Letter to our Shareholders, April 12, 2023
To our shareholders, customers, and friends,
You will find the 2022 Consolidated Financial Statements for River Valley Community Bancorp and its wholly owned subsidiary, River Valley Community Bank (collectively referred to as the “Company”) HERE. Along with this report, we are providing additional context for you regarding the Company’s continued growth and development.
The following highlights many of the Bank’s achievements in 2022:
- Total Assets ended 2022 at $630.3 million which is a 4.9% increase from the end of 2021.
- The Bank achieved record after tax Net Income for 2022 of $6.9 million, or $2.18 per diluted share, which is an increase of 26.0% from 2021. The Bank’s increased earnings during 2022 were driven primarily by higher interest income generated by our earning assets as yields increased with market rates during the year.
- Our core Loan portfolio (excluding PPP) increased to $258.1 million at year end reflecting growth of 4.6% from 12/31/2021.
- The Bank opened its Reno loan production office in early 2022 which got off to a solid start in contributing to the bank’s loan growth during the year.
- The Bank’s Total Deposits ended 2022 at $591.4 million which were up 7.9% from 12/31/2021. Notably, demand deposit accounts represented 59.7% of the total which was up slightly from 59.2% at 12/31/2021. Demand deposits help keep our cost of funds low and are a good reflection of the relationships we have with our customers. At 12/31/2022, the Bank’s proportion of demand deposits ranked in the 97th percentile in our Federal Financial Institutions Examination Council (FFIEC) Uniform Bank Performance Report (UBPR) peer grouping of 1,293 peer banks.
During 2022, the Federal Reserve’s Open Market Committee pushed interest rates significantly higher in reaction to their changed view that inflation was more than “transitory”. Between March of 2022 and March of this year, the Fed pushed the interest rate on Fed Funds up by 4.50% from essentially zero. The magnitude of this rate increase over this short period is unprecedented and while the Bank’s earnings benefitted from the increase in 2022, this abrupt change in the Fed’s interest rate policy caused dislocation in the banking industry which led to the highly publicized failures of Silicon Valley Bank and Signature Bank in March of this year, and concern with several other regional banks. The banks that failed appear to have had riskier banking models, including highly concentrated deposit bases and apparent risk management missteps which left them negatively exposed to increasing interest rates. Subsequently, they experienced significant liquidity challenges leading to their seizure by regulators as they were unable to meet the withdrawal requests of their concentrated and highly connected depositors.
In our nearly 17 years of operation, our Bank has developed a reputation for comprehensive and conservative risk management practices. This includes not only managing credit risk in a sustainable manner, but also focusing considerable time and expertise ensuring our balance sheet is adequately positioned from an interest rate and liquidity risk perspective. Further, we believe our diversified deposit base is a risk mitigant which reflects business deposit accounts representing many industries, local non-profits, public agencies, and personal accounts. Another risk mitigant we enjoy are the strong, communicative, relationships we have with our clients and our size provides direct access to management. We appreciate interacting with our customers and welcome the opportunity to discuss the Bank’s positioning, which goes a long way in reassuring all parties.
With the recent bank failures, liquidity positioning has been the primary focus on banks. We believe our bank is well positioned in this regard. The bank has ready access to liquidity, both on balance sheet and off, and our loan to deposit ratio is less than 50%. Our investment securities portfolio is comprised of high-quality investment grade securities which are performing as intended and the duration of our portfolio is relatively short. This portfolio, in addition to the bank’s cash on hand, represents a highly liquid potential source of funds if needed. In addition, the bank has considerable off-balance sheet liquidity in the form of credit lines that remain untapped but available for use if needed.
In addition, the bank remains well capitalized with capital levels well above regulatory minimum requirements. Our strong earnings have, and we expect will continue, to enhance our capital levels.
Banking is a business of confidence, and we are very proud of the reputation we have built. We appreciate the “steady hand” our customers have shown during the recent industry events, and we see this as a reflection of their confidence in the bank we have established.
Our reputation matters. We pride ourselves on the relationships we’ve built with clients that share our philosophy, and who are as invested in our communities as we are. We manage our bank sustainably for the long-run and find considerable satisfaction in serving our communities in ways bigger banks do not. We have a professional and highly committed banking team that is only getting better as we grow and develop. We believe our Bank is well positioned to meet our customer needs during these times and we also believe we are ready for market opportunities that can emerge during periods of uncertainty.
Thank you for your continued interest in and support of River Valley Community Bank!
Sincerely,
John M. Jelavich, President & Chief Executive Officer
Stephen F Danna, Chairman of the Board
Forward Looking Statements: This document may contain comments and information that constitute forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by such statements. Forward-looking statements speak only as to the date they are made. The Bank does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.