First Reliance Bancshares Reports First Quarter 2021 Results

FLORENCE, S.C., April 23, 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 first quarter of 2021.

First Quarter 2021 Highlights

• Net income for the first quarter of 2021 was $1.7 million, or $0.21 per diluted share, compared to $0.9 million, or $0.11 per diluted share, for the first quarter of 2020, representing an increase of 99.1%.
• Total deposits increased by $67.2 million, or 11.3%, to $661.2 million at March 31, 2021 from $594.0 million at December 31, 2020. Non-interest bearing and interest bearing NOW accounts increased $41.0 million, or 14.2%, to 329.1 million at March 31, 2021 from $288.2 million at December 31, 2020.
• Mortgage volume remained robust and resulted in mortgage banking income of $3.4 million during the first quarter of 2021, an increase of $2.6 million, or 344.9%, from the first quarter of 2020.
• The Company originated 193 loans for $17.4 million as part of the second round of the Paycheck Protection Program ("PPP").
• Asset quality remained strong, with non-performing assets as a percentage of total assets decreasing to 0.17% at March 31, 2021 compared to 0.21% at December 31, 2020.
• Net charge-offs were $5 thousand, or annualized 0.01% of average loans (excluding PPP), for the first quarter of 2021 compared to $50 thousand, or annualized 0.04% of average loans, for the same period in 2020.
• Cost of funds for the first quarter of 2021 decreased to 0.46% from 0.60% on a linked quarter basis and from 1.08% for the same period in 2020.
• The Company repurchased approximately 258,000 shares during the quarter at an average price of $7.80 per share.

Rick Saunders, Chief Executive Officer, remarked on the first quarter results: "First Reliance continued building on the success of 2020 with a strong start to 2021.  Our net income of $1.7 million, or $0.21 per diluted common share, for the quarter represents an increase of 99.1% over the same period last year.  We have made significant investments in both our commercial and mortgage production teams during the quarter, highlighted by the hiring of Justin Strickland, who in January became President of First Reliance Bank.  Justin's hiring represents the completion of our vision to establish an executive leadership team capable of executing our growth plans.  Additionally, against the backdrop of fiscal stimulus, the national vaccination rollout, and improved customer balance sheets, our markets appear poised for significant growth.  In preparation of the reopening of the economy and a steepening yield curve, we have begun to build our loan pipelines and have initiated strategic investment security purchases." 

Mr. Saunders continued, "During the first quarter, we completed the rollout of our new digital banking platform, which allows us to provide robust functionality and an improved user experience for our customer base.  Investments in customer-focused technology positions us for growth by providing solutions that are superior to our community banking peers.  We believe pairing first-in-class customer service with a high-quality digital banking product will make us the preferred choice for customers looking for a local financial institution with 21^st century banking capabilities."

Mr. Saunders concluded, "I want to thank all of our team members for their continued commitment to our customers and for living out our core values every day.  Although these have been challenging times, I couldn't be more excited about the direction this organization is heading and I know that our best times are ahead of us."

Payroll Protection Program

During the quarter, the Company was a participating lender in the second round of the Small Business Administration ("SBA") Payroll Protection Program.  As of March 31, 2021, the Company had originated 193 PPP loans totaling $17.4 million. Origination fees, net of costs, from these loans are approximately $0.7 million. During the quarter, the Company recognized $16 thousand of the $0.7 million in estimated net fees, with the remaining balance expected to be recognized over the next several quarters.

COVID-19 Update

The first quarter continued to bring positive developments in the fight against COVID-19.  Vaccine rollout has continued to accelerate and the additional economic stimulus in the first quarter helped strengthen consumer and business balance sheets.  As of March 31, 2021, total COVID-related loan deferrals were $8.0 million on five loans, all on their second deferral, totaling 1.6% of total loans receivable. 

Net income for the three months ended March 31, 2021 was $1.7 million, or $0.21 per diluted common share, compared to $0.9 million, or $0.11 per diluted common share, for the three months ended March 31, 2020.  

Noninterest income for the three months ended March 31, 2021 was $4.3 million, a $2.6 million increase from $1.7 million for the same period in 2020.  Noninterest income is largely driven by the Company's mortgage banking division, which produced income of $3.4 million on $162 million in mortgage volume during the three months ended March 31, 2021.  That represents an increase of $2.6 million in income from the same period in 2020.  However, mortgage banking income was negatively affected during the current quarter by a decrease of $1.0 million in the valuation of mortgage banking derivatives, which includes the valuation of our mortgage pipeline as well as associated hedges.

Noninterest expense for the three months ended March 31, 2021 was $7.7 million, a $1.6 million increase from $6.1 million for the same period in 2020.  The increase in noninterest expense is largely driven by an increase of $1.4 million in compensation and benefits.  The increase in compensation and benefits is driven by an increase in mortgage incentives as well as continued additions to banking personnel throughout the year.

Net interest income decreased $216 thousand, or 3.7%, to $5.6 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020.  The decrease in net interest income over the period was caused by a decrease in the yield on interest-earning assets.   Yield on interest-earning assets decreased to 3.69% for the three months ended March 31, 2021 from 4.91% for three months ended March 31, 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.  The Company continues to reduce its cost of funds, which decreased to 0.46% for the three months ended March 31, 2021 from 1.08% for the same period in 2020.  Average transaction deposits increased by $66.0 million, to $301.8 million for the three months ended March 31, 2021 from $235.8 million for the three months ended March 31, 2020 and were aided in part by deposit growth as a result of fiscal stimulus. 

Our asset quality continued to be strong through March 31, 2021, with nonperforming assets decreasing to $1.3 million at March 31, 2021 from $1.5 million at December 31, 2020.  The ratio of nonperforming assets to total assets declined to 0.17% at March 31, 2021, a decrease of 4 basis points compared to December 31, 2020.  Other real estate owned and repossessed assets remain nominal.  The allowance for loan losses as a percentage of total loans receivable decreased slightly to 1.26% at March 31, 2021, compared to 1.29% at December 31, 2020.  The Company had net charge-offs of $5 thousand for the three months ended March 31, 2021 compared to net recoveries of $102 thousand for the three months ended December 31, 2020.

ABOUT FIRST RELIANCE

Founded in 1999, First Reliance Bancshares, Inc. (OTC: FSRL.OB), is based in Florence, South Carolina and has assets of approximately $778 million.  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 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
[email protected]

SOURCE First Reliance Bancshares