First Reliance Bancshares Reports First Quarter 2022 Results

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Apr 27, 2022, 16:30 ET

FLORENCE, S.C., April 27, 2022 /PRNewswire/ -- First Reliance Bancshares, Inc. (OTC:FSRL), the holding company for First Reliance Bank (collectively, "First Reliance" or the "Company"), today announced its financial results for the first quarter of 2022.

First Quarter 2022 Highlights

Net income for the first quarter of 2022 was $0.9 million, or $0.11 per diluted share, compared to $1.7 million, or $0.21 per diluted share, for the first quarter of 2021.
Total loans increased $5.6 million, or 3.8% annualized, to $592.1 million at March 31, 2022 from $586.4 million at December 31, 2021.
Total investment securities available for sale increased $62.5 million, or 305.2% annualized, to $144.4 million at March 31, 2022 from $81.9 million at December 31, 2021.
Total deposits increased $56.8 million, or 29.1% annualized, to $837.7 million at March 31, 2022 from $780.8 million at December 31, 2021.
Transaction deposits⁽¹⁾ increased $49.6 million during the quarter to $441.5 million and represent 52.7% of total deposits at March 31, 2022.
Net interest income for the quarter was $6.6 million, which represents an increase of $1.0 million, or 17.4%, compared to the same period in 2021.
Asset quality remained strong, with nonperforming assets as a percentage of total assets remaining nominal at 0.11% at March 31, 2022. Remaining other real estate owned (one property) was sold during the quarter to bring the balance to zero.
The Company had net recoveries of $81 thousand, or annualized (0.06%) of average loans during the quarter compared to net charge-offs of $5 thousand, or annualized 0.00% of average loans, for the same period in 2021.
Cost of funds for the first quarter of 2022 decreased to 0.22% from 0.23% on a linked quarter basis and from 0.34% for the same period in 2021.

Rick Saunders, Chief Executive Officer, remarked: "The first quarter has brought significant changes to the economic environment, highlighted by mounting inflationary pressures, geopolitical uncertainty, and an increasingly hawkish Federal Reserve. In the face of these challenges, First Reliance continues to focus on growing our exceptional deposit franchise and originating loans that meet our high underwriting standards. While loan growth slowed in the first quarter, our pipelines remain strong as we move into Q2."

Mr. Saunders continued, "Our top priorities for the coming quarters are disciplined growth, net interest margin expansion, and improved operating leverage. While the increase in interest rates has normalized mortgage revenues, we believe our core banking business is well-positioned to take advantage of this new rate environment."

Financial Summary
	Three Months Ended
	Mar 31	Dec 31	Sept 30	June 30	Mar 31
($ in thousands, except per share data)	2022	2021	2021	2021	2021
Earnings:
Net income available to common shareholders	$ 852	$ 932	$ 1,288	$ 1,348	$ 1,708
Earnings per common share, diluted	0.11	0.12	0.16	0.17	0.21
Total revenue⁽²⁾	9,097	9,253	9,570	10,169	9,917
Net interest margin	3.12%	3.10%	3.12%	3.40%	3.36%
Return on average assets⁽³⁾	0.37%	0.41%	0.60%	0.67%	0.93%
Return on average equity⁽³⁾	4.85%	5.28%	7.29%	7.83%	9.91%
Efficiency ratio⁽⁴⁾	87.50%	88.45%	83.83%	81.82%	77.35%

Footnotes to table located at the end of this release.





	As of
	Mar 31	Dec 31	Sept 30	June 30	Mar 31
(dollars in thousands)	2022	2021	2021	2021	2021
Balance Sheet:
Total assets	$ 953,784	$ 910,797	$ 911,057	$ 832,241	$ 777,735
Total loans receivable	592,089	586,446	564,738	526,362	490,326
Total deposits	837,663	780,833	787,501	711,505	661,217
Total transaction deposits⁽¹⁾ to total deposits	52.71%	50.19%	48.25%	48.92%	49.78%
Loans to deposits	70.68%	75.11%	71.71%	73.98%	74.16%
Bank Capital Ratios:
Total risk-based capital ratio	13.67%	14.07%	15.80%	14.89%	16.00%
Tier 1 risk-based capital ratio	12.65%	13.03%	14.64%	13.84%	14.87%
Tier 1 leverage ratio	9.67%	9.66%	10.24%	10.43%	11.13%
Common equity tier 1 capital ratio	12.65%	13.03%	14.64%	13.84%	14.87%
Asset Quality Ratios:
Nonperforming assets as a percentage of total assets	0.11%	0.10%	0.15%	0.17%	0.17%
Allowance for loan losses as a percentage of total loans receivable	1.22%	1.20%	1.23%	1.20%	1.26%

Footnotes to table located at the end of this release.

CONDENSED CONSOLIDATED INCOME STATEMENTS – Unaudited
	Three Months Ended
	Mar 31	Dec 31	Sept 30	June 30	Mar 31
($ in thousands, except per share data)	2022	2021	2021	2021	2021
Interest income
Loans	$ 6,380	$ 6,663	$ 6,382	$ 6,391	$ 5,851
Investment securities	571	359	294	311	238
Other interest income	73	79	58	38	60
Total interest income	7,024	7,101	6,734	6,740	6,149
Interest expense
Deposits	197	224	257	255	286
Other interest expense	252	256	213	265	262
Total interest expense	449	480	470	520	548
Net interest income	6,575	6,621	6,264	6,220	5,601
Provision for loan losses	85	95	100	108	-
Net interest income after provision for loan losses	6,490	6,526	6,164	6,112	5,601
Noninterest income
Mortgage banking income	1,420	1,407	2,151	2,582	3,390
Service fees on deposit accounts	362	356	315	272	279
Debit card and other service charges, commissions, and fees	498	543	532	509	454
Income from bank owned life insurance	88	93	94	94	93
Gain on sale of securities, net	-	-	42	39	-
Gain on sale of loans	-	-	-	326	-
Gain on disposal of fixed assets	10	69	-	-	-
Other income	144	164	172	127	100
Total noninterest income	2,522	2,632	3,306	3,949	4,316
Noninterest expense
Compensation and benefits	5,079	4,965	5,268	5,518	4,992
Occupancy and equipment	893	862	784	779	796
Data processing, technology, and communications	837	920	852	916	866
Professional fees	180	202	234	242	238
Marketing	74	150	113	88	69
Other	897	1,085	772	777	710
Total noninterest expense	7,960	8,184	8,023	8,320	7,671
Income before provision for income taxes	1,052	974	1,447	1,741	2,246
Income tax expense	200	42	159	393	538
Net income available to common shareholders	$ 852	$ 932	$ 1,288	$ 1,348	$ 1,708

Weighted average common shares - basic	7,784	7,785	7,750	7,681	7,780
Weighted average common shares - diluted	8,100	8,096	8,084	8,164	8,168
Basic income per common share	$ 0.11	$ 0.12	$ 0.17	$ 0.18	$ 0.22
Diluted income per common share	$ 0.11	$ 0.12	$ 0.16	$ 0.17	$ 0.21

Net income for the three months ended March 31, 2022 was $0.9 million, or $0.11 per diluted common share, compared to $1.7 million, or $0.21 per diluted common share, for the three months ended March 31, 2021.

Noninterest income for the three months ended March 31, 2022 was $2.5 million, a decrease of $1.8 million from $4.3 million for the same period in 2021. Noninterest income is largely driven by the Company's mortgage banking division, which produced net revenue of $1.4 million on $72 million of mortgage sale volume during the three months ended March 31, 2022. Mortgage banking income decreased period-over-period primarily because of a decrease in sale volume. Service charges on deposit accounts as well as debit card and other fees were a combined $0.9 million for the three months ended March 31, 2022, an increase of $0.1 million from the same period in 2021.

Noninterest expense for the three months ended March 31, 2022 was $8.0 million, an increase of $0.3 million from $7.7 million for the same period in 2021. This increase was driven mainly by an increase of $0.2 million in other noninterest expense. Compensation and benefits expense increased slightly to $5.1 million for the three months ended March 31, 2022 from $5.0 million for the same period in 2021. Included in compensation and benefits for the current quarter is approximately $55 thousand in severance expense.

NET INTEREST INCOME AND MARGIN – Unaudited
	For the Three Months Ended
	March 31, 2022			March 31, 2021
	Average	Income/	Yield/	Average	Income/	Yield/
(dollars in thousands)	Balance	Expense	Rate	Balance	Expense	Rate
Assets
Interest-earning assets
Federal funds sold and interest-bearing deposits	$ 139,225	$ 66	0.19%	$ 104,580	$ 30	0.12%
Investment securities	107,863	571	2.15%	39,203	238	2.43%
Nonmarketable equity securities	614	7	4.80%	1,055	30	11.31%
Loans held for sale	19,922	164	3.33%	38,273	265	2.76%
Loans	587,161	6,216	4.29%	483,472	5,586	4.62%
Total interest-earning assets	854,785	7,024	3.33%	666,583	6,149	3.69%
Allowance for loan losses	(7,103)			(6,318)
Noninterest-earning assets	80,270			73,217
Total assets	$ 927,952			$ 733,482

Liabilities and Shareholders' Equity
Interest-bearing liabilities
NOW accounts	$ 163,581	$ 19	0.05%	$ 123,316	$ 13	0.04%
Savings & money market	275,051	84	0.12%	174,429	74	0.17%
Time deposits	120,378	94	0.32%	140,921	199	0.56%
Total interest-bearing deposits	559,010	197	0.14%	438,666	286	0.26%
FHLB advances and other borrowings	15,516	24	0.62%	16,118	46	1.13%
Subordinated debentures	25,663	228	3.60%	20,786	216	4.16%
Total interest-bearing liabilities	600,189	449	0.30%	475,570	548	0.46%
Noninterest bearing deposits	245,502			178,456
Other liabilities	12,071			10,543
Shareholders' equity	70,190			68,913
Total liabilities and shareholders' equity	$ 927,952			$ 733,482

Net interest income (tax equivalent) / interest rate spread		$ 6,575	3.03%		$ 5,601	3.23%
Net Interest Margin			3.12%			3.36%

Net interest income for the three months ended March 31, 2022 was $6.6 million compared to $5.6 million for the three months ended March 31, 2021. This increase was primarily driven by an increase in interest-earning assets as well as a decrease in the cost of interest-bearing liabilities, which decreased from 0.46% to 0.30%. Improvements in costs of interest-bearing liabilities were offset by decreases in asset yield. Yield on interest-earning assets decreased to 3.33% for the three months ended March 31, 2022 from 3.69% for the same period in 2021.

CONDENSED CONSOLIDATED BALANCE SHEETS – Unaudited
	As of
	Mar 31	Dec 31	Sept 30	June 30	Mar 31
(dollars in thousands)	2022	2021	2021	2021	2021
Assets
Cash and cash equivalents:
Cash and due from banks	$ 4,672	$ 5,299	$ 4,930	$ 5,486	$ 5,547
Interest-bearing deposits with banks	116,192	144,825	184,739	144,937	115,577
Total cash and cash equivalents	120,864	150,124	189,669	150,423	121,124
Time deposits in other banks	257	257	257	256	256
Investment securities:
Investment securities available for sale	144,422	81,917	58,470	56,881	54,413
Other investments	521	837	837	837	837
Total investment securities	144,943	82,754	59,307	57,718	55,250
Mortgage loans held for sale	23,528	23,844	33,667	33,097	48,912
Loans receivable:
Loans	592,089	586,446	564,738	526,362	490,326
Less allowance for loan losses	(7,206)	(7,040)	(6,934)	(6,323)	(6,168)
Loans receivable, net	584,883	579,406	557,804	520,039	484,158
Property and equipment, net	23,222	22,805	22,364	21,818	18,465
Mortgage servicing rights	14,536	14,057	13,785	13,603	13,353
Bank owned life insurance	18,564	18,476	18,383	18,289	18,195
Deferred income taxes	5,862	4,128	2,798	2,820	3,234
Other assets	17,125	14,946	13,023	14,178	14,788
Total assets	953,784	910,797	911,057	832,241	777,735
Liabilities
Deposits	$ 837,663	$ 780,833	$ 787,501	$ 711,505	$ 661,217
Federal Home Loan Bank advances	-	10,000	10,000	10,000	10,000
Federal funds and repurchase agreements	11,886	11,372	6,353	8,946	6,955
Subordinated debentures	15,357	15,349	15,498	10,496	10,487
Junior subordinated debentures	10,310	10,310	10,310	10,310	10,310
Other liabilities	11,937	12,131	10,983	11,393	10,548
Total liabilities	887,153	839,995	840,645	762,650	709,517
Shareholders' equity
Preferred stock - Series D non-cumulative, no par value	1	1	1	1	1
Common Stock - $.01 par value; 20,000,000 shares authorized	88	88	88	88	88
Treasury stock, at cost	(4,419)	(4,323)	(4,281)	(3,858)	(3,744)
Nonvested restricted stock	(2,572)	(2,668)	(2,737)	(2,928)	(2,868)
Additional paid-in capital	53,980	53,856	53,765	53,776	53,617
Retained earnings	24,837	23,985	23,053	21,765	20,417
Accumulated other comprehensive income (loss)	(5,284)	(137)	523	747	707
Total shareholders' equity	66,631	70,802	70,412	69,591	68,218
Total liabilities and shareholders' equity	$ 953,784	$ 910,797	$ 911,057	$ 832,241	$ 777,735

COMMON STOCK SUMMARY - Unaudited
			As of
	Mar 31	Dec 31	Sept 30	June 30	Mar 31
(shares in thousands)	2022	2021	2021	2021	2021
Voting common shares outstanding	8,782	8,793	8,784	8,788	8,784
Treasury shares outstanding	(545)	(535)	(530)	(489)	(481)
Total common shares outstanding	8,237	8,258	8,254	8,299	8,303

Tangible book value per common share⁽⁵⁾	$ 7.98	$ 8.46	$ 8.41	$ 8.27	$ 8.09

Stock price:
High	$ 10.20	$ 10.74	$ 10.50	$ 10.05	$ 10.00
Low	$ 9.75	$ 9.95	$ 9.80	$ 9.65	$ 7.46
Period end	$ 9.85	$ 10.20	$ 10.30	$ 9.90	$ 9.90

Footnotes to table located at the end of this release.

ASSET QUALITY MEASURES – Unaudited
	As of
	Mar 31	Dec 31	Sept 30	June 30	Mar 31
(dollars in thousands)	2022	2021	2021	2021	2021
Nonperforming Assets
Commercial
Owner occupied RE	$ 144	$ 152	$ 526	$ 535	$ 385
Non-owner occupied RE	295	-	-	-	-
Construction	-	-	-	-	-
Commercial business	-	-	-	-	-
Consumer
Real estate	343	341	346	383	344
Home equity	-	-	-	-	-
Construction	-	-	-	-	-
Other	104	84	121	129	164
Nonaccruing troubled debt restructurings	190	205	220	235	252
Total nonaccrual loans	$ 1,076	$ 782	$ 1,213	$ 1,282	$ 1,145
Other real estate owned	-	135	150	150	150
Total nonperforming assets	$ 1,076	$ 917	$ 1,363	$ 1,432	$ 1,295
Nonperforming assets as a percentage of:
Total assets	0.11%	0.10%	0.15%	0.17%	0.17%
Total loans receivable	0.18%	0.16%	0.24%	0.27%	0.26%
Accruing troubled debt restructurings	$ 1,393	$ 1,405	$ 1,444	$ 1,478	$ 1,544

	Three Months Ended
	Mar 31	Dec 31	Sept 30	June 30	Mar 31
(dollars in thousands)	2022	2021	2021	2021	2021
Allowance for Loan Losses
Balance, beginning of period	$ 7,040	$ 6,934	$ 6,323	$ 6,168	$ 6,173
Loans charged-off	19	5	72	59	55
Recoveries of loans previously charged-off	100	16	583	106	50
Net charge-offs (recoveries)	(81)	(11)	(511)	(47)	5
Provision for loan losses	85	95	100	108	-
Balance, end of period	$ 7,206	$ 7,040	$ 6,934	$ 6,323	$ 6,168
Allowance for loan losses to gross loans receivable	1.22%	1.20%	1.23%	1.20%	1.26%
Allowance for loan losses to nonaccrual loans	669.70%	900.26%	571.64%	493.21%	538.69%

Our asset quality remained strong through March 31, 2022, with nonperforming assets remaining nominal at $1.1 million, which represents 0.11% of total assets. The Company sold the remaining other real estate owned during the quarter to bring that balance to zero. The allowance for loan losses as a percentage of total loans receivable increased slightly to 1.22% at March 31, 2022, compared to 1.20% at December 31, 2021. The Company had net recoveries of $81 thousand for the three months ended March 31, 2022 compared to net charge-offs of $5 thousand for the same period in 2021.

LOAN COMPOSITION – Unaudited
	As of
	Mar 31	Dec 31	Sept 30	June 30	Mar 31
(dollars in thousands)	2022	2021	2021	2021	2021
Commercial real estate	$ 334,508	$ 333,060	$ 318,849	$ 290,198	$ 253,300
Consumer real estate	123,908	120,079	107,651	97,969	91,504
Commercial and industrial	66,285	60,687	61,778	63,545	60,432
PPP	-	-	-	-	16,784
Consumer and other	67,388	72,620	76,460	74,650	68,306
Total loans, net of deferred fees	592,089	586,446	564,738	526,362	490,326
Less allowance for loan losses	7,206	7,040	6,934	6,323	6,168
Total loans, net	$ 584,883	$ 579,406	$ 557,804	$ 520,039	$ 484,158

DEPOSIT COMPOSITION – Unaudited
	As of
	Mar 31	Dec 31	Sept 30	June 30	Mar 31
(dollars in thousands)	2022	2021	2021	2021	2021
Noninterest-bearing	$ 273,118	$ 238,019	$ 246,534	$ 215,814	$ 197,831
Interest-bearing:
DDA and NOW accounts	168,401	153,889	133,474	132,269	131,304
Money market accounts	217,812	204,432	216,243	169,707	137,913
Savings	61,246	58,566	59,941	57,880	52,085
Time, less than $250,000	84,874	99,059	103,126	106,219	109,295
Time, $250,000 and over	32,212	26,868	28,183	29,616	32,789
Total deposits	$ 837,663	$ 780,833	$ 787,501	$ 711,505	$ 661,217

Footnotes to tables:
(1)	Includes noninterest-bearing and interest-bearing DDA and NOW accounts.
(2)	Total revenue is the sum of net interest income and noninterest income.
(3)	Annualized for the respective period.
(4)	Noninterest expense divided by the sum of net interest income and noninterest income.
(5)	The tangible book value per share is calculated as total shareholders' equity less intangible assets, divided by period-end outstanding common shares.

ABOUT FIRST RELIANCE

Founded in 1999, First Reliance Bancshares, Inc. (OTC: FSRL.OB), is based in Florence, South Carolina and has assets of approximately $954 million. The company employs more than 180 professionals and has locations throughout South Carolina and central North Carolina. First Reliance has redefined community banking with a commitment to making customers' lives better, its founding principle. Customers of the company have given it a 93% customer satisfaction rating well above the bank industry average of 81%. First Reliance is also one of two companies throughout South Carolina to receive the Best Places to Work in South Carolina award all 16 years since the program began. We believe that this recognition confirms that our associates are engaged and committed to our brand and the communities we serve. In addition to offering a full range of personalized community banking products and services for individuals, small businesses and corporations, First Reliance offers two unique community-customers programs, which include: Hometown Heroes, a package of benefits for those serving our communities and Check N Save, an outreach program for the unbanked or under-banked. The company also offers a full suite of digital banking services, Treasury Services, a Customer Service Guaranty, a Mortgage Service Guaranty, and First Reliance Wealth Strategies.

FORWARD-LOOKING STATEMENTS

Certain statements in this news release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to future plans and expectations, and are thus prospective. Such forward-looking statements include, but are not limited to, statements with respect to our plans, objectives, expectations and intentions and other statements that are not historical facts, and other statements identified by words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," and "projects," as well as similar expressions. Such statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, we can give no assurance that the results contemplated in the forward-looking statements will be realized. The inclusion of this forward-looking information should not be construed as a representation by the Company or any person that the future events, plans, or expectations contemplated by the Company will be achieved.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (2) the strength of the United States economy in general and the strength of the local economies in which we conduct operations may be different than expected resulting in, among other things, a deterioration in the credit quality or a reduced demand for credit, including the resultant effect on the Company's loan portfolio and allowance for loan losses; (3) the rate of delinquencies and amounts of charge-offs, the level of allowance for loan loss, the rates of loan growth, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (4) the risk that the preliminary financial information reported herein and our current preliminary analysis will be different when our review is finalized; (5) changes in the U.S. legal and regulatory framework including, but not limited to, the Dodd-Frank Act and regulations adopted thereunder; (6) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) could have a negative impact on the Company, including the value of its MSR asset; (7) the business related to acquisitions may not be integrated successfully or such integration may take longer to accomplish than expected; (8) the expected cost savings and any revenue synergies from acquisitions may not be fully realized within expected timeframes; and (9) disruption from acquisitions may make it more difficult to maintain relationships with clients, associates or suppliers. Moreover, a trade war or other governmental action related to tariffs or international trade agreements or policies, as well as Covid-19 or other potential epidemics or pandemics, have the potential to negatively impact ours and/or our customers' costs, demand for our customers' products, and/or the U.S. economy or certain sectors thereof and, thus, adversely affect our business, financial condition, and results of operations. All subsequent written and oral forward-looking statements concerning the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

Contact:
Robert Haile
SEVP & Chief Financial Officer
(843) 656-5000
[email protected]

SOURCE First Reliance Bancshares

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