RIVERVIEW BANCORP INC
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
RVSB$6.120.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-31; filed 2024-02-08.
0000939057-24-000051
Item 2. : Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0000939057-24-000208
Item 2. : Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 89 previous paragraphs and 84 current paragraphs.
36 unchanged; 37 reworded; 8 added; 13 removed; 3 previous and 3 current paragraphs rearranged.
Tables are not compared: 20 previous and 15 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
At June 30, 2024, loans delinquent 30-89 days totaled $10.2 million or 0.98% of total loans, up from $1.8 million or 0.17% at March 31, 2024. The increase in loans delinquent 30-89 days was primarily attributable to two commercial real estate loans totaling $8.2 million. One of these delinquent 30-89 days loans was related to a circumstance in which the loan is in the probate process. There is a plan in place to bring the loan current after the probate process has been finalized and no
Current report
losses are expected. The other loan that is 30-89 days delinquent was due to a delay in receiving payment, but the loan has since been brought current. At June 30, 2024, CRE loans represented the largest portion of the loan portfolio at 55.32% of total loans and commercial business represented 22.82% of total loans.
Current report
Net Income. Net income was $966,000, or $0.05 per diluted share, for the three months ended June 30, 2024, down $1.9 million or 66.0% compared to $2.8 million, or $0.13 per diluted share for the same period in the prior year. The Company’s net income decreased primarily due to an increase in interest expense of $2.0 million from higher funding costs and an increase in non-interest expense of $991,000, partially offset by a $442,000 increase in interest income and a $570,000 decrease in the provision for income taxes.
Current report
Interest and Dividend Income. Interest and dividend income for the three months ended June 30, 2024 increased $442,000 to $14.4 million compared to $14.0 million for the same period in the prior year. The increase was primarily due to an increase in interest income on loans receivable of $842,000, partially offset by a decrease in interest income on investment securities of $363,000.
Current report
Interest expense on borrowings decreased $94,000 for the three months ended June 30, 2024 compared to the same period in the prior year due to the decrease in the average balance of FHLB advances. The average balance of FHLB advances was $111.7 million for the three months ended June 30, 2024, compared to $130.0 million for the same period in the prior year.
Current report
Nonperforming loans were $461,000 at June 30, 2024, compared to $178,000 at March 31, 2024. Included in the $461,000 of nonperforming loans at June 30, 2024, were $301,000 of SBA and USDA government guaranteed loans. The Company expects to receive all principal and interest on these SBA and USDA loans since the Company purchased the guaranteed portion of the loans which is backed by government guaranteed interest certificates.
Current report
Non-Interest Income. Non-interest income increased $82,000 to $3.4 million for the three months ended June 30, 2024, compared to $3.3 million for the same period in the prior year. The increase was primarily due to an increase in asset management fees of $177,000 as a result of increases in irrevocable accounts at a higher rate. Offsetting this increase were decreases in fees and service charges of $60,000 and other non-interest income of $46,000. The decrease in fees and service charges was primarily due to a decrease in interchange income of $23,000 and brokered loan fees of $18,000. The decrease in other non-interest income was related to a one-time settlement related to a data breach with a third-party vendor that was received during the same quarter in the prior year.
Current report
Non-Interest Expense. Non-interest expense increased $991,000 to $11.0 million for the three months ended June 30, 2024, compared to $10.0 million for the same period in the prior year. Salaries and employee benefits increased $345,000 due to increases in compensation expense and personnel expense. Occupancy and depreciation expense increased by $312,000 due to increases in computer software, depreciation and repair and maintenance expenses as the Company continues to update and modernize branch locations. Professional fees increased by $147,000 which was primarily due to increases in legal and consulting fees. The increase in legal expenses was primarily related to the settlement of a litigation matter. For further information regarding the pending litigation, see “Note 13. Commitments and Contingencies”. Other non-interest expense also increased by $117,000 which was primarily related to additional accruals for business and occupation taxes.
Removed paragraphs (13)
Previous report
construction loans of $5.6 million, commercial business loans of $3.6 million, and real estate one-to-four family loans of $3.4 million.
Previous report
The Bank Term Funding Program (“BTFP”) was created by the Federal Reserve to support and make additional funding available to eligible depository institutions to help banks meet the needs of their depositors. Riverview has registered and is eligible to utilize the BTFP. Riverview does not intend to utilize the BTFP, but could do so should the need arise.
Previous report
The decrease of $1.7 million in nonperforming assets is mainly attributed to a decrease in nonperforming SBA and USDA government guaranteed loans where payments were delayed due to the servicing transfer of these loans between two third-party servicers.
Previous report
At December 31, 2023, loans delinquent 30-89 days were 0.46% of total loans compared to 0.20% at March 31, 2023. At December 31, 2023, loans delinquent 30-89 days were comprised of commercial business loans, government guaranteed loans (which are included in commercial business), commercial real estate and consumer loans. At March 31, 2023, loans delinquent 30-89 days were comprised mainly of government guaranteed loans (which are included in commercial business), commercial business and consumer loans. There were no loans 30-89 days delinquent in the commercial real estate (“CRE”) portfolio at March 31, 2023. At December 31, 2023, CRE loans represented the largest portion of the loan portfolio at 56.28% of total loans and commercial business represented 22.52% of total loans.
Previous report
Net Income. Net income was $1.5 million, or $0.07 per diluted share, for the three months ended December 31, 2023, compared to $5.2 million, or $0.24 per diluted share for the same period in the prior year. Net income for the nine months ended December 31, 2023 and 2022 was $6.8 million, or $0.32 per diluted share, and $15.1 million, or $0.69 per diluted share, respectively. The Company’s net income decreased during both the three and nine month periods ended December 31, 2023, compared to the same periods in the prior year, due to increased funding costs. In addition, net income was also impacted, to a lesser extent, by an increase in non-interest expense of $703,000 and $1.2 million for the three and nine months ended December 31, 2023, partially offset by an increase in non-interest income of $93,000 and $525,000 for the same periods, respectively.
Previous report
Interest and Dividend Income. Interest and dividend income for the three and nine months ended December 31, 2023 was $14.3 million and $42.3 million, respectively, compared to $14.4 million and $41.7 million for the same periods in the prior year, respectively. The slight decrease for the three months ended December 31, 2023, was due to a $167,000 decrease in investment securities and a $118,000 decrease in other interest and dividends, reflecting a $274,000 decrease in interest earned on interest-earning deposits in other banks and, a $156,000 increase in interest income earned on other
Previous report
assets, partially offset by an increase in interest income on loans receivable of $114,000. The increase for the nine months ended December 31, 2023, was due to increases in interest income on loans receivable of $792,000 and investment securities of $422,000, partially offset by a $675,000 decrease in other interest and dividends, reflecting a $1.1 million decrease in interest earned on interest-earning deposits in other banks and a $462,000 increase in interest income earned on other earning assets
Previous report
Interest earned on other earning assets increased $156,000 and $462,000 due to increases in the average balance of $6.6 million and $5.6 million for the three and nine months ended December 31, 2023, respectively, compared to the same periods in the prior year. The average yields increased 393 basis points and 505 basis points for the three and nine months ended December 31, 2023, respectively, compared to the same periods in the prior year. The increase in the average balance of other earning assets was primarily due to the increase in the average balance of FHLB stock due to the required purchase of such stock in connection with increases in FHLB borrowings, resulting in higher dividends received from the FHLB.
Previous report
Interest earned on interest-earning deposits in other banks decreased $274,000 and $1.1 million for the three and nine months ended December 31, 2023, respectively, compared to the same periods in the prior year. The decreases were due to a decrease in the average balance to $11.1 million and $10.9 million during the three and nine months ended December 31, 2023, compared to $52.8 million and $128.4 million for the same periods in the prior year, respectively, partially offset by an increase in the average yield. The decrease in the average balance was primarily due to the decrease in excess cash held at the FRB due to the decrease in deposits, while the increase in the yield on interest earning accounts in other banks was due to the increases in the federal funds target rate by the Federal Reserve that have occurred since March 2022.
Previous report
certificates of deposit increased $66.9 million and $45.8 million for the three and nine months ended December 31, 2023, respectively, compared to the same periods in the prior year. The average rate paid on money market accounts increased 121 basis points and 104 basis points for the three and nine months ended December 31, 2023, respectively, compared to the same periods in the prior year. The average balance of interest-bearing deposits decreased $123.9 million and $145.0 million for the three and nine months ended December 31, 2023, respectively, compared to the same periods in the prior year.
Previous report
Interest expense on borrowings increased $2.4 million and $6.4 million for the three and nine months ended December 31, 2023, respectively, compared to the same periods in the prior year due to an increase in the average balance of FHLB advances and higher rates paid on the outstanding floating rate junior subordinated debentures. The average balance of FHLB advances was $167.9 million and $143.0 million for the three and nine months ended December 31, 2023, compared to $1.4 million and $485,000 for the same periods in the prior year, respectively. The average rate paid on junior subordinated debentures increased to 8.01% and 7.77% for the three and nine months ended December 31, 2023, compared to 5.84% and 4.43% for the same periods in the prior year, respectively.
Previous report
Non-Interest Income. Non-interest income increased $93,000 to $3.1 million for the three months ended December 31, 2023, compared to $3.0 million for the same period in the prior year. The increase was primarily due to an increase in asset management fees of $129,000 related to an increase in assets under management and an increase in fees and service charges of $31,000 related to employee retention credit fees income. Offsetting these increases was a decrease in other non-interest income of $84,000 related to a dividend received from BancTech Ventures during the three months ended December 31, 2022 and not replicated during the same period in 2023. Non-interest income increased $525,000 to $9.7 million for the nine months ended December 31, 2023, compared to $9.2 million for the same period in the prior year. The increase was primarily due to an increase in asset management fees of $461,000 related to an increase in assets under management. Other changes in non-interest income during the nine months ended December 31, 2023 compared to the same period in the prior year included a $32,000 decrease in fees and service charges, a $43,000 increase in BOLI income and a $53,000 increase in other non-interest income.
Previous report
Non-Interest Expense. Non-interest expense increased $703,000 and $1.2 million to $10.6 million and $30.6 million for the three and nine months ended December 31, 2023, compared to $9.8 million and $29.4 million for the same periods in the prior year, respectively. Occupancy and depreciation increased $162,000 and $330,000 for the three and nine months ended December 31, 2023, respectively, compared to the same periods in the prior year due to an increases in depreciation and repair and maintenance expenses as the Company continues to update and modernize certain branch locations. Advertising and marketing expense increased $80,000 and $256,000 for the three and nine months ended December 31, 2023, respectively, compared to the same periods in the prior year due to expenses related to implementing a high-performance growth deposit strategy. Additionally, the increase is also attributed to additional sponsorships and events as our local economy began to reopen when compared to the prior year periods. State and local taxes fees increased $130,000 and $180,000 for the three and nine months ended December 31, 2023, respectively, compared to the same periods in the prior year due to an increase in apportionment rate. FDIC insurance premium increased $62,000 and $179,000 for the three and nine months ended December 31, 2023, respectively, compared to the prior year periods due to an increase in FDIC deposit insurance assessments at the beginning of 2023. Salaries and employee benefits increased $109,000 and $160,000 for the three and nine months ended December 31, 2023, respectively, compared to the same periods in the prior year due to increases in compensation expense and group insurance, and a decrease in loan origination deferred costs, partially offset by a decrease in bonus expense. Other non-interest expense increased $137,000 and $141,000 for the three and nine months ended December 31, 2023, respectively, compared to the same periods in the prior year primarily due to fraud and deposit losses. Offsetting these increases were a decrease in data processing expense of $88,000 for the nine months ended December 31, 2023, compared to the same period in the prior year due to the decreased cost associated with processing our debit card transactions.
Reworded paragraphs (37)
Previous wording
As a progressive, community-oriented financial services business, the Company emphasizes local, personal service to residents of its primary market area. The Company considers Clark, Klickitat and Skamania counties of Washington, and Multnomah, Washington and Marion counties of Oregon as its primary market area. The Company is engaged predominantly in the business of attracting deposits from the general public and using such funds in its primary market area to originate commercial business, commercial real estate, multi-family real estate, land, real estate construction, residential real estate and other consumer loans. Additionally, the Company, from time to time, will purchase commercial business loans as a way to supplement loan originations and diversify the commercial loan portfolio. These loans are originated by a third-party located outside the Company’s primary market area. The Company also purchases the guaranteed portion of Small Business Administration (“SBA”) loans to help loan portfolio diversification, supplement loan originations and generate a higher yield than overnight cash investments or short-term investments. These SBA loans are originated through another financial institution located outside the Company’s primary market area and are purchased with servicing retained by the seller. The Company’s loans receivable, net, totaled $1.0 billion at December 31, 2023 compared to $993.5 million at March 31, 2023.
Current wording
As a progressive, community-oriented financial services business, the Company emphasizes local, personal service to residents of its primary market area. The Company considers Clark, Klickitat and Skamania counties of Washington, and Multnomah, Washington and Marion counties of Oregon as its primary market area. The Company is engaged predominantly in the business of attracting deposits from the general public and using such funds in its primary market area to originate commercial business, commercial real estate, multi-family real estate, land, real estate construction, residential real estate and other consumer loans. Additionally, the Company, from time to time, will purchase commercial business loans as a way to supplement loan originations and diversify the commercial loan portfolio. These loans are originated by a third-party located outside the Company’s primary market area. The Company also purchases the guaranteed portion of SBA loans to help loan portfolio diversification, supplement loan originations and generate a higher yield than overnight cash investments or short-term investments. These SBA loans are originated through another financial institution located outside the Company’s primary market area and are purchased with servicing retained by the seller. The Company’s loans receivable, net, totaled $1.03 billion at June 30, 2024 compared to $1.01 billion at March 31, 2024.
Previous wording
The Company’s strategic plan includes targeting the commercial banking customer base in its primary market area for loan originations and deposit growth, specifically small and medium size businesses, professionals and wealth building individuals. In pursuit of these goals, the Company will seek to increase the loan portfolio consistent with its strategic plan and asset/liability and regulatory capital objectives, which includes maintaining a significant amount of commercial business and commercial real estate loans in its loan portfolio. Significant portions of recent loan originations are concentrated in commercial business and commercial real estate loans which carry adjustable rates, higher yields and shorter terms and higher credit risk than traditional fixed-rate consumer real estate one-to-four family mortgages.
Current wording
The Company’s strategic plan includes targeting the commercial banking customer base in its primary market area for loan originations and deposit growth, specifically small and medium size businesses, professionals and wealth building individuals. In pursuit of these goals, the Company will seek to increase the loan portfolio consistent with its strategic plan and asset/liability and regulatory capital objectives, which includes maintaining a significant amount of commercial business and commercial real estate loans in its loan portfolio which typically carry adjustable rates, higher yields and shorter terms, as well as higher credit risk compared to traditional fixed-rate consumer real estate one-to-four family loans.
Previous wording
The strategic plan also stresses increased emphasis on non-interest income, including increased fees for asset management services through the Trust Company 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
Current wording
The strategic plan also stresses increased emphasis on non-interest income, including increased fees for asset management services through the Trust Company 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. We believe we are well positioned to attract new customers and to increase our market share through
Previous wording
Company serves. We believe we are well positioned to attract new customers and to increase our market share through our 17 branches, including, among others, ten in Clark County, three in the Portland metropolitan area and three lending centers.
Current wording
our 17 branches, including, among others, ten in Clark County, three in the Portland metropolitan area and three lending centers.
Previous wording
Vancouver is located in Clark County, Washington, which is just north of Portland, Oregon. Many businesses are located in the Vancouver area because of the favorable tax structure and lower energy costs in Washington as compared to Oregon. Companies located in the Vancouver area include: Sharp Microelectronics, Hewlett Packard, Georgia Pacific, Underwriters Laboratory, WaferTech, Nautilus, Barrett Business Services, PeaceHealth and Banfield Pet Hospitals, as well as several support industries. In addition to this industry base, the Columbia River Gorge Scenic Area and the Portland metropolitan area are sources of tourism.
Current wording
Vancouver is located in Clark County, Washington, which is just north of Portland, Oregon. Many businesses are located in the Vancouver area because of the favorable tax structure and lower energy costs in Washington as compared to Oregon. Companies located in the Vancouver area include: Sharp Microelectronics, Hewlett Packard, Georgia Pacific, Underwriters Laboratory, WaferTech, Barrett Business Services, PeaceHealth and Banfield Pet Hospitals, as well as several support industries. In addition to this industry base, the Columbia River Gorge Scenic Area and the Portland metropolitan area are sources of tourism.
Previous wording
Fiscal year 2024 marks the 100 th anniversary since the Bank began operations in 1923. The primary business strategy of the Company is to provide comprehensive banking and related financial services within its primary market area. Since 1998, the Company has been focusing on the expansion of its commercial and real estate construction loan portfolios. At December 31, 2023, commercial and real estate construction loans represented 90.4% of total loans compared to 89.9% at March 31, 2023. Commercial lending, including commercial real estate loans, typically has higher credit risk, greater interest margins and shorter terms than residential lending which can increase the loan portfolio's profitability.
Current wording
Fiscal year 2025 marks the 101 th anniversary since the Bank began operations in 1923. The primary business strategy of the Company is to provide comprehensive banking and related financial services within its primary market area. Since 1998, the Company has been focusing on the expansion of its commercial and real estate construction loan portfolios. At June 30, 2024, commercial and real estate construction loans represented 90.2% of total loans compared to 90.4% at March 31, 2024. Commercial lending, including commercial real estate loans, typically has higher credit risk, greater interest margins and shorter terms than residential lending which can increase the loan portfolio's profitability.
Previous wording
Execution of our Business Plan. The Company is focused on increasing its loan portfolio, especially higher yielding commercial and real estate construction loans, and its core deposits by expanding its customer base throughout its primary market areas. By emphasizing total relationship banking, the Company intends to deepen the relationships with its customers and increase individual customer profitability through cross-marketing programs, which allows the Company to better identify lending opportunities and services for customers. To build its core deposit base, the Company will continue to utilize additional product offerings, technology and a focus on customer service in working toward this goal. The Company will also continue to seek to expand its franchise through de novo branches, the selective acquisition of individual branches, loan purchases and whole bank transactions that meet its investment and market objectives.
Current wording
Execution of our Business Plan. The Company is focused on increasing its loan portfolio, especially higher yielding commercial and real estate construction loans, and its core deposits by expanding its customer base throughout its primary market areas. By emphasizing total relationship banking, the Company intends to deepen the relationships with its customers and increase individual customer profitability through cross-marketing programs, which allows the Company to better identify lending opportunities and services for customers. To build its core deposit base, the Company will continue to utilize additional product offerings, technology and a focus on customer service in working toward this goal. The Company will also continue to seek to expand its franchise through de novo branches, the selective acquisition of individual branches, loan purchases and whole bank transactions that meet its investment and market objectives. In fiscal year 2021, the Company ceased originating residential real estate loans; however, it will from time to time purchase these loans consistent with asset/liability objectives.
Previous wording
Introduction of New Products and Services. The Company continuously reviews new products and services to provide its customers with more financial options. All new technology and services are generally reviewed for business development and cost saving purposes. The Company continues to experience growth in customer use of its online banking services, where the Bank provides a full array of traditional cash management products as well as online banking products including mobile banking, mobile deposit, bill pay, e-statements, and text banking. The products are tailored to meet the needs of small to medium size businesses and households in the markets we serve. The Company intends to selectively add other products to further diversify revenue sources and to capture more of each customer’s banking relationship by cross selling loan and deposit products and additional services, including services provided through the Trust Company to increase its fee income. Assets under management by the Trust Company totaled $942.4 million and $890.6 million at December 31, 2023 and March 31, 2023, respectively.
Current wording
Introduction of New Products and Services. The Company continuously reviews new products and services to provide its customers with more financial options. All new technology and services are generally reviewed for business development and cost saving purposes. The Company continues to experience growth in customer use of its online banking services, where the Bank provides a full array of traditional cash management products as well as online banking products including mobile banking, mobile deposit, bill pay, e-statements, and text banking. The products are tailored to meet the needs of small to medium size businesses and households in the markets we serve. The Company intends to selectively add other products to further diversify revenue sources and to capture more of each customer’s banking relationship by cross selling loan and deposit products and additional services, including services provided through the Trust Company to
Previous wording
Cash and cash equivalents, including interest-earning deposits in other banks, totaled $37.6 million at December 31, 2023 compared to $22.0 million at March 31, 2023. The Company’s cash balances typically fluctuate based upon funding needs, deposit activity and investment securities purchases. Based on the Company’s asset/liability management program and liquidity objectives, the Company may deploy excess cash balances to purchase investment securities depending on the rate environment and other considerations. As a part of this strategy, the Company may choose to invest in short-term certificates of deposit held for investment, all of which are fully insured by the FDIC. There were no certificates of deposit held for investment at December 31, 2023 compared to $249,000 at March 31, 2023.
Current wording
Cash and cash equivalents, including interest-earning deposits in other banks, totaled $27.8 million at June 30, 2024 compared to $23.6 million at March 31, 2024. The Company’s cash balances typically fluctuate based upon funding needs, deposit activity and investment securities activity. Based on the Company’s asset/liability management program and liquidity objectives, the Company may deploy excess cash to purchase investment securities depending on the rate environment and other considerations. As a part of this strategy, the Company may choose to invest in short-term certificates of deposit held for investment, all of which are fully insured by the Federal Deposit Insurance Corporation (the “FDIC”).
Previous wording
Investment securities totaled $429.1 million and $455.3 million at December 31, 2023 and March 31, 2023, respectively. The decrease was due to normal pay downs, calls and maturities. There were no investment securities purchases during the nine months ended December 31, 2023 compared to $81.8 million for the nine months ended December 31, 2022. The Company’s investment securities primarily consist of a combination of securities backed by government agencies (FHLMC, FNMA, SBA or GNMA). At December 31, 2023, the Company determined that none of its investment securities required an allowance for credit losses (“ACL”). For additional information on the Company’s investment securities, see Note 5 of the Notes to the Consolidated Financial Statements contained in Item 1 of this Form 10-Q.
Current wording
Investment securities totaled $363.2 million and $372.7 million at June 30, 2024 and March 31, 2024, respectively. The decrease was due to normal pay downs, calls and maturities. The Company had no sales of investment securities during the three months ended June 30, 2024. The Company’s investment securities primarily consist of a combination of securities backed by government agencies (FHLMC, FNMA, SBA or GNMA). At June 30, 2024, the Company determined that none of its investment securities required an allowance for credit losses (“ACL”). For additional information on the Company’s investment securities, see Note 5 of the Notes to the Consolidated Financial Statements contained in Item 1 of this Form 10-Q.
Previous wording
Loans receivable, net, totaled $1.0 billion at December 31, 2023 compared to $993.5 million at March 31, 2023, an increase of $9.3 million. The increase was primarily attributed to increases in multi-family loans of $11.2 million, commercial real estate loans of $8.6 million and land loans of $2.3 million. These increases were partially offset by decreases in real estate
Current wording
Loans receivable, net, totaled $1.03 billion at June 30, 2024, compared to $1.01 billion at March 31, 2024, an increase of $21.1 million. The increase was primarily attributable to increases in commercial business loans of $9.1 million, multi-family loans of $8.5 million, other installment loans of $5.1 million, and real estate construction loans of $3.4 million. These increases were partially offset by a decrease in commercial real estate loans of $5.4 million.
Previous wording
The Company no longer originates one-to-four family mortgage loans; however, will from time to time purchase these loans consistent with its asset/liability objectives. Additionally, the Company will purchase commercial business loans to supplement loan originations and diversify the commercial loan portfolio. These commercial business loans are originated by a third-party located outside the Company’s primary market area. Commercial business loans purchased at December 31, 2023 totaled $28.3 million compared to $26.2 million at March 31, 2023. The Company also purchases the guaranteed portion of SBA loans to help loan portfolio diversification, supplement loan originations and generate a higher yield than overnight cash investments or short-term investments. These SBA loans are originated through another financial institution located outside the Company’s primary market area and are purchased with servicing retained by the seller. At December 31, 2023, the Company’s purchased SBA loan portfolio was $51.8 million compared to $55.5 million at March 31, 2023.
Current wording
The Company no longer originates one-to-four family mortgage loans; however, will from time to time purchase these loans consistent with its asset/liability objectives. Additionally, the Company will purchase commercial business loans and consumer loans to supplement loan originations and diversify the loan portfolio. Purchased loans are originated by a third-party located outside the Company’s primary market area. Commercial business loans purchased at June 30, 2024 totaled $26.2 million compared to $27.2 million at March 31, 2024. Consumer loans purchased at June 30, 2024 totaled $5.0 million compared to none at March 31, 2024. The Company also purchases the guaranteed portion of SBA loans to help loan portfolio diversification, supplement loan originations and generate a higher yield than overnight cash investments or short-term investments. These SBA loans are originated through another financial institution located outside the Company’s primary market area and are purchased with servicing retained by the seller. At June 30, 2024, the Company’s purchased SBA loan portfolio was $50.4 million compared to $51.0 million at March 31, 2024.
Previous wording
Deposits decreased $46.3 million to $1.22 billion at December 31, 2023 compared to $1.27 billion at March 31, 2023 due to increased competition, pricing and an overall decrease in market liquidity. Regular savings accounts decreased $55.2 million and non-interest bearing accounts decreased $54.2 million. These decreases were partially offset by an increase of $41.7 million in certificates of deposit, $17.5 million in interest checking accounts, and $3.9 million in money market accounts. The Company had no wholesale-brokered deposits at December 31, 2023 and March 31, 2023. Core branch deposits accounted for 98.4% of total deposits at December 31, 2023 compared to 97.5% at March 31, 2023. The Company plans to continue its focus on core deposits and on building customer relationships as opposed to obtaining deposits through the wholesale markets.
Current wording
Deposits decreased $12.0 million to $1.22 billion at June 30, 2024, compared to $1.23 billion at March 31, 2024 due to increased competition, pricing and an overall decrease in market liquidity. Regular savings accounts decreased $13.0 million, non-interest bearing accounts decreased $9.8 million, and interest bearing accounts decreased $8.3 million. These decreases were partially offset by increases of $13.5 million in certificates of deposit and $5.7 million in money market accounts. The Company had no wholesale-brokered deposits at June 30, 2024 and March 31, 2024. Core branch deposits accounted for 98.0% of total deposits at both June 30, 2024 and March 31, 2024. The Company plans to continue its focus on core deposits and on building customer relationships as opposed to obtaining deposits through the wholesale markets.
Previous wording
Accrued expenses and other liabilities increased $11.0 million to $26.7 million at December 31, 2023 compared to $15.7 million at March 31, 2023. The increase was primarily due to an outstanding balance in Trust sweep funds of $13.3 million at December 31, 2023 that were subsequently disbursed the following business day.
Current wording
Accrued expenses and other liabilities increased $3.2 million to $19.4 million at June 30, 2024 compared to $16.2 million at March 31, 2024. The increase was primarily due to an outstanding balance in Trust sweep funds of $4.8 million at June 30, 2024 that were subsequently disbursed the following business day.
Previous wording
FHLB advances were $157.1 million at December 31, 2023 compared to $123.8 million at March 31, 2023, an increase of $33.3 million. FHLB advances at December 31, 2023 and March 31, 2023 were comprised of overnight advances totaling $107.1 million and $73.8 million, respectively, and a short-term borrowing of $50.0 million for both periods. FHLB advances were utilized to partially offset the decrease in deposit balances.
Current wording
FHLB advances increased $25.2 million to $113.5 million at June 30, 2024 compared to $88.3 million at March 31, 2024. FHLB advances at June 30, 2024 and March 31, 2024 were comprised of overnight advances. FHLB advances were utilized to fund new loan originations and to partially offset the decrease in deposit balances.
Previous wording
Shareholders' equity increased $3.2 million to $158.5 million at December 31, 2023 compared to $155.2 million at March 31, 2023. The increase was mainly attributable to current period net income of $6.8 million and a decrease in the accumulated other comprehensive loss related to the change in unrealized holding losses on securities available for sale, net of tax, of $855,000. Offsetting these changes were the repurchase of 109,162 shares of common stock totaling $577,000 and the payment of cash dividends totaling $3.8 million.
Current wording
Shareholders' equity increased $320,000 to $155.9 million at June 30, 2024 compared to $155.6 million at March 31, 2024. The increase was mainly attributable to current period net income of $966,000, partly offset by an increase in the accumulated other comprehensive loss related to the change in unrealized holding losses on securities available for sale, net of tax, of $250,000 and the payment of cash dividends totaling $422,000.
Previous wording
The Bank is a state-chartered, federally insured institution subject to various regulatory capital requirements administered by the FDIC and WDFI. Failure to meet minimum capital requirements can result in the initiation of 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 under 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.
Current wording
The Bank is a state-chartered, federally insured institution subject to various regulatory capital requirements administered by the FDIC and Washington State Department of Financial Institutions, Division of Banks. Failure to meet minimum capital requirements can result in the initiation of 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 under 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.
Previous wording
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total and tier I capital to risk-weighted assets, core capital to total assets and tangible capital to tangible assets (set forth in the table below).
Current wording
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total and 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 met all capital adequacy requirements to which it was subject as of June 30, 2024.
Previous wording
The Company must maintain an adequate level of liquidity to ensure the availability of sufficient funds for loan originations, deposit withdrawals and continuing operations, satisfy other financial commitments and take advantage of investment opportunities. During the nine months ended December 31, 2023, the Bank used its sources of funds primarily to fund deposit withdrawals resulting from increased competition and pricing pressure and to fund loan commitments. At December 31, 2023, cash and cash equivalents and available for sale investment securities totaled $234.0 million, or 14.7% of total assets. Management believes that the Company’s security portfolio is of high quality and its securities would therefore be marketable. The levels of these assets are dependent on the Company’s operating, financing, lending, and investing activities during any given period. The Bank generally maintains sufficient cash and short-term investments to meet short-term liquidity needs; however, its primary liquidity management practice is to manage short-term borrowings, consistent with its asset/liability objectives. In addition to these primary sources of funds, the Bank has several secondary borrowing sources available to meet potential funding requirements, including FRB borrowings and FHLB advances. At December 31, 2023, the Bank had no advances from the FRB and maintains a credit facility with the FRB with an available borrowing capacity of $125.2 million, subject to sufficient collateral. At December 31, 2023, the Bank had advances totaling $157.1 million from the FHLB and had an additional borrowing capacity of $137.8 million with the FHLB, subject to sufficient collateral and stock investment. At December 31, 2023, the Bank had sufficient unpledged collateral to allow it to utilize its available borrowing capacity from the FRB and the FHLB. Borrowing capacity may, however, fluctuate based on acceptability and risk rating of loan collateral and counterparties could adjust discount rates applied to such collateral at their discretion.
Current wording
The Company must maintain an adequate level of liquidity to ensure the availability of sufficient funds for loan originations, deposit withdrawals, continuing operations, satisfaction other financial commitments, and to take advantage of investment opportunities. During the three months ended June 30, 2024, the Bank used its sources of funds primarily to fund deposit withdrawals resulting from increased competition and pricing pressure and to fund loan commitments. At June 30, 2024, cash and cash equivalents and available for sale investment securities totaled $165.2 million, or 10.7% of total assets. Management believes that the Company’s security portfolio is of high quality and its securities would therefore be marketable. The levels of these assets are dependent on the Company’s operating, financing, lending, and investing activities during any given period. The Bank generally maintains sufficient cash and short-term investments to meet short-term liquidity needs; however, its primary liquidity management practice is to manage short-term borrowings, consistent with its asset/liability objectives. In addition to these primary sources of funds, the Bank has several secondary borrowing sources available to meet potential funding requirements, including FRB borrowings and FHLB advances. At June 30, 2024, the Bank had no advances from the FRB and maintains a credit facility with the FRB with an available borrowing capacity of $291.9 million, subject to sufficient collateral. At June 30, 2024, the Bank had advances totaling $113.5 million from the FHLB and had an additional borrowing capacity of $164.4 million with the FHLB, subject to sufficient collateral and stock investment. At June 30, 2024, the Bank had sufficient unpledged collateral to allow it to utilize its available borrowing capacity from the FRB and the FHLB. Borrowing capacity may, however, fluctuate based on acceptability and risk rating of loan collateral and counterparties could adjust discount rates applied to such collateral at their discretion.
Previous wording
An additional source of wholesale funding includes brokered certificates of deposit. While the Company has utilized brokered deposits from time to time, historically it has not extensively relied on brokered deposits to fund its operations. At December 31, 2023 and March 31, 2023, the Bank had no wholesale brokered deposits. The Bank also participates in the Certificate of Deposit Account Registry Services (“CDARS”) and Insured Cash Sweep (“ICS”) deposit products, which allow the Company to accept deposits in excess of the FDIC insurance limit for depositors while obtaining “pass-through” insurance for total deposits. The Bank’s CDARS and ICS balances were $45.2 million, or 3.71% of total deposits, and $22.8 million, or 1.8% of total deposits, at December 31, 2023 and March 31, 2023, respectively. The combination of all the Bank’s funding sources gives the Bank available liquidity of $682.1 million, or 42.9% of total assets at December 31, 2023.
Current wording
An additional source of wholesale funding includes brokered certificates of deposit. While the Company has utilized brokered deposits from time to time, historically it has not extensively relied on brokered deposits to fund its operations. At June 30, 2024 and March 31, 2024, the Bank had no wholesale brokered deposits. The Bank also participates in the Certificate of Deposit Account Registry Services (“CDARS”) and Insured Cash Sweep (“ICS”) deposit products, which allow the Company to accept deposits in excess of the FDIC insurance limit for depositors while obtaining “pass-through” insurance for total deposits. The Bank’s CDARS and ICS balances were $39.8 million, or 3.3% of total deposits, and $39.6 million, or 3.2% of total deposits, at June 30, 2024 and March 31, 2024, respectively. The combination of all the Bank’s funding sources gives the Bank available liquidity of $810.3 million, or 52.7% of total assets at June 30, 2024.
Previous wording
At December 31, 2023, the Company had total commitments of $173.2 million, which includes commitments to extend credit of $9.9 million, unused lines of credit totaling $101.2 million, undisbursed real estate construction loans totaling $60.5 million, and standby letters of credit totaling $1.6 million. The Company anticipates that it will have sufficient funds available to meet current loan commitments. Certificates of deposit that are scheduled to mature in less than one year from December 31, 2023 totaled $152.6 million. Historically, the Bank has been able to retain a significant amount of its
Current wording
At June 30, 2024, the Company had total commitments of $131.3 million, which includes commitments to extend credit of $3.1 million, unused lines of credit totaling $80.3 million, undisbursed real estate construction loans totaling $46.3 million, and standby letters of credit totaling $1.6 million. The Company anticipates that it will have sufficient funds available to meet current loan commitments. Certificates of deposit that are scheduled to mature in less than one year from June 30, 2024 totaled $193.5 million. Historically, the Bank has been able to retain a significant amount of its deposits as they mature. Offsetting these cash outflows are scheduled loan and investment securities maturities of less than one year totaling $35.7 million and $28.0 million, respectively, at June 30, 2024.
Previous wording
The Company incurs capital expenditures on an ongoing basis to expand and improve our product offerings, enhance and modernize our technology infrastructure, and to introduce new technology-based products to compete effectively in our markets. We evaluate capital expenditure projects based on a variety of factors, including expected strategic impacts (such as forecasted impact on revenue growth, productivity, expenses, service levels and customer retention) and our expected return on investment. The amount of capital investment is influenced by, among other things, current and projected demand for our services and products, cash flow generated by operating activities, cash required for other purposes and regulatory considerations. Based on our current capital allocation objectives, during the remainder of fiscal 2024 we expect cash expenditures of approximately $15,000 for capital investment in premises and equipment.
Current wording
The Company incurs capital expenditures on an ongoing basis to expand and improve our product offerings, enhance and modernize our technology infrastructure, and to introduce new technology-based products to compete effectively in our markets. We evaluate capital expenditure projects based on a variety of factors, including expected strategic impacts (such as forecasted impact on revenue growth, productivity, expenses, service levels and customer retention) and our expected
Previous wording
Riverview Bancorp, Inc., as a separate legal entity from the Bank, must provide for its own liquidity. Sources of capital and liquidity for Riverview Bancorp, Inc. include distributions from the Bank and the issuance of debt or equity securities. Dividends and other capital distributions from the Bank are subject to regulatory notice. Management currently expects to continue the Company’s current practice of paying quarterly cash dividends on its common stock subject to the Board of Directors’ discretion to modify or terminate this practice at any time and for any reason without prior notice. The current quarterly common stock dividend rate is $0.06 per share, as approved by the Board of Directors, which management believes is a dividend rate per share which enables the Company to balance our multiple objectives of managing and investing in the Bank, and returning a substantial portion of the Company’s cash to its shareholders. Assuming continued payment during fiscal 2024 at this rate of $0.06 per share, average total dividend paid each quarter would be approximately $1.3 million based on the number of the Company’s outstanding shares as of December 31, 2023. At December 31, 2023, Riverview Bancorp, Inc. had $8.8 million in cash to meet its liquidity needs.
Current wording
Riverview Bancorp, Inc., as a separate legal entity from the Bank, must provide for its own liquidity. Sources of capital and liquidity for Riverview Bancorp, Inc. include distributions from the Bank and the issuance of debt or equity securities. Dividends and other capital distributions from the Bank are subject to regulatory notice. Management currently expects to continue the Company’s current practice of paying quarterly cash dividends on its common stock subject to the Board of Directors’ discretion to modify or terminate this practice at any time and for any reason without prior notice. The current quarterly common stock dividend rate is $0.02 per share, as approved by the Board of Directors, which management believes is a dividend rate per share that will enable the Company to balance multiple objectives of managing and investing in the Bank, and returning a substantial portion of the Company’s cash to its shareholders. Assuming continued payment during fiscal 2025 at this rate of $0.02 per share, average total dividend paid each quarter would be approximately $422,000 based on the number of the Company’s outstanding shares as of June 30, 2024. At June 30, 2024, Riverview Bancorp, Inc. had $8.8 million in cash to meet its liquidity needs.
Previous wording
Nonperforming assets, consisting solely of nonaccrual loans, were $186,000 or 0.01% of total assets at December 31, 2023, compared to nonperforming assets, consisting of nonaccrual loans and accruing loans 90 days or more past due, of $1.9 million or 0.12% of total assets at March 31, 2023. At December 31, 2023, there were no SBA and United States Department of Agriculture (“USDA”) government guaranteed loans included in nonperforming assets compared to $1.6 million of such loans at March 31, 2023. Nonperforming government guaranteed loans at March 31, 2023, were not considered to be nonaccrual loans and were still accruing interest because the Company expected to receive all principal and interest since the Company purchased the guaranteed portion of these loans which is backed by government guaranteed interest certificates.
Current wording
Nonperforming assets were $461,000 or 0.03% of total assets at June 30, 2024, compared to $178,000 or 0.01% of total assets at March 31, 2024. At June 30, 2024, SBA and United States Department of Agriculture (“USDA”) government guaranteed loans that were 90 days or more past due and still accruing interest included in nonperforming assets totaled $301,000 compared to $5,000 at March 31, 2024. The Company expects to receive all principal and interest since the Company purchased the guaranteed portion of these loans which is backed by government guaranteed interest certificates.
Previous wording
The ACL for loans was $15.4 million or 1.51% of total loans at December 31, 2023 and $15.3 million or 1.52% of total loans at March 31, 2023. For the nine months ended December 31, 2023 and 2022, the Company did not record a provision for credit losses. The coverage ratio of the ACL for loans to nonperforming loans was 8,259% at December 31, 2023 compared to 827% at March 31, 2023. The Company’s general valuation allowance to non-impaired loans was 1.51% and 1.52% at December 31, 2023 and March 31, 2023, respectively.
Current wording
The ACL for loans was $15.4 million or 1.47% of total loans at June 30, 2024 and $15.4 million or 1.50% of total loans at March 31, 2024. For the three months ended June 30, 2024 and 2023, the Company did not record a provision for credit losses. The coverage ratio of the ACL for loans to nonperforming loans was 3332.75% at June 30, 2024 compared to 8631.46% at March 31, 2024. The Company’s general valuation allowance to pooled or “collectively evaluated” loans was 1.47% at June 30, 2024 and 1.50% at March 31, 2024.
Previous wording
Management considers the ACL for loans and unfunded loan commitments to be adequate at December 31, 2023 based on the assessment of various factors affecting the loan portfolio, and the Company believes it has established its existing ACL in accordance with GAAP. However, a decline in national and local economic conditions (including declines as a result of inflation or recession), results of examinations by the Company’s banking regulators, or other factors could result in a material increase in the ACL for loans and unfunded loan commitments and may adversely affect the Company’s future financial condition and results of operations. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing ACL will be adequate or that substantial increases will not be necessary should the quality of any loans deteriorate or should collateral values decline as a result of the factors discussed elsewhere in this document. For further information regarding the Company’s impaired loans and ACL for loans and unfunded loan commitments, see Note 6 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q.
Current wording
Management considers the ACL for loans and unfunded loan commitments to be adequate at June 30, 2024 based on the assessment of various factors affecting the loan portfolio, and the Company believes it has established its existing ACL in accordance with GAAP. However, a decline in national and local economic conditions (including declines as a result of inflation or recession), results of examinations by the Company’s banking regulators, or other factors could result in a material increase in the ACL for loans and unfunded loan commitments and may adversely affect the Company’s future financial condition and results of operations. In addition, because future events affecting borrowers and collateral cannot
Previous wording
A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in our expected future cash flows; a sustained, significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; adverse action
Current wording
A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in our expected future cash flows; a sustained, significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; adverse action or assessment by a regulator; and unanticipated competition. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on the Company’s consolidated financial statements.
Previous wording
Comparison of Operating Results for the Three and Nine Months Ended December 31, 2023 and 2022
Current wording
Comparison of Operating Results for the Three Months Ended June 30, 2024 and 2023
Previous wording
Net interest income for the three and nine months ended December 31, 2023 was $9.3 million and $29.5 million, representing a decrease of $4.4 million and $10.3 million, respectively, compared to the three and nine months ended December 31, 2022. The decrease during both the three and nine month periods was primarily due to increased interest expense on deposits and borrowings. Net interest margin for the three and nine months ended December 31, 2023 was 2.49% and 2.64%, respectively, compared to 3.48% and 3.30% for the three and nine months ended December 31, 2022, respectively. The decrease in the net interest margin was primarily attributable to the increase in interest expense and the decrease in total average interest earning assets.
Current wording
Net interest income for the three months ended June 30, 2024 decreased $1.5 million to $8.8 million compared to $10.4 million for the same period in the prior year. The decrease was primarily due to increased interest expense on deposits. Net interest margin for the three months ended June 30, 2024 was 2.47% compared to 2.79% for the three months ended June 30, 2023. The decrease in the net interest margin was attributable to the increase in interest expense and the decrease in total average interest earning assets.
Previous wording
Interest and fees earned on net loans increased by $114,000 and $792,000 for the three and nine months ended December 31, 2023, respectively, compared to the same periods in the prior year due to an increase in the yield earned on non-mortgage loans as well as, for the nine months ended December 31, 2023, an increase in the average balance of non-mortgage loans. The average yield on loans increased to 4.56% and 4.53% for the three and nine months ended December 31, 2023, compared to 4.50% and 4.42% for the comparable periods in 2022. The average yield on non-mortgage loans increased 30 basis points to 4.52% for the three months ended December 31, 2023 and 51 basis points to 4.56% for the nine months ended December 31, 2023, while the average yield on mortgage related loans decreased two basis points to 4.57% for the three months ended December 31, 2023 and three basis points to 4.51% for the nine months ended December 31, 2023,compared to the same periods in the prior year. The average balance of net loans remained unchanged at $1.0 billion for both the three and nine months ended December 31, 2023 and 2022, respectively. The average balance of non-mortgage loans decreased by $1.2 million and increased by $7.5 million and the average balance of mortgage loans decreased by $316,000 and $4.2 million for the three and nine months ended December 31, 2023, respectively, compared to the same periods in the prior year.
Current wording
Interest and fees earned on net loans increased by $842,000 for the three months ended June 30, 2024, compared to the same period in the prior year, due to increases in the yield earned on and the average outstanding balance of net loans, specifically mortgage loans. The average yield on loans increased 20 basis points to 4.70% for the three months ended June 30, 2024 compared to 4.50% for the comparable period in 2023. The average yield on mortgage related loans increased 23 basis points to 4.72% and non-mortgage related loans increased 11 basis points to 4.65% for the three months ended June 30, 2024. The average balance of net loans increased $26.7 million to $1.03 billion for the three months ended June 30, 2024 from $1.00 billion for the same period in the prior year, with the average balance of mortgage related loans increasing $21.2 million and the non-mortgage related loans increasing $5.5 million.
Previous wording
Interest earned on investment securities decreased $167,000 for the three months ended December 31, 2023, and increased $422,000 for the nine months ended December 31, 2023, compared to the same periods in the prior year. The decrease in interest income on investment securities for the three months ended December 31, 2023, compared to the same period in the prior year, was the result of a decrease in the average balance of investment securities. The increase in interest income on investment securities for the nine months ended December 31, 2023, compared to the same period in the prior year, primarily was the result of an increase in the yield on investment securities. The average yield on investment securities was 2.01% for both the three months ended December 31, 2023 and 2022. The average yield on investment securities increased to 2.02% for the nine months ended December 31, 2023 compared to 1.89% for the same prior year period. The average balance of investment securities was $458.0 million and $466.7 million for the three and nine months ended December 31, 2023, compared to $491.2 million and $468.8 million for the same periods in the prior year, respectively.
Current wording
Interest earned on investment securities decreased $363,000 for the three months ended June 30, 2024, compared to the same period in the prior year. The decrease was primarily the result of a decrease in the average balance of investment securities of $84.8 million to $391.3 million for the three months ended June 30, 2024, compared to $476.1 million for the same period in the prior year. During the last quarter of fiscal year 2024, the Company restructured a portion of its balance sheet by selling approximately $46.2 million of its lower-yielding available for sale investment securities. The remaining difference is attributable to normal paydown activities. The average yield on investment securities was 2.11% for the three months ended June 30, 2024 compared to 2.05% for the same period in the prior year. The increase in yield is related to the sales of lower-yielding securities as previously discussed.
Previous wording
Interest Expense. Interest expense totaled $4.9 million and $12.7 million for the three and nine months ended December 31, 2023, compared to $743,000 and $1.9 million for the three and nine months ended December 31, 2022, respectively. Interest expense on deposits increased $1.8 million and $4.4 million for the three and nine months ended December 31, 2023, respectively, compared to the same periods in the prior year primarily due to the increase in the average rates paid on certificates of deposit and money market accounts, and to a lesser extent, the average balance of certificates of deposit. The average rate paid on certificates of deposits increased 242 basis points and 215 basis points for the three and nine months ended December 31, 2023, respectively, compared to the same periods for the prior year. The average balance of
Current wording
Interest Expense. Interest expense totaled $5.6 million for the three months ended June 30, 2024, compared to $3.6 million for the three months ended June 30, 2023. Interest expense on deposits increased $2.1 million for the three months ended June 30, 2024 compared to the same period the prior year, primarily due to an increase in the average rates paid on certificates of deposit, interest checking accounts and money market accounts, and to a lesser extent, the average balance of certificates of deposit. The average rate paid on certificates of deposits increased 131 basis points and the average balance increased $62.3 million for the three months ended June 30, 2024, compared to the same period in the prior year. The average rates paid on interest checking accounts and money market accounts increased 105 basis points and 78 basis points, respectively, for the three months ended June 30, 2024, compared to the same period in the prior year. The average balance of total interest-bearing deposits increased $4.8 million to $859.3 million for the three months ended June 30, 2024 compared to $854.5 million for the same period in the prior year, and the average rate increased 96 basis points to 1.61% during that same period.
Previous wording
The following table sets forth the effects of changing rates and volumes on net interest income of the Company for the three and nine months ended December 31, 2023 compared to the three and nine months ended December 31, 2022. Variances that were insignificant have been allocated based upon the percentage relationship of changes in volume and changes in rate to the total net change (in thousands).
Current wording
The following table sets forth the effects of changing rates and volumes on net interest income of the Company for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Variances that were insignificant have been allocated based upon the percentage relationship of changes in volume and changes in rate to the total net change (in thousands).
Previous wording
**Provision for Credit Losses.**There was no provision for credit losses under the current CECL methodology for the three and nine months ended December 31, 2023, and no provision for loan losses under the prior incurred loss method for the three and nine months ended December 31, 2022. The Company adopted the CECL methodology as of April 1, 2023, which resulted in a one-time upward adjustment to the ACL of $42,000, and an after-tax decrease to opening retained earnings of $53,000. All amounts prior to April 1, 2023 were calculated using the previous incurred loss methodology to compute our allowance for loan losses, which is not directly comparable to the new CECL methodology. The lack of provision for credit losses for the three and nine months ended December 31, 2023 also reflects assumptions related to our forecast concerning the economic environment as a result of local, national and global events, including recent bank failures. In addition, expected loss estimates consider various factors, including customer-specific information, changes in risk ratings, projected delinquencies, and the impact of economic conditions on borrowers' ability to repay. Net recoveries totaled $15,000 for the three months ended December 31, 2023, compared to $6,000 for the same period in the prior year. Net recoveries totaled $10,000 for the nine months ended December 31, 2023 compared to $35,000 for the same period in the prior year. Annualized net recoveries were insignificant for both the three and nine months ended December 31, 2023 and 2022.
Current wording
**Provision for Credit Losses.**The Company recorded no provision for credit losses for both the three months ended June 30, 2024 and 2023. The lack of provision for credit losses for the three months ended June 30, 2024 reflects assumptions related to our forecast concerning the economic environment as a result of local, national and global events, including recent bank failures. In addition, expected loss estimates consider various factors, including customer-specific information, changes in risk ratings, projected delinquencies, and the impact of economic conditions on borrowers' ability to repay. For the three months ended June 30, 2024, net charge-offs were insignificant compared to net charge-offs of $8,000 for the three months ended June 30, 2023.
Previous wording
While we believe the estimates and assumptions used in our determination of the adequacy of the allowance for credit losses are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of future provisions will not exceed the amount of past provisions or that any increased provisions that may be required will not have a material adverse impact on our financial condition and results of operations. A further decline in national and local economic conditions, as a result of the effects of inflation, and a potential recession or slowed economic growth, among other factors, could result in a material increase in the allowance for credit losses and have a material adverse impact on our financial condition and results of operations. In addition, the determination of the amount of our allowance for credit losses is subject to review by bank regulators as part of the routine examination process, which may result in the adjustment of reserves based upon their judgment of information available
Current wording
While we believe the estimates and assumptions used in our determination of the adequacy of the allowance for credit losses are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of future provisions will not exceed the amount of past provisions or that any increased provisions that may be required will not have a material adverse impact on our financial condition and results of operations. A further decline in national and local economic conditions, as a result of the effects of inflation, and a potential recession or slowed economic growth, among other factors, could result in a material increase in the allowance for credit losses and have a material adverse impact on our financial condition and results of operations. In addition, the determination of the amount of our allowance for credit losses is subject to review by bank regulators as part of the routine examination process, which may result in the adjustment of reserves based upon their judgment of information available to them at the time of their examination and have a material adverse impact on our financial condition and results of operations.
Previous wording
Nonperforming loans were $186,000 at December 31, 2023, compared to $1.9 million at March 31, 2023. The ratio of the ACL for loans to nonperforming loans was 8,259% at December 31, 2023 compared to 827% at March 31, 2023. See “Asset Quality” above for additional information related to asset quality that management considers in determining the appropriate level of the ACL.
Current wording
The ratio of the ACL for loans to nonperforming loans was 3332.75% at June 30, 2024 compared to 8631.46% at March 31, 2024. See “Asset Quality” above for additional information related to asset quality that management considers in determining the appropriate level of the ACL.
Previous wording
Income Taxes. The provision for income taxes was $377,000 and $1.9 million for the three and nine months ended December 31, 2023, compared to $1.6 million and $4.5 million for the same periods in the prior year, respectively. The decrease in the provision for income taxes was due to lower pre-tax income for the three and nine months ended December 31, 2023, compared to the same periods in the prior year. The Company’s effective tax rate for the three and nine months ended December 31, 2023, was 20.6% and 21.9%, compared to 23.1% and 23.0% for the three and nine months ended December 31, 2022, respectively. The lower effective tax rate for the three and nine months ended December 31, 2023 is due to lower pretax income. At December 31, 2023, management deemed that a valuation allowance related to the Company’s deferred tax asset was not necessary. At December 31, 2023, the Company had a net deferred tax asset of $10.0 million compared to $10.3 million at March 31, 2023.
Current wording
Income Taxes. The provision for income taxes was $253,000 for the three months ended June 30, 2024, compared to $823,000 for the same period in the prior year. The decrease in the provision for income taxes was due to lower pre-tax income for the three months ended June 30, 2024, compared to the same period in the prior year. The Company’s effective tax rate for the three months ended June 30, 2024, was 20.8%, compared to 22.4% for the three months ended June 30, 2023. The lower effective tax rate for the three months ended June 30, 2024 is due to lower pretax income. At June 30, 2024, management deemed that a valuation allowance related to the Company’s deferred tax asset was not necessary. At June 30, 2024, the Company had a net deferred tax asset of $9.9 million compared to $9.8 million at March 31, 2024.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
increase its fee income. Assets under management by the Trust Company totaled $897.9 million and $961.8 million at June 30, 2024 and March 31, 2024, respectively.
Current report — wording carried from elsewhere
return on investment. The amount of capital investment is influenced by, among other things, current and projected demand for our services and products, cash flow generated by operating activities, cash required for other purposes and regulatory considerations. Based on our current capital allocation objectives, during the remainder of fiscal 2025 we expect cash expenditures of approximately $435,000 for capital investment in premises and equipment.
Current report — wording carried from elsewhere
be predicted with certainty, there can be no assurance that the existing ACL will be adequate or that substantial increases will not be necessary should the quality of any loans deteriorate or should collateral values decline as a result of the factors discussed elsewhere in this document. For further information regarding the Company’s individually evaluated loans and ACL for loans and unfunded loan commitments, see Note 6 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
deposits as they mature. Offsetting these cash outflows are scheduled loan and investment securities maturities of less than one year totaling $31.8 million and $25.1 million, respectively, at December 31, 2023.
Previous report — wording carried elsewhere
or assessment by a regulator; and unanticipated competition. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on the Company’s consolidated financial statements.
Previous report — wording carried elsewhere
to them at the time of their examination and have a material adverse impact on our financial condition and results of operations.