EX-99.1 2 sfb3974021-ex991.htm EARNINGS PRESS RELEASE FOR PERIOD ENDED SEPTEMBER 30, 2021

Exhibit 99.1

Southern First Reports Results for Third Quarter 2021

Greenville, South Carolina, October 26, 2021 – Southern First Bancshares, Inc. (NASDAQ: SFST), holding company for Southern First Bank, today announced its financial results for the three- and nine- month periods ended September 30, 2021.

“The third quarter was a record quarter for Southern First,” stated Art Seaver, the company’s Chief Executive Officer. “Our team generated record loan growth, strong deposit growth, and the highest quarterly net income in our company’s history.”

2021 Third Quarter Highlights

● | Net income improved to $14.0 million, compared to $2.2 million for Q3 2020
● | Diluted earnings per common share improved to $1.75 per share, compared to $0.28 for Q3 2020
● | Loan loss reversal of $6.0 million, compared to provision of $11.1 million for Q3 2020
● | Total loans increased 14.9% to $2.4 billion at Q3 2021, compared to $2.1 billion at Q3 2020
● | Total deposits increased 11.6% to $2.4 billion at Q3 2021, compared to $2.2 billion at Q3 2020

|  | Quarter Ended
|  | September 30 |  | June 30 |  | March 31 |  | December 31 |  | September 30
|  | 2021 |  | 2021 |  | 2021 |  | 2020 |  | 2020
Earnings ($ in thousands, except per share data): |  |  |  |  |  |  |  |  |  |  |
Net income available to common shareholders |  | $ | 14,017 |  | 10,323 |  | 10,366 |  | 8,601 |  | 2,217
Earnings per common share, diluted |  |  | 1.75 |  | 1.29 |  | 1.31 |  | 1.10 |  | 0.28
Total revenue(1) |  |  | 26,411 |  | 25,052 |  | 27,177 |  | 27,947 |  | 28,221
Net interest margin (tax-equivalent)(2) |  |  | 3.38% |  | 3.50% |  | 3.60% |  | 3.55% |  | 3.52%
Return on average assets(3) |  |  | 2.03% |  | 1.61% |  | 1.68% |  | 1.38% |  | 0.36%
Return on average equity(3) |  |  | 21.67% |  | 16.96% |  | 18.22% |  | 15.51% |  | 4.03%
Efficiency ratio(4) |  |  | 53.15% |  | 53.87% |  | 52.11% |  | 52.04% |  | 50.26%
Noninterest expense to average assets (3) |  |  | 2.06% |  | 2.10% |  | 2.30% |  | 2.36% |  | 2.34%
Balance Sheet ($ in thousands): |  |  |  |  |  |  |  |  |  |  |
Total loans(5) |  | $ | 2,389,047 |  | 2,254,135 |  | 2,183,682 |  | 2,142,867 |  | 2,078,540
Total deposits |  |  | 2,433,018 |  | 2,310,892 |  | 2,258,751 |  | 2,142,758 |  | 2,181,056
Core deposits(6) |  |  | 2,367,841 |  | 2,220,577 |  | 2,161,759 |  | 2,011,903 |  | 2,011,919
Total assets |  |  | 2,784,176 |  | 2,650,183 |  | 2,579,922 |  | 2,482,587 |  | 2,479,411
Loans to deposits |  |  | 98.19% |  | 97.54% |  | 96.68% |  | 100.01% |  | 95.30%
Holding Company Capital Ratios(7): |  |  |  |  |  |  |  |  |  |  |
Total risk-based capital ratio |  |  | 14.88% |  | 14.98% |  | 14.82% |  | 14.38% |  | 14.15%
Tier 1 risk-based capital ratio |  |  | 12.59% |  | 12.63% |  | 12.43% |  | 11.97% |  | 11.72%
Leverage ratio |  |  | 10.20% |  | 10.27% |  | 10.12% |  | 9.70% |  | 9.47%
Common equity tier 1 ratio(8) |  |  | 12.00% |  | 12.00% |  | 11.79% |  | 11.32% |  | 11.06%
Tangible common equity(9) |  |  | 9.54% |  | 9.50% |  | 9.28% |  | 9.20% |  | 8.82%
Asset Quality Ratios: |  |  |  |  |  |  |  |  |  |  |
Nonperforming assets/total assets |  |  | 0.50% |  | 0.27% |  | 0.30% |  | 0.37% |  | 0.42%
Classified assets/tier one capital plus allowance for loan losses |  |  | 14.90% |  | 13.36% |  | 14.42% |  | 8.18% |  | 7.00%
Loans 30 days or more past due/ loans(5) |  |  | 0.49% |  | 0.14% |  | 0.12% |  | 0.17% |  | 0.26%
Net charge-offs (recoveries)/average loans(5) (YTD annualized) |  |  | (0.01%) |  | 0.00% |  | 0.07% |  | 0.10% |  | 0.11%
Allowance for loan losses/loans(5) |  |  | 1.51% |  | 1.86% |  | 1.99% |  | 2.06% |  | 2.03%
Allowance for loan losses/nonaccrual loans |  |  | 259.95% |  | 619.47% |  | 557.47% |  | 547.14% |  | 482.43%

[Footnotes to table located on page 6]

1

INCOME STATEMENTS – Unaudited
|  | Quarter Ended
|  | September 30 |  | June 30 |  | March 31 |  | December 31 |  | September 30
(in thousands, except per share data) |  | 2021 |  | 2021 |  | 2021 |  | 2020 |  | 2020
Interest income |  |  |  |  |  |  |  |  |  |  |
Loans |  | $ | 23,063 |  | 22,409 |  | 22,465 |  | 23,171 |  | 23,042
Investment securities |  |  | 355 |  | 269 |  | 301 |  | 325 |  | 310
Federal funds sold |  |  | 68 |  | 53 |  | 47 |  | 51 |  | 63
Total interest income |  |  | 23,486 |  | 22,731 |  | 22,813 |  | 23,547 |  | 23,415
Interest expense |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 934 |  | 920 |  | 1,155 |  | 1,861 |  | 2,393
Borrowings |  |  | 380 |  | 381 |  | 385 |  | 383 |  | 385
Total interest expense |  |  | 1,314 |  | 1,301 |  | 1,540 |  | 2,244 |  | 2,778
Net interest income |  |  | 22,172 |  | 21,430 |  | 21,273 |  | 21,303 |  | 20,637
Provision (reversal) for loan losses |  |  | (6,000) |  | (1,900) |  | (300) |  | 2,300 |  | 11,100
Net interest income after provision for loan losses |  |  | 28,172 |  | 23,330 |  | 21,573 |  | 19,003 |  | 9,537
Noninterest income |  |  |  |  |  |  |  |  |  |  |
Mortgage banking income |  |  | 2,829 |  | 1,983 |  | 4,633 |  | 5,064 |  | 6,277
Service fees on deposit accounts |  |  | 199 |  | 173 |  | 185 |  | 190 |  | 211
ATM and debit card income |  |  | 542 |  | 521 |  | 470 |  | 483 |  | 465
Income from bank owned life insurance |  |  | 321 |  | 331 |  | 267 |  | 281 |  | 270
Net lender and referral fees on PPP loans |  |  | - |  | 268 |  | - |  | - |  | -
Other income |  |  | 348 |  | 346 |  | 349 |  | 626 |  | 361
Total noninterest income |  |  | 4,239 |  | 3,622 |  | 5,904 |  | 6,644 |  | 7,584
Noninterest expense |  |  |  |  |  |  |  |  |  |  |
Compensation and benefits |  |  | 7,468 |  | 6,823 |  | 6,683 |  | 6,836 |  | 6,666
Mortgage production costs |  |  | 1,956 |  | 2,264 |  | 2,867 |  | 3,057 |  | 2,666
Occupancy |  |  | 1,684 |  | 1,550 |  | 1,637 |  | 1,596 |  | 1,601
Other real estate owned (income) expenses |  |  | (3) |  | 1 |  | 387 |  | 550 |  | 673
Outside service and data processing costs |  |  | 1,229 |  | 1,238 |  | 1,142 |  | 1,052 |  | 1,046
Insurance |  |  | 244 |  | 262 |  | 301 |  | 385 |  | 377
Professional fees |  |  | 561 |  | 498 |  | 421 |  | 501 |  | 395
Marketing |  |  | 240 |  | 201 |  | 182 |  | 146 |  | 165
Other |  |  | 660 |  | 658 |  | 542 |  | 421 |  | 594
Total noninterest expenses |  |  | 14,039 |  | 13,495 |  | 14,162 |  | 14,544 |  | 14,183
Income before provision for income taxes |  |  | 18,372 |  | 13,457 |  | 13,315 |  | 11,103 |  | 2,938
Income tax expense |  |  | 4,355 |  | 3,134 |  | 2,949 |  | 2,502 |  | 721
Net income available to common shareholders |  | $ | 14,017 |  | 10,323 |  | 10,366 |  | 8,601 |  | 2,217
Earnings per common share – Basic |  | $ | 1.78 |  | 1.32 |  | 1.33 |  | 1.11 |  | 0.29
Earnings per common share – Diluted |  |  | 1.75 |  | 1.29 |  | 1.31 |  | 1.10 |  | 0.28
Basic weighted average common shares |  |  | 7,874 |  | 7,848 |  | 7,807 |  | 7,741 |  | 7,732
Diluted weighted average common shares |  |  | 8,001 |  | 7,988 |  | 7,941 |  | 7,836 |  | 7,815

[Footnotes to table located on page 6]

Net income for the third quarter of 2021 was $14.0 million, or $1.75 per diluted share, a $3.7 million increase from the second quarter of 2021 and an $11.8 million increase from the third quarter of 2020. Net interest income increased $742 thousand for the third quarter of 2021, compared to the second quarter of 2021, and increased $1.5 million, or 7.4%, compared to the third quarter of 2020. While our interest expense has stabilized from previous rate reductions, our interest income continues to be affected by declining loan yield; however, loan growth has offset the negative impact of the lower market rates.

The provision for loan losses was a reversal of $6.0 million for the third quarter compared to a reversal of $1.9 million for the second quarter of 2021 and an expense of $11.1 million for the third quarter of 2020. The $17.1 million decrease in provision expense from the third quarter of 2020 was driven by a reduction in the historical loss percentages of our various loan categories as well as an overall improvement in economic conditions such as unemployment and hotel occupancy rates.

Noninterest income totaled $4.2 million for the third quarter of 2021, a $617 thousand increase from the second quarter of 2021 and a $3.3 million decrease from the third quarter of 2020. As the largest component of our noninterest income, mortgage banking income was the driving factor in the increase in noninterest income from the prior quarter and the decrease from the prior year. While loan origination volume increased during the third quarter, volume remains significantly lower than the prior year, due in part to fewer refinance transactions.

2

Noninterest expense for the third quarter of 2021 increased $544 thousand compared with the second quarter of 2021 and decreased $144 thousand compared with the third quarter of 2020. The variances from the prior quarter and prior year were driven primarily by an increase in compensation and benefits expense and occupancy costs, partially offset by a reduction in mortgage production costs.

Our effective tax rate was 23.7% for the third quarter of 2021, 22.3% for the second quarter of 2021, and 24.5% for the third quarter of 2020. The changes in the effective tax rate from the prior quarter and prior year relate primarily to the impact of stock options in each respective quarter.

NET INTEREST INCOME AND MARGIN - Unaudited
|  | For the Three Months Ended
|  | September 30, 2021 |  | June 30, 2021 |  | September 30, 2020
|  | 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 |  | $ | 145,899 |  | $ | 68 |  | 0.18% |  | $ | 119,211 |  | $ | 53 |  | 0.18% |  | $ | 162,092 |  | $ | 63 |  | 0.15%
Investment securities, taxable |  |  | 93,428 |  |  | 301 |  | 1.28% |  |  | 85,306 |  |  | 212 |  | 1.00% |  |  | 77,365 |  |  | 261 |  | 1.34%
Investment securities, nontaxable(2) |  |  | 10,974 |  |  | 70 |  | 2.54% |  |  | 11,599 |  |  | 74 |  | 2.56% |  |  | 7,136 |  |  | 64 |  | 3.55%
Loans(10) |  |  | 2,351,467 |  |  | 23,063 |  | 3.89% |  |  | 2,240,236 |  |  | 22,409 |  | 4.01% |  |  | 2,088,746 |  |  | 23,042 |  | 4.39%
Total interest-earning assets |  |  | 2,601,768 |  |  | 23,502 |  | 3.58% |  |  | 2,456,352 |  |  | 22,748 |  | 3.71% |  |  | 2,335,339 |  |  | 23,430 |  | 3.99%
Noninterest-earning assets |  |  | 132,929 |  |  |  |  |  |  |  | 117,836 |  |  |  |  |  |  |  | 104,065 |  |  |  |  |
Total assets |  | $ | 2,734,697 |  |  |  |  |  |  | $ | 2,574,188 |  |  |  |  |  |  | $ | 2,439,404 |  |  |  |  |
Interest-bearing liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
NOW accounts |  | $ | 316,775 |  |  | 48 |  | 0.06% |  | $ | 298,446 |  |  | 46 |  | 0.06% |  | $ | 264,786 |  |  | 50 |  | 0.08%
Savings & money market |  |  | 1,209,991 |  |  | 651 |  | 0.21% |  |  | 1,131,391 |  |  | 580 |  | 0.21% |  |  | 1,021,850 |  |  | 1,176 |  | 0.46%
Time deposits |  |  | 161,300 |  |  | 235 |  | 0.58% |  |  | 175,612 |  |  | 294 |  | 0.67% |  |  | 296,186 |  |  | 1,167 |  | 1.57%
Total interest-bearing deposits |  |  | 1,688,066 |  |  | 934 |  | 0.22% |  |  | 1,605,449 |  |  | 920 |  | 0.23% |  |  | 1,582,822 |  |  | 2,393 |  | 0.60%
FHLB advances and other borrowings |  |  | - |  |  | - |  | -% |  |  | 44 |  |  | 2 |  | 18.23% |  |  | - |  |  | - |  | -
Subordinated debentures |  |  | 36,062 |  |  | 380 |  | 4.18% |  |  | 36,035 |  |  | 379 |  | 4.22% |  |  | 35,954 |  |  | 385 |  | 4.26%
Total interest-bearing liabilities |  |  | 1,724,128 |  |  | 1,314 |  | 0.30% |  |  | 1,641,528 |  |  | 1,301 |  | 0.32% |  |  | 1,618,776 |  |  | 2,778 |  | 0.68%
Noninterest-bearing liabilities |  |  | 753,901 |  |  |  |  |  |  |  | 688,576 |  |  |  |  |  |  |  | 601,896 |  |  |  |  |
Shareholders’ equity |  |  | 256,668 |  |  |  |  |  |  |  | 244,084 |  |  |  |  |  |  |  | 218,732 |  |  |  |  |
Total liabilities and shareholders’ equity |  | $ | 2,734,697 |  |  |  |  |  |  | $ | 2,574,188 |  |  |  |  |  |  | $ | 2,439,404 |  |  |  |  |
Net interest spread |  |  |  |  |  |  |  | 3.28% |  |  |  |  |  |  |  | 3.39% |  |  |  |  |  |  |  | 3.31%
Net interest income (tax equivalent) / margin |  |  |  |  | $ | 22,188 |  | 3.38% |  |  |  |  | $ | 21,447 |  | 3.50% |  |  |  |  | $ | 20,652 |  | 3.52%
Less: tax-equivalent adjustment(2) |  |  |  |  |  | 16 |  |  |  |  |  |  |  | 17 |  |  |  |  |  |  |  | 15 |  |
Net interest income |  |  |  |  | $ | 22,172 |  |  |  |  |  |  | $ | 21,430 |  |  |  |  |  |  | $ | 20,637 |  |

[Footnotes to table located on page 6]

Net interest income was $22.2 million for the third quarter of 2021, a $742 thousand increase from the second quarter of 2021, resulting primarily from a $754 thousand increase in interest income on a tax-equivalent basis. The increase in interest income was driven by an increase of $145.4 million in average interest-earning assets during the third quarter of 2021 with $111.2 million of the increase in average loan balances. In addition, average interest-bearing liabilities increased by $82.6 million and interest expense increased by $13 thousand during the same period. In comparison to the third quarter of 2020, net interest income increased $1.5 million resulting primarily from lower deposit costs, partially offset by lower yields on interest-earning assets. Our net interest margin, on a tax-equivalent basis, was 3.38% for the third quarter of 2021, a 12-basis point decrease from 3.50% for the second quarter of 2021 and a 14 basis point decrease from 3.52% for the third quarter of 2020. Compression in yield on our interest-earning assets resulted in the lower net interest margin for the third quarter of 2021 compared to the second quarter of 2021 and the third quarter of 2020.

3

BALANCE SHEETS - Unaudited |  |  |  |  |  |  |  |  |  |  |
|  | Ending Balance
|  | September 30 |  | June 30 |  | March 31 |  | December 31 |  | September 30
(in thousands, except per share data) |  | 2021 |  | 2021 |  | 2021 |  | 2020 |  | 2020
Assets |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents: |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks |  | $ | 17,944 |  | 17,093 |  | 12,621 |  | 12,920 |  | 14,916
Federal funds sold |  |  | 47,440 |  | 75,327 |  | 74,268 |  | 21,744 |  | 64,893
Interest-bearing deposits with banks |  |  | 63,149 |  | 61,377 |  | 68,456 |  | 66,023 |  | 83,106
Total cash and cash equivalents |  |  | 128,533 |  | 153,797 |  | 155,345 |  | 100,687 |  | 162,915
Investment securities: |  |  |  |  |  |  |  |  |  |  |
Investment securities available for sale |  |  | 113,802 |  | 91,232 |  | 92,997 |  | 94,729 |  | 87,991
Other investments |  |  | 2,820 |  | 2,770 |  | 1,770 |  | 3,635 |  | 2,589
Total investment securities |  |  | 116,622 |  | 94,002 |  | 94,767 |  | 98,364 |  | 90,580
Mortgage loans held for sale |  |  | 31,641 |  | 36,427 |  | 57,073 |  | 60,257 |  | 63,823
Loans (5) |  |  | 2,389,047 |  | 2,254,135 |  | 2,183,682 |  | 2,142,867 |  | 2,078,540
Less allowance for loan losses |  |  | (36,075) |  | (41,912) |  | (43,499) |  | (44,149) |  | (42,219)
Loans, net |  |  | 2,352,972 |  | 2,212,223 |  | 2,140,183 |  | 2,098,718 |  | 2,036,321
Bank owned life insurance |  |  | 49,521 |  | 49,200 |  | 48,869 |  | 41,102 |  | 40,821
Property and equipment, net |  |  | 78,456 |  | 69,193 |  | 61,710 |  | 60,236 |  | 61,386
Deferred income taxes |  |  | 16,591 |  | 25,025 |  | 9,813 |  | 9,518 |  | 6,510
Other assets |  |  | 9,840 |  | 10,316 |  | 12,162 |  | 13,705 |  | 17,055
Total assets |  | $ | 2,784,176 |  | 2,650,183 |  | 2,579,922 |  | 2,482,587 |  | 2,479,411
Liabilities |  |  |  |  |  |  |  |  |  |  |
Deposits |  | $ | 2,433,018 |  | 2,310,892 |  | 2,258,751 |  | 2,142,758 |  | 2,181,056
Federal Home Loan Bank advances |  |  | - |  | - |  | - |  | 25,000 |  | -
Subordinated debentures |  |  | 36,079 |  | 36,052 |  | 36,025 |  | 35,998 |  | 35,971
Other liabilities |  |  | 49,450 |  | 51,580 |  | 45,624 |  | 50,537 |  | 43,635
Total liabilities |  |  | 2,518,547 |  | 2,398,524 |  | 2,340,400 |  | 2,254,293 |  | 2,260,662
Shareholders’ equity |  |  |  |  |  |  |  |  |  |  |
Preferred stock - $.01 par value; 10,000,000 shares authorized |  |  | - |  | - |  | - |  | - |  | -
Common Stock - $.01 par value; 10,000,000 shares authorized |  |  | 79 |  | 79 |  | 79 |  | 78 |  | 77
Nonvested restricted stock |  |  | (1,469) |  | (1,173) |  | (1,075) |  | (698) |  | (989)
Additional paid-in capital |  |  | 113,501 |  | 112,604 |  | 111,181 |  | 108,831 |  | 108,337
Accumulated other comprehensive income (loss) |  |  | (248) |  | 400 |  | (90) |  | 1,023 |  | 865
Retained earnings |  |  | 153,766 |  | 139,749 |  | 129,427 |  | 119,060 |  | 110,459
Total shareholders’ equity |  |  | 265,629 |  | 251,659 |  | 239,522 |  | 228,294 |  | 218,749
Total liabilities and shareholders’ equity |  | $ | 2,784,176 |  | 2,650,183 |  | 2,579,922 |  | 2,482,587 |  | 2,479,411
Common Stock |  |  |  |  |  |  |  |  |  |  |
Book value per common share |  | $ | 33.57 |  | 31.86 |  | 30.58 |  | 29.37 |  | 28.27
Stock price: |  |  |  |  |  |  |  |  |  |  |
High |  |  | 53.50 |  | 55.26 |  | 54.09 |  | 35.80 |  | 27.96
Low |  |  | 48.62 |  | 47.61 |  | 35.15 |  | 24.15 |  | 23.30
Period end |  |  | 53.50 |  | 51.16 |  | 46.88 |  | 35.35 |  | 24.15
Common shares outstanding |  |  | 7,913 |  | 7,900 |  | 7,853 |  | 7,773 |  | 7,738

[Footnotes to table located on page 6]

4

ASSET QUALITY MEASURES - Unaudited
|  | Quarter Ended
|  | September 30 |  | June 30 |  | March 31 |  | December 31 |  | September 30
(dollars in thousands) |  | 2021 |  | 2021 |  | 2021 |  | 2020 |  | 2020
Nonperforming Assets |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | - |  | - |  | - |  | - |  | -
Non-owner occupied RE |  |  | 7,400 |  | 1,048 |  | 1,127 |  | 1,143 |  | 1,059
Construction |  |  | - |  | - |  | 135 |  | 139 |  | 143
Commercial business |  |  | 1,469 |  | 37 |  | 190 |  | 195 |  | 201
Consumer |  |  |  |  |  |  |  |  |  |  |
Real estate |  |  | 1,461 |  | 2,372 |  | 2,762 |  | 2,536 |  | 2,518
Home equity |  |  | 818 |  | 426 |  | 439 |  | 547 |  | 632
Construction |  |  | - |  | - |  | - |  | - |  | -
Other |  |  | - |  | - |  | - |  | - |  | -
Nonaccruing troubled debt restructurings |  |  | 2,730 |  | 2,883 |  | 3,150 |  | 3,509 |  | 4,198
Total nonaccrual loans |  |  | 13,878 |  | 6,766 |  | 7,803 |  | 8,069 |  | 8,751
Other real estate owned |  |  | - |  | 366 |  | - |  | 1,169 |  | 1,684
Total nonperforming assets |  | $ | 13,878 |  | 7,132 |  | 7,803 |  | 9,238 |  | 10,435
Nonperforming assets as a percentage of: |  |  |  |  |  |  |  |  |  |  |
Total assets |  |  | 0.50% |  | 0.27% |  | 0.30% |  | 0.37% |  | 0.42%
Total loans |  |  | 0.58% |  | 0.32% |  | 0.36% |  | 0.43% |  | 0.50%
Accruing troubled debt restructurings (TDRs) |  | $ | 4,044 |  | 4,622 |  | 4,379 |  | 4,893 |  | 5,277
Classified assets/tier 1 capital plus allowance for loan losses |  |  | 14.90% |  | 13.36% |  | 14.42% |  | 8.18% |  | 7.00%
|  | Quarter Ended
|  | September 30 |  | June 30 |  | March 31 |  | December 31 |  | September 30
(dollars in thousands) |  | 2021 |  | 2021 |  | 2021 |  | 2020 |  | 2020
Allowance for Loan Losses |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of period |  | $ | 41,912 |  | 43,499 |  | 44,149 |  | 42,219 |  | 31,602
Loans charged-off |  |  | (243) |  | (8) |  | (406) |  | (1,000) |  | (1,064)
Recoveries of loans previously charged-off |  |  | 406 |  | 321 |  | 56 |  | 630 |  | 581
Net loans recovered (charged-off) |  |  | 163 |  | 313 |  | (350) |  | (370) |  | (483)
Provision (reversal) for loan losses |  |  | (6,000) |  | (1,900) |  | (300) |  | 2,300 |  | 11,100
Balance, end of period |  | $ | 36,075 |  | 41,912 |  | 43,499 |  | 44,149 |  | 42,219
Allowance for loan losses to gross loans |  |  | 1.51% |  | 1.86% |  | 1.99% |  | 2.06% |  | 2.03%
Allowance for loan losses to nonaccrual loans |  |  | 259.95% |  | 619.47% |  | 557.47% |  | 547.14% |  | 482.43%
Net charge-offs (recoveries) /average loans QTD (annualized) |  |  | (0.03%) |  | (0.06%) |  | 0.07% |  | 0.07% |  | 0.09%

Total nonperforming assets increased by $6.7 million to $13.9 million for the third quarter of 2021, compared to the second quarter of 2021, and by $3.4 million from the third quarter of 2020. Nonperforming assets represented 0.50% of total assets at September 30, 2021, compared to 0.27% and 0.42% at June 30, 2021 and September 30, 2020, respectively. The increase in non-performing assets during the third quarter of 2021 was driven by one relationship made up of two commercial and one consumer real estate loans totaling $9.0 million. The Bank is currently in negotiations with a third-party to sell the two commercial notes. We do not believe that this increase is systemic or indicative of the credit quality of our remaining portfolio. The allowance for loan losses as a percentage of nonaccrual loans was 259.95% at September 30, 2021, compared to 619.47% at June 30, 2021 and 482.43% at September 30, 2020. During the third quarter of 2021, our classified asset ratio increased to 14.90% from 13.36% as of June 30, 2021 as a result of the one large relationship that was downgraded during the quarter. In addition, the classified asset ratio remains elevated from the third quarter of 2020 due to the $26.2 million of hotel loans that we downgraded to substandard during the first quarter of 2021. We remain cautious and believe that the hospitality and tourism industry is still at risk for credit loss due to reduced business and recreational travel related to the current pandemic. We continue to monitor the industry as well as the financial condition of our clients.

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On September 30, 2021, the allowance for loan losses was $36.1 million, or 1.51% of total loans, compared to $41.9 million, or 1.86% of total loans, at June 30, 2021 and $42.2 million, or 2.03% of total loans, at September 30, 2020. For the third quarter of 2021, there were net recoveries of $163 thousand, or (0.03%) annualized, compared to net recoveries of $313 thousand, or (0.06%), annualized, for the second quarter of 2021. Net charge-offs were $483 thousand for the third quarter of 2020. Despite the increase in nonperforming assets and loans 30 days or more past due, there was a negative provision for loan losses of $6.0 million for the third quarter of 2021 compared to a negative provision of $1.9 million for the second quarter of 2021 and an $11.1 million provision for the third quarter of 2020. The negative provision for the quarter ended September 30, 2021 was driven by a reduction in the historical loss percentages of our various loan categories combined with an overall improvement in economic conditions such as unemployment and hotel occupancy rates.

LOAN COMPOSITION - Unaudited
|  | Quarter Ended
|  | September 30 |  | June 30 |  | March 31 |  | December 31 |  | September 30
(dollars in thousands) |  | 2021 |  | 2021 |  | 2021 |  | 2020 |  | 2020
Commercial |  |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | 470,614 |  | 452,130 |  | 448,505 |  | 433,320 |  | 419,316
Non-owner occupied RE |  |  | 628,521 |  | 600,094 |  | 584,187 |  | 585,269 |  | 570,139
Construction |  |  | 87,892 |  | 60,786 |  | 51,996 |  | 61,467 |  | 64,063
Business |  |  | 307,969 |  | 307,933 |  | 303,895 |  | 307,599 |  | 303,760
Total commercial loans |  |  | 1,494,996 |  | 1,420,943 |  | 1,388,583 |  | 1,387,655 |  | 1,357,278
Consumer |  |  |  |  |  |  |  |  |  |  |
Real estate |  |  | 648,276 |  | 605,026 |  | 574,541 |  | 536,311 |  | 496,684
Home equity |  |  | 155,049 |  | 149,789 |  | 154,157 |  | 156,957 |  | 161,795
Construction |  |  | 57,419 |  | 48,077 |  | 44,170 |  | 40,525 |  | 39,355
Other |  |  | 33,307 |  | 30,300 |  | 22,231 |  | 21,419 |  | 23,428
Total consumer loans |  |  | 894,051 |  | 833,192 |  | 795,099 |  | 755,212 |  | 721,262
Total gross loans, net of deferred fees |  |  | 2,389,047 |  | 2,254,135 |  | 2,183,682 |  | 2,142,867 |  | 2,078,540
Less—allowance for loan losses |  |  | (36,075) |  | (41,912) |  | (43,499) |  | (44,149) |  | (42,219)
Total loans, net |  | $ | 2,352,972 |  | 2,212,223 |  | 2,140,183 |  | 2,098,718 |  | 2,036,321
DEPOSIT COMPOSITION - Unaudited |  |  |  |  |  |  |  |  |  |  |
|  | Quarter Ended
|  | September 30 |  | June 30 |  | March 31 |  | December 31 |  | September 30
(dollars in thousands) |  | 2021 |  | 2021 |  | 2021 |  | 2020 |  | 2020
Non-interest bearing |  | $ | 720,444 |  | 658,758 |  | 677,282 |  | 576,610 |  | 575,195
Interest bearing: |  |  |  |  |  |  |  |  |  |  |
NOW accounts |  |  | 331,167 |  | 316,744 |  | 304,530 |  | 268,739 |  | 284,490
Money market accounts |  |  | 1,188,666 |  | 1,136,315 |  | 1,064,659 |  | 1,042,745 |  | 1,025,518
Savings |  |  | 34,018 |  | 33,442 |  | 31,589 |  | 27,254 |  | 23,837
Time, less than $100,000 |  |  | 28,469 |  | 29,179 |  | 31,856 |  | 36,454 |  | 38,510
Time and out-of-market deposits, $100,000 and over |  |  | 130,254 |  | 136,454 |  | 148,835 |  | 190,956 |  | 233,506
Total deposits |  | $ | 2,433,018 |  | 2,310,892 |  | 2,258,751 |  | 2,142,758 |  | 2,181,056

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) September 30, 2021 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 has been providing financial services since 1999 and now operates in 12 locations in the Greenville, Columbia, and Charleston markets of South Carolina as well as the Charlotte, Triangle and Triad regions of North Carolina and Atlanta, Georgia. Southern First Bancshares has consolidated assets of approximately $2.8 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.

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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 “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “target,” and “project,” 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 the company conducts operations may be different than expected, including, but not limited to, due to the negative impacts and disruptions resulting from the national political turmoil as well as continuing impact 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, changes affecting oversight of the financial services industry or consumer protection; (5) the impact of the policies of the U.S. presidential administration and Congress on the regulatory landscape, capital markets, and the response to and management of the COVID-19 pandemic; (6) 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; (7) 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 (8) 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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