Riverview Bancorp, Inc. — Form 10-Q Summary
Reporting period: The filing covers the three and six months ended September 30, 2020, which is fiscal 2021 Q2 and first half. The request metadata says “2020 Q2,” but that does not match the filing period. Amounts below are in millions unless noted.
Financial performance
| Metric | Three months ended Sept. 30, 2020 | Year-over-year change | Six months ended Sept. 30, 2020 | Year-over-year change |
|---|---|---|---|---|
| Interest and dividend income | $11.9 | Down from $12.9 | $24.2 | Down from $25.4 |
| Net interest income | $11.1 | Down from $11.7 | $22.2 | Down from $23.2 |
| Provision for loan losses | $1.8 | Up from $0 | $6.3 | Up from $0 |
| Non-interest income | $2.8 | Down from $3.2 | $5.4 | Down from $6.3 |
| Non-interest expense | $8.8 | Down from $9.0 | $17.5 | Down from $18.2 |
| Net income | $2.5; diluted EPS $0.11 | Down from $4.5; $0.20 | $3.0; diluted EPS $0.14 | Down from $8.7; $0.38 |
| Net interest margin | 3.33% | Down from 4.36% | 3.48% | Down from 4.35% |
Management attributed lower earnings mainly to COVID-related loan-loss provisions, reduced net interest margin, and lower non-interest income. Lower expenses partly offset those pressures. The reported net interest margin is a key profitability measure; the filing does not present a separate conventional gross margin.
Financial position, cash flow, and liquidity
- Assets and loans: Total assets were $1,425.2 at September 30, up from $1,180.8 at March 31. Net loans were $956.3, up from $898.9; growth included $110.8 of SBA Paycheck Protection Program (PPP) loans.
- Deposits and cash: Deposits rose to $1,200.0 from $990.4. Cash and cash equivalents increased to $238.0 from $42.0, largely as deposit growth outpaced loan growth. Management cited PPP proceeds, government stimulus deposits, and higher savings/reduced withdrawals.
- Liquidity: Cash, certificates of deposit held for investment, and available-for-sale securities totaled $364.5, or 25.6% of assets. The Bank reported $843.7 of total available liquidity, including borrowing capacity, and $205.2 of additional FHLB capacity and $60.3 of FRB capacity, subject to collateral and other conditions.
- Debt: FHLB advances were $30.0, versus none at March 31, and were expected to mature in October 2020. Junior subordinated debentures were $26.7. The filing describes the debentures as LIBOR-linked and maturing between 2033 and 2037.
- Credit quality: The allowance for loan losses was $18.9, or 1.93% of total loans, compared with $12.6, or 1.38%, at March 31. Nonperforming loans were $1.3, down from $1.4; the allowance equaled 1,479.69% of nonperforming loans.
- Capital: Shareholders’ equity was $149.0. The Bank was categorized as “well capitalized”; its September 30 total capital ratio was 17.53% and common equity tier 1 ratio was 16.26%.
- Cash flow, first half: Operating activities provided $7.5, investing activities used $47.6, and financing activities provided $236.1. Cash increased by $196.0 to $238.0. Financing inflows included a $209.5 net increase in deposits and $30.0 of borrowings.
Material changes and management commentary
- The sharp fall in margin reflected lower market rates, downward repricing of adjustable-rate assets, and low-yield PPP loans; asset yields declined faster than funding costs. PPP loans averaged $97.8 in the first half and yielded 2.91% including deferred-fee recognition.
- Commercial and construction loans were 92.3% of total loans at September 30. Commercial real estate was 53.94% of total loans, and commercial business loans included the PPP portfolio.
- COVID-19 loan payment deferrals had declined materially from June: 13 commercial loans totaling $49.7 were deferred at September 30, compared with 98 loans totaling $161.6 at June 30. Four consumer and mortgage loans totaling $471,000 also had deferrals; these COVID-related modifications were not classified as TDRs under applicable guidance.
- The Company reported $107.5 of hotel/motel loans and $79.2 of retail strip-center loans, respectively 11.0% and 8.1% of total loans. Management warned that prolonged disruption could hurt borrower repayment and collateral values.
- Management said it added to the allowance for probable COVID-related credit weakness and cautioned that further economic deterioration could require additional provisions. It considered the existing allowance adequate at the reporting date.
- Management’s September goodwill assessment concluded fair value was more likely than not above carrying value. A sustained downturn or stock-price decline could trigger impairment; goodwill was $27.1.
Outlook, risks, contingencies, and unusual items
- The filing provides no quantified earnings or margin guidance. Management’s strategy emphasizes commercial lending, core deposit growth, cost management, and expansion; one new Ridgefield branch was planned for early 2021.
- Key risks include the duration and economic effects of COVID-19, commercial real estate and industry concentrations, credit deterioration, interest-rate and funding changes, and the LIBOR transition. The company’s 2020 Form 10-K risk factors were reported as unchanged in material respects.
- At September 30, commitments totaled $162.6, including loan-origination commitments, unused lines and undisbursed funds, and standby letters of credit. Management expected sufficient funds to meet current commitments.
- Ordinary-course litigation was not expected by management to have a material effect. No material goodwill impairment or investment-security impairment charge was recorded.
- The company repurchased 295,900 shares for $1.4 during the first half. Its repurchase program had authorized up to 500,000 shares, and the company reported completing that authorization by April 17, 2020 at an average $4.89 per share.
Most important facts for investors to verify
- Confirm the reporting period: the filing is for fiscal 2021 Q2, ended September 30, 2020, not 2020 Q2.
- Track the allowance and credit quality as COVID-related deferrals expire, especially exposures to hotels, retail properties, and commercial real estate.
- Assess how PPP forgiveness and repayment affect loan balances, fee income, yields, and unusually high cash and deposit balances.
- Verify the status and repayment or refinancing of the $30.0 FHLB advances that were scheduled to mature in October 2020.
- Monitor net interest margin and deposit pricing, including the LIBOR transition implications for the junior subordinated debentures.
- Review contingent liquidity capacity, collateral availability, and the $162.6 of off-balance-sheet commitments.