10-Q 1 ck0001641601-10q_20180930.htm 10-Q ck0001641601-10q_20180930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018  

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    

Commission File Number: 333-205986

 

RIVER FINANCIAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

 

ALABAMA

 

46-1422125

( State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer
Identification No.)

2611 Legends Drive

Prattville, Alabama

 

36066

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (334) 290-1012

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of November 1, 2018, the registrant had 5,690,123 shares of common stock, $1.00 par value per share, outstanding.

 

 


Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

5

 

Consolidated Statements of Financial Condition

5

 

Consolidated Statements of Income

6

 

Consolidated Statements of Comprehensive Income

7

 

Consolidated Statements of Changes in Stockholders’ Equity

8

 

Consolidated Statements of Cash Flows

9

 

Notes to Unaudited Consolidated Financial Statements

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

47

Item 4.

Controls and Procedures

47

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

48

Item 1A.

Risk Factors

48

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

48

Item 3.

Defaults Upon Senior Securities

48

Item 4.

Mine Safety Disclosures

48

Item 5.

Other Information

48

Item 6.

Exhibits

49

Signatures

51

 

 

 

 

 

 


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of River Financial Corporation (“we”, “our” or “us” on a consolidated basis) contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Such statements include projections, predictions, expectations or statements as to beliefs or future events or results or refer to other matters that are not historical facts. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from those contemplated by the statements. The forward-looking statements contained in this annual report are based on various factors and were derived using numerous assumptions. In some cases, you can identify these forward-looking statements by words like “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “intend”, “believe”, “estimate”, “predict”, “potential”, or “continue” or the negative of those words and other comparable words. You should be aware that those statements reflect only our predictions. If known or unknown risks or uncertainties should materialize, or if any one or more of our material underlying assumptions should prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected. You should bear this in mind when reading this report and not place undue reliance on these forward-looking statements. Factors that might cause such differences include, but are not limited to:

 

The businesses of any bank acquired by us may not be integrated successfully or the integration may be more difficult, time-consuming or costly than expected;

 

The expected growth opportunities or costs savings from such transactions may not be fully realized or may take longer to realize than expected;

 

Revenues following such transactions may be lower than expected as a result of losses of customers or other reasons;

 

Deposit attrition, operating costs, customer loss and business disruption following such transactions, including difficulties in maintaining relationships with employees, may be greater than expected;

 

Governmental approvals of such transactions may not be obtained on the proposed terms or expected timeframe;

 

Reputational risks and the reaction of the companies’ customers to such transactions;

 

Diversion of management time on merger related issues;

 

Changes in asset quality and credit risk of our bank;

 

Inflation;

 

Customer acceptance of the our products and services;

 

Customer borrowing, repayment, investment and deposit practices;

 

The negative impact on profitability imposed on us by a compressed net interest margin on loans and other extensions of credit that affects our ability to lend profitably and to price loans effectively in the face of competitive pressures;

 

Our liquidity requirements could be adversely affected by changes in our assets and liabilities;

 

Our ability to attract, develop and retain qualified banking professionals;

 

Failure to attract or retain stable deposits at reasonable cost that is competitive with the larger international, national, and regional financial service providers with which we compete;

 

Significant reliance on loans secured by real estate and the associated vulnerability to downturns in the local real estate market, natural disasters and other variables impacting the value of real estate;

 

The introduction, withdrawal, success and timing of business initiatives;

 

The impact, extent, and timing of technological changes;

 

A weakening of the economies in which we conduct operations may adversely affect our operating results;

 

The U.S. legal and regulatory framework, or changes in such framework, could adversely affect our operating results;

 

The interest rate environment may compress margins and adversely affect net interest income; and

 

Competition from other financial services companies in our markets could adversely affect operations.

 

3


 

You should also consider carefully the risk factors discussed in Item 1A of Part II of this Form 10-Q, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements and could materially and adversely affect our business, operating results and financial condition. The risks discussed in this report are factors that, individually or in the aggregate, management believes could cause our actual results to differ materially from expected and historical results. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider such disclosures to be a complete discussion of all potential risks or uncertainties. Factors not here or there listed may develop or, if currently extant, we may not have yet recognized them.

The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

4


 

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

RIVER FINANCIAL CORPORATION

Consolidated Statements of Financial Condition

(in thousands except share data)

 

 

 

September 30, 2018

 

 

December 31, 2017

 

 

 

Unaudited

 

 

Audited

 

Assets

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

14,248

 

 

$

14,669

 

Interest-bearing deposits in banks

 

 

930

 

 

 

889

 

Cash and cash equivalents

 

 

15,178

 

 

 

15,558

 

 

 

 

 

 

 

 

 

 

Certificates of deposit in banks

 

 

2,744

 

 

 

5,214

 

Securities available-for-sale

 

 

148,626

 

 

 

193,289

 

Loans held for sale

 

 

4,977

 

 

 

3,858

 

Loans, net of unearned income

 

 

641,365

 

 

 

547,121

 

Less allowance for loan losses

 

 

(6,063

)

 

 

(4,881

)

Net loans

 

 

635,302

 

 

 

542,240

 

Premises and equipment, net

 

 

21,676

 

 

 

21,809

 

Accrued interest receivable

 

 

2,437

 

 

 

2,499

 

Bank owned life insurance

 

 

20,419

 

 

 

19,991

 

Foreclosed assets

 

 

723

 

 

 

1,546

 

Deferred income taxes

 

 

3,562

 

 

 

1,977

 

Core deposit intangible

 

 

1,196

 

 

 

1,560

 

Goodwill

 

 

10,050

 

 

 

10,050

 

Other assets

 

 

4,662

 

 

 

3,701

 

Total assets

 

$

871,552

 

 

$

823,292

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

182,703

 

 

$

185,171

 

Interest-bearing deposits

 

 

543,743

 

 

 

514,690

 

Total deposits

 

 

726,446

 

 

 

699,861

 

Securities sold under agreements to repurchase

 

 

11,277

 

 

 

13,865

 

Federal Home Loan Bank advances

 

 

30,000

 

 

 

10,000

 

Federal funds purchased

 

 

1,954

 

 

 

1,153

 

Note payable

 

 

4,554

 

 

 

5,357

 

Accrued interest payable and other liabilities

 

 

4,148

 

 

 

3,107

 

Total liabilities

 

 

778,379

 

 

 

733,343

 

Common stock related to 401(k) Employee Stock Ownership Plan

 

 

1,152

 

 

 

950

 

Stockholders' Equity:

 

 

 

 

 

 

 

 

Common stock ($1 par value; 10,000,000 shares authorized; 5,140,401 and 5,113,951

   shares issued; 5,128,906 and 5,098,068 shares outstanding, respectively)

 

 

5,140

 

 

 

5,114

 

Additional paid in capital

 

 

65,250

 

 

 

64,935

 

Retained earnings

 

 

27,961

 

 

 

22,388

 

Accumulated other comprehensive loss

 

 

(4,895

)

 

 

(2,116

)

Treasury stock at cost (11,495 and 15,883 shares, respectively)

 

 

(283

)

 

 

(372

)

Common stock related to 401(k) Employee Stock Ownership Plan

 

 

(1,152

)

 

 

(950

)

Total stockholders' equity

 

 

92,021

 

 

 

88,999

 

Total equity

 

 

93,173

 

 

 

89,949

 

Total liabilities and stockholders' equity

 

$

871,552

 

 

$

823,292

 

 

The accompanying notes are an integral part of these financial statements.

 

 

5


 

RIVER FINANCIAL CORPORATION

Unaudited Consolidated Statements of Income

(in thousands except per share data)

 

 

 

For the Three Months Ended:

 

 

For the Nine Months Ended:

 

 

 

September 30,

 

 

September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

8,269

 

 

$

7,097

 

 

$

23,551

 

 

$

20,858

 

Taxable securities

 

 

551

 

 

 

756

 

 

 

1,729

 

 

 

2,226

 

Nontaxable securities

 

 

180

 

 

 

278

 

 

 

547

 

 

 

843

 

Other interest income

 

 

74

 

 

 

46

 

 

 

162

 

 

 

157

 

Total interest income

 

 

9,074

 

 

 

8,177

 

 

 

25,989

 

 

 

24,084

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

931

 

 

 

587

 

 

 

2,330

 

 

 

1,653

 

Short-term borrowings

 

 

9

 

 

 

12

 

 

 

31

 

 

 

34

 

Federal Home Loan Bank advances

 

 

162

 

 

 

32

 

 

 

329

 

 

 

57

 

Note payable

 

 

62

 

 

 

64

 

 

 

184

 

 

 

188

 

Total interest expense

 

 

1,164

 

 

 

695

 

 

 

2,874

 

 

 

1,932

 

Net interest income

 

 

7,910

 

 

 

7,482

 

 

 

23,115

 

 

 

22,152

 

Provision for loan losses

 

 

480

 

 

 

660

 

 

 

1,440

 

 

 

1,380

 

Net interest income after provision for loan losses

 

 

7,430

 

 

 

6,822

 

 

 

21,675

 

 

 

20,772

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges and fees

 

 

830

 

 

 

746

 

 

 

2,436

 

 

 

2,159

 

Investment brokerage revenue

 

 

44

 

 

 

18

 

 

 

102

 

 

 

49

 

Mortgage operations

 

 

700

 

 

 

516

 

 

 

1,807

 

 

 

1,410

 

Bank owned life insurance income

 

 

145

 

 

 

769

 

 

 

428

 

 

 

976

 

Net gain (loss) on sale of investment securities

 

 

(56

)

 

 

-

 

 

 

(53

)

 

 

3

 

Other noninterest income

 

 

80

 

 

 

120

 

 

 

265

 

 

 

251

 

Total noninterest income

 

 

1,743

 

 

 

2,169

 

 

 

4,985

 

 

 

4,848

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

3,349

 

 

 

3,123

 

 

 

10,266

 

 

 

8,791

 

Occupancy expenses

 

 

366

 

 

 

367

 

 

 

1,099

 

 

 

1,051

 

Equipment rentals, depreciation, and maintenance

 

 

206

 

 

 

233

 

 

 

677

 

 

 

630

 

Telephone and communications

 

 

69

 

 

 

63

 

 

 

190

 

 

 

202

 

Advertising and business development

 

 

154

 

 

 

179

 

 

 

501

 

 

 

538

 

Data processing

 

 

480

 

 

 

416

 

 

 

1,326

 

 

 

1,289

 

Foreclosed assets, net

 

 

45

 

 

 

66

 

 

 

135

 

 

 

137

 

Federal deposit insurance and other regulatory assessments

 

 

81

 

 

 

76

 

 

 

241

 

 

 

251

 

Legal and other professional services

 

 

285

 

 

 

122

 

 

 

568

 

 

 

382

 

Other operating expense

 

 

915

 

 

 

903

 

 

 

2,612

 

 

 

2,510

 

Total noninterest expense

 

 

5,950

 

 

 

5,548

 

 

 

17,615

 

 

 

15,781

 

Income before income taxes

 

 

3,223

 

 

 

3,443

 

 

 

9,045

 

 

 

9,839

 

Provision for income taxes

 

 

741

 

 

 

880

 

 

 

2,039

 

 

 

2,939

 

Net income

 

$

2,482

 

 

$

2,563

 

 

$

7,006

 

 

$

6,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net earnings per common share

 

$

0.48

 

 

$

0.50

 

 

$

1.37

 

 

$

1.35

 

Diluted net earnings per common share

 

$

0.48

 

 

$

0.49

 

 

$

1.34

 

 

$

1.33

 

Dividends per common share

 

$

-

 

 

$

-

 

 

$

0.28

 

 

$

0.25

 

 

The accompanying notes are an integral part of these financial statements.

 

 

6


 

RIVER FINANCIAL CORPORATION

Unaudited Consolidated Statements of Comprehensive Income

(in thousands)

 

 

 

For the Three Months Ended

 

 

For the Nine  Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net income

 

$

2,482

 

 

$

2,563

 

 

$

7,006

 

 

$

6,900

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gains (losses)

 

 

(1,092

)

 

 

(191

)

 

 

(3,764

)

 

 

2,363

 

Reclassification adjustments for net (gains) losses realized in net income

 

 

56

 

 

 

-

 

 

 

53

 

 

 

(3

)

Income tax effect

 

 

261

 

 

 

70

 

 

 

932

 

 

 

(871

)

Other comprehensive income (loss)

 

 

(775

)

 

 

(121

)

 

 

(2,779

)

 

 

1,489

 

Comprehensive income

 

$

1,707

 

 

$

2,442

 

 

$

4,227

 

 

$

8,389

 

 

The accompanying notes are an integral part of these financial statements.

 

 

7


 

RIVER FINANCIAL CORPORATION

Unaudited Consolidated Statements of Changes in Stockholders' Equity

(in thousands except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Common

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

 

 

 

 

Stock

 

 

Total

 

 

 

Common

 

 

Paid In

 

 

Retained

 

 

Comprehensive

 

 

Treasury

 

 

Related to

 

 

Stockholders'

 

 

 

Stock

 

 

Capital

 

 

Earnings

 

 

Income (Loss)

 

 

Stock

 

 

KSOP

 

 

Equity

 

Balance at December 31, 2017

 

$

5,114

 

 

$

64,935

 

 

$

22,388

 

 

$

(2,116

)

 

$

(372

)

 

$

(950

)

 

$

88,999

 

Net income

 

 

-

 

 

 

-

 

 

 

7,006

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,006

 

Other comprehensive loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,779

)

 

 

-

 

 

 

-

 

 

 

(2,779

)

Exercise of stock options and warrants  (26,450 shares)

 

 

26

 

 

 

265

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

291

 

Purchase of treasury stock (4,794 shares)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(127

)

 

 

-

 

 

 

(127

)

Sale of treasury shares (9,182 shares)

 

 

-

 

 

 

9

 

 

 

-

 

 

 

-

 

 

 

216

 

 

 

-

 

 

 

225

 

Dividends declared ($0.28 per share)

 

 

-

 

 

 

-

 

 

 

(1,433

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,433

)

Stock compensation expense

 

 

-

 

 

 

41

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

41

 

Change for KSOP related shares

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(202

)

 

 

(202

)

Balance at September 30, 2018

 

$

5,140

 

 

$

65,250

 

 

$

27,961

 

 

$

(4,895

)

 

$

(283

)

 

$

(1,152

)

 

$

92,021

 

 

The accompanying notes are an integral part of these financial statements.

 

 

8


 

RIVER FINANCIAL CORPORATION

Unaudited Consolidated Statements of Cash Flows

(in thousands)

 

 

 

For the Nine  Months

 

 

 

Ended September 30,

 

 

 

2018

 

 

2017

 

Cash Flows From (Used For) Operating Activities:

 

 

 

 

 

 

 

 

Net Income

 

$

7,006

 

 

$

6,900

 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

1,440

 

 

 

1,380

 

Provision for losses on foreclosed assets

 

 

90

 

 

 

115

 

Amortization of securities available-for-sale

 

 

1,293

 

 

 

1,723

 

Accretion of securities available-for-sale

 

 

(25

)

 

 

(24

)

Realized net (gain) loss on securities available-for-sale

 

 

53

 

 

 

(3

)

Accretion of discount on acquired loans

 

 

(1,015

)

 

 

(1,896

)

Amortization of deferred loan fees

 

 

(929

)

 

 

(784

)

Amortization of core deposit intangible asset

 

 

364

 

 

 

428

 

Stock compensation expense

 

 

41

 

 

 

42

 

Bank owned life insurance income

 

 

(428

)

 

 

(976

)

Depreciation and amortization of premises and equipment

 

 

742

 

 

 

702

 

(Gain) loss on sale of foreclosed assets

 

 

11

 

 

 

(55

)

Deferred income tax benefit

 

 

(653

)

 

 

(43

)

(Increase) decrease in operating assets and (decrease) increase in operating liabilities:

 

 

 

 

 

 

 

 

  Loans held-for-sale

 

 

(1,119

)

 

 

3,456

 

  Accrued interest receivable

 

 

62

 

 

 

54

 

  Other assets

 

 

(98

)

 

 

(395

)

  Accrued interest payable and other liabilities

 

 

1,041

 

 

 

(41

)

Net cash from operating activities

 

 

7,876

 

 

 

10,583

 

Cash Flows From (Used For) Investing Activities:

 

 

 

 

 

 

 

 

Sales of certificate of deposit

 

 

1,452

 

 

 

-

 

Maturity of certificate of deposit

 

 

1,245

 

 

 

498

 

Purchase of certificate of deposit

 

 

(249

)

 

 

(249

)

Activity in securities available-for-sale:

 

 

 

 

 

 

 

 

Sales

 

 

47,339

 

 

 

13,246

 

Maturities, payments, calls

 

 

20,216

 

 

 

19,396

 

Purchases

 

 

(27,903

)

 

 

(52,587

)

Loan principal originations, net

 

 

(92,876

)

 

 

(6,962

)

Proceeds from sale of foreclosed assets

 

 

1,040

 

 

 

2,017

 

Purchases of premises and equipment

 

 

(609

)

 

 

(1,183

)

Purchase of restricted equity securities, net

 

 

(862

)

 

 

(721

)

Proceeds from bank owned life insurance

 

 

-

 

 

 

1,070

 

Net cash used for investing activities

 

 

(51,207

)

 

 

(25,475

)

Cash Flows From (Used For) Financing Activities:

 

 

 

 

 

 

 

 

Net increase (decrease) in deposits

 

 

26,585

 

 

 

(22,240

)

Net decrease in securities sold under agreements to repurchase

 

 

(2,588

)

 

 

(426

)

Proceeds from Federal Home Loan Bank advances

 

 

80,000

 

 

 

40,000

 

Repayment of Federal Home Loan Bank advances

 

 

(60,000

)

 

 

(25,000

)

Repayment of note payable

 

 

(803

)

 

 

(803

)

Federal funds purchased

 

 

801

 

 

 

-

 

Proceeds from issuance of common stock

 

 

-

 

 

 

85

 

Proceeds from exercise of common stock options and warrants

 

 

291

 

 

 

263

 

Purchase of treasury stock

 

 

(127

)

 

 

(407

)

Sale of treasury stock

 

 

225

 

 

 

113

 

Cash dividends

 

 

(1,433

)

 

 

(1,272

)

Net cash from (used for) financing activities

 

 

42,951

 

 

 

(9,687

)

Net Change In Cash And Cash Equivalents

 

 

(380

)

 

 

(24,579

)

Cash and Cash Equivalents At Beginning Of Period

 

 

15,558

 

 

 

42,499

 

Cash and Cash Equivalents At End Of Period

 

$

15,178

 

 

$

17,920

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosures Of Cash Flows Information:

 

 

 

 

 

 

 

 

Cash Payments For:

 

 

 

 

 

 

 

 

Interest paid to depositors

 

$

2,303

 

 

$

1,771

 

Interest paid on borrowings

 

$

524

 

 

$

271

 

Income taxes

 

$

1,651

 

 

$

2,874

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Transfer of loans to foreclosed assets

 

$

318

 

 

$

2,411

 

The accompanying notes are an integral part of these financial statements.

9


 

River Financial Corporation

Notes to Unaudited Consolidated Financial Statements

(amounts in thousands, except share and per share data)

 

Note 1 – Basis of Presentation

General

The unaudited consolidated financial statements include the accounts of River Financial Corporation (“River” or the “Company”) and its wholly owned subsidiary, River Bank & Trust (“Bank”). The Bank provides a full range of commercial and consumer banking services primarily in the Montgomery, Alabama metropolitan area, Autauga, Elmore, Etowah, Lee and Tallapoosa counties and surrounding counties in Alabama. The Bank is primarily regulated by the Federal Deposit Insurance Corporation (“FDIC”) and undergoes periodic examinations by this regulatory agency and the Alabama Banking Department.  The Company is regulated by the Federal Reserve Bank (“FRB”) and is also subject to periodic examinations.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly River Financial Corporation’s consolidated statements of financial condition, statements of income, statements of comprehensive income, statements of changes in stockholders’ equity and statements of cash flows for the periods presented, and all such adjustments are of a normal recurring nature. All material intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the entire year.

These interim consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission and, therefore, certain information and note disclosures normally presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted or abbreviated. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes as of December 31, 2017, which are contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017

Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Estimates are used in accounting for, among other items, the allowance for loan losses, foreclosed asset valuations, useful lives for depreciation and amortization, fair value of financial instruments, deferred taxes, and contingencies. Estimates that are particularly susceptible to significant change for the Company include the determination of the allowance for loan losses, investment securities impairment, and assessment of deferred tax assets and liabilities, and therefore are critical accounting policies. Management does not anticipate any material changes to estimates in the near term. Factors that may cause sensitivity to the aforementioned estimates include but are not limited to: external market factors such as market interest rates and employment rates, changes to operating policies and procedures, economic conditions in our markets, and changes in applicable banking regulations. Actual results may ultimately differ from estimates, although management does not generally believe such differences would materially affect the consolidated financial statements in any individual reporting period presented.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10


 

Note 2 – Earnings Per Share

Basic earnings per common share are computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share are computed by dividing net income by the effect of the issuance of potential common shares that are dilutive and by the sum of the weighted-average number of shares of common stock outstanding. All shares owned by the Company’s 401(k) Employee Stock Ownership Plan (KSOP) are included in the earnings per share calculations.

The reconciliation of the components of the basic and diluted earnings per share is as follows (amounts in thousands):

 

 

 

For the Three Months

 

 

For the Nine  Months

 

 

 

Ended September 30,

 

 

Ended September 30,

 

 

 

2018

 

 

 

2017

 

 

2018

 

 

 

2017

 

Net earnings available to common shareholders

 

$

2,482

 

 

$

2,563

 

 

$

7,006

 

 

$

6,900

 

Weighted average common shares outstanding

 

 

5,131,134

 

 

 

5,110,644

 

 

 

5,122,397

 

 

 

5,096,275

 

Dilutive effect of stock options

 

 

87,640

 

 

 

86,559

 

 

 

88,709

 

 

 

81,189

 

Diluted common shares

 

 

5,218,774

 

 

 

5,197,203

 

 

 

5,211,106

 

 

 

5,177,464

 

Basic earnings per common share

 

$

0.48

 

 

$

0.50

 

 

$

1.37

 

 

$

1.35

 

Diluted earnings per common share

 

$

0.48

 

 

$

0.49

 

 

$

1.34

 

 

$

1.33

 

 

 

Note 3 – Investment Securities

Securities available-for-sale at September 30, 2018 and December 31, 2017 are as follows (amounts in thousands):

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair  Value

 

September 30, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Securities available-for-sale: