LAKEWOOD, Colo., Oct. 23, 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 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 fell to 2.53% 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. Total criticized assets remain low, at $7.02 million, a decrease of $282,000 from the $7.30 million at September 30, 2018. Criticized assets to total assets declined to 2.53% 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 Ended | Nine 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 | $ | 2,499 | $ | 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 | $ | 6,435 | $ | 7,577 | $ | 7,247 | $ | 6,672 | $ | 6,712 | ||||||||||||||||||
| Other real estate owned | — | — | — | — | — | |||||||||||||||||||||||
| Investment securities | 581 | 583 | 584 | 585 | 586 | |||||||||||||||||||||||
| Total criticized assets | $ | 7,016 | $ | 8,160 | $ | 7,831 | $ | 7,257 | $ | 7,298 | ||||||||||||||||||
| Criticized assets to total assets | 2.53 | % | 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 | % | ||||||||||||||||||