Solera National Bancorp Announces Third Quarter, Nine Month Results

Lakewood, Colorado, UNITED STATES


LAKEWOOD, Colo., Nov. 7, 2014 (GLOBE NEWSWIRE) -- Solera National Bancorp, Inc. (OTCQB:SLRK), the holding company for Solera National Bank, today reported financial results for the three and nine months ended September 30, 2014. For the three months ended September 30, 2014, the Company reported a net loss of $442,000 or $(0.17) per share compared to a net loss of $638,000 or $(0.25) per share for the three months ended September 30, 2013. For the nine months ended September 30, 2014, the Company reported a net loss of $834,000 or $(0.32) per share compared to a net loss of $18,000 or $(0.01) per share for the nine months ended September 30, 2013.

Robert J. Fenton, President and CEO, commented: "The Company's new board and management team made substantial progress during the quarter to address legacy issues and deficiencies identified after taking control of the Company. The third quarter 2014 results included charges related to the wind-down of the residential mortgage operation totaling approximately $395,000.  Additionally, we took aggressive actions resulting in annualized expense savings of approximately $1 million which has positioned the Company for a return to profitability in fourth quarter 2014.

"Solera continues to play an important role in the Colorado business community.  As a small business-focused bank, we are able to provide customized financial solutions, ongoing support and rapid decision-making that our clients value. The Bank remains well capitalized, and able to support increased lending activity. The fourth quarter began well with $7.5 million of new, high-quality loans originated in October."

Review of Operations

Interest and fees on loans were $1.04 million in third quarter 2014 compared to $949,000 in third quarter 2013, reflecting stable revenue generated by the Bank's commercial loan portfolio and increased contribution from residential mortgage loans retained in the Bank's portfolio. For the nine months of 2014, interest and fees on loans was $3.26 million compared to $2.61 million for the nine months of 2013.  Total interest income was $1.44 million for the three months ended September 30, 2014 compared to $1.51 million for the three months ended September 30, 2013.  For the nine months of 2014, total interest income increased to $4.67 million compared to $4.28 million for the nine months of 2013.

Fenton continued: "Given the significant change in Solera's business model from a year ago, with a return to concentration on our core commercial banking strengths, we believe the Company's ability to maintain a steady interest income stream and continue to manage interest expense was a positive take-away." He noted the Company's net interest margin in third quarter 2014 was 3.08%, up from 2.92% a year ago, and net interest margin for the nine months of 2014 rose to 3.22% compared to 2.83% for the nine months of 2013.

Total interest expense was $298,000 in third quarter 2014 compared to $311,000 in third quarter 2013. For the nine months ended September 30, 2014, total interest expense was $921,000 compared to $904,000 for the nine months ended September 30, 2013.

In third quarter 2014, the Company's net interest income, including a $250,000 provision for loan and lease losses, was $892,000 compared to $1.20 million in third quarter 2013, which had no recorded loss provision.  For the nine months ended September 30, 2014, net interest income after a $400,000 provision for loan and lease losses was $3.34 million compared to $3.38 million for the nine months ended September 30, 2013 which had no recorded loss provision.

Total noninterest income in third quarter 2014 was $571,000 compared to $1.68 million in third quarter 2013.  For the nine months ended September 30, 2014, total noninterest income was $3.24 million compared with $6.04 million for the nine months ended September 30, 2013. Lower total noninterest income in both periods of 2014 reflected a sharp decline of income from the sale of residential mortgages and the wind-down of this line of business during the third quarter 2014.

Total noninterest expense in third quarter 2014 declined sharply to $1.91 million compared to $3.52 million in third quarter 2013, primarily reflecting lower ongoing salary and compensation expenses, including lower commission payments related to mortgage lending. This was partially offset by a number of charges related to the mortgage division closure, including abandoned lease reserves, office equipment write-downs, closing out vendor contracts and miscellaneous expenses totaling approximately $395,000 in third quarter 2014.

Balance Sheet Review, Credit Quality and Shareholder Value

Net loans, after allowance for loan and lease losses, were $77.78 million at September 30, 2014 compared to $71.54 million at September 30, 2013.  The Company's allowance for loan and lease losses was $1.56 million, or 1.97% of gross loans, at September 30, 2014 compared to $1.10 million, or 1.52% of gross loans, at September 30, 2013.  The balance sheet reflected no loans held for sale as of September 30, 2014, compared to $9.67 million a year ago as a result of exiting the residential mortgage lending business.

Fenton commented: "We increased our allowance for loan loss reserve by $400,000 over the past two quarters to account for an increase in criticized and classified loans stemming from weakened credit underwriting and monitoring practices. Fortunately, we have a low level of non-performing loans and have taken the necessary steps to improve underwriting and portfolio management on-going." 

Total deposits at September 30, 2014 were $122.89 million compared to $127.37 million at September 30, 2013.  Total assets were $148.00 million at September 30, 2014 compared to $172.30 million at September 30, 2013, primarily reflecting an increase in net loans partially offset by a decrease in loans held for sale and a decrease in investment securities which had the benefit of reducing the Company's interest rate risk profile.

The Bank's asset and loan quality measurements continued to demonstrate soundness and stability.  At September 30, 2014, the ratio of non-performing loans to gross loans was 0.20% and non-performing assets to total assets was 0.94%. The Bank sold one of its two OREO assets in October and the other property is under contact and scheduled to close in November.  As a result, non-performing assets to total assets are expected to be negligible by year-end.

The Bank continued to exceed accepted regulatory standards for a well-capitalized institution and improved all capital ratios as of September 30, 2014 compared to both the prior quarter and the prior year, with a tier 1 leverage ratio of 10.3%, a tier 1 risk-based capital ratio of 15.6%, and a total risk-based capital ratio of 16.9%.

Tangible book value per share, excluding accumulated other comprehensive income, was $6.64 at September 30, 2014, compared to $7.21 at September 30, 2013.  Total stockholders' equity was $17.91 million at September 30, 2014 compared to $18.26 million at September 30, 2013.  The year-over-year total stockholders' equity comparison includes an improvement in accumulated other comprehensive loss as a result of an increase in the fair value of the Bank's available-for-sale investment portfolio.

Fenton concluded: "We have made significant progress toward our goal of returning Solera National Bank to profitability.  Our Board of Directors and management team appreciate our customers and shareholders who have maintained their support of the Company during a period of considerable turmoil and change.  With a strong balance sheet and a commitment to profitable growth, we look forward to resolving the remaining legacy issues and building a franchise able to drive shareholder value."

About Solera National Bancorp, Inc.

Solera National Bancorp, Inc. was incorporated in 2006 to organize and serve as the holding company for Solera National Bank, which opened for business in September 2007.  Solera National Bank is a community bank serving emerging businesses primarily in the Front Range of Colorado.  At the core of Solera National Bank is welcoming, inclusive and respectful customer service, a focus on supporting a growing and diverse Colorado economy, and a passion to serve our community through service, education and volunteerism.  For more information, please visit http://www.SoleraBank.com.

Cautions Concerning Forward-Looking Statements:

This press release contains statements that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  The statements contained in this release, which are not historical facts and that relate to future plans or projected results of Solera National Bancorp, Inc. ("Company") and its wholly-owned subsidiary, Solera National Bank ("Bank"), are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied.   These risks and uncertainties can include the risks associated with the ability to grow the Bank and the services it provides, the ability to successfully integrate new business lines and expand into new markets, competition in the marketplace, general economic conditions and many other risks described in the Company's Securities and Exchange Commission filings.  The most significant of these uncertainties are described in our Annual Report on Form 10-K and Quarterly reports on Form 10-Q all of which any reader of this release is encouraged to study (including all amendments to those reports) and exhibits to those reports, and include (but are not limited to) the following: the Company has a limited operating history upon which to base an estimate of its future financial performance; general economic conditions may be less favorable than expected, causing an adverse impact on our financial performance; and the Company is subject to extensive regulatory oversight, which could restrain its growth and profitability.  We undertake no obligation to update or revise any forward-looking statement.  Readers of this release are cautioned not to put undue reliance on forward-looking statements.

SOLERA NATIONAL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
($000s) 9/30/2014 6/30/2014 9/30/2013
ASSETS      
Cash and due from banks  $ 1,545  $ 868  $ 1,432
Federal funds sold  1,055  —  390
Interest-bearing deposits with banks  257  257  257
Investment securities, available-for-sale  58,489  59,652  77,648
FHLB and Federal Reserve Bank stocks, at cost  849  1,403  2,395
Gross loans  79,290  83,423  72,595
Net deferred (fees)/expenses  53  73  47
Allowance for loan and lease losses  (1,563)  (1,300)  (1,101)
Net loans  77,780  82,196  71,541
Loans held for sale  —  14,383  9,672
Premises and equipment, net  714  798  937
Other real estate owned  1,392  1,485  1,776
Accrued interest receivable  659  652  679
Bank-owned life insurance  4,425  4,389  4,277
Other assets  831  1,887  1,293
TOTAL ASSETS  $ 147,996  $ 167,970  $ 172,297
       
LIABILITIES AND STOCKHOLDERS' EQUITY    
Noninterest-bearing demand deposits  $ 5,012  $ 4,747  $ 4,742
Interest-bearing demand deposits  7,755  8,197  9,562
Savings and money market deposits  49,593  49,159  52,429
Time deposits  60,529  65,983  60,639
Total deposits  122,889  128,086  127,372
       
Accrued interest payable  78  74  78
Short-term FHLB borrowings  —  14,141  17,947
Long-term FHLB borrowings  6,500  6,500  7,500
Accounts payable and other liabilities  619  889  1,143
TOTAL LIABILITIES  130,086  149,690  154,040
       
Common stock  27  27  26
Additional paid-in capital  27,101  26,840  26,493
Accumulated deficit  (8,849)  (8,407)  (7,377)
Accumulated other comprehensive loss  (213)  (78)  (885)
Treasury stock, at cost, 14,208 shares  (156)  (102)  —
TOTAL STOCKHOLDERS' EQUITY  17,910  18,280  18,257
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $ 147,996  $ 167,970  $ 172,297
 
 
SOLERA NATIONAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
           
  Three Months Ended Nine Months Ended
($000s, except per share data) 9/30/2014 6/30/2014 9/30/2013 9/30/2014 9/30/2013
Interest and dividend income          
Interest and fees on loans  $ 1,038  $ 1,098  $ 949  $ 3,259  $ 2,607
Interest on loans held for sale  45  104  112  202  327
Investment securities  341  397  432  1,153  1,289
Dividends on bank stocks  13  16  17  44  51
Other  3  3  3  7  6
Total interest income  1,440  1,618  1,513  4,665  4,280
Interest expense          
Deposits  263  274  271  806  785
FHLB borrowings  35  40  40  115  119
Total interest expense  298  314  311  921  904
Net interest income  1,142  1,304  1,202  3,744  3,376
Provision for loan and lease losses  250  150  —  400  —
Net interest income after
provision for loan and lease losses
 892  1,154  1,202  3,344  3,376
Noninterest income          
Customer service and other fees  29  30  31  83  73
Other income  37  36  39  113  94
Gain on loans sold  446  1,542  1,564  2,878  5,576
Gain on sale of available-for-sale securities  59  59  49  168  294
Total noninterest income  571  1,667  1,683  3,242  6,037
Noninterest expense          
Employee compensation and benefits  820  1,520  2,429  4,023  6,509
Occupancy  275  242  257  767  777
Professional fees  176  271  187  683  424
Other general and administrative  634  811  650  1,947  1,721
Total noninterest expense  1,905  2,844  3,523  7,420  9,431
Net Loss  $ (442)  $ (23)  $ (638)  $ (834)  $ (18)
           
Loss per share  $ (0.17)  $ (0.01)  $ (0.25)  $ (0.32)  $ (0.01)
Tangible book value per share  $ 6.64   $ 6.82   $ 7.21   $ 6.73   $ 7.21 
Net interest margin 3.08 % 3.27 % 2.92 % 3.22 % 2.83 %
           
Asset Quality:          
Non-performing loans to gross loans 0.20 % 0.19 % —%    
Non-performing assets to total assets 0.94 % 0.88 % 1.03 %    
Allowance for loan losses to gross loans 1.97 % 1.56 % 1.52 %    
           
Allowance for loan losses to non-performing loans 976.88 % 807.45 % NM*    
Other real estate owned  $ 1,392   $ 1,485   $ 1,776     
* Not meaningful due to the insignificant amount of non-performing loans.
           
Selected Financial Ratios: (Solera National Bank Only)        
Tier 1 leverage ratio 10.3 % 9.8 % 9.8 %    
Tier 1 risk-based capital ratio 15.6 % 14.5 % 15.0 %    
Total risk-based capital ratio 16.9 % 15.6 % 16.0 %    

        

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