First Reliance Reports Record 1Q17 Net Income Of $634,042 Up 23.32% From 1Q16

News provided by

Apr 28, 2017, 06:00 ET

FLORENCE, S.C., April 28, 2017 /PRNewswire/ -- First Reliance Bancshares, Inc. (OTC: FSRL), the holding company (the "Company") for First Reliance Bank (the "Bank"), reported first quarter 2017 net income after tax of $634,042. Profitability continues to be led by strong loan and deposit growth, and expanding operating efficiencies. In the first quarter of 2017, net income after tax is up 23.32% compared to $514,138 in the first quarter a year ago. Net income to common shareholders improved 329.9% in the first quarter of 2017 to $634,042 compared to $147,499 in the first quarter one year ago. Diluted EPS grew 347.9% to $0.13 as of March 31, 2017 from $0.03 one year ago as a result of redeeming 100% of the TARP funds in the third quarter of 2016.

"Our strong performance in growing low cost deposits and loan production provides opportunities to increase our brand presence throughout South Carolina with further expansions into the Midlands and Coastal regions. We have recently expanded our footprint in Dorchester County with a Loan Production Office in Summerville which is pending regulatory approval to be a full service branch. Given that capital markets are responding positively to our industry, we are giving strong consideration to raising additional capital to fund our growth initiatives," said Rick Saunders, President and CEO.

Financial Highlights (at or for the periods ended March 31, 2017, except as noted)

Diluted EPS grew 347.9% to $0.13 as of March 31, 2017 from $0.03 one year ago.
Book value per share is $5.90, up 12% from one year ago
Return on Assets of 0.61% and Return on Equity of 9.33%
Completion of Series A and B -Preferred Stock (TARP) redemption in third quarter 2016 with anticipated improvement in earnings per share of $0.21
Branch expansion into Summerville and Dorchester County
Loan growth is up $37.4 million or 14.04% from one year ago while earning asset yields remained stable at 4.54%.
Non Interest Bearing checking accounts increased $9.2 million to 24.7% of total deposits from one year ago as we attract new customers through unique programs and the convenience of digital banking
Total revenues increased 10.1% to $5.7 million in 1Q17 from $5.2 million in 1Q16 reflecting balance sheet growth
Mortgage production volume reached record levels of $56.2 million for 1Q2017 compared to $48.2 million one year ago
Net interest margin (NIM) was 4.26% as the Company continues to leverage its low cost of funds at 28bp
Bank Tier 1 Leverage ratio improved to 10.12% from 9.97% a quarter earlier and remains well-capitalized

Review of Income Statement
Net interest income remained relatively flat at $3.4 million compared to a year ago despite increased interest expense of $174,125, associated with the secured loan and subordinated debt used to refinance higher cost Series A and B Preferred stock (TARP) and growth in interest-bearing deposit balances. The Company continues to leverage its low cost of funds at 28bp.

Noninterest income increased 41.9% to $2.4 million for the first quarter of 2017, compared to $1.7 million for the first quarter 2016. The increase in noninterest income was largely due to the increase in gains on sales of mortgage loans, growth in service charges on deposit accounts, and growth in debit card income. Mortgage originations from combined retail and correspondent divisions totaled $56.2 million on 291 loans originated as of March 31. 2017 compared to $48.2 million on 267 loans originated one year ago.

Balance Sheet and Asset Quality
Total assets increased $39.6 million, or 10.4% to $420 million at March 31, 2017, compared to $380.3 million from March 31, 2016.

Loans receivable grew by $37.4 million, or 14%, at March 31. 2017, compared to $266.6 million, at March 31, 2016 largely due to continued growth in all our markets including commercial portfolio, 1-4 family mortgage portfolio and our consumer loan portfolios. 1-4 Family mortgage portfolio loans are up 96.7% year-over-year and Consumer loans are up 31.2%. We have recruited multiple bankers in the Charleston market from some of the recent bank consolidations and they've been a contributing factor to our additional growth. "Our strategic focus has been on revenue diversification through growth in 1-4 mortgage and consumer loan channels and continued emphasis on small business lending. We've seen steady growth in these sectors as the economies in our markets improve in job growth, housing sales and new construction and manufacturing growth. Focus on these sectors allows for better asset yields, improved margins, along with a better diversified loan portfolio which reduces risk," added Saunders

No-cost/low cost deposits increased by $17.2 million, or 10.2%, to $186 million at March 31, 2017, from $168.7 million at March 31, 2016. The Company grew household checking accounts by a strong 5.3% year to date as the Company continues to attract new customers through unique programs such as Hometown Heroes, Moms First and iMatter Programs and with its convenient digital banking services including a new mobile mortgage application. "By delivering exceptional customer service we are able to attract new customers primarily through word of mouth from our satisfied and loyal customers resulting in approximately 30% of our new accounts, said Saunders.

Nonperforming assets declined $1.3 million to $4.9 million at March 31, 2017 compared to one year ago. The ratio of nonperforming assets to total assets declined to 1.16% at March 31, 2017, compared to 1.63% one year earlier. The allowance for loan losses as a percentage of loans was 0.90% at March 31, 2017, compared to 0.97% one year earlier. For the first quarter of 2017, 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 December 31, 2016, capital ratios were as follows:

Ratio	First Reliance Bank	Well-capitalized Minimum
Tier 1 leverage ratio	10.12%	5.00%
Common equity tier 1 capital	11.88%	6.50%
Tier 1 capital ratio	11.88%	8.00%
Total capital ratio	12.70%	10.00%

First Reliance's tangible book value was $5.90, at March 31, 2017, up 12% from $5.28, at March 31, 2016. The Company currently trades at 114.4% of book value as of March 31, 2017.

Providing an incredible experience remains the focus of the bank and the customer satisfaction score of 95%, which is well above bank industry satisfaction scores of 80%, is a strong indication of their commitment to excellence. Customer satisfaction in retail banking in today's world is tied to providing a great digital experience backed by personal service. First Reliance continues to enhance its online banking services and recently added mobile mortgage application to its digital services. The Bank will expand customer payment systems for both consumer and business customers this year.

First Reliance Bank was named among the top 1% most extraordinary banks in the U.S. by the Institute of Extraordinary Banking. We are proud of our culture and our associates who are committed to our communities and making the lives of our customers better.

Regional Economic Conditions – April 2017
According to recent reports, South Carolina's economy continues to show positive trends with the unemployment rate 4.3% as of the end of February. Employment on a year-over-year basis, expanded 1.6 percent, which was on pace with national growth. South Carolina new residential permits in February are up 1.9 percent from the prior month and up 26.8 percent from February 2016 indicating a strong housing demand. 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 including companies like ESAB, Heinz, Honda, GE Healthcare, Johnson Controls, Monster.com, QVC, Roche, and OTIS Elevator. Florence County is world class, with one of the best business climates in the southeast. It has recently been named among America's top 50 cities for business relocation and expansion by Expansion Management Magazine. The business climate of Florence County has brought more than $1 billion in capital investments in the commercial, industrial, institutional arts sectors in the past eight years alone. The South Carolina Arts Commission has recently named downtown Florence as the newest state-recognized cultural district.

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 130 highly-talented associates and serves the Columbia, Lexington, Charleston, Mount Pleasant, Summerville, Loris, North Myrtle Beach, 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, Mobile mortgage applications, 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%.

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*
				Year over Year		Year over Year
	March 31	December 31	March 31	$ Change		% Change
	2017	2016	2016
Assets
Cash and cash equivalents:
Cash and due from banks	$ 5,148,814	$ 4,810,304	$ 4,777,813	$	371,001	7.77%
Interest-bearing deposits with other banks	18,048,484	22,287,560	14,190,513	$	3,857,971	27.19%
Total cash and cash equivalents	23,197,298	27,097,864	18,968,326	$	4,228,972	22.29%

Time deposits in other banks	101,919	101,816	101,715	$	204	0.20%

Securities available-for-sale	17,571,229	17,862,635	11,186,354	$	6,384,875	57.08%
Securities held-to-maturity (Estimated fair value of $19,602,624,
$20,842,140 and $25,121,907 at March 31, 2017, December 31, 2016 and March 31, 2016	19,242,080	20,438,084	24,173,520	$	(4,931,440)	-20.40%
Nonmarketable equity securities	806,700	734,300	606,800	$	199,900	32.94%
Total investment securities	37,620,009	39,035,019	35,966,674	$	1,653,335	4.60%

Mortgage loans held for sale	7,087,154	5,355,532	8,058,647	$	(971,493)	-12.06%

Loans receivable	304,024,206	288,126,331	266,601,285	$	37,422,921	14.04%
Less allowance for loan losses	(2,785,916)	(2,648,535)	(2,711,576)	$	(74,340)	2.74%
Loans, net	301,238,290	285,477,796	263,889,709	$	37,348,581	14.15%

Premises, furniture and equipment, net	18,702,546	18,873,718	22,869,271	$	(4,166,725)	-18.22%
Accrued interest receivable	867,318	961,449	867,159	$	159	0.02%
Other real estate owned	2,414,662	2,870,484	2,952,733	$	(538,071)	-18.22%
Cash surrender value life insurance	14,046,700	13,964,986	13,703,252	$	343,448	2.51%
Net deferred tax assets	8,158,865	8,463,657	9,918,842	$	(1,759,977)	-17.74%
Mortgage servicing rights	4,702,803	4,211,582	1,458,133	$	3,244,670
Other assets	1,910,135	1,707,519	1,639,407	$	270,728	16.51%
Total assets	$ 420,047,698	$ 408,121,422	$ 380,393,868	$	39,653,830	10.42%
Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing transaction accounts	$ 84,866,269	$ 76,175,393	$ 75,658,916	$	9,207,353	12.17%
Interest-bearing transaction accounts	74,571,228	76,736,892	70,030,844	$	4,540,384	6.48%
Savings	116,795,905	115,741,395	101,583,860	$	15,212,045	14.97%
Time deposits $250,000 and over	9,649,918	17,757,192	18,807,154	$	(9,157,236)	-48.69%
Other time deposits	57,778,166	50,124,647	45,509,583	$	12,268,583	26.96%
Total deposits	343,661,486	336,535,519	311,590,357	$	32,071,129	10.29%

Securities sold under agreement to repurchase	14,727,395	11,088,526	9,684,987	$	5,042,408	52.06%
Advances from Federal Home Loan Bank	9,000,000	8,000,000	5,000,000	$	4,000,000	80.00%
Notes Payable	7,000,000	6,893,211	7,000,000	$	-	100.00%
Junior subordinated debentures	10,310,000	10,310,000	3,310,000	$	7,000,000	211.48%
Subordinated debentures	4,804,997	4,896,398	0	$	4,804,997
Accrued interest payable	213,673	298,950	54,981	$	158,692	288.63%
Other liabilities	2,781,224	3,431,091	3,293,097	$	(511,873)	-15.54%
Total liabilities	392,498,775	381,453,695	339,933,422	$	52,565,353	15.46%

Shareholders' Equity
Preferred stock
Series A cumulative perpetual preferred stock -0 shares issued and outstanding at March 31, 2017 and December 31, 2016 and 15,349 shares as of March 31, 2016	-	-	15,179,709	$	(15,179,709)	-100.00%
Series B cumulative perpetual preferred stock - 0 shares issued and outstanding at Mach 31, 2017 and December 31, 2016 and 767 shares as of March 31, 2016	-	-	767,000	$	(767,000)	-100.00%
Series D preferred stock - 599 , 600 and 610 shares issued and outstanding at March 31, 2017, December 31, 2016 and March 31, 2016, respectively	599	600	610	$	(11)	-
Common stock, $0.01 par value; 20,000,000 shares authorized,
4,707,291.000 4,679,881.000 and 4,680,681.000 shares issued and outstanding
at March 31, 2017, December 31, 2016 and March 31, 2016 , respectively	47,089	46,798	46,807	$	282	0.60%
Capital surplus	25,241,707	25,071,543	25,645,087	$	(403,380)	-1.57%
Treasury stock, at cost, 39,069 shares at March 31, 2017 and
December 31, 2016, respectively and 38,663 shares at March 31, 2016	(219,106)	(219,106)	(217,230)	$	(1,876)	0.86%
Nonvested restricted stock	(247,932)	(262,153)	(311,809)	$	63,877	-20.49%
Retained Earnings/Deficit	2,896,784	2,262,742	(745,028)	$	3,641,812	-488.82%
Accumulated other comprehensive (loss) income	(170,218)	(232,697)	95,300	$	(265,518)	-278.61%
Total shareholders' equity	27,548,923	26,667,727	40,460,446	$	(12,911,523)	-31.91%
Total liabilities and shareholders' equity	$ 420,047,698	$ 408,121,422	$ 380,393,868	$	39,653,830	10.42%

First Reliance Bancshares, Inc. and Subsidiary
*Consolidated Statements of Operations*				Year over Year
				$ Change		% Change
	Three Months Ended	Three Months Ended	Three Months Ended
	March 31, 2017	December 31, 2016	March 31, 2016
Interest income:
Loans, including fees	$ 3,675,451	$ 3,617,498	$ 3,438,321	$	237,130	6.90%

Investment securities:
Taxable	198,657	205,420	214,427	$	(15,770)	-7.35%
Tax exempt	28,201	28,220	28,329	$	(128)	-0.45%
Other interest income	37,557	26,422	25,366	$	12,191	48.06%
Total	3,939,867	3,877,560	3,706,443	$	233,424	6.30%
Interest expense:
Time deposits	128,501	113,044	75,071	$	53,430	71.17%
Other deposits	91,899	81,088	68,450	$	23,449	34.26%
Other interest expense	271,751	274,014	71,785	$	199,966	278.56%
Total	492,151	468,146	215,306	$	276,845	128.58%

Net interest income	3,447,716	3,409,414	3,491,136	$	(43,420)	-1.24%
Provision for loan losses	(151,500)	-	-	$	(151,500)	#DIV/0!
Net interest income after provision for loan losses	3,296,216	3,409,414	3,491,136	$	(194,920)	-5.58%

Noninterest income:
Service charges on deposit accounts	345,947	357,712	332,654	$	13,293	4.00%
Gain on sale of mortgage loans	1,608,433	1,698,913	924,338	$	684,095	74.01%
Income from bank owned life insurance	81,715	86,602	87,641	$	(5,926)	-6.76%
Other service charges, commissions, and fees	325,294	318,904	312,608	$	12,686	4.06%
Gain on sale of available-for-sale securities	-	-	-	$	-	100.00%
Other	70,918	716,450	57,154	$	13,764	24.08%
Total	2,432,307	3,178,581	1,714,395	$	717,912	41.88%

Noninterest expenses:
Salaries and benefits	2,835,033	3,153,885	2,482,437	$	352,596	14.20%
Occupancy	400,632	385,007	371,480	$	29,152	7.85%
Furniture and equipment related expenses	400,637	403,977	360,633	$	40,004	11.09%
Other	1,155,058	1,203,331	1,170,760	$	(15,702)	-1.34%
Total	4,791,360	5,146,200	4,385,310	$	406,050	9.26%
Income before income taxes	937,163	1,441,795	820,221	$	116,942	14.26%
Income tax	303,121	484,579	306,083	$	(2,962)	-0.97%
Net income	634,042	957,216	514,138	$	119,904	23.32%
Preferred stock dividends accrued	-	-	366,639	$	(366,639)	-100.00%
Net income available to common shareholders	$ 634,042	$ 957,216	$ 147,499	$	486,543	329.86%

Average common shares outstanding, basic	4,585,048	4,438,570	4,428,788	$	156,260	3.53%
Average common shares outstanding, diluted	4,718,546	4,554,138	4,543,303	$	175,243	3.86%

Income per common share:
Basic income per share	$ 0.14	$ 0.22	$ 0.03	$	0	633.33%
Diluted income per share	0.13	0.21	0.03	$	0	600.00%

First Reliance Bancshares, Inc. and Subsidiary
*Consolidated Statements of Operations*				Year over Year
				$ Change		% Change

	March 2017	December 2016	March 2016
Interest income:
Loans, including fees	$ 3,675,451	$ 14,363,973	$ 3,438,321	$	10,925,652	317.76%

Investment securities:
Taxable	198,657	801,878	214,427	$	587,451	273.96%
Tax exempt	28,201	113,099	28,329	$	84,770	299.23%
Other interest income	37,557	109,578	25,366	$	84,212	331.99%
Total	3,939,867	15,388,528	3,706,442	$	11,682,086	315.18%
Interest expense:
Time deposits	128,501	366,955	75,071	$	291,884	388.81%
Other deposits	91,899	300,580	68,450	$	232,130	339.12%
Other interest expense	271,751	630,250	71,785	$	558,465	777.97%
Total	492,151	1,297,785	215,306	$	1,082,479	502.76%

Net interest income	3,447,716	14,090,743	3,491,136	$	10,599,607	303.61%
Provision for loan losses	(151,500)	9,075	0	$	9,075	#DIV/0!
Net interest income after provision for loan losses	3,296,216	14,081,668	3,491,136	$	10,590,532	303.35%

Noninterest income:
Service charges on deposit accounts	345,947	1,385,517	332,654	$	1,052,863	316.50%
Gain on sale of mortgage loans	1,608,433	6,153,308	924,338	$	5,228,970	565.70%
Income from bank owned life insurance	81,715	349,374	87,641	$	261,733	298.64%
Other service charges, commissions, and fees	325,294	1,236,026	312,608	$	923,418	295.39%
Gain on sale of available-for-sale securities	-	13,261	-	$	13,261	#DIV/0!
Gain on sale of premises	0	652,367	-	$	652,367	#DIV/0!
Other	70,918	240,780	57,154	$	183,626	321.28%
Total	2,432,307	10,030,633	1,714,395	$	8,316,238	485.08%

Noninterest expenses:
Salaries and benefits	2,835,033	11,270,540	2,482,437	$	8,788,103	354.01%
Occupancy	400,632	1,572,271	371,480	$	1,200,791	323.25%
Furniture and equipment related expenses	400,637	1,517,840	360,633	$	1,157,207	320.88%
Other	1,155,058	4,428,482	1,170,760	$	3,257,722	278.26%
Total	4,791,360	18,789,133	4,385,310	$	14,403,823	328.46%
Income before income taxes	937,163	5,323,168	820,221	$	4,502,947	548.99%
Income tax expense (benefit)	303,121	1,801,260	306,083	$	1,495,177	488.49%
Net income	634,042	3,521,908	514,138	$	3,007,770	585.01%
Preferred stock dividends accrued	-	937,848	366,639	$	571,209	155.80%
Deemed dividends on preferred stock resulting from	-	-	-
net accretion of discount and amortization of premium	-	-	-
Net income available to common shareholders	$ 634,042	$ 2,584,060	$ 147,499	$	2,436,561	1651.92%

Average common shares outstanding, basic	4,585,048	4,438,570	4,428,788	$	9,782	0.22%
Average common shares outstanding, diluted	4,718,546	4,554,138	4,543,303	$	10,835	0.24%

Income per common share:
Basic income per share	0.14	$ 0.58	$ 0.03	$	1	1648.06%
Diluted income per share	0.13	0.57	0.03	$	1	1647.75%

Asset Quality and Capital Adequacy

(dollars in thousands, except asset quality and per share data)	As of and for the Three Months Ended
	March 31, 2017	December 31, 2016	March 31, 2016
Income Statement Data
Net Interest Income	3,447,716	3,409,414	3,491,136
Provision for loan losses	(151,500)	-	-
Noninterest Income	2,432,307	3,178,581	1,714,395
Noninterest Expense	4,791,360	5,146,200	4,385,310
Income Tax (Benefit)	303,121	484,579	306,083
Net Income	634,042	957,216	514,138
Asset Quality
Loans 90 days past due & still accruing	-	-	-
Nonaccrual loans	2,440	2,588	3,224



Total nonperforming loans	2,440	2,588	3,224
	304,024	288,126	266,601
OREO and repossessed assets	2,415	2,870	2,953
Total Nonperforming Assets	4,855	5,458	6,177

Nonperforming loans to loans	0.80%	0.90%	1.21%
Nonperforming assets to total assets	1.16%	1.34%	1.63%
Allowance for loan losses to total loans	0.90%	0.90%	0.97%
Allowance for loan losses to nonperforming loans	114.18%	102.34%	-84.11%
Capital Data (at quarter end)
Book value per share	5.90	5.75	5.28
Tangible book value per share	5.90	5.75	5.28

Per Share Data
Shares Outstanding- basic	4,585,048	4,438,570	4,428,788
Shares Outstanding- diluted	4,718,546	4,554,138	4,543,303
Earnings Per Share - basic	$ 0.14	$ 0.22	$ 0.03
Earnings Per Share -diluted	0.13	0.21	0.03

Profitability Ratios
Net Interest Margin	4.26%	4.37%	4.46%
Return on Assets	0.61%	0.95%	0.55%
Return on Equity	9.33%	14.56%	5.15%

Capital Adequacy- Bank Only
Tier 1 leverage ratio	10.11%	9.97%	11.36%
Common Equity Tier 1 capital	11.88%	12.21%	12.90%
Tier 1 capital ratio	11.88%	12.21%	12.90%
Total capital ratio	12.71%	13.03%	13.75%
Total risk weighted assets	338,089	323,406	318,767