Riverview Bancorp, Inc. — Form 10-Q Summary
Reporting period: The filing covers the three months ended June 30, 2022, Riverview’s first quarter of fiscal 2023—not calendar 2022 Q1. Figures are unaudited; dollar amounts below are in millions unless noted.
Financial performance and condition
| Metric | June 2022 quarter / June 30, 2022 | Comparable period or prior quarter |
|---|---|---|
| Net interest income | $12.7 | $11.3 in June 2021 quarter |
| Net interest margin | 3.11% | 3.07% in June 2021 quarter |
| Non-interest income | $3.1 | $3.6 in June 2021 quarter |
| Non-interest expense | $9.8 | $9.1 in June 2021 quarter |
| Net income / diluted EPS | $4.7 / $0.21 | $5.8 / $0.26 in June 2021 quarter |
| Total assets | $1,697.7 | $1,740.1 at March 31, 2022 |
| Net loans | $997.9 | $975.9 at March 31, 2022 |
| Deposits | $1,495.6 | $1,533.9 at March 31, 2022 |
| Cash and cash equivalents | $141.8 | $241.4 at March 31, 2022 |
| Shareholders’ equity | $154.4 | $157.2 at March 31, 2022 |
- Cash flow: Operating activities provided $3.8; investing activities used $62.5; financing activities used $40.8. Cash declined $99.6 during the quarter.
- Debt and liquidity: Junior subordinated debentures were $26.9. The Bank had no FHLB or Federal Reserve advances and reported available borrowing capacity of $302.2 from the FHLB and $59.4 from the Federal Reserve, subject to collateral. Reported combined available liquidity was $907.1, or 53.4% of assets.
- Capital: The Bank was categorized as “well capitalized”; its total capital ratio was 16.31% and leverage ratio was 9.29% at June 30.
- Credit quality: Allowance for loan losses was $14.6, or 1.44% of loans. Nonperforming loans were $27.5, up from $22.1 at March 31; most were government-guaranteed SBA and USDA loans affected by a servicing-transfer delay.
Material changes and management commentary
- Year-over-year net income declined $1.1, although net interest income increased $1.4. Management attributed the earnings decline chiefly to the prior-year $1.6 loan-loss recapture and $0.5 BOLI death benefit, neither of which recurred; higher expenses and lower other income also contributed.
- Net interest margin edged up as investment-security and overnight-cash yields improved and deposit costs fell. The average loan yield decreased to 4.39% from 4.67%, partly reflecting lower rates on originations and reduced PPP fee recognition.
- Loans increased $22.0 from March 31, mainly from one-to-four-family loan purchases and construction originations. Deposits fell $38.3; core branch deposits remained 96.7% of deposits, and the company reported no brokered deposits.
- Available-for-sale securities had $19.7 of unrealized losses at June 30, and held-to-maturity securities had $26.4 of estimated fair-value losses. Management attributed the losses primarily to rising market rates, considered them temporary, and stated it had the ability and intent to hold the securities until recovery.
- The company repurchased 182,770 shares for $1.3 during the quarter under a $5.0 million authorization. It declared a $0.06-per-share quarterly dividend.
Outlook, risks and contingencies
- No specific earnings or revenue guidance was provided. Management expected approximately $2.3 of capital expenditures for the remainder of fiscal 2023 and said it currently expected to continue quarterly dividends at $0.06 per share, subject to Board discretion.
- Management said the SBA/USDA servicing-transfer reconciliation was ongoing. The related $27.2 of loans were past due because payments were delayed, but the company continued to accrue interest and expected principal and interest because the balances were government guaranteed.
- Key stated risks include economic deterioration, inflation or recession, changing interest rates and funding costs, credit losses and collateral values, deposit retention, regulatory actions, competition, and technology or third-party service disruptions. The filing also notes LIBOR transition exposure for variable-rate debentures.
- Off-balance-sheet commitments totaled $169.6, including $150.5 of undisbursed loan funds and unused lines. Management expected sufficient funds to meet current commitments. Ordinary-course litigation was not expected to have a material effect.
- Management concluded goodwill was not impaired at June 30, 2022, but warned that sustained adverse market or company conditions could lead to future impairment. Adoption of the expected-credit-loss standard (CECL) was expected to change the allowance, but the magnitude was not yet known.
Important facts for investors to verify
- Track the resolution of the SBA/USDA servicing transfer and whether the unusually high past-due balance converts to timely collections.
- Monitor deposit trends, cash usage, and liquidity availability, including the collateral-dependent borrowing capacity.
- Assess the effect of rising rates on securities’ unrealized losses, net interest margin, and deposit costs.
- Review loan portfolio concentrations, allowance adequacy, and nonperforming-loan coverage as economic conditions change.
- Confirm subsequent dividend and repurchase decisions, and the eventual CECL adoption impact.