First Reliance Reports Record 4Q16 Pre-Tax Income Of $1.4 Million, Up 52.72% From 4Q15

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Feb 21, 2017, 05:00 ET

FLORENCE, S.C., Feb. 21, 2017 /PRNewswire/ -- First Reliance Bancshares, Inc. (OTC: FSRL), the holding company (the "Company") for First Reliance Bank (the "Bank"), reported fourth quarter 2016 pre-tax profits of $1,441,795. This is the 12^th consecutive quarter of profitability which continues to be fueled by strong loan and deposit growth, and expanding operating efficiencies. In the fourth quarter of 2016, pre-tax income is up 52.72% compared to $944,100 in the fourth quarter a year ago. Net income totaled $957,216 for the quarter ended December 3 1, 2016. Net income to common shareholders improved 252.38% in the fourth quarter of 2016 to $957,216 or $0.21 per diluted share from $271,491 or $0.14 per diluted share from fourth quarter 2015 as a result of redeeming 100% of the TARP funds in the third quarter of 2016.

"We continue to be successful in growing low cost core deposits which has funded strong loan growth in all our markets allowing us to grow earning assets and positively impact profitability. Our strong performance provides opportunities to increase our brand presence throughout South Carolina with further expansions into the Midlands and Coastal regions. Given that capital markets are responding positively to our industry, we are giving strong consideration to raise additional capital to fund our growth initiatives," said Rick Saunders, President and CEO.

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

EPS of $0.57 per diluted share for 2016, which includes TARP-Preferred dividends paid through the second quarter of 2016. TARP–Preferred stock was redeemed in the third quarter of 2016. Excluding preferred dividend payments, EPS would have been $0.77 per diluted share for 2016
EPS quarter over quarter improved 10%
Book value per share is $5.75 up 10% from one year ago
Return on Assets of 0.95% and Return on Equity of 14.56%
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 Loris and North Myrtle Beach
Loan growth is up $28 million or 10.9% from one year ago while earning asset yields remained stable at 4.60% showing
Bank sold premises during the 4^th quarter totaling $4.5 million with a gain on sale of $652,367
No and Low Cost Deposits increased 6.6% from the like period in 2015 as we attract new customers through unique programs and the launching of our mobile deposit technology as part of our Reliance "On-The-Go" convenient services
Total revenues increased 39.10% to $6.5 million in 4Q16 from $4.7 million in 3Q15 reflecting balance sheet growth
Mortgage production volume reached record levels of $327.5 million as of year ending December 31, 2016 compared to $155.8 million one year ago
Net interest margin (NIM) was 4.37% as the Company continues to leverage its low cost of funds at 22bp
Bank total risk based capital ratio improved to 13.03% from 12.5% a quarter earlier and remains well-capitalized

Review of Income Statement
Net interest income decreased to $3.4 million compared to $3.5 million a year ago, largely reflecting increased interest expense of $177,994 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 22bp.

Noninterest income increased 78.15% to $3.2 million for the fourth quarter of 2016, compared to $1.8 million for the fourth quarter 2015. The increase in noninterest income was largely due to the increase in gains on sales of mortgage loans, increased valuations in mortgage servicing rights due to rising interest rates, growth in debit card income, and gains on the sale of bank premises. Mortgage originations from combined retail and correspondent wholesale divisions totaled $327.5 million on 1,698 loans originated as of December 31. 2016 compared to $155.8 million on 824 loans originated one year ago.

Balance Sheet and Asset Quality

Total assets increased $32.8 million, or 8.74% to $408.1 million at December 31, 2016, compared to $375.3 million from December 31, 2015.

Loans grew by $28.3 million, or 10.90%, at December 31, 2016, compared to $259.8 million, at December 31, 2015 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 8.1% year-over-year, commercial and industrial loans are up 9.6%, and Consumer loans are up 34.1 %. "Our strategic focus has been on revenue diversification through growth in 1-4 mortgage and consumer loan channels. We've seen steady growth in these sectors as the economies in our markets continue to improve in job growth, housing sales and new construction. 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 $10.9 million, or 6.6%, to $177.9 million at December 31, 2016, from $167 million at December 31, 2015. The Company grew household checking accounts by 3.04% year to date as the Company continues to attract new customers through unique programs such as Hometown Heroes, Moms First and iMatter Programs. "Customer word of mouth attracts approximately 30% of our new accounts as customers are willing to refer for us. Our indirect auto loans and mortgage business line also have provided growth opportunities to attract new customers to our bank. We've focused on attracting small business customers which has had strong growth as word of mouth has spread about our commitment to our customers and the service they receive. We have expanded our Relationship Banker teams in the Low Country, Midlands and Coastal regions to service and attract new business customers," said Saunders.

Asset quality continues to improve with nonperforming assets, consisting of nonperforming loans, OREO and loans delinquent 90 days or more, declined by $358 thousand to $5.4 million at December 31, 2016 compared to one year ago. The ratio of nonperforming assets to total assets was 1.34% at December 31, 2016, compared to 1.56% one year earlier. The allowance for loan losses as a percentage of loans was 0.90% at December 31, 2016, compared to 0.99% one year earlier. For the fourth 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 December 31, 2016, capital ratios were as follows:

Ratio	First Reliance Bank	Well-capitalized Minimum
Tier 1 leverage ratio	9.97 %	5.00%
Common equity tier 1 capital	12.21%	6.50%
Tier 1 capital ratio	12.21%	8.00%
Total capital ratio	13.03%	10.00%

First Reliance's tangible book value was $5.75, at December 31, 2016, up 10% from $5.23, at December 31, 2015. The Company currently trades at 103.3% of book value as of December 31, 2016 and trades on an earnings per share multiple of 10.42 times.

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.

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 will focus on expanding customer payment systems for both consumer and business customers in the upcoming year.

Regional Economic Conditions – February 2017
According to recent reports, South Carolina's economy continued to improve as labor markets and employment grew 1.7% over previous year end, household conditions improved and housing market indicators were up 6.9%, 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.

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, 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%.

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*

	December 31	September 30	December 31
	2016	2016	2015
Assets
Cash and cash equivalents:
Cash and due from banks	$ 4,810,304	$ 4,704,134	$ 3,703,357
Interest-bearing deposits with other banks	22,287,560	11,455,124	16,357,619
Total cash and cash equivalents	27,097,864	16,159,258	20,060,976

Time deposits in other banks	101,816	101,816	101,612

Securities available-for-sale	17,862,635	18,671,693	11,255,855
Securities held-to-maturity (Estimated fair value of $20,842,140
and $26,270,623 at December 31, 2016 and December 31, 2015, respectively)	20,438,084	21,569,074	25,470,171
Nonmarketable equity securities	734,300	1,350,600	813,400
Total investment securities	39,035,019	41,591,367	37,539,426

Mortgage loans held for sale	5,510,689	14,784,129	8,070,283

Loans receivable	288,126,331	285,332,840	259,806,101
Less allowance for loan losses	(2,648,535)	(2,710,305)	(2,693,985)
Loans, net	285,477,796	282,622,535	257,112,116

Premises, furniture and equipment, net	18,873,718	22,658,107	22,856,744
Accrued interest receivable	961,449	876,684	979,347
Other real estate owned	2,870,484	2,553,284	2,506,733
Cash surrender value life insurance	13,964,985	13,878,383	13,615,610
Net deferred tax assets	8,463,658	8,763,732	9,950,018
Mortgage servicing rights	4,211,582	3,063,895	1,015,403
Other assets	1,552,362	2,405,986	1,502,230
Total assets	$ 408,121,422	$ 409,459,176	$ 375,310,498
Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing transaction accounts	$ 76,175,393	$ 79,139,444	$ 68,147,262
Interest-bearing transaction accounts	76,736,892	73,626,962	76,304,111
Savings	115,741,395	109,334,379	99,870,631
Time deposits $250,000 and over	17,757,192	16,252,258	14,990,007
Other time deposits	50,124,647	48,958,506	44,612,452
Total deposits	336,535,519	327,311,549	303,924,463

Securities sold under agreement to repurchase	11,088,526	9,421,742	8,201,396
Advances from Federal Home Loan Bank	8,000,000	20,500,000	10,000,000
Notes Payable	6,893,211	7,000,000
Junior subordinated debentures	10,310,000	15,310,000	10,310,000
Subordinated debentures	4,896,398	0	0
Accrued interest payable	298,950	192,940	54,002
Other liabilities	3,431,091	3,736,505	2,586,907
Total liabilities	381,453,695	383,472,736	335,076,768

Shareholders' Equity
Preferred stock
Series A cumulative perpetual preferred stock -0 and 15,349 shares issued and outstanding at December 31, 2016 and 2015	-	-	15,179,709
Series B cumulative perpetual preferred stock - 0 and 767 shares issued and outstanding at December 31, 2016 and 2015	-	-	767,000
Series D preferred stock - 600 and 612 shares issued and outstanding at December 31, 2016 and 2015	600	600	612
Common stock, $0.01 par value; 20,000,000 shares authorized,
4,679,881 and 4,680,481 shares issued and outstanding
at December 31, 216 and December 31, 2015 , respectively	46,798	46,794	46,804
Capital surplus	25,071,543	25,068,897	26,007,698
Treasury stock, at cost, 39,069 and 38,663, shares at December 31, 2016 and
December 31, 2015, respectively	(219,105)	(219,105)	(217,230)
Nonvested restricted stock	(262,154)	(276,691)	(326,481)
Retained Earnings/Deficit	2,262,742	1,305,525	(1,259,166)
Accumulated other comprehensive (loss) income	(232,697)	60,420	34,784
Total shareholders' equity	26,667,727	25,986,440	40,233,730
Total liabilities and shareholders' equity	$ 408,121,422	$ 409,459,176	$ 375,310,498

First Reliance Bancshares, Inc. and Subsidiary
*Consolidated Statements of Operations*

	Three Months Ended	Three Months Ended	Three Months Ended
	December 31, 2016	September 30, 2016	December 31, 2015
Interest income:
Loans, including fees	$ 3,617,498	$ 3,632,812	$ 3,471,988

Investment securities:
Taxable	205,420	199,673	219,687
Tax exempt	28,220	28,266	28,347
Other interest income	26,422	24,194	29,121
Total	3,877,560	3,884,945	3,749,143
Interest expense:
Time deposits	113,044	101,563	59,924
Other deposits	81,088	77,293	75,493
Other interest expense	274,014	215,033	74,378
Total	468,146	393,889	209,795

Net interest income	3,409,414	3,491,056	3,539,348
Provision for loan losses	-	-	587,430
Net interest income after provision for loan losses	3,409,414	3,491,056	2,951,918

Noninterest income:
Service charges on deposit accounts	357,712	355,003	360,401
Gain on sale of mortgage loans	1,698,913	2,349,825	961,618
Income from bank owned life insurance	86,602	87,395	84,576
Other service charges, commissions, and fees	318,904	296,282	296,171
Gain on sale of available-for-sale securities	-	13,261	-
Other	716,450	63,733	81,407
Total	3,178,581	3,165,499	1,784,173

Noninterest expenses:	6,587,995		4,736,091
Salaries and benefits	3,153,885	2,940,871	2,556,054
Occupancy	385,007	416,626	442,763
Furniture and equipment related expenses	403,977	381,442	415,965
Other	1,203,331	1,325,000	377,209
Total	5,146,200	5,063,939	3,791,991
Income before income taxes	1,441,795	1,592,616	944,100
Income tax	484,579	545,932	309,999
Net income	957,216	1,046,684	634,101
Preferred stock dividends	-	155,069	362,610
Net income available to common shareholders	$ 957,216	$ 891,615	$ 271,491

Average common shares outstanding, basic	4,443,549	4,443,355	4,428,514
Average common shares outstanding, diluted	4,568,470	4,562,711	4,551,758

Income per common share:
Basic income per share	$ 0.22	$ 0.20	$ 0.14
Diluted income per share	0.21	0.20	0.14

First Reliance Bancshares, Inc. and Subsidiary
*Consolidated Statements of Operations*


	December 2016	December 2015
Interest income:
Loans, including fees	$ 14,363,973	$ 13,866,514

Investment securities:
Taxable	801,878	925,411
Tax exempt	113,099	113,599
Other interest income	109,578	129,247
Total	15,388,528	15,034,771
Interest expense:
Time deposits	366,955	327,768
Other deposits	300,580	209,324
Other interest expense	630,250	303,036
Total	1,297,785	840,128

Net interest income	14,090,743	14,194,643
Provision for loan losses	9,075	777,678
Net interest income after provision for loan losses	14,081,668	13,416,965

Noninterest income:
Service charges on deposit accounts	1,385,517	1,430,808
Gain on sale of mortgage loans	6,153,308	3,110,229
Income from bank owned life insurance	349,374	333,046
Other service charges, commissions, and fees	1,236,026	1,161,788
Gain on sale of available-for-sale securities	13,261	9,562
Gain on sale of premises	652,367	-
Other	240,780	328,365
Total	10,030,633	6,373,798

Noninterest expenses:
Salaries and benefits	11,270,540	9,747,542
Occupancy	1,572,271	1,628,527
Furniture and equipment related expenses	1,517,840	1,583,048
Other	4,428,482	4,345,959
Total	18,789,133	17,305,076
Income before income taxes	5,323,168	2,485,687
Income tax expense (benefit)	1,801,260	(6,326,661)
Net income	3,521,908	8,812,348
Preferred stock dividends	937,848	1,450,440
Deemed dividends on preferred stock resulting from	-	-
net accretion of discount and amortization of premium	-	-
Net income available to common shareholders	$ 2,584,060	$ 7,361,908

Average common shares outstanding, basic	4,438,570	4,491,053
Average common shares outstanding, diluted	4,554,138	4,595,204

Income per common share:
Basic income per share	$ 0.58	$ 1.64
Diluted income per share	0.57	1.60

Asset Quality and Capital Adequacy

(dollars in thousands, except asset quality and per share data)	As of and for the Three Months Ended
	December 31, 2016	September 30, 2016	December 31, 2015
Asset Quality
Loans 90 days past due & still accruing	-		85
Nonaccrual loans	2,588	2,590	3,224
Total nonperfoming loans	2,588	2,590	3,309
OREO and repossessed assets	2,870	2,553	2,507
Total Nonperforming Assets	5,458	5,143	5,816

Nonperforming loans to loans	0.90%	0.91%	1.27%
Nonperforming assets to total assets	1.34%	1.27%	1.56%
Allowance for loan losses to total loans	0.90%	0.90%	0.99%
Allowance for loan losses to nonperforming loans	102.34%	104.64%	81.41%
Capital Data (at quarter end)
Book value per share	5.75	5.60	5.23
Tangible book value per share	5.75	5.60	5.23

Per Share Data
Shares Outstanding- basic	4,443,549	4,443,355	4,491,053
Shares Outstanding- diluted	4,568,470	4,562,711	4,595,203
Earning Per Share - basic	$ 0.22	$ 0.20	$ 0.14
Earning Per Share -diluted	0.21	0.20	0.14

Profitability Ratios
Net Interest Margin	4.37%	4.42%	4.42%
Return on Assets	0.95%	1.04%	2.35%
Return on Equity	14.56%	16.34%	21.90%

Capital Adequacy- Bank Only
Tier 1 leverage ratio	9.97%	9.87%	10.87%
Common Equity Tier 1 capital	12.21%	11.67%	12.93%
Tier 1 capital ratio	12.21%	11.67%	12.93%
Total capital ratio	13.03%	12.51%	13.79%
Total risk weighted assets	323,406	327,872	311,316