Market Overview

First Reliance Bancshares, Inc. Reports 1st Quarter 2019 Results and Reaffirms Stock Repurchase Plan

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FLORENCE, S.C., May 1, 2019 /PRNewswire/ -- First Reliance Bancshares, Inc. (OTC:FSRL), the holding company (the "Company") for First Reliance Bank (the "Bank"), reported first quarter 2019 net income of $661,955, or $0.08 per diluted share, up significantly from first quarter 2018 net income of $88,072 or $0.01 per diluted share.  The increase in net income for the first quarter of 2019 versus 2018 was due primarily to higher net interest income, which grew 9%, and benefited from loan growth of $57 million, up 14% year over year.  Also during the first quarter of 2019, the Company made strides toward reducing non-interest expenses by $177,098 compared to first quarter 2018 (adjusted for merger related costs for both quarters) and incurred increased provision for loan loss expense of $145,547 in first quarter of 2019 compared to $20,477 in the first quarter of 2018 as outstanding loans grew by $57 million, or 15%, to $449 million at March 31, 2019, compared to $392 million, at March 31, 2018.

First Reliance Bancshares

F. R. Saunders, Jr., the Company's Chief Executive Officer, stated, "We are very pleased with our first quarter operating results as we continue to see a positive impact on earnings with organic growth from our recent expansions into Greenville and Myrtle Beach, South Carolina along with expansions into Winston-Salem and Charlotte, North Carolina.  Today, market conditions are heated, and it is becoming increasingly more challenging to attract low-cost deposits and deploy these funds in higher yielding loans.  As such, we are now shifting our primary focus to increasing our profitability and reducing our efficiency ratio.  This initiative is a multi-pronged approach which will begin to show results in 2019 with the fuller effect coming in 2020.  During 2018, we took a deep dive into how we do business now and how we need to do business going forward.  This work identified in excess of $2.5 million of cost savings and revenue enhancements that will be implemented over a judicious timeline in order to minimize the effects on our customers.  Our commitment is to drive our efficiency ratio down to the mid 60's over the next three years.  Additionally, we closed our Loris, South Carolina branch in December 2018, and have announced the closing of our Summerville, South Carolina office in June 2019.  These markets were not providing us the growth and returns necessary to keep them open.  We will continue to analyze all our locations to ensure they are located and staffed for profitable growth," said Saunders.

The Board of Directors of the Company recently authorized the repurchase of up to approximately 100,000 shares of the Company's Common Stock and Series D Preferred Stock in open market and privately negotiated transactions through December 31, 2019.  The Board implemented the repurchase plan because it believes recent share trading prices undervalue the Company and to provide smaller shareholders with a source of liquidity.

Highlights

  • Net interest income improved 9% at $5.1 million for the three months ended March 31, 2019, compared to the same period of 2018;
  • Loans increased 14% or $57 million over the past year;
  • Deposits grew 17% or $75 million over the past year;
  • Transaction accounts increased $17 million, or 9%, over the past year;
  • Announced the closure of the Loris, South Carolina branch effective December 31, 2018. Customers will be serviced from the Myrtle Beach office at 507, 21st Avenue N., Myrtle Beach, SC;
  • Announced the closure of the Summerville, South Carolina branch effective June 15, 2019. Customers will be serviced from the Mount Pleasant office at 800 South Shelmore Blvd, Mount Pleasant, SC or from the Charleston office at 25 Cumberland Street, Charleston, SC;
  • Approved a 100,000 share Common Stock and Series D Preferred Stock Repurchase program to create liquidity for our smaller shareholders;
  • Began accepting deposits in our Winston-Salem, North Carolina branch office 3rd quarter 2018;
  • Requesting approval from FDIC to accept deposits and operate a full service branch in Mooresville, North Carolina (Lake Norman area of the greater Charlotte area MSA) in 3rd quarter 2019; and
  • Enacted new lease accounting standards effective March 31, 2019 thus increasing premises, furniture and equipment and lease liability by $6.2 million.

Review of Income Statement

Net interest income improved 9% to $5.1 million for the first quarter of 2019, compared to the same period of 2018.  According to Jeffrey Paolucci, Executive Vice President and Chief Financial Officer, "The increase in net interest income was due principally to growth in earning assets while net interest margin at 4.17% as of March 31, 2019 continues to perform well compared to our peers due to strong asset yields and solid base of lower priced deposits.  With our entry into new and more competitive markets and the flattening of the yield curve, we are expecting some compression in our margins.  Yield on earning assets increased to 5.11% for the quarter ended March 31, 2019, compared to 4.77% for the first quarter of 2018.  Cost of funds increased to 96 basis points for the first quarter of 2019, compared to 46 basis points for the year prior quarter." 

Noninterest income was $2.0 million for the quarter ended March 31, 2019, down from $2.4 million in the first quarter of 2018 primarily due to lesser gains on sale of mortgage loans.  Also, the Company took a $300,000 servicing right income adjustment taken in March 2018, while no income adjustment was taken in March 2019. 

Balance Sheet

Total assets increased $72 million, or 14%, to $604 million at March 31, 2019, compared to $532 million at March 31, 2018.  Loans receivable grew by $57 million, or 15%, to $449 million at March 31, 2019, compared to $392 million, at March 31, 2018 due to organic loan growth in our commercial, 1-4 family mortgage portfolios and consumer loan portfolios.  Mr. Saunders added, "With increased competition for low cost funding and pressure on operating margins, we are focusing our growth efforts to markets with deep client relationships that are less price sensitive.  Our growth experience in the new markets of Winston-Salem, Mooresville-Charlotte, and Myrtle Beach is better than expected with loan growth in one year totaling $31 million in Winston-Salem, $12 million in Mooresville-Charlotte, and $12 million in Myrtle Beach.  We are now accepting deposits in our Winston-Salem and Myrtle Beach branch offices and plan to accept deposits in our Mooresville-Charlotte location by third quarter 2019.  Our completed acquisition of Independence National Bank in 2018 positioned us in the Greenville, SC market and boosted our loans and deposits. Upstate South Carolina is arguably one of the best markets in the Southeast and we look forward to continued growth opportunities in Greenville and surrounding areas.  Transaction deposits increased by $17 million, or 9%, to $202 million at March 31, 2019, from $185 million one year ago.  Household checking accounts increased by 10% reflecting our strong year-over-year branch sales growth.  One of the main drivers of our strong margin is our concentration of core transaction accounts.  Obtaining the main checking account for consumers and businesses is a major focus for all of our bankers.  During 2018, we added a Director of Treasury Services to work closely with our bankers and to develop a full suite of deposit accounts and services for our business customers.  We continue to enhance our deposit offerings to retain and attract this low-cost deposit base."

Asset Quality

"Our asset quality continues to be very positive with nonperforming assets declining by $61,000 to $2.2 million at March 31, 2019 compared to one year ago.  OREO and repossessed assets remain nominal.  The ratio of nonperforming assets to total assets declined to 0.37% at March 31, 2019, compared to 0.49% one year earlier.  The allowance for loan losses as a percentage of loans was 0.65% at March 31, 2019 (adjusted for purchase accounting marks on acquired loans), compared to 0.62% one year earlier.  For the first quarter of 2019, Company recoveries offset and out-paced loan charge offs with a positive net recovery of $73,000.  We are very pleased with the current quality of our loan portfolio.  During 2018, we made additions to our credit team and introduced new technology and processes for more efficient credit approvals, closings, and fundings," added Mr. Saunders.

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 March 31, 2019, capital ratios were as follows:

 

Ratio

First Reliance Bank

Well-capitalized Minimum

Tier 1 leverage ratio

9.48%

5.00%

Common equity tier 1 capital

10.98%

6.50%

Tier 1 capital ratio

10.98%

8.00%

Total capital ratio

11.64%

10.00%

 

ABOUT FIRST RELIANCE BANCSHARES, INC.

Founded in 1999, First Reliance Bancshares, Inc., (OTC:FSRL) is based in Florence, SC and has assets of approximately $604 million.  The Company employs more than 166 professionals 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.  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 13 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, jpaolucci@firstreliance.com.

 

First Reliance Bancshares, Inc. and Subsidiary




Consolidated Balance Sheets









March

December

March


2019

2018

2018

Assets




Cash and cash equivalents:




Cash and due from banks

$                                                                       5,028,887

$                                                              4,638,332

$                                           4,229,533

Interest-bearing deposits with other banks

21,397,846

29,923,656

23,862,041

Total cash and cash equivalents

26,426,733

34,561,988

28,091,574





Time deposits in other banks

253,345

253,003

2,752,252





Securities available-for-sale

38,975,898

33,556,796

25,748,692

Securities held-to-maturity (Estimated fair value of $11,936,060, $14,250,850, 



and $18,870,275 at March 31, 2019, December 31, 2018, and March 31, 2018)

11,728,233

14,107,252

16,273,831

Nonmarketable equity securities

948,400

1,393,500

1,006,800

Trust Preferred Securities

0

0

0

Total investment securities

51,652,531

49,057,548

43,029,323





Mortgage loans held for sale

12,180,449

12,713,361

8,964,502





Loans receivable

449,028,477

430,795,891

392,270,200

Less allowance for loan losses

(3,000,560)

(2,788,188)

(2,493,665)

Loans, net

446,027,917

428,007,703

389,776,535





Premises, furniture and equipment, net

26,490,764

20,310,879

20,178,871

Accrued interest receivable

1,348,416

1,318,104

1,090,420

Other real estate owned

229,295

341,519

761,215

Cash surrender value life insurance

17,401,808

17,306,312

17,012,489

Net deferred tax assets

7,698,885

7,923,572

8,535,933

Mortgage servicing rights

9,575,367

9,023,859

7,142,777

Goodwill

690,917

690,917

727,654.00

Core deposit intangible

639,115

684,217

828,748.00

Other assets

3,768,239

2,796,830

3,463,924

Total assets

$                                                                 604,383,781

$                                                        584,989,812

$                                     532,356,217

Liabilities and Shareholders' Equity




Liabilities




Deposits




Noninterest-bearing transaction accounts

$                                                                 116,847,979

$                                                        103,201,256

$                                     100,824,151

Interest-bearing transaction accounts

85,550,093

83,251,127

84,618,230

Savings

114,705,765

120,801,341

137,394,385

Time deposits $250,000 and over

43,361,348

42,870,456

26,396,238

Other time deposits

151,917,075

126,044,529

87,742,736

Total deposits

512,382,260

476,168,709

436,975,740





Securities sold under agreement to repurchase

7,348,743

16,852,981

16,980,384

Advances from Federal Home Loan Bank

6,600,000

20,000,000

10,000,000

Notes Payable

-

-

-

Junior subordinated debentures

10,310,000

10,310,000

10,310,000

Subordinated debentures

4,853,045

4,934,877

4,873,264

Accrued interest payable

410,128

447,883

181,378

Lease Liabilty

6,238,784



Other liabilities

3,059,909

4,106,913

3,049,650

Total liabilities

551,202,870

532,821,363

482,370,416





Shareholders' Equity




Preferred stock




Series D preferred stock - 581, 581 and 587 shares issued and outstanding at
March 31 2019, December 31, 2018, and March 31, 2018, respectively

581

581

587

Series E preferred stock -  0 shares issued and outstanding at March 31, 2019 and
December 31, 2018, 410,499 shares issued and outstanding at March 31, 2018

-

-

2,955,593

Common stock, $0.01 par value; 20,000,000 shares authorized, 8,032,833, 8,002,172 and
7,889,772 shares issued and outstanding at March 31, 2019, December 31, 2018, and
March 31, 2018, respectively

80,328

80,022

80,047

Non-Voting Common Stock - 410,499 shares issued and outstanding as of
March 31, 2019 and December 31, 2018, 0 shares outstanding as of March 31, 2018

4,105

4,105

-

Capital surplus

51,080,816

50,904,763

81,170,550

Treasury stock, at cost, 110,023, 94,505 and  41,032 at March 31, 2019, 




December 31, 2018 and March 31, 2018, respectively

(743,143)

(624,120)

(233,192)

Nonvested restricted stock

(1,533,362)

(1,508,630)

(1,664,674)

Retained Earnings/Deficit

4,665,572

4,003,616

(31,671,363)

Accumulated other comprehensive loss

(373,986)

(691,888)

(651,747)

Total shareholders' equity

53,180,911

52,168,449

49,985,801

Total liabilities and shareholders' equity

$                                                                 604,383,781

$                                                        584,989,812

$                                     532,356,217

 

First Reliance Bancshares, Inc. and Subsidiary




Consolidated Statements of Operations









Three Months Ended

Three Months Ended

Three Months Ended


March 31, 2019

December 31, 2018

March 31, 2018

Interest income:




Loans, including fees

$                                                                                                         6,138,497

$                                                        5,913,149

$                                                        5,092,527





Investment securities:




Taxable

299,938

299,711

245,539

Tax exempt

34,312

34,283

38,910

Other interest income

87,911

153,108

62,124

Total

6,560,658

6,400,251

5,439,100

Interest expense:




Time deposits

967,550

796,162

334,231

Other deposits

139,151

142,706

108,360

Other interest expense

312,525

281,407

268,081

Total

1,419,226

1,220,275

710,672





Net interest income

5,141,432

5,179,977

4,728,428

Provision for loan losses

145,547

285,918

20,477

Net interest income after provision for loan losses

4,995,885

4,894,059

4,707,951





Noninterest income:




Service charges on deposit accounts

398,227

453,128

371,154

Gain on sale of mortgage loans

1,001,504

1,195,889

1,498,497

Income from bank owned life insurance

95,496

98,197

96,734

Other service charges, commissions, and fees

370,759

393,771

348,271

Gain on Sale of Investment Securities

21,168



Gain on Nonmarketable securities

12,380

800,000

-

Other

97,054

100,909

120,685

Total

1,996,588

3,041,894

2,435,341





Noninterest expenses:




Salaries and benefits

3,757,601

3,865,590

3,839,036

Occupancy

589,442

571,866

540,574

Furniture and equipment related expenses

471,059

503,636

578,132

Other

1,308,178

1,316,045

1,345,636

Merger Related Expenses

37,211

181,551

698,098

Total

6,163,491

6,438,688

7,001,476

Income before income taxes

828,982

1,497,265

141,816

Income Tax Expense

167,027

327,998

53,744

Net income 

661,955

1,169,267

88,072

Net income available to common shareholders

$                                                                                                              661,955

$                                                        1,169,267

$                                                               88,072





Average common shares outstanding, basic

7,950,432

7,934,841

7,888,139

Average common shares outstanding, diluted

8,057,750

8,040,316

8,046,466





Income per common share:




Basic income per share

$                                                                                                                       0.08

$                                                                     0.15

$                                                                     0.01

Diluted income per share

$                                                                                                                       0.08

$                                                                     0.15

$                                                                     0.01

 

First Reliance Bancshares, Inc. and Subsidiary




Consolidated Statements of Operations













March 31, 2019

December 31, 2018

March 31, 2018

Interest income:




Loans, including fees

$                                                                 6,138,497

$                                                              22,010,885

$                                                                 5,092,527





Investment securities:




Taxable

299,938

1,039,259

245,539

Tax exempt

34,312

147,950

38,910

Other interest income

87,911

426,598

62,124

Total

6,560,658

23,624,692

5,439,100

Interest expense:




Time deposits

967,550

2,191,437

334,231

Other deposits

139,151

534,572

108,360

Other interest expense

312,525

964,475

268,081

Total

1,419,226

3,690,484

710,672





Net interest income

5,141,432

19,934,208

4,728,428

Provision for loan losses

145,547

510,356

20,477

Net interest income after provision for loan losses

4,995,885

19,423,852

4,707,951





Noninterest income:




Service charges on deposit accounts

398,227

1,597,211

371,154

Gain on sale of mortgage loans

1,001,504

5,138,660

1,498,497

Income from bank owned life insurance

95,496

390,557

96,734

Other service charges, commissions, and fees

370,759

1,510,405

348,271

Gain on sale of Investment Securities

21,168

-

-

Gain on Nonmarketable securities

12,380

800,000

-

Other

97,054

487,529

120,685

Total

1,996,588

9,924,362

2,435,341





Noninterest expenses:




Salaries and benefits

3,757,601

15,373,131

3,839,036

Occupancy

589,442

2,227,135

540,574

Furniture and equipment related expenses

471,059

2,021,351

578,132

Other

1,308,178

5,549,562

1,345,636

Merger Related Expense

37,211

1,005,195

698,098

Total

6,163,491

26,176,374

7,001,476

Income before income taxes

828,982

3,171,840

141,816

Income tax expense 

167,027

741,606

53,744

Net income

661,955

2,430,234

88,072

Net income available to common shareholders

$                                                                     661,955

$                                                                 2,430,234

$                                                                        88,072





Average common shares outstanding, basic

7,950,432

7,738,547

7,888,139

Average common shares outstanding, diluted

8,057,750

7,867,586

8,046,466





Income (loss) per common share:




Basic income (loss)  per share

$                                                                              0.08

$                                                                              0.31

$                                                                              0.01

Diluted income (loss) per share

$                                                                              0.08

$                                                                              0.31

$                                                                              0.01

 

Asset Quality and Capital Adequacy








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

As of and for the Three Months Ended


March 31, 2019

December 31, 2018

March 31, 2018

Asset Quality




Loans 90 days past due & still accruing

-

10

-

Nonaccrual loans

1,985

1,923

1,836

























Total nonperfoming loans

1,985

1,933

1,836





OREO and repossessed assets

229

342

761

Total Nonperforming Assets

2,214

2,275

2,597





Accruing TDRs

3,720

4,746

-





Nonperforming loans to loans

0.48%

0.45%

0.46%

Nonperforming assets to total assets

0.37%

0.39%

0.49%

Allowance for loan losses to total loans

0.65%

0.63%

0.62%

Allowance for loan losses to nonperforming loans

151.16%

144.24%

135.82%

Capital Data (at quarter end)




Book value per share

6.38

6.27

5.99

Tangible book value per share

6.22

6.11

5.79





Per Share Data




QTD Weighted Average Shares Outstanding- basic

7,950,432

7,934,841

7,888,139

QTD Weighted Average Shares Outstanding- diluted

8,057,750

8,040,316

8,046,466

Earning Per Share - basic

$                                                                                            0.08

$                                                     0.15

$                                                           0.01

Earning Per Share -diluted

0.08

0.15

0.01





Profitability Ratios




Net Interest Margin

4.17%

4.30%

4.30%

Return on Average Assets

0.69%

0.69%

0.69%

Return on Average Equity

6.33%

6.33%

6.85%





Capital Adequacy- Bank Only




Tier 1 leverage ratio

9.48%

9.51%

10.54%

Common Equity Tier 1 capital

10.98%

11.40%

12.65%

Tier 1 capital ratio

10.98%

11.40%

12.65%

Total capital ratio

11.64%

12.05%

13.24%

Total risk weighted assets

492,386

466,353

429,511

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/first-reliance-bancshares-inc-reports-1st-quarter-2019-results-and-reaffirms-stock-repurchase-plan-300841227.html

SOURCE First Reliance Bancshares, Inc.

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