Greenville, S.C.-based Southern First Bancshares Inc. sold and issued $23.0 million aggregate principal amount of 4.75% fixed-to-floating rate subordinated notes due Sept. 30, 2029, in a private offering.
The 2029 notes were sold pursuant to subordinated note purchase agreements with certain qualified institutional buyers and accredited investors, and were issued under an indenture between Southern First Bancshares and UMB Bank NA, as trustee.
Proceeds from the offering are expected to be $22.5 million after deducting estimated expenses. The company intends to use the proceeds for general corporate purposes, including providing capital to Southern First Bank and supporting organic growth.
From and including the date of issuance to, but excluding, Sept. 30, 2024, the notes will bear interest at a fixed annual rate of 4.75%, payable semiannually in arrears, for the first five years of the term. From and including Sept. 30, 2024, to, but excluding, the maturity date or early redemption date, the interest rate shall reset quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be three-month term secured overnight financing rate, plus 340.8 basis points, payable quarterly in arrears. The company noted in a Form 8-K, however, that the interest rate on the notes during the applicable floating rate period may be determined based on a rate other than three-month term Sofr.
Southern First Bancshares may redeem the notes in whole or in part on Sept. 30, 2024, on any interest payment date thereafter and at any time upon the occurrence of certain events. The notes are not subject to redemption at the option of the holder.
Under a registration rights agreement with the purchasers of the 2029 notes, the company agreed to take certain actions to provide for the exchange of the notes for subordinated notes that are registered under the Securities Act and have substantially the same terms as the 2029 notes. Under certain circumstances, if the company fails to meet its obligations under the registration rights agreement, it would be required to pay additional interest to the holders of the notes.
The notes are unsecured, subordinated obligations of Southern First Bancshares only and are not obligations of, and are not guaranteed by, any subsidiary of the company. These are not subject to any sinking fund and are not convertible into or, other than with respect to the exchange notes, exchangeable for any other securities or assets of the company or any of its subsidiaries.
Additionally, the company disclosed that it agreed to sell about $6.0 million of health savings account, or HSA, deposit accounts to a large, nationwide HSA servicer. The transaction is scheduled to close in early October, and the company expects to record a gain of approximately $700,000 from the sale in the fourth quarter.
Southern First Bancshares also disclosed that the estimated building cost related to an office facility of about 100,000 square feet is $30.0 million to $40.0 million.
The company on Feb. 12 agreed to acquire from Verde Properties LLC a parcel of land containing about 7 acres of office land located at the corner of Verde Boulevard and Laurens Road in Greenville. The construction of the site, which Southern First Bancshares plans to use for its headquarters, is expected to begin in late spring of 2020 with the project completed by March 2022. The company's current lease expires March 2022.
