Southern First(SFST) - 2022 Q4 - Annual Report

Financial Performance - Net income available to common shareholders decreased by 37.67% to $29.1 million for the year ended December 31, 2022, down from $46.7 million in 2021[281]. - Net interest income for the year ended December 31, 2022, was $97.6 million, an increase of $9.9 million from $87.7 million in 2021, driven by a $24.5 million increase in interest income[311]. - Noninterest income decreased by 44.1% to $9.6 million in 2022, down from $17.1 million in 2021[284]. - Comprehensive income for 2022 was $16,445 thousand, down from $44,948 thousand in 2021, reflecting a decrease of about 63%[429]. - Earnings per common share (diluted) decreased to $3.61 in 2022 from $5.85 in 2021, a drop of approximately 38%[426]. - Net income for 2022 was $29,115,000, a decrease of 37.8% from $46,711,000 in 2021 and an increase of 58.7% from $18,328,000 in 2020[435]. Asset and Deposit Growth - Total assets increased by 26.2% to $3.69 billion as of December 31, 2022, compared to $2.93 billion in 2021[279]. - Deposits increased by 22.23% to $3.13 billion in 2022, compared to $2.56 billion in 2021[284]. - Total deposits rose to $3,133,864 thousand in 2022, up from $2,563,826 thousand in 2021, marking an increase of approximately 22%[423]. - Retail deposits amounted to $2.90 billion, or 92.5% of total deposits, as of December 31, 2022, compared to $2.56 billion (100% of total deposits) in 2021[362]. - Core deposits reached $2.76 billion as of December 31, 2022, compared to $2.48 billion in 2021 and $2.01 billion in 2020[364]. Loan Performance - Total loans outstanding increased from $2.49 billion in 2021 to $3.27 billion in 2022, with average loans rising from $2.31 billion to $2.87 billion during the same period[338]. - The company experienced a loan growth of $783.5 million in 2022, with $500.0 million attributed to commercial loans and $283.4 million to consumer-related loans[340]. - Real estate loans comprised $2.78 billion, or 84.8% of the loan portfolio as of December 31, 2022, down from $2.13 billion, or 85.5%, in 2021[339]. - The average consumer real estate loan had a principal balance of $468,000 and an average rate of 3.71% as of December 31, 2022[340]. Credit Quality - The provision for credit losses was $6.2 million in 2022, compared to a negative provision of $12.4 million in 2021[284]. - The allowance for credit losses as of December 31, 2022, totaled $38.6 million, or 1.18% of gross loans, compared to $30.4 million or 1.22% of gross loans in 2021[318]. - Nonperforming assets decreased to 0.07% of total assets as of December 31, 2022, indicating improved asset quality[319]. - The percentage of nonperforming assets to total assets improved to 0.07% in 2022 from 0.17% in 2021, indicating enhanced credit quality[356]. Interest Income and Expense - Net interest income rose by 11.3% to $97.6 million in 2022, driven by a $525 million increase in average earning assets[296]. - Interest income for 2022 was $117.7 million, with 97.1% of this income derived from loans[297]. - Interest expense for 2022 was $20.0 million, with 90.3% attributed to deposits, up from 71.9% in 2021[298]. - The net interest margin (TE) decreased to 3.19% in 2022 from 3.45% in 2021, a decline of 26 basis points[303]. - The net interest spread was 2.88% for 2022, down from 3.35% in 2021, reflecting a 47 basis point decrease[308]. Noninterest Expenses - Total noninterest expenses increased to $62.9 million for the year ended December 31, 2022, a rise of $6.5 million or 11.5% from $56.4 million in 2021, primarily due to increased compensation and benefits expenses[326]. - The efficiency ratio increased to 58.71% in 2022 from 53.83% in 2021, indicating higher noninterest expenses relative to income[284]. - Compensation and benefits expenses rose by $2.7 million or 7.4% in 2022, primarily due to a $5.2 million increase in salaries and incentive compensation[329]. Regulatory and Compliance - The total capital to risk-weighted assets ratio was 12.45% as of December 31, 2022, exceeding the minimum requirement of 8%[378]. - The company’s capital ratios were in excess of all regulatory requirements as of December 31, 2022[443]. - The company actively manages interest rate risk through an asset/liability management committee, which meets monthly to monitor interest rate sensitivity[388]. Accounting and Reporting Changes - The company adopted a new credit loss accounting standard effective January 1, 2022, impacting the method of accounting for credit losses[414]. - The cumulative effect of adopting CECL resulted in a net decrease to retained earnings of $2.8 million as of January 1, 2022[474]. - Changes in the allowance for credit losses under CECL are recorded as provision for credit loss expense[477].