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. | |||||||||||||||||||||
($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.