News Details

VANCOUVER, Wash.--(BUSINESS WIRE)-- Riverview Bancorp, Inc. (Nasdaq GSM: RVSB). (“Riverview” or the “Company”) today reported a net loss of $16.6 million, or $0.74 per share, in its third fiscal quarter ended December 31, 2011, compared to net income of $579,000, or $0.03 per share, in its third fiscal quarter a year ago. The Company’s financial results were impacted by the previously announced increase in the provision for loan losses of $8.1 million as well as the establishment of an $8.7 million deferred tax asset valuation allowance.

Highlights (at or for the period ended December 31, 2011)

• Credit Quality: Nonperforming loans (NPLs) increased to $32.0 million, or 4.61% of total loans. Real estate owned (REO)decreased to $20.7 million from $25.6 million at September 30, 2011.
• Capital and Liquidity: The Company remains very well capitalized with total risk-based capital ratio of 13.14% and a tangible common equity ratio of 7.84%. Liquidity remains strong with no outstanding borrowings and increased on-balance sheet liquidity.
• Balance Sheet Review: Branch deposit growth remained strong during the quarter. Branch deposits increased $9.6 million and total deposits increased $5.8 million during the quarter. Average deposits increased $18.4 million during the quarter and $31.6 million from the same quarter as the prior year. Loan balances decreased $2.2 million as loan growth has continued to be challenging. Average loan balances decreased $1.7 million during the quarter.
• Net Interest Margin: The net interest margin during the third fiscal quarter was 4.21%.
• Income Statement: Net loss was $16.6 million, or $0.74 per diluted share, as a result of the increase in the provision for loan losses and the deferred tax asset valuation.
• Deferred Tax Asset Valuation: The Company established a deferred tax asset valuation allowance of $8.7 million. This allowance represents a non-cash accounting entry that may be reversed in future periods if, among other considerations, the Company returns to sustained profitability. Reversals of this allowance would increase the Company’s net income in these future periods.

“The decision to significantly adjust our loan loss provision will help position Riverview not only for recovery and financial growth, but continued long-term success in an economy that remains frustratingly sluggish,” said Pat Sheaffer, Chairman and CEO. “The good news is that we will be strengthened by this move and our liquidity and capital levels remain strong. We are fortunate to have a solid net interest margin, a growing customer base and successful core operations. It was because of these strong capital levels that we were able to establish this valuation allowance and remain well-capitalized with no impact on our customers or our core business operations.”

Credit Quality

“The real estate market remains challenging,” said Ron Wysaske, President and COO. “Our focus will remain on preserving capital while aggressively identifying problem credits and reducing our exposure on these properties. We have already made significant progress in reducing our exposure to these types of loans, primarily land development and building lot loans, and selling acquired properties as quickly as possible.”

NPLs totaled $32.0 million, or 4.61% of total loans at December 31, 2011, compared to $29.7 million, or 4.27% of total loans at September 30, 2011.

REO balances decreased $4.9 million during the quarter to $20.7 million at December 31, 2011 compared to $25.6 million in the preceding quarter. REO sales during the quarter totaled $4.0 million, with write-downs of $2.5 million and additions of $1.6 million. Riverview currently has several additional properties under contract, including $1.0 million in REO that sold in January 2012.

The allowance for loan losses was $15.9 million at December 31, 2011, representing 2.29% of total loans and 49.71% of NPLs. The provision for loan losses was $8.1 million in the third quarter compared to $2.2 million in the preceding quarter and $1.6 million in the third quarter a year ago.

Balance Sheet Review

Deposit growth was highlighted by continued strong branch deposit growth. Total deposits increased $5.8 million during the quarter to $735.0 million at December 31, 2011 compared to $729.3 million at September 30, 2011 and $696.7 million a year ago. Average deposit balances, which eliminate fluctuations in daily balances, increased $18.4 million during the quarter and $31.6 million a year ago. Core deposits increased $37.8 million to $681.1 million at December 31, 2011 compared to $643.4 million a year ago. Core deposits comprise 92.7% of total deposits at December 31, 2011.

Net loans were $678.6 million at December 31, 2011 compared to $680.8 million at September 30, 2011 and $660.1 million a year ago. The decrease in net loans during the quarter is due to the continued difficult lending environment. Average loan balances decreased $1.7 million during the quarter. New loan production during the past year was concentrated in single-family residential mortgages and small-business commercial loans.

As with the previous quarter, Riverview continues to reduce its exposure to land development and speculative construction loans. The balance of these portfolios was $58.5 million at December 31, 2011 compared to $66.6 million at September 30, 2011 and $75.1 million a year ago. Speculative construction loans were $13.0 million, and land development loans were $45.5 million, representing a combined total of less than 9% of the total loan portfolio at December 31, 2011.

The commercial real estate (“CRE”) loan portfolio continues to perform well with only isolated credit issues. The CRE loan portfolio totaled $358.5 million as of December 31, 2011, of which 29% was owner-occupied and 71% was investor-owned. At December 31, 2011, the CRE portfolio contained nine loans totaling $8.9 million that were nonperforming, representing 2.49% of the total CRE portfolio.

Net Interest Margin

Riverview’s net interest margin was 4.21% for the third quarter compared to 4.35% for the preceding quarter. The decrease was due to a higher balance of cash and liquid assets being held by the Bank, as well as the reversal of interest from non-accrual loans. The increase in cash and liquids assets resulted in a 13 basis point decrease in the net interest margin while the reversal of interest on non-accrual loans decreased the net interest margin by nine basis points. The cost of interest bearing deposits was 0.67% during the current quarter, a decrease of eight basis points from the preceding quarter and a decrease of 33 basis points from the third quarter a year ago.

Income Statement

Net interest income was $8.4 million in the third quarter, which was the same as the preceding quarter. Net interest income was $8.8 million in the third quarter a year ago. The decline in net interest income was due to the reversal of interest on non-accrual loans and the continued pressure on loan yields as a result of the low interest rate environment. Operating revenue, which consists of net interest income plus non-interest income, was $9.9 million during the third quarter compared to $10.3 million in the preceding quarter and $10.7 million in the third quarter a year ago.

Non-interest income was $1.5 million in the third quarter compared to $1.8 million in the preceding quarter and $1.9 million in the third quarter a year ago. In the first nine months of fiscal year 2012, non-interest income was $5.3 million compared to $6.2 million in the first nine months of fiscal year 2011. The decline from the prior year was primarily due to a decline in both gains on the sale of REO properties and gains on sale of loans held for sale.

Fee income for Riverview Asset Management Corp. (“RAMCorp”), a trust company subsidiary of the Bank, totaled $568,000 during the third quarter compared to $570,000 in the preceding quarter and $520,000 in the third quarter a year ago. Fiscal year-to-date, RAMCorp’s fee income totaled $1.8 million compared to $1.5 million in the same period a year ago. Assets under management increased 9.8% to $337.7 million at December 31, 2011 compared to $307.5 million at December 31, 2010.

Non-interest expense was $10.2 million in the third quarter compared to $7.8 million in the preceding quarter and $8.3 million in the third quarter a year ago. Non-Interest expense increased due to an increase in REO expenses of $2.0 million from the prior linked quarter and $1.9 million from the same quarter a year ago. The increase in REO expenses was a result of write-downs on several properties due to updated valuations.

The Company established an $8.7 million valuation allowance against the deferred tax asset balance as of December 31, 2011, which reduced its deferred tax asset to $594,000. Looking forward, management will review the deferred tax asset valuation allowance on a quarterly basis. Any future reversals of the deferred tax asset valuation allowance would decrease the Company’s income tax expense and increase its after tax net income in the period of reversal.

The Company initiated its annual goodwill impairment test during the quarter. Any potential goodwill impairment could be material but would be a non‐cash charge and have no effect on the Company’s cash balances, liquidity or tangible equity. In addition, because goodwill is not included in the calculation of regulatory capital, the Company’s well‐capitalized regulatory ratios would not be affected by this potential non‐cash expense. We expect to finalize our goodwill impairment analysis during the fourth quarter of fiscal year 2012 and the results thereof will be disclosed in the fourth quarter financial statements.

Capital and Liquidity

The Bank continues to maintain capital levels in excess of the regulatory requirements to be categorized as “well capitalized” with a total risk-based capital ratio of 13.14% and a Tier 1 leverage ratio of 9.74% at December 31, 2011. The Company also has an additional $11.0 million in assets that could be used in the future to boost the Bank’s capital levels or support future growth.

At December 31, 2011, the Bank had available total and contingent liquidity of over $490 million, including over $300 million of borrowing capacity from the Federal Home Loan Bank of Seattle and the Federal Reserve Bank of San Francisco, and more than $70 million from cash and short-term investments. At December 31, 2011, the Bank had no outstanding borrowings.

Company Growth

Riverview recently began construction on its new branch in Gresham, Oregon, with the branch expected to open in the Summer 2012. The 5,000 square-foot full-service branch will fill a long-standing need for community banking in a rapidly growing metropolitan area and will be one of four Riverview branches in Oregon.

Non-GAAP Financial Measures

In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. Riverview believes that certain non-GAAP financial measures provide investors with information useful in understanding the company’s financial performance; however, readers of this report are urged to review these non-GAAP financial measures in conjunction with GAAP results as reported.

Financial measures that exclude intangible assets are non-GAAP measures. To provide investors with a broader understanding of capital adequacy, Riverview provides non-GAAP financial measures for tangible common equity, along with the GAAP measure. Tangible common equity is calculated as shareholders’ equity less goodwill and other intangible assets. In addition, tangible assets are total assets less goodwill and other intangible assets.

The following table provides reconciliations of ending shareholders’ equity (GAAP) to ending tangible shareholders’ equity (non-GAAP), and ending assets (GAAP) to ending tangible assets (non-GAAP).

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 $862 million, it is the parent company of the 88 year-old Riverview Community Bank, as well as Riverview Asset Management Corp. There are 17 branches, including twelve in the Portland-Vancouver area and three lending centers. The Bank offers true community banking services, focusing on providing the highest quality service and financial products to commercial and retail customers.

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

Such forward-looking statements may include projections. Any such projections were not prepared in accordance with published guidelines of the American Institute of Certified Public Accountants or the Securities Exchange Commission regarding projections and forecasts nor have such projections been audited, examined or otherwise reviewed by independent auditors of the Company. In addition, such projections are based upon many estimates and inherently subject to significant economic and competitive uncertainties and contingencies, many of which are beyond the control of management of the Company. Accordingly, actual results may be materially higher or lower than those projected. The inclusion of such projections herein should not be regarded as a representation by the Company that the projections will prove to be correct.

The Company cautions readers not to place undue reliance on any forward-looking statements. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company. The Company does not undertake and specifically disclaims any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for fiscal 2012 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us, and could negatively affect the Company’s operating and stock price performance.

Riverview Bancorp, Inc.
Pat Sheaffer or Ron Wysaske, 360-693-6650

Source: Riverview Bancorp, Inc.