Press Release: First Reliance Reports Record 2Q16 Pre-tax Income of $1.5 million, up 121.2% from 2Q15
First Reliance Reports Record 2Q16 Pre-tax Income of $1.5 million, up 121.2% from 2Q15
FLORENCE, S.C., Aug. 10, 2016
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 10(th) 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%. Stock Market Quotes, Business News, Financial News from http://commodity-market-news.com
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.
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 17(th) 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
Press Release: First Reliance Reports Record 2Q16 -2-
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:
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:
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)
Press Release: First Reliance Reports Record 2Q16 -3-
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
Jeffrey A. Paolucci, EVP & CFO
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