Southern First reports results for third 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 September 30, 2024.

“Our third quarter results continued our positive momentum and outlook this year. Our focus on building a high-quality balance sheet again rewarded us with outstanding asset quality performance, which is among the industry’s best. We are well-positioned for increasing profitability in this operating environment despite persistent growth headwinds and uncertain interest rate moves by the Fed,” stated Art Seaver, the Company’s Chief Executive Officer. “This quarter we executed on opportunities to lower our funding costs, which is reflected in our solid margin expansion. Our team did an outstanding job of growing core checking accounts by 21%, annualized. Loan growth was flat due to our deliberate actions around disciplined pricing and high credit quality standards. We also believe that business growth may be waiting for additional clarity on interest rates, the political environment and global influences on the economy. Meanwhile, we are taking care of our clients and developing strong business pipelines one relationship at a time with relentless relationship banking and exceptional service.”

2024 Third Quarter Highlights

• Net income of $4.4 million and diluted earnings per common share of $0.54
• Total loans of $3.6 billion and total deposits of $3.5 billion
• Nonperforming assets to total assets of 0.28% and net recoveries of $9 thousand
• Net interest margin of 2.08% for Q3 2024, compared to 1.98% for Q2 2024
• Book value per common share of $40.04 and TCE ratio of 7.82%

Net income for the third quarter of 2024 was $4.4 million, or $0.54 per diluted share, a $1.4 million increase from the second quarter of 2024 and a $284 thousand increase from the third quarter of 2023. Net interest income increased $1.1 million during the third quarter of 2024, compared to the second quarter of 2024, and increased $1.2 million, compared to the third 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.

There was no provision for credit losses for the third quarter of 2024, compared to a provision for credit losses of $500 thousand during the second quarter of 2024. There was no provision during the third quarter due to loans remaining flat and low charge-offs during the quarter.

Noninterest income was $3.2 million for the third quarter of 2024, compared to $3.5 million for the second quarter of 2024. Mortgage banking income continues to be the largest component of our noninterest income at $1.4 million for the third quarter of 2024 compared to $1.9 million for the second quarter of 2024.

Noninterest expense for the third quarter of 2024 was $18.0 million, a $604 thousand decrease from the second quarter of 2024. The decrease in noninterest expense from the previous quarter was driven by a decrease in compensation and benefits expense. The decrease in compensation and benefits expenses was due primarily to a decrease in commissions expense and certain employee benefits expenses.

Our effective tax rate was 23.5% for the third quarter of 2024 as compared to 23.3% for the second quarter of 2024.

Net interest income was $20.6 million for the third quarter of 2024, a $1.1 million increase from the second quarter of 2024, driven by a $625 thousand increase in interest income, on a tax-equivalent basis, and a $438 thousand decrease in interest expense. The increase in interest income was driven by a $1.0 million increase in interest income on loans resulting from loans being originated and renewed at higher rates than much of our loan portfolio. Our net interest margin, on a tax-equivalent basis, was 2.08% for the third quarter of 2024, a ten-basis point increase from 1.98% for the second quarter of 2024. During the third quarter of 2024, the yield on our loan portfolio increased by seven-basis points, while the cost of our interest-bearing deposits decreased by two-basis points, as compared to the second quarter of 2024, resulting in an increase in net interest margin for the period.

Total nonperforming assets increased by $365 thousand during the third quarter of 2024, and represented 0.28% of total assets, compared to 0.27% for the second quarter of 2024. The increase in nonperforming assets was driven by three new relationships, totaling $698 thousand, placed on nonaccrual during the third quarter of 2024, offset by one relationship returning to accrual status and several large paydowns on existing nonaccrual loans. In addition, our classified asset ratio was 4.35% for the third quarter of 2024 compared to 4.22% for the second quarter of 2024.

At September 30, 2024 and June 30, 2024, the allowance for credit losses was $40.2 million, or 1.11% of total loans. We had net recoveries of $9 thousand, or 0.00% annualized, for the third quarter of 2024, compared to net charge-offs of $1.0 million, or 0.11% annualized, for the second quarter of 2024. We did not record a provision for credit losses related to the loan portfolio during the third quarter of 2024, compared to a $750 thousand provision for credit losses related to the loan portfolio for the second 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 $4.2 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.

FORWARD-LOOKING STATEMENTS

Certain statements in this news release contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to future plans and expectations, and are thus prospective. Such forward-looking statements are identified by words such as “believe,” “expect,” “anticipate,” “estimate,” “preliminary”, “intend,” “plan,” “future, “target,” “continue,” “lasting,” “building,” and “project,” as well as similar expressions. Such statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, we can give no assurance that the results contemplated in the forward-looking statements will be realized. The inclusion of this forward-looking information should not be construed as a representation by our company or any person that the future events, plans, or expectations contemplated by our company will be achieved.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (2) the strength of the United States economy in general and the strength of the local economies in which the company conducts operations may be different than expected; (3) the rate of delinquencies and amounts of charge-offs, the level of allowance for credit loss, the rates of loan and deposit growth as well as pricing of each product, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (4) changes in legislation, regulation, policies, or administrative practices, whether by judicial, governmental, or legislative action, including, but not limited to, changes affecting oversight of the financial services industry or consumer protection; (5) the impact of changes to Congress and the Presidential election on the regulatory landscape and capital markets; (6) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) could continue to have a negative impact on the company; (7) changes in interest rates, which may continue to affect the company’s net income, interest expense, prepayment penalty income, mortgage banking income, and other future cash flows, or the market value of the company’s assets, including its investment securities; (8) elevated inflation which may cause adverse risk to the overall economy, and could indirectly pose challenges to our clients and to our business; (9) any increase in FDIC assessments which have increased and may continue to increase our cost of doing business; and (10) changes in accounting principles, policies, practices, or guidelines. Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov). All subsequent written and oral forward-looking statements concerning the company or any person acting on its behalf is expressly qualified in its entirety by the cautionary statements above. We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law.