Savi Financial Corporation Earns $561,000 in the Second Quarter of 2023; Highlighted by Steady Balance Sheet Growth and Strong Credit Quality

Rhea-AI Summary

Savi Financial Corporation, Inc. reported net income of $561,000, or $0.13 per diluted share, for Q2 2023, driven by strong loan growth and improvements in CECL modeling. Net income for the first six months of 2023 was $1.03 million. Total deposits increased 3% YoY and remained flat compared to the previous quarter. Total loans increased 3% for the quarter and 18% YoY. Net interest margin was 3.66% in Q2 2023, higher than the peer average of 3.48%.

MOUNT VERNON, Wash., July 31, 2023 (GLOBE NEWSWIRE) -- Savi Financial Corporation, Inc. (OTC Pink: SVVB), the bank holding company for SaviBank, today reported net income of $561,000, or $0.13 per diluted share, for the second quarter of 2023, compared to $468,000, or $0.11 per diluted share, in the preceding quarter and $572,000, or $0.13 per diluted share, in the second quarter of 2022. Results for the current quarter were driven by strong loan growth and continued improvements in the Company’s CECL modeling . In the first six months of 2023, net income was $1.03 million, or $0.23 per diluted share, compared to $1.54 million, or $0.35 per diluted share, in the first six months of 2022. All results are unaudited.

“Our operating results for the second quarter and the first six months of 2023 reflected solid balance sheet growth and excellent credit quality,” 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 quarter, which added to second quarter profitability. Additionally, operating expenses were lower due to the slowdown in loan production. Total deposits increased 3% year over year and remained relatively flat compared to three months earlier, as we continue to operate in a challenging economic environment where competition for deposits and the cost of funding remains high. We are focused on protecting our net interest income while also maintaining a strong capital position as we look for opportunities in our markets.”

“Loan production continues to be steady, with total loans increasing 3% for the quarter, and increasing 18% compared to a year ago,” said Andrew Hunter, President and CEO of SaviBank. “While loan growth has cooled off compared to the record setting pace of 2022, we are encouraged that loan demand continues to hold steady despite the higher rate environment and we continue to seek out lending opportunities.”

“The unprecedented rise in funding costs that is affecting the entire banking industry impacted our net interest margin (“NIM”) during the quarter,” said Rob Woods, Chief Financial Officer of SaviBank. “The NIM contraction we experienced during the quarter was primarily related to pressure from the funding side of the balance sheet.” The cost of funds increased to 159 basis points during the quarter, compared to 114 basis points in the preceding quarter. The Company’s NIM was 3.66% in the second quarter of 2023, compared to 3.98% in the preceding quarter, and 3.90% in the second quarter a year ago. The NIM remains higher than the peer average of 3.48% posted by the 157 banks that comprised the Dow Jones U.S. Microcap Bank Index at March 31, 2023.

Second Quarter 2023 Highlights:

• Net income was $561,000 in the second quarter of 2023, compared to $572,000 in the second quarter of 2022, and $468,000 in the first quarter of 2023.
• Earnings per diluted share were $0.13 in the second quarter of 2023, and in the second quarter of 2022, and $0.11 in the preceding quarter.
• Net interest income increased 14% to $4.85 million in the second quarter of 2023, compared to $4.26 million in the second quarter a year ago, and decreased 5% compared to $5.12 million in the first quarter of 2023.
• Total revenue, consisting of net interest income and non-interest income, was $5.82 million in the second quarter of 2023, compared to $6.07 million in the second quarter a year ago and $6.09 million in the preceding quarter.
• Non-interest expense was $5.33 million in the second quarter of 2023, compared to $5.28 million in the second quarter a year ago, and $5.53 million in the preceding quarter.
• Average second quarter 2023 total loans increased 21% to $461.1 million, compared to $382.5 million in the second quarter a year ago, and increased 4% from $444.3 million in the first quarter of 2023. Total loans at June 30, 2023, increased 18% to $467.6 million from $396.7 million a year ago and increased 3% compared to $453.8 million at March 31, 2023.
• SBA and USDA loan production for the twelve months ended June 30, 2023, totaled 19 loans for $25.2 million, compared to production of 30 loans for $42.6 million in the year-ago period.
• Average second quarter 2023 total deposits grew 3% to $467.1 million from $451.4 million in the second quarter a year ago, and increased 4% from $449.1 million in the first quarter of 2023. Total deposits increased 3% to $466.7 million, at June 30, 2023, from $454.6 million a year ago, and decreased modestly from $467.5 million at March 31, 2023. Uninsured deposits totaled approximately 25% of total deposits at June 30, 2023.
• Due to strong credit quality, the Company recorded a $189,000 credit to the provision for loan losses in the second quarter of 2023. This compared to a $79,000 provision for loan losses in the second quarter of 2022, and no provision for loan losses in the first quarter of 2023.
• Allowance for loan losses, as a percentage of total loans, was 1.17% at June 30, 2023, compared to 1.08% at June 30, 2022, and 1.27% at March 31, 2023.
• Nonperforming loans, as a percentage of total loans, was 0.02% at June 30, 2023. This compared to 0.42% at June 30, 2022, and zero nonperforming loans at March 31, 2023.
• Nonperforming assets, as a percentage of total assets, was 0.13% at June 30, 2023, compared to 0.45% a year ago and 0.12% three months earlier.
• Net charge-offs were $107,000 in the second quarter of 2023, compared to $35,000 in the second quarter of 2022, and $82,000 in the prior quarter.
• SaviBank capital levels remained above the threshold for well-capitalized institutions with a tier-1 leverage ratio of 8.32% at June 30, 2023.

In June 2023, the Company announced updated timing to its formerly announced plan to form a new state-chartered commercial bank headquartered in Bellingham, Washington. The formation is pending regulatory approval and is anticipated to close during Spring of 2024. 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. 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 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 1.26% in June 2023, compared to a year ago, and there was a 1.57 month supply of homes on the market. For Island County, the average house sold for $575,000, up 2.68% from a year ago and supply totaled 1.87 months. For Whatcom County, the average home sold for $575,000, down 5.74% from a year ago and supply totaled 2.08 months. For San Juan County, the average home sold for $923,000, down 1.81% from a year ago and supply totaled 8.22 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																							Six Months Ended
	June 30, 2023					June 30, 2022					Var %				March 31, 2023					Var %				June 30, 2023					June 30, 2022					Var %
SUMMARY OF OPERATIONS
Interest income	$	6,946				$	4,648				49	%			$	6,573				6	%			$	13,519				$	8,953				51	%
Interest expense		(2,097	)				(389	)			439					(1,456	)			44					(3,553	)				(696	)			410
Net interest income		4,849					4,259				14					5,117				(5	)				9,966					8,257				21
Provision for loan losses		189					(79	)			(339	)				—				N/M					189					(79	)			(339	)
NII after loss provision		5,038					4,180				21					5,117				(2	)				10,155					8,178				24
Non-interest income		970					1,809				(46	)				974				(0	)				1,944					3,877				(50	)
Non-interest expense		(5,327	)				(5,275	)			1					(5,529	)			(4	)				(10,856	)				(10,148	)			7
Income before tax		681					714				(5	)				562				21					1,243					1,907				(35	)
Federal income tax expense		120					142				(15	)				94				28					214					371				(42	)
Net income	$	561				$	572				(2	)%			$	468				20	%			$	1,029				$	1,536				(33	)%
PER COMMON SHARE DATA
Number of shares outstanding (000s)		3,459					3,440				1	%				3,452				0.20	%				3,459					3,440				0.55	%
Earnings per share, basic	$	0.16				$	0.17				(5	)			$	0.14				16				$	0.30				$	0.45				(33	)
Earnings per share, diluted	$	0.13				$	0.13				(2	)			$	0.11				15				$	0.23				$	0.35				(34	)
Market value		6.90					10.00				(31	)				7.60				(9	)				6.90					10.00				(31	)
Book value		10.91					10.76				1					10.85				1					10.91					10.76				1
Market value to book value		63.25	%				92.92	%			(32	)				70.07	%			(10	)				63.25	%				92.92	%			(32	)
BALANCE SHEET DATA
Assets	$	576,458				$	518,034				11	%			$	563,324				2	%			$	576,458				$	518,034				11	%
Investments securities		36,074					54,730				(34	)				38,105				(5	)				36,074					54,730				(34	)
Total loans		467,624					396,748				18					453,807				3					467,624					396,748				18
Total deposits		466,675					454,621				3					467,507				(0	)				466,675					454,621				3
Borrowings		52,500					7,500				600					36,450				44					52,500					7,500				600
Sub Debt - Savi Financial Only		17,000					17,000				-					17,000				-					17,000					17,000				-
Shareholders’ equity		37,737					37,020				2					37,443				1					37,737					37,020				2
AVERAGE BALANCE SHEET DATA
Average assets	$	569,891				$	514,806				11	%			$	563,324				1	%			$	549,987				$	498,612				10	%
Average total loans		461,062					382,522				21					444,322				4					452,738					368,565				23
Average total deposits		467,091					451,436				3					449,108				4					448,692					443,523				1
Average shareholders' equity		37,590					37,191				1					36,860				2					37,007					37,302				(1	)
ASSET QUALITY RATIOS
Net (charge-offs) recoveries	$	(107	)			$	(35	)			N/M				$	(82	)			N/M				$	(189	)			$	(34	)			N/M
Net (charge-offs) recoveries to average loans		(0.09	)%				(0.04	)%			N/M					(0.07	)%			N/M					(0.08	)%				(0.02	)%			N/M
Non-performing loans as a % of loans		0.02					0.42				(96	)				-				N/M					0.02					0.70				(97	)
Non-performing assets as a % of assets		0.13					0.45				(72	)				0.12				7					0.13					0.60				(79	)
Allowance for loan losses as a % of total loans		1.17					1.08				8					1.27				(8	)				1.17					0.96				21
Allowance for loan losses as a % of non-performing loans		6,412.94					257.02				2,395					26,118.18				(75	)				6,412.94					257.02				2,395
FINANCIAL RATIOS\STATISTICS
Return on average equity		5.97	%				6.15	%			(3	)%				5.08	%			18	%				5.56	%				8.24	%			(33	)%
Return on average assets		0.39					0.44				(11	)				0.33				19					0.37					0.62				(39	)
Net interest margin		3.66					3.90				(6	)				3.98				(8	)				3.85					3.80				1
Efficiency ratio		91.51					81.59				12					90.79				1					91.41					80.11				14
Average number of employees (FTE)		149					138				8					150				(1	)				147					137				7
CAPITAL RATIOS
Tier 1 leverage ratio -- Bank		8.32					8.00				4	%				8.26				1	%				8.32					8.00				4	%
Common equity tier 1 ratio -- Bank		8.92					9.06				(2	)				8.92				(0	)				8.92					9.06				(2	)
Tier 1 risk-based capital ratio -- Bank		8.92					9.06				(2	)				8.92				(0	)				8.92					9.06				(2	)
Total risk-based capital ratio --Bank		10.14					10.08				1					10.17				(0	)				10.14					10.08				1

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

FAQ

What is the net income for Q2 2023?

The net income for Q2 2023 is $561,000.

What contributed to the strong operating results for Q2 2023?

The strong operating results for Q2 2023 were driven by strong loan growth and improvements in the Company's CECL modeling.

How did total deposits change compared to the previous quarter?

Total deposits remained relatively flat compared to the previous quarter.

What was the increase in total loans for the quarter?

Total loans increased 3% for the quarter.

What was the net interest margin in Q2 2023 compared to the peer average?

The net interest margin in Q2 2023 was 3.66%, higher than the peer average of 3.48%.