Southern First Reports Results for Second Quarter of 2009

GREENVILLE, SC – July 21, 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 second quarter of 2009 was $355 thousand compared to $862 thousand for the second quarter of 2008.  The $507 thousand lower net income in the second quarter of 2009 compared to the same period in 2008 is primarily due to a $300 thousand special assessment related to FDIC insurance and a $275 thousand increase in the provision for loan losses. 
 
Net income for the six months ended June 30, 2009 was $843 thousand compared to net income of $1.6 million for the first six months in 2008. 
 
“The economic recession and difficult banking environment continue to negatively impact our company’s earnings,” stated Art Seaver the company’s CEO. “Despite higher credit costs and absorbing an additional $500 thousand in FDIC insurance premiums, our company generated $843 thousand in earnings for the first six months and made significant progress on our strategic goals of maintaining strong capital ratios, managing credit risk, and growing retail deposits. In addition, the combination of margin expansion and a 36% increase in noninterest income strengthened the core earnings of our company.”
 
During the first six months of 2009, all regulatory capital ratios have increased as a result of current year earnings and the company’s $17.3 million participation in the TARP Capital Purchase Program. With an equity-to-assets ratio of 7.37% and a total risk-based capital ratio of 12.8%, the company’s capital ratios far exceed the regulatory requirements for a “well capitalized” institution.
 
“The company’s intense focus on credit risk has been rewarded as nonperforming assets and past due loans declined for the quarter,” commented Seaver. The company’s nonperforming assets to total assets ratio declined slightly for the quarter to 1.77%; however, it remains elevated from the 1.42% ratio at December 31, 2008. Nonperforming assets at June 30, 2009 consisted of $8.7 million of nonperforming loans and $4.5 million of other real estate owned. During the first six months of 2009, the company increased its provision for loan losses to $1.7 million compared to $1.3 million during the first six months of 2008. The company’s reserve for loan losses increased to $7.7 million or 1.36% of loans at June 30, 2009.

Deposits have increased $26.6 million during the first six months of 2009, representing an annualized growth rate of 11.3%. The opening of two retail branch offices in 2008 has expanded the retail presence of the company in both the Greenville and Columbia markets and resulted in strong momentum in new account activity. During the first six months of 2009, the number of new transaction accounts is 18.9% greater than new accounts opened during the first six months of 2008. This activity enabled the company to reduce higher costing certificates of deposit and contributed to the improvement in net interest margin.
 
Our net interest margin was 2.91% for the second quarter of 2009, a slight increase from the 2.88% margin for the second quarter of 2008, and a 19 basis point improvement from the 2.72% margin for the first quarter of 2009.  Our margin has continued to improve during each month of 2009, due primarily to our certificates of deposit which are repricing down to the current market rates.  In addition, our noninterest income has increased $144 thousand in the second quarter of 2009 to $519 thousand compared to $375 thousand for the same period in 2008.  The 38.4% increase is primarily due to additional income related to loan origination fees and service charges on deposit accounts.  For the first six months of 2009, noninterest income increased $247 thousand to $933 thousand compared to $686 thousand for the first six months of 2008.