BURLINGTON, Wash., Oct. 31, 2019 (GLOBE NEWSWIRE) -- Savi Financial Corporation, Inc. (OTC Pink: SVVB), the bank holding company for SaviBank, today reported third quarter 2019 earnings of $353,000, or $0.08 per diluted share, compared to $390,000, or $0.09 per diluted share, in the third quarter of 2018.  Earnings were impacted by an increase in operating costs as a result of implementing the company’s branch expansion strategy.  In the first nine months of the year, Savi reported net income of $1.26 million, or $0.29 per diluted share, compared to $1.57 million, or $0.36 per diluted share, in the first nine months of 2018.

“We have been actively building out our infrastructure, and hiring key talent, in an effort to expand our customer base and take advantage of market disruptions,” said Michal D. Cann, Chairman and CEO.  “While the costs associated with our organic franchise expansion impacted earnings again this quarter, we believe we have the foundation in place for improved operating results going forward."

“We generated 23% year-over-year loan growth and 28% deposit growth, while maintaining an above average net interest margin,” said Andrew Hunter, President.  “We are realizing positive results from our efforts and remain intensely focused on improving our operating performance.  Our markets in Northwest Washington continue to generate excellent opportunities for growth, and we are now well positioned to foster long-term customer relationships.”

Total revenue, consisting of net interest income and non-interest income, increased 14% to $3.21 million in the third quarter of 2019, compared to $2.82 million in the third quarter a year ago, and decreased 8% from $3.47 million in the second quarter of 2019.  Year-to-date, revenues increased 18% to $9.96 million from $8.46 million in the like period a year earlier. 

“Our net interest margin compressed during the quarter, primarily due to increased competition for deposits.  However, our strong loan growth and higher loan yields continue to keep our net interest margin above industry averages,” said Hunter.  Net interest margin was 4.15% in the third quarter of 2019 from 4.48% in the third quarter a year ago.  The net interest margin remains significantly higher than the peer average of 3.72% posted by the 469 banks that comprised the SNL Microcap U.S. Bank Index at June 30, 2019.  In the first nine months of 2019, net interest margin remained healthy at 4.39% compared to 4.41% in the first nine months of 2018.

Third Quarter 2019 Highlights:

• Pretax income was $452,000 in the third quarter, compared to $497,000 in the third quarter of 2018, and $483,000 in the second quarter of 2019.
• Earnings per diluted share were $0.08 in the third quarter, compared to $0.09 in both the third quarter a year ago and preceding quarter.
• Net interest income increased 18% to $2.95 million in the third quarter of 2019, compared to $2.49 million in the third quarter a year ago, and was down from $3.05 million in the second quarter of 2019. 
• Average third quarter total loans increased 26%, to $251.7 million, compared to $200.3 million a year ago, and grew 3% from $244.5 million in the second quarter of 2019.  Total loans at September 30, 2019, increased 23% to $255.0 million from $207.1 million a year ago and grew 1% from $251.3 at June 30, 2019.
• SBA and USDA loan production for the twelve months ended September 30, 2019 totaled 17 loans for $9.5 million, compared to production of 26 loans for $10.4 million in the year-ago period.
• Average third quarter total deposits grew 29% to $250.2 million from $194.5 million, in the third quarter a year ago, and increased 5% from $238.4 million in the second quarter of 2019.  Total deposits grew 28% to $256.2 million, at September 30, 2019, from $200.6 million a year ago, and grew 5% from $244.3 million at June 30, 2019.  
• Asset quality remained strong with nonperforming loans at 0.07% of total loans at September 30, 2019. This compares to nonperforming loans at 0.01% of total loans at September 30, 2018, and nonperforming loans at 0.11% of total loans at June 30, 2019. 
• Nonperforming assets (“NPAs”) were 0.24% at September 30, 2019, compared to 0.20% a year ago and 0.25% three months earlier.  The current NPAs reflects the stability of the loan portfolio and paydowns in principle balances.
• Net recoveries were $7,000 in the third quarter of 2019, compared to net charge-offs of $6,000 in the third quarter a year ago, and net charge-offs of $32,000 in the preceding quarter. 
• Allowance for loan losses, as a percentage of total loans, was 0.99% at September 30, 2019, compared to 1.00%, at September 30, 2018.
• SaviBank capital levels remained above the threshold for well-capitalized institutions. The total risk-based capital ratio was 11.80% and the tier-1 leverage ratio was 10.07%. 

“Our branch expansion strategy in Northwest Washington this year has been robust,” said Cann.  “We opened a full-service branch in Concrete on October 7, 2019, and we expanded our loan production office into a full-service branch in Anacortes on September 9, 2019.  Additionally, we opened our new Oak Harbor branch at the end of May, relocated our main Burlington branch in March, opened our Sedro Woolley branch in March and opened a Mt. Vernon branch in January.  As a result, costs associated with this expansion have affected operating results for the current quarter.  We believe that with these additional locations we have the infrastructure and the key talent in place to expand our client outreach, contribute to future earnings growth, and increase our franchise value.”

About Northwest Washington

SaviBank currently operates six branches in Skagit County, two branches in Island County, and one branch in Whatcom County.

The Skagit, Whatcom and Island counties region stretches north from the greater Seattle/Everett/Bellevue metropolis to the Canadian border.  Northwest Washington continues to be one of the most vibrant regions in the country, with a solid employment base, moderate climate and a strong housing market.  

The housing market in Skagit, Island and Whatcom Counties remains healthy.  According the Northwest Multiple Listing Service, the average home in Skagit County sold for $380,000, up 4.11% in September 2019 compared to a year ago, and there was a 2.47 month supply of homes on the market.  For Island County, the average house sold for $390,000, up 8.33% from a year ago and supply totaled 2.18 months.  For Whatcom County, the average home sold for $382,000, up 3.72% from a year ago and supply totaled 2.59 months.

Skagit County’s economy is dominated by manufacturing, which accounts for 33.4% of GDP with food, machinery and oil and petroleum products the leading contributors.  Skagit’s population is projected to grow 5.71% from 2020 through 2025, and median household income is projected to increase by 16.18% during the same time frame.  

Whatcom County is home to Western Washington University and is the nation’s largest producer of raspberries.  Whatcom County’s population is projected to grow 6.26% from 2020 through 2025, and median household income is projected to increase by 13.28%. 

Island County is home to Naval Air Station Whidbey Island.  Whidbey Island’s population is 86,280, with approximately 23,575 in Oak Harbor.  Island County’s population is projected to grow 5.19% from 2020 through 2025 and median household income is projected to increase by 6.07%.

Sources:

http://www.northwestmls.com/library/CorporateContent/statistics/Recaps.pdf
www.SNL.com
https://www.usnews.com/news/best-states/rankings

About Savi Financial Corporation Inc. and SaviBank –

Savi Financial Corporation is the bank holding company of SaviBank. The Bank began operations April 11, 2005, and has 9 branch locations in Anacortes, Burlington, Bellingham, Concrete, Mount Vernon, Oak Harbor, Freeland and Sedro-Woolley, Washington. The Bank provides loan and deposit services to customers who are predominantly small and middle-market businesses and individuals in and around Skagit, Island, and Whatcom counties. As a locally-owned community bank, we believe that when everyone becomes Savi about their finances, our entire community benefits. Call us or stop by one of our branches and we’ll show you how to bank Savi. For additional information about SaviBank visit http://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, 2019				September 30, 2018				Var %			June 30, 2019				Var %			September 30, 2019				September 30, 2018				Var %
SUMMARY OF OPERATIONS
Interest income	$	3,820			$	2,966			29	%		$	3,853			(1	)%		$	11,346			$	8,277			37	%
Interest expense	(866		)		(472		)		83			(801		)		8			(2,389		)		(1,249		)		91
Net interest income	2,954				2,494				18			3,052				(3	)		8,957				7,028				27
Provision for loan losses	(30		)		(98		)		(69	)		(179		)		(61	)		(305		)		(137		)		123
NII after loss provision	2,924				2,396				22			2,873				2			8,652				6,891				26
Non-interest income	252				329				(23	)		413				(39	)		1,003				1,436				(30	)
Non-interest expense	(2,724		)		(2,228		)		22			(2,803		)		(3	)		(8,053		)		(6,337		)		27
Income before tax	452				497				(9	)		483				(6	)		1,602				1,990				(19	)
Federal income tax expense	99				107				(7	)		102				(3	)		343				424				(19	)
Net income	$	353			$	390			(9	)%		$	381			(7	)%		$	1,259			$	1,566			(20	)%
PER COMMON SHARE DATA
Number of shares outstanding (000s)	3,433				3,423				0	%		3,433				—	%		3,433				3,423				0.29	%
Earnings per share, diluted	$	0.08			$	0.09			(10	)		$	0.09			(7	)		$	0.29			$	0.36			(20	)
Market value	10.45				12.07				(13	)		10.77				(3	)		10.45				12.07				(13	)
Book value	9.50				8.88				7			9.39				1			9.50				8.88				7
Market value to book value	109.97		%		135.93		%		(19	)		114.68		%		(4	)		109.97		%		135.93		%		(19	)
BALANCE SHEET DATA
Assets	$	310,134			$	247,111			26	%		$	299,731			3	%		$	310,134			$	247,111			26	%
Investments securities	10,805				9,120				18			11,147				(3	)		10,805				9,120				18
Total loans	254,960				207,129				23			251,321				1			254,960				207,129				23
Total deposits	256,228				200,600				28			244,256				5			256,228				200,600				28
Borrowings	20,000				15,000				33			22,000				(9	)		20,000				15,000				33
Shareholders’ equity	32,623				30,394				7			32,240				1			32,623				30,394				7
AVERAGE BALANCE SHEET DATA
Average assets	$	304,933			$	240,738			27	%		$	290,604			5	%		$	288,929			$	227,611			27	%
Average total loans	251,662				200,295				26			244,542				3			242,673				190,669				27
Average total deposits	250,242				194,475				29			238,422				5			232,333				187,477				24
Average shareholders' equity	32,432				30,192				7			31,967				1			31,873				29,450				8
ASSET QUALITY RATIOS
Net (charge-offs) recoveries	$	7			$	(6	)		N/M			$	(32	)		N/M			$	(39	)		$	(12	)		225
Net (charge-offs) recoveries to average loans	0.01		%		(0.01		)%		N/M			(0.05		)%		N/M			(0.02		)%		(0.01		)%		155
Non-performing loans as a % of loans	0.07				0.01				630			0.11				(34	)		0.07				0.01				630
Non-performing assets as a % of assets	0.24				0.20				20			0.25				(4	)		0.24				0.20				20
Allowance for loan losses as a % of total loans	0.99				1.00				(1	)		1.01				(2	)		0.99				1.00				(1	)
Allowance for loan losses as a % of non-performing loans	1,361.29				18,827.27				(93	)		1,351.08				1			1,361.29				18,827.27				(93	)
FINANCIAL RATIOS\STATISTICS
Return on average equity	4.35		%		5.17		%		(16	)%		4.77		%		(9	)%		5.27		%		7.09		%		(26	)%
Return on average assets	0.46				0.65				(29	)		0.52				(12	)		0.58				0.92				(37	)
Net interest margin	4.15				4.48				(7	)		4.47				(7	)		4.39				4.41				(0	)
Efficiency ratio	83.73				76.54				9			79.60				5			79.70				73.17				9
Average number of employees (FTE)	98				75				31			89				10			98				75				31
CAPITAL RATIOS
Tier 1 leverage ratio  -- Bank	10.07				11.79				(15	)%		10.32				(3	)%		10.07				11.79				(15	)%
Common equity tier 1 ratio  -- Bank	10.85				12.56				(14	)		11.13				(2	)		10.85				12.56				(14	)
Tier 1 risk-based capital ratio  -- Bank	10.85				12.56				(14	)		11.13				(2	)		10.85				12.56				(14	)
Total risk-based capital ratio --Bank	11.80				13.53				(13	)		12.09				(2	)		11.80				13.53				(13	)

Contact:

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