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Savi Financial Corporation Earns $468,000 in the First Quarter of 2023; Highlighted by Strong Loan and Deposit Growth

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Savi Financial Corporation (SVVB) reported a net income of $468,000 in Q1 2023, a decrease from $1.09 million in the prior quarter and $964,000 in Q1 2022. This translates to $0.11 earnings per diluted share, down from $0.25 in Q4 2022 and $0.22 in Q1 2022. Loan production remained strong with a 4% quarterly increase and 24% year-over-year growth, despite decreased demand for mortgage and small business loans due to rising interest rates. Total deposits grew by 4% year-over-year to $467.5 million, and credit quality metrics remained robust with no loan losses recorded. However, the net interest margin decreased to 3.96% from 4.57% in the prior quarter, reflecting increased funding costs.

Positive
  • Total deposits increased by 4% year-over-year to $467.5 million.
  • Total loans grew 4% quarterly and 24% year-over-year, reaching $453.8 million.
  • No provision for loan losses recorded due to strong credit quality.
  • SaviBank capital levels are above well-capitalized thresholds with a tier-1 leverage ratio of 8.26%.
Negative
  • Net income decreased to $468,000 from $1.09 million in Q4 2022, representing a decline of 57%.
  • Earnings per share fell to $0.11, down from $0.25 in the previous quarter.
  • Net interest margin decreased to 3.96% from 4.57% in the preceding quarter due to increased funding costs.
  • Non-interest expenses increased to $5.53 million compared to $4.68 million in the prior quarter.

MOUNT VERNON, Wash., April 27, 2023 (GLOBE NEWSWIRE) -- Savi Financial Corporation, Inc. (OTC Pink: SVVB), the bank holding company for SaviBank, today reported net income of $468,000, or $0.11 per diluted share, for the first quarter of 2023, compared to $1.09 million, or $0.25 per diluted share, in the preceding quarter and $964,000, or $0.22 per diluted share, in the first quarter of 2022. Results for the current quarter were driven by strong loan and deposit growth. All results are unaudited.

“Savi’s first quarter operating results reflected solid balance sheet expansion and excellent credit quality metrics,” said Michal D. Cann, Chairman and President of Savi Financial Corporation. “Total deposits grew during the quarter, as we continue to see consistent loyalty in our customer base. Operating expenses were lower during the preceding quarter due to some nonrecurring expense reversals, which impacted our linked quarter net income comparison. Overall, operating income was negatively impacted by the increase in interest rates in the first quarter. Despite the challenges and headwinds facing the banking industry, our ability to grow our balance sheet organically will ultimately further enhance the value of our Company over time. We are well-positioned to come out stronger and more profitable on the other side of this current economic cycle.”

“Loan production continues to be strong, with total loans increasing 4% for the quarter, and increasing 24% compared to a year ago,” said Andrew Hunter, President and CEO of SaviBank. “While higher interest rates have dampened consumer demand for mortgage loans, and small business (SBA) loans during the first few months of the year, we have the right teams in place and are well positioned to grow these loan portfolios when interest rates stabilize or decrease.”

“At the end of March, our negative $3.0 million accumulated other comprehensive income (“AOCI”) was related to our unrealized loss on available for sale securities, and this was only 8% of our overall capital. With the liquidity we carry on our balance sheet, we have no intention of liquidating any securities prior to maturity,” said Hunter.

“The net interest margin (”NIM”) contraction we experienced during the quarter was primarily related to pressure from the funding side of the balance sheet,” said Rob Woods, Chief Financial Officer of SaviBank. The cost of funds increased to 114 basis points during the quarter, compared to 41 basis points in the preceding quarter. SaviBank’s NIM was 3.96% in the first quarter of 2023, compared to 4.57% in the preceding quarter, and 3.63% in the first quarter a year ago. The NIM remains higher than the peer average of 3.77% posted by the 158 banks that comprised the Dow Jones U.S. Microcap Bank Index at December 31, 2022.

First Quarter 2023 Highlights:

  • Net income was $468,000 in the first quarter of 2023, compared to $964,000 in the first quarter of 2022, and $1.09 million in the fourth quarter of 2022.
  • Earnings per share were $0.11 in the first quarter of 2023, compared to $0.22 in the first quarter a year ago, and $0.25 in the preceding quarter.
  • Net interest income increased 28% to $5.12 million in the first quarter of 2023, compared to $4.00 million in the first quarter a year ago, and decreased 4% compared to $5.34 million in the fourth quarter of 2022.
  • Total revenue, consisting of net interest income and non-interest income, was $6.09 million in the first quarter of 2023, compared to $6.07 million in the first quarter a year ago and decreased 4% compared to $6.37 million in the preceding quarter.
  • Non-interest expense was $5.53 million in the first quarter of 2023, compared to $4.87 million in the first quarter a year ago, and $4.68 million in the preceding quarter.
  • Average first quarter 2023 total loans increased 25% to $444.3 million, compared to $354.5 million in the first quarter a year ago, and increased 6% from $420.9 million in the fourth quarter of 2022. Total loans at March 31, 2023, increased 24% to $453.8 million from $364.6 million a year ago and increased 4% compared to $434.4 million at December 31, 2022.
  • SBA and USDA loan production for the twelve months ended March 31, 2023, totaled 26 loans for $33.6 million, compared to production of 27 loans for $32.7 million in the year-ago period.
  • Average first quarter 2023 total deposits grew 2% to $449.1 million from $440.5 million in the first quarter a year ago, and increased 1% from $444.6 million in the fourth quarter of 2022. Total deposits increased 4% to $467.5 million, at March 31, 2023, from $448.3 million a year ago, and increased 9% from $430.7 million at December 31, 2022. Uninsured deposits totaled approximately 20% of total deposits at March 31, 2023.
  • Due to strong credit quality, the company recorded no provision for loan losses in the first quarter of 2023 or the first quarter a year ago. This compared to a provision for loan losses of $335,000 in the fourth quarter of 2022.
  • Allowance for loan losses, as a percentage of total loans, was 1.27% at March 31, 2023, compared to 1.16% at March 31, 2022, and 1.34% at December 31, 2022.
  • The Company had zero nonperforming loans on its books at March 31, 2023. This compared to nonperforming loans, as a percentage of total loans, of 0.40% at March 31, 2022, and 0.11% at December 31, 2022.
  • Nonperforming assets, as a percentage of total assets, was 0.12% at March 31, 2023, compared to 0.47% a year ago and 0.21% three months earlier.
  • Net charge-offs were $82,000 in the first quarter of 2023, compared to net charge-offs of $1,000 in the first quarter of 2022, and net recoveries of $39,000 in the prior quarter.
  • SaviBank capital levels remained above the threshold for well-capitalized institutions with a tier-1 leverage ratio of 8.26% at March 31, 2023.

“Our newly proposed community bank in Bellingham, WA., named Orca Bank, is pending regulatory approval, and is on schedule to open during the third quarter of 2023,” Cann continued. “The formation of Orca Bank came from a local group of community-minded businesspeople from Whatcom County, with the help of Savi Financial Corporation, the parent company of SaviBank. This stand-alone community bank will focus on serving the communities in Whatcom County, the largest county in which Savi Financial Corporation operates. This transaction will enable us to better serve the banking needs of Whatcom County, with a local board of directors and management making local decisions.”

About Northwest Washington

SaviBank currently operates six branches in Skagit County, two branches in Island County, one branch in Whatcom County, one branch in San Juan County and a loan production office in Thurston County. The Skagit, Whatcom, Island and San Juan counties region stretches north from the greater Seattle/Everett/Bellevue metropolis to the Canadian border.

The housing market in Skagit, Island, Whatcom and San Juan counties remains healthy, although has fallen off the record high levels from a year ago. According to the Northwest Multiple Listing Service, the average home in Skagit County sold for $545,000, down 0.91% in March 2023, compared to a year ago, and there was a 1.56 month supply of homes on the market. For Island County, the average house sold for $575,000, down 5.82% from a year ago and supply totaled 1.56 months. For Whatcom County, the average home sold for $560,000, down 9.67% from a year ago and supply totaled 2.04 months. For San Juan County, the average home sold for $860,000, down 4.18% from a year ago and supply totaled 3.84 months.

Skagit’s population is projected to grow 3.93% from 2023 through 2028, and median household income is projected to increase by 12.04% during the same time frame. Whatcom County’s population is projected to grow 3.74% from 2023 through 2028, and median household income is projected to increase by 18.03%. Island County’s population is projected to grow 3.59% from 2023 through 2028, and median household income is projected to increase by 16.96%. San Juan County’s population is projected to grow 7.64% from 2023 through 2028, and median household income is projected to increase by 14.38%.

Sources:
https://www.nwmls.com/real-estate-news/monthly-market-snapshot/
https://www.capitaliq.spglobal.com/

About Savi Financial Corporation Inc. and SaviBank –

Savi Financial Corporation is the bank holding company which owns SaviBank. The Bank began operations April 11, 2005, and has 10 branch locations in Anacortes, Burlington, Bellingham, Concrete, Mount Vernon (2), Oak Harbor, Freeland, Sedro-Woolley, and Friday Harbor, Washington, and a Mortgage Loan Production Office in Olympia. The Bank provides loan and deposit services to customers who are predominantly small and middle-market businesses and individuals in and around Skagit, Island, Whatcom and San Juan counties. As a locally-owned community bank, we believe that when everyone becomes Savi about their finances, our entire community benefits. For additional information about SaviBank, visit: www.SaviBank.com

Forward Looking Statement

This release may contain “forward-looking statements” that are subject to risks and uncertainties. Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. All statements, other than statements of historical fact, regarding our financial position, business strategy and management’s plans and objectives for future operations are forward-looking statements. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” and “intend” and words or phrases of similar meaning, as they relate to SaviBank or management, are intended to help identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe that management’s expectations as reflected in forward-looking statements are reasonable, we cannot assure readers that those expectations will prove to be correct. Forward-looking statements are subject to various risks and uncertainties that may cause our actual results to differ materially and adversely from our expectations as indicated in the forward-looking statements. These risks and uncertainties include our ability to maintain or expand our market share or net interest margins, and to implement our marketing and growth strategies. Further, actual results may be affected by our ability to compete on price and other factors with other financial institutions; customer acceptance of new products and services; the regulatory environment in which we operate; and general trends in the local, regional and national banking industry and economy, as those factors relate to our cost of funds and return on assets. In addition, there are risks inherent in the banking industry relating to collectability of loans and changes in interest rates. Many of these risks, as well as other risks may have a material adverse impact on our operations and business.

          
SELECTED FINANCIAL DATA         
(In thousands of dollars, except for ratios and per share amounts)        
Unaudited         
 Three Months Ended
 March 31,
2023
 December 31,
2022
 Var % March 31,
2022
 Var %
SUMMARY OF OPERATIONS         
Interest income$6,573  $5,889  12% $4,305  53%
Interest expense (1,456)  (554) 163   (307) 374 
Net interest income 5,117   5,335  (4)  3,998  28 
Provision for loan losses    (335) N/M     N/M 
NII after loss provision 5,117   5,000  2   3,998  28 
Non-interest income 974   1,032  (6)  2,068  (53)
Non-interest expense (5,529)  (4,681) 18   (4,873) 13 
Income before tax  562   1,351  (58)  1,193  (53)
Federal income tax expense 94   259  (64)  229  (59)
Net income$468  $1,092  (57)% $964  (51)%
          
PER COMMON SHARE DATA          
Number of shares outstanding (000s) 3,452   3,442  0%  3,439  0%
Earnings per share, diluted$0.11  $0.25  (57) $0.22  (52)
Market value 7.60   8.40  (10)  10.78  (29)
Book value 10.85   10.54  3   10.86  (0)
Market value to book value 70.07%  79.70% (12)  99.23% (29)
          
BALANCE SHEET DATA         
Assets$563,324  $523,516  8% $511,578  10%
Investments securities 38,105   38,103  0   48,489  (21)
Total loans   453,807   434,419  4   364,634  24 
Total deposits 467,507   430,709  9   448,251  4 
Borrowings   53,450   54,500  (2)  24,500  118 
Shareholders’ equity 37,443   36,277  3   37,361  0 
          
AVERAGE BALANCE SHEET DATA         
Average assets$563,324  $522,150  8% $495,571  14%
Average total loans 444,322   420,947  6   354,454  25 
Average total deposits 449,108   444,632  1   440,497  2 
Average shareholders' equity 36,860   35,828  3   37,500  (2)
          
ASSET QUALITY RATIOS         
Net (charge-offs) recoveries$(82) $39  N/M  $(1) 8,100%
Net (charge-offs) recoveries to average loans (0.07)%  0.04% N/M   (0.00)% 6,441 
Non-performing loans as a % of loans 0.00   0.11  (96)  0.40  (99)
Non-performing assets as a % of assets 0.12   0.21  (43)  0.47  (74)
Allowance for loan losses as a % of total loans 1.27   1.34  (6)  1.16  9 
Allowance for loan losses as a % of non-performing loans 26,118.18   1,258.96  1,975   289.54  8,921 
          
FINANCIAL RATIOS\STATISTICS         
Return on average equity 5.08%  12.19% (58)%  10.28% (51)%
Return on average assets 0.33   0.84  (60)  0.78  (57)
Net interest margin 3.96   4.57  (13)  3.63  9 
Efficiency ratio 90.79   69.77  30   78.58  16 
Average number of employees (FTE) 150   148  1   132  14 
          
CAPITAL RATIOS         
          
Tier 1 leverage ratio -- Bank 8.26   8.72  (5)%  7.97  4%
Common equity tier 1 ratio -- Bank 8.92   9.13  (2)%  9.64  (7)%
Tier 1 risk-based capital ratio -- Bank 8.92   9.13  (2)%  9.64  (7)%
Total risk-based capital ratio -- Bank 10.17   10.38  (2)%  10.72  (5)%


Contact:Michal D. Cann
 Chairman & President
 Savi Financial Corporation
 (360) 707-2272

FAQ

What were Savi Financial Corporation's earnings for Q1 2023?

Savi Financial Corporation reported a net income of $468,000, or $0.11 per diluted share, for Q1 2023.

How did Savi Financial Corporation's loan production perform in Q1 2023?

Loan production increased by 4% for the quarter and 24% compared to a year ago.

What was the total deposits amount for Savi Financial Corporation in Q1 2023?

Total deposits grew to $467.5 million in Q1 2023, marking a 4% increase year-over-year.

What is the current net interest margin for Savi Financial Corporation?

The net interest margin for Q1 2023 decreased to 3.96%.

What challenges did Savi Financial Corporation face in Q1 2023?

The bank faced challenges from rising interest rates, impacting consumer demand for loans.

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