Savi Financial Corporation Earns $559,000 in the Third Quarter of 2023; Results Reflect Robust Loan Growth and Strong Credit Quality

Rhea-AI Summary

Savi Financial Corporation, Inc. reported net income of $559,000, or $0.13 per diluted share, for Q3 2023. Net income for the first nine months of 2023 was $1.59 million. Total deposits increased 5% YoY and 3% QoQ. Loan production increased 4% QoQ and 19% YoY. NIM remained stable at 3.66%. Orca Bank, a new state-chartered commercial bank, received regulatory approval and is expected to open in 2024.

Positive

• Net income for Q3 2023 was $559,000, a decrease from $561,000 in the preceding quarter and $1.10 million in Q3 2022.
• Total deposits increased 5% YoY and 3% QoQ.
• Loan production increased 4% QoQ and 19% YoY.
• Net interest income increased 4% to $5.04 million in Q3 2023.
• Orca Bank received regulatory approval and is expected to open in 2024.

Negative

• None.

MOUNT VERNON, Wash., Oct. 30, 2023 (GLOBE NEWSWIRE) -- Savi Financial Corporation, Inc. (OTC Pink: SVVB), the bank holding company for SaviBank, today reported net income of $559,000, or $0.13 per diluted share, for the third quarter of 2023, compared to $561,000, or $0.13 per diluted share, in the preceding quarter and $1.10 million, or $0.25 per diluted share, in the third quarter of 2022. Results for the third quarter of 2023 were driven by strong loan growth and continued improvements in the Company’s CECL modeling. In the first nine months of 2023, net income was $1.59 million, or $0.36 per diluted share, compared to $2.63 million, or $0.60 per diluted share, in the first nine months of 2022. All results are unaudited.

“Our third quarter 2023 operating results were driven by another strong quarter of loan and deposit growth,” said Michal D. Cann, Chairman and President of Savi Financial Corporation. “As a result of our strong credit metrics, we were able to record a reversal to our reserves during the current quarter, which added to third quarter profitability. Total deposits increased 5% year-over-year and 3% compared to three months earlier; a testament to the hard work of our dedicated team of bankers who continue to find success in a challenging economic environment where competition for deposits and the cost of funding remains high. Another highlight during the quarter was receiving regulatory approval from the Federal Deposit Insurance Corporation for the formation of Orca Bank. We anticipate opening Orca Bank in 2024.”

“Loan production continues to be strong, with total loans increasing 4% from the linked quarter, and increasing 19% compared to a year ago,” said Andrew Hunter, President and CEO of SaviBank. “We continue to seek out lending opportunities from new and existing customers, at a time when some of our competitors are scaling back on loan growth.”

“Our NIM remained stable compared to the preceding quarter, largely due to higher yielding new loans being put on the books, as well as variable rate loans repricing,” said Rob Woods, Chief Financial Officer of SaviBank. “While deposit and other funding costs increased during the quarter, they are being carefully monitored and controlled.” The cost of funds increased to 186 basis points during the quarter, compared to 159 basis points in the preceding quarter.

The Company’s NIM was 3.66% in the third quarter of 2023, which was unchanged compared to the preceding quarter, and a decrease compared to 4.37% in the third quarter a year ago. The NIM remains higher than the peer average of 3.34% posted by the 153 banks that comprised the Dow Jones U.S. Microcap Bank Index at June 30, 2023.

Third Quarter 2023 Highlights:

• Net income was $559,000 in the third quarter of 2023, compared to $561,000 in the second quarter of 2023, and $1.10 million in the third quarter of 2022.
• Earnings per diluted share were $0.13 in the third quarter of 2023, and in the preceding quarter, and $0.25 in the third quarter of 2022.
• Net interest income increased 4% to $5.04 million in the third quarter of 2023, compared to $4.85 million in the second quarter of 2023, and increased 1% compared to $4.98 million in the third quarter of 2022.
• Total revenue, consisting of net interest income and non-interest income, was $5.89 million in the third quarter of 2023, compared to $5.82 million in the preceding quarter and $6.73 million in the third quarter a year ago.
• Non-interest expense was $5.38 million in the third quarter of 2023, compared to $5.23 million in the preceding quarter, and $5.39 million in the third quarter a year ago.
• Average third quarter 2023 total loans increased 3% to $473.6 million, compared to $461.1 million in the second quarter of 2023, and increased 17% from $403.1 million in the third quarter of 2022. Total loans at September 30, 2023, increased 4% to $487.2 million from $467.6 million at June 30, 2023 and increased 19% compared to $408.4 million at September 30, 2022.
• SBA and USDA loan production for the twelve months ended September 30, 2023, totaled 19 loans for $14.3 million, compared to production of 19 loans for $24.8 million in the year-ago period.
• Average third quarter 2023 total deposits grew 1% to $474.1 million, from $467.1 million in the preceding quarter, and increased 4% from $456.6 million in the third quarter of a year ago. Total deposits increased 3% to $481.5 million, at September 30, 2023, compared to $466.7 million at June 30, 2023, and increased 5% compared to $458.6 million at September 30, 2022. Uninsured deposits totaled approximately 17.7% of total deposits at September 30, 2023.
• Due to strong credit quality and re-evaluation of our investment portfolio, the Company recorded a $350,000 credit to its reserves in the third quarter of 2023. This compared to a $189,000 credit to its reserves in the second quarter of 2023, and no provision in the third quarter of 2022.
• Allowance for loan losses, as a percentage of total loans, was 1.16% at September 30, 2023, compared to 1.17% at June 30, 2023, and 1.34% at September 30, 2022.
• Nonperforming loans, as a percentage of total loans, was 0.09% at September 30, 2023. This compared to 0.02% at June 30, 2023, and 0.32% at September 30, 2022.
• Nonperforming assets, as a percentage of total assets, was 0.19% at September 30, 2023, compared to 0.13% at June 30, 2023, and 0.38% a year ago.
• Net charge-offs were $77,000 in the third quarter of 2023, compared to $107,000 in the second quarter of 2023, and $190,000 in the third quarter a year ago.
• SaviBank capital levels remained above the threshold for well-capitalized institutions with a tier-1 leverage ratio of 8.24% at September 30, 2023.

On August 22, 2023, the Company announced that it had received regulatory approval from the Federal Deposit Insurance Corporation (“FDIC”) for its previously announced plan to form a new state-chartered commercial bank headquartered in Bellingham, Washington. The transaction involves the formation of Orca Bank by applying for a de novo bank charter, with Savi Financial acquiring Orca Bank as a wholly owned subsidiary. Additionally, Orca Bank will acquire SaviBank’s Bellingham branch, located at 1910 Broadway, Bellingham, WA 98225. Formation, capitalization and acquisitions will occur simultaneously after issuance of the Orca Bank Charter upon approval by regulators and closing of the reorganization.

“We are very pleased to have received regulatory approval from the Federal Deposit Insurance Corporation and we are currently awaiting regulatory approval from the Federal Reserve Board. At this juncture, we anticipate opening Orca Bank in 2024,” said Cann.

Michal D. Cann will be Chairman and CEO of Orca Bank and Drew Wilkens will be President of Orca Bank.

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 it 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 $550,000, down 0.50% in September 2023, compared to a year ago, and there was a 2.08 month supply of homes on the market. For Island County, the average house sold for $610,000, up 12.44% from a year ago and supply totaled 2.43 months. For Whatcom County, the average home sold for $554,000, up 1.56% from a year ago and supply totaled 2.44 months. For San Juan County, the average home sold for $960,000, up 24.07% from a year ago and supply totaled 5.13 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																		Nine Months Ended
	September 30, 2023				September 30, 2022				Var %			June 30, 2023				Var %			September 30, 2023				September 30, 2022				Var %
SUMMARY OF OPERATIONS
Interest income	$	7,573			$	5,374			41	%		$	6,946			9	%		$	21,092			$	14,327			47	%
Interest expense		(2,539	)			(394	)		544				(2,097	)		21				(6,092	)			(1,090	)		459
Net interest income		5,034				4,980			1				4,849			4				15,000				13,237			13
Provision for credit losses		350				-			N/M				189			85				539				(79	)		(782	)
NII after loss provision		5,384				4,980			8				5,038			7				15,539				13,158			18
Non-interest income		852				1,746			(51	)			970			(12	)			2,796				5,623			(50	)
Non-interest expense		(5,559	)			(5,391	)		3				(5,327	)		4				(16,415	)			(15,539	)		6
Income before tax		677				1,335			(49	)			681			(1	)			1,920				3,242			(41	)
Federal income tax expense		119				240			(50	)			120			(1	)			333				611			(45	)
Net income	$	558			$	1,095			(49	)%		$	561			(1	)%		$	1,587			$	2,631			(40	)%
PER COMMON SHARE DATA
Number of shares outstanding (000s)		3,460				3,441			1	%			3,459			0.03	%			3,460				3,441			0.55	%
Earnings per share, basic	$	0.16			$	0.32			(49	)		$	0.16			(1	)		$	0.46			$	0.76			(40	)
Earnings per share, diluted	$	0.13			$	0.25			(50	)		$	0.13			(0	)		$	0.36			$	0.60			(40	)
Market value		6.86				10.00			(31	)			6.90			(1	)			6.86				10.00			(31	)
Book value		10.95				10.28			7				10.91			0				10.95				10.28			7
Market value to book value		62.65	%			97.26	%		(36	)			63.25	%		(1	)			62.65	%			97.26	%		(36	)
BALANCE SHEET DATA
Assets	$	591,370			$	520,783			14			$	576,458			3	%		$	591,370			$	520,783			14	%
Investments securities		35,140				54,533			(36	)			36,074			(3	)			35,140				54,533			(36	)
Total loans		487,184				408,417			19				467,624			4				487,184				408,417			19
Total deposits		481,476				458,555			5				466,675			3				481,476				458,555			5
Borrowings		52,500				7,500			600				52,500			-				52,500				7,000			650
Sub Debt - Savi Financial Only		17,000				17,000			-				17,000							17,000				17,500			(3	)
Shareholders’ equity		37,887				35,379			7				37,737			0				37,887				35,379			7
AVERAGE BALANCE SHEET DATA
Average assets	$	583,931			$	519,409			12	%		$	569,891			2	%		$	557,460			$	500,174			11	%
Average total loans		473,590				403,112			17				461,062			3				459,765				380,208			21
Average total deposits		474,076				456,588			4				467,091			1				456,093				445,649			2
Average shareholders' equity		37,812				36,200			4				37,590			1				37,082				36,509			2
ASSET QUALITY RATIOS
Net (charge-offs) recoveries	$	(77	)		$	(190	)		N/M			$	(107	)		N/M			$	(266	)		$	(224	)		N/M
Net (charge-offs) recoveries to average loans		(0.07	)%			(0.19	)%		N/M				(0.09	)%		N/M				(0.08	)%			(0.08	)%		N/M
Non-performing loans as a % of loans		0.09				0.32			(70	)			0.02			374				0.09				0.42			(77	)
Non-performing assets as a % of assets		0.19				0.38			(50	)			0.13			45				0.19				0.51			(63	)
Allowance for loan losses as a % of total loans		1.16				1.34			(13	)			1.17			(1	)			1.16				0.98			18
Allowance for loan losses as a % of non-performing loans		1,223.59				419.22			192				6,412.94			(81	)			1,223.59				419.22			192
FINANCIAL RATIOS\STATISTICS
Return on average equity		5.90	%			12.10	%		(51	)%			5.97	%		(1	)%			5.71	%			9.61	%		(41	)%
Return on average assets		0.38				0.84			(55	)			0.39			(3	)			0.38				0.70			(46	)
Net interest margin		3.66				4.37			(16	)			3.66			-				3.77				3.98			(5	)
Efficiency ratio		92.23				75.36			22				91.51			1				92.24				78.41			18
Average number of employees (FTE)		145				145			-				149			(3	)			146				139			5
CAPITAL RATIOS
Tier 1 leverage ratio -- Bank		8.24				7.74			6	%			8.32			(1	)%			8.24				7.74			6	%
Common equity tier 1 ratio -- Bank		9.08				8.65			5	%			8.92			2	%			9.08				8.65			5	%
Tier 1 risk-based capital ratio -- Bank		9.08				8.65			5	%			8.92			2	%			9.08				8.65			5	%
Total risk-based capital ratio --Bank		10.22				9.91			3	%			10.14			1	%			10.22				9.91			3	%

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

FAQ

What was Savi Financial Corporation's net income for Q3 2023?

Savi Financial Corporation reported net income of $559,000 for Q3 2023.

What was the change in total deposits?

Total deposits increased 5% YoY and 3% QoQ.

How did loan production change?

Loan production increased 4% QoQ and 19% YoY.

What was the net interest income for Q3 2023?

Net interest income increased 4% to $5.04 million in Q3 2023.

What is the expected opening date for Orca Bank?

Orca Bank is expected to open in 2024.