Southern First Bancshares (SFST) risk factors, FY2025 10-K

Risks Related to Economic Conditions

1. 01Our business may be adversely affected by conditions in the financial markets and economic conditions generally
2. 02A significant portion of our loan portfolio is secured by real estate, and events that negatively affect the real estate market could hurt our business

Risks Related to Lending Activities

1. 03Our loan portfolio contains a number of real estate loans with relatively large balances
2. 04Commercial real estate loans increase our exposure to credit risk42% rewritten
3. 05Imposition of limits by the bank regulators on commercial and multi-family real estate lending activities could curtail our growth and adversely affect our earnings
4. 06Repayment of our commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value
5. 07We may have higher credit losses than we have allowed for in our allowance for credit losses
6. 08Our decisions regarding allowance for credit losses and credit risk may materially and adversely affect our business
7. 09A percentage of the loans in our portfolio may include exceptions to our loan policies and supervisory guidelines

Risks Related to Capital and Liquidity

1. 10Liquidity needs could adversely affect our financial condition and results of operations44% rewritten

Legal, Accounting, Regulatory and Compliance Risks

1. 11We are subject to extensive regulation that has limited the conduct of our business, and could impose financial requirements, each of which could have an adverse impact on our operations
2. 12We are subject to fair lending laws, and failure to comply with these laws could lead to material penalties
3. 13We face risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities58% rewritten
4. 14We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations
5. 15Consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business
6. 16The Federal Reserve may require us to commit capital resources to support the Bank

Risks Related to Our Operations

1. 17Competition with other financial institutions may have an adverse effect on our ability to retain and grow our client base, which could have a negative effect on our financial condition or results of operations
2. 18We are subject to environmental risks that could result in losses
3. 19We rely on other companies to provide key components of our business infrastructure27% rewritten
4. 20We may be adversely affected by the soundness of other financial institutions
5. 21We are subject to losses due to errors, omissions or fraudulent behavior by our employees, clients, counterparties or other third parties
6. 22Our operational or security systems may experience an interruption or breach in security, including as a result of cyber-attacks
7. 23Our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses
8. 24Our controls and procedures may fail or be circumvented
9. 25Failure to keep pace with technological change could adversely affect our business
10. 26The development and use of AI presents risks and challenges that may adversely impact our business
11. 27Our profitability is dependent on our banking activities

Risks Related to Our Industry

1. 28We are subject to interest rate risk, which could adversely affect our financial condition and profitability
2. 29Inflationary pressures and rising prices may affect our results of operations and financial condition40% rewritten
3. 30The Federal Reserve has implemented significant economic strategies that have affected interest rates, inflation, asset values, and the shape of the yield curve
4. 31Negative public opinion surrounding the Company and the financial institutions industry generally could damage our reputation and adversely impact our earnings
5. 32Adverse developments affecting the financial services industry, such as recent bank failures or concerns involving liquidity, may have a material adverse effect on the Company’s operations23% rewritten
6. 33Consumers may decide not to use banks to complete their financial transactions
7. 34Our reliance on brokered deposits could adversely affect our liquidity and operating results22% rewritten

Risks Related to Our Strategic Plans

1. 35We are dependent on key individuals and the loss of one or more of these key individuals could curtail our growth and adversely affect our prospects62% rewritten
2. 36of promptly finding qualified replacement personnel. Leadership transitions can be inherently difficult to manage, and an inadequate transition to a permanent successor may cause disruptions to our business due to, among other things, diverting management’s attention or causing a deterioration in moraleNew
3. 37The success of our growth strategy depends on our ability to identify and retain individuals with experience and relationships in the markets in which we intend to expand
4. 38We will face risks with respect to future expansion
5. 39New lines of business or new products and services may subject us to additional risk

Risks Related to Our Common Stock

1. 40Our ability to pay cash dividends is limited, and we may be unable to pay future dividends even if we desire to do so
2. 41Our stock price may be volatile, which could result in losses to our investors and litigation against us
3. 42Future sales of our stock by our shareholders or the perception that those sales could occur may cause our stock price to decline
4. 43Provisions of our articles of incorporation and bylaws, South Carolina law, and state and federal banking regulations, could delay or prevent a takeover by a third party52% rewritten
5. 44Our common stock is not an insured deposit and is not guaranteed by the FDIC
6. 45We may be subject to claims and litigation asserting lender liability
7. 46From time to time, we are, or may become, involved in suits, legal proceedings, information-gatherings, investigations and proceedings by governmental and self-regulatory agencies that may lead to adverse consequences