Riverview Bancorp, Inc. — Form 10-Q Summary
Business context and reporting period
Riverview Bancorp, Inc. is a community-oriented bank holding company serving markets in Washington and Oregon, with commercial and real estate lending, deposit banking, and trust and asset management services. This filing covers the three months ended June 30, 2023, the first quarter of fiscal 2024; income and cash flow comparisons are with the three months ended June 30, 2022. Balance-sheet comparisons are with March 31, 2023. Figures below are in U.S. dollars.
Financial performance and position
| Metric | Quarter / period-end result | Comparison or context |
|---|---|---|
| Net interest income | $10.4 million | Down $2.3 million year over year |
| Net interest margin | 2.79% | 3.11% in the prior-year quarter |
| Net income; diluted EPS | $2.8 million; $0.13 | $4.7 million; $0.21 in the prior-year quarter |
| Interest and dividend income | $14.0 million | Up 5.8% year over year |
| Interest expense | $3.6 million | Up from $0.5 million in the prior-year quarter |
| Non-interest income / expense | $3.3 million / $10.0 million | Income up $0.2 million; expense up $0.2 million year over year |
| Cash flows | $9.1 million operating; $10.3 million investing; $(11.5) million financing | Cash and cash equivalents increased $7.9 million to $29.9 million during the quarter |
| Total assets; loans, net | $1.583 billion; $989.1 million | Loans, net, down $4.5 million from March 31 |
| Deposits; FHLB advances | $1.243 billion; $136.1 million | Deposits down $21.9 million and advances up $12.3 million from March 31 |
| Shareholders’ equity | $154.1 million | Down $1.2 million from March 31 |
| Allowance for credit losses | $15.3 million; 1.53% of loans | No quarterly provision for credit losses; $8,000 net charge-offs |
The Bank was categorized as well capitalized. At June 30, 2023, its total capital ratio was 16.82%, CET1 ratio 15.56%, and Tier 1 leverage ratio 10.54%. Management reported $664.5 million of available liquidity, including borrowing sources, equal to 42.0% of total assets. Available capacity included $175.7 million from the FHLB and $55.4 million from the Federal Reserve, subject to collateral and other conditions.
Material changes and management commentary
- Net income declined about 39% year over year. The principal pressure was a sharp increase in funding costs: deposit interest expense rose $1.1 million and borrowing expense rose $2.0 million. The average rate on interest-bearing deposits increased to 0.65% from 0.11%; the average rate on FHLB advances was 5.24%.
- Interest income increased $0.8 million as yields on loans and securities rose, but this did not offset higher interest expense. Average interest-earning assets were lower year over year, and the net interest margin contracted 32 basis points.
- Deposits fell amid competition, pricing pressure, and lower market liquidity. The Bank used additional FHLB advances partly to offset withdrawals. Core branch deposits were 98.1% of deposits; the Company reported no brokered deposits at quarter-end.
- Commercial and construction lending represented 90.2% of total loans. Management’s strategy emphasizes commercial lending, core deposit growth, relationship banking, asset quality, and growth in trust and fee income. Trust Company assets under management were $901.6 million, up from $890.6 million at March 31.
- Unrealized losses remained substantial in the securities portfolio: $27.0 million on available-for-sale securities and $36.1 million on held-to-maturity securities at June 30. Management attributed these losses primarily to interest-rate movements, said it could and intended to hold the investments until recovery, and recorded no securities credit-loss allowance.
Outlook, risks, contingencies, and unusual items
- The filing provides no specific earnings or revenue guidance. Management expects to continue the $0.06 quarterly common dividend, subject to Board discretion; this is not a guarantee. It expects approximately $1.4 million in premises and equipment capital expenditures during the remainder of fiscal 2024.
- Credit quality indicators included $1.0 million of nonperforming assets, 0.06% of total assets, at June 30, versus $1.9 million at March 31. Most of the reported past-due balance consisted of government-guaranteed SBA and USDA loans affected by a servicing-transfer reconciliation; management expects repayment under the guarantees. The allowance-to-nonperforming-loans ratio was 1,496.88%.
- The Company adopted CECL on April 1, 2023. Adoption increased the allowance by $42,000 and reduced opening retained earnings by $53,000 after tax; prior-period credit-loss figures use a different methodology and are not directly comparable.
- A lawsuit is ongoing, with proceedings stayed while settlement efforts continue. Management said a loss was not probable and could not be reasonably estimated, so no accrual was recorded; an unfavorable resolution could affect a particular period materially.
- Key stated risks include deposit outflows and funding costs, interest-rate changes, recession and inflation, commercial real estate and other credit exposure, securities-market values, regulatory actions, and operational or technology disruptions. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether deposit trends stabilize and whether higher deposit pricing or borrowing costs continue to pressure net interest margin.
- The composition and availability of the stated $664.5 million liquidity, including collateral requirements and the distinction between cash on hand and contingent borrowing capacity.
- Changes in commercial real estate concentrations, criticized or past-due loans, charge-offs, and CECL allowance assumptions, including treatment of the SBA/USDA servicing-transfer balances.
- The impact of unrealized securities losses on capital and liquidity if securities must be sold, and whether management’s ability and intent to hold remains unchanged.
- Developments in the lawsuit, the dividend decision, and progress toward management’s core-deposit and commercial-lending objectives.