(Photo by Tim Ford/Power Suit Portraits)

Founded in 1999, First Reliance Bancshares, Inc. (OTC: FSRL), is based in Florence, South Carolina, and has assets of approximately $911 million. It is the holding company for First Reliance Bank. 

CEO Rick Saunders has worked in finance and banking as his career of choice from an early age. From 1983 through 1997, he was senior vice president and city executive of Florence for Pee Dee State Bank, where he was also a member of the Senior Loan Committee and board of directors. During this time, his responsibilities included corporate banking, business development, and policy making. 

From 1997 to 1998, he served as senior market executive with Centura Bank after its merger with Pee Dee State Bank. In 1998, he began organizing First Reliance Bank and presently serves as its chief executive officer.

Saunders graduated from the South Carolina Bankers School, a cooperative program with the College of Business Administration of the University of South Carolina in 1986. Two years later, he graduated from the Southeastern School of Agriculture Lending, a cooperative program with the College of Agricultural Science of Clemson University.

He was awarded the Order of the Palmetto by Governor McMasters (2019) for his dedication and contributions to the well-being of South Carolina and its communities. He has been recognized with an Entrepreneur Award for his contributions to the prosperity of the Pee Dee Region by the Florence-Darlington Technical College’s Educational Foundation (2016), named Business Man of the Year (2007, Florence Chamber of Commerce), the Ernst and Young Entrepreneur of the Year (2007), and the Beta Gamma Sigma honoree from Francis Marion University School of Business (2004-2005).

He is also a board member of the College of Charleston, School of Business Board of Governors.  He is a member of the South Carolina Business Development Corporation board, a board member of Florence County Sheriff's Office Foundation, the board of directors for First Reliance Bank, First Reliance BancShares, the Florence Rotary Club, and the Florence Baptist Temple.

In a recent interview with David Dykes, editor of Greenville Business Magazine, Columbia Business Monthly, Charleston Business Magazine, and B2B: The Grand Strand, Saunders talked about regional and community lenders, how he built his company and how he has navigated it through inflationary times and banking risks.

Here are excerpts, edited for brevity and clarity, of that February conversation at his office in Florence.  

Q. Let's talk about the bank crisis. Supposedly it’s over, but many people are saying the worst may be yet to come for some regional and community lenders. And profits dropped sharply in the fourth quarter. The Fed postponed the end to its aggressive campaign to curb inflation, and that could offer some relief. But when you look in your crystal ball, what's your forecast?

Saunders: Let me start by saying that sometimes I get conflicted with the idea that I've got 43 years of experience and some insight as to what I think would happen from that experience, and the opposite of that, some scar tissue still left from 2008 and balancing the difference between those two. 

As I began to try to navigate my company through whatever I think is happening, I struggled internally with the demons that say, you've done this for 43 years, intuitively you should understand what's going to happen versus 2008 (which) was pretty traumatic for our industry and for our company, and I don't ever want to experience that again.

Banking is a risk business, and we're in the business of taking risk and getting paid for that risk. But too much risk can obviously be costly, and too little risk can be costly equally as bad. I have my opinions on where I think the world is heading, and it's shaping up differently, I think, than maybe where I first thought. Let me kind of go back and say that I, for the last three years, have not been a fan of the trillions of dollars the government has injected into the system and what that did to bank balance sheets. It made us feel a bit more comfortable than we should with respect to our funding.

Deposits were less attractive because there were just so many of them. And I was nervous all the way through that whole process, always advising my team not to over lever those deposits or deploy those deposits, because at some point in time I felt like the Fed would have to address the consequences of that kind of outflow or dollars injected into the economy. And that proved to be the case. So maybe a little bit of experience paid off there. The other side, though, is that we've had hyperinflation in equities, and we've had hyperinflation in real estate, this time funded differently. 

The 2008 crisis was funded with debt. This has been funded with government stimulus, but regardless, it's still hyperinflation. And I don't think anytime that you can have values of things go up as fast as they've gone up, not have some consequence the other way. Additionally, when rates go from zero to 7 percent, near zero to 7 percent, the consequence to people who happen to overleverage themselves is going to be punitive as well. 

I'm beginning to think a little softer, I guess, on what I think the implications are to companies like mine who are fortunate enough to be in the Southeast and not be extreme lenders in speculative real estate business. But those who are in larger urban and municipal areas who extended their exposure to speculative commercial real estate probably there will be a consequence for that, I'm sure.

Q. What do you think about your net interest income (a measure of profitability) for this year? Do you think it's going to be up, down?

Saunders: It depends. We're forecasting up about 8 percent. We were down slightly in 2023. Our margins have bottomed out and have turned to the positive, but also up 8 percent’s factored in some growth for us for this year. We're not on target in the first two months of the year. But we've got a pipeline. Our pipelines are robust, and people are doing business, and our lenders, our bankers are working hard, and we're optimistic that we will be able to hit our growth expectations for the year. Assuming that the world doesn't implode, or the Fed doesn't do anything crazy with interest rates, we think we will see enough. I do think that, though, the industry as a whole is still seeing some challenges with margin management and net interest income, and I think that's going to be impactful to the industry for the next year or so.

Q. When you talk about growth, is it going to be organic growth? Or is an acquisition a possibility?

Saunders: We never budget the opportunity for an acquisition unless we know one's working. And acquisitions are very difficult for companies our size right now. One is that share prices are under pressure because the world's just not happy with the banking industry as an investment of choice, because of the uncertainty, what's going on. The other is that the way the accounting takes place in an acquisition, you have to then realize the true value of assets that have lower interest rates. A bank that has a lot of low-yielding loans that we would acquire, or we would sell to, you would have to then write the value of those assets. And it's pretty punitive to deal – for companies our size. So, acquisitions will be a challenge for banks until interest rates are stable for a long period of time or come back down.

Q. By the same token, with your share price, the 52-week high has been $9 a share. Your market cap could make you an acquisition target right now.

Saunders: Right.

Q. You've been in the business for a long time. You’ve worked hard. The day may come when you say this is too attractive offer to refuse. Do you think about possibly being a partner?

Saunders: Obviously I’ve got to do what I think is right for the shareholders. And I lead this company a little bit differently, though, than maybe some CEOs. And you can argue is it the right way? But I think there are three stakeholders in our organization. The first and the most important to me are our people who work here. When you ask somebody to come join your team, am I doing right by them? And I'm not talking about just am I doing right by them by selling the company. I have to factor in is selling the company right for my associates as well. Then there's the client (bank customer). Is selling the company right for the client? Does it give them better opportunity? Does it give them more opportunity? Does the company I'm looking to sell to – are they going to get treated with the same level of service and the same level of compassion and empathy and ambition that we would otherwise hold ourselves to? And then of course, the shareholder, how does the shareholder look?

I've always built this company with the idea that we would build a legacy business and it would be designed to make a difference. And if I could make a difference in the right way, the shareholders ultimately would win that. There have been ebbs and flows with the shareholder, whether they won or not. We've always done a really good job with making that difference with the client and with the associate. 

I brought a team in the last two years, and you've had the opportunity to sit down and speak to some of them yourself. This team was built and designed to make sure the shareholder got their fair share as well. I want a good run at seeing this team really do something pretty extraordinary. I think they can. They're doing it now. I'm not really entertaining offers until I see this team really buckle down and can deliver and execute like I think they can deliver and execute.

 

Q. You’re not entertaining offers. But have you had any?

Saunders: We get calls all the time. Look, we're a billion-dollar company in the Southeast. We're an attractive option for people trying to get to South Carolina.

Q. Talk about market share, deposit market share. Some bank CEOs have told me they expect their market presidents to have at least a 5 percent market share. How does that fit into your thinking and your strategy? You ranked 25th in deposit share in South Carolina (according to FDIC data).

Saunders: I tell our employees primarily to never forget that in banking, we are in the deposit business. We make loans as a way to invest those deposits. But we're in the deposit business. That's what we do. We gather as many deposits as we can and as low a price as we can, and we deploy those deposits. ... Most of those investments are in loans, which are good for the economy. Then there are some in bonds and then some in cash. 

But generally speaking, we're in the deposit business. When we set our targets for the year, the first thing we do is we set what kind of deposit growth do we want. And for us, the way we measure success is that we have some minimum standards we think all our offices should be, and then we have a pace at which they think they should get there. And then after that, the pace of growth should be to outpace the growth of the branches in your general market area. A branch sitting in Charleston, South Carolina, and I've only got one branch in Charleston, South Carolina. To think that I can have 5 percent market share with one branch in Charleston, South Carolina, would be a ridiculous idea.

In a certain geocoded area around that branch, we expect that branch to be growing faster than the branches in its specific area. That's how we measure success. Now, there's no straight line to a number in banking. And the reason I say that is that there are irrational behaviors of your competitors, and then there are talent challenges in the industry, and then there are economic ebbs and flows that affect whether we're pushing the gas or we're mashing the clutch in terms of growth and pushing the gas and mashing the clutch in are ultimately impactful to the deposits as well. 

The flip side would be, prior to the Fed's movement in rates, lots of banks, not us, because we always know the value of checking deposits, we're saying, no, no, no we don't want any more checking deposits. It's just we got all deposits we can stand because we couldn't deploy them fast enough. The other side is that when rates start going up at a hyper, hyper pace, you may choose to say, I'm not paying 5 or 6 percent for certificates of deposits because my loan demand may be softening. I may not grow the deposit base of the bank as fast as people might think you should, because I may not have – the economics may not make sense.

Q. You said in the Greater Pee Dee Business Journal in 2008 that at the end of the day, you wanted banking industry to emulate you, not you copying other ideas. How are you still thinking outside the box now?

Saunders: We're finishing up our next three-year plan, and I wrote inside the front of the plan the dangers of lack of imagination to my team. In banking, we have a natural tendency to migrate to tradition, and tradition is a very dangerous thing. Now, there's a reason for tradition, because tradition works. But the unfortunate thing is that tradition in a small bank will limit your capacity to do exceptional things. I've challenged my team to use their imagination on what the next three to five years looks like for us. And I'm going to tell you, David, it's not easy. Banking is not designed to be hyper creative. There's risk that comes with creativity. There's cost that comes with creativity. And then of course, there's an expected return and execution that comes when you have creative thinking.

Banks – like all businesses – are kind of broken into three quadrants. Either you're a cost leader, either you got the best price or the lowest price, whatever, or you're a niche company. You have a niche for something, a vertical that's specific or you have something that makes you different. We kind of lean on the idea that our people and our customers make us different.

I don't always feel like that's the case because I think sometimes we fall back into the habit of tradition, and I want to be very intentional about what we call exceptional delivery of service to our customers. And that's where I'm talking about separating ourselves. The hours we open, the branding of our company, the messaging to our employees, the expectations for delivery. Those things need to be intentional. They need to be consistent. They need to be delivered. And it's hard.

As a leader of the company, when we were 50 employees and three branches, it was easy for me to keep my hands on that steering wheel. A couple hundred employees and 11 branches across two states, it’s still not as difficult as it would be if I were Bank of America, obviously, but it becomes more and more challenging, and I can see why sometimes leaders just say, OK, we'll fall right back into habit of tradition. I don't want to be that guy. I don't want to be a business if I think we got to be just like everybody else. Because honestly, I don't know that I can provide enough difference for the shareholder component. All three have to win. … If the employee can't win, the customer can't win and the shareholder can't win, then there's no reason for me to stay independent. I got to make sure all three win. I think the shareholder only wins if I become very intentional about being different than everybody else. And that's a hard thing to do.

Q. I've talked to a number of bank CEOs, and I've asked the question about bitcoin, cryptocurrency. I haven't met many of the CEOs who think they're gamblers and want to take that on. But what's your assessment of that or artificial intelligence? I mean, are those niches?

Saunders: No, not for us they’re not. First off, I don't understand bitcoin. I haven’t figured out how anybody sees any value in it. Of course, something that can be as valuable as an investment as that is, and be worth nothing the next day, means nobody really understands it. … That kind of thing takes a level of risk taking and intellectual horsepower that I'm not sure that I'm the leader that can create that kind of different approach. That's why I really kind of stayed away from this concept of being a niche banker. Just because I just think you put all your eggs in one carton, you run a risk of losing them all when things go south. I'm not saying that somebody can't find a way into both of those lanes and find a way to make money at it. It just won't be something we'll ever do, not under my leadership.

Q. The Wall Street Journal reported recently that the SEC (Securities and Exchange Commission) is questioning some community and regional banks about their exposure to commercial real estate and loan portfolios. Rising interest rates, high vacancies pushed the commercial property sector into a tailspin. Should this be under the regulator spotlight, do you think?

Saunders: Absolutely. It was one of the very same conversations they were having in 2005, ’06 and ’07. Overexposure to sectors in real estate. Like I said, though, I think this is a different time. That was an over levered sector where people who weren't really even qualified were buying into real estate and it pushed all real estate, all real property higher and then it all just collapsed like a house of cards. 

This is different this time, used with different kind of financing, different kind of sourced, sourced a different way…I'm not an economist so I want to be careful about how I word this, but I don't think 3 percent inflation and 3 percent unemployment is a target the Fed’s going to be ultimately happy with. And I think taking inflation from six to three is easy. From three to two is where stuff gets broken. And honestly, I don't think they're going to be happy with inflation until it gets to two. And I honestly don't think they can get to two until unemployment gets to five and until wage pressures come under control, I don't think they can control inflation the way they want.

Real estate and consumer debt, commercial real estate and consumer debt, and I'm saying commercial real estate, whether towered facilities or strip malls where small businesses operate. Small businesses probably could feel some pain. And I think people who own real property, where small businesses are housed, like these little, small strip malls here that have 15 short-term leases to mom and pop shops, those could be under pressure if rates stay high and unemployment goes up and they (Fed officials) tweak the system to a point where the pressure is felt. … However, the other side of that, though, is that we're in the Southeast. We've been the fortunate recipient of a flood of people into our geography. We don't have a lot of high-towered office space here in South Carolina. And even if they do something that breaks the economy, I think the Southeast economy holds up better than the national economy just because of the flood of people who have come here. I don’t know that the pain we feel here will be as strong as maybe the Northeast.

Q. What about bank branches? JPMorgan Chase has indicated it believes in branches, announcing 500 new branches in the next three years. What does that tell you about a branch network and yours in particular?

Saunders: Any of the big national and international banks in the Northeast that are seeing floods of their customers move to the Southeast would say we’ve got to invest in bank branches because they want this idea, at least, that those people who are leaving still have connectivity to their organization. Smart move. 

There is something to be said about a physical presence in a market. It creates brand awareness. It creates stability. It sends a message to the community that you're committed to it. Branches are important. Do I think it's as important as it was 15 years ago? No, I don't. I think technology solves a lot of that. … It's hard to spend $3 (million) or $4 million on an office and then go spend a million dollars a year in people and stuff to run it and capture enough market share to pay for it. … We're still very cautious about when we spend the money to do that. 

Q. What about coming out of Covid with remote work? How did you handle that in the branches, in your executive offices? How are you requiring people to work now?

Saunders: The company operates differently than I would personally prefer it to.

Q. But you're the CEO. 

Saunders: I know, and I'm trying to be very careful that I don't make the wrong decision because of the demands of the workforce now. We're a billion dollar organization with a couple of hundred employees, and finding the talent it takes to work in a company as complex as ours requires some flexibility in how we staff anymore. It didn't pre-Covid. Pre-Covid, you could say, we're coming into offices, this is what we do. We do have a remote workforce. I don't know what percentage it is, but we have primarily what we would call more of a blended operation than a true remote workforce. 

We do have several positions that are true remote, but the majority of our remote work still is required to have a day or two in the office, and they don't seem to mind that. Water cooler conversations done the right way are important. Relationships with your coworkers is important to engagement and controlling turnover. People want to have friends and relationships at work. Good ideas and good conversation are sometimes often done in the break room and not in the boardroom.

It's necessary that people show up and learn more about the company and learn more about each other and learn more about their jobs. I encourage an in-office workforce. I'm satisfied with a blended operation now because we do have some very talented people who prefer to work remotely.

Q. In the past, you've been selected as one of the state's best places to work, and you've talked about how you should drive growth and innovation in a year of heightened risk. But in your tenure as CEO, if you could go back and do one thing differently, what would that be?

Saunders: The first thing that pops in my head – I'm not sure it's the right answer, David – is I wish I had been a little bit slower about growth, and I wish I had paid a little more attention to the noise in 2005 and ’06 sooner because 2008 was punitive for us. Now, granted, we did not have to raise capital, dilute our shareholders. We did not go under a formal regulatory order, but it took us about eight years to slug out of that period. 

And it's because we were taking more risk than I think at the time we should have been taking. I wish I'd have been a little more deliberate about managing. I was just too young and too inexperienced a leader, and everybody was doing it, and I was doing what the pack was doing and not breaking apart when my gut was telling me I shouldn't be. I should have listened to my gut a little faster then. 

The other is, and this is throughout the company, but maybe more in my inner circle, I wish I’d maybe been a little more slow to fill seats … sometimes you do get desperate to put cheeks in seats, and you hire people too fast. I had a mentor tell me one time, be quick to fire and slow to hire. I was probably the opposite of that for a little while as a young leader. 

I probably put people in sometimes that maybe they weren't ready, or they didn't blend culturally, or their values were different than mine. And then sometimes I think I held on too long to people that I trusted and liked but probably knew they couldn't take me to the next level, too.

Q. Do you consider yourself a banking maverick? You seem to wear that label in a good way, that you don't want to be caught up in the crowd. You don't want to be following. … You want to be leading prudently and smartly. Is a maverick a good label?

Saunders: I don't know. That name makes me uncomfortable, that term. I am doing something that, when we started this in 1998, everybody said, you're not qualified. You should not be doing this. You all are just a bunch of country bangers from Florence, South Carolina. These guys probably don't need to be doing this, and maybe they were right at the time. 

My fear of failure and the fact that we had just a perfect opportunity to do this allowed me enough time to figure it out. But the good Lord blessed me with some really good mentors and coaches and really kind of shaped me as a leader in the way I thought about leading an organization and maybe gave me enough time to still be relevant 25 years later where most of the guys and gals who were doing it 26 years ago are gone. I still feel unworthy. And because I feel unworthy, I push myself to be different, and to thrive and to do something that I think the world says you probably can't. I'm motivated by this idea that people say, yeah, I'm not sure he's the guy or can do it.

I want to be different. I don't want to look like everybody else because I was never told I was like everybody else. Maybe that's what I'm more motivated by than just this idea I’m a maverick.

Q.  Geographically, your headquarters technically is still Florence. But when you had the ribbon cutting in Columbia, you and the others who were there that day made a big deal about being in Columbia. Is that your operational headquarters, but this is your holding company headquarters?

Saunders: Short answer is no. Florence is still our home office. I am the only executive in the company left in Florence. Half of my executive team is in Columbia. Half of my other team is in Charleston. As much as I love Florence, South Carolina, this is my home and it will always be my home; getting talent, banking talent in Florence, is a challenge just to be a bigger company. 

If I wanted to be a $500 million operation forever, it would be fine. I have to think about where the growth of the organization is going to be. I have a home in Charleston. I do not have a home in Columbia. But Columbia is an hour away. It's not like it's a big deal to get there. The president of our company operates out of, our human resource fleet is out of Columbia. But all of my technology, all of my back office operations, all of my finance team, my mortgage operation, all out of Charleston. So, I would say probably we have a bigger presence in Charleston in terms of people headcount than we actually do in Columbia.

But it’s close to a 50-50 split. Probably, one day we may move our headquarters to one of those markets, either Charleston or Columbia. I won't move with that. It would be an optics change because the market likes the idea of a bank headquarters somewhere, and then talent likes that, too. Recruiting talent to Charleston and Columbia is much easier than recruiting talent to Florence.

Q. The Florence economy – is it on solid footing? 

Saunders: Yes, the Florence economy is on solid footing. It's always been steady. Even in the ebbs and flows of world market and national market disruptions, Florence has always been reasonably steady. We have good infrastructure here. We've got a great hospital system. We do a really good job of attracting industry to Florence, but we tend to attract lower wage, blue collar jobs. I don't know if that's the culture of the area, or is that by design? I don't know the answer to that, but we tend to attract more lower wage, blue collar jobs than we do white collar, professional jobs. And it ultimately becomes an impediment. Workforce then becomes a challenge, and then the economics become a challenge because the average wage is going to be less than it would be, say, in Charleston. 

Wealth seems to migrate to Charleston. Industry seems to migrate to Greenville…We're a rural community. We've always kind of been a rural community, and it's been identified as a farmers community, a blue collar community. And I don't know that that changes until somebody comes up with a very good strategy on how to. I'm not sure anybody wants to. That in and of itself probably means that trajectory isn't steep, but it doesn't mean the downward trajectory is steep, either. I just think it makes it steady. What we get here is pretty predictable, and that in itself carries some comfort.

Q. Finally, I'm sorry for the loss of your dad (who died in January 2024). What's the most important thing he taught you?

Saunders: Thank you, by the way, for acknowledging that. I would say probably to always recognize that there will always be somebody in the room smarter than you, but that doesn't mean they have to outthink you or outwork you. So, if you are very deliberate in your thought and you're very deliberate in your effort to work, you probably can outperform somebody who has a higher IQ.

Q. How should he be remembered, and what is his legacy?

Saunders: My dad was a simple man. He managed a gas company, never aspired to have things. He started working when he was 14 because his father was sick, and he supported his family because his father was basically incapacitated from 14 to he died at my father's age of 20.

One of the things that resonates with me personally was never depend on anybody else, that you chart your own path in life and your own course, and while people can help you make sure you create your own identity and your own independence. Probably the thing that stood out to me, and I don't know that I paid attention to it, but it kind of resonated with me as people began to write me notes. And I guess I thought about it because I always saw my dad as the father who was just tough, right? He was a hard driver. Get up, go to work, be the first one up, be the first one there, and do your work with excellence. And drive, drive, drive, drive.

As a young teenager, I always thought I never could do good enough. It always drove me to do more do more, do more. Some people – that puts them in a corner. To me, it just drove me to push and do more, and that's the way I saw my father.

When my father retired from the gas company … he retired for a year at 62, 63. He came and said, ‘This retirement thing sucks. Can I come to work at the bank? Is there something I can do?’ And I said, ‘Yeah, why don't you help me with our properties and keep the yards clean and the plumbing working and the lights on and whatever?’

So, he was our facilities guy, and he stayed here for 24 years until he passed. Up until he got really sick, he was still working two or three days a week. 

That being said, I had hundreds and hundreds of people tell me how kind my father was to them, how he was always humble and smiling and willing to help. And there was never a day that somebody asked him to do something for them that he didn't do it with a sense of pride and humility and willingness to help whoever needed help at the time.

I guess I didn't see that side of my father as being a kind, loving, giving person. So, I was happy that that resonated with hundreds and hundreds of people that said he was one of the most gentlest, kindest men that just didn't expect anything from anybody and was willing to give all the time.