Exhibit 99.1
Southern First Reports Results for Third Quarter of 2012
Greenville, South Carolina, October 23, 2012 – Southern First Bancshares, Inc. (NASDAQ: SFST), holding company for Southern First Bank, N.A. (also doing business as Greenville First Bank), today announced that net income for the third quarter of 2012 was $1.2 million compared to $483 thousand for the third quarter of 2011. After dividends paid on preferred stock, net income available to the common shareholders was $842 thousand compared to $197 thousand for the third quarter of 2011. For the nine months ended September 30, 2012, net income was $2.7 million and net income to common shareholders was $1.8 million. In comparison, net income for the nine months ended September 30, 2011 was $1.7 million and the net income to common shareholders was $793 thousand.
2012 Third Quarter Highlights
Net income increased 154% to $1.2 million during the 3rd quarter of 2012 compared to the prior year
Net interest margin for the 3rd quarter of 2012 increased to 3.72% compared to 3.36% in 2011
Loan balances increased to $637.7 million as of September 30, 2012 compared to $591.1 million in 2011
Nonperforming assets improved to 1.43% at 3rd quarter 2012 compared to 1.65% in 2011
Strong loan production in new Charleston, South Carolina market
“Our third quarter earnings represent the strongest quarterly earnings performance in our company’s history,” stated Art Seaver, the company’s CEO. “We continue to experience solid loan growth and are particularly excited about the early production from our Charleston team. While our East Bay Street office in Charleston will not physically open until November, we have already booked over $8 million in loans outstanding. This loan growth, coupled with our continued margin expansion and fee income, has clearly impacted our earnings momentum. Our continued focus on reducing nonperforming assets and credit costs is evident as our nonperforming asset ratio is at the lowest level in nearly four years.”
| | | Quarter Ended |
| | September 30 | June 30 | March 31 | December 31 | September 30 |
| | 2012 | 2012 | 2012 | 2011 | 2011 |
Earnings ($ in thousands, except per share data): | | | | | | |
Net income | $ | 1,226 | 815 | 688 | 440 | 483 |
Net income to common shareholder | | 842 | 589 | 399 | 152 | 197 |
Earnings per common share, diluted (4) | | 0.21 | 0.15 | 0.10 | 0.04 | 0.05 |
Net interest margin (tax-equivalent)(3) | | 3.72% | 3.61% | 3.45% | 3.36% | 3.36% |
Asset Quality Ratios: | | | | | | |
Nonperforming assets as a percentage of total assets | | 1.43% | 1.70% | 1.79% | 1.82% | 1.65% |
Net charge-offs as a percentage of average loans (YTD annualized) | | 0.71% | 0.75% | 0.62% | 0.81% | 0.62% |
Allowance for loan losses as a percentage of total loans | | 1.45% | 1.48% | 1.51% | 1.49% | 1.48% |
Allowance for loan losses as a percentage of nonperforming loans | | 100.49% | 88.07% | 91.55% | 86.96% | 94.94% |
Capital Ratios (1): | | | | | | |
Total risk-based capital ratio | | 13.03% | 13.34% | 13.38% | 13.34% | 13.44% |
Tier 1 risk-based capital ratio | | 11.78% | 12.09% | 12.13% | 12.08% | 12.19% |
Leverage ratio | | 9.75% | 9.83% | 9.78% | 9.62% | 9.84% |
Tangible common equity (2) | | 6.02% | 6.24% | 6.02% | 5.98% | 5.98% |
Other ($ in thousands): | | | | | | |
Gross loans | $ | 637,659 | 618,874 | 607,925 | 598,635 | 591,055 |
Core deposits | | 429,183 | 426,640 | 430,073 | 413,090 | 394,621 |
Total deposits | | 574,439 | 554,417 | 566,722 | 562,912 | 554,676 |
Total assets | | 780,415 | 759,632 | 770,006 | 767,745 | 758,106 |
(1) September 30, 2012 ratios are preliminary. |
(2) The tangible common equity ratio is calculated as total equity less preferred stock divided by total assets. |
(3) The tax-equivalent adjustment to net interest income adjusts the yield for assets earning tax-exempt income to a comparable yield on a taxable basis. |
(4) Per share amounts for the 2011 periods have been restated to reflect the 10% stock dividend in 2012. |
Operating Results
Net interest margin for the third quarter of 2012 improved to 3.72% from 3.61% for the second quarter of 2012, and increased 36 basis points from 3.36% for the third quarter of 2011. Net interest margin for the nine months ended September 30, 2012 was 3.60% compared to 3.27% for the nine months ended September 30, 2011. The primary driver of the increased net interest margin is the $46.6 million growth in loan balances during the past twelve months, combined with the 50 basis point decrease in the cost of our interest bearing liabilities.
During the third quarter of 2012, the company recorded total credit costs of $1.4 million compared to $1.7 million during the third quarter of 2011. Of the $1.4 million in credit costs, $1.1 million related to the provision for loan losses while $267 thousand related primarily to a loss and write-down on two properties in other real estate owned. In addition, loan charge-offs for the quarter were $1.0 million and related primarily to three commercial loans and one residential property. Comparatively, the company recorded a loan loss provision of $1.7 million and expenses related to real estate owned of $16 thousand during the third quarter of 2011. For the nine months ended September 30, 2012, total credit costs were $4.3 million, consisting of a $3.6 million provision for loan losses and expenses of $720 thousand related to expenses from the sale and management of other real estate owned. Total credit costs were $4.1 million during the nine months ended September 30, 2011 and related to a $3.1 million provision for loan losses and $1.1 million of expenses from the sale and management of other real estate owned. The company’s allowance for loan losses was $9.3 million, or 1.45%, of loans at September 30, 2012 which provides approximately 100% coverage of non-performing loans.
Noninterest income was $1.3 million and $723 thousand for the three months ended September 30, 2012 and 2011, respectively. For the nine months ended September 30, 2012 and 2011, noninterest income was $2.9 million and $1.9 million, respectively. The increase in noninterest income during the three and nine month periods is related primarily to gains on sale of investment securities, combined with increases in loan fee income, service fees on deposit accounts and in rental income. In addition, income derived from mortgage originations is a significant part of our noninterest income at $328 thousand and $667 thousand for the three months and nine months ended September 30, 2012, respectively.
Noninterest expense was $5.0 million and $4.4 million for the three months ended September 30, 2012 and 2011, respectively, and $14.5 million and $13.7 million for the nine months ended September 30, 2012 and 2011, respectively. The increase in noninterest expense during the 2012 periods related primarily to increases in salaries and benefits, occupancy, data processing and related costs, and professional fees.
Nonperforming assets decreased to $11.2 million, or 1.43%, of total assets as of September 30, 2012 compared to $12.5 million, or 1.65%, at September 30, 2011. Of the $11.2 million in total nonperforming assets as of September 30, 2012, nonperforming loans represent $9.2 million and other real estate owned represents $2.0 million. During the third quarter of 2012, the company recorded $1.0 million in net charge-offs, or 0.63% of average loans on an annualized basis. Classified assets improved from the prior year to 40% of tier 1 capital plus the allowance for loan losses at September 30, 2012, compared to 51% at September 30, 2011.
Gross loans were $637.7 million as of September 30, 2012 compared to $598.6 million at December 31, 2011 and $591.1 million at September 30, 2011. The $39.1 million increase in loan balances during the first nine months of 2012 was concentrated primarily in residential mortgage loans. Core deposits increased $34.6 million to $429.2 million at September 30, 2012 compared to September 30, 2011. The increase in retail funding continued to enable the company to reduce its wholesale funding by approximately $33 million during the last twelve month period. The company has reduced its brokered deposits by over $200 million since June 2009.
Shareholders’ equity totaled $63.3 million as of September 30, 2012, a $1.4 million increase from the same period in 2011. With a tier 1 leverage ratio of 9.75% and total risk based capital ratio of 13.03%, the company’s capital ratios exceed the regulatory requirements for a “well capitalized” institution.
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Financial Highlights - Unaudited
| | Quarter Ended | 3rd Qtr | Nine Months Ended | YTD |
| | September 30 | 2012-2011 | September 30 | 2012-2011 |
(in thousands, except earnings per share) | | 2012 | 2011 | % Change | 2012 | 2011 | % Change |
Earnings Summary | | | | | | | |
Interest income | $ | 8,790 | 8,851 | (0.7)% | 25,880 | 26,343 | (1.8)% |
Interest expense | | 2,082 | 2,877 | (27.6)% | 6,665 | 9,166 | (27.3)% |
Net interest income | | 6,708 | 5,974 | 12.3% | 19,215 | 17,177 | 11.9% |
Provision for loan losses | | 1,125 | 1,670 | (32.6)% | 3,600 | 3,045 | 18.2% |
Noninterest income | | 1,286 | 723 | 77.9% | 2,865 | 1,897 | 51.0% |
Noninterest expense | | 5,025 | 4,352 | 15.5% | 14,459 | 13,674 | 5.7% |
Income before provision for income taxes | | 1,844 | 675 | 173.2% | 4,021 | 2,355 | 70.7% |
Income tax expense | | 618 | 192 | 221.9% | 1,292 | 706 | 83.0% |
Net income | | 1,226 | 483 | 153.8% | 2,729 | 1,649 | 65.5% |
Preferred stock dividends | | 204 | 216 | (5.6)% | 636 | 649 | (2.0)% |
Discount accretion | | 180 | 70 | 157.1% | 360 | 207 | 73.9% |
Redemption of preferred stock | | - | - | - | 96 | - | 100.0% |
Net income available to common shareholders | $ | 842 | 197 | 327.4% | 1,829 | 793 | 130.6% |
Basic weighted average common shares (4) | | 3,845 | 3,821 | 0.6% | 3,842 | 3,818 | 0.6% |
Diluted weighted average common shares (4) | | 3,955 | 3,935 | 0.5% | 3,956 | 3,915 | 1.1% |
Earnings per common share - Basic (4) | $ | 0.22 | 0.05 | 340.0% | 0.48 | 0.21 | 128.6% |
Earnings per common share - Diluted (4) | | 0.21 | 0.05 | 320.0% | 0.46 | 0.20 | 130.0% |
| | Quarter Ended | 3rd Qtr | |
| | September 30 | 2012-2011 | June 30 | March 31 | December 31 |
| | 2012 | 2011 | % Change | 2012 | 2012 | 2011 |
Balance Sheet Highlights | | | | | | | |
Assets | $ | 780,415 | 758,106 | 2.9% | 759,632 | 770,006 | 767,745 |
Investment securities | | 71,891 | 89,040 | (19.3)% | 74,231 | 78,615 | 108,584 |
Loans | | 637,659 | 591,055 | 7.9% | 618,874 | 607,925 | 598,635 |
Allowance for loan losses | | 9,254 | 8,751 | 5.7% | 9,131 | 9,196 | 8,925 |
Other real estate owned | | 1,976 | 3,262 | (39.4)% | 2,555 | 3,733 | 3,686 |
Noninterest bearing deposits | | 87,403 | 61,647 | 41.8% | 94,008 | 83,459 | 68,985 |
Interest bearing deposits | | 487,036 | 493,028 | (1.2)% | 460,409 | 483,263 | 493,927 |
Total deposits | | 574,439 | 554,675 | 3.6% | 554,417 | 566,722 | 562,912 |
Other borrowings | | 124,100 | 122,700 | 1.1% | 122,700 | 122,700 | 122,700 |
Junior subordinated debentures | | 13,403 | 13,403 | 0.0% | 13,403 | 13,403 | 13,403 |
Shareholders’ equity | | 63,287 | 61,868 | 2.3% | 63,171 | 63,006 | 62,540 |
Common Stock | | | | | | | |
Book value per common share (4) | $ | 12.19 | 11.87 | 2.7% | 12.34 | 12.06 | 12.02 |
Stock price (4): | | | | | | | |
High | | 9.51 | 9.48 | 0.3% | 9.00 | 7.36 | 7.21 |
Low | | 8.05 | 6.18 | 30.3% | 6.86 | 6.09 | 5.51 |
Period end | | 8.96 | 6.27 | 42.9% | 8.50 | 6.85 | 6.50 |
Other | | | | | | | |
Return on average assets (5) | | 0.64% | 0.26% | 146.2% | 0.43% | 0.36% | 0.23% |
Return on average equity (5) | | 7.66% | 3.12% | 145.5% | 5.12% | 4.34% | 2.79% |
Loans to deposits | | 111.01% | 106.56% | 4.2% | 111.63% | 107.27% | 106.35% |
Efficiency ratio (6) | | 61.80% | 64.89% | (4.8)% | 62.89% | 65.28% | 61.78% |
Team members | | 121 | 111 | 9.0% | 117 | 114 | 113 |
(4) Per share amounts for the 2011 periods have been restated to reflect the 10% stock dividend in 2012. |
(5) Annualized based on quarterly net income. |
(6) Noninterest expense divided by the sum of net interest income and noninterest income, excluding real estate activity and gain on sale of investments. |
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Asset quality measures - Unaudited
| | | YTD | | |
| | September 30 | September 30 | 2012-2011 | June 30 | March 31 | December 31 |
(dollars in thousands) | | 2012 | 2011 | % Change | 2012 | 2012 | 2011 |
Nonperforming Assets | | | | | | | |
Commercial | | | | | | | |
Owner occupied RE | $ | 588 | 983 | (40.2)% | 599 | 699 | 1,061 |
Non-owner occupied RE | | 1,350 | 740 | 82.4% | 1,476 | 1,090 | 1,745 |
Construction | | 1,005 | 1,288 | (22.0)% | 1,005 | 1,047 | 1,314 |
Commercial business | | 372 | 976 | (61.9)% | 507 | 515 | 503 |
Consumer | | | | | | | |
Real estate | | 122 | 1,134 | (89.2)% | 286 | 618 | 476 |
Home equity | | 365 | 385 | (5.2)% | 558 | 263 | 386 |
Construction | | - | - | - | - | - | - |
Other | | - | 4 | (100.0)% | - | - | - |
Nonaccruing troubled debt restructurings | | 5,407 | 3,708 | 45.8% | 5,937 | 5,812 | 4,779 |
Total nonaccrual loans | | 9,209 | 9,218 | (0.1)% | 10,368 | 10,044 | 10,264 |
Other real estate owned | | 1,976 | 3,262 | (39.4)% | 2,555 | 3,733 | 3,686 |
Total nonperforming assets | $ | 11,185 | 12,480 | (10.4)% | 12,923 | 13,777 | 13,950 |
Nonperforming assets as a percentage of: | | | | | | | |
Total assets | | 1.43% | 1.65% | (13.3)% | 1.70% | 1.79% | 1.82% |
Total loans | | 1.75% | 2.11% | (17.1)% | 2.09% | 2.27% | 2.33% |
Accruing troubled debt restructurings | $ | 8,591 | 6,591 | 30.3% | 8,569 | 6,661 | 7,429 |
| | Quarter Ended | 3rd Qtr | Nine Months Ended | YTD |
| | September 30 | 2012-2011 | September 30 | 2012-2011 |
| | 2012 | 2011 | Change | 2012 | 2011 | Change |
Allowance for Loan Losses | | | | | | | |
Balance, beginning of period | $ | 9,131 | 8,719 | 4.7% | 8,925 | 8,386 | 6.4% |
Loans charged-off | | (1,004) | (1,654) | (39.3)% | (3,291) | (2,763) | 19.1% |
Recoveries of loans previously charged-off | | 2 | 16 | (87.5)% | 20 | 83 | (75.9)% |
Net loans charged-off | | (1,002) | (1,638) | (38.8)% | (3,271) | (2,680) | 22.1% |
Provision for loan losses | | 1,125 | 1,670 | (32.6)% | 3,600 | 3,045 | 18.2% |
Balance, end of period | $ | 9,254 | 8,751 | 5.7% | 9,254 | 8,751 | 5.7% |
Allowance for loan losses to gross loans | | 1.45 % | 1.48 % | (2.0)% | 1.45 % | 1.48 % | (2.0)% |
Allowance for loan losses to nonaccrual loans | | 100.49 % | 94.94 % | 5.8% | 100.49 % | 94.94 % | 5.8% |
Net charge-offs to average loans (annualized) | | 0.63 % | 1.11 % | (43.2)% | 0.71 % | 0.62 % | 14.5% |
AVERAGE YIELD/RATE - Unaudited | |
| |
| Quarter Ended September 30 | | Nine Months Ended September 30 |
| 2012 | 2011 | | 2012 | 2011 |
| Yield/Rate(7) |
Interest-earning assets | | | | | |
Federal funds sold | 0.23% | 0.23% | | 0.25% | 0.24% |
Investment securities, taxable | 2.19% | 2.46% | | 2.22% | 2.59% |
Investment securities, nontaxable | 4.76% | 4.82% | | 4.77% | 5.22% |
Loans | 5.26% | 5.59% | | 5.29% | 5.69% |
Total interest-earning assets | 4.86% | 4.96% | | 4.83% | 5.00% |
Interest-bearing liabilities | | | | | |
NOW accounts | 0.55% | 0.95% | | 0.62% | 1.11% |
Savings & money market | 0.37% | 0.78% | | 0.40% | 0.81% |
Time deposits | 1.19% | 1.83% | | 1.39% | 1.99% |
Total interest-bearing deposits | 0.79% | 1.34% | | 0.91% | 1.48% |
Note payable and other borrowings | 3.35% | 3.69% | | 3.40% | 3.74% |
Junior subordinated debentures | 2.79% | 2.55% | | 2.81% | 2.58% |
Total interest-bearing liabilities | 1.36% | 1.82% | | 1.45% | 1.95% |
Net interest spread | 3.50% | 3.14% | | 3.37% | 3.06% |
Net interest income (tax equivalent) / margin | 3.72% | 3.36% | | 3.60% | 3.27% |
(7) Annualized for the respective three and nine month periods. |
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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, N.A., the 9th largest bank headquartered in South Carolina; which also does business as Greenville First Bank, N.A. in Greenville County. Since 1999 Southern First Bancshares has been providing financial services and now operates in six locations in the Greenville and Columbia markets of South Carolina. Southern First Bancshares has assets of approximately $780 million and its stock is traded in the NASDAQ Global Market under the symbol SFST. More information can be found at www.southernfirst.com.
FORWARD-LOOKING STATEMENTS
Certain statements in this news release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to future plans and expectations, and are thus prospective. Such forward-looking statements include but are not limited to (1) statements with respect to our expectations regarding the Company’s net interest margin that are not historical facts, and (2) other statements identified by words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “targets,” and “projects,” as well as similar expressions. Such statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, we can give no assurance that the results contemplated in the forward-looking statements will be realized. The inclusion of this forward-looking information should not be construed as a representation by our company or any person that the future events, plans, or expectations contemplated by our company will be achieved.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (2) the strength of the United States economy in general and the strength of the local economies in which we conduct operations may be different than expected resulting in, among other things, a deterioration in the credit quality or a reduced demand for credit, including the resultant effect on the company’s loan portfolio and allowance for loan losses; (3) the rate of delinquencies and amounts of charge-offs, the level of allowance for loan loss, the rates of loan growth, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (4) changes in the U.S. legal and regulatory framework; and (5) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) could have a negative impact on the company. Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov). All subsequent written and oral forward-looking statements concerning the company or any person acting on its behalf is expressly qualified in its entirety by the cautionary statements above. We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.
FINANCIAL CONTACT: MIKE DOWLING 864-679-9070
MEDIA CONTACT: ART SEAVER 864-679-9010
WEB SITE: www.southernfirst.com
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