Southern First Reports Results for Third Quarter of 2011

GREENVILLE, SC – October 25, 2011 – Southern First Bancshares, Inc. (NASDAQ: SFST), holding company for Southern First Bank, NA (also doing business as Greenville First Bank), announced that net income for the third quarter of 2011 was $483 thousand compared to $337 thousand for the third quarter of 2010.  After dividends paid to the US Treasury on our preferred stock, net income available to the common shareholders was $197 thousand compared to $55 thousand for the third quarter of 2010.

Third Quarter 2011 Highlights

• Third quarter earnings improved to $483 thousand from $337 thousand in prior year Loan balances increased by $13.1 million during third quarter of 2011
• Net interest margin increased to 3.36%, an increase for the fifth consecutive quarter
• New transaction accounts increased by 32% during the third quarter compared to the prior year
• Nonperforming assets improved for the fifth straight quarter to 1.65% from 2.24% in prior year

“During the third quarter, our company’s success was evident as we continue to focus on growing long term client relationships and improving core profitability,” stated Art Seaver, the company’s CEO. “Loan growth was strong, core deposit growth was solid, and our net margin was the highest level in over three years. Nonperforming assets have now declined for the 5th straight quarter and total credit costs have declined by 19% from the same period in 2010.” 

Net income for the nine months ended September 30, 2011 was $1.7 million compared to $450 thousand for the nine months ended September 30, 2010.  After dividends paid to the US Treasury on our preferred stock, net income available to the common shareholders was $793 thousand for the nine month period in 2011 compared to a net loss to the common shareholders of $392 thousand for the same period in 2010.

Nonperforming assets decreased to $12.5 million or 1.65% of total assets as of September 30, 2011.  Of the $12.5 million in total nonperforming assets, nonperforming loans represent $9.2 million and other real estate owned represents $3.3 million.  During the first nine months of 2011, the company recorded $2.7 million in net charge-offs, or 0.62% of average loans on an annualized basis.

During the third quarter of 2011, the company recorded total credit costs of $1.7 million compared to $1.3 million during the third quarter of 2010.  Of the $1.7 million in credit costs, $1.7 million related to the provision for loan losses while $16 thousand related to losses on the sale of other real estate owned.  Comparatively, the company recorded a loan loss provision of $1.3 million and expenses related to real estate owned activity of $60 thousand during the same period in 2010.  For the nine months ended September 30, 2011, total credit costs were $4.1 million consisting of a $3.1 million provision for loan losses and $1.1 million related to losses on the sale of other real estate owned and related activity.  Total credit costs were $5.0 million during the nine months ended September 30, 2010 and related primarily to a $5.0 million provision for loan losses.  The company’s allowance for loan losses was $8.8 million, or 1.48%, of loans at September 30, 2011 which provides approximately 95% coverage of non-performing loans.

Total loans were $591.1 million as of September 30, 2011, a $13.1 million increase compared to June 30, 2011 and an $11.2 million increase from September 30, 2010.  Total retail deposits increased $58.5 million to $508.9 million at September 30, 2011 compared to September 30, 2010.  The increase in retail funding continued to enable the company to reduce its wholesale funding by over $46 million during the last twelve month period. Brokered deposits now represent only 6.0% of total funding for the bank.

Net interest margin for the third quarter of 2011 improved to 3.36% from 3.28% for the previous quarter of 2011 and from 3.00% for the third quarter of 2010.  The net interest margin for the first nine months of 2011 was 3.27% compared to 2.87% for the nine months ended September 30, 2010.

Noninterest income was $723 thousand and $147 thousand, respectively, for the three months ended September 30, 2011 and 2010.  For the nine months ended September 30, 2011 and 2010, noninterest income was $1.9 million and $2.3 million, respectively.  The increase in noninterest income during the three month period is related primarily to a $450 thousand other-than-temporary impairment recorded on an investment security during the third quarter of 2010.  During the nine month period of 2011, noninterest income decreased due primarily to a $1.1 million gain on sale of investment securities recorded in the second quarter of 2010, partially offset by a $450 thousand other-than-temporary impairment recorded during the third quarter of 2010.  In addition, our noninterest expense was $4.4 million and $3.7 million, respectively, for the three months ended September 30, 2011 and 2010.  Noninterest expense for the nine month periods ended September 30, 2011 and 2010 was $13.7 million and $11.8 million, respectively.  The increase in noninterest expense during the three and nine month periods related primarily to increased compensation and benefits expenses and costs associated with selling and maintaining our other real estate owned.

Shareholders’ equity totaled $61.9 million as of September 30, 2011, a $1.8 million increase from the same period in 2010. With a tier 1 leverage ratio of 9.84% and total risk based capital ratio of 13.69%, the company’s capital ratios exceed the regulatory requirements for a “well capitalized” institution.

During the third quarter of 2011, the Company determined that it had been accounting for its preferred stock and related discount accretion in error.  All prior period amounts related to preferred stock, discount accretion, net income (loss) to common shareholders and earnings (loss) per common share have been restated.  The error was not material to the interim and annual financial statements.

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.