PR Newswire | Jul 27, 2020 06:01AM EDT

Completes S5.5 Million Subordinated Debt Issuance

07/27 05:01 CDT

First Reliance Reports Record 2nd Quarter 2020 Net Income Of $3.9 Million And Completes S5.5 Million Subordinated Debt Issuance FLORENCE, S.C., July 27, 2020

FLORENCE, S.C., July 27, 2020 /PRNewswire/ -- First Reliance Bancshares, Inc. (OTC:FSRL), the holding company for First Reliance Bank (collectively, "Company" or the "Company"), today announced its financial results for the three-month period ended June 30, 2020.

2020 Second Quarter Highlights

* Pre-tax pre-provision earnings of $6.3 million, a 255.8% increase over Q2 2019; * Net income for Q2 2020 improved to $3.9 million, a 195.5% increase over Q2 2019; * Diluted EPS improved to $0.49 per common share, a 206.3% increase over Q2 2019; * Tangible book value increased 13.6% over Q2 2019 to $7.34; * Total risk-based capital improved 213 basis points to 13.31% for Q2 2020, compared to 11.18% for Q2 2019; * Total assets increased 20.2% to $763 million at Q2 2020, compared to $635 million at Q2 2019; * Cost of funds decreased 49 basis points to 0.63% at Q2 2020, compared to 1.12% for Q2 2019; * Transaction deposits to total deposits increased to 49.6% at Q2 2020, compared to 38.2% at Q2 2019; * Completed $5.5 million subordinated debt issuance June 2020 with funds retained at the holding company; * Net interest margin decreased to 3.55% (decreased to 3.73% excluding PPP loans) for Q2 2020, compared to 4.05% for Q2 2019; * Provision expense totaled $1.2 million for Q2 2020 compared to $169 thousand for Q2 2019; * Total loan deferrals outstanding as of Q2 2020 totaled $14.7 million or 2.9% of total loans; * Asset quality continued to be strong, with nonperforming assets to average assets at 0.21% and past due ratio at 0.34% at Q2 2020; * Consolidated Charleston market offices and Charlotte market offices; * Opened Stratford Road branch office in Winston Salem, North Carolina in Q2 2020; and * Record mortgage revenues of $8.1 million for Q2 2020 compared to $1.8 million for Q2 2019.

"We are extremely pleased to report that First Reliance achieved record-setting net income of $3.9 million, or $0.49 per diluted common share, for the three months ended June 30, 2020. Our financial performance in Q2 2020 positions the Company to continue its successful financial performance from 2019," Rick Saunders, President and CEO of First Reliance said. "This is the best quarter in the Company's 21-year history, showing excellent loan growth, increased capital levels, higher liquidity levels, and record-setting mortgage volumes.

"During Q2 2020, First Reliance recognized record mortgage revenues of $8.1 million compared to $1.8 million during the same period one year ago. Additionally, we completed the issuance of $5.5 million of subordinated debt to be held at the holding company, with no immediate plans to inject into the Bank. We have strategically slowed loan growth, focusing on diversifying our revenue streams, growing our core deposit base, and eliminating unnecessary expenses.

"The conditions surrounding COVID-19 and the corresponding economic outlook remain uncertain. While there is much unknown about the economic impact of the pandemic, our Company has reacted by crafting effective response plans and also preparing our balance sheet and our resources for an uncertain future. In order to aid our many business customers in their time of financial hardship, we modified or deferred payments on 414 loans up to 60 days, totaling $82.2 million during Q2 2020. As of June 30, 2020, total loan deferrals had reduced to $14.7 million on 44 loans, which included $12 million on 21 loans on their second deferral.

"In order to protect our customers and employees during the COVID-19 Pandemic, we again moved to drive-through only on July 17, 2020. We continue to serve our customers through other channels or in person when requested. In order to protect against economic uncertainty as related to the COVID-19 pandemic, we have performed stress testing on our loan portfolio, as well as capital and liquidity needs. Results indicated no material exposure to industries with an elevated risk to Covid-19 within our loan portfolio.

"We are proud to have worked throughout the pandemic to meet everyday banking needs, to provide the emergency relief needs of our customers and communities, and to protect our bank as much as possible against economic downturn. We are thankful for the continuing support shown by our customers, communities, and our shareholders."

Payroll Protection Program ("PPP")

During the quarter, the Company was a participating lender in the Small Business Administration ("SBA") Payroll Protection Program created under the Coronavirus Aid, Relief, and Economic Security Act. The Company directly originated 186 PPP loans totaling $30.2 million. Gross origination fees from the PPP loans that we originated are currently expected to total $1.1 million, based on our current expectations with respect to the eligibility of such PPP loans to qualify for loan forgiveness. During the quarter, the Company recognized $94 thousand of the $1.1 million in estimated fees by originating PPP loans, with the remaining balance expected to be recognized over the next several quarters.

Financial Summary

Quarter Ended

June 30 March 31 December 31 September 30 June 30

2020 2020 2019 2019 2019

Earnings ($ in thousands, except per share data):

Net income available to common shareholders $ 3,901 858 599 1,507 1,320

Earnings per common share, diluted 0.49 0.11 0.07 0.19 0.16

Total revenue^(1) 13,241 7,542 7,502 8,631 8,328

Net interest margin 3.55% 4.09% 3.96% 3.86% 4.05%

Return on average assets^(2) 2.12% 0.54% 0.37% 0.94% 0.86%

Return on average equity^(2) 26.20% 5.89% 4.20% 10.85% 9.79%

Efficiency ratio^(3) 54.40% 80.25% 83.11% 72.94% 79.02%

Balance Sheet($ in thousands):

Total assets $ 762,647 660,886 661,612 657,533 634,749

Total loans^(4) 512,384 480,573 480,183 473,466 475,769

Total deposits 582,361 506,225 505,088 508,885 527,763

Total transaction deposits ^(5) to total deposits 49.62% 49.06% 44.84% 40.06% 38.19%

Loans to deposits 87.98% 94.93% 95.07% 93.04% 90.15%

Bank Capital Ratios:

Total risk-based capital ratio 13.31% 12.45% 11.54% 11.13% 11.18%

Tier 1 risk-based capital ratio 12.48% 11.75% 10.88% 10.53% 10.56%

Tier 1 Leverage ratio 9.68% 10.29% 9.23% 9.11% 9.19%

Common equity tier 1 ratio^(6) 12.48% 11.75% 10.88% 10.53% 10.56%

Asset Quality Ratios:

Nonperforming assets as a percentage of total assets 0.21% 0.26% 0.28% 0.29% 0.33%

Allowance for loan losses as a percentage of loans^(4) 0.92% 0.81% 0.74% 0.69% 0.68%

Allowance for loan losses as a percentage of nonaccrual loans 332.75% 291.94% 240.47% 187.59% 164.58%

Footnotes to table located on page 10.

INCOME STATEMENTS - Unaudited

Quarter Ended Six Months Ended

June 30 Mar 31 Dec 31 Sept 30 June 30 June 30

(in thousands, except per share data) 2020 2020 2019 2019 2019 2020 2019

Interest income

Loans $ 6,556 $ 6,568 6,760 6,688 6,603 13,124 12,741

Investment securities 299 323 327 327 347 622 682

Other interest income 41 90 91 68 82 131 170

Total interest income 6,896 6,981 7,178 7,083 7,032 13,877 13,593

Interest expense

Deposits 652 828 1,043 1,259 1,226 1,480 2,333

Other interest expense 371 336 397 337 276 707 588

Total interest expense 1,023 1,164 1,440 1,596 1,502 2,187 2,921

Net interest income 5,873 5,817 5,738 5,487 5,530 11,690 10,672

Provision for loan losses 1,175 375 470 209 169 1,550 296

Net interest income after provision for loan losses 4,698 5,442 5,268 5,278 5,361 10,140 10,376

Noninterest income

Mortgage banking income 8,062 4,274 1,798 2,301 1,800 12,336 2,996

Mortgage servicing rights valuation adjustment (1,429) (3,512) (1,127) (180) - (4,941) (195)

Service fees on deposit accounts 242 463 447 438 399 705 797

Debit Card and other service charges, commissions, 429 315 408 382 387 744 758and fee:

Income from bank owned life insurance 102 103 96 96 97 205 192

Gain on sale of securities, net (211) (9) 1 1 3 (220) 36

Other income 173 91 141 106 112 264 210

Total noninterest income 7,368 1,725 1,764 3,144 2,798 9,093 4,794

Noninterest expense

Compensation and benefits 4,395 3,583 3,718 3,819 4,074 7,978 7,831

Occupancy 619 612 603 602 582 1,231 1,171

Furniture and equipment related expenses 585 537 435 440 475 1,122 947

Electronic Data Processing 200 194 190 252 267 394 484

Professional Fees 329 267 377 438 284 596 480

Marketing 56 77 84 71 77 133 150

Other 774 783 838 672 803 1,557 1,644

Merger Related Expenses - - - - - - 37

Total noninterest expenses 6,958 6,053 6,245 6,294 6,562 13,011 12,744

Income before provision for income taxes 5,108 1,114 787 2,128 1,597 6,222 2,426

Income tax expense 1,207 256 188 621 277 1,463 444

Net income available to common $ 3,901 $ 599 1,507 1,320 4,759 1,982shareholders 858

Weighted Average Shares - Basic 7,915 7,901 7,903 7,946 7,959 7,908 7,955

Weighted Average Shares - Diluted 7,998 8,014 8,047 8,077 8,071 8,010 8,065

Basic income per common share $ $ $ 0.08 $ 0.19 $ 0.17 $ 0.60 $ 0.25 0.49 0.11

Diluted income per common share $ $ $ 0.07 $ 0.19 $ 0.16 $ 0.59 $ 0.25 0.49 0.11

Net income for the three months ended June 30, 2020 was $3.9 million, or $0.49 per diluted common share, compared to $1.3 million, or $0.16 per diluted common share, for the three months ended June 30, 2019. Net Income for the six months ended June 30, 2020 totaled $4.8 million, or $0.59 per diluted common share, compared to $2.0 million, or $0.25 per diluted common share for the six months ended June 20, 2019.

Noninterest income for the three-months ended June 30, 2020 was $7.4 million, a $4.6 million increase from $2.8 million for the same period one-year ago. Noninterest income is largely driven by the Company's mortgage banking division. In the second quarter of 2020, mortgage production volumes reached $223 million as compared with $76 million for the same period one-year ago. The mortgage pipeline remains robust and the Company is projecting volumes for Q3 2020 slightly lower but modestly consistent with second quarter 2020 volumes. "As mortgage rates reached all-time record lows, we saw unprecedented mortgage volume throughout our markets in the second quarter of 2020. Our mortgage team is working tirelessly to support the demand and help our customers with refinancing their homes, renovations, or new home purchases," said CEO Saunders.

Noninterest expense increased by $396 thousand or 6%, for the second quarter of 2020 compared to the same period one-year ago. The increase in noninterest expense is attributed to higher mortgage division expenses of $565 thousand over the same period one year ago which contributed to the $4.6 million increase in noninterest income during the second quarter 2020. Expense control continues to be in the forefront of the Company's strategic efforts and measures are being implemented where feasible. During the second quarter 2020, the Company consolidated its Charleston market offices and Charlotte market offices to gain operating efficiencies with continued focus building an infrastructure to support future growth when the pandemic subsides.

NET INTEREST INCOME AND MARGIN - Unaudited

For the 3 Months Ended

June 30, 2020 March 31, 2020 December 31, 2019 June 30 2019

Average Income/ Yield Average Income/ Yield/ Average Income/ Yield Average Income/ Yield / / /

(dollars in thousands) Balance Expense Rate Balance Expense Rate Balance Expense Rate Balance Expense Rate

Interest-earning assets

Federal funds sold and interest-bearing $50,290 $12 0.09% $19,487 $57 1.17% $19,876 $71 1.42% $15,902 $65 1.63%deposits

Investment securities 41,189 300 2.91% 45,175 323 2.86% 46,413 327 2.82% 49,496 347 2.81%

Nonmarketable equity securities 4,089 29 2.85% 2,119 33 6.15% 2,179 20 3.75% 916 17 7.62%

Loans^(8) 565,422 6,555 4.64% 501,507 6,568 5.24% 511,005 6,760 5.29% 480,724 6,603 5.49%

Total interest-earning assets 660,990 6,896 4.17% 568,288 6,981 4.91% 579,473 7,178 4.95% 547,038 7,032 5.14%

Allowance for loan losses (4,085) (3,584) (3,216) (2,933)

Noninterest-earning assets 77,900 73,621 73,050 72,065

Total assets $734,805 $638,325 $649,307 $616,170

Interest-bearing liabilities

NOW accounts $103,652 $15 0.06% $95,462 $11 0.05% $86,535 $11 0.05% $ 82,390 $9 0.05%

Savings & money market 127,968 104 0.33% 119,672 116 0.39% 121,712 132 0.43% 90,104 126 0.56%

Time deposits 151,414 533 1.41% 148,721 701 1.89% 170,875 900 2.11% 194,874 1,091 2.23%

Total interest-bearing deposits 383,034 652 0.68% 363,855 828 0.91% 379,122 1,043 1.10% 367,368 1,226 1.33%

FHLB advances and other borrowings 87,523 182 0.83% 50,935 252 1.98% 56,290 312 2.22% 23,166 76 1.32%

Subordinated debentures 16,942 189 4.45% 15,309 84 2.20% 15,310 85 2.22% 15,310 200 5.21%

Total interest-bearing liabilities 487,499 1,023 0.84% 430,099 1,164 1.08% 450,722 1,440 1.28% 405,844 1,502 1.48%

Noninterest bearing deposits 176,688 140,338 131,282 120,530

Other Liabilities 11,057 9,603 10,235 35,857

Shareholders' equity 59,561 58,285 57,068 53,938

Total liabilities and shareholders' equity $734,805 $638,325 $649,307 $616,169

Net interest income (tax equivalent) / interest $5,873 3.33% $5,817 3.83% $5,738 3.67% $5,530 3.66%rate spread

Net Interest Margin 3.55% 4.09% 3.96% 4.05%

Footnotes to table located on page 10.

Net interest income increased $339 thousand, or 6.2%, to $5.9 million for the three months ended June 30, 2020 compared to $5.5 million for the three months ended June 30, 2019. The increase in net interest income resulted primarily from the growth in our loan portfolio, a significant increase in noninterest bearing deposits, and lower cost deposit balances. The Company continues to reduce its cost of funds which declined to 0.63% as of June 30, 2020 from 1.12% for the same period one year ago. Transaction deposits increased by $87.3 million, to $288.9 million for the second quarter 2020 from $201.5 million one year ago and were aided in part by deposit growth as a result of participating in the Paycheck Protection Program. Despite the growth in net interest income, the net interest margin for the three months ended June 30, 2020 decreased 50 basis points (and decreased 32 basis points excluding PPP loans) to 3.55% from 4.05% for the three months ended June 30, 2019, due primarily from the origination of lower yielding Paycheck Protection Program loans and realizing a full quarterly impact of the 150 basis point decrease in interest rates by the Federal Reserve on variable rate loans. While a low rate environment for an extended period of time will exert margin pressure, the Company has actively managed the balance sheet to minimize the impact on earnings. The Company intentionally reduced its exposure to higher cost deposits and focused on building relationships and growing deposits through core checking account acquisition. Transaction accounts (see footnote No. 5) to total deposits increased to a record high 49.6% for the three-months ended June 30, 2020 compared to 39.2% for the same period one-year ago. The Company continues to experience double-digit growth in commercial deposit accounts and treasury services. Customers are doing more business overall and seem to like the Company's brand of banking, as reflected in the strong services per household number of 5.8.

Balance Sheets - Unaudited

Ending Balance

June 30 March 31 December 31 September 30 June 30

($ in thousands, except per share data) 2020 2020 2019 2019 2019

Assets

Cash and cash equivalents:

Cash and due from banks $ 4,952 $ 16,869 12,945 5,342 5,084

Interest-bearing deposits with banks 78,554 18,922 27,649 21,786 11,926

Total cash and cash equivalents 83,506 35,791 40,594 27,128 17,010

Investment securities:

Investment securities available for sale 28,237 34,842 35,715 36,186 37,464

Investment securities held to maturity 9,318 9,767 10,417 10,801 11,423

Other investments 4,264 2,989 2,423 2,423 948

Total investment securities 41,819 47,598 48,555 49,410 49,835

Mortgage loans held for sale 57,329 34,042 27,901 41,959 27,226

Loans ^(4) 512,384 480,573 480,183 473,466 475,769

Less allowance for loan losses (4,715) (3,877) (3,547) (3,251) (3,211)

Loans, net 507,669 476,696 476,636 470,215 472,558

Property and equipment, net 20,523 20,528 19,967 20,016 20,133

Mortgage servicing rights 9,698 8,421 11,023 11,247 10,308

Bank owned life insurance 17,898 17,796 17,692 17,596 17,499

Deferred income taxes 5,068 6,156 6,581 6,728 7,293

Other assets 19,137 13,858 12,663 13,234 12,887

Total assets $ 762,647 $ 660,886 661,612 657,533 634,749

Liabilities

Deposits $ 582,361 $ 506,225 505,088 508,885 527,763

Federal Home Loan Bank advances 85,000 55,000 43,300 43,300 6,600

Federal funds and repurchase agreements 2,464 16,530 31,137 23,122 18,162

Subordinated debentures 10,358 4,835 4,881 4,838 4,900

Junior subordinated debentures 10,310 10,310 10,310 10,310 10,310

Other liabilities 9,814 9,971 9,811 10,626 11,854

Total liabilities 700,307 602,871 604,527 601,081 579,589

Shareholders' equity

Preferred stock - Series D non-cumulative, no 1 1 1 1 1par value

Common Stock - $.01 par value; 20,000,000 81 81 80 80 80shares authorized

Non-Voting Common Stock, $.01 par value; 4 4 4 4 4430,000 shares authorized

Treasury stock, at cost (1,478) (1,402) (1,283) (1,227) (864)

Nonvested restricted stock (1,748) (1,757) (1,254) (1,010) (1,427)

Additional paid-in capital 51,822 51,652 51,137 50,777 51,137

Accumulated other comprehensive income (loss) 806 606 308 334 243

Retained earnings 12,852 8,830 8,092 7,493 5,986

Total shareholders' equity 62,340 58,015 57,085 56,452 55,160

Total liabilities and shareholders' equity $ 762,647 $ 660,886 661,612 657,533 634,749

Common Stock

Tangible book value per common share ^(7) $ $ 6.76 6.71 6.46 7.34 6.83

Stock price:

High 5.50 7.82 7.90 8.00 7.29

Low 4.93 5.50 7.60 7.02 7.00

Period end 5.07 5.50 7.82 7.90 7.15

Common shares outstanding 8,130 8,103 8,034 7,990 8,039

Non-voting common shares outstanding 410 410 410 410 410

Treasury shares outstanding 200 187 184 177 116

Total assets increased 20.2% to $763 million at June 30, 2020, compared to $635 million at June 30, 2019. Total loans grew by $36 million, or 7.7%, to $512 million at June 30, 2020, compared to $476 million for the same period one-year ago due to primarily Paycheck Protection Program loan originations, organic loan growth in our commercial, 1-4 family mortgage and consumer loan portfolios.

CEO Saunders said, "We are one of the very few community banks strategically positioned for growth in the premier markets in the Carolinas. Because of this potential, our long history and our strong culture, we have attracted new talent from other financial institutions as we aim to take advantage of current market disruptions."

"As our North Carolina presence has grown, we relocated and expanded the Winston-Salem office into a full service branch site in May to position the Company for future growth in the Winston-Salem market. We are also actively looking for branch sites in the Lake Norman and other fast growing markets in the Charlotte MSA. With developing economic uncertainty, current and future market expansion plans will be evaluated prudently." For example, we have moved breaking ground for a new Myrtle Beach branch - Grissom Parkway out a little further into the near future as we continue to monitor the impact COVID-19 has on the economy.

ASSET QUALITY MEASURES - Unaudited

Our asset quality continued to be strong through June 30, 2020, with nonperforming assets declining by $489 thousand to $1.6 million at June 30, 2020 compared to the same date one-year ago. The ratio of nonperforming assets to total assets declined to 0.21% at June 30, 2020, a decrease of 12 basis points compared to June 30, 2019. OREO and repossessed assets remain nominal. The allowance for loan losses as a percentage of loans improved to 0.92% at June 30, 2020 (adjusted for purchase accounting marks on acquired loans), compared to 0.68% one year earlier due primarily to provisioning associated with the anticipated economic impact of the COVID-19 pandemic. "While we have not seen increased delinquencies or any direct impact of COVID-19 to our asset quality, we believe it is prudent to reflect this pandemic in our allowance models. During Q2 2020, we made provisions for loan losses totaling $1.2 million compared to $169 thousand for the same period one year ago. Year to date through June 30, 2020, the Company has funded $1.6 million in provisions for loan losses compared to $296 thousand during the six months of 2019. We are actively performing stress tests on our loan portfolio, monitoring the political and regulatory landscape, and also monitoring COVID-19 hotspots and the impact it may have on the markets we serve. The Company continues to actively monitor loan deferral levels which have declined to $14.7 million or less than 3% of the loan portfolio as of the end of the second quarter 2020 and there has not been any unusual or unforeseen credit line drawdowns to date and no increase in overdraft activity. The Company has minimal exposure to any industry that may have an elevated exposure to Covid-19", said CEO Saunders. Net charge offs remain nominal.

June 30 March 31 December 31 September 30 June 30

(dollars in thousands) 2020 2020 2019 2019 2019

Nonperforming Assets

Commercial

Owner occupied RE $ 999 $ 507 518 529 97

Non-owner occupied RE - - - - -

Construction - - - - -

Commercial business 135 12 39 112 693

Consumer

Real estate 10 526 591 597 725

Home equity - - - 183 180

Construction - - - - -

Other 273 283 327 312 256

Nonaccruing troubled debt restructurings

Total nonaccrual loans $ 1,417 $ 1,328 1,475 1,733 1,951

Other real estate owned 209 392 347 164 164

Total nonperforming assets $ 1,626 $ 1,720 1,822 1,897 2,115

Nonperforming assets as a percentage of:

Total assets 0.21% 0.26% 0.28% 0.29% 0.33%

Total loans 0.32% 0.36% 0.38% 0.40% 0.54%

Accruing troubled debt restructurings $ 2,620 $ 3,502 3,584 3,119 2,630

Quarter Ended

June 30 March 31 December 31 September 30 June 30

(dollars in thousands) 2020 2020 2019 2019 2019

Allowance for Loan Losses

Balance, beginning of period $ 3,877 $ 3,547 3,251 3,211 3,231

Loans charged-off 452 168 222 247 221

Recoveries of loans previously charged-off 115 123 48 78 32

Net loans charged-off 337 45 174 169 189

Provision for loan losses 1,175 375 470 209 169

Balance, end of period $ 4,715 $ 3,877 3,547 3,251 3,211

Allowance for loan losses to gross loans 0.92% 0.81% 0.74% 0.69% 0.68%

Allowance for loan losses to nonaccrual loans 332.75% 291.94% 240.47% 187.59% 164.58%

Net charge-offs to average loans QTD (annualized) 0.24% 0.04% 0.14% 0.13% 0.16%

LOAN COMPOSITION - Unaudited

Quarter Ended

June 30 March 31 December 31 September 30 June 30

(dollars in thousands) 2020 2020 2019 2019 2019

Commercial

Owner occupied RE $ 113,205 $ 115,711 116,244 109,133 109,329

Non-owner occupied RE 70,748 69,474 59,287 63,304 60,313

Construction 35,029 29,523 33,196 30,123 27,503

Business 62,464 63,522 61,129 57,573 60,783

PPP 30,211

Total commercial loans 311,657 278,230 269,856 260,133 257,928

Consumer

Real Estate 99,565 97,465 99,394 101,742 104,309

Home equity 21,895 21,362 21,987 21,472 21,309

Construction 5,496 5,708 5,062 4,915 4,971

Other 73,771 77,808 83,884 85,204 87,252

Total consumer loans 200,727 202,343 210,327 213,333 217,841

Total gross loans, net of deferred fees 512,384 480,573 480,183 473,466 475,769

Less-allowance for loan losses 4,715 3,877 3,547 3,251 3,211

DEPOSIT COMPOSITION - Unaudited

Quarter Ended

June 30 March 31 December 31 September 30 June 30

(dollars in thousands) 2020 2020 2019 2019 2019

Non-interest bearing $ 185,208 $ 144,359 137,312 123,839 117,862

Interest bearing:

NOW accounts 103,732 104,003 89,169 80,017 83,695

Money market accounts 101,083 94,778 94,742 95,775 91,082

Savings 34,392 26,270 25,730 25,876 26,409

Time, less than $250,000 120,782 104,841 121,818 142,662 164,939

Time and out-of-market deposits, $250,000 and over 37,164 31,974 36,317 40,716 43,776

Total Deposits $ 582,361 $ 506,225 505,088 508,885 527,763

Footnotes to tables:

(1)Total revenue is the sum of net interest income and noninterest income.

(2)Annualized for the respective three-month period.

(3)Noninterest expense divided by the sum of net interest income and noninterest income annualized for respective three-month period.

(4) Excludes mortgage loans held for sale.

(5) Includes noninterest bearing and interest bearing NOW accounts.

(6)The common equity tier 1 ratio is calculated as the sum of common equity divided by risk-weighted assets.

The tangible book value per share is calculated as total shareholders' (7)equity less intangible assets, divided by period end dilutive shares.

(8) Includes mortgage loans held for sale.

ABOUT FIRST RELIANCE BANCSHARES

Founded in 1999, First Reliance Bancshares, Inc. (OTC: FSRL.OB), is based in Florence, South Carolina and has assets of approximately $763 million. The Company employs more than 150 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 93% 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 15 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.

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. Moreover, a trade war or other governmental action related to tariffs or international trade agreements or policies, as well as Covid-19 or other potential epidemics or pandemics, have the potential to negatively impact ours and/or our customers' costs, demand for our customers' products, and/or the U.S. economy or certain sectors thereof and, thus, adversely affect our business, financial condition, and results of operations. 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) 543-5510jpaolucci@firstreliance.com

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SOURCE First Reliance Bancshares, Inc.