Riverview Bancorp, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended March 31, 2022; comparisons are primarily with the year ended March 31, 2021. Riverview is a community bank serving southwest Washington and parts of Oregon, with trust and asset-management operations. The Bank converted from a federal savings bank to a Washington state-chartered commercial bank in April 2021.
Financial highlights
| Metric | FY2022 / March 31, 2022 | Prior comparable period |
|---|---|---|
| Net income | $21.8 million | $10.5 million |
| Diluted earnings per share | $0.98 | $0.47 |
| Net interest income | $47.6 million | $44.9 million |
| Net interest margin | 3.03% | 3.41% |
| Total assets | $1.74 billion | $1.55 billion |
| Net loans | $975.9 million | $924.1 million |
| Deposits | $1.53 billion | $1.35 billion |
| Shareholders’ equity | $157.2 million | $151.6 million |
| Cash and cash equivalents | $241.4 million | $265.4 million |
Interest and dividend income was $49.8 million and non-interest income was $12.7 million. The efficiency ratio was 60.82%, versus 64.73% in FY2021. Return on average assets was 1.31% and return on average equity was 13.62%.
Net cash provided by operating activities was $16.5 million, compared with $24.2 million in FY2021. Investing activities used $221.7 million, including substantial securities and loan purchases; financing activities provided $181.2 million, principally from deposit growth. Cash declined by $24.0 million during the year.
Year-end debt included $26.8 million of junior subordinated debentures. The Bank had no FHLB advances or Federal Reserve borrowings at year-end. Management reported $986.5 million of available liquidity from funding sources, including borrowing facilities, subject to collateral and other conditions. Regulatory capital ratios remained above minimums: total risk-based capital was 16.38%, CET1 was 15.12%, and the leverage ratio was 9.19%; the Bank was categorized as well capitalized.
Changes versus FY2021
- Net income more than doubled, reflecting higher net interest income, a $4.6 million loan-loss recapture versus a $6.3 million provision in FY2021, and increased non-interest income.
- Net interest income rose 6.0%, but net interest margin fell 38 basis points to 3.03%. Management attributed margin pressure to low rates, lower yields on new loans and securities, elevated low-yield cash, and PPP loan effects.
- Non-interest income increased $1.7 million. The year included a $500,000 bank-owned life insurance death benefit; transaction fees and asset-management fees also increased.
- Deposits increased $187.8 million, while net loans rose $51.8 million. Loan growth included commercial real estate and multifamily lending, purchased one-to-four-family loans, and purchased commercial and SBA loans. PPP balances fell to $3.1 million from $93.4 million.
- Allowance for loan losses declined to $14.5 million, or 1.47% of loans, from $19.2 million, or 2.03%. Criticized loans fell to $7.8 million from $42.5 million, primarily reflecting risk-rating upgrades.
- Nonperforming assets rose sharply to $22.1 million, or 1.27% of assets, from $571,000. Most of the increase was $21.8 million of SBA/USDA government-guaranteed loans affected by a third-party servicing-transfer and certificate-reconciliation disruption; the Company expected principal and interest to be recoverable. Excluding these guaranteed loans, nonperforming loans were $291,000.
- Available-for-sale securities had a $9.8 million after-tax unrealized loss in other comprehensive income, largely attributed to rising market rates. The Company transferred $85.8 million of securities from available-for-sale to held-to-maturity during the year.
Outlook, risks and other notable items
- No formal earnings or revenue guidance is provided. Management’s stated priorities include commercial and construction loan growth, core-deposit growth, asset quality management, expense control, and expansion of fee income. The Company expected approximately $2.1 million of FY2023 capital expenditures and said it expected to continue quarterly dividends at $0.055 per share, subject to Board discretion.
- Interest-rate sensitivity modeling estimated net interest income would change by +3.2% over 12 months under a 300-basis-point rate increase and by -3.1% under a 100-basis-point decrease. These are model estimates, not guidance; management noted asset sensitivity, loan-rate floors, and modeling limitations.
- Commercial real estate and multifamily lending is a major concentration: commercial real estate loans were 58.9% of total loans, and the Bank’s CRE concentration measure was 310% of risk-based capital, above the supervisory screening threshold described in the filing. Construction and land lending also carries valuation, completion, and borrower-refinancing risks.
- Uninsured deposits were estimated at $320.0 million, approximately 20.9% of deposits. Deposit growth had benefited from PPP proceeds, government stimulus, and pandemic-era saving patterns; management cautioned that competition and changing depositor behavior could affect funding.
- CECL adoption is scheduled for a future fiscal year beginning after December 15, 2022. Management anticipated the allowance could increase but had not determined the amount.
- Other identified risks include COVID-19 and regional economic conditions, rising rates and margin pressure, borrower credit deterioration, cybersecurity and third-party service-provider disruptions, LIBOR transition for subordinated debentures, and possible future goodwill impairment. Goodwill of $27.1 million was not impaired at year-end. The filing reports no material pending litigation; the independent auditor issued an unqualified opinion on the financial statements, and management concluded internal controls were effective.
Important facts for investors to verify
- Progress and ultimate resolution of the SBA/USDA servicing transfer, including whether the $21.8 million of past-due guaranteed loans returns to normal payment status as expected.
- Whether the loan-loss recapture and credit-quality improvements persist, and how the allowance changes as CECL is implemented.
- Commercial real estate concentration, construction commitments, and performance of purchased loans, including loans originated outside Riverview’s primary market area.
- Deposit retention, uninsured-deposit levels, and the availability of borrowing capacity under required collateral conditions.
- Net interest margin and securities valuations as interest rates change, as well as the effect of the LIBOR transition on subordinated debt costs.
- Dividend and repurchase disclosures: the filing reports $4.7 million of dividends paid in FY2022 and a current quarterly dividend rate of $0.055 per share; verify subsequent Board actions and capital-allocation decisions.