PR Newswire
GREENVILLE, S.C., Oct. 19, 2023
GREENVILLE, S.C., Oct. 19, 2023 /PRNewswire/ -- Southern First Bancshares, Inc. (NASDAQ: SFST), holding company for Southern First Bank, today announced its financial results for the three-month period ended September 30, 2023.
"Our team generated improved performance over the prior quarter as evidenced by the growth in book value, general margin stability, capital accretion, and outstanding credit quality," stated Art Seaver, the Company's Chief Executive Officer. "While the monetary policy of the Federal Reserve has increased interest rates dramatically and resulted in a significant decline in loan demand, we are proud of our efforts to grow client relationships and support the needs of our clients and communities."
2023 Third Quarter Highlights
- Net income was $4.1 million and diluted earnings per common share were $0.51 for Q3 2023
- Core deposits remained at $2.9 billion at Q3 2023, compared to Q2 2023 and increased 5% from Q3 2022
- Total loans increased 2% (annualized) to $3.6 billion at Q3 2023, compared to Q2 2023 and increased 17%, from $3.0 billion at Q3 2022
- Book value per common share increased to $37.57 at Q3 2023, or 4%, over Q3 2022
- Credit quality remains strong with nonperforming assets to total assets of 0.11% and past due loans to total loans of 0.13% at Q3 2023
- Net interest margin was 1.97% for Q3 2023, compared to 2.05% for Q2 2023 and 3.19% for Q3 2022
- Improvement in common equity tier 1 and risk-based capital ratios during Q3 2023, compared to Q2 2023
Quarter Ended | ||||||
September 30 | June 30 | March 31 | December 31 | September 30 | ||
2023 | 2023 | 2023 | 2022 | 2022 | ||
Earnings ($ in thousands, except per share data): | ||||||
Net income available to common shareholders | $ | 4,098 | 2,458 | 2,703 | 5,492 | 8,413 |
Earnings per common share, diluted | 0.51 | 0.31 | 0.33 | 0.68 | 1.04 | |
Total revenue(1) | 22,094 | 21,561 | 22,468 | 25,826 | 28,134 | |
Net interest margin (tax-equivalent)(2) | 1.97 % | 2.05 % | 2.36 % | 2.88 % | 3.19 % | |
Return on average assets(3) | 0.40 % | 0.26 % | 0.30 % | 0.63 % | 1.00 % | |
Return on average equity(3) | 5.35 % | 3.27 % | 3.67 % | 7.44 % | 11.57 % | |
Efficiency ratio(4) | 78.31 % | 80.67 % | 76.12 % | 63.55 % | 57.03 % | |
Noninterest expense to average assets (3) | 1.69 % | 1.82 % | 1.89 % | 1.87 % | 1.92 % | |
Balance Sheet ($ in thousands): | ||||||
Total loans(5) | $ | 3,553,632 | 3,537,616 | 3,417,945 | 3,273,363 | 3,030,027 |
Total deposits | 3,347,771 | 3,433,018 | 3,426,774 | 3,133,864 | 3,001,452 | |
Core deposits(6) | 2,866,574 | 2,880,507 | 2,946,567 | 2,759,112 | 2,723,592 | |
Total assets | 4,019,957 | 4,002,107 | 3,938,140 | 3,691,981 | 3,439,669 | |
Book value per common share | 37.57 | 37.42 | 37.16 | 36.76 | 35.99 | |
Loans to deposits | 106.15 % | 103.05 % | 99.74 % | 104.45 % | 100.95 % | |
Holding Company Capital Ratios(7): | ||||||
Total risk-based capital ratio | 12.56 % | 12.40 % | 12.67 % | 12.91 % | 13.58 % | |
Tier 1 risk-based capital ratio | 10.58 % | 10.42 % | 10.66 % | 10.88 % | 11.49 % | |
Leverage ratio | 8.17 % | 8.48 % | 8.80 % | 9.17 % | 9.44 % | |
Common equity tier 1 ratio(8) | 10.17 % | 10.00 % | 10.23 % | 10.44 % | 11.02 % | |
Tangible common equity(9) | 7.56 % | 7.53 % | 7.60 % | 7.98 % | 8.37 % | |
Asset Quality Ratios: | ||||||
Nonperforming assets/ total assets | 0.11 % | 0.08 % | 0.12 % | 0.07 % | 0.08 % | |
Classified assets/tier one capital plus allowance for credit losses | 4.72 % | 4.68 % | 5.10 % | 4.71 % | 5.24 % | |
Loans 30 days or more past due/ loans(5) | 0.13 % | 0.07 % | 0.11 % | 0.11 % | 0.07 % | |
Net charge-offs (recoveries)/average loans(5) (YTD annualized) | 0.01 % | 0.03 % | 0.01 % | (0.05 %) | (0.06 %) | |
Allowance for credit losses/loans(5) | 1.16 % | 1.16 % | 1.18 % | 1.18 % | 1.20 % | |
Allowance for credit losses/nonaccrual loans | 953.25 % | 1,363.11 % | 854.33 % | 1,470.74 % | 1,388.87 % | |
[Footnotes to table located on page 6] |
INCOME STATEMENTS – Unaudited | ||||||
Quarter Ended | ||||||
September 30 | June 30 | March 31 | December 31 | September 30 | ||
(in thousands, except per share data) | 2023 | 2023 | 2023 | 2022 | 2022 | |
Interest income | ||||||
Loans | $ | 43,542 | 41,089 | 36,748 | 33,939 | 29,752 |
Investment securities | 1,470 | 706 | 613 | 562 | 506 | |
Federal funds sold | 2,435 | 891 | 969 | 525 | 676 | |
Total interest income | 47,447 | 42,686 | 38,330 | 35,026 | 30,934 | |
Interest expense | ||||||
Deposits | 25,130 | 21,937 | 17,179 | 10,329 | 5,021 | |
Borrowings | 2,972 | 1,924 | 727 | 578 | 459 | |
Total interest expense | 28,102 | 23,861 | 17,906 | 10,907 | 5,480 | |
Net interest income | 19,345 | 18,825 | 20,424 | 24,119 | 25,454 | |
Provision for (reversal of) credit losses | (500) | 910 | 1,825 | 2,325 | 950 | |
Net interest income after provision for credit losses | 19,845 | 17,915 | 18,599 | 21,794 | 24,504 | |
Noninterest income | ||||||
Mortgage banking income | 1,208 | 1,337 | 622 | 291 | 1,230 | |
Service fees on deposit accounts | 356 | 331 | 325 | 316 | 318 | |
ATM and debit card income | 588 | 536 | 555 | 558 | 542 | |
Income from bank owned life insurance | 349 | 338 | 332 | 344 | 315 | |
Other income | 248 | 194 | 210 | 198 | 275 | |
Total noninterest income | 2,749 | 2,736 | 2,044 | 1,707 | 2,680 | |
Noninterest expense | ||||||
Compensation and benefits | 10,231 | 10,287 | 10,356 | 9,576 | 9,843 | |
Occupancy | 2,562 | 2,518 | 2,457 | 2,666 | 2,442 | |
Outside service and data processing costs | 1,744 | 1,705 | 1,629 | 1,521 | 1,529 | |
Insurance | 1,243 | 897 | 689 | 551 | 507 | |
Professional fees | 504 | 751 | 660 | 788 | 555 | |
Marketing | 293 | 335 | 366 | 282 | 338 | |
Other | 725 | 900 | 947 | 1,029 | 832 | |
Total noninterest expenses | 17,302 | 17,393 | 17,104 | 16,413 | 16,046 | |
Income before provision for income taxes | 5,293 | 3,258 | 3,539 | 7,088 | 11,138 | |
Income tax expense | 1,195 | 800 | 836 | 1,596 | 2,725 | |
Net income available to common shareholders | $ | 4,098 | 2,458 | 2,703 | 5,492 | 8,413 |
Earnings per common share – Basic | $ | 0.51 | 0.31 | 0.34 | 0.69 | 1.06 |
Earnings per common share – Diluted | 0.51 | 0.31 | 0.33 | 0.68 | 1.04 | |
Basic weighted average common shares | 8,053 | 8,051 | 8,026 | 7,971 | 7,972 | |
Diluted weighted average common shares | 8,072 | 8,069 | 8,092 | 8,071 | 8,065 | |
[Footnotes to table located on page 6] |
Net income for the third quarter of 2023 was $4.1 million, or $0.51 per diluted share, a $1.6 million increase from the second quarter of 2023 and a $4.3 million decrease from the third quarter of 2022. Net interest income increased $520 thousand for the third quarter of 2023, compared to the second quarter of 2023, and decreased $6.1 million, compared to the third quarter of 2022. The increase in net interest income from the prior quarter was primarily driven by an increase in interest income on loans and federal funds sold. The decrease in net interest income from the prior year was driven primarily by an increase in interest expense on our deposit accounts related to the Federal Reserve's 525-basis point interest rate hikes during the past 19 months.
There was a reversal of the provision for credit losses of $500 thousand for the third quarter of 2023, compared to a provision of $910 thousand for the second quarter of 2023 and a provision of $950 thousand for the third quarter of 2022. The provision reversal during the third quarter of 2023 includes a $100 thousand reversal of the provision for credit losses and a $400 thousand reversal of the reserve for unfunded commitments. The reversal of the provision for credit losses was driven by lower expected loss rates, while the reversal of the reserve for unfunded commitments was driven by a decrease in the balance of unfunded commitments at September 30, 2023, compared to the previous quarter and year.
Noninterest income was $2.7 million for each of the third quarter of 2023, the second quarter of 2023, and the third quarter of 2022. Mortgage banking income continues to be the largest component of our noninterest income at $1.2 million for the third quarter of 2023, $1.3 million for the second quarter of 2023, and $1.2 million for the third quarter of 2022.
Noninterest expense for the third quarter of 2023 was $17.3 million, a $91 thousand decrease from the second quarter of 2023, and a $1.3 million increase from the third quarter of 2022. The decrease in noninterest expense from the previous quarter was driven by decreases in professional fees and other noninterest expenses, while the increase from the prior year related to increases in compensation and benefits, outside service and data processing costs, and insurance expenses. Compensation and benefits expenses increased from the previous year, driven by annual salary increases and the hiring of new team members. Outside service and data processing costs increased due to an increase in software licensing and maintenance costs, while insurance costs increased due to higher FDIC insurance premiums.
Our effective tax rate was 22.6% for the third quarter of 2023, 24.6% for the second quarter of 2023, and 24.5% for the third quarter of 2022. The lower tax rate in the third quarter of 2023 as compared to the previous quarters of 2023 relates primarily to the effect of equity compensation transactions and return to provision differences on our tax rate during the quarter.
NET INTEREST INCOME AND MARGIN - Unaudited | |||||||||
For the Three Months Ended | |||||||||
September 30, 2023 | June 30, 2023 | September 30,2022 | |||||||
(dollars in thousands) | Average | Income/ | Yield/ | Average | Income/ | Yield/ | Average | Income/ | Yield/ |
Interest-earning assets | |||||||||
Federal funds sold and interest-bearing deposits | $ 181,784 | $ 2,435 | 5.31 % | $ 71,004 | $ 891 | 5.03 % | $ 122,071 | $ 676 | 2.20 % |
Investment securities, taxable | 148,239 | 1,429 | 3.82 % | 93,922 | 623 | 2.66 % | 91,462 | 449 | 1.95 % |
Investment securities, nontaxable(2) | 7,799 | 55 | 2.77 % | 10,200 | 108 | 4.24 % | 10,160 | 74 | 2.89 % |
Loans(10) | 3,554,478 | 43,542 | 4.86 % | 3,511,225 | 41,089 | 4.69 % | 2,941,350 | 29,752 | 4.01 % |
Total interest-earning assets | 3,892,300 | 47,461 | 4.84 % | 3,686,351 | 42,711 | 4.65 % | 3,165,043 | 30,951 | 3.88 % |
Noninterest-earning assets | 159,103 | 155,847 | 159,233 | ||||||
Total assets | $4,051,403 | $3,842,198 | $3,324,726 | ||||||
Interest-bearing liabilities | |||||||||
NOW accounts | $ 297,028 | 620 | 0.83 % | $ 297,234 | 537 | 0.72 % | $ 361,500 | 178 | 0.20 % |
Savings & money market | 1,748,638 | 16,908 | 3.84 % | 1,727,009 | 15,298 | 3.55 % | 1,417,181 | 3,663 | 1.03 % |
Time deposits | 648,949 | 7,602 | 4.65 % | 573,095 | 6,102 | 4.27 % | 361,325 | 1,180 | 1.30 % |
Total interest-bearing deposits | 2,694,615 | 25,130 | 3.70 % | 2,597,338 | 21,937 | 3.39 % | 2,140,006 | 5,021 | 0.93 % |
FHLB advances and other borrowings |