Solera National Bancorp Announces 2Q, First Half 2016 Financial Results
LAKEWOOD, Colo., July 21, 2016 (GLOBE NEWSWIRE) -- Solera National Bancorp, Inc. (OTC: SLRK), the holding company for Solera National Bank, a business-focused bank primarily serving the Denver metropolitan area, today reported financial results for the second quarter and first half of 2016.
Highlights for the quarter ended June 30, 2016 include:
- Seventh consecutive profitable quarter
- Net income of $322,000, or $0.12 per share
- Return on Average Assets and Return on Average Equity of 0.91% and 6.11%, respectively
- Efficiency ratio of 75.1%
- Gross loan growth of $12.7 million, or 15.9% versus linked-quarter
- Satisfactory rating on 2016 Community Reinvestment Act examination
For the three months ended June 30, 2016, the Company reported net income of $322,000, or $0.12 per share, compared to net income of $454,000, or $0.17 per share, for the three months ended March 31, 2016, and $335,000, or $0.12 per share, for the three months ended June 30, 2015. For the six months ended June 30, 2016, Solera reported net income of $776,000, or $0.28 per share, compared with net income of $810,000, or $0.30 per share, for the six months ended June 30, 2015. First quarter 2016 results included a gain on loans sold of $125,000, or $0.05 per share. First half 2015 results included a $106,000 benefit, or $0.04 per share, from the reversal of a deferred rent obligation associated with the purchase of the Company's main office, which had previously been on a long-term lease.
Martin P. May, President and CEO, commented: "The Company continues to perform well, delivering our seventh consecutive quarterly profit. During the quarter, we generated appreciable growth in our loan portfolio both organically and through the purchase of a participation interest in a pool of rehabilitated federal student loans. These floating rate loans are guaranteed by the full faith and credit of the U.S. Treasury and therefore add a negligible amount of interest rate risk or credit risk to the Company's balance sheet. Additionally, we completed the implementation of our upgraded teller and new account software to better serve our customers and improve our operating efficiency."
Net interest income after provision for loan and lease losses was $957,000 for the quarter ended June 30, 2016, compared to $1.05 million and $1.03 million in the quarters ended March 31, 2016 and June 30, 2015, respectively. Net interest income after provision for loan and lease losses for the six months of 2016 was $2.0 million, compared to $2.09 million in the six months of 2015. The Company's net interest margin in second quarter 2016 was 2.87% compared to 3.09% in the linked-quarter and 3.10% in the second quarter 2015. The decline in net interest income and net interest margin in the first half of 2016 compared to first half of 2015 was attributed to a 16 basis point increase in the cost of funds due to a shift from less expensive savings and money market accounts to more expensive, longer-term time deposits. This was partially due to a certificate of deposit promotional campaign in the second half of 2015 to increase longer-term deposits. The Company recorded no provision for loan and lease losses in the first half of 2016 or first half of 2015.
Total noninterest income in second quarter 2016 was $126,000 compared to $242,000 in first quarter 2016 and $100,000 in second quarter 2015. The decrease versus the linked-quarter is due to a $125,000 gain in first quarter 2016 on the sale of the guaranteed portion of an SBA 7(a) loan. The second quarter 2016 includes gains on sale of investment securities of $70,000 compared to $51,000 in first quarter 2016 and $35,000 in second quarter 2015. Noninterest income was $368,000 for the six months ended June 30, 2016 compared to $263,000 for the six months ended June 30, 2015.
The Company continues to effectively control expenses. Total noninterest expense of $761,000 in second quarter 2016 compared favorably with $834,000 in the linked-quarter and $791,000 in the second quarter of 2015. In the first half of 2016, noninterest expense was $1.60 million compared to $1.54 million in the first half of 2015. The increase is primarily due to a $106,000 benefit in 2015 from the reversal of a deferred rent obligation associated with the purchase of the Company's main office, which had previously been on a long-term lease. May commented, "The Company's efficiency ratio of 70.9% for the first half of 2016 is in the mid-point of our range of 65% to 75% and reflects ongoing efforts to align noninterest expense growth with top line revenue growth."
The Company continued to record no income tax expense due to the utilization of available net operating loss carryforwards.
Balance Sheet Review and Asset Quality Strength
Total assets of $142.84 million at June 30, 2016 increased from $140.56 million at March 31, 2016 and $140.17 million at June 30, 2015. The increase versus the linked-quarter was due to substantial growth in gross loans partly offset by a decrease in investment securities available for sale.
Net loans, after allowance for loan and lease losses, were $90.97 million at June 30, 2016 compared to $78.42 million at March 31, 2016 and $81.58 million at June 30, 2015. Organic net loan growth was $2.83 million during the second quarter of 2016 from loan originations of $7.52 million offset by payoffs and pay downs totaling $4.68 million. This growth was augmented by the purchase of a $10 million participation interest in a pool of rehabilitated student loans. The Company had no loans held for sale at June 30, 2016. Melissa K. Larkin, Chief Financial Officer commented: "We found the participation in the rehabilitated student loan pools to be an attractive alternative to purchasing bonds, as they provide interest rate risk protection given their variable rate structure and limited credit risk given their government guarantee, with the added benefit of yielding above our investment portfolio average."
The allowance for loan and lease losses at June 30, 2016 was $1.58 million, or 1.70% of gross loans, compared to $1.56 million, or 1.95% of gross loans at March 31, 2016, and $1.63 million, or 1.95% of gross loans at June 30, 2015. The decline in the allowance for loan and lease losses as a percentage of gross loans is primarily due to the $10 million participation interest in a pool of rehabilitated student loans that comes with minimal risk of loss given the government guarantee.
Total investment securities available-for-sale were $36.16 million at June 30, 2016 compared to $43.75 million at March 31, 2016 and $47.33 million at June 30, 2015. The Company capitalized on the recent rally in the U.S. Treasury market to sell investment securities to both reduce interest rate risk and provide liquidity to purchase the participation interest in the student loan pool. Investment securities held-to-maturity of $4.5 million remained unchanged at June 30, 2016 compared to March 31, 2016 and increased $3.5 million compared to June 30, 2015.
Total deposits at June 30, 2016 were $117.02 million compared to $114.30 million at March 31, 2016 and $109.21 million at June 30, 2015. Time deposits increased $12.99 million versus the prior year as a result of the Company's efforts to attract longer-term, relatively low cost deposits.
The Company continues to experience sound asset quality metrics from improved underwriting and the success of certain exit strategies. At June 30, 2016, the Company had no non-performing loans, non-performing assets or other real estate owned. Total criticized assets decreased to $6.19 million at June 30, 2016 from $7.25 million at March 31, 2016 and $8.63 million at June 30, 2015.
The Company had no past due commercial loans as of June 30, 2016. However, $3.33 million of the student loan participation pool were 30 days+ past due at June 30, 2016 of which $2.21 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 making the Bank's maximum exposure to credit losses slightly less than 1%.
The Company's earnings continue to generate capital, and its capital ratios are well in excess of the highest required regulatory benchmark levels. As of June 30, 2016, the Bank's Tier 1 leverage ratio was 13.8%, Tier 1 risk-based capital was 18.9%, and total risk-based capital was 20.2%.
Tangible book value per share, including accumulated other comprehensive income, was $7.75 at June 30, 2016, compared to $7.54 at March 31, 2016 and $6.89 at June 30, 2015. Total stockholders' equity was $21.37 million at June 30, 2016 compared to $20.82 million at March 31, 2016 and $19.08 million at June 30, 2015. Total stockholders' equity at June 30, 2016 included an accumulated other comprehensive gain of $248,000 compared to a loss of $278,000 at June 30, 2015 as a result of an increase in the fair value of the Bank's available-for-sale investment portfolio due to a decrease in longer-term interest rates.
May concluded: "The Company has demonstrated the ability to consistently generate core earnings over an extended period of time while dedicating the necessary resources to address the deficiencies identified by the board of directors, management team and bank regulators in the second half of 2014. We are pleased with the results of our recent Community Reinvestment Act examination and expect to fully resolve the remaining regulatory issues in the very near future. With a strong balance sheet and a significant amount of capital available to leverage, we continue to build 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.
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. 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|
|Cash and due from banks||$||678||$||521||$||749||$||644||$||562|
|Federal funds sold||1,755||3,130||1,740||365||—|
|Interest-bearing deposits with banks||261||751||750||750||750|
|Investment securities, available-for-sale||36,159||43,752||48,374||42,733||47,326|
|Investment securities, held-to-maturity||4,500||4,500||4,500||3,750||1,000|
|FHLB and Federal Reserve Bank stocks, at cost||853||860||874||941||1,091|
|Net deferred (fees)/expenses||(201||)||(54||)||(15||)||(6||)||28|
|Allowance for loan and lease losses||(1,577||)||(1,557||)||(1,518||)||(1,609||)||(1,626||)|
|Loans held for sale||—||—||1,039||—||—|
|Premises and equipment, net||1,884||1,902||1,918||1,955||1,999|
|Accrued interest receivable||616||531||570||542||563|
|Bank-owned life insurance||4,433||4,401||4,369||4,565||4,531|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Noninterest-bearing demand deposits||4,156||4,069||3,954||4,362||4,034|
|Interest-bearing demand deposits||7,913||7,644||8,405||6,524||6,604|
|Savings and money market deposits||36,798||38,151||42,320||42,706||43,405|
|Accrued interest payable||127||112||88||102||79|
|Short-term FHLB borrowings||—||—||—||450||5,846|
|Long-term FHLB borrowings||4,000||5,000||5,000||5,500||5,500|
|Accounts payable and other liabilities||317||333||309||370||449|
|Additional paid-in capital||27,149||27,143||27,137||27,130||27,126|
|Accumulated other comprehensive gain (loss)||248||17||(501||)||(175||)||(278||)|
|Treasury stock, at cost||(156||)||(156||)||(156||)||(156||)||(156||)|
|TOTAL STOCKHOLDERS' EQUITY||21,374||20,815||19,837||19,837||19,081|
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY||$||142,841||$||140,559||$||146,073||$||139,445||$||140,167|
|SOLERA NATIONAL BANCORP, INC.|
|CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)|
|Three Months Ended||Six Months Ended|
|($000s, except per share data)||6/30/2016||3/31/2016||12/31/2015||9/30/2015||6/30/2015||6/30/2016||6/30/2015|
|Interest and dividend income|
|Interest and fees on loans||$||1,011||$||1,054||$||1,060||$||1,106||$||1,042||$||2,065||$||2,071|
|Dividends on bank stocks||11||10||11||12||12||21||23|
|Total interest income||1,275||1,360||1,357||1,352||1,299||2,635||2,633|
|Total interest expense||318||314||305||286||273||632||544|
|Net interest income||957||1,046||1,052||1,066||1,026||2,003||2,089|
|Provision for loan and lease losses||—||—||—||(50||)||—||—||—|
|Net interest income after provision for loan and lease losses||957||1,046||1,052||1,116||1,026||2,003||2,089|
|Customer service and other fees||24||24||25||28||30||48||57|
|Gain on loans sold||—||125||—||—||—||125||—|
|Gain on sale of available-for-sale securities||70||51||6||45||35||121||135|
|Total noninterest income||126||242||75||407||100||368||263|
|Employee compensation and benefits||376||406||410||422||373||782||749|
|Other general and administrative||298||292||307||321||317||590||607|
|Total noninterest expense||761||834||808||874||791||1,595||1,542|
|Income per share||$||0.12||$||0.17||$||0.12||$||0.24||$||0.12||$||0.28||$||0.30|
|Tangible book value per share||$||7.75||$||7.54||$||7.18||$||7.17||$||6.89||$||7.75||$||6.89|
|Net interest margin||2.87||%||3.09||%||3.10||%||3.19||%||3.10||%||2.98||%||3.12||%|
|Return on Average Assets||0.91||%||1.27||%||0.89||%||1.86||%||0.94||%||1.10||%||1.03||%|
|Return on Average Equity||6.11||%||8.93||%||6.43||%||13.34||%||6.99||%||7.80||%||8.98||%|
|Non-performing loans to gross loans||—%||—%||0.16||%||0.30||%||0.18||%|
|Non-performing assets to total assets||—%||—%||0.09||%||0.18||%||0.10||%|
|Allowance for loan losses to gross loans||1.70||%||1.95||%||1.85||%||1.92||%||1.95||%|
|Total criticized loans||$||5,594||$||6,112||$||3,773||$||4,482||$||7,478|
|Other real estate owned||—||—||—||—||—|
|Total criticized assets||$||6,191||$||7,248||$||4,913||$||5,626||$||8,625|
|Criticized assets to total assets||4.33||%||5.16||%||3.36||%||4.03||%||6.15||%|
|Selected Financial Ratios: (Solera National Bank Only)|
|Tier 1 leverage ratio||13.8||%||13.5||%||13.2||%||13.1||%||12.6||%|
|Tier 1 risk-based capital ratio||18.9||%||19.4||%||18.8||%||17.3||%||17.3||%|
|Total risk-based capital ratio||20.2||%||20.7||%||20.0||%||18.5||%||18.6||%|