Southern First Reports Results For Second Quarter 2019

Southern First Bancshares, Inc. (NASDAQ: SFST), holding company for Southern First Bank, today announced its financial results for the three- and six-month periods ended June 30, 2019.

2019 Second Quarter Highlights
• Net income improved to $7.2 million, a 31.4% increase over Q2 2018
• Diluted EPS improved to $0.93 per share, a 31.0% increase over Q2 2018
• Total revenue growth of 18.7% over Q2 2018
• Efficiency ratio of 55.1% for Q2 2019, compared to 57.4% for Q2 2018
• Loan growth of $75.4 million, or 17.4% on an annualized basis
• Deposit growth of $95.8 million, or 21.8% on an annualized basis, with 96% of the growth being in core deposits
• Nonperforming assets of 0.27% of total assets
• Net charge-offs of 0.06% of average loans on an annualized basis

“Our second quarter performance was exceptional as we made over $7.2 million in earnings for the quarter,” stated Art Seaver, the Company’s Chief Executive Officer. “I am grateful to our talented team of bankers as outstanding growth in core deposits, loans, and mortgage production were significant contributors to our results.”

Net income for the second quarter of 2019 was $7.2 million, a 31.4% increase over the second quarter of 2018. For the six months ended June 30, 2019, net income was $13.2 million, an increase of 23.5% over the six months ended June 30, 2018. Net interest income increased 13.2% for the second quarter of 2019 compared to the second quarter of 2018 and 12.9% for the first six months of 2019 as compared to the first six months of 2018. The increase in net interest income was driven by overall loan growth, partially offset by growth in interest-bearing deposits.

Noninterest income increased $1.3 million, or 47.6%, during the three months ended June 30, 2019 compared to the three months ended June 30, 2018, and increased $1.9 million, or 36.4%, for the six months ended June 30, 2019 compared to the six months ended June 30, 2018. The increase for both the three- and six-month periods was driven by higher mortgage banking income as a result of additional mortgage executives and the favorable mortgage rate environment.

Noninterest expense increased $1.4 million, or 13.9%, for the second quarter of 2019 compared to the second quarter of 2018, and increased $2.8 million, or 14.8%, for the first six months of 2019 compared to the first six months of 2018. The increase in noninterest expense for both the three- and six-month periods related primarily to increases in compensation and benefits, occupancy, and data processing and related costs as we continue to expand our footprint in South Carolina, North Carolina, and Georgia. Included in noninterest expense are mortgage banking expenses of $1.7 million and $2.8 million for the three and six months ended June 30, 2019, respectively, and $1.2 million and $2.1 million for the three and six months ended June 30, 2018, respectively.

Our effective tax rate for the second quarter of 2019 declined to 19.2% from 21.3% for the second quarter of 2018 as a result of the favorable tax impact from various employee stock option transactions that occurred during the second quarter of 2019. Our effective tax rate was 21.3% and 22.1% for the six months ended June 30, 2019 and June 30, 2018, respectively.

Net interest income was $16.5 million for the second quarter of 2019, a $721,000 increase from the first quarter of 2019 and a $1.9 million increase from the second quarter of 2018. The increases in net interest income resulted primarily from the growth in our loan portfolio, which was partially offset by growth in interest-bearing deposits. Our net interest margin, on a tax-equivalent basis, was 3.43% for the second quarter of 2019, a nine basis point decrease from 3.52% for the first quarter of 2019 and a six basis point decrease from 3.49% for the second quarter of 2018. Our average interest-earning assets increased by $114.4 million during the second quarter of 2019 for interest income of $23.1 million, or a yield of 4.78%, while our average interest-bearing liabilities increased by $86.2 million for interest expense of $6.5 million, or a cost of 1.79%. Despite a $71.0 million increase in average loans and a two basis point increase in loan yield, the $41.2 million increase in federal funds sold and interest-earning deposits resulted in a yield on total interest-earning assets of 4.78%, a three basis point decrease from the first quarter of 2019. The increase in total cost of funds for the second quarter of 2019 was driven by the $92.4 million increase in interest-bearing deposits with a 10 basis point increase in deposit costs from the first quarter of 2019.

Total nonperforming assets declined by $240,000 to $5.8 million, which represents 0.27% of total assets, a decrease of three basis points compared to March 31, 2019. The decrease in nonperforming assets was primarily a result of a $102 million increase in total assets during the second quarter. The allowance for loan losses as a percentage of nonaccrual loans was 277.9% at June 30, 2019, an increase from 265.4% at March 31, 2019 and 208.5% at June 30, 2018.

At June 30, 2019, the allowance for loan losses was $16.1 million, or 0.89% of total loans compared to $16.1 million, or 0.93% of total loans at March 31, 2019 and $15.8 million, or 0.94% of total loans at December 31, 2018. Net charge-offs were $207,000, or 0.06% on an annualized basis, for the second quarter of 2019 compared to $11,000 of net charge-offs for the first quarter of 2019. Net charge-offs were $978,000, or 0.23% on an annualized basis for the fourth quarter of 2018.

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 Bank 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 assets of approximately $2.1 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.


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