Riverview Financial (RIVE) 10-Q 2018 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form10-Q

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended March 31, 2018

or

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from                    

333-201017

(Commission File Number)

RIVERVIEW FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Pennsylvania	38-3917371
(State of incorporation)	(IRS Employer Identification Number)
3901 North Front Street, Harrisburg, PA	17110
(Address of principal executive offices)	(Zip code)

(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 and posted on its corporate Web site, if any, 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.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

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  ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of the registrant’s common stock, as of the latest practicable date: 9,084,373 at April 30, 2018.

RIVERVIEW FINANCIAL CORPORATION

FORM10-Q

For the Quarter Ended March 31, 2018

Contents		Page No.
PART I.	FINANCIAL INFORMATION:
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets at March 31, 2018 and December 31, 2017	3
	Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the Three Months Ended March 31, 2018 and 2017	4
	Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2018 and 2017	5
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		38
Item 4.	Controls and Procedures		38
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings		39
Item 1A.	Risk Factors		39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		39
Item 3.	Defaults upon Senior Securities		39
Item 4.	Mine Safety Disclosures		39
Item 5.	Other Information		39
Item 6.	Exhibits		39
	Signatures	40

Riverview Financial Corporation

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands, except per share data)

	March 31, 2018			December 31, 2017
Assets:
Cash and due from banks	$	14,396		$	9,413
Interest-bearing deposits in other banks		40,724			16,373
Federal funds sold		4,729
Investment securitiesavailable-for-sale		88,773			93,201
Loans held for sale		610			254
Loans, net		934,190			955,971
Less: allowance for loan losses		6,515			6,306
Net loans		927,675			949,665
Premises and equipment, net		18,714			18,631
Accrued interest receivable		2,865			3,237
Goodwill		24,754			24,754
Intangible assets		4,155			4,376
Other assets		43,771			43,703
Total assets	$	1,171,166		$	1,163,607
Liabilities:
Deposits:
Noninterest-bearing	$	157,011		$	155,895
Interest-bearing		881,594			870,585
Total deposits		1,038,605			1,026,480
Short-term borrowings					6,000
Long-term debt		13,160			13,233
Accrued interest payable		466			468
Other liabilities		10,535			11,170
Total liabilities		1,062,766			1,057,351
Stockholders’ equity:
Common stock: no par value, authorized 20,000,000 shares; March 31, 2018, issued and outstanding 9,084,277 shares; December 31, 2017, issued and outstanding 9,069,363 shares		100,660			100,476
Capital surplus		422			423
Retained earnings		9,747			6,936
Accumulated other comprehensive loss		(2,429	)		(1,579	)
Total stockholders’ equity		108,400			106,256
Total liabilities and stockholders’ equity	$	1,171,166		$	1,163,607

See notes to consolidated financial statements.

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Riverview Financial Corporation

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

(Dollars in thousands, except per share data)

For the three months ended March 31,	2018			2017
Interest income:
Interest and fees on loans:
Taxable	$	12,241		$	4,285
Tax-exempt		234			108
Interest and dividends on investment securitiesavailable-for-sale:
Taxable		523			564
Tax-exempt		82			47
Dividends					3
Interest on interest-bearing deposits in other banks		79			23
Interest on federal funds sold		10			6
Total interest income		13,169			5,036
Interest expense:
Interest on deposits		1,554			532
Interest on short-term borrowings		30			22
Interest on long-term debt		176			75
Total interest expense		1,760			629
Net interest income		11,409			4,407
Provision for loan losses		390			605
Net interest income after provision for loan losses		11,019			3,802
Noninterest income:
Service charges, fees and commissions		1,228			337
Commission and fees on fiduciary activities		210			30
Wealth management income		154			258
Mortgage banking income		170			82
Bank owned life insurance investment income		191			73
Net loss on sale of investment securitiesavailable-for-sale					(1	)
Total noninterest income		1,953			779
Noninterest expense:
Salaries and employee benefits expense		5,322			2,836
Net occupancy and equipment expense		1,122			646
Amortization of intangible assets		221			164
Net cost of operation of other real estate owned		(1	)		36
Other expenses		2,872			1,481
Total noninterest expense		9,536			5,163
Income (loss) before income taxes		3,436			(582	)
Income tax expense (benefit)		625			(15	)
Net income (loss)		2,811			(567	)
Other comprehensive income (loss):
Unrealized gain (loss) on investment securitiesavailable-for-sale	$	(1,075	)	$	512
Reclassification adjustment for net loss on sale of investment securitiesavailable-for-sale included in net income					1
Income tax expense (benefit) related to other comprehensive income		(225	)		174
Other comprehensive income (loss), net of income taxes		(850	)		339
Comprehensive income (loss)	$	1,961		$	(228	)
Per share data:
Net income:
Basic	$	0.31		$	(0.12	)
Diluted	$	0.31		$	(0.12	)
Average common shares outstanding:
Basic		9,079,043			3,454,704
Diluted		9,137,706			3,454,704
Dividends declared	$			$	0.14

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)

	Preferred Stock		Common Stock		Capital Surplus			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance, January 1, 2017			$	29,052	$	220		$	14,845		$	(2,197	)	$	41,920
Net loss									(567	)					(567	)
Other comprehensive income (loss), net of income taxes												339			339
Compensation cost of option grants						4									4
Issuance of 269,885 common shares				2,658											2,658
Issuance of 1,348,809 preferred shares	$	13,283													13,283
Issuance under ESPP, 401k and Dividend Reinvestment plans: 10,607 shares				123											123
Dividends declared, $0.14 per share									(669	)					(669	)
Balance, March 31, 2017	$	13,283	$	31,833	$	224		$	13,609		$	(1,858	)	$	57,091
Balance, January 1, 2018	$		$	100,476	$	423		$	6,936		$	(1,579	)	$	106,256
Net income									2,811						2,811
Other comprehensive income (loss), net of income taxes												(850	)		(850	)
Compensation cost of option grants						(1	)								(1	)
Issuance under ESPP, 401k and Dividend Reinvestment plans: 10,153 shares				135											135
Exercise of stock options: 4,761 shares				49											49
Balance, March 31, 2018	$		$	100,660	$	422		$	9,747		$	(2,429	)	$	108,400

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)

For the Three Months Ended March 31,	2018			2017
Cash flows from operating activities:
Net income (loss)	$	2,811		$	(567	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization of premises and equipment		286			195
Provision for loan losses		390			605
Stock based compensation		(1	)		4
Net amortization of investment securitiesavailable-for-sale		207			103
Net cost of operation of other real estate owned		(1	)		36
Net loss on sale of investment securitiesavailable-for-sale					1
Amortization of purchase adjustment on loans		(1,873	)		(43	)
Amortization of intangible assets		221			164
Deferred income taxes		687			(48	)
Proceeds from sale of loans originated for sale		5,827			4,558
Net gain on sale of loans originated for sale		(170	)		(82	)
Loans originated for sale		(6,013	)		(4,346	)
Bank owned life insurance investment income		(191	)		(73	)
Net change in:
Accrued interest receivable		372			(155	)
Other assets		(691	)		(603	)
Accrued interest payable		(2	)		11
Other liabilities		(635	)		(223	)
Net cash provided by (used in) operating activities		1,224			(463	)
Cash flows from investing activities:
Investment securitiesavailable-for-sale:
Purchases
Proceeds from repayments		3,146			782
Proceeds from sales
Proceeds from the sale of other real estate owned		145			215
Net decrease in restricted equity securities		208			60
Net decrease (increase) decrease in loans		23,473			(55,290	)
Purchases of premises and equipment		(369	)		(110	)
Business disposition, net of cash					329
Net cash provided by (used in) investing activities		26,603			(54,014	)
Cash flows from financing activities:
Net increase in deposits		12,125			43,947
Net increase (decrease) in short-term borrowings		(6,000	)		(1,500	)
Repayment of long-term debt		(73	)		(81	)
Proceeds from long-term debt
Issuance under ESPP, 401k and DRP plans		135			123
Issuance of common stock					2,658
Issuance of preferred stock					13,283
Proceeds from exercise of stock options		49
Cash dividends paid					(669	)
Net cash provided by (used in) financing activities		6,236			57,761
Net increase (decrease) in cash and cash equivalents		34,063			3,284
Cash and cash equivalents—beginning		25,786			19,120
Cash and cash equivalents—ending	$	59,849		$	22,404
Supplemental disclosures:
Cash paid during the period for:
Interest	$	1,762		$	927
Income taxes
Noncash items from investing activities:
Other real estate acquired in settlement of loans				$	187

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”), 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”). On October 2, 2017, the Company announced the completion of its merger of equals with CBT Financial Corp. (“CBT”), effective October 1, 2017 pursuant to the Agreement and Plan of Merger between Riverview and CBT, dated April 19, 2017. On the effective date, CBT was merged with and into Riverview, with Riverview surviving (the “merger”). Additionally, CBT Bank, the wholly-owned subsidiary of CBT, merged with and into Riverview Bank, the wholly-owned subsidiary of Riverview, with Riverview Bank as the surviving institution. The Company’s financial results reflect the merger of CBT Bank with and into Riverview Bank under the purchase method of accounting, with the Company treated as the acquirer from accounting and reporting purposes. As a result, the historical financial information included in the Company’s consolidated financial statements and related notes as reported in this Form10-Q is that of Riverview.

Riverview Bank, with 30 full service offices and three 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 and small to medium sized businesses in the Pennsylvania market areas of Berks, Blaire, Centre, Clearfield, Dauphin, Huntingdon, Lebanon, Lycoming, Northumberland, Perry, Schuylkill and Somerset Counties in Pennsylvania.

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 to Form10-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 to 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 months ended and as of March 31, 2018, 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, 2017 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 2017 Annual Report on Form10-K, filed on March 23, 2018.

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. Significant estimates that are particularly susceptible to material change in the near term relate to the determination of the allowance for loan losses, fair value of financial instruments, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, the valuation of deferred tax assets, the determination of other-than-temporary impairment losses on securities and impairment of goodwill. Actual results could differ from those estimates.

Recent Accounting Standards

In January 2016, the Financial Accounting Standards Board, (“FASB”) issued ASUNo. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities”. This ASU addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments by making targeted improvements to GAAP as follows: (i) require equity investments, except those accounted for under the equity method of accounting or those that result in consolidation of the investee, to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer; (ii) simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value; (iii) eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (iv) eliminate the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (v) require

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public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (vi) require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (vii) require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset , securities or loans and receivables, on the balance sheet or the accompanying notes to the financial statements; and (viii) clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related toavailable-for-sale securities in combination with the entity’s other deferred tax assets. The Company measured the fair value of its loan portfolio as of March 31, 2018 using an exit price notion. The adoption of ASU2016-01 did not have a material effect on our consolidated financial statements.

In February 2016, the FASB issued ASUNo. 2016-02, “Leases (Topic 842)”. Among other things, in the amendments in ASU2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and aright-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently assessing the impact that ASU2016-02 will have on its consolidated financial statements.

In June 2016, the FASB ASUNo. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. ASU2016-13 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. ASU2016-13 also requires new disclosures for financial assets measured at amortized cost, loans andavailable-for-sale debt securities. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. We have dedicated staff and resources in place to evaluate the Company’s options including evaluating the appropriate model options and collecting and reviewing loan data for use in these models. The Company is currently still assessing the impact that this new guidance will have on its consolidated financial statements.

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 flow.

In December 2016, the FASB issued ASUNo. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers”.ASU 2016-20 updates the new revenue standard by clarifying issues that have arisen fromASU 2014-09, but does not change the core principle of the new standard. The issues addressed in this ASU include: (i) Loan guarantee fees; (ii) Impairment testing of contract costs; (iii) Interaction of impairment testing with guidance in other topics; (iv) Provisions for losses on construction-type and production-type contracts; (v) Scope of Topic 606; (vi) Disclosure of remaining performance obligations; (vii) Disclosure of prior-period performance obligations; (viii) Contract modifications; (ix) Contract asset vs. receivable; (x) Refund liability; (xi) Advertising costs; (xii) Fixed-odds wagering contracts in the casino industry; and (xiii) Cost capitalization for advisors to private funds and public funds. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2017. The amendments can be applied retrospectively to each prior reporting period or retrospectively with the cumulative effect of initially applying this new guidance recognized at the date of initial application. Since the guidance does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other GAAP, the new guidance did not have a material impact on revenue most closely associated with financial instruments, including interest income and expense. The Company completed its overall assessment of revenue streams and review of related contracts potentially affected by the ASU, including trust and asset management fees, deposit related fees, and interchange fees. Based on this assessment, the Company concluded that ASU2014-09 did not materially change the method in which the Company currently recognizes revenue for these revenue streams. The Company adopted ASU2014-09 and its related amendments on its required effective date of January 1, 2018 utilizing the modified retrospective approach. Since there was no net income impact upon adoption of the new guidance, a cumulative effect adjustment to opening retained earnings was not deemed necessary. The adoption ofASU 2016-20 and2014-09 did not have a material effect on our consolidated financial statements. See Note 8 Revenue Recognition for more information.

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In January 2017, FASB issued ASUNo. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”. The ASU clarifies the definition of a business to assist with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of ASUNo. 2017-01 did not have a material effect on our consolidated financial statements.

In January 2017, the FASB issued ASUNo. 2017-03, “Accounting Changes and Error Corrections (Topic 250) and Investments - Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the 2016 EITF Meetings”. The ASU adds an SEC paragraph to ASUs2014-09,2016-02 and2016-13 which specifies the SEC staff view that a registrant should evaluate ASUs that have not yet been adopted to determine the appropriate disclosure about the potential material effects of those ASUs on the financial statements when adopted. The guidance also specifies the SEC staff view on financial statement disclosures when the company does not know or cannot reasonably estimate the impact that adoption of the ASUs will have on the financial statements. The ASU also conforms to SEC guidance on accounting for tax benefits resulting from investments in affordable housing projects to the guidance in ASU2014-01, Investments—Equity Method and Joint Ventures (Topic 323). The amendments in this update are effective upon issuance. The guidance did not have a significant impact on our consolidated financial statements.

In January 2017, 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 February 2017, the FASB issued ASUNo. 2017-05, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Topic 610): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets”. The amendments clarify that a financial asset is within the scope of Topic 610 if it meets the definition of an in substance nonfinancial asset. The amendments also define the term in substance nonfinancial asset. The amendments clarify that nonfinancial assets within the scope of Topic 610 may include nonfinancial assets transferred within a legal entity to a counterparty. For example, a parent may transfer control of nonfinancial assets by transferring ownership interests in a consolidated subsidiary. A contract that includes the transfer of ownership interests in one or more consolidated subsidiaries is within the scope of Topic 610 if substantially all of the fair value of the assets that are promised to the counterparty in a contract is concentrated in nonfinancial assets. The amendments clarify that an entity should identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a counterparty and derecognize each asset when a counterparty obtains control of it. The guidance is effective for public business entities for annual periods beginning after December 15, 2017 and interim periods therein. Entities may use either a full or modified approach to adopt the ASU. The adoption of ASUNo. 2017-05 did not have a material effect on our consolidated financial statements.

In March 2017, the FASB issued ASUNo. 2017-07, “Compensation—Retirement Benefits (Topic 715)”, which requires employers that offer or maintain defined benefit plans to disaggregate the service component from the other components of net benefit cost and provides guidance on presentation of the service component and the other components of net benefit cost in the statement of operations. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The adoption of ASUNo. 2017-07 did not have a material effect on our consolidated financial statements.

In March 2017, FASB issued ASUNo. 2017-08, “Receivables—Nonrefundable Fees and Other Costs (Topic 310), Premium Amortization 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. The Company is assessing the impact of ASU2017-08 on its accounting and disclosures.

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In May 2017, the FASB issued ASUNo. 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting”. This ASU clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. This ASU is effective for fiscal years beginning after December 15, 2017, and interims periods within those fiscal years. The adoption of ASUNo. 2017-09 did not have a material effect on our consolidated financial statements.

In August 2017, FASB issued ASUNo. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”. The amendments in the Update better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. To meet that objective, the amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The guidance is not expected to have a significant impact on the Company’s financial positions, results of operations or disclosures.

In September 2017, the FASB issued ASUNo. 2017-13, “Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842)”. This Accounting Standards Update adds SEC paragraphs pursuant to the SEC Staff Announcement at the July 20, 2017 Emerging Issues Task Force (EITF) meeting. The July announcement addresses Transition Related to Accounting Standards UpdatesNo. 2014-09, Revenue from Contracts with Customers (Topic 606), andNo. 2016-02, Leases (Topic 842). This Update also supersedes SEC paragraphs pursuant to the rescission of SEC Staff Announcement, “Accounting for Management Fees Based on a Formula,” effective upon the initial adoption of Topic 606, Revenue from Contracts with Customers, and SEC Staff Announcement, “Lessor Consideration of Third-Party Value Guarantees,” effective upon the initial adoption of Topic 842, Leases. The amendments in this Update also rescind three SEC Observer Comments effective upon the initial adoption of Topic 842. One SEC Staff Observer comment is being moved to Topic 842. The adoption of ASU2017-13 did not have a material effect on our consolidated financial statements.

In November 2017, the FASB issued ASUNo. 2017-14 “Income Statement—Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606)”. This Accounting Standards Update amends SEC paragraphs pursuant to the SEC Staff Accounting Bulletin No. 116 and SEC ReleaseNo. 33-10403, which bring existing guidance into conformity with Topic 606, Revenue from Contracts with Customers. The adoption of ASUNo. 2017-14 did not have a material effect on our consolidated financial statements.

In February 2018, the FASB issued ASUNo. 2018-02, “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. The amendments in this Update allow for a reclassification of stranded tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. The amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted and the Company elected to early adopt this guidance effective December 31, 2017. The adoption of ASUNo. 2018-02 resulted in a reclassification of stranded tax effects of $259 from accumulated other comprehensive income (loss) to retained earnings.

In February 2018, the FASB issued ASUNo. 2018-03, “Technical Corrections and Improvements to Financial Instruments — Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”, which makes minor changes to the ASUNo. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities”. The technical corrections affect the following aspects of the ASU: (i) equity securities without a readily determinable fair value — discontinuation; (ii) equity securities without a readily determinable fair value — adjustments; (iii) forward contracts and purchased options; (iv) presentation requirements for certain fair value option liabilities; (v) fair value option liabilities denominated in a foreign currency and (vi) transition guidance for equity securities without a readily determinable fair value. The amendments in this Update are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years beginning after June 15, 2018. The adoption of ASUNo. 2018-03 did not have a material effect on our consolidated financial statements.

In March 2018, the FASB has issued ASUNo. 2018-05, “Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin [SAB] No. 118”. The ASU adds seven paragraphs to ASC 740, Income Taxes, that contain SEC guidance related to SAB 118 codified as SEC SAB Topic 5.EE, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act”). The adoption of ASUNo. 2018-05 did not have a material effect on our consolidated financial statements.

10

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 March 31, 2018 and December 31, 2017 is as follows:

	March 31, 2018			December 31, 2017
Net unrealized loss on investment securitiesavailable-for-sale	$	(2,206	)	$	(1,131	)
Related income taxes		(463	)		(238	)
Net of income taxes		(1,743	)		(893	)
Benefit plan adjustments		(869	)		(869	)
Related income taxes		(183	)		(183	)
Net of income taxes		(686	)		(686	)
Accumulated other comprehensive income (loss)	$	(2,429	)	$	(1,579	)

Other comprehensive income (loss) and related tax effects for the three months ended March 31, 2018 and 2017 is as follows:

Three months ended March 31,	2018			2017
Unrealized loss on investment securitiesavailable-for-sale	$	(1,075	)	$	512
Net gain on the sale of investment securitiesavailable-for-sale (1)					1
Other comprehensive loss before taxes		(1,075	)		513
Income tax expense (benefit)		(225	)		174
Other comprehensive loss	$	(850	)	$	339

⁽¹⁾  Represents amounts reclassified out of accumulated other comprehensive income and included in gains on sale of investment securities on the consolidated statements of income and comprehensive income.

11

3. Earnings per share:

Basic earnings per share is computed by dividing net income (loss) allocated to common stockholders divided by the weighted-average number of common shares outstanding during the period. Net income (loss) allocated to common stockholders is net income (loss) adjusted for preferred stock dividends including dividends declared, less income (loss) allocated to participating securities. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance.

The following table provides a reconciliation between the computation of basic earnings per share and diluted earnings per share for the three months ended March 31, 2018 and 2017:

Three months ended March 31,	2018		2017
Numerator:
Net income (loss)	$	2,811	$	(567	)
Dividends on preferred stock				(185	)
Net income (loss) available to common stockholders	$	2,811	$	(752	)
Undistributed loss allocated to preferred stockholders				347
Income (loss) allocated to common stockholders	$	2,811	$	(405	)
Denominator:
Basic		9,079,043		3,454,704
Dilutive options		58,663
Diluted		9,137,706		3,454,704
Earnings per share:
Basic	$	0.31	$	(0.12	)
Diluted	$	0.31	$	(0.12	)

For the three months ended March 31, 2018, there were no outstanding stock options that were excluded from the dilutive earnings per share calculation. There were 43,000 outstanding stock options for the three months ended March 31, 2017 that were excluded from the diluted earnings per share calculation because of their antidilutive effect.

On January 20, 2017, Riverview announced that it entered into agreements with accredited investors and qualified institutional buyers to raise approximately $17.0 million in common and preferred equity, before expenses, through the private placement of 269,885 shares of its no par value common stock at a price of $10.50 per share and 1,348,809 shares of a newly created Series A convertible, perpetual preferred stock (the “Series A preferred stock”) at a price of $10.50 per share.

12

4. Investment securities:

The amortized cost and fair value of investment securitiesavailable-for-sale aggregated by investment category at March 31, 2018 and December 31, 2017 are summarized as follows:

March 31, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
State and municipals:
Taxable	$	35,153	$	219	$	1,271	$	34,101
Tax-exempt		15,141		5		235		14,911
Mortgage-backed securities:
U.S. Government agencies		21,291		50		54		21,287
U.S. Government-sponsored enterprises		9,868		12		327		9,553
Corporate debt obligations		9,526				605		8,921
Total	$	90,979	$	286	$	2,492	$	88,773
December 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
State and municipals:
Taxable	$	35,352	$	334	$	684	$	35,002
Tax-exempt		16,325		47		64		16,308
Mortgage-backed securities:
U.S. Government agencies		22,908		3		94		22,817
U.S. Government-sponsored enterprises		10,218		19		148		10,089
Corporate debt obligations		9,529				544		8,985
Total	$	94,332	$	403	$	1,534	$	93,201

The maturity distribution of the fair value, which is the net carrying amount, of the debt securities classified asavailable-for-sale at March 31, 2018, is summarized as follows:

March 31, 2018	Fair Value
Within one year	$	2,823
After one but within five years		6,203
After five but within ten years		12,566
After ten years		36,341
		57,933
Mortgage-backed securities		30,840
Total	$	88,773

Securities with a carrying value of $52,729 and $93,201 at March 31, 2018 and December 31, 2017, respectively, were pledged to secure public deposits and repurchase agreements 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 March 31, 2018 and December 31, 2017, 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.

The fair value and gross unrealized losses of investment securities with unrealized losses for which an other-than-temporary impairment (“OTTI”) has not been recognized at March 31, 2018 and December 31, 2017, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, are summarized as follows:

13

	Less Than 12 Months				12 Months or More				Total
March 31, 2018	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
State and municipals:
Taxable	$	6,699	$	97	$	19,628	$	1,174	$	26,327	$	1,271
Tax-exempt		13,835		235						13,835		235
Mortgage-backed securities:
U.S. Government agencies		3,095		48		158		6		3,253		54
U.S. Government-sponsored enterprises		4,042		92		3,952		235		7,994		327
Corporate debt obligation						8,921		605		8,921		605
Total	$	27,671	$	472	$	32,659	$	2,020	$	60,330	$	2,492

	Less Than 12 Months				12 Months or More				Total
December 31, 2017	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Government-sponsored enterprises
State and municipals:
Taxable	$	4,757	$	30	$	20,185	$	654	$	24,942	$	684
Tax-exempt		10,506		64						10,506		64
Mortgage-backed securities:
U.S. Government agencies		16,746		87		193		7		16,939		94
U.S. Government-sponsored enterprises		4,294		23		4,174		125		8,468		148
Corporate debt obligation		3,800		200		5,185		344		8,985		544
Total	$	40,103	$	404	$	29,737	$	1,130	$	69,840	$	1,534

The Company had 87 investment securities, consisting of 68 taxable state and municipal obligations, 15 mortgage-backed securities, and four corporate debt obligations that were in unrealized loss positions at March 31, 2018. Of these securities, 25 taxable state and municipal obligation, five mortgage-backed securities and four corporate debt obligations were in a continuous unrealized loss position for twelve months or more. Management does not consider the unrealized losses on the debt securities, as a result of changes in interest rates, to be OTTI based on historical evidence that indicates the cost of these securities is recoverable within a reasonable period of time in relation to normal cyclical changes in the market rates of interest. Moreover, because there has been no material change in the credit quality of the issuers or other events or circumstances that may cause a significant adverse impact on the fair value of these securities, and management does not intend to sell these securities and it is unlikely that the Company will be required to sell these securities before recovery of their amortized cost basis, which may be maturity, the Company does not consider the unrealized losses to be OTTI at March 31, 2018. There was no OTTI recognized for the three months ended March 31, 2018 and 2017.

The Company had 88 investment securities, consisting of 34 taxable state and municipal obligations, 21tax-exempt state and municipal obligations, 29 mortgage-backed securities and four corporate debt obligations that were in unrealized loss positions at December 31, 2017. Of these securities, 25 taxable state and municipal obligations, five mortgage-backed securities and two corporate debt obligations were in a continuous unrealized loss position for twelve months or more.

14

5. Loans, net and allowance for loan losses:

The major classifications of loans outstanding, net of deferred loan origination fees and costs at March 31, 2018 and December 31, 2017 are summarized as follows. Net deferred loan costs were $891 and $863 at March 31, 2018 and December 31, 2017.

	March 31, 2018		December 31, 2017
Commercial	$	135,049	$	140,116
Real estate:
Construction		33,209		34,405
Commercial		516,333		526,230
Residential		236,390		240,626
Consumer		13,209		14,594
Total	$	934,190	$	955,971

The changes in the allowance for loan losses account by major classification of loan for the three months ended March 31, 2018 and 2017 are summarized as follows:

				Real Estate
March 31, 2018	Commercial			Construction		Commercial		Residential			Consumer			Unallocated		Total
Allowance for loan losses:
Beginning Balance January 1, 2018	$	1,206		$	379	$	2,963	$	1,340		$	37		$	381	$	6,306
Charge-offs		(77	)						(50	)		(99	)				(226	)
Recoveries		3					22		1			39					45
Provisions		(316	)		5		493		(112	)		55			265		390
Ending balance	$	816		$	384	$	3,458	$	1,179		$	32		$	646	$	6,515

				Real Estate
March 31, 2017	Commercial			Construction		Commercial		Residential			Consumer			Unallocated		Total
Allowance for loan losses:
Beginning Balance January 1, 2017	$	629		$	160	$	2,110	$	789		$	44				$	3,732
Charge-offs									(7	)		(5	)				(12	)
Recoveries							3 2		1								4
Provisions		(4	)				432		38			15		$	124		605
Ending balance	$	625		$	160	$	2,545	$	821		$	54		$	124	$	4,329

15

The allocation of the allowance for loan losses and the related loans by major classifications of loans at March 31, 2018 and December 31, 2017 is summarized as follows:

			Real Estate
March 31, 2018	Commercial		Construction		Commercial		Residential		Consumer		Unallocated		Total
Allowance for loan losses:
Ending balance	$	816	$	384	$	3,458	$	1,179	$	32	$	646	$	6,515
Ending balance: individually evaluated for impairment		69				78		47						194
Ending balance: collectively evaluated for impairment		747		384		3,380		1,132		32		646		6,321
Ending balance: purchased credit impaired loans	$		$		$		$		$		$		$
Loans receivable:
Ending balance	$	135,049	$	33,209	$	516,333	$	236,390	$	13,209	$		$	934,190
Ending balance: individually evaluated for impairment		1,693				2,919		2,414						7,026
Ending balance: collectively evaluated for impairment		132,912		33,209		507,714		233,052		13,209				920,096
Ending balance: purchased credit impaired loans	$	444	$		$	5,700	$	924	$		$		$	7,068

			Real Estate
December 31, 2017	Commercial		Construction		Commercial		Residential		Consumer		Unallocated		Total
Allowance for loan losses:
Ending balance	$	1,206	$	379	$	2,963	$	1,340	$	37	$	381	$	6,306
Ending balance: individually evaluated for impairment		56				76		92						224
Ending balance: collectively evaluated for impairment		1,150		379		2,887		1,248		37		381		6,082
Ending balance: purchased credit impaired loans	$		$		$		$		$		$		$
Loans receivable:
Ending balance	$	140,116	$	34,405	$	526,230	$	240,626	$	14,594	$		$	955,971
Ending balance: individually evaluated for impairment		777				2,988		2,482						6,247
Ending balance: collectively evaluated for impairment		138,824		34,405		516,300		237,089		14,594				941,212
Ending balance: purchased credit impaired loans	$	515	$		$	6,942	$	1,055	$		$		$	8,512

The Company segments loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. Loans are individually analyzed for credit risk by classifying them within the Company’s internal risk rating system. The Company’s risk rating classifications are defined as follows:

• Pass—A loan to borrowers with acceptable credit quality and risk that is not adversely classified as Substandard, Doubtful, Loss or designated as Special Mention.

• Special Mention—A loan that has potential weaknesses that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position at some future date. Special Mention loans are not adversely classified since they do not expose the Company to sufficient risk to warrant adverse classification.

16

• Substandard—A loan that is inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

• Doubtful—A loan classified as Doubtful has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make the collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

• Loss—A loan classified as Loss is considered uncollectible and of such little value that its continuance as a bankable loan is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be effected in the future.

The following tables present the major classification of loans summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system at March 31, 2018 and December 31, 2017:

March 31, 2018	Pass		Special Mention		Substandard		Doubtful	Total
Commercial	$	121,929	$	8,623	$	4,497		$	135,049
Real estate:
Construction		32,028		1,058		123			33,209
Commercial		489,204		11,724		15,405			516,333
Residential		230,320		2,187		3,883			236,390
Consumer		13,111		98					13,209
Total	$	886,592	$	23,690	$	23,908		$	934,190
December 31, 2017	Pass		Special Mention		Substandard		Doubtful	Total
Commercial	$	126,506	$	9,372	$	4,238		$	140,116
Real estate:
Construction		32,840		1,442		123			34,405
Commercial		497,852		15,305		13,073			526,230
Residential		234,808		2,214		3,604			240,626
Consumer		14,474		120					14,594
Total	$	906,480	$	28,453	$	21,038		$	955,971

The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of March 31, 2018 and December 31, 2017. Purchase credit impaired (“PCI”) loans are excluded from the aging and nonaccrual loan schedules.

	Accrual Loans
March 31, 2018	30-59 Days Past Due		60-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Nonaccrual Loans		Total Loans
Commercial	$	864	$	23			$	887	$	132,723	$	995	$	134,605
Real estate:
Construction		14						14		33,195				33,209
Commercial		1,767		60	$	150		1,977		508,309		347		510,633
Residential		2,121		231		234		2,586		231,598		1,282		235,466
Consumer		125		19		9		153		13,056				13,209
Total	$	4,891	$	333	$	393	$	5,617	$	918,881	$	2,624	$	927,122
Purchased credit impaired loans														7,068
Total Loans													$	934,190

17

	Accrual Loans
December 31, 2017	30-59 Days Past Due		60-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Nonaccrual Loans		Total Loans
Commercial	$	1,829	$	85			$	1,914	$	137,612	$	75	$	139,601
Real estate:
Construction		8						8		34,397				34,405
Commercial		2,213		152	$	150		2,515		516,410		363		519,288
Residential		2,110		551		533		3,194		235,070		1,307		239,571
Consumer		149		60		9		218		14,376				14,594
Total	$	6,309	$	848	$	692	$	7,849	$	937,865	$	1,745	$	947,459
Purchased credit impaired loans														8,512
Total Loans													$	955,971

The following tables summarize information concerning impaired loans as of and for the three months ended March 31, 2018 and 2017, and as of and for the year ended, December 31, 2017 by major loan classification:

								This Quarter
March 31, 2018	Recorded Investment			Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial	$	1,033		$	1,033			$	1,119	$	353
Real estate:
Construction
Commercial		8,084			8,084				8,736		1,035
Residential		3,152			3,170				3,252		79
Consumer
Total		12,269			12,287				13,107		1,467
With an allowance recorded:
Commercial		1,105			1,105	$	69		442		2
Real estate:
Construction
Commercial		534	��		534		78		535		6
Residential		186			324		47		187		2
Consumer
Total		1,825			1,963		194		1,164		10
Commercial		2,138			2,138		69		1,561		355
Real estate:
Construction
Commercial		8,618			8,618		78		9,271		1,041
Residential		3,338			3,494		47		3,439		81
Consumer
Total	$	14,094		$	14,250	$	194	$	14,271	$	1,477

18

							For the Year Ended
December 31, 2017	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial	$	1,107	$	1,107			$	1,210	$	77
Real estate:
Construction
Commercial		9,399		9,399				10,164		340
Residential		3,197		3,215				2,896		149
Consumer
Total		13,703		13,721				14,270		566
With an allowance recorded:
Commercial		185		185	$	56		186		1
Real estate:
Construction
Commercial		531		531		76		532		23
Residential		340		478		92		339		12
Consumer
Total		1,056		1,194		224		1,057		36
Commercial		1,292		1,292		56		1,396		78
Real estate:
Construction
Commercial		9,930		9,930		76		10,696		363
Residential		3,537		3,693		92		3,235		161
Consumer
Total	$	14,759	$	14,915	$	224	$	15,327	$	602

							This Quarter
March 31, 2017	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial	$	730	$	730	$		$	767	$	8
Real estate:
Construction
Commercial		3,165		3,165				3,230		36
Residential		2,447		2,585				2,641		33
Consumer
Total		6,342		6,480				6,638		77
With an allowance recorded:
Commercial		120		120		1		122
Real estate:
Construction
Commercial		867		867		160		709		6
Residential
Consumer
Total		987		987		161		831		6
Commercial		850		850		1		889		8
Real estate:
Construction
Commercial		4,032		4,032		160		3,939		42
Residential		2,447		2,585				2,641		33
Consumer
Total	$	7,329	$	7,467	$	161	$	7,469	$	83

19

For the three months ended March 31, interest income, related to impaired loans, would have been $47 in 2018 and $26 in 2017 had the loans been current and the terms of the loans not been modified.

Troubled debt restructured loans are loans with original terms, interest rate, or both, that have been modified as a result of a deterioration in the borrower’s financial condition and a concession has been granted that the Company would not otherwise consider. Unless on nonaccrual, interest income on these loans is recognized when earned, using the interest method. The Company offers a variety of modifications to borrowers that would be considered concessions. The modification categories offered generally fall within the following categories:

• Rate Modification—A modification in which the interest rate is changed to a below market rate.

• Term Modification—A modification in which the maturity date, timing of payments or frequency of payments is changed.

• Interest Only Modification—A modification in which the loan is converted to interest only payments for a period of time.

• Payment Modification—A modification in which the dollar amount of the payment is changed, other than an interest only modification described above.

• Combination Modification—Any other type of modification, including the use of multiple categories above.

Included in the commercial loan and commercial and residential real estate categories are troubled debt restructurings that are classified as impaired. Troubled debt restructurings totaled $5,429 at March 31, 2018, $5,606 at December 31, 2017 and $6,021 at March 31, 2017.

The following tables present the number of loans and recorded investment in loans restructured and identified as troubled debt restructurings for the three months ended March 31, 2017, as well as the number and recorded investment in these loans that subsequently defaulted. Defaulted loans are those which are 30 days or more past due for payment under the modified terms. There were no loans restructured as troubled debt restructuring for the three months ended March 31, 2018.

March 31, 2017	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Recorded Investment
Troubled Debt Restructurings:
Residential real estate		1	$	59	$	29	$	29

During 2018, there were no defaults on loans restructured and four defaults on loans restructured totaling $1,229 during 2017.

Purchased loans are initially recorded at their acquisition date fair values. The carryover of the allowance for loan losses is prohibited as any credit losses in the loans are included in the determination of the fair value of the loans at the acquisition date. Fair values for purchased loans are based on a cash flow methodology that involves assumptions and judgments as to credit risk, default rates, loss severity, collateral values, discount rates, payment speeds, and prepayment risk.

As part of its acquisition due diligence process, the Bank reviews the acquired institution’s loan grading system and the associated risk rating for loans. In performing this review, the Bank considers cash flows, debt service coverage, delinquency status, accrual status, and collateral for the loan. This process allows the Bank to clearly identify the population of acquired loans that had evidence of deterioration in credit quality since origination and for which it was probable, at acquisition, that the Bank would be unable to collect all contractually required payments. All such loans identified by the Bank are considered to be within the scope of ASC310-30, Loan and Debt Securities Acquired with Deteriorated Credit Quality and are identified as “Purchased Credit Impaired Loans”.

As a result of the merger with CBT, effective October 1, 2017, the Bank identified 37 purchased credit impaired (“PCI”) loans. As part of the merger with Citizens, effective December 31, 2015, the Bank identified 10 PCI loans. As a result of the consolidation with Union, effective November 1, 2013, the Bank identified 14 PCI loans. For all PCI loans, the excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable discount and is recognized into interest income over the remaining life of the loan. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as thenon-accretable discount. Thenon-accretable discount represents estimated future credit losses expected to be incurred over the life of the loan. Subsequent decreases to the expected cash flows require the Bank to evaluate the need for an allowance for loan losses on these loans. Subsequent improvements in expected cash flows result in the reversal of a corresponding amount of thenon-accretable discount which the Bank then reclassifies as an accretable discount that is recognized into interest income over the remaining life of the loan. The Bank’s evaluation of the amount of future cash flows that it expects to collect is based on a cash flow methodology that involves assumptions and judgments as to credit risk, collateral values, discount rates, payment speeds, and prepayment risk. Charge-offs of the principal amount on purchased impaired loans are first applied to thenon-accretable discount.

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For purchased loans that are not deemed impaired at acquisition, credit discounts representing principal losses expected over the life of the loans are a component of the initial fair value, and the discount is accreted to interest income over the life of the asset. Subsequent to the purchase date, the method used to evaluate the sufficiency of the credit discount is similar to originated loans, and if necessary, additional reserves are recognized in the allowance for loan losses.

The unpaid principal balances and the related carrying amount of acquired loans as of March 31, 2018 and December 31, 2017 were as follows:

	March 31, 2018		December 31, 2017
Credit impaired purchased loans evaluated individually for incurred credit losses:
Outstanding balance	$	13,861	$	16,803
Carrying Amount		7,068		8,512
Other purchased loans evaluated collectively for incurred credit losses:
Outstanding balance		405,063		421,620
Carrying Amount		402,084		418,146
Total Purchased Loans:
Outstanding balance		418,924		438,423
Carrying Amount	$	409,152	$	426,658

As of the indicated dates, the changes in the accretable discount related to the purchased credit impaired loans were as follows:

	Quarter Ended March 31,
	2018			2017
Balance—beginning of period	$	2,129		$	370
Additions
Accretion recognized during the period		(1,443	)		(23	)
Net reclassification fromnon-accretable to accretable		969			(24	)
Balance—end of period	$	1,655		$	323

The Company is a party to financial instruments withoff-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, unused portions of lines of credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets.

Unused commitments at March 31, 2018, totaled $123,691, consisting of $47,834 in commitments to extend credit, $71,162 in unused portions of lines of credit and $4,695 in standby letters of credit. Due to fixed maturity dates, specified conditions within these instruments, and the ultimate needs of our customers, many will expire without being drawn upon. We believe that amounts actually drawn upon can be funded in the normal course of operations and therefore, do not represent a significant liquidity risk to us. In comparison, unused commitments, at December 31, 2017, totaled $129,734, consisting of $52,706 in commitments to extend credit, $72,157 in unused portions of lines of credit and $4,871 in standby letters of credit.

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6. Other assets:

The components of other assets at March 31, 2018 and December 31, 2017 are summarized as follows:

	March 31, 2018		December 31, 2017
Other real estate owned	$	92	$	236
Bank owned life insurance		29,256		29,065
Restricted equity securities		1,098		1,306
Deferred tax assets		7,487		7,949
Other assets		5,838		5,147
Total	$	43,771	$	43,703

7. Fair value estimates:

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosure under GAAP. Fair value estimates are calculated without attempting to estimate the value of anticipated future business and the value of certain assets and liabilities that are not considered financial. Accordingly, such assets and liabilities are excluded from disclosure requirements.

In accordance with FASB ASC 820, “Fair Value Measurements and Disclosures”, fair value is the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets. In many cases, these values cannot be realized in immediate settlement of the instrument.

Current fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction that is not a forced liquidation or distressed sale between participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

In accordance with GAAP, the Company groups its assets and liabilities generally measured at fair value into three levels based on market information or other fair value estimates in which the assets and liabilities are traded or valued and the reliability of the assumptions used to determine fair value. These levels include:

• Level 1: Unadjusted quoted prices of identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

• Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

• Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

An asset’s or liability’s placement in the fair value hierarchy is based on the lowest level of input that is significant to the fair value estimate.

The following methods and assumptions were used by the Company to calculate fair values and related carrying amounts of assets and liabilities measured at fair value on a recurring basis:

Investment securities:The fair values of U.S. Treasury securities and marketable equity securities are based on quoted market prices from active exchange markets. The fair values of debt securities are based on pricing from a matrix pricing model.

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Assets and liabilities measured at fair value on a recurring basis at March 31, 2018 and December 31, 2017 are summarized as follows:

	Fair Value Measurement Using
March 31, 2018	Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
State and Municipals:
Taxable	$	34,101		$	34,101
Tax-exempt		14,911			14,911
Mortgage-backed securities:
U.S. Government agencies		21,287			21,287
U.S. Government-sponsored enterprises		9,553			9,553
Corporate debt obligations		8,921			8,921
Total	$	88,773		$	88,773
	Fair Value Measurement Using
December 31, 2017	Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
State and municipals:
Taxable	$	35,002		$	35,002
Tax-exempt		16,308			16,308
Mortgage-backed securities:
U.S. Government agencies		22,817			22,817
U.S. Government-sponsored enterprises		10,089			10,089
Corporate debt obligations		8,985			8,985
Total	$	93,201		$	93,201

Assets and liabilities measured at fair value on a nonrecurring basis at March 31, 2018 and December 31, 2017 are summarized as follows:

	Fair Value Measurement Using
March 31, 2018	Amount		(Level 1) Quoted Prices in Active Markets for Identical Assets	(Level 2) Significant Other Observable Inputs	(Level 3) Significant Unobservable Inputs
Other real estate owned	$	92			$	92
Impaired loans, net of related allowance		1,631				1,631
Total	$	1,723			$	1,723
	Fair Value Measurement Using
December 31, 2017	Amount		(Level 1) Quoted Prices in Active Markets for Identical Assets	(Level 2) Significant Other Observable Inputs	(Level 3) Significant Unobservable Inputs
Other real estate owned	$	236			$	236
Impaired loans, net of related allowance		832				832
Total	$	1,068			$	1,068

Fair values of impaired loans are based on the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent.

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Fair value of other real estate owned is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable. Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company utilized Level 3 inputs to determine fair value at March 31, 2018 and December 31, 2017:

	Quantitative Information about Level 3 Fair Value Measurements
March 31, 2018	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
Other real estate owned	$	92	Appraisal of collateral	Appraisal adjustments	0.0% to 69.0% (33.0)%
				Liquidation expenses	0.0% to 7.0% (7.0)%
Impaired loans	$	1,631	Appraisal of collateral	Appraisal adjustments	0.0% to 0.0% (0.0)%
				Liquidation expenses	7.0% to 20.0% (11.0)%
	Quantitative Information about Level 3 Fair Value Measurements
December 31, 2017	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
Other real estate owned	$	236	Appraisal of collateral	Appraisal adjustments	0.0% to 69.0% (39.0)%
				Liquidation expenses	0.0% to 7.0% (7.0)%
Impaired loans	$	832	Appraisal of collateral	Appraisal adjustments	0.0% to 0.0% (0.0)%
				Liquidation expenses	0.0% to 7.0% (7.0)%

Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 Inputs which are not identifiable.

Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

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The carrying and fair values of the Company’s financial instruments at March 31, 2018 and December 31, 2017 and their placement within the fair value hierarchy are as follows:

			Fair Value Hierarchy
March 31, 2018	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	59,849	$	59,849	$	59,849
Investment securities		88,773		88,773				$	88,773
Loans held for sale		610		610					610
Net loans (1)		927,675		911,930						$	911,930
Accrued interest receivable		2,865		2,865					729		2,136
Restricted equity securities		1,098		1,098		1,098
Financial liabilities:							��
Deposits	$	1,038,605	$	1,000,954				$	1,000,954
Long-term debt		13,160		13,356					13,356
Accrued interest payable		466		466					466
			Fair Value Hierarchy
December 31, 2017	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	25,786	$	25,786	$	25,786
Investment securitiesavailable-for-sale		93,201		93,201				$	93,201
Loans held for sale		254		254					254
Net loans(1)		949,665		954,876						$	954,876
Accrued interest receivable		3,237		3,237					640		2,597
Restricted equity securities		1,306		1,306		1,306
Financial liabilities:
Deposits	$	1,026,480	$	1,022,068				$	1,022,068
Short-term borrowings		6,000		6,000					6,000
Long-term debt		13,233		14,634					14,634
Accrued interest payable		468		468					468

(1) The carrying amount is net of unearned income and the allowance for loan losses in accordance with the adoption of ASU No. 2016-01where the fair value of loans as of March 31, 2018 was measured using an exit price notion. The fair value of loans at December 31, 2017 was measured using an entry price notion.

Note 8. Revenue recognition:

On January 1, 2018, the Company adopted ASUNo. 2014-09 “Revenue from Contracts with Customers” (Topic 606) and all subsequent ASUs that modified Topic 606. As stated in Note 1 Summary of Significant Accounting Policies, the implementation of the new standard did not have a material impact on the measurement or recognition of revenue; as such, a cumulative effect adjustment to opening retained earnings was not deemed necessary. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. In addition, certain noninterest income streams such as fees associated with mortgage servicing rights, financial guarantees, derivatives, and certain credit card fees are also not in scope of the new guidance. Topic 606 is applicable to noninterest revenue streams such as trust and asset management income, deposit related fees, interchange fees, merchant income, and other fees. However, the recognition of these revenue streams did not change significantly upon adoption of Topic 606. Substantially all of the Company’s revenue is generated from contracts with customers. Noninterest revenue streamsin-scope of Topic 606 are discussed below.

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Service Charges, Fees and Commissions

Service charges on deposit accounts consist of monthly service fees, check orders, and other deposit account related fees. The Company’s performance obligation for monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Check orders and other deposit account related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

Fees, exchange, and other service charges are primarily comprised of debit and credit card income, ATM fees, merchant services income, and other service charges. Debit and credit card income is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as Mastercard. Such income is presented net of network expenses as the Company acts as an agent in these transactions. ATM fees are primarily generated when a Company cardholder uses anon-Company ATM or anon-Company cardholder uses a Company ATM. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. Other service charges include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Company’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month.

Other noninterest income consists of other recurring revenue streams such as commissions from sales of mutual funds and other investments, investment advisor fees from wealth management products, safety deposit box rental fees, and other miscellaneous revenue streams. Commissions from the sale of mutual funds and other investments are recognized on trade date, which is when the Company has satisfied its performance obligation. The Company also receives periodic service fees or trailers from mutual fund companies typically based on a percentage of net asset value. Trailer revenue is recorded over time, usually monthly or quarterly, as net asset value is determined. Investment advisor fees from wealth management products is earned over time and based on an annual percentage rate of the net asset value. The investment advisor fees are charged to the customer’s account in advance on the first month of the quarter, and the revenue is recognized over the following three-month period. Safe deposit box rental fees are charged to the customer on an annual basis and recognized upon receipt of payment. The Company determined that since rentals and renewals occur fairly consistently over time, revenue is recognized on a basis consistent with the duration of the performance obligation.

Trust and Asset Management

Trust and asset management income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon themonth-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customers’ accounts. The Company does not earn performance-based incentives. Optional services such as real estate sales and tax return preparation services are also available to existing trust and asset management customers. The Company’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as incurred). Payment is received shortly after services are rendered.

The following presents noninterest income, segregated by revenue streamsin-scope andout-of-scope of Topic 606, for the three months ended March 31, 2018 and 2017.

March 31,	2018		2017
Noninterest Income:
In-scope of Topic 606:
Service charges, fees and commissions	$	1,228	$	337
Trust and asset management		364		288
Noninterest income(in-scope of Topic 606)		1,592		625
Noninterest income(out-of-scope of Topic 606)		361		154
Total noninterest income	$	1,953	$	779

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Contract Balances

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration, resulting in a contract receivable, or before payment is due, resulting in a contract asset. A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on transactional activity, or standardmonth-end revenue accruals such as asset management fees based onmonth-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of March 31, 2018 and December 31, 2017, the Company did not have any significant contract balances.

Contract Acquisition Costs

In connection with the adoption of Topic 606, an entity is required to capitalize, and subsequently amortize into expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained, for example, sales commission. The Company utilizes the practical expedient which allows entities to immediately expense contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less. Upon adoption of Topic 606, the Company did not capitalize any contract acquisition cost.

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Riverview Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Dollars in thousands, except per share data)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the unaudited consolidated interim financial statements contained in Part I, Item 1 of this report, and with our audited consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” presented in our Annual Report on Form10-K for the year ended December 31, 2017.

Cautionary Note Regarding Forward-Looking Statements:

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to risks and uncertainties. These statements are based on assumptions and may describe future plans, strategies and expectations of Riverview Financial Corporation and its direct and indirect subsidiaries. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. All statements in this report, other than statements of historical facts, are forward-looking statements.

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Important factors that could cause our actual results to differ materially from those in the forward-looking statements include, but are not limited to: our ability to achieve the intended benefits of acquisitions and integration of previously acquired businesses; restructuring initiatives; changes in interest rates; economic conditions, particularly in our market area; legislative and regulatory changes and the ability to comply with the significant laws and regulations governing the banking and financial services business; monetary and fiscal policies of the U.S. government, including policies of the U.S. Department of Treasury and the Federal Reserve System; credit risk associated with lending activities and changes in the quality and composition of our loan and investment portfolios; demand for loan and other products; deposit flows; competition; changes in the values of real estate and other collateral securing the loan portfolio, particularly in our market area; changes in relevant accounting principles and guidelines; and inability of third party service providers to perform.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, Riverview Financial Corporation does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

Notes to the Consolidated Financial Statements referred to in the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) are incorporated by reference into the MD&A. Certain prior period amounts have been reclassified to conform with the current year’s presentation and did not have any effect on the operating results or financial position of the Company.

Critical Accounting Policies:

Disclosure of our significant accounting policies are included in Note 1 to the consolidated financial statements of the Annual Report on Form10-K for the year ended December 31, 2017. Some of these policies are particularly sensitive requiring significant judgments, estimates and assumptions. Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. We believe that the most critical accounting policies upon which our financial condition and results of operation depend, and which involve the most complex subjective decisions or assessments, are included in Note 1 to the consolidated financial statements in the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 2017, as filed with the Securities and Exchange Commission on March 23, 2018.

Operating Environment:

The United States economy grew at a stronger pace in the first quarter of 2018 compared to the same period last year but declined slightly from the fourth quarter of 2017. The gross domestic product (“GDP”), the value of all goods and services produced in the United States, increased at an annualized rate of 2.3% in the first quarter of 2018 compared to 1.2% in the first quarter of 2017 and 2.9% in the fourth quarter of 2017. The consumer price index for the last 12 months rose 2.4% ending March 31, 2018. Excluding the food and energy components, core consumer price index increased 2.1% over the latest twelve months which was above the Federal Open Market Committee (“FOMC”) inflation benchmark of 2.0%. As a result, the FOMC increased the federal funds target rate on March 21, 2018 for the fourth time since the beginning of 2017 to a range of 1.50% to 1.75%. The FOMC has continued to take the stance that the current target range is accommodative and it may take additional monetary policy actions in the near term to increase general market rates. Accordingly, these interest rate increases may have an adverse impact on our loan growth, asset quality and fund costs.

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Review of Financial Position:

Total assets increased $7,559, to $1,171,166 at March 31, 2018, from $1,163,607 at December 31, 2017. Loans, net decreased to $934,190 at March 31, 2018, compared to $955,971 at December 31, 2017, a decrease of $21,781. The decrease in loans during the first three months of 2018 was primary a result of payments and repayments on commercial real estate loans. Investment securities decreased $4,428, or 4.8%, in the three months ended March 31, 2018. Noninterest-bearing deposits increased $1,116, while interest-bearing deposits increased $11,009 in the three months ended March 31, 2018. Total stockholders’ equity increased $2,144, or 2.0%, to $108,400 at March 31, 2018 from $106,256 atyear-end 2017. On January 20, 2017, the Company announced the successful completion of a $17.0 million private placement of common and preferred securities. The additional capital not only afforded the Company the ability to significantly grow its loan portfolio but more notably the capital raise allowed us to acquire CBT Financial Corp., the parent company of CBT Bank, in a stock transaction valued at approximately $54,568 effective October 1, 2017. This action formed a community banking franchise with approximately $1.2 billion in assets and provides enhanced products and services through 33 banking locations covering 12 Pennsylvania counties. For the three months ended March 31, 2018, total assets averaged $1,163,242, an increase of $605,181 from $558,061 for the same period in 2017. For the first quarter of 2017, total assets, loans, net and deposits increased $57,325, $55,138 and $43,947, respectively.

Investment Portfolio:

The Company’s entire investment portfolio is held asavailable-for-sale, which allows for greater flexibility in using the investment portfolio for liquidity purposes by allowing securities to be sold when favorable market opportunities exist. Investment securitiesavailable-for-sale totaled $88,773 at March 31, 2018, a decrease of $4,428, or 4.8%, from $93,201 at December 31, 2017. The reduction was a result of payments and prepayments on investments as no securities were acquired in the first quarter of 2018.

For the three months ended March 31, 2018, the investment portfolio averaged $92,788, an increase of $17,787 compared to $75,001 for the same period last year. The increase was primarily attributable to assets acquired from the merger. Thetax-equivalent yield on the investment portfolio decreased to 2.74% for the three months ended March 31, 2018, from 3.45% for the comparable period of 2017. Thetax-equivalent yield on the investment portfolio for the first quarter of 2018 increased three basis points from 2.71% for the fourth quarter of 2017.

Securitiesavailable-for-sale are carried at fair value, with unrealized gains or losses net of deferred income taxes reported in the accumulated other comprehensive income (loss) component of stockholders’ equity. We reported a net unrealized holding loss, included as a separate component of stockholders’ equity of $1,743, net of deferred income taxes of $463, at March 31, 2018, and $893, net of deferred income taxes of $138, at December 31, 2017.

The Asset/Liability Committee (“ALCO”) reviews the performance and risk elements of the investment portfolio quarterly. Through active balance sheet management and analysis of the securities portfolio, we endeavor to maintain sufficient liquidity to satisfy depositor requirements and meet the credit needs of our customers.

Loan Portfolio:

Loans, net, decreased to $934,190 at March 31, 2018 from $955,971 at December 31, 2017, a decrease of $21,781, or 2.3%. We experienced declines in all major sectors of loans. Business loans, including commercial, construction and commercial real estate loans, decreased $16,160, or 2.3%, to $684,591 at March 31, 2018 from $700,751 at December 31, 2017. Retail loans, including residential real estate and consumer loans, decreased $5,621, or 2.2%, to $249,599 at March 31, 2018 from $255,220 atyear-end 2017. For the first quarter of 2017, loans, net grew $55,138, or 13.5%. The decline in loans in the first quarter of 2018 was a result of payoffs of certain loans acquired in the merger with CBT and normal payments exceeding loan originations. Business loans increased $56,851, while retail loans decreased $1,713 during the first quarter of 2017.

For the three months ended March 31, 2018, loans, net averaged $945,727, an increase of $525,647 compared to $420,080 for the same period of 2017. Thetax-equivalent yield on the loan portfolio was 5.38% for the three months ended March 31, 2018, a 108 basis point increase from the comparable period last year. Loan accretion included in loan interest income in the first quarter of 2018 related to loans acquired in the fourth quarter of 2017 was $1,819. Thetax-equivalent yield excluding the loan accretion would have been 4.30% in the first three months of 2018 which was the same yield as recorded for the same period last year. Thetax-equivalent yield on the loan portfolio increased 44 basis points during the first quarter of 2018 to 5.38% from the 4.94% in the fourth quarter of 2017.

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In addition to the risks inherent in our loan portfolio in the normal course of business, we are also a party to financial instruments withoff-balance sheet risk to meet the financing needs of our customers. These instruments include legally binding commitments to extend credit, unused portions of lines of credit and commercial letters of credit made under the same underwriting standards ason-balance sheet instruments, and may involve, to varying degrees, elements of credit risk and interest rate risk (“IRR”) in excess of the amount recognized in the consolidated financial statements.

Off-balance sheet commitments at March 31, 2018, totaled $123,691, consisting of $47,834 in commitments to extend credit, $71,162 in unused portions of lines of credit and $4,695 in standby letters of credit. Due to fixed maturity dates, specified conditions within these instruments, and the ultimate needs of our customers, many will expire without being drawn upon. We believe that amounts actually drawn upon can be funded in the normal course of operations and therefore, do not represent a significant liquidity risk to us. In comparison,off-balance sheet commitments, at December 31, 2017, totaled $129,734, consisting of $52,706 in commitments to extend credit, $72,157 in unused portions of lines of credit and $4,871 in standby letters of credit.

Asset Quality:

National, Pennsylvania and market area unemployment rates at March 31, 2018 and 2017 are summarized as follows:

	2018			2017
United States		4.1	%		4.5	%
Pennsylvania		4.6			5.2
Berks County		5.0			4.8
Blair County		5.0			5.2
Centre County		3.8			3.7
Clearfield County		6.7			7.1
Dauphin County		4.7			4.6
Huntingdon County		7.6			7.3
Lebanon County		4.6			4.3
Lycoming County		6.2			6.4
Northumberland County		6.6			6.5
Perry County		4.8			4.7
Schuylkill County		6.4			6.5
Somerset County		7.1			7.2

Employment conditions in 2018 improved for the United States, Commonwealth of Pennsylvania and five of the Counties in which we have branch locations. The remainder of our Counties only increased slightly with respect to higher unemployment comparing March 31, 2018 and 2017. The average unemployment rate for all of our Counties remained the same at 5.7% comparing March 31, 2018 and 2017. The lowest unemployment rate in 2018 for all the Counties we serve was 3.8% which was in Centre County with the highest recorded rate being 7.6% in Huntingdon County. An increase in unemployment rates may have a negative impact on economic growth within these areas and could have a corresponding effect on our business by decreasing loan demand and weakening asset quality.

Our asset quality weakened slightly in the three months ended March 31, 2018. Nonperforming assets increased $268, or 3.3% to $8,419 at March 31, 2018, from $8,151 at December 31, 2017. We experienced decreases in accruing restructured loans, accruing loans past due 90 days or more and other real estate owned which were more than offset by an increase in nonaccrual loans. As a percentage of loans, net and foreclosed assets, nonperforming assets equaled 0.90% at March 31, 2018 compared to 0.85% at December 31, 2017.

Loans on nonaccrual status increased $879 to $2,624 at March 31, 2018 from $1,745 at December 31, 2017. The increase in nonaccrual loans was due to an increase of $920 in commercial loans partially offset by decreases of $16 in commercial real estate loans and $25 in residential real estate loans. Accruing troubled debt restructured loans declined $168, to $5,310 at March 31, 2018 from $5,478 at December 31, 2017. Accruing loans past due 90 days or more declined $299, while other real estate owned decreased $144 during the three months ended March 31, 2018.

In addition, compared to the end of the first quarter of 2017, nonperforming assets increased $347, from $8,072 at March 31, 2017. Decreases in accruing troubled debt restructured loans and other real estate owned, partially offset increases in nonaccrual loans and accruing loans past due 90 days or more.

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Generally, maintaining a high loan to deposit ratio is our primary goal in order to maximize profitability. However, this objective is superseded by our attempts to ensure that asset quality remains strong. We continue to focus our efforts on maintaining sound underwriting standards for both commercial and consumer credit.

We maintain the allowance for loan losses at a level we believe adequate to absorb probable credit losses related to specifically identified loans, as well as probable incurred loan losses inherent in the remainder of the loan portfolio as of the balance sheet date. The allowance for loan losses is based on past events and current economic conditions. We employ the Federal Financial Institutions Examination Council Interagency Policy Statement, as amended December 13, 2006, and GAAP in assessing the adequacy of the allowance account. Under GAAP, the adequacy of the allowance account is determined based on the provisions of FASB Accounting Standards Codification (“ASC”) 310, “Receivables”, for loans specifically identified to be individually evaluated for impairment and the requirements of FASB ASC 450, “Contingencies”, for large groups of smaller-balance homogeneous loans to be collectively evaluated for impairment.

We follow our systematic methodology in accordance with procedural discipline by applying it in the same manner regardless of whether the allowance is being determined at a high point or a low point in the economic cycle. Each quarter, the Chief Credit Officer identifies those loans to be individually evaluated for impairment and those loans collectively evaluated for impairment utilizing a standard criteria. Grades are assigned quarterly to loans identified to be individually evaluated. A loan’s grade may differ from period to period based on current conditions and events. However, we consistently utilize the same grading system each quarter. We consistently use loss experience from the latest eight quarters in determining the historical loss factor for each pool collectively evaluated for impairment. Qualitative factors are evaluated in the same manner each quarter and are adjusted within a relevant range of values based on current conditions. For additional disclosure related to the allowance for loan losses refer to the note entitled, “Loans, net and Allowance for Loan Losses”, in the Notes to Consolidated Financial Statements to this Quarterly Report.

The allowance for loan losses increased $209 to $6,515 at March 31, 2018, from $6,306 at the end of 2017. The increase in the allowance was a result of the provision for loan losses of $390 for the first quarter of 2018 exceeding net charge-offs for the period. For the three months ended March 31, 2018, net charge-offs were $181, or 0.8%, of average loans outstanding, a $173 increase compared to $8, or 0.01% of average loans outstanding in the same period of 2017.

Deposits:

We attract the majority of our deposits from within our twelve county market area by offering various deposit products including demand deposit accounts, NOW accounts, business checking accounts, money market deposit accounts, savings accounts, club accounts and time deposits, including certificates of deposit and IRA’s. For the three months ended March 31, 2018, total deposits increased to $1,038,605 from $1,026,480 at December 31, 2017. Noninterest-bearing accounts increased $1,116, while interest-bearing accounts increased $11,009 in the three months ended March 31, 2018. Interest-bearing transaction accounts, including NOW, money market and savings accounts, increased $2,762, to $566,162 at March 31, 2018 from $563,400 at December 31, 2017. Total time deposits increased $8,247 to $315,432 at March 31, 2018 from $307,185 at December 31, 2017. Time deposits less than $100 increased $6,348, or 3.3%, while time deposits of $100 or more increased $1,899, or 1.7%.

For the three months ended March 31, interest-bearing deposits averaged $875,985 in 2018 compared to $402,339 in 2017. The cost of interest-bearing deposits was 0.72% in 2018 compared to 0.54% in 2017. For the three months ended March 31, the overall cost of interest-bearing liabilities including the cost of borrowed funds, was 0.80% in 2018 compared to 0.60% in 2017. The cost of interest-bearing liabilities increased 6 basis points when comparing the first quarter of 2018 with the fourth quarter of 2017.

Corresponding with recent FOMC actions, interest rates have increased from historic lows that existed for an extended period. All deposit rates have increased and as such, customers have continued to be attracted to interest-bearingnon-maturity deposits to provide flexibility in the event of additional increases in general market rates in the near term.

Borrowings:

The Bank utilizes borrowings as a secondary source of liquidity for its asset/liability management. Advances are available from the Federal Home Loan Bank of Pittsburgh (“FHLB”) provided certain standards related to credit worthiness have been met. Repurchase and term agreements are also available from the FHLB.

Short-term borrowings are generally used to meet temporary funding needs and consist of federal funds purchased, securities sold under agreements to repurchase, and overnight and short-term borrowings from the Atlantic Community Bankers Bank (“ACBB”) and the FHLB. At March 31, 2018, we did not have any short-term borrowings outstanding at March 31, 2018 compared to $6,000 at December 31, 2017, all of which were borrowed under the Bank’s Open Repo Plus line with the FHLB. For the three months ended March 31, short-term borrowings averaged $7,297 in 2018 and $10,324 in 2017. The average cost of short-term borrowings was

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1.67% in the first quarter of 2018 and 0.86% for the same period last year. Long-term debt totaled $13,160 at March 31, 2018 as compared to $13,233 at December 31, 2017. The average cost of long-term debt was 5.41% in the three months ended March 31, 2018 and 2.73% for the same period last year.

As a result of the merger with CBT, the Company assumed the subordinated debentures that were recorded as of the October 1, 2017 effective date. A trust formed by CBT Financial issued $5,000 of floating rate trust preferred securities in 2003 as part of a pooled offering of such securities. The interest rate adjusts quarterly to the three-month LIBOR rate plus 2.95%. CBT Financial issued subordinated debentures to the trust in exchange for ownership of all of the common securities of the trust and the proceeds of the offering; the debentures represent the sole asset of the trust. CBT Financial became eligible to redeem the subordinated debentures, in whole but not in part, beginning in 2008 at a price of 100% of face value. The subordinated debentures must be redeemed no later than 2033. The interest rate on the subordinated debentures was 5.13% and 4.55% on March 31, 2018 and December 31, 2017.

In 2005 a trust formed by CBT Financial issued $4,000 of fixed rate trust preferred securities as part of a pooled offering of such securities. CBT Financial issued subordinated debentures to the trust in exchange for ownership of all of the common securities of the trust and the proceeds of the offering; the debentures represent the sole asset of the trust. CBT Financial became eligible to redeem the subordinated debentures, in whole but not in part, beginning in 2010 at a price of 100% of face value. CBT Financial did not redeem the subordinated debentures and the rate converted to a floating rate of three month LIBOR plus 1.54%. The subordinated debentures must be redeemed no later than 2035. The interest rate on the subordinated debentures was 3.66% and 3.13% on March 31, 2018 and December 31, 2017.

Interest payments on the debentures may be deferred at any time at the election of the Company for up to 20 consecutive quarters. Interest on the debentures will accrue during the extension period, and all accrued principal and interest must be paid at the end of the extension period. During an extension period, the Company may not declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to any of the Company’s capital stock.

Market Risk Sensitivity:

Market risk is the risk to our earnings or financial position resulting from adverse changes in market rates or prices, such as interest rates, foreign exchange rates or equity prices. Our exposure to market risk is primarily interest rate risk (“IRR”) associated with our lending, investing and deposit-gathering activities. During the normal course of business, we are not exposed to foreign exchange risk or commodity price risk. Our exposure to IRR can be explained as the potential for change in our reported earnings and/or the market value of our net worth. Variations in interest rates affect earnings by changing net interest income and the level of other interest-sensitive income and operating expenses. Interest rate changes also affect the underlying economic value of our assets, liabilities andoff-balance sheet items. These changes arise because the present value of future cash flows, and often the cash flows themselves, change with interest rates. The effects of the changes in these present values reflect the change in our underlying economic value and provide a basis for the expected change in future earnings related to interest rates. IRR is inherent in the role of banks as financial intermediaries. However, a bank with a high degree of IRR may experience lower earnings, impaired liquidity and capital positions, and most likely, a greater risk of insolvency. Therefore, banks must carefully evaluate IRR to promote safety and soundness in their activities.

As a result of economic uncertainty and a prolonged era of historically low market rates, it has become challenging to manage IRR. Due to these factors, IRR and effectively managing it are very important to both bank management and regulators. Bank regulations require us to develop and maintain an IRR management program, overseen by the Board of Directors and senior management, which involves a comprehensive risk management process in order to effectively identify, measure, monitor and control risk. Should bank regulatory agencies identify a material weakness in a bank’s risk management process or high risk exposure relative to capital, bank regulatory agencies may take action to remedy these shortcomings. Moreover, the level of IRR exposure and the quality of a bank’s risk management process is a determining factor when evaluating capital adequacy.

The Asset Liability committee (“ALCO”), comprised of members of our senior management and other appropriate officers, oversees our IRR management program. Specifically, ALCO analyzes economic data and market interest rate trends, as well as competitive pressures, and utilizes computerized modeling techniques to reveal potential exposure to IRR. This allows us to monitor and attempt to control the influence these factors may have on our rate-sensitive assets (“RSA”) and rate-sensitive liabilities (“RSL”), and overall operating results and financial position. One such technique utilizes a static gap model that considers repricing frequencies of RSA and RSL in order to monitor IRR. Gap analysis attempts to measure our interest rate exposure by calculating the net amount of RSA and RSL that reprice within specific time intervals. A positive gap occurs when the amount of RSA repricing in a specific period is greater than the amount of RSL repricing within that same time frame and is indicated by a RSA/RSL ratio greater than 1.0. A negative gap occurs when the amount of RSL repricing is greater than the amount of RSA and is indicated by a RSA/RSL ratio of less than 1.0. A positive gap implies that earnings will be impacted favorably if interest rates rise and adversely if interest rates fall during the period. A negative gap tends to indicate that earnings will be affected inversely to interest rate changes.

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Our cumulativeone-year RSA/RSL ratio equaled 1.50 at March 31, 2018. Given the recent actions of the FOMC and the potential for rates to increase in the future, the focus of ALCO has been to move towards a positive static gap position.

The current position at March 31, 2018, indicates that the amount of RSA repricing within one year would exceed that of RSL, thereby causing increases in market rates, to increase net interest income. However, these forward-looking statements are qualified in the aforementioned section entitled “Forward-Looking Discussion” in this Management’s Discussion and Analysis.

Static gap analysis, although a standard measuring tool, does not fully illustrate the impact of interest rate changes on future earnings. First, market rate changes normally do not equally or simultaneously affect all categories of assets and liabilities. Second, assets and liabilities that can contractually reprice within the same period may not do so at the same time or to the same magnitude. Third, the interest rate sensitivity table presents aone-day position. Variations occur daily as we adjust our rate sensitivity throughout the year. Finally, assumptions must be made in constructing such a table.

As the static gap report fails to address the dynamic changes in the balance sheet composition or prevailing interest rates, we utilize a simulation model to enhance our asset/liability management. This model is used to create pro forma net interest income scenarios under various interest rate shocks. Model results at March 31, 2018, produced similar results from those indicated by theone-year static gap position. Given an instantaneous and parallel shift in interest rates of plus 100 basis points, our projected net interest income for the 12 months ending March 31, 2019, would increase 2.0% from model results using current interest rates. We will continue to monitor our IRR through employing deposit and loan pricing strategies and directing the reinvestment of loan and investment repayments in order to manage our IRR position.

Financial institutions are affected differently by inflation than commercial and industrial companies that have significant investments in fixed assets and inventories. Most of our assets are monetary in nature and change correspondingly with variations in the inflation rate. It is difficult to precisely measure the impact inflation has on us, however we believe that our exposure to inflation can be mitigated through asset/liability management.

Liquidity:

Liquidity management is essential to our continuing operations and enables us to meet financial obligations as they come due, as well as to take advantage of new business opportunities as they arise. Financial obligations include, but are not limited to, the following:

• Funding new and existing loan commitments;

• Payment of deposits on demand or at their contractual maturity;

• Repayment of borrowings as they mature;

• Payment of lease obligations; and

• Payment of operating expenses.

These obligations are managed daily, thus enabling us to effectively monitor fluctuations in our liquidity position and to adapt that position according to market influences and balance sheet trends. Future liquidity needs are forecasted and strategies are developed to ensure adequate liquidity at all times.

Historically, core deposits have been the primary source of liquidity because of their stability and lower cost, in general, than other types of funding. Providing additional sources of funds are loan and investment payments and prepayments and the ability to sell both available for sale securities and mortgage loans held for sale. We believe liquidity is adequate to meet both present and future financial obligations and commitments on a timely basis.

We employ a number of analytical techniques in assessing the adequacy of our liquidity position. One such technique is the use of ratio analysis to determine the extent of our reliance on noncore funds to fund our investments and loans maturing after March 31, 2018. Our noncore funds at March 31, 2018, were comprised of time deposits in denominations of $250 or more and other borrowings. These funds are not considered to be a strong source of liquidity since they are very interest rate sensitive and are considered to be highly volatile. At March 31, 2018, our net noncore funding dependence ratio, the difference between noncore funds and short-term investments to long-term assets, was 0.26%, while our net short-term noncore funding ratio, noncore funds maturing withinone-year, less short-term investments to assets equaled 1.94%. Comparatively, our overall noncore dependence ratio improved fromyear-end 2017 when it was 3.73%. Similarly, our net short-term noncore funding ratio was 1.96% atyear-end, indicating that our reliance on noncore funds has decreased.

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The Consolidated Statements of Cash Flows present the changes in cash and cash equivalents from operating, investing and financing activities. Cash and cash equivalents, consisting of cash on hand, cash items in the process of collection, deposit balances with other banks and federal funds sold, increased $34,063 during the three months ended March 31, 2018. Cash and cash equivalents increased $3,284 for the same period last year. For the three months ended March 31, 2018, we realized net cash inflows of $1,224 from operating activities, $26,603 from investing activities and $6,236 from financing activities. For the same period of 2017, net cash outflows of $463 from operating activities and $54,014 from investing activities were more than offset by a net cash inflow of $57,761 from financing activities.

Operating activities provided net cash of $1,224 for the three months ended March 31, 2018 compared to a use of net cash of $463 for the same period last year. Net income, adjusted for the effects of gains and losses along with noncash transactions such as depreciation, amortization and the provision for loan losses, is the primary source of funds from operations.

Investing activities primarily include transactions related to our lending activities and investment portfolio. Investing activities provided net cash of $26,603 for the three months ended March 31, 2018. For the comparable period in 2017, investing activities used net cash of $54,014. In 2018, payments and prepayments on loans exceeding loan originations was the primary factor causing the net cash inflow from investing activities. Conversely, an increase in lending activities was the primary factor causing the net cash outflow from investing in the first quarter of 2017.

Financing activities provided net cash of $6,236 for the three months ended March 31, 2018 and $57,761 for the same period last year. Deposit gathering is a predominant financing activity. During the three months ended March 31, 2018 and 2017, deposits increased $12,125 and $43,947, respectively. The repayment of short-term borrowing of $6,000 in the first quarter of 2018 partially offset the increase in net cash from deposit activities. Adding to the net cash inflow from deposits gathering in 2017 was a capital issuance which accounted for an increase in cash of $15,941.

We believe that our future liquidity needs will be satisfied through maintaining an adequate level of cash and cash equivalents, by maintaining readily available access to traditional funding sources, and through proceeds received from the investment and loan portfolios. The current sources of funds are expected to enable us to meet all cash obligations as they come due.

Capital:

Stockholders’ equity totaled $108,400, or $11.93 per common share, at March 31, 2018, and $106,256, or $11.72 per common share, at December 31, 2017. The increase in stockholders’ equity in the three months ended March 31, 2018 was a result of the retention of earnings of $2,811, compensation costs of $1 relating to option grants, the issuance of common stock to Riverview’s ESPP, 401k and dividend reinvestment plans of $135, the issuance of common stock related to the stock options exercised of $49 and the recognition of a change in the other comprehensive loss of $850, resulting from increase in the net unrealized loss on the investment portfolio.

Bank regulatory agencies consider capital to be a significant factor in ensuring the safety of a depositor’s accounts. These agencies have adopted minimum capital adequacy requirements that include mandatory and discretionary supervisory actions for noncompliance. As a result of the merger with CBT, the Company exceeded the asset threshold limitation at year end 2017 and became subject to risk-based capital and leverage rules.

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The Company’s and Bank’s capital ratios and the minimum ratios required for capital adequacy purposes and to be considered well capitalized under the prompt corrective action provisions are summarized below for the year ended March 31, 2018 and December 31, 2017:

	Actual					Minimum Regulatory Capital Ratios under Basel III (with 1.875% capital conservation buffer phase-in)					Well Capitalized under Basel III
March 31, 2018:	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (to risk-weighted assets):
Riverview	$	91,928		10.1	%	$	90,251	³	9.875	%
Riverview Bank		98,090		10.7			90,265	³	9.875		$	91,408	³	10.0	%
Tier 1 capital (to risk-weighted assets):
Riverview		85,343		9.3			71,972	³	7.875
Riverview Bank		91,505		10.0			71,894	³	7.875			73,126	³	8.0
Tier 1 capital (to average total assets):
Riverview		85,343		7.4			46,530	³	4.00
Riverview Bank		91,505		8.1			45,318	³	4.00			56,647	³	5.0
Common equity tier 1 risk based capital (to risk-weighted assets):
Riverview		78,507		8.6			58,263	³	6.375
Riverview Bank	$	91,505		10.0		$	58,273	³	6.375		$	59,415	³	6.5
	Actual					Minimum Regulatory Capital Ratios under Basel III (with 1.25% capital conservation buffer phase-in)					Well Capitalized under Basel III
December 31, 2017:	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (to risk-weighted assets):
Riverview	$	90,703		9.8	%	$	85,946	³	9.25	%
Riverview Bank		96,926		10.4			85,963	³	9.25		$	92,933	³	10.0	%
Tier 1 capital (to risk-weighted assets):
Riverview		84,330		9.1			67,363	³	7.25
Riverview Bank		90,553		9.7			67,376	³	7.25			74,346	³	8.0
Tier 1 capital (to average total assets):
Riverview		84,330		7.4			45,583	³	4.00
Riverview Bank		90,553		7.9			45,583	³	4.00			56,978	³	5.0
Common equity tier 1 risk based capital (to risk-weighted assets):
Riverview		77,996		8.4			53,426	³	5.75
Riverview Bank	$	90,553		9.7		$	53,437	³	5.75		$	60,407	³	6.5

Based on the most recent notification from the FDIC, the Bank was categorized as well capitalized at March 31, 2018 and December 31, 2017. There are no conditions or negative events since this notification that we believe have changed the Bank’s category.

On March 14, 2018, the Board of Directors of Riverview announced the suspension of the payment of its first quarter 2018 dividend in order to conserve capital as a result of recognizing certain material nonrecurring fourth quarter expenses in 2017. The Company recognizednon-recurring merger relatedpre-tax costs of $3,674 in 2017. In addition, in the fourth quarter of 2017, Riverview recognized a $3,888, or $(0.43) per share, charge to income tax expense related to there-measurement of net deferred tax assets resulting from the new 21% federal corporate income tax rate established by the Tax Cuts and Jobs Act, enacted in December 2017.

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Review of Financial Performance:

The Company reported net earnings of $2,811 or $0.31 per basic and diluted weighted average common share for the three months ended March 31, 2018, compared to net loss of $567 or $(0.12) per basic and diluted weighted average common share, for the comparable period of 2017. The return on average assets and return on average stockholders’ equity were 0.98% and 10.59% for the three months ended March 31, 2018. The improvement in net income recognized in the three months ended March 31, 2018 was directly attributable to the merger with CBT and the implementation of certain other strategic initiatives to enhance shareholder value through organic asset growth. In the first quarter of 2017, the Company successfully completed a $17.0 million private placement of common and preferred securities. The additional capital allowed Riverview to acquire CBT and provided it with the ability to significantly grow its loan portfolio by hiring multiple teams of experienced and established lenders to serve new and existing markets. The results for the first quarter ended March 31, 2018 includepre-tax merger related costs of $433.

Net Interest Income:

Net interest income is the fundamental source of earnings for commercial banks. Fluctuations in the level of net interest income can have the greatest impact on net profits. Net interest income is defined as the difference between interest revenue, interest and fees earned on interest-earning assets, and interest expense, the cost of interest-bearing liabilities supporting those assets. The primary sources of earning assets are loans and investment securities, while interest-bearing deposits, short-term and long-term borrowings comprise interest-bearing liabilities. Net interest income is impacted by:

• Variations in the volume, rate and composition of earning assets and interest-bearing liabilities;

• Changes in general market rates; and

• The level of nonperforming assets.

Changes in net interest income are measured by the net interest spread and net interest margin. Net interest spread, the difference between the average yield earned on earning assets and the average rate incurred on interest-bearing liabilities, illustrates the effects changing interest rates have on profitability. Net interest margin, net interest income as a percentage of earning assets, is a more comprehensive ratio, as it reflects not only the spread, but also the change in the composition of interest-earning assets and interest-bearing liabilities.Tax-exempt loans and investments carrypre-tax yields lower than their taxable counterparts. Therefore, in order to make the analysis of net interest income more comparable,tax-exempt income and yields are reported herein on atax-equivalent basis using the prevailing federal statutory tax rate of 21% in 2018 and 34% in 2017.

For the three months ended March 31, 2018,tax-equivalent net interest income increased $7,006 to $11,493 in 2018 from $4,487 in 2017. The increase intax-equivalent net interest income was primarily attributable to the net growth in average earning assets from the merger and organic loan growth along with an improvement in the tax equivalent net interest margin. Average earning assets grew $83,001 more than the growth of average interest-bearing liabilities comparing the first quarters of 2018 and 2017. Thetax-equivalent net interest margin for the three months ended March 31, was 4.38% in 2018 compared to 3.57% in 2017. The net interest spread increased to 4.25% for the three months ended March 31, 2018 from 3.48% for the three months ended March 31, 2017. Loan accretion included in loan interest income in the first quarter of 2018 related to loans acquired in the fourth quarter of 2017 was $1,819, resulting in an increase in thetax-equivalent net interest margin of 69 basis points. Thetax-equivalent net interest margin for the fourth quarter of 2017 was 4.05%.

For the three months ended March 31, 2018,tax-equivalent interest income increased $8,137, to $13,253 from $5,116 for the three months ended March 31, 2017. A volume variance in interest income of $7,451 attributable to changes in the average balance of earning assets was aided by a $686 favorable rate variance due to an improvement in the yield on earning assets. Specifically, the increase was primarily due to the growth in average earning assets which increased $555,703 to $1,064,739 for the first quarter of 2018 from $509,036 for the same period in 2017. The overall yield on earning assets, on a fullytax-equivalent basis, increased for the three months ended March 31, 2018 to 5.05% as compared to 4.08% for the three months ended March 31, 2017. This improvement was a result of the combined impact of the merger along with the associated effects of applying purchase accounting and reporting a higher concentration of loans as a percentage of earning assets. Average loans increased $525,647 comparing the first quarters of 2018 and 2017 which causedtax-equivalent interest income to increase $6,890. Thetax-equivalent yield on the loan portfolio was 5.38% for the three months ended March 31, 2018 compared to 4.29% for the same period last year. This increase caused a positive impact ontax-equivalent interest income of $1,199 comparing the three months ended March 31, 2018 and 2017. Thetax-equivalent yield excluding loan accretion from acquired loans would have been 4.30% in the first three months of 2018 which was the same yield as recorded for the first three months of 2017. The yield earned on investments decreased 71 basis points for the first quarter of 2018 to 2.74% from 3.45% for the first quarter of 2017 and resulted in lowertax-equivalent interest income of $542. Average investments increased to $92,788 for the quarter ended March 31, 2018 compared to $75,001 for the same period in 2017 resulting in an increase intax-equivalent interest income of $531. Overalltax-equivalent interest earned on investments was $627 for the three month period ended March 31, 2018 compared to $638 for the same period in 2017.

Total interest expense increased $1,131 to $1,760 for the three months ended March 31, 2018 from $629 for the three months ended March 31, 2017. An unfavorable volume variance caused interest expenses to increase $838. In addition, an unfavorable rate variance resulted in a $293 increase in fund costs. The average volume of interest bearing liabilities increased to $896,487 for the three months ended March 31, 2018, from $423,785 for the three months ended March 31, 2017. Average interest-bearing deposits increased $473,646 to $875,985 for the first quarter of 2018 from $402,339 for the same period last year. The cost of funds increased to 0.80% for the three months ended March 31, 2018 as compared to 0.60% for the same period in 2017.

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The average balances of assets and liabilities, corresponding interest income and expense and resulting average yields or rates paid are summarized as follows. Average balances were calculated using average daily balances. Averages for earning assets include nonaccrual loans. Loan fees are included in interest income on loans. Investment averages includeavailable-for-sale securities at amortized cost. Income on investment securities and loans is adjusted to a tax equivalent basis using the prevailing federal statutory tax rate.

	Three months ended
	March 31, 2018							March 31, 2017
	Average Balance		Interest		Yield/ Rate			Average Balance		Interest		Yield/ Rate
Assets:
Earning assets:
Loans
Taxable	$	908,574	$	12,241		5.46	%	$	403,684	$	4,285		4.30	%
Tax exempt		37,153		296		3.23	%		16,396		164		4.06	%
Investments
Taxable		76,952		523		2.76	%		69,253		567		3.32	%
Tax exempt		15,836		104		2.66	%		5,748		71		5.01	%
Interest bearing deposits		23,607		79		1.36	%		10,662		23		0.87	%
Federal funds sold		2,617		10		1.55	%		3,293		6		0.74	%
Total earning assets		1,064,739		13,253		5.05	%		509,036		5,116		4.08	%
Less: allowance for loan losses		6,474							3,811
Other assets		104,977							52,836
Total assets	$	1,163,242						$	558,061
Liabilities and Stockholders’ Equity:
Interest bearing liabilities:
Money market accounts		131,678		269		0.83	%	$	73,592	$	117		0.64	%
NOW accounts		246,762		347		0.57	%		126,778		89		0.28	%
Savings accounts		188,358		32		0.07	%		79,368		29		0.15	%
Time deposits less than $100		196,599		543		1.12	%		73,510		163		0.90	%
Time deposits $100 or more		112,588		363		1.31	%		49,091		134		1.11	%
Short term borrowings		7,297		30		1.67	%		10,324		22		0.86	%
Long-term debt		13,205		176		5.41	%		11,122		75		2.73	%
Total interest bearing liabilities		896,487		1,760		0.80	%		423,785		629		0.60	%
Non-interest bearing demand deposits		149,123							73,188
Other liabilities		9,996							6,325
Stockholders’ equity		107,636							54,763
Total liabilities and stockholders’ equity	$	1,163,242						$	558,061
Net interest income/spread			$	11,493		4.25	%			$	4,487		3.48	%
Net interest margin						4.38	%						3.57	%
Tax-equivalent adjustments:
Loans			$	62						$	56
Investments				22							24
Total adjustments			$	84						$	80

Provision for Loan Losses:

We evaluate the adequacy of the allowance for loan losses account on a quarterly basis utilizing our systematic analysis in accordance with procedural discipline. We take into consideration certain factors such as composition of the loan portfolio, volumes of nonperforming loans, volumes of net charge-offs, prevailing economic conditions and other relevant factors when determining the adequacy of the allowance for loan losses account. We make monthly provisions to the allowance for loan losses account in order to maintain the allowance at the appropriate level indicated by our evaluations. Based on our most current evaluation, we believe that the allowance is adequate to absorb any known and inherent losses in the portfolio as of March 31, 2018.

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For the three months ended March 31, the provision for loan losses totaled $390 in 2018 and $605 in 2017. The decrease in the provision in 2018 was a direct result of slower loan growth as compared to 2017 and the continuation of positive trends in asset quality.

Noninterest Income:

For the quarter ended March 31, noninterest income totaled $1,953 in 2018, an increase of $1,174 from $779 in 2017. All major categories of noninterest income improved as a result of the merger with the exception of the retail wealth management component of our wealth management division. Retail wealth management income, excluding Trust, decreased $104 comparing the first quarters of 2018 and 2017 due to the dissolution of a business acquired in 2016. Service charges, fees and commissions and trust income improved $891and $180, respectively, comparing the first quarters of 2018 and 2017. Commission and fees on fiduciary activities increased $180 comparing the three months ended March 31, 2018 and 2017. Mortgage banking income in 2018 improved to $170 compared to $82 in 2017. Income from bank owned life insurance increased to $191 in the first quarter of 2018 compared to $73 for the comparable quarter of 2017.

Noninterest Expenses:

In general, noninterest expense is categorized into three main groups: employee-related expenses, occupancy and equipment expenses and other expenses. Employee-related expenses are costs associated with providing salaries, including payroll taxes and benefits, to our employees. Occupancy and equipment expenses, the costs related to the maintenance of facilities and equipment, include depreciation, general maintenance and repairs, real estate taxes, lease expense and utility costs. Other expenses include general operating expenses such as advertising, contractual services, insurance, including FDIC assessment, other taxes and supplies. Several of these costs and expenses are variable, while the remainder are fixed. We utilize budgets and other related strategies in an effort to control the variable expenses.

Noninterest expense increased $4,373 or 84.7%, to $9,536 for the three months ended March 31, 2018, from $5,163 for the same period last year. The majority of this increase relates to salaries and employee benefit expense, which was a result of the merger with CBT and related costs. Additions to facilities as a result of the CBT merger along with offices to support the lending teams were primarily responsible for the $476 or 73.6%, increase in occupancy and equipment costs. The majority of the $1,391 increase in other expenses comparing the first quarters of 2018 and 2017 was a result of the business combination with CBT. Other expenses for the first quarter ended March 31, 2018 includepre-tax merger related costs of $433.

Income Taxes:

We recorded income tax expense of $625 for the three months ended March 31, 2018, and an income tax benefit of $15 for the same period last year. Our effective tax rate was 18.2% for the first quarter of 2018. The Company benefitted from the enactment of the Tax Cuts and Jobs Act legislation in the fourth quarter of 2017 which reduced the corporate federal tax rate from a maximum of 35% to a flat rate of 21% effective January 1, 2018.

Riverview Financial Corporation

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK

Not applicable to a smaller reporting company.

Item 4. Controls and Procedures.

(a) Evaluation of disclosure controls and procedures.

At March 31, 2018, the end of the period covered by this Quarterly Report on Form10-Q, the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) evaluated the effectiveness of the Company’s disclosure controls and procedures as defined inRule 13a-15(e) under the Exchange Act. Based upon that evaluation, the CEO and CFO concluded that the disclosure controls and procedures, at March 31, 2018, were effective to provide reasonable assurance that information required to be disclosed in the Company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that information required to be disclosed in such reports is accumulated and communicated to the CEO and CFO to allow timely decisions regarding required disclosure.

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(b) Changes in internal control.

There were no changes made in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

In the opinion of the Company, after review with legal counsel, there are no proceedings pending to which the Company is a party or to which its property is subject, which, if determined adversely to the Company, would have a material effect on the consolidated results of operations or financial condition. There are no proceedings pending other than ordinary, routine litigation incident to the business of the Company. In addition, no material proceedings are pending or are known to be threatened or contemplated against the Company by governmental authorities.

Item 1A. Risk Factors

Not required for smaller reporting companies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits.

The following Exhibits are incorporated by reference hereto:

31.1	Section  302 Certification of the Chief Executive Officer (Pursuant to Rule13a-14(a)/15d-14(a)).
31.2	Section  302 Certification of the Chief Financial Officer (Pursuant to Rule13a-14(a)/15d-14(a)).
32.1	Chief Executive Officer’s §1350 Certification (Pursuant to Rule13a-14(b)/15d-14(b)).
32.2	Chief Financial Officer’s §1350 Certification (Pursuant to Rule13a-14(b)/15d-14(b)).
101	Interactive Data File (XBRL).

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

By:	/s/ Kirk D. Fox
	Kirk D. Fox
	Chief Executive Officer
	(Principal Executive Officer)
Date:	May 11, 2018
By:	/s/ Scott A. Seasock
	Scott A. Seasock
	Chief Financial Officer
	(Principal Financial Officer)
Date:	May 11, 2018

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