Press Release

CORRECTING and REPLACING -- Solera National Bancorp Announces Third Quarter 2019 Financial Results

Strong core deposit growth enhances liquidity

Company Release - 10/23/2019 2:41 PM ET

LAKEWOOD, Colo., Oct. 23, 2019 (GLOBE NEWSWIRE) -- Regarding the release issued earlier today, Solera National Bancorp, Inc. (OTC:SLRK) discovered that Special Mention loans were misreported as of September 30, 2019. The numbers have been corrected, and the complete corrected release follows in full:

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 nine months ended September 30, 2019. 

Highlights for the quarter and nine-months ended September 30, 2019 include:

  • Net income increased to a record setting $952,000 for the third quarter 2019, ending the nine-months at $2.7 million, an 80% increase over the $1.5 million earned for the nine-months ended September 30, 2018

  • Cost of funds dropped to 78 basis points for the nine-months ended September 30, 2019 compared to 104 basis points for the same period last year

  • Third quarter 2019 cost of funds fell to 70 basis points, a seven basis point improvement over the linked-quarter

  • Net interest margin of 3.88% for the nine-months ended September 30, 2019 improved from 3.47% for the same period last year

  • Gross loans rose $22.4 million since December 31, 2018 ending the third quarter at $192.8 million

  • Notable growth of $75.8 million, or 105%, year-over-year in noninterest-bearing deposits, with a balance of $147.7 million or 63% of total deposits at September 30, 2019

  • Strong asset quality; nonperforming loans of less than 0.01% of gross loans and criticized assets were 3.58% of total assets as of September 30, 2019

  • Return on average assets improved to 1.48% for the nine-months ended September 30, 2019 compared to 0.98% for the nine-months ended September 30, 2018

  • Return on average equity was 9.60% for the nine-months ended September 30, 2019 compared to 6.67% for the nine-months ended September 30, 2018

For the three-months ended September 30, 2019, the Company reported net income of $952,000, or $0.23 per share, compared to net income of $901,000 or $0.22 per share, for the three-months ended June 30, 2019, and net income of $649,000, or $0.16 per share, for the three-months ended September 30, 2018.  The third quarter results included $79,000, or $0.02 per share, in provision expense compared to $12,000 for the linked-quarter and $131,000, or $0.03 per share, for the three-months ended September 30, 2018.

For the nine-months ended September 30, 2019, the Company reported net income of $2.69 million, or $0.66 per share, compared to $1.49 million, or $0.44 per share, for the nine-months ended September 30, 2018.  Martin P. May, President and CEO, commented: “We are pleased with the growth of our bottom-line results as we begin to leverage the Bank’s capital. Improving earnings per share 50% year-over-year is a significant accomplishment.” 

Operational Highlights

Net interest income after provision for loan and lease losses was $2.30 million for the quarter ended September 30, 2019 compared to $2.24 million for the quarter ended June 30, 2019 and $1.74 million for the quarter ended September 30, 2018.  Net interest income after provision for loan and lease losses for the nine-months ended September 30, 2019 of $6.60 million increased $2.06 million, or 45%, over the same period last year.  This improvement was aided by a decline in provision expense for the nine-months ended September 30, 2019 which was $162,000 compared to $481,000 for the same period last year.  

Loan growth, combined with increasing interest rates, lead to an increase of $1.36 million, or 25%, in interest and fee income on loans for the nine-months ended September 30, 2019 compared to the same period in 2018.  Interest expense decreased $158,000 for the nine months of 2019 compared to the same period in 2018 despite the $58.03 million increase in total deposits during this time. 

Net interest margin decreased 15 basis points from second quarter 2019 (3.96%) to third quarter 2019 (3.81%).  Ms. Melissa K. Larkin, Chief Financial Officer, commented:  “The decline in net interest margin during the third quarter 2019 is primarily due to the Federal Open Market Committee reducing short-term interest rates twice during the quarter.  In both July and September rates were cut 25 basis points and the Bank’s variable rate assets were immediately impacted by this rate reduction.”  Year-over-year net interest margin has improved 41 basis points rising from 3.47% for the nine-months ended September 30, 2018 to 3.88% for the same period in 2019.

Total noninterest income in third quarter 2019 was $105,000 compared to $252,000 and $63,000 in second quarter 2019 and third quarter 2018, respectively.  Third quarter 2019 results included gains on the sale of investment securities of $11,000 compared to $154,000 for second quarter 2019; no gains were recorded for third quarter 2018.  For the nine-months ended September 30, 2019, noninterest income was $426,000 compared to $192,000 for the same period in 2018.  Ms. Larkin noted, “The 86% improvement year-over-year in customer service and other fees is directly correlated with the Bank’s growth in new deposit customers and increased product offerings.  We are pleased to see this metric showing improvement as this has been an area of focus for us.”

Total noninterest expense in third quarter 2019 of $1.15 million decreased $161,000 from $1.31 million for second quarter 2019.  Second quarter 2019 included a charge of $208,000 in employee compensation and benefits related to a change of control clause that caused some employee stock options to become fully vested.  Excluding this item, noninterest expense increased $47,000, or 4%, during third quarter 2019 compared to the linked-quarter.  Total noninterest expense for the nine-months ended September 30, 2019 was $3.50 million, up $707,000 or 25%, from $2.79 million for the same prior year period.  The increase includes the $208,000 nonrecurring employee compensation expense mentioned above, along with higher data processing expenses due to a surge in customers and greater employee compensation and benefits expense due to increased staffing to support franchise growth.

The Company’s third quarter 2019 efficiency ratio (noninterest expense divided by the sum of net interest income and noninterest income) improved to 46.60% compared to 49.46% for the third quarter of 2018 and was essentially unchanged from the linked quarter after adjusting for the nonrecurring employee stock option expenses (46.94%). The efficiency ratio for the nine-months ended September 30, 2019 was 49.76% compared to 53.49% for the nine-months ended September 30, 2018.

Income tax expense increased significantly year-over-year at $843,000 for the nine-months ended September 30, 2019 compared to $452,000 for the same period of 2018 given the improvement in pre-tax income.

Balance Sheet Review and Asset Quality Strength

Total assets of $277.82 million at September 30, 2019 increased from $243.34 million at June 30, 2019 and $216.03 million at September 30, 2018.  The increase compared to the linked quarter was due to the growth in gross loans along with higher interest-bearing deposits with banks and an increase in federal funds sold.

Net loans, after allowance for loan and lease losses, were $189.74 million at September 30, 2019 compared to $178.58 million at June 30, 2019 and $161.41 million at September 30, 2018.  Net loan growth of $11.16 million during the third quarter of 2019 was driven by commercial loan originations of $14.25 million partly offset by payoffs, pay downs and an increase in the allowance for loan losses totaling $3.09 million.  For the nine-months ended September 30, 2019, the $22.08 million expansion in net loans consisted primarily of commercial loan originations totaling $41.63 million, a net decrease in student loans of $2.07 million, partly offset by payoffs, pay downs and an increase in the allowance for loan losses totaling $17.48 million.   

The allowance for loan and lease losses at September 30, 2019 was $2.40 million, or 1.24% of gross loans, compared to $2.34 million, or 1.29%, at June 30, 2019 and $2.19 million, or 1.33% of gross loans at September 30, 2019.  The third quarter provision expense of $79,000 increased $67,000 from the linked quarter due to loan growth.    

Total investment securities available-for-sale increased to $27.49 million at September 30, 2019 compared to $26.98 million at June 30, 2019 and $31.43 million at September 30, 2018.  Investment securities held-to-maturity of $6.41 million remain unchanged from June 30, 2019 and were up $1.5 million from September 30, 2018.  The Company realized a gain of $11,000 from the sale of a corporate bond during the third quarter 2019.

Total deposits at September 30, 2019 were $234.10 million, a $33.46 million, or 17%, increase from $200.64 million at June 30, 2019 and a $58.03 million, or 33%, increase over the $176.07 million at September 30, 2018.  The Company continued to make significant progress growing its core deposit franchise.  Noninterest-bearing demand deposits of $147.73 million at September 30, 2019 rose $33.29 million, or 29%, versus the linked-quarter and climbed $75.81 million, or 105%, since September 30, 2018. 

The Company continues to experience sound asset quality metrics.  At both September 30 and June 30, 2019, the Company had minimal non-performing assets and no other real estate owned.  Criticized assets to total assets increased to 3.58% at September 30, 2019 from 3.35% at June 30, 2019 and 3.38% at September 30, 2018.

Commercial and residential loans past due have remained inconsequential for all periods presented, with the only notable past dues coming from the student loan participation pool.  $3.01 million of the $16.40 million student loan participation pool were 30 days+ past due at September 30, 2019.  This was down slightly from $3.36 million 30 days+ past due at June 30, 2019.  Of the $3.01 million past due, $1.71 million were 90 days+ past due as of September 30, 2019.  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 September 30, 2019, the Bank’s Tier 1 leverage ratio was 14.8%, Tier 1 risk-based capital was 19.0%, and total risk-based capital was 20.2%.

Tangible book value per share, including accumulated other comprehensive income, was $9.64 at September 30, 2019 compared to $9.36 at June 30, 2019, and $8.47 at September 30, 2018.  “We remain committed to growing shareholder equity and providing a solid return in a safe and efficient manner.  This quarter confirms that our strategy is working,” reflected Mr. May. Total stockholders' equity was $39.21 million at September 30, 2019 compared to $38.10 million at June 30, 2019 and $34.53 million at September 30, 2018. The fair value of the Bank's available-for-sale investment portfolio has improved from a year ago due to a decline in interest rates. As of September 30, 2019, the available-for-sale investment portfolio had a net gain of $222,000 compared to a net gain of $59,000 at June 30, 2019 and a net loss of $772,000 at September 30, 2018.

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 the needs of emerging businesses and real estate investors.  At the core of Solera National Bank is welcoming, attentive and respectful customer service, a focus on supporting a diverse 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) 9/30/19 6/30/19 3/31/19 12/31/18 9/30/18
ASSETS          
Cash and due from banks $1,860  $1,761  $1,113  $1,676  $1,939 
Federal funds sold  27,400   5,265   1,100   2,310   3,950 
Interest-bearing deposits with banks  14,599   14,041   2,936   2,402   1,938 
Investment securities, available-for-sale  27,485   26,979   34,084   31,005   31,427 
Investment securities, held-to-maturity  6,409   6,408   6,406   4,908   4,907 
FHLB and Federal Reserve Bank stocks, at cost  1,246   1,239   1,261   1,202   1,244 
Gross loans  192,752   181,461   176,388   170,399   164,090 
Net deferred (fees)/expenses  (618)  (543)  (539)  (465)  (492)
Allowance for loan and lease losses  (2,395)  (2,337)  (2,335)  (2,274)  (2,186)
Net loans  189,739   178,581   173,514   167,660   161,412 
Premises and equipment, net  1,622   1,627   1,638   1,646   1,682 
Accrued interest receivable  1,026   1,091   1,204   1,095   1,070 
Bank-owned life insurance  4,803   4,775   4,748   4,721   4,694 
Other assets  1,630   1,573   1,648   2,058   1,768 
TOTAL ASSETS $277,819  $243,340  $229,652  $220,683  $216,031 
           
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing demand deposits $147,731  $114,444  $95,193  $84,287  $71,926 
Interest-bearing demand deposits  5,728   5,307   5,591   10,561   11,230 
Savings and money market deposits  43,111   42,246   45,832   41,565   41,661 
Time deposits  37,526   38,638   40,181   44,269   51,253 
Total deposits  234,096   200,635   186,797   180,682   176,070 
           
Accrued interest payable  127   124   126   132   160 
Short-term FHLB borrowings        1,500       
Long-term FHLB borrowings  4,000   4,000   4,000   4,000   5,000 
Accounts payable and other liabilities  383   483   538   386   272 
TOTAL LIABILITIES  238,606   205,242   192,961   185,200   181,502 
           
Common stock  41   41   41   41   41 
Additional paid-in capital  37,194   37,194   36,971   36,953   36,935 
Retained earnings/(accumulated deficit)  1,912   960   59   (778)  (1,519)
Accumulated other comprehensive gain / (loss)  222   59   (224)  (577)  (772)
Treasury stock, at cost  (156)  (156)  (156)  (156)  (156)
TOTAL STOCKHOLDERS' EQUITY  39,213   38,098   36,691   35,483   34,529 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $277,819  $243,340  $229,652  $220,683  $216,031 
           


 
SOLERA NATIONAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
  Three Months EndedNine Months Ended
($000s, except per share data) 9/30/19 6/30/19 3/31/19 12/31/18 9/30/18 9/30/19 9/30/18
Interest and dividend income              
Interest and fees on loans $2,357  $2,291  $2,208  $2,121  $2,006  $6,856  $5,496 
Investment securities  238   289   278   258   257   805   779 
Dividends on bank stocks  16   17   17   18   19   50   56 
Other  149   41   49   28   20   239   34 
Total interest income  2,760   2,638   2,552   2,425   2,302   7,950   6,365 
Interest expense              
Deposits  365   363   403   401   402   1,131   1,204 
FHLB borrowings  17   19   18   20   26   54   139 
Total interest expense  382   382   421   421   428   1,185   1,343 
Net interest income  2,378   2,256   2,131   2,004   1,874   6,765   5,022 
Provision for loan and lease losses  79   12   71   99   131   162   481 
Net interest income after provision for loan and lease losses  2,299   2,244   2,060   1,905   1,743   6,603   4,541 
Noninterest income              
Customer service and other fees  66   71   43   36   33   180   97 
Other income  28   27   26   28   30   81   95 
Gain on sale of securities  11   154            165    
Total noninterest income  105   252   69   64   63   426   192 
Noninterest expense              
Employee compensation and benefits  704   915   653   584   569   2,272   1,680 
Occupancy  47   52   44   73   56   143   154 
Professional fees  61   13   42   41   19   116   91 
Other general and administrative  340   333   292   291   314   965   864 
Total noninterest expense  1,152   1,313   1,031   989   958   3,496   2,789 
Net Income Before Taxes  $1,252  $1,183  $1,098  $980  $848  $3,533  $1,944 
Income Tax Expense  300   282   261   239   199   843   452 
Net Income  $952  $901  $837  $741  $649  $2,690  $1,492 
               
Income Per Share $0.23  $0.22  $0.21  $0.18  $0.16  $0.66  $0.44 
Tangible Book Value Per Share $9.64  $9.36  $9.01  $8.71  $8.47  $9.64  $8.47 
Net Interest Margin  3.81%  3.96%  3.88%  3.74%  3.60%  3.88%  3.47%
Cost of Funds  0.70%  0.77%  0.88%  0.89%  0.95%  0.78%  1.04%
Efficiency Ratio  46.60%  55.78%  46.86%  47.82%  49.46%  49.76%  53.49%
Return on Average Assets  1.46%  1.52%  1.49%  1.36%  1.18%  1.48%  0.98%
Return on Average Equity  9.85%  9.64%  9.28%  8.47%  7.58%  9.60%  6.67%
               
Asset Quality:              
Non-performing loans to gross loans  0.01%  0.23%  0.02%  0.02%  0.02%    
Non-performing assets to total assets  0.00%  0.17%  0.01%  0.02%  0.02%    
Allowance for loan losses to gross loans  1.24%  1.29%  1.32%  1.33%  1.33%    
               
Criticized loans/assets:              
Special mention $5,423  $1,465  $1,470  $1,603  $1,608     
Substandard: Accruing  3,926   5,687   5,749   5,035   5,068     
Substandard: Nonaccrual  10   425   28   34   36     
Doubtful                   
Total criticized loans $9,359  $7,577  $7,247  $6,672  $6,712     
Other real estate owned                   
Investment securities  581   583   584   585   586     
Total criticized assets $9,940  $8,160  $7,831  $7,257  $7,298     
Criticized assets to total assets  3.58%  3.35%  3.41%  3.29%  3.38%    
               
Selected Financial Ratios: (Solera National Bank Only)   
Tier 1 leverage ratio  14.8%  15.6%  15.6%  15.8%  15.9%    
Tier 1 risk-based capital ratio  19.0%  20.2%  19.5%  20.6%  21.1%    
Total risk-based capital ratio  20.2%  21.4%  20.7%  21.8%  22.3%    
               

 

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Source: Solera National Bank