LAKEWOOD, Colo., April 24, 2019 (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, 2019.
Highlights for the quarter ended March 31, 2019 include:
- Net income increased to a record-setting $837,000 for the first quarter 2019, up 109%, or $437,000, from first quarter 2018.
- Gross loans rose $27.5 million, or 19%, over the 12-month period from March 31, 2018 to March 31, 2019.
- Noninterest-bearing deposits grew 123% from $42.7 million at March 31, 2018 to $95.2 million at March 31, 2019.
- Cost of funds have fallen 22bps to 0.88% for the first quarter 2019 compared to 1.10% for the first quarter 2018.
- Net interest margin expanded 56 basis points from 3.36% for first quarter 2018 to 3.92% for first quarter 2019, and 13 basis points over 3.79% for fourth quarter 2018.
- Strong asset quality; nonperforming assets of only 0.01% of total assets and criticized assets of 3.41% of total assets.
- Efficiency ratio improved to 46.86% versus 59.89% in first quarter 2018.
For the three months ended March 31, 2019, the Company reported net income of $837,000, or $0.21 per share, compared to net income of $741,000, or $0.18 per share, for the three months ended December 31, 2018, and net income of $400,000, or $0.15 per share, for the three months ended March 31, 2018.
Martin P. May, President and CEO, commented: “We were particularly pleased with the earnings growth achieved in first quarter 2019. Our team has been busy working on some new initiatives that will expand our product offerings as well as improve our technology. During this period of innovation building, we’ve still achieved steady growth and solid improvement in earnings.”
May continued, “We are delaying our annual shareholders meeting until July 23, 2019 and looking forward to updating shareholders on the Company’s strategic initiatives at that time. Details about the meeting will be mailed to all shareholders of record in advance.”
Operational Highlights
Net interest income after provision for loan and lease losses was $2.06 million for the quarter ended March 31, 2019 compared to $1.91 million and $1.38 million in the quarters ended December 31, 2018 and March 31, 2018, respectively. The Company recorded provision for loan and lease losses of $71,000 in the quarter ended March 31, 2019 compared to $99,000 and $68,000 in the quarters ended December 31, 2018 and March 31, 2018, respectively. The increases to the provision for loan and lease losses were driven primarily by portfolio growth.
The Company's net interest margin in first quarter 2019 was 3.92% compared to 3.79% in the linked-quarter and 3.36% in the first quarter 2018. The increase in net interest margin compared to first quarter 2018 is attributed to higher loan portfolio yields and a shift in mix from higher cost time deposits and FHLB advances to lower cost deposits.
Also aiding the improvement in the Bank’s net interest margin was the 22 basis point improvement in cost of funds from 1.10% for the three months ended March 31, 2018 to 0.88% for the three months ended March 31, 2019 despite four increases in the Federal Reserve Target Rate during this time.
Total noninterest income has remained steady between periods at $69,000 for first quarter 2019 compared to $64,000 in fourth quarter 2018 and $62,000 in first quarter 2018. The Company recorded no gains on loans sold or gains on sale of available-for-sale securities in any of these periods.
Total noninterest expense of $1.03 million in first quarter 2019, increased from $989,000 in the linked-quarter and $918,000 in the first quarter of 2018. The increase from prior year is principally due to higher employee compensation and benefits to support franchise growth. However, as a percentage of average assets, noninterest expenses remain well managed, declining from 1.97% for the first quarter 2018 to 1.83% for the first quarter 2019.
Strong revenues coupled with controlled noninterest expenses allowed the Company’s first quarter 2019 efficiency ratio (noninterest expense divided by the sum of net interest income and noninterest income) to remain below 50% for the third quarter in a row. The efficiency ratio for the three months ended March 31, 2019 of 46.9% was an impressive improvement over 59.9% for first quarter 2018.
The Company’s income tax expense has remained steady at approximately 24%, which is a combined rate of 21% for Federal and approximately 3% for State. The Company recorded income tax expense of $261,000 for first quarter 2019 compared to $239,000 for fourth quarter 2018 and $119,000 for first quarter 2018.
Balance Sheet Review and Asset Quality Strength
Total assets of $229.65 million at March 31, 2019 increased from $220.68 million at December 31, 2018 and $198.04 million at March 31, 2018. Gross loans increased $5.99 million, or 4%, from the linked-quarter to $176.39 million at March 31, 2019, and increased $27.55 million, or 19%, from first quarter 2018.
Net loans, after allowance for loan and lease losses, were $173.51 million at March 31, 2019 compared to $167.66 million at December 31, 2018 and $146.57 million at March 31, 2018. Net loan growth of $5.85 million during the first quarter of 2019 was driven by commercial loan originations of $14.96 million, partly offset by payoffs, pay downs and an increase in the allowance for loan losses totaling $9.11 million.
The allowance for loan and lease losses at March 31, 2019 was $2.34 million, or 1.32% of gross loans, compared to $2.27 million, or 1.33% at December 31, 2018, and $1.80 million, or 1.21% of gross loans at March 31, 2018. The 11 basis point increase in the allowance for loan and lease losses as a percentage of gross loans from first quarter 2018 to first quarter 2019 was primarily due to an increase in criticized assets. Total criticized assets of $7.83 million at March 31, 2019 increased $2.09 million over the $5.74 million at March 31, 2018. Despite the increase, criticized assets to total assets remain low at 3.41% of total assets as of March 31, 2019. Criticized assets increased only slightly during first quarter 2019 as compared to the linked-quarter, up $574,000 from $7.26 million at December 31, 2018; thus, the provision expense recorded in first quarter 2019 is primarily to account for loan growth rather than a change in credit quality.
Total investment securities available-for-sale were $34.08 million at March 31, 2019 compared to $31.01 million at December 31, 2018 and $31.71 million at March 31, 2018. Investment securities held-to-maturity of $6.41 million at March 31, 2019 compared to $4.91 million at December 31, 2018 and $4.90 million at March 31, 2018.
The Company had no past due commercial or residential mortgage loans as of March 31, 2019. However, $3.18 million of the student loan participation pool were 30 days+ past due at March 31, 2019. Of the $3.18 million past due, $1.76 million were 90 days+ past due as of March 31, 2019. The student loans are backed by an approximate 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%.
Total deposits at March 31, 2019 were $186.80 million compared to $180.68 million at December 31, 2018 and $156.52 million at March 31, 2018. Noninterest-bearing demand deposits of $95.19 million, comprising over 50% of total deposits, at March 31, 2019 increased $10.91 million, or 13%, versus the linked-quarter, and increased $52.51 million from $42.68 million at March 31, 2018. This growth allowed the Company to reduce expensive time deposits, which declined $21.27 million from first quarter 2018 to $40.18 million as of March 31, 2019. Mr. May stated, “The flat and inverted yield curve is top of mind for most bank CEOs today. The competition for low-cost deposits is the most intense we’ve seen for decades. We are delivering the products and services that our customers want and are committed to making continued technological improvements to meet their needs and exceed their expectations. That’s our focus for 2019. We intend to remain a strong competitor in this fight by staying on our toes. We believe our small and nimble structure will reap rewards.”
Capital Strength
The Company’s capital ratios continue to be well in excess of the highest required regulatory benchmark levels. As of March 31, 2019, the Bank’s Tier 1 leverage ratio was 15.6%, Tier 1 risk-based capital was 19.5%, and total risk-based capital was 20.7%.
Tangible book value per share, including accumulated other comprehensive income, was $9.01 at March 31, 2019, compared to $8.71 at December 31, 2018 and $8.52 at March 31, 2018. Total stockholders' equity was $36.69 million at March 31, 2019 compared to $35.48 million at December 31, 2018 and $26.98 million at March 31, 2018. Total stockholders' equity at March 31, 2019 included an accumulated other comprehensive loss of $224,000 compared to a loss of $577,000 at December 31, 2018 and a loss of $573,000 at March 31, 2018. The fair value of the Bank's available-for-sale investment portfolio has improved from a year ago due to a decline in longer-term interest rates compared to this time last year.
The Company reported retained earnings of $59,000 for the first quarter 2019, compared with an accumulated deficit as of December 31, 2018 and March 31, 2018 of $778,000 and $2.61 million, respectively.
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 growing and 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.
Contacts: Martin P. May, President & CEO (303) 937-6422
Melissa K. Larkin, EVP & CFO (303) 937-6423
FINANCIAL TABLES FOLLOW
| SOLERA NATIONAL BANCORP, INC. | ||||||||||||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||
| ($000s) | 3/31/2019 | 12/31/2018 | 9/30/2018 | 6/30/2018 | 3/31/2018 | |||||||||||||||||
| ASSETS | ||||||||||||||||||||||
| Cash and due from banks | $ | 3,434 | $ | 3,519 | $ | 3,105 | $ | 1,430 | $ | 2,413 | ||||||||||||
| Federal funds sold | 1,100 | 2,310 | 3,950 | 5,250 | 580 | |||||||||||||||||
| Interest-bearing deposits with banks | 615 | 559 | 772 | 11,254 | 516 | |||||||||||||||||
| Investment securities, available-for-sale | 34,084 | 31,005 | 31,427 | 31,765 | 31,708 | |||||||||||||||||
| Investment securities, held-to-maturity | 6,406 | 4,908 | 4,907 | 4,905 | 4,904 | |||||||||||||||||
| FHLB and Federal Reserve Bank stocks, at cost | 1,261 | 1,202 | 1,244 | 1,440 | 1,342 | |||||||||||||||||
| Gross loans | 176,388 | 170,399 | 164,090 | 161,680 | 148,839 | |||||||||||||||||
| Net deferred (fees)/expenses | (539 | ) | (465 | ) | (492 | ) | (493 | ) | (471 | ) | ||||||||||||
| Allowance for loan and lease losses | (2,335 | ) | (2,274 | ) | (2,186 | ) | (2,060 | ) | (1,800 | ) | ||||||||||||
| Net loans | 173,514 | 167,660 | 161,412 | 159,127 | 146,568 | |||||||||||||||||
| Premises and equipment, net | 1,638 | 1,646 | 1,682 | 1,723 | 1,744 | |||||||||||||||||
| Accrued interest receivable | 1,204 | 1,095 | 1,070 | 1,047 | 1,090 | |||||||||||||||||
| Bank-owned life insurance | 4,748 | 4,721 | 4,694 | 4,667 | 4,640 | |||||||||||||||||
| Other assets | 1,648 | 2,058 | 1,768 | 1,983 | 2,530 | |||||||||||||||||
| TOTAL ASSETS | $ | 229,652 | $ | 220,683 | $ | 216,031 | $ | 224,591 | $ | 198,035 | ||||||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||||||||
| Noninterest-bearing demand deposits | $ | 95,193 | $ | 84,287 | $ | 71,926 | $ | 55,284 | $ | 42,684 | ||||||||||||
| Interest-bearing demand deposits | 5,591 | 10,561 | 11,230 | 29,331 | 6,108 | |||||||||||||||||
| Savings and money market deposits | 45,832 | 41,565 | 41,661 | 39,600 | 46,278 | |||||||||||||||||
| Time deposits | 40,181 | 44,269 | 51,253 | 61,035 | 61,449 | |||||||||||||||||
| Total deposits | 186,797 | 180,682 | 176,070 | 185,250 | 156,519 | |||||||||||||||||
| Accrued interest payable | 126 | 132 | 160 | 181 | 140 | |||||||||||||||||
| Short-term FHLB borrowings | 1,500 | — | — | — | 9,239 | |||||||||||||||||
| Long-term FHLB borrowings | 4,000 | 4,000 | 5,000 | 5,000 | 5,000 | |||||||||||||||||
| Accounts payable and other liabilities | 538 | 386 | 272 | 235 | 161 | |||||||||||||||||
| TOTAL LIABILITIES | 192,961 | 185,200 | 181,502 | 190,666 | 171,059 | |||||||||||||||||
| Common stock | 41 | 41 | 41 | 41 | 31 | |||||||||||||||||
| Additional paid-in capital | 36,971 | 36,953 | 36,935 | 36,921 | 30,285 | |||||||||||||||||
| Retained earnings/(accumulated deficit) | 59 | (778 | ) | (1,519 | ) | (2,168 | ) | (2,611 | ) | |||||||||||||
| Accumulated other comprehensive loss | (224 | ) | (577 | ) | (772 | ) | (713 | ) | (573 | ) | ||||||||||||
| Treasury stock, at cost | (156 | ) | (156 | ) | (156 | ) | (156 | ) | (156 | ) | ||||||||||||
| TOTAL STOCKHOLDERS' EQUITY | 36,691 | 35,483 | 34,529 | 33,925 | 26,976 | |||||||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 229,652 | $ | 220,683 | $ | 216,031 | $ | 224,591 | $ | 198,035 | ||||||||||||
| SOLERA NATIONAL BANCORP, INC. | |||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | |||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| ($000s, except per share data) | 3/31/2019 | 12/31/2018 | 9/30/2018 | 6/30/2018 | 3/31/2018 | ||||||||||||||||
| Interest and dividend income | |||||||||||||||||||||
| Interest and fees on loans | $ | 2,208 | $ | 2,121 | $ | 2,006 | $ | 1,904 | $ | 1,586 | |||||||||||
| Investment securities | 278 | 258 | 257 | 266 | 256 | ||||||||||||||||
| Dividends on bank stocks | 17 | 18 | 19 | 20 | 17 | ||||||||||||||||
| Other | 49 | 28 | 20 | 8 | 6 | ||||||||||||||||
| Total interest income | 2,552 | 2,425 | 2,302 | 2,198 | 1,865 | ||||||||||||||||
| Interest expense | |||||||||||||||||||||
| Deposits | 403 | 401 | 402 | 419 | 383 | ||||||||||||||||
| FHLB borrowings | 18 | 20 | 26 | 74 | 39 | ||||||||||||||||
| Total interest expense | 421 | 421 | 428 | 493 | 422 | ||||||||||||||||
| Net interest income | 2,131 | 2,004 | 1,874 | 1,705 | 1,443 | ||||||||||||||||
| Provision for loan and lease losses | 71 | 99 | 131 | 282 | 68 | ||||||||||||||||
| Net interest income after provision for loan and lease losses | 2,060 | 1,905 | 1,743 | 1,423 | 1,375 | ||||||||||||||||
| Noninterest income | |||||||||||||||||||||
| Customer service and other fees | 43 | 36 | 33 | 35 | 29 | ||||||||||||||||
| Other income | 26 | 28 | 30 | 32 | 33 | ||||||||||||||||
| Total noninterest income | 69 | 64 | 63 | 67 | 62 | ||||||||||||||||
| Noninterest expense | |||||||||||||||||||||
| Employee compensation and benefits | 653 | 584 | 569 | 560 | 551 | ||||||||||||||||
| Occupancy | 44 | 73 | 56 | 50 | 48 | ||||||||||||||||
| Professional fees | 42 | 41 | 19 | 19 | 53 | ||||||||||||||||
| Other general and administrative | 292 | 291 | 314 | 284 | 266 | ||||||||||||||||
| Total noninterest expense | 1,031 | 989 | 958 | 913 | 918 | ||||||||||||||||
| Net Income Before Taxes | $ | 1,098 | $ | 980 | $ | 848 | $ | 577 | $ | 519 | |||||||||||
| Income Tax Expense | (261 | ) | (239 | ) | (199 | ) | (134 | ) | (119 | ) | |||||||||||
| Net Income | $ | 837 | $ | 741 | $ | 649 | $ | 443 | $ | 400 | |||||||||||
| Income Per Share | $ | 0.21 | $ | 0.18 | $ | 0.16 | $ | 0.13 | $ | 0.15 | |||||||||||
| Tangible Book Value Per Share | $ | 9.01 | $ | 8.71 | $ | 8.47 | $ | 8.32 | $ | 8.52 | |||||||||||
| Net Interest Margin | 3.92 | % | 3.79 | % | 3.67 | % | 3.44 | % | 3.36 | % | |||||||||||
| Cost of Funds | 0.88 | % | 0.89 | % | 0.95 | % | 1.10 | % | 1.10 | % | |||||||||||
| Efficiency Ratio | 46.86 | % | 47.82 | % | 49.46 | % | 50.58 | % | 59.89 | % | |||||||||||
| Return on Average Assets | 1.49 | % | 1.36 | % | 1.18 | % | 0.84 | % | 0.86 | % | |||||||||||
| Return on Average Equity | 9.28 | % | 8.47 | % | 7.58 | % | 5.82 | % | 6.30 | % | |||||||||||
| Asset Quality: | |||||||||||||||||||||
| Non-performing loans to gross loans | 0.02 | % | 0.02 | % | 0.02 | % | — | % | — | % | |||||||||||
| Non-performing assets to total assets | 0.01 | % | 0.02 | % | 0.02 | % | — | % | — | % | |||||||||||
| Allowance for loan losses to gross loans | 1.32 | % | 1.33 | % | 1.33 | % | 1.27 | % | 1.21 | % | |||||||||||
| Criticized loans/assets: | |||||||||||||||||||||
| Special mention | $ | 1,470 | $ | 1,603 | $ | 1,608 | $ | 4,346 | $ | 2,709 | |||||||||||
| Substandard: Accruing | 5,749 | 5,035 | 5,068 | 2,423 | 2,442 | ||||||||||||||||
| Substandard: Nonaccrual | 28 | 34 | 36 | — | — | ||||||||||||||||
| Doubtful | — | — | — | — | — | ||||||||||||||||
| Total criticized loans | $ | 7,247 | $ | 6,672 | $ | 6,712 | $ | 6,769 | $ | 5,151 | |||||||||||
| Other real estate owned | — | — | — | — | — | ||||||||||||||||
| Investment securities | 584 | 585 | 586 | 588 | 589 | ||||||||||||||||
| Total criticized assets | $ | 7,831 | $ | 7,257 | $ | 7,298 | $ | 7,357 | $ | 5,740 | |||||||||||
| Criticized assets to total assets | 3.41 | % | 3.29 | % | 3.38 | % | 3.28 | % | 2.90 | % | |||||||||||
| Selected Financial Ratios: (Solera National Bank Only) | |||||||||||||||||||||
| Tier 1 leverage ratio | 15.6 | % | 15.8 | % | 15.9 | % | 16.1 | % | 14.8 | % | |||||||||||
| Tier 1 risk-based capital ratio | 19.5 | % | 20.6 | % | 21.1 | % | 20.8 | % | 18.1 | % | |||||||||||
| Total risk-based capital ratio | 20.7 | % | 21.8 | % | 22.3 | % | 22.0 | % | 19.4 | % | |||||||||||