River Valley Bancorp. has a market cap of $22.65 million; its shares were traded at around $15 with a P/E ratio of 8.29 and P/S ratio of 0.97. The dividend yield of River Valley Bancorp. stocks is 5.6%. River Valley Bancorp. had an annual average earning growth of 8.4% over the past 10 years.
Highlight of Business Operations:Interest-bearing demand deposits held by the Corporation increased by $6.4 million to $15.9 million at June 30, 2010. This compared to $9.5 million at December 31, 2009. During the period, $15.0 million in Federal Home Loan Bank advances were repaid, $1.0 million of Bank-owned life insurance was purchased, and a branch in New Albany, Indiana was purchased. The branch acquisition included $1.2 million in demand and maturity deposits; building and fixtures valued at $502,000; and goodwill and core deposit intangibles of $48,000 and $28,000 respectively. Net cash received in this transaction totaled $582,000.
Borrowings totaled $71.2 million at June 30, 2010 versus $86.2 million at December 31, 2009, a drop of $15.0 million, or 17.4%, period to period, as the Corporation used portions of excess liquidity to pay down advances. Of total borrowings, $64.0 million and $79.0 million, respectively, represented Federal Home Loan Bank (FHLB) advances with average rates of 4.65% and 4.56% at the respective dates. These balances and average rates on advances from the FHLB compare to $84.0 million and 4.58% at June 30, 2009. The increase in the average rate in 2010 resulted from the repayment of lower cost advances over the period, leaving some of the longer term, higher rate advances outstanding. The drop in average balances, June 2009 to June 2010, resulted in a $430,000, or 19.7%, decrease in the cost of borrowing period to period. Borrowing costs of $1.8 million for the six months ended June 30, 2010 compared to $2.2 million for the same period in 2009. The Corporation primarily utilizes bullet advances from the Federal Home Loan Bank, although similar borrowing can be achieved through the Federal Reserve Bank of St. Louis. Bullet advances have steep penalties for prepayment and therefore the Corporation only repays these borrowings at maturity.
Stockholders equity totaled $32.0 million at June 30, 2010, an increase of $1.3 million, or 4.3%, from the $30.7 million at December 31, 2009. The increase was primarily due to the change in the unrealized gains on available-for-sale investments, at a gain position of $1.1 million at June 30, 2010, as compared to $453,000 at December 31, 2009, and year-to-date net income of $1.4 million. The Corporation paid dividends totaling $814,000 to preferred and common shareholders during the period, with dividends to common shareholders of $.42 per share.
The Corporation s net income for the six months ended June 30, 2010 totaled $1.4 million, an increase of $1.2 million from the $181,000 reported for the period ended June 30, 2009. The increase was primarily attributable to a $1.9 million decline in provision expense for the six months ended June 30, 2010, compared to the same period in 2009, and to a significant decrease in the cost of funds, period to period, as deposit and borrowing cost of funds dropped from 2.57% at June 30, 2009 to 2.05% at June 30, 2010. This drop translated to an $808,000, or 17.1%, decrease in interest expense period to period. This compared to a slight decrease in income from interest-earning assets of $96,000, or 1.0%, for the same period, with the yield on loans changing only negligibly from 6.00% at June 30, 2009 to 6.04% a year later, and average balances for the loan portfolio declining. Yields on investments dropped from 4.05% at June 30, 2009 to 3.62% at June 30, 2010. However, income from investments increased from June 30, 2009 to June 30, 2010 on a more than $8.0 million increase in investments held. That increase was comprised roughly of a $3.4 million increase in municipal securities plus a $5.2 million increase in residential mortgage-backed collateralized mortgage obligation securities. Corporate investments dropped by $2.1 million over the same period and federal agency investments grew by a slight $1.5 million. Gain on loan sales to the secondary market, a significant contributor to net income in 2009, decreased dramatically in the first six months of 2010, with income for the six-month period ended June 30, 2010 at $162,000 as compared to $771,000 for the same period in 2009, a decrease of $609,000.
Total interest expense for the same period decreased by $808,000, or 17.1%, from the $4.7 million reported at June 30, 2009 to $3.9 million at June 30, 2010. For the six months ended June 30, 2010 interest expense from deposits totaled $2.2 million while interest expense from borrowings totaled $1.8 million, as compared to $2.5 million and $2.2 million for the same period in 2009. Of the overall decrease in interest expense, $378,000 was attributable to interest expense on deposits, primarily fixed-maturity deposits, as certificates matured and re-priced at the lower rates in effect since the Federal Reserve cuts in 2008, and the spread between interest-earning assets and interest-bearing liabilities widened. Over the same period, the Corporation experienced a decrease of $430,000, or 19.7%, on interest expense for borrowings as advances were repaid. The average rate paid on those borrowings increased from 4.58% at June 30, 2009 to 4.65% at June 30, 2010 as the Corporation repaid $15.0 million in lower rate advances, leaving higher rate advances outstanding. Total advances outstanding as of June 30, 2010 were $64.0 million as compared to $84.0 million at the same point in 2009.
Other income decreased by $643,000 during the six months ended June 30, 2010 to $1.7 million, as compared to the $2.3 million reported for the same period in 2009. The decrease was due primarily to the decrease in loan sales into the secondary market, period to period. Gains on sales to the FHLMC (Freddie Mac) for the six months ending June 30, 2010 totaled $162,000, a decrease of $609,000 from the $771,000 recorded for the same period ended June 30, 2009. Service fees and charges, which includes income from overdrawn deposit accounts (NSF fees), decreased $142,000 as customers appeared to be more frugal in their spending habits. Offsetting that decrease were losses on foreclosed real estate owned, which were less for the six-month period ended June 30, 2010, at $9,000, as compared to net losses of $46,000 at the same point in 2009. Gains on the sale of available-for-sale securities for the six months ended June 30, 2010 were $131,000, as compared to $97,000 for the same period in 2009, as the Corporation took advantage of gain positions on investments with pending call options. Unlike interest income, “Other Income” is not always readily predictable and is subject to variations depending on outside influences.
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