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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
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 incorporation (I.R.S. Employer
or organization) I.D. Number)
900 Washington St., Ste. 900,Vancouver, Washington 98660
- -------------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (360) 693-6650
-------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such 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
----- -----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes X No
---- ----
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 per share, 4,789,911 shares outstanding as of June 30, 2004.
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, 2004 and March 31, 2004 1
Consolidated Statements of Income
Three Months Ended June 30, 2004 and 2003 2
Consolidated Statements of Shareholders' Equity
for the Year Ended March 31, 2004 and the
Three Months Ended June 30, 2004 3
Consolidated Statements of Cash Flows for the
Three Months Ended June 30, 2004 and 2003 4
Notes to Consolidated Financial Statements 5-13
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of
Operations 13-24
Item 3: Quantitative and Qualitative Disclosures
About Market Risk 24-25
Item 4: Controls and Procedures 25
Part II. Other Information 26-27
-----------------
SIGNATURES 28
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2004 AND MARCH 31, 2004
JUNE 30, MARCH 31,
(In thousands, except share data) (Unaudited) 2004 2004
- ------------------------------------------------------------------------------
ASSETS
Cash (including interest-earning accounts of $17,235
and $32,334) $ 37,341 $ 47,907
Loans held for sale 821 407
Investment securities available for sale, at fair
value (amortized cost of $32,713 and $32,751) 32,079 32,883
Mortgage-backed securities held to maturity, at
amortized cost (fair value of $2,488 and $2,591) 2,448 2,517
Mortgage-backed securities available for sale, at
fair value (amortized cost of $14,386 and $10,417) 14,303 10,607
Loans receivable (net of allowance for loan losses
of $4,489 and $4,481) 382,057 381,127
Real estate owned 460 742
Prepaid expenses and other assets 3,604 1,289
Accrued interest receivable 1,705 1,786
Federal Home Loan Bank stock, at cost 6,078 6,034
Premises and equipment, net 8,618 9,735
Deferred income taxes, net 3,089 2,736
Mortgage servicing rights, net 601 624
Goodwill 9,214 9,214
Core deposit intangible, net 678 758
Bank owned life insurance 12,275 12,121
-------- --------
TOTAL ASSETS $515,371 $520,487
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposit accounts $402,632 $409,115
Accrued expenses and other liabilities 6,402 5,862
Advance payments by borrowers for taxes and insurance 94 328
Federal Home Loan Bank advances 40,000 40,000
-------- --------
Total liabilities 449,128 455,305
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY:
Serial preferred stock, $.01 par value; 250,000
authorized, issued and outstanding, none - -
Common stock, $.01 par value; 50,000,000 authorized,
issued and outstanding:
June 30, 2004 - 4,986,979 issued, 4,789,911
outstanding 50 50
March 31, 2004 - 4,974,979 issued, 4,777,911
outstanding
Additional paid-in capital 40,427 40,187
Retained earnings 27,786 26,330
Unearned shares issued to employee stock
ownership trust (1,547) (1,598)
Accumulated other comprehensive (loss) income (473) 213
-------- --------
Total shareholders' equity 66,243 65,182
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $515,371 $520,487
======== ========
See notes to consolidated financial statements.
1
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME Three Months Ended
June 30,
(In thousands, except share data) (Unaudited) 2004 2003
- ------------------------------------------------------------------------------
INTEREST INCOME:
Interest and fees on loans receivable $ 6,626 $ 5,669
Interest on investment securities 168 67
Interest on mortgage-backed securities 160 181
Other interest and dividends 139 214
---------- ----------
Total interest income 7,093 6,131
---------- ----------
INTEREST EXPENSE:
Interest on deposits 1,043 1,009
Interest on borrowings 496 495
---------- ----------
Total interest expense 1,539 1,504
---------- ----------
Net interest income 5,554 4,627
Less provision for loan losses 140 70
---------- ----------
Net interest income after provision for loan
losses 5,414 4,557
---------- ----------
NON-INTEREST INCOME:
Fees and service charges 1,170 1,173
Asset management fees 272 223
Gain on sale of loans held for sale 175 304
Loan servicing income (expense) 19 (108)
Gain on sale of premises and equipment 828 -
Bank owned life insurance 154 -
Other 22 24
---------- ----------
Total non-interest income 2,640 1,616
---------- ----------
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,646 2,249
Occupancy and depreciation 773 586
Data processing 249 204
Amortization of core deposit intangible 81 82
Advertising and marketing expense 251 269
FDIC insurance premium 15 12
State and local taxes 153 94
Telecommunications 64 48
Professional fees 123 89
Other 477 302
---------- ----------
Total non-interest expense 4,832 3,935
---------- ----------
INCOME BEFORE FEDERAL INCOME TAXES 3,222 2,238
PROVISION FOR FEDERAL INCOME TAXES 1,023 738
---------- ----------
NET INCOME $ 2,199 $ 1,500
========== ==========
Earnings per common share:
Basic $ 0.46 $ 0.34
Diluted 0.45 0.34
Weighted average number of shares outstanding:
Basic 4,790,785 4,371,380
Diluted 4,864,583 4,442,363
See notes to consolidated financial statements.
2
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED MARCH 31, 2004
AND THE THREE MONTHS ENDED JUNE 30, 2004
(Unaudited)
Unearned
Shares Accum-
Issued to ulated
Employee Other
Common Addi- Stock Unearned Compre-
Stock tional Owner- Shares hensive
(In thousands, except ---------------- Paid-in Retained ship Issued to Income
per share data) Shares Amount Capital Earnings Trust MRDP (Loss) Total
- ---------------------------------------------------------------------------------------------------------
Balance April 1, 2003 4,358,704 $ 46 $ 33,525 $ 22,389 $ (1,804) $ (15) $ 370 $ 54,511
Cash dividends ($0.56
per share) - - - (2,613) - - - (2,613)
Exercise of stock options 40,281 1 484 - - - - 485
Stock repurchased and
retired (81,500) (1) (1,509) - - - - (1,510)
Stock issued in connection
with acquisition (Note 16) 430,655 4 7,343 7,347
Earned ESOP shares 24,633 - 271 - 206 - - 477
Tax benefit, stock option
and MDRP - - 73 - - - - 73
Earned MRDP shares 5,138 - - - - 15 - 15
--------- ---- -------- -------- -------- -------- ------- --------
4,777,911 50 40,187 19,776 (1,598) - 370 58,785
Comprehensive income:
Net income - - - 6,554 - - - 6,554
Other comprehensive income:
Unrealized holding loss
on securities of $157
(net of $81 tax effect) - - - - - - (157) (157)
--------
Total comprehensive income - - - - - - - 6,397
--------- ---- -------- -------- -------- -------- ------- --------
Balance March 31, 2004 4,777,911 50 40,187 26,330 (1,598) - 213 65,182
Cash dividends ($0.155
per share) - - - (743) - - - (743)
Exercise of stock options 12,000 - 166 - - - - 166
Earned ESOP shares - - 74 - 51 - - 125
Earned MRDP shares - - - - - - -
--------- ---- -------- -------- -------- -------- ------- --------
4,789,911 50 40,427 25,587 (1,547) - 213 64,730
Comprehensive income:
Net income - - - 2,199 - - - 2,199
Other comprehensive income:
Unrealized holding loss
on securities of $686
(net of $353 tax effect) - - - - - - (686) (686)
--------
Total comprehensive income - - - - - - - 1,513
--------- ---- -------- -------- -------- -------- ------- --------
Balance June 30, 2004 4,789,911 $ 50 $ 40,427 $ 27,786 $ (1,547) $ - $ (473) $ 66,243
========= ==== ======== ======== ======== ======== ======= ========
See notes to consolidated financial statements.
3
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30,
(In thousands) (Unaudited) 2004 2003
- ------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,199 $ 1,500
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization 486 470
Mortgage servicing rights valuation adjustment (16) 39
Provision for loan losses 140 70
Noncash expense related to ESOP 125 108
Noncash expense related to MRDP - 8
Increase in deferred loan origination fees, net of
amortization 3 187
Federal Home Loan Bank stock dividend (44) (60)
Origination of loans held for sale (8,485) (16,478)
Proceeds from sales of loans held for sale 8,087 16,730
Net gain on loans held for sale, sale of real
estate owned, mortgage-backed securities,
investment securities and premises and equipment (861) (307)
Changes in assets and liabilities:
Increase in prepaid expenses and other assets (144) (188)
Decrease in accrued interest receivable 82 39
Increase (decrease) in accrued expenses and other
liabilities (313) 439
--------- ---------
Net cash provided by operating activities 1,259 2,557
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan originations (94,525) ( 63,692)
Principal repayments/refinance on loans 93,817 67,504
Principal repayments on investment securities
available for sale 37 -
Purchase of mortgage-backed securities available
for sale (5,000) -
Principal repayments on mortgage-backed securities
available for sale 1,030 2,866
Principal repayments on mortgage-backed securities
held to maturity 68 213
Purchase of premises and equipment (51) (65)
Additions to real estate owned (13) -
Proceeds from sale of real estate owned and
premises and equipment 33 (19)
--------- ---------
Net cash (used in) provided by investing
activities (4,604) 6,807
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in deposit accounts (6,484) 19,294
Dividends paid (669) (545)
Proceeds from Federal Home Loan Bank advances 15,100 -
Repayment of Federal Home Loan Bank advances (15,100) -
Net increase in advance payments by borrowers (234) (227)
Proceeds from exercise of stock options 166 195
--------- ---------
Net cash (used in) provided by financing
activities (7,221) 18,717
--------- ---------
NET (DECREASE) INCREASE IN CASH (10,566) 28,081
CASH, BEGINNING OF PERIOD 47,907 60,858
--------- ---------
CASH, END OF PERIOD $ 37,341 $ 88,939
========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Interest $ 1,583 $ 1,513
Income taxes - -
NONCASH INVESTING AND FINANCING ACTIVITIES:
Dividends declared and accrued in other
liabilities $ 743 $ 614
Receivable from sale and leaseback of premises 2,391 -
Financed sale of real estate owned (228) -
Fair value adjustment to securities available
for sale (1,039) (824)
Income tax effect related to fair value adjustment 353 280
See notes to consolidated financial statements.
4
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Quarterly Reports on 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 accounting principles generally accepted in the United States
of America. However, all adjustments that 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.
Annual Report on Form 10-K for the year ended March 31, 2004. The results of
operations for the three months ended June 30, 2004 are not necessarily
indicative of the results which may be expected for the entire fiscal year.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Riverview Bancorp, Inc. and
Subsidiary include all the accounts of Riverview Bancorp, Inc. (the "Company")
and the consolidated accounts of its wholly-owned subsidiary, Riverview
Community Bank (the "Bank"), the Bank's wholly-owned subsidiary, Riverview
Services, Inc., and the Bank's majority-owned subsidiary, Riverview Asset
Management Corp. ("RAM Corp.") All inter-company transactions and balances
have been eliminated in consolidation.
3. STOCK-BASED COMPENSATION
At June 30, 2004, the Bank had two stock-based employee compensation plans.
The Bank accounts for those plans under the recognition and measurement
principles of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees", and related interpretations. Accordingly, no
stock-based compensation cost is reflected in net income as all options
granted under the Bank's plans had an exercise price equal to the market value
of the underlying common stock on the date of grant. The following
illustrates the effect on net income and earnings per share if the Bank had
applied the fair value recognition provision of Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation" to stock-based compensation awards:
Three Months Ended June 30,
---------------------------
2004 2003
------- ------
Net income (in thousands):
As reported $2,199 $1,500
Deduct: Total stock based compensation
expense determined under fair value based
method for all options, net of related
tax benefit (23) (49)
------ ------
Pro forma 2,176 1,451
Earnings per common share - basic:
As reported $ 0.46 $ 0.34
Pro forma 0.45 0.33
Earnings per common share - fully diluted:
As reported $ 0.45 $ 0.34
Pro forma 0.45 0.33
5
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 the impact of 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 and from assumed vesting of shares
awarded but not released under the Company's Management Recognition
Development Plan ("MRDP") plan. Employee Stock Ownership Plan ("ESOP") shares
are not considered outstanding for earnings per share purposes until they are
committed to be released.
Three Months Ended
June 30,
------------------------
2004 2003
---------- ----------
Basic EPS computation:
Numerator-Net income $2,199,000 $1,500,000
Denominator-Weighted average common
shares outstanding 4,790,785 4,371,380
Basic EPS $ 0 .46 $ 0.34
========== ==========
Diluted EPS computation:
Numerator-Net Income $2,199,000 $1,500,000
Denominator-Weighted average
common shares outstanding 4,790,785 4,371,380
Effect of dilutive stock options 73,798 67,377
Effect of dilutive MRDP shares - 3,606
---------- ----------
Weighted average common shares
and common stock equivalents 4,864,583 4,442,363
Diluted EPS $ 0.45 $ 0.34
========== ==========
5. INVESTMENT SECURITIES
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, 2004
- -------------
Trust Preferred $ 5,000 $ 19 $ - $ 5,019
Agency securities 11,000 43 (102) 10,941
Equity securities 12,700 - (700) 12,000
Municipal bonds 4,013 106 - 4,119
------- ---- ------ -------
Total $32,713 $168 $ (802) $32,079
======= ==== ====== =======
March 31, 2004
- --------------
Trust Preferred $ 5,000 $ 19 $ - $ 5,019
Agency securities 11,000 194 - 11,194
Equity securities 12,700 - (300) 12,400
Municipal bonds 4,051 219 - 4,270
------- ---- ------ -------
Total $32,751 $432 $ (300) $32,883
======= ==== ====== =======
The contractual maturities of investment securities available for sale are as
follows (in thousands):
Amortized Estimated
June 30, 2004 Cost Fair Value
- ------------- --------- ----------
Due after one year through five years $12,413 $12,421
Due after five years through ten years 530 556
Due after ten years (1) 19,770 19,102
------- -------
Total $32,713 $32,079
======= =======
(1) Includes equity securities with an amortized cost of $12,700 and
estimated fair value of $12,000.
6
Investment securities with an amortized cost of $16.5 million and $16.5
million and a fair value of $15.8 million and $16.3 million at June 30, 2004
and March 31, 2004, respectively, were pledged as collateral for advances at
the Federal Home Loan Bank of Seattle ("FHLB"). The Bank pledged investment
securities with an amortized cost of $500,000 and $500,000 and a fair value of
$493,000 and $504,000 at June 30, 2004 and March 31, 2004, respectively, as
collateral for treasury tax and loan funds.
The fair value of temporarily impaired securities, the amount of unrealized
losses and the length of time these unrealized losses existed as of June 30,
2004 are as follows (in thousands):
Less than 12 months 12 months or longer Total
-----------------------------------------------------------
Description of Fair Unrealized Fair Unrealized Fair Unrealized
Securities Value Losses Value Losses Value Losses
----- ---------- ----- ---------- ----- ----------
Agency securities $ 5,898 $(102) $ - $ - $ 5,898 $(102)
Equity securities 12,000 (700) - - 12,000 (700)
------- ----- ----- ----- ------- -----
Total temporarily
impaired
securities $17,898 $(802) $ - $ - $17,898 $(802)
======= ===== ===== ===== ======= =====
The Company has evaluated these securities and has determined that the decline
in the value is temporary. The decline in value is not related to any company
or industry specific event. The Company anticipates full recovery of amortized
cost with respect to these securities in the event of a more favorable market
interest rate environment.
The Company realized no gains or losses on sales of investment securities
available for sale for the three month period ended June 30, 2004 and 2003.
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, 2004 Cost Gains Losses Value
- ------------- --------- ---------- ---------- ---------
Real estate mortgage
investment conduits $1,802 $ 23 $ - $1,825
FHLMC mortgage-backed
securities 295 6 - 301
FNMA mortgage-backed securities 351 11 - 362
------ ----- ----- ------
Total $2,448 $ 40 $ - $2,488
====== ===== ===== ======
March 31, 2004
- --------------
Real estate mortgage
investment conduits $1,802 $ 55 $ - $1,857
FHLMC mortgage-backed
securities 332 8 - 340
FNMA mortgage-backed securities 383 11 - 394
------ ----- ----- ------
Total $2,517 $ 74 $ - $2,591
====== ===== ===== ======
The contractual maturities of mortgage-backed securities classified as held to
maturity are as follows (in thousands):
Amortized Estimated
June 30, 2004 Cost Fair Value
- ------------- --------- ----------
Due after one year through five years $ 31 $ 32
Due after five years through ten years 7 8
Due after ten years 2,410 2,448
------ ------
Total $2,448 $2,488
====== ======
Mortgage-backed securities held to maturity with an amortized cost of $1.8
million and $1.8 million and a fair value of $1.8 million and $1.9 million at
June 30, 2004 and March 31, 2004, respectively, were pledged as collateral for
governmental public funds held by the Bank. Mortgage-backed securities held to
maturity with an amortized cost of $294,000 and $332,000 and a fair value of
$302,000 and $341,000 at June 30, 2004 and March 31, 2004, respectively, were
pledged as collateral for treasury tax and loan funds held by the Bank. The
real estate mortgage investment conduits consist of Federal Home Loan Mortgage
Corporation ("FHLMC") and Federal National Mortgage Association ("FNMA")
securities.
7
Mortgage-backed securities available for sale consisted of the following (in
thousands):
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
June 30, 2004 Cost Gains Losses Value
- ------------- --------- ---------- ---------- ---------
Real estate mortgage
investment conduits $ 2,554 $ 52 $ - $ 2,606
FHLMC mortgage-backed
securities 11,508 54 (197) 11,365
FNMA mortgage-backed securities 324 8 - 332
------- ----- ------ -------
Total $14,386 $ 114 $ (197) $14,303
======= ===== ====== =======
March 31, 2004
- --------------
Real estate mortgage
investment conduits $ 2,943 $ 72 $ - $ 3,015
FHLMC mortgage-backed
securities 7,086 104 - 7,190
FNMA mortgage-backed securities 388 14 - 402
------- ----- ------ -------
Total $10,417 $ 190 $ - $10,607
======= ===== ====== =======
The contractual maturities of mortgage-backed securities available for sale
are as follows (in thousands):
Amortized Estimated
June 30, 2004 Cost Fair Value
- ------------- --------- ----------
Due after one year through five years $ 2,340 $ 2,401
Due after five years through ten years 9,449 9,252
Due after ten years 2,597 2,650
------- -------
Total $14,386 $14,303
======= =======
Expected maturities of mortgage-backed securities held to maturity and
available for sale 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 $14.0
million and $9.9 million and a fair value of $13.9 million and $10.1 million
at June 30, 2004 and March 31, 2004, respectively, were pledged as collateral
for advances at the FHLB. Mortgage-backed securities available for sale with
an amortized cost of $81,000 and $105,000 and a fair value of $85,000 and
$111,000 at June 30, 2004 and March 31, 2004, respectively, were pledged as
collateral for treasury tax and loan funds held by the Bank.
The fair value of temporarily impaired securities, the amount of unrealized
losses and the length of time these unrealized losses existed as of June 30,
2004 are as follows (in thousands):
Less than 12 months 12 months or longer Total
-----------------------------------------------------------
Description of Fair Unrealized Fair Unrealized Fair Unrealized
Securities Value Losses Value Losses Value Losses
----- ---------- ----- ---------- ----- ----------
Mortgage-backed
securities $9,252 $(197) $ - $ - $9,252 $(197)
------ ----- ------ ------ ------ -----
Total
temporarily
impaired
securities $9,252 $(197) $ - $ - $9,252 $(197)
====== ===== ====== ====== ====== =====
The Company has evaluated these securities and has determined that the decline
in the value is temporary. The decline in value is not related to any company
or industry specific event. The Company anticipates full recovery of amortized
cost with respect to these securities in the event of a more favorable market
interest rate environment.
The Company realized no gains or losses on sales of mortgage-backed securities
available for sale for the three months ended June 30, 2004 and 2003.
8
7. LOANS RECEIVABLE
Loans receivable excluding loans held for sale consisted of the following (in
thousands):
June 30, March 31,
2004 2004
-------- --------
Residential:
One-to-four-family $ 43,387 $ 44,194
Multi-family 5,046 5,074
Construction:
One-to-four-family 70,895 78,094
Commercial real estate 1,453 1,453
Commercial 58,608 57,702
Consumer:
Secured 28,576 26,908
Unsecured 1,966 1,689
Land 25,618 27,020
Commercial real estate 182,091 177,785
-------- --------
417,640 419,919
Less:
Undisbursed portion of loans 28,121 31,204
Deferred loan fees 2,973 3,107
Allowance for loan losses 4,489 4,481
-------- --------
Loans receivable, net $382,057 $381,127
======== ========
Most of the Bank's business activity is with customers located in the states
of Washington and Oregon. Loans and extensions of credit outstanding at one
time to one borrower are generally limited by federal regulation to 15% of the
Bank's shareholder's equity, excluding accumulated other comprehensive income.
As of June 30, 2004 and March 31, 2004, the Bank had no loans to one borrower
in excess of the regulatory limit and also had no individual industry
concentrations of credit.
8. ALLOWANCE FOR LOAN LOSSES
A reconciliation of the allowance for loan losses is as follows (in
thousands):
Three Months Ended
June 30,
------------------
2004 2003
------ ------
Beginning balance $4,481 $2,739
Provision for losses 140 70
Charge-offs (133) (15)
Recoveries 1 -
Net change in allowance for
unfunded loan commitments and
lines of credit - (1)
------ ------
Ending balance $4,489 $2,793
====== ======
Changes in the allowance for unfunded loan commitments and lines of credit
were as follows (in thousands):
Three Months Ended
June 30,
------------------
2004 2003
------ ------
Beginning balance $ 191 $ 175
Net change in allowance for
unfunded loan commitments and
lines of credit (12) 1
------ ------
Ending balance $ 179 $ 176
====== ======
9
The allowance for unfunded loan commitments is included in other liabilities
on the consolidated balance sheets. The provision for unfunded commitments is
charged to non-interest expense.
At June 30, 2004 and March 31, 2004, the Company's recorded investment in
impaired loans was $1.3 million and $1.3 million respectively. An allowance
for credit losses of $157,000 was determined in accordance with SFAS 114 (as
amended by SFAS 118). The average investment in impaired loans was
approximately $1.3 million during the three months ended June 30, 2004 and
$1.2 million for the year ended March 31, 2004. Interest income recognized on
impaired loans was $4,000 for the three months ended June 30, 2004 and $44,000
for the year ended March 31, 2004. There were no loans past due 90 days or
more and still accruing interest at June 30, 2004 and March 31, 2004.
9. LOANS HELD FOR SALE
The Company identifies loans held for sale at the time of origination, which
are carried at the lower of aggregate cost or net realizable value. Market
values are derived from available market quotations for comparable pools of
mortgage loans. Adjustments for unrealized losses, if any, are charged to
income.
10. MORTGAGE SERVICING RIGHTS
The following table is a summary of the activity in mortgage servicing rights
("MSRs") and the related allowance for the periods indicated and other related
financial data (in thousands):
Three Months
Ended June 30,
------------------
2004 2003
------ ------
Balance at beginning of period, net $ 624 $ 629
Additions 40 41
Amortization (79) (150)
Change in valuation allowance 16 (39)
----- -----
Balance at end of period, net $ 601 $ 481
===== =====
Valuation allowance at beginning of
period $ 106 $ 413
Change in valuation allowance (16) 39
----- -----
Valuation allowance balance at end
of period $ 90 $ 452
===== =====
The Company evaluates MSRs for impairment by stratifying MSRs based on the
predominant risk characteristics of the underlying financial assets. At June
30, 2004 and March 31, 2004, the fair value of MSRs totaled $1.1 million and
$669,000, respectively. The June 30, 2004 fair value was estimated using
various discount rates and a range of PSA values (the Bond Market
Association's standard prepayment values) that ranged from 133 to 1,192.
Amortization expense for the net carrying amount of MSRs at June 30, 2004 is
estimated as follows (in thousands):
Year Ending
March 31,
-----------------
2005 $162
2006 151
2007 98
2008 91
2009 72
After 2009 27
----
Total $601
====
11. CORE DEPOSIT INTANGIBLE
Net unamortized core deposit intangible totaled $678,000 at June 30, 2004 and
$758,000 at March 31, 2004. Amortization expense related to the core deposit
intangible during the three months ended June 30, 2004 and 2003 totaled
$81,000 and $82,000, respectively. During the three months ended September 30,
2003, the Company had additions to core deposit intangibles totaling $820,000
in connection with the acquisition of Today's Bancorp, Inc. ("Today's
Bancorp").
10
Amortization expense for the net core deposit intangible at June 30, 2004 is
estimated to be as follows (in thousands):
Year Ending
March 31,
-----------------
2005 $100
2006 116
2007 98
2008 83
2009 71
After 2009 210
----
Total $678
====
12. BORROWINGS
Borrowings are summarized as follows (in thousands):
At June 30, 2004 At March 31, 2004
---------------- -----------------
Federal Home Loan Bank advances $40,000 $40,000
Weighted average interest rate: 4.87% 4.88%
Borrowings have the following maturities at June 30, 2004 (in thousands):
Year Ending
March 31,
-----------------
2006 $15,000
2007 20,000
2008 5,000
-------
Total $40,000
=======
13. NEW ACCOUNTING PRONOUNCEMENTS
For the quarter ended June 30, 2004, there were no new accounting
pronouncements that will have a significant impact on the Company's financial
statements.
14. COMMITMENTS AND CONTINGENCIES
Off-balance sheet arrangements. 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, commercial and consumer
loans, and 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. Since some
commitments may expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements. The Company uses the
same credit policies in making commitments as it does for on-balance sheet
instruments. Commitments to extend credit are conditional and are honored for
up to 45 days subject to the Company's usual terms and conditions. Collateral
is not required to support commitments. The allowance for unfunded loan
commitments was $179,000 at June 30, 2004.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily used to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. Collateral held
varies as specified above, and is required in instances where the Bank deems
necessary.
11
The following is a summary of commitments and contingent liabilities with
off-balance sheet risk as of June 30, 2004:
Contract or
Notional
(In Thousands) Amount
------------
Commitments to originate loans
Adjustable $ 23,013
Fixed 3,954
Standby letters of credit 146
Undisbursed loan funds, and unused lines of credit 87,197
--------
Total $114,310
========
At June 30, 2004, the Company had firm commitments to sell $821,000 of
residential loans to FHLMC. These agreements are short-term, fixed-rate
commitments and no material gain or loss is likely.
Other Contractual Obligations. In connection with certain asset sales, the
Bank typically makes representations and warranties about the underlying
assets conforming to specified guidelines. If the underlying assets do not
conform to the specifications, the Bank may have an obligation to repurchase
the assets or indemnify the purchaser against loss. As of June 30, 2004,
loans under warranty totaled $126.2 million, which substantially represents
the unpaid principal balance of the Company's loans serviced for others
portfolio. The Bank believes that the potential for loss under these
arrangements is remote. Accordingly, no contingent liability is recorded in
the financial statements.
At June 30, 2004, scheduled maturities of certificates of deposit, FHLB
advances and future minimum operating lease commitments were as follows (in
thousands):
Within 1-3 4-5 Over Total
1 year Years Years 5 Years Balance
------- ------- ------- ------- --------
Certificates of deposit $83,300 $30,651 $10,311 $ 3,951 $128,213
FHLB advances - 35,000 5,000 - 40,000
Operating leases 1,130 1,810 1,714 2,348 7,002
------- ------- ------- ------- --------
Total other contractual
obligations $84,430 $67,461 $17,025 $ 6,299 $175,215
======= ======= ======= ======= ========
The Company is party to litigation arising in the ordinary course of business.
In the opinion of management, these actions will not have a material adverse
effect, if any, on the Company's financial position, results of operations, or
liquidity.
15. ACQUISITION
On July 18, 2003, the Company completed the acquisition of Today's Bancorp.
Each share of Today's Bancorp was exchanged for 0.826 shares of the Company's
common stock, or $13.64 in cash, or a combination thereof, resulting in the
issuance of 430,655 new shares. Total stock and cash consideration for Today's
Bancorp's was $17.2 million. The acquisition was accounted for using the
purchase method of accounting and, accordingly, the assets and liabilities of
Today's Bancorp were recorded at their respective fair values. Core deposit
intangible is being amortized using an accelerated method over ten years.
Goodwill, the excess of the purchase price over net fair value of the assets
and liabilities acquired was recorded at $9.2 million. The goodwill is not
tax deductible because this was a nontaxable transaction. The purchased assets
and assumed liabilities were recorded as follows (in thousands):
12
Assets
- ------
Cash $ 17,054
Investments 6,895
Building and equipment 1,130
Loans 85,427
Core deposit intangible 820
Goodwill 9,214
Other, net 1,768
Total Assets 122,308
Liabilities
- -----------
Deposits $(105,113)
Net Acquisition costs $ 17,195
Less:
Stock issued in acquisition (7,347)
Cash Acquired (17,054)
---------
Cash used in acquisition, net
of cash acquired $ 7,206
=========
The following unaudited pro forma financials for the three months ended June
30, 2004 and 2003 assumes that the Today's Bancorp acquisition occurred as of
April 1, 2003, after giving effect to certain adjustments. The pro forma
results have been prepared for comparative purposes only and are not
necessarily indicative of the results of operations which may occur in the
future or that would have occurred had the Today's Bancorp acquisition been
consummated on the date indicated.
Pro Forma Financial Information for
the Three Months Ended June 30,
2004 2003
-----------------------------------
(in thousands)
Net Interest Income $ 5,414 $ 5,561
Non-interest Income 2,640 1,708
Non-interest Expense 4,832 4,934
Net Income $ 2,199 $ 1,518
Earnings per common share:
Basic $ 0.46 $ 0.32
Diluted 0.45 0.31
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Management's Discussion and Analysis and other portions of this report contain
certain "forward-looking statements" concerning the future operations of the
Company. Management 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 the Company of the protections
of such safe harbor with respect to all "forward-looking statements" contained
in our Quarterly Report. The Company has used "forward-looking statements" to
describe future plans and strategies, including its expectations of the
Company's future financial results. Management'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 general
economic climate in the Company's market area and the country as a whole, the
ability of the Company to control costs and expenses, deposit flows, demand
for mortgages and other loans, real estate values and vacancy rates, the
ability of the Company to efficiently incorporate acquisitions into its
operations, competition, 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. The Company undertakes no obligation to publish revised
forward-looking statements to reflect the occurrence of unanticipated events
or circumstances after the date hereof.
13
Critical Accounting Policies
The Company has established various accounting policies that govern the
application of accounting principles generally accepted in the United States
of America ("GAAP") in the preparation of the Company's Consolidated Financial
Statements. The Company has identified four policies, that as a result of
judgments, estimates and assumptions inherent in those policies, are critical
to an understanding of the Company's Consolidated Financial Statements. These
policies relate to the methodology for the determination of the allowance for
loan losses, the impairment of goodwill, the valuation of the mortgage
servicing rights and the impairment of investments. These policies and the
judgments, estimates and assumptions are described in greater detail in
subsequent sections of Management's Discussions and Analysis and in the notes
to the Consolidated Financial Statements included in the Company's Annual
Report on Form 10-K for the year ended March 31, 2004. Management believes
that the judgments, estimates and assumptions used in the preparation of the
Company's Consolidated Financial Statements are appropriate given the factual
circumstances at the time. However, given the sensitivity of the Company's
Consolidated Financial Statements to these critical accounting policies, the
use of other judgments, estimates and assumptions could result in material
differences in the Company's results of operations or financial condition.
Allowance for Loan Losses
- -------------------------
The allowance for loan losses is maintained at a level sufficient to provide
for probable loan losses based on evaluating known and inherent risks in the
loan portfolio. The allowance is provided based upon management's continuing
analysis of the pertinent factors underlying the quality of the loan
portfolio. These factors include changes in the size and composition of the
loan portfolio, actual loan loss experience, current economic conditions, and
detailed analysis of individual loans for which full collectibility may not be
assured. The detailed analysis includes techniques to estimate the fair value
of loan collateral and the existence of potential alternative sources of
repayment. The appropriate allowance level is estimated based upon factors and
trends identified by management at the time the consolidated financial
statements are prepared.
Goodwill
- --------
Goodwill is initially recorded when the purchase price paid for an acquisition
exceeds the estimated fair value of the net identified tangible and intangible
assets acquired. Goodwill is presumed to have an indefinite useful life and
is tested, at least annually, for impairment at the reporting unit level. We
perform an annual review in the fourth quarter of each year, or more
frequently if indicators of potential impairment exist, to determine if the
recorded goodwill is impaired. Our impairment review process compares the
fair value of the Bank to its carrying value, including the goodwill related
to the Bank. If the fair value exceeds the carrying value, goodwill of the
Bank unit is not considered impaired and no additional analysis is necessary.
As of June 30, 2004, there have been no events or changes in circumstances
that would indicate a potential impairment.
Mortgage Servicing Rights
- -------------------------
The Company stratifies its MSRs based on the predominant characteristics of
the underlying financial assets, including coupon interest rate and
contractual maturity of the mortgage. An estimated fair value of MSRs is
determined quarterly using a discounted cash flow model. The model estimates
the present value of the future net cash flows of the servicing portfolio
based on various factors, such as servicing costs, servicing income, expected
prepayments speeds, discount rate, loan maturity and interest rate. The effect
of changes in market interest rates on estimated rates of loan prepayments
represents the predominant risk characteristic underlying the MSRs portfolio.
The Company's methodology for estimating the fair value of MSRs is highly
sensitive to changes in assumptions. For example, the determination of fair
value uses anticipated prepayment speeds. Actual prepayment experience may
differ and any difference may have a material effect on the fair value. Thus,
any measurement of fair value of MSRs is limited by the existing conditions
and assumptions made as of the date of analysis. Those assumptions may not be
appropriate if they are applied to a different time.
Future expected net cash flows from servicing a loan in the servicing
portfolio would not be realized if the loan is paid off earlier than
anticipated. Moreover, because most loans within the servicing portfolio do
not contain penalty provisions for early payoff, the Company will not receive
a corresponding economic benefit if the loan pays off earlier than expected.
MSRs are the discounted present value of the future net cash flows projected
from the servicing portfolio. Accordingly, prepayment risk subjects the
Company's MSRs to impairment. MSRs impairment is recorded in the amount that
the estimated fair value is less than the MSRs carrying value on a strata by
strata basis.
14
Investment Valuation
- --------------------
The Company's determination of impairment for various types of investments
accounted for in accordance with SFAS No. 115 is predicated on the notion of
other-than-temporary. The key indicator that an investment may be impaired is
that the fair value of the investment is less than its carrying value. Each
reporting period, the Company reviews those investments for which the fair
value is less than the carrying value. The review includes determining
whether certain indicators demonstrate the fair value of the investment has
been negatively impacted. These indicators include deteriorating financial
condition, regulatory, economic or technological changes, downgrade by a
rating agency and length of time the fair value has been less than carrying
value. If any indicators of impairment are present, management determines the
fair value of the investment and compares this to its carrying value. If the
fair value of the investment is less than the carrying value of the
investment, the investment is considered impaired and a determination must be
made as to whether the impairment is other-than-temporary.
Securities held to maturity are carried at cost, adjusted for amortization of
premiums and accretion of discounts which are recognized in interest income
using the interest method. If the cost basis of these securities is
determined to be other-than-temporary impaired, the amount of the impairment
is charged to operations.
Securities available for sale are carried at fair value. Premiums and
discounts are amortized using the interest method over the remaining period to
contractual maturity. Unrealized holding gains and losses, or valuation
allowances established for net unrealized losses, are excluded from earnings
and reported as a separate component of shareholders' equity as accumulated
other comprehensive income (loss), net of income taxes, unless the security is
deemed other-than-temporary impaired. If the security is determined to be
other-than-temporary impaired, the amount of the impairment is charged to
operations.
An impairment shall be deemed other-than-temporary unless positive evidence
indicating that the investment's carrying value is recoverable within a
reasonable period of time outweighs negative evidence to the contrary.
Evidence that is objectively determinable and verifiable is given greater
weight than evidence that is subjective and or not verifiable. Evidence based
on future events will generally be less objective as it is based on future
expectations and therefore is generally less verifiable or not verifiable at
all. Factors considered in evaluating whether a decline in value is
other-than-temporary include, (a) the length of time and the extent to which
the fair value has been less than amortized cost, (b) the financial condition
and near-term prospects of the issuer and (c) our intent and ability to retain
the investment for a period of time. In situations in which the security's
fair value is below amortized cost but it continues to be probable that all
contractual terms of the security will be satisfied, and that the decline is
due solely to changes in interest rates (not because of increased credit
risk), and the Company asserts that it has positive intent and ability to hold
that security to maturity, no other-than-temporary impairment is recognized.
General
A progressive, community-oriented financial institution, the Company
emphasizes local, personal service to residents of its primary market area,
which encompasses Clark, Cowlitz, Klickitat and Skamania Counties in
Washington State. The Company is engaged primarily in the business of
attracting deposits from the general public and using these funds to originate
loans for commercial and consumer purposes in its primary market area.
The Company continues to change the composition of its loan portfolio and
deposit base as part of the transition to commercial banking. Commercial real
estate loans and commercial loans have grown from 15.72% and 5.87% of the
fiscal 2000 loan portfolio, to 43.6% and 14.0% at June 30, 2004.
The Company's strategic plan includes the diversification of its loan
portfolio to include a larger portion of commercial and commercial real estate
loans. Targeting the commercial banking customer base, specifically small and
medium size businesses, professionals and wealth building individuals within
its primary market area, is an objective of the Company.
Significant portions of the growing commercial loan portfolio carry adjustable
rates, higher yields or shorter terms, and higher credit risk than traditional
fixed-rate mortgages. The strategic plan stresses increased emphasis on
non-interest income, including increased fees for asset management and deposit
service charges. This focus is designed to enhance earnings and reduce
interest rate risk.
A related goal is to increase the proportion of personal and business checking
account deposits and provide a more complete range of financial services to
customers in the local communities. Whether increasing loan portfolio size or
15
deposit base, the Company will continue to emphasize controlled growth. The
Company is well positioned to attract new customers and to increase its market
share given that the administrative headquarters and nine of its thirteen
branches are located in Clark County, which is one of the fastest growing
counties in the state, according to the U.S. Census Bureau.
In order to support its strategy of growth without compromising its local,
personal service to its customers and a commitment to asset quality, the
Company has made significant investments in experienced branch, lending, asset
management and support personnel and has incurred significant costs in
facility expansion. The Company's efficiency ratios reflect this investment
and will remain relatively high by industry standards for the foreseeable
future due to the emphasis on growth and local, personal service. Control of
non-interest expenses remains a high priority for the Company's management.
The Company continuously reviews new products and services to give its
customers more financial options. With an emphasis on growth of non-interest
income and control of non-interest expense, all new technology and services
are reviewed for business development and cost saving purposes. The in house
processing of checks and production of images has supported the Bank's
increased service to customers and at the same time has increased efficiency.
The Company continues to experience growth in customer use of the online
banking services. Customers are able to conduct a full range of services on a
real-time basis, including balance inquiries, transfers and electronic bill
paying. This online service has also enhanced the delivery of cash management
services to commercial customers. The internet banking web site is
www.riverviewbank.com.
Market Area
With its home office and six branches in Vancouver, Washington and branch
offices in Camas, Washougal, Stevenson, White Salmon, Battle Ground,
Goldendale and Longview, the Company continues to provide local, personal
service to its customers. The market area for lending and deposit taking
activities encompasses Clark, Cowlitz, Skamania and Klickitat Counties,
throughout the Columbia River Gorge area.
The Company operates a trust and financial services company, RAM Corp.,
located in downtown Vancouver. Riverview Mortgage, a mortgage broker division
of the Company, originates mortgage (including construction) loans for various
mortgage companies in the Portland metropolitan area, as well as for the
Company. Commercial and business banking services are offered by the Business
and Professional Banking Division located at the downtown Vancouver branch.
Vancouver, located in Clark County, is north of Portland, Oregon. Several
large employers including Sharp Microelectronics, Hewlett Packard, Georgia
Pacific, Underwriters Laboratory and Wafer Tech are located in Clark County.
In addition to the expanding industry base, the Columbia River Gorge is a
popular tourist destination, generating revenue for all the communities with
the area. As a result, Southwest Washington's economy has become less
dependent on the timber industry.
Comparison of Financial Condition at June 30, 2004 and March 31, 2004
At June 30, 2004, the Company had total assets of $515.4 million, compared
with $520.5 million at March 31, 2004. The decrease in total assets was
primarily due to a decrease in overnight investments of cash as a result of
decreased deposits accounts, including the maturity of high-yielding brokered
and wholesale certificates of deposit.
Cash, including interest-earning accounts, totaled $37.3 million at June 30,
2004, compared to $47.9 million at March 31, 2004. The decrease is due in
part to the purchase of mortgage backed securities of $5 million and the
decrease in deposit accounts.
Loans held for sale increased $414,000 to $821,000 at June 30, 2004, compared
to $407,000 at March 31, 2004. The increase reflects the variable demand for
residential loan financing. As interest rates fall, loan volume shifts to
fixed rate production. Conversely, in a rising interest rate environment, loan
volume will shift to adjustable rate production. The Company originates
fixed-rate residential loans for sale in the secondary market and retains the
related loan servicing rights. Selling fixed interest rate mortgage loans
allows the Company to reduce the interest rate risk associated with long term,
fixed interest rate products. It also frees up funds to make new loans and
diversify the
16
loan portfolio. We continue to service the loans we sell, maintaining the
customer relationship and generating ongoing non-interest income.
Loans receivable, net, were $382.1 million at June 30, 2004, compared to
$381.1 million at March 31, 2004. Commercial real estate loans increased $4.3
million which partially offset the decrease of $4.3 million in net residential
construction loans. A substantial portion of the Company's loan portfolio is
secured by real estate, either as primary or secondary collateral, located in
its primary market areas.
Investment securities available-for-sale was $32.1 million at June 30, 2004,
compared to $32.9 million at March 31, 2004. The $800,000 decrease was
primarily due to unrealized net market gains and losses.
Mortgage-backed securities held-to-maturity was $2.4 million at June 30, 2004,
compared to $2.5 million at March 31, 2004. The $100,000 decrease was a
result of pay downs.
Mortgage-backed securities available-for-sale was $14.3 million at June 30,
2004, compared to $10.6 million at March 31, 2004. The $3.7 million net
increase reflects $5.0 million in purchases and $1.3 million in paydowns and
unrealized market gains and losses.
Bank-owned life insurance increased to $12.3 million at June 30, 2004, from
$12.1 million at March 31, 2004. The $200,000 increase reflects the increase
in cash surrender value of the policies.
Prepaid expenses and other assets were $3.6 million at June 30, 2004, compared
to $1.3 million at March 31, 2004. The $2.3 million increase is a receivable
due to the sale and leaseback of the Camas Branch. The sale occurred on June
30, 2004. Cash associated with the receivable was received on July 1, 2004.
Deposit accounts totaled $402.6 million at June 30, 2004, compared to $409.1
million at March 31, 2004. The total average outstanding balance of checking
accounts and money market accounts ("transaction accounts") increased 2.6% to
$234.8 million for the quarter ended June 30, 2004, compared to $228.9 million
for the quarter ended March 31, 2004. Transaction accounts represented 59.4%
and 58.1% of average total outstanding balance of deposits for the quarters
ended June 30, 2004 and March 31, 2004, respectively. The average
outstanding balance of certificates of deposit decreased $6.2 million to
$130.5 million, compared to $136.7 million for the quarter ended March 31,
2004 as high yielding brokered and wholesale certificates of deposits matured
during the quarter.
FHLB advances were $40.0 million at both June 30, 2004 and March 31, 2004.
Shareholders' Equity and Capital Resources
Shareholders' equity increased $1.0 million to $66.2 million at June 30, 2004
from $65.2 million at March 31, 2004. The increase was primarily as a result
of the $1.5 million total comprehensive income, offset by $743,000 in cash
dividends paid to shareholders.
The Bank is subject to various regulatory capital requirements administered by
the Office of Thrift Supervision ("OTS"). 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 Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of
the Bank's assets, liabilities and certain off-balance sheet items as
calculated in accordance with regulatory accounting practices. The 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 Bank to maintain minimum amounts and ratios of total capital to
risk-weighted assets, Tier I capital to risk-weighted assets, core capital to
total assets and tangible capital to tangible assets (set forth in the table
below). Management believes the Bank meets all capital adequacy requirements
to which it is subject as of June 30, 2004.
As of June 30, 2004, the most recent notification from the OTS categorized the
Bank as "well capitalized" under the regulatory framework for prompt
corrective action. To be categorized as "well capitalized," the Company must
maintain minimum total capital and Tier I capital to risk weighted assets,
core capital to total assets and tangible
17
capital to tangible assets (set forth in the table below). There are no
conditions or events since that notification that management believes have
changed the Company's category.
The 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
------ ----- ------ ----- ------ -----
June 30, 2004
Total Capital:
(To Risk Weighted
Assets) $56,420 13.31% $33,913 8.0% $42,391 10.0%
Tier I Capital:
(To Risk Weighted
Assets) 51,931 12.25 16,956 4.0 25,435 6.0
Tier I Capital:
(To Adjusted
Tangible Assets) 51,931 10.37 15,019 3.0 25,031 5.0
Tangible Capital:
(To Tangible
Assets) 51,931 10.37 7,509 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
------ ----- ------ ----- ------ -----
March 31, 2004
Total Capital:
(To Risk Weighted
Assets) $53,952 12.78% $33,760 8.0% $42,200 10.0%
Tier I Capital:
(To Risk Weighted
Assets) 49,471 11.72 16,880 4.0 25,320 6.0
Tier I Capital:
(To Adjusted
Tangible
Assets) 49,471 9.81 15,125 3.0 25,209 5.0
Tangible Capital:
(To Tangible
Assets) 49,471 9.81 7,563 1.5 N/A N/A
The following table is a reconciliation of the Bank's capital, calculated
according to generally accepted accounting principles to regulatory tangible
and risk-based capital at June 30, 2004 (in thousands):
Equity $ 61,606
Net unrealized securities loss 473
Goodwill and other intangibles (10,088)
Servicing asset (60)
---------
Tangible capital 51,931
General valuation allowance 4,489
---------
Total capital $ 56,420
=========
Liquidity
The Bank's primary sources of funds are customer deposits, proceeds from
principal and interest payments on loans, the sale of loans, maturing
securities and FHLB advances. While maturities and scheduled amortization of
loans are a predictable source of funds, deposit flows and mortgage
prepayments are greatly influenced by general interest rates, economic
conditions and competition.
The Bank must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to fund loan originations and deposit
withdrawals, satisfy other financial commitments and to take advantage of
investment opportunities. The Bank generally maintains sufficient cash and
short-term investments to meet short-term liquidity needs. At June 30, 2004,
cash totaled $37.3 million, or 7.2%, of total assets. The Bank has a line of
credit with the FHLB of Seattle. The line of credit is 35% of total assets to
the extent the Bank provides qualifying collateral and
18
holds sufficient FHLB stock. At June 30, 2004, the Bank had $40.0 million of
outstanding advances from the FHLB of Seattle under an available credit
facility of $178.6 million, limited to available collateral.
Sources of capital and liquidity for the Company on a stand-alone basis
include distributions from the Bank and the issuance of debt or equity.
Dividends and other capital distributions from the Bank are subject to
regulatory restrictions.
Off-Balance Sheet Arrangements and Other Contractual Obligations
Through the normal course of operations, the Company has entered into certain
contractual obligations and other commitments. Our obligations generally
relate to funding of operations through deposits and borrowings as well as
leases for premises. Our commitments generally relate to our lending
operations.
The Company has obligations under long-term operating leases, principally for
building space and land. Lease terms generally cover a five year period, with
options to extend, and are non-cancelable.
The Company has commitments to originate fixed and variable rate mortgage
loans to customers. Because some commitments expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. Undisbursed loan funds and unused lines of credit include funds
not disbursed, but committed to construction projects and home equity and
commercial lines of credit. Standby letters of credit are conditional
commitments issued by us to guarantee the performance of a customer to a third
party.
For further information regarding the company's off-balance sheet arrangements
and other contractual obligations, see Note 14 of the Notes to the
Consolidated Financial Statements.
Asset Quality
The allowance for loan losses was $4.5 million at June 30, 2004 and $4.5
million at March 31, 2004. Management believes the allowance for loan losses
at June 30, 2004 is adequate to cover probable credit losses existing in the
loan portfolio 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 and data, current 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.
Commercial loans are considered to involve a higher degree of credit risk than
one-to-four-family residential loans, and tend to be more vulnerable to
adverse conditions in the real estate market and deteriorating economic
conditions.
Non-performing assets were $1.7 million, or 0.34% of total assets at June 30,
2004, compared with $2.0 million, or 0.39% of total assets at March 31, 2004.
The $1.3 million balance of non-accrual loans is composed of 2 residential
real estate loans, 2 commercial real estate loans and 17 commercial loans.
The following table sets forth information regarding the Company's
non-performing assets.
19
June 30, 2004 March 31, 2004
------------- --------------
(dollars in thousands)
Loans accounted for on a nonaccrual basis:
Residential real estate $ 235 $ 24
Commercial real estate 309 309
Land - 31
Commercial 726 872
Consumer - 65
------ ------
Total 1,270 1,301
------ ------
Accruing loans which are contractually
past due 90 days or more - -
------ ------
Total of nonaccrual and
90 days past due loans 1,270 1,301
------ ------
Real estate owned (net) 460 742
------ ------
Total nonperforming assets $1,730 $2,043
====== ======
Total loans delinquent 90 days
or more to net loans 0.33% 0.34%
Total loans delinquent 90 days or
more to total assets 0.25 0.25
Total nonperforming assets to total assets 0.34 0.39
Comparison of Operating Results for the Three Months Ended June 30, 2004 and
2003
Financial Highlights. Net income for the three months ended June 30, 2004 was
$2.2 million, or $0.46 per basic share ($0.45 per diluted share), compared to
net income of $1.5 million, or $0.34 per basic share ($0.34 per diluted share)
for the three months ended June 30, 2003. The Company's improved operating
results reflect significant growth of assets and liabilities, combined with an
$828,000 gain on the sale and leaseback of the Company's Camas branch and
operations center. The Company's operating results also reflect a significant
increase in other non-interest income and non-interest expenses due to the
acquisition of Today's Bancorp in July 2003. Excluding the $828,000 gain on
the sale of the branch, net income for the three months ended June 30, 2004
was $1.7 million, or $0.34 per basic share ($0.34 per diluted share).
The annualized return on average assets was 1.74% for the three months ended
June 30, 2004, compared to 1.47% for the three months ended June 30, 2003.
For the same periods, the annualized return on average common equity was
13.32% compared to 10.77%. In addition, the efficiency ratio (excluding
intangible asset amortization), which is defined as the percentage of
noninterest expenses to total revenue, improved to 57.54% compared to 59.90%
for the three months ended June 30, 2003.
Net Interest Income. The Company's profitability depends primarily on its net
interest income, which is the difference between the income it receives on
interest-earning assets and its cost of funds, which consists of interest paid
on deposits and borrowings. Net interest income is also affected by the
relative amounts of interest-earning assets and interest-bearing liabilities.
When interest-earning assets equal or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income. The level of
non-interest income and expenses also affects the Company's profitability.
Non-interest income includes deposit service fees, income associated with the
origination and sale of mortgage loans, brokering loans, loan servicing fees,
income from real estate owned, net gains on sales of assets, bank-owned life
insurance income and asset management fee income. Non-interest expenses
include compensation and benefits, occupancy and equipment expenses, deposit
insurance premiums, data servicing expenses and other operating costs. The
Company's results of operations are also significantly affected by general
economic and competitive conditions, particularly changes in market interest
rates, government legislation and regulation, and monetary and fiscal
policies.
20
Net interest income for the three months ended June 30, 2004 was $5.6 million,
representing a $1.0 million, or a 21.7% increase, compared to the same prior
year period. This improvement reflected a 21.2% increase in the average
balance of interest-earning assets (primarily increases in the average balance
of commercial loans and investment securities, partially offset by a decrease
in the average balance of residential mortgage loans and mortgage-backed
securities) to $458.4 million. The increase in interest-earning assets was
offset by a 31.0% increase in average balance of interest-bearing liabilities
(an increase in all deposit categories) to $375.6 million. The ratio of
average interest-earning assets to average interest-bearing liabilities
decreased to 122.0% in the three month period ended June 30, 2004 from 131.9%
in the same prior year period. The ratio indicates that the interest-earning
asset growth is being funded more by interest-bearing liabilities as compared
to capital and non-interest-bearing demand deposits.
Interest Income. Interest income totaled $7.1 million and $6.1 million, for
the three months ended June 30, 2004 and 2003, respectively. Average
interest-earning assets increased $80.1 million to $458.4 million for the
three months ended June 30, 2004 from $378.3 million for the same fiscal 2003
period. The yield on interest-earning assets was 6.25% for the three months
ended June 30, 2004 compared to 6.54% for the same three months ended June 30,
2003. The decreased yield is primarily the result of lower yields on loans
that reflect the Federal Reserve Board fed funds rate cuts that occurred
during fiscal years 2003 and 2004.
Interest Expense. Interest expense was $1.5 million for both the three months
ended June 30, 2004 and 2003. Average interest-bearing liabilities increased
$88.8 million to $375.6 million for the three months ended June 30, 2004 from
$286.8 million for the same prior year period. The change in interest expense
reflects the lower rates of interest paid on deposits and FHLB borrowings due
to the Federal Reserve Board fed funds rate cuts that occurred during fiscal
years 2003 and 2004. The weighted average interest rate on total deposits
decreased to 1.25% for the three months ended June 30, 2004 from 1.64% for the
same period in the prior year. The weighted average interest rate of FHLB
borrowings decreased to 4.84% for the three months June 30, 2004 from 4.96%
for same period in the prior year. The level of liquidity in the first three
months of fiscal year 2005 allowed the runoff of high interest rate deposits
acquired in the acquisition of Today's Bancorp and held the FHLB borrowings
stable at $40.0 million.
The following table sets forth, for the periods indicated, information
regarding average balances of assets and liabilities as well as the total
dollar amounts of interest income from average interest-earning assets and
interest expense on average interest-bearing liabilities, resultant yields,
interest rate spread, ratio of interest-earning assets to interest-bearing
liabilities and net interest margin.
21
Quarter Ended June 30,
---------------------------------------------------------
2004 2003
--------------------------- ---------------------------
Interest Interest
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
------- --------- ------ ------- --------- ------
(Dollars in thousands)
Interest-earning
assets:
Mortgage loans $134,899 $2,531 7.53% $157,385 $3,037 7.74%
Non-mortgage
loans 254,827 4,095 6.45 148,234 2,632 7.12
-------- ------ ------ -------- ------ ------
Total net
loans (1) 389,726 6,626 6.82 305,619 5,669 7.44
Mortgage-backed
securities(2) 16,184 160 3.97 14,602 181 4.97
Investment
securities(2) 32,739 278 3.41 20,265 168 3.33
Daily interest-
bearing assets 13,695 31 0.91 32,131 90 1.12
Other earning
assets 6,034 44 2.92 5,646 60 4.26
-------- ------ ------ -------- ------ ------
Total interest-
earning assets 458,378 7,139 6.25 378,263 6,168 6.54
Non-interest-earning
assets:
Office properties
and equipment, net 9,652 9,557
Other non-interest-
earning assets 39,783 21,485
-------- --------
Total assets $507,813 $409,305
======== ========
Interest-bearing
liabilities:
Regular savings
accounts $ 29,866 41 0.55 $ 25,163 45 0.72
NOW accounts 105,131 197 0.75 68,505 191 1.12
Money market
accounts 69,013 164 0.95 54,264 134 0.99
Certificates of
deposit 130,484 641 1.97 98,889 639 2.59
-------- ------ ------ -------- ------ ------
Total deposits 334,494 1,043 1.25 246,821 1,009 1.64
Other interest-
bearing
liabilities 41,100 496 4.84 40,000 495 4.96
-------- ------ ------ -------- ------ ------
Total interest-
bearing
liabilities 375,594 1,539 1.64 286,821 1,504 2.10
Non-interest-
bearing
liabilities:
Non-interest-
bearing deposits 60,657 63,115
Other liabilities 5,342 3,501
-------- --------
Total
liabilities 441,593 353,437
Shareholders'
equity 66,220 55,868
-------- --------
Total
liabilities and
shareholders'
equity $507,813 $409,305
======== ========
Net interest
income $5,600 $4,664
====== ======
Interest rate
spread 4.61% 4.44%
====== ======
Net interest margin 4.90% 4.95%
====== ======
Ratio of average
interest-earning
assets to average
interest-bearing
liabilities 122.04% 131.88%
====== ======
Tax Equivalent
Adjustment $ 46 $ 37
====== ======
(1) Includes non-accrual loans.
(2) For purposes of the computation of average yield on investments available
for sale, historical cost balances were utilized, therefore, the yield
information does not give effect to change in fair value that are
reflected as a component of shareholders' equity.
22
The following table sets forth the effects of changing rates and volumes on
net interest income of the Company for the quarter ended June 30, 2004.
Variances that were immaterial have been allocated based upon the percentage
relationship of changes in volume and changes in rate to the total net
change.
Three Months Ended June 30,
----------------------------------
2004 vs 2003
----------------------------------
Increase (Decrease)
Due to
------------------- Total
Increase
Volume Rate (Decrease)
------ ------- ----------
(In thousands)
Interest Income:
Mortgage loans $ (424) $ (82) $ (506)
Non-mortgage loans 1,734 (271) 1,463
Mortgage-backed securities 19 (40) (21)
Investment securities (1) 106 4 110
Daily interest-bearing (44) (15) (59)
Other earning assets 4 (20) (16)
------ ------ -------
Total interest income 1,395 (424) 971
------ ------ -------
Interest Expense:
Regular savings accounts 7 (11) (4)
NOW accounts 82 (76) 6
Money market accounts 35 (5) 30
Certificates of deposit 176 (174) 2
Other interest-bearing liabilities 13 (12) 1
------ ------ -------
Total interest expense 313 (278) 35
------ ------ -------
Net interest income (1) $1,082 $ (146) $ 936
====== ====== =======
(1) Taxable equivalent
Provision for Loan Losses. The provision for loan losses for the three month
period ended June 30, 2004 was $140,000, compared to $70,000 for the same
period in the prior year. Net charge-offs for the current period were
$132,000, compared to $15,000 for the same period of the prior year. The ratio
of allowance for loan losses to total net loans increased to 1.16% compared to
0.93% at June 30, 2003. The acquisition of Today's Bancorp in July 2003 added
$2.6 million to the allowance for loan losses. Net charge-offs to average net
loans for the three-month period ended June 30, 2004 increased to 0.14% from
0.02% for the same period in the prior year. During the quarter ended June
30, 2004, management evaluated known and inherent risks in the loan portfolio.
Based on the analysis, changes were made in the estimation, assumptions and
allocation of the allowance for loan losses. Management considered the
allowance for loan losses at June 30, 2004 to be adequate to cover probable
losses inherent in the loan portfolio based on the assessment of various
factors affecting the loan portfolio.
Non-Interest Income. Non-interest income increased $1.0 million or 62.5% for
the quarter ended June 30, 2004 to $2.6 million compared to $1.6 million for
the quarter ended June 30, 2003. The increase was due primarily to the gain
on the sale and leaseback of the Camas branch and operations center of
$828,000 and the increase in the cash surrender value of bank-owned life
insurance of $154,000. The bank-owned life insurance was purchased in
December 2003.
Reduced mortgage refinance activity resulted in gains on the sale of loans
decreasing $129,000 for the quarter ended June 30, 2004 to $175,000 compared
to $304,000 for the quarter ended June 30, 2003. The increase in loan
servicing income of $127,000 for the same period also reflects the decrease in
mortgage refinancing activity. Loan servicing income for the quarter ended
June 30, 2004 includes a $16,000 write-up to the market value of mortgage
servicing rights as compared to a $39,000 write down in market value of
mortgage servicing rights for the same prior year period. For the same
periods, loan servicing income also included amortization of mortgage
servicing rights of $79,000 and $150,000, respectively. The decrease in
amortization is due to the reduction of early payoffs of loans sold with
servicing retained. Asset management services income was $272,000 for the
quarter ended June 30, 2004,
23
compared to $223,000 for the quarter ended June 30, 2003. RAMCorp. had $141.5
million in total assets under management at June 30, 2004, compared to $125.9
million at June 30, 2003.
Non-Interest Expense. Non-interest expense increased $897,000, or 22.8%, to
$4.8 million for the three month period ended June 30, 2004, compared to $3.9
million for the three months ended June 30, 2003. One measure of a bank's
ability to contain non-interest expense is the efficiency ratio. It is
calculated by dividing total non-interest expense (less intangible asset
amortization) by the sum of net interest income plus non-interest income (less
intangible asset amortization and lower of cost or market adjustments). The
Company's efficiency ratio excluding intangible asset amortization and lower
cost or market adjustments was 57.54% for the three months ended June 30,
2004, compared to 59.90% for the same period in the prior year. Excluding the
gain on the sale and leaseback of the Company's Camas Branch, the efficiency
ratio for the three months ended June 20, 2004 was 63.95%.
The principal component of the Company's non-interest expense is salaries and
employee benefits. For the three months ended June 30, 2004, salaries and
employee benefits, which include mortgage broker commission compensation, was
$2.6 million, a 18.2% increase over the three months ended June 30, 2003 total
of $2.2 million. Full-time equivalent employees increased to 188 at June 30,
2004 from 161 at June 30, 2003. The majority of the increase in full-time
equivalent employees is due to the acquisition of Today's Bancorp which added
several commercial lenders and branch personnel. This acquisition also
contributed to increases in occupancy, depreciation, data processing,
telecommunication and other expense.
The acquisition of Today's Bancorp and the related acquisition of $105.1
million in deposits accounts created an $820,000 core deposit intangible
("CDI"), representing the excess of cost over fair market of acquired
deposits. The CDI is being amortized over a ten-year life using an accelerated
amortization method. The amortization expense was $39,000 for the three months
ended June 30, 2004.
The acquisition of the Hazel Dell and Longview branches from the Resolution
Trust Corporation in fiscal 1995 and the related acquisition of $42.0 million
in customer deposits created a $3.2 million CDI. The amortization expense was
$42,000 for the three months ended June 30, 2004 compared to $82,000 for the
prior year period. As of June 30, 2004, this CDI is fully amortized.
Other non-interest expense was $477,000, or a 57.9% increase over the three
months ended June 30, 2003 total of $302,000. The majority of the increase
over the prior period was due to the termination of a former Today's Bancorp
branch operating lease. A loss of $107,000 was incurred to write off the
remaining net book value of the leasehold improvements of the branch. The
increase in other non-interest expense for the period also included $25,000
related to the write down of other real estate owned to its net realizable
value.
Provision for Federal Income Taxes. Provision for federal income taxes was
$1.0 million for the three months ended June 30, 2004, compared to $738,000
for the three months ended June 30, 2003 as a result of higher income before
taxes. The effective tax rate for three months ended June 30, 2004 was 31.8%
compared to 33.0% for the three months ended June 30, 2003. The effective tax
rate declined from the prior quarter, reflecting the impact of the purchase
of bank-owned life insurance and additional investments in municipal
securities.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our Asset Liability Committee is responsible for implementing the interest
rate risk policy, which sets forth limits established by the Board of
Directors of acceptable changes in net interest income, and the portfolio
value from specified changes in interest rates. The OTS defines net portfolio
value as the present value of expected cash flows from existing assets minus
the present value of expected cash flows from existing liabilities plus the
present value of expected cash flows from existing off-balance sheet
contracts. Our Asset Liability Committee reviews, among other items, economic
conditions, the interest rate outlook, the demand for loans, the availability
of deposits and borrowings, and our current operating results, liquidity,
capital and interest rate exposure. In addition, the Asset Liability
Committee monitors asset and liability characteristics on a regular basis and
performs analyses to determine the potential impact of various business
strategies in controlling interest rate risk and other potential impact of
these strategies upon future earnings under various interest rate scenarios.
Based on these reviews, our Asset Liability Committee formulates a strategy
that is intended to implement the objectives contained in our business plan
without exceeding losses in net interest income and net portfolio value limits
set forth in our interest rate risk policy.
24
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 year ended March
31, 2004.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures: An evaluation of
the Company's disclosure controls and procedures (as defined in Section 13(a)-
15(e) and 15d 15(e) of the Securities Exchange Act of 1934) was carried out
under the supervision and with the participation of the Company's Chief
Executive Officer, Chief Financial Officer and several other members of the
Company's senior management as of the end of the period covered by this
report. The Company's Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures as currently
in effect are effective in ensuring that the information required to be
disclosed by the Company in the reports it files or submits under the
Securities and Exchange Act of 1934 is (i) accumulated and communicated to the
Company's management (including the Chief Executive Officer and Chief
Financial Officer) in a timely manner, and (ii) recorded, processed,
summarized and reported within the time periods specified in the SEC's rules
and forms.
(b) Changes in Internal Controls: There was no change in the Company's
internal control over financial reporting during the Company's most
recently completed fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Company's internal
control over financial reporting.
25
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Not applicable
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
---------------------------------------------------------------------
Securities
----------
The following table summarizes the Company's share repurchases for the
quarter ended June 30, 2004.
Total Number
of Shares
Purchased as Maximum Number of
Part of Shares that
Average Publicly May Yet Be
Total Number of Price Paid Announced Purchased Under the
Period Shares Purchased (1) per Share Program Program (2)
- -------- -------------------- ---------- ------------ -------------------
April - $ - - -
May - - - -
June - - - -
----- ------ ----- -------
Total - $ - - 133,204
===== ====== ===== =======
(1) Of these shares, no shares were purchased other than through a publicly
announced program.
(2) In September 2002, the Company announced a stock repurchase of up to 5%,
or 214,000 shares of its outstanding common stock. This program expires
when all shares under the plan have been repurchased.
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:
26
3.1 Articles of Incorporation of the Registrant(1)
3.2 Bylaws of the Registrant(1)
4 Form of Certificate of Common Stock of the Registrant(1)
10.1 Employment Agreement with Patrick Sheaffer(2)
10.2 Employment Agreement with Ronald A. Wysaske(2)
10.3 Severance Agreement with Karen Nelson(2)
10.4 Severance Agreement with John A. Karas(3)
10.5 Employee Severance Compensation Plan(2)
10.6 Employee Stock Ownership Plan(4)
10.7 Management Recognition and Development Plan(5)
10.8 1998 Stock Option Plan(5)
10.9 1993 Stock Option and Incentive Plan(5)
10.10 2003 Stock Option Plan (6)
31.1 Certifications of the Chief Executive 0fficer Pursuant to
Section 302 of the Sarbanes-Oxley Act
31.2 Certifications of the Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act
32 Certifications of the Chief Executive Officer and Chief
Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act
(b) Reports on Form 8-K: None
- ------------
(1) Filed as an exhibit to the Registrant's Registration Statement on Form
S-1 (Registration No. 333-30203), and incorporated herein by reference.
(2) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1997, and incorporated herein by
reference.
(3) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the year ended March 31, 2002, and incorporated herein by reference.
(4) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the year ended March 31, 1998, and incorporated herein by reference.
(5) Filed on October 23, 1998, as an exhibit to the Registrant's Registration
Statement on Form S-8, and incorporated herein by reference.
(6) Filed as an exhibit to the Registrant's Definitive Annual Meeting Proxy
Statement for the 2003 Annual Meeting of Shareholders, and incorporated
herein by reference.
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RIVERVIEW BANCORP, INC.
By: /s/ Patrick Sheaffer By: /s/ Ron Dobyns
--------------------------- ---------------------------
Patrick Sheaffer Ron Dobyns
Chairman of the Board Senior Vice President
Chief Executive Officer (Chief Financial and
(Principal Executive Officer) Accounting Officer)
Date: August 3, 2004 Date: August 3, 2004
28
Exhibit 31.1
- ------------
Section 302 Certification
I, Patrick Sheaffer, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Riverview Bancorp,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we
have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period
in which this quarterly report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fiscal fourth quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weakness in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial data information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 3, 2004
/S/ Patrick Sheaffer
-------------------------------
Patrick Sheaffer
Chairman and Chief Executive Officer
29
Exhibit 31.2
- ------------
Section 302 Certification
I, Ron Dobyns, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Riverview Bancorp,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we
have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period
in which this quarterly report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fiscal fourth quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weakness in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial data information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 3, 2004
/S/ Ron Dobyns
------------------------------
Ron Dobyns
Chief Financial Officer
30
Exhibit 32
----------
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER OF
RIVERVIEW BANCORP, INC.
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned herby certify, pursuant to Section 906 of the Sarbanes-Oxley
act of 2002 and in connection with this annual report on Form 10-Q that:
1. the report fully complies with the requirements of sections 13(a) and
15(d) of the Securities Exchange Act of 1934, as amended, and
2. the information contained in the report fairly presents, in all material
respects, the company's financial condition and results of operations.
/S/ Patrick Sheaffer /S/ Ron Dobyns
- ----------------------------- ------------------------------
Patrick Sheaffer Ron Dobyns
Chief Executive Officer Chief Financial Officer
Dated: August 3, 2004
31