Southern First Reports Results for Third Quarter of 2009
October 21, 2009
GREENVILLE, SC – October 20, 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 third quarter of 2009 was $424 thousand compared to a net loss of $126 thousand for the third quarter of 2008. The $550 thousand increase is primarily due to a $1.8 million impairment charge on Fannie Mae stock during the third quarter of 2008, partially offset by increases of $435 thousand in the provision for loan losses, $825 thousand in noninterest expenses, and $257 thousand in income tax expense during the third quarter of 2009 compared to the same period in 2008.
Net income for the nine months ended September 30, 2009 was $1.3 million compared to net income of $1.5 million for the first nine 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 $700 thousand in FDIC insurance premiums, our company generated $1.3 million in earnings for the first nine months of 2009 and made significant progress on our strategic goals of maintaining strong capital ratios, managing credit risk, and growing retail deposits. In addition, the 33% increase in noninterest income, excluding the prior year impairment charge, strengthened the core earnings of our company.
During the first nine 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 average equity-to-assets ratio of 7.67% and a total risk-based capital ratio of 13.3%, the company’s capital ratios far exceed the regulatory requirements for a well capitalized institution.
While nonperforming assets as a percentage of total assets has increased from 1.42% at December 31, 2008 to 1.91% at September 30, 2009, the number of additional loans that are being placed on nonaccrual each quarter is declining. The primary reason for the higher percentage of nonperforming assets in 2009 relates to the increase in other real estate owned. The time required to foreclose and sell these properties continues to lengthen due to the soft real estate market. Nonperforming assets at September 30, 2009 consisted of $9.9 million of nonperforming loans and $4.1 million of other real estate owned. During the first nine months of 2009, the company increased its provision for loan losses to $2.8 million compared to $2.0 million during the first nine months of 2008. The company’s reserve for loan losses increased to $7.9 million or 1.39% of loans at September 30, 2009.
Deposits have increased $25.3 million during the first nine months of 2009 to $494.8 million, representing an annualized growth rate of 7.2%. The opening of two branch offices in 2008 combined with the opening of our Columbia regional office in August 2009, 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 nine months of 2009, retail deposits increased $41.3 million while out-of-market deposits declined $16.1 million.
Our net interest margin was 2.86% for the third quarter of 2009, a decrease from the 2.94% margin for the third quarter of 2008, and a 5 basis point decline from the 2.91% margin for the second quarter of 2009. Our margin for the third quarter of 2009 was negatively impacted by lower loan income a result of additional loans being placed on nonaccrual and an increase in our lower earning investment portfolio. The decline in our deposit rates offset a portion of the decrease in asset yields as our certificates of deposit continue to reprice down to the current market rates.
In addition, our noninterest income has increased $120 thousand in the third quarter of 2009 to $533 thousand compared to $413 thousand for the same period in 2008, excluding the impairment charge. The increase is primarily due to additional income related to loan origination fees, service charges on deposit accounts, and bank owned life insurance. For the first nine months of 2009, noninterest income increased $367 thousand to $1.5 million compared to $1.1 million, excluding the impairment charge, for the first nine months of 2008.
Total assets were $732.7 million at September 30, 2009, a 5.2% increase over total assets of $696.6 million at September 30, 2008. Total loans were $569.7 million as of September 30, 2009, a 1.5% increase over the same period of 2008. Total assets increased 5.7% since December 31, 2008, primarily resulting from an increase in our cash and investment portfolio of $27.4 million. During the same period, our deposits increased $25.3 million, our borrowings decreased $5.3 million and our capital increased $20.5 million.
The Company’s book value per common share was $14.56 as of September 30, 2009, while the closing stock price on that day was $8.08 per share.
SUMMARY CONSOLIDATED FINANCIAL DATA
Our summary consolidated financial data as of and for the three and nine
months ended September 30, 2009 and 2008 has not been audited but, in the
opinion of our management, contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly our financial
position and results of operations for such periods in accordance with
generally accepted accounting principles.
Three Months Nine Months
Ended September 30, Ended September 30,
2009 2008 2009 2008
(Dollars in thousands, except per share data)
Summary Results of
Operations Data:
Interest income $ 9,115 $ 10,059 $ 27,092 $ 30,705
Interest expense 4,165 5,216 12,762 16,690
Net interest income 4,950 4,843 14,330 14,015
Provision for loan
losses 1,085 650 2,810 1,950
Net interest income
after provision for
loan losses 3,865 4,193 11,520
12,065
Noninterest income
(loss) 533 (1,427) 1,466 (741)
Noninterest expense 3,865 3,040 11,258 9,212
Income (loss) before 533 (274) 1,728 2,112
taxes
Income tax expense 109 (148) 461 630
(benefit)
Net income (loss) 424 (126) 1,267 1,482
Preferred stock 218 – 512 –
dividend to be paid
Dividend accretion 127 – 297 –
Net income (loss)
available to common
shareholders $ 79 $ (126) $ 458 $ 1,482
Per Share Data:
Net income per $ 0.03 $ (0.04) $ 0.15 $ 0.50
common share,
basic
Net income per $ 0.03 $ (0.04) $ 0.15 $ 0.47
common share,
diluted
Common book value $ 14.56 $ 12.48 $ 14.56 $ 12.48
per share
Weighted average common
shares outstanding:
Basic 3,049 3,002 3,046 2,985
Diluted 3,110 3,002 3,070 3,175
Performance Ratios:
Return on average 0.23% (0.07)% 0.24% 0.29%
assets (1)
Return on average 2.80% (1.29)% 3.08% 5.02%
equity (1)
Net interest Margin 2.86% 2.94% 2.84% 2.88%
(tax-equivalent) (1)
Efficiency ratio (2) 70.49% 89.00% 71.27% 69.40%
Growth Ratios and
Other Data:
Percentage change in 162.70% (113.17)% (69.10)% (44.41)%
net income available
to common shareholders
from the same period
of the previous year
Percentage change in 175.00% (113.33)% (68.09)% (42.68)%
diluted net income per
common share from the
same period of the
previous year
(1) Annualized for the three and nine month periods.
(2) Computed by dividing noninterest expense by the sum of net interest income and noninterest income.
At September 30, At December 31,
2009 2008 2008
Summary Balance Sheet Data:
Assets $732,670 $696,566 $692,979
Federal Funds Sold 21,963 12,003 8,800
Investment securities 99,659 90,018 85,412
Loans (2) 569,687 561,275 566,607
Allowance for loan losses 7,916 6,492 7,005
Deposits 494,816 477,828 469,537
Oth
er borrowings 159,425 161,700 164,675
Junior subordinated debentures 13,403 13,403 13,403
Shareholders’ equity 60,232 37,648 39,786
Asset Quality Ratios:
Nonperforming assets, past due
and restructured loans to total
loans(2) 2.45% 0.98% 1.73%
Nonperforming assets, past due
and restructured loans to total
assets 1.91% 0.79% 1.42%
Net charge-offs year to date to
average total loans(1)(2) 0.45% 0.30% 0.35%
Allowance for loan losses to
nonperforming loans 80.15% 188.54% 91.00%
Allowance for loan losses to
total loans(2) 1.39% 1.16% 1.24%
Capital Ratios:
Average equity to average assets 7.67% 5.81% 5.73%
Leverage ratio 9.90% 7.70% 7.70%
Tier 1 risk-based capital ratio 12.10% 9.20% 9.20%
Total risk-based capital ratio 13.30% 10.30% 10.40%
Growth Ratios and Other Data:
Percentage change in assets from
prior year 5.18%
Percentage change in net loans from
prior year(2) 1.26%
Percentage change in deposits from
prior year 3.56%
Percentage change in equity from
prior year 59.99%
Loans to deposits ratio(2) 115.13%
(1) Annualized for the nine month periods.
(2) Includes nonperforming loans.
