Riverview Bancorp, Inc. — Form 10-Q Summary
Reporting period: Quarter ended June 30, 2019, the company’s fiscal first quarter of fiscal 2020. The request labels the period “2019 Q1,” but the filing reports results through June 30, 2019. Financial statements are unaudited; amounts below are in U.S. dollars unless noted.
Financial performance
| Metric | Quarter ended June 30, 2019 | Comparable 2018 quarter |
|---|---|---|
| Interest and dividend income | $12.5 million | $12.1 million |
| Net interest income | $11.4 million | $11.5 million |
| Net interest margin | 4.32% | 4.40% |
| Non-interest income | $3.2 million | $3.1 million |
| Non-interest expense | $9.2 million | $9.0 million |
| Net income | $4.2 million | $4.4 million |
| Diluted earnings per share | $0.18 | $0.20 |
| Operating cash flow | $6.5 million | $4.2 million |
Net income fell about 6% year over year. Higher loan interest income and non-interest income were outweighed by substantially higher interest expense and operating costs, and by the absence of the prior-year $200,000 loan-loss recapture. The filing attributes the NIM comparison in part to $585,000 of recovered interest on previously charged-off loans in the 2018 quarter. The efficiency ratio was 63.0% at June 30, 2019.
Balance sheet, funding and credit
- Total assets were $1.165 billion at June 30, up from $1.157 billion at March 31, 2019. Net loans increased to $876.5 million from $864.7 million; growth was concentrated in commercial real estate and construction lending.
- Deposits declined to $922.3 million from $925.1 million amid local competition and pricing pressure. Core branch deposits were 97.9% of deposits; there were no brokered deposits.
- FHLB advances were $56.9 million, compared with $56.6 million at March 31. Junior subordinated debentures were $26.6 million. The company reported no FRB advances.
- Cash and cash equivalents were $24.1 million. Cash, investment certificates and available-for-sale securities totaled $195.6 million, or 16.8% of assets. Reported total available liquidity, including funding sources, was $582.6 million, or 50.0% of assets, subject to collateral and other conditions.
- Shareholders’ equity was $138.7 million, up from $133.1 million. The Bank was categorized as “well capitalized”; its total capital ratio was 17.18% and leverage ratio was 11.94%.
- Nonperforming loans were $1.46 million, or 0.16% of total loans, versus $1.52 million, or 0.17%, at March 31. The allowance was $11.4 million, or 1.29% of loans, with coverage of nonperforming loans of 785%. There was no loan-loss provision in the quarter; net charge-offs were $15,000.
- Commercial and construction loans were 89.8% of total loans; commercial real estate alone was 53.2%. Management describes commercial lending as higher risk than traditional residential lending.
Changes, outlook and risks
- Management anticipated continued organic loan growth and said it would continue to prioritize commercial lending, core deposits, relationship banking, cost control and growth in Trust Company fee income. The filing provides no quantified earnings or margin guidance.
- Assets under management at the Trust Company rose to $694.8 million from $646.0 million at March 31. Asset management fees increased $217,000 year over year. The company launched an online mortgage origination platform in June.
- Deposit competition and pricing pressure contributed to a $5.4 million reduction in core branch deposits during the quarter. Interest expense rose to $1.1 million from $618,000, reflecting greater FHLB usage and higher deposit costs.
- The company adopted lease accounting standard ASC 842 on April 1, 2019, recording $5.1 million of operating lease right-of-use assets and $5.2 million of operating lease liabilities at June 30.
- The company was preparing to adopt the expected-credit-loss standard (CECL). Management anticipated an increase in the loan-loss allowance but said the amount was not yet known.
- Key risks include borrower and collateral deterioration, local economic and real-estate conditions, interest-rate and funding-cost changes, deposit competition, regulatory actions, and technology or third-party service disruptions. Loan commitments and unused lines totaled $184.2 million. Management considered ordinary-course litigation immaterial; no material changes to previously disclosed risk factors were reported.
Important facts for investors to verify
- Confirm the period distinction: this is the quarter ended June 30, 2019 (fiscal Q1 FY2020), not a calendar first quarter.
- Track whether loan growth—particularly commercial real estate and construction—continues without deterioration in credit quality or an increase in provisions.
- Monitor deposit retention, funding costs, reliance on FHLB advances and the availability of borrowing capacity, which depends on acceptable collateral.
- Assess the impact and timing of CECL adoption; the filing gives no quantified estimate of the anticipated allowance increase.
- Reconcile the GAAP net interest income figure of $11.430 million with the MD&A’s fully tax-equivalent presentation of approximately $11.442 million; the filing identifies the latter as a non-GAAP measure.