SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) of
- ----- THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
-------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) of
- ----- THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 0-22957
RIVERVIEW BANCORP, INC.
(Exact name of registrant as specified in its charter)
Washington 91-1838969
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 N.E. Fourth Ave. Camas, WA 98607
(Address of principal executive office)
Registrant's telephone number, including area code: (360)834-2231
Check whether the registrant: (1) filed all reports required to be filed by
Sections 13 or 15(d) of the Exchange Act during the past 12 months (or for
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No_.
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date: Common Stock, $.01 par value --- 6,185,990 shares as of
June 30, 1998.
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Form 10-Q
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
INDEX
Page
----
Part I. Financial Information
---------------------
Item 1: Financial Statements (Unaudited)
Consolidated Statements of Financial Condition
as of June 30, 1998 and March 31, 1998 1
Consolidated Statements of Income: Three Months
Ended June 30, 1998 and 1997 2
Consolidated Statements of Shareholders' Equity
for the Year ended March 31, 1998 and for the Three Months
Ended June 30, 1998 3
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1998 and 1997 4
Notes to Consolidated Financial Statements 5-10
(unaudited)
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11-18
Part II. Other Information 19
SIGNATURES 20
EXHIBITS 21-22
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RIVERVIEW BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Condition
As of June 30, 1998 and March 31, 1998
June 30, March 31,
(In thousands, except share data) (Unaudited) 1998 1998
- ------------------------------------------------------------------------------
ASSETS
Cash (including interest-earning accounts of
$16,511 and $20,504) $ 21,812 $ 27,482
Loans held for sale 1,864 1,430
Investment securities held to maturity, at amortized
cost (fair value of $8,316 and $8,394) 8,264 8,336
Investment securities available for sale, at fair
value (amortized cost of $13,674 and $9,961) 13,638 9,977
Mortgage-backed securities held to maturity, at
amortized cost, (fair value of $18,131 and $20,758) 17,768 20,341
Mortgage-backed securities available for sale, at fair
value (amortized cost of $30,687 and $32,526) 30,757 32,690
Loans receivable (net of allowance of $1,043
and $984 for loan losses) 162,431 161,198
Prepaid expenses and other assets 1,103 882
Accrued interest receivable 1,614 1,597
Federal Home Loan Bank stock 2,003 1,966
Premises and equipment 4,962 4,802
Land held for development 471 471
Core deposit intangible 1,921 2,002
--------- ---------
TOTAL ASSETS $ 268,608 $ 273,174
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposit accounts $ 183,788 $ 179,825
Accrued expenses and other liabilities 3,204 2,490
Advance payment by borrowers for taxes and insurance (37) 84
Deferred income taxes, net 143 143
Federal Home Loan Bank advances 19,550 29,550
--------- ---------
Total Liabilities 206,648 212,092
SHAREHOLDERS' EQUITY
Serial preferred stock, $.01 par value; 250,000
authorized, issued and outstanding , none
Common stock, June 30, 1998- $.01 par value;
50,000,000 authorized; 6,185,990 issued,
5,841,120 outstanding; March 31, 1998
6,154,326, issued, 5,809,456 outstanding 62 62
Additional paid-in capital 53,488 53,399
Unearned shares issued to employee stock ownership
trust (2,993) (2,993)
Retained earnings 11,381 10,495
Net unrealized gain on securities available for sale,
net of tax 22 119
--------- ---------
Total shareholders' equity 61,960 61,082
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 268,608 $ 273,174
========= =========
The accompanying notes are an integral part of these unaudited consolidated
statements.
1
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RIVERVIEW BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three Months Ended June 30,
(In thousands, except share data) (Unaudited) 1998 1997
- ------------------------------------------------------------------------------
INTEREST INCOME
Interest on loans receivable $ 4,198 $ 3,636
Interest on investment securities 325 353
Interest on mortgage-backed securities 836 592
Other interest and dividends 263 42
---------- ----------
Total interest income 5,622 4,623
---------- ----------
INTEREST EXPENSE
Interest on deposits 1,961 1,808
Interest on borrowings 371 442
---------- ----------
Total interest expense 2,332 2,250
---------- ----------
Net interest income 3,290 2,373
Less provision for loan losses 60 45
---------- ----------
Net interest income after
provision for loan losses 3,230 2,328
---------- ----------
NON-INTEREST INCOME
Fees and service charges 537 340
Gain on sale of loans held for sale 61 14
Gain on sale of securities 27 9
Loan servicing income 38 66
Other 19 40
---------- ----------
Total non-interest income 682 469
---------- ----------
NON-INTEREST EXPENSE
Salaries and employee benefits 1,176 971
Occupancy and depreciation 360 299
FDIC insurance premium 26 27
Amortization of excess of cost over fair value
of deposits acquired 82 82
Marketing 70 84
Other 203 199
---------- ----------
Total non-interest expense 1,917 1,662
---------- ----------
INCOME BEFORE FEDERAL INCOME TAXES 1,995 1,135
FEDERAL INCOME TAX EXPENSE 738 390
---------- ----------
NET INCOME $ 1,257 $ 745
========== ==========
Earnings per common share:
Basic $ 0.22 $ 0.12
Diluted 0.21 0.12
Weighted average number of shares outstanding:
Basic 5,814,248 6,044,820
Diluted 5,945,666 6,171,736
The accompanying notes are an integral part of these unaudited consolidated
statements.
2
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RIVERVIEW BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED MARCH 31, 1998
AND THE THREE MONTHS ENDED JUNE 30, 1998
(In thousands, except share data) (Unaudited)
- ---------------------------------------------------------------------------------------------------------
Unearned Net
Shares Unrealized
Issued to Gain
ADDI- Employee (Loss) On
COMMON STOCK TIONAL Stock Securities
----------------- PAID-IN Ownership RETAINED Available
SHARES AMOUNT CAPITAL Trust EARNINGS for Sale TOTAL
------ ------ ------- ----- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, April 1, 1997 6,043,656 $ 2,416 $ 16,043 $ (386) $ 7,033 $ (84) $25,022
Net Income - - - - 3,924 - 3,924
Retirement of Mutual
Holding Company stock (3,570,270) (1,408) 1,494 - - - 86
Issuance and exchange
of common stock as a result
of conversion/reorganization 3,570,750 (948) 35,586 - - - 34,638
Retirement of fractional shares (230) - - - - - -
Cash dividends - - - - (462) - (462)
Exercise of stock options 26,578 2 88 - - - 90
Shares acquired by ESOP (285,660) - - (2,856) - - (2,856)
Earned ESOP shares 24,632 - 188 249 - - 437
Change in unrealized gain on
securities available for sale,
net of tax - - - - - 203 203
--------- ------- -------- ------- ------- ----- -------
Balance, March 31, 1998 5,809,456 $ 62 $ 53,399 $(2,993) $10,495 $ 119 $61,082
--------- ------- -------- ------- ------- ----- -------
Net Income - - - - 1,257 - 1,257
Cash dividends - - - - (371) - (371)
Exercise of stock options 31,664 - 89 - - - 89
Earned ESOP shares - - - - - - -
Change in net unrealized gain
on securities available for
sale, net - - - - - (97) (97)
--------- ------- -------- ------- ------- ----- -------
Balance, June 30, 1998 5,841,120 $ 62 $ 53,488 $(2,993) $11,381 $ 22 $61,960
========= ======= ======== ======= ======= ===== =======
The accompanying notes are an integral part of these unaudited consolidated statements.
3
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RIVERVIEW BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended June 30,
(In thousands) (Unaudited) 1998 1997
- ------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,257 $ 745
Adjustments to reconcile net income to cash
used in operating activities:
Depreciation and amortization 252 189
Provision for losses on loans 60 45
Increase in deferred loan origination fees,
net of amortization 129 112
Federal Home Loan Bank stock dividend (37) (33)
Net gain on sale of real estate owned, mortgage-
backed and investment securities and premises
and equipment (39) (23)
Changes in assets and liabilities:
Increase in loans held for sale (434) (29)
Increase in prepaid expenses and other assets (221) (10)
Increase in accrued interest receivable (17) (38)
Increase (decrease) in accrued expenses and other
liabilities 610 (63)
-------- ---------
Net cash provided by operating activities 1,560 895
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan originations (41,222) (20,182)
Principal repayments on loans 39,800 17,602
Proceeds from call, maturity, or sale of securities
available for sale 5,909 987
Purchase of investment securities available for sale (9,608) -
Purchase of mortgage-backed securities available
for sale - (12,100)
Proceeds from sale of mortgage-backed securities
available for sale - 2,280
Principal repayments on mortgage-backed securities
held to maturity 2,603 1,437
Principal repayments on mortgage-backed securities
available for sale 1,794 55
Purchase of investment securities held to maturity (982) -
Proceeds from call or maturity of investment
securities held to maturity 1,076 3,000
Purchase of premises and equipment (314) (200)
Purchase of Federal Home Loan Bank stock - (64)
Proceeds from sale of real estate - 135
-------- ---------
Net cash used in investing activities (944) (7,050)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposit accounts 3,963 (794)
Dividends paid (217) (58)
Proceeds from Federal Home Loan Bank advances - 28,850
Repayment of Federal Home Loan Bank advances (10,000) (23,480)
Net decrease in advance payments by borrowers (121) (83)
Proceeds from exercise of stock options 89 33
-------- ---------
Net cash (used) provided by financing activities (6,286) 4,468
-------- ---------
NET DECREASE IN CASH (5,670) (1,687)
CASH, BEGINNING OF PERIOD 27,482 6,951
-------- ---------
CASH, END OF PERIOD $ 21,812 $ 5,264
======== =========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest $ 2,359 $ 2,264
Income taxes 170 100
NONCASH INVESTING ACTIVITIES:
Transfer of loans to real estate owned 175 -
Dividends declared and accrued in other liabilities 371 -
Fair value adjustment to securities available for sale 147 109
Income tax effect related to fair value adjustment (50) (37)
The accompanying notes are an integral part of these unaudited consolidated
statements.
4
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RIVERVIEW BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
(1) Organization and Basis of Presentation
--------------------------------------
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and, therefore, do not include all
disclosures necessary for a complete presentation of financial condition,
results of operations, and cash flows in conformity with generally accepted
accounting principles. However, all adjustments which are, in the opinion of
management, necessary for a fair presentation of the interim unaudited
financial statements have been included. All such adjustments are of a normal
recurring nature.
The unaudited consolidated financial statements should be read in conjunction
with the audited financial statements included in the Riverview Bancorp, Inc.
1998 Annual Report on Form 10-K. The results of operations for the three
months ended June 30, 1998 are not necessarily indicative of the results which
may be expected for the entire fiscal year.
(2) Principles of Consolidation
---------------------------
The accompanying unaudited consolidated financial statements of Riverview
Bancorp, Inc. and Subsidiary (the "Company") include all the accounts of
Riverview Bancorp, Inc. and the consolidated accounts of its wholly-owned
subsidiary, Riverview Community Bank (the "Community Bank") and the Community
Bank's wholly-owned subsidiary, Riverview Services, Inc. Significant
inter-company balances and transactions have been eliminated in the
consolidation.
(3) Comprehensive Income
--------------------
Effective April 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, Reporting Comprehensive Income. SFAS No. 130
requires all items that are required to be recognized under accounting
standards as components of comprehensive income to be reported in a financial
statement that is displayed in equal prominence with the other financial
statements and to disclose as a part of shareholders' equity accumulated
comprehensive income. Comprehensive income is defined as the change in equity
during a period from transactions and other events from nonowner sources. The
Company has chosen, for purposes of its interim financial reporting, to
present comprehensive income in the notes to financial statements.
5
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Comprehensive income is the total of net income and other comprehensive
income, which for the Company is comprised entirely of unrealized gains and
losses on securities available for sale.
The gross unrealized holding gains for the first quarter of 1998 were $34,000,
the income tax expense was $12,000 and therefore, the net gain was $22,000.
The gross reclassification adjustment for gains on available for sale
investment securities included in non-interest income for the first quarter of
1998 was $27,000, the income tax expense was $10,000 and therefore, the net
reclassification adjustment was $17,000. The gross unrealized holding losses
for the first quarter of 1997 were $19,000, the income tax benefit was $7,000
and therefore, the net loss was $12,000. The gross reclassification
adjustment for gains on available for sale investment and mortgage backed
securities included in non-interest income for the first quarter of 1997 was
$9,000, the income tax expense was $3,000 and therefore, the net
reclassification adjustment was $6,000.
(4) Earnings Per Share
------------------
Basic EPS is computed by dividing net income applicable to common stock by the
weighted average number of common shares outstanding during the period,
without considering any dilutive items. Diluted EPS is computed by dividing
net income applicable to common stock by the weighted average number of common
shares and common stock equivalents for items that are dilutive, net of shares
assumed to be repurchased using the treasury stock method at the average share
price for the Company's common stock during the period. Common stock
equivalents arise from assumed conversion of outstanding stock options.
Employee Stock Ownership Plan shares are not considered outstanding for
earnings per share purposes until they are allocated.
6
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Three Months Ended
June 30,
-------------------
1998 1997
---- ----
Basic EPS computation:
Numerator-Net Income $1,257,000 $ 745,000
Denominator-Weighted average
common shares outstanding 5,814,248 6,044,820
Basic EPS $ 0.22 $ 0.12
========== ==========
Diluted EPS computation:
Numerator-Net Income $1,257,000 $ 745,000
Denominator-Weighted average
common shares outstanding 5,814,248 6,044,820
Effect of dilutive stock options 131,418 126,916
---------- ----------
Weighted average common shares
and common stock equivalents 5,945,666 6,171,736
Diluted EPS $ 0.21 $ 0.12
========== ==========
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(5) Investment Securities
---------------------
The amortized cost and approximate fair value of investment securities held to
maturity consisted of the following (in thousands):
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
June 30, 1998 -------- -------- ------- --------
- -------------
Agency securities $ 7,282 $ 57 $ (5) $ 7,334
Municipal Securities 982 - - 982
-------- -------- ------- --------
Total $ 8,264 $ 57 $ (5) $ 8,316
======== ======== ======= ========
March 31, 1998
- --------------
Agency securities $ 7,336 $ 64 $ (6) $ 7,394
U.S. Treasury securities 1,000 - - 1,000
-------- -------- ------- --------
Total $ 8,336 $ 64 $ (6) $ 8,394
======== ======== ======= ========
The contractual maturities of investment securities held to maturity were as
follows (in thousands):
Estimated
Amortized Fair
June 30, 1998 Cost Value
- ------------- ---------- ----------
Due in one year or less $ 6,282 $ 6,337
Due after one year through five years 1,000 997
Due after ten years 982 982
-------- --------
Total $ 8,264 $ 8,316
======== ========
There were no sales of investment securities held to maturity during the three
months ended June 30, 1998 and 1997.
The amortized cost and approximate fair value of investment securities
available for sale consisted of the following (in thousands):
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
June 30, 1998 -------- -------- ------- --------
- -------------
Agency securities $ 12,100 $ 17 $ (20) $ 12,097
U.S. Treasury securities 999 1 - 1,000
Equity securities 575 - (34) 541
-------- -------- ------- --------
Total $ 13,674 $ 18 $ (54) $ 13,638
======== ======== ======= ========
March 31, 1998
- --------------
Agency securities $ 7,000 $ 13 $ (9) $ 7,004
U.S. Treasury securities 2,961 12 - 2,973
-------- -------- ------- --------
Total $ 9,961 $ 25 $ (9) $ 9,977
======== ======== ======= ========
The contractual maturities of investment securities available for sale are as
follows (in thousands):
Estimated
Amortized Fair
June 30, 1998 Cost Value
- ------------- ---------- --------
Due in one year or less $ 999 $ 1,000
Due after one year through five years 9,000 9,007
Due after five years through ten years 3,100 3,090
Due after ten years 575 541
-------- --------
Total $ 13,674 $ 13,638
======== ========
Investment securities with an amortized cost of $1,000,000 and a fair value of
$996,880 and $995,000 at June 30, 1998 and March 31, 1998, respectively, were
pledged as collateral for treasury tax and loan funds held by the Community
Bank.
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(6) Mortgage-Backed Securities
--------------------------
Mortgage-backed securities held to maturity consisted of the following (in
thousands):
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- -------- ------- --------
June 30, 1998
- -------------
Real estate mortgage
investment conduits $ 4,769 $ 165 $ - $ 4,934
FHLMC mortgage-backed
securities 4,486 69 (4) 4,551
FNMA mortgage-backed
securities 8,513 141 (8) 8,646
-------- -------- ------- --------
Total $ 17,768 $ 375 $ (12) $ 18,131
======== ======== ======= ========
March 31, 1998
- --------------
Real estate mortgage
investment conduits $ 5,627 $ 195 $ - $ 5,822
FHLMC mortgage-backed
securities 5,111 82 (5) 5,188
FNMA mortgage-backed
securities 9,603 155 (10) 9,748
-------- -------- ------- --------
Total $ 20,341 $ 432 $ (15) $ 20,758
======== ======== ======= ========
The real estate mortgage investment conduits consist of Federal Home Loan
Mortgage Corporation (FHLMC) and Federal National Mortgage Association (FNMA)
securities.
The contractual maturities of mortgage-backed securities held to maturity at
June 30, 1998 were as follows (in thousands):
Estimated
Amortized Fair
June 30, 1998 Cost Value
- ------------- ---------- ----------
Due after one year through five years $ 353 $ 355
Due after five years through ten years 7,666 7,751
Due after ten years 9,749 10,025
-------- --------
$ 17,768 $ 18,131
======== ========
Mortgage-backed securities available for sale consisted of the following (in
thousands):
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- -------- ------- --------
June 30, 1998
- -------------
Real estate mortgage
investment conduits $ 21,890 $ 54 $ (24) $ 21,920
FHLMC mortgage-backed
securities 883 14 - 897
FNMA mortgage-backed
securities 7,914 26 - 7,940
-------- -------- ------- --------
Total $ 30,687 $ 94 $ (24) $ 30,757
======== ======== ======= ========
March 31, 1998
- --------------
Real estate mortgage
investment conduits $ 21,914 $ 148 $ (2) $ 22,060
FHLMC mortgage-backed
securities 1,021 17 - 1,038
FNMA mortgage-backed
securities 9,591 16 (15) 9,592
-------- -------- ------- --------
Total $ 32,526 $ 181 $ (17) $ 32,690
======== ======== ======= ========
The contractual maturities of mortgage-backed securities available for sale
were as follows (in thousands):
Estimated
Amortized Fair
June 30, 1998 Cost Value
- ------------- ---------- ----------
Due after five years through ten years $ 5,809 $ 5,836
Due after ten years 24,878 24,921
-------- --------
$ 30,687 $ 30,757
======== ========
Expected maturities of mortgage-backed securities will differ from contractual
maturities because borrowers may have the right to prepay obligations with or
without prepayment penalties.
Mortgage-backed securities held to maturity with an amortized cost of $505,000
and $522,000 and a fair value of $507,000. and $523,000 at June 30, 1998 and
March 31, 1998, were pledged as collateral for public funds held by the
Community Bank.
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(7) Loans Receivable
----------------
Loans receivable consisted of the following (in thousands):
June 30, March 31,
1998 1998
---------- ----------
Residential:
One to four family $ 86,401 $ 94,795
Multi-family 5,470 4,790
Construction:
One to four family 43,859 35,003
Multi-family 6,359 5,352
Commercial real estate 905 -
Commercial 2,528 1,992
Consumer:
Secured 13,543 13,638
Unsecured 2,673 2,470
Land 17,894 16,431
Non-residential 11,117 9,407
---------- ----------
190,749 183,878
Less:
Undisbursed portion of loans 24,804 19,354
Deferred loan fees, net 2,469 2,340
Allowance for possible loan losses 1,043 984
Unearned discounts 2 2
---------- ----------
Loans receivable, net $ 162,431 $ 161,198
========== ==========
(8) Loans Held for Sale
-------------------
The Community Bank sells substantially all long-term fixed rate mortgage loans
in the secondary market. All such loans held for sale are identified as held
for sale at the time of origination and are carried at the lower of cost or
estimated market value on an aggregate porfolio basis. Market values are
derived from available market quotations for comparable pools of mortgage
loans. Adjustments for unrealized losses, if any, are charged to income.
(9) Borrowings
----------
Borrowings are summarized as follows (in thousands):
June 30, March 31,
1998 1998
---------- ----------
Federal Home Loan Bank Advances $ 19,550 $ 29,550
========== ==========
Weighted average interest rate: 6.13% 6.29%
========== ==========
Borrowings have the following maturities at June 30, 1998 (in thousands):
1999 $ 7,000
2000 7,000
2001 5,550
----------
$ 19,550
==========
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RIVERVIEW BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
Riverview Bancorp, Inc., a Washington corporation, was organized on June 23,
1997 for the purpose of becoming the holding company for Riverview Community
Bank (formerly Riverview Savings Bank, FSB) upon the Riverview Savings Bank's
reorganization as a wholly owned subsidiary of the Company resulting from the
conversion of Riverview, M.H.C. from a federal mutual holding company to a
stock holding company ("Conversion and Reorganization"). The Conversion and
Reorganization was completed on September 30, 1997. Riverview Savings Bank,
FSB changed its name to Riverview Community Bank ("Community Bank") effective
June 29, 1998.
The Community Bank is regulated by the Office of Thrift Supervision ("OTS"),
its primary regulator, and by the Federal deposit Insurance Corporation
("FDIC"), the insurer of its deposits. The Community Bank's deposits are
insured by the FDIC up to applicable legal limits under the Savings
Association Insurance Fund ("SAIF"). The Community Bank has been a member of
the Federal Home Loan Bank System since 1937.
As a traditional, community-oriented, financial institution, the Community
Bank focuses on traditional financial services to residents of its primary
market area. The Community Bank considers Clark, Cowlitz, Klickitat and
Skamania counties of Washington as its primary market area. The primary
business of the Community Bank is attracting deposits from the general public
and using such funds to originate fixed-rate mortgage loans and adjustable
rate mortgage loans secured by one to four family residential real estate
located in its primary market area. The Community Bank is also an active
originator of one to four family and multi-family construction loans and
consumer loans. Riverview Mortgage, a mortgage broker division of the
Community Bank originates mortgage loans (including construction loans) for
various mortgage companies predominantly in the Portland and Seattle
metropolitan areas, as well as for the Community Bank.
Year 2000 Compliance
The Community Bank uses the services of an outside service bureau for its
significant data processing applications. Based on discussions with its
service bureau, the Community Bank does not
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expect that the cost of addressing any Year 2000 issue will be a material
event or uncertainty that would cause its reported financial information not
to be necessarily indicative of future financial condition, or the costs or
consequences of incomplete or untimely resolution of any Year 2000 issue
represent a known material event or uncertainty that is reasonably likely to
affect its future results, or cause its reported financial information not to
be necessarily indicative of future operating results or future financial
condition. The Company has developed an intensive Action Plan for addressing
the concerns and risks associated with the coming millennium. The
comprehensive plan was written based on guidelines established by the Federal
Financial Institutions Examination Council's Interagency Statement entitled
"Year 2000 Project Management Awareness." The Year 2000 Action Plan includes
defined phases for Awareness, Assessment, Renovation, Validation and
Implementation. As part of the awareness phases, a Special Projects Team
composed of individuals from every operational sector of the Company was
utilized to assess all vendors, customers and correspondents. All computer
hardware was upgraded in the last quarter of fiscal 1996 and the first quarter
of fiscal 1997. All vendors and applications have been identified. The
Special Projects Team is in the validation phase of the Action Plan and the
Company has set the first calendar quarter of 1999 as the target date for full
compliance with Year 2000.
FINANCIAL CONDITON
At June 30, 1998, the Company had total assets of $268.6 million compared with
$273.2 million at March 31, 1998. The $4.6 million or 1.7% decrease in assets
was primarily a result of the $10.0 million pay down of Federal Home Loan
("FHLB") borrowings. Cash, including interest-earning accounts, totaled $21.8
million at June 30, 1998 compared to $27.5 million at March 31, 1998. At June
30, 1998, the Company had $190.7 million in gross loans, an increase of $6.8
million compared to $183.9 million at March 31, 1998. Note 7 Loans Receivable
provides a detailed break down of the $6.8 million increase in gross loans.
Consumer, commercial, and land loans carry higher interest rates and a higher
degree of risk compared to one-to-four family mortgage loans. Deposits totaled
$183.8 million at June 30, 1998, compared to $179.8 million at March 31, 1998.
FHLB advances totaled $19.6 million at June 30, 1998 compared to $29.6 million
at March 31, 1998.
Capital Resources
Total shareholders' equity increased $.9 million, or 1.5%, from $61.1 million
for the three months ended June 30, 1998 to $62.0
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million at March 31, 1998. This increase was the net result of $1.3 million in
earnings for the year to date and dividends of $.4 million.
The Community Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators, that if undertaken could have a direct
material effect on the Community Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Community Bank must meet specific capital guidelines that involve
quantitative measures of the Community Bank's assets, liabilities, and certain
off-balance sheet items as calculated under regulatory accounting practices.
The Community Bank's capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings, and
other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Community Bank to maintain amounts and ratios of tangible and core
capital to adjusted total assets and of total risk-based capital to
risk-weighted assets of 1.5%, 3.0%, and 8.0%, respectively. As of June 30,
1998, the Community Bank meets all capital adequacy requirements to which it
is subject.
As of March 31, 1998, the most recent notification from the OTS categorized
the Community Bank as "well capitalized" under the regulatory framework for
prompt corrective action. To be categorized as "well capitalized" the
Community Bank must maintain minimum core and total risk-based capital ratios
of 5.0%, and 10.0%, respectively. At June 30, 1998, the Community Bank's
tangible, core and risk-based total capital ratios amounted to 17.8%, 17.8%,
and 34.1%, respectively. There are no conditions or events since that
notification that management believes have changed the Community Bank's
category.
The Community Bank's actual and required minimum capital amounts and ratios
are presented in the following table (dollars in thousands):
13
<PAGE>
<PAGE>
Categorized
as "Well
"Capitalized
Under
For Capital Prompt Corrective
Actual Adequacy Purpose Action Provision
--------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
As of June 30, 1998 ------ ----- ------ ----- ------ -----
Total Capital:
(To Risk Weighted Assets) $45,867 34.1% $10,752 8.0% $13,440 10.0%
Tier I Capital:
(To Risk Weighted Assets) 45,295 33.7 N/A N/A 8,064 6.0
Core Capital:
(To Total Assets) 45,295 17.8 7,634 3.0 12,724 5.0
Tangible Capital:
(To Tangible Assets) 45,295 17.8 3,817 1.5 N/A N/A
Categorized
as "Well
"Capitalized
Under
For Capital Prompt Corrective
Actual Adequacy Purpose Action Provision
--------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
As of March 31, 1998 ------ ----- ------ ----- ------ -----
Total Capital:
(To Risk Weighted Assets) $44,584 32.7% $10,922 8.0% $13,653 10.0%
Tier I Capital:
(To Risk Weighted Assets) 44,071 32.3 N/A N/A 8,192 6.0
Core Capital:
(To Total Assets) 44,071 17.0 7,765 3.0 12,942 5.0
Tangible Capital:
(To Tangible Assets) 44,071 17.0 3,883 1.5 N/A N/A
The following table is a reconciliation of the Community Bank's capital,
calculated according to generally accepted accounting principles (GAAP), to
regulatory tangible and risk-based capital at June 30, 1998 (in thousands):
Equity $47,261
Net unrealized gain on securities
Available for sale (45)
Core deposit intangible asset (1,921)
-------
Tangible capital 45,295
Land held for development (471)
General valuation allowance 1,042
-------
Total capital $45,866
=======
Bank Liquidity
OTS regulations require the Community Bank to maintain an average daily
balance of liquid assets as a percentage of average daily
14
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<PAGE>
net withdrawable deposit accounts plus short term borrowings of at least 4%.
The Community Bank's regulatory liquidity ratio was 40.1% at June 30, 1998
compared to 43.6% at March 31, 1998. The Community Bank anticipates that it
will have sufficient funds available to meet current loan commitments and
other cash needs. At June 30, 1998, the Community Bank had outstanding
commitments to originate $7.6 million mortgage loans, none of which were
committed to be sold in the secondary market.
Cash, including interest-earning overnight investments, was $21.8 million at
June 30, 1998 compared to $27.5 million at March 31, 1998. Investment
securities and mortgage-backed securities available for sale at June 30, 1998
were $13.6 million and $30.8 million, respectively, compared to $10.0 million
and $32.7 million, respectively, at March 31, 1998.
Asset Quality
Allowance for loan losses was $1.0 million at June 30, 1998, compared to
$984,000 at March 31, 1998. Management deemed the allowance for loan losses at
June 30, 1998 to be adequate at that date. No assurances, however, can be
given that future additions to the allowance for loan losses will not be
necessary. The allowance for loan losses is maintained at a level sufficient
to provide for estimated loan losses based on evaluating known and inherent
risks in the loan portfolio. Pertinent factors considered include size and
composition of the portfolio, actual loss experience, current and anticipated
economic conditions, and detailed analysis of individual loans. The
appropriate allowance level is estimated based upon factors and trends
identified by management at the time the consolidated financial statements are
prepared.
Nonperforming assets were $758,000 or 0.28% of total assets at June 30, 1998
compared with $517,000 or 0.19% of total assets at March 31, 1998. The
increase in nonaccrual residential loans presented in the following table is
the result of an increase in nonaccrual one to four family construction loans.
The following table sets forth information with respect to the Community
Bank's nonperforming assets at the dates indicated:
15
<PAGE>
<PAGE>
June 30, 1998 March 31, 1998
------------- --------------
(Dollars in thousands)
Loans accounted for on
a nonaccrual basis:
Real Estate
Residential $636 $401
Commercial 115 105
Consumer 3 -
---- ----
Total 754 506
Accruing loans which are
contractually past due 90
days or more 4 11
---- ----
Total 4 11
Total of nonaccrual and ---- ----
90 days past due loans 758 517
---- ----
Real estate owned - -
---- ----
Total nonperforming assets $758 $517
==== ====
Total loans delinquent 90
days or more to net loans 0.46% 0.32%
Total loans delinquent 90
days or more to total assets 0.28 0.19
Total nonperforming assets
to total assets 0.28 0.19
Comparison of Operating Results for the Three Months Ended
June 30, 1998 and 1997
The Company's net income depends primarily on its net interest income, which
is the difference between interest earned on its loans and investments and the
interest paid on interest-bearing liabilities. Net interest income is
determined by (a) the difference between the yield earned on interest-earning
assets and rates paid on interest-bearing liabilities (interest rate spread)
and (b) the relative amounts of interest-earning assets and interest-bearing
liabilities. The Company's interest rate spread is affected by regulatory,
economic and competitive factors that influence rates, loan demand and deposit
flows. Net interest margin is calculated by dividing net interest income by
the average interest-earning assets. Net interest income and net interest
margin are affected by changes in interest rates, volume and the mix of
interest-earning assets and interest-bearing liabilities, and the level of
non-performing assets. The Company's net income is also affected by the
generation of non-interest income, which primarily consists of fees and
service charges, loan servicing income, gains on sale of securities,
16
<PAGE>
<PAGE>
gains from sale of loans and other income. In addition, net income is
affected by the level of operating expenses and establishment of a provision
for loan losses.
Net income for the three months ended June 30, 1998 was $1.3 million, $0.22
per basic share ($0.21 per diluted share). This compares to net income of
$0.7 million, $0.12 per basic share ($0.12 per diluted share) for the same
period in fiscal 1998. The earnings per diluted share increase of 75% to $0.21
at June 30, 1998 from $0.12 at June 30, 1997 reflected several factors. Net
interest income increased $.9 million or 39% for the three months ended June
30, 1998 compared to the same period in fiscal 1997 due to a 23% increase in
interest-earning assets. Non-interest income increased $213,000 or 45%
reflecting increases in fees and service charges as well as gains on sales of
loans and securities in fiscal 1999 as compared to fiscal 1998.
Average interest-earning assets increased to $261.0 million for the quarter
ending June 30, 1998 from $212.8 million for the quarter ending June 30, 1997.
On September 30, 1997 the Company completed the Conversion and Reorganization.
In the Conversion and Reorganization, 3,570,270 shares previously held by
Riverview, M.H.C. were retired and simultaneously 3,570,750 shares of common
stock of the Company were sold at a subscription price of $10.00 per share
resulting in net proceeds of approximately $31.8 million.
Interest income for the three months ended June 30, 1998 was $5.6 million, an
increase of $1.0 million or 22% over $4.6 million for the same period in 1997.
Yield on interest-earning assets for the three month 1998 period was 8.61%
compared to 8.69% for the three month 1997 period. The lower 1998 yield on
interest earning assets resulted primarily from the lower yield received on
investments in mortgage-backed and investment securities and overnight funds.
The higher interest income resulted from growth in loans, mortgage-backed
securities and overnight investments.
Interest expense was $2.3 million for each of the quarters ended June 30, 1998
and 1997. The cost of interest-bearing liabilities for the three month 1998
period was 4.68% compared to 4.66% for the three month 1997 period.
Net interest income increased $0.9 million, or 39%, to $3.2 million for the
three months ended June 30, 1998, compared to $2.3 million for the three
months ended June 30, 1997. The interest rate spread decreased from 4.03% to
3.93% reflecting the growth in mortgage-backed securities and overnight
investments. The net interest margin improved to 5.03% at June 30, 1998 from
4.46% at June 30, 1997. The improved margin reflects the $48.2
17
<PAGE>
<PAGE>
million increase in average interest-earning assets to $261.0 million at June
30, 1998 from $212.8 million at June 30, 1997 partially offset by the $6.5
million increase in interest-bearing liabilities to $199.7 million for the
quarter ended June 30, 1998 from $193.2 million for the quarter ended June 30,
1997.
The provision for loan losses was $60,000 and there were $2,000 in net
charge-offs during the three months ended June 30, 1998 compared to a $45,000
provision and $9,000 in net charge-offs during the three months ended June 30,
1997. During the quarter ended June 30, 1998, the provision was increased in
response to portfolio growth. The loan loss provision was deemed necessary
based upon management's analysis of historical loss rates, current loan
growth, and other factors considered.
Non-interest income increased $213,000, or 45%, to $682,000 for the three
month ended June 30, 1998 from $469,000 for the three months ended June 30,
1997. The $213,000 increase for the current quarter is primarily due to a
$34,000 increase in deposit service charges resulting from an increased number
of deposit accounts, $97,000 increase in loan origination fees on loans
brokered through Riverview Mortgage Brokerage and gains on sale of loans and
securities.
Non-interest expense increased $255,000, or 15%, from $1.7 million for the
quarter ended June 30, 1997 to $1.9 for the quarter ended June 30, 1998. The
1998 quarter reflects the addition of ten full-time equivalent employees over
the 1997 quarter. This resulted from adding seven loan staff reflecting
expansion in the mortgage broker division and consumer loans and three
administrative staff. Salaries and employee benefits increased $205,000 to
$1.2 million for the quarter ended June 30, 1998.
Provision for federal income taxes for the first quarter 1998 was $738,000,
resulting in an effective tax rate of 37%, compared to $390,000 and 34% for
the like quarter of a year ago. The 3% increase in the first quarter 1998
effective tax rate is attributable to the impact of the ESOP market value
adjustment.
18
<PAGE>
<PAGE>
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Not applicable
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
Not applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
3.1 Articles of Incorporation of the Registrant*
3.2 Bylaws of Registrant*
10.1 Employment Agreement with Patrick Sheaffer**
10.2 Employment Agreement with Ron Wysaske**
10.3 Employment Agreement with Michael C. Yount**
10.4 Employment Agreement with Karen Nelson**
10.5 Riverview Savings Bank, FBS Severance Compensation
Agreement**
10.6 Riverview Savings Bank, FSB Employee Stock Ownership
Plan***
21 Subsidiaries of Registrant***
27 Financial Data Schedule
(b) Reports on Form 8-K: No Forms 8-K were filed during the
quarter ended March 31, 1998.
(c) Reports on Form 8-K: none
______________
* Filed as an exhibit to the registrant's Registration Statement on Form
S-1, as amended (333-30203), and incorporated herein by reference.
** Filed as an exhibit to the Registrant's Form 10-Q for the quarter ended
September 30, 1997, and incorporated herein by reference.
*** Filed as an exhibit to the Registrant's Form 10-K for the year ended
March 31, 1998, and incorporated herein by reference.
19
<PAGE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
RIVERVIEW BANCORP, INC.
DATE: August 5, 1998 BY:/s/ Patrick Sheaffer
______________________________
Patrick Sheaffer
President
DATE: August 5, 1998 BY:/s/ Ron Wysaske
______________________________
Ron Wysaske
Executive Vice President/Treasurer
20
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 21812
<INT-BEARING-DEPOSITS> 16511
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 44395
<INVESTMENTS-CARRYING> 26032
<INVESTMENTS-MARKET> 26447
<LOANS> 162431
<ALLOWANCE> 1043
<TOTAL-ASSETS> 268608
<DEPOSITS> 183788
<SHORT-TERM> 7000
<LIABILITIES-OTHER> 3310
<LONG-TERM> 12550
0
0
<COMMON> 62
<OTHER-SE> 61898
<TOTAL-LIABILITIES-AND-EQUITY> 268608
<INTEREST-LOAN> 4198
<INTEREST-INVEST> 1161
<INTEREST-OTHER> 263
<INTEREST-TOTAL> 5622
<INTEREST-DEPOSIT> 1961
<INTEREST-EXPENSE> 2332
<INTEREST-INCOME-NET> 3290
<LOAN-LOSSES> 60
<SECURITIES-GAINS> 27
<EXPENSE-OTHER> 1917
<INCOME-PRETAX> 1995
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1257
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.21
<YIELD-ACTUAL> 5.03
<LOANS-NON> 754
<LOANS-PAST> 4
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 984
<CHARGE-OFFS> 3
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 1043
<ALLOWANCE-DOMESTIC> 856
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 186
</TABLE>
