Operating Results

Net interest margin for the first quarter of 2014 was 3.68%, compared to 3.71% for the prior quarter, and 3.69% for the first quarter of 2013.   During the first quarter of 2014, our average interest-earning assets increased by $25.6 million; however, the yield on our interest-earning assets declined by four basis points.  In comparison, our average interest-bearing liabilities increased by $21.8 million during the first quarter of 2014, with the respective cost declining by two basis points. 

Noninterest income was $969 thousand and $882 thousand for the three months ended March 31, 2014 and 2013, respectively.  The increase in noninterest income during the three month period ended March 31, 2014 relates primarily to increases in loan fee income and other income.  A significant portion of our loan fee income relates to income derived from mortgage originations which was $304 thousand and $237 thousand for the three months ended March 31, 2014 and 2013, respectively. 

Noninterest expense was $5.8 million and $5.2 million for the three months ended March 31, 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, partially offset by a decrease in insurance expense.

During the first quarter of 2014, we recorded total credit costs of $1.0 million compared to $1.1 million during the first quarter of 2013.  The $1.0 million in credit costs during the first quarter of 2014 related primarily to the $1.0 million provision for loan losses, combined with expenses of $13 thousand related to the sale and management of other real estate owned.  In addition, net loan charge-offs for the first quarter of 2014 were $500 thousand, or 0.27% of average loans on an annual basis, and related primarily to two specific loans.  Comparatively, we recorded a loan loss provision of $1.1 million and $20 thousand related to costs associated with other real estate owned during the first quarter of 2013.  Our allowance for loan losses was $10.7 million, or 1.38% of loans, at March 31, 2014 which provides approximately 121% coverage of nonaccrual loans, compared to $9.4 million, or 1.41% of loans, at March 31, 2013.

Nonperforming assets were $10.0 million, or 1.07% of total assets, as of March 31, 2014.  Comparatively, nonperforming assets were $9.5 million, or 1.07%, at December 31, 2013, and $8.8 million, or 1.07%, at March 31, 2013.  The $500 thousand increase in nonperforming assets during the first quarter of 2014 relates to two commercial loans which were put on nonaccrual status during the quarter. Of the $10.0 million in total nonperforming assets as of March 31, 2014, nonperforming loans represent $8.9 million and other real estate owned represents $1.1 million.  Classified assets improved to 29% of tier 1 capital plus the allowance for loan losses at March 31, 2014, compared to 34% at March 31, 2013.

Gross loans were $778.8 million as of March 31, 2014, compared to $737.3 million at December 31, 2013, and $665.2 million at March 31, 2013.  Core deposits, which exclude out-of-market deposits and time deposits of $100,000 or more, increased to $519.9 million at March 31, 2014 compared to $482.0 million at December 31, 2013, and $460.2 million at March 31, 2013.  

Shareholders’ equity totaled $69.8 million as of March 31, 2014, compared to $65.7 million at December 31, 2013, and $64.4 million at March 31, 2013. As of March 31, 2014, our capital ratios continue to exceed the regulatory requirements for a “well capitalized” institution.

On January 27, 2014, we issued a total of 475,000 shares of our common stock at $13.00 per share in a private placement offering.  Immediately following the consummation of the Private Placement, we redeemed 4,057 shares of our outstanding Fixed Rate Cumulative Perpetual Preferred Stock, Series T at redemption price of $1,000 per share, or par, using the proceeds from the private placement.  The remaining proceeds were retained to pay related transaction fees and expenses and for general corporate purposes. 

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Financial Highlights - Unaudited

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Asset quality measures - Unaudited

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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 8th 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 $937 million and its common 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 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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