Southern First Bank

Southern First Reports Results for Third Quarter of 2016

Greenville, South Carolina, October 25, 2016 – Southern First Bancshares, Inc. (NASDAQ: SFST) holding company for Southern First Bank, today reported net income available to the common shareholders of $3.4 million, or $0.51 per diluted share, for the third quarter of 2016. In comparison, net income available to common shareholders was $2.7 million, or $0.41 per diluted share, for the third quarter of 2015. For the nine months ended September 30, 2016, net income to common shareholders was $9.7 million, or $1.45 per diluted share. In comparison, net income available to common shareholders for the nine months ended September 30, 2015 was $7.3 million, or $1.12 per diluted share.

2016 Third Quarter Highlights

• Net income to common shareholders increased 26% to $3.4 million for Q3 2016 compared to $2.7 million for Q3 2015
• Gross loans increased 12% to $1.11 billion at Q3 2016, compared to $993.2 million at Q3 2015
• Total deposits increased 11% to $1.05 billion at Q3 2016, compared to $943.9 million at Q3 2015
• Total revenue increased 16% to $13.9 million for Q3 2016, compared to $12.0 million for Q3 2015
• Return on average assets increased to 1.08% for Q3 2016, compared to 0.95% for Q3 2015
• Announced expansion into Raleigh, NC region on August 22, 2016

“This was an outstanding quarter for Southern First with excellent growth and earnings performance. We are also excited to have introduced our new Raleigh team and to begin building client relationships in the Triangle region,” stated Art Seaver, the Company’s Chief Executive Officer.

Operating Results

Net interest margin for the third quarter of 2016 was 3.63%, compared to 3.62% for both the prior quarter and for the third quarter of 2015. During the third quarter of 2016, our average interest-earning assets increased by $115.2 million, compared to the third quarter of 2015; however, the yield on our interest-earning assets declined by three basis points. In comparison, our average interest-bearing liabilities increased by $65.8 million during the third quarter of 2016, compared to the third quarter of 2015, with the respective cost decreasing by two basis points.

Noninterest income was $3.0 million and $2.1 million for the three months ended September 30, 2016 and 2015, respectively. For the nine months ended September 30, 2016 and 2015, noninterest income was $8.7 million and $6.4 million, respectively. The increase in noninterest income during the three and nine month periods ended September 30, 2016 relates primarily to increases in mortgage banking income and other income. Specifically, mortgage banking income was $2.0 million and $1.3 million for the three months ended September 30, 2016 and 2015, respectively, and $5.7 million and $3.8 million for the nine months ended September 30, 2016 and 2015, respectively. During the second quarter of 2016 we transitioned to mandatory delivery of mortgage loans which increased the profit margin we receive on mortgage originations. In addition, our mortgage production volume increased during the 2016 periods as compared to 2015.

Noninterest expense was $7.8 million and $6.9 million for the three months ended September 30, 2016 and 2015, respectively, and $23.2 million and $21.0 million for the nine months ended September 30, 2016 and 2015, respectively. The increase in noninterest expense during the three and nine month periods ended September 30, 2016 relates primarily to increases in compensation and benefits, occupancy, data processing and related costs, and professional fees. Included in noninterest expense are mortgage banking expenses of $1.3 million and $861 thousand for the three months ended September 30, 2016 and 2015, respectively, and $3.5 million and $2.7 million for the nine months ended September 30, 2016 and 2015, respectively.

During the three months ended September 30, 2016, we recorded total credit costs of $906 thousand, including an $825 thousand provision for loan losses and $81 thousand expenses related to the sale and management of other real estate owned. In addition, net loan charge-offs for the third quarter of 2016 were $664 thousand, or 0.24% of average loans, annualized. During the three months ended September 30, 2015, our total credit costs were $1.0 million, including an $875 thousand provision for loan losses and $148 thousand expenses related to the sale and management of other real estate owned. Net loan charge-offs for the third quarter of 2015 were $434 thousand, or 0.18% of average loans, annualized. For the nine months ended September 30, 2016 and 2015, total credit costs were $2.7 million and $3.5 million, respectively. Our allowance for loan losses was $14.5 million, or 1.30% of loans, at September 30, 2016 which provides approximately 258% coverage of nonaccrual loans, compared to $13.4 million, or 1.35% of loans, and approximately 186% coverage of nonaccrual loans at September 30, 2015.

Nonperforming assets were $7.5 million, or 0.58% of total assets, as of September 30, 2016. Comparatively, nonperforming assets were $9.1 million, or 0.75% of total assets, at December 31, 2015, and $9.8 million, or 0.84% of total assets, at September 30, 2015. Of the $7.5 million in total nonperforming assets as of September 30, 2016, nonperforming loans represent $5.6 million and other real estate owned represents $1.9 million. Classified assets improved to 16% of tier 1 capital plus the allowance for loan losses at September 30, 2016, compared to 18% at September 30, 2015.

Gross loans were $1.114 billion, excluding mortgage loans held for sale, as of September 30, 2016, compared to $1.005 billion at December 31, 2015 and $993.2 million at September 30, 2015. Core deposits, which exclude out-of-market deposits and time deposits of $250,000 or more, increased to $880.4 million at September 30, 2016 compared to $864.3 million at December 31, 2015 and $851.2 million at September 30, 2015. In late June 2016, we received a short-term client deposit of approximately $40 million; however, a majority of this deposit was withdrawn in early July 2016.

Shareholders’ equity totaled $106.0 million as of September 30, 2016, compared to $94.2 million at December 31, 2015 and $91.1 million as of September 30, 2015. As of September 30, 2016, our capital ratios continue to exceed the regulatory requirements for a “well capitalized” institution.

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 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 $1.3 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 .

Financial Contact: Mike Dowling | 864-679-9070
Media Contact: Art Seaver | 864-679-9010
Website: www.southernfirst.com