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SaviBank 2017 2nd Quarter Results

SaviBank 2Q17 Profits Increased 74% to $404,000 from 2Q16; Fueled by 24% Growth in Loans and 13% in Deposits

Burlington, WA – August 2, 2017 — SaviBank (OTC Pink: SVVB), today reported second quarter 2017 profits increased 74% to $404,000, or $0.0236 per share, compared to $232,000, or $0.0198 per share for the second quarter 2016. This was an increase of 11% from $363,000, or $0.0245 per share, in the first quarter 2017. This increase was driven by 24% loan growth and 13% deposit growth, year over year. In the first six months of 2017, net income more than doubled to $767,000, or $0.0449 per share, compared to $370,000, or $0.0316 per share, in the first six months of 2016. All results are unaudited.

“Our profitability continues to build momentum with second quarter 2017 profits at the second highest level in our history,” said Michal D. Cann, Chairman and Chief Executive Officer. “Strong growth in loans and deposits are being generated by our dedicated team of bankers in our expanding footprint in some of Northwest Washington’s fastest growing communities. To support our fast-growing balance sheet, we completed a two-stage, $8.5 million capital raise in the second quarter, with investments from our largest shareholder, our local community and a few long-term institutional owners. We are already beginning to deploy this fresh capital into new loans to local business owners and consumers.”

“We continue to generate an above average net interest margin, which was 4.41% in the second quarter of 2017, down 2 basis points in the quarter and 4 basis points year-over-year,” noted Rob Woods, Chief Financial Officer. The net interest margin is significantly better than the peer average of 3.57% posted by the 489 microcap banks in the SNL Financials Microcap Bank Index as of March 31, 2017.

“Our SBA and USDA loan production remains strong, and the sales of these assets were highly productive, generating $374,000 in gains on the sale of 7 loans during the quarter. While SBA and USDA lending can be somewhat variable from one quarter to the next, this portion of our portfolio continues to show consistent growth,” said Andrew Hunter, President.

“New customer relationships from all our branches and strong loyalty from our long-term customers are contributing to our strong loan and deposit growth,” Cann noted. “We are also in the process of building a new branch in Bellingham and are on track to open by year end.”

Second Quarter and First Half 2017 Highlights (at, or for the period June 30, 2017)

• Net interest income increased 24% to $2.01 million in the second quarter of 2017, compared to $1.62 million a year ago, and grew 7% from $1.87 million in the first quarter of 2017. For the first six months of 2017, net interest income grew 30% to $3.88 million from $2.99 million in the same period of 2016.
• Non-interest income increased 64% to $537,000 in the second quarter of 2017, from $328,000 in the second quarter of 2016, and increased 44% from $372,000 in the preceding quarter, reflecting the increased gains from sale of SBA loans.
• For the second quarter of 2017, net interest margin (“NIM”) was 4.41%, and included 4 basis points from the repayment of a past due loan, compared to 4.45% with 15 basis points in recoveries for the second quarter of 2016, and 4.43% for the first quarter of 2017 with 19 basis point in recoveries.
• Average second quarter total loans increased 25%, to $166.0 million, compared to $132.6 million a year ago, and grew 6% from $156.3 million at the end of the first quarter of 2017. End of quarter total loans increased 24% to $171.5 million, compared to $137.9 million a year ago and grew 6% from $162.0 million at March 31, 2017.
• Average second quarter total deposits grew 15% to $144.6 million from $125.6 million in the second quarter a year ago, and increased 8% from $134.4 million at the end of the first quarter of 2017. End of period deposits grew 13% to $150.4 million from $133.1 million a year ago, and grew 10% from $136.9 million at the end of the first quarter of 2017.
• Nonperforming loans were 0.02% of total loans at June 30, 2017, compared to 0.03% at March 31, 2017 and 0.14% at June 30, 2016.
• Net recoveries totaled $129,000 in the second quarter of 2017, $8,000 in the second quarter of 2016, and $315,000 in the first quarter of 2017. For the first six months of 2017, net recoveries totaled $444,000 compared to net charge-offs of $53,000 in the first six months of 2016.
• Allowance for loan losses, as a percentage of total loans, was 1.16% at June 30, 2017, compared to 1.00%, at June 30, 2016.
• With the new capital raised during the quarter, SaviBank capital levels improved and remain above the threshold for well-capitalized institutions. The total risk-based capital ratio was 15.21% and the tier-1 leverage ratio was 12.97%.
• Book value per share was $1.73 at June 30, 2017, compared to $1.27 a year ago.

About Northwest Washington
SaviBank operates two branches and one loan production office in Skagit County, two branches in Island County, and one branch in Whatcom County. A new branch is being built in Whatcom County, which will replace the existing branch location in October 2017. 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 finance website WalletHub has ranked Washington state as having the best economy in the U.S. That finding is based on a number of economic factors, from number of patents filed, to how many tech jobs are available. Washington came in No. 1 for highest gross-domestic product in the U.S., and most exports per capita; Washington ranked in the top five U.S. states for highest change in nonfarm payrolls, and the number of available tech jobs.

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 5.22% from 2017 through 2022, and median household income is projected to increase by 7.98% 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 5.93% from 2017 through 2022, and median household income is projected to increase by 6.86%.

Island County is home to Naval Air Station Whidbey Island, which supports approximately 7,000 military personnel, with an additional 14,000 family members, over 14,000 retirees, 350+ reservists, and 2,400 civilian employees. Island County’s population is projected to grow 4.57% from 2017 through 2022 and median household income is projected to increase by 11.02%.

Sources:

• https://patch.com/washington/seattle/washington-has-best-economy-u-s-new-report-says
• https://fortress.wa.gov/esd/employmentdata/reports-publications/regional-reports/county-profiles/skagitcounty-profile
• https://esd.wa.gov/labormarketinfo/county-profiles/whatcom
• https://www.snl.com/interactiveX/DemographicProfileReport.aspx?ID=4100094&Ownership=Current&MarketType=County&submit3=Apply;
• http://www.militaryinstallations.dod.mil/MOS/f?p=MI:CONTENT:0::::P4_INST_ID,P4_CONTENT_TITLE,P4_CONTENT_EKMT_ID,P4_CONTENT_DIRECTORY:5080,Installation%20Overview,30.90.30.30.30.0.0.0.0,1
• http://nwreporter.nwmls.com/library/NWREporterContent/2017/07_July/PRTables_Jun17.pdf

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Forward Looking Statement
This release may contain “forward-looking statements” that are subject to risks and uncertainties. Readers should not place undue reliance on forwardlooking 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.