EX-99.1 2 sfb4052661-ex991.htm EARNINGS PRESS RELEASE FOR PERIOD ENDED MARCH 31, 2022.

Exhibit 99.1

Southern First Reports Results for First Quarter 2022

Greenville, South Carolina, April 26, 2022 – Southern First Bancshares, Inc. (NASDAQ: SFST), holding company for Southern First Bank, today announced its financial results for the three-month period ended March 31, 2022.

“The first quarter represents the strongest loan growth quarter in our company’s history and is a testimony to our exceptional team and the value we provide in our client relationships,” stated Art Seaver, the company’s Chief Executive Officer.

2022 First Quarter Highlights

● | Net income was $8.0 million and diluted earnings per common share were $0.98 for Q1 2022
● | Total loans increased 22% to $2.7 billion at Q1 2022, compared to $2.2 billion at Q1 2021
● | Total deposits increased 20% to $2.7 billion at Q1 2022, compared to $2.3 billion at Q1 2021
● | Net interest margin was stable at 3.37% for Q1 2022
● | Book value per common share increased to $34.90, or 14%, over Q1 2021
● | Early adoption of Current Expected Credit Losses (CECL) standard as of January 1, 2022

|  | Quarter Ended
|  | March 31 |  | December 31 |  | September 30 |  | June 30 |  | March 31
|  | 2022 |  | 2021 |  | 2021 |  | 2021 |  | 2021
Earnings ($ in thousands, except per share data): |  |  |  |  |  |  |  |  |  |  |
Net income available to common shareholders |  | $ | 7,970 |  | 12,005 |  | 14,017 |  | 10,323 |  | 10,366
Earnings per common share, diluted |  |  | 0.98 |  | 1.49 |  | 1.75 |  | 1.29 |  | 1.31
Total revenue(1) |  |  | 26,091 |  | 26,194 |  | 26,411 |  | 25,052 |  | 27,177
Net interest margin (tax-equivalent)(2) |  |  | 3.37% |  | 3.35% |  | 3.38% |  | 3.50% |  | 3.60%
Return on average assets(3) |  |  | 1.10% |  | 1.66% |  | 2.03% |  | 1.61% |  | 1.68%
Return on average equity(3) |  |  | 11.60% |  | 17.61% |  | 21.67% |  | 16.96% |  | 18.22%
Efficiency ratio(4) |  |  | 56.28% |  | 56.25% |  | 53.15% |  | 53.87% |  | 52.11%
Noninterest expense to average assets(3) |  |  | 2.03% |  | 2.06% |  | 2.06% |  | 2.10% |  | 2.30%
Balance Sheet ($ in thousands): |  |  |  |  |  |  |  |  |  |  |
Total loans(5) |  | $ | 2,660,675 |  | 2,489,877 |  | 2,389,047 |  | 2,254,135 |  | 2,183,682
Total deposits |  |  | 2,708,174 |  | 2,563,826 |  | 2,433,018 |  | 2,310,892 |  | 2,258,751
Core deposits(6) |  |  | 2,541,113 |  | 2,479,412 |  | 2,367,841 |  | 2,220,577 |  | 2,161,759
Total assets |  |  | 3,073,234 |  | 2,925,548 |  | 2,784,176 |  | 2,650,183 |  | 2,579,922
Loans to deposits |  |  | 98.25% |  | 97.12% |  | 98.19% |  | 97.54% |  | 96.68%
Holding Company Capital Ratios(7): |  |  |  |  |  |  |  |  |  |  |
Total risk-based capital ratio |  |  | 14.37% |  | 14.90% |  | 14.88% |  | 14.98% |  | 14.82%
Tier 1 risk-based capital ratio |  |  | 12.18% |  | 12.65% |  | 12.59% |  | 12.63% |  | 12.43%
Leverage ratio |  |  | 10.12% |  | 10.19% |  | 10.20% |  | 10.27% |  | 10.12%
Common equity tier 1 ratio(8) |  |  | 11.65% |  | 12.09% |  | 12.00% |  | 12.00% |  | 11.79%
Tangible common equity(9) |  |  | 9.08% |  | 9.50% |  | 9.54% |  | 9.50% |  | 9.28%
Asset Quality Ratios: |  |  |  |  |  |  |  |  |  |  |
Nonperforming assets/ total assets |  |  | 0.15% |  | 0.17% |  | 0.50% |  | 0.27% |  | 0.30%
Classified assets/tier one capital plus allowance for credit losses |  |  | 7.83% |  | 12.61% |  | 14.90% |  | 13.36% |  | 14.42%
Loans 30 days or more past due/ loans(5) |  |  | 0.13% |  | 0.09% |  | 0.49% |  | 0.14% |  | 0.12%
Net charge-offs (recoveries)/average loans(5) (YTD annualized) |  |  | 0.00% |  | 0.06% |  | (0.01%) |  | 0.00% |  | 0.07%
Allowance for credit losses/loans(5) |  |  | 1.24% |  | 1.22% |  | 1.51% |  | 1.86% |  | 1.99%
Allowance for credit losses/nonaccrual loans |  |  | 726.88% |  | 625.16% |  | 259.95% |  | 619.47% |  | 557.47%

[Footnotes to table located on page 6]

1

INCOME STATEMENTS – Unaudited

|  | Quarter Ended
|  | Mar 31 |  | Dec 31 |  | Sept 30 |  | Jun 30 |  | Mar 31
(in thousands, except per share data) |  | 2022 |  | 2021 |  | 2021 |  | 2021 |  | 2021
Interest income |  |  |  |  |  |  |  |  |  |  |
Loans |  | $ | 23,931 |  | 23,661 |  | 23,063 |  | 22,409 |  | 22,465
Investment securities |  |  | 474 |  | 410 |  | 355 |  | 269 |  | 301
Federal funds sold |  |  | 59 |  | 66 |  | 68 |  | 53 |  | 47
Total interest income |  |  | 24,464 |  | 24,137 |  | 23,486 |  | 22,731 |  | 22,813
Interest expense |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 908 |  | 900 |  | 934 |  | 920 |  | 1,155
Borrowings |  |  | 392 |  | 380 |  | 380 |  | 381 |  | 385
Total interest expense |  |  | 1,300 |  | 1,280 |  | 1,314 |  | 1,301 |  | 1,540
Net interest income |  |  | 23,164 |  | 22,857 |  | 22,172 |  | 21,430 |  | 21,273
Provision (reversal) for credit losses |  |  | 1,105 |  | (4,200) |  | (6,000) |  | (1,900) |  | (300)
Net interest income after provision for credit |  |  |  |  |  |  |  |  |  |  |
losses |  |  | 22,059 |  | 27,057 |  | 28,172 |  | 23,330 |  | 21,573
Noninterest income |  |  |  |  |  |  |  |  |  |  |
Mortgage banking income |  |  | 1,494 |  | 1,931 |  | 2,829 |  | 1,983 |  | 4,633
Service fees on deposit accounts |  |  | 191 |  | 200 |  | 199 |  | 173 |  | 185
ATM and debit card income |  |  | 528 |  | 560 |  | 542 |  | 521 |  | 470
Income from bank owned life insurance |  |  | 315 |  | 312 |  | 321 |  | 331 |  | 267
Net lender and referral fees on PPP loans |  |  | 44 |  | - |  | - |  | 268 |  | -
Other income |  |  | 355 |  | 334 |  | 348 |  | 346 |  | 349
Total noninterest income |  |  | 2,927 |  | 3,337 |  | 4,239 |  | 3,622 |  | 5,904
Noninterest expense |  |  |  |  |  |  |  |  |  |  |
Compensation and benefits |  |  | 8,144 |  | 7,880 |  | 7,468 |  | 6,823 |  | 6,683
Mortgage production costs |  |  | 1,649 |  | 1,666 |  | 1,956 |  | 2,264 |  | 2,867
Occupancy |  |  | 1,777 |  | 2,079 |  | 1,684 |  | 1,550 |  | 1,637
Other real estate owned (income) expenses |  |  | - |  | - |  | (3) |  | 1 |  | 387
Outside service and data processing costs |  |  | 1,411 |  | 1,256 |  | 1,229 |  | 1,238 |  | 1,142
Insurance |  |  | 261 |  | 342 |  | 244 |  | 262 |  | 301
Professional fees |  |  | 496 |  | 577 |  | 561 |  | 498 |  | 421
Marketing |  |  | 256 |  | 251 |  | 240 |  | 201 |  | 182
Other |  |  | 691 |  | 684 |  | 660 |  | 658 |  | 542
Total noninterest expenses |  |  | 14,685 |  | 14,735 |  | 14,039 |  | 13,495 |  | 14,162
Income before provision for income taxes |  |  | 10,301 |  | 15,659 |  | 18,372 |  | 13,457 |  | 13,315
Income tax expense |  |  | 2,331 |  | 3,654 |  | 4,355 |  | 3,134 |  | 2,949
Net income available to common |  |  |  |  |  |  |  |  |  |  |
shareholders |  | $ | 7,970 |  | 12,005 |  | 14,017 |  | 10,323 |  | 10,366
Earnings per common share – Basic |  | $ | 1.00 |  | 1.52 |  | 1.78 |  | 1.32 |  | 1.33
Earnings per common share – Diluted |  |  | 0.98 |  | 1.49 |  | 1.75 |  | 1.29 |  | 1.31
Basic weighted average common shares |  |  | 7,932 |  | 7,877 |  | 7,874 |  | 7,848 |  | 7,807
Diluted weighted average common shares |  |  | 8,096 |  | 8,057 |  | 8,001 |  | 7,988 |  | 7,941

[Footnotes to table located on page 6]

Net income for the first quarter of 2022 was $8.0 million, or $0.99 per diluted share, a $4.0 million decrease from the fourth quarter of 2021 and a $2.4 million decrease from the first quarter of 2021. The decrease in net income was driven by an increased provision for credit losses due to the early adoption of the new CECL methodology as described below as well as a decrease in net mortgage banking income. Net interest income increased $307 thousand for the first quarter of 2022, compared with the fourth quarter of 2021, and increased $1.9 million, or 8.9%, compared to the first quarter of 2021. The increase in net interest income was driven by $170.8 million of loan growth during the first quarter of 2022.

The provision for credit losses was $1.1 million for the first quarter of 2022, compared to a negative provision of $4.2 million for the fourth quarter of 2021 and a negative provision of $300 thousand for the first quarter of 2021. The provision expense during the first quarter of 2022 was calculated under the new CECL methodology, includes a $1.0 million provision for loan losses and an $80,000 provision for unfunded commitments compared to reversals of provision during the prior year quarters as the economy showed improvement after the onset of the pandemic. In addition, we upgraded $86.4 million of hotel loans during the first quarter of 2022 after observing 12 months of positive financial performance.

2

Noninterest income totaled $2.9 million for the first quarter of 2022, a $410 thousand decrease from the fourth quarter of 2021 and a $3.0 million decrease from the first quarter of 2021. As the largest component of our noninterest income, mortgage banking income was the driving factor in the change in noninterest income from the prior quarter and the prior year due to lower mortgage origination volume during the past 12 months.

Noninterest expense for the first quarter of 2022 decreased $50 thousand compared with the fourth quarter of 2021 and increased $523 thousand compared with the first quarter of 2021. Compensation and benefits expenses increased from the prior periods due to hiring of new team members, combined with annual salary increases, while outside service and data processing costs increased from the prior quarter and prior year due to increased volume from deposit account and debit card transactions. Partially offsetting these increased costs was a decrease in mortgage production costs due to the lower mortgage origination volume and no other real estate owned activity since the first quarter of 2021.

Our effective tax rate was 22.6% for the first quarter of 2022, 23.3% for the fourth quarter of 2021, and 22.1% for the first quarter of 2021. The reduced tax rate in the first quarter of 2022 relates to the favorable tax impact of equity compensation transactions during the quarter.

NET INTEREST INCOME AND MARGIN - Unaudited

|  | For the Three Months Ended
|  | March 31, 2022 |  | December 31, 2021 |  | March 31, 2021
|  | 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 |  | $ | 89,096 |  | $ | 59 |  | 0.27% |  | $ | 138,103 |  | $ | 66 |  | 0.19% |  | $ | 89,522 |  | $ | 47 |  | 0.21%
Investment securities, taxable |  |  | 113,101 |  |  | 425 |  | 1.52% |  |  | 107,181 |  |  | 351 |  | 1.30% |  |  | 85,136 |  |  | 245 |  | 1.17%
Investment securities, nontaxable(2) |  |  | 11,899 |  |  | 64 |  | 2.17% |  |  | 11,695 |  |  | 75 |  | 2.56% |  |  | 11,000 |  |  | 73 |  | 2.68%
Loans(10) |  |  | 2,573,978 |  |  | 23,931 |  | 3.77% |  |  | 2,452,677 |  |  | 23,661 |  | 3.83% |  |  | 2,209,569 |  |  | 22,465 |  | 4.12%
Total interest-earning assets |  |  | 2,788,074 |  |  | 24,479 |  | 3.56% |  |  | 2,709,656 |  |  | 24,153 |  | 3.54% |  |  | 2,395,227 |  |  | 22,830 |  | 3.87%
Noninterest-earning assets |  |  | 152,565 |  |  |  |  |  |  |  | 153,284 |  |  |  |  |  |  |  | 101,932 |  |  |  |  |
Total assets |  | $ | 2,940,639 |  |  |  |  |  |  | $ | 2,862,940 |  |  |  |  |  |  | $ | 2,497,159 |  |  |  |  |
Interest-bearing liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
NOW accounts |  | $ | 406,054 |  |  | 115 |  | 0.11% |  | $ | 330,067 |  |  | 64 |  | 0.08% |  | $ | 280,737 |  |  | 46 |  | 0.07%
Savings & money market |  |  | 1,242,225 |  |  | 618 |  | 0.20% |  |  | 1,278,930 |  |  | 637 |  | 0.20% |  |  | 1,084,467 |  |  | 586 |  | 0.22%
Time deposits |  |  | 158,720 |  |  | 175 |  | 0.45% |  |  | 155,708 |  |  | 199 |  | 0.51% |  |  | 213,378 |  |  | 523 |  | 0.99%
Total interest-bearing deposits |  |  | 1,806,999 |  |  | 908 |  | 0.20% |  |  | 1,764,705 |  |  | 900 |  | 0.20% |  |  | 1,578,582 |  |  | 1,155 |  | 0.30%
FHLB advances and other borrowings |  |  | 16,626 |  |  | 12 |  | 0.29% |  |  | - |  |  | - |  | -% |  |  | 2,809 |  |  | 5 |  | 0.72%
Subordinated debentures |  |  | 36,116 |  |  | 380 |  | 4.27% |  |  | 36,089 |  |  | 380 |  | 4.18% |  |  | 36,008 |  |  | 380 |  | 4.28%
Total interest-bearing liabilities |  |  | 1,859,741 |  |  | 1,300 |  | 0.28% |  |  | 1,800,794 |  |  | 1,280 |  | 0.28% |  |  | 1,617,399 |  |  | 1,540 |  | 0.39%
Noninterest-bearing liabilities |  |  | 802,299 |  |  |  |  |  |  |  | 791,700 |  |  |  |  |  |  |  | 648,969 |  |  |  |  |
Shareholders’ equity |  |  | 278,600 |  |  |  |  |  |  |  | 270,446 |  |  |  |  |  |  |  | 230,791 |  |  |  |  |
Total liabilities and shareholders’ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
equity |  | $ | 2,940,639 |  |  |  |  |  |  | $ | 2,862,940 |  |  |  |  |  |  | $ | 2,497,159 |  |  |  |  |
Net interest spread |  |  |  |  |  |  |  | 3.28% |  |  |  |  |  |  |  | 3.26% |  |  |  |  |  |  |  | 3.48%
Net interest income (tax equivalent) / |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
margin |  |  |  |  | $ | 23,179 |  | 3.37% |  |  |  |  | $ | 22,873 |  | 3.35% |  |  |  |  | $ | 21,290 |  | 3.60%
Less: tax-equivalent adjustment(2) |  |  |  |  |  | 15 |  |  |  |  |  |  |  | 16 |  |  |  |  |  |  |  | 17 |  |
Net interest income |  |  |  |  | $ | 23,164 |  |  |  |  |  |  | $ | 22,857 |  |  |  |  |  |  | $ | 21,273 |  |

[Footnotes to table located on page 6]

Net interest income was $23.2 million for the first quarter of 2022, a $307 thousand increase from the fourth quarter of 2021, resulting primarily from a $327 thousand increase in interest income, on a tax-equivalent basis. While at a lower yield, the $121.3 million growth in average loan balances attributed to the increase in interest income. In comparison to the first quarter of 2021, net interest income increased $1.9 million, resulting primarily from $364.4 million growth in average loan balances during the 2022 period, despite a 35-basis point decrease in loan yield. Our net interest margin, on a tax-equivalent basis, was 3.37% for the first quarter of 2022, a two-basis point increase from 3.35% for the fourth quarter of 2021 and a 23-basis point decrease from 3.60% for the first quarter of 2021. Reduced rates on our interest-earning assets, partially offset by lower costs on our interest-bearing liabilities, resulted in the lower net interest margin during the first quarter of 2022 in comparison to the first quarter of 2021.

3

BALANCE SHEETS - Unaudited

|  | Ending Balance
|  | March 31 |  | December 31 |  | September 30 |  | June 30 |  | March 31
(in thousands, except per share data) |  | 2022 |  | 2021 |  | 2021 |  | 2021 |  | 2021
Assets |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents: |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks |  | $ | 20,992 |  | 21,770 |  | 17,944 |  | 17,093 |  | 12,621
Federal funds sold |  |  | 95,093 |  | 86,882 |  | 47,440 |  | 75,327 |  | 74,268
Interest-bearing deposits with banks |  |  | 33,131 |  | 58,557 |  | 63,149 |  | 61,377 |  | 68,456
Total cash and cash equivalents |  |  | 149,216 |  | 167,209 |  | 128,533 |  | 153,797 |  | 155,345
Investment securities: |  |  |  |  |  |  |  |  |  |  |
Investment securities available for sale |  |  | 106,978 |  | 120,281 |  | 113,802 |  | 91,232 |  | 92,997
Other investments |  |  | 4,104 |  | 4,021 |  | 2,820 |  | 2,770 |  | 1,770
Total investment securities |  |  | 111,082 |  | 124,302 |  | 116,622 |  | 94,002 |  | 94,767
Mortgage loans held for sale |  |  | 17,840 |  | 13,556 |  | 31,641 |  | 36,427 |  | 57,073
Loans (5) |  |  | 2,660,675 |  | 2,489,877 |  | 2,389,047 |  | 2,254,135 |  | 2,183,682
Less allowance for credit losses |  |  | (32,944) |  | (30,408) |  | (36,075) |  | (41,912) |  | (43,499)
Loans, net |  |  | 2,627,731 |  | 2,459,469 |  | 2,352,972 |  | 2,212,223 |  | 2,140,183
Bank owned life insurance |  |  | 50,148 |  | 49,833 |  | 49,521 |  | 49,200 |  | 48,869
Property and equipment, net |  |  | 95,129 |  | 92,370 |  | 78,456 |  | 69,193 |  | 61,710
Deferred income taxes |  |  | 10,635 |  | 8,397 |  | 16,591 |  | 25,025 |  | 9,813
Other assets |  |  | 10,859 |  | 10,412 |  | 9,840 |  | 10,316 |  | 12,162
Total assets |  | $ | 3,072,640 |  | 2,925,548 |  | 2,784,176 |  | 2,650,183 |  | 2,579,922
Liabilities |  |  |  |  |  |  |  |  |  |  |
Deposits |  | $ | 2,708,174 |  | 2,563,826 |  | 2,433,018 |  | 2,310,892 |  | 2,258,751
Subordinated debentures |  |  | 36,133 |  | 36,106 |  | 36,079 |  | 36,052 |  | 36,025
Other liabilities |  |  | 49,809 |  | 47,715 |  | 49,450 |  | 51,580 |  | 45,624
Total liabilities |  |  | 2,794,116 |  | 2,647,647 |  | 2,518,547 |  | 2,398,524 |  | 2,340,400
Shareholders’ equity |  |  |  |  |  |  |  |  |  |  |
Preferred stock - $.01 par value; 10,000,000 shares |  |  |  |  |  |  |  |  |  |  |
authorized |  |  | - |  | - |  | - |  | - |  | -
Common Stock - $.01 par value; 10,000,000 shares |  |  |  |  |  |  |  |  |  |  |
authorized |  |  | 80 |  | 79 |  | 79 |  | 79 |  | 79
Nonvested restricted stock |  |  | (3,425) |  | (1,435) |  | (1,469) |  | (1,173) |  | (1,075)
Additional paid-in capital |  |  | 117,286 |  | 114,226 |  | 113,501 |  | 112,604 |  | 111,181
Accumulated other comprehensive income (loss) |  |  | (6,393) |  | (740) |  | (248) |  | 400 |  | (90)
Retained earnings |  |  | 170,976 |  | 165,771 |  | 153,766 |  | 139,749 |  | 129,427
Total shareholders’ equity |  |  | 278,524 |  | 277,901 |  | 265,629 |  | 251,659 |  | 239,522
Total liabilities and shareholders’ equity |  | $ | 3,072,640 |  | 2,925,548 |  | 2,784,176 |  | 2,650,183 |  | 2,579,922
Common Stock |  |  |  |  |  |  |  |  |  |  |
Book value per common share |  | $ | 34.90 |  | 35.07 |  | 33.57 |  | 31.86 |  | 30.58
Stock price: |  |  |  |  |  |  |  |  |  |  |
High |  |  | 65.02 |  | 64.73 |  | 53.50 |  | 55.26 |  | 54.09
Low |  |  | 50.84 |  | 52.73 |  | 48.62 |  | 47.61 |  | 35.15
Period end |  |  | 50.84 |  | 62.49 |  | 53.50 |  | 51.16 |  | 46.88
Common shares outstanding |  |  | 7,981 |  | 7,925 |  | 7,913 |  | 7,900 |  | 7,853

[Footnotes to table located on page 6]

4

ASSET QUALITY MEASURES - Unaudited

|  | Quarter Ended
|  | March 31 |  | December 31 |  | September 30 |  | June 30 |  | March 31
(dollars in thousands) |  | 2022 |  | 2021 |  | 2021 |  | 2021 |  | 2021
Nonperforming Assets |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | - |  | - |  | - |  | - |  | -
Non-owner occupied RE |  |  | 265 |  | 270 |  | 7,400 |  | 1,048 |  | 1,127
Construction |  |  | - |  | - |  | - |  | - |  | 135
Commercial business |  |  | - |  | - |  | 1,469 |  | 37 |  | 190
Consumer |  |  |  |  |  |  |  |  |  |  |
Real estate |  |  | 739 |  | 989 |  | 1,461 |  | 2,372 |  | 2,762
Home equity |  |  | 815 |  | 653 |  | 818 |  | 426 |  | 439
Construction |  |  | - |  | - |  | - |  | - |  | -
Other |  |  | - |  | - |  | - |  | - |  | -
Nonaccruing troubled debt restructurings |  |  | 2,713 |  | 2,952 |  | 2,730 |  | 2,883 |  | 3,150
Total nonaccrual loans |  |  | 4,532 |  | 4,864 |  | 13,878 |  | 6,766 |  | 7,803
Other real estate owned |  |  | - |  | - |  | - |  | 366 |  | -
Total nonperforming assets |  | $ | 4,532 |  | 4,864 |  | 13,878 |  | 7,132 |  | 7,803
Nonperforming assets as a percentage of: |  |  |  |  |  |  |  |  |  |  |
Total assets |  |  | 0.15% |  | 0.17% |  | 0.50% |  | 0.27% |  | 0.30%
Total loans |  |  | 0.17% |  | 0.20% |  | 0.58% |  | 0.32% |  | 0.36%
Accruing troubled debt restructurings (TDRs) |  | $ | 3,241 |  | 3,299 |  | 4,044 |  | 4,622 |  | 4,379
Classified assets/tier 1 capital plus allowance for credit |  |  |  |  |  |  |  |  |  |  |
losses |  |  | 7.83% |  | 12.61% |  | 14.90% |  | 13.36% |  | 14.42%

|  | Quarter Ended
|  | March 31 |  | December 31 |  | September 30 |  | June 30 |  | March 31
(dollars in thousands) |  | 2022 |  | 2021 |  | 2021 |  | 2021 |  | 2021
Allowance for Credit Losses |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of period |  | $ | 30,408 |  | 36,075 |  | 41,912 |  | 43,499 |  | 44,149
CECL adjustment |  |  | 1,500 |  | - |  | - |  | - |  | -
Loans charged-off |  |  | (169) |  | (1,509) |  | (243) |  | (8) |  | (406)
Recoveries of loans previously charged-off |  |  | 180 |  | 42 |  | 406 |  | 321 |  | 56
Net loans charged-off |  |  | 11 |  | (1,467) |  | 163 |  | 313 |  | (350)
Provision for credit losses |  |  | 1,025 |  | (4,200) |  | (6,000) |  | (1,900) |  | (300)
Balance, end of period |  | $ | 32,944 |  | 30,408 |  | 36,075 |  | 41,912 |  | 43,499
Allowance for credit losses to gross loans |  |  | 1.24% |  | 1.22% |  | 1.51% |  | 1.86% |  | 1.99%
Allowance for credit losses to nonaccrual loans |  |  | 726.88% |  | 625.22% |  | 259.95% |  | 619.47% |  | 557.47%
Net charge-offs to average loans QTD (annualized) |  |  | 0.00% |  | 0.24% |  | (0.03%) |  | (0.06%) |  | 0.07%

Total nonperforming assets decreased by $332 thousand to $4.5 million for the first quarter of 2022, representing 0.15% of total assets, compared to 0.17% in the fourth quarter of 2021. The allowance for credit losses as a percentage of nonaccrual loans was 726.9% on March 31, 2022, compared to 625.2% on December 31, 2021 and 557.5% on March 31, 2021. During the first quarter of 2022, our classified asset ratio improved to 7.83% as a result of five, or $14.1 million in the aggregate, hotel loans we upgraded from substandard after observing 12 months of positive financial performance following the pandemic.

Effective January 1, 2022, we early adopted the Current Expected Credit Loss (“CECL”) methodology for estimating credit losses, which resulted in an increase of $1.5 million to our allowance for credit losses and an increase of $2.0 million to our reserve for unfunded commitments. The tax-effected impact of these two items totaled $2.8 million and was recorded as an adjustment to our retained earnings as of January 1, 2022.

On March 31, 2022, the allowance for credit losses was $32.9 million, or 1.24% of total loans, compared to $30.4 million, or 1.22% of total loans, at December 31, 2021 and $43.5 million, or 1.99% of total loans, at March 31, 2021. We had net recoveries of $11 thousand, for the first quarter of 2022 compared to net charge-offs of $1.5 million, or 0.24% annualized, for the fourth quarter of 2021. Net charge-offs were $350 thousand for the first quarter of 2021. There was a provision for credit losses of $1.1 million for the first quarter of 2022 compared to a provision reversal of $4.2 million for the fourth quarter of 2021 and a reversal of $300 thousand for the first quarter of 2021. The provision for the quarter ended March 31, 2022 was recorded using the new CECL methodology and reflected the impact of $86.4 million of hotel loans which were upgraded during the first quarter after observation of 12 months of positive financial performance following the recent pandemic.

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LOAN COMPOSITION - Unaudited

|  | Quarter Ended
|  | March 31 |  | December 31 |  | September 30 |  | June 30 |  | March 31
(dollars in thousands) |  | 2022 |  | 2021 |  | 2021 |  | 2021 |  | 2021
Commercial |  |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | 527,776 |  | 488,965 |  | 470,614 |  | 452,130 |  | 448,505
Non-owner occupied RE |  |  | 705,811 |  | 666,833 |  | 628,521 |  | 600,094 |  | 584,187
Construction |  |  | 75,015 |  | 64,425 |  | 87,892 |  | 60,786 |  | 51,996
Business |  |  | 352,932 |  | 333,049 |  | 307,969 |  | 307,933 |  | 303,895
Total commercial loans |  |  | 1,661,534 |  | 1,553,272 |  | 1,494,996 |  | 1,420,943 |  | 1,388,583
Consumer |  |  |  |  |  |  |  |  |  |  |
Real estate |  |  | 745,667 |  | 694,401 |  | 648,276 |  | 605,026 |  | 574,541
Home equity |  |  | 155,678 |  | 154,839 |  | 155,049 |  | 149,789 |  | 154,157
Construction |  |  | 72,627 |  | 59,846 |  | 57,419 |  | 48,077 |  | 44,170
Other |  |  | 25,169 |  | 27,519 |  | 33,307 |  | 30,300 |  | 22,231
Total consumer loans |  |  | 999,141 |  | 936,605 |  | 894,051 |  | 833,192 |  | 795,099
Total gross loans, net of deferred fees |  |  | 2,660,675 |  | 2,489,877 |  | 2,389,047 |  | 2,254,135 |  | 2,183,682
Less—allowance for credit losses |  |  | (32,944) |  | (30,408) |  | (36,075) |  | (41,912) |  | (43,499)
Total loans, net |  | $ | 2,627,731 |  | 2,459,469 |  | 2,352,972 |  | 2,212,223 |  | 2,140,183
DEPOSIT COMPOSITION - Unaudited |  |  |  |  |  |  |  |  |  |  |
|  |  | Quarter Ended
|  | March 31 |  | December 31 |  | September 30 |  | June 30 |  | March 31
(dollars in thousands) |  | 2022 |  | 2021 |  | 2021 |  | 2021 |  | 2021
Non-interest bearing |  | $ | 779,262 |  | 768,650 |  | 720,444 |  | 658,758 |  | 677,282
Interest bearing: |  |  |  |  |  |  |  |  |  |  |
NOW accounts |  |  | 416,322 |  | 401,788 |  | 331,167 |  | 316,744 |  | 304,530
Money market accounts |  |  | 1,238,866 |  | 1,201,099 |  | 1,188,666 |  | 1,136,315 |  | 1,064,659
Savings |  |  | 41,630 |  | 39,696 |  | 34,018 |  | 33,442 |  | 31,589
Time, less than $100,000 |  |  | 24,484 |  | 26,099 |  | 28,469 |  | 29,179 |  | 31,856
Time and out-of-market deposits, $100,000 and over |  |  | 207,610 |  | 126,494 |  | 130,254 |  | 136,454 |  | 148,835
Total deposits |  | $ | 2,708,174 |  | 2,563,826 |  | 2,433,018 |  | 2,310,892 |  | 2,258,751

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) March 31, 2022 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 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 $3.1 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,” 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.

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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; (3) the rate of delinquencies and amounts of charge-offs, the level of allowance for credit 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 changes to the U.S. presidential administration and Congress on the regulatory landscape and capital markets; (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, interest expense, 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