On Tuesday, the company reported a net loss of $16.6 million, or $0.74 per share, in its third fiscal quarter ended December 31, 2011.
“This is a big number – a $16 million hit for the quarter. But there are a couple of stories behind it,” said Ron Wysaske, Riverview president and CEO. “First and foremost, the bank is sound, has plenty of cash and plenty of liquidity.”
As Wysaske explained it, Riverview’s financial results were impacted by an increase in the provision for loan losses of $8.1 million as well as the establishment of an $8.7 million deferred tax asset valuation allowance.
In the case of the loan losses, Wysaske said the primary culprit is land loans that have been negatively impacted by diminished local real estate prices.
“One of our taglines is ‘Riverview: reflecting our community’s strengths.’ Well, it turns out that we reflect our community’s weaknesses to, and we are doing that primarily with land loans,” he said.
Meanwhile, Riverview’s establishment of a deferred tax asset valuation allowance represents a non-cash accounting entry that may be reversed in future periods if, among other considerations, the company returns to sustained profitability. Reversals of this allowance would then increase Riverview’s net income in future periods.
“The point is once we get back to profitability, and we fully expect that to happen soon, we will be able to take that 8.7 million back,” said Wysaske, adding that the bank remains classified as well-capitalized, which is a critical point, he said.
“We’ve got in excess of $80 million of cash on hand and we have over $400 – almost $500 million of available liquidity from typical sources for banks… So we’re in a great position from a liquidity standpoint,” he said.
Expanding on Wysaske’s point, Riverview Executive Vice President Kim Capeloto pointed to the fact that the bank would have posted a gain before loan loss provisions and the deferred tax asset revision.
“It is important that people understand we’re not going anywhere,” said Capeloto. “We are extremely well-capitalized. Our core business is very strong. Our deposits are up, our customer accounts are up; we’re building a brand new branch in Gresham.”
Compared to its third fiscal quarter ended December 31, 2010, Riverview’s deposit accounts increased from $696,749 to $735,046. Loans receivable also grew from $660,075 to $678,626.
As an institution that’s deeply rooted in the local community, Capeloto said Riverview followed its philosophy and worked with borrowers over the years on a case-by-case basis, as opposed to simply opting for wholesale cuts using federal dollars to flush away problem loans, like many banks did early on in the recession.
“You didn’t have a whole bunch of instances where Riverview was in the headlines for massive losses due to this type of stuff, and most of that is because of the way we’ve managed through the process,” said Capeloto. “Unfortunately, at this particular time, it’s just where we are in the economy. It hasn’t turned around as fast as we all would have liked to see it turn around, and as a result we have to recognize evaluations as they are today.”
“We’ll keep making the good fight,” added Wysaske. “We’ve got the tools to do it; we’ve got the cash to do it. We’re not going to change our philosophy because I think it is right for a community bank to do what we’ve been doing.”
