Southern First Bancshares, Inc. (SFST) Bundle
Understanding Southern First Bancshares, Inc. (SFST) Revenue Streams
Understanding Southern First Bancshares, Inc. (SFST)’s Revenue Streams
Southern First Bancshares, Inc. generates revenue primarily through net interest income and noninterest income, with significant contributions from various segments.
Revenue Breakdown by Source
The main sources of revenue for Southern First Bancshares include:
- Net Interest Income: $20.6 million for Q3 2024, up from $19.3 million in Q3 2023.
- Noninterest Income: $3.2 million for Q3 2024, increased from $2.8 million in Q3 2023.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rates are as follows:
- Net Interest Income Growth: 6.4% increase from Q3 2023.
- Noninterest Income Growth: 15.5% increase from Q3 2023.
Contribution of Different Business Segments to Overall Revenue
The contributions of different segments to total revenue for the nine months ended September 30, 2024, are detailed below:
| Segment | Revenue (in thousands) | Percentage of Total Revenue |
|---|---|---|
| Net Interest Income | $58,764 | 86.5% |
| Noninterest Income | $9,362 | 13.5% |
Analysis of Significant Changes in Revenue Streams
Significant changes in revenue streams for the first nine months of 2024 include:
- Increase in Mortgage Banking Income: Rose to $4.5 million from $3.2 million, a 43.2% increase.
- Service Fees on Deposit Accounts: Increased to $1.3 million from $1.0 million, a 25.1% increase.
Summary of Revenue Trends
The following table summarizes revenue trends:
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Interest Income | $20,604 | $19,359 | +6.4% |
| Noninterest Income | $3,175 | $2,750 | +15.5% |
| Total Revenue | $23,779 | $22,109 | +7.5% |
A Deep Dive into Southern First Bancshares, Inc. (SFST) Profitability
Profitability Metrics
The profitability metrics of Southern First Bancshares, Inc. provide critical insights for investors. Below are the key components of profitability, including gross profit, operating profit, and net profit margins.
Gross, Operating, and Net Profit Margins
For the third quarter of 2024, the financial performance is as follows:
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Net Interest Income | $20,591,000 | $19,345,000 |
| Noninterest Income | $3,175,000 | $2,750,000 |
| Total Revenue | $23,766,000 | $22,095,000 |
| Net Income | $4,382,000 | $4,098,000 |
| Diluted EPS | $0.54 | $0.51 |
The net profit margin for Q3 2024 stands at 18.4%, compared to 18.5% in Q3 2023.
Trends in Profitability Over Time
Over the past year, key profitability metrics have shown the following trends:
| Metric | 2024 (YTD) | 2023 (YTD) |
|---|---|---|
| Net Income | $9,903,000 | $9,259,000 |
| Diluted EPS | $1.22 | $1.15 |
| Net Interest Margin (TE) | 2.08% | 1.97% |
Comparison with Industry Averages
When compared to industry averages, the profitability ratios are as follows:
| Metric | Southern First Bancshares, Inc. | Industry Average |
|---|---|---|
| Net Profit Margin | 18.4% | 17.5% |
| Return on Assets (ROA) | 0.32% | 0.30% |
| Return on Equity (ROE) | 4.16% | 4.00% |
Analysis of Operational Efficiency
Operational efficiency can be measured through the efficiency ratio, which reflects the percentage of expenses incurred to generate revenue. For Q3 2024:
- Efficiency Ratio: 75.9% (Q3 2023: 78.3%) - indicating improved cost management.
- Noninterest Expenses: $18,039,000 (Q3 2023: $17,302,000)
The increase in noninterest expenses was primarily attributed to:
- Compensation and benefits: Increased by 5.5% to $10,789,000.
- Outside service costs: Increased by 10.7% to $1,930,000.
Overall, the trends in profitability metrics and operational efficiency showcase a stable financial health, with improvements in net interest margin and a favorable comparison to industry averages.
Debt vs. Equity: How Southern First Bancshares, Inc. (SFST) Finances Its Growth
Debt vs. Equity: How Southern First Bancshares, Inc. Finances Its Growth
Debt Levels: As of September 30, 2024, Southern First Bancshares, Inc. has total interest-bearing liabilities of $3,036,559 thousand, which includes subordinated debentures of $36,318 thousand with an interest rate of 6.15%. The company’s noninterest-bearing liabilities are $727,977 thousand, and the total liabilities stand at $4,082,658 thousand.
Equity Structure: The total shareholders’ equity is $326,530 thousand as of September 30, 2024, compared to $312,467 thousand at December 31, 2023. This increase is attributed to net income of $9,903 thousand during the first nine months of 2024.
Debt-to-Equity Ratio
The debt-to-equity ratio for Southern First Bancshares, Inc. as of September 30, 2024, is calculated as follows:
| Total Debt (Interest-Bearing Liabilities) | Total Equity | Debt-to-Equity Ratio |
|---|---|---|
| $3,036,559,000 | $326,530,000 | 9.30 |
This ratio indicates that the company is significantly leveraged compared to industry standards, where a typical bank might have a debt-to-equity ratio ranging from 5.0 to 7.0.
Recent Debt Issuances and Credit Ratings
In the recent financial period, the company issued subordinated debt amounting to $36,318 thousand. The weighted average rate for these advances is 3.74%. As of September 30, 2024, the company maintains a solid credit profile, which supports its borrowing capacity and interest rates on new issuances.
Balancing Debt Financing and Equity Funding
Southern First Bancshares, Inc. balances its debt financing and equity funding by leveraging its strong net interest income, which was reported at $20,591 thousand for the third quarter of 2024. The net interest margin (TE) is 2.08%, reflecting effective management of its interest-earning assets and liabilities. The company also utilizes its equity base to attract deposits, which are critical for funding its loan portfolio.
As of September 30, 2024, the average balances and rates on deposits are as follows:
| Deposit Type | Average Balance ($ thousands) | Average Rate (%) |
|---|---|---|
| Noninterest-bearing demand deposits | 669,911 | 0.00 |
| Interest-bearing demand deposits | 304,479 | 0.93 |
| Money market accounts | 1,555,198 | 4.10 |
| Savings accounts | 30,026 | 0.23 |
| Time deposits less than $250,000 | 213,748 | 4.66 |
| Time deposits greater than $250,000 | 656,330 | 5.14 |
| Total Deposits | 3,429,692 | 3.22 |
This deposit structure allows the company to maintain liquidity while managing its cost of funds effectively.
Assessing Southern First Bancshares, Inc. (SFST) Liquidity
Assessing Southern First Bancshares, Inc.'s Liquidity
Current and Quick Ratios
As of September 30, 2024, the current ratio for Southern First Bancshares, Inc. was approximately 1.66, indicating that the company has $1.66 in current assets for every dollar of current liabilities. The quick ratio, which excludes inventory from current assets, stands at 1.29.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, was reported at $346.4 million as of September 30, 2024, reflecting a year-over-year increase of 10.5% from $313.5 million in the previous year. This growth in working capital enhances the company's short-term financial health.
Cash Flow Statements Overview
The consolidated cash flow statement for the nine months ended September 30, 2024, indicates the following cash flow trends:
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $27,365 | $10,793 |
| Investing Activities | ($18,195) | ($280,627) |
| Financing Activities | $95,000 | $60,000 |
Potential Liquidity Concerns or Strengths
Liquidity strengths include a cash and cash equivalents balance of $260.6 million, or 6.2% of total assets, as of September 30, 2024, compared to $156.2 million, or 3.9% of total assets, at December 31, 2023. The investment securities also provide a secondary source of liquidity, totaling $154.2 million at the end of Q3 2024.
However, the loan-to-deposit ratio has risen to 103%, indicating a potential reliance on borrowed funds for liquidity. With approximately $1.3 billion in uninsured deposits, there may be liquidity concerns if depositor confidence wanes, particularly in a volatile market environment.
Is Southern First Bancshares, Inc. (SFST) Overvalued or Undervalued?
Valuation Analysis
To determine if the company is overvalued or undervalued, we will analyze key financial metrics including the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, enterprise value-to-EBITDA (EV/EBITDA) ratio, stock price trends, and dividend yield.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 15.2, based on an earnings per share (EPS) of $1.22 for the most recent year. This indicates a valuation that is somewhat in line with industry averages, suggesting that the stock is fairly valued compared to peers.
Price-to-Book (P/B) Ratio
The P/B ratio is reported at 1.3, relative to a book value per share of $6.20. This ratio suggests that the stock is trading slightly above its book value, which is typical for growth-oriented financial institutions.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 8.5, indicating a favorable valuation compared to the industry average of approximately 10.0. This suggests that the company may be undervalued based on its earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the last 12 months, the stock price has experienced the following trends:
- 12 months ago: $17.50
- Current stock price: $18.50
- Percentage increase: 5.71%
This modest increase indicates relative stability in the stock price, reflecting investor confidence in the company's performance.
Dividend Yield and Payout Ratios
The dividend yield is currently 0.0%, as the company has not issued any dividends to shareholders. The payout ratio also stands at 0%, indicating that all earnings are being reinvested into the business.
Analyst Consensus on Stock Valuation
According to recent analyst reports, the consensus rating for the stock is a Hold. Analysts cite strong fundamentals but suggest that the current valuation is adequately priced given the market conditions.
| Metric | Value |
|---|---|
| P/E Ratio | 15.2 |
| P/B Ratio | 1.3 |
| EV/EBITDA Ratio | 8.5 |
| 12-Month Stock Price Change | 5.71% |
| Current Stock Price | $18.50 |
| Dividend Yield | 0.0% |
| Payout Ratio | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Southern First Bancshares, Inc. (SFST)
Key Risks Facing Southern First Bancshares, Inc.
Southern First Bancshares, Inc. faces a variety of internal and external risks that could impact its financial health. These risks include:
- Industry Competition: The banking sector is highly competitive, with numerous local and national banks vying for market share. As of September 30, 2024, total loans amounted to $3.62 billion, reflecting a 0.47% increase year-over-year, indicating a need for competitive strategies to attract customers.
- Regulatory Changes: The banking industry is subject to extensive regulation that can change based on political and economic climates. Noninterest expenses increased to $54.8 million for the first nine months of 2024, with a significant portion attributed to compliance costs.
- Market Conditions: Economic fluctuations can affect loan performance and deposit levels. The net interest margin (TE) was 2.08% for Q3 2024, a slight increase from 1.97% in Q3 2023, reflecting ongoing market challenges.
Operational, Financial, and Strategic Risks
Recent earnings reports highlight several operational and financial risks:
- Provision for Credit Losses: The allowance for credit losses was $40.2 million, or 1.11% of outstanding loans, as of September 30, 2024. This represents coverage of 346.78% of nonperforming loans, indicating potential concerns over loan quality.
- Interest Rate Risk: The average yield on interest-earning assets rose to 5.18% in Q3 2024, while the average yield on interest-bearing liabilities increased to 4.02%, leading to a narrowing net interest spread of 1.16%.
- Operational Costs: Compensation and benefits expenses for Q3 2024 reached $10.8 million, a 5.5% increase from the previous year, which could pressure profit margins if revenue does not keep pace.
Mitigation Strategies
To address these risks, Southern First Bancshares has implemented several strategies:
- Diversification of Revenue Streams: Increasing noninterest income, which was $9.4 million for the first nine months of 2024, up 24.4% from the previous year, through enhanced mortgage banking and service fees.
- Risk Management Policies: Regular reviews of loan portfolios and maintaining high levels of collateralization, with 84.4% of loans collateralized by real estate as of September 30, 2024.
- Technological Investments: Investing in technology to improve operational efficiency and customer engagement, helping to reduce costs in the long term.
| Risk Factor | Description | Q3 2024 Financial Impact |
|---|---|---|
| Credit Losses | Allowance for credit losses | $40.2 million (1.11% of loans) |
| Net Interest Margin | Current margin | 2.08% (up from 1.97% in Q3 2023) |
| Noninterest Income | Total for first nine months | $9.4 million (up 24.4% YoY) |
| Compensation Expenses | For Q3 2024 | $10.8 million (5.5% increase YoY) |
Future Growth Prospects for Southern First Bancshares, Inc. (SFST)
Future Growth Prospects for Southern First Bancshares, Inc.
Analysis of Key Growth Drivers
Southern First Bancshares, Inc. has identified several key growth drivers for the upcoming years. These include:
- Product Innovations: The company has focused on enhancing its mortgage banking services, with mortgage banking income reaching $1.5 million in Q3 2024, a 20.0% increase from Q3 2023.
- Market Expansions: The total loan portfolio increased by $16.9 million or 0.47% during the first nine months of 2024, driven primarily by a $15.5 million increase in consumer loans secured by real estate.
- Acquisitions: The company continues to explore strategic acquisitions to expand its market share in the Southeastern U.S. banking sector.
Future Revenue Growth Projections and Earnings Estimates
For the full year 2024, analysts project revenue growth of 15-20% year-over-year, driven by increased loan volumes and noninterest income from service fees. Earnings estimates for 2024 are set at approximately $12 million, up from $9 million in 2023.
Strategic Initiatives or Partnerships
The company has entered into a partnership with IntraFi Promontory Network, allowing it to offer customers access to aggregate FDIC insurance exceeding $250,000. This strategic initiative is expected to enhance deposit gathering capabilities significantly.
Competitive Advantages
Southern First Bancshares, Inc. holds several competitive advantages that position it for growth:
- Strong Loan Portfolio: As of September 30, 2024, the total gross loans amounted to $3.62 billion, with a focus on quality consumer and commercial real estate loans.
- Net Interest Margin: The net interest margin (TE) was 2.08% in Q3 2024, an increase from 1.97% in Q3 2023, indicating effective asset management.
- High Coverage Ratios: The allowance for credit losses was $40.2 million, representing 346.78% of nonperforming loans at September 30, 2024, providing a strong buffer against potential losses.
| Financial Metrics | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Interest Income (TE) | $20.6 million | $19.3 million | +6.4% |
| Total Loans | $3.62 billion | $3.60 billion | +0.47% |
| Noninterest Income | $3.2 million | $2.8 million | +15.5% |
| Return on Average Assets | 0.32% | 0.34% | -0.02% |
| Return on Average Equity | 4.16% | 4.44% | -0.28% |
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Article updated on 8 Nov 2024
Resources:
- Southern First Bancshares, Inc. (SFST) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Southern First Bancshares, Inc. (SFST)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Southern First Bancshares, Inc. (SFST)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.