Riverview Bancorp Inc has a market cap of $68.3 million; its shares were traded at around $3.18 with and P/S ratio of 1.3.
Highlight of Business Operations:In January 2009, the Bank entered into a Memorandum of Understanding (“MOU”) with the OTS. Under that agreement, the Bank must, among other things, develop a plan for achieving and maintaining a minimum tier 1 capital (leverage) ratio of 8% and a minimum total risk-based capital ratio of 12%, compared to its current minimum required regulatory tier 1 capital (leverage) ratio of 4% and total risk-based capital ratio of 8%. As of December 31, 2010, the Bank s leverage ratio was 11.38% (3.38% over the required minimum) and its total risk-based capital ratio was 14.39% (2.39% over the required minimum). The MOU also requires the Bank to: (a) remain in compliance with the minimum capital ratios contained in the business plan; (b) provide notice to and obtain a non-objection from the OTS prior to the Bank declaring a dividend; (c) maintain an adequate allowance for loan and lease losses; (d) engage an independent consultant to conduct a comprehensive evaluation of the Bank s asset quality; (e) submit a quarterly update to its written comprehensive plan to reduce classified assets, that is acceptable to the OTS; and (f) obtain written approval of the Loan Committee and the Board prior to the extension of credit to any borrower with a classified loan. For additional information relating to the Bank s regulatory capital requirements, see "Shareholders' Equity and Capital Resources" set forth below.
As a progressive, community-oriented financial institution, the Company emphasizes local, personal service to residents of its primary market area. The Company considers Clark, Cowlitz, Klickitat and Skamania counties of Washington and Multnomah, Clackamas 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, commercial real estate, multi-family real estate, real estate construction, residential real estate and other consumer loans. Commercial, commercial real estate and real estate construction loans have decreased to 84.5% of the loan portfolio at December 31, 2010 from 87.6% at March 31, 2010 and 87.7% from a year ago, decreasing the risk profile of the total loan portfolio. The Company s strategy over the past several years has been to control balance sheet growth in order to improve its regulatory capital ratios, including the targeted reduction of residential construction related loans. Speculative construction loans represent $19.2 million, or 87.1% of the residential construction portfolio at December 31,
2010, a decrease of 21.5% from September 30, 2010 and 38.6% from a year ago. Land acquisition and development loans totaled $56.0 million at December 31, 2010, a decrease of 10.5% from September 30, 2010 and 27.1% from December 31, 2009. Most recently, the Company has shifted its focus to growing certain segments within its loan portfolio. The primary focus has been on increasing commercial business loans, owner occupied commercial real estate loans and certain one-to-four family mortgage loans.
Weak economic conditions and ongoing strains in the financial and housing markets, which accelerated throughout 2008 and generally continued into 2010, presented an unusually challenging environment for banks. This has resulted in an increase in loan delinquencies and foreclosure rates, primarily in our residential construction and land development loan portfolios as compared to prior periods. Foreclosures and delinquencies are also the result of investor speculation in many states, including Washington and Oregon, while job losses and depressed economic conditions have resulted in the higher levels of delinquent loans. The economic downturn, and more specifically the slowdown in residential real estate sales, has resulted in further uncertainty in the financial markets. This has been particularly evident in the Company s need to provide for credit losses during these periods at significantly higher levels than its historical experience and has also affected its net interest income and other operating revenue and expenses. During the quarter ended December 31, 2010, unemployment in the Company s market area remained variable with Clark County s unemployment decreasing and unemployment in Portland, Oregon increasing. According to the Washington State Employment Security Department, unemployment in Clark County increased to 13.1% at December 31, 2010 compared to 12.0% at September 30, 2010, however, decreased compared to 14.6% in March 2010 and 13.7% at December 2009. According to the Oregon Employment Department, unemployment in Portland decreased during the quarter ended December 31, 2010 to 9.8% compared to 10.1% in September 30, 2010, 10.0% in March 2010 and 10.4% in December 2009. Home values at December 31, 2010 in the Company s market area remained lower than home values in 2009 and 2008, due in large part to an increase in volume of foreclosures and short sales. However, home values have begun to stabilize after decreasing sharply during the past several fiscal years. According to the Regional Multiple Listing Services (RMLS), inventory levels in Portland, Oregon have decreased to 7.9 months at December 2010 compared to 10.5 months at September 2010 and remained relatively unchanged compared to 7.7 months at December 2009. Inventory levels in Clark County have decreased to 9.1 months at December 2010 compared to 10.4 months at September 2010 and increased compared to 7.6 months at December 2009.
According to RMLS, closed home sales in Clark County decreased 3.3% and 17.8% in December 2010 compared to September 2010 and December 2009, respectively. Closed home sales in Portland increased 4.5% and decreased 2.9% in December 2010 compared to September 2010 and December 2009, respectively. Commercial real estate leasing activity in the Portland/Vancouver area has performed better than the residential real estate market, but it is generally affected by a slow economy later than other indicators. According to Norris Beggs Simpson, commercial vacancy rates in Clark County and Portland, Oregon were approximately 18.7% and 23.9%, respectively as of December 31, 2010. During the past several fiscal years, the Company has experienced a decline in the values of real estate collateral underlying its loans, including certain of its construction real estate and land acquisition and development loans, has experienced increased loan delinquencies and defaults, and believes there are indications that these increased loan delinquencies and defaults may remain elevated for the foreseeable future.
Deposit accounts increased $8.7 million to $696.7 million at December 31, 2010, compared to $688.0 million at March 31, 2010. The Company had no wholesale-brokered deposits as of December 31, 2010 or March 31, 2010. Core branch deposits (comprised of all demand, savings and interest checking accounts, plus all time deposits and excludes wholesale-brokered deposits, trust account deposits, Interest on Lawyer Trust Accounts (“IOLTA”), public funds and Internet based deposits) accounted for 92.3% of total deposits at December 31, 2010, compared to 94.8% at March 31, 2010. The decline in core deposits as a percentage of total deposits was primarily due to the increase in trust account deposits and an increase in internet based deposits. Despite this decrease, the Company remains focused on growing its core deposits and on building customer relationships as opposed to obtaining deposits through the wholesale markets.
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