,352,371	)
Loans, net	$	67,404,237		$	70,666,626

Clover Community Bankshares, Inc. and Subsidiary

Notes to Unaudited Consolidated Interim

Note 4.

Loans Receivable and Allowance for Loan Losses, Continued

The following tables summarize activity related to the allowance for loan losses for the nine months ended September 30, 2018 and for the year ended December 31, 2017, as well as the composition and information relative to impaired loans, by portfolio segment, as of September 30, 2018 and December 31, 2017:

	For the nine months ended September 30, 2018
	Commercial & Industrial			Real Estate Construction			Real Estate Mortgage - Residential			Real Estate Mortgage - Commercial		Consumer and Other			Total
Allowance for loan losses:
Beginning balance
December 31, 2017	$	91,202		$	271,288		$	241,436		$	648,867	$	99,578		$	1,352,371
Charge-offs		-			-			(27,628	)		-		(3,038	)		(30,666	)
Recoveries		-			-			10,000			-		500			10,500
Provisions		(38,767	)		(22,799	)		(975	)		79,263		(16,722	)		-
Ending balance September 30, 2018	$	52,435		$	248,489		$	222,833		$	728,130	$	80,318		$	1,332,205
Ending balances:
Individually evaluated for impairment	$	-		$	-		$	4,255		$	415,063	$	1,039		$	420,357
Collectively evaluated for impairment	$	52,435		$	248,489		$	218,578		$	313,067	$	79,279		$	911,848
Loans receivable:
Ending balance - total	$	6,251,777		$	5,545,395		$	17,403,068		$	32,053,403	$	7,409,724		$	68,663,367
Ending balances:
Individually evaluated for impairment	$	1,107,430		$	-		$	1,236,473		$	2,752,644	$	101,601		$	5,198,148
Collectively evaluated for impairment	$	5,144,347		$	5,545,395		$	16,166,595		$	29,300,759	$	7,308,123		$	63,465,219

Clover Community Bankshares, Inc. and Subsidiary

Notes to Unaudited Consolidated Interim Financial Statements

Note 4.

Loans Receivable and Allowance for Loan Losses, Continued

	For the year ended December 31, 2017
	Commercial & Industrial			Real Estate Construction			Real Estate Mortgage - Residential			Real Estate Mortgage - Commercial		Consumer and Other			Total
Allowance for loan losses:
Beginning balance
December 31, 2016	$	107,993		$	314,973		$	378,000		$	430,232	$	82,223		$	1,313,421
Charge-offs		-			-			-			-		(1,517	)		(1,517	)
Recoveries		-			40,000			400			-		67			40,467
Provisions		(16,791	)		(83,685	)		(136,964	)		218,635		18,805			-
Ending balance
December 31, 2017	$	91,202		$	271,288		$	241,436		$	648,867	$	99,578		$	1,352,371
Ending balances:
Individually evaluated for impairment	$	1,990		$	-		$	9,656		$	346,101	$	1,473		$	359,220
Collectively evaluated for impairment	$	89,212		$	271,288		$	231,780		$	302,766	$	98,105		$	993,151
Loans receivable:
Ending balance - total	$	7,627,155		$	6,201,105		$	19,226,155		$	30,502,195	$	8,373,648		$	71,930,258
Ending balances:
Individually evaluated for impairment	$	59,617		$	-		$	949,555		$	2,819,417	$	95,272		$	3,923,861
Collectively evaluated for impairment	$	7,567,538		$	6,201,105		$	18,276,600		$	27,682,778	$	8,278,376		$	68,006,397

Clover Community Bankshares, Inc. and Subsidiary

Notes to Unaudited Consolidated Interim Financial Statements

Note 4.

Loans Receivable and Allowance for Loan Losses, Continued

The following tables, by loan category, present at September 30, 2018 and December 31, 2017 loans individually evaluated and considered impaired. These tables include performing troubled debt restructurings.

September 30, 2018	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no allowance recorded:
Commercial and industrial	$	1,107,430	$	1,107,430	$	-	$	1,384,606	$	53,715
Real estate:
Construction		-		-		-		-		-
Mortgage-residential		650,602		650,602		-		658,003		22,228
Mortgage-commercial		1,279,079		1,279,079		-		1,317,362		7,425
Consumer and other		21,161		21,161		-		22,436		598
		3,058,272		3,058,272		-		3,382,407		83,966
With an allowance recorded:
Commercial and industrial		-		-		-		-		-
Real estate:
Construction		-		-		-		-		-
Mortgage-residential		585,871		585,871		4,255		591,420		24,564
Mortgage-commercial		1,473,565		1,473,565		415,063		1,477,245		22,811
Consumer and other		80,440		80,440		1,039		86,703		4,668
		2,139,876		2,139,876		420,357		2,155,368		52,043
Total:
Commercial and industrial		1,107,430		1,107,430		-		1,384,606		53,715
Real estate:
Construction		-		-		-		-		-
Mortgage-residential		1,236,473		1,236,473		4,255		1,249,423		46,792
Mortgage-commercial		2,752,644		2,752,644		415,063		2,794,607		30,236
Consumer and other		101,601		101,601		1,039		109,139		5,266
	$	5,198,148	$	5,198,148	$	420,357	$	5,537,775	$	136,009

Clover Community Bankshares, Inc. and Subsidiary

Notes to Unaudited Consolidated Interim Financial Statements

Note 4.

Loans Receivable and Allowance for Loan Losses, Continued

December 31, 2017	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no allowance recorded:
Commercial and industrial	$	40,842	$	40,842	$	-	$	51,919	$	3,816
Real estate:
Construction		-		-		-		-		-
Mortgage-residential		108,418		108,418		-		113,922		4,825
Mortgage-commercial		1,803,316		1,803,316		-		1,842,022		97,024
Consumer and other		-		-		-		-		-
		1,952,576		1,952,576		-		2,007,863		105,665
With an allowance recorded:
Commercial and industrial		18,775		18,775		1,990		20,614		-
Real estate:
Construction		-		-		-		-		-
Mortgage-residential		841,137		841,137		9,656		849,539		47,620
Mortgage-commercial		1,016,101		1,016,101		346,101		1,010,421		42,779
Consumer and other		95,272		95,272		1,473		103,488		7,572
		1,971,285		1,971,285		359,220		1,984,062		97,971
Total:
Commercial and industrial		59,617		59,617		1,990		72,533		3,816
Real estate:
Construction		-		-		-		-		-
Mortgage-residential		949,555		949,555		9,656		963,461		52,445
Mortgage-commercial		2,819,417		2,819,417		346,101		2,852,443		139,803
Consumer and other		95,272		95,272		1,473		103,488		7,572
	$	3,923,861	$	3,923,861	$	359,220	$	3,991,925	$	203,636

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on at least a quarterly basis. The Company uses the following definitions for risk ratings:

Clover Community Bankshares, Inc. and Subsidiary

Notes to Unaudited Consolidated Interim Financial Statements

Note 4.

Loans Receivable and Allowance for Loan Losses, Continued

Loans classified as Watch are fundamentally sound but exhibit some credit deficiency or special circumstances that warrant special attention of management. Normally the factors contributing to this classification are considered temporary, less than twelve months in duration. Loans classified as Special Mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Loans classified as Substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution may sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard, with 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. Loans classified as Loss are considered uncollectible and the continuance as an active bank asset is not justified. The loss element can be determined with a considerable degree of certainty both as to the nature and the amount. The determined loss amount should be charged off. Also included would be any value of the loan which exceeds the market value of the underlying collateral as established by an appraisal or other independent valuation method.

Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be Pass rated loans. As of September 30, 2018 and December 31, 2017, and based on the most recent analysis performed, the risk category of loans by class of loans is shown in the table below.

September 30, 2018	Pass		Watch		Special Mention		Substandard		Doubtful		Loss		Total
Commercial and industrial	$	5,167,617	$	-	$	-	$	1,084,160	$	-	$	-	$	6,251,777
Real estate:
Construction		5,545,395		-		-		-		-		-		5,545,395
Mortgage-residential		16,752,466		61,423		-		589,179		-		-		17,403,068
Mortgage-commercial		29,419,811		441,321		-		2,192,271		-		-		32,053,403
Consumer and other		7,378,285		31,439		-		-		-		-		7,409,724
Total	$	64,263,574	$	534,183	$	-	$	3,865,610	$	-	$	-	$	68,663,367
December 31, 2017	Pass		Watch		Special Mention		Substandard		Doubtful		Loss		Total
Commercial and industrial	$	6,133,490	$	1,474,890	$	-	$	18,775	$	-	$	-	$	7,627,155
Real estate:
Construction		6,201,105		-		-		-		-		-		6,201,105
Mortgage-residential		18,562,240		619,644		-		44,271		-		-		19,226,155
Mortgage-commercial		27,806,239		-		-		2,695,956		-		-		30,502,195
Consumer and other		8,333,686		39,962		-		-		-		-		8,373,648
Total	$	67,036,760	$	2,134,496	$	-	$	2,759,002	$	-	$	-	$	71,930,258

Clover Community Bankshares, Inc. and Subsidiary

Notes to Unaudited Consolidated Interim Financial Statements

Note 4.

Loans Receivable and Allowance for Loan Losses, Continued

A delinquent loan is generally placed in nonaccrual status when it becomes 90 days or more past due. At the time a loan is placed in nonaccrual status, all interest which has been accrued on the loan but remains unpaid is reversed and deducted from earnings as a reduction of reported interest income. No additional interest is accrued on the loan balance until the collection of both principal and interest becomes reasonably certain. At September 30, 2018 and December 31, 2017, nonaccrual loans totaled $2,346,536 and $2,288,603, respectively.

The following tables, by loan category, present loans past due and in nonaccrual status as of September 30, 2018 and December 31, 2017:

September 30, 2018	30 - 59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Nonaccrual		Total Past Due		Current		Total Loans

Commercial and industrial	$	-	$	-	$	-	$	-	$	-	$	6,251,777	$	6,251,777
Real estate:
Construction		-		-		-		-		-		5,545,395		5,545,395
Mortgage-residential		-		-		-		168,679		168,679		17,234,389		17,403,068
Mortgage-commercial		14,414		-		-		2,177,857		2,192,271		29,861,132		32,053,403
Consumer and other		1,702		-		-		-		1,702		7,408,022		7,409,724
	$	16,116	$	-	$	-	$	2,346,536	$	2,362,652	$	66,102,632	$	68,663,367

December 31, 2017	30 - 59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Nonaccrual		Total Past Due		Current		Total Loans

Commercial and industrial	$	672,414	$	109,624	$	-	$	18,775	$	800,813	$	6,826,342	$	7,627,155
Real estate:
Construction		-		-		-		-		-		6,201,105		6,201,105
Mortgage-residential		114,555		-		-		44,271		158,826		19,067,329		19,226,155
Mortgage-commercial		-		17,932		-		2,225,557		2,243,489		28,258,706		30,502,195
Consumer and other		23,764		16,198		-		-		39,962		8,333,686		8,373,648
	$	810,733	$	143,754	$	-	$	2,288,603	$	3,243,090	$	68,687,168	$	71,930,258

Troubled debt restructurings (TDRs) are loans that have been restructured from their original contractual terms and include concessions that would not otherwise have been granted outside of the financial difficulty of the borrower. Concessions can relate to the contractual interest rate, maturity date, or payment structure of the note. As part of the Company’s workout plan for individual loan relationships, the Company may restructure loan terms to assist borrowers facing challenges. The purpose of a TDR is to facilitate ultimate repayment of the loan. TDRs, all of which were included in impaired loans at September 30, 2018 and December 31, 2017, amounted to $1,276,932 and $1,524,592, respectively.

The Company’s policy with respect to accrual of interest on loans restructured in a TDR follows relevant supervisory guidance. That is, if a borrower has demonstrated performance under the previous loan terms and shows capacity to perform under the restructured loan terms, continued accrual of interest at the restructured interest rate is likely. If a borrower was materially delinquent on payments prior to the restructuring but shows capacity to meet the restructured loan terms, the loan will likely continue as nonaccrual going forward. Lastly, if the borrower does not perform under the restructured terms, the loan is placed on nonaccrual status. There were $0 and $18,775 in TDRs on nonaccrual status at September 30, 2018 and December 31, 2017, respectively.

Clover Community Bankshares, Inc. and Subsidiary

Notes to Unaudited Consolidated Interim Financial Statements

Note 4.

Loans Receivable and Allowance for Loan Losses, Continued

Management will continue to closely monitor these loans and will cease accruing interest on them if management believes that the borrowers may not continue performing based on the restructured note terms. If, after previously being classified as a TDR, a loan is restructured a second time, then that loan is automatically placed on nonaccrual status. The Company’s policy with respect to nonperforming TDRs 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.

During the nine months ended September 30, 2018, the Company modified one residential mortgage loan and one consumer loan that were considered to be TDRs. The Company made a rate concession on these loans as a result of financial difficulty displayed by the borrowers. The recorded investment in these loans was $70,193 before and after the modification. During the year ended December 31, 2017, the Company modified one consumer loan that was considered to be a TDR. The Company made a rate concession on this loan as a result of financial difficulty displayed by the borrower. The recorded investment in this loan was $107,251 before and after the modification.

As of September 30, 2018 and December 31, 2017, no loans previously determined to be a TDR defaulted during the previous 9 months and 12 months, respectively.

In the determination of the allowance for loan losses, all TDRs are reviewed to ensure that one of the three proper valuation methods (fair market value of the collateral, present value of cash flows, or observable market price) is adhered to. All TDRs are considered impaired.

Certain officers and directors of the Company and its subsidiary, their immediate families and business interests are loan customers of, and had other transactions with the Bank in the normal course of business. Related party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated parties and do not involve more than normal risk of collectability. The aggregate dollar amount of these loans was $771,669 and $919,496 at September 30, 2018 and December 31, 2017, respectively. During 2018, there were advances of $141,131 on 3 related party loans and principal repayments of $288,958.

Note 5.

Deposits

Time deposits that meet or exceed the FDIC insurance limit of $250,000 at September 30, 2018 and December 31, 2017 amounted to $1,570,689 and $2,123,859, respectively.

At September 30, 2018, the scheduled maturities of time deposits are as follows:

2018	$	4,687,486
2019		9,095,053
2020		2,302,719
2021		513,085
2022		56,688
Thereafter		56,882
Total	$	16,711,913

Clover Community Bankshares, Inc. and Subsidiary

Notes to Unaudited Consolidated Interim Financial Statements

Note 6.

Note Payable

On March 5, 2014, the Company obtained a $2,000,000 note payable from a correspondent bank, the proceeds of which were used in connection with the repurchasing and retirement of a series of preferred stock. The note payable bears interest at the rate of 4.4 percent per annum and requires principal and interest payments of $111,995 due quarterly until its maturity on January 1, 2019. The note payable is collateralized by the stock of the Bank that is owned by the Company. The total amount outstanding on the note payable as of September 30, 2018 and December 31, 2017 was $111,675 and $436,705, respectively.

Note 7.

Preferred Stock

The Series A Preferred Stock has senior rights over common stock with regard to dividends and rights upon liquidation. Unlike common stock, the Series A Preferred Stock will not have voting rights except under very limited circumstances. The preferred stock pays dividends at the rate of 5 percent greater than common stock per share dividends.

On March 3, 2009, the Company’s Articles of Incorporation were amended to authorize the issuance of a class of 10,000,000 shares of preferred stock, having no par value. Subject to certain conditions, the amendment authorizes the Company’s Board of Directors to issue preferred stock without shareholders’ approval. Under this amendment, the Board is authorized to determine the terms of one or more series of preferred stock, including the preferences, rights, and limitations of each series.

Note 8.

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC Topic 740, “Income Taxes”, a method whereby certain items of income and expense (principally provision for loan losses, depreciation, and prepaid expenses) are included in one reporting period for financial accounting purposes and another for income tax purposes. Refer to the notes within the consolidated financial statements for the year ended December 31, 2017 for more information. The accounting literature states that a deferred tax asset should be reduced by a valuation allowance if, based on the weight of all available evidence, it is more likely than not (a likelihood of more than 50%) that some portion or the entire deferred tax asset will not be realized. The determination of whether a deferred tax asset is realizable is based on weighing all available evidence, including both positive and negative evidence. In making such judgments, significant weight is given to evidence that can be objectively verified.

The Company believes that its income tax filing positions taken or expected to be taken in 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 flows. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740, “Income Taxes”.

Clover Community Bankshares, Inc. and Subsidiary

Notes to Unaudited Consolidated Interim Financial Statements

Note 9.

Fair Value of Financial Instruments

The Company values certain assets at fair value on a recurring basis. Assets valued at fair value on a recurring basis are those valued at fair value at each balance sheet date, whereas those valued on a nonrecurring basis are not re-measured as of each balance sheet date. There are no liabilities measured at fair value on a recurring basis.

The table below presents the balances of assets measured at fair value on a recurring or nonrecurring basis by level within the hierarchy of inputs that may be used to measure fair value.

	September 30, 2018
	Total		Level 1		Level 2		Level 3
Recurring basis:
Securities available for sale	$	37,829,398	$	-	$	37,829,398	$	-

Nonrecurring basis:
Impaired loans		4,777,791		-		-		4,777,791
Other real estate owned		960,210		-		-		960,210

	December 31, 2017
	Total		Level 1		Level 2		Level 3
Recurring basis:
Securities available for sale	$	38,082,932	$	-	$	38,032,932	$	-

Nonrecurring basis:
Impaired loans		3,564,641		-		-		3,564,641
Other real estate owned		1,217,705		-		-		1,217,705

Note 10.

Business Combination

On June 15, 2018, the Company and Carolina Trust BancShares, Inc. (“Carolina Trust”) jointly announced signing of a definitive merger agreement under which Carolina Trust has agreed to acquire the Company in a cash and stock transaction. The merger was completed on January 1, 2019.

Exhibit 99.3

Carolina Trust BancShares, Inc. and Clover Community Bankshares, Inc.

Unaudited Pro Forma Condensed Combined Balance Sheets As of September 30, 2018

($ in thousands, except share and per share data)

	Carolina Trust BancShares, Inc.			Clover Community Bankshares, Inc.			Pro Forma Before Adjustments			Pro Forma Purchase Accounting Adjustments					Adjustments for Merger and Transactional Costs				Pro Forma Combined

ASSETS
Cash and due from banks	$	9,000		$	6,723		$	15,723		$	(1,075	)		A	$	(873	)	A	$	13,775
Interest-earning deposits in other banks		26,416			4,073			30,489			(3,226	)		A		(2,618	)	A		24,645
Cash and cash equivalents		35,416			10,796			46,212			(4,301	)				(3,491	)	A		38,420
Certificates of deposits		1,498			4,791			6,289			-					-				6,289
Securities available for sale, at fair value		29,992			37,829			67,821			-					-				67,821
Securities held to maturity		-			1,000			1,000			-					-				1,000
Equity securities		749			-			749			-					-				749
Nonmarketable equity securities		1,050			182			1,232			-					-				1,232
Loans		380,746			68,736			449,482			(2,474	)		B		-				447,008
Allowance for loan losses		(3,925	)		(1,332	)		(5,257	)		1,332			C		-				(3,925	)
Net loans		376,821			67,404			444,225			(1,142	)				-				443,083
Accrued interest receivable		1,210			481			1,691			-					-				1,691
Bank premises, equipment and software		6,154			1,916			8,070			921			D		-				8,991
Foreclosed assets		1,782			960			2,742			(117	)		E		-				2,625
Goodwill		-			-			-			4,893			F		1,074		A		5,967
Other intangible assets		47			-			47			3,160			G		-				3,207
Bank owned life insurance		7,344			3,487			10,831			-					-				10,831
Other assets		3,108			669			3,777			(747	)		I		644		A		3,674
Total Assets	$	465,171		$	129,515		$	594,686		$	2,667				$	(1,773	)		$	595,580

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	66,796		$	32,312		$	99,108		$	-				$	-			$	99,108
Interest-bearing		319,701			82,666			402,367			(46	)		H		-				402,321
Total deposits		386,497			114,978			501,475			(46	)				-				501,429
Borrowings		16,258			-			16,258			-					-				16,258
Notes payable		-			112			112			-					-				112
Subordinated notes and debentures		9,733			-			9,733			-					-				9,733
Other liabilities		3,729			1,039			4,768								(482	)	A		4,286
Total liabilities		416,217			116,129			532,346			(46	)				(482	)			531,818
Preferred stock		-			1			1			(1	)		M		-				-
Common stock warrant		426			-			426			-					-				426
Common stock		17,892			9			17,901			5,301		J,	K		-				23,202
Additional paid-in capital		25,212			2,684			27,896			8,105		J,	K		-				36,001
Retained earnings		6,335			11,442			17,777			(11,442	)		J		(1,291	)	A		5,044
Accumulated other comprehensive income		(911	)		(750	)		(1,661	)		750			J		-				(911	)
Total stockholders’ equity		48,954			13,386			62,340			2,713					(1,291	)			63,762
Total Liabilities and Stockholders’ Equity	$	465,171		$	129,515		$	594,686		$	2,667				$	(1,773	)		$	595,580

Carolina Trust BancShares, Inc. and Clover Community Bankshares, Inc.

Unaudited Pro Forma Condensed Combined Statements of Operations For the Nine Months Ended September 30, 2018

($ in thousands, except per share data)

	Carolina Trust BancShares, Inc.		Clover Community Bankshares, Inc.			Pro Forma Before Adjustments		Adjustments				Pro Forma Combined
INTEREST INCOME
Interest on investment securities and cash	$	984	$	940		$	1,924	$	-			$	1,924
Interest and fees on loans		14,460		2,763			17,223		297		B		17,520
Total interest income		15,444		3,703			19,147		297				19,444
INTEREST EXPENSE
Interest expense non-maturity deposits		500		66			566		-				566
Interest expense time deposits		2,043		59			2,102		8		H		2,110
Interest expense borrowed funds		248		-			248		-				248
Interest expense capital lease		10		-			10		-				10
Interest expense debt		16		11			27		-				27
Interest expense subordinated debt		574		-			574		-				574
Total interest expense		3,391		136			3,527		8				3,535
NET INTEREST INCOME		12,053		3,567			15,620		289				15,909
Loan loss provision		415		-			415		-				415
Net interest income after loan loss provision		11,638		3,567			15,205		289				15,494

NONINTEREST INCOME
Service charges on deposit accounts		461		388			849		-				849
Interchange fee income, net		165		282			447		-				447
Gain on sale of investment securities		-		-			-		-				-
Unrealized gain on equity securities		123		-			123		-				123
Other service fees and income		321		309			630		-				630
Total noninterest income		1,070		979			2,049		-				2,049

NONINTEREST EXPENSE
Salaries & benefits expense		5,496		1,962			7,458		-				7,458
Occupancy and equipment		1,131		464			1,595		17		D		1,612
Data processing expense		588		162			750		-				750
Office supplies expense		42		87			129		-				129
Professional fees		328		99			427		-				427
Advertising and marketing		90		40			130		-				130
Foreclosed asset expense, net		453		(70	)		383		-				383
Directors fees and expenses		191		58			249		-				249
Core deposit intangible amortization expense		26		-			26		407		G		433
Merger expense		480		172			652		-				652
Other operating expense		1,218		581			1,799		-				1,799
Total noninterest expense		10,043		3,555			13,598		424				14,022
INCOME BEFORE INCOME TAXES		2,665		991			3,656		(135	)			3,521
Income tax expense		659		185			844		(32	)	L		812
NET INCOME	$	2,006	$	806		$	2,812	$	(103	)		$	2,709

NET INCOME PER COMMON SHARE
Basic	$	0.33	$	0.93								$	0.31
Diluted	$	0.32	$	0.83								$	0.31
Weighted average common shares outstanding		6,118,461		863,776					1,791,539				8,773,776
Weighted average diluted common shares outstanding		6,211,670		976,901					1,678,414				8,866,985

Carolina Trust BancShares, Inc. and Clover Community Bankshares, Inc.

Unaudited Pro Forma Condensed Combined Statements of Operations For the Twelve Months Ended December 31, 2017

($ in thousands, except per share data)

	Carolina Trust BancShares, Inc.		Clover Community Bankshares, Inc.		Pro Forma Before Adjustments		Adjustments				Pro Forma Combined
INTEREST INCOME
Interest on investment securities and cash	$	915	$	1,125	$	2,040	$	-			$	2,040
Interest and fees on loans		16,534		3,971		20,505		440		B		20,945
Total interest income		17,449		5,096		22,545		440				22,985
INTEREST EXPENSE
Interest expense non-maturity deposits		442		82		524		-				524
Interest expense time deposits		2,039		76		2,115		36		H		2,151
Interest expense borrowed funds		222		12		234		-				234
Interest expense capital lease		17		-		17		-				17
Interest expense debt		-		31		31		-				31
Interest expense subordinated debt		759		-		759		-				759
Total interest expense		3,479		201		3,680		36				3,716
NET INTEREST INCOME		13,970		4,895		18,865		404				19,269
Loan loss provision		704		-		704						704
Net interest income after loan loss provision		13,266		4,895		18,161		404				18,565

NONINTEREST INCOME
Service charges on deposit accounts		487		566		1,053		-				1,053
Interchange fee income, net		139		348		487		-				487
Gain on sale of investment securities		-		52		52		-				52
Other service fees and income		407		421		828						828
Total noninterest income		1,033		1,387		2,420		-				2,420

NONINTEREST EXPENSE
Salaries & benefits expense		7,071		2,642		9,713		-				9,713
Occupancy and equipment		1,444		618		2,062		23		D		2,085
Data processing expense		948		275		1,223		-				1,223
Office supplies expense		81		113		194		-				194
Professional fees		473		155		628		-				628
Advertising and marketing		132		53		185		-				185
Foreclosed asset expense, net		281		6		287		-				287
Directors fees and expenses		256		77		333		-				333
Core deposit intangible amortization expense		44		-		44		598		G		642
Other operating expense		1,571		766		2,337		-				2,337
Total noninterest expense		12,301		4,705		17,006		621				17,627
INCOME BEFORE INCOME TAXES		1,998		1,577		3,575		(217	)			3,358
Income tax expense		1,594		564		2,158		(51	)	L		2,107
NET INCOME		404		1,013		1,417		(166	)			1,251
Preferred stock dividends		-		36		36		(36	)	M		-
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	404	$	977	$	1,381	$	(130	)		$	1,251

NET INCOME PER COMMON SHARE
Basic	$	0.09	$	1.13							$	0.17
Diluted	$	0.09	$	1.00							$	0.17
Weighted average common shares outstanding		4,655,369		863,776				1,791,539				7,310,684
Weighted average diluted common shares outstanding		4,737,874		976,901				1,678,414				7,393,189

Cash dividends per common share	$	-	$	0.30							$	0.04

Notes to Pro Forma Condensed Combined Financial Statements

Note 1. Basis of Presentation

The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting. Balance sheet data is presented as of September 30, 2018 and assumes the merger involving Carolina Trust BancShares, Inc. (“Carolina Trust”) and Clover Community Bankshares, Inc. (“Clover”) was completed on that date. Income statement data is presented to give effect to the merger as if it had occurred on January 1, 2017. The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not necessarily indicative of the results of operations or financial position had the merger been consummated at the beginning of the period presented, nor is it indicative of the results of operations in future periods or the future financial position of the combined entities. Certain historical financial information has been reclassified to conform to current presentation. The merger, which was completed on January 1, 2019, provided that the merger consideration to be paid by Carolina Trust will consist of a mixture of Carolina Trust common stock and cash, with 195,380 shares, or 20% of Clover’s common stock outstanding on the merger date converted to the per share cash consideration of $22.00 and the balance of Clover’s stock converted into Carolina Trust common stock at the 2.7181 stock exchange ratio. Each of the 113,125 shares of Clover preferred stock converted to one share of Clover common stock prior to the exchange of Clover common stock for the merger consideration.

The unaudited pro forma condensed combined financial information includes preliminary estimated adjustments to record assets and liabilities of Clover at their respective fair values and represents Carolina Trust management’s estimates based on available information. The pro forma adjustments included herein are subject to updates as additional information becomes available and as additional analyses are performed. The final allocation of the purchase price will be determined after completion of thorough analyses to determine the fair value of Clover’s tangible and identifiable intangible assets and liabilities as of the merger date. Increases or decreases in the estimated fair values of the net assets, commitments, executory contracts and other items of Clover as compared with the information shown in the unaudited pro forma condensed combined financial information may change the amount of the purchase price allocated to goodwill and other assets and liabilities and may impact the statement of income due to adjustments in yield and/or amortization of the adjusted assets or liabilities.

Note 2. Accounting Policies and Financial Statement Classifications

The accounting policies of both Carolina Trust and Clover have been reviewed and management has determined that there are no material additional conforming adjustments or financial statement reclassifications needed. There are currently no material transactions between Carolina Trust and Clover in relation to the unaudited pro forma condensed combined financial information.

Note 3. Merger Related Charges

The estimated transaction costs related to the merger are approximately $3.0 million ($2.4 million net of tax). This cost is included in the unaudited Pro Forma Condensed Combined Balance Sheets. These estimated transaction costs are still being developed and will continue to be refined over the next several months, and will include assessing personnel, benefit plans, premises, equipment, and service contracts to determine where Carolina Trust and Clover may take advantage of redundancies. These costs will be recorded as non-interest expense as incurred. The pro forma presentation of the merger-related charges is in the following table (dollars in thousands).

	Carolina Trust		Clover		Total
Professional fees	$	120	$	253	$	373
Employee benefit expenses		1,149		537		1,686
Data processing		355		474		829
Other noninterest expense		50		70		120
Total noninterest expense		1,674		1,334		3,008
Tax benefit		383		260		643
Net merger related expenses	$	1,291	$	1,074	$	2,365

Note 4. Purchase Accounting Allocation

The unaudited pro forma condensed combined financial information reflects the issuance of 2,123,858 shares of Carolina Trust common stock totaling approximately $16.1 million plus cash of approximately $4.3 million. The merger will be accounted for using the acquisition method of accounting; accordingly Carolina Trust’s cost to acquire Clover will be allocated to the assets (including identifiable intangible assets) and liabilities of Carolina Trust at their respective fair values as of the merger date. Accordingly, the pro forma purchase price was preliminarily allocated to the assets acquired and the liabilities assumed based on their estimated fair values as summarized in the following table (dollars in thousands).

Common equity capital of Clover as of September 30, 2018 ⁽¹⁾				$	13,386
Estimated Clover related expenses, net of tax					(1,074	)
Common equity capital of Clover as of September 30, 2018, adjusted					12,312
Less estimated fair value adjustments:
Allowance for loan losses	$	1,332
Loan fair value		(2,474	)
Loans, net		(1,142	)
Other real estate owned		(117	)
Premises and equipment		921
Core deposit intangible		3,160
Time deposits		46
Deferred tax adjustments related to the items above		(674	)
Deferred tax adjustment related BOLI policies acquired		(73	)
Total fair value adjustments					2,121
Net assets (Equity capital less fair value adjustments)					14,433
Total consideration paid to Clover shareholders ⁽²⁾					20,400
Goodwill				$	5,967

⁽¹⁾ Note: Stockholders’ equity reported here includes preferred equity of $1 that will convert to common equity prior to the share exchange.

⁽²⁾ Note: The purchase price is based on total consideration of $20.4 million. This includes the issuance of approximately $16.1 million in stock consideration, or 2,123,858 shares of Carolina Trust common stock with a value of $7.58 per share (based on Carolina Trust’s closing stock price on December 31, 2018, the last trading day as of the merger date.

Note 5. Pro Forma Adjustments

The following pro forma adjustments have been reflected in the unaudited pro forma condensed combined financial information. All adjustments are based on current assumptions and valuations which are subject to change.

Cash was adjusted to reflect payment of estimated merger-related expenses of $2.7 million, which includes $1.2 million for Clover and $1.5 million for Carolina Trust. Additional merger-related expenses of $0.3 million are expected to be accrued, which includes $0.1 million for Clover and $0.2 million for Carolina Trust. The impact of these cash and accrued expenses would be offset partially by $0.6 million in tax benefits. The expenses, net of tax, incurred by Clover would reduce the net assets acquired by Carolina Trust by an estimated $1.1 million, which would result in an increase to goodwill. The expenses, net of tax, incurred by Carolina Trust would reduce retained earnings by $1.3 million.

Cash was adjusted for Clover’s payment of accrued supplemental executive retirement plan expenses of $0.8 million, which would reduce other liabilities.

Based on the 976,901 outstanding shares of Clover common stock and preferred stock, Carolina Trust expects to pay aggregate cash consideration of $4.3 million, which reflects the $22.00 per share cash consideration payable pursuant to the merger agreement for 20% of the outstanding shares of Clover common stock at merger consummation.

Carolina Trust identified $2.5 million in net preliminary estimated fair value adjustments to Clover’s loan portfolio. This $2.5 million decrease to the fair value of loans reflects Carolina Trust’s estimates related to credit quality totaling $1.7 million, estimates related to market interest rates and liquidity totaling $0.7 million and adjustments to eliminate deferred fees and costs totaling $0.1 million. The fair value adjustment will be accreted using the level yield methodology over the 2.9 year weighted average life of the acquired loan portfolio. The accretions would increase interest income for the nine months ended September 30, 2018 and the year ended December 31, 2017 by approximately $0.3 million and $0.4 million, respectively.

Clover’s existing allowance for loan losses of $1.3 million was eliminated in accordance with generally accepted accounting principles.

Premises and equipment were adjusted higher by $0.9 million to reflect estimated fair value for real property, with the allocation being $0.6 million to land and $0.3 million to buildings. The adjustment to buildings would be depreciated over an estimated life of 15 years, resulting in depreciation expense of $17,000 for the nine months ended September 30, 2018 and $23,000 for the year ended December 31, 2017.

Foreclosed properties were adjusted by $0.1 million based on Carolina Trust’s estimates of adjustments to the market value of these assets.

The estimated amount of goodwill arising from pro forma purchase accounting adjustments is $4.8 million, in addition to the goodwill adjustment discussed with merger and transaction costs in paragraph 5.A above. The final allocation of purchase price will be determined after the merger is completed and all purchase accounting adjustments are finalized, which may change the amount allocated to goodwill.

Other intangible assets were adjusted to reflect a core deposit intangible of $3.2 million. A core deposit intangible arises from a financial institution having a funding base derived from stable customer relationships. These customer relationships provide a cost benefit to the acquiring institution since the associated customer deposits are typically at lower interest rates and can be expected to be retained on a long-term basis. This core deposit intangible reflects Carolina Trust management’s estimate of the market premium associated with these core deposits. The accelerated amortization period is estimated at nine years, resulting in expense of approximately $407,000 for the nine months ended September 30, 2018 and $598,000 for the year ended December 31, 2017.

Time deposits were adjusted lower by less than $0.1 million for fair value adjustments based on slightly higher current market rates for similar products. This adjustment will be amortized as an increase to interest expense over the 5 year maturity period of the time deposits under the effective yield method.

Other liabilities were adjusted higher by $0.7 million for the estimated deferred tax liability arising from the fair value adjustments and based on an estimated combined federal and state tax rate of 23.5%.

Clover’s historical stockholders’ equity was eliminated as a result of the merger when Clover stockholders’ shares were exchanged for a combination of cash and Carolina Trust common stock.

The Carolina Trust stock exchanged for Clover stock was 2,123,858 shares, $2.50 par value per share, at market price of $7.58, the closing stock price as of December 31, 2018, the last trading day prior to the closing of the merger. Fractional shares were paid in cash at the 20 day average closing stock price prior to the merger date which was $7.6305 per share.

The tax effect of the adjustments on the pro forma statement of operations is calculated based on an estimated combined federal and state income tax rate of 23.5%

The Clover preferred stock and preferred dividend is eliminated as an adjustment because the preferred stock was converted to Clover common stock prior to exchanging Clover common stock for Carolina Trust common stock.

North Carolina	000-55683	81-2019652
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

901 East Main Street, Lincolnton, North Carolina		28092
(Address of principal executive offices)		(Zip Code)

Exhibit No.	Description of Exhibit

23.1	Consent of Elliott Davis, LLC (filed herewith)

99.1	Independent Auditor’s Report, dated April 5, 2018, audited consolidated balance sheets of Clover Community Bankshares, Inc. and subsidiary as of December 31, 2017 and 2016 and related audited consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for the years ended December 31, 2017 and 2016, the notes related thereto (incorporated herein by reference to Amendment No. 1 to the Registration Statement on Form S-4 (File No. 333-227302) filed by the Company on October 24, 2018)

99.2	Unaudited consolidated balance sheets of Clover Community Bankshares, Inc. and subsidiary at September 30, 2018 and related unaudited consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for the nine months ended September 30, 2018 and 2017, and the notes related thereto (filed herewith)

99.3	Unaudited pro forma condensed combined financial information as of and for the nine months ended September 30, 2018 and for the year ended December 31, 2017, and the notes related thereto (filed herewith)

		Carolina Trust BancShares, Inc.

Date:	March 19, 2019	By:	/s/ Edwin E. Laws
			Name: Edwin E. Laws
			Title: EVP and Chief Financial Officer