Riverview Bancorp, Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2023, the second quarter of fiscal 2024, with six-month results compared with the six months ended September 30, 2022. The filing is unaudited. (The request metadata labels the period “2023 Q2”; the filing itself reports the September 2023 quarter.) Unless noted, figures are in millions.
Financial results and condition
| Metric | Quarter ended September 30, 2023 | Six months ended September 30, 2023 | Comparable 2022 period |
|---|---|---|---|
| Interest and dividend income | $14.0 | $28.0 | $14.1 quarter; $27.3 six months |
| Net interest income | $9.9 | $20.2 | $13.4 quarter; $26.1 six months |
| Net interest margin | 2.63% | 2.71% | 3.30% quarter; 3.21% six months |
| Non-interest income | $3.4 | $6.7 | $3.1 quarter; $6.3 six months |
| Non-interest expense | $10.1 | $20.1 | $9.8 quarter; $19.6 six months |
| Net income | $2.5; $0.12 diluted EPS | $5.3; $0.25 diluted EPS | $5.2 and $0.24 quarter; $9.8 and $0.45 six months |
At September 30, total assets were $1.584 billion, net loans were $1.000 billion, deposits were $1.240 billion, and shareholders’ equity was $152.0 million. Cash and cash equivalents were $30.9 million. For the six months, operating cash flow was $10.5 million; cash increased $8.8 million to $30.9 million. Financing activities used $8.9 million, including a $25.5 million net deposit decline, partly offset by $19.4 million of net borrowing proceeds.
- Debt and funding: FHLB advances were $143.2 million, up $19.4 million from March 31; the weighted average rate was 5.31%. Junior subordinated debentures were $27.0 million. The Bank had $152.1 million of additional FHLB borrowing capacity and $54.4 million of FRB capacity, subject to collateral.
- Liquidity: Cash and available-for-sale securities totaled $224.8 million, or 14.2% of assets. Management reported total available liquidity of $621.1 million, or 39.2% of assets. Core branch deposits were 97.8% of deposits; the company had no brokered deposits.
- Capital: The Bank was categorized as “well capitalized.” Its total capital ratio was 16.91%, Tier 1 risk-based ratio 15.66%, CET1 ratio 15.66%, and Tier 1 leverage ratio 10.74%.
- Credit: The allowance for credit losses on loans was $15.3 million, or 1.51% of total loans. Nonperforming assets were $198,000 (0.01% of assets), versus $1.9 million at March 31. Loans 30–89 days past due were 0.12% of loans. There was no provision for credit losses in the quarter or six-month period.
- Securities: Available-for-sale securities were $194.0 million and held-to-maturity securities $236.0 million at carrying amount. Held-to-maturity fair value was $193.3 million. Unrealized losses were attributed by management primarily to interest-rate movements, not credit deterioration; no securities ACL was recorded.
Material changes versus comparable periods
- Quarterly net income fell 52% year over year and six-month net income fell 46%. Management attributed the decline primarily to sharply higher deposit and borrowing costs.
- Quarterly net interest income declined $3.6 million and six-month net interest income declined $5.9 million. Interest expense rose to $4.2 million for the quarter from $657,000, and to $7.8 million for six months from $1.2 million. Deposit pricing and new FHLB borrowing were significant drivers.
- Interest and dividend income was nearly flat for the quarter and rose $710,000 for six months. Higher loan and securities yields were partly offset by lower interest income on bank deposits as average cash balances fell substantially.
- Deposits declined $25.5 million from March 31, amid competition, pricing pressure and lower market liquidity. Savings, non-interest-bearing and interest-checking balances fell; money-market and certificate-of-deposit balances rose. FHLB advances partly funded deposit outflows.
- Net loans increased $6.7 million from March 31, led by commercial business and real estate construction lending. Commercial and construction loans were 90.3% of total loans.
- Non-interest income increased, including higher asset-management fees and a BancTech Ventures dividend; six-month results also included employee-retention-credit income and settlement funds related to the 2022 Kaye Smith data breach. These items and the related amounts should be considered when assessing recurring income.
- Unrealized available-for-sale securities losses, net of tax, increased accumulated other comprehensive loss by $5.4 million during the six months. Total shareholders’ equity fell $3.2 million from March 31.
Outlook, management commentary, risks and unusual items
The filing gives no numerical earnings or margin guidance. Management’s strategy emphasizes commercial and construction lending, core deposit growth, relationship banking, asset quality, expense management and increased fee income. Management expected to maintain the $0.06 quarterly common dividend during fiscal 2024, subject to Board discretion, and anticipated approximately $110,000 of capital spending for the remainder of the fiscal year.
Key risks identified include further deposit competition or uninsured deposit outflows, the cost and availability of funding, changing interest rates and their effects on margins and securities values, deterioration in commercial real estate or other borrower credit, economic weakness and inflation, regulatory actions, and operational, cybersecurity and third-party risks. The loan portfolio is concentrated in commercial lending, which management notes carries greater credit risk and interest-rate sensitivity than traditional fixed-rate residential lending.
The company adopted CECL on April 1, 2023. Adoption increased the loan allowance by $42,000 and the allowance for unfunded commitments by $28,000, with a $53,000 after-tax reduction to opening retained earnings. The company reported a lawsuit in which settlement discussions were continuing after mediation; management said a loss was not probable and could not be reasonably estimated, so no accrual was recorded. Management stated disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether deposit trends and funding costs stabilize, and the resulting effect on net interest margin and earnings.
- Commercial real estate exposure, loan risk-rating trends, delinquencies and the adequacy of the allowance under CECL, particularly if economic conditions worsen.
- Liquidity assumptions and the availability of borrowing capacity, including collateral requirements and potential deposit outflows.
- The size and duration of securities’ unrealized losses and any effect on capital or liquidity if securities must be sold.
- How much non-interest income came from potentially nonrecurring items, including the data-breach settlement, BancTech Ventures dividend and employee retention credit.
- Developments in the pending lawsuit and whether its outcome or estimated exposure changes.