Southern First(SFST) - 2025 Q1 - Quarterly Report

Financial Performance - Net income for the first quarter of 2025 was $5.3 million, a 112% increase from $2.5 million in the same period of 2024[121] - Diluted earnings per share (EPS) rose to $0.65 for Q1 2025, up from $0.31 in Q1 2024[121] - Net interest income increased by 25.4% to $23.4 million in Q1 2025, compared to $18.6 million in Q1 2024[123] - Noninterest income rose to $3.1 million in Q1 2025, a $450,000, or 16.9%, increase from $2.7 million in Q1 2024, with mortgage banking income increasing by $260,000, or 22.3%[139] - Total noninterest expense for Q1 2025 was $18.8 million, a $736,000, or 4.1%, increase from $18.1 million in Q1 2024, primarily due to higher compensation and benefits expenses[141] - The efficiency ratio improved to 71.1% in Q1 2025 from 84.9% in Q1 2024, reflecting the increase in net interest income[143] - Return on average assets improved to 0.52% for the three months ended March 31, 2025, compared to 0.38% for the year ended December 31, 2024[186] - Return on average equity increased to 6.38% as of March 31, 2025, up from 4.84% at December 31, 2024[186] Asset and Liability Management - Total assets increased by 4.8% to $4.28 billion as of March 31, 2025, compared to $4.09 billion at December 31, 2024[119] - Average interest-earning assets grew by $70.5 million year-over-year, with a yield increase of 10 basis points to 5.12%[129] - Average interest-bearing liabilities increased by $26.8 million, with the rate decreasing by 46 basis points to 3.52%[129] - Loans totaled $3.68 billion as of March 31, 2025, compared to $3.63 billion at December 31, 2024[119] - Deposits rose to $3.62 billion at March 31, 2025, up from $3.44 billion at December 31, 2024[119] - Retail deposits increased to $3.02 billion, representing 83.4% of total deposits at March 31, 2025, up from $2.89 billion or 84.0% at December 31, 2024[165] - The loan-to-deposit ratio was 102% at March 31, 2025, down from 106% at December 31, 2024[165] Credit Quality and Loss Provisions - The provision for credit losses was $750,000 in Q1 2025, compared to a reversal of $175,000 in Q1 2024, driven by growth in the loan portfolio[137] - The allowance for credit losses was $40.7 million, or 1.10% of outstanding loans, providing coverage of 378.09% of nonperforming loans as of March 31, 2025, compared to $39.9 million or 1.10% of outstanding loans and 366.94% coverage at December 31, 2024[159] - As of March 31, 2025, nonperforming assets totaled $11.0 million, representing 0.26% of total assets and 0.30% of gross loans, compared to $10.9 million or 0.27% of total assets and 0.30% of gross loans at December 31, 2024[154] - Individually evaluated loans totaled $12.1 million as of March 31, 2025, with a reserve of approximately $1.8 million allocated in the allowance for credit losses[158] Capital and Equity - Total shareholders' equity increased to $337.6 million at March 31, 2025, up from $330.4 million at December 31, 2024, primarily due to net income of $5.3 million during the first three months of 2025[185] - Total capital to risk-weighted assets ratio was 12.63% as of March 31, 2025, exceeding the minimum requirement of 8.00%[191] - Tier 1 capital to risk-weighted assets ratio stood at 11.38% as of March 31, 2025, above the minimum requirement of 6.00%[191] Interest Rate Risk Management - Interest rate risk is the principal market risk faced by the company, arising from lending, investing, deposit gathering, and borrowing activities[204] - The company actively manages interest rate risk through asset/liability management, with an internal committee meeting no less than quarterly[205] - A forecasted impact on net interest income shows a decrease of 6.72% with a 300 basis point increase in interest rates, while a decrease of 24.47% is projected with a 300 basis point decrease[207] - The company has a board risk committee that meets quarterly to oversee interest rate sensitivity within board-approved limits[205] Accounting and Regulatory Matters - The company does not expect recently issued accounting standards to have a material impact on consolidated financial statements upon adoption[203] - The company has adopted various accounting policies that involve significant estimates and assumptions, which could materially impact reported results[200] - The company has not paid cash dividends to shareholders since inception, as cash dividends from the Bank are subject to legal limitations and regulatory capital requirements[193]