Southern First(US:SFST)2025-08-01 18:46Financial Performance - Net income for the three months ended June 30, 2025, was $6.6 million, compared to $3.0 million for the same period in 2024, representing a 120% increase [119]. - Diluted earnings per share (EPS) rose to $0.81 for Q2 2025, up from $0.37 in Q2 2024 [119]. - Net interest income for Q2 2025 was $25.3 million, a 29.5% increase from $19.5 million in Q2 2024 [121]. - For the first half of 2025, net interest income rose to $48.7 million, up 27.5% from $38.2 million in the same period of 2024, driven by a $7.5 million decrease in interest expense [139]. - Noninterest income for Q2 2025 was $3.3 million, a decrease of $189,000 or 5.4% from Q2 2024, with mortgage banking income down by $354,000 or 18.4% [145]. - Noninterest expense for Q2 2025 was $19.3 million, an increase of $693,000 or 3.7% from Q2 2024, primarily due to higher compensation and benefits expenses [149]. - The efficiency ratio improved to 67.5% in Q2 2025 from 80.9% in Q2 2024, reflecting increased net interest income [151]. Assets and Liabilities - Total assets increased to $4.31 billion, a 5.4% rise from $4.09 billion at December 31, 2024 [116]. - Total liabilities at June 30, 2025, were $3.96 billion, compared to $3.76 billion at December 31, 2024 [116]. - Shareholders' equity increased to $345.5 million at June 30, 2025, from $330.4 million at December 31, 2024 [116]. - Cash and cash equivalents totaled $271.0 million at June 30, 2025, representing 6.3% of total assets [184]. - Retail deposits increased to $3.08 billion, or 84.6% of total deposits, while wholesale deposits were $560.7 million, or 15.4% of total deposits at June 30, 2025 [174]. Loans and Credit Quality - Loans amounted to $3.75 billion at June 30, 2025, up from $3.63 billion at December 31, 2024 [116]. - Average loan balances increased by $78.5 million year-over-year for Q2 2025, contributing to a six basis point increase in yield on interest-earning assets [129]. - The loan portfolio increased by $115.1 million or 6.39% annualized in the first half of 2025, driven by increases in consumer and commercial loans [157]. - The provision for credit losses was $700,000 in Q2 2025, compared to $500,000 in Q2 2024, reflecting growth in the loan portfolio [142]. - Nonperforming assets totaled $11.7 million or 0.27% of total assets as of June 30, 2025, compared to $10.9 million or 0.27% at December 31, 2024 [163]. - As of June 30, 2025, the allowance for credit losses was $41.3 million, representing 1.10% of outstanding loans and providing coverage of 362.35% of nonperforming loans [168]. Interest Income and Expense - Net interest margin (TE) improved to 2.50% in Q2 2025, compared to 1.98% in Q2 2024 [127]. - Interest expense on interest-bearing deposits decreased by $3.9 million, contributing to the increase in net interest income [121]. - Average interest-earning assets grew by $79.1 million, with an average yield increase to 5.18% [127]. - Net interest spread improved to 1.69% in Q2 2025 from 1.08% in Q2 2024, driven by a 61 basis point increase due to a decrease in interest-bearing liabilities [130]. - The average yield on loans increased by 14 basis points to 5.24% in the first half of 2025, contributing to the overall increase in interest income [135]. Capital Ratios and Risk Management - The bank maintained a total capital ratio of 12.58% as of June 30, 2025, exceeding the minimum requirement of 8.00% [198]. - Tier 1 capital ratio was 11.33% at June 30, 2025, above the minimum requirement of 6.00% [198]. - Common equity Tier 1 capital ratio stood at 11.33% as of June 30, 2025, surpassing the minimum requirement of 4.50% [198]. - The company actively manages interest rate risk through asset/liability management to ensure adequate liquidity and balance between interest-sensitive assets and liabilities [211]. - The asset/liability management committee (ALCO) meets quarterly to monitor interest rate sensitivity within board-approved limits [211]. Interest Rate Sensitivity - As of June 30, 2025, a 300 basis points increase in interest rates is projected to decrease net interest income by 7.07% [213]. - A 200 basis points increase in interest rates is expected to reduce net interest income by 4.03% [213]. - A 100 basis points increase in interest rates will lead to a decrease of 1.64% in net interest income [213]. - A decrease of 100 basis points in interest rates is anticipated to increase net interest income by 1.67% [213]. - A decrease of 200 basis points in interest rates is projected to boost net interest income by 5.78% [213]. - A decrease of 300 basis points in interest rates is expected to enhance net interest income by 15.43% [213]. Accounting and Market Risks - The company does not expect recently issued accounting standards to have a material impact on consolidated financial statements upon adoption [209]. - Market risks primarily arise from interest rate risk related to lending, investing, and borrowing activities [210].