Solera National Bancorp, Inc. Reports First Quarter 2011 Results

LAKEWOOD, Colo., April 28, 2011 /PRNewswire/ -- Solera National Bancorp, Inc. (OTC Bulletin Board: SLRK), the parent Company of Solera National Bank, reported a first quarter 2011 net loss of $183,000 or ($0.07) per share compared with net income of $416,000 or $0.16 per share in fourth quarter 2010 and net income of $103,000 or $0.04 per share in first quarter 2010.

"Although we had a relatively small net loss in the first quarter, our net interest margin, a primary driver for us, continued to improve reflecting a key focus we have in 2011 on growing income from core operations," said Douglas Crichfield, President and CEO.  "Throughout 2010, we successfully re-priced both our savings accounts and interest-bearing demand accounts while maintaining a competitive rate and retaining customers.  We have experienced a great deal of customer loyalty, in part reflecting our commitment to the particular needs and preferences of the Hispanic market."

"These accounts are not only an important source of core funding, but are also an excellent customer acquisition tool for us and provide effective cross-selling opportunities.  We were very pleased with the growth in savings and money market accounts to $64.4 million from $57.1 million in the prior quarter, aided in part by the efforts of the directors' business development committee."

"Lack of loan portfolio growth for much of 2010 into the first quarter of this year, as well as an increase in non-performing assets during 2010, was a drag on earnings.  Fortunately, we have begun to see a considerable increase in loan demand recently as well as stabilization in non-performing assets, both of which provide encouragement for improving financial results."

Operating Performance

The Company generated total interest income of $1.51 million in first quarter 2011, which was down slightly compared with both fourth quarter 2010 and first quarter 2010.  However, interest expense in the first quarter declined 28% compared with the prior year's first quarter, contributing to an 11% rise in net interest income before provision for loan losses to $1.08 million in the first quarter 2011 compared with $974,000 in the first quarter 2010.

Net interest income after the provision for loan losses increased to $1.08 million in first quarter 2011 compared with $859,000 in the prior year's first quarter and $1.06 million in fourth quarter 2010.  The Bank's net interest margin, which was 3.25% in first quarter 2011, was essentially unchanged from fourth quarter 2010 but 22 basis points higher than first quarter 2010.

"During the past two years, despite the weak economy, we have had meaningful improvement in our financial results," noted Crichfield.  "Our core deposits now give us a sound foundation for increasing our loan portfolio and we have the capacity to lend.  As the economic recovery takes hold, we aim to grow the loan portfolio."

Solera generated noninterest income of $16,000 in the first quarter of 2011, compared with $494,000 in fourth quarter 2010 and $280,000 in first quarter 2010.  In previous quarters, the Company capitalized on favorable market conditions, recognizing a $475,000 net gain on the sale of securities during the fourth quarter of 2010 and $263,000 a year ago. Noninterest expense was $1.28 million in first quarter 2011 compared with $1.14 million in fourth quarter 2010 and $1.04 million in first quarter 2010.

Total assets at March 31, 2011 were $139.8 million, 2% higher than assets of $137.5 million at March 31, 2010, and essentially flat to fourth quarter 2010.  Customer deposits were $114.5 million at March 31, 2011, up 3% from the fourth quarter 2010 and 4% from the prior year.  Core deposits, which exclude time deposits, comprised 68% of total deposits at March 31, 2011 an increase from 62% of total deposits at March 31, 2010.

Total loans of $58.2 million at March 31, 2011 represented a 3% increase compared with $56.3 million at March 31, 2010.

"Commercial loan demand throughout most of the first quarter was weaker than we hoped, although we weren't surprised because small businesses were still moving cautiously" said Robert J. Fenton, Executive Vice President and CFO.  "As loan demand picks up, we will continue to exercise great care in our credit and underwriting practices.  As with many community banks, we have the opportunity to attract quality relationship customers from mega-banks that are primarily focused on serving larger accounts."

Asset Quality

Non-performing assets were 3.24% of total assets at March 31, 2011 compared to 2.79% of total assets at December 31, 2010 and 0.73% of total assets at March 31, 2010.  The allowance for loan losses was 2.02% of total loans at March 31, 2011, 2.00% at December 31, 2010 and 1.68% of total loans at March 31, 2010.

The Company did not record a provision for loan losses in first quarter 2011, reflecting lending trends and also stabilizing asset quality.  This compares to a provision for loan losses of $35,000 for the three months ended December 31, 2010, and $115,000 for the three months ended March 31, 2010.

Fenton explained that the Bank has seen stabilization in troubled credits, and is positioned to effectively move foreclosed assets.  At March 31, 2011, there was one property in other real estate owned which is under contract with an anticipated closing in early May.

Capital

The Bank's Tier 1 Leverage Capital Ratio was 11.3% at March 31, 2011, while its Total Risk-Based Capital was 18.7% — both well in excess of commonly accepted regulatory standards for well-capitalized institutions.  At March 31, 2011, the Company's tangible book value per share was $7.05.

Crichfield concluded: "Our ability to steadily grow the Bank's intrinsic value and maintain a strong capital position in this economic environment is a meaningful accomplishment.  Investors continue to take a cautious stance on the entire community banking sector, which has resulted in companies like Solera trading at a deep discount to tangible book value.  With our focus on the Hispanic and small business markets, and our strong balance sheet, Solera is well positioned to capitalize on a rebound in economic activity."

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 on September 10, 2007.  Solera National Bank is a traditional, community, commercial bank with a specialized focus serving the Hispanic market.  It prides itself in delivering personalized customer service — welcoming, inclusive and respectful — combined with leading-edge banking capabilities.  The Bank is also actively involved in the community in which it serves.

For more information, 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. ("Company") and its wholly-owned subsidiary, Solera National Bank ("Bank"), are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied.  These risks and uncertainties can include the risks associated with the ability to grow the Bank and the services it provides, the ability to successfully integrate new business lines and expand into new markets, competition in the marketplace, general economic conditions and many other risks described in the Company's Securities and Exchange Commission filings.  The most significant of these uncertainties are described in our Annual Report on Form 10-K and Quarterly reports on Form 10-Q all of which any reader of this release is encouraged to study (including all amendments to those reports) and exhibits to those reports, and include (but are not limited to) the following: the Company has a limited operating history upon which to base an estimate of its future financial performance; general economic conditions may be less favorable than expected, causing an adverse impact on our financial performance; and the Company is subject to extensive regulatory oversight, which could restrain its growth and profitability.  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 Bancorp, Inc.