Solera National Bancorp Announces 2019 Fourth Quarter and Year-End Financial Results
Net income increases 60% year-over-year
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.
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.
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 $577,000 at December 31, 2018.
Total weighted-average shares outstanding increased by 60,000 shares during fourth quarter 2019 as several executives exercised their vested stock options. The Company issued some of these new shares from treasury stock, bringing shares held in treasury to zero.
About Solera National Bancorp, Inc.
Solera National Bancorp, Inc. was incorporated in 2006 to organize and serve as the holding company for Solera National Bank, which opened for business in September 2007. Solera National Bank is a community bank serving the needs of emerging businesses and real estate investors. At the core of Solera National Bank is welcoming, attentive and respectful customer service, a focus on supporting a diverse economy, and a passion to serve our community through service, education and volunteerism. For more information, please visit http://www.SoleraBank.com.
This press release contains statements that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The statements contained in this release, which are not historical facts and that relate to future plans or projected results of Solera National Bancorp, Inc. and its wholly-owned subsidiary, Solera National Bank, are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. We undertake no obligation to update or revise any forward-looking statement. Readers of this release are cautioned not to put undue reliance on forward-looking statements.
Martin P. May, President & CEO (303) 937-6422 or-
Melissa K. Larkin, EVP & CFO,COO (303) 937-6423
FINANCIAL TABLES FOLLOW
|SOLERA NATIONAL BANCORP, INC.|
|CONSOLIDATED BALANCE SHEETS|
|Cash and due from banks||$||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|
|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||)|
|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|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Noninterest-bearing demand deposits||$||154,105||$||147,731||$||114,444||$||95,193||$||84,287|
|Interest-bearing demand deposits||7,955||5,728||5,307||5,591||10,561|
|Savings and money market deposits||39,624||43,111||42,246||45,832||41,565|
|Accrued interest payable||120||127||124||126||132|
|Short-term FHLB borrowings||—||—||—||1,500||—|
|Long-term FHLB borrowings||4,000||4,000||4,000||4,000||4,000|
|Accounts payable and other liabilities||494||383||483||538||386|
|Additional paid-in capital||37,587||37,194||37,194||36,971||36,953|
|Retained earnings/(accumulated deficit)||2,784||1,912||960||59||(778||)|
|Accumulated other comprehensive gain / (loss)||118||222||59||(224||)||(577||)|
|Treasury stock, at cost||—||(156||)||(156||)||(156||)||(156||)|
|TOTAL STOCKHOLDERS' EQUITY||40,530||39,213||38,098||36,691||35,483|
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY||$||282,113||$||277,819||$||243,340||$||229,652||$||220,683|
|SOLERA NATIONAL BANCORP, INC.|
|CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)|
|Three Months Ended||Twelve 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|
|Dividends on bank stocks||17||16||17||17||18||67||74|
|Total interest income||2,847||2,760||2,638||2,552||2,425||10,797||8,790|
|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
|Customer service and other fees||81||66||71||43||36||261||133|
|Gain on sale of securities||113||11||154||—||—||278||—|
|Total noninterest income||268||105||252||69||64||694||256|
|Employee compensation and benefits||831||704||915||653||584||3,103||2,264|
|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||$||2,924|
|Income Tax Expense||184||300||282||261||239||1,027||691|
|Income Per Share||$||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||$||8.71|
|WA Shares outstanding||4,123,620||4,063,620||4,063,620||4,063,620||4,063,620||4,078,743||3,570,427|
|Net Interest Margin||3.82||%||3.81||%||3.96||%||3.88||%||3.74||%||3.88||%||3.56||%|
|Cost of Funds||0.56||%||0.70||%||0.77||%||0.88||%||0.89||%||0.72||%||1.01||%|
|Return on Average Assets||1.25||%||1.46||%||1.52||%||1.49||%||1.36||%||1.38||%||1.04||%|
|Return on Average Equity||8.75||%||9.85||%||9.64||%||9.28||%||8.47||%||9.22||%||6.82||%|
|Non-performing loans to gross loans||0.01||%||0.01||%||0.23||%||0.02||%||0.02||%|
|Non-performing assets to total assets||0.00||%||0.00||%||0.17||%||0.01||%||0.02||%|
|Allowance for loan losses to gross loans||1.29||%||1.24||%||1.29||%||1.32||%||1.33||%|
|Total criticized loans||$||10,794||$||9,359||$||7,577||$||7,247||$||6,672|
|Other real estate owned||—||—||—||—||—|
|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||%|