Southern First reports 2020 financial results

Southern First Bancshares, Inc. (NASDAQ: SFST), holding company for Southern First Bank, today announced its financial results for three-month period and year ended December 31, 2020.

“While 2020 was a year of unprecedented challenges, I am incredibly proud of our team as they embraced our mission of ‘impacting lives’ in this pandemic environment,” stated Art Seaver, the company’s Chief Executive Officer. “We continue to add talented bankers as we expand our footprint, and we are excited to announce our first team in the Charlotte, North Carolina market.”

2020 Fourth Quarter Highlights
• Net income of $8.6 million, compared to $7.2 million for Q4 2019
• Diluted earnings per common share of $1.10 per share, compared to $0.92 for Q4 2019
• Net interest margin of 3.55%, compared to 3.41% for Q4 2019
• Loan loss provision of $2.3 million, compared to $1.1 million for Q4 2019
• Announced expansion into Charlotte, North Carolina market

COVID-19 Update
• 96% of loan modifications, or $570.8 million, have returned to original payment status
• Monitoring loans within two targeted industries which represent $128.8 million, or 6%, of total loans

COVID-19 IMPACT
The COVID-19 pandemic has resulted in uncertain economic conditions across the globe, significantly impacting our business and that of many of our clients during 2020. As we progress through the pandemic, the majority of our team has returned to working in the office at this time; however, we maintain the ability to shift to working remotely as needed. Our offices continue to operate in a drive-thru only mode with “in-person” client meetings available by appointment to maintain the safety of our team and our clients. This strategy, combined with our digital technology, has been extremely effective in serving our clients.

Beginning late in the first quarter of 2020, we began granting loan modifications or deferrals to certain borrowers affected by the pandemic on a short-term basis of three to six months. As of December 31, 2020, substantially all of these loans have reached the end of their deferral period and have begun to resume normal payments.

As we closely monitor credit risk and our exposure to increased loan losses resulting from the impact of COVID-19 on our commercial clients, we have identified two industries considered to be at higher risk for credit loss. The table below identifies the outstanding and committed loan balances for each of these industries. Of the $128.8 million of loans modified in these industries as of December 31, 2020, 95% have begun to resume normal payments.

INCOME STATEMENTS – Unaudited

Net income for the fourth quarter of 2020 was $8.6 million, or $1.10 per diluted share, a $6.4 million increase from the third quarter of 2020 and a $1.4 million increase from the fourth quarter of 2019. For the year ended December 31, 2020, net income was $18.3 million, a decrease of 34.2% over the year ended December 31, 2019, driven primarily by the increase in provision for loan losses.

Net interest income increased $666 thousand for the fourth quarter of 2020, compared with the third quarter of 2020, and increased $3.7 million, or 20.8%, compared to the fourth quarter of 2019, which primarily reflects a reduction in deposit costs over each prior period. Net interest income for the year ended December, 31 2020 increased 18.6% compared with the year ended December, 31 2019, reflecting an increase in loan balances and a reduction in deposit costs from the prior year.

The provision for loan losses decreased to $2.3 million for the fourth quarter of 2020, compared to $11.1 million for the third quarter and $1.1 million for the fourth quarter of 2019. The provision for loan losses totaled $29.6 million for the year ended December, 31 2020 compared to $2.3 million for the year ended December 31, 2019. The increased provision for the year ended December 31, 2020 was driven by qualitative adjustment factors related to the uncertain economic and business conditions at both the national and regional levels that remain at December 31, 2020. Factors such as the continued impact on the tourism and hospitality industries due to the pandemic, an increase in permanent job losses, and uncertainty in the political realm have driven this increase.

Noninterest income totaled $6.6 million for the fourth quarter of 2020, a $940 thousand decrease from the third quarter of 2020 and a $3.1 million increase from the fourth quarter of 2019. As the largest component of our noninterest income, mortgage banking income was the driving factor in the change in noninterest income from the prior quarter and the prior year.

Noninterest expense for the fourth quarter of 2020 increased $361 thousand compared with the third quarter of 2020 and increased $3.6 million compared with the fourth quarter of 2019. The increases were due primarily to higher compensation and benefits expense, mortgage production costs and other real estate owned expenses.

Our effective tax rate was 22.5% for the fourth quarter of 2020, 24.5% for the third quarter of 2020, and 21.0% for the fourth quarter of 2019. The lower tax rate this quarter relates to the favorable tax impact of stock option transactions during the quarter.

NET INTEREST INCOME AND MARGIN – Unaudited

Net interest income was $21.3 million for the fourth quarter of 2020, a $666 thousand increase from the third quarter of 2020. In addition, interest income, on a tax-equivalent basis, increased by $133 thousand due primarily to higher average loan balances, while interest expense decreased by $534 thousand driven by lower deposit costs. In comparison to the fourth quarter of 2019, net interest income increased $3.7 million due to higher loan balances and lower deposit costs, partially offset by lower yields on interest-earning assets. Our net interest margin, on a tax-equivalent basis, was 3.55% for the fourth quarter of 2020, a 3-basis point increase from 3.52% for the third quarter of 2020 and a 14-basis point increase from 3.41% for the fourth quarter of 2019. Growth in earning assets combined with lower deposit costs offset the lower loan yield during the fourth quarter of 2020, having a positive impact on our net interest margin.

ASSET QUALITY MEASURES – Unaudited
Total nonperforming assets decreased by $1.2 million to $9.2 million for the fourth quarter of 2020, representing 0.37% of total assets, compared to the third quarter of 2020. The decrease in nonperforming assets was primarily a result of $2.6 million of loans paid off during the fourth quarter of 2020, combined with a $561 thousand write-down on the one property included in our other real estate owned. Offsetting these decreases was $2.2 million of loans added to nonaccrual during the quarter. The allowance for loan losses as a percentage of nonaccrual loans was 547.14% on December 31, 2020, compared to 482.43% on September 30, 2020 and 244.95% on December 31, 2019.

On December 31, 2020, the allowance for loan losses was $44.1 million, or 2.06% of total loans, compared to $42.2 million, or 2.03% of total loans, at September 30, 2020 and $16.6 million, or 0.86% of total loans, at December 31, 2019. Net charge-offs were $370 thousand, or 0.07% on an annualized basis, for the fourth quarter of 2020 compared to $483 thousand, or 0.09% of net charge-offs, annualized, for the third quarter of 2020. Net charge-offs were $256,000 for the fourth quarter of 2019. The provision for loan losses was $2.3 million for the fourth quarter of 2020 compared to $11.1 million for the third quarter of 2020 and $1.1 million for the fourth quarter of 2019. The increased provision for the year ended December 31, 2020 was driven by qualitative adjustment factors related to the uncertain economic and business conditions at both the national and regional levels that remain at December 31, 2020. Factors such as the continued impact on the tourism and hospitality industries due to the pandemic, an increase in permanent job losses, and uncertainty in the political realm have driven this increase.

 

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 largest bank headquartered in South Carolina. Southern First Bank has been providing financial services since 1999 and now operates in 12 locations in the Greenville, Columbia, and Charleston markets of South Carolina as well as the Charlotte, Triangle and Triad regions of North Carolina and Atlanta, Georgia. Southern First Bancshares has consolidated assets of approximately $2.5 billion and its common stock is traded on the NASDAQ Global Market under the symbol “SFST.” More information can be found at www.southernfirst.com.