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, 2000
---------------
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---4,530,991 shares as of July
31, 2000.
<PAGE>
Form 10-Q
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
INDEX
Part I. Financial Information Page
--------------------- ----
Item 1: Financial Statements (Unaudited)
Consolidated Balance Sheets
as of June 30, 2000 and March 31, 2000 1
Consolidated Statements of Income: Three
Months Ended June 30, 2000 and 1999 2
Consolidated Statements of Shareholders' Equity
for the Year Ended March 31, 2000 and for the
Three Months Ended June 30, 2000 3
Consolidated Statements of Cash Flows for the
Three Months Ended June 30, 2000 and 1999 4
Notes to Consolidated Financial Statements 5-11
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11-17
Item 3: Quantitative and Qualitative Disclosures
About Market Risk 17
Part II. Other Information 18
SIGNATURES 19
EXHIBITS 20-21
<PAGE>
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
JUNE 30, 2000 and MARCH 31, 2000
JUNE 30, MARCH 31,
(In thousands, except share data) (Unaudited) 2000 2000
------------------------------------------------------------------------------
ASSETS
Cash (including interest-earning accounts of
$1,175 and $5,378) $ 12,093 $ 15,786
Loans held for sale 300 -
Investment securities held to maturity, at
amortized cost (fair value of $861 and $854) 903 903
Investment securities available for sale, at
fair value (amortized cost of $14,421 and
$14,421) 12,881 12,883
Mortgage-backed securities held to maturity,
at amortized cost (fair value of $7,975 and
$8,595) 7,979 8,657
Mortgage-backed securities available for sale,
at fair value (amortized cost of $38,634 and
$40,974) 36,809 39,378
Loans receivable (net of allowance for loan
losses of $1,932 and $1,362) 265,521 249,034
Real estate owned 622 65
Prepaid expenses and other assets 722 875
Accrued interest receivable 2,138 1,881
Federal Home Loan Bank stock, at cost 3,783 3,074
Premises and equipment, net 10,097 9,088
Land held for development 471 471
Deferred income taxes, net 1,315 1,236
Core deposit intangible, net 1,267 1,349
--------- ---------
TOTAL ASSETS $ 356,901 $ 344,680
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposit accounts $ 233,731 $ 232,355
Accrued expenses and other liabilities 3,584 3,147
Advance payments by borrowers for taxes
and insurance 28 139
Federal Home Loan Bank advances 70,925 60,550
--------- ---------
Total liabilities 308,268 296,191
COMMITMENTS AND CONTINGENCIES (NOTE 12)
SHAREHOLDERS' EQUITY:
Serial preferred stock, $.01 par value;
250,000 authorized, issued and outstanding,
none - -
Common stock, $.01 par value; 50,000,000
authorized,
June 30, 2000 - 4,912,285 issued,
4,530,991 outstanding;
March 31, 2000 - 4,902,503 issued,
4,521,209 outstanding 49 49
Additional paid-in capital 38,485 38,457
Retained earnings 15,869 15,652
Unearned shares issued to employee stock
ownership trust (2,371) (2,422)
Unearned shares held by the management
recognition and development plan (1,178) (1,178)
Accumulated other comprehensive loss (2,221) (2,069)
--------- ---------
Total shareholders' equity 48,633 48,489
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 356,901 $ 344,680
========= =========
See notes to consolidated financial statements.
1
<PAGE>
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three Months Ended
June 30,
(In thousands, except share data) (Unaudited) 2000 1999
------------------------------------------------------------------------------
INTEREST INCOME:
Interest and fees on loans receivable $ 6,133 $ 4,613
Interest on investment securities 208 254
Interest on mortgage-backed securities 806 943
Other interest and dividends 98 162
--------- ---------
Total interest income 7,245 5,972
--------- ---------
INTEREST EXPENSE:
Interest on deposits 2,428 2,024
Interest on borrowings 1,075 521
--------- ---------
Total interest expense 3,503 2,545
--------- ---------
Net interest income 3,742 3,427
Less provision for loan losses 594 90
--------- ---------
Net interest income after
provision for loan losses 3,148 3,337
--------- ---------
NON-INTEREST INCOME:
Fees and service charges 708 676
Gain on sale of loans held for sale 5 5
Gain on sale of other real estate owned - 26
Loan servicing income 32 33
Other 21 23
--------- ---------
Total non-interest income 766 763
--------- ---------
NON-INTEREST EXPENSE:
Salaries and employee benefits 1,630 1,397
Occupancy and depreciation 383 330
Data Processing 208 186
Amortization of core deposit intangible 82 82
Marketing expense 168 143
FDIC insurance premium 11 29
Other 441 461
--------- ---------
Total non-interest expense 2,923 2,628
--------- ---------
INCOME BEFORE FEDERAL INCOME TAXES 991 1,472
PROVISION FOR FEDERAL INCOME TAXES 313 509
--------- ---------
NET INCOME $ 678 $ 963
========= =========
Earnings per common share:
Basic $0.15 $0.18
Diluted 0.15 0.18
Weighted average number of shares outstanding:
Basic 4,533,026 5,322,922
Diluted 4,607,378 5,436,157
See notes to consolidated financial statements.
2
<PAGE>
<TABLE>
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED MARCH 31, 2000
AND THE NINE MONTHS ENDED JUNE 30, 2000
(Unaudited)
Unearned
Shares
Issued to Accum-
Employee ulated
Common Addi- Stock Unearned Other
Stock tional Owner- Shares Compre-
(In thousands, except ---------------- Paid-in Retained ship Issued to hensive
per share data) Shares Amount Capital Earnings Trust MRDP Income Total
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance April 1, 1999 5,346,322 $ 58 $ 48,120 $ 13,602 $ (2,743) $ (1,571) $ (599) $ 56,867
Cash Dividends - - - (1,827) - - - (1,827)
Exercise of stock options 34,096 - 137 - - - - 137
Stock repurchased and
retired (912,404) (9) (9,825) - - - - (9,834)
Earned ESOP shares 24,629 - 25 - 321 - - 346
Earned MRDP shares 28,566 - - - - 393 - 393
--------- ---- -------- -------- -------- -------- ------- --------
4,521,209 49 38,457 11,775 (2,422) (1,178) (599) 46,082
Comprehensive income:
Net income - - - 3,877 - - - 3,877
Other comprehensive income:
Unrealized holding loss on
securities of $1,454 (net
of $749 tax benefit) less
reclassification adjustment
for gains included in net
income of $16 (net of $8
tax expense) - - - - - - (1,470) (1,470)
--------
Total comprehensive income - - - - - - - 2,407
--------- ---- -------- -------- -------- -------- ------- --------
Balance, March 31, 2000 4,521,209 49 38,457 15,652 (2,422) (1,178) (2,069) 48,489
Cash dividends - - - (461) - - (461)
Exercise of stock options 9,782 - 28 - - - - 28
Stock repurchased and
retired - - - - - - - -
Earned ESOP shares - - - - 51 - - 51
Earned MRDP shares - - - - - - - -
--------- ---- -------- -------- -------- -------- ------- --------
4,530,991 49 38,485 15,191 (2,371) (1,178) (2,069) 48,107
Comprehensive income:
Net income - - - 678 - - - 678
Other comprehensive loss:
Unrealized holding loss
on securities of $152
(net of $78 tax benefit) - - - - - - (152) (152)
--------
Total comprehensive income 526
--------- ---- -------- -------- -------- -------- ------- --------
Balance, June 30, 2000 4,530,991 $ 49 $ 38,485 $ 15,869 $ (2,371) $ (1,178) $(2,221) $ 48,633
========= ==== ======== ======== ======== ======== ======= ========
See notes to consolidated financial statements.
3
</TABLE>
<PAGE>
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30,
(In thousands) 2000 1999
------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 678 $ 963
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 330 332
Provision for losses on loans 594 90
Noncash expense related to ESOP benefit 51 71
Noncash expense related to MRDP benefit 98 98
Increase in deferred loan origination fees,
net of amortization 29 209
Federal Home Loan Bank stock dividend (56) (47)
Net gain on sale of real estate owned,
mortgage-backed and investment securities
and premises and equipment - (26)
Changes in assets and liabilities:
(Increase) Decrease in loans held for sale (300) 291
Decrease in prepaid expenses and other assets 129 82
Increase in accrued interest receivable (257) (130)
Increase in accrued expenses and other liabilities 338 883
--------- ---------
Net cash provided by operating activities 1,634 2,816
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan originations (43,980) (46,381)
Principal repayments on loans 25,690 28,725
Loans sold 624 1,701
Purchase of investment securities available
for sale - (1,673)
Principal repayments on mortgage-backed
securities held to maturity 682 1,437
Principal repayments on mortgage-backed
securities available for sale 2,320 4,162
Proceeds from call or maturity of investment
securities held to maturity - 4,000
Purchase of premises and equipment (1,218) (708)
Purchase of Federal Home Loan Bank stock (653) -
Proceeds from sale of real estate - 363
--------- ---------
Net cash used in investing activities (16,535) (8,374)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposit accounts 1,377 6,088
Dividends paid (461) (347)
Repurchase of common stock - (1,593)
Proceeds from Federal Home Loan Bank advances 108,416 -
Repayment of Federal Home Loan Bank advances (98,041) -
Net decrease in advance payments by borrowers (111) (57)
Proceeds from exercise of stock options 28 -
--------- ---------
Net cash provided by financing activities 11,208 4,091
--------- ---------
NET DECREASE IN CASH (3,693) (1,467)
CASH, BEGINNING OF PERIOD 15,786 17,207
--------- ---------
CASH, END OF PERIOD $ 12,093 $ 15,740
========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest $ 3,456 $ 2,543
Income taxes 160 -
NONCASH INVESTING AND FINANCING ACTIVITIES:
Transfer of loans to real estate owned $ 557 $ 480
Dividends declared and accrued in other
liabilities 462 480
Fair value adjustment to securities available
for sale (230) (1,770)
Income tax effect related to fair value adjustment 79 602
See notes to consolidated financial statements.
4
<PAGE>
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.
2000 Annual Report on Form 10-K. The results of operations for the three
months ended June 30, 2000 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 majority-owned subsidiary, Riverview Asset Management Corporation
("RAMCORP.") and wholly-owned subsidiary, Riverview Services, Inc. All
references to the Company herein include the Community Bank where applicable.
Significant inter-company balances and transactions have been eliminated in
the consolidation.
(3) Comprehensive Income
--------------------
Comprehensive income is defined as the change in equity during a period from
transactions and other events from nonowner sources. 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 and gains and losses on sale of securities available for sale.
For the three months ended June 30, 2000, the Company's total comprehensive
income was $526,000, compared to $205,000 comprehensive loss for the three
months ended June 30, 1999, respectively.
Total comprehensive income for the three months ended June 30, 2000 is
comprised of net income of $678,000 and other comprehensive loss of $152,000,
net of tax. Other comprehensive income for the three months ended June 30,
2000, consists of unrealized securities losses of $152,000 net of tax
benefit.
Total comprehensive loss for the three months ended June 30, 1999 is $205,000
comprised of net income of $1.0 million and other comprehensive loss of $1.2
million net of tax. Other comprehensive income for the three months ended June
30, 1999, consists of unrealized securities losses of $1.2 million, net of tax
benefits.
(4) Earnings Per Share
------------------
Basic Earnings per Share ("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
5
<PAGE>
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 and awarded but not released
Management Recognition and Development Plan ("MRDP") shares. Employee Stock
Ownership Plan ("ESOP") shares are not considered outstanding for EPS purposes
until they are committed to be released.
Three Months Ended
June 30,
------------------------------
2000 1999
---- ----
Basic EPS computation:
Numerator-Net Income $ 678,000 $ 963,000
Denominator-Weighted average
common shares outstanding 4,533,026 5,322,922
Basic EPS $ 0.15 $ 0.18
========== ==========
Diluted EPS computation:
Numerator-Net Income $ 678,000 $ 963,000
Denominator-Weighted average
common shares outstanding 4,533,026 5,322,922
Effect of dilutive stock options 74,352 111,986
Effect of dilutive MRDP - 1,249
---------- ----------
Weighted average common shares
and common stock equivalents 4,607,378 5,436,157
Diluted EPS $ 0.15 $ 0.18
========== ==========
6
<PAGE>
(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
June 30, 2000 Cost Gains Losses Value
--------- ---------- ---------- --------
Municipal securities $ 903 $ - $ (42) $ 861
======== ========== ========== ========
March 31, 2000
Municipal securities $ 903 $ - $ (49) $ 854
======== ========== ========== ========
The contractual maturities of securities held to maturity are as follows (in
thousands):
Amortized Estimated
June 30, 2000 Cost Fair Value
---------- -----------
Due after ten years $ 903 $ 861
---------- -----------
$ 903 $ 861
========== ===========
There were no sales of investment securities classified as held to maturity
during the period ended June 30, 2000 and 1999.
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
June 30, 2000 Cost Gains Losses Value
--------- ---------- ---------- --------
Agency securities $ 10,489 $ - $ (879) $ 9,610
Equity securities 1,356 - (548) 808
School district bonds 2,576 - (113) 2,463
--------- ---------- ---------- --------
$ 14,421 $ - $ (1,540) $ 12,881
========= ========== ========== ========
March 31, 2000
Agency securities $ 10,489 $ - $ (780) $ 9,709
Equity securities 1,356 - (617) 739
School district bonds 2,576 - (141) 2,435
--------- ---------- ---------- --------
$ 14,421 $ - $ (1,538) $ 12,883
========= ========== ========== ========
The contractual maturities of securities available for sale are as follows (in
thousands):
Amortized Estimated
March 31, 2000 Cost Fair Value
---------- -----------
Due after one year through five years $ 3,000 $ 2,947
Due after five years through ten years 4,459 4,219
Due after ten years 6,962 5,712
---------- -----------
$ 14,421 $ 12,881
========== ===========
7
<PAGE>
(6) Mortgage-backed Securities
--------------------------
Mortgage-backed securities held to maturity consisted of the following (in
thousands):
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
June 30, 2000 Cost Gains Losses Value
--------- ---------- ---------- --------
REMICs $ 1,888 $ 34 $ - $ 1,922
FHLMC mortgage-backed
securities 2,202 15 (43) 2,174
FNMA mortgage-backed
securities 3,889 33 (43) 3,879
--------- ---------- ---------- --------
$ 7,979 $ 82 $ (86) $ 7,975
========= ========== ========== ========
March 31, 2000
REMICs $ 1,985 $ 2 $ (14) $ 1,973
FHLMC mortgage-backed
securities 2,377 20 (46) 2,351
FNMA mortgage-backed
securities 4,295 28 (52) 4,271
--------- ---------- ---------- --------
$ 8,657 $ 50 $ (112) $ 8,595
========= ========== ========== ========
Mortgage-backed securities held to maturity with an amortized cost of $306,000
and $322,000 and a fair value of $299,000 and $314,000 at June 30, 2000 and
March 31, 2000, respectively, were pledged as collateral for public funds held
by the Company. The real estate mortgage investment conduits ("REMICs")
consist of Federal Home Mortgage Corporation ("FHLMC") and Federal National
Mortgage Association ("FNMA") securities.
The contractual maturities of mortgage-backed securities classified as held to
maturity are as follows (in thousands):
Amortized Estimated
June 30, 2000 Cost Fair Value
---------- -----------
Due after one year through five years $ 3,495 $ 3,429
Due after five years through ten years 372 365
Due after ten years 4,112 4,181
---------- -----------
$ 7,979 $ 7,975
========== ===========
There were no sales of mortgage-backed securities held to maturity during the
period ended June 30, 2000 and 1999.
Mortgage-backed securities available for sale consisted of the following (in
thousands):
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
June 30, 2000 Cost Gains Losses Value
--------- ---------- ---------- --------
REMICs $ 35,959 $ - $ (1,808) $ 34,151
FHLMC mortgage-backed
securities 593 - (6) 587
FNMA mortgage-backed
securities 2,082 9 (20) 2,071
--------- ---------- ---------- --------
$ 38,634 $ 9 $ (1,834) $ 36,809
========= ========== ========== ========
March 31, 2000
REMICs $ 38,137 $ - $ (1,576) $ 36,561
FHLMC mortgage-backed
securities 619 - (7) 612
FNMA mortgage-backed
securities 2,218 9 (22) 2,205
--------- ---------- ---------- --------
$ 40,974 $ 9 $ (1,605) $ 39,378
========= ========== ========== ========
The contractual maturities of mortgage-backed securities available for sale
are as follows (in thousands):
Amortized Estimated
June 30, 2000 Cost Fair Value
---------- -----------
Due after one year through five years $ 1,806 $ 1,786
Due after five years through ten years 2,239 2,215
Due after ten years 34,589 32,808
---------- -----------
$ 38,634 $ 36,809
========== ===========
8
<PAGE>
Expected maturities of mortgage-backed securities held to maturity will differ
from contractual maturities because borrowers may have the right to prepay
obligations with or without prepayment penalties.
Mortgage-backed securities available for sale with an amortized cost of $18.7
million and $20.9 million and a fair value of $17.3 million and $19.6 million
at June 30, 2000 and March 31, 2000, respectively, were pledged as collateral
for the discount window at the Federal Reserve Bank. Mortgage-backed
securities with an amortized cost of $5.1 million and $5.1 million and a fair
value of $5.0 million and $5.0 million at June 30, 2000 and March 31, 2000,
respectively, were pledged as collateral for treasury tax and loan funds held
by the Company.
(7) Loans Receivable
----------------
Loans receivable consisted of the following (in thousands):
June 30, March 31,
2000 2000
-------- ---------
Residential:
One- to- four family $ 106,557 $ 102,542
Multi-family 11,238 10,921
Construction:
One- to- four family 48,246 49,338
Multi-family 3,176 4,669
Commercial real estate 5,503 3,597
Commercial 21,018 15,976
Consumer:
Secured 19,338 14,488
Unsecured 2,619 2,755
Land 26,638 25,475
Commercial real estate 47,275 42,871
---------- ----------
291,608 272,632
Less:
Undisbursed portion of loans 20,771 18,880
Deferred loan fees 3,383 3,355
Allowance for loan losses 1,932 1,362
Unearned discounts 1 1
---------- ----------
Loans receivable, net $ 265,521 $ 249,034
========== ==========
(8) Loans held for Sale
-------------------
The Company identifies loans held for sale at the time of origination and are
carried at the lower of cost or estimated market value on an aggregate
portfolio 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,
2000 2000
------- -------
Federal Home Loan Bank Advances $70,925 $60,550
======= =======
Weighted average interest rate: 6.51% 5.47%
==== ====
Borrowings have the following maturities at June 30, 2000 (in thousands):
2000 $45,925
2002 25,000
-------
$70,925
=======
9
<PAGE>
(10) Shareholders' Equity
--------------------
Repurchase of Common Stock
On January 20, 2000, the Company received regulatory approval to repurchase up
to 10% or 545,834 shares of its outstanding common stock at December 31, 1999.
At March 31, 2000, 555,834 common stock shares had been repurchased at an
average cost of $9.96 per share. Since the State of Washington treats all
treasury stock as retired upon purchase, all purchases of treasury stock
reduce stock issued and the cost of treasury stock acquired is charged to par
value and paid-in capital.
On February 9, 1999, the Company received regulatory approval to repurchase up
to 10% or 601,324 shares of its outstanding common stock at December 31, 1998.
At December 31, 1999, 591,324 common stock shares had been repurchased at an
average cost of $12.46 per share.
On September 15, 1998, the Company received regulatory approval to repurchase
up to 9% or 321,368 shares of the 3,570,570 shares issued during Conversion
and Reorganization(as hereinafter defined). Prior to December 31, 1998,
321,368 common stock shares had been repurchased at an average cost of $13.62
per share. The MRDP used 142,830 shares of the common stock repurchased.
(11) Recently Issued Accounting Pronouncements
-----------------------------------------
In June 1998, the Financial Accounting Standards Board released Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities on the balance sheet and
measure those instruments at fair value.
The effective date of this statement was deferred by the issuance of SFAS No.
137, Accounting for Derivative Instruments and Hedging Activities Deferral
of the Effective Date of FASB No. 133. This statement is now effective for
fiscal years beginning after June 15, 2000. The Company does not anticipate
that the adoption of SFAS No. 133 will have a material effect on its financial
position or results of operations.
(12) Commitments and Contingencies
-----------------------------
The Company is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments generally include commitments to originate
mortgage and consumer loans. Those instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized
in the balance sheet. The Company's maximum exposure to credit loss in the
event of nonperformance by the borrower is represented by the contractual
amount of those instruments. The Company uses the same credit policies in
making commitments as it does for on-balance sheet instruments. Commitments
to extend credit are conditional 14-day agreements to lend to a customer
subject to the Company's usual terms and conditions. Collateral is not
required to support commitments.
At June 30, 2000, the Company had commitments to originate fixed rate
mortgages of $5.3 million at interest rates ranging from 7.875% to 9.5%. At
June 30, 2000 adjustable rate mortgage loan commitments were $3.1 million at
an average interest rate of 10.83%. Undisbursed balance of mortgage loans
closed was $20.8 million at June 30, 2000. Consumer loan commitments totaled
$568,000 and unused lines of consumer credit totaled $10.3 million at June 30,
2000. Commercial and commercial real estate loan commitments totaled $2.2
million and unused lines of commercial and commercial real estate credit
totaled $11.8 million at June 30, 2000. The Company is a party to litigation
arising in the ordinary course of business. In the opinion of management,
these actions will not have a material effect, if any, on the Company's
financial position, results of operation, or liquidity.
10
<PAGE>
(13) Subsequent Event
----------------
During the second quarter of fiscal year 2001, the Company sold a branch site
that had been replaced by a new facility and land that had been held for
future development. The total sales price was $834,000, resulting in a
$290,700 pretax gain.
Item 2. RIVERVIEW BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Safe Harbor Clause. This report contains certain "forward-looking
statements." The Company desires to take advantage of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 and is
including this statement for the express purpose of availing itself of the
protection of such safe harbor with forward-looking statements. These
forward-looking statements, which are included in Management's Discussion and
Analysis, describe future plans or strategies and include the Company's
expectations of future financial results. The words "believe," "expect,"
"anticipate," "estimate," "project," and similar expressions identify
forward-looking statements. The Company's ability to predict results or the
effect of future plans or strategies is inherently uncertain. Factors which
could affect actual results include interest rate trends, the economic climate
in the Company's market area and the country as a whole, loan delinquency
rates, and changes in federal and state regulation. These factors should be
considered in evaluating the forward-looking statements, and undue reliance
should not be placed on such statements.
General
The Company, 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 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 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 ("FHLB") System since 1937.
The Community Bank is a community-oriented, financial institution, offering
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 construction loans,
commercial loans, commercial real estate loans and consumer loans. The
Community Bank operates twelve branches in southwest Washington, including
eight branches in Clark County. The new Washougal branch opened the first
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quarter of fiscal year 2001 and replaced the existing Washougal branch.
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. The Business and Professional Banking
Division located at the downtown Vancouver Main branch offers commercial
lending and business banking services. On November 25, 1998 the Community Bank
received regulatory approval to offer trust and investment services to its
customers. RAMCORP., a subsidiary of the Community Bank, was established to
operate the trust and investment activities. The headquarters of RAMCORP. are
in the Community Bank's Vancouver Main branch, which officially opened in
October 1998. Assets totaling approximately $69.4 million at June 30, 2000
were managed by the RAMCORP. in fiduciary or agency capacity. The Company's
main office for administration will be relocated from Camas to the Vancouver
address of 900 Washington, a 16,000 square foot leased facility, in the third
quarter of fiscal year 2001.
Financial Condition
At June 30, 2000, the Company had total assets of $356.9 million compared with
$344.7 million at March 31, 2000. The $12.2 million, or 3.5% increase in
assets reflects the growth in loans. Cash, including interest-earning
accounts, totaled $12.1 million at June 30, 2000, compared to $15.8 million at
March 31, 2000. At June 30, 2000, the Company had $291.6 million in gross
loans, an increase of $19.0 million compared to $272.6 million at March 31,
2000. Commercial loans increased $5.0 million to $21.0 million at June 30,
2000 from $16.0 million at March 31, 2000. The $5.0 million increase was
comprised of several loans and occurred in commercial loans secured by
equipment, commercial loans secured by other collateral and unsecured
commercial loans. Commercial real estate loans increased $4.4 million to $47.3
million at June 30, 2000 from $42.9 million at March 31, 2000. Loans
receivable (Note 7) provides a detailed analysis of the $291.6 million gross
loan portfolio at June 30, 2000 as compared to the $272.6 million gross loan
portfolio at March 31, 2000. Consumer, commercial, and land loans carry higher
interest rates and generally a higher degree of credit risk compared to one-
to- four family mortgage loans. Deposits totaled $233.7 million at June 30,
2000 compared to $232.4 million at March 31, 2000. FHLB advances totaled
$70.9 million at June 30, 2000 and $60.6 million at March 31, 2000. During
the quarter ended June 30, 2000, the Company replaced $45.0 million of matured
FHLB short-term fixed rate and $550,000 of FHLB long term fixed rate
borrowings with $50.0 million of FHLB short-term fixed rate borrowings.
Capital Resources
Total shareholders' equity was stable at $48.6 million at June 30, 2000
compared to $48.4 million at 31, 2000. The activity in shareholders' equity
for the first quarter of fiscal 2001 was $678,000 in earnings for the year to
date, dividends of $461,000, exercise of stock options of $28,000, earned ESOP
shares $51,000 and $152,000 change in net unrealized loss on securities
available for sale, net of tax benefit.
The Company is not subject to any regulatory capital requirement. 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 Company and the Community Bank's financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Community Bank
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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
required 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,
2000, the Community Bank met all capital adequacy requirements to which it was
subject.
As of June 30, 2000, 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, 2000, the Community Bank's tangible, core and
risk-based total capital ratios amounted to 12.0%, 12.0%, and 17.5%,
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):
Categorized as "Well
Capitalized" Under
For Capital Prompt Corrective
Actual Adequacy Purpose Action Provision
--------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
As of June 30, 2000
Total Capital:
(To Risk Weighted Assets) $43,754 18.06% $19,384 8.0% $24,230 10.0%
Tier I Capital:
(To Risk Weighted Assets) 42,293 17.46 N/A N/A 14,538 6.0
Core Capital:
(To Total Assets) 42,293 12.01 10,566 3.0 17,609 5.0
Tangible Capital:
(To Tangible Assets) 42,293 12.01 5,283 1.5 N/A N/A
As of March 31, 2000
Total Capital:
(To Risk Weighted Assets) $42,543 19.93% $17,079 8.0% $21,349 10.0%
Tier I Capital:
(To Risk Weighted Assets) 41,652 19.51 N/A N/A 12,809 6.0
Core Capital:
(To Total Assets) 41,652 12.27 10,185 3.0 16,976 5.0
Tangible Capital:
(To Tangible Assets) 41,652 12.27 5,093 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, to
regulatory tangible and risk-based capital at June 30, 2000 (in thousands):
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Equity $42,898
Net unrealized loss on securities
available for sale 1,832
Core deposit intangible asset (1,267)
Deferred tax and servicing asset (1,170)
-------
Tangible capital 42,293
Land held for development (471)
General valuation allowance 1,932
-------
Total capital $43,754
=======
Bank Liquidity
OTS regulations require the Community Bank to maintain an average daily
balance of liquid assets as a percentage of average daily net withdrawable
deposit accounts plus short-term borrowings of at least 4%. The Community
Bank's regulatory liquidity ratio was 21.2% at June 30, 2000 compared to 27.1%
at March 31, 2000. The Community Bank anticipates that it will have sufficient
funds available to meet current loan commitments and other cash needs.
Cash, including interest-earning overnight investments, was $12.1 million at
June 30, 2000 compared to $15.8 million at March 31, 2000. Investment
securities and mortgage-backed securities available for sale at June 30, 2000
were $12.9 million and $36.8 million, respectively, compared to $12.9 million
and $39.4 million, respectively, at March 31, 2000. See "Financial Condition."
Asset Quality
Allowance for loan losses was $1.9 million at June 30, 2000, compared to $1.4
million at March 31, 2000. Management deemed the allowance for loan losses at
June 30, 2000 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, industry trends,
industry data, 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. During the first quarter of
2000 the provision for loan losses increased to $594,000. The provision for
loan losses was $253,000 for the fourth quarter of fiscal year 2000 and
$90,000 for the quarter ended June 30, 1999. The increase in the provision
for loan losses reflects the growth in the loan portfolio as compared to the
prior year end and the change in mix and risks of the loan portfolio. The
Company's past loss experience with respect to its commercial loan portfolio
may not be representative of the risk of loss in such portfolios in the
future. The two major reasons for this fact is because the size of the
commercial loan portfolio has increased significantly and most of the loans
comprising the portfolio are unseasoned, having been originated within the
last two years. Commercial loans are considered to involve a higher degree of
credit risk than one- to- four residential loans, and to be more vulnerable to
adverse conditions in the real estate market and deteriorating economic
conditions.
Non-performing assets were $1.6 million, or 0.44% of total assets at June 30,
2000 compared with $1.3 million, or 0.39% of total assets at March
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31, 2000. The following table sets forth information with respect to the
Company's non-performing assets at the dates indicated:
June 30, 2000 March 31, 2000
------------- --------------
(Dollars in thousands)
Loans accounted for on
a non-accrual basis:
Real Estate
Residential $ 650 $ 1,153
Commercial 98 99
Consumer 200 26
------ -------
Total 948 1,278
------ -------
Accruing loans which are
contractually past due 90
days or more - -
------ -------
Total of non-accrual and
90 days past due loans 948 1,278
------ -------
Real estate owned 587 30
Other personal property owned 35 35
------ -------
Total non-performing assets $1,570 $ 1,343
====== =======
Total loans delinquent 90
days or more to net loans 0.36% 0.51%
Total loans delinquent 90
days or more to total assets 0.27 0.37
Total non-performing assets
to total assets 0.44 0.39
Comparison of Operating Results for the Three Months Ended
June 30, 2000 and 1999
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, 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.
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Net income for the three months ended June 30, 2000 was $678,000, $0.15 per
basic share ($0.15 per diluted share). This compares to net income of
$963,000, $0.18 per basic share ($0.18 per diluted share) for the same period
in fiscal 2000. Net interest income increased $315,000, or 9.2% for the three
months ended June 30, 2000 from $3.4 million for the three months ended June
30, 1999 due primarily to a 16.1% increase in average interest-earning assets.
Non-interest income was stable at $766,000 and $763,000 for the three months
ended June 30, 2000 and 1999, respectively. Non-interest expense increased
$295,000, or 11.23% as compared to the same period for the prior year. The
increase in non-interest expense is due primarily to increased salaries and
employee benefit expense, occupancy and marketing expense.
Average interest-earning assets increased to $335.8 million for the three
months ending June 30, 2000 from $289.5 million for the three months ending
June 30, 1999. The $46.3 million increase is due primarily to growth in the
loan portfolio, which was partially offset by principal pay downs in the
mortgage-backed and investment securities portfolio.
Interest income for the three months ended June 30, 2000 was $7.2 million, an
increase of $1.2 million, or 21.32% over the $6.0 million interest income for
the same period in fiscal 2000. Yield on interest-earning assets for the first
quarter of fiscal year 2001 was 8.68% compared to 8.32% for the same three
month period in fiscal year 2000. The higher first quarter fiscal 2001 yield
reflects the higher yield on mortgage-backed securities as compared to the
first quarter in fiscal 2000. The higher interest income in the first quarter
of fiscal year 2001 as compared to the fiscal year 2000 first quarter resulted
from growth in the loan portfolio.
Interest expense was $3.5 million and $2.5 million for the quarters ended June
30, 2000 and 1999, respectively. The cost of interest-bearing liabilities for
the first quarter of year 2000 was 5.17% compared to 4.42% for the same three
month period in 1999. The increased cost of interest-bearing liabilities
reflects the increase in interest rates and volumes of NOW accounts, money
market accounts, certificates of deposits and FHLB advances. Money market
accounts continued to have strong growth reaching $44.2 million in average
balance at June 30, 2000 compared to an average balance of $27.2 million at
June 30, 1999.
Net interest income increased $315,000, or 9.1%, to $3.7 million for the three
months ended June 30, 2000, compared to $3.4 million for the three months
ended June 30, 1999. Net interest income was increased $864,000 due to the
change in volume of average interest-earning assets and liabilities for the
three months in fiscal 2001 compared to the same fiscal 2000 period. The
change in interest rates for these three month periods reduced net interest
income $329,000. The change in rate volume mix for the same three month
periods reduced net interest income $220,000. The interest rate spread
decreased from 3.90% for the three month 1999 period to 3.51% for the three
month 2000 period. The net interest margin decreased to 4.49% during the
first quarter ended June 30, 2000 from 4.78% for the third quarter ended June
30, 1999. The decreased fiscal year 2001 net interest margin reflects the
reduced amount of loan fees amortized to income in the first quarter of fiscal
2001 compared to the same period for the prior year and the fact that
increases in the cost of interest-bearing liabilities have been larger than
increases in earnings on interest-earning assets. Average interest-earning
assets increased by $46.3 million to $335.8 million during the first quarter
ended June 30, 2000 from $289.5 million for the first quarter ended June 30,
1999. The $46.3 million increase in average interest-earning assets was
offset by the $40.4 million increase in average interest-bearing liabilities.
Average interest-bearing
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liabilities increased to $272.0 million during the quarter ended June 30, 2000
from $231.6 million for the quarter ended June 30, 1999.
The provision for loan losses was $594,000 and there were $24,529 in net
charge-offs during the three months ended June 30, 2000 compared to a $253,000
provision for loan losses and $121,986 in net charge-offs for the three months
ended March 31, 2000. The increase in the provision for loan losses is the
result of growth in the loan portfolio and the change in mix and risks. Loan
receivable (Note 7) provides a detailed analysis of the $19.0 million increase
in gross loans. The loan loss provision was deemed necessary based upon
management's analysis of historical and anticipated loss rates, current loan
growth, and other factors considered.
Non-interest income was stable at $766,000 for the first quarter of fiscal
year 2001 as compared to $763,000 for the same period in 2000.
Non-interest expense increased $295,000, or 11.23%, from $2.6 million for the
quarter ended June 30, 1999 to $2.9 million for the quarter ended June 30,
2000. Salaries and employee benefits increased $233,000 to $1.6 million for
the quarter ended June 30, 2000 as compared to the same quarter in 1999. There
were 21 more full-time equivalent employees during the 2000 quarter over the
1999 quarter. The increase in full-time equivalent employees was due to the
expansion occurring in branches, commercial lending, trust company and support
functions. In November 1999 and March 2000 new branches were opened in Clark
County which brings the total number of branches to twelve.
Provision for federal income taxes for the first quarter of fiscal year 2001
was $313,000, resulting in an effective tax rate of 32%, compared to $509,000
and 35% for the same quarter of fiscal 1999. The decrease in the effective
tax rate for three months ended June 30, 2000 is primarily attributable to the
impact of tax exempt interest, ESOP dividends and the ESOP market value
adjustment.
ITEM 3. Quantitative and Qualitative Disclosures About Market
Risk
There has not been any material change in the market risk disclosures
contained in the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 2000.
17
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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
---------------------------------------------------
Not applicable
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 Severance Compensation Agreement**
10.6 Employee Stock Ownership Plan***
10.7 1998 Stock Option Plan****
10.8 The Riverview Bancorp, Inc. Management Recognition and
Development 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 June 30, 2000.
-------------
* 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.
**** Filed as an exhibit to the Registrant's definitive proxy statement dated
June 5, 1998, and incorporated herein by reference.
18
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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 9, 2000 BY: /S/ Patrick Sheaffer
Patrick Sheaffer
President
DATE: August 9, 2000 BY: /S/ Ron Wysaske
Ron Wysaske
Executive Vice President/Treasurer
19
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