LAKEWOOD, Colo., April 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 three months ended March 31, 2017.
Highlights for the quarter ended March 31, 2017 include:
- Tenth consecutive profitable quarter
- Termination of regulatory enforcement agreement
- Noninterest-bearing deposit growth of $2.75 million, or 46% versus linked-quarter
- Strong asset quality; no nonperforming assets and modest level of criticized assets
- Return on Average Assets and Return on Average Equity of 0.51% and 3.44%, respectively
For the three months ended March 31, 2017, the Company reported net income of $200,000, or $0.07 per share, compared to net income of $2.09 million, or $0.77 per share, for the three months ended December 31, 2016, and $454,000, or $0.17 per share, for the three months ended March 31, 2016. The fourth quarter 2016 results included a full reversal of the Company’s deferred tax asset valuation allowance resulting in a one-time tax benefit of $2.21 million, or $0.81 per share, partially offset by a loss contingency of $514,000, or $0.19 per share, due to a jury verdict awarding a severance payment and related interest to our former CEO.
Martin P. May, President and CEO, commented: “The Company continues to perform well, delivering our tenth consecutive quarterly profit. We have solid momentum in several areas, particularly in growing our noninterest-bearing deposit franchise. Additionally, the focused effort we made over the last two years to address operational deficiencies were acknowledged during the quarter with the termination of the regulatory enforcement agreement executed in November 2014 with the Bank’s primary regulator.”
“We look forward to updating shareholders on our performance at the upcoming annual meeting which is scheduled for Wednesday, June 21st at 5:30 p.m. local time at the Company’s Lakewood, Colorado location. Shareholders of record as of May 12, 2017 will be entitled to attend and vote at the annual meeting.”
Operational Highlights
Net interest income after provision for loan and lease losses was $1.10 million for the quarter ended March 31, 2017 compared to $1.11 million and $1.05 million in the quarters ended December 31, 2016 and March 31, 2016, respectively. The Company recorded no provision for loan and lease losses in the quarter ended March 31, 2017 or during 2016.
The Company's net interest margin in first quarter 2017 of 3.04% was unchanged versus the linked-quarter and represented a decline from 3.09% in the first quarter 2016. The modest decrease in net interest margin compared to first quarter 2016 is largely attributed to lower loan portfolio yields due to a purchased participation interest in a pool of rehabilitated student loans with yields considerably below the portfolio average.
Total noninterest income in first quarter 2017 was $55,000 compared to $58,000 in fourth quarter 2016 and $242,000 in first quarter 2016. The decrease versus the first quarter 2016 was due to gains on loans sold and gains on sale of available-for-sale securities recorded in first quarter 2016 of $125,000 and $51,000, respectively, compared to no activity in the current quarter.
The Company continues to judiciously manage expenses. Total noninterest expense of $841,000 in first quarter 2017 compared favorably with $1.29 million in the linked-quarter and $834,000 in the first quarter of 2016. The fourth quarter 2016 was adversely impacted by recording a loss contingency of $514,000 for a severance payment and related interest to our former CEO.
In first quarter 2017, the Company recorded income tax expense of $118,000 compared to an income tax benefit of $2.21 million in the fourth quarter 2016 and no income tax in the first quarter of 2016. The fourth quarter of 2016 included a full reversal of the Company’s deferred tax asset valuation allowance after the Company concluded 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 $157.09 million at March 31, 2017 increased from $156.09 million at December 31, 2016 and $140.56 million at March 31, 2016. The increase versus March 31, 2016 was due to strong growth in gross loans partly offset by a decline in investment securities available-for-sale.
Net loans, after allowance for loan and lease losses, were $103.51 million at March 31, 2017 compared to $103.38 million at December 31, 2016 and $78.42 million at March 31, 2016. Net loan growth was a modest $129,000 during the first quarter of 2017 from loan originations of $2.75 million offset by payoffs and pay downs totaling $2.62 million. However, net loans increased $25.10 million, or 32%, during the twelve months ended March 31, 2017 from organic net loan growth of $11.68 million coupled with $13.42 million net loan growth through a purchased participation interest in a pool of rehabilitated student loans.
The allowance for loan and lease losses at March 31, 2017 of $1.60 million, or 1.52% of gross loans, was unchanged versus December 31, 2016, and compares to $1.56 million, or 1.95% of gross loans at March 31, 2016. The decline in the allowance for loan and lease losses as a percentage of gross loans versus the prior year is primarily due to the participation interest in a pool of rehabilitated student loans which come with minimal risk of loss given a U.S. government guarantee.
Total investment securities available-for-sale were $34.65 million at March 31, 2017 compared to $36.13 million at December 31, 2016 and $43.75 million at March 31, 2016. Investment securities held-to-maturity of $4.90 million at March 31, 2017 increased by $399,000 compared to December 31, 2016 and March 31, 2016.
Total deposits at March 31, 2017 were $128.04 million compared to $126.33 million at December 31, 2016 and $114.30 million at March 31, 2016. The Company’s focus on noninterest-bearing deposits has begun to yield positive results. Noninterest-bearing demand deposits of $8.69 million at March 31, 2017 increased $2.75 million, or 46%, versus the linked-quarter, and more than doubled from $4.07 million at March 31, 2016.
The Company continues to experience sound asset quality metrics. At March 31, 2017, the Company had no non-performing loans, non-performing assets or other real estate owned. Total criticized assets of $6.12 million at March 31, 2017, or 3.90% of total assets, is essentially unchanged from the linked-quarter and has declined from $7.25 million, or 5.16% of total assets, at March 31, 2016.
The Company had no past due commercial loans as of March 31, 2017. However, $5.22 million of the student loan participation pool were 31 days+ past due at March 31, 2017, of which $3.02 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 be well in excess of the highest required regulatory benchmark levels. As of March 31, 2017, the Bank’s Tier 1 leverage ratio was 13.7%, Tier 1 risk-based capital was 18.7%, and total risk-based capital was 19.9%.
Tangible book value per share, including accumulated other comprehensive income, was $8.52 at March 31, 2017, compared to $8.39 at December 31, 2016 and $7.54 at March 31, 2016. Total stockholders' equity was $23.40 million at March 31, 2017 compared to $23.07 million at December 31, 2016 and $20.82 million at March 31, 2016. Total stockholders' equity at March 31, 2017 included an accumulated other comprehensive loss of $308,000 compared to a loss of $426,000 at December 31, 2016 and a gain of $17,000 at March 31, 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 a solid foundation in place with strong capital and liquidity levels, sound asset quality metrics, and the benefit of operating in a vibrant and healthy market. We continue to invest in our technology platforms and will launch consumer mobile deposit capture in the second quarter of 2017.”
“Importantly, the Company has begun taking steps to raise additional capital. We are targeting to file a registration statement with the Securities and Exchange Commission in the third quarter of 2017 for a proposed rights offering to existing 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.
FINANCIAL TABLES FOLLOW
| SOLERA NATIONAL BANCORP, INC. | |||||||||||||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||
| ($000s) | 3/31/2017 | 12/31/2016 | 9/30/2016 | 6/30/2016 | 3/31/2016 | ||||||||||||||||
| ASSETS | |||||||||||||||||||||
| Cash and due from banks | $ | 2,126 | $ | 719 | $ | 825 | $ | 678 | $ | 521 | |||||||||||
| Federal funds sold | 185 | 80 | — | 1,755 | 3,130 | ||||||||||||||||
| Interest-bearing deposits with banks | 261 | 261 | 261 | 261 | 751 | ||||||||||||||||
| Investment securities, available-for-sale | 34,645 | 36,133 | 36,324 | 36,159 | 43,752 | ||||||||||||||||
| Investment securities, held-to-maturity | 4,899 | 4,500 | 4,500 | 4,500 | 4,500 | ||||||||||||||||
| FHLB and Federal Reserve Bank stocks, at cost | 861 | 879 | 1,027 | 853 | 860 | ||||||||||||||||
| Gross loans | 105,363 | 105,243 | 100,336 | 92,749 | 80,029 | ||||||||||||||||
| Net deferred (fees)/expenses | (249 | ) | (260 | ) | (270 | ) | (201 | ) | (54 | ) | |||||||||||
| Allowance for loan and lease losses | (1,601 | ) | (1,599 | ) | (1,584 | ) | (1,577 | ) | (1,557 | ) | |||||||||||
| Net loans | 103,513 | 103,384 | 98,482 | 90,971 | 78,418 | ||||||||||||||||
| Premises and equipment, net | 1,803 | 1,831 | 1,861 | 1,884 | 1,902 | ||||||||||||||||
| Accrued interest receivable | 816 | 798 | 768 | 616 | 531 | ||||||||||||||||
| Bank-owned life insurance | 4,525 | 4,495 | 4,464 | 4,433 | 4,401 | ||||||||||||||||
| Other assets | 3,460 | 3,011 | 765 | 731 | 1,793 | ||||||||||||||||
| TOTAL ASSETS | $ | 157,094 | $ | 156,091 | $ | 149,277 | $ | 142,841 | $ | 140,559 | |||||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||||||||||
| Noninterest-bearing demand deposits | $ | 8,689 | $ | 5,941 | $ | 5,189 | $ | 4,156 | $ | 4,069 | |||||||||||
| Interest-bearing demand deposits | 8,016 | 8,374 | 6,997 | 7,913 | 7,644 | ||||||||||||||||
| Savings and money market deposits | 43,473 | 42,569 | 38,558 | 36,798 | 38,151 | ||||||||||||||||
| Time deposits | 67,865 | 69,441 | 71,382 | 68,156 | 64,435 | ||||||||||||||||
| Total deposits | 128,043 | 126,325 | 122,126 | 117,023 | 114,299 | ||||||||||||||||
| Accrued interest payable | 131 | 103 | 144 | 127 | 112 | ||||||||||||||||
| Short-term FHLB borrowings | 1,466 | 2,415 | 1,125 | — | — | ||||||||||||||||
| Long-term FHLB borrowings | 3,400 | 3,400 | 4,000 | 4,000 | 5,000 | ||||||||||||||||
| Accounts payable and other liabilities | 654 | 776 | 390 | 317 | 333 | ||||||||||||||||
| TOTAL LIABILITIES | 133,694 | 133,019 | 127,785 | 121,467 | 119,744 | ||||||||||||||||
| Common stock | 27 | 27 | 27 | 27 | 27 | ||||||||||||||||
| Additional paid-in capital | 27,180 | 27,170 | 27,160 | 27,149 | 27,143 | ||||||||||||||||
| Accumulated deficit | (3,343 | ) | (3,543 | ) | (5,628 | ) | (5,894 | ) | (6,216 | ) | |||||||||||
| Accumulated other comprehensive gain (loss) | (308 | ) | (426 | ) | 89 | 248 | 17 | ||||||||||||||
| Treasury stock, at cost | (156 | ) | (156 | ) | (156 | ) | (156 | ) | (156 | ) | |||||||||||
| TOTAL STOCKHOLDERS' EQUITY | 23,400 | 23,072 | 21,492 | 21,374 | 20,815 | ||||||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 157,094 | $ | 156,091 | $ | 149,277 | $ | 142,841 | $ | 140,559 | |||||||||||
| SOLERA NATIONAL BANCORP, INC. | ||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | ||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||
| ($000s, except per share data) | 3/31/2017 | 12/31/2016 | 9/30/2016 | 6/30/2016 | 3/31/2016 | |||||||||||||||||
| Interest and dividend income | ||||||||||||||||||||||
| Interest and fees on loans | $ | 1,168 | $ | 1,175 | $ | 1,144 | $ | 1,011 | $ | 1,054 | ||||||||||||
| Investment securities | 256 | 254 | 242 | 249 | 292 | |||||||||||||||||
| Dividends on bank stocks | 11 | 12 | 12 | 11 | 10 | |||||||||||||||||
| Other | 3 | 1 | 2 | 4 | 4 | |||||||||||||||||
| Total interest income | 1,438 | 1,442 | 1,400 | 1,275 | 1,360 | |||||||||||||||||
| Interest expense | ||||||||||||||||||||||
| Deposits | 322 | 320 | 315 | 298 | 294 | |||||||||||||||||
| FHLB borrowings | 12 | 15 | 18 | 20 | 20 | |||||||||||||||||
| Total interest expense | 334 | 335 | 333 | 318 | 314 | |||||||||||||||||
| Net interest income | 1,104 | 1,107 | 1,067 | 957 | 1,046 | |||||||||||||||||
| Provision for loan and lease losses | — | — | — | — | — | |||||||||||||||||
| Net interest income after provision for loan and lease losses | 1,104 | 1,107 | 1,067 | 957 | 1,046 | |||||||||||||||||
| Noninterest income | ||||||||||||||||||||||
| Customer service and other fees | 23 | 26 | 28 | 24 | 24 | |||||||||||||||||
| Other income | 32 | 32 | 32 | 32 | 42 | |||||||||||||||||
| Gain on loans sold | — | — | — | — | 125 | |||||||||||||||||
| Gain on sale of available-for-sale securities | — | — | 36 | 70 | 51 | |||||||||||||||||
| Total noninterest income | 55 | 58 | 96 | 126 | 242 | |||||||||||||||||
| Noninterest expense | ||||||||||||||||||||||
| Employee compensation and benefits | 486 | 425 | 410 | 376 | 406 | |||||||||||||||||
| Occupancy | 49 | 53 | 59 | 56 | 65 | |||||||||||||||||
| Professional fees | 39 | 49 | 129 | 31 | 71 | |||||||||||||||||
| Other general and administrative | 267 | 762 | 299 | 298 | 292 | |||||||||||||||||
| Total noninterest expense | 841 | 1,289 | 897 | 761 | 834 | |||||||||||||||||
| Net Income/(Loss) Before Taxes | $ | 318 | $ | (124 | ) | $ | 266 | $ | 322 | $ | 454 | |||||||||||
| Income Tax (Expense)/Benefit | $ | (118 | ) | $ | 2,209 | $ | - | $ | - | $ | - | |||||||||||
| Net Income | $ | 200 | $ | 2,085 | $ | 266 | $ | 322 | $ | 454 | ||||||||||||
| Income Per Share | $ | 0.07 | $ | 0.77 | $ | 0.10 | $ | 0.12 | $ | 0.17 | ||||||||||||
| Tangible Book Value Per Share | $ | 8.52 | $ | 8.39 | $ | 7.80 | $ | 7.75 | $ | 7.54 | ||||||||||||
| Net Interest Margin | 3.04 | % | 3.04 | % | 2.96 | % | 2.87 | % | 3.09 | % | ||||||||||||
| Efficiency Ratio | 72.56 | % | 110.64 | % | 79.59 | % | 75.12 | % | 67.42 | % | ||||||||||||
| Return on Average Assets | 0.51 | % | 5.46 | % | 0.73 | % | 0.91 | % | 1.27 | % | ||||||||||||
| Return on Average Equity | 3.44 | % | 37.43 | % | 4.96 | % | 6.11 | % | 8.93 | % | ||||||||||||
| Asset Quality: | ||||||||||||||||||||||
| Non-performing loans to gross loans | — | % | — | % | — | % | — | % | — | % | ||||||||||||
| Non-performing assets to total assets | — | % | — | % | — | % | — | % | — | % | ||||||||||||
| Allowance for loan losses to gross loans | 1.52 | % | 1.52 | % | 1.58 | % | 1.70 | % | 1.95 | % | ||||||||||||
| Criticized loans/assets: | ||||||||||||||||||||||
| Special mention | $ | 1,210 | $ | 1,164 | $ | 1,984 | $ | 1,967 | $ | 3,137 | ||||||||||||
| Substandard: Accruing | 4,320 | 4,364 | 3,935 | 3,627 | 2,975 | |||||||||||||||||
| Substandard: Nonaccrual | — | — | — | — | — | |||||||||||||||||
| Doubtful | — | — | — | — | — | |||||||||||||||||
| Total criticized loans | $ | 5,530 | $ | 5,528 | $ | 5,919 | $ | 5,594 | $ | 6,112 | ||||||||||||
| Other real estate owned | — | — | — | — | — | |||||||||||||||||
| Investment securities | 594 | 595 | 596 | 597 | 1,136 | |||||||||||||||||
| Total criticized assets | $ | 6,124 | $ | 6,123 | $ | 6,515 | $ | 6,191 | $ | 7,248 | ||||||||||||
| Criticized assets to total assets | 3.90 | % | 3.92 | % | 4.36 | % | 4.33 | % | 5.16 | % | ||||||||||||
| Selected Financial Ratios: (Solera National Bank Only) | ||||||||||||||||||||||
| Tier 1 leverage ratio | 13.7 | % | 14.0 | % | 13.2 | % | 13.8 | % | 13.5 | % | ||||||||||||
| Tier 1 risk-based capital ratio | 18.7 | % | 18.7 | % | 19.1 | % | 18.6 | % | 19.4 | % | ||||||||||||
| Total risk-based capital ratio | 19.9 | % | 20.0 | % | 20.4 | % | 19.8 | % | 20.7 | % | ||||||||||||