1090009--3/2/2010--SOUTHERN_FIRST_BANCSHARES

related topics

{condition, economic, financial}

{stock, price, share}

{loan, real, estate}

{loss, insurance, financial}

{capital, credit, financial}

{personnel, key, retain}

{financial, litigation, operation}

{acquisition, growth, future}

{system, service, information}

{competitive, industry, competition}

{regulation, change, law}

Negative developments in the financial industry and the domestic and international credit markets have adversely affected our operations and results. There can be no assurance that recently enacted legislation will help stabilize the U.S. financial system. Because of our participation in the Treasury Department's Capital Purchase Program, we are subject to several restrictions including restrictions on compensation paid to our executives. Legislation or regulatory changes could cause us to seek to repurchase the preferred stock and warrants that we sold to the Treasury Department pursuant to the Capital Purchase Program. The Series T Preferred Stock impacts net income available to our common shareholders and earnings per common share, and the warrant we issued to Treasury may be dilutive to holders of our common stock. Continuation of the economic downturn could reduce our customer base, our level of deposits, and demand for financial products such as loans. A significant portion of our loan portfolio is secured by real estate, and events that negatively impact the real estate market could hurt our business. Our FDIC Deposit Insurance premiums have risen significantly in the recent past and may continue to increase in the future as a result of our risk assessment category and increased assessment rates imposed by the FDIC. Our decisions regarding credit risk and reserves for loan losses may materially and adversely affect our business. Lack of seasoning of our loan portfolio may increase the risk of credit defaults in the future. Our small- to medium-sized business target markets may have fewer financial resources to weather a downturn in the economy. We depend on the accuracy and completeness of information about clients and counterparties and our financial condition could be adversely affected if it relies on misleading information. Changes in prevailing interest rates may reduce our profitability. We are dependent on key individuals and the loss of one or more of these key individuals could curtail our growth and adversely affect our prospects. We are subject to extensive regulation that could limit or restrict our activities. We may be adversely affected by the soundness of other financial institutions. We may need to raise additional capital in the future to redeem the Series T Preferred Stock or to support further growth, but that capital may not be available when it is needed. Liquidity needs could adversely affect our financial condition and results of operation. We depend heavily on out of market deposits as a source of funding. We face strong competition for clients, which could prevent us from obtaining clients and may cause us to pay higher interest rates to attract clients. We will face risks with respect to future expansion and acquisitions or mergers. The 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. Our decisions regarding credit risk and reserves for loan losses may materially and adversely affect our business. A small percentage of the loans in our portfolio currently include exceptions to our loan policies and supervisory guidelines. We are exposed to the possibility of technology failure and a disruption in our operations may adversely affect our business.

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1090009--3/2/2010--SOUTHERN_FIRST_BANCSHARES_INC