FLORENCE, S.C., Aug. 10, 2018 /PRNewswire/ -- First Reliance Bancshares, Inc. 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. 

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:

 

ABOUT FIRST RELIANCE BANCSHARES, INC.

Founded in 1999, First Reliance Bancshares, Inc., FSRL 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.

 

 

 

 

 

 

 

Contact: 

Jeffrey A. Paolucci, EVP & CFO

(888) 543-5510

jpaolucci@firstreliance.com

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SOURCE First Reliance Bancshares, Inc.