First Reliance 4Q15 Pre-tax Income more than doubles to $944,100 from 4Q14

Feb 22, 2016, 07:09 ET from First Reliance Bancshares, Inc.

FLORENCE, S.C., Feb. 22, 2016 /PRNewswire/ -- First Reliance Bancshares, Inc. (OTC: FSRL), the holding company (the "Company") for First Reliance Bank (the "Bank"), reported fourth quarter 2015 pre-tax profits of 944,100.  This is the 8th consecutive quarter of profitability which has been fueled by strong loan and deposit growth, and expanding operating efficiencies.  In the fourth quarter of 2015, pre-tax income more than doubles to $944,100 from $373,561 in the fourth quarter a year ago.  Net income totaled $634,101 for the quarter ended December 31, 2015, compared to $243,736. After preferred dividends, fourth quarter 2015 net income available to common shareholders was $271,491, or $0.06 per diluted share, compared to $(118,874), or $(0.02) per diluted share, in the fourth quarter a year ago.

Net income for 2015 year end, was $8.8 million, which included a $6.9 million deferred tax asset recapture, compared to $4.4 million, which included a $3.2 million deferred tax asset recapture for 2014. Year-to-date, net income available to common shareholders was $7.4 million, or $1.60 per diluted share, compared to $3.2 million, or $0.67 per diluted share, in the year ago period.  Operating results improved reflecting the 2.1% 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 December 31, 2015, except as noted)

  • As of year end 2015, net income to common shareholders more than doubled to $7.4 million, or $1.60 per diluted share.
  • Total revenues, (net interest income plus noninterest income), increased 12.2% to $5.3 million in 4Q15 from $4.7 million in 4Q14, reflecting balance sheet growth.
  • Year end 2015, net interest income increased 2% to $14.2 million from the like period in 2014, reflecting increased loan volumes and a declining cost of funds
  • Mortgage loans held for sale increased 309.64% to $8.1 million from a year ago, reflecting organic loan growth and steady demand in the housing market.
  • Net interest margin (NIM) was 4.43%
  • First Reliance Bancshares remains well-capitalized with total risk based capital ratio of 13.8%

Review of Income Statement

Net interest income increased 2.0% to $14.2 million compared to $13.9 million a year ago, largely reflecting increased loan volume and a declining cost of funds

Net interest margin declined by two basis points to 4.43% in the fourth quarter, compared to 4.45% on a linked quarter basis and declined four basis point from 4.47% from the fourth quarter a year ago."We maintained a solid net interest margin during the fourth 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 83% to $1.8 million for the fourth quarter 2015, compared to $1.0 million for the fourth quarter 2014.  Year-to-date, noninterest income increased 49% to $6.4 million compared to $4.3 million for year ending 2014.  The increase in noninterest income was largely due to the increase in gains on sales of mortgage loans and growth in debit card income.

Total operating expenses (noninterest expense) were $3.8 million for the fourth quarter 2015, unchanged from $3.8 million for the fourth quarter of 2014. Year end 2015, operating expenses were $17.3 million, compared to $16.2 million for year ending 2014.  As reported last quarter, the year-over-year increase in operating expenses was the expansion of the mortgage division and the related increase in compensation. Year end 2015, operating expenses were $15.8 million, absent our investment in the mortgage expansion. As we further increase our mortgage lending operations and add new dealers to our indirect auto lending business lines, we expect revenues to grow further enhancing our operating efficiencies," commented Saunders.  

Balance Sheet and Asset Quality

Total assets increased $7.6 million, or 2% to $375.3 million at December 31, 2015, compared to $367.8 million from December 31, 2014.   

Loans grew by $4.7 million, or 2%, at December 31, 2015, compared to $252.4 million, at December 31, 2014, largely due to continued growth in consumer direct auto loans up 20% year-over-year.  Other consumer loans were up 22% year-over-year; indirect auto financing loans were up 99%, and 1-4 family mortgage loans were up 26% year-over-year.  "Growth in these sectors reduces our exposure to unreasonable competitive pricing pressures which results in better asset yields and also improves margins, along with a better diversified loan portfolio which reduces risk" 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 is on target to financial goals, 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 $32.8 million, or 15.52%, to $244.3 million at December 31, 2015, from $211.5 million at December 31, 2014.  For the year ended 2015, the Company grew household checking accounts by 2.2% as the Company continues to attract new customers through 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 assets decreasing during the quarter and year-over-year.  Nonaccrual loans declined 26% to $3.2 million at December 31, 2015, compared to $4.3 million a year ago.  Other-real-estate-owned (OREO) declined to $2.5 million at December 31, 2015, compared to $5.3 million at September 30, 2015 and were relatively flat at $2.4 million a year earlier. 

Nonperforming assets (NPAs), consisting of nonperforming loans, OREO and loans delinquent 90 days or more, were $5.8 million, at December 31, 2015, compared to $7.1 million, at September 30, 2015 and $6.8 million, at December 31, 2014.  The ratio of nonperforming assets was 1.56% to total assets at December 31, 2015, compared to 1.87% three months earlier, and 1.87% at December 31, 2014.  The allowance for loan losses as a percentage of loans was 0.99% at December 31, 2015, compared to 1.15%, at December 31, 2014.  For the year ended December 31, 2015, provisions to the allowance for loan losses were $777,677

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.  For the quarter ended December, 2015, capital ratios were as follows:

Ratio

First Reliance Bank    

Well-capitalized Minimum

Tier 1 leverage ratio

10.87%

5.00%

Common equity tier 1 capital

12.93%

6.50%

Tier 1 capital ratio

12.93%

8.00%

Total capital ratio

13.79%

10.00%

As of December 31, 2015, total shareholders' equity increased $3.9 million from December 31, 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 second 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 $5.23, at December 31, 2015, up from $4.34, at December 31, 2014.  The Company currently trades at 86.7% of book value as of December 31, 2015.

"We continue to enhance our products and services, to optimize how we deliver a better experience to our customers.  Last year we implemented a mortgage loan payment portal which provides convenient mortgage information, amortization schedules, and year end information. It also provides a convenient way customers can set up their mortgage payments.  This year we will launch a consumer loan payment portal and a mobile deposit product as part of our Reliance "On-The-Go" convenient services.  We will issue EMV chipped debit cards second quarter this year in order to provide another level of security for customers who enjoy the convenience of this service," said Saunders.

Regional Economic Conditions – December 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

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 120 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, Inc. and Subsidiary




Consolidated Balance Sheets









December 31

September 30

December 31


2015

2015

2014

Assets




Cash and cash equivalents:




Cash and due from banks

3,703,357

2,999,097

4,955,110

Interest-bearing deposits with other banks

16,357,619

17,434,712

17,891,077

Total cash and cash equivalents

20,060,976

20,433,809

22,846,187





Time deposits in other banks

101,612

101,511

101,409





Securities available-for-sale

11,255,855

11,531,847

13,045,588

Securities held-to-maturity (Estimated fair value of $26,270,623




   and $32,242,017 at December 31, 2015 and 2014, respectively)

25,470,171

26,556,526

31,384,418

Nonmarketable equity securities

813,400

1,875,800

1,502,400

Total investment securities

37,539,426

39,964,173

45,932,406





Mortgage loans held for sale

8,070,283

16,972,426

1,970,068





Loans receivable

259,806,101

258,467,408

255,381,014

Less allowance for loan losses

(2,693,985)

(2,659,044)

(3,002,922)

Loans, net

257,112,116

255,808,364

252,378,092





Premises, furniture and equipment, net

22,856,744

22,862,349

23,395,306

Accrued interest receivable

979,347

951,162

1,034,316

Other real estate owned

2,506,733

5,343,211

2,444,253

Cash surrender value life insurance

13,615,610

13,531,035

13,282,565

Net deferred tax assets

9,950,018

10,189,892

3,198,771

Mortgage servicing rights

1,015,403

-

-

Other assets

1,502,230

1,201,992

1,172,948

Total assets

375,310,498

387,359,924

367,756,321

Liabilities and Shareholders' Equity




Liabilities




Deposits




Noninterest-bearing transaction accounts

68,147,262

73,222,526

65,445,513

Interest-bearing transaction accounts

76,304,111

61,982,714

57,229,738

Savings

99,870,631

96,870,036

88,822,371

Time deposits $250,000 and over

14,990,007

27,441,311

27,814,120

Other time deposits

44,612,452

31,683,006

46,006,876

Total deposits

303,924,463

291,199,593

285,318,618





Securities sold under agreement to repurchase

8,201,396

7,495,674

7,573,403

Advances from Federal Home Loan Bank

10,000,000

35,000,000

25,000,000

Junior subordinated debentures

10,310,000

10,310,000

10,310,000

Accrued interest payable

54,002

49,834

806,079

Other liabilities

2,586,907

3,280,242

2,380,554

Total liabilities

335,076,768

347,335,343

331,388,654

Commitments and contingencies - Notes 4 and 15




Shareholders' Equity




Preferred stock




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

15,179,709

15,179,710

15,179,709

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

767,000

767,000

767,000

Series D preferred stock - 612 shares issued and outstanding

612

-

-

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




   4,680,481 and 4,739,823 shares issued and outstanding




at December 31, 2015 and 2014, respectively

46,804

47,410

47,398

Capital surplus

26,007,698

26,367,114

30,914,242

Treasury stock, at cost, 38,249 and 35,176 shares at December 31, 2015 and




   2014, respectively

(217,230)

(212,324)

(205,512)

Nonvested restricted stock

(326,481)

(341,314)

(385,330)

Retained deficit

(1,259,166)

(1,893,267)

(10,071,514)

Accumulated other comprehensive income

34,784

110,252

121,674

Total shareholders' equity

40,233,730

40,024,581

36,367,667

Total liabilities and shareholders' equity

375,310,498

387,359,924

367,756,321

 






First Reliance Bancshares, Inc. and Subsidiary





Consolidated Statements of Operations





For the years ended December 31, 2015 and 2014











2015

2014


% Increase

Interest income:




(Decrease)

Loans, including fees

$           13,866,514

$           13,758,531


0.78%






Investment securities:





Taxable

925,411

1,120,902


-17.44%

Tax exempt

113,599

114,081


-0.42%

Other interest income

129,247

80,517


60.52%

Total

15,034,771

15,074,031


-0.26%

Interest expense:





Time deposits

327,768

706,565


-53.61%

Other deposits

209,324

129,677


61.42%

Other interest expense

303,036

323,314


-6.27%

Total

840,128

1,159,556


-27.55%






Net interest income

14,194,643

13,914,475


2.01%

Provision for loan losses

777,678

706,891


10.01%

Net interest income after provision for loan losses

13,416,965

13,207,584


1.59%






Noninterest income:





Service charges on deposit accounts

1,430,808

1,624,575


-11.93%

Income from mortgage operations

3,110,229

953,743


226.11%

Income from bank owned life insurance

333,046

336,872


-1.14%

Other service charges, commissions, and fees

1,161,788

1,076,560


7.92%

Gain on sale of available-for-sale securities

9,562

5,321


79.70%

Other

328,365

284,518


15.41%

Total

6,373,798

4,281,589


48.87%






Noninterest expenses:





Salaries and benefits

9,747,542

7,317,950


33.20%

Occupancy

1,628,527

1,529,855


6.45%

Furniture and equipment related expenses

1,583,048

1,690,837


-6.37%

Other

4,345,959

5,624,164


-22.73%

Total

17,305,076

16,162,806


7.07%

Income before income taxes

2,485,687

1,326,367


87.41%

Income tax

(6,326,661)

(3,081,244)


105.33%

Net income

8,812,348

4,407,611


99.93%

Preferred stock dividends accrued

1,450,440

1,220,205


18.87%

Deemed dividends on preferred stock resulting from





net accretion of discount and amortization of premium

-

31,218


-100.00%

Net income available to common shareholders

$              7,361,908

$              3,156,188


133.25%






Average common shares outstanding, basic

4,491,053

4,612,758


-2.64%

Average common shares outstanding, diluted

4,595,204

4,688,981


-2.00%






Income per common share:





Basic income per share

$1.64

$0.68


141.18%

Diluted income per share

1.60

0.67


138.81%

 

 

 







First Reliance Bancshares, Inc. and Subsidiary






Consolidated Statements of Operations













Three Months Ended


Three Months Ended


Three Months Ended


December 2015


September 2015


December 2014

Interest income:






Loans, including fees

3,471,988


3,551,679


3,700,418







Investment securities:






Taxable

219,687


224,989


274,576

Tax exempt

28,347


28,391


28,469

Other interest income

29,121


21,492


23,561

Total

3,749,143


3,826,551


4,027,024

Interest expense:






Time deposits

59,924


48,684


143,752

Other deposits

75,493


61,203


31,879

Other interest expense

74,378


79,355


79,120

Total

209,795


189,243


254,751







Net interest income

3,539,348


3,637,309


3,772,273

Provision for loan losses

587,430


31,959


609,065

Net interest income after provision for loan losses

2,951,918


3,605,350


3,163,208







Noninterest income:






Service charges on deposit accounts

360,401


374,846


420,533

Gain on sale of mortgage loans

961,618


1,136,805


162,419

Income from bank owned life insurance

84,576


83,796


84,824

Other service charges, commissions, and fees

296,171


291,364


269,168

Gain on sale of available-for-sale securities

-


-


-

Other

81,407


67,698


37,690

Total

1,784,173


1,954,509


974,634







Noninterest expenses:






Salaries and benefits

2,556,054


2,460,258


1,922,094

Occupancy

442,763


402,672


404,502

Furniture and equipment related expenses

415,965


374,570


512,736

Other

377,209


1,324,928


924,949

Total

3,791,991


4,562,428


3,764,281

Income before income taxes

944,100


997,431


373,561

Income tax

309,999


326,857


129,825

Net income

634,101


670,574


243,736

Preferred stock dividends accrued

362,610


362,610


362,610

Deemed dividends on preferred stock resulting from






net accretion of discount and amortization of premium

-


-


-

Net income available to common shareholders

271,491


307,964


(118,874)







Average common shares outstanding, basic

4,428,514


4,684,552


4,738,875

Average common shares outstanding, diluted

4,551,758


4,796,516


4,808,932


-


-



Income per common share:

-


-



Basic income per share

0.06


0.07


(0.03)

Diluted income per share

0.06


0.06


(0.02)

 

 

 

Asset Quality and Capital Adequacy





(dollars in thousands, except per share data)

Period ended


December 31, 2015

September 30, 2015

December 31, 2014

Asset Quality




Loans 90 days past due & still accruing

85

-

25

Nonaccrual loans

3,224

1,851

4,381

Total nonperfoming loans

3,309

1,851

4,406

OREO and repossessed assets

2,507

5,343

2,444

Total Nonperforming Assets

5,816

7,194

6,850





Nonperforming loans to loans

1.27%

0.72%

1.73%

Nonperforming assets to total assets

1.56%

1.87%

1.87%

Allowance for loan losses to total loans

0.99%

0.96%

1.15%

Allowance for loan losses to nonperforming loans

81.41%

143.58%

68.15%


(2,693,985.00)

(2,659,044.00)

(3,002,922.00)

Capital Data (at quarter end)




Book value per share

5.23

5.18

4.34

Tangible book value per share

5.23

5.18

4.34





Per Share Data




Shares Outstanding- basic

4,491,053

4,709,602

4,612,758

Shares Outstanding- diluted

4,595,203

4,807,387

4,688,981

Earning Per Share - basic

$                                     1.64

$                                     1.51

$                                0.68

Earning Per Share -diluted

$                                     1.60

$                                     1.47

$                                0.67





Profitability Ratios




Net Interest Margin

4.43%

4.45%

4.47%

Return on Assets

2.35%

2.93%

1.23%

Return on Equity

21.90%

29.77%

13.14%





Capital Adequacy- Bank Only




Tier 1 leverage ratio

10.87%

10.75%

11.28%

Common Equity Tier 1 capital

12.93%

12.94%

N/A

Tier 1 capital ratio

12.93%

12.94%

13.93%

Total capital ratio

13.79%

13.80%

14.95%

Total risk weighted assets

311,316

308,996

294,740

 

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

SOURCE First Reliance Bancshares, Inc.



RELATED LINKS

http://www.firstreliance.com