Riverview Bancorp : Earns $2.5 Million in Second Fiscal Quarter 2024 - Form 8-K

Riverview Bancorp Earns $2.5 Million in Second Fiscal Quarter 2024

Vancouver, WA – October 26, 2023 - Riverview Bancorp, Inc. (Nasdaq GSM: RVSB) ("Riverview" or the "Company") today reported earnings of $2.5 million, or $0.12 per diluted share, in the second fiscal quarter ended September 30, 2023, compared to $2.8 million, or $0.13 per diluted share, in the first fiscal quarter ended June 30, 2023, and $5.2 million, or $0.24 per diluted share, in the second fiscal quarter a year ago.

In the first six months of fiscal 2024, net income was $5.3 million, or $0.25 per diluted share, compared to $9.8 million, or $0.45 per diluted share, in the first six months of fiscal 2023.

"Our operating results for the second fiscal quarter of 2024 remained sound, as we continue to be impacted by higher interest expense on deposits and borrowings," stated Dan Cox, Chief Operating Officer, Acting President and Chief Executive Officer. "The persistently high interest rate environment continues to present challenges to bank profitability throughout the country, including our operations. Loan growth was modest at 1.1%, or 4.5% annualized, and deposit balances remained relatively flat compared to the prior quarter end, as deposit runoff seems to have slowed. As we look to the second half of fiscal 2024, our priorities remain focused on taking care of our clients, while at the same time protecting our liquidity and capital position in this uncertain economic environment."

Second Quarter Highlights (at or for the period ended September 30, 2023)

Riverview's net interest income was $9.9 million in the current quarter, compared to $10.4 million in the preceding quarter, and $13.4 million in the second fiscal quarter a year ago. The decrease in net interest income compared to the prior quarter was driven primarily by an increase in interest expense on deposits and borrowings due to rising interest rates. In the first six months of fiscal 2024, net interest income was $20.2 million, compared to $26.1 million in the first six months of fiscal 2023.

Riverview's NIM was 2.63% for the second quarter of fiscal 2024, a 16 basis-point decrease compared to 2.79% in the preceding quarter and a 67 basis-point decrease compared to 3.30% in the second quarter of fiscal 2023. "The NIM contraction during the current quarter, compared to the prior quarter, was a result of higher interest expense due to increased rates on our deposit products and the interest expense related to our borrowings," said David Lam, EVP and Chief Financial Officer. In the first six months of fiscal 2024, the net interest margin was 2.71% compared to 3.21% in the same period a year earlier.

Investment securities totaled $430.0 million at September 30, 2023, compared to $444.2 million at June 30, 2023, and $464.7 million at September 30, 2022. The average securities balances for the quarters ended September 30, 2023, June 30, 2023, and September 30, 2022, were $466.0 million, $476.1 million, and $473.4 million, respectively. The weighted average yields on securities balances for those same periods were 2.00%, 2.05%, and 1.89%, respectively. The duration of the investment portfolio at September 30, 2023 was approximately 4.9 years. The anticipated investment cashflows over the next twelve months is approximately $42.4 million.

Riverview's yield on loans was stable at 4.51% during the second fiscal quarter, compared to 4.50% in the preceding quarter, and improved from 4.38% in the second fiscal quarter a year ago. Loan yields remain under pressure due to the concentration of fixed-rate loans in the Company's portfolio. Deposit costs increased to 0.59% during the second fiscal quarter compared to 0.44% in the preceding quarter, and 0.09% in the second fiscal quarter a year ago.

Non-interest income increased to $3.4 million during the second fiscal quarter compared to $3.3 million in the preceding quarter and $3.1 million in the second fiscal quarter of 2023. Fees and service charges increased as a result of income from a fintech referral partnership. In the first six months of fiscal 2024, non-interest income was $6.7 million compared to $6.3 million in the same period a year ago.

Asset management fees were $1.3 million during the second fiscal quarter compared to $1.4 million in the preceding quarter, and $1.2 million in the second fiscal quarter a year ago. Riverview Trust Company's assets under management were $875.7 million at September 30, 2023, compared to $901.6 million at June 30, 2023 and $752.4 million at September 30, 2022.

Non-interest expense was $10.1 million during the second quarter, compared to $10.0 million in the preceding quarter and $9.8 million in the second fiscal quarter a year ago. Salary and employee benefits were lower during the current quarter as a result of the reversal of certain equity incentives. Occupancy and depreciation costs increased during the quarter due to updates and modernization of Riverview's facilities. Advertising costs were also higher as Riverview continues to promote brand recognition to attract new customers. The efficiency ratio was 76.1% for the second fiscal quarter compared to 73.1% in the preceding quarter and 59.2% in the second fiscal quarter a year ago. Year-to-date, non-interest expense was $20.1 million compared to $19.6 million in the first six months of fiscal 2023.

Return on average assets was 0.62% in the second quarter of fiscal 2024 compared to 0.72% in the preceding quarter. Return on average equity and return on average tangible equity (non-GAAP) were 6.33% and 7.68%, respectively, compared to 7.31% and 8.86%, respectively, for the prior quarter.

Riverview's effective tax rate for the second quarter of fiscal 2024 was 22.0%, compared to 22.4% for the preceding quarter and 23.2% for the year ago quarter.

Total loans increased to $1.02 billion at September 30, 2023, compared to $1.00 billion three months earlier and $1.01 billion a year earlier. Riverview's loan pipeline was $62.7 million at September 30, 2023, compared to $75.8 million at the end of the prior quarter. New loan originations during the quarter totaled $39.5 million, compared to $20.3 million in the preceding quarter and $62.1 million in the second quarter a year ago.

Undisbursed construction loans totaled $49.9 million at September 30, 2023, compared to $45.3 million at June 30, 2023, with the majority of the undisbursed construction loans expected to fund over the next several quarters. Undisbursed homeowner association loans for the purpose of common area maintenance and repairs totaled $16.9 million at September 30, 2023, compared to $21.7 million at June 30, 2023. Revolving commercial business loan commitments totaled $62.2 million at September 30, 2023, compared to $62.5 million three months earlier. Utilization on these loans totaled 23.4% at September 30, 2023, compared to 27.0% at June 30, 2023. The weighted average rate on loan originations during the quarter was 7.06% compared to 6.53% in the preceding quarter.

The office building loan portfolio totaled $117.0 million at September 30, 2023 compared to $118.7 million a year ago. The average loan balance of this loan portfolio was $1.5 million and had an average loan-to-value ratio of 55.8% and an average debt service coverage ratio of 2.0.

Total deposits were $1.24 billion at September 30, 2023, which was nearly unchanged compared to June 30, 2023, and decreased compared to $1.49 billion a year ago. The decrease was attributed to deposit pricing pressures and customers seeking out higher yielding investment alternatives, including Riverview Trust Company's money market accounts. Non-interest checking and interest checking accounts, as a percentage of total deposits, totaled 49.5% at September 30, 2023, compared to 50.1% at June 30, 2023 and 53.3% at September 30, 2022.

FHLB advances were $143.2 million at September 30, 2023 and were comprised of overnight advances and a short-term borrowing. This compared to $136.1 million at June 30, 2023 and no outstanding FHLB advances a year earlier. These FHLB advances were utilized to partially offset the decrease in deposit balances and to fund the increase in loans receivable. The BTFP was created by the Federal Reserve to support and make additional funding available to eligible depository institutions to help banks meet the needs of their depositors. Riverview has registered and is eligible to utilize the BTFP. Riverview does not intend to utilize the BTFP, but could do so should the need arise.

Shareholders' equity was $152.0 million at September 30, 2023, compared to $154.1 million three months earlier and $147.2 million a year earlier. The decrease in shareholders' equity at September 30, 2023, compared to the prior quarter was primarily due to a $3.2 million increase in accumulated other comprehensive loss related to an increase in the unrealized loss on available for sale securities, reflecting the increase in interest rates during the current quarter. Tangible book value per share (non-GAAP) was $5.90 at September 30, 2023, compared to $6.00 at June 30, 2023, and $5.56 at September 30, 2022. Riverview paid a quarterly cash dividend of $0.06 per share on October 23, 2023, to shareholders of record on October 12, 2023.

In accordance with changes in generally accepted accounting principles, Riverview adopted the new credit loss accounting standard known as Current Expected Credit Loss ("CECL") on April 1, 2023. Under CECL, the ACL is based on expected credit losses rather than on incurred losses. Adoption of CECL, which includes the ACL and allowance for unfunded loan commitments, resulted in a cumulative effect after-tax adjustment to stockholders' equity as of April 1, 2023, of $53,000, which had no impact on earnings.

Asset quality remained stable, with non-performing loans, excluding SBA and USDA government guaranteed loans ("government guaranteed loans") (non-GAAP), at $198,000 or 0.02% of total loans as of September 30, 2023, compared

to $210,000, or 0.02% of total loans at June 30, 2023, and $248,000, or 0.02% of total loans at September 30, 2022. At September 30, 2023, there were no non-performing government guaranteed loans. At June 30, 2023, including government guaranteed loans, non-performing assets were $1.0 million, or 0.06% of total assets and $21.0 million, or 1.25% of total assets, at September 30, 2022. Previously, there were non-performing government guaranteed loans where payments had been delayed due to the servicing transfer of these loans between two third-party servicers. The service transfer has been completed as of September 30, 2023.

Riverview recorded net loan recoveries of $3,000 during the second fiscal quarter. This compared to net loan charge-offs of $8,000 for the preceding quarter. Riverview recorded no provision for credit losses for the second fiscal quarter, or for the preceding quarter.

Classified assets were $1.1 million at September 30, 2023 and June 30, 2023, compared to $6.6 million at September 30, 2022. The classified asset to total capital ratio was 0.6% at September 30, 2023 and June 30, 2023, and 3.8% a year earlier. Criticized assets increased to $35.1 million at September 30, 2023, compared to $24.5 million at June 30, 2023 and $980,000 at September 30, 2022. The increase in criticized assets during the current quarter was mainly due to two relationship downgrades that have plans in place to payoff outstanding loans or meet certain loan covenants. The Company does not believe this is a systemic credit issue.

The allowance for credit losses was $15.3 million at September 30, 2023 and June 30, 2023, and $14.6 million one year earlier. The allowance for credit losses represented 1.51% of total loans at September 30, 2023, compared to 1.53% at June 30, 2023, and 1.44% a year earlier. The allowance for credit losses to loans, net of government guaranteed loans (non-GAAP), was 1.60% at September 30, 2023, compared to 1.62% at June 30, 2023, and 1.53% a year earlier.

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 16.91% and a Tier 1 leverage ratio of 10.74% at September 30, 2023. Tangible common equity to average tangible assets ratio (non-GAAP) was 8.01% at September 30, 2023.

In November 2022, Riverview announced that its Board of Directors authorized the repurchase of up to $2.5 million of the Company's outstanding shares in the open market, based on prevailing market prices, or in privately negotiated transactions, over a period beginning on November 28, 2022, and continuing until the earlier of the completion of the repurchase or May 28, 2023, depending upon market conditions. During the first fiscal quarter of fiscal year 2024, the Company repurchased 109,162 shares at an average price of $5.29 per share. As of May 5, 2023, Riverview had completed the full $2.5 million authorized, repurchasing 394,334 shares at an average price of $6.34 per share.

In addition to results presented in accordance with generally accepted accounting principles ("GAAP"), this press release contains certain non-GAAP financial measures. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in Riverview's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers. However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP. Where applicable, comparable earnings information using GAAP financial measures is also presented. Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies. For a reconciliation of these non-GAAP financial measures, see the tables below.

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 $1.58 billion at September 30, 2023, it is the parent company of the 100-year-old Riverview 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 through 17 branches, including 13 in the Portland-Vancouver area, and 3 lending centers. For the past 10 years, Riverview has been named Best Bank by the readers of The Vancouver Business Journal and The Columbian.

"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements which include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions, future economic performance and projections of financial items. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated or implied by our forward-looking statements, including, but not limited to: potential adverse impacts to economic conditions in our local market areas, other markets where the Company has lending relationships, or other aspects of the Company's business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation, a potential recession, the failure of the U.S. Congress to increase the debt ceiling, or slowed economic growth caused by increasing political instability from acts of war including Russia's invasion of Ukraine, as well as supply chain disruptions, recent bank failures and any governmental or societal responses thereto; 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 credit losses and provision for credit losses that may be impacted by deterioration in the housing and commercial real estate markets; 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; the transition away from London Interbank Offered Rate toward new interest rate benchmarks; 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 originate loans for sale and sell loans in the secondary market; results of examinations of the Bank by the Federal Deposit Insurance Corporation and the Washington State Department of Financial Institutions, Division of Banks, and of the Company by the Board of Governors of the Federal Reserve System, or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require the Company to increase its allowance for credit losses, write-down assets, reclassify its assets, change the 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 banking, securities and tax law, and in regulatory policies and principles, or the interpretation of regulatory capital or other rules; the Company's ability to attract and retain deposits; the unexpected outflow of uninsured deposits that may require us to sell investment securities at a loss; 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 consolidated 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; disruptions, security breaches or other adverse events, failures or interruptions in or attacks on our information technology systems or on the third-party vendors who perform several of our critical processing functions; 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 implement its business strategies; the Company's ability to successfully integrate any assets, liabilities, customers, systems, and management personnel it may acquire into its operations and the Company's ability to realize related revenue synergies and cost savings within expected time frames; future goodwill impairment due to changes in Riverview's business, changes in market conditions, or other factors; 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; the quality and composition of our securities portfolio and the impact of and adverse changes in the securities markets, including market liquidity; 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 standards; the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on our business; and 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 reports filed with and furnished to the U.S. Securities and Exchange Commission.

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 included in this report or the reasons why actual results could differ from those contained in such statements, whether as a result of new information or 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 2024 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 consolidated financial condition and consolidated results of operations as well as its stock price performance.