Solera National Bancorp Announces First Quarter 2021 Financial Results

Total assets pass $500 million milestone

LAKEWOOD, CO / ACCESSWIRE / April 22, 2021 / Solera National Bancorp, Inc. (OTC PINK:SLRK) ("Company"), the holding company for Solera National Bank ("Bank"), a business-focused bank located in the Denver metropolitan area, today reported financial results for the three months ended March 31, 2021.

Highlights for the quarter ended March 31, 2021 include:

• Pre-tax, pre-provision income remained steady during first quarter 2021 at $3.2 million compared to $3.3 million for fourth quarter 2020.
• Net interest income of $4.3 million for first quarter 2021 represents a 61% increase over the $2.7 million earned in first quarter 2020.
• Tangible book value per share reached $11.40 per share as of March 31, 2021 compared to $10.06 per share as of March 31, 2020.
• The Company's impressive efficiency ratio of 32% held constant throughout fourth quarter 2020 and first quarter 2021.
• Net interest margin declined 25bps from the linked-quarter to 3.79% for the three months ended March 31, 2021. A significant portion of the Bank's loan growth for the quarter was Paycheck Protection Program (PPP) loans that yield below the Bank's commercial loan portfolio.
• The Bank funded 518 new PPP loans during the first quarter totaling $78.7 million in new originations.
• Noninterest-bearing deposits rose another 16% during the quarter to $272.3 million, a $37.1 million increase over the linked-quarter, and a $102.6 million increase since March 31, 2020.
• Asset quality remained strong with a modest level of criticized assets of 3.32% of total assets and nonperforming assets of 0.17% of total assets as of March 31, 2021.

For the three months ended March 31, 2021, the Company reported net income of $2.0 million, or $0.47 per share, compared to net income of $1.85 million, or $0.43 per share, for the three months ended December 31, 2020, and net income of $723,000, or $0.17 per share, for the three months ended March 31, 2020.

Martin P. May, President and CEO, commented: "The accomplishments of our 40-person team continue to amaze me. We processed another nearly $80 million in PPP loans all while keeping up with our ever-increasing customer volume. We are continually striving to make enhancements to our products and services and truly set the tone for how to provide quality banking for our customers. Our results quarter-after-quarter provide an unbiased measuring stick - we are gaining customers and growing revenue."

Operational Highlights

Net interest income after provision for loan and lease losses was $3.74 million for the quarter ended March 31, 2021 compared to $3.26 million and $2.19 million in the quarters ended December 31, 2020 and March 31, 2020, respectively. The Company recorded provision for loan and lease losses of $605,000 in first quarter 2021 compared to $782,000 and $506,000 in the quarters ended December 31, 2020 and March 31, 2020, respectively. The provision for loan and lease losses during first quarter 2021 was primarily due to the growth in the traditional loan portfolio.

The Company's net interest margin in first quarter 2021 was 3.79% compared to 4.04% in the linked-quarter and 3.86% in the first quarter 2020. Chief Financial Officer, Melissa K. Larkin reflected: "Short-term interest rates continue to be devastatingly low, which has dampened growth in interest and fees on loans and created margin compression. Gross loans outstanding (both PPP and traditional) grew 28% quarter-over-quarter but interest and fees on total loans grew only 4.5% during this same period. Despite the drag on yield, the PPP loans have been very positive for the Bank, contributing nearly $1 million in interest and fee income to the Company during first quarter 2021 and more than $3.0 million in interest and fee income over the last 12 months."

Total noninterest income declined to $368,000 for first quarter 2021 from $650,000 in fourth quarter 2020 and increased from $210,000 in first quarter 2020. Fourth quarter 2020 was bolstered by $400,000 in gains -- $316,000 from the sale of investment securities and $84,000 from the sale of a loan. Comparatively, the Company recorded gains on the sale of available-for-sale securities of $48,000 in first quarter 2021, and $15,000 in first quarter 2020. Customer service fees increased a dramatic 158% from $80,000 for the three months ended March 31, 2020 to $206,000 for the three months ended March 31, 2021 due to the increased number of customers serviced by the Bank and expanded product offerings. Mr. May reflected, "Increasing noninterest income has been a strategic focus of the Company for the last several years. Although we still have room to improve, I am very pleased with our progress, especially the growth in the last twelve months."

Total noninterest expense of $1.51 million in first quarter 2021, increased from $1.41 million in the linked-quarter and $1.46 million in the first quarter of 2020. The majority of the increase was due to an increase in total assets which caused FDIC insurance expenses and OCC assessments to increase, coupled with higher data processing expenses due to the steady flow of new customer accounts. Even during this period of rapid growth, noninterest expense, as a percentage of average assets, have steadily improved at 1.22% for first quarter 2021, compared to 1.35% for fourth quarter 2020 and 2.01% for first quarter 2020.

Robust revenues, coupled with controlled noninterest expenses, allowed the Company's first quarter 2021 efficiency ratio (noninterest expense divided by the sum of net interest income and noninterest income) to remain at the 32% achieved during fourth quarter 2020. The efficiency ratio for the three months ended March 31, 2021 was 32.26%, compared to 32.94% for the quarter-ended December 31, 2020, both of which were a significant improvement compared to 50.61% for the three months ended March 31, 2020.

The Company's income tax expense has remained steady at approximately 23%, which is a combined rate of 21% for Federal and approximately 4% for State, aided by tax concessions on tax-exempt securities. The Company recorded income tax expense of $601,000 for first quarter 2021, compared to $649,000 for fourth quarter 2020 and $213,000 for first quarter 2020.

Balance Sheet Review and Asset Quality Strength

Total assets of $551.12 million at March 31, 2021 increased 26% from $435.79 million at December 31, 2020 and 84% from $300.26 million at March 31, 2020. The majority of this increase came from an increase in loans - both traditional gross loans, which grew $36.12 million, or 13% since December 31, 2020 and PPP loans, which grew 83% or $61.40 million during this period. A $21.20 million increase in investment securities, available-for-sale, also contributed to the overall growth in total assets.

As a percentage of gross loans, the allowance for loan and lease losses remained relatively constant quarter-over-quarter at 1.79%, or $5.50 million, as of March 31, 2021, compared to $4.90 million, or 1.81% at December 31, 2020. Compared to the first quarter of the prior year, the allowance for loan and lease losses has increased 24 basis points, from 1.55% of gross loans at March 31, 2020. This increase is to account for the economic uncertainty from the COVID-19 pandemic, which continues to place financial stress on some borrowers. Total criticized assets of $18.29 million at March 31, 2021, declined marginally compared to the linked-quarter, down $1.12 million from $19.41 million at December 31, 2020. Criticized assets to total assets remain controlled at 3.32% of total assets as of March 31, 2021.

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. $2.41 million of the $14.36 million student loan participation pool were 30 days+ past due at March 31, 2021. Of the $2.41 million past due, $1.99 million were 90 days+ past due as of March 31, 2021. 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 making the Bank's maximum exposure to credit losses slightly less than 1%.

Total deposits at March 31, 2021 were $445.18 million compared to $382.15 million at December 31, 2020 and $253.20 million at March 31, 2020. Noninterest-bearing demand deposits of $272.29 million, which represent 61% of total deposits at March 31, 2021, increased $37.12 million, or 16%, versus the linked-quarter, and increased $102.56 million, or 60%, from $169.73 million at March 31, 2020.

To support the increase in PPP loans, the Company utilized short-term borrowings, primarily from the FHLB, which ended the first quarter 2021 at $34.13 million borrowed. Ms. Larkin stated, "Our healthy core deposit growth has enabled us to invest in traditional commercial loans and investment securities. Additionally, the Company contributed significantly to the needs of small businesses across the country through PPP lending. Our strong capital ratios and dedicated team members aided our ability to successfully deploy another round of PPP funds to struggling businesses."

Capital Strength

The Bank's capital ratios continue to be 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 March 31, 2021, the Bank's CBLR was 10.1%, which is above the required 9% minimum to qualify for using this simplified method. The Bank's CBLR was 11.3% at December 31, 2020 and 13.4% at March 31, 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 13.1% at March 31, 2021 and 14.2% at December 31, 2020.

Tangible book value per share, including accumulated other comprehensive income (loss), was $11.40 at March 31, 2021 compared to $11.23 at December 31, 2020 and $10.06 at March 31, 2020. Total stockholders' equity was $48.92 million at March 31, 2021, compared to $48.03 million at December 31, 2020 and $41.70 million at March 31, 2020. Total stockholders' equity at March 31, 2021 included an accumulated other comprehensive loss of $512,000 compared to a gain of $751,000 at December 31, 2020 and a gain of $560,000 at March 31, 2020. The fair value of the Bank's available-for-sale investment portfolio has declined since December 31, 2020 due to an increase in longer-term interest rates.

The Company's retained earnings continued their steady climb, reaching $10.72 million at March 31, 2021, a 206% increase from $3.51 million at March 31, 2020. Mr. May reflected, "The consistent contribution of capital from earnings is key to the Bank's balance sheet growth and continued improvement in return on equity. We are proud to announce to our shareholders that we are performing in the upper quartile of our peers with a 16.54% return on average equity for the first quarter of 2021. We are also pleased that our hard work is translating into an increase in the stock price. The Company's stock closed the first quarter of 2020 at $9.00 per share, which was approximately one dollar below book value per share. Today, SLRK stock has gained 41%, ending first quarter 2021 at $12.70 per share and $1.30 above tangible book value. The fruit of our labor is encouraging to see."

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.

Source: Solera National Bank

Contacts: Martin P. May, President & CEO (303) 937-6422

Melissa K. Larkin, EVP & CFO (303) 937-6423

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SOURCE: Solera National Bancorp, Inc.