Southern First Reports Results for 2008
January 21, 2009
GREENVILLE, SC – January 20, 2009 – Southern First Bancshares, Inc. (NASDAQ: SFST), holding company for Southern First Bank, NA (also doing business as Greenville First Bank), today announced that net income for the fourth quarter 2008 was $370 thousand compared to $770 thousand for the fourth quarter of 2007. The lower net income in the 2008 period is attributable to the increase in the provision for loan losses and declining net interest margin.
Net income for the year ended December 31, 2008 was $1.9 million and operating income was $3.1 million. Net income for the year ended December 31, 2007 was $3.4 million and operating income was $3.2 million. Net income decreased $1.6 million from the 2007 period while operating income decreased only $116 thousand compared to the same period in 2007. Included in 2008 was a non-cash impairment charge of $1.9 million on our Fannie Mae (FNMA) preferred stock. Net of taxes, the impairment charge was $1.3 million. Net income for 2007 includes an after-tax gain of $210 thousand related to the sale of the bank’s former main office building which occurred during the first six months of 2007.
“The current operating environment is challenging with continuing deterioration in our economy and the historically low interest rates resulting from actions by our Federal Reserve System,” stated Art Seaver, the company’s CEO. Seaver added, “We are disappointed in our company’s earnings during 2008. Shrinking margins, higher loan loss provisions, and the loss on our investment in Fannie Mae preferred stock resulted in performance that we believe is not typical of Southern First Bank. We are responding to this environment by preserving capital, aggressively managing the risk in our loan portfolio, and increasing our focus on retail deposits.”
During 2008, the company recorded a $3.2 million non-cash expense related to the provision for loan losses. The 2008 provision was $1.1 million higher than the $2.1 million provision in 2007.
During the fourth quarter of 2008, the bank recorded a provision for loan losses of $1.2 million compared to a $760 thousand provision in the fourth quarter of 2007. The company’s allowance for loan losses was 1.24% at December 31, 2008 compared to 1.13% at December 31, 2007. Annualized charge-offs for 2008 were 0.35% of average loans compared to 0.27% in 2007. “During the fourth quarter, we increased our loan loss reserve by $1.2 million and recognized additional losses in our loan portfolio,” stated Seaver. “While the Greenville and Columbia real estate markets appear to have remained relatively stable, we believe it is prudent to increase our loan loss reserve in order to strengthen our balance sheet.”
Non-performing assets totaled $9.8 million at December 31, 2008, representing 1.42% of total assets compared to 0.78% at the end of 2007. Non-performing assets at the end of 2008 consisted of $7.7 million of non-performing loans and $2.1 million of other real estate owned.
Total assets were $693.0 million as of December 31, 2008, compared to $628.1 million as of December 30, 2007, a 10.3% increase for the year 2008. Loans increased 11.2% during 2008 to $559.6 million compared to $503.1 million at the end of 2007. Mr. Seaver added, “Although loan demand remains strong, we have chosen to limit our level of growth in loans during the last half of 2008. Asset growth is not a primary strategy of our company in the current operating environment. Our present strategy is to preserve capital, manage portfolio risk, improve our margins, and continue growing retail deposits.”
Deposits grew to $469.5 million at December 31, 2008, compared to $412.8 million at December 31, 2007. “The increase reflects our company’s emphasis on deposits,” stated Seaver. The company opened two new retail offices in July of 2008 and now operates four offices in the Greenville market and two offices in the Columbia market. The company has also announced the construction of a new regional office in the Columbia market scheduled to open in the third quarter of 2009.
The Company’s book value per share was $13.07 as of December 31, 2008, while the closing stock price on that day was $9.20 per share.
