FLORENCE, S.C., Aug. 10, 2018 /PRNewswire/ — First Reliance Bancshares, Inc. (OTC: FSRL), the holding company (the “Company”) for First Reliance Bank (the “Bank”), reported second quarter 2018 net income of $465,797, or $0.06 per diluted share.  The Company’s operating earnings were $591,343, or $0.07 per diluted share.  Operating earnings is a non-GAAP measure comprised of net income exclusive of non-recurring merger related expenses.  Non-recurring merger related expenses incurred in the second quarter were $125,546, or $0.01 per diluted share. 

(PRNewsfoto/First Reliance Bank)

According to F. R. Saunders, Jr., the Company’s Chief Executive Officer, “We continue to see positive impact on earnings with organic growth from our recent expansion into North Carolina and from our acquisition in Greenville.  We are a purpose driven company and remain focused on our business model that outlines our value proposition.  While we are aware of the expense associated with expansion we have instituted an efficiency improvement initiative to remove legacy cost from our operations.  Excluding noninterest expenses associated with our three office expansion in 2018, our efficiency ratio would have been 77%.  For the remainder of 2018 and into 2019, we look to reduce operating expenses by $1.5 million, which we expect to improve our efficiency ratio further to the 70-72% range”. 

Additionally during the quarter, the Board of Directors of the Company approved the repurchase of up to approximately 30,000 shares of the Company’s Common Stock and Series D Preferred Stock in open market and privately negotiated transactions through December 31, 2018.  Mr. Saunders indicated that the Company implemented the repurchase plan because we felt the share trading prices were undervalued and to provide smaller investors a source of liquidity.

Highlights

  • Net interest income improved 30% at $4.9 million for the three months ended June 30, 2018, compared to the same period of 2017;
  • Loans increased 28% over the past year, with annualized organic loan growth of 12%. 
  • Loans increased $7.0 million during the second quarter of 2018
  • Deposits grew 26% in the past year, with organic growth $13.5 million during the second quarter of 2018;
  • Received regulatory approval for opening the Winston Salem, NC Branch;
  • Opened a loan production office in the Lake Norman market, just north of Charlotte, NC;
  • Approved a 30,000 share Common Stock and Series D Preferred Stock Repurchase Initiative;
  • Other real estate owned, or OREO, declined by $561,215 from $761,215 to $200,000 due to the sale of parcels during the quarter;
  • Non-interest bearing and interest bearing checking accounts increased 15% over the past year, with organic growth of $3.5 million during the second quarter of 2018; and
  • Net interest margin continued to expand to 4.33% as of June 30, 2018, up from 4.30% during the previous quarter as the Company continued to leverage its low cost of funds of 51 bps.

Review of Income Statement

Net interest income improved 30% at $4.9 million for the three months ended June 30, 2018, compared to the same period of 2017.  The increase in net interest income was due principally to growth in earning assets while net interest margins improved to 4.33% for the three months ended June 30, 2018 compared to 4.30% during the previous quarter. 

Noninterest income remained steady at $2.1 million for the three months ended June 30, 2018.  “Gain on sale of mortgage loans decreased modestly by $100,144 to $1.3 million for quarter ending June 30, 2018 compared to $1.4 million for quarter ending June 30, 2017 despite a higher interest rate environment and tighter operating margins.  Our investment in the diversified mortgage income strategy is paying off as purchase mortgage business continues to increase, servicing income is increasing, and delinquencies are nominal.” said Jeffrey Paolucci, Executive Vice President and Chief Financial Officer.

Balance Sheet and Asset Quality

Total assets increased $93.9 million, or 23.2% to $537.8 million at June 30, 2018, compared to $436.5 million from June 30, 2017.

Loans receivable grew by $86.8 million, or 27.8%, to $399.2 million at June 30, 2018, compared to $312.4 million, at June 30, 2017 due to acquired loans from the acquisition of Independence Bancshares, Inc., in January 2018 totaling $50.5 million and organic loan growth of $36.3 million including commercial portfolios, 1-4 family mortgage portfolios and our consumer loan portfolios.  Mr. Saunders added, “Our focus on consumer and commercial loans throughout the bank has helped us with earning asset growth and yield expansion.  Our newly acquired Greenville market is expanding in commercial, consumer, and mortgage loans and we anticipate that is market will continue to help us grow. We also see continuous growth in commercial loans in our new markets which include Winston-Salem, Charlotte, and Myrtle Beach.” 

Transaction and savings deposits increased by $36.3 million, or 12.7%, to $322.9 million at June 30, 2018, from $286.7 million one year ago.  Household checking accounts increased by 3.2% reflecting our strong year-over-year branch sales growth.  “We continue to improve our products and services involving customer controls of debit card and online banking features.  We recently added person-to-person payments and financial planning, budgeting, and other money management tools to further enhance customer experience,” said Mr. Saunders.

Nonperforming assets declined $2.1 million to $2.4 million at June 30, 2018 compared to one year ago.  The Company reduced OREO by $2.0 million via third party sales over the past twelve months to $200,000.  The ratio of nonperforming assets to total assets declined to 0.45% at June 30, 2018, compared to 1.04% one year earlier.  The allowance for loan losses as a percentage of loans was 0.58% at June 30, 2018 (adjusted for purchase accounting marks on acquired loans), compared to 0.90% one year earlier.  For the second quarter of 2018, loan charge offs were nominal and largely offset by the bank recoveries. 

Capital

First Reliance Bank continues to remain well capitalized under all regulatory measures with capital ratios exceeding the statutory well-capitalized thresholds by an ample margin.  At June 30, 2018, capital ratios were as follows:

Ratio

First Reliance Bank       

Well-capitalized Minimum

Tier 1 leverage ratio

10.22%

5.00%

Common equity tier 1 capital

12.32%

6.50%

Tier 1 capital ratio

12.32%

8.00%

Total capital ratio

12.88%

10.00%

 

ABOUT FIRST RELIANCE BANCSHARES, INC.

Founded in 1999, First Reliance Bancshares, Inc., (OTC: FSRL.OB) is based in Florence, SC and has assets of approximately $538 million.  The Company employs more than 170 professional and has locations throughout the Carolinas.

First Reliance has redefined community banking with a commitment to making customers lives better, its founding principle.  Customers of the bank have given it a 95% customer satisfaction rating for five consecutive years.  First Reliance Bank is also one of three companies throughout South Carolina who have received the Best Places To Work in South Carolina award all thirteen years since the program began.  We believe that this recognition confirms that our associates are engaged and committed to the Bank’s 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 five unique community-customers programs, which include:  Hometown Heroes, a package of benefits for those serving our communities; Check N Save, an outreach program for the unbanked or under-banked; Moms First, a program recognizing inspiring mothers; and iMatter, a program supporting a younger audience.

The Company also offers a full suite of digital banking services, a Customer Service Guaranty, a Mortgage Service Guaranty, and is open on most traditional holidays.

Additional information about the Company is available on the Company’s web site at www.firstreliance.com.

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; (7) the business related to the acquisition of Independence Bancshares, Inc., 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 the Independence acquisition may not be fully realized within expected timeframes; and (9) disruption from the Independence acquisition may make it more difficult to maintain relationships with clients, associates, or suppliers.  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 Jeffrey A. Paolucci, Executive Vice President and Chief Financial Officer, (888)543-5510.

 

First Reliance Bancshares, Inc. and Subsidiary

Consolidated Balance Sheets

June 30

December 31

June 30

2018

2017

2017

Assets

Cash and cash equivalents:

Cash and due from banks

$                        4,442,320

$                        3,494,469

$                        4,906,241

Interest-bearing deposits with other banks

28,589,512

21,136,350

28,249,142

Total cash and cash equivalents

33,031,832

24,630,819

33,155,383

Time deposits in other banks

252,252

102,020

101,919

Securities available-for-sale

25,083,661

26,894,719

17,571,627

Securities held-to-maturity (Estimated fair value of $15,809,271, $17,372,835.21,

and $19,070,573 at June 30, 2018, December 31, 2017, and June 30, 2017)

15,759,600

17,018,132

18,527,443

Nonmarketable equity securities

543,500

1,359,200

734,500

Total investment securities

41,386,761

45,272,051

36,833,570

Mortgage loans held for sale

6,919,940

7,885,938

5,642,044

Loans receivable

399,262,647

333,675,253

312,432,694

Less allowance for loan losses

(2,356,562)

(2,453,875)

(2,867,446)

Loans, net

396,906,085

331,221,378

309,565,248

Premises, furniture and equipment, net

20,406,445

18,463,156

18,714,423

Accrued interest receivable

1,130,259

1,094,740

935,200

Other real estate owned

200,000

1,706,765

2,242,328

Cash surrender value life insurance

17,110,338

14,293,702

14,129,444

Net deferred tax assets

8,406,261

4,461,063

7,821,793

Mortgage servicing rights

7,815,798

6,357,666

5,316,588

Goodwill

690,917

Core deposit intangible

779,033

Other assets

2,833,303

3,132,443

2,023,258

Total assets

$                    537,869,224

$                    458,621,741

$                     436,481,198

Liabilities and Shareholders’ Equity

Liabilities

Deposits

Noninterest-bearing transaction accounts

$                    102,528,351

$                       86,209,099

$                       87,709,487

Interest-bearing transaction accounts

86,316,598

70,642,041

76,220,974

Savings

134,090,144

118,996,069

122,745,794

Time deposits $250,000 and over

28,581,126

13,874,405

9,736,164

Other time deposits

98,959,447

63,372,449

60,128,507

Total deposits

450,475,666

353,094,063

356,540,926

Securities sold under agreement to repurchase

18,133,207

13,929,651

16,534,007

Advances from Federal Home Loan Bank

22,000,000

7,300,000

Notes Payable

7,000,000

Junior subordinated debentures

10,310,000

10,310,000

10,310,000

Subordinated debentures

4,895,329

4,911,963

4,814,252

Accrued interest payable

284,173

253,679

309,486

Other liabilities

3,342,548

3,969,060

5,345,864

Total liabilities

487,440,923

408,468,416

408,154,535

Shareholders’ Equity

Preferred stock

Series A cumulative perpetual preferred stock -0  shares issued and outstanding at June
30, 2018, December 31, 2017 and June 30, 2017

Series B cumulative perpetual preferred stock – 0 shares issued and outstanding at June
30, 2018, December 31, 2017 and June 30, 2017

Series D preferred stock – 587, 599 and 599 shares issued and outstanding at
June 30, 2018, December 31, 2017 and June 30, 2017, respectively

587

599

599

Series E preferred stock –  410,499 shares issued and outstanding at December 31, 2017

2,955,593

Common stock, $0.01 par value; 20,000,000 shares authorized,

8,001,572, 7,887,486 and 4,773,291 shares issued and outstanding

at June 30,  2018, December 31, 2017 and  June 30, 2017, respectively

80,016

78,875

47,733

Non-Voting Common Stock – 410,499  shares issued and outstanding as of June 30, 2018

4,105

Capital surplus

84,349,087

46,941,229

25,691,582

Treasury stock, at cost, 64,799, 40,177 and 39,374 shares at June 30, 2018,

December 31, 2017 and June 30, 2017, respectively

(411,798)

(229,844)

(221,203)

Nonvested restricted stock

(1,661,417)

(868,399)

(673,733)

Retained Earnings/Deficit

(31,246,948)

1,573,382

3,560,217

Accumulated other comprehensive loss

(685,331)

(298,110)

(78,532)

Total shareholders’ equity

50,428,301

50,153,325

28,326,663

Total liabilities and shareholders’ equity

$                    537,869,224

$                    458,621,741

$                    436,481,198

 

 

First Reliance Bancshares, Inc. and Subsidiary

Consolidated Statements of Operations

Three Months Ended

Three Months Ended

Three Months Ended

June 30, 2018

December 31, 2017

June 30, 2017

Interest income:

Loans, including fees

$                 5,365,689

$                4,288,116

$                4,052,786

Investment securities:

Taxable

226,109

218,397

195,305

Tax exempt

38,862

34,476

28,155

Other interest income

103,363

84,235

41,984

Total

5,734,023

4,625,224

4,318,230

Interest expense:

Time deposits

467,517

236,411

168,207

Other deposits

137,422

101,606

106,976

Other interest expense

233,470

195,758

277,001

Total

838,409

533,775

552,184

Net interest income

4,895,614

4,091,449

3,766,046

Provision for loan losses

0

74,796

Net interest income after provision for loan losses

4,895,614

4,091,449

3,691,250

Noninterest income:

Service charges on deposit accounts

354,974

394,392

362,467

Gain on sale of mortgage loans

1,283,863

1,044,773

1,384,007

Income from bank owned life insurance

97,849

81,560

82,744

Other service charges, commissions, and fees

388,929

344,319

340,816

Other

(5,973)

90,683

77,934

Total

2,119,642

1,955,727

2,247,968

Noninterest expenses:

Salaries and benefits

3,847,938

3,185,613

2,908,554

Occupancy

547,820

433,315

417,217

Furniture and equipment related expenses

542,203

427,176

419,605

Other

1,323,816

1,621,888

1,193,025

Merger Related Expenses

125,546

501,265

Total

6,387,323

6,169,257

4,938,401

Income before income taxes

627,933

(122,081)

1,000,817

Income Tax Expense

162,136

2,597,546

338,184

Net (loss) income

465,797

(2,719,627)

662,633

Net (loss)  income available to common shareholders

$                  465,797

$               (2,719,627)

$                  662,633

Average common shares outstanding, basic

8,065,932

7,847,201

4,693,073

Average common shares outstanding, diluted

8,126,732

7,997,597

4,830,339

Income (loss)  per common share:

Basic (loss) income per share

$                        0.06

$                        (0.35)

$                        0.14

Diluted (loss) income per share

$                        0.06

$                        (0.34)

$                        0.14

Non-GAAP finanical measurements (unaudited)

Net (loss) income available to common shareholders before adjustments

$                  465,797

$               (2,719,627)

$                  662,633

Adjustments

Income tax expense – tax rate change

2,644,628

Merger related costs

125,546

501,265

Total Adjustments

125,546

3,145,893

Net income after adjustments (non-GAAP)

$                  591,343

$                  426,266

$                  662,633

Adjusted Income per common share:

Basic (loss) income per share  (non-GAAP)

$                        0.07

$                        0.05

$                        0.14

Diluted (loss) income per share  (non-GAAP)

$                        0.07

$                        0.05

$                        0.14

 

 

First Reliance Bancshares, Inc. and Subsidiary

Consolidated Statements of Operations

June 30, 2018

December 31, 2017

June 30, 2017

Interest income:

Loans, including fees

$             10,458,216

$             16,321,881

$                        7,728,237

Investment securities:

Taxable

471,648

802,815

393,962

Tax exempt

77,772

118,969

56,356

Other interest income

165,487

225,924

79,541

Total

11,173,123

17,469,589

8,258,096

Interest expense:

Time deposits

801,748

732,399

296,708

Other deposits

245,782

410,459

198,874

Other interest expense

501,551

1,028,926

548,752

Total

1,549,081

2,171,784

1,044,334

Net interest income

9,624,042

15,297,805

7,213,762

Provision for loan losses

20,477

226,296

Net interest income after provision for loan losses

9,603,565

15,297,805

6,987,466

Noninterest income:

Service charges on deposit accounts

726,128

1,502,286

708,413

Gain on sale of mortgage loans

2,782,360

4,845,075

2,992,440

Income from bank owned life insurance

194,583

328,716

164,459

Other service charges, commissions, and fees

737,200

1,341,171

666,110

Other

114,712

324,003

148,853

Total

4,554,983

8,341,251

4,680,275

Noninterest expenses:

Salaries and benefits

7,686,974

12,075,338

5,743,587

Occupancy

1,088,394

1,685,622

817,849

Furniture and equipment related expenses

1,120,335

1,646,687

820,242

Other

2,669,452

501,265

2,348,083

Merger Related Expense

823,644

4,803,246

Total

13,388,799

20,712,158

9,729,761

Income before income taxes

769,749

2,926,898

1,937,980

Income tax expense 

215,880

3,616,258

641,304

Net (loss) income

553,869

(689,360)

1,296,676

Net (loss) income available to common shareholders

$                  553,869

$                  (689,360)

$              1,296,676

Average common shares outstanding, basic

8,030,507

5,465,868

4,693,073

Average common shares outstanding, diluted

8,098,737

5,606,149

4,830,339

Income (loss) per common share:

Basic (loss) income per share

$                       0.07

$                       (0.13)

$                       0.28

Diluted (loss) income per share

$                       0.07

$                       (0.12)

$                       0.27

Non-GAAP finanical measuremnets (unaudited)

Net (loss) income available to common shareholders before adjustments

$                 553,869

$                  (689,360)

$              1,296,676

Adjustments

Income tax expense – tax rate change

2,644,628

Merger related costs

823,644

501,265

Total Adjustments

823,644

3,145,893

Net income after adjustments (non-GAAP)

$              1,377,513

$                2,456,533

$              1,296,676

Adjusted Income per common share:

Basic (loss) income per share  (non-GAAP)

$                       0.17

$                        0.45

$                        0.28

Diluted (loss) income per share  (non-GAAP)

$                       0.17

$                        0.44

$                        0.27

 

 

Asset Quality and Capital Adequacy

(dollars in thousands, except asset quality and per share data)

As of and for the Three Months Ended

June 30, 2018

December 31, 2017

June 30, 2017

Asset Quality

Loans 90 days past due & still accruing

Nonaccrual loans

2,202

1,353

2,273

Total nonperfoming loans

2,202

1,353

2,273

OREO and repossessed assets

200

1,707

2,242

Total Nonperforming Assets

2,402

3,060

4,515

Nonperforming loans to loans

0.55%

0.41%

0.73%

Nonperforming assets to total assets

0.45%

0.67%

1.04%

Allowance for loan losses to total loans

0.58%

0.72%

0.90%

Allowance for loan losses to nonperforming loans

107.02%

181.37%

126.15%

Capital Data (at quarter end)

Book value per share

6.04

6.01

5.98

Tangible book value per share

6.04

6.01

5.98

Per Share Data

QTD Weighted Average Shares Outstanding- basic

8,065,932

7,847,201

4,693,073

QTD Weighted Average Shares Outstanding- diluted

8,126,732

7,997,597

4,830,339

Earning Per Share – basic

$                       0.06

$                       (0.35)

$                       0.14

Earning Per Share -diluted

0.06

(0.34)

0.14

Profitability Ratios

Net Interest Margin

4.33%

4.29%

4.32%

Return on Assets

0.35%

-2.40%

0.62%

Return on Equity

3.75%

-21.99%

9.49%

Capital Adequacy- Bank Only

Tier 1 leverage ratio

10.22%

9.50%

9.92%

Common Equity Tier 1 capital

12.32%

11.64%

11.99%

Tier 1 capital ratio

12.32%

11.64%

11.99%

Total capital ratio

12.88%

12.32%

12.83%

Total risk weighted assets

428,996

365,136

342,279

Contact: 
Jeffrey A. Paolucci, EVP & CFO
(888) 543-5510
jpaolucci@firstreliance.com

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SOURCE First Reliance Bancshares, Inc.