Solera National Bancorp Announces Second Quarter 2018 Financial Results

Increasing Profitability, Significant Loan and Deposit Growth

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	%