“We are proud of our second quarter results as we reported record earnings of $1.3 million,” stated Art Seaver, the Company’s Chief Executive Officer. “Our talented team continues to grow client relationships, and we are excited to see strong growth in each of our markets.”
| | | | | | |
| | Quarter Ended |
| | June 30 | March 31 | December 31 | September 30 | June 30 |
| | 2014 | 2014 | 2013 | 2013 | 2013 |
Earnings($ in thousands, except per share data): | | | | | | |
Net income | $ | 1,566 | 1,250 | 1,439 | 1,419 | 1,300 |
Net income available to common shareholder | | 1,313 | 1,057 | 1,248 | 1,228 | 1,109 |
Earnings per common share, diluted | | 0.26 | 0.22 | 0.27 | 0.27 | 0.25 |
Total revenue, net of gain/loss on investment securities (1) | | 9,359 | 8,613 | 8,637 | 8,418 | 8,008 |
Net interest margin (tax-equivalent)(2) | | 3.66% | 3.68% | 3.71% | 3.73% | 3.70% |
Asset Quality Ratios: | | | | | | |
Nonperforming assets as a percentage of total assets | | 1.40% | 1.07% | 1.07% | 1.19% | 0.82% |
Net charge-offs as a percentage of average loans(3) (YTD annualized) | | 0.28% | 0.27% | 0.34% | 0.38% | 0.43% |
Allowance for loan losses as a percentage of loans (3) | | 1.37% | 1.38% | 1.39% | 1.39% | 1.39% |
Allowance for loan losses as a percentage of nonperforming loans | | 90.30% | 120.99% | 122.50% | 115.54% | 172.48% |
Capital Ratios (4): | | | | | | |
Total risk-based capital ratio | | 11.91% | 12.09% | 12.22% | 12.48% | 12.56% |
Tier 1 risk-based capital ratio | | 10.66% | 10.84% | 10.96% | 11.23% | 11.31% |
Leverage ratio | | 9.01% | 9.24% | 9.13% | 9.33% | 9.33% |
Common equity tier 1 ratio (5) | | 7.61% | 7.70% | 7.09% | 7.18% | 7.16% |
Other($ in thousands): | | | | | | |
Loans (3) | $ | 812,833 | 775,770 | 733,656 | 705,447 | 685,633 |
Core deposits(6) | | 536,213 | 519,863 | 481,967 | 452,970 | 474,296 |
Total deposits | | 747,369 | 722,412 | 680,319 | 607,052 | 632,072 |
Total assets | | 967,089 | 936,884 | 890,831 | 849,890 | 839,007 |
Average Balances($ in thousands): | | | | | | |
Loans | $ | 798,410 | 753,630 | 725,776 | 695,524 | 672,930 |
Deposits | | 725,025 | 680,809 | 656,063 | 629,271 | 614,411 |
Assets | | 942,377 | 901,642 | 876,583 | 841,886 | 829,059 |
Equity | | 71,409 | 69,003 | 65,992 | 64,430 | 64,931 |
(1) Total revenue is the sum of net interest income and noninterest income. |
(2) 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. |
(3) Excludes loans held for sale. |
(4) June 30, 2014 ratios are preliminary. |
(5) The common equity tier 1 ratio is calculated as the sum of common equity divided by risk-weighted assets. |
(6) Excludes out of market deposits and time deposits greater than $100,000. |
Operating Results
Net interest margin for the second quarter of 2014 was 3.66%, compared to 3.68% for the prior quarter, and 3.70% for the second quarter of 2013. During the second quarter of 2014, our average interest-earning assets increased by $40.3 million; however, the yield on our interest-earning assets declined by six basis points. In comparison, our average interest-bearing liabilities increased by $16.8 million during the second quarter of 2014, with the respective cost declining by two basis points.
Noninterest income was $1.5 million and $878 thousand for the three months ended June 30, 2014 and 2013, respectively. For the six months ended June 30, 2014 and 2013, noninterest income was $2.5 million and $1.8 million, respectively. The increase in noninterest income during the three and six month periods ended June 30, 2014 relates primarily to increases in loan fee income and other income, as well as a $229 thousand gain on sale of investment securities. A significant portion of our loan fee income relates to income derived from mortgage originations which was $576 thousand and $880 thousand for the three and six months ended June 30, 2014, respectively. Comparatively, mortgage origination income was $222 thousand and $459 thousand for the three and six months ended June 30, 2013 respectively.
Noninterest expense was $6.3 million and $5.3 million for the three months ended June 30, 2014 and 2013, respectively, and $12.1 million and $10.5 million for the six months ended June 30, 2014 and 2013, respectively. The increase in noninterest expense during the 2014 period relates primarily to increases in salaries and benefits, professional fees, and other noninterest expense. Included in professional fees and other noninterest expense for the three and six months ended June 30, 2014, was $336 thousand and $377 thousand, respectively, of litigation costs related to a lawsuit which was resolved during the second quarter of 2014.
During the second quarter of 2014, we recorded total credit costs of $958 thousand compared to $736 thousand during the second quarter of 2013. The $958 thousand in credit costs during the second quarter of 2014 related primarily to the $950 thousand provision for loan losses, combined with expenses of $8 thousand related to the sale and management of other real estate owned. In addition, net loan charge-offs for the second quarter of 2014 were $560 thousand, or 0.28% of average loans on an annual basis, and related primarily to two commercial loans. Comparatively, the $736 thousand in credit costs during the second quarter of 2013 related primarily to the provision for loan losses, partially offset by a net gain of $14 thousand on the sale and management of other real estate owned. For the six months ended June 30, 2014, total credit costs were $2.0 million, consisting of $2.0 million provision for loan losses and expenses of $21 thousand for the sale and management of other real estate owned. For the six months ended June 30, 2013, total credit costs were $1.9 million, consisting of $1.9 million provision for loan losses and net loss of $6 thousand from the sale and management of other real estate owned. Our allowance for loan losses was $11.1 million, or 1.37% of loans, at June 30, 2014 which provides approximately 90% coverage of nonaccrual loans, compared to $9.6 million, or 1.39% of loans, at June 30, 2013.
Nonperforming assets were $13.6 million, or 1.40% of total assets, as of June 30, 2014. Comparatively, nonperforming assets were $10.0 million, or 1.07%, at March 31, 2014, and $6.9 million, or 0.82%, at June 30, 2013. The $3.6 million increase in nonperforming assets during the second quarter of 2014 relates to four commercial loans which were put on nonaccrual status during the quarter. Of the $13.6 million in total nonperforming assets as of June 30, 2014, nonperforming loans represent $12.3 million and other real estate owned represents $1.3 million. Classified assets improved to 26% of tier 1 capital plus the allowance for loan losses at June 30, 2014, compared to 34% at June 30, 2013.
Gross loans were $812.8 million as of June 30, 2014, compared to $733.7 million at December 31, 2013, and $685.6 million at June 30, 2013. Core deposits, which exclude out-of-market deposits and time deposits of $100,000 or more, increased to $536.2 million at June 30, 2014 compared to $482.0 million at December 31, 2013, and $474.3 million at June 30, 2013.
Shareholders’ equity totaled $71.9 million as of June 30, 2014, compared to $65.7 million at December 31, 2013, and $63.6 million at June 30, 2013. As of June 30, 2014, our capital ratios continue to exceed the regulatory requirements for a “well capitalized” institution.
As previously disclosed, on June 6, 2014, we obtained a $10 million revolving line of credit with another financial institution. The line of credit bears interest at LIBOR plus 2.90%, with a floor of 3.25% and a ceiling of 5.15%, and matures 36 months from the closing date.
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FINANCIAL HIGHLIGHTS - Unaudited
| | | | | | | |
| | | | |
| | Quarter Ended | 2nd Qtr | Six Months Ended | YTD |
| | June 30 | 2014-2013 | June 30 | 2014-2013 |
(in thousands, except earnings per share) | | 2014 | 2013 | % Change | 2014 | 2013 | % Change |
Earnings Summary | | | | | | | |
Interest income | $ | 9,790 | 8,912 | 9.9 % | 19,134 | 17,655 | 8.4 % |
Interest expense | | 1,720 | 1,782 | (3.5)% | 3,420 | 3,647 | (6.2)% |
Net interest income | | 8,070 | 7,130 | 13.2 % | 15,714 | 14,008 | 12.2 % |
Provision for loan losses | | 950 | 750 | 26.7 % | 1,950 | 1,875 | 4.0 % |
Noninterest income | | 1,518 | 878 | 72.9 % | 2,488 | 1,760 | 41.4 % |
Noninterest expense | | 6,315 | 5,301 | 19.1 % | 12,085 | 10,531 | 14.8 % |
Income before provision for income taxes | | 2,323 | 1,957 | 18.7 % | 4,167 | 3,362 | 23.9 % |
Income tax expense | | 757 | 657 | 15.2 % | 1,351 | 1,100 | 22.8 % |
Net income | | 1,566 | 1,300 | 20.5 % | 2,816 | 2,262 | 24.5 % |
Preferred stock dividends | | 253 | 191 | 32.5 % | 445 | 389 | 14.4 % |
Redemption of preferred stock | | - | - | - | - | 20 | n/m |
Net income available to common shareholders | $ | 1,313 | 1,109 | 18.4 % | 2,371 | 1,893 | 25.3 % |
| | | | | | | |
Basic weighted average common shares | | 4,763 | 4,269 | 11.6 % | 4,687 | 4,266 | 9.9 % |
Diluted weighted average common shares | | 5,037 | 4,424 | 13.9 % | 4,957 | 4,397 | 12.7 % |
| | | | | | | |
Earnings per common share – Basic | $ | 0.28 | 0.26 | 7.7 % | 0.51 | 0.44 | 15.9 % |
Earnings per common share - Diluted | | 0.26 | 0.25 | 4.0 % | 0.48 | 0.43 | 11.6 % |
| | | | | | | |
| | Quarter Ended | 2nd Qtr | Quarter Ended |
| | June 30 | 2014-2013 | March 31 | December 31 | September 30 |
(in thousands, except earnings per share) | | 2014 | 2013 | % Change | 2014 | 2013 | 2013 |
Balance Sheet Highlights | | | | | | | |
Assets | $ | 967,089 | 839,007 | 15.3 % | 936,884 | 890,831 | 849,890 |
Investment securities | | 64,678 | 75,599 | (14.4)% | 74,707 | 73,556 | 77,636 |
Mortgage loans held for sale | | 7,189 | 1,849 | 288.8 % | 3,028 | 3,611 | 2,586 |
Loans | | 812,833 | 685,633 | 18.6 % | 775,770 | 733,656 | 705,447 |
Allowance for loan losses | | 11,103 | 9,561 | 16.1 % | 10,713 | 10,213 | 9,816 |
Other real estate owned | | 1,277 | 1,310 | (2.5)% | 1,148 | 1,198 | 1,579 |
Noninterest bearing deposits | | 123,548 | 94,079 | 31.3 % | 116,363 | 101,971 | 94,588 |
Interest bearing deposits | | 623,821 | 537,993 | 16.0 % | 606,049 | 578,348 | 512,464 |
Total deposits | | 747,369 | 632,072 | 18.2 % | 722,412 | 680,319 | 607,052 |
Other borrowings | | 127,100 | 124,100 | 2.4 % | 124,100 | 124,100 | 157,655 |
Junior subordinated debentures | | 13,403 | 13,403 | 0.0 % | 13,403 | 13,403 | 13,403 |
Preferred stock | | 11,242 | 15,299 | (26.5)% | 11,242 | 15,299 | 15,299 |
Total shareholders’ equity | | 71,886 | 63,562 | 13.1 % | 69,775 | 65,665 | 64,776 |
Common Stock | | | | | | | |
Book value per common share | $ | 12.56 | 11.30 | 11.2 % | 12.15 | 11.66 | 11.47 |
Stock price: | | | | | | | |
High | | 13.88 | 11.35 | 22.3 % | 13.94 | 13.98 | 13.63 |
Low | | 13.09 | 10.28 | 27.3 % | 13.05 | 12.81 | 10.80 |
Period end | | 13.46 | 10.99 | 22.5 % | 13.87 | 13.28 | 13.20 |
Common shares outstanding | | 4,830 | 4,269 | 13.1 % | 4,818 | 4,320 | 4,313 |
Other | | | | | | | |
Return on average assets (7) | | 0.65% | 0.63% | 3.2% | 0.56% | 0.65% | 0.67% |
Return on average equity (7) | | 8.80% | 8.03% | 9.6% | 7.35% | 8.65% | 8.74% |
Loans to deposits | | 108.76% | 108.47% | 0.3 % | 107.39% | 107.84% | 116.21% |
Efficiency ratio (8) | | 67.35% | 66.37% | 1.5 % | 66.83% | 65.09% | 65.16% |
Team members | | 151 | 134 | 12.7 % | 140 | 140 | 138 |
(7) Annualized based on quarterly net income. |
(8) 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
| | | | | | |
| | Quarter Ended |
| | June 30 | March 31 | December 31 | September 30 | June 30 |
(dollars in thousands) | | 2014 | 2014 | 2013 | 2013 | 2013 |
Nonperforming Assets | | | | | | |
Commercial | | | | | | |
Owner occupied RE | $ | 671 | 1,191 | 1,199 | 276 | 292 |
Non-owner occupied RE | | 3,686 | 339 | 373 | 424 | 568 |
Construction | | 849 | 887 | 914 | 938 | 938 |
Commercial business | | 730 | 542 | 712 | 859 | 490 |
Consumer | | | | | | |
Real estate | | 488 | 528 | 76 | 188 | 171 |
Home equity | | - | - | 77 | 274 | 491 |
Construction | | - | - | - | - | - |
Other | | 1 | 2 | 3 | 4 | - |
Nonaccruing troubled debt restructurings | | 5,871 | 5,365 | 4,983 | 5,533 | 2,594 |
Total nonaccrual loans | | 12,296 | 8,854 | 8,337 | 8,496 | 5,544 |
Other real estate owned | | 1,277 | 1,148 | 1,198 | 1,579 | 1,310 |
Total nonperforming assets | $ | 13,573 | 10,002 | 9,535 | 10,075 | 6,854 |
Nonperforming assets as a percentage of: | | | | | | |
Total assets | | 1.40% | 1.07% | 1.07% | 1.19% | 0.82% |
Total loans | | 1.67% | 1.29% | 1.30% | 1.43% | 1.00% |
Accruing troubled debt restructurings | $ | 5,244 | 7,774 | 8,045 | 6,953 | 9,833 |
| | | | | | |
| | Quarter Ended |
| | June 30 | March 31 | December 31 | September 30 | June 30 |
| | 2014 | 2014 | 2013 | 2013 | 2013 |
Allowance for Loan Losses | | | | | | |
Balance, beginning of period | $ | 10,713 | 10,213 | 9,816 | 9,561 | 9,367 |
Loans charged-off | | (652) | (512) | (444) | (530) | (560) |
Recoveries of loans previously charged-off | | 92 | 12 | 16 | 10 | 4 |
Net loans charged-off | | (560) | (500) | (428) | (520) | (556) |
Provision for loan losses | | 950 | 1,000 | 825 | 775 | 750 |
Balance, end of period | $ | 11,103 | 10,713 | 10,213 | 9,816 | 9,561 |
Allowance for loan losses to gross loans | | 1.37 % | 1.38 % | 1.39 % | 1.39 % | 1.39 % |
Allowance for loan losses to nonaccrual loans | | 90.30 % | 120.99 % | 122.50 % | 115.54 % | 172.48 % |
Net charge-offs to average loans (annualized) | | 0.28 % | 0.27 % | 0.23 % | 0.30 % | 0.33 % |
| | | | | |
AVERAGE YIELD/RATE - Unaudited | |
| Quarter Ended |
| June 30 | March 31 | December 31 | September 30 | June 30 |
| 2014 | 2014 | 2013 | 2013 | 2013 |
| Yield/Rate(9) |
Interest-earning assets | | | | | |
Federal funds sold | 0.27% | 0.24% | 0.25% | 0.28% | 0.25% |
Investment securities, taxable | 2.62% | 2.88% | 2.45% | 2.18% | 1.95% |
Investment securities, nontaxable | 4.14% | 4.22% | 4.18% | 4.25% | 4.10% |
Loans | 4.68% | 4.75% | 4.85% | 4.93% | 5.04% |
Total interest-earning assets | 4.43% | 4.49% | 4.53% | 4.60% | 4.61% |
Interest-bearing liabilities | | | | | |
NOW accounts | 0.14% | 0.16% | 0.21% | 0.22% | 0.26% |
Savings & money market | 0.31% | 0.30% | 0.30% | 0.34% | 0.33% |
Time deposits | 0.73% | 0.74% | 0.73% | 0.81% | 0.91% |
Total interest-bearing deposits | 0.46% | 0.47% | 0.47% | 0.50% | 0.55% |
Note payable and other borrowings | 3.02% | 3.07% | 2.87% | 3.03% | 2.99% |
Junior subordinated debentures | 2.39% | 2.42% | 2.40% | 2.43% | 2.60% |
Total interest-bearing liabilities | 0.93% | 0.95% | 0.97% | 1.02% | 1.07% |
Net interest spread | 3.50% | 3.54% | 3.56% | 3.58% | 3.54% |
Net interest income (tax equivalent) / margin | 3.66% | 3.68% | 3.71% | 3.73% | 3.70% |
(9) Annualized for the respective three month period. |
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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, the 6th largest bank headquartered in South Carolina. Since 1999 Southern First Bancshares has been providing financial services and now operates in eight locations in the Greenville, Columbia, and Charleston markets of South Carolina. Southern First Bancshares has assets of approximately $967 million and its common stock is traded in the NASDAQ Global Market under the symbol SFST. More information can be found atwww.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 are 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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