First Reliance reports 1Q16 Pre-tax Income of $820,221, up 53.1% from 1Q15

FLORENCE, S.C., May 11, 2016 /PRNewswire/ -- First Reliance Bancshares, Inc. (OTC: FSRL), the holding company (the "Company") for First Reliance Bank (the "Bank"), reported first quarter 2016 pre-tax profits of $820,221.  This is the 9^th consecutive quarter of profitability which has been fueled by strong loan and deposit growth, and expanding operating efficiencies.  In the first quarter of 2016, pre-tax income is up 53.1% over $535,733 in the first quarter a year ago.  Net income totaled $514,138 for the quarter ended March 31, 2016, compared to $513,426 as of March 31, 2015. After preferred dividends, first quarter 2016 net income available to common shareholders was $147,499, or $0.03 per diluted share, compared to $150,816, or $0.03 per diluted share, in the first quarter a year ago.

"Strategically, we continue to focus on growing our market presence in the Coastal and Midlands regions of South Carolina, diversifying our revenue sources with the expansion of our mortgage business line and dealer services, increasing non-interest income and improving our efficiency ," said Rick Saunders, President and CEO.  "We also continue to focus on delivering profits that are consistent and sustainable for our shareholder."

Financial Highlights (at or for the periods ended March 31, 2016, except as noted)

• Loan growth is up 4% from one year ago.
• No and Low Cost Deposits increased 11.5% from the like period in 2015 as we attract new customers through unique and distinct deposit programs
• Total revenues, (net interest income plus noninterest income), increased 14.2% to $5.2 million in 1Q16 from $4.6 million in 1Q15.
• Mortgage loans held for sale increased 129.6% to $8.1 million from a year ago, reflecting steady demand in the housing market.
• Net interest margin (NIM) was 4.46%, up from 4.42% from a year ago.
• Nonperforming loans to total loans decreased to 1.21% from 1.57% a year ago, reflecting continued improvement in asset quality.
• First Reliance Bancshares remains well-capitalized with total risk based capital ratio of 13.8%.

Review of Income Statement

Net interest income increased to $3.5 million compared to $3.4 million a year ago, largely reflecting increased loan volume and improving net interest margin.

Net interest margin increased by four basis points to 4.46% in the first quarter, compared to 4.42% from the first quarter a year ago. "We continue to maintain a solid net interest margin during the first quarter as a result of continued improvement in our earning asset mix, and lower cost of funds," said Jeff A. Paolucci, EVP & Chief Financial Officer.   

Noninterest income increased 59% to $1.7 million for the first quarter of 2016, compared to $1.1 million for the first quarter 2015.  The increase in noninterest income was largely due to the increase in gains on sales of mortgage loans and growth in debit card income.  Mortgage originations from combined retail and correspondent wholesale divisions totaled $48 million on 267 loan originated as of March 31, 2016 compared to $11 million on 70 loans originated one year ago.  The mortgage division's entrance into a mandatory pricing environment in 2016 has provided an avenue for enhanced profitability and increased business unit efficiencies permitting us to better service our customers.

Total operating expenses (noninterest expense) were $4.4 million for the first quarter 2016, an increase from $4.0 million for the first quarter of 2015.  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. Absent mortgage expansion, noninterest expense for first quarter 2016 would be $3.9 million.  "As we further increase our mortgage lending operations, add new dealers to our auto lending business lines, and grow our organic loan portfolio, we expect revenues to grow further enhancing our operating efficiencies," commented Saunders.  

Balance Sheet and Asset Quality

Total assets increased $4.4 million, or 1.18% to $380.4 million at March 31, 2016, compared to $375.9 million from March 31, 2015.   

Loans grew by $10.1 million, or 3.9%, at March 31, 2016, compared to $256.5 million, at March 31, 2015, largely due to continued growth in 1-4 family mortgage loans, consumer auto loans which are up 13.9 % and 234.5% 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 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 $25.5 million, or 11.5%, to $247.3 million at March 31, 2016, from $221.8 million at March 31, 2015.  The Company grew annualized household checking accounts by 3%  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 continues to improve and normalize with nonperforming loans decreasing during the quarter and year-over-year.  Nonaccrual loans declined 24.7% to $3.2 million at March 31, 2016, compared to $4.0 million a year ago, and remains unchanged from the prior quarter December 31, 2015.  Nonperforming assets, consisting of nonperforming loans, OREO and loans delinquent 90 days or more, were $6.1 million, at March 31, 2016, compared to $6.0 million, at March 31, 2015.  The ratio of nonperforming loans to total loans was 1.21% at March 31, 2016, compared to 1.57% one year earlier.  The allowance for loan losses as a percentage of loans was 0.97% at March 31, 2016, compared to 1.05% one year earlier.  For the first quarter of 2016, loan charge offs were nominal and largely offset by the bank recoveries. 

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 March, 2016, capital ratios were as follows:

As of March 31, 2016, total shareholders' equity increased $3.5 million from March 31, 2015.  All TARP and preferred stock payments are current. "TARP is currently costing the Company $0.32 per share on an annualized basis.  We intend to repay TARP in the second quarter of 2016 through retained earnings and less costly capital alternatives which should have a material positive impact to shareholder value going forward..  ," said Saunders. 

First Reliance's tangible book value was $5.28, at March 31, 2016, up from $4.46, at March 31, 2015.  The Company currently trades at 83.3% of book value as of March, 31, 2016.

"We continue to enhance our products and services, to optimize how we deliver a better experience to our customers.  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 are in the process of issuing EMV chipped debit cards 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.

SOURCE First Reliance Bancshares, Inc.

Related Links

http://www.firstreliance.com