EX-99.1 2 ex99-1_012009.htm Exhibit 99.1

 

Exhibit 99.1

 

FINANCIAL CONTACT: JIM AUSTIN 864-679-9070

 

MEDIA CONTACT: EDDIE TERRELL 864-679-9016

 

WEB SITE: www.southernfirst.com

 

 

 

Southern First Reports Results for 2008

 

Greenville, SC, January 20, 2009 – Southern First Bancshares, Inc. (NASDAQ: SFST), holding company for Southern First Bank, NA (also doing business as Greenville First Bank), today announced that net income for the fourth quarter 2008 was $370 thousand compared to $770 thousand for the fourth quarter of 2007.  The lower net income in the 2008 period is attributable to the increase in the provision for loan losses and declining net interest margin.

 

Net income for the year ended December 31, 2008 was $1.9 million and operating income was $3.1 million.  Net income for the year ended December 31, 2007 was $3.4 million and operating income was $3.2 million.  Net income decreased $1.6 million from the 2007 period while operating income decreased only $116 thousand compared to the same period in 2007.  Included in 2008 was a non-cash impairment charge of $1.9 million on our Fannie Mae (FNMA) preferred stock.  Net of taxes, the impairment charge was $1.3 million. Net income for 2007 includes an after-tax gain of $210 thousand related to the sale of the bank’s former main office building which occurred during the first six months of 2007.

 

“The current operating environment is challenging with continuing deterioration in our economy and the historically low interest rates resulting from actions by our Federal Reserve System,” stated Art Seaver, the company’s CEO.  Seaver added, “We are disappointed in our company’s earnings during 2008.  Shrinking margins, higher loan loss provisions, and the loss on our investment in Fannie Mae preferred stock resulted in performance that we believe is not typical of Southern First Bank. We are responding to this environment by preserving capital, aggressively managing the risk in our loan portfolio, and increasing our focus on retail deposits.”

 

During 2008, the company recorded a $3.2 million non-cash expense related to the provision for loan losses.  The 2008 provision was $1.1 million higher than the $2.1 million provision in 2007.  During the fourth quarter of 2008, the bank recorded a provision for loan losses of $1.2 million compared to a $760 thousand provision in the fourth quarter of 2007.  The company’s allowance for loan losses was 1.24% at December 31, 2008 compared to 1.13% at December 31, 2007.  Annualized charge-offs for 2008 were 0.35% of average loans compared to 0.27% in 2007.  “During the fourth quarter, we increased our loan loss reserve by $1.2 million and recognized additional losses in our loan portfolio,” stated Seaver. “While the Greenville and Columbia real estate markets appear to have remained relatively stable, we believe it is prudent to increase our loan loss reserve in order to strengthen our balance sheet.”

 

Non-performing assets totaled $9.8 million at December 31, 2008, representing 1.42% of total assets compared to 0.78% at the end of 2007.  Non-performing assets at the end of 2008 consisted of $7.7 million of non-performing loans and $2.1 million of other real estate owned.

 

Total assets were $693.0 million as of December 31, 2008, compared to $628.1 million as of December 30, 2007, a 10.3% increase for the year 2008.  Loans increased 11.2% during 2008 to $559.6 million compared to $503.1 million at the end of 2007.  Mr. Seaver added, “Although loan demand remains strong, we have chosen to limit our level of growth in loans during the last half of 2008.  Asset growth is not a primary strategy of our company in the current operating environment.  Our present strategy is to preserve capital, manage portfolio risk, improve our margins, and continue growing retail deposits.”

 

Deposits grew to $469.5 million at December 31, 2008, compared to $412.8 million at December 31, 2007.  “The increase reflects our company’s emphasis on deposits,” stated Seaver.  The company opened two new retail offices in July of 2008 and now operates four offices in the Greenville market and two offices in the Columbia market.  The company has also announced the construction of a new regional office in the Columbia market scheduled to open in the third quarter of 2009.

 

The Company’s book value per share was $13.07 as of December 31, 2008, while the closing stock price on that day was $9.20 per share.

 

 

 

 

 

SUMMARY CONSOLIDATED FINANCIAL DATA

 

 Our summary consolidated financial data as of and for the three months and year ended December 31, 2008 and three months ended December 31, 2007 have not been audited but, in the opinion of our management, contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly our financial position and results of operations for such periods in accordance with generally accepted accounting principles. 

 

 

 

 

Three Months

 

Year

 

 

Ended December 31,

 

Ended December 31,

 

 

2008

 

2007

 

2008

 

2007

 

 

(Dollars and  shares in thousands, except per share data)

 

 

 

 

 

 

 

 

 

Summary Results of Operations Data:

 

 

 

 

 

 

 

 

Interest income

 

 $

9,508 

 

 $

10,536 

 

 $

40,212 

 

 $

39,520 

Interest expense

 

5,163 

 

6,154 

 

21,853 

 

22,781 

   Net interest income

 

4,345 

 

4,382 

 

18,359 

 

16,739 

Provision for loan losses

 

1,211 

 

760 

 

3,161 

 

2,050 

 

 

 

 

 

 

 

 

 

         Net interest income after  provision for loan losses

 

3,134 

 

3,622 

 

15,198 

 

14,689 

Noninterest income

 

342 

 

273 

 

(399)

 

1,262 

Noninterest expense

 

3,110 

 

2,762 

 

12,321 

 

10,875 

    Income before taxes

 

366 

 

1,133 

 

2,478 

 

5,076 

Income tax expense (benefit)

 

(4)

 

363 

 

626 

 

1,641 

    Net income

 

 $

370 

 

 $

770 

 

 $

1,852 

 

 $

3,435  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of GAAP to Non-GAAP Measures

 

 

 

 

 

 

 

 

    Net income, as reported (GAAP)

 

 $

370 

 

 $

770 

 

 $

1,852 

 

 $

3,435 

  Non-operating items:

 

 

 

 

 

 

 

 

    Impairment charge on FNMA stock, net of income tax

 

59 

 

-  

 

1,257 

 

-

        Gain on property held for sale, net of income tax

 

-  

 

-  

 

-  

 

(210)

    Operating earnings (net income, excluding non-

 

 

 

 

 

 

 

 

   operating items)

 

 $

429 

 

 $

770 

 

 $

3,109 

 

 $

3,225 

 

 

 

 

 

 

 

 

 

Per Share Data:

 

 

 

 

 

 

 

 

Net income, basic

 

 $

0.12 

 

 $

0.26 

 

 $

0.62 

 

 $

1.17 

Net income, diluted

 

 $

0.12 

 

 $

0.24 

 

 $

0.58 

 

 $

1.06 

Book value

 

 $

13.07 

 

 $

12.99 

 

 $

13.07 

 

 $

12.99 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

3,037 

 

2,946 

 

2,998 

 

2,942 

Diluted

 

3,144 

 

3,212 

 

3,167 

 

3,234 

 

 

 

 

 

 

 

 

 

Performance Ratios:

 

 

 

 

 

 

 

 

Return on average assets (1)

 

0.21 %

 

0.50 %

 

0.27 %

 

0.60 %

Return on average equity (1)

 

3.77 %

 

8.00 %

 

4.70 %

 

9.40 %

Net interest margin (1)

 

2.61 %

 

2.92 %

 

2.80 %

 

3.05 %

Efficiency ratio (2)

 

66.34 %

 

59.35 %

 

68.60 %

 

60.41 %

 

 

 

 

 

 

 

 

 

Growth Ratios and Other Data:

 

 

 

 

 

 

 

 

Percentage change in net income from the same

 

 

 

 

 

 

 

 

        period of the previous year

 

(51.9)%

 

 

 

(46.1)%

 

 

Percentage change in diluted net income per

 

 

 

 

 

 

 

 

        Share from the same period of the previous year

 

(50.0)%

 

 

 

(45.3)%

 

 

 ______________________________

(1)  Annualized for the three month period.

(2)  Computed by dividing noninterest expense by the sum of net interest income, excluding the gain on sale and impairment charge on securities and real estate activity, and noninterest income.

 

 

 

 

 

 

SUMMARY OF CONSOLIDATED FINANCIAL DATA, CONTINUED

 

 

At December 31,

 

2008

 

2007

 

(Dollars in thousands)

 

 

 

 

Summary Balance Sheet Data:

 

 

 

Assets

 $

692,979 

 

 $

628,129 

Investment securities

85,412 

 

87,507 

Loans (3)

566,607 

 

508,850 

Allowance for loan losses

7,006 

 

5,751 

Deposits

469,538 

 

412,821 

Federal Home Loan Bank Advances and related debt

164,675 

 

158,520 

Junior subordinate debentures

13,403 

 

13,403 

Shareholders’ equity

39,786 

 

38,278 

 

 

 

 

Asset Quality Ratios:

 

 

 

Nonperforming assets, past due and restructured

 

 

 

    loans to total loans (3)

1.73 %

 

0.92 %

Nonperforming assets, past due and restructured

 

 

 

    loans to total assets

1.42 %

 

0.75 %

Net charge-offs year to date to average total loans (3)

0.35 %

 

0.27 %

Allowance for loan losses to nonperforming loans

91.00 %

 

129.65 %

Allowance for loan losses to total loans (3)

1.24 %

 

1.13 %

 

 

 

 

Capital Ratios:

 

 

 

Average equity to average assets

5.69 %

 

6.35 %

Leverage ratio

7.74 %

 

8.31 %

Tier 1 risk-based capital ratio

9.30 %

 

10.02 %

Total risk-based capital ratio

10.44 %

 

11.15 %

 

 

 

 

Growth Ratios and Other Data:

 

 

 

Percentage change in assets

10.32 %

 

 

Percentage change in loans (3)

11.35 %

 

 

Percentage change in deposits

13.74 %

 

 

Percentage change in equity

3.94 %

 

 

Loans to deposit ratio (3)

120.67 %

 

 

                                                           

 

                                                                                                                      

(3)   Includes nonperforming loans.

 

 

 


 

 

 

 

EXPLANATION OF USE OF CERTAIN NON-GAAP FINANCIAL MEASURES

 AND FORWARD-LOOKING STATEMENTS

 

This press release contains financial information determined by methods other than in accordance with Generally Accepted Accounting Principles (“GAAP”).  The attached financial highlights provide reconciliations between GAAP net income and operating earnings, which is a non-GAAP measure.  The company's management believes that such non-GAAP measures are useful because they enhance the ability of investors and management to evaluate and compare the company's operating results from period to period in a meaningful manner.  Non-GAAP measures should not be considered as an alternative to any measure of performance as promulgated under GAAP, and investors should consider the company's impairment charge on the FNMA preferred stock in the third and fourth quarters of 2008 and the gain on property held for sale in the first six months of 2007 when assessing the performance of the company.   Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company's results as reported under GAAP. 

 

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 projected growth, or loan quality, and are thus prospective.  Such forward-looking statements are subject to risks, uncertainties, and other factors, such as a downturn in the economy, changes in the credit markets, greater than expected non-interest expenses, excessive loan losses and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.  For a more detailed description of factors that could cause or contribute to such differences, please see our filings with the Securities and Exchange Commission.

 

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 future events, plans, or expectations contemplated by our company will be achieved.  We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.