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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) of
- ------ THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
-------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) of
- ------- THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----- -----
Commission File Number: 0-22957
RIVERVIEW BANCORP, INC.
(Exact name of registrant as specified in its charter)
Washington 91-1838969
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
900 Washington, Suite 900 Vancouver, WA 98660
(Address of principal executive office)
Registrant's telephone number, including area code: (360)693-6650
Check whether the registrant: (1) filed all reports required to be filed by
Sections 13 or 15(d) of the Exchange Act during the past 12 months (or for
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No .
--- ---
Check whether the registrant is an accelerated filer (as defined in Rule 12b-2
of the Exchange Act). Yes No X
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date: Common Stock, $.01 par value---4,375,696 shares as of June
30, 2003.
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, 2003 and March 31, 2003 1
Consolidated Statements of Income: Three
Months Ended June 30, 2003 and 2002 2
Consolidated Statements of Shareholders' Equity
for the Year Ended March 31, 2003 and the
Three Months Ended June 30, 2003 3
Consolidated Statements of Cash Flows for the
Three Months Ended June 30, 2003 and 2002 4
Notes to Consolidated Financial Statements 5-14
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of
Operations 14-27
Item 3: Quantitative and Qualitative Disclosures
About Market Risk 27-28
Item 4: Controls and Procedures 28
Part II. Other Information 29
SIGNATURES 30
Part I. Financial Information
Item I. Financial statements (Unaudited)
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2003 AND MARCH 31, 2003
JUNE 30, MARCH 31,
(In thousands, except share data) (Unaudited) 2003 2003
- ------------------------------------------------------------------------------
ASSETS
Cash (including interest-earning accounts of
$68,484 and $42,464) $ 88,939 $ 60,858
Loans held for sale 1,308 1,501
Investment securities available for sale, at fair
value (amortized cost of $20,292 and $20,265) 19,745 20,426
Mortgage-backed securities held to maturity, at
amortized cost (fair value of $3,123 and $3,403) 3,087 3,301
Mortgage-backed securities available for sale, at
fair value (amortized cost of $9,825 and $12,669) 10,109 13,069
Loans receivable (net of allowance for loan losses
of $2,793 and $2,739) 296,451 300,310
Real estate owned 445 425
Prepaid expenses and other assets 1,033 854
Accrued interest receivable 1,418 1,492
Federal Home Loan Bank stock, at cost 5,706 5,646
Premises and equipment, net 9,497 9,703
Deferred income taxes, net 1,607 1,321
Mortgage servicing rights, net 481 629
Core deposit intangible, net 287 369
-------- --------
TOTAL ASSETS $440,113 $419,904
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposit accounts $340,036 $320,742
Accrued expenses and other liabilities 4,853 4,364
Advance payments by borrowers for taxes and insurance 60 287
Federal Home Loan Bank advances 40,000 40,000
-------- --------
Total liabilities 384,949 365,393
COMMITMENTS AND CONTINGENCIES (NOTE 14)
SHAREHOLDERS' EQUITY:
Serial preferred stock, $.01 par value; 250,000
authorized, issued and outstanding, none - -
Common stock, $.01 par value; 50,000,000 authorized
June 30, 2003 - 4,602,535 issued, 4,375,696
outstanding March 31, 2003 - 4,585,543 issued,
4,358,704 outstanding 46 46
Additional paid-in capital 33,777 33,525
Retained earnings 23,275 22,389
Unearned shares issued to employee stock
ownership trust (1,753) (1,804)
Unearned shares held by the management recognition
and development plan (7) (15)
Accumulated other comprehensive (loss) income (174) 370
-------- --------
Total shareholders' equity 55,164 54,511
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $440,113 $419,904
======== ========
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) 2003 2002
- -----------------------------------------------------------------------------
INTEREST INCOME:
Interest and fees on loans receivable $ 5,669 $ 5,913
Interest on investment securities 67 28
Interest on mortgage-backed securities 181 449
Other interest and dividends 214 390
------- -------
Total interest income 6,131 6,780
------- -------
INTEREST EXPENSE:
Interest on deposits 1,009 1,594
Interest on borrowings 495 1,130
------- -------
Total interest expense 1,504 2,724
------- -------
Net interest income 4,627 4,056
Less provision for loan losses 70 245
------- -------
Net interest income after
provision for loan losses 4,557 3,811
------- -------
NON-INTEREST INCOME:
Fees and service charges 1,173 928
Asset management services 223 192
Gain on sale of loans held for sale 304 349
Loan servicing expense (108) (100)
Other 24 41
------- -------
Total non-interest income 1,616 1,410
------- -------
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,249 2,034
Occupancy and depreciation 586 592
Data processing 204 210
Amortization of core deposit intangible 82 82
Advertising and marketing expense 269 189
FDIC insurance premium 12 11
State and local taxes 94 90
Telecommunications 48 44
Professional fees 89 118
Other 302 322
------- -------
Total non-interest expense 3,935 3,692
------- -------
INCOME BEFORE FEDERAL INCOME TAXES 2,238 1,529
PROVISION FOR FEDERAL INCOME TAXES 738 457
------- -------
NET INCOME $ 1,500 $ 1,072
======= =======
Earnings per common share:
Basic $ 0.34 $ 0.24
Diluted 0.34 0.24
Weighted average number of shares outstanding:
Basic 4,371,380 4,440,426
Diluted 4,442,363 4,486,182
See notes to consolidated financial statements.
2
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED MARCH 31, 2003
AND THE THREE MONTHS ENDED JUNE 30, 2003
(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, 2002 4,458,456 $ 47 $ 35,725 $ 20,208 $ (2,010) $ (218) $ (75) $ 53,677
Cash dividends - - - (2,178) - - - (2,178)
Exercise of stock options 46,577 - 417 - - - - 417
Stock repurchased and
retired (196,100) (1) (2,881) - - - - (2,882)
Earned ESOP shares 24,633 - 166 - 206 - - 372
Tax benefit associated
with MRDP - - 98 - - - - 98
Earned MRDP shares 25,138 - - - - 203 - 203
--------- ---- -------- -------- -------- -------- ------- --------
4,358,704 46 33,525 18,030 (1,804) (15) (75) 49,707
Comprehensive income
Net Income - - - 4,359 - - - 4,359
Other Comprehensive Income:
Unrealized holding gain on
securities of $966 (net of
$498 tax effect) less
reclassification adjustment
for net losses included in
net income of $1,411 (net
of $727 tax effect) - - - - - - 445 445
--------
Total comprehensive income - - - - - - - 4,804
--------- ---- -------- -------- -------- -------- ------- --------
Balance, March 31, 2003 4,358,704 46 33,525 22,389 (1,804) (15) 370 54,511
Cash dividends - - - (614) - - - (614)
Exercise of stock options 16,992 - 195 - - - - 195
Earned ESOP shares - - 57 - 51 - - 108
Earned MRDP shares - - - - - 8 - 8
--------- ---- -------- -------- -------- -------- ------- --------
4,375,696 46 33,777 21,775 (1,753) (7) 370 54,208
Comprehensive income
Net Income - - - 1,500 - - - 1,500
Other Comprehensive Loss:
Unrealized holding loss on
securities of $544 (net of
$262 tax effect) less
reclassification adjustment
for net gains included in
net income of $107 (net of
$55 tax effect) - - - - - - (544) (544)
--------
Total comprehensive income - - - - - - - 956
--------- ---- -------- -------- -------- -------- ------- --------
Balance, June 30, 2003 4,375,696 $ 46 $ 33,777 $ 23,275 $ (1,753) $ (7) $ (174) $ 55,164
========= ==== ======== ======== ======== ======== ======= ========
See notes to consolidated financial statements.
3
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS ON CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30,
(In thousands) (Unaudited) 2003 2002
- -----------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,500 $ 1,072
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 470 401
Mortgage servicing rights impairment 39 124
Provision for losses on loans 70 245
Noncash expense related to ESOP 108 86
Noncash expense related to MRDP 8 94
Increase in deferred loan origination fees,
net of amortization 187 172
Federal Home Loan Bank stock dividend (60) (80)
Origination of loans held for sale (16,478) (10,491)
Proceeds from sales of loans held for sale 16,730 11,111
Net gain on sale of real estate owned,
mortgage-backed and investment securities and
premises and equipment (307) (341)
Changes in assets and liabilities:
(Increase) Decrease in prepaid expenses and
other assets (188) 204
Decrease in accrued interest receivable 39 61
Increase in accrued expenses and other liabilities 439 19
-------- --------
Net cash provided by operating activities 2,557 2,677
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan originations (63,692) (61,192)
Principal repayments on loans 67,504 48,487
Principal repayments on mortgage-backed securities
held to maturity 213 287
Principal repayments on mortgage-backed securities
available for sale 2,866 5,740
Purchase of premises, equipment and other (65) (44)
Proceeds from sale of real estate (19) 1,006
-------- --------
Net cash provided (used in) by investing
activities 6,807 (5,716)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposit accounts 19,294 41,557
Dividends paid (545) (494)
Repurchase of common stock - (1,199)
Repayment of Federal Home Loan Bank advances - (25,000)
Net decrease in advance payments by borrowers (227) (185)
Proceeds from exercise of stock options 195 25
-------- --------
Net cash provided by financing activities 18,717 14,704
-------- --------
NET INCREASE IN CASH 28,081 11,665
CASH, BEGINNING OF PERIOD 60,858 22,492
-------- --------
CASH, END OF PERIOD $ 88,939 $ 34,157
======== ========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest $ 1,513 $ 2,885
Income taxes - 62
NONCASH INVESTING AND FINANCING ACTIVITIES:
Transfer of loans to real estate owned $ - $ 250
Dividends declared and accrued in other
liabilities 614 551
Fair value adjustment to securities
available for sale (824) 191
Income tax effect related to fair value adjustment 280 (65)
See notes to consolidated financial statements.
4
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
(1) Organization and Basis of Presentation
--------------------------------------
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and, therefore, do not include all
disclosures necessary for a complete presentation of financial condition,
results of operations, and cash flows in conformity with 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.
2003 Annual Report on Form 10-K. The results of operations for the three
months ended June 30, 2003 are not necessarily indicative of the results,
which may be expected for the entire fiscal year.
(2) Principles of Consolidation
---------------------------
The accompanying unaudited consolidated financial statements of Riverview
Bancorp, Inc. and Subsidiary (the "Company") include all the accounts of
Riverview Bancorp, Inc. and the consolidated accounts of its wholly-owned
subsidiary, Riverview Community Bank (the "Community Bank"), and the Community
Bank's majority-owned subsidiary, Riverview Asset Management Corporation
("RAMCORP.") and wholly-owned subsidiary, Riverview Services, Inc. All
references to the Company herein include the Community Bank where applicable.
All inter-company balances and transactions have been eliminated upon
consolidation.
(3) Comprehensive Income
--------------------
Comprehensive income is defined as the change in equity during a period from
transactions and other events from nonowner sources. Comprehensive income is
the total of net income and other comprehensive income, which for the Company
is comprised of unrealized gains and losses on securities available for sale
adjusted for gains and losses on securities available for sale included in
non-interest income.
For the three months ended June 30, 2003, the Company's total comprehensive
income was $956,000, compared to $1.2 million for the three months ended June
30, 2002.
Total comprehensive income for the three months ended June 30, 2003 was
comprised of net income of $1.5 million and other comprehensive loss of
$544,000, net of tax effect. Other comprehensive loss consists of unrealized
securities loss of $544,000 net of tax effect.
Total comprehensive income for the three months ended June 30, 2002 was
comprised of net income of $1.1 million and other comprehensive income of
$126,000, net of tax effect. Other comprehensive income consisted of
unrealized securities gains of $126,000 net of tax effect.
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 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 awarded but not released Management Recognition and
Development Plan ("MRDP") shares. Employee Stock Ownership Plan ("ESOP")
shares are not considered outstanding for EPS purposes until they are
committed to be released.
Three Months Ended
June 30,
--------------------------
2003 2002
----------- -----------
Basic EPS computation:
Numerator-Net Income $ 1,500,000 $ 1,072,000
Denominator-Weighted average common
shares outstanding 4,371,380 4,440,426
Basic EPS $ 0. 34 $ 0. 24
=========== ===========
Diluted EPS computation:
Numerator-Net Income $ 1,500,000 $ 1,072,000
Denominator-Weighted average
common shares outstanding 4,371,380 4,440,426
Effect of dilutive stock options 67,377 33,847
Effect of dilutive MRDP 3,606 11,909
----------- -----------
Weighted average common shares
and common stock equivalents 4,442,363 4,486,182
Diluted EPS $ 0.34 $ 0.24
=========== ===========
(5) Investment Securities
---------------------
There were no sales of investment securities classified as held to maturity
during the periods ended June 30, 2003 and 2002.
The amortized cost and approximate fair value of investment securities
available for sale consisted of the following (in thousands):
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
June 30, 2003 Cost Gains Losses Value
--------- ---------- ---------- ---------
Trust preferred securities $ 5,000 $ - $ (6) $ 4,994
Equity securities 12,700 - (800) 11,900
Other 2,592 259 - 2,851
-------- ------- ------- --------
$ 20,292 $ 259 $ (806) $ 19,745
======== ======= ======= ========
March 31, 2003
Trust Preferred $ 5,000 $ - $ (25) $ 4,975
Equity securities 12,700 - - 12,700
School district bonds 2,565 186 - 2,751
-------- ------- ------- --------
$ 20,265 $ 186 $ (25) $ 20,426
======== ======= ======= ========
6
Investment securities with an amortized cost of $11.0 million and $12.7
million and a fair value of $10.3 million and $12.7 million at June 30, 2003
and March 31, 2003, respectively, were pledged as collateral for advances at
the Federal Home Loan Bank.
The contractual maturities of securities available for sale are as follows (in
thousands):
Amortized Estimated
June 30, 2003 Cost Fair Value
--------- ----------
Due after one year through five years $ 908 $ 997
Due after five years through ten years 1,067 1,188
Due after ten years 18,317 17,560
-------- --------
$ 20,292 $ 19,745
======== ========
(6) Mortgage-backed Securities
--------------------------
Mortgage-backed securities held to maturity consisted of the following (in
thousands):
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
June 30, 2003
REMICs $ 1,803 $ - $ (1) $ 1,802
FHLMC mortgage-backed securities 521 11 - 532
FNMA mortgage-backed securities 763 26 - 789
------- ------ ----- -------
$ 3,087 $ 37 $ (1) $ 3,123
======= ====== ===== =======
March 31, 2003
REMICs $ 1,803 $ 57 $ - $ 1,860
FHLMC mortgage-backed securities 589 13 - 602
FNMA mortgage-backed securities 909 32 - 941
------- ------ ----- -------
$ 3,301 $ 102 $ - $ 3,403
======= ====== ===== =======
The contractual maturities of mortgage-backed securities classified as held to
maturity are as follows (in thousands):
Amortized Estimated
June 30, 2003 Cost Fair Value
--------- ----------
Due in one year or less $ 298 $ 305
Due after one year through five years 125 131
Due after five years through ten years 1 2
Due after ten years 2,663 2,685
------- -------
$ 3,087 $ 3,123
======= =======
Mortgage-backed securities held to maturity with an amortized cost of $2.1
million and $2.2 million and a fair value of $2.1 million and $2.3 million at
June 30, 2003 and March 31, 2003, respectively, were pledged as collateral for
governmental public funds held by the Company. Mortgage-backed securities
with an amortized cost of $381,000 and $385,000 and a fair value of $393,000
and $399,000 at June 30, 2003 and March 31, 2003, respectively, were pledged
as collateral for treasury tax and loan funds held by the Company. The real
estate mortgage investment conduits ("REMICs") consist of Federal Home
Mortgage Corporation ("FHLMC"), Federal National Mortgage Association ("FNMA")
and privately issued securities.
7
There were no sales of mortgage-backed securities held to maturity during the
periods ended June 30, 2003 and 2002.
Mortgage-backed securities available for sale consisted of the following (in
thousands):
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
June 30, 2003
REMICs $ 5,194 $ 86 $ (2) $ 5,278
FHLMC mortgage-backed securities 4,206 185 - 4,391
FNMA mortgage-backed securities 425 15 - 440
-------- ------ ------ --------
$ 9,825 $ 286 $ (2) $ 10,109
======== ====== ====== ========
March 31, 2002
REMICs $ 6,327 $ 100 $ (6) $ 6,421
FHLMC mortgage-backed securities 5,811 286 - 6,097
FNMA mortgage-backed securities 531 20 - 551
-------- ------ ------ --------
$ 12,669 $ 406 $ (6) $ 13,069
======== ====== ====== ========
The contractual maturities of mortgage-backed securities available for sale
are as follows (in thousands):
Amortized Estimated
June 30, 2003 Cost Fair Value
--------- ----------
Due in one year or less $ 153 $ 154
Due after one year through five years 4,367 4,561
Due after five years through ten years 659 659
Due after ten years 4,646 4,735
--------- ---------
$ 9,825 $ 10,109
========= =========
Expected maturities of mortgage-backed securities held to maturity will differ
from contractual maturities because borrowers may have the right to prepay
obligations with or without prepayment penalties.
Mortgage-backed securities available for sale with an amortized cost of $9.3
million and $11.9 million and a fair value of $9.5 million and $12.2 million
at June 30, 2003 and March 31, 2003, respectively, were pledged as collateral
for advances at the Federal Home Loan Bank. Mortgage-backed securities with an
amortized cost of $161,000 and $316,000 and a fair value of $170,000 and
$327,000 at June 30, 2003 and March 31, 2003, respectively, were pledged as
collateral for treasury tax and loan funds held by the Company.
8
(7) Loans Receivable
----------------
Loans receivable consisted of the following (in thousands):
June 30, March 31,
2003 2003
--------- ---------
Residential:
One- to- four family $ 54,973 $ 58,498
Multi-family 5,997 6,313
Construction:
One- to- four family 69,924 70,397
Multi-family 2,100 2,100
Commercial real estate 4,531 4,531
Commercial 33,401 34,239
Consumer:
Secured 23,006 23,458
Unsecured 1,369 1,334
Land 32,770 34,630
Commercial real estate 103,132 101,672
--------- ---------
331,203 337,172
Less:
Undisbursed portion of loans 29,080 31,222
Deferred loan fees 2,879 2,901
Allowance for loan losses 2,793 2,739
--------- ---------
Loans receivable, net $ 296,451 $ 300,310
========= =========
(8) Allowance for Loan Losses
-------------------------
A reconciliation of the allowances for loan losses is as follows (in
thousands):
Three Months Ended
June 30,
--------------------
2003 2002
------- -------
Beginning balance $ 2,739 $ 2,537
Provision for losses 70 245
Charge-offs (15) (37)
Recoveries - 3
Net change in allowance for
unfunded loan commitments and
lines of credit (1) -
------- -------
Ending balance $ 2,793 $ 2,748
======= =======
At June 30, 2003 and March 31, 2003, the Company's recorded investment in
loans for which impairment has been recognized under the guidance of Statement
of Financial Accounting Standards ("SFAS") No. 114 and SFAS No. 118 was
$631,000 and $323,000, respectively. The allowance for loan losses in excess
of specific reserves is available to absorb losses from all loans, although
allocations have been made for certain loans and loan categories as part of
management's analysis of the allowance. The average investment in impaired
loans was approximately $1.1 million and $1.1 million during the three months
ended June 30, 2003 and the year ended March 31, 2003 respectively.
(9) Intangible Assets
-----------------
The results for the quarter ended June 30, 2003, include the effect of
adopting SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 142
provides that goodwill is no longer amortized and the value of an identifiable
intangible asset must be amortized over its useful life, unless the asset is
9
determined to have an indefinite life. The Company does not have goodwill,
but does have identifiable intangible assets of core deposit intangible and
mortgage servicing rights ("MSRs") that will continue to be amortized. The
Company adopted SFAS No. 142 on April 1, 2002.
Intangible asset balances (excluding MSRs) consisted of the following (in
thousands):
June 30, 2003
--------------------------------------------
Carrying Accumulated
Amount Amortization Net
-------- ------------ -----
Core deposit intangible $ 3,269 $ 2,982 $ 287
======= ======= =====
March 31, 2003
--------------------------------------------
Carrying Accumulated
Amount Amortization Net
-------- ------------ -----
Core deposit intangible $ 3,269 $ 2,900 $ 369
======= ======= =====
Amortization Expense
Quarter Ended June 30,
2003 2002
----------------------
Core deposit intangible $ 82 $ 82
==== ====
The value of the MSRs asset is subject to prepayment risk. Future expected
net cash flows from servicing a loan in the servicing portfolio are not
realized if the loan pays off earlier than anticipated. If loans payoff
earlier than anticipated there is no economic benefit since loans in our
servicing portfolio do not contain penalty provisions for early payoff.
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. MSRs impairment is recorded in the amount that
the estimated fair value is less than the MSRs carrying value.
Changes in balance of MSRs, net of valuation, were as follows (in thousands):
Three Months Ended June 30,
2003 2002
----------------------------
Beginning balance $ 629 $ 912
Additions 41 139
Amortization (150) (60)
Impairment adjustment (39) (124)
----- -----
Total $ 481 $ 867
===== =====
Allowance at beginning of period $ 413 $ 93
Provision for impairment 39 124
----- -----
Allowance at end of period $ 452 $ 217
===== =====
10
Amortization expense for the net carrying amount of intangible assets at June
30, 2003 is estimated to be as follows (in thousands):
Fiscal year
-------------------
2004 $ 436
2005 158
2006 61
2007 43
2008 40
Thereafter 30
------
Total $ 768
======
(11) Borrowings
----------
Borrowings are summarized as follows (in thousands):
June 30, March 31,
2003 2003
------ -------
Federal Home Loan Bank Advances $40,000 $40,000
======= =======
Weighted average interest rate: 4.89% 5.53%
==== ====
Borrowings have the following maturities at June 30, 2003 (in thousands):
Fiscal Year
-----------
2006 $ 15,000
2007 20,000
2008 5,000
---------
$ 40,000
=========
(12) Shareholders' Equity
--------------------
Repurchase of Common stock
In September 2002, the Company announced a stock repurchase of up to 5%, or
214,000 shares, of its outstanding common stock. At June 30, 2003, no shares
had been repurchased under this plan.
In July 2001, the Company announced a stock repurchase of up to 10% or 465,504
shares of its outstanding shares at June 30, 2001. At June 30, 2003 464,800
shares had been repurchased at an average cost of $12.92 per share. Since the
Company is a Washington corporation and the State of Washington treats all
treasury stock as retired upon purchase, all purchases of treasury stock
11
reduce stock issued and the cost of treasury stock acquired is charged to par
value and paid-in capital.
(13) Recently Issued Accounting Pronouncements
-----------------------------------------
In January 2003, the Financial Accounting Standards Board ("FASB") issue
Interpretation No. 46 ("FIN 46"), Consolidation of Variable Interest Entities,
which establishes criteria to identify and assess a company's interest in
variable interest entities and for consolidating those entities. FIN 46 is
currently effective for variable interest entities created or obtained after
January 2003, and will be effective for all variable interest entities for
interim periods beginning after June 15, 2003. The adoption of FIN 46 is not
expected to require the consolidation by the Company of any additional
entities.
In December 2002, SFAS No. 148, Accounting for Stock-Based Compensation --
Transition and Disclosure, an amendment of FASB Statement No. 123. This
Statement amends FASB Statement No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure requirements
of Statement 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. Effective
March 31, 2003, and in accordance with Statement No.148, the Company elected
to continue to account for stock-based awards under the guidance of Accounting
Principles Board ("APB") Opinion No. 25.
Had compensation cost for the Company's stock-based compensation plans been
determined using the fair value method consistent with Statement No. 123 for
all periods presented, the Company's net income per share would have been
reduced to the pro forma amounts indicated below:
Three Months Ended
June 30,
2003 2002
------- -------
(dollars in thousands,
except per share amounts)
Net income:
As reported $ 1,500 $ 1,072
Deduct: Total stock-based employee
compensation expense determined under
fair value method for all awards, net
of related tax effects (49) (45)
------- -------
Pro forma $ 1,451 $ 1,027
======= =======
Earnings per common share - basic:
As reported $ 0.34 $ 0.24
Pro forma 0.33 0.23
Earnings per common share - fully diluted:
As reported 0.34 0.24
Pro forma 0.33 0.23
12
In September 2002, the FASB issued SFAS No. 147, Acquisitions of Certain
Financial Institutions. This Statement removes acquisitions of financial
institutions from the scope of both SFAS No. 72, Accounting for Certain
Acquisitions of Banking or Thrift Institutions, and FASB Interpretation No. 9,
Applying APB Opinions No. 16 and 17 When a Savings and Loan Association or a
Similar Institution Is Acquired in a Business Combination Accounted for by the
Purchase Method, and requires that those transactions be accounted for in
accordance with SFAS No. 141, Business Combinations, and SFAS No. 142,
Goodwill and Other Intangible Assets. As a result, the requirement in SFAS
No. 72 to recognize (and subsequently amortize) any excess of the fair value
of liabilities assumed over the fair value of tangible and identifiable
intangible assets acquired as an unidentifiable intangible asset no longer
applies to acquisitions within the scope of this Statement.
In addition, this Statement amends SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, to include in its scope long-term customer-
relationship intangible assets of financial institutions such as depositor-
and borrower-relationship intangible assets and credit cardholder intangible
assets. Consequently, those intangible assets are subject to the same
undiscounted cash flow recoverability test and impairment loss recognition and
measurement provisions that SFAS No. 144 requires for other long-lived assets
that are held and used.
This Statement is effective for acquisitions under the purchase method of
accounting for which the date of acquisition is on or after October 1, 2002.
The provisions in this Statement related to accounting for the impairment or
disposal of certain long-term customer-relationship intangible assets are
effective on October 1, 2002. Transition provisions for previously recognized
unidentifiable intangible assets are effective on October 1, 2002, with
earlier application permitted. The Company believes there will be no current
impact of adopting the provisions of this statement on its financial
statements.
(14) Commitments and Contingencies
-----------------------------
The Company is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments generally include commitments to originate
mortgage, consumer and commercial loans. Those instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the balance sheet. The Company's maximum exposure to
credit loss in the event of nonperformance by the borrower is represented by
the contractual amount of those instruments. The Company uses the same credit
policies in making commitments as it does for on-balance sheet instruments.
Commitments to extend credit are conditional, and are honored for up to 45
days subject to the Company's usual terms and conditions. Collateral is not
required to support commitments.
At June 30, 2003, the Company had commitments to originate fixed rate
mortgages of $4.0 million at interest rates ranging from 3.625% to 6.25%. At
June 30, 2002 adjustable rate mortgage loan commitments were $4.7 million at
an average interest rate of 6.263%. The undisbursed balance of mortgage loans
closed was $29.1 million at June 30, 2003. Consumer loan commitments totaled
$823,000 and unused lines of consumer credit totaled $16.6 million at June 30,
2003. Commercial real estate loan commitments totaled $4.5 million and unused
lines of commercial real estate credit totaled $11.1 million at June 30, 2003.
Commercial loan commitments totaled $4.8 million and unused commercial lines
of credit totaled $19.3 million at June 30, 2003.
13
The allowance for unfunded commitments was $176,000 at June 30, 2003.
At June 30, 2003, the Company had firm commitments to sell $1.3 million of
residential loans to FHLMC. These agreements are short term fixed rate
commitments and no material gain or loss is likely.
In connection with certain asset sales, the Community 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 Community Bank may have an obligation to repurchase the
assets or indemnify the purchaser against loss. As of June 30, 2003, loans
under warranty totaled $122.2 million, which substantially represents the
unpaid principal balance of the Company's loans serviced for others portfolio.
The Community Bank believes that the potential for loss under these
arrangements is remote. Accordingly, no contingent liability is recorded in
the financial statements.
The Company is a party to litigation arising in the ordinary course of
business. In the opinion of management, these actions will not have a
material effect, if any, on the Company's financial position, results of
operations, or liquidity.
(15) PROPOSED ACQUISITION
--------------------
On February 6, 2003 the Company announced the signing of a definitive
agreement for the acquisition of Today's Bancorp, Inc. by merger. Upon
completion of the transaction, Today's Bancorp, Inc. shareholders, with a
total of 1.1 million shares of common stock outstanding, may elect to receive
either $13.64 per share in cash or 0.8261 Riverview Bancorp, Inc. shares for
each share of Today's Bancorp, Inc. The exchange ratio is subject to
adjustment under certain conditions. The Company will issue approximately
430,655 shares of its own stock to acquire approximately 45% percent of
Today's Bancorp Inc. outstanding shares at an exchange ratio of 0.8261
Riverview shares for each share of Today's Bancorp Inc. The remaining 55% of
outstanding Today's Bancorp, Inc. shares will be acquired for an aggregate of
approximately $9.6 million in cash. If the elections with respect to the form
of consideration filed by Today's shareholders differs from the 45% stock, 55%
cash ratio, the mix of stock and cash to individual shareholders used to
effect the acquisition could change.
The merger has been unanimously approved by the directors of both companies,
approved by the shareholders of Today's Bancorp, Inc., and approved by
regulatory agencies.
The merger is expected to be completed in the third calendar quarter of 2003.
The combined organization will have assets of approximately $540 million,
deposits of approximately $430 million and shareholders' equity of
approximately $60 million.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Safe Harbor Clause. This report on Form 10-Q contains certain
"forward-looking statements." The Company desires to take advantage of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995 and is including this statement for the express purpose of availing
itself of the
14
protection of such safe harbor with forward-looking statements. These
forward-looking statements, which are included in Management's Discussion and
Analysis, describe future plans or strategies and include the Company's
expectations of future financial results. The words "believe," "expect,"
"anticipate," "estimate," "project," and similar expressions identify
forward-looking statements. The Company's ability to predict results or the
effect of future plans or strategies is inherently uncertain. Factors, which
could affect actual results, include interest rate trends, the economic
climate in the Company's market area and the country as a whole, loan
delinquency rates, and changes in federal and state regulation, merger of
Today's Bancorp, Inc. and other risks detailed in the Company's reports filed
with the Securities and Exchange Commission. These factors should be
considered in evaluating the forward-looking statements, and undue reliance
should not be placed on such statements.
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 in the preparation of the Company's consolidated financial
statements. The Company has identified two policies that due to 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 and the valuation of mortgage servicing rights. These policies
and the judgments, estimates and assumptions are described in greater detail
in Management's Discussion and Analysis and in Note 1, Note 6 and Note 8 to
the Consolidated Financial Statements included in the Company's 2003 Annual
Report on Form 10-K. 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 our results
of operations or financial condition.
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. 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 and anticipated 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.
The Company stratifies its MSRs based on the predominant characteristics of
the underlying financial assets. 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.
15
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 risk. Thus, any
measurement of MSRs fair value is limited by the conditions existing and
assumptions made as of a particular point in time. Those assumptions may not
be appropriate if they are applied to a different point in time.
Future expected net cash flows from servicing a loan in the servicing
portfolio would not be realized if the loan pays off earlier than anticipated.
Moreover, since 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 our MSRs
to impairment. MSRs impairment is recorded in the amount that the estimated
fair value is less than the MSRs carrying value.
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 that the fair value is
less than their carrying value. The review includes determining whether
certain indicators indicated 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 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 stockholders' equity as accumulated
other comprehensive income, 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.
The Company's underlying principle in determining whether impairment is other-
than temporary is an impairment shall be deemed other-than-temporary unless
positive evidence indicating that an 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
16
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
The Company is a progressive community-oriented, financial institution, which
emphasizes local, personal service to residents of its primary market area.
The Company considers Clark, Cowlitz, Klickitat and Skamania counties of
Washington as its primary market area. The Company is engaged primarily in the
business of attracting deposits from the general public and using such funds
in its primary market area to originate mortgage loans secured by one- to-
four family residential real estate, multi-family, commercial construction,
commercial real estate and non-mortgage loans providing financing for business
commercial ("commercial") and consumer purposes. Commercial real estate loans
and commercial loans have grown from 13.31% and 1.90% of the loan portfolio,
respectively, in fiscal year 1999 to 32.51% and 10.08% respectively, at June
30, 2003. The Company continues subject to market conditions, to change the
composition of its loan portfolio and deposit base as part of its migration to
commercial banking. The consolidation among financial institutions in the
Company's primary market area has created a significant gap in the ability of
the resulting financial institutions to serve customers. The Company's
strategic plan includes targeting this customer base, specifically small and
medium size businesses, professionals and wealth building individuals. In
pursuit of these goals, the Company will emphasize controlled growth and the
diversification of its loan portfolio to include a higher portion of
commercial and commercial real estate loans. A related goal is to increase
the proportion of personal and business checking account deposits used to fund
these new loans. Significant portions of these new loan products carry
adjustable rates, higher yields, or shorter terms and higher credit risk than
the traditional fixed-rate mortgages. The strategic plan stresses increased
emphasis on non-interest income, including increased fees for asset management
and deposit service charges. The strategic plan is designed to enhance
earnings, reduce interest rate risk, and provide a more complete range of
financial services to customers and the local communities the Company serves.
The Company is well positioned to attract new customers and to increase its
market share given that the administrative headquarters and eight of its
twelve branches are located in Clark County, the fastest growing county in the
state of Washington during the 1990's, 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. Control of non-interest expenses remains a high priority
for the management of the Company.
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 Company
17
continues to experience growth in the customer usage of the online banking
services and check image services to its customers. 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 branch web site is www.riverviewbank.com.
The Company conducts operations from its home office in Vancouver and twelve
branch offices in Camas, Washougal, Stevenson, White Salmon, Battle Ground,
Goldendale, Vancouver (five branch offices) and Longview, Washington. The
Company's 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,
RAMCORP., located in downtown Vancouver, Washington. Riverview Mortgage, a
mortgage broker division of the Company originates mortgage loans (including
construction loans) for various mortgage companies predominantly in the
Portland metropolitan area, as well as for the Company. The Business and
Professional Banking Division located at the downtown Vancouver main branch
offers commercial and business banking services. Vancouver is located in Clark
County, which is just north of Portland, Oregon.
Several businesses are located in the Vancouver area because of the favorable
tax structure and relatively lower energy costs in Washington as compared to
Oregon. Washington has no state income tax and Clark County operates a public
electric utility that provides relatively lower cost electricity. Located in
the Vancouver area are Sharp Electronics, Hewlett Packard, Georgia Pacific,
Underwriters Laboratory and Wafer Tech, as well as several support industries.
In addition to this industrial base, the Columbia River Gorge Scenic Area has
been a source of tourism, which has transformed the area from its past
dependence on the timber industry.
The Company, a Washington corporation, was organized on June 23, 1997 for the
purpose of becoming the holding company for Riverview Community Bank (formerly
Riverview Savings Bank, FSB) upon Riverview Savings Bank's reorganization as a
wholly owned subsidiary of the Company resulting from the conversion of
Riverview, M.H.C. from a federal mutual holding company to a stock holding
company ("Conversion and Reorganization"). The Conversion and Reorganization
was completed on September 30, 1997. Riverview Savings Bank, FSB changed its
name to Riverview Community Bank effective June 29, 1998.
Financial Condition
At June 30, 2003, the Company had total assets of $440.1 million compared with
$419.9 million at March 31, 2003. The increase in total assets reflects
primarily the growth in cash.
At June 30, 2003, the Company had $331.2 million in gross loans, a decrease of
$6.0 million compared to $337.2 million at March 31, 2003. One- to- four
family residential mortgage loans decreased $3.5 million to $55.0 million at
June 30, 2003 from $58.5 million at March 31, 2003 as a result of management's
plan to sell most of the fixed mortgage loans to the FHLMC and retain the loan
servicing of such loans. Commercial loans decreased $838,000 to $33.4 million
at June 30, 2003 from $34.2 million at March 31, 2003. The $838,000 decrease
reflects the economic conditions in the Company's market area that have
provided a challenge to businesses that wish to grow. Commercial real estate
loans increased $1.5 million to $103.1 million at June 30, 2003 from $101.7
million at March 31, 2003. Land loans decreased $1.9 million to $32.8 million
at June 30, 2003 from $34.6 million at March 31, 2003. Loans receivable (Note
18
7) provides a detailed analysis of the gross loan portfolio at June 30, 2003
as compared to the gross loan portfolio at March 31, 2003. Consumer,
commercial, and land loans carry higher interest rates and generally a higher
degree of credit risk compared to one- to- four family residential mortgage
loans.
Low interest rates continue to cause high prepayments in the Company's REMICs
and mortgage-backed securities portfolio. These high prepayments have
accelerated the decrease in the balance of REMICs and mortgage-backed
securities. Mortgage-backed Securities (Note 6) provides the balance detail.
At June 30, 2003, the Company had $800,000 unrealized loss on available for
sale equity securities. The equity securities held by the Company are FHLMC
and FNMA preferred stock.
On a monthly basis management reviews the market value of the investment
portfolio and investigates significant changes in the market value of the
portfolio. Analysis of the decline in market value of the preferred stock and
discussions with our investment advisor, First Tennessee Financial Group, has
shown that there has been no impairment to FHLMC and FNMA's abilities to pay
all amounts due per the securities contractual terms. The FHLMC and FNMA
preferred stock have held the same Moody and Fitch rating of AA3 and AA,
respectively, since they were purchased.
The current market pricing is a function of the current low rate environment
and can only be viewed as a temporary decline due to a change in interest
rates. Both preferred securities pay quarterly dividends that are based on
the two-year CMT rate and the dividend rate is reset every two years. At June
30, 2003 the two-year CMT rate had decreased 500 basis points since the FHLMC
was purchased and 353 basis points since the FNMA was purchased. When the
FHLMC preferred stock was purchased in August 2000 the two-year CMT was 6.23%
and when the FNMA preferred stock was purchased in January 2001 the two-year
CMT was 4.76%. In June 2003, the two-year CMT had declined to 1.23%. Both
securities enjoy the tax benefit of the 70% dividend received deduction
("DRD").
The dynamics of the 70% DRD on the increase and decrease in taxable equivalent
yields is a key to the price change in the securities. The current depressed
market values are a result of the historically low interest rate environment
and the negative impact of the DRD on the current taxable yields. It should be
noted that even at the current low rates that the taxable equivalent yield
realized on the securities is still at a reasonable yield compared to other
agency securities that would mature or reprice in two years. The market value
is lower due to the spreads that the market is currently asking for in this
type of security in the current low rate environment.
Based on the above analysis, management believes that the unrealized loss is a
temporary impairment. Further, the Company does not foresee selling these
preferred securities until after the securities recover their fair value. The
Company is carrying these securities as investments available for sale and not
as trading securities, which reflects its past practices of holding securities
for the long term. The Company has sufficient liquidity and capital to follow
this holding strategy in connection with the FHLMC and FNMA preferred
securities and believes that the values have the potential to recover as
interest rates fluctuate upward.
Deposits totaled $340.0 million at June 30, 2003 compared to $320.7 million at
March 31, 2003. The $19.3 million deposit increase is attributable to an
19
inflow of funds to transaction accounts partially offset by an outflow in
certificates of deposit. The year to date total average outstanding balance of
checking accounts, NOW accounts and money market accounts ("transaction
accounts") increased 13.0% to $185.9 million at June 30, 2003, compared to
$164.5 million at March 31, 2003. Total average transaction account balances
compared to average total deposit balances for the three months ended June 30,
2003 was 60.0% compared to 54.4% for the twelve month period ended March 31,
2003.
FHLB advances totaled $40.0 million at both June 30, 2003 and March 31, 2003.
Capital Resources
Total shareholders' equity increased $653,000 to $55.2 million at June 30,
2003 compared to $54.5 million at March 31, 2003. The activity in
shareholders' equity for the first three months of fiscal year 2004 was $1.5
million in earnings, dividends of $614,000, exercise of stock options
$195,000, earned ESOP shares $108,000, earned MRDP shares of $8,000 and
$544,000 increase in net unrealized loss on securities available for sale, net
of tax benefit.
The Company is not subject to any regulatory capital requirements. The
Community Bank, however, is subject to various regulatory capital requirements
implemented by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators, that if undertaken could have a direct
material effect on the Company and the Community Bank's financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Community Bank must meet specific capital guidelines
that involve quantitative measures of the Community Bank's assets,
liabilities, and certain off-balance sheet items as calculated under
regulatory accounting practices. The Community Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
required the Community Bank to maintain amounts and ratios of tangible and
core capital to adjusted total assets and of total risk-based capital to risk-
weighted assets of 1.5%, 3.0%, and 8.0%, respectively. As of June 30, 2003,
the Community Bank met all capital adequacy requirements to which it was
subject.
As of June 30, 2003, the most recent notification from the OTS categorized the
Community Bank as "well capitalized" under the regulatory framework for prompt
corrective action. To be categorized as "well capitalized," the Community Bank
must maintain minimum core and total risk-based capital ratios of 5.0% and
10.0%, respectively. At June 30, 2003, the Community Bank's tangible, core and
risk-based total capital ratios amounted to 9.63%, 9.63%, and 13.79%,
respectively. There are no conditions or events since that notification that
management believes have changed the Community Bank's category.
The Community Bank's actual and required minimum capital amounts and ratios
are presented in the following table (dollars in thousands):
20
Categorized as "Well
Capitalized" Under
For Capital Prompt Corrective
Actual Adequacy Purpose Action Provision
-----------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
As of June 30, 2003
Total Capital:
(To Risk Weighted
Assets) $44,637 13.79% $25,891 8.0% $32,364 10.0%
Tier I Capital:
(To Risk Weighted
Assets) 41,844 12.93 N/A N/A 19,418 6.0
Core Capital:
(To Total Assets) 41,844 9.63 13,034 3.0 21,723 5.0
Tangible Capital:
(To Tangible
Assets) 41,844 9.63 6,517 1.5 N/A N/A
As of March 31, 2003
Total Capital:
(To Risk Weighted
Assets) $50,893 15.89% $25,629 8.0% $32,037 10.0%
Tier I Capital:
(To Risk Weighted
Assets) 48,154 15.03 N/A N/A 19,222 6.0
Core Capital:
(To Total Assets) 48,154 11.66 12,389 3.0 20,649 5.0
Tangible Capital:
(To Tangible
Assets) 48,154 11.66 6,195 1.5 N/A N/A
The following table is a reconciliation of the Community Bank's capital,
calculated according to generally accepted accounting principles, to
regulatory tangible and risk-based capital at June 30, 2003 (in thousands):
Equity $42,005
Net unrealized loss on securities
available for sale, net of tax 174
Core deposit intangible asset (287)
Deferred tax and servicing asset (48)
Tangible capital 41,844
General valuation allowance 2,793
-------
Total capital $44,637
=======
Liquidity
The Financial Regulatory Relief and Economic Efficiency Act of 2000 repealed
the statutory liquidity requirement for savings associations, citing the
requirement as unnecessary effective July 18, 2001. In light of this action,
the OTS repealed its liquidity regulations, with some exceptions. These
exceptions provide that: savings associations must continue to maintain
sufficient liquidity to ensure safe and sound operation; and the appropriate
level of liquidity will vary depending on the activities in which the savings
21
association engages. Management does not believe this rule change has had any
adverse impact on the Community Bank's operations.
The Community Bank's primary sources of funds are deposits, FHLB borrowings,
proceeds from the principal and interest payments on loans and securities.
While maturities and scheduled amortization of loans and securities are
predictable sources of funds, deposit flows, prepayment of mortgage loans and
mortgage-backed securities are greatly influenced by general interest rates,
economic conditions and competition.
The low interest rate environment has created high demand for fixed rate
single family loans and a increased repayment of existing single family
mortgage loans and mortgage-backed securities. The Company's business plan
emphasizes the sale of fixed rate mortgages as part of its interest rate risk
strategy. The increase in the cash flows from operating activities of loans
sold of $16.7 million for the three months ended June 30, 2003 compared to
$11.1 million for the three months ended June 30, 2002 reflects this strategy.
The cash flows from net loan origination (loan originations less principal
repayments on loans) yielded a net prepayment of $3.8 million for the three
months ended June 30, 2003 as compared to net loan originations of $12.7
million for the same period in the prior year.
The Community Bank has experienced growth in deposit accounts that has caused
a net increase in cash flows from deposits of $19.3 million for the three
months ended June 30, 2003 as compared to a $41.6 million increase in net cash
flows for the same period in the prior year. The deposit growth experienced
during the three months ended June 30, 2003 has been primarily in transactions
accounts partially of set by a decrease in the balance of certificates of
deposit as compared to June 30, 2002.
Should the Community Bank require funds beyond its ability to generate them
internally, additional funds are available through the use of FHLB borrowings.
At June 30, 2003 advances from FHLB totaled $40.0 million and the Community
Bank had additional borrowing capacity available of $95.0 million from the
FHLB.
Sources of capital and liquidity for the Company on a stand-alone basis
include distributions from the Community Bank and the issuance of debt or
equity. Dividends and other capital distributions from the Community Bank are
subject to regulatory restrictions. Sources of capital and liquidity for the
Company on a stand-alone basis include distributions from the Community Bank.
Dividends and other capital distributions from the Community Bank are subject
to regulatory restrictions.
Cash, including interest-earning overnight investments, was $88.9 million at
June 30, 2003 compared to $60.9 million at March 31, 2003. The $28.1 million
increase in interest-earning overnight investments is attributable to the
increase liquidity caused by the high level of prepayment experienced in the
Company's mortgage loan portfolio and mortgage-backed securities portfolio and
growth in transaction accounts. Investment securities and mortgage-backed
securities available for sale at June 30, 2003 were $19.7 million and $10.1
million, respectively, compared to $20.4 million and $13.1 million,
respectively, at March 31, 2003. See "Financial Condition."
22
Asset Quality
The Company maintains an allowance for loan losses to provide for losses
inherent in the loan portfolio. The adequacy of the allowance is evaluated
monthly to maintain the allowance at levels sufficient to provide for inherent
losses. A key component to the evaluation is the Company's internal loan
review and loan classification system. The internal loan review system
provides for at least an annual review by the internal audit department of all
loans that meet selected criteria. The Internal Loan Classification Committee
reviews and monitors the risk and quality of the Company's loan portfolio.
The Internal Loan Classification Committee members include the Credit
Administrator, Chairman and Chief Executive officer, Chief Financial Officer,
Chief Credit Officer and Senior Vice President Business and Professional
Banking. Credit officers are expected to monitor their portfolios and make
recommendations to change loan grades whenever those changes are warranted.
At least annually loans that are delinquent 60 days or more and with specified
outstanding loan balances are subject to review by the internal audit
department. The Internal Loan Classification Committee meets quarterly to
approve any changes to loan grades, monitor loan grades and to recommend any
changes to the loan grades.
The Company uses the OTS loan classifications of special mention, substandard,
doubtful and loss, plus the additional loan classifications of pass and watch
in order to assign a loan grade to be used in the determination of the proper
amount of allowance for loan losses. The definition of a pass classification
represents a level of credit quality, which contains no well-defined
deficiency or weakness. The definition of watch classification is used to
identify a loan that currently contains no well-defined deficiency or
weakness, but it is determined necessary to closely monitor the loan.
The Company utilizes the loan classifications from the internal loan review
and Internal Loan Classification Committee in the following manner to
determine the amount of the allowance for loan losses. The calculation of the
allowance for loan losses must consider loan classification in order to
determine the amount of the allowance for loan losses for the required three
separate elements of the allowance for losses: general allowances, allocated
allowances and unallocated allowances.
The general allowance element relates to assets with no well-defined
deficiency or weakness that are classified as pass or watch, and takes into
consideration loss that is imbedded within the portfolio but has not been
realized. Borrowers are impacted by events well in advance of a lender's
knowledge that may ultimately result in a loan default and eventual loss.
Examples of such loss-causing events in the case of consumer or one- to four-
family residential loans would be a borrower job loss, divorce or medical
crisis. Examples of loss-causing events in the case of commercial or
construction loans would be a loss of customers as a result of competition or
economic changes. General allowances for each major loan type are determined
by applying loss factors that take into consideration past loss experience,
asset duration, economic conditions and overall portfolio quality to the
associated loan balance.
The allocated allowance element relates to assets with well-defined
deficiencies or weaknesses that are classified special mention, substandard,
doubtful or loss. The OTS loss factors are applied against current classified
asset balances to determine the amount of allocated allowances. Included in
these allowances are those amounts associated with loans where it is probable
23
that the value of the loan has been impaired and the loss can be reasonably
estimated.
The unallocated allowance element is more subjective and is reviewed quarterly
to take into consideration estimation errors and economic trends that are not
necessarily captured in determining the general and allocated valuation.
At June 30, 2003, the Company had an allowance for loan losses of $2.8
million, or 0.92%, of total net outstanding loans at that date. Based on past
experience and future expectations, management believes that loan loss
reserves are adequate.
While the Company believes it has established its existing allowance for loan
losses in accordance with accounting principles generally accepted in the
United States of America, or "generally accepted accounting principles" or
"GAAP", there can be no assurance that regulators, in reviewing the Company's
loan portfolio, will not request the Company to increase significantly its
allowance for loan losses, thereby negatively affecting the Company's
financial condition and results of operations.
Non-performing assets were $1.1 million, or 0.24% of total assets at June 30,
2003 compared with $748,000 at March 31, 2003, or 0.18% of total assets at
March 31, 2003. The $631,000 balance of non-accrual loans is composed of three
residential properties totaling $300,000, one land loan totaling $243,000 and
two consumer loans totaling $88,000. The $445,000 balance of other real estate
owned consists of one lot loan and a one- to- four family construction loan.
The following table sets forth information with respect to the Company's non-
performing assets at the dates indicated:
June 30, 2003 March 31, 2003
------------- --------------
(Dollars in thousands)
Loans accounted for on
a non-accrual basis:
Real Estate
Residential $ 300 $ 301
Commercial - -
Land 243 -
Commercial - -
Consumer 88 22
------- -------
Total 631 323
------- -------
Accruing loans which are
contractually past due 90 days
or more - -
------- -------
Total of non-accrual and 90 days
past due loans 631 323
------- -------
Real estate owned (net) 445 425
------- -------
Total non-performing assets $ 1,076 $ 748
======= =======
Total loans delinquent 90 days
or more to net loans 0.21% 0.11%
Total loans delinquent 90 days
or more to total assets 0.14 0.08
Total non-performing assets to
total assets 0.24 0.18
24
Loans not included in nonperforming or past due categories, but where
information about possible credit problems causes management to be uncertain
about the borrower's ability to comply with existing repayment terms, totaled
$2.3 million at June 30, 2003 and March 31, 2003, respectively.
Comparison of Operating Results for the Three Months Ended
June 30, 2003 and 2002
The Company's net income depends primarily on its net interest income, which
is the difference between interest earned on its loans and investments and the
interest paid on interest-bearing liabilities. Net interest income is
determined by (a) the difference between the yield earned on interest-earning
assets and rates paid on interest-bearing liabilities (interest rate spread)
and (b) the relative amounts of interest-earning assets and interest-bearing
liabilities. The Company's interest rate spread is affected by regulatory,
economic and competitive factors that influence rates, loan demand and deposit
flows. Net interest margin is calculated by dividing net interest income by
the average interest-earning assets. Net interest income and net interest
margin are affected by changes in interest rates, volume and the mix of
interest-earning assets and interest-bearing liabilities, and the level of
non-performing assets. The Company's net income is also affected by the
generation of non-interest income, which primarily consists of fees and
service charges, loan servicing income (expense), gains and losses on sales of
securities, gains and losses from sale of loans and other income. In
addition, net income is affected by the level of operating expenses and
establishment of a provision for loan losses.
Net income for the three months ended June 30, 2003 was $1.5 million, or $0.34
per basic share ($0.34 per diluted share) compared to net income of $1.1
million, or $0.24 per basic share ($0.24 per diluted share) for the same
period in fiscal 2003. Net interest income increased $571,000, or 14.0%, to
$4.6 million for the current quarter as compared to $4.1 million during the
same prior year period.
The increase in net interest income was the result of a shift in the deposit
mix from higher interest rate certificates of deposit to lower interest rate
transaction accounts. The total quarterly average outstanding balance of
checking accounts, NOW accounts and money market accounts ("transaction
accounts")increased $40.9 million, or 28.2%, to $185.9 million at June 30,
2003, compared to $145.0 million at June 30, 2002. The quarterly average
outstanding balance of certificates of deposits decreased 12.8% to $98.9
million from $113.4 million at June 30, 2003 and June 30, 2002, respectively.
The decrease in average balance of certificates of deposit reflected the
outflow of funds caused by the lower interest rate the Company paid. The pay
down of FHLB advances in the fourth quarter of fiscal year 2003 also
contributed to the increase of net interest income.
Net interest income increased $327,000 as a result of the change in volume of
average interest-earning assets and liabilities for the three months in fiscal
2004 compared to the same fiscal 2003 period. The change in interest rates for
this same period increased net interest income $244,000. The interest rate
spread increased from 3.70% for the three month period ended June 30, 2002 to
4.95% for the three month period ended June 30, 2003. The net interest margin
increased to 4.95% during the quarter ended June 30, 2003 from 4.30% for the
quarter ended June 30, 2002.
25
Interest income for the three months ended June 30, 2003 was $6.1 million, a
decrease of $649,000, or 9.6% from the $6.8 million interest income for the
same period in the prior fiscal year. Yield on interest-earning assets for the
first quarter of fiscal year 2004 was 6.54% compared to 7.94% for the same
three month period in fiscal year 2003. The lower first quarter fiscal 2004
yield reflects the lower interest rate environment. The Federal Reserve
targeted federal funds rate has decreased from 1.75% at June 30, 2002 to 1.00%
at June 30, 2003 during this time period and this change in the targeted
federal funds rate is reflected in the interest rates of the interest-bearing
assets. The lower interest income in the first quarter of fiscal year 2004 as
compared to the same period in fiscal year 2003 reflects this lower interest
rate environment.
Average interest-earning assets decreased to $378.3 million for the three
months ended June 30, 2003 from $386.2 million for the three months ended June
30, 2002. The decrease in the average quarterly balance of interest-earning
assets consisted of decreases in mortgage loans, mortgage-backed securities
and daily interest bearing investments partially offset by an increase in
non-mortgage loans and investment securities. Interest income decreased
$138,000 as a result of the decrease in the current quarter's volume of
average interest-earning assets as compared to the volume of average
interest-earning assets in the same fiscal 2003 period.
Interest expense decreased $1.2 million, or 44.8%, to $1.5 million for the
three months ended June 30, 2003 as compared to $2.7 million for the same
three months ended June 30, 2002. The cost of average interest-bearing
liabilities for the first quarter of year 2004 was 2.10% compared to 3.43% for
the same three month period in fiscal year 2003. The lower interest expense
for the three-month period ended June 30, 2003 is the result of the previously
mentioned change in the deposit mix, lower interest rates as well as the
reduction of average FHLB borrowings in the first quarter of fiscal year 2004
compared to the same period in the prior year. Average interest-bearing
liabilities decreased to $286.8 million at June 30, 2003, from $318.7 million
for the first quarter ended June 30, 2002. The interest expense impact of the
$31.9 million decrease in average interest-earning liabilities more than
offset the interest income impact of the $7.9 million decrease in average
interest-bearing assets. The decrease in the average balance of
interest-bearing liabilities was the result of a decrease in the average
balances of certificates of deposit and FHLB borrowings partially offset by
growth in transaction accounts.
The change in interest rates between the periods resulted in a $244,000
increase in net interest income. This quarterly comparison of the impact of
the changes in interest rates illustrates the liability sensitivity of the
balance sheet for this period of comparison. The decrease in interest rates
increased net interest income due to the lag in the repricing of loans and
securities as compared to the repricing of the liabilities, especially money
market accounts, certificates of deposit and FHLB borrowings. Floors (minimum
interest rates) and fixed rates in the loans and securities helped to reduce
the interest rate sensitivity of the assets.
The provision for loan losses for the three-month period ended June 30, 2003
was $70,000 compared to $245,000 for the same period in the prior year. There
was $15,000 in net charge-offs during the three months ended June 30, 2003,
compared to $34,000 in net charge-offs for the three months ended June 30,
2002. Net charge-offs to average net loans was 0.02% for the three months
ended June 30, 2003 compared to 0.05% for the three months ended June 30,
2002. The lower loan loss provision in the first quarter of fiscal year 2004
26
reflects the $2.0 million reduction in classified loans at June 30, 2003 as
compared to June 30, 2002, which was partially offset by growth in commercial
and commercial real estate loans. There were no significant changes in
estimation, assumptions or reallocations of allowance for the three months
ended June 30, 2003 and 2002, respectively. Based upon management's analysis
of historical and anticipated loss rates, current loan growth, and other
factors considered, the allowance for loan losses at June 30, 2003 is believed
to be adequate for the losses inherent in the loan portfolio.
The 14.6% increase in non-interest income to $1.6 million for the quarter
ended June 30, 2003 compared to $1.4 million for the quarter ended June 30,
2002 reflects increased fee income from deposit service charges, mortgage
broker fees and asset management fees. The lower interest rate environment
has increased prepayment on residential mortgages, which has shortened the
duration on mortgage servicing rights assets. In the first quarter of fiscal
year 2004 a $39,000 mortgage servicing rights impairment charge was made to
non-interest income as compared to $124,000 impairment charge to non-interest
income for the same period in the prior year.
Non-interest expense increased $243,000 to $3.9 million for the three months
ended June 30, 2003 from $3.7 million for the three months ended June 30,
2002. Salaries and employee benefits increased $215,000 to $2.2 million for
the quarter ended June 30, 2003 as compared to the same quarter in the prior
year. There were eleven more full-time equivalent employees during the fiscal
year 2003 quarter over the fiscal year 2002 quarter. The fiscal year 2003
quarter salaries and employee benefits also reflect the increases in mortgage
broker commissions when compared to the same period in the prior year.
Provision for federal income taxes for the first quarter of fiscal year 2004
was $738,000, resulting in an effective tax rate of 33.0%, compared to
$457,000 and 29.9% for the same quarter of fiscal year 2003. The 3.1% increase
in the effective tax rate for three months ended June 30, 2003 is primarily
attributable to the impact of the tax permanent difference caused by the ESOP
market value adjustment and reduced dividend received deduction.
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 analysis 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
27
without exceeding the net interest income and net portfolio value limits set
forth in our interest rate risk policy.
There has not been any material change in the market risk disclosures
contained in the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 2003.
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)-14(c) of the Securities Exchange Act of 1934 (the "Act)) 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 within the 90-day period preceding the filing date
of this quarterly 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 Act 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: In the quarter ended June 30, 2003,
the Company did not make any significant changes in, nor take any corrective
actions regarding, its internal controls or other factors that could
significantly affect these controls.
28
RIVERVIEW BANCORP, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Not applicable
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
Not applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable
Item 5. Other Information
-----------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
3.1 Articles of Incorporation of the Registrant(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 Michael C. Yount(2)
10.4 Severance Agreement with Karen Nelson(2)
10.5 Severance Agreement with John A. Karas(5)
10.6 Employee Severance Compensation Plan(2)
10.7 Employee Stock Ownership Plan(3)
10.8 Management Recognition and Development Plan(4)
10.9 1998 Stock Option Plan(4)
10.10 1993 Stock Option and Incentive Plan(4)
21 Subsidiaries of Registrant(3)
31 Certifications Pursuant to Section 302 of the
Sarbanes-Oxley Act
32 Certifications Pursuant to Section 906 of the
Sarbanes-Oxley Act.
(b) Reports on Form 8-K: Forms 8-K were filed on April 2, May 5,
June 5 and June 25 during the quarter ended June 30, 2003.
- --------------
(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 Form 10-Q for the quarter ended
September 30, 1997, and incorporated herein by reference.
(3) Filed as an exhibit to the Registrant's Form 10-K for the year ended
March 31, 1998, and incorporated herein by reference.
(4) Filed on October 23, 1998, as an exhibit to the Registrant's Registration
Statement on Form S-8, and incorporated herein by reference.
(5) Filed as an exhibit to the Registrant's form 10-K for the year ended
March 31, 2002, and incorporated by reference.
29
In accordance with the requirements of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
RIVERVIEW BANCORP, INC.
DATE: August 4, 2003 BY: /S/ Patrick Sheaffer
Patrick Sheaffer
President and Chief Executive Officer
DATE: August 4, 2003 BY: /S/ Ronald Wysaske
Ronald Wysaske
Executive Vice President
30
EXHIBIT 31
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
31
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 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 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 changes in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially effect, 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 the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses 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 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 4, 2003 /S/ Patrick Sheaffer
Patrick Sheaffer
President and Chief Executive Officer
32
I, Ronald Wysaske, 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 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 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 changes in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially effect, 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 the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses 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 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 4, 2003 /S/ Ronald Wysaske
Ronald Wysaske
Chief Financial Officer
33
EXHIBIT 32
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
34
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 quarterly report on Form 10Q 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/ Ronald Wysaske
Patrick Sheaffer Ronald Wysaske
Dated: August 4, 2003
A signed original of the written statement required by Section 906 has been
provided to Riverview Bancorp, Inc. and will be retained by Riverview Bancorp,
Inc. and furnished to the Securities and Exchange Commission or its staff upon
request.
35