Southern First reports results for third quarter of 2017

Southern First Bancshares, Inc. (NASDAQ: SFST) holding company for Southern First Bank, today reported net income available to common shareholders of $4.2 million, or $0.55 per diluted share, for the third quarter of 2017. In comparison, net income available to common shareholders was $3.4 million, or $0.51 per diluted share, for the third quarter of 2016. For the nine months ended September 30, 2017, net income to common shareholders was $11.0 million, or $1.50 per diluted share. In comparison, net income to common shareholders for the nine months ended September 30, 2016 was $9.7 million, or $1.45 per diluted share.

2017 Third Quarter Highlights

• Net income to common shareholders increased 24% to $4.2 million for Q3 2017 compared to $3.4 million for Q3 2016
• Total loans increased 19% to $1.33 billion at Q3 2017, compared to $1.11 billion at Q3 2016
• Total deposits increased 28% to $1.34 billion at Q3 2017, compared to $1.05 billion at Q3 2016
• Other borrowings decreased by 66%, or $76.0 million, compared to Q3 2016
• Efficiency ratio improved to 55.6% for Q3 2017

“We are excited about our earnings momentum as we surpassed $4.0 million in net income for the first time in our company’s history,” stated Art Seaver, the company’s Chief Executive Officer. “Our investments in talent and infrastructure continue to produce strong core deposit growth, enabling our company to transform the liability side of our balance sheet.”

Operating Results

Net interest margin for the third quarter of 2017 was 3.60%, compared to 3.63% for the third quarter of 2016. During the third quarter of 2017, our average interest-earning assets increased by $274.5 million, compared to the third quarter of 2016, while the yield on our interest-earning assets remained stable. In comparison, our average interest-bearing liabilities increased by $188.6 million during the third quarter of 2017, compared to the third quarter of 2016, while the cost of these liabilities increased by seven basis points. The increase in the cost of our interest-bearing liabilities drove the three basis point decrease in the net interest margin for the 2017 period as compared to 2016.

Noninterest income was $2.5 million and $3.0 million for the three months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016, noninterest income was $7.2 million and $8.7 million, respectively. The decrease in noninterest income during the three- and nine-month periods ended September 30, 2017 relates primarily to a decrease in mortgage banking revenue during the 2017 periods, combined with a gain on sale of investment securities in the first quarter of 2016. Specifically, mortgage banking revenue was $1.4 million and $4.1 million for the three and nine months ended September 30, 2017, respectively, and $2.0 million and $5.7 million for the three and nine months ended September 30, 2016, respectively.

Noninterest expense was $8.8 million and $7.8 million for the three months ended September 30, 2017 and 2016, respectively, and $25.9 million and $23.2 million for the nine months ended September 30, 2017 and 2016, respectively. The increase in noninterest expense during the three- and nine-month periods ended September 30, 2017 relates primarily to increases in compensation and benefits, occupancy, and outside service and data processing costs, partially offset by a decrease in real estate owned expenses. Included in noninterest expense are mortgage banking expenses of $970 thousand and $2.9 million for the three and nine months ended September 30, 2017, respectively, and $1.3 million and $3.5 million for the three and nine months ended September 30, 2016, respectively.

During the three months ended September 30, 2017, we recorded total credit costs of $528 thousand, including a $500 thousand provision for loan losses and $28 thousand of expenses related to the sale and management of other real estate owned. In addition, we had net charge-offs for the third quarter of 2017 of $365 thousand, or 0.11% of average loans, annualized. During the three months ended September 30, 2016, our total credit costs were $906 thousand, including an $825 thousand provision for loan losses and $81 thousand of expenses related to the sale and management of other real estate owned. Net loan charge-offs for the third quarter of 2016 were $664 thousand, or 0.24% of average loans on an annual basis. For the nine months ended September 30, 2017 and 2016, total credit costs were $1.5 million and $2.7 million, respectively. Our allowance for loan losses was $15.6 million, or 1.17% of loans, at September 30, 2017, which provides approximately 278% coverage of nonaccrual loans, compared to $14.5 million, or 1.30% of loans, and approximately 258% coverage of nonaccrual loans at September 30, 2016.

Nonperforming assets were $6.0 million, or 0.39% of total assets, as of September 30, 2017. Comparatively, nonperforming assets were $7.5 million, or 0.58% of total assets, at September 30, 2016. Of the $6.0 million in total nonperforming assets as of September 30, 2017, nonperforming loans represent $5.6 million and other real estate owned represents $420 thousand. Classified assets improved to 11% of tier 1 capital plus the allowance for loan losses at September 30, 2017, compared to 16% at September 30, 2016.

Gross loans were $1.3 billion, excluding mortgage loans held for sale, as of September 30, 2017, compared to $1.1 billion at September 30, 2016. Core deposits, which exclude out-of-market deposits and time deposits of $250,000 or more, increased to $1.2 billion at September 30, 2017 compared to $880.4 million at September 30, 2016.

Shareholders’ equity totaled $147.4 million as of September 30, 2017, compared to $109.9 million at December 31, 2016, and $106.0 million at September 30, 2016. As of September 30, 2017, 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’s wholly-owned subsidiary, Southern First Bank, is the third largest bank headquartered in South Carolina. Southern First Bancshares has been providing financial services since 1999 and now operates in 11 locations in the Greenville, Columbia, and Charleston markets of South Carolina as well as Raleigh, North Carolina and Atlanta, Georgia. Southern First Bancshares has consolidated assets of approximately $1.6 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