Riverview Bancorp Earns $1.6 Million In First Fiscal Quarter
Highlighted by Continued Credit Quality Improvements
Vancouver, WA – July 23, 2013 - Riverview Bancorp, Inc. (Nasdaq GSM: RVSB) (“Riverview” or the “Company”) today reported net income of $1.6 million, or $0.07 per diluted share, in its fiscal first quarter ended June 30, 2013. This compares to net income of $1.6 million, or $0.07 per diluted share, in the preceding quarter and a net loss of $1.8 million, or $0.08 per diluted share, in the first quarter a year ago.
“Our strategic plan remains on schedule. We have strengthened the overall health of the company with improved credit quality metrics and sound capital ratios, and we were profitable for the fourth consecutive quarter,” said Pat Sheaffer, Chairman and CEO. “Going forward we will continue to work on improving our asset quality while looking for growth opportunities in the Portland and Vancouver market areas.”
First Quarter Highlights (at or for the period ended June 30, 2013)
| · | Net income was $1.6 million, or $0.07 per diluted share |
| · | Net interest margin was 3.51% for the quarter |
| · | Nonperforming assets decreased $2.2 million during the quarter to $34.6 million (6.0% decline) |
| · | Classified assets decreased $7.8 million during the quarter to $59.8 million (11.6% decline) |
| · | Net recoveries for the first quarter totaled $554,000 compared to net charge-offs of $390,000 in the preceding quarter; marking the fifth consecutive quarter of declining charge-offs |
| · | Core deposits were strong and accounted for 95% 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 15.81% and a Tier 1 leverage ratio of 10.27% |
Credit Quality
“We continued to make meaningful progress in reducing our level of problem assets, with nonperforming assets, REO and net charge-offs all declining during the current quarter,” said Ron Wysaske, President and COO.
Classified assets decreased $7.8 million during the quarter to $59.8 million at June 30, 2013 compared to $67.6 million at March 31, 2013 and $109.6 million at June 30, 2012. The classified asset ratio decreased to 66.4% at June 30, 2013.
Nonperforming loans were $21.4 million, or 4.07% of total loans, at June 30, 2013 compared to $21.1 million, or 3.94% of total loans at March 31, 2013 and $36.8 million, or 5.95% of total loans a year ago. The slight increase was due to a $4.0 million loan on an office building in Portland that was moved to nonaccrual status during the quarter. This loan is fully collateralized and has a pending sale on one of the two pieces of collateral that would payoff approximately $2.5 million of the outstanding loan balance.
REO balances decreased $2.5 million during the quarter to $13.2 million, the lowest level in over four years. During the quarter, REO sales totaled $3.0 million with write-downs of $1.3 million and additions of $1.8 million. Riverview also has several additional properties under sales contracts which are expected to close in the September quarter.
The Bank had a provision recapture of $2.5 million during the first quarter. The provision recapture during the current quarter reflects the continued improvement in credit quality as well as the decline in net loan charge-offs. Riverview
RVSB First Quarter Fiscal 2014 Results
July 23, 2013
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recorded a $3.6 million provision recapture in the preceding quarter and made a $4.0 million provision for loan losses in the first quarter a year ago.
The allowance for loan losses was $13.7 million at June 30, 2013, representing 2.61% of total loans and 64.03% of nonperforming loans. Net charge-offs declined for the fifth consecutive quarter as the Bank’s problem credits continued to decline and the recoveries on prior loan charge-offs increased. As a result, Riverview had net recoveries of $554,000 in the fiscal first quarter, compared to net charge-offs of $390,000 in the preceding quarter and net charge-off of $2.9 million in the fiscal first quarter a year ago.
Balance Sheet Review
Net loan balances declined $8.7 million during the quarter, primarily due to the Bank’s continued focus on reducing classified loan balances. Net loans were $511.7 million at June 30, 2013 compared to $520.4 million at March 31, 2013 and $597.1 million at June 30, 2012. “Over the past year our focus has been on reducing classified loan balances,” said Wysaske. “As classified loan balances continue to decrease, we are focusing more of our attention on increasing loan production. We have two full service lending teams that are working both the Vancouver and Portland market areas looking for new relationships and quality loans. We remain optimistic for our loan growth potential in fiscal year 2014 as our loan pipeline has been growing in recent quarters.”
The commercial real estate (“CRE”) loan portfolio totaled $292.2 million at June 30, 2013, of which 29% was owner-occupied and 71% was investor-owned. The CRE portfolio contained eight loans totaling $13.4 million that were nonperforming, representing 4.6% of the total CRE portfolio and 62.7% of total nonperforming loans.
Total deposits were $659.5 million at June 30, 2013 compared to $663.8 million at March 31, 2013 and $705.9 million a year ago. The Company’s focus remains on growing low cost customer deposits. At June 30, 2013, non-interest checking accounts were $117.5 million, an increase of 4.4% from the prior quarter.
In fiscal 2012, Riverview established a valuation allowance against its deferred tax asset. At June 30, 2013, the total valuation allowance was $15.8 million. Management and Riverview’s outside advisors will review the deferred tax asset on a quarterly basis to determine the appropriate valuation allowance. Any future reversals of the deferred tax asset valuation allowance would decrease Riverview’s income tax expense, increase its after tax net income and shareholders’ equity.
Income Statement
Riverview’s net interest margin was 3.51% for the first quarter compared to 3.64% for the preceding quarter and 4.22% in the first quarter a year ago. The decrease from prior year was primarily due to an increase in cash balances along with a corresponding decrease in loan balances and the re-pricing of loans in the loan portfolio. Loan yields have continued to contract as existing loans in the portfolio re-price and new loans are originated in the current low interest rate environment.
Non-interest income increased to $2.2 million in the first quarter of fiscal 2014 compared to $2.0 million in the preceding quarter. Mortgage banking activity remained higher than normal with a total of $20.8 million in new mortgage loans originated during the quarter, resulting in a $317,000 gain on sale of loans held for sale. Asset management fees increased to $736,000 during the quarter compared to $604,000 in the same quarter a year ago due to an increase in assets under management as well as an increase in investment activity.
Non-interest expense decreased to $9.2 million in the first quarter of fiscal 2014 compared to $10.2 million in the preceding quarter. Data processing expenses in the first quarter included $275,000 in conversion expenses related to the Company’s change in its core operating system during June 2013. REO expenses decreased from prior quarter to $1.6 million. The decrease was primarily attributable to a reduction in total write-downs. REO write-downs during the quarter totaled $1.3 million compared to $2.6 million in the prior quarter.
“We continue to be aggressive in the pricing of our existing REO properties in an attempt to liquidate these properties more quickly,” Wysaske concluded. “Based on sales activity during the quarter as well as pending sales activity, the updated pricing strategy appears to be working successfully.”
RVSB First Quarter Fiscal 2014 Results
July 23, 2013
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Capital and Liquidity
Riverview 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 15.81% and a Tier 1 leverage ratio of 10.27% at June 30, 2013.
At June 30, 2013, the Bank had available total and contingent liquidity of more than $485 million, including over $225 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 $150 million of cash and short-term investments.
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) | | June 30, 2013 | | | March 31, 2013 | | | June 30, 2012 | |
| | | | | | | | | | |
| Shareholders' equity | | $ | 80,144 | | | $ | 78,442 | | | $ | 73,820 | |
| Goodwill | | | 25,572 | | | | 25,572 | | | | 25,572 | |
| Other intangible assets, net | | | 455 | | | | 454 | | | | 566 | |
| Tangible shareholders' equity | | $ | 54,117 | | | $ | 52,416 | | | $ | 47,682 | |
| | | | | | | | | | | | | |
| Total assets | | $ | 774,578 | | | $ | 777,003 | | | $ | 814,730 | |
| Goodwill | | | 25,572 | | | | 25,572 | | | | 25,572 | |
| Other intangible assets, net | | | 455 | | | | 454 | | | | 566 | |
| Tangible assets | | $ | 748,551 | | | $ | 750,977 | | | $ | 788,592 | |
RVSB First Quarter Fiscal 2014 Results
July 23, 2013
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About Riverview
Riverview Bancorp, Inc. (www.riverviewbank.com) is headquartered in Vancouver, Washington – just north of Portland, Oregon on the I-5 corridor. With assets of $775 million, it is the parent company of the 90 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 2014 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.
RVSB First Quarter Fiscal 2014 Results
| RIVERVIEW BANCORP, INC. AND SUBSIDIARY | | | | | | | | | |
| Consolidated Balance Sheets | | | | | | | | | |
| (In thousands, except share data) (Unaudited) | | June 30, 2013 | | | March 31, 2013 | | | June 30, 2012 | |
| ASSETS | | | | | | | | | |
| | | | | | | | | | |
| Cash (including interest-earning accounts of $96,110, $100,093 | | $ | 111,878 | | | $ | 115,415 | | | $ | 71,362 | |
| and $58,539) | | | | | | | | | | | | |
| Certificate of deposits | | | 42,652 | | | | 44,635 | | | | 40,975 | |
| Loans held for sale | | | 1,258 | | | | 831 | | | | 100 | |
| Investment securities held to maturity, at amortized cost | | | - | | | | - | | | | 487 | |
| Investment securities available for sale, at fair value | | | 14,590 | | | | 6,216 | | | | 6,291 | |
| Mortgage-backed securities held to maturity, at amortized | | | 122 | | | | 125 | | | | 168 | |
| Mortgage-backed securities available for sale, at fair value | | | 6,068 | | | | 431 | | | | 813 | |
| Loans receivable (net of allowance for loan losses of $13,697, | | | | | | | | | | | | |
| $15,643 and $20,972) | | | 511,692 | | | | 520,369 | | | | 597,138 | |
| Real estate and other pers. property owned | | | 13,165 | | | | 15,638 | | | | 22,074 | |
| Prepaid expenses and other assets | | | 2,800 | | | | 3,063 | | | | 4,550 | |
| Accrued interest receivable | | | 1,751 | | | | 1,747 | | | | 2,084 | |
| Federal Home Loan Bank stock, at cost | | | 7,089 | | | | 7,154 | | | | 7,350 | |
| Premises and equipment, net | | | 17,708 | | | | 17,693 | | | | 17,887 | |
| Deferred income taxes, net | | | 498 | | | | 522 | | | | 612 | |
| Mortgage servicing rights, net | | | 406 | | | | 388 | | | | 448 | |
| Goodwill | | | 25,572 | | | | 25,572 | | | | 25,572 | |
| Core deposit intangible, net | | | 49 | | | | 66 | | | | 118 | |
| Bank owned life insurance | | | 17,280 | | | | 17,138 | | | | 16,701 | |
| | | | | | | | | | | | | |
| TOTAL ASSETS | | $ | 774,578 | | | $ | 777,003 | | | $ | 814,730 | |
| | | | | | | | | | | | | |
| LIABILITIES AND EQUITY | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| LIABILITIES: | | | | | | | | | | | | |
| Deposit accounts | | $ | 659,495 | | | $ | 663,806 | | | $ | 705,892 | |
| Accrued expenses and other liabilities | | | 8,966 | | | | 8,006 | | | | 8,675 | |
| Advance payments by borrowers for taxes and insurance | | | 237 | | | | 1,025 | | | | 605 | |
| Junior subordinated debentures | | | 22,681 | | | | 22,681 | | | | 22,681 | |
| Capital lease obligation | | | 2,420 | | | | 2,440 | | | | 2,495 | |
| Total liabilities | | | 693,799 | | | | 697,958 | | | | 740,348 | |
| | | | | | | | | | | | | |
| EQUITY: | | | | | | | | | | | | |
| Shareholders' equity | | | | | | | | | | | | |
| Serial preferred stock, $.01 par value; 250,000 authorized, | | | | | | | | | | | | |
| issued and outstanding, none | | | - | | | | - | | | | - | |
| Common stock, $.01 par value; 50,000,000 authorized, | | | | | | | | | | | | |
| June 30, 2013 – 22,471,890 issued and outstanding; | | | 225 | | | | 225 | | | | 225 | |
| March 31, 2013 – 22,471,890 issued and outstanding; | | | | | | | | | | | | |
| June 30, 2012 – 22,471,890 issued and outstanding; | | | | | | | | | | | | |
| Additional paid-in capital | | | 65,541 | | | | 65,551 | | | | 65,593 | |
| Retained earnings | | | 15,809 | | | | 14,169 | | | | 9,756 | |
| Unearned shares issued to employee stock ownership trust | | | (464 | ) | | | (490 | ) | | | (567 | ) |
| Accumulated other comprehensive loss | | | (967 | ) | | | (1,013 | ) | | | (1,187 | ) |
| Total shareholders’ equity | | | 80,144 | | | | 78,442 | | | | 73,820 | |
| | | | | | | | | | | | | |
| Noncontrolling interest | | | 635 | | | | 603 | | | | 562 | |
| Total equity | | | 80,779 | | | | 79,045 | | | | 74,382 | |
| | | | | | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | | $ | 774,578 | | | $ | 777,003 | | | $ | 814,730 | |
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July 23, 2013
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| RIVERVIEW BANCORP, INC. AND SUBSIDIARY | | | | | | | | | |
| Consolidated Statements of Operations | | | | | | | | | |
| | | Three Months Ended | |
| (In thousands, except share data) (Unaudited) | | June 30, 2013 | | | March 31, 2013 | | | June 30, 2012 | |
| INTEREST INCOME: | | | | | | | | | |
| Interest and fees on loans receivable | | $ | 6,605 | | | $ | 6,690 | | | $ | 9,045 | |
| Interest on investment securities-taxable | | | 39 | | | | 54 | | | | 53 | |
| Interest on investment securities-non taxable | | | - | | | | - | | | | 8 | |
| Interest on mortgage-backed securities | | | 16 | | | | 4 | | | | 8 | |
| Other interest and dividends | | | 171 | | | | 157 | | | | 129 | |
| Total interest income | | | 6,831 | | | | 6,905 | | | | 9,243 | |
| | | | | | | | | | | | | |
| INTEREST EXPENSE: | | | | | | | | | | | | |
| Interest on deposits | | | 527 | | | | 550 | | | | 823 | |
| Interest on borrowings | | | 150 | | | | 150 | | | | 349 | |
| Total interest expense | | | 677 | | | | 700 | | | | 1,172 | |
| Net interest income | | | 6,154 | | | | 6,205 | | | | 8,071 | |
| Less provision (recapture) for loan losses | | | (2,500 | ) | | | (3,600 | ) | | | 4,000 | |
| | | | | | | | | | | | | |
| Net interest income after provision for loan losses | | | 8,654 | | | | 9,805 | | | | 4,071 | |
| | | | | | | | | | | | | |
| NON-INTEREST INCOME: | | | | | | | | | | | | |
| Fees and service charges | | | 1,030 | | | | 1,083 | | | | 1,057 | |
| Asset management fees | | | 736 | | | | 547 | | | | 604 | |
| Gain on sale of loans held for sale | | | 317 | | | | 245 | | | | 727 | |
| Bank owned life insurance income | | | 142 | | | | 142 | | | | 149 | |
| Other | | | 21 | | | | 15 | | | | (97 | ) |
| Total non-interest income | | | 2,246 | | | | 2,032 | | | | 2,440 | |
| | | | | | | | | | | | | |
| NON-INTEREST EXPENSE: | | | | | | | | | | | | |
| Salaries and employee benefits | | | 3,870 | | | | 4,051 | | | | 3,793 | |
| Occupancy and depreciation | | | 1,244 | | | | 1,259 | | | | 1,234 | |
| Data processing | | | 688 | | | | 379 | | | | 314 | |
| Amortization of core deposit intangible | | | 17 | | | | 17 | | | | 19 | |
| Advertising and marketing expense | | | 204 | | | | 153 | | | | 219 | |
| FDIC insurance premium | | | 411 | | | | 418 | | | | 287 | |
| State and local taxes | | | 126 | | | | 130 | | | | 148 | |
| Telecommunications | | | 68 | | | | 74 | | | | 121 | |
| Professional fees | | | 338 | | | | 307 | | | | 421 | |
| Real estate owned expenses | | | 1,612 | | | | 2,882 | | | | 939 | |
| Other | | | 665 | | | | 566 | | | | 781 | |
| Total non-interest expense | | | 9,243 | | | | 10,236 | | | | 8,276 | |
| | | | | | | | | | | | | |
| INCOME (LOSS) BEFORE INCOME TAXES | | | 1,657 | | | | 1,601 | | | | (1,765 | ) |
| PROVISION FOR INCOME TAXES | | | 17 | | | | 6 | | | | 15 | |
| NET INCOME (LOSS) | | $ | 1,640 | | | $ | 1,595 | | | $ | (1,780 | ) |
| | | | | | | | | | | | | |
| Earnings (loss) per common share: | | | | | | | | | | | | |
| Basic | | $ | 0.07 | | | $ | 0.07 | | | $ | (0.08 | ) |
| Diluted | | $ | 0.07 | | | $ | 0.07 | | | $ | (0.08 | ) |
| Weighted average number of shares outstanding: | | | | | | | | | | | | |
| Basic | | | 22,357,962 | | | | 22,351,804 | | | | 22,333,329 | |
| Diluted | | | 22,358,633 | | | | 22,352,229 | | | | 22,333,329 | |
RVSB First Quarter Fiscal 2014 Results
July 23, 2013
Page 7
| (Dollars in thousands) | | At or for the three months ended | |
| | | June 30, 2013 | | | March 31, 2013 | | | June 30, 2012 | |
| AVERAGE BALANCES | | | | | | | | | |
| Average interest–earning assets | | $ | 702,926 | | | $ | 691,793 | | | $ | 768,156 | |
| Average interest-bearing liabilities | | | 568,246 | | | | 574,763 | | | | 636,132 | |
| Net average earning assets | | | 134,680 | | | | 117,030 | | | | 132,024 | |
| Average loans | | | 531,427 | | | | 543,906 | | | | 671,798 | |
| Average deposits | | | 657,136 | | | | 662,978 | | | | 732,812 | |
| Average equity | | | 79,997 | | | | 78,370 | | | | 76,483 | |
| Average tangible equity | | | 53,974 | | | | 52,321 | | | | 50,506 | |
