EX-99.1 2 sfb35772726-ex991.htm EARNINGS PRESS RELEASE FOR PERIOD ENDED JUNE 30, 2020

Exhibit 99.1

Southern First Reports Results for Second Quarter 2020

Greenville, South Carolina, July 28, 2020 – Southern First Bancshares, Inc. (NASDAQ: SFST), holding company for Southern First Bank, today announced its financial results for the three and six-month period ended June 30, 2020.

“In this current environment, our focus continues to be on the care of our team and clients,” stated Art Seaver, the company’s Chief Executive Officer. “This was a quarter that witnessed significant activity around the PPP program, and I am proud of our team for their passion to help our clients. We remain diligent in our focus on risk in this environment and in continuing to impact lives – the mission of our company.”

2020 Second Quarter Highlights

● | Net income of $4.7 million, compared to $7.2 million for Q2 2019
● | Diluted earnings per common share of $0.60 per share, compared to $0.93 for Q2 2019
● | Loan loss provision of $10.2 million, compared to $300 thousand for Q2 2019

COVID-19 Update

● | Payment modifications on 863 loans for $647.1 million
| ○ | 56% of modifications, or $362.1 million, returned to original payment status
● | Loans within nine targeted industries represent 43% of total modifications
| ○ | 41% of target industry modifications, or $150.0 million, returned to original payment status
● | Completed sale of $97.5 million PPP loan portfolio, recognizing net SBA fees of $2.2 million in Q2 2020
● | Columbia office, South Carolina consolidation as a result of success in digital strategies

|  | Quarter Ended
|  | June 30 |  | March 31 |  | December 31 |  | September 30 |  | June 30
|  | 2020 |  | 2020 |  | 2019 |  | 2019 |  | 2019
Earnings ($ in thousands, except per share data): |  |  |  |  |  |  |  |  |  |  |
Net income available to common shareholders |  | $ | 4,678 |  | 2,832 |  | 7,198 |  | 7,412 |  | 7,239
Earnings per common share, diluted |  |  | 0.60 |  | 0.36 |  | 0.92 |  | 0.95 |  | 0.93
Total revenue(1) |  |  | 28,981 |  | 22,014 |  | 21,136 |  | 21,675 |  | 20,629
Net interest margin (tax-equivalent)(2) |  |  | 3.42% |  | 3.43% |  | 3.41% |  | 3.36% |  | 3.43%
Return on average assets(3) |  |  | 0.77% |  | 0.51% |  | 1.32% |  | 1.37% |  | 1.43%
Return on average equity(3) |  |  | 8.78% |  | 5.42% |  | 14.18% |  | 15.20% |  | 15.72%
Efficiency ratio(4) |  |  | 43.63% |  | 56.20% |  | 51.92% |  | 52.98% |  | 55.11%
Noninterest expense to average assets (3) |  |  | 2.09% |  | 2.23% |  | 2.01% |  | 2.12% |  | 2.24%
Balance Sheet ($ in thousands): |  |  |  |  |  |  |  |  |  |  |
Total loans(5) |  | $ | 2,036,801 |  | 2,030,261 |  | 1,943,525 |  | 1,838,427 |  | 1,809,355
Total deposits |  |  | 2,188,643 |  | 2,025,698 |  | 1,876,124 |  | 1,899,295 |  | 1,854,008
Core deposits(6) |  |  | 1,991,005 |  | 1,804,027 |  | 1,656,005 |  | 1,690,294 |  | 1,619,722
Total assets |  |  | 2,482,295 |  | 2,372,249 |  | 2,267,195 |  | 2,201,626 |  | 2,116,044
Loans to deposits |  |  | 93.06% |  | 100.23% |  | 103.59% |  | 96.80% |  | 97.59%
Holding Company Capital Ratios(7): |  |  |  |  |  |  |  |  |  |  |
Total risk-based capital ratio |  |  | 13.76% |  | 13.59% |  | 13.73% |  | 13.63% |  | 12.31%
Tier 1 risk-based capital ratio |  |  | 11.37% |  | 11.29% |  | 11.63% |  | 11.51% |  | 11.40%
Leverage ratio |  |  | 9.38% |  | 10.00% |  | 10.10% |  | 9.82% |  | 9.95%
Common equity tier 1 ratio(8) |  |  | 10.72% |  | 10.63% |  | 10.94% |  | 10.80% |  | 10.67%
Tangible common equity(9) |  |  | 8.71% |  | 8.87% |  | 9.08% |  | 9.02% |  | 8.97%
Asset Quality Ratios: |  |  |  |  |  |  |  |  |  |  |
Nonperforming assets as a percentage of total assets |  |  | 0.36% |  | 0.42% |  | 0.30% |  | 0.32% |  | 0.27%
Net charge-offs as a percentage of average loans(5) (YTD annualized) |  |  | 0.12% |  | 0.04% |  | 0.08% |  | 0.09% |  | 0.03%
Allowance for loan losses as a percentage of loans(5) |  |  | 1.55% |  | 1.11% |  | 0.86% |  | 0.86% |  | 0.89%
Allowance for loan losses as a percentage of nonaccrual loans |  |  | 350.74% |  | 226.14% |  | 244.95% |  | 225.50% |  | 277.91%
[Footnotes to table located on page 7]

1

COVID-19 IMPACT
As a result of the uncertain economic conditions brought about by the COVID-19 pandemic, our business and that of many of our clients has been impacted significantly. In order to maintain the safety of our team and our clients, we shifted approximately 70% of our team to working remotely and began operating in a drive-thru only mode with “in-person” client meetings by appointment in late March 2020. This strategy, combined with digital technology, has proven to be extremely effective, highlighting a number of possibilities for operational improvements, including consolidating our three Columbia, South Carolina offices into one location. We believe that this office combination will create a new synergy among our Columbia team, assist with staffing challenges and facilitate a renewed sense of service to our clients. The consolidation is expected to take place on September 30, 2020.

In an effort to assist our clients through this challenging time, we became an approved SBA lender in March 2020 and processed 853 loans under the Payroll Protection Program (“PPP”) for a total of $97.5 million, receiving SBA lender fee income of $3.9 million. As the regulations and guidance for PPP loans and the forgiveness process continued to change and evolve, management recognized the operational risk and complexity associated with this portfolio and decided to pursue the sale of the PPP loan portfolio to a third party better suited to support and serve our PPP clients through the loan forgiveness process. This loan sale will allow our team to focus on serving our clients and proactively monitor and address credit risk brought on by the pandemic. On June 26, 2020 we completed the sale of our PPP loan portfolio to The Loan Source Inc., together with its servicing partner ACAP SME LLC, and immediately recognized SBA lender fee income of $2.2 million, net of sale and processing costs.

Beginning late in the first quarter of 2020, we began granting loan modifications or deferrals to certain borrowers affected by the pandemic on a short-term basis of three to six months. As of June 30, 2020, our clients had requested loan payment deferrals or payments of interest only on 863 loans totaling $647.1 million, of which 90.0% were commercial loans. As of June 30, 2020, 56% of these loans have reached the end of their deferral period and are beginning to resume normal payments. At June 30, 2020, non-performing assets were not yet materially impacted by the economic pressures of COVID-19; however, accruing TDRs increased by $2.9 million during the first quarter of 2020 due to loan modifications related to three client relationships who were experiencing financial difficulty prior to the pandemic.

As we closely monitor credit risk and our exposure to increased loan losses resulting from the impact of COVID-19 on our commercial clients, we have identified nine loan categories to monitor during this crisis. The table below identifies these segments as well as the outstanding and committed loan balances for each industry. Of the $276.9 million of loans modified in these categories, 54% have begun to resume normal payments.

|  |  | June 30, 2020
|  |  |  |  |  |  |  |  | % of |  |  |  |
|  |  |  |  | % of Total |  | Total |  | Committed |  | Total |  |
|  | Balance |  | Loans |  | Committed |  | Balance |  | Modified |  |
(dollars in thousands) |  | Outstanding |  | Outstanding |  | Balance |  | Outstanding |  | Balance |  | % Modified
Religious organizations |  | $ | 60,088 |  | 3.0% |  | 90,439 |  | 66.4% |  | 33,671 |  | 56.0%
Entertainment facilities |  |  | 4,745 |  | 0.2% |  | 9,325 |  | 50.9% |  | 845 |  | 17.8%
Hotels |  |  | 84,163 |  | 4.1% |  | 104,049 |  | 80.9% |  | 74,383 |  | 88.4%
Personal care businesses |  |  | 1,356 |  | 0.1% |  | 1,395 |  | 97.2% |  | 572 |  | 42.2%
Restaurants |  |  | 14,467 |  | 0.7% |  | 15,977 |  | 90.5% |  | 9,889 |  | 68.4%
Sports facilities |  |  | 22,098 |  | 1.1% |  | 22,768 |  | 97.1% |  | 21,064 |  | 95.3%
Travel related businesses |  |  | 3,325 |  | 0.2% |  | 4,082 |  | 81.5% |  | 3,080 |  | 92.6%
Private healthcare facilities |  |  | 36,054 |  | 1.8% |  | 41,116 |  | 87.7% |  | 24,857 |  | 68.9%
Non-essential retail |  |  | 191,674 |  | 9.4% |  | 199,873 |  | 95.9% |  | 108,508 |  | 56.6%
Total |  | $ | 417,970 |  | 20.5% |  | 489,024 |  | 85.5% |  | 276,869 |  | 66.2%
[Footnotes to table located on page 7]

2

INCOME STATEMENTS – Unaudited |  |  |  |
|  | Quarter Ended |  | Six Months Ended
|  | Jun 30 |  | Mar 31 |  | Dec 31 |  | Sept 30 |  | June 30 |  | June 30
(in thousands, except per share data) |  | 2020 |  | 2020 |  | 2019 |  | 2019 |  | 2019 |  | 2020 |  | 2019
Interest income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans |  | $ | 23,554 |  | 23,367 |  | 23,124 |  | 22,817 |  | 22,098 |  | 46,921 |  | 42,988
Investment securities |  |  | 384 |  | 396 |  | 438 |  | 576 |  | 539 |  | 780 |  | 1,087
Federal funds sold |  |  | 53 |  | 103 |  | 334 |  | 663 |  | 451 |  | 155 |  | 625
Total interest income |  |  | 23,991 |  | 23,866 |  | 23,896 |  | 24,056 |  | 23,088 |  | 47,856 |  | 44,700
Interest expense |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 3,627 |  | 5,174 |  | 5,771 |  | 6,409 |  | 6,175 |  | 8,802 |  | 11,550
Borrowings |  |  | 590 |  | 594 |  | 492 |  | 368 |  | 374 |  | 1,184 |  | 793
Total interest expense |  |  | 4,217 |  | 5,768 |  | 6,263 |  | 6,777 |  | 6,549 |  | 9,986 |  | 12,343
Net interest income |  |  | 19,774 |  | 18,098 |  | 17,633 |  | 17,279 |  | 16,539 |  | 37,870 |  | 32,357
Provision for loan losses |  |  | 10,200 |  | 6,000 |  | 1,050 |  | 650 |  | 300 |  | 16,200 |  | 600
Net interest income after provision for loan losses |  |  | 9,574 |  | 12,098 |  | 16,583 |  | 16,629 |  | 16,239 |  | 21,670 |  | 31,757
Noninterest income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage banking income |  |  | 5,776 |  | 2,668 |  | 2,181 |  | 3,055 |  | 2,830 |  | 8,444 |  | 4,687
Service fees on deposit accounts |  |  | 197 |  | 262 |  | 260 |  | 271 |  | 265 |  | 459 |  | 530
ATM and debit card income |  |  | 394 |  | 398 |  | 441 |  | 464 |  | 443 |  | 793 |  | 823
Income from bank owned life insurance |  |  | 270 |  | 270 |  | 281 |  | 282 |  | 222 |  | 540 |  | 438
Gain on sale of securities, net |  |  | - |  | - |  | 719 |  | 2 |  | 3 |  | - |  | -
Loss on extinguishment of debt |  |  | (37) |  | - |  | (1,496) |  | - |  | - |  | (37) |  | -
Net lender fees on PPP loan sale |  |  | 2,247 |  | - |  | - |  | - |  | - |  | 2,247 |  | -
Other income |  |  | 360 |  | 318 |  | 1,117 |  | 322 |  | 327 |  | 679 |  | 606
Total noninterest income |  |  | 9,207 |  | 3,916 |  | 3,503 |  | 4,396 |  | 4,090 |  | 13,125 |  | 7,084
Noninterest expense |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Compensation and benefits |  |  | 8,450 |  | 7,871 |  | 7,175 |  | 7,668 |  | 7,399 |  | 16,322 |  | 14,182
Occupancy |  |  | 1,498 |  | 1,536 |  | 1,429 |  | 1,416 |  | 1,343 |  | 3,033 |  | 2,682
Outside service and data processing costs |  |  | 1,228 |  | 1,192 |  | 1,109 |  | 1,073 |  | 1,045 |  | 2,420 |  | 2,005
Insurance |  |  | 298 |  | 320 |  | 70 |  | 145 |  | 280 |  | 619 |  | 598
Professional fees |  |  | 527 |  | 497 |  | 447 |  | 399 |  | 414 |  | 1,023 |  | 853
Marketing |  |  | 101 |  | 258 |  | 208 |  | 237 |  | 236 |  | 359 |  | 496
Other |  |  | 542 |  | 698 |  | 535 |  | 546 |  | 651 |  | 1,240 |  | 1,200
Total noninterest expenses |  |  | 12,644 |  | 12,372 |  | 10,973 |  | 11,484 |  | 11,368 |  | 25,016 |  | 22,016
Income before provision for income taxes |  |  | 6,137 |  | 3,642 |  | 9,113 |  | 9,541 |  | 8,961 |  | 9,779 |  | 16,825
Income tax expense |  |  | 1,459 |  | 810 |  | 1,915 |  | 2,129 |  | 1,722 |  | 2,269 |  | 3,576
Net income available to common shareholders |  | $ | 4,678 |  | 2,832 |  | 7,198 |  | 7,412 |  | 7,239 |  | 7,510 |  | 13,249
Earnings per common share – Basic |  | $ | 0.61 |  | 0.37 |  | 0.94 |  | 0.98 |  | 0.97 |  | 0.98 |  | 1.77
Earnings per common share – Diluted |  |  | 0.60 |  | 0.36 |  | 0.92 |  | 0.95 |  | 0.93 |  | 0.96 |  | 1.71
Basic weighted average common shares |  |  | 7,722 |  | 7,679 |  | 7,608 |  | 7,548 |  | 7,496 |  | 7,701 |  | 7,478
Diluted weighted average common shares |  |  | 7,819 |  | 7,827 |  | 7,811 |  | 7,781 |  | 7,756 |  | 7,823 |  | 7,749
[Footnotes to table located on page 7]

Net income for the second quarter of 2020 was $4.7 million, or $0.60 per diluted share, a $1.8 million increase from the first quarter of 2020 and a $2.6 million decrease from the second quarter of 2019. For the six months ended June 30, 2020, net income was $7.5 million, a decrease of 43.3% over the six months ended June 30, 2019.

Net interest income increased $1.7 million for the second quarter of 2020 compared with the first quarter of 2020, reflecting an increase in loan balances and a reduction in deposit costs. In comparison to the second quarter of 2019, net interest income increased $3.2 million, or 19.6%. Net interest income for the first six months of 2020 increased 17.0% compared with the first half of 2019.

The provision for loan losses increased to $10.2 million for the second quarter of 2020, compared to $6.0 million for the first quarter and $300 thousand for the second quarter of 2019. The increased provision during the second quarter of 2020 was driven by qualitative factors related to the uncertain economic conditions created by the COVID-19 pandemic. The provision for loan losses totaled $16.2 million for the first six months of 2020 compared to $600 thousand for the first six months of 2019.

3

Noninterest income totaled $9.2 million for the second quarter of 2020, a $5.3 million increase from the first quarter of 2020, and $5.1 million increase from the second quarter of 2019. The primary drivers of the increases were mortgage banking income resulting from the favorable mortgage rate environment and net SBA lender fee income of $2.2 million received on PPP loans originated and then sold to a third party.

Noninterest expense for the second quarter of 2020 increased $272 thousand compared with the first quarter of 2020 and $1.3 million compared with the second quarter of 2019. The increases were due primarily to higher compensation and benefits expense related to mortgage banking.

Our effective tax rate was 23.8% for the second quarter of 2020, 22.2% for the first quarter of 2020, and 19.2% for the second quarter of 2019. The higher tax rate this quarter relates to the favorable tax impact of stock option transactions in the prior periods.

NET INTEREST INCOME AND MARGIN - Unaudited
|  | For the Three Months Ended
|  | June 30, 2020 |  | March 31, 2020 |  | June 30, 2019
|  | Average |  | Income/ |  | Yield/ |  | Average |  | Income/ |  | Yield/ |  | Average |  | Income/ |  | Yield/
(dollars in thousands) |  | Balance |  | Expense |  | Rate(3) |  | Balance |  | Expense |  | Rate(3) |  | Balance |  | Expense |  | Rate(3)
Interest-earning assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal funds sold and interest-bearing deposits |  | $ | 100,009 |  | $ | 53 |  | 0.21% |  | $ | 46,101 |  | $ | 103 |  | 0.90% |  | $ | 71,905 |  | $ | 451 |  | 2.52%
Investment securities, taxable |  |  | 68,669 |  |  | 339 |  | 1.99% |  |  | 66,640 |  |  | 381 |  | 2.30% |  |  | 74,172 |  |  | 501 |  | 2.71%
Investment securities, nontaxable(2) |  |  | 6,749 |  |  | 58 |  | 3.48% |  |  | 3,815 |  |  | 19 |  | 2.05% |  |  | 5,288 |  |  | 49 |  | 3.74%
Loans(10) |  |  | 2,150,717 |  |  | 23,554 |  | 4.40% |  |  | 2,003,554 |  |  | 23,367 |  | 4.69% |  |  | 1,786,532 |  |  | 22,098 |  | 4.96%
Total interest-earning assets |  |  | 2,326,144 |  |  | 24,004 |  | 4.15% |  |  | 2,120,110 |  |  | 23,870 |  | 4.53% |  |  | 1,937,897 |  |  | 23,099 |  | 4.78%
Noninterest-earning assets |  |  | 107,054 |  |  |  |  |  |  |  | 111,338 |  |  |  |  |  |  |  | 94,673 |  |  |  |  |
Total assets |  | $ | 2,433,198 |  |  |  |  |  |  | $ | 2,231,448 |  |  |  |  |  |  | $ | 2,032,570 |  |  |  |  |
Interest-bearing liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
NOW accounts |  | $ | 252,465 |  |  | 91 |  | 0.14% |  | $ | 227,688 |  |  | 168 |  | 0.30% |  | $ | 199,118 |  |  | 140 |  | 0.28%
Savings & money market |  |  | 975,539 |  |  | 2,069 |  | 0.85% |  |  | 956,588 |  |  | 3,369 |  | 1.42% |  |  | 849,570 |  |  | 3,879 |  | 1.83%
Time deposits |  |  | 318,379 |  |  | 1,467 |  | 1.85% |  |  | 329,664 |  |  | 1,637 |  | 2.00% |  |  | 381,593 |  |  | 2,156 |  | 2.27%
Total interest-bearing deposits |  |  | 1,546,383 |  |  | 3,627 |  | 0.94% |  |  | 1,513,940 |  |  | 5,174 |  | 1.37% |  |  | 1,430,281 |  |  | 6,175 |  | 1.73%
FHLB advances and other borrowings |  |  | 80,898 |  |  | 175 |  | 0.87% |  |  | 43,470 |  |  | 158 |  | 1.46% |  |  | 25,136 |  |  | 217 |  | 3.46%
Subordinated debentures |  |  | 35,926 |  |  | 415 |  | 4.65% |  |  | 35,900 |  |  | 436 |  | 4.88% |  |  | 13,403 |  |  | 157 |  | 4.70%
Total interest-bearing liabilities |  |  | 1,663,207 |  |  | 4,217 |  | 1.02% |  |  | 1,593,310 |  |  | 5,768 |  | 1.46% |  |  | 1,468,820 |  |  | 6,549 |  | 1.79%
Noninterest-bearing liabilities |  |  | 555,746 |  |  |  |  |  |  |  | 427,992 |  |  |  |  |  |  |  | 379,023 |  |  |  |  |
Shareholders’ equity |  |  | 214,245 |  |  |  |  |  |  |  | 210,146 |  |  |  |  |  |  |  | 184,727 |  |  |  |  |
Total liabilities and shareholders’ equity |  | $ | 2,433,198 |  |  |  |  |  |  | $ | 2,231,448 |  |  |  |  |  |  | $ | 2,032,570 |  |  |  |  |
Net interest spread |  |  |  |  |  |  |  | 3.13% |  |  |  |  |  |  |  | 3.07% |  |  |  |  |  |  |  | 2.99%
Net interest income (tax equivalent) / margin |  |  |  |  | $ | 19,787 |  | 3.42% |  |  |  |  | $ | 18,102 |  | 3.43% |  |  |  |  | $ | 16,550 |  | 3.43%
Less: tax-equivalent adjustment(2) |  |  |  |  |  | 13 |  |  |  |  |  |  |  | 4 |  |  |  |  |  |  |  | 11 |  |
Net interest income |  |  |  |  | $ | 19,774 |  |  |  |  |  |  | $ | 18,098 |  |  |  |  |  |  | $ | 16,539 |  |
[Footnotes to table located on page 7]

Net interest income was $19.8 million for the second quarter of 2020, a $1.7 million increase from the first quarter of 2020. Interest income increased by $134 thousand while interest expense decreased by $1.6 million due primarily to a 43 basis point reduction in deposit costs. While average loan balances increased by $147.2 million, loan yield decreased by 29 basis points, neutralizing the impact to interest income. In comparison with the second quarter of 2019, net interest income increased $3.2 million due to higher loan balances and lower deposit costs, partially offset by lower yields on interest-earning assets and a higher subordinated debt balance. Our net interest margin, on a tax-equivalent basis, was 3.42% for the second quarter of 2020, a slight decrease from 3.43% for the first quarter of 2020 and the second quarter of 2019. Lower deposit costs nearly offset the lower loan yield during the second quarter of 2019, decreasing the impact to net interest margin.

4

BALANCE SHEETS - Unaudited |  |  |  |  |  |  |  |  |  |  |
|  | Ending Balance
|  | June 30 |  | March 31 |  | December 31 |  | September 30 |  | June 30
(in thousands, except per share data) |  | 2020 |  | 2020 |  | 2019 |  | 2019 |  | 2019
Assets |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents: |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks |  | $ | 47,292 |  | 17,521 |  | 19,196 |  | 44,349 |  | 12,220
Federal funds sold |  |  | 87,743 |  | 40,277 |  | 89,256 |  | 19,215 |  | 64,520
Interest-bearing deposits with banks |  |  | 103,371 |  | 83,314 |  | 19,364 |  | 70,959 |  | 40,044
Total cash and cash equivalents |  |  | 238,406 |  | 141,112 |  | 127,816 |  | 134,523 |  | 116,784
Investment securities: |  |  |  |  |  |  |  |  |  |  |
Investment securities available for sale |  |  | 70,997 |  | 70,507 |  | 67,694 |  | 89,427 |  | 75,252
Other investments |  |  | 2,610 |  | 5,341 |  | 6,948 |  | 3,307 |  | 3,311
Total investment securities |  |  | 73,607 |  | 75,848 |  | 74,642 |  | 92,734 |  | 78,563
Mortgage loans held for sale |  |  | 44,169 |  | 34,948 |  | 27,046 |  | 40,630 |  | 24,509
Loans (5) |  |  | 2,036,801 |  | 2,030,261 |  | 1,943,525 |  | 1,838,427 |  | 1,809,355
Less allowance for loan losses |  |  | (31,602) |  | (22,462) |  | (16,642) |  | (15,848) |  | (16,144)
Loans, net |  |  | 2,005,199 |  | 2,007,799 |  | 1,926,883 |  | 1,822,579 |  | 1,793,211
Bank owned life insurance |  |  | 40,551 |  | 40,281 |  | 40,011 |  | 39,730 |  | 39,448
Property and equipment, net |  |  | 61,344 |  | 58,656 |  | 58,478 |  | 54,846 |  | 48,262
Deferred income taxes |  |  | 4,017 |  | 4,087 |  | 4,275 |  | 8,970 |  | 7,049
Other assets |  |  | 15,002 |  | 9,518 |  | 8,044 |  | 7,614 |  | 8,218
Total assets |  | $ | 2,482,295 |  | 2,372,249 |  | 2,267,195 |  | 2,201,626 |  | 2,116,044
Liabilities |  |  |  |  |  |  |  |  |  |  |
Deposits |  | $ | 2,188,643 |  | 2,025,698 |  | 1,876,124 |  | 1,899,295 |  | 1,854,008
Federal Home Loan Bank advances |  |  | - |  | 65,000 |  | 110,000 |  | 25,000 |  | 25,000
Subordinated debentures |  |  | 35,944 |  | 35,917 |  | 35,890 |  | 35,887 |  | 13,403
Other liabilities |  |  | 41,554 |  | 35,159 |  | 39,321 |  | 42,950 |  | 33,779
Total liabilities |  |  | 2,266,141 |  | 2,161,774 |  | 2,061,335 |  | 2,003,132 |  | 1,926,190
Shareholders’ equity |  |  |  |  |  |  |  |  |  |  |
Preferred stock - $.01 par value; 10,000,000 shares authorized |  |  | - |  | - |  | - |  | - |  | -
Common Stock - $.01 par value; 10,000,000 shares authorized |  |  | 77 |  | 77 |  | 77 |  | 76 |  | 76
Nonvested restricted stock |  |  | (1,001) |  | (1,105) |  | (803) |  | (919) |  | (887)
Additional paid-in capital |  |  | 108,031 |  | 107,529 |  | 106,152 |  | 105,378 |  | 104,354
Accumulated other comprehensive income (loss) |  |  | 805 |  | 410 |  | (298) |  | 424 |  | 188
Retained earnings |  |  | 108,242 |  | 103,564 |  | 100,732 |  | 93,535 |  | 86,123
Total shareholders’ equity |  |  | 216,154 |  | 210,475 |  | 205,860 |  | 198,494 |  | 189,854
Total liabilities and shareholders’ equity |  | $ | 2,482,295 |  | 2,372,249 |  | 2,267,195 |  | 2,201,626 |  | 2,116,044
Common Stock |  |  |  |  |  |  |  |  |  |  |
Book value per common share |  | $ | 27.95 |  | 27.27 |  | 26.83 |  | 26.05 |  | 25.12
Stock price: |  |  |  |  |  |  |  |  |  |  |
High |  |  | 30.49 |  | 42.72 |  | 44.32 |  | 41.69 |  | 39.16
Low |  |  | 24.21 |  | 21.64 |  | 37.94 |  | 36.27 |  | 33.97
Period end |  |  | 27.71 |  | 28.37 |  | 42.49 |  | 39.85 |  | 39.16
Common shares outstanding |  |  | 7,735 |  | 7,718 |  | 7,673 |  | 7,619 |  | 7,558
[Footnotes to table located on page 7]

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ASSET QUALITY MEASURES - Unaudited |  |  |  |  |  |
|  | Quarter Ended
|  | June 30 |  | March 31 |  | December 31 |  | September 30 |  | June 30
(dollars in thousands) |  | 2020 |  | 2020 |  | 2019 |  | 2019 |  | 2019
Nonperforming Assets Commercial |  |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | - |  | - |  | - |  | - |  | -
Non-owner occupied RE |  |  | 2,428 |  | 3,268 |  | 188 |  | 1,963 |  | 372
Construction |  |  | - |  | - |  | - |  | - |  | -
Commercial business |  |  | 229 |  | 231 |  | 235 |  | 198 |  | 65
Consumer |  |  |  |  |  |  |  |  |  |  |
Real estate |  |  | 1,324 |  | 1,821 |  | 1,829 |  | 1,637 |  | 1,710
Home equity |  |  | 360 |  | 427 |  | 431 |  | 467 |  | 442
Construction |  |  | - |  | - |  | - |  | - |  | -
Other |  |  | - |  | - |  | - |  | - |  | -
Nonaccruing troubled debt restructurings |  |  | 4,669 |  | 4,186 |  | 4,111 |  | 2,763 |  | 3,220
Total nonaccrual loans |  |  | 9,010 |  | 9,933 |  | 6,794 |  | 7,028 |  | 5,809
Other real estate owned |  |  | - |  | - |  | - |  | - |  | -
Total nonperforming assets |  | $ | 9,010 |  | 9,933 |  | 6,794 |  | 7,028 |  | 5,809
Nonperforming assets as a percentage of: |  |  |  |  |  |  |  |  |  |  |
Total assets |  |  | 0.36% |  | 0.42% |  | 0.30% |  | 0.32% |  | 0.27%
Total loans |  |  | 0.44% |  | 0.49% |  | 0.35% |  | 0.38% |  | 0.32%
Accruing troubled debt restructurings (TDRs) |  | $ | 7,332 |  | 7,939 |  | 5,219 |  | 5,791 |  | 6,935
|  | Quarter Ended
|  | June 30 |  | March 31 |  | December 31 |  | September 30 |  | June 30
(dollars in thousands) |  | 2020 |  | 2020 |  | 2019 |  | 2019 |  | 2019
Allowance for Loan Losses |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of period |  | $ | 22,462 |  | 16,642 |  | 15,848 |  | 16,144 |  | 16,051
Loans charged-off |  |  | (1,083) |  | (266) |  | (275) |  | (963) |  | (237)
Recoveries of loans previously charged-off |  |  | 23 |  | 86 |  | 19 |  | 17 |  | 30
Net loans charged-off |  |  | (1,060) |  | (180) |  | (256) |  | (946) |  | (207)
Provision for loan losses |  |  | 10,200 |  | 6,000 |  | 1,050 |  | 650 |  | 300
Balance, end of period |  | $ | 31,602 |  | 22,462 |  | 16,642 |  | 15,848 |  | 16,144
Allowance for loan losses to gross loans |  |  | 1.55 % |  | 1.11 % |  | 0.86 % |  | 0.86 % |  | 0.89 %
Allowance for loan losses to nonaccrual loans |  |  | 350.74 % |  | 226.14 % |  | 244.95 % |  | 225.50 % |  | 277.91 %
Net charge-offs to average loans QTD (annualized) |  |  | 0.24 % |  | 0.04 % |  | 0.06 % |  | 0.21 % |  | 0.06 %

Total nonperforming assets decreased by $923 thousand to $9.0 million for the second quarter of 2020, representing 0.36% of total assets, a decrease of six basis points compared to the first quarter of 2020. The decrease in nonperforming assets was primarily a result of a $912 thousand charge-off on one commercial real estate loan. The allowance for loan losses as a percentage of nonaccrual loans was 350.74% at June 30, 2020, compared to 226.14% at March 31, 2020 and 277.91% at June 30, 2019.

At June 30, 2020, the allowance for loan losses was $31.6 million, or 1.55% of total loans, compared to $22.5 million, or 1.11% of total loans, at March 31, 2020 and $16.1 million, or 0.89% of total loans, at June 30, 2019. Net charge-offs were $1.1 million, or 0.24% on an annualized basis, for the second quarter of 2020 compared to $180 thousand, or 0.04% of net charge-offs, annualized, for the first quarter of 2020. Net charge-offs were $207,000 for the second quarter of 2019. The provision for loan losses was $10.2 million for the second quarter of 2020 compared to $6.0 million for the first quarter of 2020 and $300 thousand for the second quarter of 2019. The increased provision during the second quarter of 2020 was driven by the COVID-19 pandemic and qualitative adjustment factors related to the uncertain economic conditions at June 30, 2020.

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LOAN COMPOSITION - Unaudited |  |  |  |  |  |  |  |  |  |  |
|  | Quarter Ended
|  | June 30 |  | March 31 |  | December 31 |  | September 30 |  | June 30
(dollars in thousands) |  | 2020 |  | 2020 |  | 2019 |  | 2019 |  | 2019
Commercial |  |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | 420,858 |  | 422,124 |  | 407,851 |  | 392,896 |  | 390,727
Non-owner occupied RE |  |  | 554,566 |  | 534,846 |  | 501,878 |  | 481,865 |  | 455,346
Construction |  |  | 71,761 |  | 74,758 |  | 80,486 |  | 75,710 |  | 85,065
Business |  |  | 310,212 |  | 317,702 |  | 308,123 |  | 290,154 |  | 292,564
Total commercial loans |  |  | 1,357,397 |  | 1,349,430 |  | 1,298,338 |  | 1,240,625 |  | 1,223,702
Consumer |  |  |  |  |  |  |  |  |  |  |
Real estate |  |  | 437,742 |  | 427,697 |  | 398,245 |  | 346,512 |  | 342,100
Home equity |  |  | 173,739 |  | 183,099 |  | 179,738 |  | 174,611 |  | 170,861
Construction |  |  | 45,629 |  | 45,240 |  | 41,471 |  | 49,548 |  | 46,247
Other |  |  | 22,294 |  | 24,795 |  | 25,733 |  | 27,131 |  | 26,445
Total consumer loans |  |  | 679,404 |  | 680,831 |  | 645,187 |  | 597,802 |  | 585,653
Total gross loans, net of deferred fees |  |  | 2,036,801 |  | 2,030,261 |  | 1,943,525 |  | 1,838,427 |  | 1,809,355
Less—allowance for loan losses |  |  | (31,602) |  | (22,462) |  | (16,642) |  | (15,848) |  | (16,144)
Total loans, net |  | $ | 2,005,199 |  | 2,007,799 |  | 1,926,883 |  | 1,822,579 |  | 1,793,211

DEPOSIT COMPOSITION - Unaudited |  |  |  |  |  |  |  |  |  |  |
|  | Quarter Ended
|  | June 30 |  | March 31 |  | December 31 |  | September 30 |  | June 30
(dollars in thousands) |  | 2020 |  | 2020 |  | 2019 |  | 2019 |  | 2019
Non-interest bearing |  | $ | 573,548 |  | 437,855 |  | 397,331 |  | 414,704 |  | 368,906
Interest bearing: |  |  |  |  |  |  |  |  |  |  |
NOW accounts |  |  | 285,953 |  | 260,320 |  | 228,680 |  | 230,676 |  | 229,109
Money market accounts |  |  | 1,006,233 |  | 979,861 |  | 898,923 |  | 891,784 |  | 857,478
Savings |  |  | 22,675 |  | 19,563 |  | 16,258 |  | 15,912 |  | 15,180
Time, less than $100,000 |  |  | 41,610 |  | 43,596 |  | 47,941 |  | 55,501 |  | 59,382
Time and out-of-market deposits, $100,000 and over |  |  | 258,624 |  | 284,503 |  | 286,991 |  | 290,718 |  | 323,953
Total deposits |  | $ | 2,188,643 |  | 2,025,698 |  | 1,876,124 |  | 1,899,295 |  | 1,854,008

Footnotes to tables:
(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) Annualized for the respective three-month period.
(4) Noninterest expense divided by the sum of net interest income and noninterest income.
(5) Excludes mortgage loans held for sale.
(6) Excludes out of market deposits and time deposits greater than $250,000.
(7) June 30, 2020 ratios are preliminary.
(8) The common equity tier 1 ratio is calculated as the sum of common equity divided by risk-weighted assets.
(9) The tangible common equity ratio is calculated as total equity less preferred stock divided by total assets.
(10) Includes mortgage loans held for sale.

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 largest bank headquartered in South Carolina. Southern First Bank has been providing financial services since 1999 and now operates in 13 locations in the Greenville, Columbia, and Charleston markets of South Carolina as well as the Triangle and Triad regions of North Carolina and Atlanta, Georgia. Southern First Bancshares has consolidated assets of approximately $2.5 billion and its common stock is traded on 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.

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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 the company conducts operations may be different than expected, including, but not limited to, due to the negative impacts and disruptions resulting from the recent outbreak of the novel coronavirus, or COVID-19, on the economies and communities the company serves, which may have an adverse impact on the company’s business, operations and performance, and could have a negative impact on the company’s credit portfolio, share price, borrowers, and on the economy as a whole, both domestically and globally; (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 legislation, regulation, policies, or administrative practices, whether by judicial, governmental, or legislative action, including, but not limited to, the Coronavirus Aid, Relief, and Economic Security Act, or the “CARES Act”; (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; (6) changes in interest rates, which may affect the company’s net income, prepayment penalty income, mortgage banking income, and other future cash flows, or the market value of the company’s assets, including its investment securities; and (7) changes in accounting principles, policies, practices, or guidelines. 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, except as required by law.

FINANCIAL CONTACT: MIKE DOWLING 864-679-9070

MEDIA CONTACT: ART SEAVER 864-679-9010

WEB SITE: www.southernfirst.com

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