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Section 1: 8-K (CURRENT REPORT)

 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported)    April 23, 2019    



Southern First Bancshares, Inc.
(Exact name of registrant as specified in its charter)

South Carolina
(State or other jurisdiction of incorporation)

         000-27719                   58-2459561         
  (Commission File Number)     (IRS Employer Identification No.)  
 
100 Verdae Boulevard, Suite 100, Greenville, SC   29607  
(Address of principal executive offices) (Zip Code)

(864) 679-9000
(Registrant's telephone number, including area code)
 
Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
     
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
     
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17CFR 240.14d-2(b))
     
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


ITEM 2.02. Results of Operations and Financial Condition

On April 23, 2019, Southern First Bancshares, Inc., holding company for Southern First Bank, issued a press release announcing its financial results for the period ended March 31, 2019. A copy of the press release is attached hereto as Exhibit 99.1.

ITEM 9.01. Financial Statements and Exhibits

(c) Exhibits

       Exhibit No.       Exhibit                                                                   
99.1 Earnings Press Release for period ended March 31, 2019.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

SOUTHERN FIRST BANCSHARES, INC.                             
   
   
By:   /s/ Michael D. Dowling
Name:        Michael D. Dowling
Title:        Chief Financial Officer                                      

April 23, 2019


EXHIBIT INDEX

Exhibit Number       Description                                                                        
99.1 Earnings Press Release for the period ended March 31, 2019.


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Section 2: EX-99.1 (EARNINGS PRESS RELEASE FOR THE PERIOD ENDED MARCH 31, 2019.)

Exhibit 99.1


Southern First Reports Results for First Quarter of 2019

Greenville, South Carolina, April 23, 2019 – Southern First Bancshares, Inc. (NASDAQ: SFST), holding company for Southern First Bank, today reported net income available to common shareholders of $6.0 million, or $0.78 per diluted share, for the first quarter of 2019. In comparison, net income available to common shareholders was $5.2 million, or $0.67 per diluted share, for the first quarter of 2018.

2019 First Quarter Highlights
Net income available to common shareholders increased 15% to $6.0 million for Q1 2019 compared to $5.2 million for Q1 2018
Total loans increased 19% to $1.73 billion at Q1 2019, compared to $1.46 billion at Q1 2018
Total deposits increased 16% to $1.76 billion at Q1 2019, compared to $1.52 billion at Q1 2018
Core deposits increased 14% to $1.53 billion at Q1 2019, compared to $1.34 billion at Q1 2018
Total revenue increased 14% to $18.8 million at Q1 2019, compared to $16.5 million at Q1 2018
Efficiency ratio was 56.6% for Q1 2019, compared to 55.9% for Q1 2018

“I am proud to report a great start to the new year with record earnings of $6 million for the first quarter and core deposit growth in excess of $90 million for the quarter,” stated Art Seaver, the Company’s Chief Executive Officer. “Our team is intent on serving our clients and providing a unique client experience, as evidenced by the growth in new client relationships and retail deposits as well as excellent production by our mortgage team.”

Quarter Ended
March 31 December 31 September 30 June 30 March 31
2019    2018    2018    2018    2018
Earnings ($ in thousands, except per share data):   
Net income available to common shareholders $ 6,009 5,783 5,782 5,510 5,214
Earnings per common share, diluted 0.78 0.75 0.75 0.71 0.67
Total revenue(1) 18,812 18,473 18,034 17,383 16,462
Net interest margin (tax-equivalent)(2) 3.52% 3.59% 3.60% 3.49% 3.63%
Return on average assets(3) 1.28% 1.24% 1.28% 1.26% 1.28%
Return on average equity(3) 13.74% 13.46% 13.98% 14.03% 13.88%
Efficiency ratio(4) 56.60% 56.25% 56.49% 57.41% 55.92%
Noninterest expense to average assets(3) 2.26% 2.23% 2.26% 2.28% 2.27%
Balance Sheet ($ in thousands):
Total Loans(5) $     1,733,964 1,677,332 1,620,201 1,533,447 1,459,382
Total deposits 1,758,235 1,648,136 1,589,483 1,567,982 1,520,523
Core deposits(6) 1,527,755 1,434,125 1,390,626 1,387,928 1,336,363
Total assets 2,014,426 1,900,614 1,857,707 1,787,784 1,729,299
Holding Company Capital Ratios(7):
Total risk-based capital ratio 12.43% 12.49% 12.50% 12.77% 13.01%
Tier 1 risk-based capital ratio 11.48% 11.53% 11.48% 11.70% 11.90%
Leverage ratio 10.17% 10.14% 10.15% 9.96% 10.27%
Common equity tier 1 ratio(8) 10.72% 10.73% 10.66% 10.83% 10.98%
Tangible common equity(9) 8.99% 9.15% 8.99% 9.00% 8.95%
Asset Quality Ratios:
Nonperforming assets as a percentage of total assets 0.30% 0.31% 0.33% 0.44% 0.43%
Net charge-offs as a percentage of average loans(5) (YTD annualized) 0.00% 0.11% 0.06% 0.04% 0.05%
Allowance for loan losses as a percentage of loans(5) 0.93% 0.94% 1.00% 1.05% 1.09%
Allowance for loan losses as a percentage of nonaccrual loans 265.35% 270.36% 270.54% 208.52% 217.92%
[Footnotes to table located on page 3]

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Operating Results
Net interest margin for the first quarter of 2019 was 3.52%, compared to 3.59% for the prior quarter and 3.63% for the first quarter of 2018. During the first quarter of 2019, our average interest-earning assets increased by $252.4 million, compared to the first quarter of 2018, while the yield on our interest-earning assets increased by 37 basis points. In comparison, our average interest-bearing liabilities increased by $184.5 million during the first quarter of 2019, compared to the first quarter of 2018, with the respective cost increasing by 64 basis points.

Noninterest income was $3.0 million and $2.4 million for the three months ended March 31, 2019 and 2018, respectively. The increase in noninterest income during the three-month period ended March 31, 2019 relates primarily to an increase in mortgage banking revenue during the first quarter of 2019 as well as an increase in ATM and debit card income. Mortgage banking revenue comprises a significant portion of our noninterest income and totaled $1.9 million and $1.3 million for the three months ended March 31, 2019 and 2018, respectively.

Noninterest expense was $10.6 million and $9.2 million for the three months ended March 31, 2019 and 2018, respectively. The increase in noninterest expense during the three-month period ended March 31, 2019 was driven primarily by increases in compensation and benefits, occupancy, data processing and related costs, and other noninterest expenses. Included in noninterest expense are mortgage banking expenses of $1.1 million and $964 thousand for the three months ended March 31, 2019 and 2018, respectively.

During the three months ended March 31, 2019, we recorded total credit costs of $301 thousand, primarily related to a $300 thousand provision for loan losses. In addition, we had net charge-offs for the first quarter of 2019 of $11 thousand. During the three months ended March 31, 2018, our total credit costs were $506 thousand, including a $500 thousand provision for loan losses and $6 thousand of expenses related to the sale and management of other real estate owned. Net loan charge-offs for the first quarter of 2018 were $171 thousand, or 0.05% of average loans, annualized. Our allowance for loan losses was $16.1 million, or 0.93% of loans, at March 31, 2019 which provides approximately 265% coverage of nonaccrual loans, compared to $15.9 million, or 1.09% of loans, and approximately 218% coverage of nonaccrual loans at March 31, 2018.

Nonperforming assets were $6.0 million, or 0.30% of total assets, as of March 31, 2019. Comparatively, nonperforming assets were $7.5 million, or 0.43% of total assets, at March 31, 2018. Of the $6.0 million in total nonperforming assets as of March 31, 2019, nonperforming loans represented the entire balance with no other real estate owned. Classified assets improved to 8% of tier 1 capital plus the allowance for loan losses at March 31, 2019, compared to 9% at March 31, 2018.

Gross loans were $1.7 billion, excluding mortgage loans held for sale, as of March 31, 2019, compared to $1.5 billion at March 31, 2018. Core deposits, which exclude out-of-market deposits and time deposits of $250,000 or more, increased to $1.5 billion at March 31, 2019 compared to $1.3 billion at March 31, 2018.

Shareholders’ equity totaled $181.2 million as of March 31, 2019, compared to $173.9 million at December 31, 2018, and $154.7 million at March 31, 2018. As of March 31, 2019, the Bank’s capital ratios continue to exceed the regulatory requirements for a “well capitalized” institution.

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FINANCIAL HIGHLIGHTS - Unaudited
 
Quarter Ended 1st Qtr Quarter Ended
March 31 2019-2018 December 31 September 30 June 30
(in thousands, except per share data) 2019 2018 % Change 2018 2018 2018
Earnings Summary
Interest income      $     21,612      17,178      25.8%      21,079      19,865      18,535
Interest expense 5,794 3,136 84.8% 5,082 4,364 3,923
Net interest income 15,818 14,042 12.60% 15,997 15,501 14,612
Provision for loan losses 300 500 (40.0)% 600 400 400
Noninterest income 2,994 2,420 23.7% 2,476 2,533 2,771
Noninterest expense 10,648 9,205 15.7% 10,391 10,188 9,979
Income before provision for income taxes 7,864 6,757 16.4% 7,482 7,446 7,004
Income tax expense 1,855 1,543 20.2% 1,699 1,664 1,494
Net income available to common shareholders $ 6,009 5,214 15.2% 5,783 5,782 5,510
Basic weighted average common shares 7,459 7,337 1.7% 7,428 7,400 7,371
Diluted weighted average common shares 7,742 7,727 0.2% 7,726 7,746 7,751
Earnings per common share – Basic $ 0.81 0.71 14.1% 0.78 0.78 0.75
Earnings per common share – Diluted 0.78 0.67 16.4% 0.75 0.75 0.71
 
Quarter Ended 1st Qtr Quarter Ended
March 31 2019-2018 December 31 September 30 June 30
(in thousands, except per share data) 2019 2018 % Change 2018 2018 2018
Balance Sheet Highlights
Assets $ 2,014,426 1,729,299 16.5% 1,900,614 1,857,707 1,787,784
Investment securities 76,609 61,562 24.4% 79,026 71,815 73,126
Mortgage loans held for sale 9,393 10,885 (13.7)% 9,241 9,298 8,075
Loans(5) 1,733,964 1,459,382 18.8% 1,677,332 1,620,201 1,533,447
Allowance for loan losses 16,051 15,852 1.3% 15,762 16,140 16,100
Other real estate owned - 242 (100.0)% - 117 117
Noninterest bearing deposits 359,753 297,892 20.8% 346,570 300,331 310,709
Interest bearing deposits 1,398,482 1,222,631 14.4% 1,301,566 1,289,152 1,257,273
Total deposits 1,758,235 1,520,523 15.6% 1,648,136 1,589,483 1,567,982
Other borrowings 25,000 28,600 (12.6)% 50,000 68,500 28,600
Junior subordinated debentures 13,403 13,403 - 13,403 13,403 13,403
Tangible common equity 181,186 154,739 17.1% 173,916 166,944 160,856
Total shareholders’ equity 181,186 154,739 17.1% 173,916 166,944 160,856
Common Stock
Book value per common share $ 24.14 20.96 15.2% 23.29 22.41 21.66
Stock price:
High 39.10 46.55 (16.0)% 39.00 47.00 48.35
Low 31.63 41.00 (22.9)% 30.26 39.20 44.20
Period end 33.87 44.50 (23.9)% 32.07 39.30 44.20
Common shares outstanding 7,506 7,382 1.7% 7,466 7,449 7,426
Other
Loans to deposits 98.62% 95.98% 2.8% 101.77% 101.93% 97.80%
Team members 227 211 7.6% 229 223 224
Average Balances ($ in thousands):
Loans(5) $ 1,715,570 1,444,343 18.8% 1,659,313 1,592,279 1,491,246
Deposits 1,687,867 1,431,967 17.9% 1,610,547 1,555,618 1,543,045
Assets 1,909,960 1,645,846 16.0% 1,850,229 1,786,656 1,757,155
Equity 177,388 152,374 16.4% 170,408 164,100 157,575
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, 2019 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 loans held for sale.

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ASSET QUALITY MEASURES - Unaudited
 
Quarter Ended
March 31 December 31 September 30 June 30 March 31
(dollars in thousands)      2019      2018      2018      2018      2018
Nonperforming Assets
Commercial
Owner occupied RE $     - - - - -
Non-owner occupied RE 403 210 1,680 1,689 1,525
Construction - - - - -
Commercial business 72 81 89 94 102
Consumer
Real estate 1,840 1,980 1,153 1,174 1,091
Home equity 1,249 1,006 850 1,598 1,730
Construction - - - - -
Other - 12 - - -
Nonaccruing troubled debt restructurings 2,485 2,541 2,194 3,166 2,826
Total nonaccrual loans 6,049 5,830 5,966 7,721 7,274
Other real estate owned - - 117 117 242
Total nonperforming assets $ 6,049 5,830 6,083 7,838 7,516
Nonperforming assets as a percentage of:
Total assets 0.30% 0.31% 0.33% 0.44% 0.43%
Total loans 0.35% 0.35% 0.38% 0.51% 0.52%
Accruing troubled debt restructurings $ 6,839 6,742 6,699 7,397 5,649
 
Quarter Ended
March 31 December 31 September 30 June 30 March 31
(dollars in thousands) 2019 2018 2018 2018 2018
Allowance for Loan Losses
Balance, beginning of period $ 15,762 16,140 16,100 15,852 15,523
Loans charged-off (41) (987) (556) (311) (293)
Recoveries of loans previously charged-off 30 9 196 159 122
Net loans charged-off (11) (978) (360) (152) (171)
Provision for loan losses 300 600 400 400 500
Balance, end of period $ 16,051 15,762 16,140 16,100 15,852
Allowance for loan losses to gross loans 0.93% 0.94% 1.00% 1.05% 1.09%
Allowance for loan losses to nonaccrual loans 265.35% 270.36% 270.54% 208.52% 217.92%
Net charge-offs to average loans QTD (annualized) 0.00% 0.23% 0.09% 0.04% 0.05%
 
LOAN COMPOSITION - Unaudited
 
Quarter Ended
March 31 December 31 September 30 June 30 March 31
(dollars in thousands) 2019 2018 2018 2018 2018
Commercial
Owner occupied RE $ 386,256 367,018 372,120 358,169 339,444
Non-owner occupied RE 423,953 404,296 399,166 355,309 339,231
Construction 80,561 84,411 68,415 73,655 56,210
Business 281,502 272,980 244,348 238,402 234,820
Total commercial loans 1,172,272 1,128,705 1,084,049 1,025,535 969,705
Consumer
Real estate 330,538 320,943 311,271 290,433 275,731
Home equity 167,146 165,937 163,654 156,630 155,507
Construction 39,838 37,925 38,015 38,400 35,017
Other 24,170 23,822 23,212 22,449 23,422
Total consumer loans 561,692 548,627 536,152 507,912 489,677
Total gross loans, net of deferred fees 1,733,964 1,677,332 1,620,201 1,533,447 1,459,382
Less—allowance for loan losses (16,051) (15,762) (16,140) (16,100) (15,852)
Total loans, net $ 1,717,913 1,661,570 1,604,061 1,517,347 1,443,530

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DEPOSIT COMPOSITION - Unaudited
 
Quarter Ended
March 31 December 31 September 30 June 30 March 31
(dollars in thousands) 2019 2018 2018 2018 2018
Non-interest bearing      $      359,754      346,570      300,331      310,709      297,892
Interest bearing:
NOW accounts 211,613 186,795 237,860 251,511 243,418
Money market accounts 791,490 730,765 680,824 659,353 642,333
Savings 15,451 15,486 16,041 15,913 15,952
Time, less than $100,000 61,331 63,073 62,744 60,632 56,778
Time and out-of-market deposits, $100,000 and over 318,596 305,447 291,683 269,864 264,150
Total deposits $ 1,758,235 1,648,136 1,589,483 1,567,982 1,520,523

NONINTEREST INCOME & EXPENSE - Unaudited
 
Quarter Ended 1st Qtr Quarter Ended
     March 31 2019-2018 December 31 September 30 June 30
(dollars in thousands)      2019      2018      % Change      2018      2018      2018
Noninterest income
Mortgage banking income $     1,857 1,328 39.8% 1,233 1,354 1,629
Service fees on deposit accounts 265 257 3.1% 271 257 256
ATM and debit card income 380 334 13.8% 404 381 371
Income from bank owned life insurance 216 220 (1.8)% 217 221 220
Other income 276 281 (1.8)% 351 320 295
Total noninterest income $ 2,994 2,420 23.7% 2,476 2,533 2,771
Noninterest income to average assets(3) 0.64% 0.60% 6.7% 0.53% 0.56% 0.63%
 
Noninterest expense
Compensation and benefits $ 6,783 5,843 16.1% 6,753 6,599 6,365
Occupancy 1,339 1,137 17.8% 1,286 1,350 1,276
Data processing and related costs 960 736 30.4% 902 841 824
Insurance 318 313 1.6% 298 376 297
Professional fees 439 476 (7.8)% 365 275 457
Marketing 260 209 24.4% 204 215 229
Other 549 491 11.8% 583 532 531
Total noninterest expenses $ 10,648 9,205 15.7% 10,391 10,188 9,979
Noninterest expense to average assets(3) 2.26% 2.27% (0.4)% 2.23% 2.26% 2.28%

AVERAGE YIELD/RATE - Unaudited
 
Quarter Ended
March 31 December 31 September 30 June 30 March 31
2019 2018 2018 2018 2018
Yield/Rate(10)
Interest-earning assets
Federal funds sold      2.30%      2.20%      1.95%      1.82%      1.62%
Investment securities, taxable 2.87% 2.70% 2.65% 2.49% 2.18%
Investment securities, nontaxable 3.98% 3.91% 3.89% 3.68% 4.19%
Loans(10) 4.94% 4.86% 4.77% 4.70% 4.65%
Total interest-earning assets 4.81% 4.73% 4.61% 4.42% 4.44%
Interest-bearing liabilities
NOW accounts 0.19% 0.15% 0.20% 0.17% 0.15%
Savings & money market 1.72% 1.52% 1.34% 1.25% 1.07%
Time deposits 2.17% 2.00% 1.79% 1.61% 1.38%
Total interest-bearing deposits 1.63% 1.41% 1.24% 1.14% 0.97%
FHLB advances and other borrowings 3.32% 3.21% 3.13% 3.35% 3.25%
Junior subordinated debentures 4.93% 4.53% 4.47% 4.79% 3.48%
Total interest-bearing liabilities 1.70% 1.49% 1.33% 1.23% 1.06%
Net interest spread 3.11% 3.24% 3.28% 3.19% 3.38%
Net interest income (tax equivalent) / margin 3.52% 3.59% 3.60% 3.49% 3.63%

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 third largest bank headquartered in South Carolina. Southern First Bancshares has been providing financial services since 1999 and now operates in 13 locations in the Greenville, Columbia, and Charleston markets of South Carolina as well as the Triangle and Triad regions of North Carolina and Atlanta, Georgia. Southern First Bancshares has assets of approximately $2.0 billion and its common stock is traded in the NASDAQ Global Market under the symbol “SFST.” More information can be found at www.southernfirst.com.

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FORWARD-LOOKING STATEMENTS

Certain statements in this news release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to future plans and expectations, and are thus prospective. Such forward-looking statements are identified by words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “targets,” and “projects,” as well as similar expressions. Such statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, we can give no assurance that the results contemplated in the forward-looking statements will be realized. The inclusion of this forward-looking information should not be construed as a representation by our company or any person that the future events, plans, or expectations contemplated by our company will be achieved.

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 we conduct operations may be different than expected resulting in, among other things, a deterioration in the credit quality or a reduced demand for credit, including the resultant effect on the company’s loan portfolio and allowance for loan losses; (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 the United States legal and regulatory framework; and (5) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) could have a negative impact on the company. 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.
 

FINANCIAL CONTACT: MIKE DOWLING 864-679-9070

MEDIA CONTACT: ART SEAVER 864-679-9010

WEB SITE: www.southernfirst.com

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