About Southern First Bancshares

Southern First Bancshares, Inc. operates as the bank holding company for Southern First Bank that provides core banking products and services. The company is a commercial bank with retail offices located in the Greenville, Columbia, and Charleston markets of South Carolina, retail offices in the Raleigh, Greensboro, and Charlotte markets of North Carolina and retail office in Atlanta, Georgia. The company primarily engages in the business of accepting demand deposits and savings deposits insured by the Federal Deposit Insurance Corporation (the FDIC), and providing commercial, consumer and mortgage loans to the general public. The company primarily engages in the business of accepting demand deposits and savings deposits insured by the Federal Deposit Insurance Corporation (the FDIC), and provides commercial, consumer and mortgage loans to the general public. Business Strategy The company focuses on growing business relationships and building core deposits, profitable loans and noninterest income. The company has built a dynamic franchise that meets the financial needs of its clients by providing an array of personalized products and services delivered by seasoned banking professionals with knowledge of its local markets. The company’s overall strategic goal is to provide the highest level of service to its clients while achieving high-performance metrics within the community banking market that drive franchise and shareholder value. The company’s strategy is to focus on profitable and efficient growth; provide a distinctive client experience; and maintain a rigorous risk management infrastructure. Lending Activities The company emphasizes a range of lending services, including real estate, commercial, and equity-line consumer loans to individuals and small- to medium-sized businesses and professional firms that are located in or conduct a substantial portion of their business in its market area. The company’s underwriting standards vary for each type of loan. The company focuses its lending activities primarily on the professional sector in each of its markets, including doctors, dentists, and small business owners. By focusing on this client base and by serving each client with a consistent relationship team of bankers, the company has generated a loan portfolio with larger average loan amounts than is typical for a community bank. Commercial Real Estate Loans (Commercial Owner Occupied and Commercial Non-owner Occupied Real Estate Loans): In order to seek to ensure secondary sources of payment and liquidity to support a loan request, the company typically reviews all of the personal financial statements of the principal owners and require their personal guarantees. Construction Real Estate Loans: The company offers adjustable and fixed rate construction real estate loans for commercial and consumer projects, typically to builders and developers and to consumers who wish to build their own homes. Commercial Business Loans: The company makes loans for commercial purposes in various lines of businesses, including the manufacturing, service industry, and professional service areas. The company is eligible to offer small business loans utilizing government enhancements such as the Small Business Administration’s (SBA) 7(a) program and SBA’s 504 programs. As of December 31, 2022, the company had originated three loans utilizing government enhancements and over 20 loans engaged in state-based small business partnerships. Consumer Real Estate Loans and Home Equity Loans: The company offers fixed and adjustable rate consumer real estate loans with terms of up to 30 years. The company also offers home equity lines of credit. As of December 31, 2022, the company’s individual home equity lines of credit ranged in size from $1,000 to $1.4 million, with an average of approximately $85,000. The company’s underwriting criteria and the risks associated with home equity loans and lines of credit are generally the same as those for first mortgage loans. Home equity lines of credit typically have terms of ten years or less. The company generally limits the extension of credit to 90% of the market value of each property, although it may extend up to 100% of the market value. Other Consumer Loans: The company makes a variety of loans to individuals for personal and household purposes, including secured and unsecured installment loans and revolving lines of credit. These consumer loans are underwritten based on the borrower’s income, current debt level, past credit history, and the availability and value of collateral. Consumer rates are both fixed and variable, with negotiable terms. The company’s installment loans typically amortize over periods up to 60 months. The company typically requires monthly payments of interest and a portion of the principal on its revolving loan products. Deposit Services The company’s principal source of funds is core deposits. The company offers a full range of deposit services, including checking accounts, commercial checking accounts, savings accounts, and other time deposits of various types, ranging from daily money market accounts to long-term certificates of deposit. The company has 12 retail offices, which assist it in obtaining transaction accounts that are less affected by rising rates. The company focuses on client service and its ClientFIRST culture to attract and retain deposits. Other Banking Services In addition to deposit and loan services, the company offers other bank services, such as internet banking, cash management, safe deposit boxes, direct deposit, automatic drafts, bill payment and mobile banking services. The company earns fees for most of these services, including debit and credit card transactions, sales of checks, and wire transfers. The company also receives ATM transaction fees from transactions performed by its clients. The company is associated with the NYCE, Pulse, STAR, and Cirrus networks, which are available to its clients throughout the country. Since it outsources its ATM services, the company charged related transaction fees from its ATM service provider. The company has contracted with Fidelity National Information Systems, an outside computer service company, to provide its core data processing services and its ATM processing. The company also offers Internet banking services, bill payment services, and cash management and mobile banking services. Investment Portfolio As of December 31, 2022, the company’s investment portfolio included corporate bonds; U.S. treasuries; U.S. government agencies; SBA securities; state and political subdivisions; asset-backed securities; and mortgage-backed securities. Competition Many of the company’s competitors are well-established, larger financial institutions with substantially greater resources and lending limits, such as, Bank of America, Wells Fargo, and Truist. Supervision and Regulation The company owns 100% of the outstanding capital stock of the bank, and therefore it considered to be a bank holding company under the federal Bank Holding Company Act of 1956 (the Bank Holding Company Act). As a result, the company is primarily subject to the supervision, examination and reporting requirements of the Federal Reserve under the Bank Holding Company Act and its regulations promulgated thereunder. Moreover, as a bank holding company of a bank located in South Carolina, the company is subject to the South Carolina Banking and Branching Efficiency Act. As a South Carolina bank holding company under the South Carolina Banking and Branching Efficiency Act, the company is subject to limitations on sale or merger and to regulation by the South Carolina Board of Financial Institutions (the S.C. Board). The company must receive the S.C. Board’s approval prior to engaging in the acquisition of a South Carolina state chartered bank or another South Carolina bank holding company. The company is a bank holding company registered under the Bank Holding Company Act of 1956 (the BHCA). As a South Carolina bank, deposits in the bank are insured by the FDIC up to a maximum amount, which is $250,000 per depositor. The S.C. Board and the FDIC regulate or monitor virtually all areas of the bank’s operations. As an insured depository institution, the bank is required to comply with the capital requirements promulgated under the FDIA and the prompt corrective action regulations thereunder, which set forth five capital categories, each with specific regulatory consequences. The bank’s deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. The Dodd-Frank Act permanently increased the maximum amount of deposit insurance for banks to $250,000 per account. As an FDIC-insured bank, the bank must pay deposit insurance assessments to the FDIC based on its average total assets minus its average tangible equity. The company is a legal entity separate and distinct from the Bank and its other subsidiaries. Various legal limitations restrict the bank from lending or otherwise supplying funds to the company or its non-bank subsidiaries. The company and the bank are subject to Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Regulation W. Section 23A of the Federal Reserve Act places limits on the amount of loans or extensions of credit by a bank to any affiliate, including its holding company, and on a bank’s investments in, or certain other transactions with, affiliates and on the amount of advances to third parties collateralized by the securities or obligations of any affiliates of the bank. The Community Reinvestment Act (CRA) requires that the FDIC evaluate the record of the bank in meeting the credit needs of its local community, including low and moderate income neighborhoods. The company is subject to certain fair lending requirements and reporting obligations involving lending operations. A number of laws and regulations provide these fair lending requirements and reporting obligations, including, at the federal level, the Equal Credit Opportunity Act (ECOA), as amended by the Dodd-Frank Act, and Regulation B, as well as the Fair Housing Act (FHA) and regulations implementing the FHA. The activities of the bank are subject to a variety of statutes and regulations designed to protect consumers. This includes Title X of the Dodd-Frank Act, which prohibits engaging in any unfair, deceptive, or abusive acts or practices (UDAAP). UDAAP claims involve detecting and assessing risks to consumers and to markets for consumer financial products and services. Interest and other charges collected or contracted for by the bank are subject to state usury laws and federal laws concerning interest rates. The loan operations of the bank are also subject to federal laws applicable to credit transactions, such as: the Truth-In-Lending Act (TILA) and Regulation Z, governing disclosures of credit and servicing terms to consumer borrowers and including substantial requirements for mortgage lending and servicing, as mandated by the Dodd-Frank Act; the Home Mortgage Disclosure Act and Regulation C, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the communities they serve; ECOA and Regulation B, prohibiting discrimination on the basis of race, color, religion, or other prohibited factors in any aspect of a credit transaction; the Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act and Regulation V, as well as the rules and regulations of the FDIC governing the use of consumer reports, provision of information to credit reporting agencies, certain identity theft protections and certain credit and other disclosures; the Fair Debt Collection Practices Act and Regulation F, governing the manner in which consumer debts may be collected by collection agencies and intending to eliminate abusive, deceptive, and unfair debt collection practices; the Real Estate Settlement Procedures Act (RESPA) and Regulation X, which governs various aspects of residential mortgage loans, including the settlement and servicing process, dictates certain disclosures to be provided to consumers, and imposes other requirements related to compensation of service providers, insurance escrow accounts, and loss mitigation procedures; the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), which mandates a nationwide licensing and registration system for residential mortgage loan originators. The SAFE Act also prohibits individuals from engaging in the business of a residential mortgage loan originator without first obtaining and maintaining annually registration as either a federal or state licensed mortgage loan originator; the Homeowners Protection Act, or the PMI Cancellation Act, provides requirements relating to private mortgage insurance on residential mortgages, including the cancelation and termination of PMI, disclosure and notification requirements, and the requirement to return unearned premiums; the Fair Housing Act prohibits discrimination in all aspects of residential real-estate related transactions based on race or color, national origin, religion, sex, and other prohibited factors; the Servicemembers Civil Relief Act and Military Lending Act, providing certain protections for servicemembers, members of the military, and their respective spouses, dependents and others; and Section 106(c)(5) of the Housing and Urban Development Act requires making home ownership available to eligible homeowners. The deposit operations of the bank are also subject to federal laws, such as: the Federal Deposit Insurance Act (FDIA), which, among other things, limits the amount of deposit insurance available per insured depositor category to $250,000 and imposes other limits on deposit-taking; the Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; the Electronic Funds Transfer Act and Regulation E, which governs the rights, liabilities, and responsibilities of consumers and financial institutions using electronic fund transfer services, and which generally mandates disclosure requirements, establishes limitations on liability applicable to consumers for unauthorized electronic fund transfers, dictates certain error resolution processes, and applies other requirements relating to automatic deposits to and withdrawals from deposit accounts; the Expedited Funds Availability Act and Regulation CC, setting forth requirements to make funds deposited into transaction accounts available according to specified time schedules, disclose funds availability policies to customers, and relating to the collection and return of checks and electronic checks, including the rules regarding the creation or receipt of substitute checks; and the Truth in Savings Act and Regulation DD, which requires depository institutions to provide disclosures so that consumers can make meaningful comparisons about depository institutions and accounts. History Southern First Bancshares, Inc. was founded in 1999. The company was incorporated in 1999 under the laws of South Carolina.