Southern First reports results for second quarter 2024

Southern First Bancshares, Inc. (NASDAQ: SFST), holding company for Southern First Bank, today announced its financial results for the three-month period ended June 30, 2024.

“We reported solid performance in the second quarter with improved profitability across all measures. Loans and core deposits were modestly down, as expected, as we continue to focus on disciplined pricing on both sides of the balance sheet. Noninterest-bearing deposit growth was excellent, which reflects the strength of our team. We are expanding profitable client relationships by delivering a unique, authentic service experience. Economic conditions across all our markets remain positive, but we are constantly aware of the broader environment and remain diligent and conservative. Our focus on building a strong, high-quality balance sheet with measured, deliberate growth has been paying off in our financial results,” stated Art Seaver, the Company’s Chief Executive Officer. “We are balancing our objective of delivering high performance today with our patience in building an even stronger company for the future. Part of this effort is attracting high-quality talent to our Southern First team and we did just that this quarter with the addition of Chris Zych as Chief Financial Officer. Chris’s depth of experience and success in banking over the years will be an asset to us.”

2024 Second Quarter Highlights

• Net income was $3.0 million and diluted earnings per common share were $0.37 for Q2 2024
• Total loans were $3.6 billion at Q2 2024, a decrease of $21.2 million, or 2.35% annualized, from Q1 2024
• Total deposits were $3.5 billion at Q2 2024, a decrease of $812 thousand, or 0.09% annualized, from Q1 2024
• Nonperforming assets to total assets were 0.27% and past due loans to total loans were 0.30% at Q2 2024
• Net interest margin was 1.98% for Q2 2024, compared to 1.94% for Q1 2024
• Book value per common share increased to $39.09 at Q2 2024

Net income for the second quarter of 2024 was $3.0 million, or $0.37 per diluted share, a $477 thousand increase from the first quarter of 2024 and a $541 thousand increase from the second quarter of 2023. Net interest income increased $883 thousand during the second quarter of 2024, compared to the first quarter of 2024, and increased $703 thousand, compared to the second quarter of 2023. The increase in net interest income from the prior quarter and prior year was driven by additional interest income on our interest-earning assets.

The provision for credit losses was $500 thousand for the second quarter of 2024, compared to a reversal of $175 thousand during the first quarter of 2024. The second quarter provision for credit losses includes a $750 thousand provision related to the loan portfolio which was driven by an increase in the level of charge-offs we experienced during the quarter, combined with an increase in the specific reserve on individually assessed loans. In addition, the provision for credit losses includes a $250 thousand reversal in the provision for unfunded commitments due to a decrease in the balance of unfunded commitments at June 30, 2024.

Noninterest income was $3.5 million for the second quarter of 2024, compared to $2.7 million for the first quarter of 2024. Mortgage banking income continues to be the largest component of our noninterest income at $1.9 million for the second quarter of 2024 compared to $1.2 million for the first quarter of 2024.

Noninterest expense for the second quarter of 2024 was $18.6 million, a $543 thousand increase from the first quarter of 2024. The increase in noninterest expense from the previous quarter was driven by an increase in compensation and benefits expense as well as an increase in outside service and data processing costs. The increase in compensation and benefits expenses was due primarily to an increase in salaries and commissions expense, while the increase in outside service and data processing costs was driven by an increase in software licensing and maintenance costs.

Our effective tax rate was 23.3% for the second quarter of 2024 as compared to 25.5% for the first quarter of 2024. The lower tax rate in the second quarter of 2024 was primarily related to the effect of equity compensation transactions during the quarter.

Net interest income was $19.5 million for the second quarter of 2024, an $883 thousand increase from the first quarter of 2024, driven by a $2.2 million increase in interest income, on a tax-equivalent basis, partially offset by a $1.3 million increase in interest expense. The increase in interest income was driven by a $96.6 million increase in average federal funds sold and interest-bearing deposit balances, combined with a higher yield on our loan portfolio. Our net interest margin, on a tax-equivalent basis, was 1.98% for the second quarter of 2024, a four-basis point increase from 1.94% for the first quarter of 2024. During the second quarter of 2024, the yield on our loan portfolio increased by nine-basis points, while the cost of our interest-bearing deposits increased by only six-basis points, as compared to the first quarter of 2024, resulting in an increase in net interest margin for the period. In addition, our non-interest bearing deposits increased 6.94%, on an annualized basis, during the second quarter of 2024.

Total nonperforming assets increased by $7.6 million during the second quarter of 2024, and represented 0.27% of total assets, an increase compared to 0.09% for the first quarter of 2024. The increase in nonperforming assets was driven by four new relationships, totaling $8.0 million, placed on nonaccrual during the second quarter of 2024, with one commercial relationship totaling $6.9 million related to the assisted living industry. In addition, our classified asset ratio increased to 4.22% for the second quarter of 2024 from 3.99% in the first quarter of 2024.

At June 30, 2024, the allowance for credit losses was $40.2 million, or 1.11% of total loans, compared to $40.4 million, or 1.11% of total loans at March 31, 2024. We had net charge-offs of $1.0 million, or 0.11% annualized, for the second quarter of 2024, compared to net charge-offs of $241 thousand, or 0.03% annualized, for the first quarter of 2024. We recorded a $750 thousand provision for credit losses related to the loan portfolio during the second quarter of 2024, compared to no provision related to the loan portfolio for the first quarter of 2024.

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 second 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 $4.1 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.com.