Riverview Financial Corporation Reports First Quarter Financial Results For 2021

HARRISBURG, Pa., April 21, 2021 /PRNewswire/ -- Riverview Financial Corporation (the "Company" or "Riverview") (NASDAQ: RIVE), the holding company for Riverview Bank (the "Bank"), today reported unaudited financial results at and for the three months ended March 31, 2021. Riverview reported net income of $3.1 million, or $0.33 per basic and diluted weighted average common share, for the first quarter of 2021, compared to net income of $633 thousand, or $0.07 per basic and diluted weighted average common share, for the first quarter of 2020. 

The increase in the Company's earnings for the three months ended March 31, 2021 as compared to the same period in 2020 was the result of the impact of ongoing efficiency initiatives, including branch office consolidations, an increase in loan income from the recognition of interest and fees earned on Paycheck Protection Program ("PPP") Loans and lower deposit costs. The Company implemented cost reduction strategies beginning in 2019, and those efforts continued through the end of the fourth quarter of 2020 by implementing additional efficiency initiatives aimed at substantially lowering operating costs. The COVID-19 pandemic continues to place additional pressure on Bank earnings, causing increased emphasis on the need to improve operational efficiency to help mitigate margin compression and noninterest income reductions. As a result, Riverview closed two branch offices in January 2021 and will be completing the sale of two additional branches in May of 2021. 

In addition to evaluating its results of operations in accordance with accounting principles generally accepted in the United States of America ("GAAP"), Riverview routinely supplements its evaluation with an analysis of certain non-GAAP financial measures, such as tangible book value per share and return on average tangible stockholders' equity. Riverview believes these non-GAAP financial measures provide information useful to investors in understanding its operating performance and trends. Where non-GAAP disclosures are used in this press release, a reconciliation to the comparable GAAP measures is provided in the accompanying tables. The non-GAAP financial measures Riverview uses may differ from the non-GAAP financial measures other financial institutions use to measure their results of operations.

HIGHLIGHTS

• Return on average stockholders' equity and return on average total assets were 12.55% and 0.91% for the first quarter 2021. Return on average tangible stockholders' equity  was 12.78% for the first quarter 2021.
• Tangible book value increased $0.49 per share to $10.36 per share at March 31, 2021 from $9.87 per share at March 31, 2020.
• Tax-equivalent net interest income improved 9.6% to $9.7 million for the quarter ended March 31, 2021, compared to $8.8 million for the comparable quarter of 2020.
• Total interest-bearing deposit costs declined 47 basis points to 0.43% for the first quarter 2021 compared to 0.90% for the same quarter 2020.
• Noninterest bearing deposits increased 32.8% to $197.4 million at March 31, 2021 from $148.6 million at March 31, 2020, demonstrating success in our strategy to place greater emphasis on growth in lower cost of funds deposit accounts.
• Operating efficiency ratio improved to 68.94% in the first quarter of 2021 compared to 82.49% in the comparable quarter of 2020. 
• Realized a 9.1% year over year reduction in total noninterest expense. For the three months ended March 31, noninterest expense decreased to $8.4 million in 2021 compared to $9.2 million in 2020.
• Total loans 30 or more days past due plus nonaccrual loan balances total $4.3 million, or 0.39% of total loans outstanding, the lowest quarter end dollar level since December 2016. 
• For the three months ended March 31, net charge-offs to average loans, net were 0.02% in 2021 and 0.49% in 2020.
• The allowance for loan losses totaled $12.1 million, or 1.11% of loans, net at March 31, 2021 compared to $8.3 million or 0.93% of loans, net at March 31, 2020. Excluding 100% SBA guaranteed PPP loan balances, the allowance for loan losses represented 1.38% of loans, net at March 31, 2021.
• Nonperforming assets totaled $13.2 million or 1.20% of loans, net and foreclosed assets at March 31, 2021. Excluding performing troubled debt restructured loans, nonperforming assets represented 0.29% of loans, net and foreclosed assets at the end of the first quarter 2021.
• The coverage ratio, the allowance for loan losses as a percentage of nonperforming assets, was 92.3% at March 31, 2021. Excluding accruing restructured loans, the coverage ratio was 378.0% at March 31, 2021.
• Continued reduction in COVID-19 pandemic related loan deferments during the first quarter of 2021. As of March 31, 2021, loans in deferment consists of 15 loans totaling $18.6 million, representing 1.7% of total outstanding loan balances, or 2.1% excluding outstanding PPP loan balances.  Total current principal and interest deferred for these 15 loans totaled $1.3 million. As of December 31, 2020, loans in deferment consists of 19 loans totaling $21.9 million, representing 1.92% of total outstanding loan balances, or 2.46% excluding outstanding PPP loan balances.
• Funded $19.3 million of loans through the second round of the CARES Act Paycheck Protection Program in the first quarter 2021. Aggregate remaining accrued and unearned Small Business Administration PPP origination fees total $5.0 million at March 31, 2021. 
• Tangible stockholders' equity to tangible assets, excluding PPP loans, was 8.36% at March 31, 2021.

Brett D. Fulk, President and CEO, commented, "It is truly a pleasure to report first quarter 2021 earnings of $0.33 per share, an increase of 94% when compared to the previous quarter's $0.17 per share.  First quarter 2021 earnings also compare quite favorably to the $0.07 per share reported for the same period last year.  This significant improvement in earnings is the direct result of previously disclosed efficiency initiatives that began in 2019, significant PPP loan generation during 2020, and ongoing expense and pricing discipline.  Additionally, despite the challenges to the economy created by the COVID-19 virus, I am pleased to also report strong credit quality metrics for the first quarter.  At the end of the first quarter 2021 we reported the lowest level of nonaccrual and past due loan balances since the fourth quarter of 2016. It is particularly gratifying to report solid credit quality when it is due in no small measure to intentional strategic decisions implemented proactively to reduce the credit risk profile of our balance sheet in the two years prior to the COVID-19 outbreak.  The invaluable hard work and dedication of our outstanding employees, coupled with focused strategic initiatives developed and deployed to increase core earnings on a consistent basis, is the reason we have achieved these results.  The effectiveness of our efforts is evidenced by first quarter 2021 return on average assets and return on average tangible stockholder equity results of 0.91% and 12.78% respectively."  Fulk continued, "While we are not yet through the current margin compression cycle or beyond potential negative impact to credits within our portfolio resulting from the ongoing pandemic environment, continued results such as these will ultimately allow us to revisit our current dividend policy, as well as establishing a core earnings platform necessary to provide enhanced long-term shareholder returns."

Fulk concluded "Organic loan growth remained muted and outstanding loan balances declined during the first quarter of 2021 as receipt of PPP loan forgiveness applications accelerated and related loan balances were repaid by the SBA.  However, we are beginning to experience increased loan application activity as local economies and businesses begin to reopen and recently hired commercial relationship managers introduce opportunities for us with customers that have become disenfranchised with their current banks. These customers are those that place a high value upon responsiveness, local representation and personal relationships, all areas in which we excel.  I anticipate organic loan growth to accelerate throughout the remainder of 2021 as the economy continues to reopen and we leverage our past expansion into new growth markets, expand upon new relationships created by processing PPP loans for non-bank customers in both rounds of PPP lending, and hire additional experienced and established asset generation team members throughout our markets."     

INCOME STATEMENT REVIEW

Tax-equivalent net interest income for the three months ended March 31, increased to $9.7 million in 2021 from $8.8 million in 2020. The increase in tax-equivalent net interest income was primarily attributable to the recognition of interest and fees earned on PPP loans and lower deposit costs. The tax-equivalent net interest margin for the three months ended March 31, 2021, decreased to 3.04% from 3.60% for the comparable period of 2020. The tax-equivalent net interest margin, excluding income and fees earned on PPP loans, was 3.19% in the first quarter of 2021. The tax-equivalent yield on the loan portfolio decreased to 3.82% in the first quarter of 2021 compared to 4.64% in first quarter of 2020. The actions taken by the Federal Open Market Committee in March 2020 to reduce its target federal funds rate by 150 basis points impacted the loan portfolio yield as it had a corresponding adverse effect on our floating and adjustable rate loans along with lower yields on new originations compared to those on payments and prepayment on existing loans. Investments yielded 2.09% on a tax-equivalent basis in the first quarter of 2021 compared to 2.85% for the same period last year. For the three months ended March 31, the cost of deposits decreased 47 basis points to 0.43% in 2021 from 0.90% in 2020. Loans, net averaged $1.1 billion in the first quarter of 2021 and $874.4 million in the first quarter of 2020. Average investments totaled $133.0 million in 2021 and $82.0 million in 2020. Average interest-bearing liabilities increased to $1.1 billion in 2021 from $807.9 million for the three months ended March 31, 2020.

The Company did not recognize a charge in the form of a provision for loan losses in the first quarter of 2021 based on the results from its adequacy modeling of the allowance for loan loss account at March 31, 2021. Comparatively, the provision for loan losses totaled $1.8 million for the same period in 2020. The 2020 increase in the provision for loan losses was the combined result of organic loan growth, excluding PPP loan balances outstanding, and changes in qualitative factors related to the allowance for loan losses reserve associated with increasing risks within the economy and our credit portfolio due to the effects of COVID-19. 

For the quarter ended March 31, noninterest income decreased by $407 thousand to $2.5 million in 2021 from $2.9 million in 2020. The primary contributor to the overall decrease was $569 thousand less in gains on the sale of investment securities offset partially by increases in service charges, fees and commissions of $93 thousand and the recognition of higher comparable trust and mortgage banking income of $47 thousand and $43 thousand.

Noninterest expense decreased to $8.4 million for the three months ended March 31, 2021, from $9.2 million for the same period last year. The overall decrease was primarily due to a decrease of $589 thousand in salaries and employee benefit expenses due to the implementation of the reduction in force initiatives from branch closures and consolidation of departments. Other expenses decreased $190 thousand comparing the first quarters of 2021 and 2020 due to implementing efficiency initiatives and selective expense reductions made during the COVID-19 shutdowns.

BALANCE SHEET REVIEW

Total assets, loans, net, and deposits totaled $1.4 billion, $1.1 billion, and $1.1 billion, respectively, at March 31, 2021. For the three months ended March 31, 2021, total assets and deposits increased $17.3 million, and $65.5 million, respectively. Loans, net decreased $47.4 million in the first quarter of 2021 as business lending, including commercial and commercial real estate loans, decreased $44.7 million due primarily to SBA forgiveness payments on PPP loans. For this same period, construction lending increased $4.9 million while retail lending, which includes residential mortgage, home equity and consumer loans, decreased $7.6 million. Total investments increased to $155.9 million at March 31, 2021, compared to $103.7 million at December 31, 2020 as security purchases more than offset payments and prepayments. The increase in total deposits consisted of increases in noninterest-bearing deposits of $23.8 million and interest-bearing deposits of $41.7 million. As a percentage of total deposits, noninterest-bearing deposits amounted to 18.3% at March 31, 2021 and 17.1% at December 31, 2020. Long term debt decreased $48.1 million primarily through the repayment of the Federal Reserve's PPPLF program as PPP loans were forgiven in the first quarter of 2021.

Stockholders' equity totaled $98.6 million, or $10.55 per share, at March 31, 2021 and $97.4 million, or $10.47 per share, at December 31, 2020. The increase in stockholders' equity for the three months ended March 31, 2021 was due primarily to recognizing earnings partially offset by a change in accumulated other comprehensive income. Tangible stockholders' equity per common share increased to $10.36 at March 31, 2021, compared to $9.87 at March 31, 2020. 

ASSET QUALITY REVIEW

Nonperforming assets were $13.2 million, or 1.20% of loans, net, and foreclosed assets at March 31, 2021, $12.0 million or 1.05% at December 31, 2020, and $5.7 million or 0.65% at March 31, 2020. Nonaccrual loan growth of $1.4 million caused primarily by one commercial relationship was responsible for the increase in the first quarter of 2021. Accruing troubled debt restructured ("TDR") loans totaled $9.9 million at March 31, 2021 and was due primarily to one commercial real estate relationship. Adjusting for accruing restructured loans, nonperforming assets were $3.2 million, or 0.29% of loans, net and foreclosed assets at March 31, 2021, and $2.0 million, or 0.18%, at December 31, 2020. The allowance for loan losses balance equaled $12.1 million, or 1.11%, of loans, net, and 1.38% excluding 100% SBA guaranteed PPP loan balances outstanding, at March 31, 2021, compared to $12.2 million, or 1.07%, of loans, net, and 1.37% excluding 100% SBA guaranteed PPP loan balances outstanding at December 31, 2020. The coverage ratio, the allowance for loan losses as a percentage of nonperforming assets, was 92.3% at March 31, 2021 and 102.0% at December 31, 2020. Excluding accruing restructured loans, the coverage ratio was 378.0% at March 31, 2021. Loans charged-off, net of recoveries, for the three months ended March 31, 2021 equaled $60 thousand compared to $1.1 million for the same period last year. 

Riverview Financial Corporation is the parent company of Riverview Bank. An independent community bank, Riverview Bank serves the Pennsylvania market areas of Berks, Blair, Bucks, Centre, Clearfield, Dauphin, Huntingdon, Lebanon, Lehigh, Lycoming, Perry, Schuylkill and Somerset Counties through 25 community banking offices and three limited purpose offices. Each full-service community banking office, interdependent with the community, offers a comprehensive array of financial products and services to individuals, businesses, not-for-profit organizations and government entities. Riverview's business philosophy includes offering direct access to senior management and other officers and providing friendly, informed and courteous service, local and timely decision making, flexible and reasonable operating procedures and consistently applied credit policies. The Company's common stock trades on the NASDAQ Global Market under the symbol "RIVE". The Investor Relations site can be accessed at https://www.riverviewbankpa.com/.

SOURCE: Riverview Financial Corporation

Safe Harbor Forward-Looking Statements:

We make statements in this press release, and we may from time to time make other statements regarding our outlook or expectations for future financial or operating results and/or other matters regarding or affecting Riverview Financial Corporation, Riverview Bank, and its subsidiaries (collectively, "Riverview") that may be considered "forward-looking statements" as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements may be identified by the use of such words as "believe," "expect," "anticipate," "should," "planned," "estimated," "intend" and "potential." For these statements, Riverview claims the protection of the statutory safe harbors for forward-looking statements.

Riverview cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: prevailing economic and political conditions, particularly in our market area; credit risk associated with our lending activities; changes in interest rates, loan demand, real estate values and competition; changes in accounting principles, policies, and guidelines; changes in any applicable law, rule, regulation or practice with respect to tax or legal issues; and other economic, competitive, governmental, regulatory and technological factors affecting Riverview's operations, pricing, products and services and other factors that may be described in Riverview's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission from time to time. Beginning with the first quarter of 2020, the COVID-19 pandemic continues to have an adverse impact on the Company, its customers and the communities it serves. Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on the Company's business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be back to normal. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, the Company could be subject to any of the following risks, any of which could have a material, adverse effect on the Company's business, financial condition, liquidity, and results of operations: the demand for Bank's products and services may decline, making it difficult to grow assets and income; if the economy is unable to continue to substantially reopen, and higher levels of unemployment persist, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; the Company's allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect the Company's net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to the Company; as the result of the decline in the Federal Reserve Board's target federal funds rate to near 0%, the yield on the Company's assets may decline to a greater extent than the decline in the Company's cost of interest-bearing liabilities, continue reducing the Company's net interest margin and spread and net income; the Company's wealth management revenues may decline with continuing market turmoil; and the Company's cybersecurity risks are increased as the result of an increase in the number of employees working remotely. The risk factors associated with this event could have a material adverse effect on significant estimates, operations and business results of Riverview. Significant estimates as disclosed in Riverview's Forms 10-K and 10-Q include allowance for loan losses, fair value of financial instruments, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loan, determination of other-than-temporary impairment losses on securities, impairment of goodwill and intangible assets.

The forward-looking statements are made as of the date of this release, and, except as may be required by applicable law or regulation, Riverview assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

In addition to evaluating its results of operations in accordance with accounting principles generally accepted in the United States of America ("GAAP"), Riverview routinely presents and supplements its evaluation with an analysis of certain non-GAAP financial measures, such as tangible stockholders' equity and Core net income ratios. The reported results included in this press release contain items which Riverview considers non-core, namely net gains on sales of investment securities available-for-sale, acquisition related expenses and the adjustment to tax expense due to the enactment of the Tax Act. Riverview presents the non-GAAP financial measures because it believes that these measures provide useful and comparative information to assess trends in Riverview's results of operation. Presentation of these non-GAAP financial measures is consistent with how Riverview evaluates its performance internally and these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties in evaluation of companies in Riverview's industry. Where non-GAAP measures are used in this press release, reconciliations to the comparable GAAP measures are provided in the accompanying tables. The non-GAAP financial measures Riverview uses may differ from similarly titled non-GAAP financial measures of other financial institutions. These non-GAAP financial measures would not be considered a substitute for GAAP basis measures, and Riverview strongly encourages a review of its condensed consolidated financial statements in their entirety. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are presented in the tabular material that follows.

[TABULAR MATERIAL FOLLOWS]

SOURCE Riverview Financial Corporation