First Reliance Reports 2Q17 Net Income Of $662,632

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Aug 09, 2017, 06:00 ET

FLORENCE, S.C., Aug. 9, 2017 /PRNewswire/ -- First Reliance Bancshares, Inc. (OTC: FSRL), the holding company (the "Company") for First Reliance Bank (the "Bank"), reported second quarter 2017 net income after tax of $662,632, up 4.5% from 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. Diluted EPS as of June 30, 2017 was $0.14 compared to $0.13 in the first quarter of 2017.

"We are proud of our continued strong financial performance which allows us to grow as a company while adding to the economic well being of the communities we serve in South Carolina. We continue our branch expansion into Horry and Dorchester counties of South Carolina. While increased costs of opening branch offices have negatively impacted earnings in the short term, we anticipate increased profitability within these locations over the next 12 months which would be accretive to earnings," says Rick Saunders, President and CEO.

Financial Highlights (at or for the periods ended June 30, 2017, except as noted)

Diluted EPS improved to $0.14 as of June 30, 2017 compared to $0.13 as of March 31, 2017
Tangible book value per share is $5.98, up 10.5% from one year ago
Return on Assets of 0.62% and Return on Equity of 9.49%
Branch expansion into Summerville and Dorchester County
Loan growth is up $41.4 million or 15.3% from one year ago while earning asset yields improved to 4.63% compared to 4.54% one year ago.
Non Interest Bearing checking accounts increased $9.9 million to 24.6% of total deposits from one year ago as we attract new customers through unique programs and the convenience of digital banking
Total revenues year to date 2017 increased by 5.02% to $11.9 million compared to $11.3 million in 2016 reflecting balance sheet growth
Net interest margin (NIM) was 4.32% as the Company continues to leverage its low cost of funds at 30bp
Bank Total Capital Ratio improved to 12.83% from 12.48% a quarter earlier and remains well-capitalized

Review of Income Statement
Net interest income improved 2.08% at $3.8 million compared to a year ago despite increased interest expense of $176,061 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 30bp.

Noninterest income increased 12.95% to $4.7 million year to date 2017, compared to $4.1 million year to date 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. "Overall profitability within the mortgage business line increased 53% year over year as of June 30, 2017 due to improving operating margins, despite a reduction in mortgage originations of 4.1% year over year as of June 30, 2017. As a community bank, we are putting a higher degree of emphasis on expanding the retail mortgage channel as originations are up 10.1% year over year," said Jeffrey Paolucci, Executive Vice President and CFO.

Balance Sheet and Asset Quality

Total assets increased $52.6 million, or 13.7% to $436.5 million at June 30, 2017, compared to $383.9 million from June 30, 2016.

Loans receivable grew by $41.4 million, or 15.3%, at June 30, 2017, compared to $271 million, at June 30, 2016 largely due to continued growth in all our markets including commercial portfolios, 1-4 family mortgage portfolios and our consumer loan portfolios. 1-4 Family mortgage portfolio loans are up 75.9% year-over-year and Consumer loans are up 25.8%. "Our ability to continue to attract strong relationship bankers who are actively involved in their local communities has been a strong factor in the growth in both our loan and deposit portfolios. We have been able to successfully integrate these talented bankers into our culture and they have quickly become strong supporters of our brand, our values and focus of making the lives of our customers BETTER," says Saunders.

No-cost/low cost deposits increased by $19 million, or 11.1%, to $188 million at June 30, 2017, from $169.1 million at June 30, 2016. The Company grew household checking accounts by 5.02% reflecting our strong year over year branch sales growth. "Our associates continue to deliver a differentiated level of service to our customers through our unique programs such as Hometown Heroes and Moms First with special events that make them feel like more than a number at our bank," said Saunders.

Nonperforming assets declined $712 thousand to $4.5 million at June 30, 2017 compared to one year ago. The ratio of nonperforming assets to total assets declined to 1.04% at June 30, 2017, compared to 1.37% one year earlier. The allowance for loan losses as a percentage of loans was 0.90% at June 30, 2017, compared to 0.98% one year earlier. For the second 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	9.92 %	5.00%
Common equity tier 1 capital	11.99%	6.50%
Tier 1 capital ratio	11.99%	8.00%
Total capital ratio	12.83%	10.00%

First Reliance's tangible book value was $5.98, at June 20, 2017, up 10.5% from $5.41, at June 30, 2016. The Company currently trades at 116.1% of book value as of June 30, 2017.

First Reliance Bank was recently named as one of the Best Places to Work in South Carolina. This program was created by SC Biz News in partnership with the South Carolina Chamber of Commerce and Best Companies Group. First Reliance is one of three companies throughout South Carolina who have received the award all twelve years since the program began. Our great team of dedicated associates is the main reason we are one of the Best Places to Work in SC. This recognition reinforces that our associates are engaged and committed to the Bank and the communities we serve. We are committed to keeping our associate promise by providing them with the opportunity to do work that makes a difference.

"We are also proud of recently being awarded the 5-Star Superior Rating from Bauer Financial, an independent financial institution rating organization. This rating is based on first quarter 2017 financial data and indicates First Reliance is one of the strongest financial institutions in the nation; a dependable and financially sound community bank. While many financial institutions may look similar, we have remained committed to our purpose 'To Make The Lives of our Customers BETTER.' This unwavering commitment and the great work of our associates has allowed us to deliver the results that make us a dependable and financially sound community bank," said Saunders.

Regional Economic Conditions – May 2017
According to recent reports, South Carolina's economy continues to improve as total employment rose by 0.4 percent and in May companies' added 7,600 new jobs. Recently, one Florence county employer, Ruiz Foods a frozen food manufacturer, announced a $79 million expansion that will create 700 new jobs in the county where First Reliance is headquartered. The growth we are experiencing in South Carolina continues to provide us with opportunities to earn business and grow our community banking footprint in many corners of the state.
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

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 for 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, 2017 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
	June 30		December 31		June 30			$ Change	% Change
	2017		2016		2016
Assets
Cash and cash equivalents:
Cash and due from banks	$	4,906,241	$	4,810,304	$	4,601,349	$	304,892	6.63%
Interest-bearing deposits with other banks		28,249,142		22,287,560		11,168,524	$	17,080,618	152.94%
Total cash and cash equivalents		33,155,383		27,097,864		15,769,873	$	17,385,510	110.25%

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

Securities available-for-sale		17,571,627		17,862,635		10,725,883	$	6,845,744	63.82%
Securities held-to-maturity (Estimated fair value of $19,070,573,
$20,842,140 and $24,158,913 at June 30, 2017, December 31, 2016 and June 30, 2016)		18,527,443		20,438,084		23,010,384	$	(4,482,941)	-19.48%
Nonmarketable equity securities		734,500		734,300		394,300	$	340,200	86.28%
Total investment securities		36,833,570		39,035,019		34,130,567	$	2,703,003	7.92%

Mortgage loans held for sale		5,642,044		5,355,532		12,183,376	$	(6,541,332)	-53.69%

Loans receivable		312,432,694		288,126,331		271,020,546	$	41,412,148	15.28%
Less allowance for loan losses		(2,867,446)		(2,648,535)		(2,661,400)	$	(206,046)	7.74%
Loans, net		309,565,248		285,477,796		268,359,146	$	41,206,102	15.35%

Premises, furniture and equipment, net		18,714,423		18,873,718		22,834,270	$	(4,119,847)	-18.04%
Accrued interest receivable		935,200		961,449		888,782	$	46,418	5.22%
Other real estate owned		2,242,328		2,870,484		2,591,144	$	(348,816)	-13.46%
Cash surrender value life insurance		14,129,444		13,964,986		13,790,989	$	338,455	2.45%
Net deferred tax assets		7,821,793		8,463,657		9,225,552	$	(1,403,759)	-15.22%
Mortgage servicing rights		5,316,588		4,211,582		2,124,707	$	3,191,881	150.23%
Other assets		2,023,258		1,707,519		1,856,607	$	166,651	8.98%
Total assets	$	436,481,199	$	408,121,422	$	383,856,728	$	52,624,471	13.71%
Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing transaction accounts	$	87,709,487	$	76,175,393	$	77,796,392	$	9,913,094	12.74%
Interest-bearing transaction accounts		76,220,974		76,736,892		67,830,270	$	8,390,704	12.37%
Savings		122,745,794		115,741,395		110,741,095	$	12,004,699	10.84%
Time deposits $250,000 and over		9,736,164		17,757,192		19,781,396	$	(10,045,232)	-50.78%
Other time deposits		60,128,507		50,124,647		47,098,401	$	13,030,106	27.67%
Total deposits		356,540,926		336,535,519		323,247,554	$	33,293,372	10.30%

Securities sold under agreement to repurchase		16,534,007		11,088,526		9,783,721	$	6,750,286	69.00%
Advances from Federal Home Loan Bank		7,300,000		8,000,000		0	$	7,300,000
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		4,814,252		4,896,398		0	$	4,814,252
Accrued interest payable		309,486		298,950		55,123	$	254,363	461.45%
Other liabilities		5,345,864		3,431,091		3,396,038	$	1,949,826	57.41%
Total liabilities		408,154,535		381,453,695		346,792,436	$	61,362,098	17.69%

Shareholders' Equity
Preferred stock
Series A cumulative perpetual preferred stock -0 shares issued and outstanding at June 30, 2017, and December 31, 2016 and 4,349 shares as of June 30, 2016		-		-		11,179,710	$	(11,179,710)	-100.00%
Series B cumulative perpetual preferred stock - 0 shares issued and outstanding at June 30, 2017, and December 31, 2016 and 767 shares as of June 30, 2016		-		-		767,000	$	(767,000)	-100.00%
Series D preferred stock - 599 , 600 and 402 shares issued and outstanding at June 30, 2017, December 31, 2016 and June 30, 2016, respectively		599		600		402	$	197	48.91%
Common stock, $0.01 par value; 20,000,000 shares authorized,
4,773,291.000 4,679,881.000 and 4,640,576.000 shares issued and outstanding
at June 30, 2017, December 31, 2016 and June 30, 2016, respectively		47,733		46,798		46,992	$	741	1.58%
Capital surplus		25,691,582		25,071,543		25,223,967	$	467,615	1.85%
Treasury stock, at cost, 39,374 shares at June 30, 2017 and
December 31, 2016, respectively and 38,805 shares at June 30, 2016		(221,203)		(219,106)		(217,885)	$	(3,318)	1.52%
Nonvested restricted stock		(673,733)		(262,153)		(291,229)	$	(382,504)	131.34%
Retained Earnings/Deficit		3,560,217		2,262,742		258,839	$	3,301,378	1275.46%
Accumulated other comprehensive (loss) income		(78,532)		(232,697)		96,496	$	(175,028)	-181.38%
Total shareholders' equity		28,326,663		26,667,727		37,064,292	$	(8,737,629)	-23.57%
Total liabilities and shareholders' equity	$	436,481,198	$	408,121,422	$	383,856,728	$	52,624,470	13.71%


First Reliance Bancshares, Inc. and Subsidiary
*Consolidated Statements of Operations*								Year over Year
								$ Change	% Change
		Three Months Ended		Three Months Ended		Three Months Ended
		June 30, 2017		December 31, 2016		June 31, 2016
Interest income:
Loans, including fees	$	4,052,786	$	3,617,498	$	3,675,342	$	377,444	10.27%

Investment securities:
Taxable		195,305		205,420		182,357	$	12,948	7.10%
Tax exempt		28,155		28,220		28,284	$	(129)	-0.46%
Other interest income		41,984		26,422		33,597	$	8,387	24.96%
Total		4,318,230		3,877,560		3,919,580	$	398,650	10.17%
Interest expense:
Time deposits		168,207		113,044		86,953	$	81,254	93.45%
Other deposits		106,976		81,088		73,749	$	33,227	45.05%
Other interest expense		277,001		274,014		69,417	$	207,584	299.04%
Total		552,184		468,146		230,119	$	322,065	139.96%

Net interest income		3,766,044		3,409,414		3,689,461	$	76,583	2.08%
Provision for loan losses		(74,796)		-		9,075	$	(83,871)	-924.20%
Net interest income after provision for loan losses		3,691,248		3,409,414		3,680,386	$	10,862	0.30%

Noninterest income:
Service charges on deposit accounts		362,467		357,712		340,147	$	22,319	6.56%
Gain on sale of mortgage loans		1,384,007		1,698,913		1,637,512	$	(253,505)	-15.48%
Income from bank owned life insurance		82,744		86,602		87,736	$	(4,992)	-5.69%
Other service charges, commissions, and fees		340,816		318,904		308,233	$	32,583	10.57%
Gain on sale of available-for-sale securities		-		-		-	$	-	100.00%
Other		77,934		716,450		55,805	$	22,129	39.66%
Total		2,247,968		3,178,581		2,429,433	$	(181,465)	-7.47%

Noninterest expenses:
Salaries and benefits		2,908,554		3,153,885		2,693,569	$	214,985	7.98%
Occupancy		417,217		385,007		399,157	$	18,060	4.52%
Furniture and equipment related expenses		419,605		403,977		371,790	$	47,815	12.86%
Other		1,193,025		1,203,331		1,176,770	$	16,255	1.38%
Total		4,938,402		5,146,200		4,641,286	$	297,116	6.40%
Income before income taxes		1,000,816		1,441,795		1,468,533	$	(467,717)	-31.85%
Income tax		338,184		484,579		464,666	$	(126,482)	-27.22%
Net Income		662,632		957,216		1,003,867	$	(341,235)	-33.99%
Preferred stock dividends accrued		-		-		136,305	$	(136,305)	-100.00%
Net income available to common shareholders	$	662,632	$	957,216	$	867,562	$	(204,930)	-23.62%

Average common shares outstanding, basic		4,693,073		4,438,570		4,438,478	$	254,595	5.74%
Average common shares outstanding, diluted		4,830,339		4,554,138		4,541,668	$	288,671	6.36%

Income per common share:
Basic income per share	$	0.14	$	0.22	$	0.20	$	(0.06)	-29.40%
Diluted income per share		0.14		0.21		0.19	$	(0.05)	-27.80%

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

		June 2017		December 2016		June 2016
Interest income:
Loans, including fees	$	7,728,237	$	14,363,973	$	7,113,662	$	614,575	8.64%

Investment securities:
Taxable		393,962		801,878		396,784	$	(2,822)	-0.71%
Tax exempt		56,356		113,099		56,613	$	(257)	-0.45%
Other interest income		79,541		109,578		58,963	$	20,578	34.90%
Total		8,258,096		15,388,528		7,626,022	$	632,074	8.29%
Interest expense:
Time deposits		296,708		366,955		162,025	$	134,683	83.13%
Other deposits		198,874		300,580		142,199	$	56,675	39.86%
Other interest expense		548,752		630,250		141,201	$	407,551	288.63%
Total		1,044,334		1,297,785		445,426	$	598,908	134.46%

Net interest income		7,213,761		14,090,743		7,180,597	$	33,164	0.46%
Provision for loan losses		(226,296)		9,075		9,075	$	(235,371)	-2593.62%
Net interest income after provision for loan losses		6,987,465		14,081,668		7,171,522	$	(184,057)	-2.57%

Noninterest income:
Service charges on deposit accounts		708,413		1,385,517		672,801	$	35,612	5.29%
Gain on sale of mortgage loans		2,992,440		6,153,308		2,561,849	$	430,591	16.81%
Income from bank owned life insurance		164,459		349,374		175,378	$	(10,919)	-6.23%
Other service charges, commissions, and fees		666,110		1,236,026		620,841	$	45,269	7.29%
Gain on sale of available-for-sale securities		-		13,261		-	$	-
Gain on sale of premises		-		652,367		-	$	-
Other		148,853		240,780		112,959	$	35,894	31.78%
Total		4,680,275		10,030,633		4,143,828	$	536,447	12.95%

Noninterest expenses:
Salaries and benefits		5,743,587		11,270,540		5,176,005	$	567,582	10.97%
Occupancy		817,849		1,572,271		770,637	$	47,212	6.13%
Furniture and equipment related expenses		820,242		1,517,840		732,424	$	87,818	11.99%
Other		2,348,083		4,428,482		2,347,530	$	553	0.02%
Total		9,729,761		18,789,133		9,026,595	$	703,166	7.79%
Income before income taxes		1,937,979		5,323,168		2,288,754	$	(350,775)	-15.33%
Income tax expense (benefit)		641,304		1,801,260		770,749	$	(129,445)	-16.79%
Net income		1,296,675		3,521,908		1,518,005	$	(221,330)	-14.58%
Preferred stock dividends accrued		-		937,848		136,305	$	(136,305)	-100.00%
Deemed dividends on preferred stock resulting from		-		-		-	$	-
net accretion of discount and amortization of premium		-		-		-	$	-
Net income available to common shareholders	$	1,296,675	$	2,584,060	$	1,381,700	$	(85,025)	-6.15%

Average common shares outstanding, basic		4,693,073		4,438,570		4,438,478	$	254,595	5.74%
Average common shares outstanding, diluted		4,830,339		4,554,138		4,541,668	$	288,671	6.36%

Income per common share:
Basic income per share		0.28	$	0.58	$	0.31	$	(0)	-11.24%
Diluted income per share		0.27		0.57		0.30	$	(0)	-11.76%

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, 2017		December 31, 2016		June 30, 2016
Income Statement Data
Net Interest Income		3,766,044		3,409,414		3,689,461
Provision for loan losses		(74,796)		-		9,075
Noninterest Income		2,247,968		3,178,581		2,429,433
Noninterest Expense		4,938,402		5,146,200		4,641,286
Income Tax (Benefit)		338,184		484,579		464,666
Net Income		662,632		957,216		1,003,867
Asset Quality
Loans 90 days past due & still accruing		-		-		-
Nonaccrual loans		2,273		2,588		2,636



Total nonperfoming loans		2,273		2,588		2,636
OREO and repossessed assets		2,242		2,870		2,591
Total Nonperforming Assets		4,515		5,458		5,227

Nonperforming loans to loans		0.73%		0.90%		0.97%
Nonperforming assets to total assets		1.04%		1.34%		1.37%
Allowance for loan losses to total loans		0.90%		0.90%		0.98%
Allowance for loan losses to nonperforming loans		126.15%		102.34%		100.96%
Capital Data (at quarter end)
Book value per share		5.98		5.75		5.41
Tangible book value per share		5.98		5.75		5.41

Per Share Data
Shares Outstanding- basic		4,693,073		4,438,570		4,438,478
Shares Outstanding- diluted		4,830,339		4,554,138		4,541,668
Earning Per Share - basic	$	0.14	$	0.22	$	0.20
Earning Per Share -diluted		0.14		0.21		0.19

Profitability Ratios
Net Interest Margin		4.32%		4.37%		4.49%
Return on Assets		0.62%		0.95%		1.06%
Return on Equity		9.49%		14.56%		10.98%

Capital Adequacy- Bank Only
Tier 1 leverage ratio		9.92%		9.97%		9.85%
Common Equity Tier 1 capital		11.99%		12.21%		11.40%
Tier 1 capital ratio		11.99%		12.21%		11.40%
Total capital ratio		12.83%		13.03%		12.22%
Total risk weighted assets		342,279		323,406		324,668