Southern First Reports Results for Third Quarter 2019

Greenville, South Carolina, October 22, 2019 – Southern First Bancshares, Inc. (NASDAQ: SFST), holding company for Southern First Bank, today announced its financial results for the three- and nine-month periods ended September 30, 2019.

2019 Third Quarter Highlights
• Net income improved to $7.4 million, a 28.2% increase over Q3 2018
• Diluted EPS improved to $0.95 per share, a 26.7% increase over Q3 2018
• Efficiency ratio of 53.0% for Q3 2019, compared to 56.5% for Q3 2018
• Loan growth of $29.1 million, or 6.4% on an annualized basis
• Deposit growth of $45.3 million, or 9.7% on an annualized basis
• Core deposit growth of $70.6 million, or 17.3% on an annualized basis
• Completion of $23.0 million, 4.75% fixed-to-floating rate, subordinated debt offering

“I am proud to report another quarter of outstanding performance with $7.4 million in earnings and core deposit growth of $70.6 million,” stated Art Seaver, the Company’s Chief Executive Officer. “Our team is intent on serving our clients and providing a unique client experience, as evidenced by the growth in new client relationships and retail deposits as well as excellent production by our mortgage team.”

Net income for the third quarter of 2019 was $7.4 million, a 28.2% increase over the third quarter of 2018. For the nine months ended September 30, 2019, net income was $20.7 million, an increase of 25.2% over the nine months ended September 30, 2018. Net interest income increased 11.5% for the third quarter of 2019 compared to the third quarter of 2018 and 12.4% for the first nine months of 2019 as compared to the first nine months of 2018. The increase in net interest income was driven by growth in interest-earning assets, partially offset by growth in interest-bearing deposits.

Noninterest income increased $1.9 million, or 73.5%, during the three months ended September 30, 2019 compared to the three months ended September 30, 2018, and increased $3.8 million, or 48.6%, for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. The increase for both the three- and nine-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 $1.3 million, or 12.7%, for the third quarter of 2019 compared to the third quarter of 2018, and increased $4.1 million, or 14.1%, for the first nine months of 2019 compared to the first nine months of 2018. The increase in noninterest expense for both the three- and nine-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 $1.9 million and $4.7 million for the three and nine months ended September 30, 2019, respectively, and $1.1 million and $3.2 million for the three and nine months ended September 30, 2018, respectively.

Our effective tax rate was 22.3% for both three-month periods ended September 30, 2019 and 2018 and 21.6% and 22.2% for the nine months ended September 30, 2019 and September 30, 2018, respectively.

Net interest income was $17.3 million for the third quarter of 2019, a $740,000 increase from the second quarter of 2019 and a $1.8 million increase from the third quarter of 2018. The increases in net interest income resulted primarily from the growth in our cash balances and loan portfolio, which was partially offset by growth in interest-bearing deposits. Our net interest margin, on a tax-equivalent basis, was 3.36% for the third quarter of 2019, a seven basis point decrease from 3.43% for the second quarter of 2019 and a 24 basis point decrease from 3.60% for the third quarter of 2018. Our average interest-earning assets increased by $102.0 million during the third quarter of 2019 for interest income of $24.1 million, or a yield of 4.68%, while our average interest-bearing liabilities increased by $58.6 million for interest expense of $6.8 million, or a cost of 1.76%. While our average loans grew by $53.9 million and our average federal funds sold and interest-bearing deposits grew by $39.3 million during the third quarter, our yield on interest-earning assets declined by 10 basis points from the second quarter of 2019. In addition, our interest-bearing liabilities, which consist primarily of interest-bearing deposits, grew by $58.6 million, while the total cost of funds declined three basis points in the third quarter of 2019.

Total nonperforming assets increased by $1.2 million to $7.0 million, which represents 0.32% of total assets, an increase of five basis points compared to June 30, 2019. The increase in nonperforming assets was primarily a result of $2.9 million added to nonaccrual loans during the third quarter, partially offset by $1.6 million of nonaccrual loans removed or charged-off. The allowance for loan losses as a percentage of nonaccrual loans was 225.5% at September 30, 2019, a decrease from 277.9% at June 30, 2019 and 270.5% at September 30, 2018.

At September 30, 2019, the allowance for loan losses was $15.8 million, or 0.86% of total loans compared to $16.1 million, or 0.89% of total loans at June 30, 2019 and $15.8 million, or 0.94% of total loans at December 31, 2018. Net charge-offs were $946,000, or 0.21% on an annualized basis, for the third quarter of 2019 compared to $207,000, or 0.06% of net charge-offs, annualized, for the second quarter of 2019. Net charge-offs were $360,000 for the third quarter of 2018, or 0.09% on an annualized basis.

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 $2.2 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