Riverview Bancorp Earns $1.8 Million in Second Fiscal Quarter
VANCOUVER, Wash.--(BUSINESS WIRE)-- Riverview Bancorp, Inc. (NAS: RVSB) ("Riverview" or the "Company") today reported net income of $1.8 million, or $0.08 per share, in its second fiscal quarter ended September 30, 2012 compared to a net loss of $1.8 million, or $0.08 per share, in the preceding quarter and net income of $181,000, or $0.01 per share, in its second fiscal quarter a year ago.
"Credit quality improved for the second consecutive quarter as we continue to focus on identifying and resolving problem credits," stated Pat Sheaffer, Chairman and CEO. "Our team's success in executing this plan has resulted in a profitable quarter and reduction in nonperforming asset balances. While we will continue to pull from every resource to reduce problem assets, we can also now focus on responsible profitable growth that supports lending in the communities we serve."
Highlights (at or for the period ended September 30, 2012)
Net income was $1.8 million, or $0.08 per diluted share
The net interest margin was 4.31% compared to 4.22% for June 30, 2012
Nonperforming loans decreased $8.8 million during the quarter to $28.0 million (23.8% decline)
Nonperforming assets decreased $6.3 million during the quarter to $52.5 million (10.8% decline)
Strong core deposits at 96% of total deposits
Capital levels continue to exceed the regulatory requirements to be categorized as "well capitalized" with a total risk-based capital ratio of 13.41% and a Tier 1 leverage ratio of 9.09%
"The decrease in the provision for loan losses during the quarter was primarily driven by the improvement in credit quality of the loan portfolio and reduction in loan charge-offs," said Ron Wysaske, President and COO. Riverview recorded a $500,000 provision for loan losses in the second quarter of fiscal year 2013 compared to $4.0 million in the preceding quarter and $2.2 million in the second quarter of fiscal year 2012. The allowance for loan losses was $20.1 million at September 30, 2012 and represented 3.46% of total loans and 71.85% of nonperforming loans.
"Nonperforming loan balances decreased $8.8 million during the quarter, primarily in the commercial real estate and multi-family loan categories," added Wysaske. Nonperforming loans decreased to $28.0 million, or 4.81% of total loans, at September 30, 2012, compared to $36.8 million, or 5.95% of total loans, at June 30, 2012. The decrease in nonperforming loans was primarily driven by a reduction in the inflow of new nonperforming loans. New nonperforming loans decreased to $2.9 million during the quarter compared to $10.4 million in the preceding quarter. Loans delinquent 30 - 89 days also decreased to $3.7 million, or 0.64% of total loans, at September 30, 2012 compared to $8.0 million, or 1.29% of total loans, at June 30, 2012. Net charge-offs in the second quarter of fiscal 2013 totaled $1.3 million, compared to $2.9 million in the preceding quarter and $3.6 million in the second fiscal quarter a year ago.
Real estate owned ("REO") increased $2.4 million during the quarter to $24.5 million due to the transfer of $4.2 million in loans to REO during the quarter. REO sales during the quarter totaled $1.2 million with write-downs of $725,000. Despite the increase in REO during the quarter, the Company remains optimistic that it will be able to decrease REO over the remainder of the year due to accelerating sales during the past several quarters and the continuing improvement in real estate activity in its market area.
Nonperforming assets ("NPAs") declined to $52.5 million at September 30, 2012 compared to $58.9 million at June 30, 2012. At September 30, 2012, Riverview's NPAs were 6.49% of total assets compared to 7.22% at the end of the preceding quarter.
Balance Sheet Review
"As laid out in our capital plan that we implemented in May, our initial phase was to shrink the balance sheet while we cleaned up the loan portfolio," stated Wysaske. "During the first quarter of fiscal year 2013, we took advantage of favorable interest rates by selling $31.4 million in single-family mortgage loans to the Freddie Mac ("FHLMC") for a $650,000 gain. During the second quarter we further improved our capital position as we continued to reduce the balance sheet. Having achieved profitability, we will begin to focus more on organic growth by building new relationships and expanding the loan portfolio."
Riverview continues to reduce its exposure to land development and speculative construction loans. The balance of these portfolios declined to $31.4 million at September 30, 2012 compared to $34.0 million three months earlier. Land development and speculative construction loans represented a combined 5.4% of the total loan portfolio at September 30, 2012 compared to 5.5% of the total loan portfolio the prior quarter.
At September 30, 2012, the commercial real estate ("CRE") loan portfolio totaled $322.1 million, of which 29% was owner-occupied and 71% was investor-owned. The CRE portfolio contained six loans totaling $11.3 million that were nonperforming, representing 3.5% of the total CRE portfolio and 40.4% of total nonperforming loans.
Total deposits were $699.2 million at September 30, 2012 compared to $705.9 million at June 30, 2012 and $729.3 million a year ago. At September 30, 2012, noninterest deposits were $136.7 million, an increase of 3.4% from the previous quarter and 17.2% from a year ago. Core deposits accounted for 96% of total deposits at September 30, 2012.
Net Interest Margin
Riverview's net interest margin improved nine basis points during the quarter to 4.31% compared to 4.22% for the preceding quarter. The increase in net interest margin was a result of interest income recorded on loans removed from nonaccrual status, as well as the slowdown of new loans placed on nonaccrual status during the quarter and the re-pricing of the Company's trust preferred debentures. The cost of interest-bearing deposits decreased during the current quarter to 0.49%, a five basis point decline from the preceding quarter and a decrease of 26 basis points from the second fiscal quarter a year ago. These improvements were partially offset by lower yields on the Company's loan and investment portfolios as a result of the continued low interest rate environment.
Riverview's net interest income before the provision for loan losses was $7.8 million in the second fiscal quarter compared to $8.1 million in the preceding quarter and $8.4 million in the second fiscal quarter a year ago. Non-interest income was $2.3 million in the second fiscal quarter compared to $2.4 million in the preceding quarter and $1.8 million in the second fiscal quarter a year ago. In the first six months of fiscal year 2013, non-interest income increased 27% to $4.8 million compared to $3.7 million in the same period a year earlier. The increase in non-interest income was due to an increase in service charge income and mortgage banking activity, including the sale of $31.4 million in single-family mortgages to the FHLMC, which resulted in a $650,000 gain on sale of loans during the first quarter of fiscal year 2013.
Non-interest expense declined to $7.8 million in the second fiscal quarter compared to $8.3 million in the preceding quarter and was unchanged from $7.8 million in the second fiscal quarter a year ago. In the first six months of fiscal year 2013, non-interest expense totaled $16.1 million compared to $16.0 million in the same period a year earlier.
In fiscal 2012, the Company established a valuation allowance against its deferred tax asset. At September 30, 2012, the total valuation allowance was $17.1 million. Management will review the deferred tax asset on a quarterly basis to determine the appropriate valuation allowance, if needed. Any future reversals of the deferred tax asset valuation allowance would decrease the Company's income tax expense and increase its after tax net income in the period of reversal.
Capital and Liquidity
The Bank continues to maintain capital levels in excess of the regulatory requirements to be categorized as "well capitalized" with a total risk-based capital ratio of 13.41% and a Tier 1 leverage ratio of 9.09% at September 30, 2012.
At September 30, 2012, the Bank had available total and contingent liquidity of $500 million, including over $250 million of borrowing capacity from the Federal Home Loan Bank of Seattle and the Federal Reserve Bank of San Francisco. The Bank also has more than $125 million of cash and short-term investments.
Gresham Branch and Mobile Banking
In June 2012, Riverview opened its eighteenth branch and its fourth in Oregon. This new full service branch will fill a long-standing need for community banking in the Gresham market area. Gresham, just east of Portland, is the fourth largest city in Oregon.
Riverview launched its Mobile Banking apps for the iPhone and Android platforms in August 2012. Augmenting the existing browser based systems for smartphones, the apps were adopted quickly by our clients with almost 2,000 downloads in the first sixty days. Currently over 15% of our online customers are using Mobile Banking to check balances, review account history and transfer funds.
Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. Riverview believes that certain non-GAAP financial measures provide investors with information useful in understanding the company's financial performance; however, readers of this report are urged to review these non-GAAP financial measures in conjunction with GAAP results as reported.
Financial measures that exclude intangible assets are non-GAAP measures. To provide investors with a broader understanding of capital adequacy, Riverview provides non-GAAP financial measures for tangible common equity, along with the GAAP measure. Tangible common equity is calculated as shareholders' equity less goodwill and other intangible assets. In addition, tangible assets are total assets less goodwill and other intangible assets.
The following table provides a reconciliation of ending shareholders' equity (GAAP) to ending tangible shareholders' equity (non-GAAP), and ending assets (GAAP) to ending tangible assets (non-GAAP).
(Dollars in thousands)
Other intangible assets, net
Tangible shareholders' equity
Other intangible assets, net
Riverview Bancorp, Inc. (www.riverviewbank.com) is headquartered in Vancouver, Washington - just north of Portland, Oregon on the I-5 corridor. With assets of $810 million, it is the parent company of the 89 year-old Riverview Community Bank, as well as Riverview Asset Management Corp. The Bank offers true community banking services, focusing on providing the highest quality service and financial products to commercial and retail customers. There are 18 branches, including thirteen in the Portland-Vancouver area and three lending centers.
"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements that are subject to risks and uncertainties, including, but not limited to: the Company's ability to raise common capital, the amount of capital it intends to raise and its intended use of that capital. The credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in the Company's allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets; changes in general economic conditions, either nationally or in the Company's market areas; changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, the Company's net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in the Company's market areas; secondary market conditions for loans and the Company's ability to sell loans in the secondary market; results of examinations of us by the Office of Comptroller of the Currency or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase the Company's reserve for loan losses, write-down assets, change Riverview Community Bank's regulatory capital position or affect the Company's ability to borrow funds or maintain or increase deposits, which could adversely affect its liquidity and earnings; the Company's compliance with regulatory enforcement actions we have entered into with the OCC and the possibility that our noncompliance could result in the imposition of additional enforcement actions and additional requirements or restrictions on our operations; legislative or regulatory changes that adversely affect the Company's business including changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules; the Company's ability to attract and retain deposits; further increases in premiums for deposit insurance; the Company's ability to control operating costs and expenses; the use of estimates in determining fair value of certain of the Company's assets, which estimates may prove to be incorrect and result in significant declines in valuation; difficulties in reducing risks associated with the loans on the Company's balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect the Company's workforce and potential associated charges; computer systems on which the Company depends could fail or experience a security breach; the Company's ability to retain key members of its senior management team; costs and effects of litigation, including settlements and judgments; the Company's ability to successfully integrate any assets, liabilities, customers, systems, and management personnel it may in the future acquire into its operations and the Company's ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; the Company's ability to pay dividends on its common stock; and interest or principal payments on its junior subordinated debentures; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; other economic, competitive, governmental, regulatory, and technological factors affecting the Company's operations, pricing, products and services and the other risks described from time to time in our filings with the SEC.
Such forward-looking statements may include projections. Any such projections were not prepared in accordance with published guidelines of the American Institute of Certified Public Accountants or the Securities Exchange Commission regarding projections and forecasts nor have such projections been audited, examined or otherwise reviewed by independent auditors of the Company. In addition, such projections are based upon many estimates and inherently subject to significant economic and competitive uncertainties and contingencies, many of which are beyond the control of management of the Company. Accordingly, actual results may be materially higher or lower than those projected. The inclusion of such projections herein should not be regarded as a representation by the Company that the projections will prove to be correct.
The Company cautions readers not to place undue reliance on any forward-looking statements. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company. The Company does not undertake and specifically disclaims any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for fiscal 2013 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us, and could negatively affect the Company's operating and stock price performance.
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(In thousands, except share data) (Unaudited)
September 30, 2012
June 30, 2012
September 30, 2011
March 31, 2012
Cash (including interest-earning accounts of $83,642, $58,539, $32,955 and $33,437)
Certificate of deposits
Loans held for sale
Investment securities held to maturity, at amortized cost
Investment securities available for sale, at fair value
Mortgage-backed securities held to maturity, at amortized
Mortgage-backed securities available for sale, at fair value
Loans receivable (net of allowance for loan losses of $20,140, $20,972, $14,672, and $19,921)
Real estate and other pers. property owned
Prepaid expenses and other assets
Accrued interest receivable
Federal Home Loan Bank stock, at cost
Premises and equipment, net
Deferred income taxes, net
Mortgage servicing rights, net
Core deposit intangible, net
Bank owned life insurance
LIABILITIES AND EQUITY
Accrued expenses and other liabilities
Advance payments by borrowers for taxes and insurance
Junior subordinated debentures
Capital lease obligation
Serial preferred stock, $.01 par value; 250,000 authorized, issued and outstanding, none
Common stock, $.01 par value; 50,000,000 authorized,
September 30, 2012 - 22,471,890 issued and outstanding;
June 30, 2012 - 22,471,890 issued and outstanding;
September 30, 2011 - 22,471,890 issued and outstanding;
March 31, 2012 - 22,471,890 issued and outstanding;
Additional paid-in capital
Unearned shares issued to employee stock ownership trust
Accumulated other comprehensive loss
Total shareholders' equity
TOTAL LIABILITIES AND EQUITY
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three Months Ended
Six Months Ended
(In thousands, except share data) (Unaudited)
Sept. 30, 2012
June 30, 2012
Sept. 30, 2011
Sept. 30, 2012