Southern First Bancshares, Inc. (SFST): 5 FORCES Analysis [Nov-2025 Updated]

You're looking for the real story behind Southern First Bancshares, Inc.'s strong Q3 2025 performance-that 2.62% Net Interest Margin on $4.4 Billion in assets is certainly eye-catching, but what does it mean for the long haul? Honestly, even with solid numbers, the banking landscape in the Southeast is a pressure cooker, with customers easily shopping for better loan rates and Financial Technology (FinTech) firms nibbling at the edges. To give you that clear-eyed view I always aim for, I've mapped out exactly where the competitive leverage sits across the five critical forces-from the power of your depositors to the threat of new entrants-so you can see the risks and opportunities baked into the business model right now. Let's dive into the details below.

Southern First Bancshares, Inc. (SFST) - Porter's Five Forces: Bargaining power of suppliers

When you look at Southern First Bancshares, Inc. (SFST), the suppliers aren't widgets or raw materials; they are the providers of the bank's lifeblood: money and talent. The power these suppliers wield directly impacts the firm's profitability, which is why we watch their costs so closely.

Cost of funds is definitely a major pressure point. Competition for deposits in the vibrant Southeastern markets where Southern First Bancshares operates is fierce. This competition pushed the Net Interest Margin (NIM) to 2.62% in Q3 2025, up from 2.50% in Q2 2025. While margin expansion is good-it was 2.08% in Q3 2024-it shows the ongoing cost to secure funding. The bank is managing this by growing its loan portfolio to $3.8 billion while core deposits grew to $2.9 billion in Q3 2025.

Depositors, as a collective supplier group, have significant leverage, especially in a competitive rate environment. However, Southern First Bancshares mitigates some of this funding cost pressure through its deposit composition. As of Q2 2025, almost 21% of the bank's total deposits, which stood at $3.64 billion then, were non-interest bearing. Here's the quick math: that equates to roughly $764.4 million in funding that costs the bank nothing in direct interest expense. Still, you know that the remaining portion of deposits is costing them more, which is why that NIM is so closely watched.

It's helpful to see the key funding metrics side-by-side:

Another critical supplier group is human capital. Experienced bankers are a scarce resource in these high-growth Southeastern markets. Southern First Bancshares explicitly states they 'continue to attract and retain experienced bankers,' which signals that competition for this talent is high enough to warrant continuous focus and likely increased compensation and benefits expenses. We saw noninterest expenses related to compensation and benefits increase year-over-year, even with a slight sequential decrease in Q3 2025. You have to keep paying competitively to keep your best relationship managers.

Finally, consider the technology vendors. For core banking platforms, the power held by these suppliers is generally moderate. Why? Because switching costs are incredibly high in banking. Migrating customer data, retraining staff, and re-integrating systems for a core platform is a massive, multi-quarter undertaking. This high barrier to exit gives the incumbent technology providers a solid negotiating position, even if the annual service fees are subject to contract review.

Here is a summary of the supplier dynamics you are facing:

• Cost of funds is high due to competition for deposits, raising NIM to 2.62% in Q3 2025.
• Depositors have high leverage, but 21% of deposits are non-interest bearing, mitigating funding costs.
• Experienced bankers are a scarce resource, forcing Southern First Bancshares to continually attract and retain talent.
• Technology vendors for core systems maintain moderate power due to high switching costs for banking platforms.

Finance: draft the projected impact of a 50 basis point increase in deposit beta on Q4 2025 NIM by next Tuesday.

Southern First Bancshares, Inc. (SFST) - Porter's Five Forces: Bargaining power of customers

You're looking at the customer power in the banking sector, and for Southern First Bancshares, Inc., it's a constant balancing act between price sensitivity and relationship value. For the basic, transactional side of the business, the power leans toward the customer.

Customers have low switching costs for basic products like checking and savings accounts. While Southern First Bancshares, Inc. reported core deposits of $2.9 billion as of Q3 2025, the ease of moving these funds to a competitor offering a better yield or lower fee structure is a persistent pressure point. The Net Interest Margin for Southern First Bancshares, Inc. stood at 2.62% in Q3 2025, meaning customers are constantly aware of the rates available elsewhere.

Borrowers of the $3.8 billion loan portfolio can easily shop for better rates from competing regional and national banks. This is especially true in the competitive Southeast metro markets where Southern First Bancshares, Inc. operates its 12 banking offices. If the pricing on a commercial real estate loan or a line of credit is not competitive, the relationship team has to work hard to keep the business.

The 'ClientFIRST' relationship model is the primary defense against customer defintely switching on price alone. This strategy focuses on delivering an exceptional level of professional service through a consistent team of bankers, aiming to build loyalty beyond just the rate sheet. Southern First Bancshares, Inc. emphasizes this service model as a distinct competitive advantage against larger, out-of-state institutions.

Large commercial clients have significant leverage to negotiate favorable loan and treasury management terms. These clients often represent the largest loan balances and the most substantial operating deposit accounts, giving them the weight to push for better pricing. The bank's focus on professional markets, such as doctors, dentists, and small business owners, means these relationships are high-value and require tailored negotiation.

Here's a quick look at some key Q3 2025 metrics that frame the competitive landscape:

The bank's strategy is to make the relationship friction high enough that the cost of switching-the hassle, the disruption, the need to learn new systems-outweighs the marginal benefit of a slightly better rate. Finance: draft a sensitivity analysis on deposit churn risk if NIM drops by 25 basis points by Friday.

Southern First Bancshares, Inc. (SFST) - Porter's Five Forces: Competitive rivalry

You're looking at the competitive intensity in the Southeastern US banking space, and honestly, it's fierce. Southern First Bancshares, Inc. operates right in the middle of it, competing across South Carolina, North Carolina, and Georgia. This isn't a quiet pond; it's a crowded, dynamic market where growth is the name of the game for everyone.

The rivalry is definitely high because every regional player, big or small, is laser-focused on the same dual goals: driving high-quality loan growth and expanding their net interest margin (NIM). For Southern First Bancshares, Inc., this means every new commercial relationship or mortgage application is a direct contest against better-capitalized, larger banks.

Consider the scale difference. Southern First Bancshares, Inc. is classified as a micro-cap bank, reporting total assets of $4.4 Billion as of Q3 2025. That puts it in a different league when squaring off against established giants in the same footprint. To give you a concrete example of the disparity you're facing, look at the asset bases of some of the major regional players:

That table shows you the immediate challenge. When you're competing for the same high-value commercial client in Atlanta or Charlotte, the sheer balance sheet size of competitors like Truist Financial Corporation, with $544 Billion in assets, or Regions Financial Corporation, with $159.940 Billion in assets, changes the dynamic significantly.

Still, Southern First Bancshares, Inc. has carved out a competitive edge through discipline, which is a key differentiator when everyone is chasing growth. The bank's focus on superior asset quality acts as a shield against the aggressive lending that can sometimes accompany high rivalry. You can see this strength clearly in their Q3 2025 metrics:

• Nonperforming Assets (NPAs) to total assets: 0.27%.
• Net charge-offs (NCOs): 0.00%.
• Total Loans: $3.8 Billion.
• Core Deposits: $2.9 Billion.
• Net Interest Margin (NIM): 2.62%.

This focus on quality over quantity in lending, while maintaining a healthy NIM of 2.62%, is what allows the bank to compete effectively on relationship banking rather than just rate wars. It helps support strong profitability metrics, like the diluted EPS of $1.07 in Q3 2025, and a book value per common share of $43.51. The rivalry is intense, but Southern First Bancshares, Inc.'s asset quality is definitely a competitive strength you need to track.

Southern First Bancshares, Inc. (SFST) - Porter's Five Forces: Threat of substitutes

The threat of substitutes for Southern First Bancshares, Inc. remains a persistent factor, as various non-bank entities and alternative investment vehicles directly compete for both lending volume and core deposit funding. You need to watch these closely because they chip away at both sides of the balance sheet.

Non-bank mortgage lenders substitute a core product, as mortgage banking is a key noninterest income contributor.

The mortgage origination space is heavily dominated by non-bank entities, which directly pressures the fee income Southern First Bancshares, Inc. generates from its mortgage banking activities. For instance, in the first quarter of 2025, the nonbank share of total originations climbed to 66.4%, up from 65.2% in 2024. To put the scale in perspective, non-bank financial institutions accounted for 17 of the top 25 mortgage lenders in the U.S. by originations in 2024. While Southern First Bancshares, Inc. reported mortgage banking income of $1.6 million in fee revenue for the third quarter of 2025, this segment is constantly under threat from these larger, more specialized players. Total mortgage originations are forecast to reach $1.9 trillion in 2025, a market where nonbanks are expected to capture the majority share.

Financial Technology (FinTech) firms offer highly efficient, low-cost alternatives for payments and lending services.

FinTechs are not just a threat to traditional banking infrastructure; they are a massive, growing market segment. The U.S. Digital Lending Market was valued at $303.07 billion in 2025. Furthermore, the broader U.S. Fintech Market size was projected to reach $97.8 billion in 2025, up from $85.7 billion in 2024. These firms use AI and ML, which held a 35.6% market share in 2024 within the fintech technology segment, to offer speed and efficiency that can pull both loan originations and payment processing away from established banks.

Large brokerage houses and money market funds substitute deposits by offering higher yields on liquid assets.

For Southern First Bancshares, Inc.'s deposit base-which stood at $2.9 billion in core deposits as of Q3 2025-the primary substitute threat comes from liquid, higher-yielding investments. Money market funds (MMFs) are a major draw, with total U.S. MMF assets reaching $7 trillion in 2024. While the national average money market account (MMA) yield was only 0.44% APY as of mid-November 2025, the best online MMAs were offering rates up to 4.25% APY. The US Money Market Treasury Yield was 3.86% in November 2025. This wide gap between the average bank deposit rate and the top alternative yields creates a constant incentive for clients to move funds out of traditional accounts, directly challenging Southern First Bancshares, Inc.'s funding stability.

Credit unions and community development financial institutions (CDFIs) offer tax-advantaged, localized competition.

Localized competition is fierce, especially given Southern First Bancshares, Inc.'s focus on Southeastern markets. Credit unions, which operate as member-owned cooperatives driven by service rather than profit, offer a structural advantage through tax-exempt status. Nationally, the Credit Unions industry market size was $147.4 billion in 2025. Specifically in one of Southern First Bancshares, Inc.'s key states, the Credit Unions industry market size in South Carolina was $1.4 billion in 2025. The competitive landscape in the Carolinas is evident, as 11 credit unions across North Carolina and South Carolina were recognized on Forbes' 2025 list of America's Best-In-State Credit Unions.

Here's a quick look at the scale of these substitute threats:

Finance: review the current average rate paid on SFST's core deposits versus the 3.86% US Money Market Treasury Yield as of November 2025 by next Tuesday.

Southern First Bancshares, Inc. (SFST) - Porter's Five Forces: Threat of new entrants

The threat of new entrants for Southern First Bancshares, Inc. remains moderate. Honestly, starting a new bank from scratch-a de novo institution-is incredibly tough because of the sector's inherent structure. You're facing high capital requirements just to get the doors open, plus the sheer weight of regulatory compliance. These factors definitely act as a significant moat for established players like Southern First Bancshares, Inc.

Still, the bank's chosen turf keeps the pressure on. Southern First Bancshares, Inc. operates across high-growth Southeastern markets, including Greenville, Columbia, and Charleston in South Carolina; Charlotte, Raleigh, and Greensboro in North Carolina; and Atlanta, Georgia. These areas are magnets for capital, continually drawing both new de novo banks and expansion efforts from existing regional banks looking to plant a flag where the economy is booming. For instance, South Carolina posted the fastest-growing GDP in the nation at the start of this year, which is a huge draw. It means new competitors are always looking for a way in.

Southern First Bancshares, Inc. benefits from a soft barrier built on time and trust. The bank has a 25-year history, having been established in 1999. Those years build deep, local relationships that are hard for non-local entrants to replicate quickly. You can't just buy that kind of local knowledge; you have to earn it client by client. That relationship-focused approach, which they call the ClientFIRST model, is a key differentiator against a purely digital or distant competitor.

The regulatory compliance costs for new entrants are substantial, which helps protect the incumbent's capital position. Southern First Bancshares, Inc. maintains a strong buffer, reporting a Common Equity Tier 1 (CET1) capital ratio of 10.9% as of the latest required reporting period. This level of capitalization is a direct result of disciplined operations and provides a solid foundation against new, less capitalized competition. Here's a quick look at the scale and performance that new entrants would need to match in these attractive markets:

The difference in ROAA between Southern First Bancshares, Inc. at 0.80% and the national average of 1.21% in Q2 2025 shows that while the markets are attractive, operational efficiency for new entrants must be top-tier to compete immediately. Plus, the regulatory hurdle itself is a major cost center.

• High initial capital requirements are a primary deterrent.
• Regulatory compliance costs are substantial for startups.
• SFST's Tier 1 RBC was 11.26% in Q3 2025, showing strong capital backing.
• Geographic footprint covers high-growth metros in SC, NC, and GA.
• SFST has 25 years of established local market presence.

Finance: review the capital expenditure budget for Q1 2026 by end of next week.