Business Overview and History
Southern First Bancshares Inc (SFST) is a South Carolina-based bank holding company that has been serving the financial needs of individuals and businesses in the Southeastern United States for over three decades. With a unwavering commitment to client-focused banking, the company has steadily built a reputation for delivering exceptional service and tailored financial solutions.
Southern First Bancshares was founded in 1999 as a bank holding company for Southern First Bank, with its headquarters established in Greenville, South Carolina. The company primarily operates in the Upstate, Midlands, and Lowcountry regions of South Carolina, as well as the Triangle, Triad and Charlotte regions of North Carolina and the Atlanta, Georgia area. In its early years, Southern First focused on building a strong presence in its core Upstate South Carolina market through organic growth and strategic acquisitions.
During the financial crisis of 2008-2009, Southern First weathered the storm by maintaining a conservative underwriting approach and diversifying its loan portfolio. This strategy allowed the company to continue expanding its branch network and client base throughout the 2010s. A key milestone for Southern First was its expansion into the North Carolina and Georgia markets in the early 2020s, which strengthened its geographic footprint and allowed it to capitalize on new growth opportunities.
Throughout its history, Southern First has remained committed to its relationship-focused business model and client-centric culture. The company has consistently delivered strong financial performance, with steady growth in assets, deposits, and net income. Southern First has also been recognized for its community involvement and commitment to exceptional customer service, earning numerous awards and accolades over the years.
Today, Southern First Bancshares operates through its wholly-owned subsidiary, Southern First Bank, which boasts a network of 45 branches and over 500 dedicated employees. The company’s growth has been fueled by its unique approach to banking, which emphasizes personalized relationships and a deep understanding of its clients’ financial needs. This philosophy, embodied in the “ClientFIRST” culture, has enabled Southern First Bancshares to cultivate a loyal customer base and achieve consistent financial performance.
Southern First Bank is primarily engaged in the business of accepting demand deposits and savings deposits insured by the FDIC, and providing commercial, consumer, and mortgage loans to the general public. The banking industry has seen moderate growth in recent years, with a compound annual growth rate (CAGR) of approximately 4-5% for assets, loans, and deposits industry-wide. Southern First Bancshares has generally kept pace with these industry trends.
Financial Highlights and Ratios
As of December 31, 2023, Southern First Bancshares reported total assets of $4.06 billion, a 10.0% increase from the previous year’s figure of $3.69 billion. The company’s loan portfolio stood at $3.60 billion, with a loan-to-deposit ratio of 106.60%, indicating a well-balanced funding structure.
The company’s net interest margin, a key metric for banks, was 1.92% in the fourth quarter of 2023, down from 2.88% in the same period of the prior year. This decline was primarily due to the rising interest rate environment, which put pressure on the company’s cost of funds. However, Southern First Bancshares has demonstrated its ability to adapt to changing market conditions and maintain profitability.
In terms of asset quality, the company’s nonperforming assets to total assets ratio was 0.10% as of December 31, 2023, a slight increase from 0.08% in the previous year. This ratio, which measures the percentage of non-performing loans and other real estate owned, remains well below industry averages, reflecting the company’s prudent underwriting practices and effective credit risk management.
For the most recent quarter, Southern First Bancshares reported revenue of $23.77 million, representing a 12.00% increase year-over-year. Net income for the quarter was $4.38 million, up 6.80% compared to the same period in the previous year. The increase in revenue and net income was primarily driven by growth in loans and deposits as well as higher net interest margin.
The company’s loan portfolio is primarily composed of real estate loans, which represented 84.5% of total loans as of December 31, 2023. The commercial loan segment, including owner-occupied commercial real estate, non-owner occupied commercial real estate, construction, and business loans, made up 61.8% of the total loan portfolio. Within this segment, the largest concentrations were in non-owner occupied commercial real estate at 26.2% and owner-occupied commercial real estate at 17.5% of the total loan portfolio.
The consumer loan segment, which includes real estate, home equity, construction, and other consumer loans, accounted for 38.2% of the total loan portfolio as of December 31, 2023. The consumer real estate portfolio, which includes 1-4 family residential mortgages, represented the largest portion of the consumer segment at 30.0% of the total loan portfolio.
Profitability and Efficiency
Southern First Bancshares reported net income of $13.43 million for the full year 2023, a decrease from the $29.11 million recorded in 2022. The company’s return on average assets (ROAA) and return on average equity (ROAE) stood at 0.34% and 4.44%, respectively, in 2023, demonstrating its ability to generate consistent earnings.
The company’s efficiency ratio, which measures the relationship between non-interest expenses and total revenue, was 72.50% in 2023, slightly higher than the 70.90% recorded in the previous year. This metric, which the company closely monitors, indicates that Southern First Bancshares continues to maintain a well-controlled cost structure, allowing it to deliver value to its shareholders.
For the three and nine months ended September 30, 2024, the company reported net interest income of $20.6 million and $58.8 million, respectively, representing a 6.4% increase and a 0.3% increase compared to the same periods in the prior year. The net interest margin, on a tax-equivalent basis, was 2.08% and 2.00% for the three and nine months ended September 30, 2024, respectively.
Noninterest income totaled $3.2 million and $9.4 million for the three and nine months ended September 30, 2024, up 15.5% and 24.4% year-over-year, respectively. The increase was primarily driven by growth in mortgage banking income, service fees on deposit accounts, and ATM and debit card income.
Noninterest expenses were $18.0 million and $54.8 million for the three and nine months ended September 30, 2024, up 4.3% and 5.8% year-over-year, respectively. The higher expenses were mainly attributed to increases in compensation and benefits, outside service and data processing costs, and occupancy expenses.
Liquidity and Capital Strength
Southern First Bancshares maintains a strong liquidity position, with cash and cash equivalents totaling $156.17 million as of December 31, 2023. As of September 30, 2024, the company had $260.6 million in cash and cash equivalents. The company also has a $15 million unsecured holding company line of credit, which was undrawn as of the same date.
The company’s regulatory capital ratios remain well above the minimum requirements, with a total risk-based capital ratio of 12.50% and a Tier 1 leverage ratio of 8.70% as of September 30, 2024, positioning the bank as well-capitalized. These ratios exceed the regulatory requirements to be considered “well capitalized.”
Additional liquidity metrics include a debt-to-equity ratio of 0.81, a current ratio of 1.08, and a quick ratio of 1.04, further underscoring Southern First Bancshares’ financial stability and resilience.
The company’s allowance for credit losses totaled $40.2 million as of September 30, 2024, representing 1.11% of total loans, down from 1.13% as of December 31, 2023. Nonperforming assets increased to $11.6 million, or 0.28% of total assets, as of September 30, 2024, compared to $4.0 million, or 0.10% of total assets, as of December 31, 2023.
Growth Strategies and Expansion
In recent years, Southern First Bancshares has strategically expanded its footprint, opening new branches and entering new markets to capture a larger share of the Southeastern banking landscape. The company’s most recent expansion efforts have focused on the Charlotte, North Carolina, Greensboro, North Carolina, and Atlanta, Georgia metropolitan areas, where it has identified significant growth opportunities.
To support its expansion, Southern First Bancshares has invested in technology and digital banking capabilities, enhancing its ability to serve clients seamlessly across multiple channels. The company’s focus on relationship banking and personalized service has been a key driver of its success, helping it build a loyal customer base and maintain strong client retention.
Southern First Bancshares operates primarily in the Southeastern United States, with a focus on South Carolina, North Carolina, and Georgia. The company does not have any significant geographic market concentrations or exposures outside of this regional footprint, which aligns with its strategy of maintaining a strong presence in its core markets while gradually expanding into new, high-potential areas.
Risks and Challenges
As with any financial institution, Southern First Bancshares faces a variety of risks, including interest rate risk, credit risk, and market risk. The company’s performance is closely tied to the economic conditions in its primary markets, and any economic downturn or changes in consumer and business confidence could impact its loan portfolio and profitability.
Additionally, the banking industry is subject to extensive regulatory oversight, and changes in banking regulations could have a significant impact on Southern First Bancshares’ operations and compliance requirements. The company must also navigate the ongoing technological transformation in the financial services sector, ensuring that its digital offerings and infrastructure remain competitive and secure.
Conclusion
Southern First Bancshares has a proven track record of delivering consistent financial performance and maintaining a strong market position in the Southeastern United States. The company’s unwavering commitment to client-focused banking, coupled with its prudent risk management and strategic growth initiatives, have positioned it well to navigate the evolving financial landscape.
As Southern First Bancshares continues to expand its footprint and enhance its service offerings, investors will closely monitor the company’s ability to maintain its competitive edge, manage risks, and capitalize on emerging opportunities in the banking industry. With its solid financial foundation, experienced management team, and strong capital position, Southern First Bancshares appears poised to deliver long-term value for its shareholders while continuing to serve the financial needs of its growing client base in the Southeastern United States.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.