River Valley Bancorp. has a market cap of $22.17 million; its shares were traded at around $14.68 with a P/E ratio of 10.19 and P/S ratio of 0.95. The dividend yield of River Valley Bancorp. stocks is 5.72%. River Valley Bancorp. had an annual average earning growth of 8.4% over the past 10 years.
Highlight of Business Operations:Other changes in the asset mix of the Corporation occurred with varying impact on the financial statements. Reflective of the economic environment, real estate held for sale increased by $317,000, from $253,000 as of December 31, 2009 to $570,000 as of September 30, 2010. Other assets, primarily comprised of prepaid assets and mortgage servicing rights declined by $607,000 primarily due to declines in prepaid assets. The decrease in prepaid assets was due primarily to a reduction period to period, in prepaid FDIC assessment, $325,000 expensed, and prepaid insurance and retirement assets of $308,000. Interest receivable decreased 7.1% over the nine-month period from $2.2 million as of December 31, 2009 to $2.1 million as of September 30, 2010, as yields and average balances both dropped. Loans held for sale to the Federal Home Loan Mortgage Corporation (FHLMC) increased from $175,000 at December 31, 2009 to $638,000 at September 30, 2010 due to the increase in refinancing activity.
Borrowings totaled $65.2 million at September 30, 2010 versus $86.2 million at December 31, 2009, a drop of $21.0 million, or 24.4%, period to period, as the Corporation used portions of excess liquidity to pay down advances. Of total borrowings, $58.0 million and $79.0 million, respectively, represented Federal Home Loan Bank (FHLB) advances with average rates of 3.84% and 4.56% at the respective dates. These balances and average rates on advances from the FHLB compare to $80.0 million and 4.55% at September 30, 2009. In August, the Corporation took advantage of a program with the FHLB, restructuring a portion of existing advances to lower rates, with similar terms. Advances of $19.0 million, averaging a cost of 5.38%, were restructured to an average cost of 3.28% and an average term of 4.5 years. The restructuring will result in savings of approximately $33,000 per month. Borrowing costs of $2.5 million for the nine months ended September 30, 2010 compared to $3.2 million for the same period in 2009, reflecting lower average balances on borrowings and the savings from restructuring. The Corporation primarily utilizes bullet advances from the Federal Home Loan Bank. Bullet advances have steep penalties for prepayment and therefore the Corporation typically only repays these borrowings at maturity.
Stockholders equity totaled $32.5 million at September 30, 2010, an increase of $1.7 million, or 5.7%, 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 $1.6 million at September 30, 2010, as compared to $453,000 at December 31, 2009, and year-to-date net income of $1.7 million. The Corporation paid dividends totaling $1.2 million to preferred and common shareholders during the period, with dividends to common shareholders of $.63 per share.
The Corporation s net income for the nine months ended September 30, 2010 totaled $1.7 million, an increase of $796,000 from the $930,000 reported for the period ended September 30, 2009. The increase was fueled by significant decreases in the cost of funds, period to period, as deposit and borrowing cost of funds dropped from 2.47% at September 30, 2009 to 1.80% at September 30, 2010. This drop translated to a $1.3 million, or 18.7%, decrease in interest expense period to period. This compared to a slight decrease in income from interest-earning assets of $195,000, or 1.4%, for the same period, with the yield on loans changing only negligibly from 5.96% at September 30, 2009 to 6.00% a year later, and average balances for the loan portfolio declining. Yields on investments dropped from 4.01% at September 30, 2009 to 3.49% at September 30, 2010. However, income from investments increased from September 30, 2009 to September 30, 2010 on a more than $5.8 million increase in investments held. That increase was comprised roughly of a $3.1 million increase in municipal securities plus an $8.8 million increase in residential mortgage-backed collateralized mortgage obligation securities. Corporate investments dropped by $3.0 million over the same period as did federal agency investments by $2.3 million. Also contributing significantly to the increase, provision expense declined $658,000 from the nine months ended September 30, 2009 to the same point in 2010. Gain on loan sales to the secondary market, a significant contributor to net income in 2009, decreased dramatically in the first nine months of 2010, with income for the nine-month period ended September 30, 2010 at $385,000 as compared to $927,000 for the same period in 2009, a decrease of $542,000.
Total interest expense for the same period decreased by $1.3 million, or 18.7%, from the $7.0 million reported at September 30, 2009 to $5.7 million at September 30, 2010. For the nine months ended September 30, 2010 interest expense from deposits totaled $3.2 million while interest expense from borrowings totaled $2.5 million, as compared to $3.8 million and $3.2 million for the same period in 2009. Of the overall decrease in interest expense, $619,000 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 $698,000, or 21.7%, on interest expense for borrowings as advances were repaid. The average rate paid on those borrowings decreased from 4.55% at September 30, 2009 to 3.84% at September 30, 2010. The decrease in the average cost of borrowings was primarily due to the restructuring of FHLB advances to take advantage of lower rates, and to the repayment of $22.0 million in advances during the period of September 30, 2009 to September 30 2010. Total advances outstanding as of September 30, 2010 were $58.0 million as compared to $80.0 million at the same point in 2009.
A provision for losses on loans is charged to income to bring the total allowance for loan losses to a level considered appropriate by management based upon historical experience, the volume and type of lending conducted by the Corporation, the status of past due principal and interest, general economic conditions, particularly as such conditions relate to the Corporation s market area, and other factors related to the collectibility of the Corporation s loan portfolio. As a result of such analysis, management recorded a $1.9 million provision for losses on loans for the nine months ended September 30, 2010, as compared to $2.6 million for the same period in 2009. The 2009 provision, atypical to previous expenses, was the result of specific reserves established primarily for two large loan relationships. Subsequently, at December 31, 2009, these specific reserves were recorded as partial write downs of the principal balances. The 2010 provision expense was impacted by the devaluation of collateral on a single loan, valued at $1.4 million in February of 2009 and subsequently valued at $695,000 as of September, 2010. A reserve for this loan was established at September 30, 2010, with total specific reserves recorded for three relationships of $780,000. Specific reserves established as of September 30, 2009 were $3.0 million. The majority of these specific reserves were established in the second quarter of 2009 and subsequently charged off in the fourth quarter of 2009. Net charge-offs for the nine months ended September 30, 2010 were $1.0 million as compared to $163,000 for the same nine months in 2009. Outside of those specific reserves in 2009, the decrease in the provision expense year-to-year has been predicated primarily on declining levels of loan activity and shrinkage in the loan portfolio, estimated losses on non-performing loans, of which the majority have already been reduced by partial charge-offs or short sales of the underlying collateral, and some consistency in delinquencies, particularly those more than 90 days past due.
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