Riverview Bancorp, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended December 31, 2023 (fiscal 2024 Q3); comparisons are with the same periods in 2022 unless otherwise noted. Balance-sheet comparisons are with March 31, 2023. Amounts are in U.S. dollars.
Business context
Riverview Bancorp is a Washington-based community banking company operating Riverview Bank and Riverview Trust Company, primarily serving Washington and Oregon. Its business is funded largely by customer deposits and focused on commercial business, commercial real estate, construction, and other lending. Commercial and construction loans were 90.4% of total loans at December 31, 2023. Trust Company assets under management were $942.4 million, up from $890.6 million at March 31, 2023.
Key financial results
| Metric | Three months ended Dec. 31, 2023 | Three months ended Dec. 31, 2022 | Nine months ended Dec. 31, 2023 | Nine months ended Dec. 31, 2022 |
|---|---|---|---|---|
| Interest and dividend income | $14.3 million | $14.4 million | $42.3 million | $41.7 million |
| Interest expense | $4.9 million | $0.7 million | $12.7 million | $1.9 million |
| Net interest income | $9.3 million | $13.7 million | $29.5 million | $39.8 million |
| Net interest margin | 2.49% | 3.48% | 2.64% | 3.30% |
| Non-interest income | $3.1 million | $3.0 million | $9.7 million | $9.2 million |
| Non-interest expense | $10.6 million | $9.8 million | $30.6 million | $29.4 million |
| Net income | $1.5 million | $5.2 million | $6.8 million | $15.1 million |
| Diluted earnings per share | $0.07 | $0.24 | $0.32 | $0.69 |
- Quarterly net income declined about 72%; nine-month net income declined about 55%. Management attributed the earnings decline primarily to much higher deposit and borrowing costs.
- At December 31, total assets were $1.591 billion, net loans were $1.003 billion, deposits were $1.219 billion, and shareholders’ equity was $158.5 million.
- Cash and cash equivalents were $37.6 million, up from $22.0 million at March 31. For the nine months, operating cash flow was $20.6 million and cash increased $15.5 million. The operating cash flow included an $11.0 million increase in accrued expenses and other liabilities, primarily temporary Trust sweep funds subsequently disbursed.
- FHLB advances were $157.1 million, compared with $123.8 million at March 31; junior subordinated debentures were $27.0 million. FHLB borrowing helped offset deposit outflows.
Material changes and financial condition
- Deposits fell $46.3 million from March 31, driven by declines in regular savings and non-interest-bearing accounts amid competition, pricing pressure, and lower market liquidity. Core branch deposits represented 98.4% of deposits; the Company reported no brokered deposits.
- Net loans rose $9.3 million to $1.003 billion, with growth in multifamily, commercial real estate, and land lending. Commercial real estate made up 56.28% of total loans.
- Interest expense rose sharply: deposit expense increased as rates paid on certificates of deposit and money market accounts climbed, while borrowing expense reflected higher average FHLB advances and rates on floating-rate debentures.
- Non-interest expense increased $0.7 million in the quarter and $1.2 million year to date. Reported drivers included occupancy and modernization costs, marketing, FDIC premiums, state and local taxes, compensation, and fraud and deposit losses. Asset management fees supported higher non-interest income.
- Available-for-sale securities had $196.5 million in fair value; held-to-maturity securities had $232.7 million in amortized cost and $200.5 million in estimated fair value. The filing reports aggregate unrealized losses of $55.2 million across the two portfolios and attributes them primarily to interest-rate movements, not credit deterioration. Management stated it had the ability and intent to hold securities until recovery; no securities ACL was recorded.
Outlook, risks, and unusual items
- No earnings or revenue forecast is provided. Management’s stated strategy is to grow commercial lending and core deposits, manage problem assets and expenses, and expand fee income. It expects approximately $15,000 in capital expenditures for the remainder of fiscal 2024.
- Management expects to continue quarterly cash dividends at $0.06 per share, subject to Board discretion. The Bank was classified as well capitalized; its total capital ratio was 16.67% and Tier 1 leverage ratio was 10.53% at December 31.
- Liquidity included $234.0 million of cash and available-for-sale securities, plus reported total available funding of $682.1 million, or 42.9% of assets. Additional borrowing capacity was $137.8 million at the FHLB and $125.2 million at the Federal Reserve, subject to collateral and other conditions. Certificates of deposit totaling $152.6 million were scheduled to mature within one year.
- Asset quality indicators were low at period end: nonperforming assets were $186,000 (0.01% of assets), versus $1.9 million at March 31; the ACL was $15.4 million, or 1.51% of loans. There was no provision for credit losses in the reported periods. Loans 30–89 days past due were 0.46% of loans, up from 0.20% at March 31.
- The Company adopted CECL on April 1, 2023, recording a $42,000 increase to the loan ACL and a $53,000 after-tax reduction to opening retained earnings. The filing cautions that economic deterioration, collateral declines, or regulatory review could require higher credit-loss reserves.
- Off-balance-sheet commitments totaled $173.2 million, mainly undisbursed loan funds and unused lines. A lawsuit remains in settlement efforts; management said a loss was not probable and could not be reasonably estimated, so no accrual was recorded. Management noted an unfavorable resolution could materially affect results in a particular period.
- Other stated risks include interest-rate and funding changes, deposit outflows, commercial real estate and other credit exposure, market value changes in securities, competition, regulation, technology and third-party disruptions, and economic conditions. The annual goodwill test found no impairment; future impairment remains possible.
Most important facts for investors to verify
- Whether deposit retention and funding costs improve, and how that affects net interest margin and earnings.
- Deposit composition and maturities, liquidity availability, collateral-dependent borrowing capacity, and reliance on FHLB advances.
- Commercial real estate concentrations, delinquency trends, credit ratings, and whether the ACL remains adequate under changing economic conditions.
- Unrealized securities losses, potential liquidity consequences if securities must be sold, and management’s ability to hold them to recovery.
- Progress and potential exposure from the pending lawsuit, as well as the sustainability of dividends and capital levels.