First Reliance Bancshares Reports Third Quarter 2024 Results

FLORENCE, S.C., Oct. 24, 2024 /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 third quarter of 2024.

Third Quarter 2024 Highlights

• Net income increased 26.4% for the third quarter of 2024 to $1.8 million, or $0.22 per diluted share, compared to $1.4 million, or $0.18 per diluted share, for the third quarter of 2023.  Operating earnings, which excludes securities gains (losses), net of tax, was $2.0 million, or $0.24 per diluted share, for the third quarter of 2024, compared to $1.7 million, or $0.20 per diluted share, in the third quarter of 2023.
• Book value per share increased $1.86, or 22.9%, from $8.12 per share at September 30, 2023, to $9.98 per share at September 30, 2024.  Tangible book value per share increased $1.87, or 23.3%, from $8.02 per share at September 30, 2023, to $9.89 per share at September 30, 2024.
• Net interest income for the quarter was $8.1 million, which represents an increase of $900,000, or 12.5%, compared to the same quarter one year ago.  On a linked quarter basis, the increase was $438,000, or 5.7%.
• Net interest margin increased during the quarter to 3.27% at September 30, 2024, compared to 3.20% at June 30, 2024, and increased 16 basis points compared to the same period in 2023.
• The Company recorded securities losses of $162 thousand pre-tax in the third quarter of 2024 compared to $268 thousand pre-tax in third quarter of 2023.  The after-tax impact of these securities losses was $125 thousand and $209 thousand, respectively.
• Total loans held for investment decreased $214 thousand, or (0.12%) annualized, to $739.2 million at September 30, 2024, from $739.4 million at June 30, 2024. 
• Total deposits increased $52.1 million, or 23.2% annualized, to $951.9 million at September 30, 2024, from $899.8 million at June 30, 2024.
• Asset quality remained steady with nonperforming assets totaling $924 thousand, or 0.09% of total assets at September 30, 2024, compared to $310 thousand, or 0.03% of total assets at June 30, 2024. 
• Cost of funds for the third quarter of 2024 decreased to 2.23% from 2.28% on a linked quarter basis and increased from 1.91% for the same period in 2023.

Rick Saunders, Chief Executive Officer, remarked: "The third quarter of 2024 provided some clarity relative to the economy and interest rates as the Fed began to lower interest rates.  Our net interest margin improved seven basis points to 3.27%, expenses were flat from the second quarter of 2024, credit quality remained steady with low net charge offs and low nonperforming assets, and deposit growth totaled $52.1 million.  Our loan to deposit ratio dropped below 80% (77.65%) for the first time since the first quarter of 2023.  Tangible book value per share improved by $0.76 during the quarter with $0.51 per share being attributable to the lower unrealized losses in the securities portfolio."  

Footnotes to table located at the end of this release.

Net income for the three months ended September 30, 2024, was $1.8 million, or $0.22 per diluted common share, compared to $1.4 million, or $0.18 per diluted common share, for the three months ended September 30, 2023.  On an operating basis, third quarter of 2024 diluted EPS was $0.24, compared to $0.20 diluted EPS for the third quarter of 2023.  Both amounts include adding back the impact of securities losses, after tax, of $125 thousand and $209 thousand, respectively.  Net income for the nine months ended September 30, 2024, totaled $5.0 million, or $0.61 per diluted common share, compared to $3.8 million, or $0.47 per diluted common share, for the nine months ended September 30, 2023.  On an operating basis, diluted EPS was $0.63 per diluted common share or net income of $5.1 million, for the nine months ended September 30, 2024, compared to $0.54 per diluted common share or net income of $4.4 million, for the nine months ended September 30, 2023, both include adding back the impact of securities losses, after tax.

Noninterest income for the three months ended September 30, 2024, was $1.8 million, a decrease of $0.2 million from $2.0 million for the same period in 2023.  Noninterest income was primarily driven by mortgage banking income and totaled $0.8 million in the third quarter of 2024 compared to $1.1 million in the third quarter of 2023.  This decrease was the result of the decline in the fair value of the mortgage servicing asset (MSR) compared to 2023 when the MSR increased in fair value.  In the third quarter of 2024, the Company recognized securities losses totaling $162 thousand compared to $268 thousand in the third quarter of 2023. 

For the nine months ended September 30, 2024, noninterest income increased by $0.9 million, driven by improved mortgage banking income of $469 thousand primarily related to more sales volume within the secondary market, and securities losses that were $561 thousand less in 2024 compared to 2023.  These increases were partially offset by a decline in bank owned life insurance income of $119 thousand.

Noninterest expense for the three months ended September 30, 2024, was $7.6 million, an increase of $171 thousand from $7.4 million for the same period in 2023.  This increase in expense was primarily driven by an increase in higher legal and consulting professional fees of $207 thousand and higher compensation and benefits of $79 thousand due primarily to an increase in employee medical benefits.  These increases were partially offset by lower marketing expense of $85 thousand comparing 3Q 2024 to 3Q 2023.

Noninterest expense for the nine months ended September 30, 2024, was $23.1 million and increased $856 thousand over the same period one year ago.  This increase in noninterest expense was primarily related to compensation and benefits of $537 thousand attributable to mortgage commissions and an increase in employee medical benefits, and an increase in data processing and technology totaling $356 thousand resulting from higher core processor cost and software expense.  These increases were partially offset by lower occupancy and equipment expense and lower marketing cost.      

Net interest income for the three months ended September 30, 2024, was $8.1 million compared to $7.2 million for the three months ended September 30, 2023.  This increase was the result of a larger increase in interest income of $2.0 million than the increase in interest expense of $1.1 million.  This resulted in an improved net interest margin of 16 basis points to 3.27% from 3.11% one year ago.  All categories of interest-earning assets reflected higher yields, except nonmarketable equity securities and loans held-for-sale.   All categories of interest-bearing liabilities reflected higher yields, except interest bearing transaction accounts and subordinated debentures.  Interest expense on FHLB and other borrowings declined compared to the prior year, reflecting lower average balance of FHLB advances in third quarter of 2024 compared to the third quarter of 2023.  There were no outstanding FHLB advances at September 30, 2024.  In addition, the total cost of funds, including noninterest-bearing deposits, increased to 2.23% in the third quarter of 2024, compared to 1.91% in the third quarter of 2023.  

Net interest income for the nine months ended September 30, 2024, totaled $23.0 million compared to $21.7 million for the nine months ended September 30, 2023, an increase of $1.3 million.  The net interest margin was 3.20% for both of the nine months ended September 30, 2024 and September 30, 2023.  All of the yields on interest-earning assets increased and totaled 5.43% from 4.79% in the same period one year ago.  For interest-bearing liabilities, the rate paid totaled 2.91% compared to 2.20% in the same period one year ago, reflecting an increase in yield in all categories.  The total cost of funds, including noninterest-bearing deposits, was 2.26% compared to 1.61% in 2023.

First Reliance cash and cash equivalents totaled $66.7 million at September 30, 2024, compared to $47.1 million at June 30, 2024.  Cash with the Federal Reserve Bank totaled $61.6 million compared to $41.3 million at June 30, 2024.

First Reliance does not have any Held-to-Maturity (HTM) securities for any reported period.  All debt securities were classified as Available-For-Sale (AFS) securities with balances of $177.6 million and $173.3 million, at September 30, 2024 and June 30, 2024, respectively.  The unrealized loss recorded on AFS securities totaled $8.4 million as of September 30, 2024, compared to $13.9 million at June 30, 2024, a decline during the third quarter of 2024 of $5.5 million (before taxes).

As of September 30, 2024, deposits increased by $52.1 million, or 23.2% annualized.  The deposit growth was in money market accounts and interest bearing DDA and NOW accounts (see table on page 10 for detail).

The Company had no outstanding borrowings with the FHLB of Atlanta at September 30, 2024, compared to $40.0 million in outstanding borrowings with the FHLB of Atlanta at June 30, 2024.  The Company had credit availability in excess of $306.8 million with the FHLB of Atlanta, subject to collateral requirements.

First Reliance also has access to approximately $30.5 million through the Federal Reserve Bank discount window with posted collateral.  There are currently no borrowings against the Federal Reserve Bank discount window.

Asset quality remained steady during the third quarter of 2024, with nonperforming assets increasing to $0.9 million, which represents 0.09% of total assets.  The increase of $600 thousand was primarily related to one loan and no loss is expected given the collateral value and guarantees.  The allowance for credit losses as a percentage of total loans receivable decreased to 1.13% at September 30, 2024, compared to 1.15% at June 30, 2024, and 1.19% at December 31, 2023.  The allowance for credit losses declined by a provision for credit losses (release) of ($129) thousand along with net charge-offs of $52 thousand, during the third quarter of 2024.  In the third quarter of 2023, the Company experienced net charge-offs of $10 thousand and increased the ACL with a provision for credit losses by $211 thousand. 

Footnotes to table located at the end of this release.

ABOUT FIRST RELIANCE

Founded in 1999, First Reliance Bancshares, Inc. (OTC: FSRL.OB), is based in Florence, South Carolina and has assets of approximately $1.071 billion. The Company employs approximately 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, Inc.