RVSB - NASDAQ

Patrick Sheaffer - Chief Executive Officer Ron Wysaske - President, Chief Operating Officer David A. Dahlstrom - Executive Vice President, Chief Credit Officer Kevin Lycklama - Senior Vice President

Kristen Hotti - Howe, Barnes, Hoefer & Arnett Lou Cosser - D.A. Davidson & Company

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Riverview Bancorp second quarter 2009 conference call. (Operator Instructions). I would now like to turn the conference over to Pat Sheaffer, Chief Executive Officer. Please go ahead, sir.

Hey, thanks Mary. Good morning, everybody. I’d like to welcome you to Riverview Bancorp’s mid-fiscal year conference call. As always, I must call your attention to page three of our just-released earnings report, concerning forward-looking statements. As in the past, on the last few calls that we’ve done, we’ll have Ron Wysaske, our President and COO give a few prepared remarks and we’ll get right into the questions. With me here today, Ron Wysaske, President and COO of Riverview Community Bank, Dave Dahlstrom, Executive Vice President, Chief Credit Officer of Riverview Community Bank, Jim Baldovin, Executive Vice President, Retail Banking of Riverview Community Bank, Kevin Lycklama, Senior Vice President, Chief Financial Officer of Riverview Community Bank and John Karas, Chairman and CEO of Riverview Asset Management and Trust. As I said, to speed things along, we’ll have a few remarks by Ron Wysaske, commenting on our operating highlights for this just-completed second quarter. After Ron’s remarks, our management team will be willing and available to answer any questions you might have. With that, Ron?

Okay. Thank you, Pat. Good morning, everyone. We would like to discuss our second fiscal quarter results with you and by now, you know that yesterday we reported the results of the September quarter. We’ll then discuss some highlights and issues and we look forward to your questions at the end. Well, there’s no sugar-coating it. These are tough economic times for everyone and especially banks. We reported a $0.39 loss for the quarter and a $0.32 loss for the six months year-to-date. The quarterly loss was driven by elevated loan-loss provisioning and that coupled with an impairment loss on a security. Earlier we had announced the expectation of a second quarter loan-loss provision somewhere between 6.8 and 7.3 million pre-tax. The actual number turned out to be 7.2 million for the quarter and 9.95 million total for the six months ended. Additionally, the bank took an impairment charge of 3.4 million pre-tax against a $5 million par value security. That security was backed or is backed by trust-preferred debt of 20 other banks throughout the country. Asset quality has historically been a major strength for Riverview and it’s still our focus. We believe that we’ve identified the problems in the loan portfolio as well as our investment portfolio. We feel like we have several sources of strength at Riverview. Probably most important is the fact that the bank is classified as well-capitalized per federal regulations. The core profitability of the bank is strong, notwithstanding the loan-loss provisions and the security impairment. The bank has adequate liquidity to fund new loans, deposit needs of customers and other growth prospects. Core customer deposit growth has been strong and customer confidence is high. Revenue growth has also been good along with loan growth. Our trust company, Ramcorps, fee income continues to be an important source of revenue growth for the bank. Meanwhile, operating expenses have moderated over the past year, even with some expansion of banking capacity. Loan growth has been good and that growth has been in the right segments, which includes commercial and industrial loans and commercial real estate. All the while, land and construction loans have shrunk. While the economy itself may be at risk in the coming months, we believe the risk profile of our loan types has moderate. Our loan-loss allowance is now at 208 basis points of loans and commitments and we believe that we’re adequately reserved. Here’s some thoughts regarding our financial release and the economic environment as we move forward. Despite a loan-loss provision of 9.95 million and a securities impairment of 3.4 million, our net loss was only 3.4 million. Without the loss provision and write-down, core revenue and earnings of the company are on pace with last year. Our net interest margin of 418 basis points for the quarter is 54 basis points lower than the previous year. While the prime rate was lowered 325 basis points during that year, indicating our slight asset sensitivity to interest rate changes. The loan portfolio increase has helped shore up net interest income. Our loan mix is improving and the loan portfolio is growing with good diversification. Deposit growth, as always, is a priority and is up $8 million for the quarter. Customer confidence, our branch network and the CDARS program are all helping. Deposit totals are also up another $14 million at October 15th over the September 30th quarter end. We continue to grow fee income from our trust and asset management business and that helps to diversify our sources of revenue. We continue to expand business cash management products and services, such as remote deposit to enhance deposit generation capabilities. In summary, our bank has fundamental strength. We have the capital. We have the liquidity. We have the core profitability. We also have the core customer franchise anchored by 18 branch offices and 85 years of institutional history with this particular market. We’re not just surviving the challenges of the current economic environment. We’re growing and we’re strong enough to weather this storm and emerge even stronger. Repeating, we believe in diversification to help manage risk and we’re constantly searching for new opportunities. Thanks again for your interest in Riverview. Now, management welcomes your questions and comments, so back to Pat Sheaffer.

Hey, thanks Ron, good report. Mary, could you open the lines so that anybody would like to ask us any questions?

Yes, thank you.

Okay, she asked about Palm Springs, okay.

This is Pat. We’re following it closely. You know there’s so much information, you know kind of everyday stuff coming out. We certainly got to look at it. Yes, we would definitely be eligible if we wanted to participate. To say yes right now would be premature but we certainly are watching it and it’s a moving target for us. There’s some possibilities there capital is king and it would be a good chance to pick up additional capital even though we are what 1070 something but that -- and that doesn’t include another $8 million up as a holding company that we could push down. There’s some opportunities of having any extra capital, so long way around of saying we’re certainly looking at. Ron, do you want to add anything to that?

Want that Kevin or Ron?

Well, it was trending a little bit down as I said I think we ended it at 418 which was down about 50 basis points from the end of the --

March prior.

From the prior March 31 or was it prior September.

Yes, so it has definitely compressed. As I said we’ve offset some of that I think with growth in the loan portfolio. So net interest income number is very much flat compared to last year same quarter I think but definitely some compression.

Lou, this is Kevin. On a quarter to quarter basis our net interest margin I think as of June was about 420 and this quarter was like 418. So it’s been flat on a linked quarter basis. So our margin’s holding steady as Ron mentioned. It did come down 50 basis points or so since last September, but obviously as you know since last September there’s been 325 basis points cut in the federal reserve rate so but in this we’ve been able to restabilize that net interest margin, so as of the last six months or so it's been holding pretty steady.

Thank you, Luke.

Thank you. The management, there are no further questions. We’ll turn it back to you for closing comment.

Thanks Mary. Riverview, the vision going forward is to focus on our business, our customers, and our employees. As long as we focus on these areas, we can be successful during this economic slowdown so we encourage all of you to join us here at Riverview in focusing on issues that we can control and that are important to our banking business. I’d like to also thank you for listening to us. If you have any other questions, please don't hesitate to call us. Thank you again.