Safe and Sound

First Reliance Bank

Florence, SC
3
Star Rating
Florence, SC-based First Reliance Bank is an FDIC-insured bank founded in 1999. The bank holds equity of $46.2 million on $456.9 million in assets, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 138 full-time employees in 8 offices in SC, the bank has amassed loans and leases worth $339.1 million, $234.4 million of which are for real estate. U.S. bank customers currently have $370.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Reliance Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three major criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial resilience, capital is useful. When it comes to safety and soundness, the higher the capital, the better.

First Reliance Bank received a score of 8 out of a possible 30 points on our test to measure the adequacy of a bank's capital, below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Reliance Bank's Tier 1 capital ratio was 11.64 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, First Reliance Bank held equity amounting to 10.10 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of troubled assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with large numbers of these kinds of assets may eventually be required to use capital to cover losses, shrinking its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a failure in the future.

First Reliance Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, below the national average of 37.49.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.40 percent of First Reliance Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on First Reliance Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, potentially making the bank better prepared to withstand economic trouble. Conversely, losses take away from a bank's ability to do those things.

First Reliance Bank scored 6 out of a possible 30 on Bankrate's test of earnings, below the national average of 15.12.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for First Reliance Bank was 2.42 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.1 million on total equity of $46.2 million. The bank reported an annualized return on average assets, or ROA, of 0.26 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.