First Reliance 3Q15 Pre-tax Income more than Triples to $997,430 from 3Q14

Oct 30, 2015, 07:00 ET from First Reliance Bancshares, Inc.

FLORENCE, S.C., Oct. 30, 2015 /PRNewswire/ -- First Reliance Bancshares, Inc. (OTC: FSRL), the holding company (the "Company") for First Reliance Bank (the "Bank"), reported third quarter 2015 pre-tax profits reached the highest levels since 2008, fueled by strong loan and deposit growth, and expanding operating efficiencies.  In the third quarter of 2015, pre-tax income more than tripled to $997,430 from $234,117 in the third quarter a year ago.  Net income totaled $670,574 for the quarter ended September 30, 2015, compared to $3.4 million, which includes a deferred tax asset recapture of $3.6 million for the third quarter of 2014.  After preferred dividends, third quarter 2015 net income available to common shareholders was $307,964, or $0.07 per diluted share, compared to $3.1 million, or $0.66 per diluted share, in the third quarter a year ago.

Net income for the first nine months of 2015, was $8.2 million, which included a $6.9 million deferred tax asset recapture, compared to $4.2 million, which included a $3.2 million deferred tax asset recapture for the first nine months of 2014. Year-to-date, net income available to common shareholders was $7.1 million, or $1.47 per diluted share, compared to $3.3 million, or $0.70 per diluted share, in the year ago period.  Operating results improved reflecting the 5.3% asset growth over the past twelve months, generated by robust mortgage production and continued growth in consumer loan and 1-4 family mortgage originations.

"We're excited to report one of the most profitable quarters since we opened our doors sixteen years ago.  We continue to focus on growing 1-4 family mortgage loans and consumer loans, along with the expansion of the mortgage and indirect dealer finance channels, which have produced steady growth in loans and revenues. We are also generating strong growth in no-cost/low-cost deposits and customer acquisition as the South Carolina economy expands.  Our primary focus is to diversify our revenue channels, manage expenses, and improve our capital composition," said Rick Saunders, President and CEO.

Financial Highlights (at or for the periods ended September 30, 2015, except as noted)

  • For the first nine months of 2015, net income to common shareholders more than doubled to $7.1 million, or $1.47 per diluted share.
  • Total revenues, (net interest income plus noninterest income), increased 5% to $5.6 million in 3Q15 from $5.3 million in 2Q15 and grew 19% from $4.7 million in 3Q14, reflecting balance sheet growth.
  • Net interest income grew 2% in the third quarter from both the preceding and year ago quarters, reflecting increased loan volumes and a declining cost of funds.  Year-to-date, net interest income increased 5% to $10.7 million from the like period in 2014.
  • Mortgage loans held for sale increased 22% to $17.0 million from the second quarter 2015, and grew over 561% from a year ago, reflecting organic loan growth and steady demand in the housing market.
  • Net interest margin (NIM) was 4.54%
  • First Reliance Bancshares remains well-capitalized with Total risk-based capital ratio of 13.8%

Review of Income Statement

Third quarter net interest income, after the provision for loan losses, increased 4% to $3.6 million compared to $3.5 million in the preceding quarter and grew 3% from $3.5 million a year ago, largely reflecting increased loan volume and a declining cost of funds.  For the first nine months of 2015, net interest income, after the provision for loan losses, increased 4% to $10.5 million compared to $10.0 million for the first nine months of 2014.

Net interest margin improved by five basis points to 4.54% in the third quarter, compared to 4.49% on a linked quarter basis and expanded one basis point from 4.53% from the third quarter a year ago.  "We maintained a solid net interest margin during the third quarter as a result of continued improvement in our earning asset mix, and reduced cost of funds," said Jeff A. Paolucci, EVP & Chief Financial Officer.  "Contributing to a solid net interest margin, on a linked quarter basis, were the higher yields we generated from our loans.

Noninterest income increased 12% to $2.0 million for the third quarter 2015, compared to $1.8 million for the second quarter 2015 and grew 68% from $1.2 million for the third quarter 2014.  Year-to-date, noninterest income increased 47% to $4.9 million compared to $3.3 million for the first nine months of 2014.  The increase in noninterest income was largely due to the increase in gains on sales of mortgage loans.

Total operating expenses (noninterest expense) were $4.6 million for the third quarter 2015, down 13% from $5.2 million for the preceding quarter and up 3% from $4.4 million for the third quarter of 2014. For the first nine months 2015, operating expenses were $13.8 million, compared to $12.4 million for the like period a year ago.  Contributing to the year-over-year and year-to-date increase in operating expenses was the expansion of the mortgage division and the related increase in compensation associated with the addition of approximately 20 new highly experienced mortgage bankers.  "As we further increase our mortgage lending operations and add new dealers to our indirect auto lending business lines, we expect revenues to grow which should further enhance our operating efficiencies," commented Saunders.

Balance Sheet and Asset Quality

Total assets increased $6.6 million, or 2% to $387.4 million at September 30, 2015, compared to $380.7 million, at June 30, 2015, and grew $19.6 million, or 5%, from $367.8 million from September 30, 2014.

The investment securities balances moving into new loans, declined to $40.0 million at September 30, 2015, compared to $41.6 million at June 30, 2014, and $47.3 million at September 30, 2014.  "We continue to focus on maintaining a high quality investment portfolio that provides a steady stream of cash flow with limited exposure to interest rate fluctuations," Paolucci commented.  "The decline in investment securities during both the quarter and year reflects our funding higher-yielding loans."

Loans grew by $6.4 million, or 3%, at September 30, 2015, compared to $252.1 million, at September 30, 2014, largely due to continued growth in consumer direct auto loans up 29% year-over-year and 17% year-to-date.  Other consumer loans were up 24% year-over-year and 18% year-to-date; indirect auto financing and 1-4 family mortgage loans were up 11% year-over-year and 8% year-to-date.  "Growth in these sectors reduces our exposure to unreasonable competitive pricing pressures which results in better asset yields and also improves margins," added Saunders.  "The indirect auto finance business line, launched last year, is contributing to profitability, and is positioned for continued slow to moderate growth. Our mortgage loan growth this year reflects the strength of our new lending team, and we continue to see significant potential for growth in our loan origination pipelines.  Our bankers are successful in their efforts to develop new relationships and expand existing relationships in the markets we serve."

No-cost/low cost deposits increased by $15.3 million, or 7.1%, to $232.1 million at September 30, 2015, from $216.7 million at September 30, 2014.  For the nine months ended 2015, the Company grew household checking accounts by 4% as the Company continues to attract new customers through customer referrals, unique programs such as Hometown Heroes, Moms First and iMatter Programs.  The Bank's brand of banking focuses on providing customers with an exceptional experience whether at a branch or using online and mobile banking services.

Asset quality has continued to improve and normalize with nonperforming loans declining during the quarter and year-over-year.  Nonaccrual loans declined 9% to $1.9 million at September 30, 2015, compared to $2.0 million a year ago.  Other-real-estate-owned (OREO) declined to $5.3 million at September 30, 2015, compared to $5.6 million at June 30, 2015 and increased from $2.0 million a year earlier.

Nonperforming assets (NPAs), consisting of nonperforming loans, OREO and loans delinquent 90 days or more, were $7.2 million, at September 30, 2015, compared to $7.6 million, at June 30, 2015 and $4.1 million, at September 30, 2014.  The ratio of nonperforming assets was 1.87% to total assets at September 30, 2015, compared to 2.03% three months earlier, and 1.11% at September 30, 2014.  The allowance for loan losses as a percentage of loans was 0.95% at September 30, 2015, compared to 1.13%, at September 30, 2014.  For the nine month ended September 30, 2015, provisions to the allowance for loan losses were minimal at $190,248.  There are no net charge-offs.

Capital

First Reliance Bancshares continues to remain well capitalized under all regulatory measures, with capital ratios exceeding the statutory well-capitalized thresholds by an ample margin.  For the quarter ended September 30, 2015, capital ratios were as follows:

Ratio

First Reliance Bancshares

Well-capitalized Minimum

Tier 1 leverage ratio

10.75%

5.00%

Tier 1 risk-based capital ratio

12.94%

8.00%

Total risk-based capital ratio

13.80%

10.00%

As of September 30, 2015, total shareholders' equity increased $3.9 million from September 30, 2014.  In May 2015, the Company paid deferred dividends on TARP preferred stock totaling $4.2 million and deferred interest payments on outstanding trust preferred securities totaling $876,657. All TARP and preferred stock payments are current. "We plan to pay back a portion of TARP through retained earnings in the first quarter of 2016.  Then we will address the remaining portion of TARP at a later date, but will not enter any repayment strategy that would be more dilutive to capital than the current cost of TARP," said Saunders.

First Reliance's tangible book value was $5.18, at September 30, 2015, up from $4.28, at September 30, 2014.  The Company currently trades at 101% of book value as of October 27, 2015.

"We continue to enhance our products and services, to optimize how we deliver a better experience to our customers. Our Mobile Deposit product will successfully launch in November and we will introduce our Reliance On-The-Go convenient services. Our customers will be able to access and use many of the same features available to them through our online banking service, such as reviewing account balances, transferring funds and paying bills.  Our mobile banking is already becoming popular with our customers because of the additional convenience with 24/7 accessibility," said Saunders.

Regional Economic Conditions – October 2015

According to recent reports, South Carolina's economy continued to improve as labor market strengthened, household conditions improved and housing market indicators were mostly positive, particularly on a year-over-year basis.  For more information on labor markets, household conditions and housing markets in South Carolina, please visit the link below:

https://www.richmondfed.org/~/media/richmondfedorg/research/regional_economy/reports/snapshot/pdf/snapshot_sc.pdf

First Reliance is headquartered in Florence County, which is a proven, successful location for business and industry and home to over 130 companies that have a manufacturing presence. Perhaps that's why over the past five years new and expanding businesses have invested more than $1.1 billion dollars here, including companies like ESAB, Heinz, Honda, GE Healthcare, Johnson Controls, Monster.com, QVC, Roche, and OTIS Elevator.  http://www.fcedp.com/business_climate

"Hurricane Joaquin and related storms caused severe flooding throughout the state and particularly Columbia," said Saunders.  "Fortunately our branch offices did not sustain major damage, but many of our customers were impacted.  In concert with FEMA and the American Red Cross, we are supporting flood victims with a number of programs such as payment deferral options, emergency loans and other approved programs.  We will continue to work with local organizations to help the communities we serve to recover and rebuild," Saunders said.

ABOUT FIRST RELIANCE BANCSHARES, INC.

First Reliance Bancshares, Inc. is the holding company for First Reliance Bank.  The Bank was founded in 1999, employs approximately 123 highly-talented associates and serves the Columbia, Lexington, Charleston, Mount Pleasant and Florence markets in South Carolina.  First Reliance Bank offers several unique customer programs which include a Hometown Heroes package of benefits to serve those who are serving our communities, Check 'N Save, a community outreach program for the unbanked or under-banked, a Moms First program, and an iMatter program targeted to young people. The Bank also offers a Customer Service Guaranty, a Mortgage Service Guaranty, FREE Coin Machines for customers to use, Mobile Banking, and is open on most traditional bank holidays.  Its commitment to making customers' lives better and the idea that "There's More to Banking Than Money" has earned the Bank a customer satisfaction rating of 95% (2013 results from an outside survey firm.)

The common stock of First Reliance Bancshares, Inc. is traded under the symbol FSRL.OB.  Additional information about the Company is available on the Company's web site at www.firstreliance.com.

This press release contains forward-looking statements about branch openings within the meaning of the Securities Litigation Reform Act of 1995.  Forward-looking statements give our expectations or forecasts of future events.  The preliminary results for the three and six months ended June 30, 2015 presented herein above are the Company's expectations.  However, these results are subject to adjustment by management before the audit is completed and may be adjusted based upon the results of the audit.  Should management or audit adjustments be necessary, audited results could differ materially from these preliminary results.

Any or all of our forward-looking statements here or in other publications may turn out to be incorrect. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties.  Many such factors will be important in determining our actual future results.  Consequently, no forward- looking statements can be guaranteed.  Our actual results may vary materially, and there are no assurances about the performance of our common stock.

We undertake no obligation to correct or update any forward-looking statements, whether as a result of new information, future results or otherwise.

Contact Jeffrey A. Paolucci, Executive Vice President and Chief Financial Officer, (888)543-5510.

 

First Reliance Bancshares






Consolidated Income Statement






September 30, 2015

Quarter Ended






09/30/15


06/30/15


09/30/14

Interest Income







 Loans, including fees 

3,551,679


3,460,696


3,461,473


 Taxable 

224,989


233,139


278,023


 Tax-exempt 

28,391


28,408


28,512


 Other interest income 

21,492


55,492


27,200



3,826,551


3,777,735


3,795,208

Interest Expense



-




 Time deposits  

48,684


83,325


147,846


 Other deposits 

61,203


40,089


31,971


 Other Interest Expense 

79,356


92,209


64,956



189,243


215,622


244,773





-



Net Interest Income

3,637,309


3,562,114


3,550,435





-




 Provision For Loan Losses 

31,959


79,462


51,896








Net Interest income after provision for loan losses

3,605,350


3,482,652


3,498,539








Noninterest Income







 Service charges on deposit accounts 

374,846


334,682


421,013


 Gain of sale of mortgage loans 

1,136,805


935,970


287,752


 Income from bank owned life insurance 

83,796


82,641


84,276


 Other service charges, commissions, fees 

291,364


295,023


272,496


 Gain on sale of investment securities 

-


9,562


-


 Gain/Loss Nonmarketable 

-


-




 Gain on sale of fixed assets 

-


-




 Other  

67,698


93,950


100,038


Total

1,954,509


1,751,828


1,165,575








Other Operating Expenses







 Salaries and Benefits 

2,460,258


2,630,913


1,741,970


 Occupancy 

402,672


405,337


372,572


 Furniture and equipment related expenses 

374,570


400,458


371,530


 Other Operating Expenses 

1,324,928


1,785,763


1,943,925


Total

4,562,428


5,222,471


4,429,997





-



Income Before Taxes

997,431


12,009


234,117





-



Income tax expense (benefit)

326,856


(6,985,823)


(3,211,069)





-



Net Income

670,574


6,997,832


3,445,186





-




Preferred Stock Dividends

362,610


362,610


362,610


Deemed dividends on preferred stock 

-


-


-





-



Net Income Available to C/S

307,964


6,635,222


3,082,576








Average Shares OS - Basic

4,684,552


4,741,023.00


4,571,726

Average Shares OS - Diluted

4,796,516


4,834,232.06


4,665,290








Income Per Share - Basic

0.07


1.30


0.67

Income Per Share - Diluted

0.06


1.32


0.66

 

 

First Reliance Bancshares







Consolidated Income Statement







September 30, 2015

Nine Months Ended






September 30,



% Increase



2015


2014



(Decrease)

Interest Income








 Loans, including fees 

10,394,526


10,058,113



3.34%


 Taxable 

705,724


846,326



-16.61%


 Tax-exempt 

85,252


85,612



-0.42%


 Federal Funds Sold 

-


-





 Other interest income 

100,126


56,956



75.80%



11,285,628


11,047,007



2.16%

Interest Expense








 Time deposits  

267,844


562,813



-52.41%


 Other deposits 

133,831


97,798



36.84%


 Other Interest Expense 

228,657


244,194



-6.36%



630,332


904,805



-30.33%









Net Interest Income

10,655,295


10,142,202



5.06%










 Provision For Loan Losses 

190,248


97,826



94.48%









Net Interest income after provision for loan losses

10,465,047


10,044,376



4.19%









Noninterest Income








 Service charges on deposit accounts 

1,070,407


1,204,042



-11.10%


 Gain of sale of mortgage loans 

2,413,589


791,324



205.01%


 Income from bank owned life insurance 

248,470


252,048



-1.42%


 Other service charges, commissions, fees 

865,617


807,392



7.21%


 Gain on sale of investment securities 

9,562


5,321



79.71%


 Gain/Loss Nonmarketable 

-







 Gain on sale of fixed assets 

-







 Other  

246,957


246,828



0.05%


Total

4,854,602


3,306,955



46.80%









Other Operating Expenses








 Salaries and Benefits 

7,191,488


5,395,856



33.28%


 Occupancy 

1,185,764


1,125,353



5.37%


 Furniture and equipment related expenses 

1,167,083


1,178,101



-0.94%


 Other Operating Expenses 

4,233,727


4,699,215



-9.91%


Total

13,778,062


12,398,525



11.13%









Income Before Taxes

1,541,587


952,806



61.79%









Income tax benefit

(6,636,660)


(3,211,069)



106.68%









Net Income 

8,178,247


4,163,875



96.41%










Preferred Stock Dividends

1,087,830


857,595



26.85%


Deemed dividends on preferred stock 

-


31,218



-100.00%









Net Income Available to C/S

7,090,417


3,275,062



116.50%









Average Shares OS - Basic

4,709,602


4,570,257



3.05%

Average Shares OS - Diluted

4,807,387


4,648,535



3.42%









Income Per Share - Basic

1.51


0.72



110.09%

Income Per Share - Diluted

1.47


0.70



110.00%

 

First Reliance Bancshares



Consolidated Balance Sheet









September 30,


June 30,


September 30,



2015


2015


2014

Assets







Cash and cash equivalents:







Cash and due from banks


2,999,097


2,695,509


4,354,369

Interest-bearing deposits with other banks


17,434,712


11,250,251


20,207,489

Total cash and cash equivalents


20,433,809


13,945,760


24,561,858








Time deposits in other banks


101,511


101,511


101,409








Securities available-for-sale


11,531,847


11,675,354


13,537,545

Securities held-to-maturity (Estimated fair value of
$27,471,513, 28,890,909 and $33,247,693 at September
30,2015, June 30, 2015 and September 30, 2014
respectively)


26,556,526


28,225,174


32,626,235

Nonmarketable equity securities


1,875,800


1,705,800


1,142,500

Total investment securities


39,964,173


41,606,328


47,306,280








Mortgage loans held for sale


16,972,426


13,899,483


2,568,011








Loans receivable


258,467,408


258,995,043


252,090,858

Less allowance for loan losses


(2,659,044)


(2,553,931)


(2,900,341)

Loans, net


255,808,364


256,441,112


249,190,517








Premises, furniture and equipment, net


22,862,349


23,053,255


23,475,800

Accrued interest receivable


951,162


967,738


1,048,362

Other real estate owned


5,343,211


5,608,743


2,009,212

Cash surrender value life insurance


13,531,035


13,447,239


13,197,741

Net deferred tax assets


10,189,892


10,504,779


-

Other assets


1,201,992


1,171,778


4,327,599

Total assets


387,359,924


380,747,726


367,786,789








Liabilities and Shareholders' Equity







Liabilities







Deposits







Noninterest-bearing transaction accounts


73,222,526


69,660,700


69,328,528

Interest-bearing transaction accounts


61,982,714


66,833,047


61,570,826

Savings


96,870,036


91,218,703


85,834,789

Time deposits $100,000 and over


27,441,311


26,874,567


37,137,622

Other time deposits


31,683,006


33,112,418


38,453,965

Total deposits


291,199,593


287,699,435


292,325,730

Securities sold under agreement to repurchase


7,495,674


9,243,707


7,639,859

Advances from Federal Home Loan Bank


35,000,000


31,000,000


17,000,000

Junior subordinated debentures


10,310,000


10,310,000


10,310,000

Accrued interest payable


49,834


49,304


747,529

Net deferred tax liabilities


-


-


-

Other liabilities


3,280,242


2,773,983


3,675,658

Total liabilities


347,335,343


341,076,429


331,698,776








Shareholders' Equity







Preferred stock







Series A cumulative perpetual preferred stock - 15,349
shares issued and outstanding


15,179,710


15,179,710


15,179,709

Series B cumulative perpetual preferred stock - 767 shares issued and outstanding


767,000


767,000


767,000

Common stock, $0.01 par value; 20,000,000 shares authorized, 4,679,083, 4,741,023, and 4,738,370 shares issued and outstanding at September 30, 2015, June 30, 2015, and September 30, 2014, respectively


47,410


47,410


47,384

Capital surplus


26,367,114


26,729,724


30,909,652

Treasury stock, at cost, 35,324, 35,324,  and 35,176 shares at September 30, 2015, June 30, 2015,  and September 30, 2014, respectively


(212,324)


(206,010)


(205,512)

Nonvested restricted stock


(341,314)


(356,147)


(426,091)

Retained deficit


(1,893,267)


(2,560,255)


(10,315,250)

Accumulated other comprehensive income


110,252


69,865


131,121

Total shareholders' equity


40,024,581


39,671,297


36,088,013

Total liabilities and shareholders' equity


387,359,924


380,747,726


367,786,789

 

 

Asset Quality and Capital Adequacy





(dollars in thousands, except per share data)

Period ended


September 30, 2015

June 1, 2015

September 30, 2014

Asset Quality




Loans 90 days past due & still accruing

-

1

-

Nonaccrual loans

1,852

2,032

2,046

Total nonperforming loans

1,852

2,033

2,046

OREO and repossessed assets, net

5,343

5,609

2,009

Total Nonperforming Assets

7,195

7,642

4,055





Non performing loans to loans

2.78%

2.95%

1.61%

Nonperforming assets to total assets

1.87%

2.03%

1.11%

Allowance for loan losses to total loans

0.95%

0.91%

1.13%

Allowance for loan losses to nonperforming loans

36.96%

33.42%

71.51%





Capital Data (at quarter end)




Book value per share

5.18

5.04

4.28

Tangible book value per share

5.18

5.04

4.28





Per Share Data




Shares Outstanding- basic

4,709,602

4,772,333

4,570,257

Shares Outstanding- diluted

4,807,387

4,813,030

4,648,535

Earning Per Share - basic

$                             1.51

1.43

$                             0.72

Earning Per Share -diluted

$                             1.47

1.40

$                             0.70





Profitability Ratios




Net Interest Margin

4.54%

4.49%

4.53%

Return on Assets

2.93%

4.07%

1.56%

Return on Equity

29.77%

42.78%

17.27%





Capital Adequacy- Bank Only




Tier 1 leverage ratio

10.75%

10.90%

11.29%

Tier 1 risk-based capital ratio

12.94%

12.68%

13.92%

Total risk-based capital ratio

13.80%

13.51%

14.91%

Total risk weighted assets

308,996

310,055

292,608

 

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

SOURCE First Reliance Bancshares, Inc.



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http://www.firstreliance.com