Solera National Bancorp Announces 2019 Fourth Quarter and Year-End Financial Results

1/24, 6:21 PM (Source: GlobeNewswire)

LAKEWOOD, Colo., Jan. 24, 2020 (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 fourth quarter and twelve-months ended December 31, 2019. 

Highlights for the quarter and twelve-months ended December 31, 2019 include:

  • Net income increased 60%, or $1.33 million, year-over-year, ending 2019 at $3.56 million compared to $2.23 million for the year ended December 31, 2018. 
  • Cost of funds fell 14 basis points to 0.56% for the fourth quarter 2019 compared to 0.70% for the linked-quarter and 0.89% for the fourth quarter 2018.
  • The average cost of funds for the twelve-months ended December 31, 2019 was 0.72%, a 29 basis point improvement over the 1.01% average cost of funds for the twelve-months ended December 31, 2018.
  • Net interest margin of 3.88% for the twelve-months ended December 31, 2019 improved from 3.56% for the twelve-months ended December 31, 2018.
  • Gross loans rose $45.1 million, or 26%, during the year, ending 2019 at $215.5 million, which represents 76% of total assets.
  • Noninterest-bearing deposits climbed 83%, or $69.8 million, during the year, ending 2019 at $154.1 million, which represents 65% of total deposits. 
  • Solid asset quality; nonperforming loans represent less than 0.01% of gross loans and criticized assets were 4.03% of total assets as of December 31, 2019.
  • Return on average assets expanded notably during the year, reaching 1.38% for the twelve-months ended December 31, 2019, a 33% increase from 1.04% for the year ended December 31, 2018.
  • Return on average equity also jumped 35% to 9.22% for the 2019 year, compared to 6.82% for the twelve-months ended December 31, 2018.

For the twelve-months ended December 31, 2019, the Company reported net income of $3.56 million, or $0.87 per share, compared to $2.23 million, or $0.63 per share, for the twelve-months ended December 31, 2018.  Martin P. May, President and CEO, commented: “2019 was a year of rapid growth for Solera and we are proud to announce this year’s results to our shareholders.  Total assets grew 28% this year, with the majority of that growth in loans, all while the Company remained in the highest quartile among our peers for efficiency.  To achieve this level of progress, while maintaining a 50% efficiency ratio, takes a great team and a focused effort at controlling costs.” 

For the three-months ended December 31, 2019, the Company reported net income of $872,000, or $0.21 per share, compared to net income of $952,000, or $0.23 per share, for the three-months ended September 30, 2019, and net income of $741,000, or $0.18 per share, for the three-months ended December 31, 2018.  The fourth quarter 2019 results included $378,000, or $0.09 per share, in provision expense compared to $79,000, or $0.02 per share, for the linked-quarter and $99,000, or $0.02 per share, for the three-months ended December 31, 2018.

Operational Highlights

Net interest income after provision for loan and lease losses for the twelve-months ended December 31, 2019 was $8.74 million, a 36% or $2.30 million increase over the $6.45 million earned for the twelve-months ended December 31, 2018. This impressive result was a combination of increased interest income, ($10.80 million for 2019 versus $8.79 million for 2018) combined with declining interest expense ($1.52 million for 2019 versus $1.76 million for 2018).  Chairman Michael Quagliano reflected, “Every banker on the block should turn their head when they hear that statistic – increasing interest income while shrinking interest expense!” 

The results for the fourth quarter 2019 show a similar trajectory, with interest income growing 3%, to $2.85 million, for the three months ended December 31, 2019 from $2.76 million for the three-months ended September 30, 2019, while interest expense declined during the fourth quarter 2019 to $330,000 compared to $382,000 for the linked quarter. However, given the significant growth in loans during the fourth quarter 2019, the provision for loan and lease losses increased drastically at $378,000, compared to $79,000 for the linked quarter, leading to a slight decline in net interest income after provision for loan and lease losses from the prior quarter, at $2.14 million for the three-months ended December 31, 2019 compared to $2.30 million for the quarter ended September 30, 2019. 

The combination of loan growth and increasing loan yields accounted for the greater interest income.  The average balance in loans outstanding increased $30.1 million from 2018 to 2019 and the average yield on loans expanded approximately 13 basis points to over 5.00% in 2019.    

Net interest margin increased 32 basis points for the twelve-months ended December 31, 2019 (3.88%) compared to the twelve-months ended December 31, 2018 (3.56%).  Ms. Melissa K. Larkin, Chief Financial Officer, commented:  “The Bank achieved margin expansion in a year when the Federal Open Market Committee reduced short-term interest rates 75 basis points.  That’s the power of noninterest-bearing deposits.  The Bank’s growth in core deposits reduced the cost of funds 29 basis points during 2019, which created margin expansion in a time when most banks are suffering from margin compression.”  During the fourth quarter 2019, net interest margin was relatively unchanged from the prior quarter at 3.82% for the three-months ended December 31, 2019 compared to 3.81% for the three-months ended September 30, 2019 and 3.74% for the three-months ended December 30, 2018.

Total noninterest income jumped $438,000, or 171%, during the twelve-months ended December 31, 2019 to $694,000 compared to $256,000 for the twelve-months ended December 31, 2018.  The declining interest rate environment allowed the Bank to sell investment securities for gains totaling $278,000 during 2019 compared to $0 during 2018.  Additionally, customer service and other fees increased 96% during 2019 from $133,000 for the twelve-months ended December 31, 2018, to $261,000 for the twelve-months ended December 31, 2019 due to the increased number of customers serviced by the Bank and the expanded product offerings. 

Fourth quarter 2019 results included gain on the sales of investment securities of $113,000 compared to $11,000 for third quarter 2019; no gain was recorded for fourth quarter 2018.  Additionally, other income increased $46,000 during fourth quarter 2019 to $74,000 compared to $28,000 for third quarter 2019.  This upturn is due to rental income earned on the Bank’s newly acquired building in the Chery Creek neighborhood of Denver, Colorado. Mr. May commented, “As our team has grown, we have been very creative with managing our workspace. However, we finally reached the point where additional office space was needed. The new building will provide that space and produces rental income until we occupy the rest of the building. The Cherry Creek market in Denver is very robust. Having an office, and eventually a branch, in Cherry Creek will help Solera expand its market presence in Denver.”  

Customer service and other fees also continued their steady climb upward during the fourth quarter 2019 growing another 23% quarter-over-quarter, which is, again, directly correlated with the Bank’s growth in new deposit customers.  Customer service and other fees were $81,000 for fourth quarter 2019, compared to $66,000 for third quarter 2019 and $36,000 for fourth quarter 2018.

Total noninterest expense followed the same trajectory as income, increasing 28% during the 2019 year.  Total noninterest expense was $4.85 million for the twelve-months ended December 31, 2019 compared to $3.78 million for the twelve-months ended December 31, 2018.  The largest contributor to the incline was employee compensation and benefits, which increased $839,000, or 37%, year-over-year.  However, $208,000 of this increase was a non-cash item related to accelerated employee stock option expense. The remainder of the increase in salaries is due to increased staffing to support franchise growth.  Other general and administrative expenses increased $187,000, or 16%, during the year, primarily from higher data processing expenses due to the surge in customers. 

Total noninterest expense in fourth quarter 2019 of $1.35 million increased $199,000 from $1.15 million for third quarter 2019.  Occupancy expense rose $33,000 due to the new building purchased during the quarter.  The remainder of the increase pertains to increased costs due to franchise growth, as previously mentioned.

The Company’s efficiency ratio (noninterest expense divided by the sum of net interest income and noninterest income) for the twelve-months ended December 31, 2019 improved to 49.98% compared to 51.88% for the twelve-months ended December 31, 2018.

Income tax expense of $1.03 million was recorded for the twelve-months ended December 31, 2019 compared to $691,000 for the twelve-months ended December 31, 2018. 

Balance Sheet Review and Asset Quality Strength

Total assets of $282.11 million at December 31, 2019 increased from $277.82 million at September 30, 2019 and $220.68 million at December 31, 2018.  The increase compared to the linked quarter was due to the growth in gross loans and the purchase of the Cherry Creek property, partially offset by a decline in federal funds sold.

Net loans, after allowance for loan and lease losses, were $212.02 million at December 31, 2019 compared to $189.74 million at September 30, 2019 and $167.66 million at December 31, 2018.  Net loan growth of $22.29 million during the fourth quarter of 2019 was driven by commercial loan originations of $31.42 million, partly offset by payoffs, pay downs and an increase in the allowance for loan losses totaling $9.13 million.  For the twelve-months ended December 31, 2019, the $44.36 million expansion in net loans consisted primarily of commercial loan originations totaling $73.1 million, a net decrease in student loans of $2.3 million, partly offset by payoffs, pay downs and an increase in the allowance for loan losses totaling $26.44 million.   

The allowance for loan and lease losses at December 31, 2019 was $2.77 million, or 1.29% of gross loans, compared to $2.40 million, or 1.24%, at September 30, 2019 and $2.27 million, or 1.33% of gross loans at December 31, 2018.  The fourth quarter provision expense of $378,000 increased $299,000 from the linked quarter due to loan growth.    

Total investment securities available-for-sale increased to $29.09 million at December 31, 2019 compared to $27.49 million at September 30, 2019 but declined from $31.01 million at December 31, 2018.  Investment securities held-to-maturity of $6.41 million remain unchanged from September 30, 2019 and were up $1.5 million from December 30, 2018.  The Company realized gain from the sale of securities of $113,000 during the three-months ended December 31, 2019, bringing the total gain on sale of securities for the 2019 year to $278,000. 

Total deposits at December 31, 2019 were $236.97 million, a $2.87 million increase from $234.10 million at September 30, 2019 and a $56.29 million, or 31%, increase over the $180.68 million at December 31, 2018.  The Company continued to make significant progress shifting the mix of its deposits away from more costly time deposits and into core deposits.  Noninterest-bearing demand deposits of $154.11 million at December 31, 2019 rose $6.37 million versus the linked-quarter and climbed $69.82 million, or 83%, since December 31, 2018, while time deposits decreased $8.98 million or 20% during the twelve-months ended December 31, 2019.

The Company continues to maintain sound asset quality metrics with minimal non-performing assets and no other real estate owned for all periods presented.  Criticized assets to total assets increased to 4.03% at December 31, 2019 from 3.58% at September 30, 2019 and 3.29% at December 31, 2018.

Capital Strength

The Company’s capital ratios continue to be well in excess of the highest required regulatory benchmark levels.  As of December 31, 2019, the Bank’s Tier 1 leverage ratio was 14.2%, Tier 1 risk-based capital was 16.9%, and total risk-based capital was 18.1%.

Tangible book value per share, including accumulated other comprehensive income, was $9.77 at December 31, 2019 compared to $9.64 at September 30, 2019, and $8.71 at December 31, 2018.  Total stockholders' equity was $40.53 million at December 31, 2019 compared to $39.21 million at September 30, 2019 and $35.48 million at December 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 interest rates. As of December 31, 2019, the available-for-sale investment portfolio had a net gain of $118,000 compared to a net gain of $222,000 at September 30, 2019 and a net loss of $577,000 at December 31, 2018.

Total weighted-average shares outstanding increased by 60,000 shares during fourth quarter 2019 as several executives exercised their vested stock options.  The Company issued some of these new shares from treasury stock, bringing shares held in treasury to zero.

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,COO (303) 937-6423

FINANCIAL TABLES FOLLOW

SOLERA NATIONAL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
($000s) 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 
ASSETS           
Cash and due from banks $1,403  $1,860  $1,761  $1,113  $1,676  
Federal funds sold  300   27,400   5,265   1,100   2,310  
Interest-bearing deposits with banks  16,033   14,599   14,041   2,936   2,402  
Investment securities, available-for-sale  29,094   27,485   26,979   34,084   31,005  
Investment securities, held-to-maturity  6,411   6,409   6,408   6,406   4,908  
FHLB and Federal Reserve Bank stocks, at cost  1,247   1,246   1,239   1,261   1,202  
Gross loans  215,459   192,752   181,461   176,388   170,399  
Net deferred (fees)/expenses  (665)  (618)  (543)  (539)  (465) 
Allowance for loan and lease losses  (2,770)  (2,395)  (2,337)  (2,335)  (2,274) 
Net loans  212,024   189,739   178,581   173,514   167,660  
Premises and equipment, net  8,316   1,622   1,627   1,638   1,646  
Accrued interest receivable  1,076   1,026   1,091   1,204   1,095  
Bank-owned life insurance  4,830   4,803   4,775   4,748   4,721  
Other assets  1,379   1,630   1,573   1,648   2,058  
TOTAL ASSETS $282,113  $277,819  $243,340  $229,652  $220,683  
            
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing demand deposits $154,105  $147,731  $114,444  $95,193  $84,287  
Interest-bearing demand deposits  7,955   5,728   5,307   5,591   10,561  
Savings and money market deposits  39,624   43,111   42,246   45,832   41,565  
Time deposits  35,285   37,526   38,638   40,181   44,269  
Total deposits  236,969   234,096   200,635   186,797   180,682  
            
Accrued interest payable  120   127   124   126   132  
Short-term FHLB borrowings           1,500     
Long-term FHLB borrowings  4,000   4,000   4,000   4,000   4,000  
Accounts payable and other liabilities  494   383   483   538   386  
TOTAL LIABILITIES  241,583   238,606   205,242   192,961   185,200  
            
Common stock  41   41   41   41   41  
Additional paid-in capital  37,587   37,194   37,194   36,971   36,953  
Retained earnings/(accumulated deficit)  2,784   1,912   960   59   (778) 
Accumulated other comprehensive gain / (loss)  118   222   59   (224)  (577) 
Treasury stock, at cost     (156)  (156)  (156)  (156) 
TOTAL STOCKHOLDERS' EQUITY  40,530   39,213   38,098   36,691   35,483  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $282,113  $277,819  $243,340  $229,652  $220,683  
            


SOLERA NATIONAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
  Three Months EndedTwelve Months Ended
($000s, except per share data) 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 12/31/2019 12/31/2018
Interest and dividend income              
Interest and fees on loans $2,486  $2,357  $2,291  $2,208  $2,121  $9,342  $7,617 
Investment securities  226   238   289   278   258   1,031   1,037 
Dividends on bank stocks  17   16   17   17   18   67   74 
Other  118   149   41   49   28   357   62 
Total interest income  2,847   2,760   2,638   2,552   2,425   10,797   8,790 
Interest expense              
Deposits  313   365   363   403   401   1,444   1,605 
FHLB borrowings  17   17   19   18   20   71   159 
Total interest expense  330   382   382   421   421   1,515   1,764 
Net interest income  2,517   2,378   2,256   2,131   2,004   9,282   7,026 
Provision for loan and lease losses  378   79   12   71   99   540   580 
Net interest income after
provision for loan and lease losses
  2,139   2,299   2,244   2,060   1,905   8,742   6,446 
Noninterest income              
Customer service and other fees  81   66   71   43   36   261   133 
Other income  74   28   27   26   28   155   123 
Gain on sale of securities  113   11   154         278    
Total noninterest income  268   105   252   69   64   694   256 
Noninterest expense              
Employee compensation and benefits  831   704   915   653   584   3,103   2,264 
Occupancy  80   47   52   44   73   223   227 
Professional fees  63   61   13   42   41   179   132 
Other general and administrative  377   340   333   292   291   1,342   1,155 
Total noninterest expense  1,351   1,152   1,313   1,031   989   4,847   3,778 
Net Income Before Taxes  $1,056  $1,252  $1,183  $1,098  $980  $4,589  $2,924 
Income Tax Expense  184   300   282   261   239   1,027   691 
Net Income  $872  $952  $901  $837  $741  $3,562  $2,233 
               
Income Per Share $0.21  $0.23  $0.22  $0.21  $0.18  $0.87  $0.63 
Tangible Book Value Per Share $9.77  $9.64  $9.36  $9.01  $8.71  $9.77  $8.71 
WA Shares outstanding  4,123,620   4,063,620   4,063,620   4,063,620   4,063,620   4,078,743   3,570,427 
Net Interest Margin  3.82%  3.81%  3.96%  3.88%  3.74%  3.88%  3.56%
Cost of Funds  0.56%  0.70%  0.77%  0.88%  0.89%  0.72%  1.01%
Efficiency Ratio  50.56%  46.60%  55.78%  46.86%  47.82%  49.98%  51.88%
Return on Average Assets  1.25%  1.46%  1.52%  1.49%  1.36%  1.38%  1.04%
Return on Average Equity  8.75%  9.85%  9.64%  9.28%  8.47%  9.22%  6.82%
               
Asset Quality:              
Non-performing loans to gross loans  0.01%  0.01%  0.23%  0.02%  0.02%    
Non-performing assets to total assets  0.00%  0.00%  0.17%  0.01%  0.02%    
Allowance for loan losses to gross loans  1.29%  1.24%  1.29%  1.32%  1.33%    
               
Criticized loans/assets:              
Special mention $7,613  $5,423  $1,465  $1,470  $1,603     
Substandard: Accruing  3,170   3,926   5,687   5,749   5,035     
Substandard: Nonaccrual  11   10   425   28   34     
Doubtful                   
  Total criticized loans $10,794  $9,359  $7,577  $7,247  $6,672     
Other real estate owned                   
Investment securities  580   581   583   584   585     
Total criticized assets $11,374  $9,940  $8,160  $7,831  $7,257     
Criticized assets to total assets  4.03%  3.58%  3.35%  3.41%  3.29%    
               
Selected Financial Ratios: (Solera National Bank Only)   
Tier 1 leverage ratio  14.2%  14.8%  15.6%  15.6%  15.8%    
Tier 1 risk-based capital ratio  16.9%  19.0%  20.2%  19.5%  20.6%    
Total risk-based capital ratio  18.1%  20.2%  21.4%  20.7%  21.8%    

 

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