Riverview Bancorp announces balance sheet optimization

Riverview Bancorp (RVSB) implemented a strategic balance sheet optimization. This included the reclassification of its entire held-to-maturity securities to available-for-sale securities. After the reclassification, Riverview sold $149.3M in lower-yielding book value investment securities, with an average yield of 1.62%, for an estimated pre-tax loss of $11.4M. A targeted approach was used to identify lower-yielding bonds, balancing the respective loss in relation to its book value. The goal was to minimize the loss while maximizing proceeds from the sale. Reclassifying the bonds from HTM to AFS will reduce overall equity. The reclassified bonds will be measured at fair value, with the impact recorded in accumulated other comprehensive income. No additional capital was needed to support the strategic optimization, and Riverview remains well-capitalized for regulatory purposes. Riverview expects to reinvest the proceeds into a combination of higher-yielding bonds, which will be classified as available for sale at the time of purchase, support loan originations, pay down its Federal Home Loan Bank borrowings, or hold in cash. Dependent upon the combination of redeployment of funds, Riverview expects the estimated earn-back will be less than 3.5 years. The strategic optimization is expected to add approximately 25 basis points to net interest margin and approximately 13c to earnings per share annually, once fully realized. This strategic optimization is not expected to impact Riverview’s ability to continue with its existing active stock buyback.