FSRL - First Reliance Bancshares Reports Second Quarter 2022 Results

July, 29 2022 08:30 AM First Reliance Bancshares Inc

PR Newswire

FLORENCE, S.C. , July 29, 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 second quarter of 2022.

Second Quarter 2022 Highlights

Net income for the second quarter of 2022 was $1.1 million , or $0.13 per diluted share, compared to $1.3 million , or $0.17 per diluted share, for the second quarter of 2021.
Net interest income for the quarter was $7.3 million , which represents an increase of $1.1 million , or 18.0%, compared to the same period as last year.
Net interest margin expanded during the quarter to 3.39% at June 30, 2022 compared to 3.12% for the first quarter of 2022.
Total loans increased $45.9 million , or 30.8% annualized, to $638.0 million at June 30, 2022 from $592.1 million at March 31, 2022 .
Total investment securities available for sale increased $20.0 million , or 55% annualized, to $164.4 million at June 30, 2022 from $144.4 million at March 31, 2022 .
During June, the bank closed our Taylor's branch in Greenville, SC . Full cost savings will be realized by the end of the third quarter.
Asset quality improved on a linked quarter basis, with a decrease of 0.05% in nonperforming assets as a percentage of total assets to 0.06% at June 30, 2022 .
The Company had net recoveries of $178 thousand , or annualized 0.12% of average loans during the quarter compared to net recoveries of $81 thousand , or annualized 0.06% of average loans, for the quarter ended March 31, 2022 .
Cost of funds for the second quarter of 2022 decreased to 0.21% from 0.22% on a linked quarter basis and from 0.40% for the same period in 2021.

Rick Saunders , Chief Executive Officer, remarked: "We are pleased with the increase in the profitability of our core banking business highlighted by a 27 bps increase in net interest margin for the second quarter. Our bankers were able to find high quality loan opportunities during the quarter as we continue to focus on disciplined growth. We're proud of our strong asset quality metrics and will remain vigilant as we prepare our balance sheet for a softening in the national macro-economic environment."

Mr. Saunders continued, "For the last several quarters, our mortgage revenue has faced headwinds from rising interest rates and low housing supply, however we look forward to our mortgage business stabilizing in the second half of 2022."

Financial Summary


Three Months Ended



Six Months Ended

Jun 30
Mar 31
Dec 31
Sept 30
June 30

Jun 30
Jun 30
($ in thousands, except per share data)
2022
2022
2021
2021
2021

2022
2021
Earnings:








Net income available to common shareholders
1,064
852
932
1,288
1,348

1,916
3,056
Earnings per common share, diluted
0.13
0.11
0.12
0.16
0.17

0.24
0.37
Total revenue ⁽¹⁾
9,404
9,097
9,253
9,570
10,169

18,501
20,086
Net interest margin
3.39 %
3.12 %
3.10 %
3.12 %
3.40 %

3.25 %
3.41 %
Return on average assets ⁽²⁾
0.45 %
0.37 %
0.41 %
0.60 %
0.67 %

0.20 %
0.80 %
Return on average equity ⁽²⁾
6.60 %
4.85 %
5.28 %
7.29 %
7.83 %

2.85 %
8.87 %
Efficiency ratio ⁽³⁾
84.49 %
87.50 %
88.45 %
83.83 %
81.82 %

85.97 %
79.61 %


As of

Jun 30
Mar 31
Dec 31
Sept 30
June 30
(dollars in thousands)
2022
2022
2021
2021
2021
Balance Sheet:





Total assets
946,853
953,784
910,797
911,057
832,241
Total loans receivable
637,953
592,089
586,446
564,738
526,362
Total deposits
830,992
837,663
780,833
787,501
711,505
Total transaction deposits ⁽⁴⁾ to total deposits
51.14 %
52.71 %
50.19 %
48.25 %
48.92 %
Loans to deposits
76.77 %
70.68 %
75.11 %
71.71 %
73.98 %
Bank Capital Ratios:





Total risk-based capital ratio
12.97 %
13.67 %
14.07 %
15.80 %
14.89 %
Tier 1 risk-based capital ratio
11.98 %
12.65 %
13.03 %
14.64 %
13.84 %
Tier 1 leverage ratio
9.66 %
9.67 %
9.66 %
10.24 %
10.43 %
Common equity tier 1 capital ratio
11.98 %
12.65 %
13.03 %
14.64 %
13.84 %
Asset Quality Ratios:





Nonperforming assets as a percentage of total assets
0.06 %
0.11 %
0.10 %
0.15 %
0.17 %
Allowance for loan losses as a percentage of total loans receivable
1.17 %
1.22 %
1.20 %
1.23 %
1.20 %

Footnotes to table located at the end of this release.

CONDENSED CONSOLIDATED INCOME STATEMENTS – Unaudited



Three Months Ended



Six Months Ended

Jun 30
Mar 31
Dec 31
Sept 30
June 30

June 30
($ in thousands, except per share data)
2022
2022
2021
2021
2021

2022
2021
Interest income








Loans
6,781
6,380
6,663
6,382
6,391

13,161
12,242
Investment securities
840
571
359
294
311

1,411
550
Other interest income
176
73
79
58
38

249
97
Total interest income
7,797
7,024
7,101
6,734
6,740

14,821
12,889
Interest expense








Deposits
212
197
224
257
255

410
541
Other interest expense
252
252
256
213
265

503
527
Total interest expense
464
449
480
470
520

913
1,068
Net interest income
7,333
6,575
6,621
6,264
6,220

13,908
11,821
Provision for loan losses
110
85
95
100
108

195
108
Net interest income after provision for loan losses
7,223
6,490
6,526
6,164
6,112

13,713
11,713
Noninterest income








Mortgage banking income
897
1,420
1,407
2,151
2,582

2,317
5,972
Service fees on deposit accounts
357
362
356
315
272

719
551
Debit card and other service charges, commissions, and fees
559
498
543
532
509

1,057
963
Income from bank owned life insurance
89
88
93
94
94

177
188
Gain on sale of securities, net
-
-
-
42
39

-
39
Gain on sale of loans
-
-
-
-
326

-
326
Gain on disposal of fixed assets
-
10
69
-
-

10
-
Other income
168
144
164
172
127

313
226
Total noninterest income
2,070
2,522
2,632
3,306
3,949

4,593
8,265
Noninterest expense








Compensation and benefits
5,059
5,079
4,965
5,268
5,518

10,138
10,509
Occupancy and equipment
890
893
862
784
779

1,783
1,575
Data processing, technology, and communications
789
837
920
852
916

1,627
1,782
Professional fees
180
180
202
234
242

360
480
Marketing
184
74
150
113
88

258
157
Other
843
897
1,085
772
777

1,740
1,488
Total noninterest expense
7,945
7,960
8,184
8,023
8,320

15,906
15,991
Income before provision for income taxes
1,348
1,052
974
1,447
1,741

2,400
3,987
Income tax expense
284
200
42
159
393

484
931
Net income available to common shareholders
1,064
852
932
1,288
1,348

1,916
3,056









Weighted average common shares - basic
7,782
7,784
7,785
7,750
7,681

7,783
7,730
Weighted average common shares - diluted
8,094
8,100
8,096
8,084
8,164

8,097
8,207
Basic income per common share
0.14
0.11
0.12
0.17
0.18

0.25
0.40
Diluted income per common share
0.13
0.11
0.12
0.16
0.17

0.24
0.37

Net income for the three months ended June 30, 2022 was $1.1 million , or $0.13 per diluted common share, compared to $1.3 million , or $0.17 per diluted common share, for the three months ended June 30, 2021 . Net income for the six months ended June 30, 2022 totaled $1.9 million , or $0.24 per diluted common share, compared to $3.1 million , or $0.37 per diluted common share for the six months ended June 30, 2021 .

Noninterest income for the three months ended June 30, 2022 was $2.1 million , a decrease of $1.8 million from $3.9 million for the same period in 2021. Noninterest income is largely driven by the Company's mortgage banking division, which produced net revenue of $0.9 million on $73.6 million of mortgage sale volume during the three months ended June 30, 2022 . Mortgage banking income decreased due to lower margins, a reduction in the value of the pipeline, and an increase in the amount of mortgages that were retained in our LHFI portfolio from our higher margin retail channel, instead of being sold into the secondary market. For the three months ended June 30, 2021 there was a $0.3 million gain on sale of loans from the sale of the Bank's PPP loan portfolio contributing to the decrease in noninterest income when compared to the same period in 2021.

Noninterest expense for the three months ended June 30, 2022 was $7.9 million , a decrease of $0.4 million from $8.3 million for the same period in 2021. This decrease was driven mainly by a $0.5 million severance expense recorded in the second quarter of 2021. Data processing, technology, and communications for the quarter was down $0.1 million over the same period in 2021.

NET INTEREST INCOME AND MARGIN – Unaudited


For the Three Months Ended

June 30, 2022

June 30, 2021

Average
Income/
Yield/

Average
Income/
Yield/
(dollars in thousands)
Balance
Expense
Rate

Balance
Expense
Rate
Assets







Interest-earning assets







Federal funds sold and interest-bearing deposits
86,552
171
0.79 %

122,289
29
0.09 %
Investment securities
152,115
840
2.22 %

55,991
311
2.23 %
Nonmarketable equity securities
521
5
3.97 %

837
9
4.29 %
Loans held for sale
22,320
248
4.46 %

33,573
232
2.77 %
Loans
607,368
6,533
4.31 %

520,326
6,159
4.75 %
Total interest-earning assets
868,876
7,797
3.60 %

733,016
6,740
3.69 %
Allowance for loan losses
(7,315)



(6,346)


Noninterest-earning assets
81,880



74,317


Total assets
943,441



800,987










Liabilities and Shareholders' Equity







Interest-bearing liabilities







NOW accounts
169,895
20
0.05 %

132,495
15
0.05 %
Savings & money market
286,120
101
0.14 %

210,786
89
0.17 %
Time deposits
111,876
91
0.33 %

134,858
151
0.45 %
Total interest-bearing deposits
567,891
212
0.15 %

478,139
255
0.21 %
FHLB advances and other borrowings
12,398
6
0.20 %

16,997
47
1.11 %
Subordinated debentures
25,671
246
3.84 %

20,801
218
4.20 %
Total interest-bearing liabilities
605,960
464
0.31 %

515,937
520
0.40 %
Noninterest bearing deposits
260,623



205,556


Other liabilities
12,383



10,635


Shareholders' equity
64,475



68,859


Total liabilities and shareholders' equity
943,441



800,987










Net interest income (tax equivalent) / interest rate spread

7,333
3.29 %


6,220
3.29 %
Net Interest Margin


3.39 %



3.40 %


For the Six Months Ended

June 30, 2022

June 30, 2021

Average
Income/
Yield/

Average
Income/
Yield/
(dollars in thousands)
Balance
Expense
Rate

Balance
Expense
Rate
Assets







Interest-earning assets







Federal funds sold and interest-bearing deposits
112,614
236
0.42 %

113,483
58
0.10 %
Investment securities
130,111
1,411
2.19 %

47,643
550
2.33 %
Nonmarketable equity securities
568
13
4.41 %

946
39
8.27 %
Loans held for sale
21,128
412
3.93 %

35,910
496
2.78 %
Loans
597,320
12,749
4.30 %

502,001
11,746
4.72 %
Total interest-earning assets
861,741
14,821
3.47 %

699,983
12,889
3.71 %
Allowance for loan losses
(7,210)



(6,332)


Noninterest-earning assets
81,223



73,770


Total assets
935,754



767,421










Liabilities and Shareholders' Equity







Interest-bearing liabilities







NOW accounts
166,755
39
0.05 %

127,931
28
0.04 %
Savings & money market
280,616
185
0.13 %

192,708
163
0.17 %
Time deposits
116,104
185
0.32 %

137,872
350
0.51 %
Total interest-bearing deposits
563,475
409
0.15 %

458,511
541
0.24 %
FHLB advances and other borrowings
13,948
30
0.43 %

16,560
93
1.13 %
Subordinated debentures
25,667
474
3.72 %

20,794
434
4.21 %
Total interest-bearing liabilities
603,090
913
0.31 %

495,865
1,068
0.43 %
Noninterest bearing deposits
253,104



192,081


Other liabilities
12,243



10,589


Shareholders' equity
67,317



68,886


Total liabilities and shareholders' equity
935,754



767,421










Net interest income (tax equivalent) / interest rate spread

13,908
3.16 %


11,821
3.28 %
Net Interest Margin


3.25 %



3.41 %

Net interest income for the three months ended June 30, 2022 was $7.3 million compared to $6.2 million for the three months ended June 30 , 2021. 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 0.40% to 0.31%. Improvements in costs of interest-bearing liabilities were offset by decreases in asset yield. Yield on interest-earning assets decreased to 3.60% for the three months ended June 30, 2022 from 3.69% for the same period in 2021.

Net interest income was $13.9 million for the six months ended June 30, 2022 , an increase of $2.1 million over the same period in 2021. Increases in average loans and investments contributed to majority of the increase in interest income somewhat offset by a reduction in yield on interest earning assets.

CONDENSED CONSOLIDATED BALANCE SHEETS – Unaudited


As of

June 30
Mar 31
Dec 31
Sept 30
June 30
(dollars in thousands)
2022
2022
2021
2021
2021
Assets





Cash and cash equivalents:





Cash and due from banks
7,702
4,672
5,299
4,930
5,486
Interest-bearing deposits with banks
45,683
116,192
144,825
184,739
144,937
Total cash and cash equivalents
53,385
120,864
150,124
189,669
150,423
Time deposits in other banks
257
257
257
257
256
Investment securities:





Investment securities available for sale
164,440
144,422
81,917
58,470
56,881
Other investments
657
521
837
837
837
Total investment securities
165,097
144,943
82,754
59,307
57,718
Mortgage loans held for sale
19,648
23,528
23,844
33,667
33,097
Loans receivable:





Loans
637,953
592,089
586,446
564,738
526,362
Less allowance for loan losses
(7,494)
(7,206)
(7,040)
(6,934)
(6,323)
Loans receivable, net
630,459
584,883
579,406
557,804
520,039
Property and equipment, net
23,100
23,222
22,805
22,364
21,818
Mortgage servicing rights
14,893
14,536
14,057
13,785
13,603
Bank owned life insurance
18,653
18,564
18,476
18,383
18,289
Deferred income taxes
7,376
5,862
4,128
2,798
2,820
Other assets
13,985
17,125
14,946
13,023
14,178
Total assets
946,853
953,784
910,797
911,057
832,241
Liabilities





Deposits
830,992
837,663
780,833
787,501
711,505
Federal Home Loan Bank advances
-
-
10,000
10,000
10,000
Federal funds and repurchase agreements
13,805
11,886
11,372
6,353
8,946
Subordinated debentures
15,365
15,357
15,349
15,498
10,496
Junior subordinated debentures
10,310
10,310
10,310
10,310
10,310
Other liabilities
12,412
11,937
12,131
10,983
11,393
Total liabilities
882,884
887,153
839,995
840,645
762,650
Shareholders' equity





Preferred stock - Series D non-cumulative, no par value
1
1
1
1
1
Common Stock - $.01 par value; 20,000,000 shares authorized
88
88
88
88
88
Treasury stock, at cost
(4,333)
(4,419)
(4,323)
(4,281)
(3,858)
Nonvested restricted stock
(2,500)
(2,572)
(2,668)
(2,737)
(2,928)
Additional paid-in capital
54,088
53,980
53,856
53,765
53,776
Retained earnings
25,901
24,837
23,985
23,053
21,765
Accumulated other comprehensive income (loss)
(9,276)
(5,284)
(137)
523
747
Total shareholders' equity
63,969
66,631
70,802
70,412
69,591
Total liabilities and shareholders' equity
946,853
953,784
910,797
911,057
832,241

COMMON STOCK SUMMARY - Unaudited




As of



June 30
Mar 31
Dec 31
Sept 30
June 30
(shares in thousands)
2022
2022
2021
2021
2021
Voting common shares outstanding
8,801
8,782
8,793
8,784
8,788
Treasury shares outstanding
(571)
(545)
(535)
(530)
(489)
Total common shares outstanding
8,230
8,237
8,258
8,254
8,299






Tangible book value per common share ⁽⁵⁾
7.66
7.98
8.46
8.41
8.27






Stock price:





High
10.20
10.20
10.74
10.50
10.05
Low
9.25
9.75
9.95
9.80
9.65
Period end
9.25
9.85
10.20
10.30
9.90

ASSET QUALITY MEASURES – Unaudited


As of

June 30
Mar 31
Dec 31
Sept 30
June 30
(dollars in thousands)
2022
2022
2021
2021
2021
Nonperforming Assets





Commercial





Owner occupied RE
140
144
152
526
535
Non-owner occupied RE
-
295
-
-
-
Construction
-
-
-
-
-
Commercial business
81
-
-
-
-
Consumer





Real estate
3
343
341
346
383
Home equity
-
-
-
-
-
Construction
-
-
-
-
-
Other
160
104
84
121
129
Nonaccruing troubled debt restructurings
173
190
205
220
235
Total nonaccrual loans
557
1,076
782
1,213
1,282
Other real estate owned
-
-
135
150
150
Total nonperforming assets
557
1,076
917
1,363
1,432
Nonperforming assets as a percentage of:





Total assets
0.06 %
0.11 %
0.10 %
0.15 %
0.17 %
Total loans receivable
0.09 %
0.18 %
0.16 %
0.24 %
0.27 %
Accruing troubled debt restructurings
1,349
1,393
1,405
1,444
1,478







Three Months Ended

June 30
Mar 31
Dec 31
Sept 30
June 30
(dollars in thousands)
2022
2022
2021
2021
2021
Allowance for Loan Losses





Balance, beginning of period
7,206
7,040
6,934
6,323
6,168
Loans charged-off
11
19
5
72
59
Recoveries of loans previously charged-off
189
100
16
583
106
Net charge-offs (recoveries)
(178)
(81)
(11)
(511)
(47)
Provision for loan losses
110
85
95
100
108
Balance, end of period
7,494
7,206
7,040
6,934
6,323
Allowance for loan losses to gross loans receivable
1.17 %
1.22 %
1.20 %
1.23 %
1.20 %
Allowance for loan losses to nonaccrual loans
1345.42 %
669.70 %
900.26 %
571.64 %
493.21 %

Footnotes to table located at the end of this release.

Our asset quality remained strong through June 30, 2022 , with nonperforming assets dropping to $0.6 million , which represents 0.06% of total assets. The allowance for loan losses as a percentage of total loans receivable decreased slightly to 1.17% at June 30, 2022 , compared to 1.22% at March 31 , 2022. The Company had net recoveries of $178 thousand for the three months ended June 30, 2022 compared to net recoveries of $47 thousand for the same period in 2021.

LOAN COMPOSITION – Unaudited


As of

June 30
Mar 31
Dec 31
Sept 30
June 30
(dollars in thousands)
2022
2022
2021
2021
2021
Commercial real estate
368,316
334,508
333,060
318,849
290,198
Consumer real estate
142,711
123,908
120,079
107,651
97,969
Commercial and industrial
67,239
66,285
60,687
61,778
63,545
Consumer and other
59,687
67,388
72,620
76,460
74,650
Total loans, net of deferred fees
637,953
592,089
586,446
564,738
526,362
Less allowance for loan losses
7,494
7,206
7,040
6,934
6,323
Total loans, net
630,459
584,883
579,406
557,804
520,039

DEPOSIT COMPOSITION – Unaudited


As of

June 30
Mar 31
Dec 31
Sept 30
June 30
(dollars in thousands)
2022
2022
2021
2021
2021
Noninterest-bearing
265,049
273,118
238,019
246,534
215,814
Interest-bearing:





DDA and NOW accounts
159,939
168,401
153,889
133,474
132,269
Money market accounts
230,840
217,812
204,432
216,243
169,707
Savings
66,727
61,246
58,566
59,941
57,880
Time, less than $250,000
78,735
84,874
99,059
103,126
106,219
Time, $250,000 and over
29,702
32,212
26,868
28,183
29,616
Total deposits
830,992
837,663
780,833
787,501
711,505

Footnotes to tables:
(1)
Total revenue is the sum of net interest income and noninterest income.
(2)
Annualized for the respective period.
(3)
Noninterest expense divided by the sum of net interest income and noninterest income.
(4)
Includes noninterest-bearing and interest-bearing DDA and NOW accounts.
(5)
The tangible book value per share is calculated as total shareholders' equity less intangible assets, divided by period-end outstanding common shares.

ABOUT FIRST RELIANCE

Founded in 1999, First Reliance Bancshares, Inc. (OTC: FSRL.OB), is based in Florence, South Carolina and has assets of approximately $947 million . The company employs more than 175 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.

For Immediate Release Contact:
Robert Haile
SEVP & Chief Financial Officer
(843) 656-5000
rhaile@firstreliance.com

SOURCE First Reliance Bancshares

Company Name:	First Reliance Bancshares Inc
Stock Symbol:	FSRL
Market:	OTC
Website:	www.firstreliance.com

Twitter