Southern First Bank reports second quarter 2018 results

Southern First Bancshares, Inc. (NASDAQ: SFST), holding company for Southern First Bank, today reported net income available to common shareholders of $5.5 million, or $0.71 per diluted share, for the second quarter of 2018. In comparison, net income available to common shareholders was $3.6 million, or $0.49 per diluted share, for the second quarter of 2017. For the six months ended June 30, 2018, net income available to common shareholders was $10.7 million, or $1.39 per diluted share. In comparison, net income to common shareholders for the six months ended June 30, 2017 was $6.7 million, or $0.95 per diluted share.

2018 Second Quarter Highlights

• Net income available to common shareholders increased 53% to $5.5 million for Q2 2018 compared to $3.6 million for Q2 2017
• Total loans increased 18% to $1.53 billion at Q2 2018, compared to $1.30 billion at Q2 2017
• Total deposits increased 21% to $1.57 billion at Q2 2018, compared to $1.30 billion at Q2 2017
• Total core deposits increased 28% to $1.39 billion at Q2 2018, compared to $1.09 billion at Q2 2017
• Efficiency ratio improved to 57.4% for Q2 2018, compared to 58.8% for Q2 2017

“I am incredibly proud of the talent and unique culture of our team as we generated record earnings of $5.5 million in the second quarter of 2018,” stated Art Seaver, the company’s Chief Executive Officer. “We continue to see strong momentum in terms of core deposits, loans, and mortgage income.”

Operating Results
Net interest margin was 3.49% for both three-month periods ending June 30, 2018 and 2017. During the second quarter of 2018, our average interest-earning assets increased by $252.9 million, compared to the second quarter of 2017, while the yield on our interest-earning assets increased by 21 basis points. In comparison, our average interest-bearing liabilities increased by $186.8 million during the second quarter of 2018, compared to the second quarter of 2017, with the respective cost increasing by 28 basis points.

Noninterest income was $2.8 million and $2.6 million for the three months ended June 30, 2018 and 2017, respectively. For the six months ended June 30, 2018 and 2017, noninterest income was $5.2 million and $4.6 million, respectively. The increase in noninterest income during the three-month period ended June 30, 2018 relates primarily to an increase in ATM and debit card income, income derived from bank owned life insurance, and other income. The increase in noninterest income during the six-month period ended June 30, 2018 was driven by increases in mortgage banking income, ATM and debit card income and income derived from bank owned life insurance. Mortgage banking revenue comprises a significant portion of our noninterest income and totaled $1.6 million and $3.0 million for the three and six months ended June 30, 2018, respectively, and $1.6 million and $2.7 million for the three and six months ended June 30, 2017, respectively.

Noninterest expense was $10.0 million and $8.8 million for the three months ended June 30, 2018 and 2017, respectively, and $19.2 million and $17.1 million for the six months ended June 30, 2018 and 2017, respectively. The increase in noninterest expense during the three and six-month periods ended June 30, 2018 was driven primarily by increases in compensation and benefits, occupancy, and professional fees. Included in noninterest expense are mortgage banking expenses of $1.2 million and $2.1 million for the three and six months ended June 30, 2018, respectively, and $1.0 million and $1.9 million for the three and six months ended June 30, 2017, respectively.

During the three months ended June 30, 2018, we recorded total credit costs of $388 thousand, including a $400 thousand provision for loan losses and a net $12 thousand gain related to the sale and management of other real estate owned. In addition, we had net charge-offs for the second quarter of 2018 of $152 thousand, or 0.04% of average loans, annualized. During the three months ended June 30, 2017, our total credit costs were $497 thousand, including a $500 thousand provision for loan losses and a net $3 thousand gain related to the sale and management of other real estate owned. Net loan charge-offs for the second quarter of 2017 were $343 thousand, or 0.11% of average loans, annualized. For the six months ended June 30, 2018 and 2017, total credit costs were $894 thousand million and $1.0 million, respectively. Our allowance for loan losses was $16.1 million, or 1.05% of loans, at June 30, 2018, which provides approximately 209% coverage of nonaccrual loans, compared to $15.4 million, or 1.19% of loans, and approximately 294% coverage of nonaccrual loans at June 30, 2017.

Nonperforming assets were $7.8 million, or 0.44% of total assets, as of June 30, 2018. Comparatively, nonperforming assets were $5.7 million, or 0.37% of total assets, at June 30, 2017. Of the $7.8 million in total nonperforming assets as of June 30, 2018, nonperforming loans represent $7.7 million and other real estate owned represents $117 thousand. Classified assets improved to 9% of tier 1 capital plus the allowance for loan losses at June 30, 2018, compared to 10% at June 30, 2017.

Gross loans were $1.53 billion, excluding mortgage loans held for sale, as of June 30, 2018, compared to $1.30 billion at June 30, 2017. Core deposits, which exclude out-of-market deposits and time deposits of $250,000 or more, increased to $1.34 billion at June 30, 2018 compared to $1.09 billion at June, 2017.

Shareholders’ equity totaled $160.9 million as of June 30, 2018, compared to $149.7 million at December 31, 2017, and $142.7 million at June 30, 2017. As of June 30, 2018, our capital ratios continue to exceed the regulatory requirements for a “well capitalized” institution.

About Southern First Bancshares

Southern First Bancshares, Inc., Greenville, South Carolina is a registered bank holding company incorporated under the laws of South Carolina. The Company’s wholly-owned subsidiary, Southern First Bank, is the third largest bank headquartered in South Carolina. Southern First Bancshares has been providing financial services since 1999 and now operates in 13 locations in the Greenville, Columbia, and Charleston markets of South Carolina, as well as the Triangle and Triad regions of North Carolina and Atlanta, Georgia. Southern First Bancshares has assets of approximately $1.8 billion and its common stock is traded in the NASDAQ Global Market under the symbol “SFST.” More information can be found at www.southernfirst.com.