Southern First Reports Results for First Quarter 2024

Greenville, South Carolina, April 18, 2024 - Southern First Bancshares, Inc. (NASDAQ: SFST), holding company for Southern First Bank, today announced its financial results for the three-month period ended March 31, 2024.

"Our team generated excellent performance during the first quarter in terms of growing profitable client relationships and continuing to manage our credit quality exceptionally well," stated Art Seaver, the Company's Chief Executive Officer. "Our disciplined approach to pricing both loans and deposits resulted in improvement in our net interest margin, and this focus will continue as we build on our success for the long-term benefit of our communities and stakeholders."

2024 First Quarter Highlights

· Net income was $2.5 million and diluted earnings per common share were $0.31 for Q1 2024
· Total loans increased to $3.6 billion at Q1 2024, compared to $3.4 billion at Q1 2023
· Total deposits increased to $3.5 billion at Q1 2024, compared to $3.4 billion at Q1 2023
· Strong credit quality with nonperforming assets to total assets of 0.09% and past due loans to total loans of 0.36% at Q1 2024
· Net interest margin was 1.94% for Q1 2024, compared to 2.36% for Q1 2023
· Book value per common share increased to $38.65 at Q1 2024, or 4%, over Q1 2023
Quarter Ended
March 31 December 31 September 30 June 30 March 31
2024 2023 2023 2023 2023
Earnings ($ in thousands, except per share data):
Net income available to common shareholders $ 2,522 4,167 4,098 2,458 2,703
Earnings per common share, diluted 0.31 0.51 0.51 0.31 0.33
Total revenue(1) 21,309 21,390 22,094 21,561 22,468
Net interest margin (tax-equivalent)(2) 1.94% 1.92% 1.97% 2.05% 2.36%
Return on average assets(3) 0.25% 0.40% 0.40% 0.26% 0.30%
Return on average equity(3) 3.22% 5.39% 5.35% 3.27% 3.67%
Efficiency ratio(4) 84.94% 79.61% 78.31% 80.67% 76.12%
Noninterest expense to average assets (3) 1.81% 1.64% 1.69% 1.82% 1.89%
Balance Sheet ($ in thousands):
Total loans(5) $ 3,643,766 3,602,627 3,553,632 3,537,616 3,417,945
Total deposits 3,460,681 3,379,564 3,347,771 3,433,018 3,426,774
Core deposits(6) 2,807,473 2,811,499 2,866,574 2,880,507 2,946,567
Total assets 4,105,704 4,055,789 4,019,957 4,002,107 3,938,140
Book value per common share 38.65 38.63 37.57 37.42 37.16
Loans to deposits 105.29% 106.60% 106.15% 103.05% 99.74%
Holding Company Capital Ratios(7):
Total risk-based capital ratio 12.59% 12.57% 12.56% 12.40% 12.67%
Tier 1 risk-based capital ratio 10.63% 10.60% 10.58% 10.42% 10.66%
Leverage ratio 8.43% 8.14% 8.17% 8.48% 8.80%
Common equity tier 1 ratio(8) 10.22% 10.19% 10.17% 10.00% 10.23%
Tangible common equity(9) 7.68% 7.70% 7.56% 7.53% 7.60%
Asset Quality Ratios:
Nonperforming assets/ total assets 0.09% 0.10% 0.11% 0.08% 0.12%
Classified assets/tier one capital plus allowance for credit losses 3.99% 4.25% 4.72% 4.68% 5.10%
Loans 30 days or more past due/ loans(5) 0.36% 0.37% 0.13% 0.07% 0.11%
Net charge-offs (recoveries)/average loans(5) (YTD annualized) 0.03% 0.00% 0.01% 0.03% 0.01%
Allowance for credit losses/loans(5) 1.11% 1.13% 1.16% 1.16% 1.18%
Allowance for credit losses/nonaccrual loans 1,109.13% 1,026.58% 953.25% 1,363.11% 854.33%

[Footnotes to table located on page 6]

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income statements - Unaudited

Quarter Ended
Mar 31 Dec 31 Sept 30 Jun 30 Mar 31
(in thousands, except per share data) 2024 2023 2023 2023 2023
Interest income
Loans $ 45,605 44,758 43,542 41,089 36,748
Investment securities 1,478 1,674 1,470 706 613
Federal funds sold 1,280 2,703 2,435 891 969
Total interest income 48,363 49,135 47,447 42,686 38,330
Interest expense
Deposits 26,932 27,127 25,130 25,937 17,179
Borrowings 2,786 2,948 2,972 1,924 727
Total interest expense 29,718 30,075 28,102 23,861 17,906
Net interest income 18,645 19,060 19,345 18,825 20,424
Provision (reversal) for credit losses (175) (975) (500) 910 1,825
Net interest income after provision for credit losses 18,820 20,035 19,845 17,915 18,599
Noninterest income
Mortgage banking income 1,164 868 1,208 1,337 622
Service fees on deposit accounts 387 371 356 331 325
ATM and debit card income 544 565 588 536 555
Income from bank owned life insurance 377 361 349 338 332
Other income 192 165 248 194 210
Total noninterest income 2,664 2,330 2,749 2,736 2,044
Noninterest expense
Compensation and benefits 10,857 9,401 10,231 10,287 10,356
Occupancy 2,557 2,718 2,562 2,518 2,457
Outside service and data processing costs 1,846 2,000 1,744 1,705 1,629
Insurance 955 937 1,243 897 689
Professional fees 618 581 504 751 660
Marketing 369 364 293 335 366
Other 898 1,027 725 900 947
Total noninterest expenses 18,100 17,028 17,302 17,393 17,104
Income before provision for income taxes 3,384 5,337 5,293 3,258 3,539
Income tax expense 862 1,170 1,195 800 836
Net income available to common shareholders $ 2,522 4,167 4,098 2,458 2,703
Earnings per common share - Basic $ 0.31 0.51 0.51 0.31 0.34
Earnings per common share - Diluted 0.31 0.51 0.51 0.31 0.33
Basic weighted average common shares 8,110 8,056 8,053 8,051 8,026
Diluted weighted average common shares 8,142 8,080 8,072 8,069 8,092

[Footnotes to table located on page 6]

Net income for the first quarter of 2024 was $2.5 million, or $0.31 per diluted share, a $1.6 million decrease from the fourth quarter of 2023 and a $181 thousand decrease from the first quarter of 2023. Net interest income decreased $415 thousand during the first quarter of 2024, compared to the fourth quarter of 2023, and decreased $1.8 million, compared to the first quarter of 2023. The decrease in net interest income from the prior quarter was driven by less interest income on our federal funds sold and interest-bearing deposits, while the decrease from the prior year was driven by an increase in deposit and funding costs.

There was a reversal of the provision for credit losses of $175 thousand for the first quarter of 2024, compared to a reversal of $975 thousand during the fourth quarter of 2023 and a provision of $1.8 million during the first quarter of 2023. The provision reversal of $175 thousand during the first quarter of 2024 relates to a reversal in the reserve for unfunded commitments, driven by a decrease in the balance of unfunded commitments at March 31, 2024. As we continue to experience low net charge-offs, our expected loss rates continue to decline, resulting in a reduction in the allowance for credit losses as a percentage of total loans.

Noninterest income was $2.7 million for the first quarter of 2024, compared to $2.3 million for the fourth quarter of 2023, and $2.0 million for the first quarter of 2023. Mortgage banking income continues to be the largest component of our noninterest

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income at $1.2 million for the first quarter of 2024, $868 thousand for the fourth quarter of 2023, and $622 thousand for the first quarter of 2023.

Noninterest expense for the first quarter of 2024 was $18.1 million, a $1.1 million increase from the fourth quarter of 2023, and a $996 thousand increase from the first quarter of 2023. The increase in noninterest expense from the previous quarter was driven by an increase in compensation and benefits expense, while the increase from the prior year related not only to an increase in compensation and benefits expenses, but also to increases in outside service and data processing costs and insurance expenses. The increase in compensation and benefits expenses during the current quarter was due primarily to an increase in various benefit-related expenses. In addition, the increase in outside service and data processing costs from the prior quarter and prior year was driven by an increase in software licensing and maintenance costs, while insurance costs increased over the prior year due to higher FDIC insurance premiums.

Our effective tax rate was 25.5% for the first quarter of 2024, 21.9% for the fourth quarter of 2023, and 23.6% for the first quarter of 2023. The higher tax rate in the first quarter of 2024 as compared to the prior quarter and prior year was primarily related to the effect of equity compensation transactions during the quarter.

Net interest income and margin - Unaudited

For the Three Months Ended
March 31, 2024 December 31, 2023 March 31, 2023
(dollars in thousands) Average
Balance 		Income/
Expense 		Yield/
Rate(3)		 Average
Balance 		Income/
Expense 		Yield/
Rate(3)		 Average
Balance 		Income/
Expense 		Yield/
Rate(3)
Interest-earning assets
Federal funds sold and interest-bearing deposits $ 89,969 $ 1,280 5.71% $ 197,482 $ 2,703 5.43% $ 85,966 $ 969 4.57%
Investment securities, taxable 137,271 1,436 4.20% 151,969 1,632 4.26% 87,521 530 2.46%
Investment securities, nontaxable(2) 8,097 55 2.70% 7,831 55 2.76% 10,266 106 4.21%
Loans(10) 3,622,972 45,605 5.05% 3,586,863 44,758 4.95% 3,334,530 36,748 4.47%
Total interest-earning assets 3,858,309 48,376 5.03% 3,944,145 49,148 4.94% 3,518,283 38,353 4.42%
Noninterest-earning assets 159,813 174,717 161,310
Total assets $4,018,122 $4,118,862 $3,679,593
Interest-bearing liabilities
NOW accounts $ 295,774 660 0.90% $ 301,424 656 0.86% $ 303,176 440 0.59%
Savings & money market 1,620,521 16,299 4.03% 1,697,144 17,042 3.98% 1,661,878 11,992 2.93%
Time deposits 801,734 9,973 4.99% 759,839 9,429 4.92% 543,425 4,747 3.54%
Total interest-bearing deposits 2,718,029 26,932 3.97% 2,758,407 27,127 3.90% 2,508,479 17,179 2.78%
FHLB advances and other borrowings 241,319 2,229 3.71% 257,880 2,387 3.67% 18,243 200 4.45%
Subordinated debentures 36,333 557 6.15% 36,305 561 6.13% 36,224 527 5.90%
Total interest-bearing liabilities 2,995,681 29,718 3.98% 3,052,592 30,075 3.91% 2,562,946 17,906 2.83%
Noninterest-bearing liabilities 707,890 759,413 818,123
Shareholders' equity 314,551 306,857 298,524
Total liabilities and shareholders' equity $4,018,122 $4,118,862 $3,679,593
Net interest spread 1.05% 1.04% 1.59%
Net interest income (tax equivalent) / margin $18,658 1.94% $19,073 1.92% $20,447 2.36%
Less: tax-equivalent adjustment(2) 13 13 23
Net interest income $18,645 $19,060 $20,424

[Footnotes to table located on page 6]

Net interest income was $18.6 million for the first quarter of 2024, a $415 thousand decrease from the fourth quarter of 2023, driven by a $772 thousand decrease in interest income, on a tax-equivalent basis, partially offset by a $357 thousand decrease in interest expense. The decrease in interest income was driven by a $107.5 million decrease in average federal funds sold and interest-bearing deposit balances. In comparison to the first quarter of 2023, net interest income decreased $1.8 million, resulting primarily from a $432.7 million increase in average interest-bearing liabilities during the 12 months ended March 31, 2024, combined with a 115-basis point increase in the average cost. Our net interest margin, on a tax-equivalent basis, was 1.94% for the first quarter of 2024, a two-basis point increase from 1.92% for the fourth quarter of 2023 and a 42-basis point decrease from 2.36% for the first quarter of 2023. During the first quarter of 2024, the yield on our loan portfolio increased by 10-basis points, while the cost of our interest-bearing deposits increased by only seven basis points, as compared to the fourth

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quarter of 2023, resulting in a slight increase in net interest margin for the period. The lower net interest margin during the first quarter of 2024, as compared to the first quarter of 2023, was a result of our deposit and borrowing costs increasing faster than our loan yield as our interest-bearing liabilities have been more sensitive to changes in the federal funds rate over the past two years.

Balance sheets - Unaudited

Ending Balance
March 31 December 31 September 30 June 30 March 31
(in thousands, except per share data) 2024 2023 2023 2023 2023
Assets
Cash and cash equivalents:
Cash and due from banks $ 13,925 28,020 17,395 24,742 22,213
Federal funds sold 144,595 119,349 127,714 170,145 242,642
Interest-bearing deposits with banks 8,789 8,801 7,283 10,183 7,350
Total cash and cash equivalents 167,309 156,170 152,392 205,070 272,205
Investment securities:
Investment securities available for sale 125,996 134,702 144,035 91,548 94,036
Other investments 18,499 19,939 19,600 12,550 10,097
Total investment securities 144,495 154,641 163,635 104,098 104,133
Mortgage loans held for sale 11,842 7,194 7,117 15,781 6,979
Loans (5) 3,643,766 3,602,627 3,553,632 3,537,616 3,417,945
Less allowance for credit losses (40,441) (40,682) (41,131) (41,105) (40,435)
Loans, net 3,603,325 3,561,945 3,512,501 3,496,511 3,377,510
Bank owned life insurance 52,878 52,501 52,140 51,791 51,453
Property and equipment, net 93,007 94,301 95,743 96,964 97,806
Deferred income taxes 12,321 12,200 13,078 12,356 12,087
Other assets 20,527 16,837 23,351 19,536 15,967
Total assets $ 4,105,704 4,055,789 4,019,957 4,002,107 3,938,140
Liabilities
Deposits $ 3,460,681 3,379,564 3,347,771 3,433,018 3,426,774
FHLB Advances 240,000 275,000 275,000 180,000 125,000
Subordinated debentures 36,349 36,322 36,295 36,268 36,241
Other liabilities 53,418 52,436 56,993 51,307 50,775
Total liabilities 3,790,448 3,743,322 3,716,059 3,700,593 3,638,790
Shareholders' equity
Preferred stock - $.01 par value; 10,000,000 shares authorized - - - - -
Common Stock - $.01 par value; 10,000,000 shares authorized 82 81 81 81 80
Nonvested restricted stock (5,257) (3,596) (4,065) (4,051) (4,462)
Additional paid-in capital 124,159 121,777 121,757 120,912 120,683
Accumulated other comprehensive loss (11,797) (11,342) (15,255) (12,710) (11,775)
Retained earnings 208,069 205,547 201,380 197,282 194,824
Total shareholders' equity 315,256 312,467 303,898 301,514 299,350
Total liabilities and shareholders' equity $ 4,105,704 4,055,789 4,019,957 4,002,107 3,938,140
Common Stock
Book value per common share $ 38.65 38.63 37.57 37.42 37.16
Stock price:
High 38.71 37.15 30.18 31.34 45.05
Low 29.80 25.16 24.22 21.33 30.70
Period end 31.76 37.10 26.94 24.75 30.70
Common shares outstanding 8,156 8,088 8,089 8,058 8,048

[Footnotes to table located on page 6]

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Asset quality measures - Unaudited

Quarter Ended
March 31 December 31 September 30 June 30 March 31
(dollars in thousands) 2024 2023 2023 2023 2023
Nonperforming Assets
Commercial
Non-owner occupied RE $ 1,410 1,423 1,615 754 1,384
Commercial business 488 319 404 137 1,196
Consumer
Real estate 1,380 985 1,228 1,053 1,075
Home equity 367 1,236 1,068 1,072 1,078
Other 1 - - - -
Total nonaccrual loans 3,646 3,963 4,315 3,016 4,733
Other real estate owned - - - - -
Total nonperforming assets $ 3,646 3,963 4,315 3,016 4,733
Nonperforming assets as a percentage of:
Total assets 0.09% 0.10% 0.11% 0.08% 0.12%
Total loans 0.10% 0.11% 0.12% 0.09% 0.14%
Classified assets/tier 1 capital plus allowance for credit losses 3.99% 4.25% 4.72% 4.68% 5.10%
Quarter Ended
March 31 December 31 September 30 June 30 March 31
(dollars in thousands) 2024 2023 2023 2023 2023
Allowance for Credit Losses
Balance, beginning of period $ 40,682 41,131 41,105 40,435 38,639
Loans charged-off (424) (119) (42) (440) (161)
Recoveries of loans previously charged-off 183 310 168 15 102
Net loans (charged-off) recovered (241) 191 126 (425) (59)
Provision for (reversal of) credit losses - (640) (100) 1,095 1,855
Balance, end of period $ 40,441 40,682 41,131 41,105 40,435
Allowance for credit losses to gross loans 1.11% 1.13% 1.16% 1.16% 1.18%
Allowance for credit losses to nonaccrual loans 1,109.13% 1,026.58% 953.25% 1,363.11% 854.33%
Net charge-offs (recoveries) to average loans QTD (annualized) 0.03% (0.02)% (0.01)% 0.05% 0.01%

Total nonperforming assets decreased by $317 thousand during the first quarter of 2024, and represented 0.09% of total assets, a decrease compared to 0.10% for the fourth quarter of 2023 and 0.12% for the first quarter of 2023. While we added three new relationships to nonaccrual during the first quarter of 2024, there were also three relationships either returned to accrual status or paid off during the quarter. In addition, our classified asset ratio decreased to 3.99% for the first quarter of 2024 from 4.25% in the fourth quarter of 2023 and from 5.10% in the first quarter of 2023.

At March 31, 2024, the allowance for credit losses was $40.4 million, or 1.11% of total loans, compared to $40.7 million, or 1.13% of total loans at December 31, 2023, and $40.4 million, or 1.18% of total loans, at March 31, 2023. We had net charge-offs of $241 thousand, or 0.03% annualized, for the first quarter of 2024, compared to net recoveries of $191 thousand for the fourth quarter of 2023 and net charge-offs of $59 thousand for the first quarter of 2023. There was no provision for credit losses recorded during the first quarter of 2024, compared to a reversal of $640 thousand for the fourth quarter of 2023 and a provision of $1.9 million for the first quarter of 2023. As we continue to experience low net charge-offs, the expected loss rates in our allowance for credit loss continue to decline, resulting in no provision for credit loss expense for the quarter.

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LOAN COMPOSITION - Unaudited

Quarter Ended
March 31 December 31 September 30 June 30 March 31
(dollars in thousands) 2024 2023 2023 2023 2023
Commercial
Owner occupied RE $ 631,047 631,657 637,038 613,874 615,094
Non-owner occupied RE 944,530 942,529 937,749 951,536 928,059
Construction 157,464 150,680 119,629 115,798 94,641
Business 520,073 500,161 500,253 511,719 495,161
Total commercial loans 2,253,114 2,225,027 2,194,669 2,192,927 2,132,955
Consumer
Real estate 1,101,573 1,082,429 1,074,679 1,047,904 993,258
Home equity 184,691 183,004 180,856 185,584 180,974
Construction 53,216 63,348 54,210 61,044 71,137
Other 51,172 48,819 49,218 50,157 39,621
Total consumer loans 1,390,652 1,377,600 1,358,963 1,344,689 1,284,990
Total gross loans, net of deferred fees 3,643,766 3,602,627 3,553,632 3,537,616 3,417,945
Less-allowance for credit losses (40,441) (40,682) (41,131) (41,105) (40,435)
Total loans, net $ 3,603,325 3,561,945 3,512,501 3,496,511 3,377,510

DEPOSIT COMPOSITION - Unaudited

Quarter Ended
March 31 December 31 September 30 June 30 March 31
(dollars in thousands) 2024 2023 2023 2023 2023
Non-interest bearing $ 671,708 674,167 675,409 698,084 740,534
Interest bearing:
NOW accounts 293,064 310,218 306,667 308,762 303,743
Money market accounts 1,603,796 1,605,278 1,685,736 1,692,900 1,748,562
Savings 32,248 31,669 34,737 36,243 39,706
Time, less than $250,000 206,657 190,167 125,506 114,691 106,679
Time and out-of-market deposits, $250,000 and over 653,208 568,065 519,716 582,338 487,550
Total deposits $ 3,460,681 3,379,564 3,347,771 3,433,018 3,426,774
Footnotes to tables:
(1) Total revenue is the sum of net interest income and noninterest income.
(2) The tax-equivalent adjustment to net interest income adjusts the yield for assets earning tax-exempt income to a comparable yield on a taxable basis.
(3) Annualized for the respective three-month period.
(4) Noninterest expense divided by the sum of net interest income and noninterest income.
(5) Excludes mortgage loans held for sale.
(6) Excludes out of market deposits and time deposits greater than $250,000 totaling $653,208,000.
(7) March 31, 2024 ratios are preliminary.
(8) The common equity tier 1 ratio is calculated as the sum of common equity divided by risk-weighted assets.

(9) The tangible common equity ratio is calculated as total equity less preferred stock divided by total assets.

(10) Includes mortgage loans held for sale.

About Southern First Bancshares
 Southern First Bancshares, Inc., Greenville, South Carolina is a registered bank holding company incorporated under the laws of South Carolina. The company's wholly owned subsidiary, Southern First Bank, is the second largest bank headquartered in South Carolina. Southern First Bank has been providing financial services since 1999 and now operates in 12 locations in the Greenville, Columbia, and Charleston markets of South Carolina as well as the Charlotte, Triangle and Triad regions of North Carolina and Atlanta, Georgia. Southern First Bancshares has consolidated assets of approximately $4.1 billion and its common stock is traded on The NASDAQ Global Market under the symbol "SFST." More information can be found at www.southernfirst.com.

FORWARD-LOOKING STATEMENTS

Certain statements in this news release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to future plans and expectations, and are thus prospective. Such forward-looking statements are identified by words such as "believe," "expect," "anticipate," "estimate," "preliminary", "intend," "plan," "target," "continue," "lasting," and "project," as well as similar expressions. Such statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, we can give no assurance that the results contemplated in the forward-looking statements will be realized. The inclusion of this forward-looking information should not

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be construed as a representation by our company or any person that the future events, plans, or expectations contemplated by our company will be achieved.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (2) the strength of the United States economy in general and the strength of the local economies in which the company conducts operations may be different than expected; (3) the rate of delinquencies and amounts of charge-offs, the level of allowance for credit loss, the rates of loan and deposit growth as well as pricing of each product, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (4) changes in legislation, regulation, policies, or administrative practices, whether by judicial, governmental, or legislative action, including, but not limited to, changes affecting oversight of the financial services industry or consumer protection; (5) the impact of changes to Congress on the regulatory landscape and capital markets; (6) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) could continue to have a negative impact on the company; (7) changes in interest rates, which may continue to affect the company's net income, interest expense, prepayment penalty income, mortgage banking income, and other future cash flows, or the market value of the company's assets, including its investment securities; (8) elevated inflation which may cause adverse risk to the overall economy, and could indirectly pose challenges to our clients and to our business; (9) any increase in FDIC assessments which have increased and may continue to increase our cost of doing business; and (10) changes in accounting principles, policies, practices, or guidelines. Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the SEC and available at the SEC's Internet site (http://www.sec.gov). All subsequent written and oral forward-looking statements concerning the company or any person acting on its behalf is expressly qualified in its entirety by the cautionary statements above. We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law.

FINANCIAL & MEDIA CONTACT:
ART SEAVER 864-679-9010

WEB SITE: www.southernfirst.com

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Southern First Bancshares Inc. published this content on 18 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 April 2024 20:04:47 UTC.