Riverview Bancorp, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended March 31, 2021, with comparative results for FY2020. Although the request metadata says “2020 Q4,” this filing reports FY2021; the quarter ended March 31, 2021 is also summarized below. Amounts are U.S. dollars.
Business context
Riverview is a community banking company serving southwest Washington and the Portland-area counties of Oregon, with 17 branches. Its strategy emphasizes commercial business and real estate lending, relationship deposits, and fee income through its trust subsidiary. The Bank converted from a federal savings bank to a Washington state-chartered commercial bank on April 28, 2021, after the fiscal year-end.
Financial performance and condition
| Metric | FY2021 / March 31, 2021 | FY2020 / March 31, 2020 |
|---|---|---|
| Net income | $10.5 million; diluted EPS $0.47 | $15.7 million; diluted EPS $0.69 |
| Net interest income | $44.9 million | $45.7 million |
| Net interest margin | 3.41% | 4.26% |
| Provision for loan losses | $6.3 million | $1.3 million |
| Non-interest income | $11.1 million | $12.4 million |
| Non-interest expense | $36.3 million | $36.3 million |
| Total assets | $1.549 billion | $1.181 billion |
| Net loans | $924.1 million | $898.9 million |
| Deposits | $1.346 billion | $990.4 million |
| Shareholders’ equity | $151.6 million | $148.8 million |
Annual interest and dividend income was $48.3 million, down from $50.5 million; interest expense declined to $3.4 million from $4.8 million. The margin decline reflected low rates, lower asset yields, PPP lending, and cash balances earning low returns. Return on average assets was 0.74% versus 1.35%; return on average equity was 6.91% versus 10.96%.
Quarter ended March 31, 2021: Net income was $3.4 million ($0.15 diluted EPS), versus $2.9 million ($0.13) in the March 2020 quarter. Net interest income was $11.2 million versus $11.1 million; no loan-loss provision was recorded in the quarter, compared with $1.25 million in the year-earlier quarter.
Cash flow and liquidity: Operating cash flow was $24.2 million; investing activities used $150.2 million, largely reflecting securities purchases; financing activities provided $349.5 million, primarily from deposit growth. Cash and cash equivalents ended the year at $265.4 million, up from $42.0 million. Cash, certificates of deposit, and available-for-sale securities totaled $482.0 million, or 31.1% of assets. The Bank had no FHLB or Federal Reserve borrowings at year-end; reported FHLB borrowing capacity was $226.7 million, subject to collateral, and Federal Reserve capacity was $50.8 million.
Debt and capital: Junior subordinated debentures were $26.7 million; finance lease liabilities were $2.3 million. The Bank was well capitalized, with a 17.35% total risk-based capital ratio, 16.09% CET1 ratio, and 9.63% leverage ratio. It met the capital conservation buffer requirement.
Material changes and credit quality
- Deposits grew $355.6 million, attributed largely to PPP proceeds, government stimulus deposits, and higher customer savings. Core branch deposits were 97.4% of total deposits; there were no wholesale-brokered deposits.
- Loan growth included $93.4 million of outstanding PPP loans. Commercial and construction loans were 93.8% of total loans. Construction loans fell substantially, while commercial real estate loans increased.
- The allowance for loan losses rose to $19.2 million, or 2.03% of loans, from $12.6 million, or 1.38%, following a $6.3 million provision amid pandemic uncertainty. Net recoveries were $254,000.
- Nonperforming assets declined to $571,000 from $1.4 million. However, criticized loans rose to $42.5 million from $1.4 million, primarily reflecting COVID-related downgrades; classified loans increased to $7.7 million from $1.6 million.
- Non-interest income decreased, including lower asset management fees and loan-sale gains. The company shifted mortgage originations toward brokering loans to third parties rather than originating and selling them to FHLMC.
- Shareholders received $0.20 per share in dividends during FY2021. The company completed repurchases of 295,900 shares for $1.4 million.
Outlook, risks, and unusual items
The filing provides no specific quantified earnings or revenue guidance. Management planned to continue commercial lending and core-deposit growth, manage problem assets and expenses, and selectively expand; the Ridgefield branch opening was delayed to fall 2021. The company stated that COVID-19’s ultimate effects could not be reliably estimated and were expected to remain material. It continued borrower relief programs and PPP lending through the program’s May 2021 conclusion.
Key risks include pandemic-related borrower stress and reserve needs; concentration in commercial real estate (308% of risk-based capital under the cited supervisory concentration measure); interest-rate and margin sensitivity; deposit competition; PPP forgiveness and SBA guarantee compliance; operational, cybersecurity, vendor, and regulatory risks; and future CECL adoption, for which management expects an increase in credit-loss allowances but had not quantified the effect. The filing reported no material pending litigation and no investment-security impairment charge for FY2021. The annual goodwill test found no impairment; management’s March 2021 qualitative assessment also found impairment was not more likely than not.
The financial statements received an unqualified audit opinion. The auditor identified the allowance for loan losses, particularly management’s subjective qualitative-factor estimates, as a critical audit matter. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not express an opinion on internal control.
Important facts for investors to verify
- Whether elevated criticized and classified commercial real estate exposures lead to further downgrades, provisions, or charge-offs as pandemic-related conditions evolve.
- PPP forgiveness progress, fee recognition, and any SBA guarantee or servicing issues; the filing reported $69.9 million of forgiveness approvals by year-end.
- Whether deposit balances remain stable as stimulus-related inflows and unusual pandemic-era savings patterns normalize, and how excess cash is redeployed.
- Trends in net interest margin and earnings as rates, asset yields, deposit costs, and loan demand change.
- The effects of the April 2021 charter conversion, future branch costs, CECL adoption, and any changes in borrowing capacity or capital requirements.