Solera National Bancorp Announces Fourth Quarter, Full Year 2017 Financial Results
Sustained Core Profitability, Strong Loan and Deposit Growth
LAKEWOOD, Colo., Jan. 26, 2018 (GLOBE NEWSWIRE) -- Solera National Bancorp, Inc. (OTC:SLRK) (the “Company”), the holding company for Solera National Bank (the “Bank”), a business-focused bank primarily serving the Denver metropolitan area, today reported unaudited financial results for the three and twelve months ended December 31, 2017. For the three months ended December 31, 2017, the Company reported net income before taxes of $511,000, or $0.19 per share, compared to net income before taxes of $452,000, or $0.17 per share for the three months ended September 30, 2017. The Company’s net income before taxes for the year ended December 31, 2017 was $1.71 million, or $0.63 per share, compared to net income before taxes of $918,000, or $0.34 per share, for the twelve months ended December 31, 2016.
As a result of the Tax Cuts and Jobs Act that was enacted into law on December 22, 2017, the Company revalued its net deferred tax asset position to reflect the reduction in its federal corporate income tax rate from 35% to 21%. This revaluation resulted in a one-time income tax expense of approximately $610,000, or $0.22 per share, for the fourth quarter of 2017. 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. After considering the impact of taxes, the Company recorded a net loss of $279,000, or $0.10 per share, for the three months ended December 31, 2017, compared to net income of $296,000, or $0.11 per share, for the three months ended September 30, 2017, and net income of $2.09 million, or $0.77 per share, for the three months ended December 31, 2016. The Company’s net income for the year ended December 31, 2017 was $509,000, or $0.19 per share, compared to net income of $3.13 million, or $1.15 per share, for the twelve months ended December 31, 2016.
Highlights for the quarter and year ended December 31, 2017 include:
- Gross loan growth of $10.68 million, or 9.2% in fourth quarter; and $21.93 million, or 20.8% for the year
- Noninterest-bearing deposit growth of $3.53 million, or 17.2% in fourth quarter; and $18.13 million, or 305% for the year
- Net interest margin of 3.33% increased 29 basis points from same period in 2016
- Efficiency ratio of 63.8% improved from 65.0% in linked-quarter
- Outstanding asset quality metrics
Martin P. May, President and CEO, commented: “We are pleased to report solid results for the fourth quarter and full year, including an annual record for net interest income, significant growth in commercial loan and noninterest-bearing deposits, along with outstanding asset quality. While our fourth quarter results included the impact of a charge to earnings due to the recently passed tax legislation, this tax reform will lead to higher net income and enhance our capital generation capabilities going forward.”
Operational Highlights
Net interest income after provision for loan and lease losses was $1.35 million for the quarter ended December 31, 2017 compared to $1.24 million and $1.11 million in the quarters ended September 30, 2017 and December 31, 2016, respectively. For the twelve months of 2017, net interest income after provision for loan and lease losses was a record $4.85 million compared to $4.18 million for the twelve months of 2016. The Company recorded no provision for loan and lease losses in either 2017 or 2016.
The Company's net interest margin in fourth quarter 2017 was 3.33% compared to 3.11% in the linked-quarter and 3.04% in the fourth quarter 2016. The Company's net interest margin for the twelve months of 2017 was 3.14% compared to 2.99% for the twelve months of 2016. During the fourth quarter, the company received loan recovery proceeds of $214,000 of which $39,000 was reflected in interest and fees on loans. Excluding this recovery, net interest margin would have been 3.23% in the fourth quarter of 2017. The increase in net interest margin for the twelve months of 2017 compared to the twelve months of 2016 is largely attributed to a shift in earning assets from investment securities to gross loans partly offset by a modest increase in the cost of funds.
Total noninterest income in fourth quarter 2017 of $58,000 was unchanged versus the fourth quarter of 2016 and represented a slight increase compared to $55,000 in the linked-quarter. Noninterest income was $226,000 for the twelve months ended December 31, 2017 compared to $522,000 for the twelve months ended December 31, 2016. This decline was due to recording no gains on the sale of available-for-sale securities or gains on loans sold in 2017, compared to $157,000 and $125,000, respectively, in 2016.
Total noninterest expense of $900,000 in fourth quarter 2017 compared to $839,000 in the linked-quarter and $1.29 million in the fourth quarter of 2016. The increase from the linked-quarter is principally due to expenses associated with the Company’s upcoming capital raise along with higher employee compensation and benefits. The fourth quarter of 2016 included a loss contingency of $514,000 for the jury verdict awarding a severance payment and related interest to our former CEO.
In the fourth quarter of 2017, the Company recorded income tax expense of $790,000 compared to income tax expense of $156,000 in the third quarter of 2017 and a tax benefit of $2.21 million in the fourth quarter of 2016. On December 22, 2017 the Tax Cuts and Jobs Act was signed into law, a tax reform bill which lowers the current corporate federal income tax rate from 35% to 21% effective January 1, 2018. As a result, the Company reduced the value of its net deferred tax assets by $610,000, which was recorded as additional income tax expense during the fourth quarter of 2017. In the fourth quarter of 2016, the Company recorded a full reversal of the deferred tax asset valuation allowance after concluding that it was more likely than not that it will generate sufficient taxable income to realize its net deferred tax assets.
Balance Sheet Review and Asset Quality Strength
Total assets of $173.90 million at December 31, 2017 increased from $167.63 million at September 30, 2017 and $156.09 million at December 31, 2016. The increase versus the linked-quarter was due to solid growth in gross loans partly offset by a reduction in both investment securities available for sale and federal funds sold.
Net loans, after allowance for loan and lease losses, were $125.14 million at December 31, 2017 compared to $114.67 million at September 30, 2017 and $103.38 million at December 31, 2016. Net loan growth was $10.47 million during the fourth quarter of 2017 from loan originations of $15.03 million partly offset by payoffs, pay downs and an increase in the allowance for loan losses totaling $4.56 million. Net loans increased $21.75 million for the twelve months ended 2017 from loan originations of $35.12 million partially offset by loan payoffs, pay downs and an increase in the allowance for loan losses totaling $13.37 million. The strong loan growth during the year was achieved in a disciplined manner and despite competitive pressures.
The allowance for loan and lease losses at December 31, 2017 was $1.75 million, or 1.37% of gross loans, compared to $1.59 million, or 1.36% of gross loans at September 30, 2017, and $1.60 million, or 1.52% of gross loans at December 31, 2016. The increase from the linked-quarter is principally due to a loan recovery of which $175,000 was added to the allowance for loan and lease losses.
Total investment securities available-for-sale were $31.95 million at December 31, 2017 compared to $33.40 million at September 30, 2017 and $36.13 million at December 31, 2016. Investment securities held-to-maturity of $4.90 million at December 31, 2017 increased from $4.50 million at December 31, 2016.
Total deposits at December 31, 2017 were $137.51 million compared to $134.78 million at September 30, 2017 and $126.33 million at December 31, 2016. The Company’s focus on noninterest-bearing deposits continued to yield very positive results. Noninterest-bearing demand deposits increased $3.53 million versus the linked-quarter, or 17.2%, to $24.07 million at December 31, 2017, representing a three-fold increase from $5.94 million at December 31, 2016. Mr. May stated, “I couldn’t be more proud of our team and the progress made in growing noninterest-bearing deposits. We still have a long way to go to be a high-performing bank for this metric, but that’s our goal and our focus.”
The Company continues to experience outstanding asset quality metrics, substantially outperforming its peer group. At December 31, 2017, the Company had no non-performing loans, non-performing assets or other real estate owned. Total criticized assets of $4.75 million at December 31, 2017, or 2.73% of total assets, declined from $6.12 million, or 3.92% of total assets at December 31, 2016.
The Company had no past due commercial loans as of December 31, 2017 and $290,000 of past due residential real estate loans. Additionally, $3.03 million of the student loan participation pool were 30 days+ past due at December 31, 2017, of which $2.22 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 capital ratios are well above the highest required regulatory benchmark levels. As of December 31, 2017, the Bank’s Tier 1 leverage ratio was 13.6%, Tier 1 risk-based capital was 17.4%, and total risk-based capital was 18.7%.
Tangible book value per share, including accumulated other comprehensive income, was $8.67 at December 31, 2017, compared to $8.79 at September 30, 2017 and $8.39 at December 31, 2016. Total stockholders' equity was $23.83 million at December 31, 2017 compared to $24.14 million at September 30, 2017 and $23.07 million at December 31, 2016. Total stockholders' equity at December 31, 2017 included an accumulated other comprehensive loss of $243,000 compared to a loss of $175,000 and a loss of $426,000 at September 30, 2017 and December 31, 2016, respectively.
May concluded: "The Company has now generated three successive years of core earnings. Based on our overall financial strength and business development pipeline, we are well-positioned to continue participating in the economic strength of our market during 2018, creating long-term value for our shareholders. In the first quarter of 2018, we will be finalizing a registration statement with the Securities and Exchange Commission to raise up to $9.9 million in capital from current shareholders. The incremental capital will enable us to continue our current trajectory of significant organic growth and to explore other growth opportunities as they arise.”
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.
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) | 12/31/2017 | 9/30/2017 | 6/30/2017 | 3/31/2017 | 12/31/2016 | |||||||||||||||||
| ASSETS | ||||||||||||||||||||||
| Cash and due from banks | $ | 1,017 | $ | 1,383 | $ | 1,097 | $ | 2,126 | $ | 719 | ||||||||||||
| Federal funds sold | 40 | 2,105 | 210 | 185 | 80 | |||||||||||||||||
| Interest-bearing deposits with banks | 493 | 261 | 1,261 | 261 | 261 | |||||||||||||||||
| Investment securities, available-for-sale | 31,954 | 33,396 | 35,222 | 34,645 | 36,133 | |||||||||||||||||
| Investment securities, held-to-maturity | 4,902 | 4,901 | 4,900 | 4,899 | 4,500 | |||||||||||||||||
| FHLB and Federal Reserve Bank stocks, at cost | 1,244 | 1,073 | 987 | 861 | 879 | |||||||||||||||||
| Gross loans | 127,174 | 116,498 | 111,990 | 105,363 | 105,243 | |||||||||||||||||
| Net deferred (fees)/expenses | (292 | ) | (241 | ) | (246 | ) | (249 | ) | (260 | ) | ||||||||||||
| Allowance for loan and lease losses | (1,746 | ) | (1,586 | ) | (1,588 | ) | (1,601 | ) | (1,599 | ) | ||||||||||||
| Net loans | 125,136 | 114,671 | 110,156 | 103,513 | 103,384 | |||||||||||||||||
| Premises and equipment, net | 1,765 | 1,781 | 1,783 | 1,803 | 1,831 | |||||||||||||||||
| Accrued interest receivable | 837 | 855 | 794 | 816 | 798 | |||||||||||||||||
| Bank-owned life insurance | 4,612 | 4,583 | 4,554 | 4,525 | 4,495 | |||||||||||||||||
| Other assets | 1,895 | 2,625 | 3,025 | 3,460 | 3,011 | |||||||||||||||||
| TOTAL ASSETS | $ | 173,895 | $ | 167,634 | $ | 163,989 | $ | 157,094 | $ | 156,091 | ||||||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||||||||
| Noninterest-bearing demand deposits | $ | 24,068 | $ | 20,538 | $ | 12,134 | $ | 8,689 | $ | 5,941 | ||||||||||||
| Interest-bearing demand deposits | 8,049 | 7,684 | 7,855 | 8,016 | 8,374 | |||||||||||||||||
| Savings and money market deposits | 45,649 | 48,938 | 49,434 | 43,473 | 42,569 | |||||||||||||||||
| Time deposits | 59,745 | 57,615 | 63,031 | 67,865 | 69,441 | |||||||||||||||||
| Total deposits | 137,511 | 134,775 | 132,454 | 128,043 | 126,325 | |||||||||||||||||
| Accrued interest payable | 130 | 158 | 151 | 131 | 103 | |||||||||||||||||
| Short-term FHLB borrowings | 7,121 | 964 | 4,029 | 1,466 | 2,415 | |||||||||||||||||
| Long-term FHLB borrowings | 5,000 | 7,400 | 3,400 | 3,400 | 3,400 | |||||||||||||||||
| Accounts payable and other liabilities | 304 | 199 | 178 | 654 | 776 | |||||||||||||||||
| TOTAL LIABILITIES | 150,066 | 143,496 | 140,212 | 133,694 | 133,019 | |||||||||||||||||
| Common stock | 27 | 27 | 27 | 27 | 27 | |||||||||||||||||
| Additional paid-in capital | 27,253 | 27,197 | 27,190 | 27,180 | 27,170 | |||||||||||||||||
| Accumulated deficit | (3,052 | ) | (2,755 | ) | (3,051 | ) | (3,343 | ) | (3,543 | ) | ||||||||||||
| Accumulated other comprehensive gain (loss) | (243 | ) | (175 | ) | (233 | ) | (308 | ) | (426 | ) | ||||||||||||
| Treasury stock, at cost | (156 | ) | (156 | ) | (156 | ) | (156 | ) | (156 | ) | ||||||||||||
| TOTAL STOCKHOLDERS' EQUITY | 23,829 | 24,138 | 23,777 | 23,400 | 23,072 | |||||||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 173,895 | $ | 167,634 | $ | 163,989 | $ | 157,094 | $ | 156,091 | ||||||||||||
| SOLERA NATIONAL BANCORP, INC. | ||||||||||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | ||||||||||||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||
| ($000s, except per share data) | 12/31/2017 | 9/30/2017 | 6/30/2017 | 3/31/2017 | 12/31/2016 | 12/31/2017 | 12/31/2016 | |||||||||||||||||||||||
| Interest and dividend income | ||||||||||||||||||||||||||||||
| Interest and fees on loans | $ | 1,473 | $ | 1,331 | $ | 1,239 | $ | 1,168 | $ | 1,175 | $ | 5,211 | $ | 4,384 | ||||||||||||||||
| Investment securities | 250 | 255 | 249 | 256 | 254 | 1,010 | 1,037 | |||||||||||||||||||||||
| Dividends on bank stocks | 15 | 14 | 11 | 11 | 12 | 51 | 45 | |||||||||||||||||||||||
| Other | 5 | 5 | 7 | 3 | 1 | 20 | 11 | |||||||||||||||||||||||
| Total interest income | 1,743 | 1,605 | 1,506 | 1,438 | 1,442 | 6,292 | 5,477 | |||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||||||
| Deposits | 355 | 341 | 340 | 322 | 320 | 1,358 | 1,227 | |||||||||||||||||||||||
| FHLB borrowings | 35 | 28 | 14 | 12 | 15 | 89 | 73 | |||||||||||||||||||||||
| Total interest expense | 390 | 369 | 354 | 334 | 335 | 1,447 | 1,300 | |||||||||||||||||||||||
| Net interest income | 1,353 | 1,236 | 1,152 | 1,104 | 1,107 | 4,845 | 4,177 | |||||||||||||||||||||||
| Provision for loan and lease losses | — | — | — | — | — | — | — | |||||||||||||||||||||||
| Net interest income after provision for loan and lease losses |
1,353 | 1,236 | 1,152 | 1,104 | 1,107 | 4,845 | 4,177 | |||||||||||||||||||||||
| Noninterest income | ||||||||||||||||||||||||||||||
| Customer service and other fees | 26 | 24 | 26 | 23 | 26 | 99 | 102 | |||||||||||||||||||||||
| Other income | 32 | 31 | 32 | 32 | 32 | 127 | 138 | |||||||||||||||||||||||
| Gain on loans sold | — | — | — | — | — | — | 125 | |||||||||||||||||||||||
| Gain on sale of securities | — | — | — | — | — | — | 157 | |||||||||||||||||||||||
| Total noninterest income | 58 | 55 | 58 | 55 | 58 | 226 | 522 | |||||||||||||||||||||||
| Noninterest expense | ||||||||||||||||||||||||||||||
| Employee compensation and benefits | 513 | 480 | 447 | 486 | 425 | 1,926 | 1,617 | |||||||||||||||||||||||
| Occupancy | 49 | 52 | 42 | 49 | 53 | 192 | 233 | |||||||||||||||||||||||
| Professional fees | 42 | 55 | 26 | 39 | 49 | 162 | 280 | |||||||||||||||||||||||
| Other general and administrative | 296 | 252 | 265 | 267 | 762 | 1,080 | 1,651 | |||||||||||||||||||||||
| Total noninterest expense | 900 | 839 | 780 | 841 | 1,289 | 3,360 | 3,781 | |||||||||||||||||||||||
| Net Income (Loss) Before Taxes | $ | 511 | $ | 452 | $ | 430 | $ | 318 | $ | (124 | ) | $ | 1,711 | $ | 918 | |||||||||||||||
| Income Tax (Expense) Benefit | (790 | ) | (156 | ) | (138 | ) | (118 | ) | 2,209 | (1,202 | ) | 2,209 | ||||||||||||||||||
| Net (Loss) Income | $ | (279 | ) | $ | 296 | $ | 292 | $ | 200 | $ | 2,085 | $ | 509 | $ | 3,127 | |||||||||||||||
| (Loss) Income Per Share | $ | (0.10 | ) | $ | 0.11 | $ | 0.11 | $ | 0.07 | $ | 0.77 | $ | 0.19 | $ | 1.15 | |||||||||||||||
| Tangible Book Value Per Share | $ | 8.67 | $ | 8.79 | $ | 8.66 | $ | 8.52 | $ | 8.39 | $ | 8.67 | $ | 8.39 | ||||||||||||||||
| Net Interest Margin | 3.33 | % | 3.11 | % | 3.06 | % | 3.04 | % | 3.04 | % | 3.14 | % | 2.99 | % | ||||||||||||||||
| Efficiency Ratio | 63.78 | % | 64.99 | % | 64.46 | % | 72.56 | % | 110.64 | % | 66.26 | % | 83.25 | % | ||||||||||||||||
| Return on Average Assets | (0.65 | )% | 0.71 | % | 0.73 | % | 0.51 | % | 5.46 | % | 0.31 | % | 2.12 | % | ||||||||||||||||
| Return on Average Equity | (4.65 | )% | 4.94 | % | 4.95 | % | 3.44 | % | 37.43 | % | 2.14 | % | 14.42 | % | ||||||||||||||||
| Asset Quality: | ||||||||||||||||||||||||||||||
| Non-performing loans to gross loans | — | % | — | % | — | % | — | % | — | % | ||||||||||||||||||||
| Non-performing assets to total assets | — | % | — | % | — | % | — | % | — | % | ||||||||||||||||||||
| Allowance for loan losses to gross loans | 1.37 | % | 1.36 | % | 1.42 | % | 1.52 | % | 1.52 | % | ||||||||||||||||||||
| Criticized loans/assets: | ||||||||||||||||||||||||||||||
| Special mention | $ | 1,232 | $ | 486 | $ | 1,176 | $ | 1,210 | $ | 1,164 | ||||||||||||||||||||
| Substandard: Accruing | 2,924 | 3,660 | 4,128 | 4,320 | 4,364 | |||||||||||||||||||||||||
| Substandard: Nonaccrual | — | — | — | — | — | |||||||||||||||||||||||||
| Doubtful | — | — | — | — | — | |||||||||||||||||||||||||
| Total criticized loans | $ | 4,156 | $ | 4,146 | $ | 5,304 | $ | 5,530 | $ | 5,528 | ||||||||||||||||||||
| Other real estate owned | — | — | — | — | — | |||||||||||||||||||||||||
| Investment securities | 590 | 591 | 593 | 594 | 595 | |||||||||||||||||||||||||
| Total criticized assets | $ | 4,746 | $ | 4,737 | $ | 5,897 | $ | 6,124 | $ | 6,123 | ||||||||||||||||||||
| Criticized assets to total assets | 2.73 | % | 2.83 | % | 3.60 | % | 3.90 | % | 3.92 | % | ||||||||||||||||||||
| Selected Financial Ratios: (Solera National Bank Only) | ||||||||||||||||||||||||||||||
| Tier 1 leverage ratio | 13.6 | % | 13.9 | % | 14.2 | % | 13.7 | % | 14.0 | % | ||||||||||||||||||||
| Tier 1 risk-based capital ratio | 17.4 | % | 18.0 | % | 18.5 | % | 18.7 | % | 18.7 | % | ||||||||||||||||||||
| Total risk-based capital ratio | 18.7 | % | 19.3 | % | 19.7 | % | 19.9 | % | 20.0 | % | ||||||||||||||||||||
