Solera National Bancorp Announces Second Quarter 2017 Financial Results

Continued Core Profitability, Solid Loan and Deposit Growth

Lakewood, Colorado, UNITED STATES


LAKEWOOD, Colo., July 26, 2017 (GLOBE NEWSWIRE) -- Solera National Bancorp, Inc. (OTC:SLRK) (“Company”), the holding company for Solera National Bank (“Bank”), a business-focused bank primarily serving the Denver metropolitan area, today reported financial results for the second quarter and first half of 2017. 

Highlights for the quarter ended June 30, 2017 include:

  • Eleventh consecutive profitable quarter
  • Gross loan growth of $6.63 million, or 6.3%, versus linked-quarter
  • Noninterest-bearing deposit growth of $3.45 million, or 39.6%, versus linked-quarter
  • Efficiency ratio of 64.5% improved from 72.6% in the prior quarter and 75.1% for the same period in 2016
  • Tangible book value per share of $8.66 increased 11.7% from prior year
  • A 5-Star rating assigned by BauerFinancial, Inc., the nation’s leading bank rating firm

For the three months ended June 30, 2017, the Company reported net income of $292,000, or $0.11 per share, compared to net income of $200,000, or $0.07 per share, for the three months ended March 31, 2017, and $322,000, or $0.12 per share, for the three months ended June 30, 2016.

For the six months ended June 30, 2017, Solera reported net income of $492,000, or $0.18 per share, compared with net income of $776,000, or $0.28 per share, for the six months ended June 30, 2016.  The first six months of 2016 included a gain on loans sold and a gain on sale of available securities of $125,000 and $121,000, respectively, compared to no activity in the first six months of 2017.  Additionally, first half 2017 results include income tax expense of $256,000 compared to no income tax in the first half of 2016.

Martin P. May, President and CEO, commented: “We are pleased with the second quarter results in which we delivered our eleventh consecutive quarterly profit.  Our focus on acquiring core deposit relationships has led to robust growth in non-interest bearing deposits while the investment in our business development team has led to strong growth in high-quality commercial loans.  Importantly, we are gratified that BauerFinancial has recognized the bank’s financial strength by assigning their highest rating.”

“Further, we are delighted that shareholders elected Melissa K. Larkin to serve on the board of directors at our recent annual meeting.  Melissa has been with the Company since 2007 and has served as our Chief Financial Officer since 2014.  Her extensive industry experience and financial acumen will help the board fulfil its vision of having Solera National Bank become one of the premier, independent community banks in Colorado.”

Operational Highlights

Net interest income after provision for loan and lease losses was $1.15 million for the quarter ended June 30, 2017 compared to $1.10 million and $957,000 in the quarters ended March 31, 2017 and June 30, 2016, respectively.  Net interest income after provision for loan and lease losses for the six months of 2017 was $2.26 million, compared to $2.00 million in the six months of 2016.  The Company recorded no provision for loan and lease losses in the first half of 2017 or first half of 2016.

The Company's net interest margin in second quarter 2017 was 3.06% compared to 3.04% in the linked-quarter and 2.87% in the second quarter 2016.  For the six months ended June 30, 2017 net interest margin of 3.05% increased seven basis points from 2.98% for the first six months ended June 30, 2016.  The increase in net interest margin for both the second quarter and first six months of 2017 versus the prior year is due primarily to a shift in earning assets to higher yielding commercial loans from lower yielding investment securities.  Cost of funds are essentially unchanged year over year.

Total noninterest income in second quarter 2017 was $58,000 compared to $55,000 in first quarter 2017 and $126,000 in second quarter 2016.  The decrease versus second quarter 2016 was due to gains on sale of available-for-sale securities recorded in second quarter of 2016 of $70,000.  There were no realized net securities gains generated in the second quarter of 2017.

The Company continues to prudently manage expenses.  Total noninterest expense of $780,000 in the second quarter of 2017 compared favorably with $841,000 in the linked-quarter and represented a slight increase from $761,000 in the second quarter of 2016.

In the second quarter of 2017, the Company recorded income tax expense of $138,000 compared to income tax expense of $118,000 in the first quarter 2017 and no income tax in the second quarter of 2016.  In the fourth quarter of 2016, the Company recorded a full reversal of the deferred tax asset valuation allowance after concluding that it was more likely than not that it will generate sufficient taxable income within the applicable carry-forward periods to realize its net deferred tax assets.

Balance Sheet Review and Asset Quality Strength

Total assets of $163.99 million at June 30, 2017 increased from $157.09 million at March 31, 2017 and $142.84 million at June 30, 2016.  The increase versus the linked quarter and June 30, 2016 was primarily due to solid growth in gross loans.

Net loans, after allowance for loan and lease losses, were $110.16 million at June 30, 2017 compared to $103.51 million at March 31, 2017 and $90.97 million at June 30, 2016.  Net loan growth in the second quarter of 2017 was driven by loan originations of $9.81 million partly offset by payoffs and pay downs totaling $3.18 million.  Net loans increased $19.19 million, or 21%, during the twelve months ended June 30, 2017 from organic net loan growth of $17.18 million coupled with a $2.01 million net increase in a purchased participation interest in a pool of rehabilitated student loans. 

The allowance for loan and lease losses at June 30, 2017 of $1.59 million was essentially unchanged compared to March 31, 2017 and June 30, 2016.  The allowance for loan and lease losses as a percentage of gross loans of 1.42% at June 30, 2017 declined from 1.70% at June 30, 2016 due to a reduction in criticized assets along with growth in a pool of rehabilitated student loans which come with minimal risk of loss given a U.S. government guarantee.  No loan loss provisioning has been required over the past ten quarters as credit quality metrics remain outstanding relative to banking industry norms. 

Total investment securities available-for-sale were $35.22 million at June 30, 2017 compared to $34.65 million at March 31, 2017 and $36.16 million at June 30, 2016.  Investment securities held-to-maturity of $4.90 million at June 30, 2017 increased by $400,000 compared to June 30, 2016.

Total deposits at June 30, 2017 were $132.45 million compared to $128.04 million at March 31, 2017 and $117.02 million at June 30, 2016.  The Company’s focus on noninterest-bearing deposits continued to yield positive results.  Noninterest-bearing demand deposits increased $3.45 million versus the linked-quarter, or 39.6%, to $12.13 million at June 30, 2017, and almost tripled from $4.16 million at June 30, 2016.

The Company continues to experience sound asset quality.  At June 30, 2017, the Company had no non-performing loans, non-performing assets or other real estate owned.  Total criticized assets of $5.90 million at June 30, 2017, or 3.60% of total assets, declined from $6.12 million, or 3.90% of total assets, at March 31, 2017 and $6.19 million, or 4.33% of total assets, at June 30, 2016.

The Company had no past due commercial loans and $438,000 of past due residential mortgage loans as of June 30, 2017.  However, $3.73 million of the student loan participation pool were 30 days+ past due at June 30, 2017, of which $2.31 million were 90 days+ past due.  The student loans are backed by an approximately 97.5% guarantee of the U.S. Treasury under the Higher Education Act of 1965.  This guarantee includes all principal and interest so net credit losses in this portfolio are expected to be minimal.  Additionally, the Bank purchased this pool at a discount resulting in the Bank’s maximum exposure to credit losses slightly less than 1%.     

Capital Strength

The Company’s capital ratios continue to remain well in excess of the highest required regulatory benchmark levels.  As of June 30, 2017, the Bank’s Tier 1 leverage ratio was 14.2%, Tier 1 risk-based capital was 18.5%, and total risk-based capital was 19.7%.

Tangible book value per share, including accumulated other comprehensive income, was $8.66 at June 30, 2017, compared to $8.52 at March 31, 2017 and $7.75 at June 30, 2016.  Total stockholders' equity was $23.78 million at June 30, 2017 compared to $23.40 million at March 31, 2017 and $21.37 million at June 30, 2016.  Total stockholders' equity at June 30, 2017 included an accumulated other comprehensive loss of $233,000 compared to a loss of $308,000 at March 31, 2017 and a gain of $248,000 at June 30, 2016.  The fair value of the Bank's available-for-sale investment portfolio has declined from a year ago due to an increase in interest rates. 

May concluded: "The Company has strong capital and liquidity levels, solid asset quality metrics, and is operating in a vibrant and healthy economic environment.  We expect to leverage a portion of our excess capital in the third quarter of 2017 through an additional $8.0 million investment in a pool of rehabilitated student loans.  Additionally, the Company continues to take steps to raise additional capital through a proposed rights offering to current shareholders.  The incremental capital will enable us to explore additional growth opportunities including acquiring other banks or businesses, establishing strategic partnerships, and investing in business development teams or new markets."

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.

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. and its wholly-owned subsidiary, Solera National Bank, are forward-looking statements.  These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. 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.

FINANCIAL TABLES FOLLOW

  
SOLERA NATIONAL BANCORP, INC. 
CONSOLIDATED BALANCE SHEETS 
(unaudited) 
($000s) 6/30/2017 3/31/2017 12/31/2016 9/30/2016 6/30/2016  
ASSETS            
Cash and due from banks $  1,097  $  2,126  $  719  $  825  $  678   
Federal funds sold   210    185    80    —    1,755   
Interest-bearing deposits with banks   1,261    261    261    261    261   
Investment securities, available-for-sale   35,222    34,645    36,133    36,324    36,159   
Investment securities, held-to-maturity   4,900    4,899    4,500    4,500    4,500   
FHLB and Federal Reserve Bank stocks, at cost   987    861    879    1,027    853   
Gross loans   111,990    105,363    105,243    100,336    92,749   
Net deferred (fees)/expenses   (246)   (249)   (260)   (270)   (201)  
Allowance for loan and lease losses   (1,588)   (1,601)   (1,599)   (1,584)   (1,577)  
Net loans   110,156    103,513    103,384    98,482    90,971   
Premises and equipment, net   1,783    1,803    1,831    1,861    1,884   
Accrued interest receivable   794    816    798    768    616   
Bank-owned life insurance   4,554    4,525    4,495    4,464    4,433   
Other assets   3,025    3,460    3,011    765    731   
TOTAL ASSETS $  163,989  $  157,094  $  156,091  $  149,277  $  142,841   
             
LIABILITIES AND STOCKHOLDERS' EQUITY    
Noninterest-bearing demand deposits   12,134    8,689    5,941    5,189    4,156   
Interest-bearing demand deposits   7,855    8,016    8,374    6,997    7,913   
Savings and money market deposits   49,434    43,473    42,569    38,558    36,798   
Time deposits   63,031    67,865    69,441    71,382    68,156   
Total deposits   132,454    128,043    126,325    122,126    117,023   
             
Accrued interest payable   151    131    103    144    127   
Short-term FHLB borrowings   4,029    1,466    2,415    1,125    —   
Long-term FHLB borrowings   3,400    3,400    3,400    4,000    4,000   
Accounts payable and other liabilities   178    654    776    390    317   
TOTAL LIABILITIES   140,212    133,694    133,019    127,785    121,467   
             
Common stock   27    27    27    27    27   
Additional paid-in capital   27,190    27,180    27,170    27,160    27,149   
Accumulated deficit   (3,051)   (3,343)   (3,543)   (5,628)   (5,894)  
Accumulated other comprehensive gain (loss)    (233)   (308)   (426)   89    248   
Treasury stock, at cost   (156)   (156)   (156)   (156)   (156)  
TOTAL STOCKHOLDERS' EQUITY   23,777    23,400    23,072    21,492    21,374   
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $  163,989  $  157,094  $  156,091  $  149,277  $  142,841   
             

 

   
SOLERA NATIONAL BANCORP, INC.  
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)  
  Three Months Ended Six Months Ended  
($000s, except per share data) 6/30/2017 3/31/2017 12/31/2016 9/30/2016 6/30/2016 6/30/2017 6/30/2016  
Interest and dividend income                
Interest and fees on loans $  1,239  $  1,168  $  1,175  $  1,144  $  1,011  $  2,407  $  2,065   
Investment securities   249    256    254    242    249    505    541   
Dividends on bank stocks   11    11    12    12    11    22    21   
Other   7    3    1    2    4    10    8   
Total interest income   1,506    1,438    1,442    1,400    1,275    2,944    2,635   
Interest expense                
Deposits   340    322    320    315    298    662    592   
FHLB borrowings   14    12    15    18    20    26    40   
Total interest expense   354    334    335    333    318    688    632   
Net interest income   1,152    1,104    1,107    1,067    957    2,256    2,003   
Provision for loan and lease losses   —    —    —    —    —    —    —   
Net interest income after
provision for loan and lease losses
   1,152    1,104    1,107    1,067    957    2,256    2,003   
Noninterest income                
Customer service and other fees   26    23    26    28    24    49    48   
Other income   32    32    32    32    32    64    74   
Gain on loans sold   —    —    —    —    —    —    125   
Gain on sale of available-for-sale securities   —    —    —    36    70    —    121   
Total noninterest income   58    55    58    96    126    113    368   
Noninterest expense                
Employee compensation and benefits   447    486    425    410    376    933    782   
Occupancy   42    49    53    59    56    91    121   
Professional fees   26    39    49    129    31    65    102   
Other general and administrative   265    267    762    299    298    532    590   
Total noninterest expense   780    841    1,289    897    761    1,621    1,595   
Net Income/(Loss) Before Taxes  $  430  $  318  $  (124) $  266  $  322  $  748  $  776   
Income Tax (Expense)/Benefit $  (138) $  (118) $  2,209  $  -   $  -   $  (256) $  -    
Net Income  $  292  $  200  $  2,085  $  266  $  322  $  492  $  776   
                 
Income Per Share $  0.11   $  0.07   $  0.77   $  0.10   $  0.12   $  0.18   $  0.28    
Tangible Book Value Per Share $  8.66   $  8.52   $  8.39   $  7.80   $  7.75   $  8.66   $  7.75    
Net Interest Margin  3.06%  3.04%  3.04%  2.96%  2.87%  3.05%  2.98%  
Efficiency Ratio  64.46%  72.56%  110.64%  79.59%  75.12%  68.43%  70.89%  
Return on Average Assets  0.73%  0.51%  5.46%  0.73%  0.91%  0.63%  1.09%  
Return on Average Equity  4.95%  3.44%  37.43%  4.96%  6.11%  4.19%  7.58%  
                 
Asset Quality:                
Non-performing loans to gross loans  %  %  %  %  %      
Non-performing assets to total assets  %  %  %  %  %      
Allowance for loan losses to gross loans  1.42%  1.52%  1.52%  1.58%  1.70%      
                 
Criticized loans/assets:                
Special mention $  1,176  $  1,210  $  1,164  $  1,984  $  1,967       
Substandard: Accruing   4,128    4,320    4,364    3,935    3,627       
Substandard: Nonaccrual   —    —    —    —    —       
Doubtful   —    —    —    —    —       
  Total criticized loans $  5,304  $  5,530  $  5,528  $  5,919  $  5,594       
Other real estate owned   —    —    —    —    —       
Investment securities   593    594    595    596    597       
Total criticized assets $  5,897  $  6,124  $  6,123  $  6,515  $  6,191       
Criticized assets to total assets  3.60%  3.90%  3.92%  4.36%  4.33%      
                 
Selected Financial Ratios: (Solera National Bank Only)     
Tier 1 leverage ratio  14.2%  13.7%  14.0%  13.2%  13.8%      
Tier 1 risk-based capital ratio  18.5%  18.7%  18.7%  19.1%  18.5%      
Total risk-based capital ratio  19.7%  19.9%  20.0%  20.4%  19.8%      
                 

 


        

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