Southern First reports results for second quarter of 2016

Southern First Bancshares, Inc. (NASDAQ: SFST) holding company for Southern First Bank, today reported net income available to the common shareholders of $3.3 million, or $0.49 per diluted share for the second quarter of 2016. In comparison, net income available to common shareholders was $2.6 million, or $0.39 per diluted share, for the second quarter of 2015. For the six months ended June 30, 2016, net income to common shareholders was $6.3 million, or $0.94 per diluted share. In comparison, net income available to common shareholders for the six months ended June 30, 2015 was $4.6 million, or $0.70 per diluted share.

2016 Second Quarter Highlights

• Net income to common shareholders increased 29% to $3.3 million for Q2 2016 compared to $2.6 million for Q2 2015
• Core deposits increased 21% to $900.7 million at Q2 2016, compared to $741.6 million at Q2 2015
• Gross loans increased 11% to $1.07 billion at Q2 2016, compared to $963.5 million at Q2 2015
• Total revenue increased 18% to $13.7 million for Q2 2016, compared to $11.6 million for Q2 2015
• Return on average assets increased to 1.07% for Q2 2016, compared to 0.95% for Q2 2015
• Added to Russell 2000® Index as of June 27, 2016

“I’m proud of our Southern First team for their performance during the second quarter of 2016 as we generated over $3 million in quarterly earnings. We continue to see strong growth in new client relationships and excellent momentum from our mortgage team,” stated Art Seaver, the Company’s Chief Executive Officer.

Operating Results

Net interest margin for the second quarter of 2016 was 3.62%, compared to 3.64% for the prior quarter, and 3.73% for the second quarter of 2015. During the second quarter of 2016, our average interest-earning assets increased by $150.5 million, compared to the second quarter of 2015; however, the yield on our interest-earning assets declined by 14 basis points. In comparison, our average interest-bearing liabilities increased by $91.2 million during the second quarter of 2016, compared to the second quarter of 2015, with the respective cost decreasing by one basis point.

Noninterest income was $3.1 million and $2.1 million for the three months ended June 30, 2016 and 2015, respectively. For the six months ended June 30, 2016 and 2015, noninterest income was $5.7 million and $4.3 million, respectively. The increase in noninterest income during the three and six month periods ended June 30, 2016 relates primarily to increases in mortgage banking income and other income. During the second quarter of 2016, our mortgage production volume increased, and we transitioned to mandatory delivery of mortgage loans which increased our profit margin on originations.

Noninterest expense was $7.9 million and $6.6 million for the three months ended June 30, 2016 and 2015, respectively, and $15.4 million and $14.1 million for the six months ended June 30, 2016 and 2015, respectively. The $1.2 million increase in noninterest expense during the second quarter of 2016 relates primarily to increases in compensation and benefits and other real estate owned expenses, while the $1.3 million increase in noninterest expense for the six months ended June 30, 2016 is driven by increases in compensation and benefits, which includes mortgage personnel, and occupancy expenses.

During the three months ended June 30, 2016, we recorded total credit costs of $934 thousand, including a $575 thousand provision for loan losses and $359 thousand expenses related to the sale and management of other real estate owned. In addition, net loan charge-offs for the second quarter of 2016 were $156 thousand, or 0.06% of average loans, annualized. During the three months ended June 30, 2015, our total credit costs were $1.1 million, including a $1.0 million provision for loan losses and $93 thousand expenses related to the sale and management of other real estate owned. Net loan charge-offs for the second quarter of 2015 were $314 thousand, or 0.14% of average loans, annualized. For the six months ended June 30, 2016 and 2015, total credit costs were $1.8 million and $2.5 million, respectively. Our allowance for loan losses was $14.3 million, or 1.34% of loans, at June 30, 2016 which provides approximately 251% coverage of nonaccrual loans, compared to $12.9 million, or 1.34% of loans, and approximately 194% coverage of nonaccrual loans at June 30, 2015.

Nonperforming assets were $7.7 million, or 0.59% of total assets, as of June 30, 2016. Comparatively, nonperforming assets were $9.1 million, or 0.75% of total assets, at December 31, 2015, and $9.6 million, or 0.85% of total assets, at June 30, 2015. Of the $7.7 million in total nonperforming assets as of June 30, 2016, nonperforming loans represent $5.7 million and other real estate owned represents $2.0 million. Classified assets improved to 16% of tier 1 capital plus the allowance for loan losses at June 30, 2016, compared to 18% at June 30, 2015.

Gross loans were $1.065 billion, excluding mortgage loans held for sale, as of June 30, 2016, compared to $1.005 billion at December 31, 2015, and $963.5 million at June 30, 2015. Core deposits, which exclude out-of-market deposits and time deposits of $250,000 or more, increased to $900.7 million at June 30, 2016 compared to $840.2 million at December 31, 2015 and $741.6 million at June 30, 2015. In late June 2016, we received a short-term client deposit of approximately $40 million; however, a majority of this deposit was withdrawn in early July 2016.

Shareholders’ equity totaled $102.4 million as of June 30, 2016, compared to $94.2 million at December 31, 2015, and $87.7 million as of June 30, 2015. As of June 30, 2016, 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 third 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 $1.3 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.