Southern First Reports Results for First Quarter of 2011

GREENVILLE, SC – April 28, 2011 – 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 first quarter of 2011 was $537 thousand compared to $18 thousand for the first quarter of 2010.  After dividends paid to the US Treasury on our preferred stock, net income available to the common shareholders was $208 thousand as compared to a net loss available to the common shareholders for the first quarter of 2010 of $322 thousand.

• First Quarter earnings improved to $537 thousand from $18 thousand in prior year
• Nonperforming assets improved to 1.95% from 2.21% in prior year
• Total retail deposits increased $36 million representing a 32% annualized growth rate
• Number of new core transaction accounts increased at a 19% annualized growth rate
• Net interest margin increased to 3.18%, a 35 basis point increase over the 1st quarter of 2010

We are pleased to announce our company’s performance for the first quarter of 2011.  Building on the momentum from 2010, we have continued to increase our quarterly earnings, lower our nonperforming assets, grow our core deposit accounts and improve our margin, stated Art Seaver, the company’s CEO.  The company’s first quarter earnings represented the strongest quarterly earnings performance in two years and is a result of the continued hard work by our talented bank team. Reducing our credit costs continues to be a major focus and we are pleased that our hard work has resulted in three consecutive quarters of improving nonperforming assets.

Nonperforming assets decreased to $14.8 million or 1.95% of total assets as of March 31, 2011.  Of the $14.8 million in total nonperforming assets, nonperforming loans represent $11.0 million and other real estate owned represents $3.9 million.  The company’s 1.95% nonperforming asset ratio is less than half of the 5.55% average nonperforming asset ratio for all South Carolina banks as reported by fourth quarter 2010 FDIC data. During the first quarter of 2011, the company recorded $723 thousand in net charge-offs, or 0.51% of average loans on an annualized basis. Comparatively, the company’s 0.51% charge-off ratio represents one of the lowest ratios of banks in South Carolina and is well below the 2.05% charge-off average for South Carolina banks as reported in fourth quarter 2010 FDIC data. While our asset quality trends have seen improvement over the past few quarters, the operating environment remains difficult with high unemployment and a weak real estate market, added Seaver.
 
During the first quarter of 2011, the company recorded total credit costs of $1.2 million compared to $1.4 million during the same period in 2010. Of the $1.2 million of credit costs, $725 thousand related to the provision for loan losses and $492 thousand related to losses on the sale of other real estate owned and related activity.  Comparatively, the company recorded a provision for loan losses of $1.4 million and income related to other real estate owned of $16 thousand during the first quarter of 2010.  The company’s reserve for loan losses was $8.4 million, or 1.45%, of loans at March 31, 2011 which provides approximately 77% coverage of non-performing loans.

Total retail deposits increased $86.4 million to $486.1 million at March 31, 2011 compared to March 31, 2010.  The increase in retail funding continued to enable the company to reduce its wholesale funding by over $43 million during the last twelve month period. Brokered deposits now represent only 9.7% of total funding for the bank.  We are excited about the significant growth in core deposits and new client relationships, commented Seaver. Clients continue to respond to our unique ClientFIRST level of service and continue to choose Southern First as their primary bank. During the first quarter of 2011, the company opened $11.9 million in new transaction accounts and recorded $36.1 million in total retail deposit growth.

Net interest margin for the first quarter of 2011 improved to 3.18% from 3.03% for the fourth quarter of 2010 and from 2.83% for the first quarter of 2010.  Despite the higher levels of liquidity, improved loan yields and lower deposit and borrowing costs have begun to develop a positive trend in the company’s net interest margin. The improvement in our margin is a direct result of the pricing discipline on both sides of our balance sheet, noted Seaver. We believe the margin momentum should continue as we have material re-pricing opportunities on over $77 million in CD’s over the next six months.

Noninterest income was $64 thousand for the three months ended March 31, 2011 compared to $570 thousand for the same period in 2010.  The $506 thousand decrease is primarily related to increased costs associated with selling and maintaining our other real estate owned.  In addition, our noninterest expenses remained virtually unchanged for the first quarter of 2011 compared to the same period in 2010 due primarily to good expense control.

Shareholders’ equity totaled $59.8 million as of March 31, 2011, a $370 thousand decrease from the same period in 2010. With a tier 1 leverage ratio of 9.93% and total risk based capital ratio of 13.32%, the company’s capital ratios far exceed the regulatory requirements for a well capitalized institution.

Total assets were $760.2 million at March 31, 2011, a 2.3% increase over total assets of $742.8 million at March 31, 2010. Total loans were $579.6 million as of March 31, 2011, a slight decrease compared to March 31, 2010.  The modest increase in assets during the twelve months ended March 31, 2011 is primarily a result of an increase in cash of $56.5 million, partially offset by a $33.0 million decrease in investment securities.

The company’s book value per common share was $12.96 as of March 31, 2011, while the closing stock price on that day as reported on The NASDAQ Global Market was $7.99 per share.

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 consists of Southern First Bank, N.A., the 8th largest bank headquartered in South Carolina; which also does business as Greenville First Bank, N.A. in Greenville County.  Since 1999 Southern First Bancshares has been providing financial services and now operates in 6 locations in the Greenville and Columbia markets of South Carolina.  Southern First Bancshares has assets of approximately $760 million and its stock is traded under the symbol SFST in the NASDAQ Global Market.  More information can be found at www.southernfirst.com.