EX-99.1 2 sbf4087131-ex991.htm EARNINGS PRESS RELEASE FOR PERIOD ENDED JUNE 30, 2022.

Exhibit 99.1

Southern First Reports Results for Second Quarter 2022

Greenville, South Carolina, July 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 June 30, 2022.

“I am incredibly proud of the Southern First team as they generated significant new client relationships and record loan growth for the second quarter,” stated Art Seaver, the company’s Chief Executive Officer. “During this time of high inflation, rising interest rates, and the resulting transition in housing and mortgage, our team’s efforts resulted in strong performance with solid growth in net interest income and book value.”

2022 Second Quarter Highlights
● | Net income was $7.2 million and diluted earnings per common share were $0.90 for Q2 2022
● | Net interest income increased 16.1% to $24.9 million at Q2 2022, compared to $21.4 million at Q2 2021
● | Total loans increased 26% to $2.8 billion at Q2 2022, compared to $2.3 billion at Q2 2021
● | Total deposits increased 24% to $2.9 billion at Q2 2022, compared to $2.3 billion at Q2 2021
● | Book value per common share increased to $35.39, or 11%, over Q2 2021
● | Completed move to new headquarters in Greenville, South Carolina

|  |  | Quarter Ended
|  |  | June 30 |  | March 31 |  | December 31 |  | September 30 |  | June 30
|  |  | 2022 |  | 2022 |  | 2021 |  | 2021 |  | 2021
Earnings ($ in thousands, except per share data): |  |  |  |  |  |  |  |  |  |  |
Net income available to common shareholders |  | $ | 7,240 |  | 7,970 |  | 12,005 |  | 14,017 |  | 10,323
Earnings per common share, diluted |  |  | 0.90 |  | 0.98 |  | 1.49 |  | 1.75 |  | 1.29
Total revenue(1) |  |  | 27,149 |  | 26,091 |  | 26,194 |  | 26,411 |  | 25,052
Net interest margin (tax-equivalent)(2) |  |  | 3.35% |  | 3.37% |  | 3.35% |  | 3.38% |  | 3.50%
Return on average assets(3) |  |  | 0.92% |  | 1.10% |  | 1.66% |  | 2.03% |  | 1.61%
Return on average equity(3) |  |  | 10.31% |  | 11.60% |  | 17.61% |  | 21.67% |  | 16.96%
Efficiency ratio(4) |  |  | 58.16% |  | 56.28% |  | 56.25% |  | 53.15% |  | 53.87%
Noninterest expense to average assets(3) |  |  | 2.02% |  | 2.03% |  | 2.06% |  | 2.06% |  | 2.10%
Balance Sheet ($ in thousands): |  |  |  |  |  |  |  |  |  |  |
Total loans(5) |  | $ | 2,845,205 |  | 2,660,675 |  | 2,489,877 |  | 2,389,047 |  | 2,254,135
Total deposits |  |  | 2,870,158 |  | 2,708,174 |  | 2,563,826 |  | 2,433,018 |  | 2,310,892
Core deposits(6) |  |  | 2,588,283 |  | 2,541,113 |  | 2,479,412 |  | 2,367,841 |  | 2,220,577
Total assets |  |  | 3,287,663 |  | 3,073,234 |  | 2,925,548 |  | 2,784,176 |  | 2,650,183
Book value per common share |  |  | 35.39 |  | 34.90 |  | 35.07 |  | 33.57 |  | 31.86
Loans to deposits |  |  | 99.13% |  | 98.25% |  | 97.12% |  | 98.19% |  | 97.54%
Holding Company Capital Ratios(7): |  |  |  |  |  |  |  |  |  |  |
Total risk-based capital ratio |  |  | 13.97% |  | 14.37% |  | 14.90% |  | 14.88% |  | 14.98%
Tier 1 risk-based capital ratio |  |  | 11.83% |  | 12.18% |  | 12.65% |  | 12.59% |  | 12.63%
Leverage ratio |  |  | 9.71% |  | 10.12% |  | 10.18% |  | 10.20% |  | 10.27%
Common equity tier 1 ratio(8) |  |  | 11.33% |  | 11.65% |  | 12.09% |  | 12.00% |  | 12.00%
Tangible common equity(9) |  |  | 8.60% |  | 9.06% |  | 9.50% |  | 9.54% |  | 9.50%
Asset Quality Ratios: |  |  |  |  |  |  |  |  |  |  |
Nonperforming assets/ total assets |  |  | 0.09% |  | 0.15% |  | 0.17% |  | 0.50% |  | 0.27%
Classified assets/tier one capital plus allowance for credit losses |  |  | 7.29% |  | 7.83% |  | 12.61% |  | 14.90% |  | 13.36%
Loans 30 days or more past due/ loans(5) |  |  | 0.10% |  | 0.13% |  | 0.09% |  | 0.49% |  | 0.14%
Net charge-offs (recoveries)/average loans(5) (YTD annualized) |  |  | 0.02% |  | 0.00% |  | 0.06% |  | (0.01%) |  | 0.00%
Allowance for credit losses/loans(5) |  |  | 1.20% |  | 1.24% |  | 1.22% |  | 1.51% |  | 1.86%
Allowance for credit losses/nonaccrual loans |  |  | 1,166.70% |  | 726.88% |  | 625.16% |  | 259.95% |  | 619.47%
[Footnotes to table located on page 5]

1

INCOME STATEMENTS – Unaudited

|  |  | Quarter Ended
|  |  | June 30 |  | Mar 31 |  | Dec 31 |  | Sept 30 |  | Jun 30
(in thousands, except per share data) |  |  | 2022 |  | 2022 |  | 2021 |  | 2021 |  | 2021
Interest income |  |  |  |  |  |  |  |  |  |  |
Loans |  | $ | 26,610 |  | 23,931 |  | 23,661 |  | 23,063 |  | 22,409
Investment securities |  |  | 448 |  | 474 |  | 410 |  | 355 |  | 269
Federal funds sold |  |  | 180 |  | 59 |  | 66 |  | 68 |  | 53
Total interest income |  |  | 27,238 |  | 24,464 |  | 24,137 |  | 23,486 |  | 22,731
Interest expense |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 1,844 |  | 908 |  | 900 |  | 934 |  | 920
Borrowings |  |  | 510 |  | 392 |  | 380 |  | 380 |  | 381
Total interest expense |  |  | 2,354 |  | 1,300 |  | 1,280 |  | 1,314 |  | 1,301
Net interest income |  |  | 24,884 |  | 23,164 |  | 22,857 |  | 22,172 |  | 21,430
Provision (reversal) for credit losses |  |  | 1,775 |  | 1,105 |  | (4,200) |  | (6,000) |  | (1,900)
Net interest income after provision for credit losses |  |  | 23,109 |  | 22,059 |  | 27,057 |  | 28,172 |  | 23,330
Noninterest income |  |  |  |  |  |  |  |  |  |  |
Mortgage banking income |  |  | 1,184 |  | 1,494 |  | 1,931 |  | 2,829 |  | 1,983
Service fees on deposit accounts |  |  | 209 |  | 191 |  | 200 |  | 199 |  | 173
ATM and debit card income |  |  | 563 |  | 528 |  | 560 |  | 542 |  | 521
Income from bank owned life insurance |  |  | 315 |  | 315 |  | 312 |  | 321 |  | 331
Net lender and referral fees on PPP loans |  |  | - |  | 44 |  | - |  | - |  | 268
Loss on disposal of fixed assets |  |  | (394) |  | - |  | - |  | - |  | -
Other income |  |  | 388 |  | 355 |  | 334 |  | 348 |  | 346
Total noninterest income |  |  | 2,265 |  | 2,927 |  | 3,337 |  | 4,239 |  | 3,622
Noninterest expense |  |  |  |  |  |  |  |  |  |  |
Compensation and benefits |  |  | 9,915 |  | 9,456 |  | 9,208 |  | 9,064 |  | 8,724
Occupancy |  |  | 2,219 |  | 1,778 |  | 2,081 |  | 1,685 |  | 1,552
Outside service and data processing costs |  |  | 1,528 |  | 1,533 |  | 1,395 |  | 1,368 |  | 1,391
Insurance |  |  | 367 |  | 260 |  | 342 |  | 244 |  | 262
Professional fees |  |  | 693 |  | 599 |  | 682 |  | 694 |  | 615
Marketing |  |  | 329 |  | 269 |  | 260 |  | 248 |  | 208
Other |  |  | 737 |  | 790 |  | 767 |  | 736 |  | 743
Total noninterest expenses |  |  | 15,788 |  | 14,685 |  | 14,735 |  | 14,039 |  | 13,495
Income before provision for income taxes |  |  | 9,586 |  | 10,301 |  | 15,659 |  | 18,372 |  | 13,457
Income tax expense |  |  | 2,346 |  | 2,331 |  | 3,654 |  | 4,355 |  | 3,134
Net income available to common shareholders |  | $ | 7,240 |  | 7,970 |  | 12,005 |  | 14,017 |  | 10,323
Earnings per common share – Basic |  | $ | 0.91 |  | 1.00 |  | 1.52 |  | 1.78 |  | 1.32
Earnings per common share – Diluted |  |  | 0.90 |  | 0.98 |  | 1.49 |  | 1.75 |  | 1.29
Basic weighted average common shares |  |  | 7,945 |  | 7,932 |  | 7,877 |  | 7,874 |  | 7,848
Diluted weighted average common shares |  |  | 8,075 |  | 8,096 |  | 8,057 |  | 8,001 |  | 7,988
[Footnotes to table located on page 5]

Net income for the second quarter of 2022 was $7.2 million, or $0.90 per diluted share, a $731 thousand decrease from the first quarter of 2022 and a $3.1 million decrease from the second quarter of 2021. The decrease in net income was driven by an increase in noninterest expenses, as well as an increased provision for credit losses and a decrease in mortgage banking income. Net interest income increased $1.7 million, or 7.4%, for the second quarter of 2022, compared with the first quarter of 2022, and increased $3.5 million, or 16.1%, compared to the second quarter of 2021. The increase in net interest income was driven by $184.5 million of loan growth during the second quarter of 2022.

The provision for credit losses was $1.8 million for the second quarter of 2022, compared to $1.1 million for the first quarter of 2022 and a negative provision of $1.9 million for the second quarter of 2021. The provision expense during the second quarter of 2022, calculated under the new CECL methodology, includes a $1.5 million provision for loan losses and a $250,000 provision for unfunded commitments, compared to a reversal in the provision during the second quarter of 2022 as the economy showed improvement after the onset of the pandemic.

Noninterest income totaled $2.3 million for the second quarter of 2022, a $662 thousand decrease from the first quarter of 2022 and a $1.4 million decrease from the second 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. In addition, we recorded a loss on disposal of assets during the second quarter of 2022 as we completed construction and relocated to our new headquarters building in Greenville, South Carolina.

Noninterest expense for the second quarter of 2022 was $15.8 million, or a $1.1 million increase from the first quarter of 2022, and a $2.3 million increase from the second quarter of 2021. Compensation and benefits expense increased from the prior periods due to hiring of new team members, combined with annual salary increases, while occupancy expense increased from the prior quarter and prior year due to costs associated with the relocation of our headquarters. Our insurance costs increased during the second quarter of 2022 related to higher FDIC insurance premiums, while the increase in professional fees related to higher legal, consulting and appraisal fees.

2

Our effective tax rate was 24.5% for the second quarter of 2022, 22.6% for the first quarter of 2022, and 23.3% for the second quarter of 2021. The higher tax rate in the second quarter of 2022 relates to the lesser impact of equity compensation transactions on our tax rate during the quarter.

NET INTEREST INCOME AND MARGIN - Unaudited
|  | For the Three Months Ended
|  | June 30, 2022 |  | March 31, 2022 |  | June 30, 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 |  | $ | 80,909 |  | $ | 180 |  | 0.89% |  | $ | 89,096 |  | $ | 59 |  | 0.27% |  | $ | 119,211 |  | $ | 53 |  | 0.18%
Investment securities, taxable |  |  | 98,527 |  |  | 404 |  | 1.64% |  |  | 113,101 |  |  | 425 |  | 1.52% |  |  | 85,306 |  |  | 212 |  | 1.00%
Investment securities, nontaxable(2) |  |  | 10,382 |  |  | 56 |  | 2.16% |  |  | 11,899 |  |  | 64 |  | 2.17% |  |  | 11,599 |  |  | 74 |  | 2.56%
Loans(10) |  |  | 2,795,274 |  |  | 26,610 |  | 3.82% |  |  | 2,573,978 |  |  | 23,931 |  | 3.77% |  |  | 2,240,236 |  |  | 22,409 |  | 4.01%
Total interest-earning assets |  |  | 2,985,092 |  |  | 27,250 |  | 3.66% |  |  | 2,788,074 |  |  | 24,479 |  | 3.56% |  |  | 2,456,352 |  |  | 22,748 |  | 3.71%
Noninterest-earning assets |  |  | 154,659 |  |  |  |  |  |  |  | 152,565 |  |  |  |  |  |  |  | 117,836 |  |  |  |  |
Total assets |  | $ | 3,139,751 |  |  |  |  |  |  | $ | 2,940,639 |  |  |  |  |  |  | $ | 2,574,188 |  |  |  |  |
Interest-bearing liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
NOW accounts |  | $ | 389,563 |  |  | 144 |  | 0.15% |  | $ | 406,054 |  |  | 115 |  | 0.11% |  | $ | 298,446 |  |  | 46 |  | 0.06%
Savings & money market |  |  | 1,267,174 |  |  | 1,200 |  | 0.38% |  |  | 1,242,225 |  |  | 618 |  | 0.20% |  |  | 1,131,391 |  |  | 580 |  | 0.21%
Time deposits |  |  | 278,101 |  |  | 500 |  | 0.72% |  |  | 158,720 |  |  | 175 |  | 0.45% |  |  | 175,612 |  |  | 294 |  | 0.67%
Total interest-bearing deposits |  |  | 1,934,838 |  |  | 1,844 |  | 0.38% |  |  | 1,806,999 |  |  | 908 |  | 0.20% |  |  | 1,605,449 |  |  | 920 |  | 0.23%
FHLB advances and other borrowings |  |  | 53,179 |  |  | 105 |  | 0.79% |  |  | 16,626 |  |  | 12 |  | 0.29% |  |  | 44 |  |  | 2 |  | 18.23%
Subordinated debentures |  |  | 36,143 |  |  | 405 |  | 4.49% |  |  | 36,116 |  |  | 380 |  | 4.27% |  |  | 36,035 |  |  | 379 |  | 4.22%
Total interest-bearing liabilities |  |  | 2,024,160 |  |  | 2,354 |  | 0.47% |  |  | 1,859,741 |  |  | 1,300 |  | 0.28% |  |  | 1,641,528 |  |  | 1,301 |  | 0.32%
Noninterest-bearing liabilities |  |  | 833,943 |  |  |  |  |  |  |  | 802,299 |  |  |  |  |  |  |  | 688,576 |  |  |  |  |
Shareholders’ equity |  |  | 281,648 |  |  |  |  |  |  |  | 278,600 |  |  |  |  |  |  |  | 244,084 |  |  |  |  |
Total liabilities and shareholders’ equity |  | $ | 3,139,751 |  |  |  |  |  |  | $ | 2,940,639 |  |  |  |  |  |  | $ | 2,574,188 |  |  |  |  |
Net interest spread |  |  |  |  |  |  |  | 3.19% |  |  |  |  |  |  |  | 3.28% |  |  |  |  |  |  |  | 3.39%
Net interest income (tax equivalent) / |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
margin |  |  |  |  | $ | 24,896 |  | 3.35% |  |  |  |  | $ | 23,179 |  | 3.37% |  |  |  |  | $ | 21,447 |  | 3.50%
Less: tax-equivalent adjustment(2) |  |  |  |  |  | 12 |  |  |  |  |  |  |  | 15 |  |  |  |  |  |  |  | 17 |  |
Net interest income |  |  |  |  | $ | 24,884 |  |  |  |  |  |  | $ | 23,164 |  |  |  |  |  |  | $ | 21,430 |  |
[Footnotes to table located on page 5]

Net interest income was $24.9 million for the second quarter of 2022, a $1.7 million increase from the first quarter of 2022, resulting primarily from a $2.8 million increase in interest income, on a tax-equivalent basis, partially offset by a $1.1 million increase in interest expense. The increase in interest income was driven by $221.3 million growth in average loan balances at an average rate of 3.82%, five basis points higher than the previous quarter. In comparison to the second quarter of 2021, net interest income increased $3.5 million, resulting primarily from $555.0 million growth in average loan balances during the 2022 period, despite a 19-basis point decrease in loan yield. Our net interest margin, on a tax-equivalent basis, was 3.35% for the second quarter of 2022, a two-basis point decrease from 3.37% for the first quarter of 2022, and a 15-basis point decrease from 3.50% for the second quarter of 2021. Reduced rates on our interest-earning assets, combined with higher costs on our interest-bearing liabilities, resulted in the lower net interest margin during the second quarter of 2022 in comparison to the second quarter of 2021.

3

BALANCE SHEETS - Unaudited
|  | Ending Balance
|  | June 30 |  | March 31 |  | December 31 |  | September 30 |  | June 30
(in thousands, except per share data) |  | 2022 |  | 2022 |  | 2021 |  | 2021 |  | 2021
Assets |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents: |  |  |  |  |  |  |  |  |  |
Cash and due from banks | $ | 21,090 |  | 20,992 |  | 21,770 |  | 17,944 |  | 17,093
Federal funds sold |  | 124,462 |  | 95,093 |  | 86,882 |  | 47,440 |  | 75,327
Interest-bearing deposits with banks |  | 36,538 |  | 33,131 |  | 58,557 |  | 63,149 |  | 61,377
Total cash and cash equivalents |  | 182,090 |  | 149,216 |  | 167,209 |  | 128,533 |  | 153,797
Investment securities: |  |  |  |  |  |  |  |  |  |
Investment securities available for sale |  | 98,991 |  | 106,978 |  | 120,281 |  | 113,802 |  | 91,232
Other investments |  | 5,065 |  | 4,104 |  | 4,021 |  | 2,820 |  | 2,770
Total investment securities |  | 104,056 |  | 111,082 |  | 124,302 |  | 116,622 |  | 94,002
Mortgage loans held for sale |  | 18,329 |  | 17,840 |  | 13,556 |  | 31,641 |  | 36,427
Loans (5) |  | 2,845,205 |  | 2,660,675 |  | 2,489,877 |  | 2,389,047 |  | 2,254,135
Less allowance for credit losses |  | (34,192) |  | (32,944) |  | (30,408) |  | (36,075) |  | (41,912)
Loans, net |  | 2,811,013 |  | 2,627,731 |  | 2,459,469 |  | 2,352,972 |  | 2,212,223
Bank owned life insurance |  | 50,463 |  | 50,148 |  | 49,833 |  | 49,521 |  | 49,200
Property and equipment, net |  | 96,674 |  | 95,129 |  | 92,370 |  | 78,456 |  | 69,193
Deferred income taxes |  | 15,078 |  | 10,635 |  | 8,397 |  | 16,591 |  | 25,025
Other assets |  | 9,960 |  | 10,859 |  | 10,412 |  | 9,840 |  | 10,316
Total assets | $ | 3,287,663 |  | 3,072,640 |  | 2,925,548 |  | 2,784,176 |  | 2,650,183
Liabilities |  |  |  |  |  |  |  |  |  |
Deposits | $ | 2,870,158 |  | 2,708,174 |  | 2,563,826 |  | 2,433,018 |  | 2,310,892
FHLB Advances |  | 50,000 |  | - |  | - |  | - |  | -
Subordinated debentures |  | 36,160 |  | 36,133 |  | 36,106 |  | 36,079 |  | 36,052
Other liabilities |  | 48,708 |  | 49,809 |  | 47,715 |  | 49,450 |  | 51,580
Total liabilities |  | 3,005,026 |  | 2,794,116 |  | 2,647,647 |  | 2,518,547 |  | 2,398,524
Shareholders’ equity |  |  |  |  |  |  |  |  |  |
Preferred stock - $.01 par value; 10,000,000 shares |  |  |  |  |  |  |  |  |  |
authorized |  | - |  | - |  | - |  | - |  | -
Common Stock - $.01 par value; 10,000,000 shares |  |  |  |  |  |  |  |  |  |
authorized |  | 80 |  | 80 |  | 79 |  | 79 |  | 79
Nonvested restricted stock |  | (3,230) |  | (3,425) |  | (1,435) |  | (1,469) |  | (1,173)
Additional paid-in capital |  | 117,714 |  | 117,286 |  | 114,226 |  | 113,501 |  | 112,604
Accumulated other comprehensive income (loss) |  | (10,143) |  | (6,393) |  | (740) |  | (248) |  | 400
Retained earnings |  | 178,216 |  | 170,976 |  | 165,771 |  | 153,766 |  | 139,749
Total shareholders’ equity |  | 282,637 |  | 278,524 |  | 277,901 |  | 265,629 |  | 251,659
Total liabilities and shareholders’ equity | $ | 3,287,663 |  | 3,072,640 |  | 2,925,548 |  | 2,784,176 |  | 2,650,183
Common Stock |  |  |  |  |  |  |  |  |  |
Book value per common share | $ | 35.39 |  | 34.90 |  | 35.07 |  | 33.57 |  | 31.86
Stock price: |  |  |  |  |  |  |  |  |  |
High |  | 50.09 |  | 65.02 |  | 64.73 |  | 53.50 |  | 55.26
Low |  | 42.25 |  | 50.84 |  | 52.73 |  | 48.62 |  | 47.61
Period end |  | 43.59 |  | 50.84 |  | 62.49 |  | 53.50 |  | 51.16
Common shares outstanding |  | 7,986 |  | 7,981 |  | 7,925 |  | 7,913 |  | 7,900
[Footnotes to table located on page 5]

ASSET QUALITY MEASURES - Unaudited |  |  |  |  |  |  |  |  |  |
|  | Quarter Ended
|  | June 30 |  | March 31 |  | December 31 |  | September 30 |  | June 30
(dollars in thousands) |  | 2022 |  | 2022 |  | 2021 |  | 2021 |  | 2021
Nonperforming Assets |  |  |  |  |  |  |  |  |  |
Commercial |  |  |  |  |  |  |  |  |  |
Non-owner occupied RE | $ | 259 |  | 265 |  | 270 |  | 7,400 |  | 1,048
Commercial business |  | - |  | - |  | - |  | 1,469 |  | 37
Consumer |  |  |  |  |  |  |  |  |  |
Real estate |  | 183 |  | 739 |  | 989 |  | 1,461 |  | 2,372
Home equity |  | 200 |  | 815 |  | 653 |  | 818 |  | 426
Nonaccruing troubled debt restructurings |  | 2,289 |  | 2,713 |  | 2,952 |  | 2,730 |  | 2,883
Total nonaccrual loans |  | 2,931 |  | 4,532 |  | 4,864 |  | 13,878 |  | 6,766
Other real estate owned |  | - |  | - |  | - |  | - |  | 366
Total nonperforming assets | $ | 2,931 |  | 4,532 |  | 4,864 |  | 13,878 |  | 7,132
Nonperforming assets as a percentage of: |  |  |  |  |  |  |  |  |  |
Total assets |  | 0.09% |  | 0.15% |  | 0.17% |  | 0.50% |  | 0.27%
Total loans |  | 0.10% |  | 0.17% |  | 0.20% |  | 0.58% |  | 0.32%
Accruing troubled debt restructurings (TDRs) | $ | 3,558 |  | 3,241 |  | 3,299 |  | 4,044 |  | 4,622
Classified assets/tier 1 capital plus allowance for credit |  |  |  |  |  |  |  |  |  |
losses |  | 7.29% |  | 7.83% |  | 12.61% |  | 14.90% |  | 13.36%
|  | Quarter Ended
|  | June 30 |  | March 31 |  | December 31 |  | September 30 |  | June 30
(dollars in thousands) |  | 2022 |  | 2022 |  | 2021 |  | 2021 |  | 2021
Allowance for Credit Losses |  |  |  |  |  |  |  |  |  |
Balance, beginning of period | $ | 32,944 |  | 30,408 |  | 36,075 |  | 41,912 |  | 43,499
CECL adjustment |  | - |  | 1,500 |  | - |  | - |  | -
Loans charged-off |  | (316) |  | (169) |  | (1,509) |  | (243) |  | (8)
Recoveries of loans previously charged-off |  | 39 |  | 180 |  | 42 |  | 406 |  | 321
Net loans (charged-off) recovered |  | (277) |  | 11 |  | (1,467) |  | 163 |  | 313
Provision for credit losses |  | 1,525 |  | 1,025 |  | (4,200) |  | (6,000) |  | (1,900)
Balance, end of period | $ | 34,192 |  | 32,944 |  | 30,408 |  | 36,075 |  | 41,912
Allowance for credit losses to gross loans |  | 1.20% |  | 1.24% |  | 1.22% |  | 1.51% |  | 1.86%
Allowance for credit losses to nonaccrual loans |  | 1,166.70% |  | 726.88% |  | 625.22% |  | 259.95% |  | 619.47%
Net charge-offs to average loans QTD (annualized) |  | 0.04% |  | 0.00% |  | 0.24% |  | (0.03%) |  | (0.06%)

Total nonperforming assets decreased by $1.6 million to $2.9 million for the second quarter of 2022, representing 0.09% of total assets, compared to 0.15% in the first quarter of 2022. The allowance for credit losses as a percentage of nonaccrual loans was 1,166.7% on June 30, 2022, compared to 726.9% on March 31, 2022 and 619.5% on June 30, 2021. During the second quarter of 2022, our classified asset ratio improved to 7.29%. The improvement over the second quarter of 2021 was primarily the result of five, or $14.1 million in the aggregate, hotel loans we upgraded from substandard during the first quarter of 2022.

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 June 30, 2022, the allowance for credit losses was $34.2 million, or 1.20% of total loans, compared to $32.9 million, or 1.24% of total loans, at March 31, 2022, and $41.9 million, or 1.86% of total loans, at June 30, 2021. We had net charge-offs of $277 thousand, or 0.04% annualized, for the second quarter of 2022 compared to net recoveries of $11 thousand for the first quarter of 2022. Net recoveries were $313 thousand for the second quarter of 2021. There was a provision for credit losses of $1.5 million for the second quarter of 2022 compared to a provision of $1.0 million for the first quarter of 2022 and a reversal of $1.9 million for the second quarter of 2021.

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LOAN COMPOSITION - Unaudited |  |  |  |  |  |  |  |  |  |
|  | Quarter Ended
|  | June 30 |  | March 31 |  | December 31 |  | September 30 |  | June 30
(dollars in thousands) |  | 2022 |  | 2022 |  | 2021 |  | 2021 |  | 2021
Commercial |  |  |  |  |  |  |  |  |  |
Owner occupied RE | $ | 551,544 |  | 527,776 |  | 488,965 |  | 470,614 |  | 452,130
Non-owner occupied RE |  | 741,263 |  | 705,811 |  | 666,833 |  | 628,521 |  | 600,094
Construction |  | 84,612 |  | 75,015 |  | 64,425 |  | 87,892 |  | 60,786
Business |  | 389,790 |  | 352,932 |  | 333,049 |  | 307,969 |  | 307,933
Total commercial loans |  | 1,767,209 |  | 1,661,534 |  | 1,553,272 |  | 1,494,996 |  | 1,420,943
Consumer |  |  |  |  |  |  |  |  |  |
Real estate |  | 812,130 |  | 745,667 |  | 694,401 |  | 648,276 |  | 605,026
Home equity |  | 161,512 |  | 155,678 |  | 154,839 |  | 155,049 |  | 149,789
Construction |  | 76,878 |  | 72,627 |  | 59,846 |  | 57,419 |  | 48,077
Other |  | 27,476 |  | 25,169 |  | 27,519 |  | 33,307 |  | 30,300
Total consumer loans |  | 1,077,996 |  | 999,141 |  | 936,605 |  | 894,051 |  | 833,192
Total gross loans, net of deferred fees |  | 2,845,205 |  | 2,660,675 |  | 2,489,877 |  | 2,389,047 |  | 2,254,135
Less—allowance for credit losses |  | (34,192) |  | (32,944) |  | (30,408) |  | (36,075) |  | (41,912)
Total loans, net | $ | 2,811,013 |  | 2,627,731 |  | 2,459,469 |  | 2,352,972 |  | 2,212,223
DEPOSIT COMPOSITION - Unaudited |  |  |  |  |  |  |  |  |  |
|  | Quarter Ended
|  | June 30 |  | March 31 |  | December 31 |  | September 30 |  | June 30
(dollars in thousands) |  | 2022 |  | 2022 |  | 2021 |  | 2021 |  | 2021
Non-interest bearing | $ | 799,169 |  | 779,262 |  | 768,650 |  | 720,444 |  | 658,758
Interest bearing: |  |  |  |  |  |  |  |  |  |
NOW accounts |  | 364,189 |  | 416,322 |  | 401,788 |  | 331,167 |  | 316,744
Money market accounts |  | 1,320,329 |  | 1,238,866 |  | 1,201,099 |  | 1,188,666 |  | 1,136,315
Savings |  | 41,944 |  | 41,630 |  | 39,696 |  | 34,018 |  | 33,442
Time, less than $250,000 |  | 62,340 |  | 57,972 |  | 61,122 |  | 65,177 |  | 68,022
Time and out-of-market deposits, $250,000 and over |  | 282,187 |  | 174,122 |  | 91,471 |  | 93,546 |  | 97,611
Total deposits | $ | 2,870,158 |  | 2,708,174 |  | 2,563,826 |  | 2,433,018 |  | 2,310,892

Footnotes to tables:
(1) | Total revenue is the sum of net interest income and noninterest income.
(2) | The tax-equivalent adjustment to net interest income adjusts the yield for assets earning tax-exempt income to a comparable yield on a taxable basis.
(3) | Annualized for the respective three-month period.
(4) | Noninterest expense divided by the sum of net interest income and noninterest income.
(5) | Excludes mortgage loans held for sale.
(6) | Excludes out of market deposits and time deposits greater than $250,000.
(7) | June 30, 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 $3.3 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.

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

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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

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