Vancouver, WA – January 29, 2009 – Riverview Bancorp, Inc. (NASDAQ GSM: RVSB) today reported net income of $1.5 million, or $0.14 per diluted share, in the third quarter of fiscal 2009 ended December 31, 2008, compared to $2.2 million, or $0.21 per diluted share, in the third quarter of fiscal 2008.
For the first nine months of fiscal 2009, Riverview reported a net loss of $1.9 million, or $0.18 per diluted share, compared to earnings of $7.5 million, or $0.67 per diluted share, for the first nine months of fiscal 2008. Financial results for fiscal 2009 include a $3.4 million non-cash other than temporary impairment (OTTI) charge on an investment security and a $7.2 million provision for loan losses in the second fiscal quarter ended September 30, 2008.
“Our third quarter results were solid as we continue to strengthen our franchise,” said Pat Sheaffer, Chairman and CEO. “Loan and deposit growth was strong, with loan balances up 13% year-over-year and 5% over the prior quarter and deposit balances increasing 11% year-over-year and 8% over the prior quarter. However, we have not been immune to the current economic slowdown in our markets and as such, we expect loan growth to slow in the coming calendar year. We will continue to focus on reducing controllable expenses throughout the year and stabilizing the net interest margin.”
“We continue to maintain capital levels in excess of the well-capitalized regulatory threshold,” stated Sheaffer. “In addition to our solid customer base, we have available to us further sources of liquidity, including additional borrowings from the Federal Home Loan Bank, the sale of certain available for sale securities, borrowings at correspondent banks and wholesale markets, including brokered deposits. In January 2009, we were approved for participation in the Federal Reserve Bank’s primary credit program. This program, coupled with our other funding sources, will give us available liquidity of $400 million, or 43% of total assets. With our growing capital and liquidity levels, we are confident that we are well positioned to work through the challenges of this difficult economic period.”
“We have continued to rely on core deposits and our long-standing customer base to grow our deposits,” said Sheaffer. “Our stable funding sources remain a strength for Riverview, as we have traditionally focused on less volatile sources of deposits.” Non-brokered deposits have increased $32.1 million, up 5% for the quarter or 20% annualized, since September 30, 2008. At December 31, 2008, brokered deposits accounted for 5.2% of total deposits.
Riverview’s actual and required minimum capital amounts and ratios are presented in the following table.
Credit Quality
“We continue to devote a considerable amount of resources to monitoring credit quality,” said Dave Dahlstrom, EVP and Chief Credit Officer. “We have recently allocated five new officers to ensure problem assets are managed in a timely manner. We have also added additional reporting on problem loans, including comprehensive staff and management meetings and we are conducting even more intensive monitoring and analysis on our existing portfolio to help proactively identify loans before they become a problem asset. This includes, among other things, performing detailed breakdowns of our construction and land development loans by geographic region and classification. In addition, although we have always maintained a conservative philosophy regarding underwriting, for these turbulent economic times we have even further tightened our underwriting criteria across all loan types such as requiring lower loan to values and higher debt service coverage ratios.”
Non-performing assets increased $8.6 million to $31.4 million, or 3.38% of total assets, at December 31, 2008, compared to $22.8 million, or 2.54% of total assets, three months earlier. Total non-performing loans consist of forty-four loans and thirty-six lending relationships, which includes fourteen land-acquisition and development loans totaling $16.9 million, eight construction loans totaling $3.5 million, three commercial loans totaling $1.7 million, fourteen residential real estate loans totaling $2.0 million and five other real estate mortgage loans totaling $4.3 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 long-time Washington-based customer who has property located in Southern California. Riverview also had $3.0 million in other real estate owned (OREO) at the end of December 2008 compared to $699,000 at September 30, 2008. Included in OREO are sixteen properties limited to seven lending relationships. These properties consist of fourteen single-family homes and two residential lot loans. All properties are located in the Company’s primary market area except for one single family home located on the southern Washington coast.
Total classified and non-performing loans, including OREO, were $37.8 million at December 31, 2008 compared to $37.3 million at September 30, 2008 and $10.5 million at December 31, 2007. “We remain focused on reducing the level of our classified and non-performing assets as we continue to actively work with our borrowers to help mitigate losses,” added Dahlstrom. Residential land development and construction loans accounted for $25.9 million of these balances at December 31, 2008, compared to $26.8 million at September 30, 2008. Multi-family and commercial loans accounted for $4.2 million and $2.6 million, respectively, of the remaining balance at December 31, 2008, compared to $4.2 million and $3.7 million, respectively, at September 30, 2008.
The provision for loan losses was $1.2 million for the third quarter, compared to $7.2 million during the second quarter and $650,000 in the third quarter a year ago. For the first nine months of fiscal 2009 the provision for loan losses totaled $11.2 million, compared to $1.1 million in the same period a year ago. “We increased our provision for loan losses again this quarter from prior year amounts not only to account for higher levels of nonperforming loans compared to a year ago, but also as part of our prudent system to build up our reserves during these very uncertain economic times,” said Dahlstrom.
The allowance for loan losses, including unfunded loan commitments of $260,000, was $16.5 million, or 2.01% of total loans at December 31, 2008 compared to $16.4 million, or 2.08% of total loans at September 30, 2008 and $9.9 million, or 1.37% of total loans, at December 31, 2007. Net loan charge-offs were $1.1 million for the quarter ended December 31, 2008, compared to $4.2 million for the previous linked quarter and $207,000 for the fiscal third quarter a year ago.
OTTI Charge during 2Q09
During the second quarter of fiscal 2009 Riverview recorded a $3.4 million non-cash OTTI charge on an investment security. The investment 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. 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, caused the fair value to decline severely enough to warrant an OTTI charge. Consequently, management chose to recognize a $3.4 million OTTI charge during the second quarter of fiscal 2009 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 loans 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 $5.0 million, or 0.53% of total assets at December 31, 2008. Riverview does not have any exposure to Government Sponsored Enterprise (GSE) securities in its investment portfolio.
Operating Results
“The 175 basis point drop in the Federal Funds rate during the quarter, as well as the reversal of interest on loans placed on non-accrual status during the quarter reduced our net interest margin,” said Ron Wysaske, President and COO. “We expect our margin to improve as our deposit pricing catches up with the recent interest rate cuts.” The reversal of interest on loans placed on non-accrual status during the quarter accounted for a twelve basis point decrease in the quarterly net interest margin. For the third quarter of fiscal 2009, the net interest margin was 3.95% compared to 4.18% in the previous linked quarter and 4.71% in the third quarter a year ago. For the first nine months of fiscal 2009 the net interest margin was 4.11% compared to 4.75% in the first nine months of fiscal 2008.
Third quarter net interest income was $8.4 million, compared to $8.9 million in the third quarter a year ago. For the first nine months of fiscal 2009, net interest income was $25.4 million compared to $26.4 million for the same period in fiscal 2008.
Non-interest income was $1.9 million for the three months ended December 31, 2008, compared to $2.2 million for the third quarter a year ago. “The decrease in third quarter non-interest income compared to the same period a year ago is due to a $148,000 decrease in mortgage broker fees as a result of the slowing real estate market and a $77,000 decrease in asset management fees,” said Wysaske. For the first nine months of fiscal 2009, total non-interest income, excluding the $3.4 million OTTI charge during 2Q09, was $6.2 million, compared to $6.7 million for the first nine months of fiscal 2008.
“We have continued to focus on managing costs and as a result we have been able to keep our operating expenses in line in fiscal 2009, even reducing them from year ago levels,” said Wysaske. Non-interest expense improved to $6.9 million in the third quarter of fiscal 2009, compared to $7.0 million in the third quarter of fiscal 2008. Decreases in salaries and employee benefits of $257,000 were partially offset by increased FDIC insurance premiums of $110,000. Riverview’s efficiency ratio was 67.23% for the quarter ended December 31, 2008, compared to 63.69% for the same period in the prior year.
Balance Sheet Review
“Although third quarter loan growth was strong, up 5% for the quarter or 18% annualized,” said Dahlstrom. “We are seeing the loan pipeline start to decrease from the robust pace of the last few years. We expect to see a decline in loan demand and loan originations in the near term, reflecting the slowdown in the economy and tighter underwriting criteria, with our focus of keeping the portfolio high quality and well-diversified.” Net loans increased 13% to $805 million at December 31, 2008, compared to $716 million a year ago. Commercial and commercial real estate loans account for 73% of the total loan portfolio and construction loans account for 16% of the total loan portfolio at December 31, 2008.
“We continue to reduce our exposure to real estate construction and we reduced our one-to-four family construction portfolio to $76 million at quarter-end from $84 million three months earlier and $101 million at the end of December 2007,” added Dahlstrom. “We should continue to see reductions in our construction portfolio as we focus on other lending opportunities.”
Deposits grew 8% in the last three months, increasing $52 million to $690 million at the end of December 2008, compared to $637 million at September 30, 2008. Transaction accounts represent 55% of all deposits with non-interest checking balances representing 12% of total deposits and interest bearing checking balances representing 15% of total deposits. Brokered deposits increased $20.2 million since September 30, 2008, to $35.8 million, which represents 5.2% of total deposits.
Shareholders’ Equity
Shareholders’ equity was $89.6 million at December 31, 2008, compared to $92.4 million a year ago. Book value per share was $8.21 at the end of December 2008, compared to $8.46 a year earlier and tangible book value per share was $5.80 at quarter-end, compared to $6.04 a year earlier. Tangible shareholder equity was 6.82% of its total assets at December 31, 2008, compared to 7.80% a year earlier.
As previously reported, the Board of Directors of Riverview elected to suspend the dividend for the current quarter. “We believe this was a prudent step to preserve capital given the current uncertain and volatile market conditions,” said Sheaffer. “We continue to exceed the regulatory benchmark for a ‘well-capitalized’ financial institution.” At December 31, 2008, Riverview’s total risk-based capital ratio was 10.73%. “We plan on continuing to carefully manage our capital with the goal of increasing total capital,” added Sheaffer. “All capital management options are being analyzed, including an evaluation of the Bank’s balance sheet structure and the use of approximately $5 million of cash available at the holding company which could be invested in the Bank. We believe taking these steps will position Riverview to take advantage of strategic growth opportunities as they present themselves.”
Subscribe to:
Post Comments (Atom)
Posts
No comments:
Post a Comment