First Reliance Bancshares Reports Second Quarter 2021 Results

FLORENCE, S.C., July 20, 2021 /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 second quarter of 2021.

Second Quarter 2021 Highlights

• Net income for the second quarter of 2021 was $1.3 million, or $0.17 per diluted share, compared to $3.9 million, or $0.49 per diluted share, for the second quarter of 2020.
• Net interest income for the quarter was $6.2 million, which represents an increase of $0.6 million, or 11.1%, on a linked quarter basis and $0.3 million, or 4.2%, compared to the same period in 2020.
• Total loans, excluding Paycheck Protection Program (PPP) loans, increased $52.8 million, or 11.2%, to $526.4 million at June 30, 2021 from $473.5 million at March 31, 2021.
• Total deposits increased $50.3 million, or 7.6%, to $711.5 million at June 30, 2021 from $661.2 million at March 31, 2021. This growth was primarily driven by noninterest-bearing deposits and money market deposits, which increased $18.0 million and $31.8 million, respectively.
• Asset quality remained strong, with nonperforming assets as a percentage of total assets remaining unchanged from the previous quarter at 0.17%.
• The Company had net recoveries of $47 thousand, or annualized (0.04%) of average loans (excluding PPP) during the quarter compared to net charge-offs of $340 thousand, or annualized 0.28% of average loans (excluding PPP), for the same period in 2020.
• Cost of funds for the second quarter of 2021 decreased to 0.29% from 0.34% on a linked quarter basis and from 0.61% for the same period in 2020.
• Included in compensation and benefits for the current quarter is approximately $0.4 million in severance expense.
• The Company completed the sale of its PPP loan portfolio during the quarter, resulting in a net gain on sale of $0.3 million.

Rick Saunders, Chief Executive Officer, remarked on the quarter: "Our second quarter results represent the commencement of the growth phase of our strategic plan.  We've made significant investments in our infrastructure from a talent and technology standpoint and we're now seeing returns on those investments with excellent growth in both loans and deposits.  Our loan pipelines have continued to build, and we have the balance sheet strength to continue executing our growth strategy in the coming quarters.  Additionally, one of our core principals is maintaining high underwriting standards, which we will not compromise for the sake of growth.  In our mortgage business, we've continued building out our retail channel by hiring high performing producers in our Charleston, Columbia, and Charlotte markets." 

Mr. Saunders continued, "As we move forward in the execution of our growth strategy, one of our top objectives is to achieve material operating scale in our business.  As part of our strategic plan, we have established both intermediate and long-term targets on revenue and costs in order to drive improved efficiency and operating scale as we grow."

Mr. Saunders concluded, "I want to thank all of our team members for their continued dedication to our core values and their commitment to our customers, our communities, and our shareholders.  I'm proud to be a part of this organization and look forward to more bright days ahead."

Financial Summary

Footnotes to table located at the end of this release.

 Footnotes to table located at the end of this release.

CONDENSED CONSOLIDATED INCOME STATEMENTS – Unaudited

Net income for the three months ended June 30, 2021 was $1.3 million, or $0.17 per diluted common share, compared to $3.9 million, or $0.49 per diluted common share, for the three months ended June 30, 2020.  Net income for the six months ended June 30, 2021 totaled $3.1 million, or $0.37 per diluted common share, compared to $4.8 million, or $0.59 per diluted common share for the six months ended June 30, 2020.

Noninterest income for the three months ended June 30, 2021 was $3.9 million, a decrease of $3.4 from $7.3 million for the same period in 2020.  Noninterest income is largely driven by the Company's mortgage banking division, which produced net revenue of $2.6 million on $119 million of mortgage sale volume during the three months ended June 30, 2021.  The primary driver of the decrease in mortgage banking income period-over-period was a decrease in margin on loan sales.  Additionally, growth in the retail channel drove the increased utilization of bank portfolio products.  This negatively affected gain on sale during the quarter by approximately $0.4 million.  Also included in noninterest income for the three months ended June 30, 2021 is a $0.3 million gain on the sale of the Bank's PPP loan portfolio.

Noninterest expense increased by $1.4 million or 19.6%, for the three months ended June 30, 2021 compared to the same period in 2020.  The increase in noninterest expense is largely driven by an increase of $1.1 million in compensation and benefits.  Included in compensation and benefits for the current quarter is approximately $0.4 million in severance expense.  The additional increase in compensation and benefits is driven mainly by increased headcount year-over-year.

NET INTEREST INCOME AND MARGIN – Unaudited

Net interest income for the three months ended June 30, 2021 was $6.2 million, representing an increase of $0.3 million, or 4.2%, from the three months ended June 30, 2020.  The increase in net interest income over the period was driven mainly by a decrease in the cost of interest-bearing liabilities, which decreased to 0.40% for the three months ended June 30, 2021 from 0.84% for the same period in 2020.  Improvements in costs of interest-bearing liabilities were offset to some extent by continued downward pressure on asset yield.  Yield on interest-earning assets decreased to 3.69% for the three months ended June 30, 2021 from 4.20% for the same period in 2020.  The decrease was driven by both a change in balance sheet mix and an overall decrease in interest rates stemming from decreases in the federal funds target rate during 2020. 

Net interest income was $11.8 million for both the six months ended June 30, 2021 and June 30, 2020.  The minimal change in net interest income was driven by a decrease in yield on interest-earning assets offset by a decrease in costs of interest-bearing liabilities.

CONDENSED CONSOLIDATED BALANCE SHEETS – Unaudited

COMMON STOCK SUMMARY - Unaudited

Footnotes to table located at the end of this release.

ASSET QUALITY MEASURES – Unaudited

Our asset quality remained strong through June 30, 2021, with nonperforming assets increasing slightly to $1.4 million at June 30, 2021 from $1.3 million at March 31, 2021.  The ratio of nonperforming assets to total assets remained at 0.17% at June 30, 2021.  Other real estate owned and repossessed assets remain nominal.  The allowance for loan losses as a percentage of total loans receivable decreased slightly to 1.20% at June 30, 2021, compared to 1.26% at March 31, 2021.  The Company had net recoveries of $47 thousand for the three months ended June 30, 2021 compared to net charge-offs of $340 thousand for the same period in 2020.

LOAN COMPOSITION – Unaudited

DEPOSIT COMPOSITION – Unaudited

 Footnotes to tables:

ABOUT FIRST RELIANCE

Founded in 1999, First Reliance Bancshares, Inc. (OTC: FSRL.OB), is based in Florence, South Carolina and has assets of approximately $832 million.  The Company employs more than 185 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 three companies throughout South Carolina to receive the Best Places To Work in South Carolina award all 15 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.  We also offer a full suite of digital banking services, a Customer Service Guaranty, a Mortgage Service Guaranty, and are open on most traditional holidays.

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
rhaile@firstreliance.com

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SOURCE First Reliance Bancshares