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Solera National Bancorp Announces First Quarter Financial Results

LAKEWOOD, Colo., April 23, 2015 (GLOBE NEWSWIRE) -- Solera National Bancorp, Inc. (OTCQB:SLRK), the holding company for Solera National Bank, today reported financial results for the three months ended March 31, 2015.

For the three months ended March 31, 2015, the Company reported net income of $475,000 or $0.17 per share compared to a net loss of $369,000 or $(0.14) per share for the three months ended March 31, 2014. First quarter 2015 was the second consecutive profitable quarter for Solera following initiatives in the second half of 2014 to focus on the Company's core commercial banking business and reduce overhead costs.

Robert J. Fenton, President and CEO, commented: "We believe our most recent results reflect the positive impact of operating with a leaner, more efficient infrastructure while maintaining a strong commitment to asset quality through disciplined credit and risk management practices.

"As further demonstration of our focus on maintaining a strong credit culture, we are pleased to announce the recent hiring of Vernon Hansen as our Chief Credit Officer. Vern brings years of experience in credit management from executive roles in regional bank management, commercial lending, and as a consultant to community banks on commercial and SBA lending analysis, structuring, and underwriting."

Operational Highlights

Total interest income was $1.33 million for the three months ended March 31, 2015, compared to $1.61 million for the three months ended March 31, 2014, primarily reflecting year-over-year declines in investment securities and loans held for sale. Total interest income was relatively stable compared with $1.38 million for the quarter ended December 31, 2014.

The Company's net interest margin was 3.14%, unchanged from fourth quarter 2014 and down from 3.37% in first quarter 2014, reflecting continuing pressure on margins in a low-interest rate environment and a competitive market for high-quality commercial loans.

Total interest expense declined to $271,000 in first quarter 2015 compared to $309,000 in first quarter 2014, which was primarily driven by fewer time deposits as the Company allowed certificates of deposit to run off, and reduced borrowings to manage the Bank's funding needs.

In first quarter 2015, the Company's net interest income was $1.06 million compared to $1.30 million in first quarter 2014. The Company recorded no provision for loan and lease losses in either quarter. Total noninterest income in first quarter 2015 was $163,000 compared with $1.00 million in first quarter 2014, reflecting the Bank's exit from the residential mortgage lending business, which generated an $890,000 gain on loans sold in the prior year's first quarter. The majority of the Bank's noninterest income generated during the first quarter 2015 came from the sale of investment securities, which resulted in $100,000 of net gain, an increase of $50,000 from the first quarter 2014.

The Company officially launched its Investment Services Division in first quarter 2015, and now offers securities through AOS, Inc., which does business as MoneyBlock, a member of FINRA and SIPC. Mr. Jackson Lounsberry, a registered representative of MoneyBlock with over 18 years experience and a member of the Company's board, heads the division. Fenton said, "We are excited about the benefits of teaming with an established advisor to extend investment management capabilities to clients, many of whom are business owners with personal and professional investment management needs. This also provides an opportunity for the Bank to increase noninterest income from other investment services offerings."

Total noninterest expense in first quarter 2015 was $751,000 compared to $2.67 million in first quarter 2014, with lower ongoing salary and compensation expenses following the wind-down of the Company's residential mortgage operations and a concerted effort to reduce overhead costs. Additionally, the Company recorded a $106,000 benefit in the first quarter 2015 from the reversal of a deferred rent obligation associated with the purchase of its main office, which had previously been on a long-term lease. The building is under contract and expected to close at the end of April. As a result, the Company had no occupancy expense in first quarter 2015.

"By purchasing our main banking facility, we expect to reduce noninterest expenses by approximately $130,000 annually," Melissa K. Larkin, Chief Financial Officer, explained. "This purchase also underscores the strength of our commitment to serving our diverse, local community as well as to serving small businesses in the greater Denver metro area."

Balance Sheet Review, Credit Quality and Shareholder Value

Net loans, after allowance for loan and lease losses, were $80.28 million at March 31, 2015, compared to $80.93 million in the prior year first quarter, and up $1 million from December 31, 2014 totals. The Company's allowance for loan and lease losses was $1.61 million, or 1.97% of gross loans, at March 31, 2015 compared to $1.13 million or 1.37% of gross loans at March 31, 2014. The balance sheet included no loans held for sale as of March 31, 2015, compared to $8.27 million a year ago, reflecting the Company's exit from residential mortgage lending.

Total deposits at March 31, 2015 were $117.34 million compared to $132.03 million at March 31, 2014. The Company trimmed certificates of deposits by approximately $7.5 million from the year before. Transaction accounts comprised approximately 53% of the Company's total deposits at both March 31, 2015 and March 31, 2014.

Total assets were $143.52 million at March 31, 2015 compared to $144.67 million at December 31, 2014. First quarter 2015 asset totals reflected the sale of the Company's only property held in other real estate owned, reducing assets by $657,000, and a decrease in investment securities, which had the benefit of reducing the Company's interest rate risk profile. Larkin said: "We took advantage of bond market rallies during the first quarter 2015 to reduce the overall size of our investment portfolio accomplishing both a reduction in interest rate risk and generating cash to fund expected loan growth."

The Bank's asset and loan quality measurements continued to demonstrate soundness and stability. At March 31, 2015, the ratio of non-performing loans to gross loans was 0.19% and non-performing assets to total assets was 0.11%. The Company's allowance for loan losses to gross loans was 1.97% at March 31, 2015, and its allowance for loan losses to non-performing loans exceeded 1,000%.

The Bank continued to exceed accepted regulatory standards for a well-capitalized institution and improved all capital ratios as of March 31, 2015 compared to the prior year's first quarter. Tier 1 leverage ratio was 12.1%, a tier 1 risk-based capital ratio of 17.0%, and a total risk-based capital ratio of 18.2%.

Tangible book value per share, excluding accumulated other comprehensive income, was $6.86 at March 31, 2015 unchanged from March 31, 2014, and increased from $6.71 at December 31, 2014. Total stockholders' equity rose to $19.26 million at March 31, 2015 compared to $17.55 million at March 31, 2014 and $18.44 million at December 31, 2014. The year-over-year total stockholders' equity comparison included an improvement in accumulated other comprehensive gain (loss) as a result of an increase in the fair value of the Bank's available-for-sale investment portfolio.

Fenton concluded: "By focusing on strengthening the Solera franchise and concentrating on productivity and efficient operations, we have experienced a dramatic turnaround from losses to profitability. We believe our actions have positioned the Company to renew its focus on growth and earning new business.

"The vitality and overall economic health of the Denver metropolitan area, and the continued expansion of entrepreneurial, small- and midsize businesses, is a promising indicator. We look forward to continuing on a path that has led to improved value for our stakeholders."

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.

Cautions Concerning Forward-Looking Statements:

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.

SOLERA NATIONAL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
($000s) 3/31/2015 12/31/2014 3/31/2014
ASSETS
Cash and due from banks $ 908 $ 602 $ 1,054
Federal funds sold 4,300 2,830
Interest-bearing deposits with banks 2,757 257 257
Investment securities, available-for-sale 47,806 52,900 66,341
FHLB and Federal Reserve Bank stocks, at cost 871 780 2,091
Gross loans 81,886 80,864 81,963
Net deferred (fees)/expenses 10 24 89
Allowance for loan and lease losses (1,613) (1,600) (1,126)
Net loans 80,283 79,288 80,926
Loans held for sale 8,266
Premises and equipment, net 663 670 845
Other real estate owned 657 1,746
Accrued interest receivable 540 616 674
Bank-owned life insurance 4,497 4,462 4,353
Other assets 894 1,610 1,585
TOTAL ASSETS $ 143,519 $ 144,672 $ 168,138
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing demand deposits $ 4,503 $ 5,853 $ 6,118
Interest-bearing demand deposits 9,781 7,866 10,535
Savings and money market deposits 47,722 48,007 52,593
Time deposits 55,329 57,387 62,784
Total deposits 117,335 119,113 132,030
Accrued interest payable 72 62 71
Short-term FHLB borrowings 8,683
Long-term FHLB borrowings 6,500 6,500 8,500
Accounts payable and other liabilities 352 556 1,305
TOTAL LIABILITIES 124,259 126,231 150,589
Common stock 27 27 27
Additional paid-in capital 27,121 27,120 26,736
Accumulated deficit (7,973) (8,448) (8,384)
Accumulated other comprehensive gain (loss) 241 (102) (728)
Treasury stock, at cost, 25,776 shares (156) (156) (102)
TOTAL STOCKHOLDERS' EQUITY 19,260 18,441 17,549
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 143,519 $ 144,672 $ 168,138
SOLERA NATIONAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three Months Ended
($000s, except per share data) 3/31/2015 12/31/2014 3/31/2014
Interest and dividend income
Interest and fees on loans $ 1,029 $ 1,079 $ 1,122
Interest on loans held for sale 53
Investment securities 293 291 416
Dividends on bank stocks 11 10 15
Other 1 3 2
Total interest income 1,334 1,383 1,608
Interest expense
Deposits 246 259 269
FHLB borrowings 25 28 40
Total interest expense 271 287 309
Net interest income 1,063 1,096 1,299
Provision for loan and lease losses 26
Net interest income after provision for loan and lease losses 1,063 1,070 1,299
Noninterest income
Customer service and other fees 27 28 27
Other income 36 36 37
Gain on loans sold 890
Gain on sale of available-for-sale securities 100 86 50
Total noninterest income 163 150 1,004
Noninterest expense
Employee compensation and benefits 376 257 1,683
Occupancy 182 250
Professional fees 85 101 236
Other general and administrative 290 279 503
Total noninterest expense 751 819 2,672
Net income (loss) $ 475 $ 401 $ (369)
Income (loss) per share $ 0.17 $ 0.15 $ (0.14)
Tangible book value per share $ 6.86 $ 6.71 $ 6.86
Net interest margin 3.14 % 3.14 % 3.37 %
Asset Quality:
Non-performing loans to gross loans 0.19 % 0.19 % —%
Non-performing assets to total assets 0.11 % 0.56 % 1.04 %
Allowance for loan losses to gross loans 1.97 % 1.98 % 1.37 %
Allowance for loan losses to non-performing loans 1,047.40 % 1,019.11 % NM*
Other real estate owned $ — $ 657 $ 1,746
* Not meaningful due to the insignificant amount of non-performing loans.
Selected Financial Ratios: (Solera National Bank Only)
Tier 1 leverage ratio 12.1 % 11.3 % 9.7 %
Tier 1 risk-based capital ratio 17.0 % 15.9 % 14.3 %
Total risk-based capital ratio 18.2 % 17.1 % 15.3 %

CONTACT: Robert J. Fenton, Solera National Bancorp, Inc. President & CEO (303) 202-0933

Source:Solera National Bank