Southern First Bancshares, Inc.
Index to Form 10-K
| Page |
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| PART I |
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| Item 1. | Business | 5 |
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| Item 1A. | Risk Factors | 29 |
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| Item 1B. | Unresolved Staff Comments | 43 |
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| Item 1C. | Cybersecurity | 43 |
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| Item 2. | Properties | 44 |
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| Item 3. | Legal Proceedings | 45 |
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| Item 4. | Mine Safety Disclosures | 45 |
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| PART II |
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| Item 5. | Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities | 45 |
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| Item 6. | [Reserved] | 46 |
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| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 47 |
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| Item 7A. | Quantitative and Qualitative Disclosures about Market Risk | 65 |
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| Item 8. | Financial Statements and Supplementary Data | 66 |
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| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 110 |
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| Item 9A. | Controls and Procedures | 110 |
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| Item 9B. | Other Information | 110 |
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| Item 9C. | Disclosures Regarding Foreign Jurisdictions that Prevent Inspections | 111 |
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| PART III |
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| Item 10. | Directors, Executive Officers and Corporate Governance | 111 |
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| Item 11. | Executive Compensation | 111 |
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| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters | 111 |
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| Item 13. | Certain Relationships and Related Transactions, and Director Independence | 111 |
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| Item 14. | Principal Accounting Fees and Services | 111 |
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| PART IV |
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| Item 15. | Exhibits, Financial Statement Schedules | 112 |
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| SIGNATURES | 116 | |
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**CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements may relate to our financial condition, results of operation, plans, business strategy, objectives, or future performance. These statements are based on many assumptions and estimates and are not guarantees of future performance. Our actual results may differ materially from those anticipated in any forward-looking statements, as they will depend on many factors about which we are unsure, including many factors which are beyond our control. The words “may,” “would,” “could,” “should,” “will,” “seek to,” “strive,” “focus,” “expect,” “anticipate,” “predict,” “project,” “potential,” “believe,” “continue,” “assume,” “intend,” “plan,” and “estimate,” as well as similar expressions, are meant to identify such forward-looking statements. Potential risks and uncertainties that could cause our actual results to differ from those anticipated in any forward-looking statements include, but are not limited to, those described below under Item 1A. Risk Factors and the following:
| · | Restrictions or conditions imposed by our regulators on our operations; |
| · | Increases in competitive pressure in the banking and financial services industries; |
| · | Changes in access to funding or increased regulatory requirements with regard to funding, which could impair our liquidity; |
| · | Changes in deposit flows, which may be negatively affected by a number of factors, including rates paid by competitors, general interest rate levels, regulatory capital requirements, returns available to clients on alternative investments and general economic or industry conditions; |
| · | Credit losses as a result of declining real estate values, increasing interest rates, increasing unemployment, changes in payment behavior or other factors; |
| · | Credit losses due to loan concentration; |
| · | Changes in the amount of our loan portfolio collateralized by real estate and weaknesses in the real estate market; |
| · | Our ability to successfully execute our business strategy; |
| · | Our ability to attract and retain key personnel; |
| · | The success and costs of our expansion into the Charlotte, North Carolina, Greensboro, North Carolina and Atlanta, Georgia markets and into potential new markets; |
| · | Risks with respect to future mergers or acquisitions, including our ability to successfully expand and integrate the businesses and operations that we acquire and realize the anticipated benefits of the mergers or acquisitions; |
| · | Changes in the interest rate environment which could reduce anticipated or actual margins; |
| · | Changes in political conditions or the legislative or regulatory environment, including new governmental initiatives affecting the financial services industry; |
| · | Changes in economic conditions resulting in, among other things, a deterioration in credit quality; |
| · | Changes occurring in business conditions and inflation; |
| · | Increased cybersecurity risk, including potential business disruptions or financial losses; |
| · | The adequacy of the level of our allowance for credit losses and the amount of loan loss provisions required in future periods; |
| · | Examinations by our regulatory authorities, including the possibility that the regulatory authorities may, among other things, require us to increase our allowance for credit losses or write-down assets; |
| · | Changes in U.S. monetary policy, the level and volatility of interest rates, the capital markets and other market conditions that may affect, among other things, our liquidity and the value of our assets and liabilities; |
| · | Any increase in FDIC assessments which will increase our cost of doing business; |
| · | Risks associated with complex and changing regulatory environments, including, among others, with respect to data privacy, artificial intelligence (“AI”), information security, climate change or other environmental, social and governance matters, and labor matters, relating to our operations; |
| · | The rate of delinquencies and amounts of loans charged-off; |
| · | The rate of loan growth in recent years and the lack of seasoning of a portion of our loan portfolio; |
| · | Our ability to maintain appropriate levels of capital and to comply with our capital ratio requirements; |
| · | Adverse changes in asset quality and resulting credit risk-related losses and expenses; |
| · | Changes in accounting standards, rules and interpretations and the related impact on our financial statements; |
| · | Risks associated with actual or potential litigation or investigations by customers, regulatory agencies or others; |
| · | Adverse effects of failures by our vendors to provide agreed upon services in the manner and at the cost agreed; |
| · | The potential effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as epidemics and pandemics, war or terrorist activities, such as the war in Ukraine, the Middle East conflict, and the conflict between China and Taiwan, disruptions in our customers’ supply chains, disruptions in transportation, essential utility outages or trade disputes and related tariffs; and disruptions caused by widespread cybersecurity incidents; and |
| · | Other risks and uncertainties detailed in this Annual Report on Form 10-K and, from time to time, in our other filings with the Securities and Exchange Commission (“SEC”). |
If any of these risks or uncertainties materialize, or if any of the assumptions underlying such forward-looking statements proves to be incorrect, our results could differ materially from those expressed in, implied or projected by, such forward-looking statements. For information with respect to factors that could cause actual results to differ from the expectations stated in the forward-looking statements, see “Risk Factors” under Part I, Item 1A of this Annual Report on Form 10-K. We urge investors to consider all of these factors carefully in evaluating the forward-looking statements contained in this Annual Report on Form 10-K. We make these forward-looking as of the date of this document and we do not intend, and assume no obligation, to update the forward-looking statements or to update the reasons why actual results could differ from those expressed in, or implied or projected by, the forward-looking statements, except as required by applicable law.
