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Solera National Bancorp Announces Second Quarter 2018 Financial Results

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LAKEWOOD, Colo., July 23, 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 second quarter and first half of 2018. 

Highlights for the quarter and six-months ended June 30, 2018 include:

  • Net income increased 71% for the six-months ended 2018 compared to the same period last year

  • Efficiency ratio improved to 54.9% for the six-months ended June 30, 2018 versus 67.0% for the six-months ended June 30, 2017

  • Gross loans rose $12.8 million, or 9% versus linked-quarter; and $34.5 million or 27% for the six-months ended June 30, 2018

  • Noninterest-bearing deposits climbed 130% for the six-months ended June 30, 2018 reaching $55.3 million

  • Net interest margin of 3.44% for the quarter ended June 30, 2018 increased 38 basis points from same period last year

  • Successful completion of capital raise added $9.7 million or 35% more capital compared to December 31, 2017

  • Asset quality remained strong with no nonperforming assets and modest level of criticized assets

  • Return on average assets and return on average equity was 0.84% and 5.82%, respectively

For the three-months ended June 30, 2018, the Company reported net income of $443,000, or $0.13 per share, compared to net income of $400,000 for $0.15 per share, for the three-months ended March 31, 2018, and net income of $292,000, or $0.11 per share, for the three-months ended June 30, 2017.  The second quarter results included $282,000, or $0.08 per share, in provision expense compared to $68,000, or $0.02 per share, for the linked-quarter and $0 for the three-months ended June 30, 2017.

For the six-months ended June 30, 2018, the Company reported net income of $843,000, or $0.27 per share, compared to $492,000, or $0.18 per share for the six-months ended June 30, 2017.  Martin P. May, President and CEO, commented: "2018 continues to be about growth – the Company has expanded net income, loans, core deposits and capital.  Total assets rose over $50 million, pushing the Company above $200 million for the first time in its history.  Core deposits have grown $55 million since June 2017 with 79% of that increase coming from noninterest bearing deposits.  Our successful capital raise added $9.7 million in common equity providing a foundation to support our current growth trajectory.  We are very pleased with the progress we have seen this year and continue to look for new opportunities to expand our business."  

Operational Highlights

Net interest income after provision for loan and lease losses was $1.42 million for the quarter ended June 30, 2018 compared to $1.38 million for the quarter ended March 31, 2018 and $1.15 million for the quarter ended June 30, 2017.  Net interest income after provision for loan and lease losses of $2.80 million increased $542,000, or 24%, for the six-months ended June 30, 2018 compared to the same period last year, despite an additional $350,000 in provision expense during the six-months ended June 30, 2018.

Loan growth, combined with increasing interest rates, lead to an increase of $1.08 million, or 45%, in interest and fees on loans for the first six months of 2018 compared to the same period in 2017.  Mr. May reflected, "Great clients, great shareholders, and a great team of employees, combined with a thriving Denver economy have helped Solera achieve exciting results this year.  The increase in loans has been impressive and yet core-deposit growth has outpaced loans.  As a result, the Company's net interest margin continues to expand.  Our team has worked hard and with our additional capital we are poised to continue to deliver superior results and increasing franchise value."

Net interest margin rose eight basis points from first quarter 2018 (3.36%) to second quarter 2018 (3.44%).  Year-over-year net interest margin has improved 35 basis points rising from 3.05% for the six-months ended June 30, 2017 to 3.40% for the same period in 2018.  The increase in net interest margin compared to first quarter 2017 is attributed to higher loan portfolio yields, along with the significant progress in noninterest-bearing deposit balances.

Total noninterest income in second quarter was $67,000 compared to $62,000 and $58,000 in first quarter 2018 and second quarter 2017, respectively.   For the six-months ended June 30, 2018, noninterest income increased 14% to $129,000 compared to $113,000 for the same period in 2017. 

Total noninterest expense in second quarter 2018 of $913,000 was virtually unchanged compared to first quarter 2018, and increased $133,000, or 17%, from $780,000 in second quarter 2017.  The increase from the prior year is principally due to higher employee compensation and benefits to support franchise growth along with increases in data processing expenses due to a substantial increase in customers.  Total noninterest expense for the six-months ended June 30, 2018 was $1.83 million, an increase of $210,000, or 13%, from $1.62 million for the six-months ended June 30, 2017. 

Strong revenues coupled with stable noninterest expenses allowed the Company's second quarter 2018 efficiency ratio (noninterest expense divided by the sum of net interest income and non-interest income) to set a record, dropping to 50.6% compared to 59.9% during the first quarter 2018.   The efficiency ratio for the six-months ended June 30, 2018 was also an impressive improvement over the same period of 2017 at 54.9% versus 67.0%.

Income tax expense remained relatively flat year-over-year at $253,000 for the six-months ended June 30, 2018 compared to $256,000 for the same period of 2017, despite the 47% increase in net income before taxes.  This is due to the decline in the corporate income tax rate from 34% in 2017 to 21% in 2018, as a result of the Tax Cuts and Jobs Act.

Balance Sheet Review and Asset Quality Strength

Total assets of $224.59 million at June 30, 2018 increased from $198.04 million at March 31, 2018 and $163.99 million at June 30, 2017.  The increase compared to the linked quarter was due to the growth in gross loans along with higher interest-bearing deposits with banks. 

Net loans, after allowance for loan and lease losses, were $159.13 million at June 30, 2018 compared to $146.57 million at March 31, 2018 and $110.16 million at June 30, 2017.  Net loan growth of $12.56 million during the second quarter of 2018 was driven by commercial loan originations of $21.57 million partly offset by payoffs, pay downs and an increase in the allowance for loan losses totaling $9.01 million.  For the six-months ended June 30, 2018, the $33.9 million expansion in net loans consisted primarily of commercial loan originations totaling $34.76 million, a net increase in student loans of $8.47 million, partly offset by payoffs, pay downs and an increase in the allowance for loan losses totaling $9.24 million.   

The allowance for loan and lease losses increased during the second quarter 2018 by $260,000, to $2.06 million, or 1.27% of gross loans.  The increase was driven by the growth in commercial loans outstanding along with an increase in special mention loans.  This compared to $1.80 million, or 1.21% of gross loans, at March 31, 2018 and $1.59 million, or 1.42% of gross loans at June 30, 2017.  The decline in the allowance for loan and lease losses as a percentage of gross loans since June 2017 is due to an improvement in substandard graded loans and 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 remained stable at $31.77 million at June 30, 2018 compared to $31.71 million at March 31, 2018 and $35.22 million at June 30, 2017.  Investment securities held-to-maturity of $4.9 million remain unchanged from prior periods.

Total deposits at June 30, 2018 were $185.25 million, a $28.73 million increase, or 18%, from $156.52 million at March 31, 2018 and a $52.80 million increase, or 40%, compared to $132.45 million at June 30, 2017.  The Company continued to make significant progress growing its core deposit franchise.  Noninterest-bearing demand deposits of $55.28 million at June 30, 2018 rose $12.60 million, or 30%, versus the linked-quarter and climbed $43.15 million, or 356%, since June 30, 2017.  Additionally, interest-bearing demand deposits increased $23.22 million during the second quarter to $29.33 million compared to $6.11 million at March 31, 2018 and $7.86 million at June 30, 2017.  Mr. May noted: "We've attracted some important new commercial deposit relationships that will create larger swings in balances than we've experienced previously given the nature of their business.  We're eager to offer our superior customer service to these customers and assist with all of their banking needs."

The Company continues to experience sound asset quality metrics.  At both June 30 and March 31, 2018, the Company had no non-performing loans, non-performing assets or other real estate owned.  Total criticized assets of $7.36 million increased $1.62 million over the $5.74 million at March 31, 2018 but remain low at 3.28% of total assets. 

The Company had no past due commercial loans as of June 30, 2018 and $133,000 from one past due residential mortgage loan. Additionally, $4.25 million of the student loan participation pool were 30 days+ past due at June 30, 2018.  This was an improvement from the $5.16 million 30 days+ past due at March 31, 2018.  Of the $4.25 million past due, $2.82 million were 90 days+ past due as of June 30, 2018.  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 June 30, 2018, the Bank's Tier 1 leverage ratio was 16.1%, Tier 1 risk-based capital was 20.8%, and total risk-based capital was 22.0%.

Tangible book value per share, including accumulated other comprehensive income, was $8.32 at June 30, 2018 compared to $8.52 at March 31, 2018, and $8.66 at June 30, 2017.  The decline is primarily due to an increase in the number of shares outstanding by 1,332,307, representing the additional shares sold during the first half of 2018 in the Company's rights offering.  Total stockholders' equity was $33.93 million at June 30, 2018 compared to $26.98 million at March 31, 2018 and $23.78 million at June 30, 2017.  The increase in stockholders' equity is also due to the rights offering which closed on May 31, 2018 and contributed $9.66 million in common equity.  Total stockholders' equity at June 30, 2018 included an accumulated other comprehensive loss of $713,000 compared to a loss of $573,000 at March 31, 2018 and $233,000 at June 30, 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. 

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)   6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017
ASSETS                    
Cash and due from banks   $   1,489     $   2,435     $   1,017     $   1,383     $   1,097  
Federal funds sold      5,250        580        40        2,105        210  
Interest-bearing deposits with banks      11,195        494        493        261        1,261  
Investment securities, available-for-sale      31,765        31,708        31,954        33,396        35,222  
Investment securities, held-to-maturity      4,905        4,904        4,902        4,901        4,900  
FHLB and Federal Reserve Bank stocks, at cost      1,440        1,342        1,244        1,073        987  
Gross loans      161,680        148,839        127,174        116,498        111,990  
Net deferred (fees)/expenses      (493 )      (471 )      (292 )      (241 )      (246 )
Allowance for loan and lease losses      (2,060 )      (1,800 )      (1,746 )      (1,586 )      (1,588 )
Net loans      159,127        146,568        125,136        114,671        110,156  
Premises and equipment, net      1,723        1,744        1,765        1,781        1,783  
Accrued interest receivable      1,047        1,090        837        855        794  
Bank-owned life insurance      4,667        4,640        4,612        4,583        4,554  
Other assets      1,983        2,530        1,895        2,625        3,025  
TOTAL ASSETS   $   224,591     $   198,035     $   173,895     $   167,634     $   163,989  
                     
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing demand deposits   $   55,284     $   42,684     $   24,068     $   20,538     $   12,134  
Interest-bearing demand deposits      29,331        6,108        8,049        7,684        7,855  
Savings and money market deposits      39,600        46,278        45,649        48,938        49,434  
Time deposits      61,035        61,449        59,745        57,615        63,031  
Total deposits      185,250        156,519        137,511        134,775        132,454  
                     
Accrued interest payable      181        140        130        158        151  
Short-term FHLB borrowings      —        9,239        7,121        964        4,029  
Long-term FHLB borrowings      5,000        5,000        5,000        7,400        3,400  
Accounts payable and other liabilities      235        161        304        199        178  
TOTAL LIABILITIES      190,666        171,059        150,066        143,496        140,212  
                     
Common stock      41        31        27        27        27  
Additional paid-in capital      36,921        30,285        27,253        27,197        27,190  
Accumulated deficit      (2,168 )      (2,611 )      (3,052 )      (2,755 )      (3,051 )
Accumulated other comprehensive loss       (713 )      (573 )      (243 )      (175 )      (233 )
Treasury stock, at cost      (156 )      (156 )      (156 )      (156 )      (156 )
TOTAL STOCKHOLDERS' EQUITY      33,925        26,976        23,829        24,138        23,777  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $   224,591     $   198,035     $   173,895     $   167,634     $   163,989  
                     

 

 
SOLERA NATIONAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
    Three Months Ended   Six Months Ended
($000s, except per share data)   6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017   6/30/2018   6/30/2017
Interest and dividend income                            
Interest and fees on loans   $   1,904     $   1,586     $   1,473     $   1,331     $   1,239     $   3,490     $   2,407  
Investment securities      266        256        250        255        249        522        505  
Dividends on bank stocks      20        17        15        14        11        37        22  
Other      8        6        5        5        7        14        10  
Total interest income      2,198        1,865        1,743        1,605        1,506        4,063        2,944  
Interest expense                            
Deposits      419        383        355        341        340        802        662  
FHLB borrowings      74        39        35        28        14        113        26  
Total interest expense      493        422        390        369        354        915        688  
Net interest income      1,705        1,443        1,353        1,236        1,152        3,148        2,256  
Provision for loan and lease losses      282        68        —        —        —        350        —  
Net interest income after
provision for loan and lease losses
     1,423        1,375        1,353        1,236        1,152        2,798        2,256  
Noninterest income                            
Customer service and other fees      35        29        26        24        26        64        49  
Other income      31        33        32        31        32        64        64  
Gain on loans sold      —        —        —        —        —        —        —  
Gain on sale of securities      1        —        —        —        —        1        —  
Total noninterest income      67        62        58        55        58        129        113  
Noninterest expense                            
Employee compensation and benefits      560        551        513        480        447        1,111        933  
Occupancy      50        48        49        52        42        98        91  
Professional fees      19        53        42        55        26        72        65  
Other general and administrative      284        266        296        252        265        550        532  
Total noninterest expense      913        918        900        839        780        1,831        1,621  
Net Income Before Taxes    $   577     $   519     $   511     $   452     $   430     $   1,096     $   748  
Income Tax Expense      (134 )      (119 )      (790 )      (156 )      (138 )      (253 )      (256 )
Net Income (Loss)   $   443     $   400     $   (279 )   $   296     $   292     $   843     $   492  
                             
Income (Loss) Per Share   $   0.13      $   0.15      $   (0.10 )   $   0.11      $   0.11      $   0.27      $   0.18   
Tangible Book Value Per Share   $   8.32      $   8.52      $   8.67      $   8.79      $   8.66      $   8.32      $   8.66   
Net Interest Margin     3.44 %     3.36 %     3.33 %     3.11 %     3.06 %     3.40 %     3.05 %
Efficiency Ratio     50.61 %     59.89 %     62.60 %     63.69 %     63.08 %     54.88 %     67.03 %
Return on Average Assets     0.84 %     0.86 %     (0.65 )%     0.71 %     0.73 %     0.88 %     0.63 %
Return on Average Equity     5.82 %     6.30 %     (4.65 )%     4.94 %     4.95 %     6.19 %     4.29 %
                             
Asset Quality:                            
Non-performing loans to gross loans     %     %     %     %     %        
Non-performing assets to total assets     %     %     %     %     %        
Allowance for loan losses to gross loans     1.27 %     1.21 %     1.37 %     1.36 %     1.42 %        
                             
Criticized loans/assets:                            
Special mention   $   4,346     $   2,709     $   1,232     $   486     $   1,176          
Substandard: Accruing      2,423        2,442        2,924        3,660        4,128          
Substandard: Nonaccrual      —        —        —        —        —          
Doubtful      —        —        —        —        —          
  Total criticized loans   $   6,769     $   5,151     $   4,156     $   4,146     $   5,304          
Other real estate owned      —        —        —        —        —          
Investment securities      588        589        590        591        593          
Total criticized assets   $   7,357     $   5,740     $   4,746     $   4,737     $   5,897          
Criticized assets to total assets     3.28 %     2.90 %     2.73 %     2.83 %     3.60 %        
                             
Selected Financial Ratios: (Solera National Bank Only)      
Tier 1 leverage ratio     16.1 %     14.8 %     13.6 %     13.9 %     14.2 %        
Tier 1 risk-based capital ratio     20.8 %     18.1 %     17.4 %     18.0 %     18.5 %        
Total risk-based capital ratio     22.0 %     19.4 %     18.7 %     19.3 %     19.7 %        
                             

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