First Reliance Announces Strong 2nd Quarter Results

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Jul 31, 2015, 07:00 ET

FLORENCE, S.C., July 31, 2015 /PRNewswire/ -- First Reliance Bancshares, Inc. (OTC: FSRL) announced that it had net income of $7.0 million for the quarter ended June 30, 2015. This compares to a net income of $372,331 for the quarter ended June 30, 2014. The increase in net income is largely attributed to a deferred tax asset recapture of $6.9 million. Additionally, the Company had one-time credit and mortgage charges of $585,000 during the quarter ended June 30, 2015. Net income for six months ended June 30, 2015 was $7.5 million. This compares to net income of $718,689 for the six months ended June 30, 2014. Operating results were positively impacted by asset growth of $13 million since December 31, 2014 through robust retail and correspondent mortgage production and continued consumer loan and 1-4 family mortgage originations.

Net interest income increased $426,219, and totaled $7.0 million for the six months ended June 30, 2015, compared to $6.5 million for the six months ended June 31, 2014. Interest income increased $207,277 while interest expense was reduced by $218,942. The Company continues to benefit from increased loan volume and a declining cost of funds, which was 0.20% for the six months ended June 30, 2015 compared to 0.33% for the six months ended June 30, 2014.

Noninterest income increased $758,713, and totaled $2.9 million for the six month ended June 30, 2015 compared to $2.1 million for the six month ended June 30, 2014. The increase in noninterest income is largely attributable to a year over year increase in gains on sales of mortgage loans of $762,513.

Noninterest expense levels increased $1.2 million, and totaled $9.2 million for the six months ended June 30, 2015 compared to $8.0 million for the comparable period of 2014. Contributing to this increase were expenses associated with the expansion of our mortgage division totaling $873,324 as a result of adding approximately 20 new associates—a component of our ongoing strategic initiative to diversify sources of revenue. As this business line grows, we expect noninterest income to be positively impacted.

Total assets increased $13 million or 3.53% to $381 million as of June 30, 2015, compared to $368 million as of December 31, 2014.

Loans and Mortgage Loans Held for Sale increased by $15.5 million or 6.0%, as of June 30, 2015 from $257.3 million as of December 31, 2014 largely due to continued growth in consumer indirect auto financing and 1-4 family mortgage loans. We believe the indirect auto finance business line launched last year is strategically positioned for continued slow to moderate growth; primarily focused on high quality loan customers and transacting business only in the markets we currently are serving. This business line has reached profitability and is now contributing positively to the bottom line.

No-Cost/Low Cost Deposits increased by $16.2 million, or 7.67%, to $227.7 million at June 30, 2015, from $211.5 million at December 31, 2014. The Company continues to attract new customers through customer referrals, unique programs such as Hometown Heroes, Moms First and iMatter Programs. Customers enjoy the Bank's brand of banking focused on providing customers with an exceptional experience whether at a branch or using online and mobile banking services.

The Company continues to show improvement in asset quality. The Company's nonperforming assets totaled $7.6 million as of June 30, 2015, down substantially from $12.9 million as of June 30, 2014. The ratio of nonperforming assets to total assets was 2.03% as of June 20, 2015 compared to 3.56% as of June 30, 2014. The allowance for loan losses as a percentage of loans was 0.99% as of June 30, 2015, compared to 1.18% as of June 30, 2014. For the six month ended June 30, 2015, provisions to the allowance for loan losses were minimal at $158,289.

Capital levels remain strong. As of June 30, 2015, total shareholders equity increased $3.3 million since 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. Additionally, the Company recaptured $6.9 million in remaining deferred tax asset. The Company's tangible book value per share increased to $5.04 as of June 30, 2015 from $4.46 per share as of March 31, 2015.

"First Reliance Bank continues to show steady growth in both deposits and loans," says Rick Saunders, President and CEO. "The bank continues to be well capitalized and in excess of regulatory requirements, and has strong liquidity," he adds.

"We continue to grow our consumer lending platform and diversify our revenue stream with the expansion of our mortgage line of business and indirect auto finance. As the mortgage business line grows, we expect noninterest income to be positively impacted," says Saunders. "Additionally, asset quality continues to show improvement."

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.

6 Months Ended
	June 30, 2015	June 30, 2014	% Change
Income Statement Data
Net Interest Income	7,017,986	6,591,768	6.47%
Provision for loan losses	158,289	45,930	244.63%
Noninterest Income	2,900,093	2,141,380	35.43%
Noninterest Expense	9,212,048	7,968,528	15.61%
Income Tax (Benefit)	(6,963,516)	-	-
Net Income	7,511,258	718,689	945.13%

Per Share Data
Net Income Per Share
Basic	$ 1.43	$ 0.04	3475.00%
Diluted	$ 1.40	$ 0.04	3400.00%

Average Shares Outstanding
Basic	4,722,333	4,569,510	3.34%
Diluted	4,813,030	4,640,145	3.73%

Key Ratios
Return on Assets	4.07%	0.41%	892.68%
Return on Equity	42.78%	4.45%	861.35%
Nonperforming assets to assets	2.03%	3.56%	-42.98%
Reserve to loans	0.99%	1.18%	-16.10%
Reserve to nonperforming loans	33.42%	22.12%	51.08%
Net Interest Margin	4.49%	4.50%	-0.22%

FIRST RELIANCE BANCSHARES, INC. AND SUBSIDIARY

Consolidated Balance Sheets

				June 2015		December 2014
Assets					(Unaudited)		(Audited)

	Cash and cash equivalents:
		Cash and due from banks		$	2,695,509	$	4,955,110
	Interest-bearing deposits with other banks				11,250,251		17,891,077
	Total cash and cash equivalents				13,945,760		22,846,187

	Time deposits in other banks				101,511		101,409

	Securities available-for-sale				11,675,354		13,045,588
	Securities held-to-maturity				28,225,174		31,384,418
	Nonmarketable equity securities				1,705,800		1,502,400
			Total investment securities		41,606,328		45,932,406

	Mortgage loans held for sale				13,899,483		1,970,068

	Loans receivable				258,995,043		255,381,014
		Less allowance for loan losses			(2,553,931)		(3,002,922)
			Loans, net		256,441,112		252,378,092

	Premises, furniture and equipment, net				23,053,255		23,395,306
	Accrued interest receivable				967,738		1,034,316
	Other real estate owned				5,608,743		2,444,253
	Cash surrender value life insurance				13,447,239		13,282,565
	Net deferred tax asset				10,504,779		3,198,771
	Other assets				1,171,778		1,172,948
			Total assets	$	380,747,726	$	367,756,321


Liabilities and Shareholders' Equity
	Liabilities
	Deposits
		Noninterest-bearing transaction accounts		$	69,660,700	$	65,445,513
		Interest-bearing transaction accounts			66,833,047		57,229,738
		Savings			91,218,703		88,822,371
		Time deposits $100,000 and over			26,874,567		36,500,148
		Other time deposits			33,112,418		37,320,848
			Total deposits		287,699,435		285,318,618
	Securities sold under agreement to repurchase				9,243,707		7,573,403
	Advances from Federal Home Loan Bank				31,000,000		25,000,000
	Junior subordinated debentures				10,310,000		10,310,000
	Accrued interest payable				49,304		806,079
	Other liabilities				2,773,983		2,380,554
			Total liabilities		341,076,429		331,388,654

Shareholders' Equity
	Preferred stock
		Series A cumulative perpetual preferred stock - 15,349 shares issued and outstanding			15,179,709		15,179,709
		Series B cumulative perpetual preferred stock - 767 shares issued and outstanding			767,000		767,000
	Common stock, $0.01 par value; 20,000,000 shares authorized,
		4,741,203 and 4,739,823 shares issued and outstanding
		at June 30, 2015 and December 31, 2014			47,410		47,398
	Capital surplus				26,729,724		30,914,242
	Treasury stock, at cost, 35,324 and 35,176 shares at June 30, 2015 and
		December 31, 2014, respectively			(206,010)		(205,512)
	Nonvested restricted stock				(356,147)		(385,330)
	Retained deficit				(2,560,255)		(10,071,514)
	Accumulated other comprehensive income				69,866		121,674
			Total shareholders' equity		39,671,297		36,367,667
	Total liabilities and shareholders' equity			$	380,747,726	$	367,756,321


FIRST RELIANCE BANCSHARES, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Operations
(Unaudited)

				Three Months Ended				Six Months Ended
				June 30,				June 30,
				2015		2014		2015		2014

Interest income:
	Loans, including fees			$	3,460,697	$	3,322,961	$	6,842,846	$	6,596,640
	Investment securities:
		Taxable			233,139		280,322		480,735		568,303
		Nontaxable			28,408		28,529		56,861		57,100
	Other interest income				55,492		17,854		78,634		29,756
			Total		3,777,736		3,649,666		7,459,076		7,251,799

Interest expense:
	Time deposits				83,325		165,847		219,160		414,967
	Other deposits				40,089		32,494		72,628		65,827
	Other interest expense				92,208		97,759		149,302		179,238
			Total		215,622		296,100		441,090		660,032

Net interest income					3,562,114		3,353,566		7,017,986		6,591,768

Provision for loan losses					79,462		45,930		158,289		45,930

Net interest income after provision for loan losses					3,482,652		3,307,636		6,859,697		6,545,837

Noninterest income:
	Service charges on deposit accounts				334,682		399,654		695,562		783,029
	Gain on sales of mortgage loans				935,970		302,331		1,266,085		503,572
	Income from bank owned life insurance				82,641		84,247		164,674		167,772
	Other charges, commissions and fees				295,023		276,282		574,253		534,896
	Gain on sale of securities				9,562		-		9,562		5,321
	Other non-interest income				93,950		73,083		189,957		146,790
			Total		1,751,828		1,135,596		2,900,093		2,141,380

Noninterest expenses:
	Salaries and employee benefits				2,630,913		1,841,151		4,731,230		3,653,886
	Occupancy expense				405,337		385,751		783,092		752,781
	Furniture and equipment expense				400,458		387,422		788,587		806,571
	Other operating expenses				1,785,763		1,456,575		2,909,139		2,755,290
			Total		5,222,471		4,070,900		9,212,048		7,968,528

Net income before income taxes					12,009		372,333		547,742		718,689

Income tax benefit					6,985,823		-		6,963,516		-

Net income					6,997,832		372,333		7,511,258		718,689
Preferred stock dividends					362,610		285,865		725,220		494,985
Deemed dividends on preferred stock resulting from
	net accretion of discount and amortization of premium				-		-		-		31,218
Net income available
	to common shareholders			$	6,635,222	$	86,468	$	6,786,038	$	192,486



Average common shares outstanding, basic					4,717,006		4,569,895		4,722,333		4,569,510
Average common shares outstanding, diluted					4,810,215		4,630,783		4,813,030		4,640,145

Income per common share:
	Basic income per share			$	1.41	$	0.02	$	1.59	$	0.04
	Diluted income per share				1.45		0.02		1.56		0.04