First Reliance Bancshares Reports First Quarter 2023 Results

FLORENCE, S.C., April 26, 2023 /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 2023.

First Quarter 2023 Highlights

• Net income increased 60.9% for the first quarter of 2023 to $1.4 million, or $0.17 per diluted share, compared to $0.9 million, or $0.11 per diluted share, for the first quarter of 2022.
• Net interest income for the quarter was $7.3 million, which represents a decrease of $0.6 million, or 7.8%, on a linked quarter basis and an increase of $0.7 million, or 10.6% compared to the same period in 2022.
• Net interest margin decreased during the quarter to 3.34% at March 31, 2023, compared to 3.68% for the fourth quarter of 2022, but increased 22 basis points compared to the same period in 2022.
• Total loans increased $8.7 million, or 5.2% annualized, to $670.0 million at March 31, 2023, from $661.3 million at December 31, 2022.
• Total deposits increased $38.7 million, or 19.4% annualized, to $836.9 million at March 31, 2023, from $798.2 million at December 31, 2022.
• In the first quarter of 2023, the company adopted ASU 2016-13 ("CECL"). The day one impact was a $886 thousand increase to the unfunded commitment reserve, a $114 thousand increase to our allowance for credit losses, and a $254 thousand increase in the deferred tax asset which resulted in a decline in equity of $723 thousand.
• Asset quality remained steady with nonperforming assets as a percentage of total assets of 0.05% at March 31, 2023, and December 31, 2022. The Company had net charge-offs of $102.4 thousand or annualized 0.06% of average loans during the quarter compared to net charge-offs of $85.4 thousand, or annualized 0.05% of average loans, for the quarter ended December 31, 2022.
• Cost of funds for the first quarter of 2023 increased to 1.24% from 0.71% on a linked quarter basis and from 0.22% for the same period in 2022.

Rick Saunders, Chief Executive Officer, remarked: "Our first quarter results reflect the strength of our balance sheet as we continued to grow deposits and added quality loans, while maintaining strong capital and liquidity.  We were also able to increase our tangible book value per share $0.37 to $8.04 during the quarter despite adopting CECL in the first quarter of 2023.  We have always put the client at the center of our mission and those relationships are essential to executing our strategic plan.  We look forward to continuing to serve our clients' banking needs."

Financial Summary

CONDENSED CONSOLIDATED INCOME STATEMENTS – Unaudited

Net income for the three months ended March 31, 2023, was $1.4 million, or $0.17 per diluted common share, compared to $0.9 million, or $0.11 per diluted common share, for the three months ended March 31, 2022.  

Noninterest income for the three months ended March 31, 2023, was $2.2 million, a decrease of $0.3 million from $2.5 million for the same period in 2022.  Noninterest income is largely driven by the Company's mortgage banking division, which produced net revenue of $0.9 million during the three months ended March 31, 2023, compared to $1.4 million for the same period in 2022.  The decrease in mortgage noninterest income is primarily due to a decrease in sales volume compared to the prior year quarter in 2022.  Additionally, the Bank continues to portfolio select loans out of the higher margin retail channel which has also contributed to reduced gain on sale proceeds.   Income from bank owned life insurance increased $156 thousand compared to the first quarter of 2022 due to the receipt of a death benefit during the first quarter of 2023.

Noninterest expense for the three months ended March 31, 2023, was $7.5 million, a decrease of $0.5 million from $8.0 million for the same period in 2022.  This decrease was primarily driven by a decrease in compensation and benefits and other expense somewhat offset by an increase in marketing expense compared to first quarter 2022.    

NET INTEREST INCOME AND MARGIN – Unaudited

Net interest income for the three months ended March 31, 2023, was $7.3 million compared to $6.6 million for the three months ended March 31, 2022.  This increase was primarily driven by an increase in interest-earning assets, as well as an increase in interest rates.  Yield on interest-earning assets increased to 4.57% for the three months ended March 31, 2023, from 3.33% for the same period in 2022. 

CONDENSED CONSOLIDATED BALANCE SHEETS – Unaudited

First Reliance cash and cash equivalents totaled $75.8 million at March 31, 2023, compared to $33.8 million at December 31, 2022.  Cash with the Federal Reserve Bank totaled $70.8 million compared to $28.8 million at December 31, 2022.

At March 31, 2023, and December 31, 2022, First Reliance did not have any Held-to-Maturity (HTM) securities.  All debt securities were classified as available for sale (AFS) securities with balances of $164.2 million and $162.1 million, respectively.  The unrealized loss recorded on these securities totaled $15.6 million compared to $18.6 million, respectively, an improvement in the first quarter of $3.0 million (before taxes).

As of March 31, 2023, deposits increased by $38.7 million or 19.4% annualized.  The bank had estimated uninsured and uncollaterialized deposits of $252.8 million, or 30.2% of total bank deposits.

The Company had $45.0 million in outstanding borrowings with the Federal Home Loan Bank (FHLB) of Atlanta at March 31, 2023, up from $30.0 million at December 31, 2022.  The Company had remaining credit availability in excess of $235 million with the FHLB of Atlanta, subject to collateral requirements.

First Reliance also has access to more than $37.0 million through the Federal Reserve Bank discount window with posted collateral.  There are currently no borrowings against the Federal Reserve Bank discount window.

COMMON STOCK SUMMARY - Unaudited

ASSET QUALITY MEASURES – Unaudited 

Our asset quality remained strong through March 31, 2023, with nonperforming assets remaining at $0.5 million, which represents 0.05% of total assets.  The allowance for credit losses as a percentage of total loans receivable increased to 1.20% at March 31, 2023, compared to 1.16% at December 31, 2022.  The allowance for credit losses increased $114 thousand due to the day one entries related to the adoption of CECL in the first quarter of 2023.  The Company had net charge-offs of $102 thousand for the three months ended March 31, 2023, compared to net recoveries of $81 thousand for the same period in 2022.

LOAN COMPOSITION – Unaudited

DEPOSIT COMPOSITION – Unaudited

ABOUT FIRST RELIANCE

Founded in 1999, First Reliance Bancshares, Inc. (OTC: FSRL.OB), is based in Florence, South Carolina and has assets of approximately $1.00 billion. The company employs more than 170 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 17 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. The company offers a full range of personalized community banking products and services for individuals, small businesses, and corporations.  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 credit losses; (3) the rate of delinquencies and amounts of charge-offs, the level of allowance for credit 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