Southern First reports results for third quarter of 2018

Southern First Bancshares, Inc. (NASDAQ: SFST), holding company for Southern First Bank, reported net income available to common shareholders of $5.8 million, or $0.75 per diluted share, for the third quarter of 2018. In comparison, net income available to common shareholders was $4.3 million, or $0.55 per diluted share, for the third quarter of 2017. For the nine months ended September 30, 2018, net income available to common shareholders was $16.5 million, or $2.13 per diluted share. In comparison, net income to common shareholders for the nine months ended September 30, 2017 was $11.0 million, or $1.50 per diluted share.

2018 Third Quarter Highlights

• Net income available to common shareholders increased 36% to $5.8 million for Q3 2018 compared to $4.3 million for Q3 2017
• Total loans increased 22% to $1.62 billion at Q3 2018, compared to $1.33 billion at Q3 2017
• Total deposits increased 18% to $1.59 billion at Q3 2018, compared to $1.34 billion at Q3 2017
• Total core deposits increased 20% to $1.39 billion at Q3 2018, compared to $1.16 billion at Q3 2017
• Net interest margin remained at 3.60% for Q3 2018 compared to Q3 2017

“I am proud of our Southern First team and our third quarter results as we report record earnings and loan growth for the quarter,” stated Art Seaver, the company’s Chief Executive Officer. “Our team continues to build and develop client relationships in each of our markets, generating strong momentum as we finish out 2018.”

Operating Results

Net interest margin was 3.60% for the third quarter of 2018 and 2017. During the third quarter of 2018, our average interest-earning assets increased by $233.4 million, compared to the third quarter of 2017, while the yield on our interest-earning assets increased by 30 basis points. In comparison, our average interest-bearing liabilities increased by $180.7 million during the third quarter of 2018, compared to the third quarter of 2017, with the respective cost increasing by 40 basis points.

Noninterest income was $2.5 million for the three months ended September 30, 2018 and 2017. For the nine months ended September 30, 2018 and 2017, noninterest income was $7.7 million and $7.2 million, respectively. While total noninterest income was relatively unchanged for the three-month period ended September 30, 2018 as compared to the same period in 2017, ATM and debit card income increased and mortgage banking income and service fees on deposit accounts decreased during the third quarter of 2018. The increase in noninterest income during the nine-month period ended September 30, 2018 was driven primarily by increases in mortgage banking income, ATM and debit card income and other income, partially offset by a decrease in service fees on deposit accounts. Mortgage banking revenue comprises a significant portion of our noninterest income and totaled $1.4 million and $4.3 million for the three and nine months ended September 30, 2018, respectively, and $1.4 million and $4.1 million for the three and nine months ended September 30, 2017, respectively.

Noninterest expense was $10.2 million and $8.8 million for the three months ended September 30, 2018 and 2017, respectively, and $29.4 million and $25.9 million for the nine months ended September 30, 2018 and 2017, respectively. The increase in noninterest expense during both the three- and nine-month periods ended September 30, 2018 was driven primarily by increases in compensation and benefits, occupancy, and insurance expense, while professional fees also contributed to the increase during the nine-months ended September 30, 2018. Included in noninterest expense are mortgage banking expenses of $1.1 million and $3.2 million for the three and nine months ended September 30, 2018, respectively, and $970 thousand and $2.9 million for the three and nine months ended September 30, 2017, respectively.

During the three months ended September 30, 2018, we recorded total credit costs of $401 thousand, including a $400 thousand provision for loan losses and $1,000 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 2018 of $360 thousand, or 0.09% of average loans, annualized. During the three months ended September 30, 2017, our total credit costs were $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. Net loan charge-offs for the third quarter of 2017 were $365 thousand, or 0.11% of average loans, annualized. For the nine months ended September 30, 2018 and 2017, total credit costs were $1.3 million and $1.5 million, respectively. Our allowance for loan losses was $16.1 million, or 1.00% of gross loans, at September 30, 2018, which provides approximately 271% coverage of nonaccrual loans, compared to $15.6 million, or 1.17% of gross loans, and approximately 278% coverage of nonaccrual loans at September 30, 2017.

Nonperforming assets were $6.1 million, or 0.33% of total assets, as of September 30, 2018. Comparatively, nonperforming assets were $6.0 million, or 0.39% of total assets, at September 30, 2017. Of the $6.1 million in total nonperforming assets as of September 30, 2018, nonperforming loans represent $6.0 million and other real estate owned represents $117 thousand. Classified assets totaled 9% of tier 1 capital plus the allowance for loan losses at September 30, 2018, compared to 11% at September 30, 2017.

Gross loans were $1.6 billion, excluding mortgage loans held for sale, as of September 30, 2018, compared to $1.3 billion at September 30, 2017. Core deposits, which exclude out-of-market deposits and time deposits of $250,000 or more, totaled to $1.4 billion at September 30, 2018 compared to $1.2 billion at September, 2017.

Shareholders’ equity totaled $166.9 million as of September 30, 2018, compared to $149.7 million at December 31, 2017, and $147.4 million at September 30, 2017. As of September 30, 2018, 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 13 locations in the Greenville, Columbia, and Charleston markets of South Carolina, as well as the Triangle and Triad regions of North Carolina and Atlanta, Georgia. Southern First Bancshares has consolidated assets of approximately $1.9 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.