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On Tuesday, Piper Sandler analyst Stephen Scouten initiated coverage on Southern First Bancshares (NASDAQ:SFST), currently trading at $35 with a market capitalization of $286 million, assigning the stock an Overweight rating with a price target of $43.00. Scouten’s assessment indicates a shift in the bank’s strategy, moving away from the challenges faced during the past two years and toward a more favorable financial trajectory.
Southern First Bancshares has experienced significant difficulties since the bank’s operations were initially optimized for a zero interest rate environment. The company’s balance sheet was not well-suited to cope with the sudden increase in interest rates, given that over 80% of its loans were fixed-rate and it maintained a high-cost deposit base. Despite these challenges, InvestingPro data shows the bank has maintained profitability, with earnings per share of $2.25 over the last twelve months.
However, Scouten notes that Southern First Bancshares has already begun to see improvements. The bank’s net interest margin (NIM) has expanded by 47 basis points from the first quarter of 2024, as interest rates have begun to stabilize. The analyst projects that the NIM will continue to increase, reaching approximately 2.70% by the end of 2026.
The positive outlook is further supported by strategic adjustments to the bank’s balance sheet construction. As Southern First Bancshares benefits from the repricing of fixed-rate loans and a liability-sensitive balance sheet, these changes are expected to contribute to an increase in profitability and earnings per share growth.
The $43 price target set by Piper Sandler suggests that Southern First Bancshares’ shares will trade at roughly 90% of the projected tangible book value per share (TBVPS) as the bank’s financial position strengthens. Currently trading at 0.85 times book value and showing strong revenue growth of 12%, the bank appears fairly valued according to InvestingPro Fair Value metrics. For deeper insights into the bank’s valuation and growth prospects, including additional ProTips and detailed financial metrics, subscribers can access the full analysis on InvestingPro.
In other recent news, Southern First Bancshares, Inc. has announced several significant developments. The company has expanded its board by appointing three new directors: Jennie Cluverius, Darrin Goss, and Billy McClatchey. These appointments were approved by the joint Board of Directors of Southern First Bancshares and Southern First Bank, with Cluverius joining the Compensation Committee, Goss the Audit Committee, and McClatchey the Risk Committee. Additionally, Southern First Bancshares has promoted Wes Wilbanks to Chief Credit Officer and Executive Vice President, highlighting his 25 years of banking experience. This move is aligned with the company’s focus on growth and risk management within its loan portfolio. In another executive update, the company announced the upcoming departure of its Chief Risk Officer, William M. Aiken III, effective March 31, 2025. Aiken has been a key figure in the company’s risk management strategies since joining in 2020. These changes reflect Southern First Bancshares’ ongoing efforts to strengthen its leadership team and maintain a robust strategic direction in the competitive banking industry.
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