LAKEWOOD, Colo., Oct. 27, 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 third quarter and nine months of 2016.
Highlights for the quarter ended September 30, 2016 include:
- Eight consecutive profitable quarters
- Net income of $266,000, or $0.10 per share
- Return on Average Assets and Return on Average Equity of 0.73% and 4.96%, respectively
- Net loan growth of $7.51 million, or 8.3% versus linked-quarter
- Phil Randell joins the board of directors
For the three months ended September 30, 2016, the Company reported net income of $266,000, or $0.10 per share, compared to net income of $322,000, or $0.12 per share, for the three months ended June 30, 2016, and $649,000, or $0.24 per share, for the three months ended September 30, 2015. For the nine months ended September 30, 2016, Solera reported net income of $1.04 million, or $0.38 per share, compared with net income of $1.46 million, or $0.54 per share, for the nine months ended September 30, 2015. Third quarter 2016 results include approximately $100,000 in legal expenses incurred in defending a lawsuit brought by the Company’s former CEO. In third quarter 2015, the Company’s noninterest income included a one-time bank owned life insurance benefit of $293,000.
Martin P. May, President and CEO, commented: “The Company is performing well, delivering our eighth consecutive quarterly profit. We continued to grow our loan portfolio both organically and through the purchase of an additional participation interest in a pool of rehabilitated federal student loans. Additionally, we added talented business development officers to the team this quarter. Kreighton Reed and Susan Rawley will focus on growing our core deposits and generating new business lending opportunities. Finally, we are excited to have Phil Randell join our board of directors as we benefit from his 37 years of commercial banking experience in the Denver market.”
Operational Highlights
Net interest income after provision for loan and lease losses was $1.07 million for the quarter ended September 30, 2016, compared to $957,000 and $1.12 million in the quarters ended June 30, 2016 and September 30, 2015, respectively. Net interest income after provision for loan and lease losses for the nine months of 2016 was $3.07 million, compared to $3.21 million in the nine months of 2015. The Company recorded no provision for loan and lease losses in 2016 compared to a $50,000 credit to the provision for loan and lease losses in the third quarter 2015.
The Company's net interest margin in third quarter 2016 was 2.96% compared to 2.87% in the linked-quarter and 3.19% in the third quarter 2015. The Company's net interest margin for the nine months of 2016 was 2.98% compared to 3.15% in the nine month of 2015. The decline in net interest income and net interest margin for the nine months of 2016 compared to the nine months of 2015 is largely attributed to a 13 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.
Total noninterest income in third quarter 2016 was $96,000 compared to $126,000 in second quarter 2016 and $407,000 in third quarter 2015. The decrease versus the linked-quarter is due to lower gains on the sale of available-for-sale securities. In third quarter 2015, the Company’s noninterest income included a one-time bank owned life insurance benefit of $293,000. Noninterest income was $464,000 for the nine months ended September 30, 2016 compared to $670,000 for the nine months ended September 30, 2015.
The Company continues to diligently manage expenses. However, third quarter 2016 was adversely impacted by legal expenses of approximately $100,000 incurred to defend a lawsuit brought by John Carmichael, a former CEO of the Company seeking a severance payment after his for-cause termination. Total noninterest expense of $897,000 in third quarter 2016 compared unfavorably with $761,000 in the linked-quarter and $874,000 in the third quarter of 2015. For the nine months of 2016, noninterest expense was $2.49 million compared to $2.42 million for the nine months of 2015 principally due to higher legal expenses.
The Company continued to record no income tax expense due to the utilization of available net operating loss carryforwards.
Loss Contingency
In August 2015, Mr. Carmichael filed a breach of contract lawsuit against Solera National Bank and Solera National Bancorp, Inc. The case proceeded to trial in September 2016 and resulted in a jury verdict awarding Mr. Carmichael a severance payment of 1.99 times his annual salary totaling $427,850. A dispute remains as to whether Mr. Carmichael is also entitled to the value of 10,000 shares of Solera National Bancorp, Inc. common stock as of his termination date. Additionally, a calculation for pre-judgment interest has not been determined. Final judgment has not yet been entered in this litigation.
It is the Bank’s understanding that regulatory approval is required to ensure that a golden parachute payment to Mr. Carmichael would not violate federal law. The Company did not record a charge to earnings this quarter for this loss contingency as we are unable to calculate a reasonable estimate of potential loss and there is a reasonable probability that the Company will not receive regulatory approval to pay the judgment given recent case law. We anticipate receiving a determination from regulators before year-end.
Balance Sheet Review and Asset Quality Strength
Total assets of $149.28 million at September 30, 2016 increased from $142.84 million at June 30, 2016 and $139.45 million at September 30, 2015. The increase versus the linked-quarter was due to strong growth in gross loans.
Net loans, after allowance for loan and lease losses, were $98.48 million at September 30, 2016 compared to $90.97 million at June 30, 2016 and $82.15 million at September 30, 2015. Organic net loan growth was $2.70 million during the third quarter of 2016 from loan originations of $5.57 million offset by payoffs and pay downs totaling $2.87 million. This growth was supplemented by the purchase of an incremental $5 million participation interest in a pool of rehabilitated student loans. The outstanding balance of rehabilitated student loan pools total $14.73 million at September 30, 2016 and continues to be an attractive alternative to purchasing bonds.
The allowance for loan and lease losses at September 30, 2016 was $1.58 million, or 1.58% of gross loans, compared to $1.58 million, or 1.70% of gross loans at June 30, 2016, and $1.61 million, or 1.92% of gross loans at September 30, 2015. The decline in the allowance for loan and lease losses as a percentage of gross loans is primarily due to the $14.73 million participation interest in a pool of rehabilitated student loans that comes with minimal risk of loss given the U.S. government guarantee.
Total investment securities available-for-sale were $36.32 million at September 30, 2016 compared to $36.16 million at June 30, 2016 and $42.73 million at September 30, 2015. Investment securities held-to-maturity of $4.5 million remained unchanged at September 30, 2016 compared to June 30, 2016 and increased $750,000 compared to September 30, 2015.
Total deposits at September 30, 2016 were $122.13 million compared to $117.02 million at June 30, 2016 and $113.19 million at September 30, 2015. Time deposits increased $11.79 million versus the prior year due to the Company’s efforts to attract longer-term deposits through both retail and wholesale channels.
The Company continues to experience sound asset quality metrics outperforming its peer group. At September 30, 2016, the Company had no non-performing loans, non-performing assets or other real estate owned. Total criticized assets increased modestly to $6.52 million at September 30, 2016 from $6.19 million at June 30, 2016 and $5.63 million at September 30, 2015.
The Company had no past due commercial loans as of September 30, 2016. However, $4.29 million of the student loan participation pool were 30 days+ past due at September 30, 2016 of which $3.46 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%.
Capital Strength
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 September 30, 2016, the Bank’s Tier 1 leverage ratio was 13.2%, Tier 1 risk-based capital was 19.1%, and total risk-based capital was 20.4%.
Tangible book value per share, including accumulated other comprehensive income, was $7.80 at September 30, 2016, compared to $7.75 at June 30, 2016 and $7.17 at September 30, 2015. Total stockholders' equity was $21.49 million at September 30, 2016 compared to $21.37 million at June 30, 2016 and $19.84 million at September 30, 2015. Total stockholders' equity at September 30, 2016 included an accumulated other comprehensive gain of $89,000 compared to a loss of $175,000 at September 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 now generated consistent core earnings over the past two years. The Bank has excess capital to leverage, our asset quality remains solid, and we operate in a vibrant market. We are making the necessary investments in our business development team and technology platforms, including the planned roll out of mobile deposit capture. This will make banking with Solera more convenient for all of our clients. We are well positioned to continue building 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 | |||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||
| ($000s) | 9/30/2016 | 6/30/2016 | 3/31/2016 | 12/31/2015 | 9/30/2015 | ||||||||||||||||
| ASSETS | |||||||||||||||||||||
| Cash and due from banks | $ | 825 | $ | 678 | $ | 521 | $ | 749 | $ | 644 | |||||||||||
| Federal funds sold | — | 1,755 | 3,130 | 1,740 | 365 | ||||||||||||||||
| Interest-bearing deposits with banks | 261 | 261 | 751 | 750 | 750 | ||||||||||||||||
| Investment securities, available-for-sale | 36,324 | 36,159 | 43,752 | 48,374 | 42,733 | ||||||||||||||||
| Investment securities, held-to-maturity | 4,500 | 4,500 | 4,500 | 4,500 | 3,750 | ||||||||||||||||
| FHLB and Federal Reserve Bank stocks, at cost | 1,027 | 853 | 860 | 874 | 941 | ||||||||||||||||
| Gross loans | 100,336 | 92,749 | 80,029 | 82,124 | 83,768 | ||||||||||||||||
| Net deferred (fees)/expenses | (270 | ) | (201 | ) | (54 | ) | (15 | ) | (6 | ) | |||||||||||
| Allowance for loan and lease losses | (1,584 | ) | (1,577 | ) | (1,557 | ) | (1,518 | ) | (1,609 | ) | |||||||||||
| Net loans | 98,482 | 90,971 | 78,418 | 80,591 | 82,153 | ||||||||||||||||
| Loans held for sale | — | — | — | 1,039 | — | ||||||||||||||||
| Premises and equipment, net | 1,861 | 1,884 | 1,902 | 1,918 | 1,955 | ||||||||||||||||
| Accrued interest receivable | 768 | 616 | 531 | 570 | 542 | ||||||||||||||||
| Bank-owned life insurance | 4,464 | 4,433 | 4,401 | 4,369 | 4,565 | ||||||||||||||||
| Other assets | 765 | 731 | 1,793 | 599 | 1,047 | ||||||||||||||||
| TOTAL ASSETS | $ | 149,277 | $ | 142,841 | $ | 140,559 | $ | 146,073 | $ | 139,445 | |||||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||||||||||
| Noninterest-bearing demand deposits | 5,189 | 4,156 | 4,069 | 3,954 | 4,362 | ||||||||||||||||
| Interest-bearing demand deposits | 6,997 | 7,913 | 7,644 | 8,405 | 6,524 | ||||||||||||||||
| Savings and money market deposits | 38,558 | 36,798 | 38,151 | 42,320 | 42,706 | ||||||||||||||||
| Time deposits | 71,382 | 68,156 | 64,435 | 66,160 | 59,594 | ||||||||||||||||
| Total deposits | 122,126 | 117,023 | 114,299 | 120,839 | 113,186 | ||||||||||||||||
| Accrued interest payable | 144 | 127 | 112 | 88 | 102 | ||||||||||||||||
| Short-term FHLB borrowings | 1,125 | — | — | — | 450 | ||||||||||||||||
| Long-term FHLB borrowings | 4,000 | 4,000 | 5,000 | 5,000 | 5,500 | ||||||||||||||||
| Accounts payable and other liabilities | 390 | 317 | 333 | 309 | 370 | ||||||||||||||||
| TOTAL LIABILITIES | 127,785 | 121,467 | 119,744 | 126,236 | 119,608 | ||||||||||||||||
| Common stock | 27 | 27 | 27 | 27 | 27 | ||||||||||||||||
| Additional paid-in capital | 27,160 | 27,149 | 27,143 | 27,137 | 27,130 | ||||||||||||||||
| Accumulated deficit | (5,628 | ) | (5,894 | ) | (6,216 | ) | (6,670 | ) | (6,989 | ) | |||||||||||
| Accumulated other comprehensive gain (loss) | 89 | 248 | 17 | (501 | ) | (175 | ) | ||||||||||||||
| Treasury stock, at cost | (156 | ) | (156 | ) | (156 | ) | (156 | ) | (156 | ) | |||||||||||
| TOTAL STOCKHOLDERS' EQUITY | 21,492 | 21,374 | 20,815 | 19,837 | 19,837 | ||||||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 149,277 | $ | 142,841 | $ | 140,559 | $ | 146,073 | $ | 139,445 | |||||||||||
| SOLERA NATIONAL BANCORP, INC. | ||||||||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | ||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||
| ($000s, except per share data) | 9/30/2016 | 6/30/2016 | 3/31/2016 | 12/31/2015 | 9/30/2015 | 9/30/2016 | 9/30/2015 | |||||||||||||||||||||
| Interest and dividend income | ||||||||||||||||||||||||||||
| Interest and fees on loans | $ | 1,144 | $ | 1,011 | $ | 1,054 | $ | 1,060 | $ | 1,106 | $ | 3,209 | $ | 3,177 | ||||||||||||||
| Investment securities | 242 | 249 | 292 | 278 | 231 | 783 | 766 | |||||||||||||||||||||
| Dividends on bank stocks | 12 | 11 | 10 | 11 | 12 | 33 | 35 | |||||||||||||||||||||
| Other | 2 | 4 | 4 | 8 | 3 | 10 | 7 | |||||||||||||||||||||
| Total interest income | 1,400 | 1,275 | 1,360 | 1,357 | 1,352 | 4,035 | 3,985 | |||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||||
| Deposits | 315 | 298 | 294 | 284 | 263 | 907 | 755 | |||||||||||||||||||||
| FHLB borrowings | 18 | 20 | 20 | 21 | 23 | 58 | 75 | |||||||||||||||||||||
| Total interest expense | 333 | 318 | 314 | 305 | 286 | 965 | 830 | |||||||||||||||||||||
| Net interest income | 1,067 | 957 | 1,046 | 1,052 | 1,066 | 3,070 | 3,155 | |||||||||||||||||||||
| Provision for loan and lease losses | — | — | — | — | (50 | ) | — | (50 | ) | |||||||||||||||||||
| Net interest income after provision for loan and lease losses | 1,067 | 957 | 1,046 | 1,052 | 1,116 | 3,070 | 3,205 | |||||||||||||||||||||
| Noninterest income | ||||||||||||||||||||||||||||
| Customer service and other fees | 28 | 24 | 24 | 25 | 28 | 76 | 85 | |||||||||||||||||||||
| Other income | 32 | 32 | 42 | 44 | 334 | 106 | 405 | |||||||||||||||||||||
| Gain on loans sold | — | — | 125 | — | — | 125 | — | |||||||||||||||||||||
| Gain on sale of available-for-sale securities | 36 | 70 | 51 | 6 | 45 | 157 | 180 | |||||||||||||||||||||
| Total noninterest income | 96 | 126 | 242 | 75 | 407 | 464 | 670 | |||||||||||||||||||||
| Noninterest expense | ||||||||||||||||||||||||||||
| Employee compensation and benefits | 410 | 376 | 406 | 410 | 422 | 1,192 | 1,171 | |||||||||||||||||||||
| Occupancy | 59 | 56 | 65 | 52 | 82 | 180 | 151 | |||||||||||||||||||||
| Professional fees | 129 | 31 | 71 | 39 | 49 | 231 | 166 | |||||||||||||||||||||
| Other general and administrative | 299 | 298 | 292 | 307 | 321 | 889 | 928 | |||||||||||||||||||||
| Total noninterest expense | 897 | 761 | 834 | 808 | 874 | 2,492 | 2,416 | |||||||||||||||||||||
| Net income | $ | 266 | $ | 322 | $ | 454 | $ | 319 | $ | 649 | $ | 1,042 | $ | 1,459 | ||||||||||||||
| Income per share | $ | 0.10 | $ | 0.12 | $ | 0.17 | $ | 0.12 | $ | 0.24 | $ | 0.38 | $ | 0.54 | ||||||||||||||
| Tangible book value per share | $ | 7.80 | $ | 7.75 | $ | 7.54 | $ | 7.18 | $ | 7.17 | $ | 7.80 | $ | 7.80 | ||||||||||||||
| Net interest margin | 2.96 | % | 2.87 | % | 3.09 | % | 3.10 | % | 3.19 | % | 2.98 | % | 3.15 | % | ||||||||||||||
| Efficiency Ratio | 79.59 | % | 75.12 | % | 67.42 | % | 72.08 | % | 59.13 | % | 73.79 | % | 65.39 | % | ||||||||||||||
| Return on Average Assets | 0.73 | % | 0.91 | % | 1.27 | % | 0.89 | % | 1.86 | % | 0.96 | % | 1.38 | % | ||||||||||||||
| Return on Average Equity | 4.96 | % | 6.11 | % | 8.93 | % | 6.43 | % | 13.34 | % | 6.55 | % | 10.03 | % | ||||||||||||||
| Asset Quality: | ||||||||||||||||||||||||||||
| Non-performing loans to gross loans | — | % | — | % | — | % | 0.16 | % | 0.30 | % | ||||||||||||||||||
| Non-performing assets to total assets | — | % | — | % | — | % | 0.09 | % | 0.18 | % | ||||||||||||||||||
| Allowance for loan losses to gross loans | 1.58 | % | 1.70 | % | 1.95 | % | 1.85 | % | 1.92 | % | ||||||||||||||||||
| Criticized loans/assets: | ||||||||||||||||||||||||||||
| Special mention | $ | 1,984 | $ | 1,967 | $ | 3,137 | $ | 1,242 | $ | 638 | ||||||||||||||||||
| Substandard: Accruing | 3,935 | 3,627 | 2,975 | 2,400 | 3,589 | |||||||||||||||||||||||
| Substandard: Nonaccrual | — | — | — | 131 | 139 | |||||||||||||||||||||||
| Doubtful | — | — | — | — | 116 | |||||||||||||||||||||||
| Total criticized loans | $ | 5,919 | $ | 5,594 | $ | 6,112 | $ | 3,773 | $ | 4,482 | ||||||||||||||||||
| Other real estate owned | — | — | — | — | — | |||||||||||||||||||||||
| Investment securities | 596 | 597 | 1,136 | 1,140 | 1,144 | |||||||||||||||||||||||
| Total criticized assets | $ | 6,515 | $ | 6,191 | $ | 7,248 | $ | 4,913 | $ | 5,626 | ||||||||||||||||||
| Criticized assets to total assets | 4.36 | % | 4.33 | % | 5.16 | % | 3.36 | % | 4.03 | % | ||||||||||||||||||
| Selected Financial Ratios: (Solera National Bank Only) | ||||||||||||||||||||||||||||
| Tier 1 leverage ratio | 13.2 | % | 13.8 | % | 13.5 | % | 13.2 | % | 13.1 | % | ||||||||||||||||||
| Tier 1 risk-based capital ratio | 19.1 | % | 18.6 | % | 19.4 | % | 18.8 | % | 17.3 | % | ||||||||||||||||||
| Total risk-based capital ratio | 20.4 | % | 19.8 | % | 20.7 | % | 20.0 | % | 18.5 | % | ||||||||||||||||||