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River Valley Bancorp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 16, 2011 08:20PM
River Valley Bancorp. (RIVR) filed Quarterly Report for the period ended 2011-03-31. River Valley Bancorp. has a market cap of $25.74 million; its shares were traded at around $17 with a P/E ratio of 12.69 and P/S ratio of 1.14. The dividend yield of River Valley Bancorp. stocks is 4.94%. River Valley Bancorp. had an annual average earning growth of 3.3% over the past 10 years.
Highlight of Business Operations:
At March 31, 2011, the Corporation s consolidated assets totaled $387.0 million, a slight increase of $425,000, or 0.1%, from December 31, 2010. The change in assets was driven by a $4.8 million decrease in loan receivables as the difficult lending environment continued to affect loan production and $2.3 million of real estate collateral for non-performing loans was foreclosed upon and transferred to real estate held for sale. Countering the decrease in the loan portfolio was growth in investments available for sale, with investments held by the Corporation increasing $5.1 million, period to period, an overall increase of 6.8% from $75.2 million at December 31, 2010 to $80.3 million as of March 31, 2011. Over the same period, the Corporation repaid $3.0 million in borrowings with the Federal Home Loan Bank of Indianapolis (FHLB) and restructured an additional $10.0 million to lock in lower borrowing rates. Those rates decreased 20 basis points across the period, from 3.84% as of December 31, 2010 to 3.64% as of March 31, 2011. Total deposits increased $2.3 million from December 31, 2010 to March 31, 2011, with the majority of the increase in noninterest bearing deposits. Changes in other assets and other liabilities over the period were comprised of changes in prepaid asset balances and non-earning liabilities such as clearing accounts for official checks.
Borrowing totaled $62.2 million at March 31, 2011 versus $65.2 million at December 31, 2010, a drop of $3.0 million, or 4.6%, period to period, as the Corporation used portions of excess liquidity to pay down advances. Of total borrowings, $55.0 million and $58.0 million, respectively, represented Federal Home Loan Bank (FHLB) advances with average rates of 3.64% and 3.84% at the respective dates. These balances and average rates on advances from the FHLB represent a reduction from the same at March 31, 2010 which were $71.0 million and 4.60%. The drop in average balances and rates, March 2010 to March 2011, resulted in a $319,000, or 35.2%, decrease in the cost of borrowing period to period. Borrowing costs of $587,000 for the three months ended March 31, 2011 compared to $906,000 for the same period in 2010. A significant contributor to the decrease in the cost of borrowing, period to period, was the restructuring of $29.0 million in advances over the last 12 months, with the Corporation taking advantage of lower borrowing costs and locking in those low costs against future rate volatility.
Stockholders equity totaled $32.3 million at March 31, 2011, an increase of $813,000, or 2.6%, from the $31.5 million at December 31, 2010. The increase was primarily due to the change in the unrealized earnings on available-for-sale investments, at a gain position of $877,000 at March 31, 2011, as compared to $443,000 at December 31, 2010, and first quarter earnings of $802,000. During the three months ending March 31, 2011, $16,000 was used to purchase 1,000 shares of Corporation stock, in satisfaction of a 2010 award under one of the corporate employee benefit plans, and the Corporation paid dividends totaling $409,000 to preferred and common shareholders during the period. Dividends to common shareholders for the three-month period were $.21 per share.
The Corporation s net income for the three months ended March 31, 2011 totaled $802,000, an increase of $83,000, or 11.5%, from the net income of $719,000 reported for the period ended March 31, 2010. The increase in income for the 2011 period was primarily attributable to a significant decrease in the cost of funds, period to period, as deposit and borrowing costs of funds dropped from 2.13% at March 31, 2010 to 1.63% at March 31, 2011. This drop translated to a $511,000, or 25.7%, decrease in interest expense period to period. This compared to a slight decrease in income from interest-earning assets of $143,000, or 3.1%, for the same period, with the yield on loans changing only negligibly, from 6.04% at March 31, 2010 to 5.93% a year later, and average balances for the loan portfolio declining. Yields on investments dropped, from 3.62% at March 31, 2010 to 3.43% at March 31, 2011, causing only a slight decrease in interest income, $51,000 period to period, as average balances increased slightly. Gain on loan sales to the secondary market, a significant contributor to net income in 2009 and 2010, was $160,000 for the three-month period ended March 31, 2011 as compared to $87,000 for the same three-month period in 2010. Sales into the secondary market, primarily to the Federal Home Loan Mortgage Corporation (Freddie Mac), which were strong throughout 2010, were $4.5 million for the first three months of 2011, a slight improvement over the $3.4 million in sales during the same period in 2010. This source of income is not expected to continue through 2011as sales into the secondary markets are predicted to decline significantly in response to tightened lending criteria and lack of consumer ability and enthusiasm for refinancing of primary residences.
Total interest expense for the same period decreased significantly by $511,000, or 25.7%, from the $2.0 million reported at March 31, 2010 to $1.5 million at March 31, 2010. For the three months ended March 31, 2011, interest expense from deposits totaled $888,000 while interest expense from borrowings totaled $587,000, as compared to $1.1 million and $906,000 for the same period in 2010. Of the overall decrease in interest expense, $192,000 was attributable to interest expense on deposits, primarily fixed-maturity deposits, as repricing of these deposits was done at constantly lowering rates. Over the same period, the Corporation experienced a decrease of $319,000 on interest expense for borrowings as advances were repaid and the average balance of funds borrowed from the FHLB dropped. The average rate paid on those borrowings dropped from 4.60% at March 31, 2010 to 3.64% at March 31, 2011 as $16.0 million in advances were repaid over the period and $29.0 million in advances were restructured to take advantage of lower rates currently and into the future. Borrowing at the FHLB as of March 31, 2011 totaled $55.0 million with an additional $47.0 million available by authorization of the board of directors of the Corporation.
Other income increased by $137,000, or 17.6%, during the three months ended March 31, 2011 to $915,000, as compared to the $778,000 reported for the same period in 2010. The increase was due primarily to the increase in loan sales into the secondary market, period to period. Gains on sales to the FHLMC (Freddie Mac) for the three months ending March 31, 2011 totaled $160,000, an increase of $73,000 over the $87,000 recorded for the same period ended March 31, 2010. The other major contributor to the increase, period to period, was in the gains on the sale of available-for-sale investments, $126,000 for the three-month period ended March 31, 2011 as compared to $34,000 for the same period in 2010, as the Corporation took advantage of gain positions on investments. Period to period, service fees and charges, which includes income from overdrawn deposit accounts (NSF fees), decreased slightly as customers appeared to be more frugal in their spending habits. Losses on foreclosed real estate owned, $16,000 for the three-month period ended March 31, 2010, increased moderately to $49,000 for the same three-month period in 2011. Unlike interest income, “Other Income” is not always readily predictable and is subject to variations depending on outside influences.
Stocks Discussed: RIVR,