Solera National Bancorp Announces First Quarter 2018 Financial Results

Increasing Profitability, Significant Loan and Deposit Growth

LAKEWOOD, Colo., April 19, 2018 (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 three months ended March 31, 2018. 

Highlights for the quarter ended March 31, 2018 include:

• Gross loan growth of $21.7 million, or 17% versus linked-quarter
• Noninterest-bearing deposit growth of $18.6 million, or 77% versus linked-quarter
• Net interest margin of 3.36% increased 32 basis points from same period last year
• Strong asset quality; no nonperforming assets and modest level of criticized assets
• Return on Average Assets and Return on Average Equity of 0.86% and 6.30%, respectively
• Commencement of rights offering; $3 million in capital raised through quarter-end
• Ranked 11^th Healthiest Bank out of 5,557 FDIC-insured banks in the United States⁽¹⁾

For the three months ended March 31, 2018, the Company reported net income of $400,000, or $0.15 per share, compared to a net loss of $279,000, or $0.10 per share, for the three months ended December 31, 2017, and net income of $200,000, or $0.07 per share, for the three months ended March 31, 2017.  The fourth quarter of 2017 included a one-time income tax expense of approximately $610,000, or $0.22 per share, from revaluing the Company’s net deferred tax asset position as a result of the Tax Cuts and Jobs Act enacted into law on December 22, 2017.

Martin P. May, President and CEO, commented: “The Company is off to a strong start this year.  We are particularly pleased with our solid loan and deposit growth.  Net interest margin and other key profitability measures improved markedly versus the same quarter last year.  The incremental capital from our rights offering will enable us to increase our legal lending limit, while exploring additional growth opportunities.  Our balance sheet strength and the vibrant market we operate in give us reasons to be confident about the future.”

May continued, “We look forward to updating shareholders on our performance at the upcoming annual meeting which is scheduled for Wednesday, May 9th at 5:30 p.m. local time at the Company’s Lakewood, Colorado location.  Shareholders of record as of March 26, 2018 will be entitled to attend and vote at the annual meeting.”

Operational Highlights

Net interest income after provision for loan and lease losses was $1.38 million for the quarter ended March 31, 2018 compared to $1.35 million and $1.10 million in the quarters ended December 31, 2017 and March 31, 2017, respectively.  The Company recorded provision for loan and lease losses of $68,000 in the quarter ended March 31, 2018 compared to no provision for loan and lease losses throughout 2017.

The Company's net interest margin in first quarter 2018 of 3.36% compared to 3.33% in the linked-quarter and 3.04% in the first quarter 2017.  The increase in net interest margin compared to first quarter 2017 is attributed to higher loan portfolio yields, a shift in mix from lower yielding investment securities to higher yielding loans, along with significant growth in noninterest-bearing deposits.

Total noninterest income in first quarter 2018 was $62,000 compared to $58,000 in fourth quarter 2017 and $55,000 in first quarter 2017.  Customer service and other fees increased versus the fourth quarter 2017 and first quarter 2017.  The Company recorded no gains on loans sold or gains on sale of available-for-sale securities in first quarter 2018 or during 2017.

Total noninterest expense of $918,000 in first quarter 2018, essentially unchanged from $910,000 in the linked-quarter, increased $77,000, or 9%, from $841,000 in the first quarter of 2017.  The increase from the prior year is principally due to higher employee compensation and benefits to support franchise growth along with expenses associated with the Company’s capital raise.  The Company’s efficiency ratio (non-interest expense divided by the sum of net interest income FTE and non-interest income) for the first quarter of 2018 was 63.9% compared to 72.6% for the first quarter of 2017.

In first quarter 2018, the Company recorded income tax expense of $119,000 compared to income tax expense of $790,000 in the fourth quarter 2017 and income tax expense of $118,000 in the first quarter of 2017.  The fourth quarter of 2017 included a one-time income tax expense of approximately $610,000 from revaluing the Company’s net deferred tax asset position as a result of the Tax Cuts and Jobs Act.

Balance Sheet Review and Asset Quality Strength

Total assets of $198.04 million at March 31, 2018 increased from $173.90 million at December 31, 2017 and $157.09 million at March 31, 2017.  The increase versus March 31, 2017 was due to significant growth in gross loans. 

Net loans, after allowance for loan and lease losses, were $146.57 million at March 31, 2018 compared to $125.14 million at December 31, 2017 and $103.51 million at March 31, 2017.  Net loan growth of $21.43 million during the first quarter of 2018 was driven by commercial loan originations of $13.18 million and a net increase of $9.28 million in student loans, partly offset by payoffs, pay downs and an increase in the allowance for loan losses totaling $1.03 million.  The Company leveraged a portion of its excess capital by increasing its interest in the rehabilitated student loan pool, originally purchased in 2016, by approximately $10 million.  Melissa K. Larkin, the Company’s Chief Financial Officer stated:  “The student loan pool has performed as expected since our first purchase in the second quarter of 2016.  They provide interest rate risk protection given their variable rate structure and limited credit risk given their government guarantee.”

The allowance for loan and lease losses at March 31, 2018 of $1.80 million, or 1.21% of gross loans, compared to $1.75 million, or 1.37% at December 31, 2017, and $1.60 million, or 1.52% of gross loans at March 31, 2017.  The decline in the allowance for loan and lease losses as a percentage of gross loans is primarily due to the growth in the student loan portfolio which contains minimal risk of loss given a U.S. government guarantee of approximately 97.5%. 

Total investment securities available-for-sale were $31.71 million at March 31, 2018 compared to $31.95 million at December 31, 2017 and $34.65 million at March 31, 2017.  Investment securities held-to-maturity of $4.90 million at March 31, 2018 were unchanged compared to December 31, 2017 and March 31, 2017.

Total deposits at March 31, 2018 were $156.52 million compared to $137.51 million at December 31, 2017 and $128.04 million at March 31, 2017.  The Company continued to make significant progress growing its core deposit franchise.  Noninterest-bearing demand deposits of $42.68 million at March 31, 2018 increased $18.62 million, or 77%, versus the linked-quarter, and increased $34.0 million from $8.69 million at March 31, 2017.  Mr. May commented, “We established a goal last year to substantially increase noninterest-bearing deposits.  As a result of this focused effort, we identified a market opportunity which lead to a significant number of new relationships.  I’m proud of our team and the superior customer service they deliver day in and day out.”

The Company continues to experience sound asset quality metrics.  At March 31, 2018, the Company had no non-performing loans, non-performing assets or other real estate owned.  Total criticized assets of $5.74 million at March 31, 2018, or 2.90% of total assets, increased slightly from the linked-quarter and has declined from $6.12 million, or 3.90% of total assets, at March 31, 2017.

The Company had no past due commercial loans as of March 31, 2018 and $133,000 from one past due residential mortgage loan. Additionally, $5.16 million of the student loan participation pool were 30 days+ past due at March 31, 2018, of which $3.01 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 the 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 be well in excess of the highest required regulatory benchmark levels.  As of March 31, 2018, the Bank’s Tier 1 leverage ratio was 14.8%, Tier 1 risk-based capital was 18.1%, and total risk-based capital was 19.4%.

Tangible book value per share, including accumulated other comprehensive income, was $8.52 at March 31, 2018, compared to $8.67 at December 31, 2017 and $8.52 at March 31, 2017.  Total stockholders' equity was $26.98 million at March 31, 2018 compared to $23.83 million at December 31, 2017 and $23.40 million at March 31, 2017.  Total stockholders' equity at March 31, 2018 included an accumulated other comprehensive loss of $573,000 compared to a loss of $243,000 at December 31, 2017 and a loss of $308,000 at March 31, 2017.  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. 

References

⁽¹⁾  “How Healthy Is Your Bank?” DepositAccounts, by LendingTree LLC, 5 Apr. 2018, www.depositaccounts.com/banks/health.aspx.

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.                   

Contact:		Martin P. May, President & CEO (303) 937-6422
		-or-
		Melissa K. Larkin, EVP & CFO (303) 937-6423

SOLERA NATIONAL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
($000s)		3/31/2018				12/31/2017				9/30/2017				6/30/2017				3/31/2017
ASSETS
Cash and due from banks		$	2,435			$	1,017			$	1,383			$	1,097			$	2,126
Federal funds sold			580				40				2,105				210				185
Interest-bearing deposits with banks			494				493				261				1,261				261
Investment securities, available-for-sale			31,708				31,954				33,396				35,222				34,645
Investment securities, held-to-maturity			4,904				4,902				4,901				4,900				4,899
FHLB and Federal Reserve Bank stocks, at cost			1,342				1,244				1,073				987				861
Gross loans			148,839				127,174				116,498				111,990				105,363
Net deferred (fees)/expenses			(471	)			(292	)			(241	)			(246	)			(249	)
Allowance for loan and lease losses			(1,800	)			(1,746	)			(1,586	)			(1,588	)			(1,601	)
Net loans			146,568				125,136				114,671				110,156				103,513
Premises and equipment, net			1,744				1,765				1,781				1,783				1,803
Accrued interest receivable			1,090				837				855				794				816
Bank-owned life insurance			4,640				4,612				4,583				4,554				4,525
Other assets			2,530				1,895				2,625				3,025				3,460
TOTAL ASSETS		$	198,035			$	173,895			$	167,634			$	163,989			$	157,094
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing demand deposits		$	42,684			$	24,068			$	20,538			$	12,134			$	8,689
Interest-bearing demand deposits			6,108				8,049				7,684				7,855				8,016
Savings and money market deposits			46,278				45,649				48,938				49,434				43,473
Time deposits			61,449				59,745				57,615				63,031				67,865
Total deposits			156,519				137,511				134,775				132,454				128,043
Accrued interest payable			140				130				158				151				131
Short-term FHLB borrowings			9,239				7,121				964				4,029				1,466
Long-term FHLB borrowings			5,000				5,000				7,400				3,400				3,400
Accounts payable and other liabilities			161				304				199				178				654
TOTAL LIABILITIES			171,059				150,066				143,496				140,212				133,694
Common stock			31				27				27				27				27
Additional paid-in capital			30,285				27,253				27,197				27,190				27,180
Accumulated deficit			(2,611	)			(3,052	)			(2,755	)			(3,051	)			(3,343	)
Accumulated other comprehensive gain (loss)			(573	)			(243	)			(175	)			(233	)			(308	)
Treasury stock, at cost			(156	)			(156	)			(156	)			(156	)			(156	)
TOTAL STOCKHOLDERS' EQUITY			26,976				23,829				24,138				23,777				23,400
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	198,035			$	173,895			$	167,634			$	163,989			$	157,094

 

SOLERA NATIONAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
		Three Months Ended
($000s, except per share data)		3/31/2018				12/31/2017				9/30/2017				6/30/2017				3/31/2017
Interest and dividend income
Interest and fees on loans		$	1,586			$	1,473			$	1,331			$	1,239			$	1,168
Investment securities			256				250				255				249				256
Dividends on bank stocks			17				15				14				11				11
Other			6				5				5				7				3
Total interest income			1,865				1,743				1,605				1,506				1,438
Interest expense
Deposits			383				355				341				340				322
FHLB borrowings			39				35				28				14				12
Total interest expense			422				390				369				354				334
Net interest income			1,443				1,353				1,236				1,152				1,104
Provision for loan and lease losses			68				—				—				—				—
Net interest income after provision for loan and lease losses			1,375				1,353				1,236				1,152				1,104
Noninterest income
Customer service and other fees			29				26				24				26				23
Other income			33				32				31				32				32
Total noninterest income			62				58				55				58				55
Noninterest expense
Employee compensation and benefits			551				513				480				447				486
Occupancy			48				49				52				42				49
Professional fees			53				42				55				26				39
Other general and administrative			266				296				252				265				267
Total noninterest expense			918				900				839				780				841
Net Income Before Taxes		$	519			$	511			$	452			$	430			$	318
Income Tax Expense			(119	)			(790	)			(156	)			(138	)			(118	)
Net Income (Loss)		$	400			$	(279	)		$	296			$	292			$	200
Income (Loss) Per Share		$	0.15			$	(0.10	)		$	0.11			$	0.11			$	0.07
Tangible Book Value Per Share		$	8.52			$	8.67			$	8.79			$	8.66			$	8.52
Net Interest Margin			3.36	%			3.33	%			3.11	%			3.06	%			3.04	%
Efficiency Ratio			63.88	%			63.78	%			64.99	%			64.46	%			72.56	%
Return on Average Assets			0.86	%			(0.65	)%			0.71	%			0.73	%			0.51	%
Return on Average Equity			6.30	%			(4.65	)%			4.94	%			4.95	%			3.44	%
Asset Quality:
Non-performing loans to gross loans			—	%			—	%			—	%			—	%			—	%
Non-performing assets to total assets			—	%			—	%			—	%			—	%			—	%
Allowance for loan losses to gross loans			1.21	%			1.37	%			1.36	%			1.42	%			1.52	%
Criticized loans/assets:
Special mention		$	2,709			$	1,232			$	486			$	1,176			$	1,210
Substandard: Accruing			2,442				2,924				3,660				4,128				4,320
Substandard: Nonaccrual			—				—				—				—				—
Doubtful			—				—				—				—				—
Total criticized loans		$	5,151			$	4,156			$	4,146			$	5,304			$	5,530
Other real estate owned			—				—				—				—				—
Investment securities			589				590				591				593				594
Total criticized assets		$	5,740			$	4,746			$	4,737			$	5,897			$	6,124
Criticized assets to total assets			2.90	%			2.73	%			2.83	%			3.60	%			3.90	%
Selected Financial Ratios: (Solera National Bank Only)
Tier 1 leverage ratio			14.8	%			13.6	%			13.9	%			14.2	%			13.7	%
Tier 1 risk-based capital ratio			18.1	%			17.4	%			18.0	%			18.5	%			18.7	%
Total risk-based capital ratio			19.4	%			18.7	%			19.3	%			19.7	%			19.9	%