SaviBank 2017 4th Quarter Results
SaviBank 2017 Pre-tax Profits Increase 94% to $2.28 Million from 2016; Loans Grow 21% and Deposits Increase 30% Year-Over-Year
Burlington, WA – January 30, 2018 — SaviBank (OTC Pink: SVVB), today reported for 2017 pre-tax income almost doubled to $2.28 million, compared to $1.18 million in 2016. Net income in 2017 was $27,000, or $0.002 per share, including the $1.49 million valuation charge for its deferred tax asset (DTA). In 2016, earnings totaled $5.73 million, or $0.49 per share, which included a DTA valuation addition of $5.0 million. Profitability was fueled by 21% loan growth, 30% deposit growth, excellent asset quality and strong net interest margin. All results are unaudited.
“In 2017, we accomplished several milestones that will support our growth for several years to come.” said Michal D. Cann, Chairman and CEO. “At the end of December, we formed Savi Financial Corporation, a small bank holding company, that will become the parent company of SaviBank. The holding company will facilitate the growth of our Northwest Washington franchise and provide additional avenues to fund growth. Earlier in the year, we completed a private placement of 5.4 million shares, raising net proceeds of $8.6 million. The offering was oversubscribed by $580,222 and brought 41 new shareholders into the ownership base. Finally, we opened a new branch on Whidbey Island expanding our footprint into this growing market.”
With the signing into law of the Tax Cuts and Jobs Act of 2017, generally accepted accounting principles required DTAs on corporate balance sheets be revalued to reflect the future tax benefits based on the new 21% top rate, which replaces the 35% top rate. “As a result of this accounting change, we made an adjustment to the value of our DTAs causing a tax expense of $1.49 million,” said Rob Woods, Chief Financial Officer. “In the fourth quarter of 2016, we recognized a tax benefit for the DTA valuation of $5.0 million.” The following table presents a year-to-year comparison of key financial results before these non-operating tax adjustments.
“When we recognized the value of the deferred tax assets in 2016, our marginal tax rate was 34%, which generated a significant tax benefit in the fourth quarter of that year. With the top marginal rate now at 21%, the value of that assets is lower than originally calculated,” said Woods. “We anticipate overall lower tax rates will contribute to higher profitability, going forward.”
Total revenue, consisting of net interest income and non-interest income, increased 17% to $2.78 million in the fourth quarter of 2017 compared to $2.37 million in the fourth quarter a year ago and declined 3% from $2.88 million in the third quarter of 2017, reflecting the timing and volume of government guaranteed loans. For 2017, revenues increased 29% to $11.06 million from $8.60 million in 2016.
Net interest margin, while still well above average, declined to 4.23% in the fourth quarter of 2017, from 4.46% in the third quarter and 4.36% in the fourth quarter a year ago. For the full year, net interest margin was 4.37% compared to 4.41% in 2016. The decline in NIM is due to an increase in our cost of funds as the market for deposits gets more competitive. The net interest margin is significantly better than the peer average of 3.71% posted by the 535 micro-cap banks in the SNL Financials Microcap Bank Index as of September 30, 2017.
“Non interest income benefited from the robust SBA and USDA loan production generated during the year. Non interest income increased 29% in 2017, to $1.71 million, of which $930, 000was from gains on the sale of loans compared to $1.32 million, of which $616,000 was from loans sales in 2016,” said Andrew Hunter, President. “The Western Washington economy continues to create strong demand for SBA and USDA loans and we continue to be highly competitive in our market for this funding source.”
Fourth Quarter and Full Year 2017 Highlights (at, or for the period December 31, 2017)
- Earnings per share were a loss of $0.067 in the fourth quarter, reflecting the $0.087 charge from the DTA valuation and the capital raise in the first half of 2017 that added 5.4 million shares to the ownership base. EPS was $0.0236 in the third quarter of 2017 and $0.43 in the fourth quarter a year ago, reflecting the benefit of the DTA valuation in 2016. For the full year in 2017, EPS was $0.0016 from $0.49 in 2016.
- Net interest income increased 22% to $2.13 million in the fourth quarter of 2017, compared to $1.74 million a year ago, and was almost unchanged from $2.15 million in the third quarter of 2017. For the full year in 2017, net interest income grew 27% to $8.16 million from $6.41 million in 2016.
- Average fourth quarter total loans increased 18%, to $176.1 million, compared to $149.5 million a year ago, and grew 2% from $172.6 million in the third quarter of 2017. End of quarter total loans increased 21% to $183.8 million, compared to $152.0 million a year ago and grew 4% from $176.7 million at September 30, 2017.
- Average fourth quarter total deposits grew 23% to $175.3 million from $143.0 million in the fourth quarter a year ago, and increased 12% from $156.5 million in the third quarter of 2017. End of period deposits grew 30% to $178.3 million from $137.2 million a year ago, and grew 9% from $163.8 million at the end of the third quarter of 2017.
- Asset quality remains exceptionally strong with nonperforming loans at 0.04% of total loans at December 31, 2017, 0.02% at September 30, 2017, and 0.03% at December 31, 2016.
- Net recoveries or charge-offs were minimal in the fourth and third quarters of 2017 and the fourth quarter of 2016. For 2017, net recoveries totaled $399,000 compared to charge-offs of $74,000 in 2016.
- Allowance for loan losses, as a percentage of total loans was 1.06% at December 31, 2017, compared to 1.00%, at December 31, 2016.
- With the new capital raised during the first half, SaviBank capital levels remain above the threshold for well-capitalized institutions. The total risk-based capital ratio was 15.15% and the tier-1 leverage ratio was 12.37%.
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. The new Bellingham branch in Whatcom County opened in October 2017.
CNBC.com named Washington state as the “Top State for Business” in 2017. The state earned the top ranking based on economic growth, a well-educated workforce, a friendly business climate, solid infrastructure, and quality lifestyle factors. CNBC.com noted the following statistics:
“Washington’s economy grew 3.7% in 2016, nearly two and a half times the national rate.
“The nation’s largest concentration of STEM (science, technology, engineering and math) workers reside in Washington state.
“Washington state follows California in the most patents filed last year.
“Washington state has no income or corporate income tax, but wages and rent are among the highest in the United States. “
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.
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%.
- https://fortress.wa.gov/esd/employmentdata/reports-publications/regional-reports/county-profiles/skagitcounty-profile; https://esd.wa.gov/labormarketinfo/county-profiles/whatcom;
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.