Claim 1 is that the theory is local. Claim 2 is that there is wavefunction collapse onto a randomly-selected eigenstate at the time of measurement. The long-distance correlations in outcomes seen in Bell experiments in the context of Claim 2 do indeed show that wavefunction collapse must be non-local. But Bell experiments are only excluding the possibility of local theories of wavefunction collapse, not Realism or non-Realism.
The Everett Interpretation (also known as the Many Worlds Interpretation) has no wavefunction collapse, and is both local and Realist. There are no faster than light influences. The wavefunction represents the true, objective state of the universe. It is also deterministic - there is no randomness. When an observation is made, the observer enters a superposition of observer states each seeing one outcome. This happens locally. In a Bell experiment, two particles with correlated wavefunctions are separated. Each observer observing a particle becomes correlated with it, and hence with the other particle, and hence with the other observer. When the observers get back together to compare notes, each superposed sub-state only interacts with superposed sub-states of the other observer making compatible observations. You get perfect correlation without faster-than-light influences, because there is no collapse and loss of information at the time of observation. The information is retained, but is not directly accessible to the observer sub-states who cannot see one another. They can only deduce their existence because interference between them cancels out certain combinations of outcomes.
An electron passing through one slit cannot 'see itself' passing through the other slit. (They are not, for example, electrostatically repelled from one another.) An electron (if it was smart enough!) could only deduce that it was part of a wavefunction when it observed that it never hits the screen at the nulls of the interference pattern.
Local realism can survive Bell's test. What gets contradicted is local wavefunction collapse.
On a philosophical note, some people argue that because the non-locality of wavefunction collapse has no observable consequences (it can't do, because there is a local alternative interpretation that predicts the same observations), and in particular, can't be used to send signals faster than light, that this collapse isn't really in violation of locality, but some more subtle property. Here, we have to point out the difference between ontology (our theory about what is) and epistemology (our theory about what we can observe/deduce). Wavefunction collapse is an ontological theory. We make an observation, and it collapses the entire wavefunction onto a single randomly-selected eigenstate instantaneously, everywhere. Observable consequences or not, this is the picture in our head.
That ontological picture has such strange consequences when combined with relativity that many reject the question entirely, and say there is no objective ontological 'reality' out there for us to observe. There is only epistemological observation. Quantum mechanics gives a method for calculating the outcome of experiments, but it should not be taken as saying anything about what is really happening behind the scenes. We observe shadows on the wall of Plato's cave, but nothing is outside the cave casting them. There are only the shadows. This is non-Realism.
As Einstein put the question: "Do you really believe that the moon isn’t there when nobody looks?"
That physics should take this proposal seriously - when there is a local, deterministic, realist alternative interpretation readily available - I think is fascinating in terms of the psychology and sociology of the scientific community. Einstein was wrong about hidden variables, but I think he was right that there was a problem.
Whether you choose to believe in non-local wavefunction collapse, local superpositions of observers, or that there is no reality to observe is your choice. They all make the same predictions about observations, so they are experimentally indistinguishable. None of them can ever be shown to be wrong. But the existence of the Everett interpretation as a local, realist ontology means that Bell experiments cannot exclude either locality or realism. They can only do so in combination with particular metaphysical assumptions.