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First Reliance Reports Record 2Q16 Pre-tax Income of $1.5 million, up 121.2% from 2Q15

First Reliance Bancshares Logo

News provided by

First Reliance Bancshares, Inc.

Aug 10, 2016, 06:30 ET

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FLORENCE, S.C., Aug. 10, 2016 /PRNewswire/ -- First Reliance Bancshares, Inc. (OTC: FSRL), the holding company (the "Company") for First Reliance Bank (the "Bank"), reported second quarter 2016 income before income taxes of $1,468,533.  This is the 10th consecutive quarter of profitability which has been fueled by strong loan and deposit growth, and expanding operating efficiencies.  In the second quarter of 2016, income before income taxes is up 121.2% over $12,009 in the second quarter  of 2015.  Net income totaled $1,003,867 for the quarter ended June 30, 2016,  After preferred dividends, second quarter 2016 net income available to common shareholders was $867,562, or $0.19 per diluted share.  Management currently projects that net income available to common shareholders for the year ending December 31, 2016 will be approximately $0.60 per diluted share. 

"As we've diversified our revenue sources, we have been on course to meet our business objectives for growth, profit and delinquency in both our indirect dealer services and our mortgage business lines.  We are funding this growth with low cost core deposits and by increasing non-interest income and improving our efficiency.  We continue to focus on growing our market presence in the Coastal and Midlands regions of South Carolina and have expanded into the Loris and North Myrtle Beach area of South Carolina," said Rick Saunders, President and CEO. "We also continue to focus on delivering profits that are consistent and sustainable for our shareholders."

Financial Highlights (at or for the periods ended June 30, 2016, except as noted):

  • Redeemed $4.0 million of TARP preferred stock on May 31, 2016 and the remaining balance of approximately $12.1 million in two installments on July 8 and August 5, 2016.  The redemption of all TARP preferred stock is expected to positively impact net income available to common shareholders by $0.21 per common share, on an annualized basis.
  • Branch expansion into Loris and North Myrtle Beach.
  • Loans receivable have increased by $12.0 million, or 4.65%, from one year ago.
  • Checking and Savings deposits increased 6.79% from June 30, 2015 as we attract new customers through innovative programs and the launching of our mobile deposit technology as part of our Reliance "On-The-Go" convenient services. 
  • Total revenues (net interest income plus noninterest income), increased 15.1% to $6.1 million in 2Q16 from $5.3 million in 2Q15, reflecting balance sheet growth.
  • Operating Expenses are down 11.13% in 2Q16 as the Company continues to improve operating efficiencies
  • Mortgage production volume reached a record level of $138.7 million for the six months ended June 30, 2016, compared to $43.2 million for the six months ended June 30, 2015
  • Net interest margin (NIM) was 4.49%, as the Company continues to leverage its low cost of funds at 0.19 bps.
  • Nonperforming assets decreased $2.4 million from one year ago, reflecting continued improvement in asset quality.
  • First Reliance Bank remains well-capitalized for regulatory purposes, with a total risk-based capital ratio of 12.22%.

Statement of Operations

Net interest income for the quarter ended June 30, 2016 increased to $3.7 million compared to $3.6 million for the same period of 2015, largely reflecting increased loan volume and improving net interest margin.

Net interest margin increased by six basis points to 4.49% the second quarter of 2016, compared to 4.43% for the quarter ended December 31, 2015. "Our net interest margin is the foundation for the Company's strong profitability and we strongly focus on maintaining and improving our earning asset mix while keeping our cost of funds at low levels," said Jeff A. Paolucci, EVP & Chief Financial Officer.  

Noninterest income increased 39% to $2.4 million for the second quarter of 2016, compared to $1.7 million for the second quarter of 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 $138.7 million on 730 loans originated during the quarter ended June 30, 2016 compared to $43.2 million on 232 loans originated during the same quarter of 2015. 

Total operating expenses (noninterest expense) decreased 11.13% to $4.6 million for the second quarter 2016, from $5.2 million for the second quarter of 2015.  Despite an increase in related expenses associated with higher productions volumes within the mortgage division, the Company realized reductions FDIC insurance premiums, bank insurance, lower OREO carrying expenses, and outside professional fees.  "We continue to realize significant noninterest expense savings as we formulate workflow synergies and improved operating efficiencies," said Paolucci.

Balance Sheet and Asset Quality

Total assets increased $3.1 million, or 0.82% to $383.9 million at June 30, 2016, compared to $380.7 million at June 30, 2015.  

Loans grew by $12.0 million, or 4.65%, at June 30, 2016, compared to $258.9 million, at June 30, 2015, largely due to continued growth in our 1-4 family mortgage portfolio and our consumer loan portfolios.  1-4 Family mortgage portfolio loans are up 57% year-over-year.  Consumer loans are up 49.4%.  "Our strategic focus has been on revenue diversification through growth in 1-4 mortgage and consumer loan channels.  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.

Checking and Savings Deposits increased by $10.8 million, or 6.79 %, to $170.2 million at June 30, 2016, from $159.4 million at June 30, 2015.  The Company grew household checking accounts by 2% year to date as the Company continues to attract new customers through unique programs such as Hometown Heroes, Moms First and iMatter Programs. "We continue to enhance our products and services, to optimize how we deliver a better experience to our customers whether at a branch or using online and mobile banking services.  This past quarter we launched our consumer loan payment portal and mobile deposit as part of our Reliance "On-The-Go" convenient services.  We completed issuing new EMV chipped debit cards to our customers in order to provide another level of security for customers who enjoy the convenience of this service," said Saunders.

Asset quality continues to improve with nonperforming assets, consisting of nonperforming loans, OREO and loans delinquent 90 days or more, declined by $2.4 million to $5.2 million at June 30, 2016 compared to one year ago.  The ratio of nonperforming assets to total assets was 1.37% at June 30, 2016, compared to 2.03% one year earlier.  The allowance for loan losses as a percentage of loans was 0.98% at June 30, 2016, compared to 0.99% one year earlier.  For the second quarter of 2016, loan charge offs were nominal and largely offset by 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.  At June 30, 2016, regulatory capital ratios were as follows:

Ratio  

First Reliance Bank  

Well-capitalized Minimum

Tier 1 leverage ratio   

 9.85.%

5.00%

Common equity tier 1 capital  

11.40%

6.50%

Tier 1 capital ratio                                   

11.40%

8.00%

Total capital ratio  

12.22%

10.00%

As of June 30, 2016, total shareholders' equity declined by $3.1 million from June 30, 2015.  On  May 31, 2016, the Company made a partial redemption of 4,000 shares, or 26.1%, of its 15,249 shares of outstanding Fixed Rate Cumulative Perpetual Preferred Stock Series A ("Series A-Preferred Stock") that were originally issued to the United States Department of the Treasury under the Troubled Asset Relief Program Capital Purchase Program ("TARP").  On July 12, 2016, the Company redeemed an additional 7,000 shares of Series a Preferred Stock and on August 5, 2016 redeemed the remaining $5.1 million of its outstanding TARP preferred stock The redemption price was $1,000 per share, plus accrued and unpaid dividends. The redemptions were funded with the proceeds of a new $7.0 million senior credit facility $5.0 million in subordinated notes sold in privately negotiated transactions.

"We are pleased to be in a position to replace the securities originally issued to the U.S. Treasury under the TARP Capital Purchase Program with lower cost financing alternatives. This is a huge step forward for our company and allows us to move forward with new strategic initiatives," said Saunders.

First Reliance's book value per share was $5.41, at June 30, 2016, up from $5.04, at June 30, 2016.

"We remain committed to shareholders, our customers and the communities we serve.  As a local community bank, we felt it was important to recognize law enforcement officials in all of our markets for the job they do for the community and businesses.  We held appreciation events in all of our markets to let law enforcement know we support them and appreciate them," said Saunders. "This year is our 17th year of business and as we host anniversary events in our markets we are thankful for our customers and businesses who bank with us and support us.  Our associates are highly involved in our communities and commit to giving over 800 hours of volunteer time annually.  We are passionate about community banking and our purpose to make the lives of our customers better."

ABOUT FIRST RELIANCE BANCSHARES, INC. AND ITS MARKETS

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, 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, 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%.  First Reliance Bank was named a Best Places To Work for eleven consecutive years.  It is also one of four businesses in South Carolina that is in the Best Places To Work Hall of Fame because it has received the award each year the program has been in existence.

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.

Regional Economic Conditions – August 2016

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, South Carolina, which is a proven, successful location for business and industry and home to over 130 companies that have a manufacturing presence.  Over the past five years new and expanding businesses have invested more than $1.1 billion dollars in the county, including companies like ESAB, Heinz, Honda, GE Healthcare, Johnson Controls, Monster.com, QVC, Roche, and OTIS Elevator.  For more information on the business climate in Florence County, please visit the link below:

http://www.fcedp.com/business_climate

The website links provided above regarding regional economic conditions are provided for convenience only and the Company undertakes no responsibility for the accuracy of information provided at these websites.

Certain statements in this news release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to future plans and expectations, and are thus prospective.  Such forward-looking statements include but are not limited to statements with respect to our plans, objectives, expectations and intentions and other statements that are not historical facts, and other statements identified by words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," and "projects," as well as similar expressions.  Such statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.  Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate.  Therefore, we can give no assurance that the results contemplated in the forward-looking statements will be realized.  The inclusion of this forward-looking information should not be construed as a representation by the Company or any person that the future events, plans, or expectations contemplated by the Company will be achieved.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (2) the strength of the United States economy in general and the strength of the local economies in which we conduct operations may be different than expected resulting in, among other things, a deterioration in the credit quality or a reduced demand for credit, including the resultant effect on the Company's loan portfolio and allowance for loan losses; (3) the rate of delinquencies and amounts of charge-offs, the level of allowance for loan loss, the rates of loan growth, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (4) the risk that the preliminary financial information reported herein and our current preliminary analysis will be different when our review is finalized; (5) changes in the U.S. legal and regulatory framework including, but not limited to, the Dodd-Frank Act and regulations adopted thereunder; and (6) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) could have a negative impact on the Company.  All subsequent written and oral forward-looking statements concerning the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.  We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

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

First Reliance Bancshares, Inc. and Subsidiary


Consolidated Balance Sheets








June 30


December 31

June 30


2016


2015

2015

Assets





Cash and cash equivalents:





Cash and due from banks

$      4,601,349


$     3,703,357

$      2,695,509

Interest-bearing deposits with other banks

11,168,524


16,357,619

11,250,251

Total cash and cash equivalents

15,769,873


20,060,976

13,945,760






Time deposits in other banks

101,715


101,612

101,511






Securities available-for-sale

10,725,883


11,255,855

11,675,354

Securities held-to-maturity (Estimated fair value of $24,158,913





   and $26,270,623 at June 30, 2016 and December 31, 2015, respectively)

23,010,384


25,470,171

28,225,174

Nonmarketable equity securities

394,300


813,400

1,705,800

Total investment securities

34,130,567


37,539,426

41,606,328






Mortgage loans held for sale

12,183,376


8,070,283

13,809,338






Loans receivable

271,020,546


259,806,101

258,990,043

Less allowance for loan losses

(2,661,400)


(2,693,985)

(2,553,931)

Loans, net

268,359,146


257,112,116

256,436,112






Premises, furniture and equipment, net

22,834,270


22,856,744

23,056,133

Accrued interest receivable

888,782


979,347

967,738

Other real estate owned

2,591,144


2,506,733

5,608,743

Cash surrender value life insurance

13,790,989


13,615,610

13,447,239

Net deferred tax assets

9,225,552


9,950,018

10,504,779

Mortgage servicing rights

2,124,707


1,015,403

95,145.23

Other assets

1,856,607


1,502,230

1,168,900

Total assets

$     383,856,728


$     375,310,498

380,747,726

Liabilities and Shareholders' Equity





Liabilities





Deposits





Noninterest-bearing transaction accounts

$     77,796,392.33


$     68,147,262

69,660,700

Interest-bearing transaction accounts

67,830,270


76,304,111

66,833,047

Savings

110,741,095


99,870,631

91,218,703

Time deposits $250,000 and over

19,781,396


14,990,007

3,879,989

Other time deposits

47,098,401


44,612,452

56,106,996

Total deposits

323,247,554


303,924,463

287,699,435






Securities sold under agreement to repurchase

9,783,721


8,201,396

9,243,707

$4

-


10,000,000

31,000,000

Junior subordinated debentures

10,310,000


10,310,000

10,310,000

Accrued interest payable

55,123


54,002

49,304

Other liabilities

3,396,038


2,586,907

2,773,983

Total liabilities

346,792,436


335,076,768

341,076,429






Shareholders' Equity





Preferred stock





Series A cumulative perpetual preferred stock - 4,349 shares issued and outstanding

11,179,710


15,179,709

15,179,709

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

767,000


767,000

767,000

Series D preferred stock - 402 shares issued and outstanding

402


612

-

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





4,640,576 and 4,680,481 shares issued and outstanding





at June 30, 216 and December 31, 2015 , respectively

46,992


46,804

47,410

Capital surplus

25,223,967


26,007,698

26,729,724

Treasury stock, at cost, 38,805 and 38,249 shares at June 30, 2016 and





December 31, 2015, respectively

(217,885)


(217,230)

(206,010)

Nonvested restricted stock

(291,229)


(326,481)

(356,147)

Retained Earnings/Deficit

258,839


(1,259,166)

(2,560,255)

Accumulated other comprehensive income

96,496


34,784

69,866

Total shareholders' equity

37,064,292


40,233,730

39,671,297

Total liabilities and shareholders' equity

$     383,856,728


$     375,310,498

$     380,747,726

First Reliance Bancshares, Inc. and Subsidiary

Consolidated Statements of Operations





Three Months Ended

Three Months Ended


June 30, 2016

June 30, 2015

Interest income:



Loans, including fees

$     3,675,342

$     3,460,697




Investment securities:



Taxable

182,357

233,139

Tax exempt

28,284

28,408

Other interest income

33,597

55,492

Total

3,919,580

3,777,736

Interest expense:



Time deposits

86,953

83,325

Other deposits

73,749

40,089

Other interest expense

69,417

92,208

Total

230,119

215,622




Net interest income

3,689,461

3,562,114

Provision for loan losses

9,075

79,462

Net interest income after provision for loan losses

3,680,386

3,482,652




Noninterest income:



Service charges on deposit accounts

340,147

334,682

Gain on sale of mortgage loans

1,637,512

935,970

Income from bank owned life insurance

87,736

82,641

Other service charges, commissions, and fees

308,233

295,023

Gain on sale of available-for-sale securities

-

9,562

Other

55,805

93,950

Total

2,429,433

1,751,828




Noninterest expenses:



Salaries and benefits

2,693,569

2,630,913

Occupancy

399,157

405,337

Furniture and equipment related expenses

371,790

400,458

Other

1,176,770

1,785,763

Total

4,641,286

5,222,471

Income before income taxes

1,468,533

12,009

Income tax

464,666

(6,985,823)

Net income

1,003,867

6,997,832

Preferred stock dividends accrued

136,305

362,610

Deemed dividends on preferred stock resulting from



net accretion of discount and amortization of premium

-

-

Net income available to common shareholders

$      867,562

$     6,635,222




Average common shares outstanding, basic

4,438,478

4,717,006

Average common shares outstanding, diluted

4,541,668

4,810,215




Income per common share:



Basic income per share

0.20

1.41

Diluted income per share

0.19

1.38

First Reliance Bancshares, Inc. and Subsidiary

Consolidated Statements of Operations





Six Months Ended

Six Months Ended


June 30, 2016

June 30, 2015

Interest income:



Loans, including fees

$     7,113,662

$     6,842,846




Investment securities:



Taxable

396,784

480,735

Tax exempt

56,613

56,861

Other interest income

58,963

78,634

Total

7,626,022

7,459,076

Interest expense:



Time deposits

162,025

219,160

Other deposits

142,199

72,628

Other interest expense

141,201

149,302

Total

445,426

441,090




Net interest income

7,180,597

7,017,986

Provision for loan losses

9,075

158,289

Net interest income after provision for loan losses

7,171,522

6,859,697




Noninterest income:



Service charges on deposit accounts

672,801

695,562

Gain on sale of mortgage loans

2,561,849

1,084,787

Income from bank owned life insurance

175,378

164,674

Other service charges, commissions, and fees

620,841

574,253

Gain on sale of available-for-sale securities

-

9,562

Other

112,959

176,666

Total

4,143,828

2,705,504




Noninterest expenses:



Salaries and benefits

5,176,005

4,731,230

Occupancy

770,637

783,092

Furniture and equipment related expenses

732,424

792,513

Other

2,347,530

2,710,624

Total

9,026,595

9,017,459

Income before income taxes

2,288,754

547,742

Income tax expense (benefit)

770,749

(6,963,516)

Net income

1,518,005

7,511,258

Preferred stock dividends accrued

136,305

181,305

Deemed dividends on preferred stock resulting from



net accretion of discount and amortization of premium

-

-

Net income available to common shareholders

$     1,381,700

$     7,329,953




Average common shares outstanding, basic

4,438,478

4,722,333

Average common shares outstanding, diluted

4,541,668

4,813,030




Income per common share:



Basic income per share

0.31

1.55

Diluted income per share

0.30

1.52

Asset Quality and Capital Adequacy






(dollars in thousands, except asset
quality and per share data)

As of and for the Three Months Ended


June 30, 2016

December 31, 2015

June 30, 2015

Income Statement Data




Net Interest Income

3,689,461

3,539,351

3,562,114

Provision for loan losses

9,075

587,430

79,462

Noninterest Income

2,429,433

1,987,751

1,751,828

Noninterest Expense

4,641,286

3,795,572

5,222,471

Income Tax (Benefit)

464,666

309,999

(6,985,823)

Net Income 

1,003,867

634,101

6,997,832

Asset Quality




Loans 90 days past due & still accruing

-

85

-

Nonaccrual loans

2,636

3,224

2,033













Total nonperforming loans

2,636

3,309

2,033

OREO and repossessed assets

2,591

2,507

5,609

Total Nonperforming Assets

5,227

5,816

7,642





Nonperforming loans to loans

0.97%

1.27%

0.78%

Nonperforming assets to total assets

1.37%

1.56%

2.03%

Allowance for loan losses to total loans

0.98%

0.99%

0.99%

Allowance for loan losses to nonperforming loans

100.96%

81.41%

125.57%

Capital Data (at quarter end)




Book value per share

5.41

5.23

5.04

Tangible book value per share

5.41

5.23

5.04





Per Share Data




Shares Outstanding- basic

4,438,478

4,491,053

4,722,333

Shares Outstanding- diluted

4,541,668

4,595,203

4,813,030

Earning Per Share - basic

0.20

1.64

1.44

Earning Per Share -diluted

0.19

1.60

1.41





Profitability Ratios




Net Interest Margin

4.49%

4.43%

4.49%

Return on Assets

1.06%

2.35%

4.07%

Return on Equity

10.98%

21.90%

42.78%





Capital Adequacy- Bank Only




Tier 1 leverage ratio

9.85%

10.87%

10.90%

Common Equity Tier 1 capital

11.40%

12.93%

12.69%

Tier 1 capital ratio

11.40%

12.93%

12.69%

Total capital ratio

12.22%

13.79%

13.52%

Total risk weighted assets

324,668

311,316

309,842





Contact:    
Jeffrey A. Paolucci, EVP & CFO     
(888) 543-5510     
[email protected]

Logo - http://photos.prnewswire.com/prnh/20160809/397011LOGO

SOURCE First Reliance Bancshares, Inc.

Related Links

http://www.firstreliance.com

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