First Reliance Bancshares Reports Fourth Quarter 2021 Results

FLORENCE, S.C., Jan. 26, 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 fourth quarter and full year 2021.

Fourth Quarter and Full Year 2021 Highlights

• Net income for the fourth quarter of 2021 was $0.9 million, or $0.12 per diluted share, compared to $1.4 million, or $0.17 per diluted share, for the fourth quarter of 2020. Net income for the year ended December 31, 2021 was $5.3 million, or $0.65 per diluted share, compared to $10.6 million, or $1.32 per diluted share, for the year ended December 31, 2020.
• Total loans increased $21.7 million, or 15.4% annualized, to $586.4 million at December 31, 2021 from $564.7 million at September 30, 2021. For the full year 2021, total loans increased $108.5 million, or 22.7%, from $478.0 million at December 31, 2020.
• Total investment securities available for sale increased $23.4 million, or 160.4% annualized, to $81.9 million at December 31, 2021 from $58.5 million at September 30, 2021. For the full year 2021, total investment securities increased $49.2 million, or 150.1%, from $32.8 million at December 31, 2020.
• Total deposits decreased $6.7 million, or 3.4% annualized, to $780.8 million at December 31, 2021 from $787.5 million at September 30, 2021. For the full year 2021, total deposits increased $186.8 million, or 31.5%, from $594.0 million at December 31, 2020.
• Noninterest-bearing and interest-bearing NOW accounts increased $11.9 million during the quarter to $391.9 million and represent 50.2% of total deposits at December 31, 2021.
• Net interest income for the quarter was $6.6 million, which represents an increase of $0.4 million, or 5.7%, on a linked quarter basis and an increase of $0.9 million, or 16.2%, compared to the same period in 2020. Net interest income for the full year was $24.7 million, which represents an increase of $0.5 million, or 1.9%, compared to the same period in 2020.
• Asset quality remained strong, with nonperforming assets as a percentage of total assets decreasing to 0.10% at December 31, 2021 from 0.15% at September 30, 2021.
• Cost of funds for the fourth quarter of 2021 decreased to 0.23% from 0.24% on a linked quarter basis and from 0.44% for the same period in 2020.
• During the fourth quarter, the Company discontinued new loan originations in the indirect auto channel. The Company retained the existing indirect auto loan portfolio and expects to realize compensation cost savings beginning in the first quarter of 2022.

Rick Saunders, Chief Executive Officer, remarked on the year: "2021 was highlighted by strong organic growth in both loans and deposits as well as significant investments in both our commercial and mortgage production teams.  Our core banking franchise continues to execute on our strategic plan, highlighted by a 22.7% growth in loans, a 31.5% growth in deposits, and a decrease in nonperforming assets to 0.10% of total assets.  We're especially proud of our growth in checking balances, which now make up over 50% of total deposits.  In our mortgage business, we saw a normalization of revenues as the year progressed and interest rates increased." 

Mr. Saunders continued, "We remain focused on growth and improving operating leverage during the coming year.  As the interest rate environment becomes more favorable, we expect our earning asset mix to normalize, especially as it relates to cash.  The rise in the yield curve should provide opportunities to accelerate our deployment of cash into investment securities as well as achieve increased yields in new loan originations.  Additionally, our strong deposit franchise should allow us to have low deposit betas in a rising rate environment."

Footnotes to table located at the end of this release.

Footnotes to table located at the end of this release.

Net income for the three months ended December 31, 2021 was $0.9 million, or $0.12 per diluted common share, compared to $1.4 million, or $0.17 per diluted common share, for the three months ended December 31, 2020.  Net income for the twelve months ended December 31, 2021 totaled $5.3 million, or $0.65 per diluted common share, compared to $10.6 million, or $1.32 per diluted common share for the twelve months ended December 31, 2020.

Noninterest income for the three months ended December 31, 2021 was $2.6 million, a decrease of $2.5 million from $5.2 million for the same period in 2020.  Noninterest income is largely driven by the Company's mortgage banking division, which produced net revenue of $1.4 million on $103 million of mortgage sale volume during the three months ended December 31, 2021.  Mortgage banking income decreased period-over-period primarily because of a decrease in sale volume as well as reduced margin.  Service charges on deposit accounts as well as debit card and other fees increased to a combined $0.9 million, an increase of $0.2 million from $0.7 million for the same period in 2020. 

Noninterest expense for the three months ended December 31, 2021 was $8.2 million, a decrease of $0.5 million from $8.7 million for the same period in 2020.  This decrease was driven mainly by decreases in compensation and benefits expense of $0.4 million, furniture and equipment expense of $0.2 million, and professional fees of $0.2 million.  Included in compensation and benefits for the current quarter is approximately $90 thousand in severance expense.  Other noninterest expense for the quarter increased approximately $0.2 million compared the same period in 2020.  This increase was mainly driven by expense of $168 thousand for the purchase of South Carolina state income tax credits during the quarter.  These credits lowered our state income tax expense by approximately $192 thousand.

Net interest income for the three months ended December 31, 2021 was $6.6 million compared to $5.7 million for the three months ended December 31, 2020.  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 0.60% to 0.33%. 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 December 31, 2021 from 3.71% for the same period in 2020.  This 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 for the twelve months ended December 31, 2021 was $24.7 million compared to $24.3 million for the twelve months ended December 31, 2020.  Included within net interest income for these periods was $0.3 million and $0.9 million, respectively, of PPP interest and accelerated fee income.  The Company sold the PPP portfolios in full during the second quarter of 2021 and the third quarter of 2020.  If interest and fee income on PPP loans are removed from both twelve-month periods, net interest income increased by $1.0 million, or 4.4%, period-over-period.  This increase was primarily driven by an increase in interest-earning assets as well as a decrease in the cost of interest-bearing liabilities.

Footnotes to table located at the end of this release.

Our asset quality remained strong through December 31, 2021, with nonperforming assets decreasing to $0.9 million from $1.4 million at September 30, 2021. The ratio of nonperforming assets to total assets decreased to 0.10% at December 31, 2021 from 0.15% at September 30, 2021.  Other real estate owned remains nominal.  The allowance for loan losses as a percentage of total loans receivable decreased slightly to 1.20% at December 31, 2021, compared to 1.23% at September 30, 2021.  The Company had net recoveries of $11 thousand for the three months ended December 31, 2021 compared to net recoveries of $102 thousand for the same period in 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 $911 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
rhaile@firstreliance.com

SOURCE First Reliance Bancshares