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Solera National Bancorp Announces Third Quarter 2017 Financial Results

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LAKEWOOD, Colo., Oct. 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 third quarter and the first nine months of 2017. 

Highlights for the quarter ended September 30, 2017 include:

  • Twelfth consecutive profitable quarter
  • Noninterest-bearing deposit growth of $8.40 million, or 69.3%, versus linked-quarter
  • Gross loan growth of $4.51 million, or 4.0%, versus linked-quarter
  • Solid asset quality metrics
  • Net interest margin of 3.11% increased 15 basis points from same period in 2016
  • Efficiency ratio of 65.0% improved from 79.6% for the same period in 2016
  • Tangible book value per share of $8.79 increased 12.7% from prior year

For the three months ended September 30, 2017, the Company reported net income of $296,000, or $0.11 per share, compared to net income of $292,000, or $0.11 per share, for the three months ended June 30, 2017, and $266,000, or $0.10 per share, for the three months ended September 30, 2016.

For the nine months ended September 30, 2017, Solera reported net income of $788,000, or $0.29 per share, compared with net income of $1.04 million, or $0.38 per share, for the nine months ended September 30, 2016.  The first nine months of 2016 included a gain on loans sold and a gain on sale of securities of $125,000 and $157,000, respectively, compared to no asset sales during the first nine months of 2017.  Additionally, the first nine months of 2017 results include income tax expense of $412,000 compared to no income tax in the first nine months of 2016.

Martin P. May, President and CEO, commented: "Overall, we are pleased with our solid operating performance in the third quarter and our outlook continues to be positive.  Our team continues its relentless focus on growth, efficiency and profitability."  

Operational Highlights

Net interest income after provision for loan and lease losses was $1.24 million for the quarter ended September 30, 2017 compared to $1.15 million and $1.07 million in the quarters ended June 30, 2017 and September 30, 2016, respectively.  Net interest income after provision for loan and lease losses for the first nine months of 2017 was $3.49 million, compared to $3.07 million in the first nine months of 2016.  The Company recorded no provision for loan and lease losses during the first nine months of either 2017 or 2016.

The Company's net interest margin in third quarter 2017 was 3.11% compared to 3.06% in the linked-quarter and 2.96% in the third quarter 2016.  For the nine months ended September 30, 2017, net interest margin of 3.08% increased nine basis points from 2.98% for the nine months ended September 30, 2016.  The increase in net interest margin for both the third quarter and first nine months of 2017 versus the prior year is due primarily to growth in earning assets combined with a shift to higher yielding commercial loans from lower yielding investment securities.  Cost of funds are essentially unchanged year over year.

Total noninterest income in third quarter 2017 was $55,000 compared to $58,000 in second quarter 2017 and $96,000 in third quarter 2016.  The decrease versus third quarter 2016 was due to gains on sale of available-for-sale securities recorded in third quarter of 2016 of $36,000 compared to no realized net securities gains generated in the third quarter of 2017.

Total noninterest expense of $839,000 in the third quarter of 2017 increased from $780,000 in the linked-quarter but declined from $897,000 in the third quarter of 2016.  The increase from the linked-quarter is primarily due to investment in our business development team and higher professional services fees.  The decline from the third quarter of 2016 is principally due to legal fees incurred last year to defend a lawsuit brought by a former CEO of the Company.

In the third quarter of 2017, the Company recorded income tax expense of $156,000 compared to income tax expense of $138,000 in the second quarter of 2017 and no income tax in the third 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 $167.63 million at September 30, 2017 increased from $163.99 million at June 30, 2017 and $149.28 million at September 30, 2016.  The increase versus the linked quarter and September 30, 2016 was primarily due to solid growth in gross loans.

Net loans, after allowance for loan and lease losses, were $114.67 million at September 30, 2017 compared to $110.16 million at June 30, 2017 and $98.48 million at September 30, 2016.  Net loan growth in the third quarter of 2017 was driven by loan originations of $7.53 million partly offset by payoffs and pay downs totaling $3.02 million.  Gross loans increased $16.16 million, or 16.1%, during the twelve months ended September 30, 2017 from organic net loan growth of $19.26 million partly offset by a $3.10 million net decrease in a purchased participation interest in a pool of rehabilitated student loans. 

The allowance for loan and lease losses at September 30, 2017 of $1.59 million was effectively unchanged compared to June 30, 2017 and September 30, 2016.  The allowance for loan and lease losses as a percentage of gross loans of 1.36% at September 30, 2017 declined from 1.58% at September 30, 2016 due to a reduction in criticized assets and the continued strengthening of the economic environment.  No loan loss provisioning has been required over the past eleven quarters as the Bank's credit quality metrics remain outstanding relative to banking industry norms. 

Total investment securities available-for-sale were $33.40 million at September 30, 2017 compared to $35.22 million at June 30, 2017 and $36.32 million at September 30, 2016.  Investment securities held-to-maturity of $4.90 million at September 30, 2017 increased by $401,000 compared to September 30, 2016.

Total deposits at September 30, 2017 were $134.78 million compared to $132.45 million at June 30, 2017 and $122.13 million at September 30, 2016.  The Company's focus on noninterest-bearing deposits continued to yield very positive results.  Noninterest-bearing demand deposits increased $8.40 million versus the linked-quarter, or 69.3%, to $20.54 million at September 30, 2017, and 295.8%, or $15.35 million, from $5.19 million at September 30, 2016.

The Company continues to experience sound asset quality metrics.  At September 30, 2017, the Company had no non-performing loans, non-performing assets or other real estate owned.  Total criticized assets of $4.74 million at September 30, 2017, or 2.83% of total assets, declined from $5.90 million, or 3.60% of total assets, at June 30, 2017 and $6.52 million, or 4.36% of total assets, at September 30, 2016.

The Company had no past due commercial loans and $1.0 million of past due residential mortgage loans as of September 30, 2017, the majority of which was paid current in early October.  Additionally, $3.49 million of the student loan participation pool were 30 days+ past due at September 30, 2017, of which $2.56 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 September 30, 2017, the Bank's Tier 1 leverage ratio was 13.9%, Tier 1 risk-based capital was 18.0%, and total risk-based capital was 19.3%.

Tangible book value per share, including accumulated other comprehensive income, was $8.79 at September 30, 2017, compared to $8.66 at June 30, 2017 and $7.80 at September 30, 2016.  Total stockholders' equity was $24.14 million at September 30, 2017 compared to $23.78 million at June 30, 2017 and $21.49 million at September 30, 2016.  Total stockholders' equity at September 30, 2017 included an accumulated other comprehensive loss of $175,000 compared to a loss of $233,000 at June 30, 2017 and a gain of $89,000 at September 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 levels and is operating in a vibrant and healthy economic environment.  Importantly, we are in the process of finalizing a registration statement with the Securities and Exchange Commission to raise additional capital from current shareholders.  The incremental capital will enable us to explore growth opportunities such as 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.

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

FINANCIAL TABLES FOLLOW

SOLERA NATIONAL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
($000s)   9/30/2017   6/30/2017   3/31/2017   12/31/2016   9/30/2016
ASSETS                    
Cash and due from banks   $ 1,383     $ 1,097     $ 2,126     $ 719     $ 825  
Federal funds sold     2,105       210       185       80        
Interest-bearing deposits with banks     261       1,261       261       261       261  
Investment securities, available-for-sale     33,396       35,222       34,645       36,133       36,324  
Investment securities, held-to-maturity     4,901       4,900       4,899       4,500       4,500  
FHLB and Federal Reserve Bank stocks, at cost     1,073       987       861       879       1,027  
Gross loans     116,498       111,990       105,363       105,243       100,336  
Net deferred (fees)/expenses     (241 )     (246 )     (249 )     (260 )     (270 )
Allowance for loan and lease losses     (1,586 )     (1,588 )     (1,601 )     (1,599 )     (1,584 )
Net loans     114,671       110,156       103,513       103,384       98,482  
Premises and equipment, net     1,781       1,783       1,803       1,831       1,861  
Accrued interest receivable     855       794       816       798       768  
Bank-owned life insurance     4,583       4,554       4,525       4,495       4,464  
Other assets     2,625       3,025       3,460       3,011       765  
TOTAL ASSETS   $ 167,634     $ 163,989     $ 157,094     $ 156,091     $ 149,277  
                     
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing demand deposits   $ 20,538     $ 12,134     $ 8,689     $ 5,941     $ 5,189  
Interest-bearing demand deposits     7,684       7,855       8,016       8,374       6,997  
Savings and money market deposits     48,938       49,434       43,473       42,569       38,558  
Time deposits     57,615       63,031       67,865       69,441       71,382  
Total deposits     134,775       132,454       128,043       126,325       122,126  
                     
Accrued interest payable     158       151       131       103       144  
Short-term FHLB borrowings     964       4,029       1,466       2,415       1,125  
Long-term FHLB borrowings     7,400       3,400       3,400       3,400       4,000  
Accounts payable and other liabilities     199       178       654       776       390  
TOTAL LIABILITIES     143,496       140,212       133,694       133,019       127,785  
                     
Common stock     27       27       27       27       27  
Additional paid-in capital     27,197       27,190       27,180       27,170       27,160  
Accumulated deficit     (2,755 )     (3,051 )     (3,343 )     (3,543 )     (5,628 )
Accumulated other comprehensive gain (loss)     (175 )     (233 )     (308 )     (426 )     89  
Treasury stock, at cost     (156 )     (156 )     (156 )     (156 )     (156 )
TOTAL STOCKHOLDERS' EQUITY     24,138       23,777       23,400       23,072       21,492  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 167,634     $ 163,989     $ 157,094     $ 156,091     $ 149,277  


SOLERA NATIONAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
    Three Months Ended
  Nine Months Ended
($000s, except per share data)   9/30/2017   6/30/2017   3/31/2017   12/31/2016   9/30/2016   9/30/2017   9/30/2016
Interest and dividend income                            
Interest and fees on loans   $ 1,331     $ 1,239     $ 1,168     $ 1,175     $ 1,144     $ 3,738     $ 3,209  
Investment securities     255       249       256       254       242       760       783  
Dividends on bank stocks     14       11       11       12       12       36       33  
Other     5       7       3       1       2       15       10  
Total interest income     1,605       1,506       1,438       1,442       1,400       4,549       4,035  
Interest expense                            
Deposits     341       340       322       320       315       1,003       907  
FHLB borrowings     28       14       12       15       18       54       58  
Total interest expense     369       354       334       335       333       1,057       965  
Net interest income     1,236       1,152       1,104       1,107       1,067       3,492       3,070  
Provision for loan and lease losses                                          
Net interest income after
provision for loan and lease losses
    1,236       1,152       1,104       1,107       1,067       3,492       3,070  
Noninterest income                            
Customer service and other fees     24       26       23       26       28       73       76  
Other income     31       32       32       32       32       95       106  
Gain on loans sold                                         125  
Gain on sale of available-for-sale securities                             36             157  
Total noninterest income     55       58       55       58       96       168       464  
Noninterest expense                            
Employee compensation and benefits     480       447       486       425       410       1,413       1,192  
Occupancy     52       42       49       53       59       143       180  
Professional fees     55       26       39       49       129       120       231  
Other general and administrative     252       265       267       762       299       784       889  
Total noninterest expense     839       780       841       1,289       897       2,460       2,492  
Net Income (Loss) Before Taxes    $ 452     $ 430     $ 318     $ (124 )   $ 266     $ 1,200     $ 1,042  
Income Tax (Expense) Benefit     (156 )     (138 )     (118 )     2,209             (412 )      
Net Income    $ 296     $ 292     $ 200     $ 2,085     $ 266     $ 788     $ 1,042  
                             
Income Per Share   $ 0.11     $ 0.11     $ 0.07     $ 0.77     $ 0.10     $ 0.29     $ 0.38  
Tangible Book Value Per Share   $ 8.79     $ 8.66     $ 8.52     $ 8.39     $ 7.80     $ 8.66     $ 7.80  
Net Interest Margin     3.11 %     3.06 %     3.04 %     3.04 %     2.96 %     3.08 %     2.98 %
Efficiency Ratio     64.99 %     64.46 %     72.56 %     110.64 %     79.59 %     67.21 %     73.79 %
Return on Average Assets     0.71 %     0.73 %     0.51 %     5.46 %     0.73 %     0.64 %     0.96 %
Return on Average Equity     4.94 %     4.95 %     3.44 %     37.43 %     4.96 %     4.42 %     6.55 %
                             
Asset Quality:                            
Non-performing loans to gross loans     %     %     %     %     %        
Non-performing assets to total assets     %     %     %     %     %        
Allowance for loan losses to gross loans     1.36 %     1.42 %     1.52 %     1.52 %     1.58 %        
                             
Criticized loans/assets:                            
Special mention   $ 486     $ 1,176     $ 1,210     $ 1,164     $ 1,984          
Substandard: Accruing     3,660       4,128       4,320       4,364       3,935          
Substandard: Nonaccrual                                      
Doubtful                                      
  Total criticized loans   $ 4,146     $ 5,304     $ 5,530     $ 5,528     $ 5,919          
Other real estate owned                                      
Investment securities     591       593       594       595       596          
Total criticized assets   $ 4,737     $ 5,897     $ 6,124     $ 6,123     $ 6,515          
Criticized assets to total assets     2.83 %     3.60 %     3.90 %     3.92 %     4.36 %        
                             
Selected Financial Ratios: (Solera National Bank Only)      
Tier 1 leverage ratio     13.9 %     14.2 %     13.7 %     14.0 %     13.2 %        
Tier 1 risk-based capital ratio     18.0 %     18.5 %     18.7 %     18.7 %     19.1 %        
Total risk-based capital ratio     19.3 %     19.7 %     19.9 %     20.0 %     20.4 %        
                             
                             

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