Southern First Reports Results For Third Quarter Of 2014

GREENVILLE, SC –  Southern First Bancshares, Inc. (NASDAQ: SFST) holding company for Southern First Bank, today reported net income available to the common shareholders of $1.6 million, or $0.31 per diluted share for the third quarter of 2014. In comparison, net income available to common shareholders was $1.2 million, or $0.27 per diluted share, for the third quarter of 2013.  For the nine months ended September 30, 2014, net income to common shareholders was $3.9 million, or $0.79 per diluted share.  In comparison, net income to common shareholders for the nine months ended September 30, 2013 was $3.1 million, or $0.71 per diluted share.

2014 Third Quarter Highlights

• Net income to common shareholders increased 28% to $1.6 million for Q3 2014 compared to $1.2 million for Q3 2013
• Loan balances increased 18.0% to $832.7 million during Q3 2014, compared to $705.4 million at Q3 2013
• Core deposits increased 23.1% to $557.4 million during Q3 2014, compared to $453.0 million at Q3 2013
• Net interest margin decreased to 3.66%  for Q3 2014, compared to 3.73% for Q3 2013 and 3.66% for Q2 2014
• Total revenue increased 19.4% to $10.1 million during Q3 2014, compared to $8.4 million for Q3 2013
• Total assets surpassed the $1 billion milestone after 14 years of operation

“I am proud of the accomplishments of the Southern First team as we generated record earnings of $1.6 million and surpassed $1 billion in total assets,” stated Art Seaver, the Company’s CEO. “We are also excited to open our second office in the Charleston region while continuing to experience solid client growth in each of our markets.”

Operating Results

Net interest margin for the third quarter of 2014 was 3.66%, unchanged from the prior quarter, and 3.73% for the third quarter of 2013.   During the third quarter of 2014, our average interest-earning assets increased by $135.2 million, compared to the third quarter of 2013; however, the yield on our interest-earning assets declined by 19 basis points.  In comparison, our average interest-bearing liabilities increased by $91.3 million during the third quarter of 2014, compared to the third quarter of 2013, with the respective cost declining by 11 basis points.

Noninterest income was $1.6 million and $1.1 million for the three months ended September 30, 2014 and 2013, respectively.  For the nine months ended September 30, 2014 and 2013, noninterest income was $4.0 million and $2.8 million, respectively.  The increase in noninterest income during the three and nine month periods ended September 30, 2014 relates primarily to increases in loan fee income and other income, as well as a $230 thousand gain on sale of investment securities which occurred during the second quarter of 2014.  A significant portion of our loan fee income relates to income derived from mortgage originations which was $820 thousand and $1.7 million for the three and nine months ended September 30, 2014, respectively. Comparatively, mortgage origination income was $357 thousand and $816 thousand for the three and nine months ended September 30, 2013, respectively.

Noninterest expense was $6.1 million and $5.5 million for the three months ended September 30, 2014 and 2013, respectively, and $18.2 million and $16.0 million for the nine months ended September 30, 2014 and 2013, respectively.  The increase in noninterest expense during the 2014 period relates primarily to increases in salaries and benefits and other noninterest expense.

During the third quarter of 2014, we recorded total credit costs of $1.4 million compared to $799 thousand during the third quarter of 2013.  The $1.4 million in credit costs during the third quarter of 2014 related primarily to the $1.3 million provision for loan losses, combined with expenses of $71 thousand related to the sale and management of other real estate owned.  In addition, net loan charge-offs for the third quarter of 2014 were $1.1 million, or 0.54% of average loans on an annual basis, and related primarily to three commercial relationships.  Comparatively, the $799 thousand in credit costs during the third quarter of 2013 related primarily to the provision for loan losses, combined with $25 thousand of expenses related to the sale and management of other real estate owned.  For the nine months ended September 30, 2014, total credit costs were $3.4 million, consisting of $3.3 million provision for loan losses and expenses of $96 thousand for the sale and management of other real estate owned.  For the nine months ended September 30, 2013, total credit costs were $2.7 million, consisting of $2.7 million provision for loan losses and expenses of $30 thousand from the sale and management of other real estate owned.  Our allowance for loan losses was $11.3 million, or 1.36% of loans, at September 30, 2014 which provides approximately 142% coverage of nonaccrual loans, compared to $9.8 million, or 1.39% of loans, at September 30, 2013.

Nonperforming assets were $11.5 million, or 1.14% of total assets, as of September 30, 2014.  Comparatively, nonperforming assets were $13.6 million, or 1.40%, at June 30, 2014, and $10.1 million, or 1.19%, at September 30, 2013.  Of the $11.5 million in total nonperforming assets as of September 30, 2014, nonperforming loans represent $8.0 million and other real estate owned represents $3.5 million.  Classified assets improved to 25% of tier 1 capital plus the allowance for loan losses at September 30, 2014, compared to 31% at September 30, 2013.

Gross loans were $832.7 million as of September 30, 2014, compared to $733.7 million at December 31, 2013, and $705.4 million at September 30, 2013.  Of the $99.1 million of loan growth during 2014, $43.2 million was in theGreenville market, $23.7 million was in the Columbia market, and $32.2 million was in the Charleston market.  Core deposits, which exclude out-of-market deposits and time deposits of $100,000 or more, increased to $557.4 million at September 30, 2014 compared to $482.0 million at December 31, 2013, and $453.0 million at September 30, 2013.  During the first nine months of 2014, core deposits grew by $75.5 million with growth of $37.5 in theGreenville market, $9.7 in the Columbia market, and $28.3 in the Charleston market.

Shareholders’ equity totaled $73.6 million as of September 30, 2014, compared to $65.7 million at December 31, 2013, and $64.8 million at September 30, 2013. As of September 30, 2014, our capital ratios continue to exceed the regulatory requirements for a “well capitalized” institution.

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 consists of Southern First Bank, the 6th largest bank headquartered in South Carolina.  Southern First Bancshares has been providing financial services since 1999 and now operates in nine locations in the Greenville, Columbia, and Charleston markets of South Carolina.  Southern First Bancshares has assets of approximately $1.0 billion and its common stock is traded in the NASDAQ Global Market under the symbol SFST.  More information can be found at www.southernfirst.com.