Southern First reports results for 2016

Southern First Bancshares, Inc. (NASDAQ: SFST) holding company for Southern First Bank, today reported net income available to the common shareholders of $3.3 million, or $0.49 per diluted share, for the fourth quarter of 2016. In comparison, net income available to common shareholders was $2.9 million, or $0.43 per diluted share, for the fourth quarter of 2015. For the year ended December 31, 2016, net income to common shareholders was $13.0 million, or $1.94 per diluted share. In comparison, net income available to common shareholders for the year ended December 31, 2015 was $10.2 million, or $1.55 per diluted share.

2016 Fourth Quarter Highlights

• Net income to common shareholders increased 15% to $3.3 million for Q4 2016 compared to $2.9 million for Q4 2015
• Gross loans increased 16% to $1.16 billion at Q4 2016, compared to $1.00 billion at Q4 2015
• Total deposits increased 11% to $1.09 billion at Q4 2016, compared to $985.7 million at Q4 2015
• Core deposits increased 8% to $937 million for Q4 2016, compared to $864 million for Q4 2015
• Return on average assets increased to 1.00% for Q4 2016, compared to 0.93% for Q4 2015

“I am proud of our 2016 accomplishments of our Southern First team as we generated record earnings of $13.0 million and experienced significant growth in loans, core deposits and mortgage fee income,” stated Art Seaver, the Company’s Chief Executive Officer. “We also recently received regulatory approval to open our new office in the Triangle region of North Carolina and carry great momentum going into the new year.”

Operating Results

Net interest margin for the fourth quarter of 2016 was 3.63%, compared to 3.63% for the prior quarter and 3.48% for the fourth quarter of 2015. During the fourth quarter of 2016, our average interest-earning assets increased by $85.0 million, compared to the fourth quarter of 2015, while the yield on our interest-earning assets increased by 14 basis points due to a higher level of low-yielding federal funds sold during the 2015 period. In comparison, our average interest-bearing liabilities increased by $36.8 million during the fourth quarter of 2016, compared to the fourth quarter of 2015, with the respective cost increasing by two basis points.

Noninterest income was $2.1 million and $2.0 million for the three months ended December 31, 2016 and 2015, respectively. For the year ended December 31, 2016 and 2015, noninterest income was $10.8 million and $8.4 million, respectively. The increase in noninterest income during the three and twelve month periods ended December 31, 2016 relates primarily to increases in mortgage banking income, service fees on deposit accounts and other income. Specifically, mortgage banking income was $1.2 million and $1.1 million for the three months ended December 31, 2016 and 2015, respectively, and $6.8 million and $5.0 million for the twelve months ended December 31, 2016 and 2015, respectively. During the second quarter of 2016, we transitioned to mandatory delivery of mortgage loans which increased the profit margin we receive on mortgage originations. In addition, our mortgage production volume increased during the 2016 periods as compared to 2015.

Noninterest expense was $8.0 million and $7.2 million for the three months ended December 31, 2016 and 2015, respectively, and $31.2 million and $28.2 million for the twelve months ended December 31, 2016 and 2015, respectively. The increase in noninterest expense during the three and twelve month periods ended December 31, 2016 relates primarily to increases in compensation and benefits, occupancy, other real estate owned expenses, and professional fees. Included in noninterest expense are mortgage banking expenses of $980 thousand and $746 thousand for the three months ended December 31, 2016 and 2015, respectively, and $4.5 million and $3.4 million for the year ended December 31, 2016 and 2015, respectively.

During the three months ended December 31, 2016, we recorded total credit costs of $765 thousand, including a $275 thousand provision for loan losses and $490 thousand expenses related to the sale and management of other real estate owned. In addition, we had a net recovery for the fourth quarter of 2016 of $102 thousand. During the three months ended December 31, 2015, our total credit costs were $839 thousand, including a $700 thousand provision for loan losses and $139 thousand expenses related to the sale and management of other real estate owned. Net loan charge-offs for the fourth quarter of 2015 were $439 thousand, or 0.17% of average loans, annualized. For the year ended December 31, 2016 and 2015, total credit costs were $3.5 million and $4.3 million, respectively. Our allowance for loan losses was $14.9 million, or 1.28% of loans, at December 31, 2016 which provides approximately 271% coverage of nonaccrual loans, compared to $13.6 million, or 1.36% of loans, and approximately 206% coverage of nonaccrual loans at December 31, 2015.

Nonperforming assets were $6.1 million, or 0.46% of total assets, as of December 31, 2016. Comparatively, nonperforming assets were $9.1 million, or 0.75% of total assets, at December 31, 2015. Of the $6.1 million in total nonperforming assets as of December 31, 2016, nonperforming loans represent $5.5 million and other real estate owned represents $639 thousand. Classified assets improved to 13% of tier 1 capital plus the allowance for loan losses at December 31, 2016, compared to 17% at December 31, 2015.

Gross loans were $1.164 billion, excluding mortgage loans held for sale, as of December 31, 2016, compared to $1.005 billion at December 31, 2015. Core deposits, which exclude out-of-market deposits and time deposits of $250,000 or more, increased to $937.5 million at December 31, 2016 compared to $864.3 million at December 31, 2015.

Shareholders’ equity totaled $108.9 million as of December 31, 2016, compared to $94.2 million at December 31, 2015. As of December 31, 2016, 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 ten locations in the Greenville, Columbia, and Charleston markets of South Carolina as well as Raleigh, North Carolina. Southern First Bancshares has assets of approximately $1.3 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.