FSRL - First Reliance Bancshares Inc. Reports 2019 Financial Results

FLORENCE, S.C., Feb. 11, 2020 /PRNewswire/ -- First Reliance Bancshares, Inc. (OTC: FSRL), the holding company (the "Company") for First Reliance Bank (the "Bank"), today announced financial results for the three-months and year-ended December 31, 2019.

The Company reported net income of $599,211, or $0.07 per diluted share for the three-months ended December 31, 2019 compared to $1.2 million, or $0.14 per diluted share, for the same period one year ago.  The decrease in net income for the three month period of 2019 versus 2018 was due primarily to a one-time Mortgage Servicing Rights (MSR) valuation adjustment totaling $1.1 million.  Historically, the Company performed valuation adjustments on the MSR asset annually, however beginning 2020, MSR valuation adjustments will be performed quarterly.  Absent the one-time MSR adjustment, net income after MSR adjustment (a non-GAAP financial measure) was $1.5 million, or $0.18 per diluted share for the three-months ended December 31, 2019 compared to $1.1 million, or $0.14 per diluted share, for the same period one year ago.  Net income for the twelve months ended December 31, 2019 totaled $4.1 million, or $0.51 per diluted share compared to $0.31 per diluted share for the same period one year ago.  Net income after MSR adjustment (non-GAAP) was $5.1 million, or $0.63 per diluted share for the twelve-months ended 2019 compared to $2.2 million, or $0.28 per diluted share for the same period one year ago.

Highlights

• Diluted EPS increased 65%, to $0.51 per share for the twelve-months ended December 31, 2019 compared to $0.31 per share one year ago;
• Tangible book value increased 10.6% to $6.76 at December 31, 2019, compared to $6.11 one year ago;
• Total Assets grew 13.1% to $661.6 million at December 31, 2019 compared to $585.0 million one year ago;
• Total Loans receivable increased 11.4% to $480.1 at December 31, 2019 compared to $431.0 million one year ago;
• Total Deposits increased 6.1% to $505.1 million at December 31, 2019, compared to $476.2 million one year ago;
• Noninterest Bearing transaction accounts increased 33.1%, or $34.1 million, during the twelve-months ended December 31, 2019;
• Net interest income improved 10.8% to $5.7 million for the three-months ended December 31, 2019, compared to $5.2 million for the same period of 2018;
• Return on average equity was 7.46% for the twelve-months ended December 31, 2019 compared to 4.88% for 2018;
• Return on average assets was 0.66% for the twelve-months ended December 31, 2019 compared to 0.45% for 2018;
• Hired Robert Dozier as the Chief Banking Officer; and
• Hired Brenton Mackie as the Midlands Market President

Changes in key balance sheet items are summarized below:

Changes in key income statement items are summarized below.

F. R. Saunders, Jr., the Company's Chief Executive Officer, stated "we had an exceptional year in both our new and existing markets, growing loans at 11% and deposits at 6%, which includes a 33% increase in non-interest bearing transaction accounts year-over-year in a very competitive banking environment.  Mortgage production in 2019 was robust given the favorable mortgage rate environment, with mortgage production totaling $363 million and exceeding forecasts by $100 million.  Tangible book value per share increased 11% to $6.76 and diluted EPS grew by 65%, respectively, in 2019.

We recently announced Robert Dozier joining First Reliance Bank as Chief Banking Officer.  Mr. Dozier is responsible for corporate strategy and the strategic market expansion of First Reliance Bank's footprint throughout the Carolinas. He will also oversee commercial sales management and community development for all markets.  In addition, Brenton Mackie has joined the First Reliance team as Regional Executive Midlands.  Mr. Mackie will help strategic market expansion of First Reliance Bank's footprint in the Midlands Region as well as oversee sales management and community development throughout that footprint.   We welcome our new leaders and look forward to continued growth opportunities in Midlands and all our North and South Carolina areas.

We are finalizing plans for a new Myrtle Beach branch – Grissom Parkway to be built in 2020 as our team in the Myrtle Beach have worked hard at expanding our market presence.  The market grew loans by $15 million and deposits by $8 million during 2019. 

Our investment made last year in North Carolina continues to pay off as the market grew loans by $40 million and deposits by $9 million in 2019.  We are preparing to relocate and expand our Winston-Salem office into a full service branch site in 2020 which will allow us to position ourselves for future growth in the Winston-Salem market.  We are also actively looking for branch sites in the Lake Norman and the fast growing Charlotte markets." 

Income Statement

Total revenue for the quarter ended December 31, 2019 totaled $7.5 million, a decline of $720,000, or 8.8%, compared to the same quarter one year ago.  Absent the one-time MSR valuation adjustment, total revenue for the quarter ended December 31, 2019 would have totaled $8.6 million, an increase of $407,000, or 5%, compared to the same quarter one year ago.  Net interest income increased 10.8% to $5.7 million for the fourth quarter of 2019 compared to the same period of 2018.  According to Jeffrey A. Paolucci, Executive Vice President and Chief Financial Officer, "despite experiencing a 75% basis point decline in interest rates by the Federal Reserve in the second half of 2019, the Company's earning asset yield improved to 5.01% at year-end 2019 from 4.91% one year ago.  Additionally, we have intentionally reduced our exposure to higher cost of deposits during the last two quarters of 2019 which will prove beneficial in lowering our cost of funds throughout 2020."

Balance Sheet

Total assets increased $76.6 million, or 13.1%, to $661.6 million at December 31, 2019, compared to $585.0 million at December 31, 2018.  Loans receivable grew by $49.1 million, or 11.4%, to $480.2 million, at December 31, 2019, compared to $431.0 million, at December 31, 2018 due primarily to organic loan growth in our commercial, 1-4 family mortgage and consumer loan portfolios.  Mr. Saunders added, "obtaining the main checking account for consumers and businesses is a major focus for all of our bankers.  During 2019, we grew noninterest bearing transaction accounts balances by over 33%.  Our Treasury Services focus saw double digit growth in commercial deposit accounts and treasury service products.  Customers are doing more business with us overall and seem to like our brand of banking as is reflected in our strong services per household number of 5.6."

Asset Quality

Our asset quality continues to be very strong, with nonperforming assets declining by $451,000 to $1.8 million at December 31, 2019 compared to one year ago.  OREO and repossessed assets remain nominal.  The ratio of nonperforming assets to total assets declined to 0.28% at December 31, 2019, compared to 0.39% one year earlier.  The allowance for loan losses as a percentage of loans improved to 0.74% at December 31, 2019 (adjusted for purchase accounting marks on acquired loans), compared to 0.70% one year earlier.   Year-date-date provision expense is up 92.8%, to $983,803 compared to the same period a year ago of $510,356 due to an increase in loans outstanding.

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 December 31, 2019, capital ratios were as follows:

ABOUT FIRST RELIANCE BANCSHARES, INC.

Founded in 1999, First Reliance Bancshares, Inc. (OTC: FSRL.OB), is based in Florence, South Carolina and has assets of approximately $661.1 million.  The Company employs more than 142 professionals and has locations throughout South Carolina and central North Carolina.  First Reliance has redefined community banking with a commitment to making customers lives better, its founding principle.  Customers of the company have given it a 90% customer satisfaction rating well above the bank industry average of 81%.  First Reliance is also one of three companies throughout South Carolina to receive the Best Places To Work in South Carolina award all 14 years since the program began.  We believe that this recognition confirms that our associates are engaged and committed to our brand and the communities we serve.  In addition to offering a full range of personalized community banking products and services for individuals, small businesses, and corporations, First Reliance offers two unique community-customers programs, which include:  Hometown Heroes, a package of benefits for those serving our communities and Check N Save, an outreach program for the unbanked or under-banked.  We also offer a full suite of digital banking services, a Customer Service Guaranty, a Mortgage Service Guaranty, and are open on most traditional holidays.

Additional information about the Company is available on the Company's web site at www.firstreliance.com.

Addendum to News Release

Use of Certain Non-GAAP Financial Measures and Forward-Looking Statements

Use of Certain Non-GAAP Financial Measures

This news release contains financial information determined by methods other than in accordance with generally accepted accounting principles ("GAAP").  Such statements should be read along with the accompanying tables, which provide a reconciliation of non-GAAP measures to GAAP measures.  This news release and the accompanying tables discuss financial measures, including but not limited to, net income after MSR adjustment, which is a non-GAAP measure.  We believe that such non-GAAP measures are useful because they enhance the ability of investors and management to evaluate and compare the Company's operating results from period to period in a meaningful manner.  Non-GAAP measures should not be considered as an alternative to any measure of performance as promulgated under GAAP.  Investors should consider the Company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company.  Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company's results or financial condition as reported under GAAP.

 Please refer to the Non-GAAP reconciliation table in the financial statements accompanying this release for additional information.

Forward-Looking Statements

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; (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, including the value of its MSR asset; (7) the business related to acquisitions may not be integrated successfully or such integration may take longer to accomplish than expected; (8) the expected cost savings and any revenue synergies from acquisitions may not be fully realized within expected timeframes; and (9) disruption from acquisitions may make it more difficult to maintain relationships with clients, associates or suppliers.  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, EVP & CFO

(888) 543-5510

jpaolucci@firstreliance.com

SOURCE First Reliance Bancshares, Inc.