Savi Financial Corporation Earns Record $3.72 Million for the Year 2022 and $1.09 Million for Fourth Quarter; Highlighted by Stellar Loan Growth and Net Interest Margin Expansion

Rhea-AI Summary

Savi Financial Corporation (OTC Pink: SVVB) reported a 4% increase in net income for 2022, reaching $3.72 million or $0.84 per diluted share, up from $3.58 million in 2021. Strong loan growth and net interest margin expansion contributed to these record results. The fourth quarter net income was $1.09 million, slightly down from the prior quarter but significantly up from $268,000 year-over-year. The bank's net interest margin (NIM) improved to 4.57% compared to 3.84% a year ago. Additionally, Savi Financial is on track to open a new community bank, Orca Bank, in Bellingham, WA, pending regulatory approval.

Positive

• Net income increased 4% to $3.72 million in 2022.
• Net interest income rose by 10% to $18.6 million for the year.
• Loan production increased 23% year-over-year, reaching total loans of $434.4 million.
• Net interest margin improved to 4.57%, surpassing the peer average of 3.70%.
• The bank is expanding with the planned opening of Orca Bank in 2023.

Negative

• Total deposits slightly decreased to $430.7 million, a 6% decline quarter-over-quarter.
• Costs of funds rose to 41 basis points, indicating potential future pressure on margins.
• Deposit costs are expected to rise due to market competition.

MOUNT VERNON, Wash., Jan. 30, 2023 (GLOBE NEWSWIRE) -- Savi Financial Corporation, Inc. (OTC Pink: SVVB), the bank holding company for SaviBank, today reported net income increased 4% to $3.72 million, or $0.84 per diluted share, for the year 2022, compared to $3.58 million, or $0.82 per diluted share, in 2021. The record results for the year were driven by strong loan growth and net interest margin expansion. Net income for the fourth quarter of 2022 was $1.09 million, or $0.25 per diluted share, compared to $1.10 million, or $0.25 per diluted share, in the preceding quarter and $268,000, or $0.06 per diluted share, in the fourth quarter of 2021. All results are unaudited.

“We continued the momentum from the preceding quarter and posted strong fourth quarter results, delivering record profits for the year 2022,” said Michal D. Cann, Chairman and President of Savi Financial Corporation. “Our fourth quarter results included strong loan growth compared to the preceding quarter and the previous year, and substantial net interest margin expansion resulting from higher yields on loans. Looking ahead, we will continue to create value for our clients, our communities, and our shareholders, by being the best community bank in the areas we serve.”

“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.”

“Loan production continues to be strong, with total loans increasing 6% for the quarter to a record high at year end, and increasing 23% compared to a year ago,” said Andrew Hunter, President and CEO of SaviBank.

“The 20 basis point improvement in our net interest margin during the quarter compared to the prior quarter was driven by rising interest rates on loans while deposit and other funding costs were carefully monitored and controlled,” said Rob Woods, Chief Financial Officer of SaviBank. “We could experience further net interest margin expansion, over the next quarter, as some of our variable loans adjust rates quarterly.” SaviBank’s NIM was 4.57% in the fourth quarter of 2022, compared to 4.37% in the preceding quarter, and 3.84% in the fourth quarter a year ago. The NIM remains higher than the peer average of 3.70% posted by the 154 banks that comprised the Dow Jones U.S. Microcap Bank Index at September 30, 2022. For the year 2022, the NIM was 4.13% compared to 3.99% in 2021.

“Deposit costs have also remained manageable, although we expect to see increasing costs for deposits in future quarters due to competition in our markets,” said Woods. The cost of funds for the fourth quarter of 2022 increased to 41 basis points, compared to 15 basis points in the prior quarter.

During the third quarter of 2022, the Company began accounting for credit losses under CECL. As a result of adopting this standard, $2.3 million was reserved through retained earnings, which resulted in a $1.8 million tax-effective allocation from the Company’s capital position to the CECL transaction.

Full Year and Fourth Quarter 2022 Highlights:

• Net income increased 4% to $3.72 million for the year 2022, compared to $3.58 million in 2021. Net income was $1.09 million in the fourth quarter of 2022, compared to $268,000 in the fourth quarter of 2021, and $1.10 million in the third quarter of 2022.
• Earnings per share were $0.84 in 2022, compared to $0.82 in 2021. Earnings per share were $0.25 in the fourth quarter of 2022, compared to $0.06 in the fourth quarter a year ago, and $0.25 in the preceding quarter.
• Net interest income increased 10% to $18.6 million in 2022, compared to $16.9 million in 2021. Net interest income increased 25% to $5.34 million in the fourth quarter of 2022, compared to $4.26 million in the fourth quarter a year ago, and increased 7% compared to $4.98 million in the third quarter of 2022.
• Total revenue, consisting of net interest income and non-interest income, increased 12% to $25.2 million for the year, compared to $22.4 million for 2021. Total revenue increased 11% to $6.37 million in the fourth quarter of 2022, compared to $5.72 million in the fourth quarter a year ago and decreased 5% compared to $6.73 million in the preceding quarter.
• Non-interest expense totaled $20.2 million for the year, compared to $17.1 million for 2021. Non-interest expense was $4.68 million in the fourth quarter of 2022, compared to $4.91 million in the fourth quarter a year ago, and $5.39 million in the preceding quarter. Noninterest expense for the fourth quarter of 2021 included a $164,000 prepayment penalty for a paydown on FHLB borrowings.
• Average fourth quarter 2022 total loans increased 24% to $420.9 million, compared to $340.3 million in the fourth quarter a year ago, and increased 4% from $403.1 million in the fourth quarter of 2021. Total loans at December 31, 2022, increased 23% to $434.4 million from $352.2 million a year ago and increased 6% compared to $408.4 million at September 30, 2022.
• SBA and USDA loan production for the twelve months ended December 31, 2022, totaled 24 loans for $33.8 million, compared to production of 27 loans for $32.8 million in the year-ago period.
• Average fourth quarter 2022 total deposits grew 4% to $444.6 million from $425.7 million in the fourth quarter a year ago, and decreased 3% from $456.6 million in the third quarter of 2021. Total deposits decreased modestly to $430.7 million, at December 31, 2022, from $432.4 million a year ago, and decreased 6% from $458.6 million at September 30, 2022.
• The provision for loan losses was $414,000 for 2022, compared to $819,000 for 2021. The provision for loan losses for the fourth quarter of 2022 was $335,000, compared to $491,000 in the fourth quarter of 2021. The Company transitioned to CECL during the third quarter of 2022 and reserved $2.3 million through retained earnings, and as a result, recorded no provision for loan losses during the third quarter of 2022.
• Allowance for loan losses, as a percentage of total loans, was 1.34% at December 31, 2022, compared to 1.20% at December 31, 2021, and 1.34% at September 30, 2022.
• Nonperforming loans, as a percentage of total loans, was 0.11% at December 31, 2022, compared to 0.40% at December 31, 2021, and 0.32% at September 30, 2022.
• Nonperforming assets, as a percentage of total assets, was 0.21% at December 31, 2022, compared to 0.49% a year ago and 0.38% three months earlier.
• Net recoveries were $39,000 in the fourth quarter of 2022, compared to net charge-offs of $242,000 in the fourth quarter of 2021, and net charge-offs of $190,000 in the prior quarter.
• SaviBank capital levels remained above the threshold for well-capitalized institutions with a tier-1 leverage ratio of 8.72% at December 31, 2022.

“During 2022 we transitioned our loan production office in Friday Harbor to a full-service branch, and we opened a loan production office in Olympia. Our total branch network now stands at 10 branches,” said Cann. “Over the past few years, we have been actively growing Savi Financial Corporation and expanding our presence in and around the Northwest Washington communities we serve. We will continue to search for opportunities to expand our company franchise.”

Recent Events

On May 26, 2022, the Company announced plans 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. Orca Bank is scheduled to open during the third quarter of 2023. For more details on the application visit the FDIC website at www.FDIC.gov.

On March 7, 2022, the Company completed the issuance of $17 million in 10-year fixed-to-floating rate subordinated notes due in 2032 in a private placement transaction to certain institutional accredited investors and qualified buyers. The notes will initially bear interest at 4.25% per annum through March 31, 2027, at which point interest will accrue at a floating rate payable quarterly.

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. According to the Northwest Multiple Listing Service, the average home in Skagit County sold for $515,000, up 0.98% in December 2022, compared to a year ago, and there was a 2.37 month supply of homes on the market. For Island County, the average house sold for $553,000, up 10.28% from a year ago and supply totaled 3.08 months. For Whatcom County, the average home sold for $568,000, up 6.07% from a year ago and supply totaled 2.73 months. For San Juan County, the average home sold for $517,000, down 37.20% from a year ago and supply totaled 5.50 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/wp-content/uploads/2023/01/Recaps_December2022.pdf
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																		Year Ended
	December 31, 2022				December 31, 2021				Var %			September 30, 2022				Var %			December 31, 2022				December 31, 2021				Var %
SUMMARY OF OPERATIONS
Interest income	$	5,889			$	4,546			30	%		$	5,374			10	%		$	20,216			$	18,438			10	%
Interest expense		(554	)			(289	)		92				(394	)		41				(1,644	)			(1,555	)		6
Net interest income		5,335				4,257			25				4,980			7				18,572				16,883			10
Provision for loan losses		(335	)			(491	)		(32	)			—			N/M				(414	)			(819	)		(49	)
NII after loss provision		5,000				3,766			33				4,980			0				18,158				16,064			13
Non-interest income		1,032				1,459			(29	)			1,746			(41	)			6,655				5,546			20
Non-interest expense		(4,681	)			(4,912	)		(5	)			(5,391	)		(13	)			(20,220	)			(17,101	)		18
Income before tax		1,351				313			332				1,335			1				4,593				4,509			2
Federal income tax expense		259				45			476				240			8				870				926			(6	)
Net income	$	1,092			$	268			307	%		$	1,095			0	%		$	3,723			$	3,583			4	%
PER COMMON SHARE DATA
Number of shares outstanding (000s)		3,442				3,439			0	%			3,441			0.03	%			3,442				3,439			0.09	%
Earnings per share, diluted	$	0.25			$	0.06			304			$	0.25			(0	)		$	0.84			$	0.82			3
Book value		10.54				10.93			(4	)			10.28			3				10.54				10.93			(4	)
BALANCE SHEET DATA
Assets	$	523,516			$	479,190			9	%		$	520,783			1	%		$	523,516			$	479,190			9	%
Investments securities		38,103				34,267			11				54,533			(30	)			38,103				34,267			11
Total loans		434,419				352,231			23				408,417			6				434,419				352,231			23
Total deposits		430,709				432,424			(0	)			458,555			(6	)			430,709				432,424			(0	)
Borrowings		54,500				7,500			627				24,500			122				54,500				7,500			627
Shareholders’ equity		36,277				37,583			(3	)			35,379			3				36,277				37,583			(3	)
AVERAGE BALANCE SHEET DATA
Average assets	$	522,150			$	477,752			9	%		$	519,409			1	%		$	501,353			$	444,285			13	%
Average total loans		420,947				340,313			24				403,112			4				390,476				346,160			13
Average total deposits		444,632				425,745			4				456,588			(3	)			431,567				390,675			10
Average shareholders' equity		35,828				37,596			(5	)			36,200			(1	)			36,930				35,908			3
ASSET QUALITY RATIOS
Net (charge-offs) recoveries	$	39			$	(242	)		N/M			$	(190	)		N/M			$	(185	)		$	(283	)		N/M
Net (charge-offs) recoveries to average loans		0.04	%			(0.28	)%		N/M				(0.19	)%		N/M				(0.05	)%			(0.08	)%		N/M
Non-performing loans as a % of loans		0.11				0.40			(73	)			0.32			(67	)			0.11				0.40			(73	)
Non-performing assets as a % of assets		0.21				0.49			(56	)			0.38			(44	)			0.21				0.49			(56	)
Allowance for loan losses as a % of total loans		1.34				1.20			12				1.34			0				1.34				1.20			12
Allowance for loan losses as a % of non-performing loans		1,258.96				300.50			319				419.22			200				1,258.96				300.50			319
FINANCIAL RATIOS\STATISTICS
Return on average equity		12.19	%			2.85	%		328	%			12.10	%		1	%			10.08	%			9.98	%		1	%
Return on average assets		0.84				0.22			273				0.84			(1	)			0.74				0.81			(8	)
Net interest margin		4.57				3.84			19				4.37			5				4.13				3.99			4
Efficiency ratio		69.77				81.57			(14	)			75.36			(7	)			76.23				73.77			3
Average number of employees (FTE)		148				128			16				145			2				139				117			19
CAPITAL RATIOS
Tier 1 leverage ratio -- Bank		8.72				7.91			10	%			7.74			13	%			8.72				7.91			10	%
Common equity tier 1 ratio -- Bank		9.13				10.05			(9	)%			8.65			6	%			9.13				10.05			(9	)%
Tier 1 risk-based capital ratio -- Bank		9.13				10.05			(9	)%			8.65			6	%			9.13				10.05			(9	)%
Total risk-based capital ratio --Bank		10.38				11.21			(7	)%			9.91			5	%			10.38				11.21			(7	)%

FAQ

What was Savi Financial Corporation's net income for 2022?

Savi Financial Corporation reported a net income of $3.72 million for 2022.

What is the net interest margin for SVVB?

As of the fourth quarter of 2022, Savi Financial's net interest margin was 4.57%.

When is Orca Bank scheduled to open?

Orca Bank is scheduled to open in the third quarter of 2023, pending regulatory approval.

How much did total loans increase for SVVB in 2022?

Total loans increased by 23% year-over-year, reaching $434.4 million.

What was the earnings per share for SVVB in 2022?

The earnings per share for Savi Financial Corporation in 2022 was $0.84.