VANCOUVER, Wash., Oct. 20, 2008 (GLOBE NEWSWIRE) -- Riverview Bancorp, Inc. (Nasdaq:RVSB) today reported that a $7.2 million addition to its loan loss reserve and a $3.4 million non-cash other than temporary impairment (OTTI) charge on an investment security, generated a net loss of $4.2 million, or $0.39 per diluted share, in the second quarter of fiscal 2009, compared to earnings of $2.4 million, or $0.22 per diluted share, in the second quarter of fiscal 2008. For the first six months of fiscal 2009, net losses were $3.4 million, or $0.32 per diluted share, compared to earnings of $5.3 million, or $0.47 per diluted share, in the first six months of fiscal 2008.
"Riverview's underlying business and core fundamentals remain a strength for the Bank, despite the reduced earnings during the quarter," said Pat Sheaffer, Chairman and CEO. "During the recent quarter we continued to further expand our customer relationships with solid growth in both loans and deposits. Our stable net interest margin remains a core strength for the Bank and management has continued to focus on reducing controllable expenses."
Riverview's liquidity position remains strong and we continue to maintain capital levels in excess of the well-capitalized regulatory threshold. In addition to our solid customer base, management has the ability to access many additional sources of liquidity, including additional borrowings from the FHLB, the sale of certain available for sale securities, borrowings at correspondent banks and wholesale markets including brokered deposits. Currently, the Bank has $200 million of additional liquidity available, or 22.3% of total assets. The Bank's actual and required minimum capital amounts and ratios are presented in the following table.
Adequately Well
September 30, 2008 Actual Capitalized Capitalized
------------------ --------------- --------------- ---------------
Amount Ratio Amount Ratio Amount Ratio
Total Capital (To
Risk-Weighted
Assets) $86,301 10.70% $64,527 8.00% $80,659 10.00%
Tier 1 Capital (To
Risk-Weighted
Assets) 76,216 9.45% 33,263 4.00% 48,395 6.00%
Tier 1 Capital (To
Adjusted Tangible
Assets) 76,216 8.86% 34,423 3.00% 43,029 5.00%
"The decision to increase our loan loss provision was prompted by a number of factors and was primarily a result of current economic conditions, the slowdown in residential real estate sales, an extensive analysis of our loan portfolio, as well as our methodology for determining the level of our allowance for loan losses," said Sheaffer. "We believe that strengthening our allowance for loan losses is prudent at this time in light of the continuing weakness in the residential development and housing markets as well as the overall economy. Timely identification and resolution of problem loans remains a high priority for Riverview and its entire management team. Riverview's capital levels and core business fundamentals remain strong and bolstering our allowance for loan losses will position us for continued growth over the long run."
The investment security for which a non-cash impairment charge has been recognized is a trust preferred pooled security issued by other bank holding companies, is classified as available for sale and has a par value of $5.0 million. In September 2008, the investment rating of the security was lowered from "A1" to "Baa3" by one rating agency. Additionally, since June 30, 2008, two of the twenty issuers of the security invoked their original contractual right to defer interest payments and one issuer has defaulted. However, the tranche of the security held by Riverview continues to pay as agreed. Although management believes it is possible that all principal and interest will be received, and the Company has the ability and intention to continue to hold the security until there is a recovery in fair value, general market concerns over these and similar types of securities, as well as a lowering of the investment rating for this specific security, has caused the fair value to decline severely enough to warrant an OTTI charge. Consequently, management chose to book a $3.4 million OTTI charge bringing the value of the security to $1.6 million. Management does not believe that the recognition of this impairment charge has any other implications for the Company's business fundamentals or its outlook.
Riverview does not have sub-prime residential real estate in its loan portfolio and does not believe that it has any direct exposure to sub-prime lending in its Mortgage Backed Securities portfolio. Other than the trust preferred pooled security discussed above, the Company does not have any other investment securities of concern. Mortgage backed securities totaled $5.3 million, or 0.59% of total assets at September 30, 2008. Riverview does not have any exposure to Government Sponsored Enterprise (GSE) securities in its investment portfolio.
Credit Quality
Non-performing assets were $22.8 million, or 2.54% of total assets, at September 30, 2008, compared to $23.6 million, or 2.67% of total assets, at June 30, 2008, and $206,000, or 0.03% of total assets, at September 30, 2007. Total non-performing assets consist of twenty six loans to twenty two borrowers, which includes eight land-acquisition and development loans totaling $15.7 million, three construction loans totaling $1.6 million, two commercial loans totaling $1.2 million and five other real estate mortgage loans totaling $2.7 million. All of the loans are to borrowers located in Oregon and Washington, with the exception of one land acquisition and development loan totaling $1.4 million to a Washington borrower who has property located in Southern California. Riverview had $699,000 in other real estate owned (OREO) at the end of September 2008.
"We significantly increased our provision for loan losses to account for higher levels of non-performing loans compared to a year ago," said Dave Dahlstrom, Executive Vice-President and CCO. "These problem loans are limited to a few lending relationships and are not a trend in the overall loan portfolio. We remain focused on reducing the level of our non-performing assets as we continue to work closely with our borrowers to help mitigate losses."
The allowance for loan losses, including unfunded loan commitments of $286,000, was $16.4 million, or 2.08% of total loans at the end of the second quarter, compared to $13.4 million, or 1.73% of total loans at June 30, 2008 and $9.5 million, or 1.36% of total loans, at September 30, 2007. "We believe that the allowance for loan losses is adequate and appropriate based on our current analysis of the loan portfolio's credit quality, current economic conditions, and underlying collateral values," noted Dahlstrom. Net loan charge-offs were $4.2 million for the quarter ended September 30, 2008, compared to $330,000 for the previous linked quarter and $66,000 for the second quarter a year ago.
Shareholders' Equity
Shareholders' equity was $88.1 million at September 30, 2008, compared to $92.6 million a year ago. Book value per share was $8.06 at the end of September 2008, compared to $8.42 a year earlier. Tangible book value per share was $5.65 at quarter-end, compared to $6.01 a year earlier.
Operating Results
Net interest income for the second quarter of fiscal 2009 was $8.6 million, compared to $8.7 million in the second quarter a year ago. For the first six months of fiscal 2009, net interest income was $17.0 million compared to $17.5 million for the same period in fiscal 2008. The decline in net interest income is due in part to interest-bearing assets re-pricing down faster than interest-bearing liabilities as the Federal Reserve cut rates over the last 12 months, as well as the increased level of nonperforming assets. The reversal of interest on loans placed on non-accrual status during the quarter accounted for a four basis point decrease in the quarterly net interest margin. For the second quarter of fiscal 2009, the net interest margin was 4.18% compared to 4.20% in the previous linked quarter and 4.72% in the second quarter a year ago. For the first six months of fiscal 2009 the net interest margin was 4.19% compared to 4.78% in the first six months of fiscal 2008.
Excluding the impact of the $3.4 million OTTI charge, non-interest income was $2.1 million for the three months ended September 30, 2008, compared to $2.2 million for the same quarter a year ago. For the first six months of fiscal 2009, total non-interest income was $4.3 million, excluding the impact of the OTTI charge, compared to $4.5 million for the first six months of 2008. "For the first half of fiscal 2009, fee income from Riverview Asset Management Corp. increased 10.4% compared to the same period a year ago, but was offset by a $518,000 decline in mortgage broker loan fees, reflecting the continued slowdown in the real estate market," said Ron Wysaske, President and COO.
Non-interest expense improved to $6.7 million in the second quarter of fiscal 2009, compared to $6.8 million in the second quarter of fiscal 2008. Decreases in salaries and employee benefits of $168,000 were offset by increased FDIC insurance premiums of $138,000. Riverview's efficiency ratio, excluding the effects of the non-cash impairment charge, improved slightly to 62.44% for the quarter ended September 30, 2008, compared to 62.61% for the same period in prior year. Management continues to focus on managing controllable costs. "We have been able to keep our operating expenses in line in fiscal 2009, even reducing them from year ago levels," said Wysaske. "The reduction in net income and earnings per share is mostly attributable to the increased credit cost and the investment security impairment charge."
Balance Sheet Review
"Our land development and construction portfolios continue to decline as planned," said Dahlstrom. "We continue to grow the loan portfolio at a more moderate pace than the double digit growth of the past few years, with the focus of keeping the portfolio in high quality and well-diversified assets." Net loans increased 12% to $770 million at September 30, 2008, compared to $687 million a year ago. Commercial loans accounted for 72% and construction loans accounted for 17% of the total loan portfolio at September 30, 2008, compared to 66% and 23% respectively, a year earlier.
"During the quarter, we further reduced our exposure to real estate construction and shrunk that portfolio to $135 million at quarter-end from $142 million at June 30, 2008 and $162 million at the end of September 2007," added Dahlstrom. "We should continue to see reductions in our construction portfolio as we focus on other lending opportunities."
"We have continued to focus on deposit growth by expanding our commercial and retail banking products," said Wysaske. "During the second quarter we began offering Certificate of Deposit Registry Service (CDARS(tm)) deposits. Through the CDARS(tm) program, our customers can now access FDIC insurance up to $50 million." Deposits grew at an annualized rate of 5.1% during the second quarter, increasing $8 million to $637 million at September 30, 2008, compared to $629 million at June 30, 2008. Transaction accounts represent 56% of all deposits with non-interest checking balances and interest bearing checking balances each representing 13% of total deposits.
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 $896 million, it is the parent company of the 85 year-old Riverview Community Bank, as well as Riverview Mortgage and Riverview Asset Management Corp. There are 18 branches, including ten in fast growing Clark County, three in the Portland metropolitan area and four lending centers. The Bank offers true community banking services, focusing on providing the highest quality service and financial products to commercial and retail customers.
Financial measures that exclude OTTI charges are non-GAAP measures. To provide investors with a broader understanding of earnings, the Company provided non-GAAP financial measures for non-interest income and the efficiency ratio, along with the GAAP measure of non-interest income and the efficiency ratio, because OTTI charges are not likely to occur in normal operations. Management believes that these non-GAAP financial measures are useful to investors because they allow for greater transparency, facilitate comparisons to prior periods and competitor's results and assist in forecasting performance for future periods because they exclude items we believe to be outside the normal operating results.
Statements concerning future performance, developments or events, concerning expectations for growth and market forecasts, and any other guidance on future periods, constitute forward-looking statements, which are subject to a number of risks and uncertainties that might cause actual results to differ materially from stated objectives. These factors include but are not limited to: RVSB's ability to acquire shares according to internal repurchase guidelines, regional economic conditions and the company's ability to efficiently manage expenses. Additional factors that could cause actual results to differ materially are disclosed in Riverview Bancorp's recent filings with the SEC, including but not limited to Annual Reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
September 30, 2008, March 31, 2008 and September 30, 2007
(In thousands, except share data) Sept. 30, March 31, Sept. 30,
(Unaudited) 2008 2008 2007
---------------------------------------------------------------------
ASSETS
Cash (including interest-earning
accounts of $11,786, $14,238 and
$15,271) $ 26,214 $ 36,439 $ 36,877
Loans held for sale 773 -- 604
Investment securities held to maturity,
at amortized cost (fair value of $536,
none and none) 536 -- --
Investment securities available for sale,
at fair value (amortized cost of $9,371,
$7,825 and $8,735) 9,473 7,487 8,761
Mortgage-backed securities held to
maturity, at amortized cost (fair value
of $701, $892 and $1,039) 698 885 1,027
Mortgage-backed securities available for
sale, at fair value (amortized cost of
$4,619, $5,331 and $6,043) 4,567 5,338 5,943
Loans receivable (net of allowance for
loan losses of $16,124, $10,687 and
$9,062) 770,391 756,538 687,419
Real estate and other pers. property
owned 699 494 74
Prepaid expenses and other assets 6,102 2,679 2,957
Accrued interest receivable 3,280 3,436 3,850
Federal Home Loan Bank stock, at cost 7,350 7,350 7,350
Premises and equipment, net 20,281 21,026 21,336
Deferred income taxes, net 4,442 4,571 4,089
Mortgage servicing rights, net 271 302 332
Goodwill 25,572 25,572 25,572
Core deposit intangible, net 488 556 630
Bank owned life insurance 14,470 14,176 13,893
-------- -------- --------
TOTAL ASSETS $895,607 $886,849 $820,714
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposit accounts $637,490 $667,000 $659,785
Accrued expenses and other liabilities 7,675 8,654 8,982
Advance payments by borrowers for taxes
and insurance 375 393 376
Federal Home Loan Bank advances 136,660 92,850 33,600
Junior subordinated debentures 22,681 22,681 22,681
Capital lease obligation 2,668 2,686 2,704
-------- -------- --------
Total liabilities 807,549 794,264 728,128
SHAREHOLDERS' EQUITY:
Serial preferred stock, $.01 par value;
250,000 authorized, issued and
outstanding, none -- -- --
Common stock, $.01 par value; 50,000,000
authorized, September 30, 2008 -
10,923,773 issued and outstanding;
March 31, 2008 - 10,913,773 issued and
outstanding; September 30, 2007 -
10,996,650 issued and outstanding 109 109 110
Additional paid-in capital 46,846 46,799 47,953
Retained earnings 42,024 46,871 45,629
Unearned shares issued to employee stock
ownership trust (954) (976) (1,057)
Accumulated other comprehensive income
(loss) 33 (218) (49)
-------- -------- --------
Total shareholders' equity 88,058 92,585 92,586
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $895,607 $886,849 $820,714
======== ======== ========
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income for the Three and Six Months
Ended September 30, 2008 and 2007
(In thousands, except share data) (Unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
2008 2007 2008 2007
----------------------------------------------
INTEREST INCOME:
Interest and fees on
loans receivable $ 13,425 $ 14,631 $ 26,749 $ 29,511
Interest on investment
securities-taxable 121 140 177 312
Interest on investment
securities-non taxable 37 38 69 76
Interest on mortgage-
backed securities 55 85 116 176
Other interest and
dividends 91 420 184 663
---------------------- ----------------------
Total interest income 13,729 15,314 27,295 30,738
INTEREST EXPENSE:
Interest on deposits 3,800 6,033 7,906 12,223
Interest on borrowings 1,287 587 2,380 993
---------------------- ----------------------
Total interest
expense 5,087 6,620 10,286 13,216
---------------------- ----------------------
Net interest income 8,642 8,694 17,009 17,522
Less provision for
loan losses 7,200 400 9,950 450
---------------------- ----------------------
Net interest income
after provision for
loan losses 1,442 8,294 7,059 17,072
NON-INTEREST INCOME:
Fees and service
charges 1,219 1,382 2,429 2,809
Asset management fees 547 513 1,171 1,061
Gain on sale of loans
held for sale 81 92 133 183
Impairment of
investment security (3,414) -- (3,414) --
Loan servicing income 33 27 61 66
Bank owned life
insurance income 148 140 294 279
Other 73 62 195 120
---------------------- ----------------------
Total non-interest
income (1,313) 2,216 869 4,518
NON-INTEREST EXPENSE:
Salaries and employee
benefits 3,740 3,908 7,624 7,876
Occupancy and
depreciation 1,251 1,244 2,484 2,546
Data processing 208 208 407 376
Amortization of core
deposit intangible 33 38 68 80 `
Advertising and
marketing expense 255 370 436 652
FDIC insurance premium 157 19 271 38
State and local taxes 169 178 344 349
Telecommunications 114 92 238 196
Professional fees 248 172 450 395
Other 533 602 1,053 1,104
---------------------- ----------------------
Total non-interest
expense 6,708 6,831 13,375 13,612
---------------------- ----------------------
INCOME (LOSS) BEFORE
INCOME TAXES (6,579) 3,679 (5,447) 7,978
PROVISION (CREDIT) FOR
INCOME TAXES (2,381) 1,249 (2,042) 2,709
---------------------- ----------------------
NET INCOME (LOSS) $ (4,198) $ 2,430 $ (3,405) $ 5,269
====================== ======================
Earnings (loss) per
common share:
Basic $ (0.39) $ 0.22 $ (0.32) $ 0.47
Diluted $ (0.39) $ 0.22 $ (0.32) $ 0.47
Weighted average number
of shares outstanding:
Basic 10,692,838 10,904,464 10,685,459 11,146,813
Diluted 10,695,836 11,026,598 10,698,419 11,275,562
At or for
At or for the six the year
months ended ended
September 30, March 31,
2008 2007 2008
-------- -------- --------
FINANCIAL CONDITION DATA (Dollars in thousands)
------------------------
Average interest-earning assets $811,443 $732,999 $751,023
Average interest-bearing liabilities 705,142 621,295 643,265
Net average earning assets 106,301 111,704 107,758
Non-performing assets 22,770 206 8,171
Non-performing loans 22,071 132 7,677
Allowance for loan losses 16,124 9,062 10,687
Allowance for loan losses and unfunded
loan commitments 16,410 9,484 11,024
Average interest-earning assets to
average interest-bearing liabilities 115.08% 117.98% 116.75%
Allowance for loan losses to
non-performing loans 73.06% 6,865.15% 139.21%
Allowance for loan losses to total loans 2.05% 1.30% 1.39%
Allowance for loan losses and unfunded
loan commitments to total loans 2.08% 1.36% 1.44%
Non-performing loans to total loans 2.80% 0.02% 1.00%
Non-performing assets to total assets 2.54% 0.03% 0.92%
Shareholders' equity to assets 9.83% 11.28% 10.44%
Number of banking facilities 20 19 20
LOAN DATA Sept. 30, Sept. 30, March 31,
--------- 2008 2007 2008
-------- -------- --------
Commercial and
construction
Commercial $123,569 15.71% $ 90,515 13.00% $109,585 14.28%
Other real estate
mortgage 442,482 56.26% 367,380 52.75% 429,422 55.97%
Real estate
construction 134,930 17.16% 162,429 23.32% 148,631 19.37%
--------------------------------------------------
Total commercial
and construction 700,981 89.13% 620,324 89.07% 687,638 89.62%
Consumer
Real estate one-to
four family 82,062 10.43% 71,725 10.30% 75,922 9.90%
Other installment 3,472 0.44% 4,432 0.63% 3,665 0.48%
--------------------------------------------------
Total consumer 85,534 10.87% 76,157 10.93% 79,587 10.38%
--------------------------------------------------
Total loans 786,515 100.00% 696,481 100.00% 767,225 100.00%
======= ======= =======
Less:
Allowance for loan
losses 16,124 9,062 10,687
-------- -------- --------
Loans receivable,
net $770,391 $687,419 $756,538
======== ======== ========
COMPOSITION OF COMMERCIAL AND CONSTRUCTION LOAN TYPES BASED ON LOAN
PURPOSE
--------------------------------------------------------------------
Other
Real Commercial &
Estate Real Estate Construction
Commercial Mortgage Construction Total
---------- -------- ------------ ------------
September 30, 2008 (Dollars in thousands)
------------------
Commercial $ 123,569 $ -- $ -- $ 123,569
Commercial
construction -- -- 50,925 50,925
Office buildings -- 83,168 -- 83,168
Warehouse/industrial -- 41,501 -- 41,501
Retail/shopping
centers/strip malls -- 81,007 -- 81,007
Assisted living
facilities -- 30,553 -- 30,553
Single purpose
facilities -- 79,307 -- 79,307
Land -- 99,668 -- 99,668
Multi-family -- 27,278 -- 27,278
One-to-four family -- -- 84,005 84,005
------------------------------------------------
Total $ 123,569 $442,482 $ 134,930 $ 700,981
================================================
March 31, 2008
--------------
Commercial $ 109,585 $ -- $ -- $ 109,585
Commercial
construction -- -- 55,277 55,277
Office buildings -- 88,106 -- 88,106
Warehouse/industrial -- 39,903 -- 39,903
Retail/shopping
centers/strip malls -- 70,510 -- 70,510
Assisted living
facilities -- 28,072 -- 28,072
Single purpose
facilities -- 65,756 -- 65,756
Land -- 108,030 -- 108,030
Multi-family -- 29,045 -- 29,045
One-to-four family -- -- 93,354 93,354
------------------------------------------------
Total $ 109,585 $429,422 $ 148,631 $ 687,638
================================================
At the year
At the six months ended September 30, ended March 31,
2008 2007 2008
---- ---- ----
(Dollars in thousands)
DEPOSIT DATA
------------
Interest
checking $ 80,266 12.59% $132,340 20.06% $102,489 15.37%
Regular
savings 27,528 4.32% 27,408 4.15% 27,401 4.11%
Money market
deposit
accounts 166,834 26.17% 235,091 35.63% 189,309 28.38%
Non-interest
checking 83,555 13.11% 85,492 12.96% 82,121 12.31%
Certificates
of deposit 279,307 43.81% 179,454 27.20% 265,680 39.83%
-------------------------------------------------------
Total
deposits $637,490 100.00% $659,785 100.00% $667,000 100.00%
=======================================================
At or for the three At or for the six
months ended months ended
September 30, September 30,
SELECTED OPERATING DATA 2008 2007 2008 2007
----------------------- ---- ---- ---- ----
(Dollars in thousands, except share data)
Efficiency ratio(4) 91.53% 62.61% 74.81% 61.76%
Efficiency ratio net of
intangible
amortization 90.61% 61.98% 74.10% 61.15%
Coverage ratio(6) 128.83% 127.27% 127.17% 128.72%
Coverage ratio net of
intangible
amortization 129.46% 127.98% 127.82% 129.49%
Return on average
assets(1) -1.86% 1.19% -0.77% 1.29%
Return on average
equity(1) -17.66% 9.98% -7.17% 10.58%
Average rate earned on
interest-earned assets 6.63% 8.31% 6.72% 8.37%
Average rate paid on
interest-bearing
liabilities 2.84% 4.22% 2.91% 4.24%
Spread(7) 3.79% 4.09% 3.81% 4.13%
Net interest margin 4.18% 4.72% 4.19% 4.78%
PER SHARE DATA
--------------
Basic earnings per
share(2) $ (0.39) $ 0.22 $ (0.32) $ 0.47
Diluted earnings per
share(3) (0.39) 0.22 (0.32) 0.47
Book value per share(5) 8.06 8.42 8.06 8.42
Tangible book value per
share(5) 5.65 6.01 5.65 6.01
Market price per share:
High for the period $ 7.38 $ 15.73 $ 9.79 $ 16.28
Low for the period 4.52 13.30 4.52 13.30
Close for period end 5.96 14.85 5.96 14.85
Cash dividends declared
per share 0.045 0.110 0.135 0.220
Average number of
shares outstanding:
Basic(2) 10,692,838 10,904,464 10,685,459 11,146,813
Diluted(3) 10,695,836 11,026,598 10,698,419 11,275,562
(1) Amounts are annualized.
(2) Amounts calculated exclude ESOP shares not committed to be
released.
(3) Amounts calculated exclude ESOP shares not committed to be
released and include common stock equivalents.
(4) Non-interest expense divided by net interest income and
non-interest income.
(5) Amounts calculated include ESOP shares not committed to be
released.
(6) Net interest income divided by non-interest expense.
(7) Yield on interest-earning assets less cost of funds on interest
bearing liabilities.