EX-99.1 2 sfst4013201-ex991.htm EARNINGS PRESS RELEASE FOR PERIOD ENDED DECEMBER 31, 2021

Exhibit 99.1

Southern First Reports 2021 Financial Results

Greenville, South Carolina, January 25, 2022 – Southern First Bancshares, Inc. (NASDAQ: SFST), holding company for Southern First Bank, today announced its financial results for the three-month period and year ended December 31, 2021.

“We are incredibly proud of our team and their record performance in 2021,” stated Art Seaver, the company’s Chief Executive Officer. “We have a proven ability to grow organically and have added significant talent to our team this past year, including our new market expansion to Charlotte, North Carolina.”

2021 Fourth Quarter Highlights

● | Net income improved to $12.0 million, compared to $8.6 million for Q4 2020
● | Diluted earnings per common share improved to $1.49 per share, compared to $1.10 for Q4 2020
● | Total loans increased 16.2% to $2.5 billion, compared to $2.1 billion at Q4 2020
● | Total deposits increased 19.7% to $2.6 billion, compared to $2.1 billion at Q4 2020
● | Adoption of Current Expected Credit Losses (CECL) reserve methodology as of January 1, 2022

|  | Quarter Ended
|  | December 31 |  | September 30 |  | June 30 |  | March 31 |  | December 31
|  | 2021 |  | 2021 |  | 2021 |  | 2021 |  | 2020
Earnings ($ in thousands, except per share data): |  |  |  |  |  |  |  |  |  |  |
Net income available to common shareholders |  | $ | 12,005 |  | 14,017 |  | 10,323 |  | 10,366 |  | 8,601
Earnings per common share, diluted |  |  | 1.49 |  | 1.75 |  | 1.29 |  | 1.31 |  | 1.10
Total revenue(1) |  |  | 26,194 |  | 26,411 |  | 25,052 |  | 27,177 |  | 27,947
Net interest margin (tax-equivalent)(2) |  |  | 3.35% |  | 3.38% |  | 3.50% |  | 3.60% |  | 3.55%
Return on average assets(3) |  |  | 1.66% |  | 2.03% |  | 1.61% |  | 1.68% |  | 1.38%
Return on average equity(3) |  |  | 17.61% |  | 21.67% |  | 16.96% |  | 18.22% |  | 15.51%
Efficiency ratio(4) |  |  | 56.25% |  | 53.15% |  | 53.87% |  | 52.11% |  | 52.04%
Noninterest expense to average assets(3) |  |  | 2.06% |  | 2.06% |  | 2.10% |  | 2.30% |  | 2.36%
Balance Sheet ($ in thousands): |  |  |  |  |  |  |  |  |  |  |
Total loans(5) |  | $ | 2,489,877 |  | 2,389,047 |  | 2,254,135 |  | 2,183,682 |  | 2,142,867
Total deposits |  |  | 2,563,826 |  | 2,433,018 |  | 2,310,892 |  | 2,258,751 |  | 2,142,758
Core deposits(6) |  |  | 2,479,412 |  | 2,367,841 |  | 2,220,577 |  | 2,161,759 |  | 2,011,903
Total assets |  |  | 2,925,548 |  | 2,784,176 |  | 2,650,183 |  | 2,579,922 |  | 2,482,587
Loans to deposits |  |  | 97.12% |  | 98.19% |  | 97.54% |  | 96.68% |  | 100.01%
Holding Company Capital Ratios(7): |  |  |  |  |  |  |  |  |  |  |
Total risk-based capital ratio |  |  | 14.90% |  | 14.88% |  | 14.98% |  | 14.82% |  | 14.38%
Tier 1 risk-based capital ratio |  |  | 12.65% |  | 12.59% |  | 12.63% |  | 12.43% |  | 11.97%
Leverage ratio |  |  | 10.19% |  | 10.20% |  | 10.27% |  | 10.12% |  | 9.70%
Common equity tier 1 ratio(8) |  |  | 12.09% |  | 12.00% |  | 12.00% |  | 11.79% |  | 11.32%
Tangible common equity(9) |  |  | 9.50% |  | 9.54% |  | 9.50% |  | 9.28% |  | 9.20%
Asset Quality Ratios: |  |  |  |  |  |  |  |  |  |  |
Nonperforming assets/total assets |  |  | 0.17% |  | 0.50% |  | 0.27% |  | 0.30% |  | 0.37%
Classified assets/tier one capital plus allowance for loan losses |  |  | 12.61% |  | 14.90% |  | 13.36% |  | 14.42% |  | 8.18%
Loans 30 days or more past due/ loans(5) |  |  | 0.09% |  | 0.49% |  | 0.14% |  | 0.12% |  | 0.17%
Net charge-offs (recoveries)/average loans(5) (YTD annualized) |  |  | 0.06% |  | (0.01%) |  | 0.00% |  | 0.07% |  | 0.10%
Allowance for loan losses/loans(5) |  |  | 1.22% |  | 1.51% |  | 1.86% |  | 1.99% |  | 2.06%
Allowance for loan losses/nonaccrual loans |  |  | 625.16% |  | 259.95% |  | 619.47% |  | 557.47% |  | 547.14%

[Footnotes to table located on page 6]

1

INCOME STATEMENTS – Unaudited

|  | Quarter Ended |  | Twelve Months Ended
|  | Dec 31 |  | Sept 30 |  | Jun 30 |  | Mar 31 |  | Dec 31 |  | December 31
(in thousands, except per share data) |  | 2021 |  | 2021 |  | 2021 |  | 2021 |  | 2020 |  | 2021 |  | 2020
Interest income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans |  | $ | 23,661 |  | 23,063 |  | 22,409 |  | 22,465 |  | 23,171 |  | 91,599 |  | 93,133
Investment securities |  |  | 410 |  | 355 |  | 269 |  | 301 |  | 325 |  | 1,335 |  | 1,415
Federal funds sold |  |  | 66 |  | 68 |  | 53 |  | 47 |  | 51 |  | 233 |  | 270
Total interest income |  |  | 24,137 |  | 23,486 |  | 22,731 |  | 22,813 |  | 23,547 |  | 93,167 |  | 94,818
Interest expense |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 900 |  | 934 |  | 920 |  | 1,155 |  | 1,861 |  | 3,909 |  | 13,055
Borrowings |  |  | 380 |  | 380 |  | 381 |  | 385 |  | 383 |  | 1,526 |  | 1,953
Total interest expense |  |  | 1,280 |  | 1,314 |  | 1,301 |  | 1,540 |  | 2,244 |  | 5,435 |  | 15,008
Net interest income |  |  | 22,857 |  | 22,172 |  | 21,430 |  | 21,273 |  | 21,303 |  | 87,732 |  | 79,810
Provision (reversal) for loan losses |  |  | (4,200) |  | (6,000) |  | (1,900) |  | (300) |  | 2,300 |  | (12,400) |  | 29,600
Net interest income after provision for loan losses |  |  | 27,057 |  | 28,172 |  | 23,330 |  | 21,573 |  | 19,003 |  | 100,132 |  | 50,210
Noninterest income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage banking income |  |  | 1,931 |  | 2,829 |  | 1,983 |  | 4,633 |  | 5,064 |  | 11,376 |  | 19,785
Service fees on deposit accounts |  |  | 200 |  | 199 |  | 173 |  | 185 |  | 190 |  | 757 |  | 860
ATM and debit card income |  |  | 560 |  | 542 |  | 521 |  | 470 |  | 483 |  | 2,092 |  | 1,741
Income from bank owned life insurance |  |  | 312 |  | 321 |  | 331 |  | 267 |  | 281 |  | 1,231 |  | 1,091
Net lender and referral fees on PPP loans |  |  | - |  | - |  | 268 |  | - |  | - |  | - |  | 2,247
Other income |  |  | 334 |  | 348 |  | 346 |  | 349 |  | 626 |  | 1,645 |  | 1,629
Total noninterest income |  |  | 3,337 |  | 4,239 |  | 3,622 |  | 5,904 |  | 6,644 |  | 17,101 |  | 27,353
Noninterest expense |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Compensation and benefits |  |  | 7,880 |  | 7,468 |  | 6,823 |  | 6,683 |  | 6,836 |  | 28,854 |  | 26,287
Mortgage production costs |  |  | 1,666 |  | 1,956 |  | 2,264 |  | 2,867 |  | 3,057 |  | 8,753 |  | 9,898
Occupancy |  |  | 2,079 |  | 1,684 |  | 1,550 |  | 1,637 |  | 1,596 |  | 6,950 |  | 6,226
Other real estate owned (income) expenses |  |  | - |  | (3) |  | 1 |  | 387 |  | 550 |  | 385 |  | 1,223
Outside service and data processing costs |  |  | 1,256 |  | 1,229 |  | 1,238 |  | 1,142 |  | 1,052 |  | 4,865 |  | 4,223
Insurance |  |  | 342 |  | 244 |  | 262 |  | 301 |  | 385 |  | 1,149 |  | 1,380
Professional fees |  |  | 577 |  | 561 |  | 498 |  | 421 |  | 501 |  | 2,057 |  | 1,771
Marketing |  |  | 251 |  | 240 |  | 201 |  | 182 |  | 146 |  | 873 |  | 628
Other |  |  | 684 |  | 660 |  | 658 |  | 542 |  | 421 |  | 2,544 |  | 2,108
Total noninterest expenses |  |  | 14,735 |  | 14,039 |  | 13,495 |  | 14,162 |  | 14,544 |  | 56,430 |  | 53,744
Income before provision for income taxes |  |  | 15,659 |  | 18,372 |  | 13,457 |  | 13,315 |  | 11,103 |  | 60,803 |  | 23,819
Income tax expense |  |  | 3,654 |  | 4,355 |  | 3,134 |  | 2,949 |  | 2,502 |  | 14,092 |  | 5,491
Net income available to common shareholders |  | $ | 12,005 |  | 14,017 |  | 10,323 |  | 10,366 |  | 8,601 |  | 46,711 |  | 18,328
Earnings per common share – Basic |  | $ | 1.52 |  | 1.78 |  | 1.32 |  | 1.33 |  | 1.11 |  | 5.96 |  | 2.37
Earnings per common share – Diluted |  |  | 1.49 |  | 1.75 |  | 1.29 |  | 1.31 |  | 1.10 |  | 5.85 |  | 2.34
Basic weighted average common shares |  |  | 7,877 |  | 7,874 |  | 7,848 |  | 7,807 |  | 7,741 |  | 7,844 |  | 7,719
Diluted weighted average common shares |  |  | 8,057 |  | 8,001 |  | 7,988 |  | 7,941 |  | 7,836 |  | 7,989 |  | 7,824

[Footnotes to table located on page 6]

Net income for the fourth quarter of 2021 was $12.0 million, or $1.49 per diluted common share, a $2.0 million decrease from the third quarter of 2021 and a $3.4 million increase from the fourth quarter of 2020. Net interest income increased $685 thousand for the fourth quarter of 2021, compared to the third quarter of 2021, and increased $1.6 million, or 7.3%, compared to the fourth quarter of 2020. The increase in net interest income was driven by an increase in interest income related to growth in our loan portfolio which was partially offset by the impact of lower market rates on new and renewed loans. In addition, our interest expense has also been impacted by the lower market rates.

The provision for loan losses was a reversal of $4.2 million for the fourth quarter of 2021 compared to a reversal of $6.0 million for the third quarter of 2021 and an expense of $2.3 million for the fourth quarter of 2020. The $6.5 million decrease in provision expense from the fourth 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 as well as an improvement in credit quality, including non-performing and past due loans.

2

Noninterest income totaled $3.3 million for the fourth quarter of 2021, a $902 thousand decrease from the third quarter of 2021 and a $3.3 million decrease from the fourth quarter of 2020. As the largest component of our noninterest income, mortgage banking income was the driving factor in the decrease in noninterest income from the prior quarter and the prior year. Loan origination volume remains significantly lower than the prior year, due in part to fewer refinance transactions.

Noninterest expense for the fourth quarter of 2021 increased $696 thousand compared with the third quarter of 2021 and increased $191 thousand compared with the fourth 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 23.3% for the fourth quarter of 2021, 23.7% for the third quarter of 2021, and 22.5% for the fourth 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
|  |  |  |  | December 31, 2021 |  |  |  |  | September 30, 2021 |  |  |  |  | December 31, 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 |  | $ | 138,103 |  | $ | 66 |  | 0.19% |  | $ | 145,899 |  | $ | 68 |  | 0.18% |  | $ | 112,473 |  | $ | 51 |  | 0.18%
Investment securities, taxable |  |  | 107,181 |  |  | 351 |  | 1.30% |  |  | 93,428 |  |  | 301 |  | 1.28% |  |  | 83,260 |  |  | 273 |  | 1.30%
Investment securities, nontaxable(2) |  |  | 11,695 |  |  | 75 |  | 2.56% |  |  | 10,974 |  |  | 70 |  | 2.54% |  |  | 9,311 |  |  | 68 |  | 2.89%
Loans(10) |  |  | 2,452,677 |  |  | 23,661 |  | 3.83% |  |  | 2,351,467 |  |  | 23,063 |  | 3.89% |  |  | 2,182,619 |  |  | 23,171 |  | 4.22%
Total interest-earning assets |  |  | 2,709,656 |  |  | 24,153 |  | 3.54% |  |  | 2,601,768 |  |  | 23,502 |  | 3.58% |  |  | 2,387,663 |  |  | 23,563 |  | 3.93%
Noninterest-earning assets |  |  | 153,284 |  |  |  |  |  |  |  | 132,929 |  |  |  |  |  |  |  | 90,519 |  |  |  |  |
Total assets |  | $ | 2,862,940 |  |  |  |  |  |  | $ | 2,734,697 |  |  |  |  |  |  | $ | 2,478,182 |  |  |  |  |
Interest-bearing liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
NOW accounts |  | $ | 330,067 |  |  | 64 |  | 0.08% |  | $ | 316,775 |  |  | 48 |  | 0.06% |  | $ | 276,780 |  |  | 42 |  | 0.06%
Savings & money market |  |  | 1,278,930 |  |  | 637 |  | 0.20% |  |  | 1,209,991 |  |  | 651 |  | 0.21% |  |  | 1,058,573 |  |  | 903 |  | 0.34%
Time deposits |  |  | 155,708 |  |  | 199 |  | 0.51% |  |  | 161,300 |  |  | 235 |  | 0.58% |  |  | 260,579 |  |  | 916 |  | 1.40%
Total interest-bearing deposits |  |  | 1,764,705 |  |  | 900 |  | 0.20% |  |  | 1,688,066 |  |  | 934 |  | 0.22% |  |  | 1,595,932 |  |  | 1,861 |  | 0.46%
FHLB advances and other borrowings |  |  | - |  |  | - |  | -% |  |  | - |  |  | - |  | -% |  |  | 272 |  |  | - |  | -
Subordinated debentures |  |  | 36,089 |  |  | 380 |  | 4.18% |  |  | 36,062 |  |  | 380 |  | 4.18% |  |  | 35,981 |  |  | 383 |  | 4.23%
Total interest-bearing liabilities |  |  | 1,800,794 |  |  | 1,280 |  | 0.28% |  |  | 1,724,128 |  |  | 1,314 |  | 0.30% |  |  | 1,632,185 |  |  | 2,244 |  | 0.55%
Noninterest-bearing liabilities |  |  | 791,700 |  |  |  |  |  |  |  | 753,901 |  |  |  |  |  |  |  | 625,422 |  |  |  |  |
Shareholders’ equity |  |  | 270,446 |  |  |  |  |  |  |  | 256,668 |  |  |  |  |  |  |  | 220,575 |  |  |  |  |
Total liabilities and shareholders’ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
equity |  | $ | 2,862,940 |  |  |  |  |  |  | $ | 2,734,697 |  |  |  |  |  |  | $ | 2,478,182 |  |  |  |  |
Net interest spread |  |  |  |  |  |  |  | 3.26% |  |  |  |  |  |  |  | 3.28% |  |  |  |  |  |  |  | 3.38%
Net interest income (tax equivalent) / |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
margin |  |  |  |  | $ | 22,873 |  | 3.35% |  |  |  |  | $ | 22,188 |  | 3.38% |  |  |  |  | $ | 21,319 |  | 3.55%
Less: tax-equivalent adjustment(2) |  |  |  |  |  | 16 |  |  |  |  |  |  |  | 16 |  |  |  |  |  |  |  | 16 |  |
Net interest income |  |  |  |  | $ | 22,857 |  |  |  |  |  |  | $ | 22,172 |  |  |  |  |  |  | $ | 21,303 |  |

[Footnotes to table located on page 6]

Net interest income was $22.9 million for the fourth quarter of 2021, a $685 thousand increase from the third quarter of 2021, resulting primarily from a $651 thousand increase in interest income on a tax-equivalent basis. The increase in interest income was driven by an increase of $107.6 million in average interest-earning assets during the fourth quarter of 2021 with $101.2 million of the increase in average loan balances. In addition, average interest-bearing liabilities increased by $76.7 million and interest expense decreased by $34 thousand during the same period. In comparison to the fourth quarter of 2020, net interest income increased $1.6 million, resulting primarily from lower deposit costs combined with an increase in average loan balances. Our net interest margin, on a tax-equivalent basis, was 3.35% for the fourth quarter of 2021, a 3-basis point decrease from 3.38% for the third quarter of 2021 and a 20-basis point decrease from 3.55% for the fourth quarter of 2020. Compression in yield on our interest-earning assets resulted in the lower net interest margin for the fourth quarter of 2021 compared to the third quarter of 2021 and the fourth quarter of 2020.

3

BALANCE SHEETS - Unaudited

|  |  | Ending Balance
|  |  | December 31 |  | September 30 |  | June 30 |  | March 31 |  | December 31
(in thousands, except per share data) |  |  | 2021 |  | 2021 |  | 2021 |  | 2021 |  | 2020
Assets |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents: |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks |  | $ | 21,770 |  | 17,944 |  | 17,093 |  | 12,621 |  | 12,920
Federal funds sold |  |  | 86,882 |  | 47,440 |  | 75,327 |  | 74,268 |  | 21,744
Interest-bearing deposits with banks |  |  | 58,557 |  | 63,149 |  | 61,377 |  | 68,456 |  | 66,023
Total cash and cash equivalents |  |  | 167,209 |  | 128,533 |  | 153,797 |  | 155,345 |  | 100,687
Investment securities: |  |  |  |  |  |  |  |  |  |  |
Investment securities available for sale |  |  | 120,281 |  | 113,802 |  | 91,232 |  | 92,997 |  | 94,729
Other investments |  |  | 4,021 |  | 2,820 |  | 2,770 |  | 1,770 |  | 3,635
Total investment securities |  |  | 124,302 |  | 116,622 |  | 94,002 |  | 94,767 |  | 98,364
Mortgage loans held for sale |  |  | 13,556 |  | 31,641 |  | 36,427 |  | 57,073 |  | 60,257
Loans (5) |  |  | 2,489,877 |  | 2,389,047 |  | 2,254,135 |  | 2,183,682 |  | 2,142,867
Less allowance for loan losses |  |  | (30,408) |  | (36,075) |  | (41,912) |  | (43,499) |  | (44,149)
Loans, net |  |  | 2,459,469 |  | 2,352,972 |  | 2,212,223 |  | 2,140,183 |  | 2,098,718
Bank owned life insurance |  |  | 49,833 |  | 49,521 |  | 49,200 |  | 48,869 |  | 41,102
Property and equipment, net |  |  | 92,370 |  | 78,456 |  | 69,193 |  | 61,710 |  | 60,236
Deferred income taxes |  |  | 8,397 |  | 16,591 |  | 25,025 |  | 9,813 |  | 9,518
Other assets |  |  | 10,412 |  | 9,840 |  | 10,316 |  | 12,162 |  | 13,705
Total assets |  | $ | 2,925,548 |  | 2,784,176 |  | 2,650,183 |  | 2,579,922 |  | 2,482,587
Liabilities |  |  |  |  |  |  |  |  |  |  |
Deposits |  | $ | 2,563,826 |  | 2,433,018 |  | 2,310,892 |  | 2,258,751 |  | 2,142,758
Federal Home Loan Bank advances |  |  | - |  | - |  | - |  | - |  | 25,000
Subordinated debentures |  |  | 36,106 |  | 36,079 |  | 36,052 |  | 36,025 |  | 35,998
Other liabilities |  |  | 47,715 |  | 49,450 |  | 51,580 |  | 45,624 |  | 50,537
Total liabilities |  |  | 2,647,647 |  | 2,518,547 |  | 2,398,524 |  | 2,340,400 |  | 2,254,293
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 |  | 79 |  | 78
Nonvested restricted stock |  |  | (1,435) |  | (1,469) |  | (1,173) |  | (1,075) |  | (698)
Additional paid-in capital |  |  | 114,226 |  | 113,501 |  | 112,604 |  | 111,181 |  | 108,831
Accumulated other comprehensive income (loss) |  |  | (740) |  | (248) |  | 400 |  | (90) |  | 1,023
Retained earnings |  |  | 165,771 |  | 153,766 |  | 139,749 |  | 129,427 |  | 119,060
Total shareholders’ equity |  |  | 277,901 |  | 265,629 |  | 251,659 |  | 239,522 |  | 228,294
Total liabilities and shareholders’ equity |  | $ | 2,925,548 |  | 2,784,176 |  | 2,650,183 |  | 2,579,922 |  | 2,482,587
Common Stock |  |  |  |  |  |  |  |  |  |  |
Book value per common share |  | $ | 35.07 |  | 33.57 |  | 31.86 |  | 30.58 |  | 29.37
Stock price: |  |  |  |  |  |  |  |  |  |  |
High |  |  | 64.73 |  | 53.50 |  | 55.26 |  | 54.09 |  | 35.80
Low |  |  | 52.73 |  | 48.62 |  | 47.61 |  | 35.15 |  | 24.15
Period end |  |  | 62.49 |  | 53.50 |  | 51.16 |  | 46.88 |  | 35.35
Common shares outstanding |  |  | 7,926 |  | 7,913 |  | 7,900 |  | 7,853 |  | 7,773

[Footnotes to table located on page 6]

4

ASSET QUALITY MEASURES - Unaudited

|  |  | Quarter Ended
|  |  | December 31 |  | September 30 |  | June 30 |  | March 31 |  | December 31
(dollars in thousands) |  |  | 2021 |  | 2021 |  | 2021 |  | 2021 |  | 2020
Nonperforming Assets |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | - |  | - |  | - |  | - |  | -
Non-owner occupied RE |  |  | 270 |  | 7,400 |  | 1,048 |  | 1,127 |  | 1,143
Construction |  |  | - |  | - |  | - |  | 135 |  | 139
Commercial business |  |  | - |  | 1,469 |  | 37 |  | 190 |  | 195
Consumer |  |  |  |  |  |  |  |  |  |  |
Real estate |  |  | 989 |  | 1,461 |  | 2,372 |  | 2,762 |  | 2,536
Home equity |  |  | 653 |  | 818 |  | 426 |  | 439 |  | 547
Construction |  |  | - |  | - |  | - |  | - |  | -
Other |  |  | - |  | - |  | - |  | - |  | -
Nonaccruing troubled debt restructurings |  |  | 2,952 |  | 2,730 |  | 2,883 |  | 3,150 |  | 3,509
Total nonaccrual loans |  |  | 4,864 |  | 13,878 |  | 6,766 |  | 7,803 |  | 8,069
Other real estate owned |  |  | - |  | - |  | 366 |  | - |  | 1,169
Total nonperforming assets |  | $ | 4,864 |  | 13,878 |  | 7,132 |  | 7,803 |  | 9,238
Nonperforming assets as a percentage of: |  |  |  |  |  |  |  |  |  |  |
Total assets |  |  | 0.17% |  | 0.50% |  | 0.27% |  | 0.30% |  | 0.37%
Total loans |  |  | 0.20% |  | 0.58% |  | 0.32% |  | 0.36% |  | 0.43%
Accruing troubled debt restructurings (TDRs) |  | $ | 3,299 |  | 4,044 |  | 4,622 |  | 4,379 |  | 4,893
Classified assets/tier 1 capital plus allowance for loan losses |  |  | 12.61% |  | 14.90% |  | 13.36% |  | 14.42% |  | 8.18%

|  |  | Quarter Ended
|  |  | December 31 |  | September 30 |  | June 30 |  | March 31 |  | December 31
(dollars in thousands) |  |  | 2021 |  | 2021 |  | 2021 |  | 2021 |  | 2020
Allowance for Loan Losses |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of period |  | $ | 36,075 |  | 41,912 |  | 43,499 |  | 44,149 |  | 42,219
Loans charged-off |  |  | (1,509) |  | (243) |  | (8) |  | (406) |  | (1,000)
Recoveries of loans previously charged-off |  |  | 42 |  | 406 |  | 321 |  | 56 |  | 630
Net loans recovered (charged-off) |  |  | (1,467) |  | 163 |  | 313 |  | (350) |  | (370)
Provision (reversal) for loan losses |  |  | (4,200) |  | (6,000) |  | (1,900) |  | (300) |  | 2,300
Balance, end of period |  | $ | 30,408 |  | 36,075 |  | 41,912 |  | 43,499 |  | 44,149
Allowance for loan losses to gross loans |  |  | 1.22 % |  | 1.51 % |  | 1.86 % |  | 1.99 % |  | 2.06 %
Allowance for loan losses to nonaccrual loans |  |  | 625.16 % |  | 259.95 % |  | 619.47 % |  | 557.47 % |  | 547.14 %
Net charge-offs (recoveries) /average loans QTD (annualized) |  |  | 0.24 % |  | (0.03 %) |  | (0.06 %) |  | 0.07 % |  | 0.07 %

Total nonperforming assets decreased by $9.0 million to $4.9 million for the fourth quarter of 2021, compared to the third quarter of 2021, and by $4.4 million from the fourth quarter of 2020. Nonperforming assets represented 0.17% of total assets at December 31, 2021, compared to 0.50% and 0.37% at September 30, 2021 and December 31, 2020, respectively. The decrease in nonperforming assets during the fourth quarter of 2021 was driven by one relationship made up of two commercial and one consumer real estate loans totaling $9.0 million. We negotiated with a third-party to sell the two commercial notes early in the fourth quarter, resulting in a combined charge-off of $812 thousand. The allowance for loan losses as a percentage of nonaccrual loans was 625.16% at December 31, 2021, compared to 259.95% at September 30, 2021 and 547.14% at December 31, 2020. During the fourth quarter of 2021, our classified asset ratio decreased to 12.59% from 14.90% as of September 30, 2021 as a result of the one large relationship that was sold during the fourth quarter. The classified asset ratio remains elevated in comparison to fourth quarter of 2020 due to the $26.2 million of hotel loans that we downgraded to substandard during the first quarter of 2021. We continue to closely monitor our loan relationships with our clients in the hospitality and tourism industry in order to assess the risk for credit loss as business and recreational travel trends normalize.

On December 31, 2021, the allowance for loan losses was $30.4 million, or 1.22% of total loans, compared to $36.1 million, or 1.51% of total loans, at September 30, 2021 and $44.1 million, or 2.06% of total loans, at December 31, 2020. For the fourth quarter of 2021, there were net charge-offs of $1.5 million, or 0.24% annualized, compared to net recoveries of $163 thousand, or (0.03%) annualized, for the third quarter of 2021.

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Net charge-offs were $370 thousand for the fourth quarter of 2020. There was a reversal to the provision for loan losses of $4.2 million for the fourth quarter of 2021 compared to a reversal of $6.0 million for the third quarter of 2021 and a $2.3 million provision for the fourth quarter of 2020. The negative provision for the quarter ended December 31, 2021 was driven by the overall improvement in the credit quality of the loan portfolio, including non-performing and past due loans.

The Company anticipates adopting ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” more commonly referred to as “CECL,” as of January 1, 2022. Upon adoption, we estimate that there will be a charge to retained earnings of $3.5 million to $7.0 million, arising from an increase to the allowance for credit losses and reserve for unfunded commitments.

LOAN COMPOSITION - Unaudited

|  |  | Quarter Ended
|  |  | December 31 |  | September 30 |  | June 30 |  | March 31 |  | December 31
(dollars in thousands) |  |  | 2021 |  | 2021 |  | 2021 |  | 2021 |  | 2020
Commercial |  |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | 488,965 |  | 470,614 |  | 452,130 |  | 448,505 |  | 433,320
Non-owner occupied RE |  |  | 666,833 |  | 628,521 |  | 600,094 |  | 584,187 |  | 585,269
Construction |  |  | 64,425 |  | 87,892 |  | 60,786 |  | 51,996 |  | 61,467
Business |  |  | 333,049 |  | 307,969 |  | 307,933 |  | 303,895 |  | 307,599
Total commercial loans |  |  | 1,553,272 |  | 1,494,996 |  | 1,420,943 |  | 1,388,583 |  | 1,387,655
Consumer |  |  |  |  |  |  |  |  |  |  |
Real estate |  |  | 694,401 |  | 648,276 |  | 605,026 |  | 574,541 |  | 536,311
Home equity |  |  | 154,839 |  | 155,049 |  | 149,789 |  | 154,157 |  | 156,957
Construction |  |  | 59,846 |  | 57,419 |  | 48,077 |  | 44,170 |  | 40,525
Other |  |  | 27,519 |  | 33,307 |  | 30,300 |  | 22,231 |  | 21,419
Total consumer loans |  |  | 936,605 |  | 894,051 |  | 833,192 |  | 795,099 |  | 755,212
Total gross loans, net of deferred fees |  |  | 2,489,877 |  | 2,389,047 |  | 2,254,135 |  | 2,183,682 |  | 2,142,867
Less—allowance for loan losses |  |  | (30,408) |  | (36,075) |  | (41,912) |  | (43,499) |  | (44,149)
Total loans, net |  | $ | 2,459,469 |  | 2,352,972 |  | 2,212,223 |  | 2,140,183 |  | 2,098,718

DEPOSIT COMPOSITION - Unaudited |  |  |  |  |  |  |  |  |  |  |
|  |  | Quarter Ended
|  |  | December 31 |  | September 30 |  | June 30 |  | March 31 |  | December 31
(dollars in thousands) |  |  | 2021 |  | 2021 |  | 2021 |  | 2021 |  | 2020
Non-interest bearing |  | $ | 768,650 |  | 720,444 |  | 658,758 |  | 677,282 |  | 576,610
Interest bearing: |  |  |  |  |  |  |  |  |  |  |
NOW accounts |  |  | 401,788 |  | 331,167 |  | 316,744 |  | 304,530 |  | 268,739
Money market accounts |  |  | 1,201,099 |  | 1,188,666 |  | 1,136,315 |  | 1,064,659 |  | 1,042,745
Savings |  |  | 39,696 |  | 34,018 |  | 33,442 |  | 31,589 |  | 27,254
Time, less than $100,000 |  |  | 26,099 |  | 28,469 |  | 29,179 |  | 31,856 |  | 36,454
Time and out-of-market deposits, $100,000 and over |  |  | 126,494 |  | 130,254 |  | 136,454 |  | 148,835 |  | 190,956
Total deposits |  | $ | 2,563,826 |  | 2,433,018 |  | 2,310,892 |  | 2,258,751 |  | 2,142,758

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) December 31, 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.

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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’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 $2.9 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 “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “target,” “preliminary,” 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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