Southern First Bancshares : Reports Results for Fourth Quarter 2022 - Form 8-K

Southern First Reports Results for Fourth Quarter 2022

Greenville, South Carolina, January 24, 2023 - Southern First Bancshares, Inc. (NASDAQ: SFST), holding company for Southern First Bank, today announced its financial results for the three and twelve months ended December 31, 2022.

"Southern First continues to attract talented bankers, and clients are moving their relationships to Southern First at a record pace," stated Art Seaver, the company's Chief Executive Officer. "In the fourth quarter of 2022, our team generated the largest loan growth quarter in our company's history. While this transitional interest rate cycle of the Federal Reserve is weakening our current margin, we continue to grow book value and are excited about our momentum as we head into the new year."

2022 Fourth Quarter Highlights

●	Net income was $5.5 million, compared to $12.0 million for Q4 2021
●	Diluted earnings per common share were $0.68 per share, compared to $1.49 for Q4 2021
●	Total loans increased 31% to $3.3 billion, compared to $2.5 billion at Q4 2021
●	Total deposits increased 22% to $3.1 billion at Q4 2022, compared to $2.6 billion at Q4 2021
●	Book value per common share increased to $36.76, or 5%, over Q4 2021

		Quarter Ended
		December 31		September 30		June 30		March 31		December 31
		2022		2022		2022		2022		2021
Earnings ($ in thousands, except per share data):
Net income available to common shareholders		$	5,492		8,413		7,240		7,970		12,005
Earnings per common share, diluted			0.68		1.04		0.90		0.98		1.49
Total revenue(1)			25,826		28,134		27,149		26,091		26,194
Net interest margin (tax-equivalent)(2)			2.88%		3.19%		3.35%		3.37%		3.35%
Return on average assets(3)			0.63%		1.00%		0.92%		1.10%		1.66%
Return on average equity(3)			7.44%		11.57%		10.31%		11.60%		17.61%
Efficiency ratio(4)			63.55%		57.03%		58.16%		56.28%		56.25%
Noninterest expense to average assets(3)			1.87%		1.92%		2.02%		2.03%		2.06%
Balance Sheet ($ in thousands):
Total loans(5)		$	3,273,363		3,030,027		2,845,205		2,660,675		2,489,877
Total deposits			3,133,864		3,001,452		2,870,158		2,708,174		2,563,826
Core deposits(6)			2,759,112		2,723,592		2,588,283		2,541,113		2,479,412
Total assets			3,691,981		3,439,669		3,287,663		3,073,234		2,925,548
Book value per common share			36.76		35.99		35.39		34.90		35.07
Loans to deposits			104.45%		100.95%		99.13%		98.25%		97.12%
Holding Company Capital Ratios(7):
Total risk-based capital ratio			12.91%		13.58%		13.97%		14.37%		14.90%
Tier 1 risk-based capital ratio			10.88%		11.49%		11.83%		12.18%		12.65%
Leverage ratio			9.17%		9.44%		9.71%		10.12%		10.18%
Common equity tier 1 ratio(8)			10.44%		11.02%		11.33%		11.65%		12.09%
Tangible common equity(9)			7.98%		8.37%		8.60%		9.06%		9.50%
Asset Quality Ratios:
Nonperforming assets/ total assets			0.07%		0.08%		0.09%		0.15%		0.17%
Classified assets/tier one capital plus allowance for credit losses			4.71%		5.24%		7.29%		7.83%		12.61%
Loans 30 days or more past due/ loans(5)			0.11%		0.07%		0.10%		0.13%		0.09%
Net charge-offs (recoveries)/average loans(5) (YTD annualized)			(0.05%)		(0.06%)		0.02%		0.00%		0.06%
Allowance for credit losses/loans(5)			1.18%		1.20%		1.20%		1.24%		1.22%
Allowance for credit losses/nonaccrual loans			1,470.74%		1,388.87%		1,166.70%		726.88%		625.16%

[Footnotes to table located on page 6]

1

income statements - Unaudited

		Quarter Ended		Twelve Months Ended
		Dec 31		Sept 30		Jun 30		Mar 31		Dec 31		December 31
(in thousands, except per share data)		2022		2022		2022		2022		2021		2022		2021
Interest income
Loans		$	33,939		29,752		26,610		23,931		23,661		114,233		91,599
Investment securities			562		506		448		474		410		1,990		1,335
Federal funds sold			525		676		180		59		66		1,439		233
Total interest income			35,026		30,934		27,238		24,464		24,137		117,662		93,167
Interest expense
Deposits			10,329		5,021		1,844		908		900		18,102		3,909
Borrowings			578		459		510		392		380		1,939		1,526
Total interest expense			10,907		5,480		2,354		1,300		1,280		20,041		5,435
Net interest income			24,119		25,454		24,884		23,164		22,857		97,621		87,732
Provision (reversal) for loan losses			2,325		950		1,775		1,105		(4,200)		6,155		(12,400)
Net interest income after provision for loan losses			21,794		24,504		23,109		22,059		27,057		91,466		100,132
Noninterest income
Mortgage banking income			291		1,230		1,184		1,494		1,931		4,198		11,376
Service fees on deposit accounts			187		194		209		191		200		782		757
ATM and debit card income			575		559		563		528		560		2,225		2,092
Income from bank owned life insurance			344		315		315		315		312		1,289		1,231
Loss on disposal of fixed assets			-		-		(394)		-		-		(394)		-
Other income			310		382		388		399		334		1,480		1,645
Total noninterest income			1,707		2,680		2,265		2,927		3,337		9,580		17,101
Noninterest expense
Compensation and benefits			9,576		9,843		9,915		9,456		9,208		38,790		36,103
Occupancy			2,666		2,442		2,219		1,778		2,081		9,105		6,956
Other real estate owned expenses			-		-		-		-		-		-		385
Outside service and data processing costs			1,521		1,529		1,528		1,533		1,395		6,112		5,468
Insurance			551		507		367		260		342		1,686		1,149
Professional fees			788		555		693		599		682		2,635		2,589
Marketing			282		338		329		269		260		1,216		905
Other			1,029		832		737		790		767		3,389		2,875
Total noninterest expenses			16,413		16,046		15,788		14,685		14,735		62,933		56,430
Income before provision for income taxes			7,088		11,138		9,586		10,301		15,659		38,113		60,803
Income tax expense			1,596		2,725		2,346		2,331		3,654		8,998		14,092
Net income available to common shareholders		$	5,492		8,413		7,240		7,970		12,005		29,115		46,711
Earnings per common share - Basic		$	0.69		1.06		0.91		1.00		1.52		3.66		5.96
Earnings per common share - Diluted			0.68		1.04		0.90		0.98		1.49		3.61		5.85
Basic weighted average common shares			7,971		7,972		7,945		7,932		7,877		7,958		7,844
Diluted weighted average common shares			8,071		8,065		8,075		8,096		8,057		8,072		7,989

[Footnotes to table located on page 6]

Net income for the fourth quarter of 2022 was $5.5 million, or $0.68 per diluted share, a $2.9 million decrease from the third quarter of 2022 and a $6.5 million decrease from the fourth quarter of 2021. Net interest income decreased $1.3 million for the fourth quarter of 2022, compared to the third quarter of 2022, and increased $1.3 million, or 5.5%, compared to the fourth quarter of 2021. The decrease in net interest income from the prior quarter was driven by an increase in interest expense on our deposit accounts related to the Federal Reserve's 425-basis point increase in the federal funds rate. The increase in net interest income from the fourth quarter of 2021 related to growth in our loan portfolio, partially offset by the higher interest expense on our deposit accounts.

The provision for credit losses was $2.3 million for the fourth quarter of 2022, compared to $950 thousand for the third quarter of 2022 and a reversal of $4.2 million for the fourth quarter of 2021. The provision expense during the fourth quarter of 2022, calculated under the Current Expected Credit Loss ("CECL") methodology adopted effective January 1, 2022, includes a $2.3 million provision for loan losses and a $25 thousand provision for unfunded commitments. The increased provision during the fourth quarter was driven by $243.3 million of loan growth. The reversal in the provision during the fourth quarter of 2021 was driven by improvement in economic conditions after the onset of the pandemic.

2

Noninterest income totaled $1.7 million for the fourth quarter of 2022, a $973 thousand decrease from the third quarter of 2022 and a $1.6 million decrease from the fourth quarter of 2021. In prior quarters, mortgage banking income has been the largest component of our noninterest income; however, due to lower mortgage origination volume during the past 12 months, combined with our strategy to keep a larger percentage of these loans in our portfolio, mortgage banking income decreased to $291 thousand from prior quarter income of $1.2 million and from income of $1.9 million for the prior year.

Noninterest expense for the fourth quarter of 2022 was $16.4 million, a $367 thousand increase from the third quarter of 2022, and a $1.7 million increase from the fourth quarter of 2021. The increase in noninterest expense from the previous quarter was driven by increases in occupancy, professional fees, and other noninterest expenses, while the increase from the prior year related to increases in compensation and benefits, occupancy, insurance and other noninterest expenses. In comparison to the prior quarter, the increases in occupancy, professional fees and other noninterest expenses were due to higher property tax expenses, an increase in legal and accounting/audit costs, as well as an increase in FDIC insurance premiums. Compensation and benefits expense increased from the prior year primarily due to the hiring of new team members, combined with annual salary increases, while the increase in occupancy expense relates to costs associated with the relocation of our headquarters. In addition, our insurance costs increased during 2022 due to higher FDIC insurance premiums and our noninterest expense increase reflects higher travel and entertainment costs as well as an increase in fraud losses.

Our effective tax rate was 22.5% for the fourth quarter, a decrease from 24.5% for the prior quarter of 2022 and 23.3% for the fourth quarter of 2021. The lower tax rate in the fourth quarter of 2022 relates to the greater impact of our tax-exempt and equity compensation transactions on our tax rate during the quarter.

Net interest income and margin - Unaudited

					For the Three Months Ended
		December 31, 2022		September 30, 2022		December 31, 2021
(dollars in thousands)		Average Balance			Income/ Expense			Yield/ Rate(3)		Average Balance			Income/ Expense			Yield/ Rate(3)		Average Balance			Income/ Expense			Yield/ Rate(3)
Interest-earning assets
Federal funds sold and interest-bearing deposits		$	60,176			$	525				3.46	%		$	122,071			$	676				2.20	%		$	138,103			$	66				0.19	%
Investment securities, taxable			86,594				515				2.36	%			91,462				449				1.95	%			107,181				351				1.30	%
Investment securities, nontaxable(2)			9,987				61				2.42	%			10,160				74				2.89	%			11,695				75				2.56	%
Loans(10)			3,165,061				33,939				4.25	%			2,941,350				29,752				4.01	%			2,452,677				23,661				3.83	%
Total interest-earning assets			3,321,818				35,040				4.18	%			3,165,043				30,951				3.88	%			2,709,656				24,153				3.54	%
Noninterest-earning assets			162,924												159,233												153,284
Total assets		$	3,484,742											$	3,324,726											$	2,862,940
Interest-bearing liabilities
NOW accounts		$	343,541				379				0.44	%		$	361,500				178				0.20	%		$	330,067				64				0.08	%
Savings & money market			1,529,532				7,657				1.99	%			1,417,181				3,663				1.03	%			1,278,930				637				0.20	%
Time deposits			405,907				2,293				2.24	%			361,325				1,180				1.30	%			155,708				199				0.51	%
Total interest-bearing deposits			2,278,980				10,329				1.80	%			2,140,006				5,021				0.93	%			1,764,705				900				0.20	%
FHLB advances and other borrowings			7,594				81				4.23	%			1,357				10				2.92	%			-				-				-	%
Subordinated debentures			36,197				497				5.45	%			36,169				449				4.93	%			36,089				380				4.18	%
Total interest-bearing liabilities			2,322,771				10,907				1.86	%			2,177,532				5,480				1.00	%			1,800,794				1,280				0.28	%
Noninterest-bearing liabilities			869,314												858,202												791,700
Shareholders' equity			292,657												288,542												270,446
Total liabilities and shareholders' equity		$	3,484,742											$	3,324,276											$	2,862,940
Net interest spread											2.32	%											2.88	%											3.26	%
Net interest income (tax equivalent) / margin						$	24,133				2.88	%						$	25,471				3.19	%						$	22,873				3.35	%
Less: tax-equivalent adjustment(2)							14												17												16
Net interest income						$	24,119											$	25,454											$	22,857

[Footnotes to table located on page 6]

Net interest income was $24.1 million for the fourth quarter of 2022, a $1.3 million decrease from the third quarter, driven by a $5.4 million increase in interest expense, partially offset by a $4.1 million increase in interest income, on a taxable basis.

3

The increase in interest expense was driven by $139.0 million growth in average interest-bearing deposit balances at an average rate of 1.80%, an 87-basis points increase over the previous quarter, partially offset by $223.7 million growth in average loan balances at a yield of 4.25%, an increase of 24-basis points from the third quarter of 2022. In comparison to the fourth quarter of 2021, net interest income increased $1.3 million, resulting primarily from $712.4 million growth in average loan balances during 2022, combined with a 42-basis point increase in loan yield. Our net interest margin, on a tax-equivalent basis, was 2.88% for the fourth quarter of 2022, a 31-basis point decrease from 3.19% from the third quarter of 2022 and a 47-basis point decrease from 3.35% for the fourth quarter of 2021. As a result of the Federal Reserve's 425-basis point interest rate hikes during 2022, the yield on our interest-earning assets has increased by 64-basis points during the fourth quarter of 2022 in comparison to the fourth quarter of 2021. However, the rate on our interest-bearing liabilities, specifically our interest-bearing deposits, has increased by 158-basis points during the same time period, resulting in the lower net interest margin during the fourth quarter of 2022.

Balance sheets - Unaudited

			Ending Balance
			December 31		September 30		June 30		March 31		December 31
(in thousands, except per share data)			2022		2022		2022		2022		2021
Assets
Cash and cash equivalents:
Cash and due from banks		$	18,788		16,530		21,090		20,992		21,770
Federal funds sold			101,277		139,544		124,462		95,093		86,882
Interest-bearing deposits with banks			50,809		4,532		36,538		33,131		58,557
Total cash and cash equivalents			170,874		160,606		182,090		149,216		167,209
Investment securities:
Investment securities available for sale			93,347		91,521		98,991		106,978		120,281
Other investments			10,833		5,449		5,065		4,104		4,021
Total investment securities			104,180		96,970		104,056		111,082		124,302
Mortgage loans held for sale			3,917		9,243		18,329		17,840		13,556
Loans(5)			3,273,363		3,030,027		2,845,205		2,660,675		2,489,877
Less allowance for credit losses			(38,639)		(36,317)		(34,192)		(32,944)		(30,408)
Loans, net			3,234,724		2,993,710		2,811,013		2,627,731		2,459,469
Bank owned life insurance			51,122		50,778		50,463		50,148		49,833
Property and equipment, net			99,183		99,530		96,674		95,129		92,370
Deferred income taxes			12,522		18,425		15,078		10,635		8,397
Other assets			15,459		10,407		9,960		10,859		10,412
Total assets		$	3,691,981		3,439,669		3,287,663		3,072,640		2,925,548
Liabilities
Deposits		$	3,133,864		3,001,452		2,870,158		2,708,174		2,563,826
FHLB Advances			175,000		60,000		50,000		-		-
Subordinated debentures			36,214		36,187		36,160		36,133		36,106
Other liabilities			52,391		54,245		48,708		49,809		47,715
Total liabilities			3,397,469		3,151,884		3,005,026		2,794,116		2,647,647
Shareholders' equity
Preferred stock - $.01 par value; 10,000,000 shares authorized			-		-		-		-		-
Common Stock - $.01 par value; 10,000,000 shares authorized			80		80		80		80		79
Nonvested restricted stock			(3,306)		(3,348)		(3,230)		(3,425)		(1,435)
Additional paid-in capital			119,027		118,433		117,714		117,286		114,226
Accumulated other comprehensive loss			(13,410)		(14,009)		(10,143)		(6,393)		(740)
Retained earnings			192,121		186,629		178,216		170,976		165,771
Total shareholders' equity			294,512		287,785		282,637		278,524		277,901
Total liabilities and shareholders' equity		$	3,691,981		3,439,669		3,287,663		3,072,640		2,925,548
Common Stock
Book value per common share		$	36.76		35.99		35.39		34.90		35.07
Stock price:
High			49.50		47.16		50.09		65.02		64.73
Low			41.46		41.66		42.25		50.84		52.73
Period end			45.75		41.66		43.59		50.84		62.49
Common shares outstanding			8,011		7,997		7,986		7,981		7,925

[Footnotes to table located on page 6]

4

Asset quality measures - Unaudited

		Quarter Ended
			December 31		September 30		June 30		March 31		December 31
(dollars in thousands)			2022		2022		2022		2022		2021
Nonperforming Assets
Commercial
Non-owner occupied RE		$	247		253		259		265		270
Commercial business			182		79		-		-		-
Consumer
Real estate			207		-		183		739		989
Home equity			195		197		200		815		653
Nonaccruing troubled debt restructurings			1,796		2,086		2,289		2,713		2,952
Total nonaccrual loans			2,627		2,615		2,931		4,532		4,864
Other real estate owned			-		-		-		-		-
Total nonperforming assets		$	2,627		2,615		2,931		4,532		4,864
Nonperforming assets as a percentage of:
Total assets			0.07%		0.08%		0.09%		0.15%		0.17%
Total loans			0.08%		0.09%		0.10%		0.17%		0.20%
Accruing troubled debt restructurings (TDRs)		$	4,503		4,683		3,558		3,241		3,299
Classified assets/tier 1 capital plus allowance for credit losses			4.71%		5.24%		7.29%		7.83%		12.61%
			Quarter Ended
			December 31		September 30		June 30		March 31		December 31
(dollars in thousands)			2022		2022		2022		2022		2021
Allowance for Credit Losses
Balance, beginning of period		$	36,317		34,192		32,944		30,408		36,075
CECL adjustment			-		-		-		1,500		-
Loans charged-off			-		-		(316)		(169)		(1,509)
Recoveries of loans previously charged-off			22		1,600		39		180		42
Net loans (charged-off) recovered			22		1,600		(277)		11		(1,467)
Provision for credit losses			2,300		525		1,525		1,025		(4,200)
Balance, end of period		$	38,639		36,317		34,192		32,944		30,408
Allowance for credit losses to gross loans			1.18%		1.20%		1.20%		1.24%		1.22%
Allowance for credit losses to nonaccrual loans			1,470.74%		1,388.87%		1,166.70%		726.88%		625.22%
Net charge-offs to average loans QTD (annualized)			0.00%		(0.22%)		0.04%		0.00%		0.24%

Total nonperforming assets remained at $2.6 million for the fourth quarter of 2022, representing 0.07% of total assets, compared to 0.08% in the third quarter of 2022. During the fourth quarter of 2022, our classified asset ratio improved to 4.71% from 12.61% in the fourth quarter of 2021. The improvement over the fourth quarter of 2021 was primarily the result of six hotel loans, or $18.5 million in the aggregate, we upgraded from substandard during 2022.

Effective January 1, 2022, we early adopted the 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 December 31, 2022, the allowance for credit losses was $38.6 million, or 1.18% of total loans, compared to $36.3 million, or 1.20% of total loans, at September 30, 2022, and $30.4 million, or 1.22% of total loans, at December 31, 2021. We had negligible net recoveries of $22 thousand for the fourth quarter of 2022 compared to net recoveries of $1.6 million for the third quarter of 2022 and net charge-offs of $1.5 million for the fourth quarter of 2021. There was a provision for credit losses of $2.3 million for the fourth quarter of 2022 compared to a provision of $525 thousand for the third quarter of 2022 and a reversal of $4.2 million for the fourth quarter of 2021.

5

LOAN COMPOSITION - Unaudited

			Quarter Ended
			December 31		September 30		June 30		March 31		December 31
(dollars in thousands)			2022		2022		2022		2022		2021
Commercial
Owner occupied RE		$	612,901		572,972		551,544		527,776		488,965
Non-owner occupied RE			862,579		799,569		741,263		705,811		666,833
Construction			109,726		85,850		84,612		75,015		64,425
Business			468,112		419,312		389,790		352,932		333,049
Total commercial loans			2,053,318		1,877,703		1,767,209		1,661,534		1,553,272
Consumer
Real estate			931,278		873,471		812,130		745,667		694,401
Home equity			179,300		171,904		161,512		155,678		154,839
Construction			80,415		77,798		76,878		72,627		59,846
Other			29,052		29,151		27,476		25,169		27,519
Total consumer loans			1,220,045		1,152,324		1,077,996		999,141		936,605
Total gross loans, net of deferred fees			3,273,363		3,030,027		2,845,205		2,660,675		2,489,877
Less-allowance for credit losses			(38,639)		(36,317)		(34,192)		(32,944)		(30,408)
Total loans, net		$	3,234,724		2,993,710		2,811,013		2,627,731		2,459,469

DEPOSIT COMPOSITION - Unaudited

			Quarter Ended
			December 31		September 30		June 30		March 31		December 31
(dollars in thousands)			2022		2022		2022		2022		2021
Non-interest bearing		$	804,115		791,050		799,169		779,262		768,650
Interest bearing:
NOW accounts			318,030		357,862		364,189		416,322		401,788
Money market accounts			1,506,418		1,452,958		1,320,329		1,238,866		1,201,099
Savings			40,673		42,335		41,944		41,630		39,696
Time, less than $250,000			32,469		79,387		62,340		57,972		61,122
Time and out-of-market deposits, $250,000 and over			432,159		277,860		282,187		174,122		91,471
Total deposits		$	3,133,864		3,001,452		2,870,158		2,708,174		2,563,826

	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)	December 31, 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 second 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 $3.7 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.

6

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 and deposit growth as well as pricing of each product, 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 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 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

7