“I am proud of the accomplishments of the Southern First team as we generated record earnings of $1.6 million and surpassed $1 billion in total assets,” stated Art Seaver, the Company’s CEO. “We are also excited to open our second office in the Charleston region while continuing to experience solid client growth in each of our markets.”
| | | | | | |
| | Quarter Ended |
| | September 30 | June 30 | March 31 | December 31 | September 30 |
| | 2014 | 2014 | 2014 | 2013 | 2013 |
Earnings($ in thousands, except per share data): | | | | | | |
Net income | $ | 1,826 | 1,566 | 1,250 | 1,439 | 1,419 |
Net income available to common shareholder | | 1,573 | 1,313 | 1,057 | 1,248 | 1,228 |
Earnings per common share, diluted | | 0.31 | 0.26 | 0.22 | 0.27 | 0.27 |
Total revenue(1) | | 10,051 | 9,588 | 8,613 | 8,637 | 8,418 |
Net interest margin (tax-equivalent)(2) | | 3.66% | 3.66% | 3.68% | 3.71% | 3.73% |
Efficiency ratio(3) | | 60.35% | 65.86% | 66.98% | 66.82% | 65.45% |
Balance Sheet($ in thousands): | | | | | | |
Loans(4) | $ | 832,722 | 812,833 | 775,770 | 733,656 | 705,447 |
Core deposits(5) | | 557,417 | 536,213 | 519,863 | 481,967 | 452,970 |
Total deposits | | 772,760 | 747,369 | 722,412 | 680,319 | 607,052 |
Total assets | | 1,007,553 | 967,089 | 936,884 | 890,831 | 849,890 |
Holding Company Capital Ratios(6): | | | | | | |
Total risk-based capital ratio | | 11.77% | 11.91% | 12.09% | 12.22% | 12.48% |
Tier 1 risk-based capital ratio | | 10.52% | 10.66% | 10.84% | 10.96% | 11.23% |
Leverage ratio | | 8.84% | 9.01% | 9.24% | 9.13% | 9.33% |
Common equity tier 1 ratio(7) | | 7.52% | 7.61% | 7.70% | 7.09% | 7.18% |
Tangible common equity(8) | | 6.19% | 6.27% | 6.25% | 5.65% | 5.82% |
Asset Quality Ratios: | | | | | | |
Nonperforming assets as a percentage of total assets | | 1.14% | 1.40% | 1.07% | 1.07% | 1.19% |
Net charge-offs as a percentage of average loans(4) (YTD annualized) | | 0.37% | 0.28% | 0.27% | 0.34% | 0.38% |
Allowance for loan losses as a percentage of loans(4) | | 1.36% | 1.37% | 1.38% | 1.39% | 1.39% |
Allowance for loan losses as a percentage of nonperforming loans | | 141.99% | 90.30% | 120.99% | 122.50% | 115.54% |
(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) Noninterest expense divided by the sum of net interest income and noninterest income. |
(4) Excludes loans held for sale. |
(5) Excludes out of market deposits and time deposits greater than $100,000. |
(6) September 30, 2014 ratios are preliminary. |
(7) The common equity tier 1 ratio is calculated as the sum of common equity divided by risk-weighted assets. |
(8) The tangible common equity ratio is calculated as total equity less preferred stock divided by total assets. |
Operating Results
Net interest margin for the third quarter of 2014 was 3.66%, unchanged from the prior quarter, and 3.73% for the third quarter of 2013. During the third quarter of 2014, our average interest-earning assets increased by $135.2 million, compared to the third quarter of 2013; however, the yield on our interest-earning assets declined by 19 basis points. In comparison, our average interest-bearing liabilities increased by $91.3 million during the third quarter of 2014, compared to the third quarter of 2013, with the respective cost declining by 11 basis points.
Noninterest income was $1.6 million and $1.1 million for the three months ended September 30, 2014 and 2013, respectively. For the nine months ended September 30, 2014 and 2013, noninterest income was $4.0 million and $2.8 million, respectively. The increase in noninterest income during the three and nine month periods ended September 30, 2014 relates primarily to increases in loan fee income and other income, as well as a $230 thousand gain on sale of investment securities which occurred during the second quarter of 2014. A significant portion of our loan fee income relates to income derived from mortgage originations which was $820 thousand and $1.7 million for the three and nine months ended September 30, 2014, respectively. Comparatively, mortgage origination income was $357 thousand and $816 thousand for the three and nine months ended September 30, 2013, respectively.
Noninterest expense was $6.1 million and $5.5 million for the three months ended September 30, 2014 and 2013, respectively, and $18.2 million and $16.0 million for the nine months ended September 30, 2014 and 2013, respectively. The increase in noninterest expense during the 2014 period relates primarily to increases in salaries and benefits and other noninterest expense.
During the third quarter of 2014, we recorded total credit costs of $1.4 million compared to $799 thousand during the third quarter of 2013. The $1.4 million in credit costs during the third quarter of 2014 related primarily to the $1.3 million provision for loan losses, combined with expenses of $71 thousand related to the sale and management of other real estate owned. In addition, net loan charge-offs for the third quarter of 2014 were $1.1 million, or 0.54% of average loans on an annual basis, and related primarily to three commercial relationships. Comparatively, the $799 thousand in credit costs during the third quarter of 2013 related primarily to the provision for loan losses, combined with $25 thousand of expenses related to the sale and management of other real estate owned. For the nine months ended September 30, 2014, total credit costs were $3.4 million, consisting of $3.3 million provision for loan losses and expenses of $96 thousand for the sale and management of other real estate owned. For the nine months ended September 30, 2013, total credit costs were $2.7 million, consisting of $2.7 million provision for loan losses and expenses of $30 thousand from the sale and management of other real estate owned. Our allowance for loan losses was $11.3 million, or 1.36% of loans, at September 30, 2014 which provides approximately 142% coverage of nonaccrual loans, compared to $9.8 million, or 1.39% of loans, at September 30, 2013.
Nonperforming assets were $11.5 million, or 1.14% of total assets, as of September 30, 2014. Comparatively, nonperforming assets were $13.6 million, or 1.40%, at June 30, 2014, and $10.1 million, or 1.19%, at September 30, 2013. Of the $11.5 million in total nonperforming assets as of September 30, 2014, nonperforming loans represent $8.0 million and other real estate owned represents $3.5 million. Classified assets improved to 25% of tier 1 capital plus the allowance for loan losses at September 30, 2014, compared to 31% at September 30, 2013.
Gross loans were $832.7 million as of September 30, 2014, compared to $733.7 million at December 31, 2013, and $705.4 million at September 30, 2013. Of the $99.1 million of loan growth during 2014, $43.2 million was in the Greenville market, $23.7 million was in the Columbia market, and $32.2 million was in the Charleston market. Core deposits, which exclude out-of-market deposits and time deposits of $100,000 or more, increased to $557.4 million at September 30, 2014 compared to $482.0 million at December 31, 2013, and $453.0 million at September 30, 2013. During the first nine months of 2014, core deposits grew by $75.5 million with growth of $37.5 in the Greenville market, $9.7 in the Columbia market, and $28.3 in the Charleston market.
Shareholders’ equity totaled $73.6 million as of September 30, 2014, compared to $65.7 million at December 31, 2013, and $64.8 million at September 30, 2013. As of September 30, 2014, our capital ratios continue to exceed the regulatory requirements for a “well capitalized” institution.
2
FINANCIAL HIGHLIGHTS - Unaudited
| | | | | | | |
| | | | |
| | Quarter Ended | 3rd Qtr | Nine Months Ended | YTD |
| | September 30 | 2014-2013 | September 30 | 2014-2013 |
(in thousands, except earnings per share) | | 2014 | 2013 | % Change | 2014 | 2013 | % Change |
Earnings Summary | | | | | | | |
Interest income | $ | 10,253 | 9,100 | 12.7 % | 29,388 | 26,754 | 9.8 % |
Interest expense | | 1,762 | 1,737 | 1.4 % | 5,182 | 5,383 | (3.7)% |
Net interest income | | 8,491 | 7,363 | 15.3 % | 24,206 | 21,371 | 13.3 % |
Provision for loan losses | | 1,325 | 775 | 71.0 % | 3,275 | 2,650 | 23.6 % |
Noninterest income | | 1,560 | 1,055 | 47.9 % | 4,048 | 2,815 | 43.8 % |
Noninterest expense | | 6,066 | 5,510 | 10.1 % | 18,151 | 16,040 | 13.2 % |
Income before provision for income taxes | | 2,660 | 2,133 | 24.7 % | 6,828 | 5,496 | 24.2 % |
Income tax expense | | 834 | 714 | 16.8 % | 2,185 | 1,815 | 20.4 % |
Net income | | 1,826 | 1,419 | 28.7 % | 4,643 | 3,681 | 26.1 % |
Preferred stock dividends | | 253 | 191 | 32.5 % | 699 | 580 | 20.5 % |
Redemption of preferred stock | | - | - | - | - | 20 | n/m |
Net income available to common shareholders | $ | 1,573 | 1,228 | 28.1 % | 3,944 | 3,121 | 26.4 % |
| | | | | | | |
Basic weighted average common shares | | 4,830 | 4,272 | 13.1 % | 4,776 | 4,268 | 11.9 % |
Diluted weighted average common shares | | 5,046 | 4,490 | 12.4 % | 4,985 | 4,428 | 12.6 % |
| | | | | | | |
Earnings per common share – Basic | $ | 0.33 | 0.29 | 13.8 % | 0.83 | 0.73 | 13.7 % |
Earnings per common share – Diluted | | 0.31 | 0.27 | 14.8 % | 0.79 | 0.71 | 11.3 % |
| | | | | | | |
| | Quarter Ended | 3rd Qtr | Quarter Ended |
| | September 30 | 2014-2013 | June 30 | March 31 | December 31 |
(in thousands, except earnings per share) | | 2014 | 2013 | % Change | 2014 | 2014 | 2013 |
Balance Sheet Highlights | | | | | | | |
Assets | $ | 1,007,553 | 849,890 | 18.6 % | 967,089 | 936,884 | 890,831 |
Investment securities | | 63,391 | 77,636 | (18.3)% | 64,678 | 74,707 | 73,556 |
Mortgage loans held for sale | | 9,372 | 2,586 | 262.4 % | 7,189 | 3,028 | 3,611 |
Loans | | 832,722 | 705,447 | 18.0 % | 812,833 | 775,770 | 733,656 |
Allowance for loan losses | | 11,305 | 9,816 | 15.2 % | 11,103 | 10,713 | 10,213 |
Other real estate owned | | 3,549 | 1,579 | 124.8 % | 1,277 | 1,148 | 1,198 |
Noninterest bearing deposits | | 131,948 | 94,588 | 39.5 % | 123,548 | 116,363 | 101,971 |
Interest bearing deposits | | 640,812 | 512,464 | 25.0 % | 623,821 | 606,049 | 578,348 |
Total deposits | | 772,760 | 607,052 | 27.3 % | 747,369 | 722,412 | 680,319 |
Other borrowings | | 139,600 | 157,655 | (11.5)% | 127,100 | 124,100 | 124,100 |
Junior subordinated debentures | | 13,403 | 13,403 | - | 13,403 | 13,403 | 13,403 |
Tangible common equity | | 62,350 | 49,477 | 26.0 % | 60,644 | 58,533 | 50,366 |
Preferred stock | | 11,242 | 15,299 | (26.5)% | 11,242 | 11,242 | 15,299 |
Total shareholders’ equity | | 73,592 | 64,776 | 13.6 % | 71,886 | 69,775 | 65,665 |
Common Stock | | | | | | | |
Book value per common share | $ | 12.91 | 11.47 | 12.6 % | 12.56 | 12.15 | 11.66 |
Stock price: | | | | | | | |
High | | 14.25 | 13.63 | 4.5 % | 13.88 | 13.94 | 13.98 |
Low | | 13.50 | 10.80 | 25.0 % | 13.09 | 13.05 | 12.81 |
Period end | | 13.94 | 13.20 | 5.6 % | 13.46 | 13.87 | 13.28 |
Common shares outstanding | | 4,830 | 4,313 | 12.0 % | 4,830 | 4,818 | 4,320 |
Other | | | | | | | |
Return on average assets(9) | | 0.74% | 0.67% | 10.4% | 0.65% | 0.56% | 0.65% |
Return on average equity(9) | | 9.86% | 8.74% | 12.8% | 8.80% | 7.35% | 8.65% |
Loans to deposits | | 107.76% | 116.21% | (7.3)% | 108.76% | 107.39% | 107.84% |
Team members | | 156 | 138 | 13.0 % | 151 | 140 | 140 |
Average Balances($ in thousands): | | | | | | | |
Loans | $ | 827,986 | 695,524 | 19.0% | 798,410 | 753,630 | 725,776 |
Deposits | | 760,465 | 629,271 | 20.8% | 725,025 | 688,809 | 656,063 |
Assets | | 979,929 | 841,886 | 16.4% | 942,377 | 901,642 | 876,583 |
Equity | | 73,506 | 64,430 | 14.1% | 71,409 | 69,003 | 65,992 |
(9) Annualized based on quarterly net income. |
3
ASSET QUALITY MEASURES - Unaudited
| | | | | | |
| | Quarter Ended |
| | September 30 | June 30 | March 31 | December 31 | September 30 |
(dollars in thousands) | | 2014 | 2014 | 2014 | 2013 | 2013 |
Nonperforming Assets | | | | | | |
Commercial | | | | | | |
Owner occupied RE | $ | 640 | 671 | 1,191 | 1,199 | 276 |
Non-owner occupied RE | | 2,877 | 3,686 | 339 | 373 | 424 |
Construction | | 855 | 849 | 887 | 914 | 938 |
Commercial business | | 745 | 730 | 542 | 712 | 859 |
Consumer | | | | | | |
Real estate | | 488 | 488 | 528 | 76 | 188 |
Home equity | | 188 | - | - | 77 | 274 |
Construction | | - | - | - | - | - |
Other | | 3 | 1 | 2 | 3 | 4 |
Nonaccruing troubled debt restructurings | | 2,166 | 5,871 | 5,365 | 4,983 | 5,533 |
Total nonaccrual loans | | 7,962 | 12,296 | 8,854 | 8,337 | 8,496 |
Other real estate owned | | 3,549 | 1,277 | 1,148 | 1,198 | 1,579 |
Total nonperforming assets | $ | 11,511 | 13,573 | 10,002 | 9,535 | 10,075 |
Nonperforming assets as a percentage of: | | | | | | |
Total assets | | 1.14% | 1.40% | 1.07% | 1.07% | 1.19% |
Total loans | | 1.38% | 1.67% | 1.29% | 1.30% | 1.43% |
Accruing troubled debt restructurings | $ | 7,216 | 6,479 | 7,774 | 8,045 | 6,953 |
| | | | | | |
| | Quarter Ended |
| | September 30 | June 30 | March 31 | December 31 | September 30 |
| | 2014 | 2014 | 2014 | 2013 | 2013 |
Allowance for Loan Losses | | | | | | |
Balance, beginning of period | $ | 11,103 | 10,713 | 10,213 | 9,816 | 9,561 |
Loans charged-off | | (1,138) | (652) | (512) | (444) | (530) |
Recoveries of loans previously charged-off | | 15 | 92 | 12 | 16 | 10 |
Net loans charged-off | | (1,123) | (560) | (500) | (428) | (520) |
Provision for loan losses | | 1,325 | 950 | 1,000 | 825 | 775 |
Balance, end of period | $ | 11,305 | 11,103 | 10,713 | 10,213 | 9,816 |
Allowance for loan losses to gross loans | | 1.36 % | 1.37 % | 1.38 % | 1.39 % | 1.39 % |
Allowance for loan losses to nonaccrual loans | | 141.99 % | 90.30 % | 120.99 % | 122.50 % | 115.54 % |
Net charge-offs to average loans QTD (annualized) | | 0.54 % | 0.28 % | 0.27 % | 0.23 % | 0.30 % |
| | | | | |
AVERAGE YIELD/RATE - Unaudited | |
| Quarter Ended |
| September 30 | June 30 | March 31 | December 31 | September 30 |
| 2014 | 2014 | 2014 | 2013 | 2013 |
| Yield/Rate(10) |
Interest-earning assets | | | | | |
Federal funds sold | 0.26% | 0.27% | 0.24% | 0.25% | 0.28% |
Investment securities, taxable | 2.46% | 2.62% | 2.88% | 2.45% | 2.18% |
Investment securities, nontaxable | 4.12% | 4.14% | 4.22% | 4.18% | 4.25% |
Loans | 4.71% | 4.68% | 4.75% | 4.85% | 4.93% |
Total interest-earning assets | 4.41% | 4.43% | 4.49% | 4.53% | 4.60% |
Interest-bearing liabilities | | | | | |
NOW accounts | 0.16% | 0.14% | 0.16% | 0.21% | 0.22% |
Savings & money market | 0.33% | 0.31% | 0.30% | 0.30% | 0.34% |
Time deposits | 0.71% | 0.73% | 0.74% | 0.73% | 0.81% |
Total interest-bearing deposits | 0.45% | 0.46% | 0.47% | 0.47% | 0.50% |
Note payable and other borrowings | 3.06% | 3.02% | 3.07% | 2.87% | 3.03% |
Junior subordinated debentures | 2.40% | 2.39% | 2.42% | 2.40% | 2.43% |
Total interest-bearing liabilities | 0.91% | 0.93% | 0.95% | 0.97% | 1.02% |
Net interest spread | 3.50% | 3.50% | 3.54% | 3.56% | 3.58% |
Net interest income (tax equivalent) / margin | 3.66% | 3.66% | 3.68% | 3.71% | 3.73% |
(10) Annualized for the respective three month period. |
4
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. 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 $1.0 billion 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
5
