Market Overview

First Reliance Bancshares, Inc. Reports Record Mid Year Earnings Results, Up 258% Versus First Half Of 2018

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FLORENCE, S.C., Aug. 2, 2019 /PRNewswire/ -- First Reliance Bancshares, Inc. (OTC:FSRL), the holding company (the "Company") for First Reliance Bank (the "Bank"), today reported net income of $2.0 million, or $0.25 per diluted share for the six-months ended June 30, 2019 compared to $553,869, or $0.07 per diluted share, for the same period one year ago.  Net income for the three-months ended June 30, 2019, was $1.3 million, or $0.16 per diluted share, compared to $465,797, or $0.06 per diluted share for the same period one year ago.  Net income for the six-months ended June 30, 2019 represents a 258% increase and net income for the three-months ended June 30, 2019, represents a 183% increase when compared to the same periods in 2018.  The increase in net income for the second quarter of 2019 versus 2018 was due primarily to higher net interest income, which grew 13% and benefited from loan growth of $76 million, up 19% year over year.

First Reliance Bancshares

Increases in key balance sheet items are summarized below:


As of June 30, 2019


Year-Over-Year

Quarter-to-Date

Year-to-Date


(dollars in thousands}

Assets

$96,897

18.01%

$30,364

5.02%

$49,759

8.50%

Loans

$76,660

19.06%

$26,498

5.90%

$44,731

10.40%

Deposits

$77,288

17.16%

$15,380

3.00%

$51,594

10.83%

Equity

$4,731

9.38%

$1,979

3.72%

$2,991

5.73%

F. R. Saunders, Jr., the Company's Chief Executive Officer, stated, "We are very pleased with our second quarter operating results as we continue to see a positive impact on earnings from organic growth following our recent expansions into Greenville and Myrtle Beach, South Carolina and Winston-Salem and Charlotte, North Carolina.  Our existing markets are also performing well, attracting loans and deposits, in very competitive environments.  Loan growth has been exceptional, growing consistently at a 5.0% per quarter pace.  Our primary focus is on increasing our profitability and reducing our efficiency ratio.  This initiative is a multi-pronged approach which we expect to begin showing results in 2019 with the fuller effect coming in 2020.  We partnered with a vendor who has helped us examine all areas of the bank for more efficient processes, cost savings and revenue enhancements.  We are in process of implementing many of these initiatives over the next several months.  Our commitment is to drive our efficiency ratio down over the next three years.  We named Ben Brazell as Chief Administrative Officer to oversee the implementation of all our growth and efficiency projects," said Saunders.

Highlights

  • Diluted EPS increased 259%, to $0.25 per share for the six-months ending June 30, 3019 compared to $0.07 per share one year ago;
  • Diluted EPS increased 185% to $0.16 per share for the three-months ending June 30, 3019 compared to $0.06 per share one year ago;
  • Net interest income improved 13% at $5.5 million for the three-months ended June 30, 2019, compared to the same period of 2018;
  • Tangible Book Value increased 8.38% to $6.46 for the period ending June 30, 2019, compared to $5.96 one year ago;
  • Loans increased 19% or $76 million over the past year;
  • Deposits grew 17% or $77 million over the past year;
  • Return on average equity was 7.50% for the six-months ended June 30, 2019 compared to 2.22% for the six-months ended period one year ago;
  • Return on average assets was 0.67% for the six-months ended June 30, 2019 compared to 0.21% for the six-months ended period one year ago;
  • Non-interest bearing transaction accounts increased $15 million, or 15%, over the past year;
  • 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, South Carolina or from the Charleston office at 25 Cumberland Street, Charleston, South Carolina;
  • Received regulatory approval to accept deposits and operate a full-service branch in Mooresville, North Carolina (Lake Norman area of the greater Charlotte area MSA) in early 2020; and
  • Enacted new lease accounting standards effective March 31, 2019, resulting in an increase in premises, furniture and equipment and lease liability of $6.2 million.

Increases in key income statement items are summarized below.


For the Three Months Ended



June 30, 2019

June 30, 2018

Increase


                    (dollars in thousands)






Total revenue

$8,328

$7,016

$1,312

19%

Total non-interest expense

$6,581

$6,387

$194

3%

Net interest income

$5,530

$4,896

$634

13%

Non-interest income

$2,798

$2,120

$678

32%

Net Income

$1,320

$466

$854

183%

Income Statement

Total revenue for the quarter ended June 30, 2019 totaled $8.3 million, an increase of $1.3 million, or 19%, compared to the quarter ended one year ago.  Net interest income increased 13% to $5.5 million for the second quarter of 2019 compared to the same period of 2018.  According to Jeffrey A. Paolucci, Executive Vice President and Chief Financial Officer, "The increase in total revenue was due principally to strong loan growth for the second quarter, an increase in net interest margin to 4.19% as of June 30, 2019 from 4.17% for the same period one year ago, and strong net mortgage income and fee income growth.  Net interest margin continues to perform well compared to our peers due to strong asset yields and a solid base of lower priced deposits.  However, with our entry into new and more competitive markets and the flattening of the yield curve, we expect some compression in net interest margin for the balance of the year and continuing into 2020.  Yield on earning assets increased to 5.14% for the quarter ended June 30, 2019, compared to 4.85% for the second quarter of 2018.  Cost of funds remained flat at 96 basis points for the second quarter of 2019 compared to 46 basis points for the year prior quarter."

Non-interest income was $2.8 million for the quarter ended June 30, 2019, up significantly from $2.1 million in the second quarter of 2018 primarily due to increased gains on sale of mortgage loans.  Mortgage loans held for sale increased to 293% to $27 million as of June 30, 2019 compared to $7 million for the prior year period.  Mortgage production is up 3% to $80 million as of June 30, 2019 compared to $78 million for the prior year period. "We are very pleased with volumes in our mortgage line of business as we continue to service strong demand in our markets for new and refinanced mortgage loans.  We offer existing and new customers of the bank a broad range of mortgage loan products which fit the needs of most anyone who comes to us," said Mr. Paolucci.

Balance Sheet
Total assets increased $97 million, or 18%, to $635 million at June 30, 2019, compared to $538 million at June 30, 2018.  Loans receivable grew by $76 million, or 19%, to $476 million, at June 30, 2019, compared to $399 million, at June 30, 2018 due primarily to organic loan growth in our commercial, 1-4 family mortgage and consumer loan portfolios.  Mr. Saunders added, "We are now accepting deposits in our Winston-Salem and Myrtle Beach branch offices and plan to accept deposits in our Mooresville-Charlotte location in early 2020.  Since the end of 2018, we have increased deposits by 471% and loans by 310% in our Winston-Salem market and increased deposits by 82% and loans by 413% in our Myrtle Beach market, while total household checking accounts increased 5.5%, reflecting our strong branch sales growth.  One of the main drivers of our margin performance is concentration on core transaction accounts.  Obtaining the main checking account for consumers and businesses continues to be a major focus for all of our bankers.  We have increased our services per household to 5.4 since the end of 2018. In 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.  As a result, small business cash management use has grown 15% and commercial business has grown 4% since the end of 2018."

Asset Quality

Our asset quality continues to be very strong, with nonperforming assets increasing only slightly by $150,000 to $2.5 million at June 30, 2019 compared to one year ago.  OREO and repossessed assets remain nominal.  The ratio of nonperforming assets to total assets declined to 0.40% at June 30, 2019, compared to 0.45% one year earlier.  The allowance for loan losses as a percentage of loans was 0.59% at June 30, 2019 (adjusted for purchase accounting marks on acquired loans), compared to 0.58% one year earlier. 

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, 2019, capital ratios were as follows:

Ratio

First Reliance
Bank


Well-Capitalized

Minimum

Tier 1 leverage

9.19%


5.00%


Common equity tier 1 capital

10.56%


6.50%


Tier 1 capital

10.56%


8.00%


Total capital

11.18%


10.00%







ABOUT FIRST RELIANCE BANCSHARES, INC.

Founded in 1999, First Reliance Bancshares, Inc. (OTC: FSRL.OB), is based in Florence, South Carolina and has assets of approximately $635 million.  The Company employs more than 166 professionals and has locations throughout South Carolina and central North Carolina.  First Reliance has redefined community banking with a commitment to making customers lives better, its founding principle.  Customers of the company have given it a 90% customer satisfaction rating.  First Reliance is also one of three companies throughout South Carolina to receive the Best Places To Work in South Carolina award all 14 years since the program began.  We believe that this recognition confirms that our associates are engaged and committed to our 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 and Check N Save, an outreach program for the unbanked or under-banked.  We also offer a full suite of digital banking services, a Customer Service Guaranty, a Mortgage Service Guaranty, and are 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 acquisitions may not be integrated successfully or such integration may take longer to accomplish than expected; (8) the expected cost savings and any revenue synergies from acquisitions may not be fully realized within expected timeframes; and (9) disruption from acquisitions may make it more difficult to maintain relationships with clients, associates or suppliers.  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.

First Reliance Bancshares, Inc. and Subsidiary




Consolidated Balance Sheets









June

December

June


2019

2018

2018

Assets




Cash and cash equivalents:




Cash and due from banks

$                              5,084,271

$                               4,638,332

$                       4,442,320

Interest-bearing deposits with other banks

11,672,571

29,923,656

28,589,512

Total cash and cash equivalents

16,756,842

34,561,988

33,031,832





Time deposits in other banks

253,345

253,003

252,252





Securities available-for-sale

37,464,213

33,556,796

25,083,661

Securities held-to-maturity (Estimated fair value of $11,769,710, $14,250,850, 




and $15,809,271 at June 30, 2019, December 31, 2018, and June 30, 2018)

11,422,660

14,107,252

15,759,600

Nonmarketable equity securities

948,400

1,393,500

543,500

Total investment securities

49,835,273

49,057,548

41,386,761





Mortgage loans held for sale

27,225,698

12,713,361

6,919,940





Loans receivable

475,526,532

430,795,891

399,262,647

Less allowance for loan losses

(2,960,174)

(2,788,188)

(2,356,562)

Loans, net

472,566,358

428,007,703

396,906,085





Premises, furniture and equipment, net

20,133,374

20,310,879

20,406,445

Accrued interest receivable

1,424,304

1,318,104

1,130,259

Other real estate owned

164,295

341,519

200,000

Cash surrender value life insurance

17,498,686

17,306,312

17,110,338

Net deferred tax assets

7,293,378

7,923,572

8,406,261

Mortgage servicing rights

10,307,543

9,023,859

7,815,798

Goodwill

690,917

690,917

690,917

Core deposit intangible

595,551

684,217

779,033

Other assets

10,002,954

2,796,830

2,833,303

Total assets

$                         634,748,518

$                           584,989,812

$                   537,869,224

Liabilities and Shareholders' Equity




Liabilities




Deposits




Noninterest-bearing transaction accounts

$                         117,862,240

$                            103,201,256

$                  102,528,351

Interest-bearing transaction accounts

83,694,869

83,251,127

86,316,598

Savings

117,490,936

120,801,341

134,090,144

Time deposits $250,000 and over

43,775,583

42,870,456

28,581,126

Other time deposits

164,939,550

126,044,529

98,959,447

Total deposits

527,763,178

476,168,709

450,475,666





Securities sold under agreement to repurchase

14,161,727

16,852,981

18,133,207

Federal Funds Purchased

4,000,000

-

-

Advances from Federal Home Loan Bank

6,600,000

20,000,000

-

Junior subordinated debentures

10,310,000

10,310,000

10,310,000

Subordinated debentures

4,899,907

4,934,877

4,895,329

Accrued interest payable

575,836

447,883

284,173

Lease Liabilty

6,000,634



Other liabilities

5,277,600

4,106,913

3,342,548

Total liabilities

579,588,882

532,821,363

487,440,923





Shareholders' Equity




Preferred stock




Series D preferred stock - 579, 581 and 587 shares issued and outstanding at
June 30 2019, December 31, 2018, and June 30, 2018, respectively

579

581

587

Common stock, $0.01 par value; 20,000,000 shares authorized, 8,038,877, 8,002,712 and 7,869,772 shares issued and outstanding at June 30, 2019, December 31, 2018, and June 30, 2018, respecitvely

80,389

80,022

80,016

Non-Voting Common Stock - 410,499 shares issued and outstanding as of
June 30, 2019,  December 31, 2018 and June 30, 2018

4,105

4,105

4,105

Capital surplus

51,137,325

50,904,763

84,349,087

Treasury stock, at cost, 116,042, 94,505 and  64,999 at June 30, 2019, 




December 31, 2018 and June 30, 2018, respectively

(863,872)

(624,120)

(411,798)

Nonvested restricted stock

(1,426,972)

(1,508,630)

(1,661,417)

Retained Earnings/Deficit

5,985,572

4,003,616

(31,246,948)

Accumulated other comprehensive loss

242,510

(691,888)

(685,331)

Total shareholders' equity

55,159,636

52,168,449

50,428,301

Total liabilities and shareholders' equity

$                          634,748,518

$                            584,989,812

$                   537,869,224

 

First Reliance Bancshares, Inc. and Subsidiary




Consolidated Statements of Operations









Three Months Ended

Three Months Ended

Three Months Ended


June 30, 2019

December 31, 2018

June 30, 2018

Interest income:




Loans, including fees

$                       6,602,505

$                        5,913,149

$                       5,365,689





Investment securities:




Taxable

313,108

299,711

226,109

Tax exempt

34,227

34,283

38,862

Other interest income

82,133

153,108

103,363

Total

7,031,973

6,400,251

5,734,023

Interest expense:




Time deposits

1,091,030

796,162

467,517

Other deposits

135,397

142,706

137,422

Other interest expense

275,789

281,407

233,470

Total

1,502,216

1,220,275

838,409





Net interest income

5,529,758

5,179,977

4,895,614

Provision for loan losses

150,000

285,918

-

Net interest income after provision for loan losses

5,379,758

4,894,059

4,895,614





Noninterest income:




Service charges on deposit accounts

399,025

453,128

354,974

Gain on sale of mortgage loans

1,799,722

1,195,889

1,283,863

Income from bank owned life insurance

96,878

98,197

97,849

Other service charges, commissions, and fees

387,205

393,771

388,929

Gain on Nonmarketable securities

2,667

800,000

-

Other

112,377

100,909

(5,973)

Total

2,797,874

3,041,894

2,119,642





Noninterest expenses:




Salaries and benefits

4,074,027

3,865,590

3,847,938

Occupancy

581,933

571,866

547,820

Furniture and equipment related expenses

475,754

503,636

542,203

Other

1,449,045

1,316,045

1,323,816

Merger Related Expenses

-

181,551

125,546

Total

6,580,759

6,438,688

6,387,323

Income before income taxes

1,596,873

1,497,265

627,933

Income Tax Expense

276,874

327,998

162,136

Net income 

1,319,999

1,169,267

465,797

Net  income available to common shareholders

$                       1,319,999

$                        1,169,267

$                          465,797





Average common shares outstanding, basic

7,958,719

7,934,841

8,065,932

Average common shares outstanding, diluted

8,071,222

8,040,316

8,126,732





Income  per common share:




Basic income per share

$                               0.17

$                                 0.15

$                               0.06

Diluted income per share

$                               0.16

$                                 0.15

$                               0.06

 

First Reliance Bancshares, Inc. and Subsidiary




Consolidated Statements of Operations













June 30, 2019

December 31, 2018

June 30, 2018

Interest income:




Loans, including fees

$                   12,741,002

$                     22,010,885

$                      10,458,216





Investment securities:




Taxable

613,046

1,039,259

471,648

Tax exempt

68,539

147,950

77,772

Other interest income

170,044

426,598

165,487

Total

13,592,631

23,624,692

11,173,123

Interest expense:




Time deposits

2,058,581

2,191,437

801,748

Other deposits

274,547

534,572

245,782

Other interest expense

588,314

964,475

501,551

Total

2,921,442

3,690,484

1,549,081





Net interest income

10,671,190

19,934,208

9,624,042

Provision for loan losses

295,547

510,356

20,477

Net interest income after provision for loan losses

10,375,643

19,423,852

9,603,565





Noninterest income:




Service charges on deposit accounts

797,253

1,597,211

726,128

Gain on sale of mortgage loans

2,801,225

5,138,660

2,782,360

Income from bank owned life insurance

192,374

390,557

194,583

Other service charges, commissions, and fees

757,965

1,510,405

737,200

Gain on sale of Investment Securities

21,168

-

-

Gain on Nonmarketable securities

15,047

800,000

-

Other

209,431

487,529

114,712

Total

4,794,463

9,924,362

4,554,983





Noninterest expenses:




Salaries and benefits

7,831,628

15,373,131

7,686,974

Occupancy

1,171,375

2,227,135

1,088,394

Furniture and equipment related expenses

946,813

2,021,351

1,120,335

Other

2,757,222

5,549,562

2,669,452

Merger Related Expense

37,211

1,005,195

823,644

Total

12,744,249

26,176,374

13,388,799

Income before income taxes

2,425,857

3,171,840

769,749

Income tax expense 

443,901

741,606

215,880

Net  income

1,981,956

2,430,234

553,869

Net income available to common shareholders

$                     1,981,956

$                       2,430,234

$                           553,869





Average common shares outstanding, basic

7,954,598

7,738,547

8,030,507

Average common shares outstanding, diluted

8,064,509

7,867,586

8,098,737





Income (loss) per common share:




Basic income (loss)  per share

$                              0.25

$                                0.31

$                               0.07

Diluted income (loss) per share

$                              0.25

$                                0.31

$                               0.07

 

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, 2019

December 31, 2018

June 30, 2018

Asset Quality




Loans 90 days past due & still accruing

-

10

-

Nonaccrual loans

2,388

1,923

2,202

























Total nonperforming loans

2,388

1,933

2,202





OREO and repossessed assets

164

342

200

Total Nonperforming Assets

2,552

2,275

2,402





Accruing TDRs

2,630

4,746

-





Nonperforming loans to loans

0.50%

0.45%

0.55%

Nonperforming assets to total assets

0.40%

0.39%

0.45%

Allowance for loan losses to total loans

0.59%

0.63%

0.58%

Allowance for loan losses to nonperforming loans

123.96%

144.24%

107.02%

Capital Data (at quarter end)




Book value per share

6.62

6.27

6.14

Tangible book value per share

6.46

6.11

5.96





Per Share Data




QTD Weighted Average Shares Outstanding- basic

7,958,719

7,934,841

8,065,932

QTD Weighted Average Shares Outstanding- diluted

8,071,222

8,040,316

8,126,732

Earning Per Share - basic

$                               0.17

$                               0.15

$                               0.06

Earning Per Share -diluted

0.16

0.15

0.06





Profitability Ratios




Net Interest Margin

4.19%

4.30%

4.17%

Return on Average Assets

0.67%

0.45%

0.21%

Return on Average Equity

7.50%

4.88%

2.22%





Capital Adequacy- Bank Only




Tier 1 leverage ratio

9.19%

9.51%

10.22%

Common Equity Tier 1 capital

10.56%

11.40%

12.32%

Tier 1 capital ratio

10.56%

11.40%

12.32%

Total capital ratio

11.18%

12.05%

12.88%

Total risk weighted assets

524,912

466,353

428,996

 

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

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SOURCE First Reliance Bancshares, Inc.

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