With two consecutive profitable quarters behind them, Riverview Community Bank officials are starting to breathe easier.
The Vancouver bank's parent, Riverview Bancorp Inc. on Wednesday reported $1 million in earnings, or $0.05 per diluted share, for its third fiscal quarter ending Dec. 31. Added to a small profit last quarter and offset by a first-quarter loss, Riverview now has a $1 million profit to date for the current fiscal year.
"Riverview's turnaround plan is on schedule," declared Pat Sheaffer, the bank's chairman and CEO, in a news release that accompanied the earnings report.
It's been a long tough spell for Riverview, which last year gained the distinction of being the only bank based in Clark County after the former First Independent Bank was folded into Spokane-based Sterling Bank. Before its last two profitable quarters, Riverview has reported three consecutive losses.
Those losses were significant for a small bank with 18 branches and $795 million in assets. Its loss for all of fiscal 2012, which ended in March, was $31.7 million.
As the bank pumped millions of dollars into reserves for bad loans, an analyst for Wunderlich Securities in April downgraded Riverview's stock to "sell." He suggested in an interview that Riverview's own best option might also be to sell — that is, sell the bank.
Instead, the bank chose to stay the course and work through its problems by working to shrink its inventory of troubled loans and bank-owned real estate. Officials insisted that Riverview was fundamentally sound and said they wanted to maintain its independent, locally based status, even as its stock at one point dipped to barely more than $1 per share.
In Wednesday's third-quarter earnings report, Riverview said its nonperforming assets — bank-owned properties and troubled loans — had dropped by almost 14 percent during the quarter, down to $45 million. It maintained a $19.6 million allowance for loan losses, representing almost 80 percent of its troubled, or nonperforming, loans, but officials hope they can start to shrink that cushion.
"Now that profitability looks sustainable and our capital position is strengthened, we can turn our focus on responsible organic growth that supports lending in the communities we serve," Sheaffer said in a statement.
Riverview's steady progress is not without major challenges. With fewer borrowers and declining interest rates, the bank has less income from loans. It earned $7.4 million for the quarter in net interest and fees on loans, compared with $8.4 million in the same period one year ago. In addition, competition within the industry remains intense as national and regional banks, as well as credit unions, jockey for position in a recovering economy.
"We need to find good loans and put them on our balance sheet," said Ron Wysaske, Riverview's president and chief operating officer. "It's a challenge."
Still, Riverview at last is seeing blue sky even in January, Wysaske said. "Now we're getting into kind of a fortuitous time," Wysaske said. "A lot of positives are coming out. We're looking forward to next quarter and the quarter after that."