Market Overview

Riverview Bancorp Reports Record Earnings of $4.5 Million in Second Quarter of Fiscal Year 2020; Results Driven by Solid Deposit Growth, Increased Revenue Generation and Improved Operating Efficiencies

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VANCOUVER, Wash., Oct. 24, 2019 (GLOBE NEWSWIRE) -- Riverview Bancorp, Inc. (Nasdaq GSM: RVSB) ("Riverview" or the "Company") today reported earnings for the second fiscal quarter ended September 30, 2019 increased to $4.5 million, or $0.20 per diluted share, compared to $4.2 million, or $0.18 per diluted share, in the preceding quarter, and $4.2 million, or $0.19 per diluted share, in the second fiscal quarter a year ago.

"Riverview's second quarter financial results continue to demonstrate the strength of our franchise, generating record earnings for both the second quarter and for the first six months of fiscal year 2020," said Kevin Lycklama, president and chief executive officer. "I am extremely proud of the outstanding job by our entire team. Growing our deposits by more than $60 million and producing record quarterly earnings is a truly remarkable accomplishment."

Second Quarter Highlights (at or for the period ended September 30, 2019)

  • Record quarterly net income of $4.5 million, or $0.20 per diluted share.
  • Net interest margin (NIM) increased to 4.36% for the quarter.
  • Return on average assets improved to 1.55% for the second quarter.
  • Total deposits increased $60.0 million during the quarter to $982.3 million.
  • FHLB Advances paid down to zero during the quarter.
  • Total loans were $881.3 million at September 30, 2019.
  • Asset quality remains strong, with non-performing assets at 0.13% of total assets.
  • Total risk-based capital ratio was 17.27% and Tier 1 leverage ratio was 11.79%.
  • Paid a quarterly cash dividend of $0.045 per share, generating a current dividend yield of 2.49% based on the share price at close of market on October 15, 2019.

Income Statement

Return on average assets improved to 1.55% in the second quarter of fiscal year 2020 compared to 1.46% in the second quarter of fiscal 2019. Return on average equity and average tangible equity (non-GAAP) remained healthy at 12.68% and 15.79%, respectively, compared to 13.68% and 17.75% for the second fiscal quarter a year ago.

"Riverview's operating performance during the quarter was outstanding, generating strong core earnings, while maintaining excellent asset quality," stated Lycklama. "We continue to monitor and manage our overhead expenses, as we grow our franchise."

Total net revenues increased during the quarter to $14.9 million compared to $14.6 million in both the prior quarter and the year ago quarter.  Year-to-date, total net revenues increased to $29.5 million from $29.2 million in the same period a year ago. The increase was primarily driven by an increase in average loans and non-interest income.

Net interest income for the quarter was $11.7 million compared to $11.5 million in the preceding quarter and $11.8 million in the second fiscal quarter a year ago. In the first six months of fiscal 2020, net interest income was $23.2 million, compared to $23.4 million in the first six months of fiscal 2019. The decrease in net interest income for the six months ended September 30, 2019 was primarily attributable to an increase in funding costs compared to the same prior year period in addition to $585,000 of non-accrual interest from a prior charged off loan that was collected during the six months ended September 30, 2018.

Riverview's second fiscal quarter NIM was 4.36% compared to 4.33% in the prior quarter and 4.39% in the second fiscal quarter a year ago. The accretion on purchased loans totaled $78,000 during the current quarter compared to $108,000 during the preceding quarter and $152,000 in the same period a year ago, resulting in a two basis point increase in the NIM for the current period compared to a four basis point increase for the preceding quarter and a seven basis point increase for the same period a year ago. Net fees on loan prepayments were $112,000 for the second fiscal quarter of 2020 which added four basis points to the NIM compared to $31,000 adding one basis point to the NIM in the preceding quarter and $172,000 adding six basis points to the NIM in the second fiscal quarter a year ago. In the first six months of fiscal 2020, Riverview's NIM was 4.35% compared to 4.43% in the same period a year earlier. Net fees on loan prepayments were $144,000 for the six month ended September 30, 2019 which added three basis points to the NIM compared to $282,000 adding five basis points to the NIM in the same six month period a year ago.

"Our net interest margin remains strong, however, funding costs increased during the quarter due to deposit pricing pressures as we increased rates on certain deposit products," said David Lam, executive vice president and chief financial officer. "We anticipate the increased competition in our market areas will continue to place pressure on both loan and deposit pricing."

The weighted average rate on loans originated during the quarter ended September 30, 2019, was 5.21% compared to 5.73% for the quarter ended June 30, 2019, and 5.63% for the quarter ended September 30, 2018. The decrease in the weighted average rate on loans was attributed to the recent fed rate decreases along with pricing competition in our market area.

Non-interest income increased to $3.2 million in the second fiscal quarter compared to $3.1 million in the preceding quarter and $2.8 million in the second fiscal quarter a year ago. The improvement in non-interest income was primarily driven by an increase in fees and service charges.  In the first six months of fiscal 2020, non-interest income increased 10.4% to $6.3 million compared to $5.7 million in the same period a year ago.

Asset management fees increased 15.6% compared to the same quarter a year ago. Asset management fees were $1.1 million during the second fiscal quarter compared to $943,000 in the second fiscal quarter a year ago. In the first six months of fiscal 2020, asset management fees increased 19.5% to $2.2 million compared to $1.9 million in the first six months of fiscal 2019. Riverview Trust Company's assets under management decreased slightly to $690.5 million at September 30, 2019 compared to $694.8 million three months earlier and increased $76.5 million, or 12.5%, compared to $614.0 million one year earlier.

Non-interest expense decreased to $9.0 million during the second fiscal quarter of 2020 compared to $9.2 million in the preceding quarter. The decrease during the current quarter was, in part, related to an $81,000 gain on the disposal of equipment in addition to the utilization of the Federal Deposit Insurance Corporation (FDIC) credits of $76,000 to offset current quarter FDIC insurance assessments as a result of the FDIC deposit insurance fund exceeding the statutorily required minimum reserve ratio of 1.35% and assessment credits being issued when the reserve ratio is at or above 1.38%. Year-to-date, non-interest expense was $18.2 million compared to $17.9 million in the first six months of fiscal 2019. The increase in non-interest expense is attributable to strategic growth initiatives and improved digital product offerings which increased our technology related expenses as well as the addition of several experienced bankers.

The efficiency ratio improved to 60.47% for the second fiscal quarter compared to 62.95% in the preceding quarter and 60.99% in the second fiscal quarter a year ago.

For the second fiscal quarter of 2020, income tax expense totaled $1.4 million, for an effective tax rate of 23.0%, compared to 22.5% in the first fiscal quarter of 2020 and 22.4% in the second fiscal quarter of 2019.

Balance Sheet Review

Total deposits increased $60.0 million during the quarter to $982.3 million compared to $922.3 million three months earlier. Deposit costs increased from 0.15% in the previous quarter to 0.28%, reflecting the continued deposit pricing pressures in our local markets.

"We made significant progress in growing our deposits during the quarter," said Lycklama. "With the increase in deposits, we were able to repay our outstanding FHLB borrowings and reduce our loan to deposit ratio to 89.7% compared to 96.3% in the previous quarter." 

Federal Home Loan Bank (FHLB) advances were paid down to zero during the second fiscal quarter of 2020 compared to $56.9 million in outstanding FHLB advances at June 30, 2019.

Riverview's total loans decreased modestly during the quarter to $881.3 million compared to $888.0 million three months earlier and increased $31.5 million, or 3.7%, when compared to $849.8 million a year ago. Total loans continue to be impacted by an increase in paydowns on existing loans, however, the loan pipeline remained healthy at $43.8 million at September 30, 2019 compared to $47.7 million at the end of the prior quarter. Undisbursed construction loans totaled $53.3 million at September 30, 2019, compared to $69.0 million three months earlier, with the majority of the undisbursed construction loans expected to fund over the next several quarters.

Shareholders' equity increased to $143.1 million at September 30, 2019 compared to $138.7 million three months earlier and $122.4 million a year earlier. Tangible book value per share (non-GAAP) increased to $5.06 at September 30, 2019 compared to $4.88 at June 30, 2019, and $4.17 at September 30, 2018. Riverview will pay a quarterly cash dividend of $0.045 per share on October 25, 2019, to shareholders of record on October 14, 2019.

Credit Quality

Riverview's asset quality continues to improve, with non-performing loans, non-performing assets and classified assets all decreasing compared to a year ago. Riverview recorded no provision for loan losses during the second fiscal quarter of 2020 or in the linked quarter. In the second fiscal quarter a year ago, Riverview recorded a provision for loan losses of $250,000.  

Non-performing loans totaled $1.5 million, or 0.17% of total loans, at September 30, 2019 compared to $1.5 million, or 0.16% of total loans, at June 30, 2019 and $2.3 million, or 0.27% of total loans, at September 30, 2018. Riverview has had no real estate owned balances for the last 4 quarters.

Net loan charge offs were $6,000 during the second fiscal quarter of 2020 compared to $15,000 in the preceding quarter and $86,000 in the second fiscal quarter a year ago.

Classified assets decreased to $4.3 million at September 30, 2019 compared to $6.0 million at June 30, 2019 and $6.2 million at September 30, 2018. The classified asset to total capital ratio was 3.0% at September 30, 2019 compared to 4.1% three months earlier and 4.7% a year earlier.

At September 30, 2019, the allowance for loan losses totaled $11.4 million, which was unchanged compared to three months earlier. The allowance for loan losses represented 1.30% of total loans at September 30, 2019 compared to 1.29% of total loans at the end of the prior quarter. Included in the carrying value of loans are net discounts on the MBank purchased loans, which may reduce the need for an allowance for loan losses on these loans because they are carried at an amount below the outstanding principal balance. The remaining net discount on these purchased loans was $1.3 million at September 30, 2019 compared to $1.4 million at the end of the prior quarter and $1.9 million at September 30, 2018.

Capital

Riverview continues to maintain capital levels well in excess of the regulatory requirements to be categorized as "well capitalized" with a total risk-based capital ratio of 17.27% and a Tier 1 leverage ratio of 11.79% at September 30, 2019. The Company's tangible common equity to average tangible assets ratio (non-GAAP) increased to 10.06% at September 30, 2019.

Non-GAAP Financial Measures

In addition to results presented in accordance with generally accepted accounting principles ("GAAP"), this press release contains certain non-GAAP financial measures. We believe that certain non-GAAP financial measures provide investors with information useful in understanding the Company's financial performance; however, readers of this report are urged to review these non-GAAP financial measures in conjunction with GAAP results as reported.

Financial measures that exclude intangible assets are non-GAAP measures. To provide investors with a broader understanding of capital adequacy, Riverview provides non-GAAP financial measures for tangible common equity, along with the GAAP measure. Tangible shareholders' equity is calculated as shareholders' equity less goodwill and other intangible assets. In addition, tangible assets are total assets less goodwill and other intangible assets. We calculate tangible book value per share by dividing tangible shareholders' equity by the number of common shares outstanding. This non-GAAP financial measure has inherent limitations, is not required to be uniformly applied and is not audited. Further, the non-GAAP financial measure should not be considered in isolation or as a substitute for book value per share or total shareholders' equity determined in accordance with GAAP and may not be comparable to similarly titled measures reported by other companies. Reconciliations of the GAAP and non-GAAP financial measures are presented below.

(Dollars in thousands)   September 30, 2019   June 30, 2019   September 30, 2018   March 31, 2019
                 
Shareholders' equity   $ 143,119   $ 138,663   $ 122,410   $ 133,122
Goodwill     27,076     27,076     27,076     27,076
Core deposit intangible, net     839     880     1,011     920
Tangible shareholders' equity   $ 115,204   $ 110,707   $ 94,323   $ 105,126
                 
Total assets   $ 1,173,019   $ 1,165,234   $ 1,148,447   $ 1,156,921
Goodwill     27,076     27,076     27,076     27,076
Core deposit intangible, net     839     880     1,011     920
Tangible assets   $ 1,145,104   $ 1,137,278   $ 1,120,360   $ 1,128,925
                 

About Riverview

Riverview Bancorp, Inc. (www.riverviewbank.com) is headquartered in Vancouver, Washington – just north of Portland, Oregon, on the I-5 corridor. With assets of $1.17 billion at September 30, 2019, it is the parent company of the 96-year-old Riverview Community Bank, as well as Riverview Trust Company. The Bank offers true community banking services, focusing on providing the highest quality service and financial products to commercial and retail clients. There are 18 branches, including 14 in the Portland-Vancouver area and three lending centers. For the past 6 years, Riverview has been named Best Bank by the readers of The Vancouver Business Journal, The Columbian and The Gresham Outlook.

"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements that are subject to risks and uncertainties, including, but not limited to: the Company's ability to raise common capital; the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in the Company's allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets; changes in general economic conditions, either nationally or in the Company's market areas; changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, the Company's net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in the Company's market areas; secondary market conditions for loans and the Company's ability to sell loans in the secondary market; results of examinations of us by the Office of Comptroller of the Currency or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase the Company's reserve for loan losses, write-down assets, change Riverview Community Bank's regulatory capital position or affect the Company's ability to borrow funds or maintain or increase deposits, which could adversely affect its liquidity and earnings; legislative or regulatory changes that adversely affect the Company's business including changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules; the Company's ability to attract and retain deposits; further increases in premiums for deposit insurance; the Company's ability to control operating costs and expenses; the use of estimates in determining fair value of certain of the Company's assets, which estimates may prove to be incorrect and result in significant declines in valuation; difficulties in reducing risks associated with the loans on the Company's balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect the Company's workforce and potential associated charges; computer systems on which the Company depends could fail or experience a security breach; the Company's ability to retain key members of its senior management team; costs and effects of litigation, including settlements and judgments; the Company's ability to successfully integrate any assets, liabilities, customers, systems, and management personnel it may in the future acquire into its operations and the Company's ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; the Company's ability to pay dividends on its common stock; and interest or principal payments on its junior subordinated debentures; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; other economic, competitive, governmental, regulatory, and technological factors affecting the Company's operations, pricing, products and services and the other risks described from time to time in our filings with the SEC.

Such forward-looking statements may include projections. Any such projections were not prepared in accordance with published guidelines of the American Institute of Certified Public Accountants or the Securities Exchange Commission regarding projections and forecasts nor have such projections been audited, examined or otherwise reviewed by independent auditors of the Company. In addition, such projections are based upon many estimates and inherently subject to significant economic and competitive uncertainties and contingencies, many of which are beyond the control of management of the Co

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