Solera National Bancorp Announces Second Quarter 2021 Financial Results
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Solera National Bancorp Announces Second Quarter 2021 Financial Results

Thursday, July 22, 2021 9:00 AM
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Earnings

Quarterly earnings continue to soar topping $4.0 million, pre-tax.

LAKEWOOD, CO / ACCESSWIRE / July 22, 2021 / Solera National Bancorp, Inc. (OTC PINK: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 second quarter and first half of 2021.

Highlights for the quarter and six-months ended June 30, 2021 include:

  • Pre-tax, pre-provision income climbed to a new record during second quarter 2021 at $4.0 million compared to $3.2 million for first quarter 2021.
  • YTD net income was up 157% at $5.07 million for the six-months ended June 30, 2021 compared to $1.97 million for the six-months ended June 30, 2020.
  • Cost of funds remained consistent at 19 basis points for both the second quarter and year-to-date 2021; this is a 54%, or 22 basis point, improvement over the 0.41% cost of funds for the six-months ended June 30, 2020.
  • The Company's impressive efficiency ratio remained stable throughout first half of 2021 averaging 33.8% for the six-months ended June 30, 2021.
  • Traditional gross loans continued their controlled growth increasing 7%, or $21.5 million, during the second quarter 2021.
  • Noninterest-bearing deposits climbed 23%, or $62.3 million, quarter-over-quarter and $146.7 million, or 78%, year-over-year ending June 30, 2021 at $334.6 million.
  • Asset quality remained healthy with a modest level of criticized assets of 3.49% of total assets. However, nonperforming assets worsened to 1.28% of total assets as of June 30, 2021.
  • Return on average assets of 2.26% for the three months ended June 30, 2021, was impressive but inflated by $462,000 of gains on the sales of securities and virtually no provision for loan losses recorded. Net of the securities gains, ROAA would have been approximately 1.92%.
  • Return on average equity was similarly impacted by the aforementioned items allowing the metric to accelerate to 23.8% for the three-months ended June 30, 2021 compared to 16.5% for the linked quarter. Similarly, net of the securities gains, ROAE would have been approximately 20.19%.

For the six-months ended June 30, 2021, the Company reported net income of $5.07 million, or $1.18 per share, compared to $1.97 million, or $0.48 per share, for the six-months ended June 30, 2020. Martin P. May, President and CEO, commented: "Solera had yet another quarter of exciting results to share with our stockholders. Franchise value continues to make meaningful strides forward and I'm proud that the team's unwavering dedication to taking care of our customers is being displayed so clearly in our results."

Operational Highlights 

Net interest income after provision for loan and lease losses was $5.00 million for the quarter ended June 30, 2021 compared to $3.74 million for the quarter ended March 31, 2021 and $2.55 million for the quarter ended June 30, 2020. Net interest income after provision for loan and lease losses for the six-months ended June 30, 2021 of $8.74 million increased $4.0 million, or 84%, from the same prior year period. This improvement was partially aided by lower provision expense ($400,000 less) and an increase in interest and fee income earned on Paycheck Protection Program (PPP) loans ($1.82 million higher).

Year-over-year rates on loans are down, but loan growth has led to a $1.22 million, or 24%, increase in interest and fees on traditional loans for the first six-months of 2021 compared to the same period in 2020. Further contributing to the growth in net interest income was the $159,000 decline in interest expense for the first six-months of 2021 compared to the same period in 2020 despite the $126.7 million increase in total deposits during this time.

For the six-months ended June 30, 2021, net interest margin increased 18 basis points to 3.84% from 3.66% for the six-months ended June 30, 2020. Mr. May commented: "The improvement in the Bank's net interest margin comes exclusively from the progress made on cost of funds, which declined 54% year-over-year. Without this progress, the Bank would be experiencing margin compression due to the low interest rate environment and the extremely competitive market for high-quality borrowers, which are demanding low interest rates." For the second quarter 2021, net interest margin was 3.88%, up 9 basis points from 3.79% for the linked quarter, and up 38 basis points from 3.50% for second quarter 2020.

Total noninterest income in second quarter 2021 was $929,000 compared to $368,000 for the linked quarter. The increase in second quarter 2021 was due to gains on the sale of investment securities totaling $462,000 compared to $48,000 for first quarter 2021. Additionally, customer service and other fees improved 71% quarter-over-quarter, from $206,000 for first quarter 2021 to $353,000 for second quarter 2021 due to the increased number of customers serviced by the Bank and expanded product offerings. For the six-months ended June 30, 2021, noninterest income was $1.30 million, a $604,000 improvement over the $693,000 earned during the first six months of 2020.

Total noninterest expense in second quarter 2021 was $1.92 million, compared with $1.51 million for first quarter 2021. For the six-months ended June 30, 2021, total noninterest expense was $3.42 million compared with $2.94 million for the same prior-year period. The increases are the result of franchise growth creating a need for additional resources, primarily personnel, and higher costs directly correlated with more customers. Noninterest expenses have remained well managed throughout the Bank's rapid growth, at 1.68% of average assets (excluding PPP loans) for the six-months ended June 30, 2021 compared to 1.99% for the six-months ended June 30, 2020.

The Company's second quarter 2021 efficiency ratio (noninterest expense divided by the sum of net interest income and noninterest income) remained notable at 35.06% compared to 32.26% for the linked quarter. The efficiency ratio for the six-months ended June 30, 2021 was a marked improvement at 33.77% compared to 47.75% for the six-months ended June 30, 2020.

The Company's income tax expense is approximately 23%, which is a combined rate of 21% for Federal and approximately 4% for State, aided by tax concessions on tax-exempt securities.

Balance Sheet Review and Asset Quality Strength 

Total assets of $531.99 million at June 30, 2021 declined 3%, or $19.13 million from $551.12 million at March 31, 2021 and increased 35%, or $136.79 million from $395.20 million at June 30, 2020. The decrease compared to the linked quarter was primarily due to the net decline in PPP loans as forgiveness outpaced new originations. During second quarter 2021, the Bank funded 78 new PPP loans totaling $5.87 million and received forgiveness on 243 PPP loans totaling $43.80 million. This decline was partially offset by growth in the Bank's traditional loan portfolio of $21.48 million. Total asset growth from June 30, 2020 to June 30, 2021 consisted of PPP loans ($108.97 million), a 50% expansion in traditional loans ($107.02 million), additions to the investment portfolio ($18.81 million) and a $4.71 million increase in premises and equipment primarily for a corporate jet.

The allowance for loan and lease losses (ALLL) at June 30, 2021 was unchanged from the linked quarter at $5.50 million, or 1.67% of gross traditional loans, compared to 1.79% of gross traditional loans at March 31, 2021, and $3.77 million, or 1.72% of gross loans at June 30, 2020. Total criticized assets of $18.59 million at June 30, 2021 remained relatively flat compared to the linked quarter, $18.29 million at March 31, 2021 and increased from $13.72 million at June 30, 2020. Criticized assets to total assets remain manageable at 3.49% of total assets as of June 30, 2021 compared to 3.47% as of June 30, 2020. Non-performing loans increased from $955,000 to $6.80 million at June 30, 2021. Ms. Melissa K. Larkin, Chief Financial Officer noted: "Ironically, this change was the primary driver behind a flat ALLL for the quarter, despite the increase in the size the Bank's traditional loan portfolio. When a loan moves to nonaccrual, a specific impairment test is required by GAAP (Generally Accepted Accounting Principles). Since this particular loan is well secured, the specific reserve calculation was less than that applied under the pooled analysis and led to the reduction in the Bank's ALLL as a percentage of gross loans for second quarter 2021."

Total investment securities available-for-sale declined to $73.31 million at June 30, 2021 compared to $74.07 million at March 31, 2021 and increased from $58.50 million at June 30, 2020. Held-to-maturity investment securities were essentially unchanged from the linked quarter at $10.42 million and increased $4.01 million from June 30, 2020. For the six-months ended June 30, 2021, the Company realized $510,000 in gains on the sale of $18.51 million in corporate and municipal bonds.

Total deposits at June 30, 2021 were $467.47 million compared to $445.18 million at March 31, 2021 and $340.72 million at June 30, 2020. Noninterest-bearing demand deposits of $334.62 million, which represent 72% of total deposits, at June 30, 2021 increased $62.33 million, or 23%, versus the linked quarter, and increased $146.74 million from $187.88 million at June 30, 2020. Most other funding sources including short-term borrowings, time deposits and savings and money market deposits declined during second quarter 2021. The majority of these funds were short-term sources used to help fund the volume of PPP loans originated by the Bank and have declined, as expected, given the influx of cash as PPP loans have been forgiven.

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. $2.06 million of the student loan participation pool were 30 days+ past due at June 30, 2021. This was down slightly from $2.41 million 30 days+ past due at March 31, 2021. Of the $2.06 million past due, $1.19 million were 90 days+ past due as of June 30, 2021. 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 the pool at a discount resulting in the Bank's maximum exposure to credit losses slightly less than 1%.

Capital Strength 

The Company's capital ratios continue to be well in excess of the highest required regulatory benchmark levels. Last year, 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 June 30, 2021, the Bank's CBLR was 9.6%, which is above the required 9% minimum to qualify for using this simplified method. The Bank's CBLR was 10.1% at March 31, 2021 and 11.0% at June 30, 2020. The declining trend is a direct result of asset growth. Removing PPP loans from the Bank's balance sheet, the Bank's CBLR would have been 12.4% at June 30, 2021, 13.1% at March 31, 2021 and 13.3% at June 30, 2020.

Tangible book value per share, including accumulated other comprehensive income, was $12.60 at June 30, 2021 compared to $11.40 at March 31, 2021, and $10.47 at June 30, 2020. Total stockholders' equity was $54.16 million at June 30, 2021 compared to $48.92 million at March 31, 2021 and $43.40 million at June 30, 2020. Total stockholders' equity at June 30, 2021 included an accumulated other comprehensive gain of $1.58 million compared to a loss of $512,000 at March 31, 2021 and a gain of $1.02 million at June 30, 2020. The fair value of the Bank's available-for-sale investment portfolio increased as of June 30, 2021 due to a drop in longer-term interest rates.

The Company's retained earnings continued to increase, reaching $13.79 million at June 30, 2021, a 190% increase from $4.75 million at June 30, 2020.

Annual Meeting 

Ms. Larkin commented: "The Company's Annual Meeting material should be arriving via mail in mid-August. Please be sure to review the material and vote. The meeting will be held at the Bank's main location, 319 S. Sheridan Blvd. Lakewood, CO. Shareholders are invited to attend in person but may also vote electronically. We are grateful for your continued support of Solera."

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.

Contacts: Martin P. May, President & CEO (303) 937-6422 and Melissa K. Larkin, EVP & CFO (303) 937-6423

**FINANCIAL TABLES FOLLOW**

SOLERA NATIONAL BANCORP, INC. 
CONSOLIDATED BALANCE SHEETS 
(unaudited)

 
($000s)
 6/30/2021  3/31/2021  12/31/2020  9/30/2020  6/30/2020  
ASSETS
 
 
  
 
  
 
  
 
  
 
  
Cash and due from banks
 $2,525  $2,418  $4,384  $2,339  $4,016  
Federal funds sold
  2,700   2,000   6,200   6,000   1,100  
Interest-bearing deposits with banks
  880   828   807   824   792  
Investment securities, available-for-sale
  73,308   74,074   52,877   42,225   58,503  
Investment securities, held-to-maturity
  10,421   10,420   10,418   10,416   6,414  
FHLB and Federal Reserve Bank stocks, at cost
  2,330   2,766   1,322   1,256   1,256  
Paycheck Protection Program (PPP) loans, gross
  97,172   135,102   73,705   93,372   93,682  
Net deferred (fees)/expenses, PPP loans
  (3,118)  (3,781)  (1,520)  (2,328)  (2,707) 
Net PPP loans
  94,054   131,321   72,185   91,044   90,975  
Traditional loans, gross
  328,633   307,304   271,184   238,400   219,818  
Net deferred (fees)/expenses, traditional loans
  (688)  (850)  (782)  (764)  (619) 
Allowance for loan and lease losses
  (5,500)  (5,500)  (4,900)  (4,124)  (3,773) 
Net traditional loans
  322,445   300,954   265,502   233,512   215,426  
Premises and equipment, net
  13,019   13,093   13,155   8,287   8,310  
Accrued interest receivable
  2,080   2,444   1,886   1,855   1,450  
Bank-owned life insurance
  4,989   4,963   4,937   4,910   4,883  
Other assets
  3,241   5,839   2,119   2,010   2,073  
TOTAL ASSETS
 $531,992  $551,120  $435,792  $404,678  $395,198  
                      
LIABILITIES AND STOCKHOLDERS' EQUITY
                     
Noninterest-bearing demand deposits
 $334,620  $272,288  $235,172  $210,496  $187,876  
Interest-bearing demand deposits
  15,979   15,487   12,576   8,961   9,234  
Savings and money market deposits
  89,223   107,202   83,399   61,143   65,460  
Time deposits
  27,647   50,207   50,999   59,089   78,150  
Total deposits
  467,469   445,184   382,146   339,689   340,720  

 
                     
Accrued interest payable
  41   54   50   68   84  
Short-term borrowings
  4,735   34,133   -   14,000   5,000  
Long-term FHLB borrowings
  4,000   4,000   4,000   4,000   4,000  
Accounts payable and other liabilities
  1,589   18,828   1,566   941   1,993  
TOTAL LIABILITIES
  477,834   502,199   387,762   358,698   351,797  

 
                     
Common stock
  43   43   43   43   41  
Additional paid-in capital
  38,748   38,668   38,518   38,518   37,587  
Retained earnings
  13,786   10,722   8,718   6,870   4,753  
Accumulated other comprehensive (loss) gain
  1,581   (512)  751   549   1,020  
TOTAL STOCKHOLDERS' EQUITY
  54,158   48,921   48,030   45,980   43,401  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 $531,992  $551,120  $435,792  $404,678  $395,198  
                      

 

SOLERA NATIONAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

 
 Three Months Ended Six Months Ended
($000s, except per share data)
 6/30/2021  3/31/2021  12/31/2020  9/30/2020  6/30/2020  6/30/2021  6/30/2020 
Interest and dividend income
 
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Interest and fees on traditional loans
 3,298  3,005  2,792  2,596  2,485  6,303  5,082 
Interest and fees on PPP loans
  1,259   986   1,027   616   426   2,245   426 
Investment securities
  647   533   411   388   414   1,180   703 
Dividends on bank stocks
  29   26   15   15   15   55   32 
Other
  3   3   3   3   4   6   102 
Total interest income
  5,236   4,553   4,248   3,618   3,344   9,789   6,345 
Interest expense
                            
Deposits
  200   174   187   221   257   374   547 
FHLB & Fed borrowings
  33   31   18   19   33   64   50 
Total interest expense
  233   205   205   240   290   438   597 
Net interest income
  5,003   4,348   4,043   3,378   3,054   9,351   5,748 
Provision for loan and lease losses
  5   605   782   355   504   610   1,010 
Net interest income after
provision for loan and lease losses
  4,998   3,743   3,261   3,023   2,550   8,741   4,738 
Noninterest income
                            
Customer service and other fees
  353   206   135   103   104   559   184 
Other income
  114   114   115   118   100   228   215 
Gain on sale of loan
  -   -   84   -   -   -   - 
Gain on sale of securities
  462   48   316   866   279   510   294 
Total noninterest income
  929   368   650   1,087   483   1,297   693 
Noninterest expense
                            
Employee compensation and benefits
  1,085   811   891   878   918   1,896   1,807 
Occupancy
  165   155   106   109   104   320   205 
Professional fees
  65   56   34   35   29   121   94 
Other general and administrative
  603   484   383   407   422   1,087   829 
Total noninterest expense
  1,918   1,506   1,414   1,429   1,473   3,424   2,935 
Net Income Before Taxes
 4,009  2,605  2,497  2,681  1,560  6,614  2,496 
Income Tax Expense
  945   601   649   564   314   1,546   527 
Net Income
 3,064  2,004  1,848  2,117  1,246  5,068  1,969 

 
                            
Income Per Share
 0.71  0.47  0.43  0.51  0.30  1.18  0.48 
Tangible Book Value Per Share
 12.60  11.40  11.23  10.75  10.47  12.60  10.47 
WA Shares outstanding
  4,298,634   4,291,286   4,276,953   4,175,504   4,143,620   4,294,815   4,143,620 
Pre-Tax Pre-Provision Income
 4,014  3,210  3,279  3,036  2,064  7,224  3,506 
Net Interest Margin
  3.88%  3.79%  4.04%  3.55%  3.50%  3.84%  3.66%
Cost of Funds
  0.19%  0.19%  0.22%  0.27%  0.35%  0.19%  0.41%
Efficiency Ratio
  35.06%  32.26%  32.94%  39.71%  45.21%  33.77%  47.75%
Return on Average Assets
  2.26%  1.62%  1.76%  2.12%  1.43%  2.00%  1.21%
Return on Average Equity
  23.78%  16.54%  15.73%  18.95%  11.71%  20.12%  9.40%
Community Bank Leverage Ratio (CBLR)
  9.6%  10.1%  11.3%  11.4%  11.0%        

 
                            
Asset Quality:
                            
Non-performing loans to gross loans
  2.07%  0.31%  0.36%  0.41%  0.46%        
Non-performing assets to total assets
  1.28%  0.17%  0.22%  0.24%  0.25%        
Allowance for loan losses to gross traditional loans
  1.67%  1.79%  1.81%  1.73%  1.72%        

 
                            
Criticized loans/assets:
                            
Special mention
 7,018  6,665  7,730  13,300  4,572         
Substandard: Accruing
  4,772   10,666   10,709   6,911   7,570         
Substandard: Nonaccrual
  6,796   955   970   987   1,002         
Doubtful
  -   -   -   -   -         
Total criticized loans
 18,586  18,286  19,409  21,198  13,144         
Other real estate owned
  -   -   -   -   -         
Investment securities
  -   -   -   576   577         
Total criticized assets
 18,586  18,286  19,409  21,774  13,721         
Criticized assets to total assets
  3.49%  3.32%  4.45%  5.38%  3.47%        

 
                            

SOURCE: Solera National Bancorp, Inc.

Solera National Bancorp, Inc.
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