UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form10-Q

for the quarterly period ended June 30, 2019March 31, 2020

or

for the transition period from                

001-38627

(Commission File Number)

RIVERVIEW FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

(717)957-2196

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T during the preceding 12 months or for such shorter period that the registrant was required to submit and post such files.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer or a smaller reporting company as defined in Rule12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company as defined in Rule12b-2 of the Exchange Act.    Yes ☐    No ☒

Securities registered pursuant to Section 12(b) of the Act:

Indicate the number of shares outstanding of the registrant’s common stock, as of the latest practicable date: 9,167,7009,240,492 at July 30, 2019.April 29, 2020.

RIVERVIEW FINANCIAL CORPORATION

FORM10-Q

For the Quarter Ended June 30, 2019March 31, 2020

Riverview Financial Corporation

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands, except per share data)

See notes to consolidated financial statements.

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Riverview Financial Corporation

CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in thousands, except per share data)

See notes to consolidated financial statements.

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Riverview Financial Corporation

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

(Dollars in thousands, except per share data)

See notes to consolidated financial statements.

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Riverview Financial Corporation

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands, except per share data)

See notes to consolidated financial statements.

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Riverview Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

1. Summary of significant accounting policies:

Nature of Operations

Riverview Financial Corporation, (the “Company” or “Riverview”“Riverview���), a bank holding company incorporated under the laws of Pennsylvania, provides a full range of financial services through its wholly-owned subsidiary, Riverview Bank (the “Bank”).

Riverview Bank, with 30twenty seven (27) full service offices and threefour (4) limited purpose offices, is a full service commercial bank offering a wide range of traditional banking services and financial advisory, insurance and investment services to individuals, municipalities andsmall-to-medium sized businesses in the Pennsylvania market areas of Berks, Blaire,Blair, Bucks, Centre, Clearfield, Cumberland, Dauphin, Huntingdon, Lebanon, Lehigh, Lycoming, Northumberland, Perry, Schuylkill and Somerset Counties in Pennsylvania.Counties. The Wealth and Trust Management divisions of the Bank provide trust and investment advisory services to the general public and businesses.

Basis of presentation:

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP’) for interim financial information and with the instructions toForm 10-Q and Article 8 ofRegulation S-X. In the opinion of management, all normal recurring adjustments necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. All significant intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform with the current year’s presentation. These reclassifications did not have any effect on the operating results or financial position of the Company. The operating results and financial position of the Company for the three and six months ended as of June 30, 2019, are not necessarily indicative of the results of operations and financial position that may be expected in the future. The condensed consolidated balance sheet at December 31, 20182019 has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by GAAP for complete financial statements. Accordingly, these unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 20182019 Annual Report onForm 10-K, filed on March 14, 2019.16, 2020.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided. Actual results could differ from those estimates.

The operating results and financial position of the Company for the three months ended as of March 31, 2020, are not necessarily indicative of the results of operations and financial position that may be expected in the future. This is especially true given the recent outbreak of the Coronavirus(“COVID-19”) pandemic which may adversely affect the Company’s business results of operations and financial conditions for an indefinite period.

Beginning in the first quarter of 2020, theCOVID-19 pandemic has caused disruption in economic and social activity, both globally and in the United States. The spread ofCOVID-19, and the related government actions to mandate or encourage quarantines and social distancing, have caused severe disruptions in the U.S. economy, which has and will likely continue to, in turn, disrupt the business, activities, and operations of our customers, as well as our own business and operations.

The national public health crisis arising from theCOVID-19 pandemic and public expectations about it, combined with certainpre-existing factors, including, but not limited to, international trade disputes, inflation risks, and oil price volatility, could further destabilize the financial markets and the markets in which Riverview operates. The resulting impacts of the pandemic on consumers, including the sudden significant increase in the unemployment rate, is expected to cause changes in consumer and business spending, borrowing needs and saving habits, which will likely affect the demand for loans and other products and services Riverview offers, as well as the creditworthiness of potential and current borrowers. The significant decrease in commercial activity associated with the pandemic, both nationally and in Riverview’s markets, may cause customers, vendors, and counterparties to be unable to meet existing payment or other obligations to Riverview and the Bank.

Riverview’s business is dependent upon the willingness and ability of its customers to conduct banking and other financial transactions. Riverview expects the pandemic to limit, at least for a period of time, customer demand for many banking activities. Many companies and residents in our market area are subject to mandatory“non-essential business” shut-downs and “stay at home” orders, which have reduced banking activity across our market area. In response to these mandates, Riverview has temporarily limited most locations todrive-up and ATM services, with lobby access available by appointment only, reduced hours

of operation at some locations and encouraged our customers to use electronic banking platforms. We expect these measures to remain in place for an undetermined period of time. In addition, the use of quarantines and social distancing methods to curtail the spread ofCOVID-19—whether mandated by governmental authorities or recommended as a public health practice—may adversely affect Riverview’s operations as key personnel, employees and customers avoid physical interaction. The continued spread ofCOVID-19 could also negatively impact the business and operations of third-party service providers who perform critical services for Riverview’s business. It is not yet known what impact these operational changes may have on Riverview’s financial performance.

There continue to be broad concerns related to the potential effects of theCOVID-19 pandemic. Even after government mandated stay at home orders expire, the aftereffects of the pandemic may continue to have an adverse effect on, among other things, (i) our ability to attract customer deposits, (ii) the ability of our borrowers to satisfy their obligations to us, (iii) the demand for our loans or our other products and services and/or (iv) unemployment rates, financial markets, real estate markets or economic growth.

The outbreak ofCOVID-19 has significantly affected the financial markets and has resulted in a number of responses by the U.S. government, including a reduction in interest rates by the Federal Reserve. These reductions in interest rates, especially if prolonged, could adversely affect our net interest income, margins and our profitability.

TheCOVID-19 pandemic and its impact on the economy heighten the risks related to economic conditions in our market areas, interest rates, loan losses and reliance on our executives and third-party service providers. For example, borrower loan defaults that adversely affect Riverview’s earnings correlate with deteriorating economic conditions, which, in turn, may impact borrowers’ creditworthiness. If our borrowers are unable to meet their payment obligations to us, we will be required to increase our allowance for the losses through provisions for credit losses. In addition, loan programs adopted by the federal government, such as the Paycheck Protection Program (“PPP”), while intended to lessen the impact of the pandemic on businesses, may result in a decreased demand for Riverview’s loan products.

The impact of the pandemic on Riverview’s financial results is evolving and uncertain. The Company expects Riverview’s net interest income andnon-interest income to decline and credit-related losses to increase for an uncertain period given the decline in economic activity occurring due to the coronavirus and the actions by the Federal Reserve with respect to interest rates. We believe that we may experience a material adverse effect in our business, results of operations and financial condition as a result of theCOVID-19 pandemic for an indefinite period. Material adverse impacts may include all or a combination of valuation impairments on Riverview’s intangible assets, investments, loans or deferred taxes.

As of the March 31, 2020, the Company does not believe there exists any impairment to our goodwill, intangible assets, long-lived assets, right of use assets, oravailable-for-sale investment securities due to theCOVID-19 pandemic. The Company assessed goodwill and concluded there was no impairment present based on the results of a qualitative test as of March 31, 2020. It is uncertain whether prolonged effects of theCOVID-19 pandemic will result in future impairment charges related to any of the aforementioned assets.

Accounting Standards Adopted in 20192020

In FebruaryAugust 2016, the FASB issued an update ASU2016-02, “Leases”, which requires lessees to record most leases on their balance sheet and recognize leasing expenses in the income statement. Operating leases, except for short-term leases that are subject to an accounting policy election, will be recorded on the balance sheet for lessees by establishing a lease liability and correspondingright-of-use asset. All entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. As the Company elected the transition option provided in ASUNo. 2018-11, the modified retrospective approach was applied on January 1, 2019 (as opposed to January 1, 2017). The Company did not elect the hindsight practical expedient, which allows entities to use hindsight when determining lease term and impairment ofright-of-use assets. The guidance in this ASU became effective January 1, 2019 at which time the Company recorded on the Consolidated Balance Sheet aright-of-use asset and lease liability of $3,719. For further detail, see Note 7 – Leases.

In March 2017, the FASB issued ASUNo. 2017-08,2016-15, “Receivables—Nonrefundable Fees“Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Other Costs (Topic 310), Premium AmortizationCash Payments”. The update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This accounting guidance became effective on Purchased Callable Debt Securities”. These amendments shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.January 1, 2020. The adoption of ASUNo. 2017-08 on January 1, 2019,the guidance did not have a material effect on our consolidatedthe Company’s financial statements.position, results of operations or disclosures.

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Measurement, based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits. The ASU became effective on January 1, 2020. The adoption of the guidance did not have a material effect on the Company’s financial position, results of operations or disclosures.

In August 2018, the FASB issued ASUNo. 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract”. This guidance aligns the accounting for implementation costs related to a hosting arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaininginternal-use software. Common examples of hosting arrangements include software as a service, platform or infrastructure as a service and other similar types of hosting arrangements. While capitalized costs related tointernal-use software is generally considered an intangible asset, costs incurred to implement a cloud computing arrangement that is a service contract would typically be characterized in the company’s financial statements in the same manner as other service costs (e.g., prepaid expense). The new guidance provides that an entity would be required to amortize capitalized implementation costs over the term of the hosting arrangement on a straight-line basis unless another systematic and rational basis is more representative of the pattern in which the entity expects to benefit from access to the hosted software. This update became effective on January 1, 2020. The adoption of the guidance did not have a material effect on the Company’s financial position, results of operations or disclosures.

Recent Accounting Standards

In June 2016, the FASB issued ASUNo. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. ASU No.2016-13 requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in earlier recognition of credit losses. ASUNo. 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans andavailable-for-sale debt securities. In November 2018, the FASB issued ASU No.2018-19—Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The amendments clarify that receivables arising from operating leases are not within the scope of Subtopic326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. In May 2019, the FASB issued ASUNo. 2019-05 “Financial Instruments-Credit Losses (Topic 326)-Targeted Transition Relief” which amends ASUNo. 2016-13 to allow companies to irrevocably elect, upon adoption of ASU No,2016-13, the fair value option on financial instruments that were previously recorded at amortized cost and are within the scope of ASC326-20 if the instruments are eligible for the fair value option under ASC825-10. The fair value option election does not apply toheld-to-maturity debt securities. Entities are required to make this election on aninstrument-by-instrument basis. In November 2019, the FASB issued ASUNo. 2019-11, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses”, which provides specific improvements and clarifications to the guidance in Topic 326. Addresses expected recoveries for purchased financial assets with credit deterioration, transition relief for troubled debt restructurings, disclosures related to accrued interest receivables, financial assets secured by collateral maintenance provisions, and conforming cross-references to Subtopic805-20. In December 2018, the federal bank regulatory agencies approved a final rule that modifies their regulatory capital rules and provides institutions the option to phase in over a three-year period anyday-one regulatory capital effects of the new accounting standard. The Company has formed an internal management committee and engaged a third partythird-party vendor to assist with the transition to the guidance set forth in this update. The committee is currently evaluating the impact of this update on the Company’s Consolidated Financial Statements, but the ALLL is expected to increase upon adoption since the allowance will be required to cover the full expected life of the portfolio. The extent of this increase is still being evaluated and will depend on economic conditions and the composition of the loan and lease portfolio at the time of adoption. Management is currently evaluating the preliminary modeling results, including a qualitative framework to account for the drivers of credit losses that are not captured by the quantitative model. In JulyOctober 2019, the FASB tentatively decidedaffirmed its previously proposed amendment to delay the effective date for small reporting public companies to interim and annual reporting periods beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company currently expects as of January 1, 2023 to recognize aone-time cumulative effect adjustment to increase the ALLL with an offsetting reduction to the retained earnings component of equity. The effective date is subject to final approval by FASB.

In August 2016, the FASB issued ASUNo. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”. The update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This new accounting guidance will be effective for interim and annual reporting periods beginning after December 15, 2019. The Company does not expect the adoption of the new accounting guidance to have a material effect on the statement of cash flows.

In January 2017, the FASB issued ASUNo. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. The ASU simplifies the subsequent measurement of goodwill and eliminates Step 2 from the goodwill impairment test. The Company should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The impairment charge is limited to the amount of goodwill allocated to that reporting unit. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The guidance is not expected to have a significant impact on the Company’s financial positions, results of operations or disclosures.

In August 2018, the FASB issued ASU2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”. The amendments in this Update improve the effectiveness of fair value measurement disclosures by modifying the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits. The ASU is effective for all entities in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. In addition, an entity may early adopt any of the removed or modified disclosures immediately and delay adoption of the new disclosures until the effective date. The guidance is not expected to have a significant impact on the Company’s financial positions, results of operations or disclosures.

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In December 2019, the FASB issued ASUNo. 2019-12, “Income Taxes”, an update to simplify the accounting for income taxes by removing certain exceptions in Topic 740 Income Taxes. In addition, ASUNo. 2019-12 improves consistent application of other areas of guidance within Topic 740 by clarifying and amending existing guidance. The new guidance is effective fiscal years beginning after December 15, 2020. The adoption of the new guidance is not expected to have a material effect on the Company’s financial position, results of operations or disclosures.

In August 2018,March 2020, the FASB issued ASUNo. 2018-15,2020-04, “Customer’s Accounting“Reference Rate Reform (Topic 848)”. In response to concerns about structural risks of interbank offered rates (“IBORs”), and, particularly, the risk of cessation of the London Interbank Offered Rate (“LIBOR”), regulators around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. The amendments in this Update provide optional guidance for Implementation Costs Incurreda limited time to ease the potential burden in a Cloud Computing Arrangement That is a Service Contract.” This guidance aligns the accounting for implementation or recognizing the effects of reference rate reform on financial reporting. ASU2020-04 provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. For transactions that are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered “minor” so that any existing unamortized origination fees/costs relatedwould carry forward and continue to a hosting arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaininginternal-use software. Common examplesbe amortized and (ii) modifications of hosting arrangements include softwarelease agreements should be accounted for as a service, platformcontinuation of the existing agreement with no reassessments of the lease classification and the discount rate or infrastructure as a service and other similar typesremeasurements of hosting arrangements. While capitalized costs related tointernal-use software is generally considered an intangible asset, costs incurred to implement a cloud computing arrangementlease payments that is a service contract would typically be characterized in the company’s financial statements in the same manner as other service costs (e.g., prepaid expense). The new guidance provides that an entityotherwise would be required for modifications not accounted for as separate contracts. ASU2020-04 also provides numerous optional expedients for derivative accounting. ASU2020-04 is effective March 12, 2020 through December 31, 2022. An entity may elect to amortize capitalized implementation costs over the termapply ASU2020-04 for contract modifications as of the hosting arrangement onJanuary 1, 2020, or prospectively from a straight-line basis unless another systematic and rational basisdate within an interim period that includes or is more representative of the pattern in which the entity expectssubsequent to benefit from accessMarch 12, 2020, up to the hosted software. This update is effectivedate that the financial statements are available to be issued. Once elected for fiscal years,a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. We are evaluating the impacts of this ASU and interim periods within those fiscal years, beginning after December 15, 2019, with earlier adoption permitted in any annual or interim period for which financial statements have not yet been issued or made available for issuance. The guidance is not expected todetermined whether LIBOR transition and this ASU will have a significant impactmaterial effect on the Company’sour business operations and consolidated financial positions, results of operations or disclosures.statements.

2. Other comprehensive income (loss):

The components of other comprehensive income (loss) and their related tax effects are reported in the Consolidated Statements of Income and Comprehensive Income (Loss). The accumulated other comprehensive income (loss) included in the Consolidated Balance Sheets relates to net unrealized gains and losses on investment securitiesavailable-for-sale and benefit plan adjustments.

The components of accumulated other comprehensive income (loss) included in stockholders’ equity at June 30, 2019March 31, 2020 and December 31, 20182019 is as follows:

Other comprehensive income (loss) and related tax effects for the three and six months ended June 30,March 31, 2020 and 2019 and 2018 is as follows:

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The maturity distribution of the fair value, which is the net carrying amount, of the debt securities classified asavailable-for-sale at June 30, 2019,March 31, 2020, is summarized as follows:

Securities with a fair value of $68,975$46,152 and $71,797$63,389 at June 30, 2019March 31, 2020 and December 31, 2018,2019, respectively, were pledged to secure public deposits as required or permitted by law.

Securities and short-term investment activities are conducted with a diverse group of government entities, corporations and state and local municipalities. The counterparty’s creditworthiness and type of collateral is evaluated on acase-by-case basis. At June 30, 2019March 31, 2020 and December 31, 2018,2019, there were no significant concentrations of credit risk from any one issuer, with the exception of U.S. Government agencies and sponsored enterprises that exceeded 10.0 percent of stockholders’ equity.

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