Solera National Bancorp Announces First Quarter 2020 Financial Results

Nachrichtenquelle: globenewswire
07.05.2020, 15:00  |  104   |   |   

Total assets reach $300 million milestone

LAKEWOOD, Colo., May 07, 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 three months ended March 31, 2020. 

Highlights for the quarter ended March 31, 2020 include:

  • Net interest income for the first quarter 2020 was $2.69 million compared to $2.52 million for the linked quarter and $2.13 million for the first quarter of 2019.

  • Tangible book value per share surpassed the double-digit mark, at $10.06 per share as of March 31, 2020 compared with $9.01 per share as of March 31, 2019.

  • Cost of funds have fallen by 40bps year-over-year to 0.48% for the first quarter 2020 compared to 0.88% for the first quarter 2019.

  • Net interest margin increased 4 basis points over the linked quarter to 3.86% for the three months ended March 31, 2020 compared to 3.82% for fourth quarter 2019. 

  • Total assets grew $70.61 million or 31% year-over-year, reaching $300.25 million as of March 31, 2020.

  • Noninterest-bearing deposits rose another 10% during the quarter to $169.73 million, a $15.6 million increase quarter-over-quarter. 

  • Asset quality remained strong with modest level of criticized assets and nonperforming assets of 0.33% of total assets as of March 31, 2020.

For the three months ended March 31, 2020, the Company reported net income of $723,000, or $0.17 per share, compared to net income of $872,000, or $0.21 per share, for the three months ended December 31, 2019, and net income of $837,000, or $0.21 per share, for the three months ended March 31, 2019.

Martin P. May, President and CEO, commented: “The first quarter of 2020 was solid for Solera National Bank.  Before consideration of provision expense, the Company’s results were lock-step with the recording-setting results from fourth quarter 2019.  Provision-adjusted net income was $1.23 million in first quarter 2020, only a slight decrease compared to provision-adjusted net income of $1.25 million in fourth quarter 2019.”  May continued, “We felt it was prudent and necessary to recognize the new-found risks in our loan portfolio given the staggering economic impact of the COVID-19 shut-down.  Many, many businesses are struggling and, although it is impossible to know yet the full extent that will be felt by Solera National Bank, we would be remiss to assume the risks in our loan portfolio are unchanged from fourth quarter 2019. As such, we increased our allowance for loan losses from 1.29% of total loans at December 31, 2019 to 1.55% of total loans at March 31, 2020.  The increase in provision expense led to the decrease in earnings per share for the quarter.” 

May also noted, “Additionally, we felt it prudent, under the social distancing protocols, to delay our annual shareholders meeting, which was originally planned for late May.  We look forward to updating shareholders on the Company’s strategic initiatives in August 2020.”  Details about the meeting will be mailed to all shareholders of record in advance.

The Bank has worked tirelessly over the last month to get emergency relief money into the hands of customers and other small businesses in need.  May reflected, “I’m proud to report that Solera has approved over 600 small businesses for paycheck protection loans that total over $86 million and 95% of those loans have been funded as of today.  Our team has worked nights and weekends to get this much-needed money into our communities and I’m continually reminded of the amazing team we have at Solera as we’ve pulled together to offer the small business community access to this program.”

Operational Highlights

Net interest income after provision for loan and lease losses was $2.19 million for the quarter ended March 31, 2020 compared to $2.14 million and $2.06 million in the quarters ended December 31, 2019 and March 31, 2019, respectively.  The Company recorded provision for loan and lease losses of $506,000 in first quarter 2020 compared to $378,000 and $71,000 in the quarters ended December 31, 2019 and March 31, 2019, respectively.  The increase in the provision for loan and lease losses during fourth quarter 2019 was driven by portfolio growth, whereas the increase in first quarter 2020 was due to the enormous uncertainty in the market due to COVID-19.

The Company's net interest margin in first quarter 2020 was 3.86% compared to 3.82% in the linked-quarter and 3.88% in the first quarter 2019.  The slight increase in net interest margin compared to the prior quarter is primarily due to improved cost of funds.  The modest decrease in net interest margin compared to the prior year is attributed to an overall decline in market interest rates across all earning assets.    

Total noninterest income declined to $210,000 for first quarter 2020 from $268,000 in fourth quarter 2019 and increased from $69,000 in first quarter 2019.  The Company recorded gains on the sale of available-for-sale securities of $15,000 in first quarter 2020, compared to $113,000 in fourth quarter 2019 and no gains were recorded in first quarter 2019.  Customer service fees increased from $43,000 for the three months ended March 31, 2019 to $80,000 for the three months ended March 31, 2020 due to the increased number of customers serviced by the Bank and expanded product offerings.  Additionally, other income increased from $26,000 in first quarter 2019 to $115,000 in first quarter 2020 due to rental income earned on the Bank’s office building purchased during fourth quarter 2019.

Total noninterest expense of $1.46 million in first quarter 2020, increased from $1.35 million in the linked-quarter and $1.03 million in the first quarter of 2019.  Compared to prior year, employee compensation and benefits increased $236,000 due to additional staffing to support franchise growth, and other general and administrative expenses increased $115,000 as a result of higher data processing expenses due to the surge in customer accounts.  However, as a percentage of average assets, noninterest expenses have remained well managed throughout the Bank’s rapid growth at 2.01% for first quarter 2020 compared to 1.93% for fourth quarter 2019 and 1.83% for first quarter 2019.

Robust revenues coupled with controlled noninterest expenses allowed the Company’s first quarter 2020 efficiency ratio (noninterest expense divided by the sum of net interest income and noninterest income) to remain solid.  The efficiency ratio for the three months ended March 31, 2020 was 50.6%, unchanged from the prior quarter, although inferior to the very impressive 46.9% achieved in first quarter 2019.   

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 $213,000 for first quarter 2020 compared to $184,000 for fourth quarter 2019 and $261,000 for first quarter 2019. 

Balance Sheet Review and Asset Quality Strength

Total assets of $300.26 million at March 31, 2020 increased from $282.11 million at December 31, 2019 and $229.65 million at March 31, 2019.  Gross loans decreased $3.76 million, or 2%, from the linked-quarter to $211.70 million at March 31, 2020, and increased $35.32 million, or 20%, from first quarter 2019.   

Net loans, after the allowance for loan and lease losses, were $207.82 million at March 31, 2020 compared to $212.02 million at December 31, 2019 and $173.51 million at March 31, 2019.  Net loans decreased $4.21 million quarter-over-quarter primarily due to the $9.34 million in payoffs coupled with an increase in the allowance for loan losses and a reduced-pace of new originations.  Year-over-year, net loans increased $34.30 million or 20%.

The allowance for loan and lease losses at March 31, 2020 was $3.27 million, or 1.55% of gross loans, compared to $2.77 million, or 1.29% at December 31, 2019, and $2.34 million, or 1.32% of gross loans at March 31, 2019.  The 26 basis point increase in the allowance for loan and lease losses quarter-over-quarter was due to market uncertainty due to COVID-19. Total criticized assets of $8.64 million at March 31, 2020 declined compared to the linked-quarter, down $2.73 million from $11.37 million at December 31, 2019. Criticized assets to total assets remain low at 2.88% of total assets as of March 31, 2020. 

Total investment securities available-for-sale were $58.32 million at March 31, 2020 compared to $29.09 million at December 31, 2019 and $34.08 million at March 31, 2019.  The $29.23 million increase during first quarter 2020 was primarily the purchase of tax-exempt municipal bonds which had favorable pricing during this time as a result of prevailing market conditions.  Investment securities held-to-maturity of $6.41 million at March 31, 2020 remain unchanged from December 31, 2019 and March 31, 2019.

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.  $2.54 million of the $15.97 million student loan participation pool were 30 days+ past due at March 31, 2020.  Of the $2.54 million past due, $1.88 million were 90 days+ past due as of March 31, 2020.  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, 2020 were $253.20 million compared to $236.97 million at December 31, 2019 and $186.80 million at March 31, 2019.  Noninterest-bearing demand deposits of $169.73 million, which represent 67.0% of total deposits, at March 31, 2020 increased $15.62 million, or 10%, versus the linked-quarter, and increased $74.53 million from $95.19 million at March 31, 2019.  This growth allowed the Company to reduce expensive time deposits, which declined $7.57 million from first quarter 2019 to $32.61 million as of March 31, 2020.  Chief Financial Officer Melissa Larkin stated, “Growing core deposits is one of our foremost financial goals. We have achieved success in this area because we have focused on delivering the products our clients need with up-to-date technology and superior customer service.”

Capital Strength

The Bank’s capital ratios continue to be well in excess of the highest required regulatory benchmark levels.  As of March 31, 2020, the Bank elected to adopt the community bank leverage ratio (CBLR) as allowed by federal banking agencies for qualified institutions.  The CBLR provides for a simple measure of capital adequacy and is calculated by taking Tier 1 capital divided by average total assets for the quarter.  Solera calculates the CBLR using Bank-only financial statements.  As of March 31, 2020 the Bank’s CBLR was 13.4%, well above the required 9% minimum to qualify for using this simplified method.  The Bank’s CBLR was 14.2% at December 31, 2019.  The decline quarter-over-quarter was due to asset growth. 

Tangible book value per share, including accumulated other comprehensive income, was $10.06 at March 31, 2020, compared to $9.77 at December 31, 2019 and $9.01 at March 31, 2019.  Total stockholders' equity was $41.70 million at March 31, 2020 compared to $40.53 million at December 31, 2019 and $36.69 million at March 31, 2019.  Total stockholders' equity at March 31, 2020 included an accumulated other comprehensive gain of $560,000 compared to a gain of $118,000 at December 31, 2019 and a loss of $224,000 at March 31, 2019.  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. 

The Company’s retained earnings continued their steady climb, reaching $3.51 million at March 31, 2020, up from $59,000 as of March 31, 2019. 

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)   3/31/2020   12/31/2019   9/30/2019   6/30/2019   3/31/2019  
ASSETS                      
Cash and due from banks   $   1,708     $   1,403     $   1,860     $   1,761     $   1,113    
Federal funds sold      7,500        300        27,400        5,265        1,100    
Interest-bearing deposits with banks      774        16,033        14,599        14,041        2,936    
Investment securities, available-for-sale      58,319        29,094        27,485        26,979        34,084    
Investment securities, held-to-maturity      6,413        6,411        6,409        6,408        6,406    
FHLB and Federal Reserve Bank stocks, at cost      1,250        1,247        1,246        1,239        1,261    
Gross loans      211,703        215,459        192,752        181,461        176,388    
Net deferred (fees)/expenses      (615 )      (665 )      (618 )      (543 )      (539 )  
Allowance for loan and lease losses      (3,272 )      (2,770 )      (2,395 )      (2,337 )      (2,335 )  
Net loans      207,816        212,024        189,739        178,581        173,514    
Premises and equipment, net      8,330        8,316        1,622        1,627        1,638    
Accrued interest receivable      1,522        1,076        1,026        1,091        1,204    
Bank-owned life insurance      4,857        4,830        4,803        4,775        4,748    
Other assets      1,769        1,379        1,630        1,573        1,648    
TOTAL ASSETS   $   300,258     $   282,113     $   277,819     $   243,340     $   229,652    
                       
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing demand deposits   $   169,726     $   154,105     $   147,731     $   114,444     $   95,193    
Interest-bearing demand deposits      15,713        7,955        5,728        5,307        5,591    
Savings and money market deposits      35,150        39,624        43,111        42,246        45,832    
Time deposits      32,607        35,285        37,526        38,638        40,181    
Total deposits      253,196        236,969        234,096        200,635        186,797    
                       
Accrued interest payable      112        120        127        124        126    
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      1,255        494        383        483        538    
TOTAL LIABILITIES      258,563        241,583        238,606        205,242        192,961    
                       
Common stock      41        41        41        41        41    
Additional paid-in capital      37,587        37,587        37,194        37,194        36,971    
Retained earnings      3,507        2,784        1,912        960        59    
Accumulated other comprehensive gain / (loss)      560        118        222        59        (224 )  
Treasury stock, at cost      —        —        (156 )      (156 )      (156 )  
TOTAL STOCKHOLDERS' EQUITY      41,695        40,530        39,213        38,098        36,691    
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $   300,258     $   282,113     $   277,819     $   243,340     $   229,652    
                       


SOLERA NATIONAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
    Three Months Ended
($000s, except per share data)   3/31/2020   12/31/2019   9/30/2019   6/30/2019   3/31/2019  
Interest and dividend income                      
Interest and fees on loans   $ 2,597     $ 2,486     $ 2,357     $ 2,291     $ 2,208    
Investment securities     289       226       238       289       278    
Dividends on bank stocks     17       17       16       17       17    
Other     98       118       149       41       49    
Total interest income     3,001       2,847       2,760       2,638       2,552    
Interest expense                      
Deposits     290       313       365       363       403    
FHLB borrowings     17       17       17       19       18    
Total interest expense     307       330       382       382       421    
Net interest income     2,694       2,517       2,378       2,256       2,131    
Provision for loan and lease losses     506       378       79       12       71    
Net interest income after
provision for loan and lease losses
    2,188       2,139       2,299       2,244       2,060    
Noninterest income                      
Customer service and other fees     80       81       66       71       43    
Other income     115       74       28       27       26    
Gain on sale of securities     15       113       11       154          
Total noninterest income     210       268       105       252       69    
Noninterest expense                      
Employee compensation and benefits     889       831       704       915       653    
Occupancy     101       80       47       52       44    
Professional fees     65       63       61       13       42    
Other general and administrative     407       377       340       333       292    
Total noninterest expense     1,462       1,351       1,152       1,313       1,031    
Net Income Before Taxes   $ 936     $ 1,056     $ 1,252     $ 1,183     $ 1,098    
Income Tax Expense     213       184       300       282       261    
Net Income   $ 723     $ 872     $ 952     $ 901     $ 837    
                       
Income Per Share   $ 0.17     $ 0.21     $ 0.23     $ 0.22     $ 0.21    
Tangible Book Value Per Share   $ 10.06     $ 9.77     $ 9.64     $ 9.36     $ 9.01    
WA Shares outstanding     4,143,620       4,123,620       4,063,620       4,063,620       4,063,620    
Net Interest Margin     3.86 %     3.82 %     3.81 %     3.96 %     3.88 %  
Cost of Funds     0.48 %     0.56 %     0.70 %     0.77 %     0.88 %  
Efficiency Ratio     50.61 %     50.56 %     46.60 %     55.78 %     46.86 %  
Return on Average Assets     0.99 %     1.25 %     1.46 %     1.52 %     1.49 %  
Return on Average Equity     7.03 %     8.75 %     9.85 %     9.64 %     9.28 %  
Community bank leverage ratio (CBLR)     13.4 %     14.2 %     14.8 %     15.6 %     15.6 %  
Asset Quality:                      
Non-performing loans to gross loans     0.47 %     0.01 %     0.01 %     0.23 %     0.02 %  
Non-performing assets to total assets     0.33 %     0.00 %     0.00 %     0.17 %     0.01 %  
Allowance for loan losses to gross loans     1.55 %     1.29 %     1.24 %     1.29 %     1.32 %  
                       
Criticized loans/assets:                      
Special mention   $ 4,640     $ 7,613     $ 5,423     $ 1,465     $ 1,470    
Substandard: Accruing     2,421       3,170       3,926       5,687       5,749    
Substandard: Nonaccrual     1,002       11       10       425       28    
Doubtful                                
  Total criticized loans   $ 8,063     $ 10,794     $ 9,359     $ 7,577     $ 7,247    
Other real estate owned                                
Investment securities     579       580       581       583       584    
Total criticized assets   $ 8,642     $ 11,374     $ 9,940     $ 8,160     $ 7,831    
Criticized assets to total assets     2.88 %     4.03 %     3.58 %     3.35 %     3.41 %  
                       
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