Savi Financial Corporation Reports Results for the Fourth Quarter and the Year 2023

Savi Financial Corporation, Inc.

MOUNT VERNON, Wash., Jan. 30, 2024 (GLOBE NEWSWIRE) -- Savi Financial Corporation, Inc. (OTC Pink: SVVB), the bank holding company for SaviBank, today announced that following a pre-tax $1.83 million in one-time costs associated with the Orca Bank formation, the Company reported a net loss of $1.54 million, or a loss of $0.35 per diluted share, for the fourth quarter of 2023. This compared to net income of $558,000, or $0.13 per diluted share, in the preceding quarter, and net income of $1.09 million, or $0.25 per diluted share, in the fourth quarter of 2022.

For the full year 2023, net income was $48,000, or $0.01 per diluted share, compared to $3.72 million, or $0.84 per diluted share, in 2022. Excluding one-time costs associated with the Orca Bank formation, net income for 2023 would have been approximately $1.70 million. All results are unaudited.

The Company’s fourth quarter 2023 operating results reflected the following changes from the third quarter of 2023: (1) a normalized provision for credit losses of $287,000 during the fourth quarter of 2023, compared to a $350,000 reversal during the prior quarter resulting from a re-evaluation of the investment portfolio from the Company’s CECL modeling; and (2) a 29% increase in non-interest expense, largely due to $1.83 million in one-time costs associated with the Orca Bank formation. Excluding Orca Bank formation expenses, net income for the fourth quarter of 2023 would have been approximately $115 thousand.

“Highlighting our operating results in 2023 was the double-digit loan and deposit growth year-over-year, as we continue to grow in our Western Washington markets,” said Michal D. Cann, Chairman and President of Savi Financial Corporation. “During the fourth quarter of 2023, we realized several one-time expenses associated with the Orca Bank formation. From an accounting perspective, we decided it was more prudent to realize these expenses now, rather than waiting to report formation expenses after the Orca Bank opening. We received regulatory approval from the Federal Deposit Insurance Corporation, and, while we are currently awaiting regulatory approval from the Federal Reserve Board, we anticipate opening Orca Bank sometime in 2024. While there will be some additional expenses following the opening later this year, we anticipate any additional future start-up expenses to be minimal. Further, we continue to maintain strong capital ratios and credit quality remains healthy. We added to our reserves during the quarter, and with no loan downgrades, we are feeling good about the health of our loan portfolio.”

“Loan production continues to be stable, remaining relatively unchanged from the prior quarter, and increasing 13% 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, and anticipate slightly lower loan growth in the year ahead.”

“Our NIM contracted during the current quarter, as the increase in loan yields was more than offset by higher funding costs,” said Rob Woods, Chief Financial Officer of SaviBank. “We anticipate that our NIM should flatten out over the next few quarters.”

The Company’s NIM was 3.54% in the fourth quarter of 2023, compared to 3.66% in the preceding quarter, and 4.57% in the fourth quarter a year ago. The NIM remains higher than the peer average of 3.26% posted by the 177 banks that comprised the Dow Jones U.S. Microcap Bank Index at September 30, 2023. The cost of funds increased to 204 basis points during the fourth quarter, compared to 186 basis points in the preceding quarter.

“Non-interest income for the year 2023 was impacted by the high interest rate environment, which led to a slowing mortgage market and fewer SBA loan originations. The result was lower mortgage and SBA fee income compared to 2022,” said Hunter. “We anticipate that when rates start to stabilize, our mortgage lending and SBA lending businesses will pick up.”

“At year end, we posted a $744,000 improvement to our accumulated other comprehensive income (“AOCI”) compared to December 31, 2022. The AOCI mark is related to our unrealized loss on available for sale securities, and this was only 8% of our overall capital at year end. With the liquidity we carry on our balance sheet, we have no intention of liquidating any securities prior to maturity,” said Woods.

Fourth Quarter and Full Year 2023 Highlights:

• Net income was $48,000 for the year 2023, compared to $3.72 million in 2022. Net loss for the fourth quarter of 2023 was $1.54 million, compared to net income of $558,000 in the third quarter of 2023, and net income of $1.09 million in the fourth quarter of 2022.

• Earnings per diluted share were $0.01 in 2023, compared to $0.84 in 2022. Losses per diluted share were $0.35 in the fourth quarter of 2023, compared to earnings per diluted share of $0.13 in the preceding quarter, and $0.25 in the fourth quarter of 2022.

• Net interest income increased 6% to $19.8 million in 2023, compared to $18.6 million in 2022. Net interest income was $4.78 million in the fourth quarter of 2023, compared to $5.03 million in the third quarter of 2023, and $5.34 million in the fourth quarter of 2022.

• Total revenue, consisting of net interest income and non-interest income, was $23.3 million for the year, compared to $25.2 million for 2022. Total revenue was $5.48 million in the fourth quarter of 2023, compared to $5.89 million in the preceding quarter and $6.37 million in the fourth quarter a year ago.

• Non-interest expense totaled $23.6 million for the year, compared to $20.2 million for 2022. Non-interest expense was $7.17 million in the fourth quarter of 2023, compared to $5.56 million in the preceding quarter, and $4.68 million in the fourth quarter a year ago.

• Average fourth quarter 2023 total loans increased 3% to $488.7 million, compared to $473.6 million in the third quarter of 2023, and increased 16% from $420.9 million in the fourth quarter of 2022. Total loans at December 31, 2023, were $488.7 million from $487.2 million at September 30, 2023 and increased 13% compared to $434.4 million at December 31, 2022.

• SBA and USDA loan production for the twelve months ended December 31, 2023, totaled 20 loans for $9.61 million, compared to production of 24 loans for $33.8 million in the year-ago period.

• Average fourth quarter 2023 total deposits grew 2% to $482.7 million, from $474.1 million in the preceding quarter, and increased 9% from $444.6 million in the fourth quarter of a year ago. Total deposits increased modestly to $483.8 million, at December 31, 2023, compared to $481.5 million at September 30, 2023, and increased 12% compared to $430.7 million at December 31, 2022. The cost of deposits was 1.83% for the fourth quarter of 2023.

• The Company recorded a $287,000 provision for credit losses in the fourth quarter of 2023. This compared to a $350,000 credit to its reserves in the third quarter of 2023, and a $335,000 provision for credit losses in the fourth quarter of 2022.

• Allowance for loan losses, as a percentage of total loans, was 1.18% at December 31, 2023, compared to 1.16% at September 30, 2023, and 1.34% at December 31, 2022.

• Nonperforming loans, as a percentage of total loans, was 0.06% at December 31, 2023. This compared to 0.09% at September 30, 2023, and 0.11% at December 31, 2022.

• Nonperforming assets, as a percentage of total assets, was 0.16% at December 31, 2023, compared to 0.19% at September 30, 2023, and 0.21% a year ago.

• Net charge-offs were $128,000 in the fourth quarter of 2023, compared to $77,000 in the third quarter of 2023, and let loan recoveries of $39,000 in the fourth quarter a year ago.

• SaviBank capital levels remained above the threshold for well-capitalized institutions with a tier-1 leverage ratio of 8.11% at December 31, 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.

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 $560,000, up 8.74% in December 2023, compared to a year ago, and there was a 2.26 month supply of homes on the market. For Island County, the average house sold for $535,000, down 3.17% from a year ago and supply totaled 2.13 months. For Whatcom County, the average home sold for $550,000, down 3.13% from a year ago and supply totaled 2.35 months. For San Juan County, the average home sold for $1.45 million, up 180.46% from a year ago and supply totaled 5.85 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																		Year Ended
	December 31, 2023				December 31, 2022				Var %			September 30, 2023				Var %			December 31, 2023				December 31, 2022				Var %
SUMMARY OF OPERATIONS
Interest income	$	7,549			$	5,889			28	%		$	7,573			(	)%		$	28,641			$	20,216			42	%
Interest expense		(2,773	)			(554	)		401				(2,539	)		9				(8,865	)			(1,644	)		439
Net interest income		4,776				5,335			(10	)			5,034			(5	)			19,776				18,572			6
Provision for loan losses		(287	)			(335	)		(14	)			350			(182	)			252				(414	)		(161	)
NII after loss provision		4,489				5,000			(10	)			5,384			(17	)			20,028				18,158			10
Non-interest income		708				1,032			(31	)			852			(17	)			3,504				6,655			(47	)
Non-interest expense		(7,173	)			(4,681	)		53				(5,559	)		29				(23,588	)			(20,220	)		17
Income before tax		(1,976	)			1,351			(246	)			677			(392	)			(56	)			4,593			(101	)
Federal income tax expense		(437	)			259			(269	)			119			(467	)			(104	)			870			(112	)
Net income	$	(1,539	)		$	1,092			(241	)%		$	558			(376	)%		$	48			$	3,723			(99	)%
PER COMMON SHARE DATA
Number of shares outstanding (000s)		3,460				3,442			1	%			3,460			—	%			3,460				3,442			0.52	%
Earnings per share, basic	$	(0.44	)		$	0.32			(239	)		$	0.16			(376	)		$	0.01			$	1.08			(99	)
Earnings per share, diluted	$	(0.35	)		$	0.25			(239	)		$	0.13			(376	)		$	0.01			$	0.84			(99	)
Market value		7.01				8.40			(17	)			6.86			2				7.01				8.40			(17	)
Book value		10.75				10.54			2				10.95			(2	)			10.75				10.54			2
Market value to book value		65.22	%			79.70	%		(18	)			62.65	%		4				65.22	%			79.70	%		(18	)
BALANCE SHEET DATA
Assets	$	593,481			$	523,516			13	%		$	591,370			0	%		$	593,481			$	523,516			13	%
Investments securities		35,451				38,103			(7	)			35,140			1				35,451				38,103			(7	)
Total loans		488,747				434,419			13				487,184			0				488,747				434,419			13
Total deposits		483,833				430,709			12				481,476			0				483,833				430,709			12
Borrowings		52,500				37,500			40				52,500			-				52,500				37,500			40
Sub Debt - Savi Financial Only		17,000				17,000			-				17,000			-				17,000				17,000			-
Shareholders’ equity		37,187				36,277			3				37,887			(2	)			37,187				36,277			3
AVERAGE BALANCE SHEET DATA
Average assets	$	592,442			$	522,150			13	%		$	583,931			1	%		$	558,499			$	501,353			11	%
Average total loans		488,740				420,947			16				473,590			3				467,068				390,476			20
Average total deposits		482,655				444,632			9				474,076			2				457,271				431,567			6
Average shareholders' equity		37,537				35,828			5				37,812			(1	)			36,732				36,930			(1	)
ASSET QUALITY RATIOS
Net (charge-offs) recoveries	$	(128	)		$	39			N/M			$	(77	)		N/M			$	(394	)		$	(185	)		N/M
Net (charge-offs) recoveries to average loans		(0.10	)%			0.04	%		N/M				(0.07	)%		N/M				(0.08	)%			(0.05	)%		N/M
Non-performing loans as a % of loans		0.06				0.11			(43	)			0.09			(30	)			0.06				0.11			(43	)
Non-performing assets as a % of assets		0.16				0.21			(23	)			0.19			(15	)			0.16				0.21			(23	)
Allowance for loan losses as a % of total loans		1.18				1.34			(12	)			1.16			2				1.18				1.34			(12	)
Allowance for loan losses as a % of non-performing loans		1,866.34				1,258.96			48				1,223.59			53				1,866.34				1,258.96			48
FINANCIAL RATIOS\STATISTICS
Return on average equity		(16.40	)%			12.19	%		(235	)%			5.90	%		(378	)%			0.13	%			10.08	%		(99	)%
Return on average assets		(1.04	)			0.84			(224	)			0.38			(372	)			0.01				0.74			(99	)
Net interest margin		3.54				4.57			(23	)			3.66			(3	)			3.80				4.13			(8	)
Efficiency ratio		108.48				69.77			55				92.23			18				91.08				76.23			19
Average number of employees (FTE)		147				148			(1	)			145			1				139				139			-
CAPITAL RATIOS
Tier 1 leverage ratio -- Bank		8.11				8.72			(7	)%			8.24			(2	)%			8.11				8.72			(7	)%
Common equity tier 1 ratio -- Bank		8.95				9.13			(2	)%			9.08			(1	)%			8.95				9.13			(2	)%
Tier 1 risk-based capital ratio -- Bank		8.95				9.13			(2	)%			9.08			(1	)%			8.95				9.13			(2	)%
Total risk-based capital ratio --Bank		10.12				10.38			(3	)%			10.22			(1	)%			10.12				10.38			(3	)%

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