First Reliance Bancshares Reports First Quarter 2025 Results

FLORENCE, S.C., April 24, 2025 /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 2025.

First Quarter 2025 Highlights

• Net income increased 30.3% for the first quarter of 2025 to $1.6 million, or $0.19 per diluted share, compared to $1.2 million, or $0.15 per diluted share, for the first quarter of 2024. Operating earnings (non-GAAP), which excludes securities losses, net of tax, gain/(loss) on disposal/write down fixed assets and right of use assets, net of tax, gain on early extinguishment of debt, net of tax, and expenses related to branch sale, net of tax, were $1.7 million, or $0.20 per diluted share, for the first quarter of 2025, compared to $1.2 million, or $0.15 per diluted share, in the first quarter of 2024.
• Book value per share increased $1.32, or 14.9%, from $8.86 per share at March 31, 2024, to $10.18 per share at March 31, 2025. Tangible book value (non-GAAP) per share increased $1.32, or 15.1%, from $8.77 per share at March 31, 2024, to $10.09 per share at March 31, 2025.
• Net interest income for the quarter was $8.8 million, which represents an increase of $1.6 million, or 21.6%, compared to the first quarter of 2024. On a linked quarter basis, the increase was $362,000, or 4.3%.
• Net interest margin increased during the quarter to 3.49% from 3.11% at March 31, 2024, and increased 11 basis points from 3.38% at December 31, 2024.
• Total loans held for investment increased $30.7 million, or 16.3% annualized, to $784.5 million at March 31, 2025, from $753.7 million at December 31, 2024. The increase was $59.3 million, or 8.2%, from $725.2 million at March 31, 2024.
• Total deposits increased $27.3 million, or 11.5% annualized, to $978.7 million at March 31, 2025, from $951.4 million at December 31, 2024. The increase was $97.4 million, or 11.0% from $881.3 million at March 31, 2024.
• All regulatory approvals have been received for the Company's sale of its two branch locations in North Carolina to Carter Bank. Carter Bank is acquiring all deposits and other assets associated with these locations. Carter Bank is not acquiring any loans in this transaction. Closing is expected to occur in the second quarter of 2025.
• Asset quality remained strong with nonperforming assets declining to $933 thousand, or 0.9% of total assets at March 31, 2025, from $1.2 million, or 0.11% of total assets at December 31, 2024, compared to $282 thousand, or 0.03% of total assets at March 31, 2024.

Rick Saunders, Chief Executive Officer, stated: "We continue to grow our balance sheet, improve our net interest margin and improve our efficiency ratio.  Despite a large increase in the provision expense due to strong loan growth in both funded and unfunded commitments, our operating earnings improved 36% year over year, and our tangible book value per share improved by 15.1%.  We expanded our NIM 38 basis points this quarter compared to the first quarter of 2024.  We expect the transaction for the two branches in North Carolina to close in late May of 2025, which we believe will further improve our operating efficiency.  Credit quality remained steady with low net charge offs and low nonperforming assets.   We remain committed to our communities and the markets we serve by providing exceptional service and banking solutions for our clients."

Footnotes to table located at the end of this release.

Net income for the three months ended March 31, 2025, was $1.6 million, or $0.19 per diluted common share, compared to $1.2 million, or $0.15 per diluted common share, for the three months ended March 31, 2024.  On an operating basis, the first quarter of 2025 diluted EPS was $0.20, compared to $0.15 diluted EPS for the first quarter of 2024.  During the first quarter of 2025, the Company added back the impact of securities losses, net of tax, of $145 thousand, cost related to the branch sale, net of tax, of $18 thousand, and subtracted the gain on early extinguishment of debt, net of tax, of $111 thousand compared to subtracting the after-tax gain on the sale of fixed assets of $15 thousand in the first quarter of 2024. 

The provision for credit losses for loans was $364 thousand, and for unfunded commitments was $343 thousand, totaling $707 thousand for the first quarter of 2025.  The increase in the ACL for loans was primarily driven by loan growth, and the increase in the reserve for unfunded commitments was primarily the result of increases in construction commitments and the expected term of those related loans.

Noninterest income for the three months ended March 31, 2025, was $2.4 million, a decrease of $89 thousand from $2.5 million in the first quarter of 2024.  Noninterest income was primarily driven by mortgage banking income which totaled $1.4 million in both the first quarter of 2025 and the first quarter of 2024.  In the first quarter of 2025, the company recognized securities losses, $182 thousand, which was partially offset by $140 thousand gain on the early extinguishment of debt. 

Noninterest expense for the three months ended March 31, 2025, was $8.4 million, an increase of $573 thousand from $7.9 million in the first quarter of 2024.  The increase was primarily driven by an increase in higher compensation and benefits of $403 thousand primarily from salaries, payroll taxes, and equity compensation; and from higher data processing and technology cost of $117 thousand. 

Operating adjustments - 1Q 2025

During the first quarter of 2025, the Company recorded the following non-recurring transactions:

• Paid off subordinated indebtedness of $1.0 million with $860 thousand, resulting in a pre-tax gain of $140 thousand,
• Recorded pre-tax securities losses of $182 thousand, and
• Recorded pre-tax branch disposal related costs of $23 thousand.

Fixed Assets and Right of Use Assets – 4Q 2024

During the fourth quarter of 2024 the Company wrote off two leases totaling $538 thousand.  One was a land lease that the company no longer intends to use, which totaled $504 thousand.  The other lease related to a facility that was consolidated into the main banking location in Charleston which expires in mid-2025 and totaled $34 thousand.  These two written off leases will reduce annual occupancy cost by $180 thousand in 2025 and by $147 thousand in 2026, 2027 and part of 2028. 

In addition, a fixed asset was written down by $300,000 related to a parcel of land in North Charleston that the company owns, and it was written down to fair value and remains for sale.

Net interest income for the three months ended March 31, 2025, was $8.8 million compared to $7.2 million for the three months ended March 31, 2024.  This increase was the result of an increase in interest income of $1.4 million, and lower interest expense of $128,000.  This resulted in an improved net interest margin of 38 basis points to 3.49% from 3.11% one year ago, led by the loan portfolio yield which improved by 19 basis points, while yield on interest-bearing liabilities improved by 30 basis points.  In addition, the total cost of funds, including noninterest-bearing deposits, decreased to 2.03% in the first quarter of 2025, compared to 2.25% in the first quarter of 2024.  On a linked quarter basis, our net interest margin improved 13 basis points, or $362,000.  

First Reliance cash and cash equivalents totaled $37.9 million at March 31, 2025, compared to $47.2 million at December 31, 2024.  Cash with the Federal Reserve Bank totaled $32.5 million as of March 31, 2025, compared to $41.8 million at December 31, 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 $181.6 million and $175.8 million, at March 31, 2025 and December 31, 2024, respectively.  The unrealized loss recorded on AFS securities totaled $10.0 million as of March 31,2025, compared to $12.9 million as of December 31, 2024, a decrease during the first quarter of 2025 of $2.9 million, pre-tax.

As of March 31, 2025, deposits increased by $27.3 million, or 11.5% annualized.  See page 9 for detail on the deposit balance amounts over the past five quarters.

The Company had no outstanding borrowings with the FHLB of Atlanta at March 31, 2025 or at December 31, 2024.

During the first quarter of 2025, the Company retired $1.0 million of subordinated debt with payment of $860,000, resulting in a gain of $140,000 on the early extinguishment of debt.  $500 thousand of the retired debt had a fixed interest rate of 5.875% and $500 thousand had a fixed interest rate of 3.375%.

The Company's subordinated debt with a current interest rate of 5.875% becomes callable in the second quarter of 2025.  The Company is evaluating the possibility of calling this debt.

Book value (BV) and tangible book value (TBV) per share increased $0.50 per share during the first quarter of 2025.  BV and TBV increased $1.32 per share since March 31, 2024, or 15%.

Asset quality remained steady during the first quarter of 2025, with nonperforming assets decreasing to $933 thousand, which represents 0.09% of total assets.  The decrease was in all categories, except one, non-owner occupied RE.   The allowance for credit losses as a percentage of total loans receivable decreased to 1.10% at March 31, 2025 compared to 1.12% at December 31, 2024, and compared to 1.17% at March 31, 2024.  The allowance for credit losses increased by a provision for credit losses of $364 thousand offset by net charge-offs of $144 thousand, during the first quarter of 2025.  In the first quarter of 2024, the Company experienced net charge-offs of $113 thousand and increased the ACL with a provision for credit losses of $217 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 $1.097 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 92% customer satisfaction rating, well above the community bank industry average of 82%.  First Reliance has also received "the Best Places to Work in South Carolina award" for 19 years consecutive years.  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
rhaile@firstreliance.com

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SOURCE First Reliance Bancshares, Inc.