River Financial Corp.
11/04/2025 | Press release | Distributed by Public on 11/04/2025 13:10
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis ofFinancial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes thereto for the year ended December 31, 2024, which are contained in the Annual Report on Form 10-K for the year ended December 31, 2024. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from our expectations. Factors that could cause such differences are discussed in our 2024 Annual Report on Form 10-K under "Part I, Item 1A - Risk Factors." We assume no obligation to update any of these forward-looking statements.
The following discussion pertains to our historical results on a consolidated basis. However, because we conduct all of our material business operations through our subsidiaries, the discussion and analysis relates to activities primarily conducted at the subsidiary level.
All dollar amounts in the tables in this section are in thousands of dollars, except per share data, yields, percentages and rates or when specifically identified. As used in this Item, the words "we," "us," "our," the "Company," "RFC," "River" and similar terms refer to River Financial Corporation and its consolidated affiliate, unless the context indicates otherwise.
Our Business
We are a bank holding company headquartered in Prattville, Alabama. We engage in the business of banking through our wholly-owned banking subsidiary, River Bank & Trust, which we may refer to as the "Bank" or "River Bank." Through the Bank, we provide a broad array of financial services to businesses, business owners, professionals, and consumers. As of September 30, 2025, we operated twenty-three full-service banking offices in Alabama in the cities of Montgomery, Prattville, Millbrook, Wetumpka, Auburn, Opelika, Gadsden, Alexander City, Daphne, Clanton, Dothan, Enterprise, Mobile, Decatur, Huntsville, Saraland, Birmingham, and Florence, Alabama. The Bank also has been approved for full service offices in Tuscaloosa, Alabama and Destin, Florida which are currently operating as loan production offices.
Segments
While our chief decision makers monitor the revenue streams of the various banking products and services, operations are managed and financial performance is evaluated on a Company-wide basis. Accordingly, all of the Company's banking operations are considered by management to be aggregated in one reportable operating segment. Because the overall banking operations comprise substantially all of the consolidated operations, no separate segment disclosures are presented in the accompanying consolidated financial statements.
Overview of Third Quarter 2025 Results
Net income was $10.7 million in the quarter ended September 30, 2025, compared with $8.7 million in the quarter ended September 30, 2024. Several significant measures from the 2025 third quarter include:
•
Net interest margin (taxable equivalent) of 3.48%, compared with 2.90% for the third quarter of 2024.
•
Net interest income increase of $7.4 million for the quarter ended September 30, 2025, representing a 30.78% rate of increase over the quarter ended September 30, 2024.
•
Annualized return on average earning assets for the quarter ended September 30, 2025 of 1.18% compared with 1.05% for the quarter ended September 30, 2024.
•
Annualized return on average equity for the quarter ended September 30, 2025 of 16.07% compared with 15.67% for the quarter ended September 30, 2024.
•
Loan increase of $76.2 million during the quarter ended September 30, 2025, representing a 11.89% annualized growth rate.
•
Securities increase of $28.3 million during the quarter ended September 30, 2025, representing a 15.35% annualized increase for the quarter.
•
Deposit increase of $128.4 million during the quarter ended September 30, 2025, representing a 15.94% annualized growth rate.
•
Stockholders' equity increase of $23.2 million during the quarter ended September 30, 2025, representing a 36.62% annualized increase.
•
Book value per share of $36.57 at September 30, 2025, compared with $30.43 per share at December 31, 2024.
•
Tangible book value per share of $32.90 at September 30, 2025, compared with $26.67 at December 31, 2024.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared based on the application of certain accounting policies, the most significant of which are described in the notes to the financial statements for the year ended December 31, 2024, which are contained in our Annual Report filed on Form 10-K. Certain of these policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to variation and may significantly affect our reported results and financial position for the current period or future periods. The use of estimates, assumptions, and judgment is necessary when financial assets and liabilities are required to be recorded at or adjusted to reflect fair value. Assets carried at fair value inherently result in more financial statement volatility. Fair values and information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices or are provided by other independent third-party sources, when available. When such information is not available, management estimates valuation adjustments. Changes in underlying factors, assumptions or estimates in any of these areas could have a material impact on our future financial condition and results of operations.
The following briefly describes the more complex policies involving a significant amount of judgments about valuation and the application of complex accounting standards and interpretations.
Allowance for Credit Losses
The allowance for credit losses has been determined in accordance with GAAP. The Company is responsible for the timely and periodic determination of the amount of the allowance for credit losses. Management believes that the allowance for credit losses is adequate to cover expected credit losses over the life of the loan portfolio. Although management evaluates available information to determine the adequacy of the allowance for credit losses, the level of allowance is an estimate which is subject to significant judgment and short-term change. Because of uncertainties associated with local and national economic forecasts, the operating and regulatory environment, collateral values and future cash flows from the loan portfolio, it is possible that a material change could occur in the allowance for credit losses in the near term. The evaluation of the adequacy of loan collateral is often based upon estimates and appraisals. Because of changing economic conditions, the valuations determined from such estimates and appraisals may also change.
Accordingly, the Company may ultimately incur losses that vary from management's current estimates. Adjustments to the allowance for credit losses will be reported in the period in which such adjustments become known and can be reasonably estimated. All loan losses are charged to the allowance for credit losses when the loss actually occurs or when the collectability of the principal is unlikely. Recoveries are credited to the allowance at the time of recovery. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for credit losses. As a result of such examinations, the Company may need to recognize additions to the allowance for credit losses based on the regulators' judgments.
In estimating the allowance for credit losses, the Company relies on models and economic forecasts developed by external parties as the primary driver of the allowance for credit losses. These models and forecasts are based on nationwide sets of data. Economic forecasts can change significantly over an economic cycle and have a significant level of uncertainty associated with them. The performance of the models is dependent on the variables used in the models being reasonable proxies for the loan portfolio's performance. However, these variables may not capture all sources of risk within the portfolio. As a result, the Company reviews the results and makes qualitative adjustments to the models to capture limitations of the models as necessary. Such qualitative factors may include adjustments to better capture the imprecision associated with the economic forecasts, and the ability of the models to capture emerging risks within the portfolio that may not be represented in the data. These judgments are evaluated through the Company's review process and revised on a quarterly basis to account for changes in facts and circumstances. It is difficult to estimate how potential changes in any one of the quantitative inputs or qualitative factors might affect the overall allowance for credit losses, and the Company's current assessments may not reflect the potential future impact of changes to those inputs or factors.
Comparison of the Results of Operations for the three and nine months ended September 30, 2025 and 2024
The following is a narrative discussion and analysis of significant changes in our results of operations for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024.
Net Income
During the three months ended September 30, 2025, our net income was $10.7 million, compared to $8.7 million for the three months ended September 30, 2024, an increase of $2.0 million, or 23.36%. The primary reason for the increase in net income for the third quarter of 2025 as compared to the third quarter of 2024 was an increase in net interest income offset by an increase in noninterest expense. During the three months ended September 30, 2025, net interest income was $31.4 million compared to $24.0 million for the three months ended September 30, 2024, an increase of $7.4 million, or 30.78%. This increase is a result of loan growth and higher yields on new and repricing loans. Total noninterest income for the third quarter of 2025 was $2.0 million compared to $4.5 million for the quarter ended September 30, 2024. This decrease in noninterest income was primarily the result of the $3.5 million increase in the net loss on sales of investment securities. Total noninterest expense in the third quarter of 2025 increased $2.4 million, or 15.36%, from the third quarter of 2024. The most significant noninterest expense continues to be salaries and employee benefits which increased approximately $1.8 million.
During the nine months ended September 30, 2025, our net income was $31.2 million, compared to $22.1 million for the nine months ended September 30, 2024, an increase of $9.1 million, or 41.23%. The primary reason for the increase in net income for the third quarter of 2025 as compared to the third quarter of 2024 was an increase in net interest income offset by an increase in noninterest expense. During the nine months ended September 30, 2025, net interest income was $88.6 million compared to $68.1 million for the nine months ended September 30, 2024, an increase of $20.5 million, or 30.10%. This increase is a result of loan growth and higher yields on new and repricing loans. Total noninterest income for the first nine months of 2025 was $9.0 million compared to $11.3 million in the first nine months of 2024. This decrease in noninterest income was primarily the result of the loss on sales of investment securities which totaled $7.0 million in the first nine months of 2025 compared to $1.4 million in the first nine months of 2024. Total noninterest expense in the third quarter of 2025 increased $5.8 million, or 12.45%, from the third quarter of 2024. The most significant increases were attributable to the $3.8 million increase in salaries and employee benefits.
Net Interest Income and Net Interest Margin Analysis
The largest component of our net income is net interest income - the difference between the income earned on interest earning assets and the interest paid on deposits and borrowed funds used to support assets. Net interest income divided by average interest earning assets represents our net interest margin. The major factors that affect net interest income and net interest margin are changes in volumes, the yield on interest earning assets and the cost of interest bearing liabilities. Our net interest margin can also be affected by economic conditions, the competitive environment, loan demand, and deposit flow. Management's ability to respond to changes in these factors by using effective asset-liability management techniques is critical to maintaining the stability of the net interest margin and the primary source of earnings. This is discussed in greater detail under the heading "Interest Sensitivity and Market Risk".
Comparison of net interest income for the three months ended September 30, 2025 and 2024
The following table shows, for the three months ended September 30, 2025 and 2024, the average balances of each principal category of our earning assets and interest bearing liabilities and the average taxable equivalent yields on assets and average costs of liabilities. These yields and costs are calculated by dividing the income or expense by the average daily balance of the associated assets or liabilities (amounts in thousands).
|
Three Months Ended September 30, 2025 |
Three Months Ended September 30, 2024 |
||||||||||||||||||||||
|
Interest |
Interest |
||||||||||||||||||||||
|
Average |
Income/ |
Average |
Average |
Income/ |
Average |
||||||||||||||||||
|
Balance |
Expense |
Yield/Rate |
Balance |
Expense |
Yield/Rate |
||||||||||||||||||
|
Interest earning assets |
|||||||||||||||||||||||
|
Loans |
$ |
2,594,511 |
$ |
43,119 |
6.59 |
% |
$ |
2,389,722 |
$ |
38,223 |
6.35 |
% |
|||||||||||
|
Mortgage loans held for sale |
9,127 |
102 |
4.44 |
% |
6,291 |
86 |
5.40 |
% |
|||||||||||||||
|
Investment securities: |
|||||||||||||||||||||||
|
Taxable securities |
727,311 |
4,924 |
2.69 |
% |
744,814 |
3,672 |
1.95 |
% |
|||||||||||||||
|
Tax-exempt securities |
77,075 |
672 |
3.46 |
% |
64,806 |
473 |
2.90 |
% |
|||||||||||||||
|
Interest bearing balances in other banks |
164,712 |
1,870 |
4.50 |
% |
85,820 |
1,177 |
5.44 |
% |
|||||||||||||||
|
Federal funds sold |
35,130 |
396 |
4.47 |
% |
13,102 |
180 |
5.44 |
% |
|||||||||||||||
|
Total interest earning assets |
$ |
3,607,866 |
$ |
51,083 |
5.62 |
% |
$ |
3,304,555 |
$ |
43,811 |
5.26 |
% |
|||||||||||
|
Interest bearing liabilities |
|||||||||||||||||||||||
|
Interest bearing transaction accounts |
$ |
798,435 |
$ |
3,324 |
1.65 |
% |
$ |
700,018 |
$ |
2,983 |
1.69 |
% |
|||||||||||
|
Savings and money market accounts |
1,066,405 |
7,029 |
2.61 |
% |
982,656 |
7,250 |
2.93 |
% |
|||||||||||||||
|
Time deposits |
741,452 |
7,206 |
3.86 |
% |
666,044 |
7,350 |
4.38 |
% |
|||||||||||||||
|
Short-term borrowings |
2 |
- |
0.00 |
% |
13,852 |
118 |
3.38 |
% |
|||||||||||||||
|
Federal Home Loan Bank advances |
150,000 |
1,498 |
3.96 |
% |
150,000 |
1,502 |
3.97 |
% |
|||||||||||||||
|
Subordinated debentures |
40,000 |
418 |
4.14 |
% |
40,000 |
418 |
4.14 |
% |
|||||||||||||||
|
Total interest bearing liabilities |
$ |
2,796,294 |
$ |
19,475 |
2.76 |
% |
$ |
2,552,570 |
$ |
19,621 |
3.05 |
% |
|||||||||||
|
Noninterest-bearing funding of earning assets |
811,572 |
- |
0.00 |
% |
751,985 |
- |
0.00 |
% |
|||||||||||||||
|
Total cost of funding earning assets |
$ |
3,607,866 |
$ |
19,475 |
2.14 |
% |
$ |
3,304,555 |
$ |
19,621 |
2.36 |
% |
|||||||||||
|
Net interest rate spread |
2.86 |
% |
2.21 |
% |
|||||||||||||||||||
|
Net interest income/margin (taxable equivalent) |
$ |
31,608 |
3.48 |
% |
$ |
24,190 |
2.90 |
% |
|||||||||||||||
|
Tax equivalent adjustment |
(253 |
) |
(214 |
) |
|||||||||||||||||||
|
Net interest income/margin |
$ |
31,355 |
3.45 |
% |
$ |
23,976 |
2.88 |
% |
|||||||||||||||
The following table reflects, for the three months ended September 30, 2025 and 2024, the changes in our net interest income due to variances in the volume of interest earning assets and interest bearing liabilities and variances in the associated rates earned or paid on these assets and liabilities (amounts in thousands).
|
Three Months Ended September 30, 2025 vs. |
|||||||||||
|
Three Months Ended September 30, 2024 |
|||||||||||
|
Variance |
|||||||||||
|
due to |
|||||||||||
|
Volume |
Yield/Rate |
Total |
|||||||||
|
Interest earning assets |
|||||||||||
|
Loans |
$ |
3,392 |
$ |
1,504 |
$ |
4,896 |
|||||
|
Mortgage loans held for sale |
38 |
(22 |
) |
16 |
|||||||
|
Investment securities: |
|||||||||||
|
Taxable securities |
(86 |
) |
1,338 |
1,252 |
|||||||
|
Tax-exempt securities |
92 |
107 |
199 |
||||||||
|
Interest bearing balances in other banks |
1,092 |
(399 |
) |
693 |
|||||||
|
Federal funds sold |
304 |
(88 |
) |
216 |
|||||||
|
Total interest earning assets |
$ |
4,832 |
$ |
2,440 |
$ |
7,272 |
|||||
|
Interest bearing liabilities |
|||||||||||
|
Interest bearing transaction accounts |
$ |
422 |
$ |
(81 |
) |
$ |
341 |
||||
|
Savings and money market accounts |
621 |
(842 |
) |
(221 |
) |
||||||
|
Time deposits |
834 |
(978 |
) |
(144 |
) |
||||||
|
Short-term borrowings |
(118 |
) |
- |
(118 |
) |
||||||
|
Federal Home Loan Bank advances |
- |
(4 |
) |
(4 |
) |
||||||
|
Subordinated debentures |
- |
- |
- |
||||||||
|
Total interest bearing liabilities |
$ |
1,759 |
$ |
(1,905 |
) |
$ |
(146 |
) |
|||
|
Net interest income |
|||||||||||
|
Net interest income (taxable equivalent) |
$ |
3,073 |
$ |
4,345 |
$ |
7,418 |
|||||
|
Taxable equivalent adjustment |
(11 |
) |
(28 |
) |
(39 |
) |
|||||
|
Net interest income |
$ |
3,062 |
$ |
4,317 |
$ |
7,379 |
|||||
Total interest income for the three months ended September 30, 2025 was $50.8 million and total interest expense was $19.5 million, resulting in net interest income of $31.4 million for the period. For the same period of 2024, total interest income was $43.6 million and total interest expense was $19.6 million, resulting in net interest income of $24.0 million for the period. This represents a 30.78% increase in net interest income when comparing the same period from 2025 and 2024. When comparing the variances related to interest income for the three months ended September 30, 2025 and 2024, the increase was primarily attributed to increases in average volumes in loans and loan yields. The volume related increase in interest income for the three months ended September 30, 2025 was accompanied by an increase in the yield on loans and investment securities. When comparing variances related to interest expense for the three months ended September 30, 2025 and 2024, the decrease primarily resulted from a decrease in deposit interest rates. The decrease in interest expense resulting from interest rate decreases was partially offset by increase in the average volume of deposits.
Comparison of net interest income for the nine months ended September 30, 2025 and 2024
The following table shows, for the nine months ended September 30, 2025 and 2024, the average balances of each principal category of our earning assets and interest bearing liabilities and the average taxable equivalent yields on assets and average costs of liabilities. These yields and costs are calculated by dividing the income or expense by the average daily balance of the associated assets or liabilities (amounts in thousands).
|
Nine Months Ended September 30, 2025 |
Nine Months Ended September 30, 2024 |
||||||||||||||||||||||
|
Interest |
Interest |
||||||||||||||||||||||
|
Average |
Income/ |
Average |
Average |
Income/ |
Average |
||||||||||||||||||
|
Balance |
Expense |
Yield/Rate |
Balance |
Expense |
Yield/Rate |
||||||||||||||||||
|
Interest earning assets |
|||||||||||||||||||||||
|
Loans |
$ |
2,549,652 |
$ |
124,549 |
6.53 |
% |
$ |
2,315,031 |
$ |
107,772 |
6.20 |
% |
|||||||||||
|
Mortgage loans held for sale |
8,368 |
301 |
4.81 |
% |
5,617 |
227 |
5.38 |
% |
|||||||||||||||
|
Investment securities: |
|||||||||||||||||||||||
|
Taxable securities |
736,118 |
14,437 |
2.62 |
% |
741,233 |
10,529 |
1.89 |
% |
|||||||||||||||
|
Tax-exempt securities |
71,623 |
1,736 |
3.24 |
% |
64,982 |
1,399 |
2.87 |
% |
|||||||||||||||
|
Interest bearing balances in other banks |
126,127 |
4,277 |
4.53 |
% |
97,142 |
3,987 |
5.47 |
% |
|||||||||||||||
|
Federal funds sold |
22,396 |
753 |
4.50 |
% |
23,274 |
956 |
5.47 |
% |
|||||||||||||||
|
Total interest earning assets |
$ |
3,514,284 |
$ |
146,053 |
5.48 |
% |
$ |
3,247,279 |
$ |
124,870 |
5.05 |
% |
|||||||||||
|
Interest bearing liabilities |
|||||||||||||||||||||||
|
Interest bearing transaction accounts |
$ |
769,438 |
$ |
9,266 |
1.61 |
% |
$ |
688,013 |
$ |
8,641 |
1.67 |
% |
|||||||||||
|
Savings and money market accounts |
1,033,184 |
20,292 |
2.63 |
% |
947,622 |
20,215 |
2.84 |
% |
|||||||||||||||
|
Time deposits |
721,350 |
21,286 |
3.95 |
% |
615,458 |
19,692 |
4.26 |
% |
|||||||||||||||
|
Securities sold under repurchase agreements |
6,885 |
172 |
3.34 |
% |
14,651 |
379 |
3.45 |
% |
|||||||||||||||
|
Federal Home Loan Bank advances |
150,201 |
4,451 |
3.96 |
% |
189,033 |
5,908 |
4.16 |
% |
|||||||||||||||
|
Subordinated debentures |
40,000 |
1,249 |
4.17 |
% |
40,000 |
1,253 |
4.17 |
% |
|||||||||||||||
|
Total interest bearing liabilities |
$ |
2,721,058 |
$ |
56,716 |
2.79 |
% |
$ |
2,494,777 |
$ |
56,088 |
2.99 |
% |
|||||||||||
|
Noninterest-bearing funding of earning assets |
793,226 |
- |
0.00 |
% |
752,502 |
- |
0.00 |
% |
|||||||||||||||
|
Total cost of funding earning assets |
$ |
3,514,284 |
$ |
56,716 |
2.16 |
% |
$ |
3,247,279 |
$ |
56,088 |
2.30 |
% |
|||||||||||
|
Net interest rate spread |
2.69 |
% |
2.06 |
% |
|||||||||||||||||||
|
Net interest income/margin (taxable equivalent) |
$ |
89,337 |
3.40 |
% |
$ |
68,782 |
2.82 |
% |
|||||||||||||||
|
Tax equivalent adjustment |
(696 |
) |
(649 |
) |
|||||||||||||||||||
|
Net interest income/margin |
$ |
88,641 |
3.37 |
% |
$ |
68,133 |
2.79 |
% |
|||||||||||||||
The following table reflects, for the nine months ended September 30, 2025 and 2024, the changes in our net interest income due to variances in the volume of interest earning assets and interest bearing liabilities and variances in the associated rates earned or paid on these assets and liabilities (amounts in thousands).
|
Nine Months Ended September 30, 2025 vs. |
|||||||||||
|
Nine Months Ended September 30, 2024 |
|||||||||||
|
Variance |
|||||||||||
|
due to |
|||||||||||
|
Volume |
Yield/Rate |
Total |
|||||||||
|
Interest earning assets |
|||||||||||
|
Loans |
$ |
10,865 |
$ |
5,912 |
$ |
16,777 |
|||||
|
Mortgage loans held for sale |
110 |
(36 |
) |
74 |
|||||||
|
Investment securities: |
|||||||||||
|
Taxable securities |
(56 |
) |
3,964 |
3,908 |
|||||||
|
Tax-exempt securities |
144 |
193 |
337 |
||||||||
|
Interest bearing balances in other banks |
1,186 |
(896 |
) |
290 |
|||||||
|
Federal funds sold |
(35 |
) |
(168 |
) |
(203 |
) |
|||||
|
Total interest earning assets |
$ |
12,214 |
$ |
8,969 |
$ |
21,183 |
|||||
|
Interest bearing liabilities |
|||||||||||
|
Interest bearing transaction accounts |
$ |
1,023 |
$ |
(398 |
) |
$ |
625 |
||||
|
Savings and money market accounts |
1,823 |
(1,746 |
) |
77 |
|||||||
|
Time deposits |
3,382 |
(1,788 |
) |
1,594 |
|||||||
|
Short-term debt |
(201 |
) |
(6 |
) |
(207 |
) |
|||||
|
Federal Home Loan Bank advances |
(1,210 |
) |
(247 |
) |
(1,457 |
) |
|||||
|
Subordinated debentures |
(4 |
) |
- |
(4 |
) |
||||||
|
Total interest bearing liabilities |
$ |
4,813 |
$ |
(4,185 |
) |
$ |
628 |
||||
|
Net interest income |
|||||||||||
|
Net interest income (taxable equivalent) |
$ |
7,401 |
$ |
13,154 |
$ |
20,555 |
|||||
|
Taxable equivalent adjustment |
(6 |
) |
(41 |
) |
(47 |
) |
|||||
|
Net interest income |
$ |
7,395 |
$ |
13,113 |
$ |
20,508 |
|||||
Total interest income for the nine months ended September 30, 2025 was $145.4 million and total interest expense was $56.7 million, resulting in net interest income of $88.6 million for the period. For the same period of 2024, total interest income was $124.2 million and total interest expense was $56.1 million, resulting in net interest income of $68.1 million for the period. This represents a 30.10% increase in net interest income when comparing the same period from 2025 and 2024. When comparing the variances related to interest income for the nine months ended September 30, 2025 and 2024, the increase was primarily attributed to increases in average volumes in loans and loan yields. The volume related increase in interest income for the nine months ended September 30, 2025 was accompanied by an increase in the yield on loans and investment securities. When comparing variances related to interest expense for the nine months ended September 30, 2025 and 2024, the increase primarily resulted from an increase in deposits with the largest increase in time deposits. The increase in interest expense resulting from an increase in deposits was partially offset by a decrease in deposit interest rates.
Provision for Credit Losses
The provision for credit losses represents a charge to earnings necessary to establish an allowance for credit losses that, in management's evaluation, is adequate to provide coverage for all expected credit losses. As a result of evaluating the allowance for credit losses at September 30, 2025, management recorded a provision for credit losses of $1.69 million in the third quarter of 2025 compared to $1.33 million in the third quarter of 2024. The increased provision for credit losses allocated was primarily due to the growth of our overall loan portfolio. In management's evaluation, our allowance for credit losses reflects an amount we believe appropriate, based on our allowance assessment methodology, to adequately cover all expected future losses as of the date the allowance is determined.
Noninterest Income
In addition to net interest income, we generate various types of noninterest income from our operations. Our banking operations generate revenue from service charges and fees mainly on deposit accounts. Our mortgage division generates revenue from originating and selling mortgage loans. Our investment brokerage division generates revenue through a revenue-sharing relationship with a registered broker-dealer. We also own life insurance policies on several key employees and record income on the increase in the cash surrender value of these policies.
The following table sets forth the principal components of noninterest income for the periods indicated (amounts in thousands).
|
For the Three Months |
For the Nine Months |
|||||||||||||||
|
Ended September 30, |
Ended September 30, |
|||||||||||||||
|
2025 |
2024 |
2025 |
2024 |
|||||||||||||
|
Service charges and fees |
$ |
2,312 |
$ |
2,115 |
$ |
6,671 |
$ |
6,172 |
||||||||
|
Investment brokerage revenue |
372 |
209 |
921 |
573 |
||||||||||||
|
Mortgage operations |
1,702 |
1,221 |
4,559 |
3,301 |
||||||||||||
|
Bank owned life insurance income |
434 |
395 |
1,250 |
1,091 |
||||||||||||
|
Net (loss) gain on sales of investment securities |
(3,472 |
) |
73 |
(6,970 |
) |
(1,359 |
) |
|||||||||
|
Other noninterest income |
679 |
527 |
2,533 |
1,571 |
||||||||||||
|
Total noninterest income |
$ |
2,027 |
$ |
4,540 |
$ |
8,964 |
$ |
11,349 |
||||||||
Noninterest income for the three months ended September 30, 2025 was $2.0 million compared to $4.5 million for the same period in 2024. The most significant increase in noninterest income was due to the $481.0 thousand increase in secondary market mortgage operations while the most significant decrease was an overall $3.5 million loss on sale of investment securities.
Noninterest income for the nine months ended September 30, 2025 was $9.0 million compared to $11.3 million for the same period in 2024. The most significant decrease in noninterest income was due to to a $5.6 million increase in the loss on sales of investment securities while the most significant increase was an overall $963 thousand increase in other noninterest income with $902 thousand of the income coming as a result of one time contract revenue negotiations.
Noninterest Expense
Noninterest expenses consist primarily of salaries and employee benefits, building occupancy and equipment expenses, advertising and promotion expenses, data processing expenses, legal and professional services and miscellaneous other operating expenses.
The following table sets forth the principal components of noninterest expense for the periods indicated (amounts in thousands).
|
For the Three Months |
For the Nine Months |
|||||||||||||||
|
Ended September 30, |
Ended September 30, |
|||||||||||||||
|
2025 |
2024 |
2025 |
2024 |
|||||||||||||
|
Salaries and employee benefits |
$ |
11,286 |
$ |
9,533 |
$ |
32,007 |
$ |
28,205 |
||||||||
|
Occupancy expenses |
1,100 |
1,017 |
3,159 |
2,963 |
||||||||||||
|
Equipment rentals, depreciation, and maintenance |
572 |
572 |
1,655 |
1,617 |
||||||||||||
|
Telephone and communications |
108 |
106 |
329 |
372 |
||||||||||||
|
Advertising and business development |
352 |
269 |
879 |
712 |
||||||||||||
|
Data processing |
1,099 |
1,093 |
3,324 |
3,121 |
||||||||||||
|
Foreclosed assets, net |
111 |
156 |
84 |
257 |
||||||||||||
|
Federal deposit insurance and other regulatory assessments |
620 |
747 |
2,127 |
2,176 |
||||||||||||
|
Legal and other professional services |
456 |
261 |
2,084 |
875 |
||||||||||||
|
Other operating expense |
2,419 |
1,956 |
6,660 |
6,218 |
||||||||||||
|
Total noninterest expense |
$ |
18,123 |
$ |
15,710 |
$ |
52,308 |
$ |
46,516 |
||||||||
Noninterest expense for the three months ended September 30, 2025 totaled $18.1 million compared with $15.7 million for the same period of 2024. The overall increase was primarily a result of salaries and employee benefits. Salaries and employee benefits increased $1.8 million, or 18.39%, to $11.3 million in the third quarter of 2025 from $9.5 million in the third quarter of 2024.
Noninterest expense for the nine months ended September 30, 2025 totaled $52.3 million compared with $46.5 million for the same period of 2024. The overall increase was primarily a result of legal and other professional services and salaries and employee benefits. Legal and other professional services increased $1.2 million, or 138.17%, to $2.1 million in the first nine months of 2025 from $875 thousand in the first nine months of 2024. The most significant increase in legal and other professional services was $920 thousand of expense coming from professional service contract negotiations. Salaries and employee benefits increased $3.8 million, or 13.48%, to $32.0 million in the in the first nine months of 2025 from $28.2 million in the first nine months of 2024.
Provision for Income Taxes
We recognized income tax expense of $2.9 million for the three months ended September 30, 2025, compared to $2.8 million for the three months ended September 30, 2024. The effective tax rate for the three months ended September 30, 2025 was 21.4% compared to 24.6% for the same period in 2024. The effective tax rate is affected by levels of items of income that are not subject to federal and/or state taxation and by levels of items of expense that are not deductible for federal and/or state income tax purposes.
We recognized income tax expense of $9.0 million for the nine months ended September 30, 2025, compared to $6.9 million for the nine months ended September 30, 2024. The effective tax rate for the nine months ended September 30, 2025 was 22.4% compared to 23.8% for the same period in 2024. The effective tax rate is affected by levels of items of income that are not subject to federal and/or state taxation and by levels of items of expense that are not deductible for federal and/or state income tax purposes.
Comparison of Financial Condition at September 30, 2025 and December 31, 2024
Overview
Our total assets increased $262.4 million, or 7.33%, from December 31, 2024 to September 30, 2025. Loans, net of deferred fees and discounts, increased $153.4 million, or 6.17%, from December 31, 2024 to September 30, 2025. Securities available-for-sale increased by $37.0 million, or 6.06%, and securities held-to-maturity decreased by $3.7 million, or 2.99%, from December 31, 2024 to September 30, 2025, respectively. Cash and cash equivalents increased $58.3 million, or 31.39% from December 31, 2024 to September 30, 2025. Total deposits increased $283.7 million, or 9.25%, from December 31, 2024 to September 30, 2025 which funded a majority of our loan growth. Total stockholders' equity increased $49.8 million, or 21.94% from December 31, 2024 to September 30, 2025.
Investment Securities
We use our securities portfolio primarily to enhance our overall yield on interest-earning assets and as a source of liquidity, as a tool to manage our balance sheet sensitivity and regulatory capital ratios, and as a base upon which to pledge assets for public deposits. When our liquidity position exceeds current needs and our expected loan demand, other investments are considered as a secondary earnings alternative. As investments mature, they are used to meet current cash needs, or they are reinvested to maintain our desired liquidity position. We have designated the majority of our securities as available-for-sale to provide flexibility, in case an immediate need for liquidity arises, and we believe that the composition of the portfolio offers needed flexibility in managing our liquidity position and interest rate sensitivity without adversely impacting our regulatory capital levels. In certain cases, we have designated securities as held-to-maturity to protect capital from changes in the value of the securities portfolio. Securities available-for-sale are reported at fair value with unrealized gains or losses reported as a separate component of other comprehensive income, net of related deferred taxes while securities held-to-maturity are reported at amortized cost. Purchase premiums and discounts are recognized in income using the interest method over the terms of the securities.
During the nine months ended September 30, 2025, we purchased investment securities totaling $198.2 million and sold investment securities with proceeds received of $135.1 million including net realized losses of $7.0 million.
The following tables summarize the amortized cost, gross unrealized gains, gross unrealized losses, and fair value of debt securities at September 30, 2025 and December 31, 2024 (amounts in thousands).
|
Amortized |
Gross |
Gross |
Fair Value |
|||||||||||||
|
September 30, 2025: |
||||||||||||||||
|
Securities available-for-sale: |
||||||||||||||||
|
Residential mortgage-backed |
$ |
535,465 |
$ |
2,429 |
$ |
(40,219 |
) |
$ |
497,675 |
|||||||
|
U.S. treasury securities |
35,158 |
- |
(1,111 |
) |
34,047 |
|||||||||||
|
U.S. govt. sponsored enterprises |
17,776 |
- |
(1,075 |
) |
16,701 |
|||||||||||
|
State, county, and municipal |
95,414 |
265 |
(8,975 |
) |
86,704 |
|||||||||||
|
Corporate debt obligations |
13,689 |
40 |
(989 |
) |
12,740 |
|||||||||||
|
Total available-for-sale |
$ |
697,502 |
$ |
2,734 |
$ |
(52,369 |
) |
$ |
647,867 |
|||||||
|
Amortized |
Gross |
Gross |
Fair Value |
|||||||||||||
|
September 30, 2025: |
||||||||||||||||
|
Securities held-to-maturity: |
||||||||||||||||
|
Residential mortgage-backed |
$ |
55,662 |
$ |
- |
$ |
(9,964 |
) |
$ |
45,698 |
|||||||
|
State, county, and municipal |
62,748 |
- |
(10,074 |
) |
52,674 |
|||||||||||
|
Total held-to-maturity |
$ |
118,410 |
$ |
- |
$ |
(20,038 |
) |
$ |
98,372 |
|||||||
|
Amortized |
Gross |
Gross |
Fair Value |
|||||||||||||
|
December 31, 2024: |
||||||||||||||||
|
Securities available-for-sale: |
||||||||||||||||
|
Residential mortgage-backed |
$ |
457,157 |
$ |
- |
$ |
(58,415 |
) |
$ |
398,742 |
|||||||
|
U.S. treasury securities |
90,508 |
- |
(5,844 |
) |
84,664 |
|||||||||||
|
U.S. govt. sponsored enterprises |
49,354 |
- |
(3,818 |
) |
45,536 |
|||||||||||
|
State, county, and municipal |
77,158 |
- |
(10,544 |
) |
66,614 |
|||||||||||
|
Corporate debt obligations |
16,714 |
3 |
(1,409 |
) |
15,308 |
|||||||||||
|
Total available-for-sale |
$ |
690,891 |
$ |
3 |
$ |
(80,030 |
) |
$ |
610,864 |
|||||||
|
Amortized |
Gross |
Gross |
Fair Value |
|||||||||||||
|
December 31, 2024: |
||||||||||||||||
|
Securities held-to-maturity: |
||||||||||||||||
|
Residential mortgage-backed |
$ |
59,274 |
$ |
- |
$ |
(12,786 |
) |
$ |
46,488 |
|||||||
|
State, county, and municipal |
62,787 |
- |
(12,337 |
) |
50,450 |
|||||||||||
|
Total held-to-maturity |
$ |
122,061 |
$ |
- |
$ |
(25,123 |
) |
$ |
96,938 |
|||||||
Loans
Loans are the largest category of interest earning assets and typically provide higher yields than other types of interest earning assets. Associated with the higher loan yields are the inherent credit and liquidity risks which management attempts to control and counterbalance. Total loans averaged $2.59 billion during the three months ended September 30, 2025, or 71.9% of average interest earning assets, as compared to $2.39 billion, or 72.3% of average interest earning assets, for the three months ended September 30, 2024. At September 30, 2025, total loans were $2.64 billion, compared to $2.49 billion at December 31, 2024, an increase of $153.4 million, or 6.17%.
The organic, or non-acquired, growth in our loan portfolio is attributable both to our ability to attract new customers and to our ability to benefit from the overall growth in our markets. We seek to build relationships with new customers, maintain and even improve our relationships with existing customers, and encourage our bankers to be involved in their communities. We expect our bankers to recognize business development efforts and to maintain healthy relationships with clients, and our philosophy is to be responsive to customer needs by providing decisions in a timely manner.
The following table provides a summary of the loan portfolio as of September 30, 2025, and December 31, 2024.
|
September 30, 2025 |
December 31, 2024 |
|||||||||||||||
|
Amount |
% of Total |
Amount |
% of Total |
|||||||||||||
|
Residential real estate: |
||||||||||||||||
|
Closed-end 1-4 family - first lien |
$ |
906,720 |
34.8 |
% |
$ |
869,415 |
35.4 |
% |
||||||||
|
Closed-end 1-4 family - junior lien |
18,879 |
0.7 |
% |
14,145 |
0.6 |
% |
||||||||||
|
Multi-family |
51,733 |
2.0 |
% |
19,651 |
0.8 |
% |
||||||||||
|
Total residential real estate |
977,332 |
37.5 |
% |
903,211 |
36.8 |
% |
||||||||||
|
Commercial real estate: |
||||||||||||||||
|
Nonfarm nonresidential |
691,354 |
26.5 |
% |
637,589 |
26.0 |
% |
||||||||||
|
Farmland |
82,886 |
3.2 |
% |
75,184 |
3.1 |
% |
||||||||||
|
Total commercial real estate |
774,240 |
29.7 |
% |
712,773 |
29.1 |
% |
||||||||||
|
Construction and land development: |
||||||||||||||||
|
Residential |
118,577 |
4.6 |
% |
101,986 |
4.2 |
% |
||||||||||
|
Other |
141,105 |
5.4 |
% |
190,955 |
7.8 |
% |
||||||||||
|
Total construction and land development |
259,682 |
10.0 |
% |
292,941 |
12.0 |
% |
||||||||||
|
Home equity lines of credit |
148,158 |
5.7 |
% |
124,064 |
5.1 |
% |
||||||||||
|
Commercial loans: |
||||||||||||||||
|
Other commercial loans |
317,345 |
12.2 |
% |
291,762 |
11.9 |
% |
||||||||||
|
Agricultural |
88,095 |
3.4 |
% |
76,348 |
3.1 |
% |
||||||||||
|
State, county, and municipal loans |
26,916 |
0.9 |
% |
33,847 |
1.2 |
% |
||||||||||
|
Total commercial loans |
432,356 |
16.5 |
% |
401,957 |
16.2 |
% |
||||||||||
|
Consumer loans |
57,051 |
2.2 |
% |
60,522 |
2.5 |
% |
||||||||||
|
Total gross loans |
2,648,819 |
101.6 |
% |
2,495,468 |
101.7 |
% |
||||||||||
|
Allowance for credit losses |
(35,043 |
) |
-1.3 |
% |
(32,088 |
) |
-1.3 |
% |
||||||||
|
Net discounts |
(6 |
) |
0.0 |
% |
(13 |
) |
0.0 |
% |
||||||||
|
Net deferred loan fees |
(8,596 |
) |
-0.3 |
% |
(8,633 |
) |
-0.4 |
% |
||||||||
|
Net loans |
$ |
2,605,174 |
100.0 |
% |
$ |
2,454,734 |
100.0 |
% |
||||||||
In this context, a "real estate loan" is defined as any loan, secured by real estate, regardless of the purpose of the loan. It is common practice for financial institutions in our market areas, and for our Bank, to obtain a security interest or lien in real estate whenever possible, in addition to any other available collateral. This collateral is taken to reinforce the likelihood of the ultimate repayment of the loan and tends to increase the magnitude of the real estate loan portfolio component. In general, we prefer real estate collateral to many other potential collateral sources, such as accounts receivable, inventory and equipment.
Real estate loans are the largest component of our loan portfolio and include residential real estate loans, commercial real estate loans, and construction and land development loans. At September 30, 2025, this category totaled $2.01 billion, or 75.93% of total gross loans, compared to $1.91 billion, or 76.50%, at December 31, 2024. Real estate loans increased $102.3 million, or 5.36%, during the period December 31, 2024 to September 30, 2025. Commercial loans increased $30.4 million, or 7.56% during the same period. Our management team and lending officers have a great deal of experience and expertise in real estate lending and commercial lending.
The federal regulatory agencies issued two "guidance" documents that have a significant impact on real estate related lending and, thus, on the operations of the Bank. One part of the guidance could require lenders to restrict lending secured primarily by certain categories of commercial real estate to a level of 300% of their capital or to raise additional capital. This factor, combined with the current economic environment, could affect the Bank's lending strategy away from, or to limit its expansion of, commercial real estate lending, which has been a material part of River Financial Corporation's lending strategy. This could also have a negative impact on our lending and profitability. Management actively monitors the composition of the Bank's loan portfolio, focusing on concentrations of credit, and the results of that monitoring activity are periodically reported to the Board of Directors.
The other guidance relates to the structuring of certain types of mortgages that allow negative amortization of consumer mortgage loans. Although the Bank does not engage at present in lending using these types of instruments, the guidance could have the effect of making the Bank less competitive in consumer mortgage lending if the local market is driving the demand for such an offering.
The repayment of loans is a source of additional liquidity for us. The following table sets forth our variable rate and fixed rate loans maturing within specific intervals at September 30, 2025.
LOAN MATURITY AND SENSITIVITY TO CHANGES IN INTEREST RATES
|
Over one |
Over five |
|||||||||||||||||||
|
One year |
year through |
years through |
Over fifteen |
|||||||||||||||||
|
Variable Rate Loans: |
or less |
five years |
fifteen years |
years |
Total |
|||||||||||||||
|
Residential real estate: |
||||||||||||||||||||
|
Closed-end 1-4 family - first lien |
$ |
9,365 |
$ |
8,910 |
$ |
7,662 |
$ |
526,771 |
$ |
552,708 |
||||||||||
|
Closed-end 1-4 family - junior lien |
1,406 |
4,410 |
174 |
- |
5,990 |
|||||||||||||||
|
Multi-family |
- |
19,723 |
- |
- |
19,723 |
|||||||||||||||
|
Total residential real estate |
10,771 |
33,043 |
7,836 |
526,771 |
578,421 |
|||||||||||||||
|
Commercial real estate: |
||||||||||||||||||||
|
Nonfarm nonresidential |
13,681 |
34,592 |
7,061 |
- |
55,334 |
|||||||||||||||
|
Farmland |
1,408 |
2,038 |
- |
250 |
3,696 |
|||||||||||||||
|
Total commercial real estate |
15,089 |
36,630 |
7,061 |
250 |
59,030 |
|||||||||||||||
|
Construction and land development: |
||||||||||||||||||||
|
Residential |
34,113 |
3,056 |
149 |
23,888 |
61,206 |
|||||||||||||||
|
Other |
38,099 |
11,535 |
4,523 |
5,013 |
59,170 |
|||||||||||||||
|
Total construction and land development |
72,212 |
14,591 |
4,672 |
28,901 |
120,376 |
|||||||||||||||
|
Home equity lines of credit |
8,839 |
6,535 |
109,685 |
- |
125,059 |
|||||||||||||||
|
Commercial loans: |
||||||||||||||||||||
|
Other commercial loans |
71,618 |
38,003 |
13,196 |
- |
122,817 |
|||||||||||||||
|
Agricultural |
63,530 |
1,779 |
- |
- |
65,309 |
|||||||||||||||
|
State, county, and municipal loans |
90 |
- |
- |
- |
90 |
|||||||||||||||
|
Total commercial loans |
135,238 |
39,782 |
13,196 |
- |
188,216 |
|||||||||||||||
|
Consumer loans |
2,777 |
869 |
- |
- |
3,646 |
|||||||||||||||
|
Total gross variable rate loans |
$ |
244,926 |
$ |
131,450 |
$ |
142,450 |
$ |
555,922 |
$ |
1,074,748 |
||||||||||
|
Over one |
Over five |
|||||||||||||||||||
|
One year |
year through |
years through |
Over fifteen |
|||||||||||||||||
|
Fixed Rate Loans: |
or less |
five years |
fifteen years |
years |
Total |
|||||||||||||||
|
Residential real estate: |
||||||||||||||||||||
|
Closed-end 1-4 family - first lien |
$ |
39,447 |
$ |
166,178 |
$ |
52,083 |
$ |
96,304 |
$ |
354,012 |
||||||||||
|
Closed-end 1-4 family - junior lien |
994 |
10,671 |
932 |
292 |
12,889 |
|||||||||||||||
|
Multi-family |
666 |
26,138 |
3,271 |
1,935 |
32,010 |
|||||||||||||||
|
Total residential real estate |
41,107 |
202,987 |
56,286 |
98,531 |
398,911 |
|||||||||||||||
|
Commercial real estate: |
||||||||||||||||||||
|
Nonfarm nonresidential |
62,468 |
346,048 |
223,857 |
3,647 |
636,020 |
|||||||||||||||
|
Farmland |
22,222 |
42,962 |
13,943 |
63 |
79,190 |
|||||||||||||||
|
Total commercial real estate |
84,690 |
389,010 |
237,800 |
3,710 |
715,210 |
|||||||||||||||
|
Construction and land development: |
||||||||||||||||||||
|
Residential |
53,988 |
3,381 |
- |
2 |
57,371 |
|||||||||||||||
|
Other |
23,460 |
44,297 |
13,948 |
230 |
81,935 |
|||||||||||||||
|
Total construction and land development |
77,448 |
47,678 |
13,948 |
232 |
139,306 |
|||||||||||||||
|
Home equity lines of credit |
1,810 |
1,236 |
19,953 |
100 |
23,099 |
|||||||||||||||
|
Commercial loans: |
||||||||||||||||||||
|
Other commercial loans |
24,742 |
129,616 |
40,170 |
- |
194,528 |
|||||||||||||||
|
Agricultural |
6,162 |
15,379 |
1,245 |
- |
22,786 |
|||||||||||||||
|
State, county, and municipal loans |
754 |
11,760 |
14,312 |
- |
26,826 |
|||||||||||||||
|
Total commercial loans |
31,658 |
156,755 |
55,727 |
- |
244,140 |
|||||||||||||||
|
Consumer loans |
7,266 |
27,280 |
18,334 |
525 |
53,405 |
|||||||||||||||
|
Total fixed rate gross loans |
$ |
243,979 |
$ |
824,946 |
$ |
402,048 |
$ |
103,098 |
$ |
1,574,071 |
||||||||||
|
Over one |
Over five |
|||||||||||||||||||
|
One year |
year through |
years through |
Over fifteen |
|||||||||||||||||
|
Total Loans: |
or less |
five years |
fifteen years |
years |
Total |
|||||||||||||||
|
Residential real estate: |
||||||||||||||||||||
|
Closed-end 1-4 family - first lien |
$ |
48,812 |
$ |
175,088 |
$ |
59,745 |
$ |
623,075 |
$ |
906,720 |
||||||||||
|
Closed-end 1-4 family - junior lien |
2,400 |
15,081 |
1,106 |
292 |
18,879 |
|||||||||||||||
|
Multi-family |
666 |
45,861 |
3,271 |
1,935 |
51,733 |
|||||||||||||||
|
Total residential real estate |
51,878 |
236,030 |
64,122 |
625,302 |
977,332 |
|||||||||||||||
|
Commercial real estate: |
||||||||||||||||||||
|
Nonfarm nonresidential |
76,149 |
380,640 |
230,918 |
3,647 |
691,354 |
|||||||||||||||
|
Farmland |
23,630 |
45,000 |
13,943 |
313 |
82,886 |
|||||||||||||||
|
Total commercial real estate |
99,779 |
425,640 |
244,861 |
3,960 |
774,240 |
|||||||||||||||
|
Construction and land development: |
||||||||||||||||||||
|
Residential |
88,101 |
6,437 |
149 |
23,890 |
118,577 |
|||||||||||||||
|
Other |
61,559 |
55,832 |
18,471 |
5,243 |
141,105 |
|||||||||||||||
|
Total construction and land development |
149,660 |
62,269 |
18,620 |
29,133 |
259,682 |
|||||||||||||||
|
Home equity lines of credit |
10,649 |
7,771 |
129,638 |
100 |
148,158 |
|||||||||||||||
|
Commercial loans: |
||||||||||||||||||||
|
Other commercial loans |
96,360 |
167,619 |
53,366 |
- |
317,345 |
|||||||||||||||
|
Agricultural |
69,692 |
17,158 |
1,245 |
- |
88,095 |
|||||||||||||||
|
State, county, and municipal loans |
844 |
11,760 |
14,312 |
- |
26,916 |
|||||||||||||||
|
Total commercial loans |
166,896 |
196,537 |
68,923 |
- |
432,356 |
|||||||||||||||
|
Consumer loans |
10,043 |
28,149 |
18,334 |
525 |
57,051 |
|||||||||||||||
|
Total gross loans |
$ |
488,905 |
$ |
956,396 |
$ |
544,498 |
$ |
659,020 |
$ |
2,648,819 |
||||||||||
The information presented in the table above is based upon the contractual maturities of the individual loans, which may be subject to renewal at their contractual maturity. Renewal of such loans is subject to review and credit approval, as well as modification of terms at their maturity. Consequently, we believe that this treatment presents fairly the maturity structure of the loan portfolio.
Allowance for Credit Losses, Provision for Credit Losses and Asset Quality
Allowance for credit losses and provision for credit losses
The allowance for credit losses represents management's estimate of expected lifetime credit losses in the loan portfolio. Management determines the allowance based on an ongoing evaluation of risk as it correlates to potential losses within the portfolio. Increases to the allowance for credit losses are made by charges to the provision for credit losses. Loans deemed to be uncollectible are charged against the allowance. Recoveries of previously charged-off amounts are credited to the allowance for credit losses.
The Bank recognizes that all significant factors that affect the collectability of the loan portfolio must be considered to determine the estimated credit losses as of the evaluation date. Furthermore, the methodology, in and of itself and even when selectively adjusted by comparison to market and peer data, does not provide a sufficient basis to determine the estimated credit losses. The Bank adjusts the modeled historical losses by a qualitative adjustment to incorporate all significant risks to form a sufficient basis to estimate the credit losses. These qualitative adjustments may increase or reduce reserve levels and include adjustments for lending management experience, loan review and audit results, asset quality and portfolio trends, loan portfolio growth, and concentrations, trends in underlying collateral, as well as external factors and economic conditions not already captured.
Loans that do not share risk characteristics are evaluated on an individual basis. Generally, this population includes loans on non-accrual status, however, they can also include any loan that does not share risk characteristics with its respective pool. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of the collateral at the reporting date unadjusted for selling costs as appropriate. When the expected source of repayment is from a source other than the underlying collateral, impairment will generally be measured based on the present value of expected proceeds discounted at the contractual interest rate.
Management believes the data it uses in determining the allowance for credit losses is sufficient to estimate potential losses in the loan portfolio; however, actual results could differ from management's estimate.
The following table presents a summary of changes in the allowance for credit losses for the periods indicated (amounts in thousands).
|
As of and for the |
As of and for the |
|||||||||||||||
|
Three Months Ended: |
Nine Months Ended: |
|||||||||||||||
|
September 30, |
September 30, |
September 30, |
September 30, |
|||||||||||||
|
2025 |
2024 |
2025 |
2024 |
|||||||||||||
|
Allowance for credit losses at beginning of period |
$ |
33,551 |
$ |
30,916 |
$ |
32,088 |
$ |
28,991 |
||||||||
|
Charge-offs: |
||||||||||||||||
|
Mortgage loans on real estate: |
||||||||||||||||
|
Residential real estate |
26 |
35 |
75 |
35 |
||||||||||||
|
Commercial real estate |
- |
250 |
1,514 |
498 |
||||||||||||
|
Construction and land development |
- |
10 |
- |
29 |
||||||||||||
|
Total mortgage loans on real estate |
26 |
295 |
1,589 |
562 |
||||||||||||
|
Home equity lines of credit |
- |
- |
- |
50 |
||||||||||||
|
Commercial |
209 |
867 |
728 |
1,213 |
||||||||||||
|
Consumer |
26 |
25 |
164 |
126 |
||||||||||||
|
Total |
261 |
1,187 |
2,481 |
1,951 |
||||||||||||
|
Recoveries: |
||||||||||||||||
|
Mortgage loans on real estate: |
||||||||||||||||
|
Residential real estate |
28 |
2 |
40 |
2 |
||||||||||||
|
Commercial real estate |
4 |
3 |
8 |
8 |
||||||||||||
|
Construction and land development |
- |
- |
- |
- |
||||||||||||
|
Total mortgage loans on real estate |
32 |
5 |
48 |
10 |
||||||||||||
|
Home equity lines of credit |
- |
- |
9 |
- |
||||||||||||
|
Commercial |
22 |
14 |
283 |
53 |
||||||||||||
|
Consumer |
13 |
3 |
38 |
13 |
||||||||||||
|
Total |
67 |
22 |
378 |
76 |
||||||||||||
|
Net charge-offs |
194 |
1,165 |
2,103 |
1,875 |
||||||||||||
|
Provision for credit losses |
1,686 |
1,326 |
5,058 |
3,961 |
||||||||||||
|
Allowance for credit losses at end of period |
$ |
35,043 |
$ |
31,077 |
$ |
35,043 |
$ |
31,077 |
||||||||
|
Total loans outstanding, net of deferred loan fees |
2,640,217 |
2,423,683 |
2,640,217 |
2,423,683 |
||||||||||||
|
Average loans outstanding, net of deferred loan fees |
2,594,511 |
2,389,722 |
2,549,652 |
2,315,031 |
||||||||||||
|
Allowance for credit losses to period end loans |
1.33 |
% |
1.28 |
% |
1.33 |
% |
1.28 |
% |
||||||||
|
Net charge-offs to average loans (annualized) |
0.03 |
% |
0.20 |
% |
0.11 |
% |
0.11 |
% |
||||||||
Allocation of the Allowance for Credit Losses
While no portion of the allowance for credits losses is in any way restricted to any individual loan or group of loans and the entire allowance is available to absorb losses from any and all loans, the following table represents management's allocation of the allowance for credit losses to specific loan categories as of the dates indicated (amounts in thousands).
|
September 30, 2025 |
December 31, 2024 |
|||||||||||||||
|
Percent of |
Percent of |
|||||||||||||||
|
Amount |
Total |
Amount |
Total |
|||||||||||||
|
Mortgage loans on real estate: |
||||||||||||||||
|
Residential real estate |
$ |
8,324 |
23.8 |
% |
$ |
7,690 |
24.0 |
% |
||||||||
|
Commercial real estate |
11,591 |
33.1 |
% |
10,629 |
33.1 |
% |
||||||||||
|
Construction and land development |
3,440 |
9.8 |
% |
4,299 |
13.4 |
% |
||||||||||
|
Total mortgage loans on real estate |
23,355 |
66.7 |
% |
22,618 |
70.5 |
% |
||||||||||
|
Home equity lines of credit |
2,294 |
6.5 |
% |
1,887 |
5.9 |
% |
||||||||||
|
Commercial |
8,853 |
25.3 |
% |
7,072 |
22.0 |
% |
||||||||||
|
Consumer |
541 |
1.5 |
% |
511 |
1.6 |
% |
||||||||||
|
Total |
$ |
35,043 |
100.0 |
% |
$ |
32,088 |
100.0 |
% |
||||||||
Nonperforming Assets
The following table presents our nonperforming assets as of the dates indicated (amounts in thousands):
|
September 30, |
December 31, |
|||||||||||
|
2025 |
2024 |
2024 |
||||||||||
|
Nonaccrual loans |
$ |
7,532 |
$ |
11,438 |
$ |
8,513 |
||||||
|
Accruing loans past due 90 days or more |
- |
24 |
8 |
|||||||||
|
Total nonperforming loans |
7,532 |
11,462 |
8,521 |
|||||||||
|
Foreclosed assets |
1,990 |
44 |
130 |
|||||||||
|
Total nonperforming assets |
$ |
9,522 |
$ |
11,506 |
$ |
8,651 |
||||||
|
Allowance for credit losses to period end loans |
1.33 |
% |
1.28 |
% |
1.29 |
% |
||||||
|
Allowance for credit losses to period end nonperforming loans |
465.19 |
% |
271.13 |
% |
376.58 |
% |
||||||
|
Net charge-offs to average loans (annualized) |
0.11 |
% |
0.11 |
% |
0.11 |
% |
||||||
|
Nonperforming assets to period end loans and foreclosed property |
0.36 |
% |
0.47 |
% |
0.35 |
% |
||||||
|
Nonperforming loans to period end loans |
0.29 |
% |
0.47 |
% |
0.34 |
% |
||||||
|
Nonperforming assets to total assets |
0.25 |
% |
0.33 |
% |
0.24 |
% |
||||||
|
Period end loans |
$ |
2,640,217 |
$ |
2,423,683 |
$ |
2,486,822 |
||||||
|
Period end total assets |
$ |
3,844,608 |
$ |
3,496,474 |
$ |
3,582,206 |
||||||
|
Allowance for credit losses |
$ |
35,043 |
$ |
31,077 |
$ |
32,088 |
||||||
|
Average loans for the period |
$ |
2,549,652 |
$ |
2,315,031 |
$ |
2,348,776 |
||||||
|
Net charge-offs for the period |
$ |
2,103 |
$ |
1,875 |
$ |
2,690 |
||||||
|
Period end loans plus foreclosed property |
$ |
2,642,207 |
$ |
2,423,727 |
$ |
2,486,952 |
||||||
Accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions and collection efforts, that the borrower's financial condition is such that the collection of interest is doubtful. In addition to consideration of these factors, loans that are past due 90 days or more are generally placed on nonaccrual status. When a loan is placed on nonaccrual status, all accrued interest on the loan is reversed and deducted from earnings as a reduction of reported interest income. No additional interest is accrued on the loan balance until collection of both principal and interest becomes reasonably certain. Payments received while a loan is on nonaccrual status will generally be applied to the outstanding principal balance. When a problem loan is finally resolved, there may ultimately be an actual write-down or charge-off of the principal balance of the loan that would necessitate additional charges to the allowance for credit losses. The nonperforming loans classification is made up of all loans 90 days or most past due and loans on nonaccrual status.
Deposits
Deposits, which include noninterest bearing demand deposits, interest bearing demand deposits, money market accounts, savings accounts, and time deposits, are the principal source of funds for the Bank. We offer a variety of products designed to attract and retain customers, with primary focus on building and expanding client relationships. Management continues to focus on establishing a comprehensive relationship with consumer and business borrowers, seeking deposits as well as lending relationships.
The following table details the composition of our deposit portfolio as of September 30, 2025, and December 31, 2024.
|
September 30, 2025 |
December 31, 2024 |
|||||||||||||||
|
Percent of |
Percent of |
|||||||||||||||
|
Amount |
Total |
Amount |
Total |
|||||||||||||
|
Demand deposits, non-interest bearing |
$ |
673,698 |
20.1 |
% |
$ |
654,229 |
21.3 |
% |
||||||||
|
Demand deposits, interest bearing |
829,038 |
24.7 |
% |
752,280 |
24.5 |
% |
||||||||||
|
Money market accounts |
955,046 |
28.5 |
% |
856,124 |
27.9 |
% |
||||||||||
|
Savings deposits |
121,707 |
3.6 |
% |
106,269 |
3.5 |
% |
||||||||||
|
Time certificates of $250 thousand or more |
433,071 |
12.9 |
% |
390,906 |
12.7 |
% |
||||||||||
|
Other time certificates |
338,301 |
10.2 |
% |
307,351 |
10.1 |
% |
||||||||||
|
Totals |
$ |
3,350,861 |
100.0 |
% |
$ |
3,067,159 |
100.0 |
% |
||||||||
Total deposits were $3.35 billion at September 30, 2025, an increase of $283.7 million from December 31, 2024 with the increase resulting mainly in the balances of money market accounts and interest bearing demand deposit accounts. Some of our demand deposit accounts are seasonal and have expected balance fluctuations. The seasonality of these demand deposits is related to property tax collections and to agricultural production.
The following table presents the Bank's time certificates of deposits by various maturities as of September 30, 2025 (amounts in thousands).
|
All Time Deposits |
Time Deposits |
Time Deposits |
||||||||||
|
Three months or less |
$ |
242,409 |
$ |
109,133 |
$ |
133,276 |
||||||
|
Greater than three months through six months |
253,280 |
143,762 |
109,518 |
|||||||||
|
Greater than six months through one year |
230,195 |
156,910 |
73,285 |
|||||||||
|
Greater than one year through three years |
41,702 |
22,666 |
19,036 |
|||||||||
|
Greater than three years |
3,786 |
600 |
3,186 |
|||||||||
|
Total |
$ |
771,372 |
$ |
433,071 |
$ |
338,301 |
||||||
Other Funding Sources
We supplement our deposit funding with wholesale funding when needed for balance sheet planning and management or when the terms are attractive and will not disrupt our offering rates in our markets. A source we have used for wholesale funding is the Federal Home Loan Bank of Atlanta (FHLB). The line of credit with the FHLB is secured by pledges of various loans in our loan portfolio. At September 30, 2025, the FHLB line of credit available was $360.1 million and at December 31, 2024 it was $237.0 million. As of September 30, 2025 and December 31, 2024, we had $150 million and $205 million Federal Home Loan Bank advances outstanding, respectively. We also have lines of credit for federal funds borrowings with other banks that totaled $100.0 million at September 30, 2025 and December 31, 2024, respectively. Furthermore, we have pledged certain loans to the Federal Reserve Bank (FRB) to secure a line of credit. At September 30, 2025, the FRB line of credit available was $404.5 million and at December 31, 2024, the FRB line of credit available was $422.1 million. Another source that we have used for wholesale funding is the Federal Reserve Bank discount window. At both September 30, 2025 and December 31, 2024, we had no borrowings outstanding with the Federal Reserve Bank discount window.
On August 9, 2021, the Company entered into a line of credit agreement with ServisFirst Bank for $10 million. The line of credit agreement was amended on March 17, 2023 to increase the line to $20 million. The line of credit is to be used for general capital needs and investments. The line, when drawn, will require quarterly payments of interest only. The line of credit was amended on March 15, 2024 and extended the maturity date 24 months to March 15, 2026. Additionally, the amendment dated March 15, 2024 increased the interest rate float at Wall Street Journal Prime with a floor of 4.50% up from 3.25%. The line of credit is secured by 51% of the Bank's stock.
On March 9, 2021, River Financial Corporation ("the Company") entered into a Subordinated Note Purchase Agreement (the "Purchase Agreement") with the purchasers signatory thereto providing for a private placement of $40 million in aggregate principal amount of 4.00% fixed-to-floating rate Subordinated Notes due March 15, 2031 (the "Notes"). The Notes were issued by the Company to the purchasers at a price equal to 100% of their face amount. Interest on the Notes will accrue from March 9, 2021, and the Company will pay interest semi-annually on March 15th and September 15thof each year, beginning on September 15, 2021, until the Notes mature. The Notes will bear interest at a fixed rate of 4.00% per year, from and including March 9, 2021 to, but excluding, March 15, 2026. From and including March 15, 2026, but excluding the maturity date or early redemption date, the interest rate will reset quarterly at a variable rate equal to the then current three-month term SOFR plus 342 basis points. The Notes may not be prepaid by the Company prior to March 15, 2026. From and after March 15, 2026, the Company may prepay all or, from time to time, any part of the Notes at 100% of the principal amount (plus accrued interest) without penalty, subject to any requirement under Federal Reserve Board regulations to obtain prior approval from the Board of Governors of the Federal Reserve System before making any prepayment. The Notes may also be prepaid by the Company at any time after the occurrence of an event that would preclude the Notes from being included in the Tier 2 Capital of the Company. The Purchase Agreement contains customary representations and warranties, events of default, and affirmative and negative covenants, including the requirement that, subject to certain limitations, the Company restructure any portion of the Notes that ceases to be deemed Tier 2 Capital. The Company used approximately $19.7 million of the net proceeds from the issuance of the Notes to pay off its note with CenterState Bank dated October 31, 2018, including interest accrued on such notes, and the remaining proceeds for general corporate purposes, including providing capital to support the organic growth of its bank subsidiary, River Bank.
On December 15, 2023, the Bank entered into an irrevocable standby letter of credit agreement with the FHLB for $75 million issued in favor of the Alabama State Treasurer, SAFE Program. The letter of credit agreement was amended on June 24, 2024 to increase the amount to $200 million. The letter of credit agreement was amended on September 13, 2024 to decrease the amount to $175 million. The Bank is charged 0.09% on the amount of the irrevocable standby letter of credit. The letter of credit shall remain in effect until terminated by either the Bank or the FHLB upon written notice to the other party.
Liquidity
Market and public confidence in our financial strength and financial institutions in general will largely determine our access to appropriate levels of liquidity. This confidence is significantly dependent on our ability to maintain sound asset quality and appropriate levels of capital reserves.
Liquidity is defined as the ability to meet anticipated customer demands for funds under credit commitments and deposit withdrawals at a reasonable cost and on a timely basis. We measure our liquidity position by giving consideration to both on- and off-balance sheet sources of and demands for funds on a daily, weekly and monthly basis.
Liquidity risk involves the risk of being unable to fund assets with the appropriate duration and rate-based liabilities, as well as the risk of not being able to meet unexpected cash needs. Liquidity planning and management are necessary to ensure the ability to fund operations cost-effectively and to meet current and future potential obligations such as loan commitments and unexpected deposit outflows. In this process, we focus on assets and liabilities and on the manner in which they combine to provide adequate liquidity to meet our needs.
Funds are available from a number of basic banking activity sources, including the core deposit base, the repayment and maturity of loans, and investment cash flows. Other funding sources include federal funds borrowings, brokered certificates of deposit and borrowings from the FHLB and FRB.
Cash and cash equivalents at September 30, 2025 and December 31, 2024, were $244.0 million and $185.7 million, respectively. Based on recorded cash and cash equivalents, management believes River Financial Corporation's liquidity resources were sufficient at September 30, 2025 to fund loans and meet other cash needs as necessary.
Off-Balance Sheet Arrangements
The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financial needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized by the balance sheet. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.
The exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. In most cases, the Company requires collateral or other security to support financial instruments with credit risk.
Financial instruments whose contract amount represents credit risk at September 30, 2025 and December 31, 2024 were as follows (amounts in thousands):
|
September 30, 2025 |
December 31, 2024 |
||||||
|
Commitments to extend credit |
$ |
453,570 |
$ |
442,506 |
|||
|
Stand-by and performance letters of credit |
8,113 |
10,060 |
|||||
|
Total |
$ |
461,683 |
$ |
452,566 |
|||
Contractual Obligations
While our liquidity monitoring and management considers both present and future demands for and sources of liquidity, the following table of contractual commitments focuses only on future obligations as of September 30, 2025 (amounts in thousands).
|
Due after 1 |
Due after 3 |
|||||||||||||||||||
|
Due in 1 |
through |
through |
Due after |
|||||||||||||||||
|
year or less |
3 years |
5 years |
5 years |
Total |
||||||||||||||||
|
Deposits without a stated maturity |
$ |
2,579,489 |
$ |
- |
$ |
- |
$ |
- |
$ |
2,579,489 |
||||||||||
|
Certificates of deposit of less than $250 thousand |
316,079 |
19,036 |
3,186 |
- |
338,301 |
|||||||||||||||
|
Certificates of deposit of $250 thousand or more |
409,805 |
22,666 |
600 |
- |
433,071 |
|||||||||||||||
|
Federal Home Loan Bank advances |
25,000 |
25,000 |
40,000 |
60,000 |
150,000 |
|||||||||||||||
|
Subordinated debt, net of debt issuance costs |
- |
- |
- |
39,615 |
39,615 |
|||||||||||||||
|
Operating leases |
838 |
1,371 |
1,311 |
5,356 |
8,876 |
|||||||||||||||
|
Total contractual obligations |
$ |
3,331,211 |
$ |
68,073 |
$ |
45,097 |
$ |
104,971 |
$ |
3,549,352 |
||||||||||
Capital Position and Dividends
At September 30, 2025 and December 31, 2024, total stockholders' equity was $276.9 million and $227.1 million, respectively. The increase of approximately $49.8 million resulted mainly from the net change in retained earnings and accumulated other comprehensive loss for the nine months ended September 30, 2025. Retained earnings for the first nine months of 2025 increased $27.0 million while accumulated other comprehensive loss also decreased $22.9 million. The ratio of stockholders' equity to total assets was 7.20% and 6.34% at September 30, 2025 and December 31, 2024, respectively.
The Company is subject to various regulatory capital requirements administered by the federal banking agencies. Certain items such as goodwill and other intangible assets are deducted from total capital in arriving at the various regulatory capital measures such as Common Equity Tier 1 capital, Tier 1 capital, and total risk-based capital. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on River Financial Corporation's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory regulations and guidelines. The Company's capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors.
River Bank is eligible to utilize the community bank leverage ratio (CBLR) framework. The Bank has evaluated this option and has elected not to utilize the CBLR framework at this time, but may do so in the future.
Quantitative measures, established by regulation to ensure capital adequacy, require River Financial Corporation and River Bank to maintain minimum amounts and ratios (set forth in the table below) of total risk based capital, Common Equity Tier 1 capital, and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined in the regulations), and of Tier 1 capital (as defined in the regulations) to average assets (as defined in the regulations).
Management believes, as of September 30, 2025 and December 31, 2024, that the Company and Bank meet all capital adequacy requirements to which they are subject. The following tables present the Company's and Bank's capital amounts and ratios as of September 30, 2025 and December 31, 2024 with the required minimum levels for capital adequacy purposes including the capital conservation buffer under Basel III and minimum levels to be well capitalized (as defined) under the regulatory prompt corrective action regulations.
|
As of September 30, 2025: |
||||||||||||||||||||
|
To Be Well Capitalized |
||||||||||||||||||||
|
Required For Capital |
Under Prompt Corrective |
|||||||||||||||||||
|
Actual |
Adequacy Purposes |
Action Regulations (1) |
||||||||||||||||||
|
Amount |
Ratio |
Amount |
Ratio |
Amount |
Ratio |
|||||||||||||||
|
River Financial Corporation: |
||||||||||||||||||||
|
Total Capital (To Risk-Weighted Assets) |
$ |
366,997 |
13.612 |
% |
$ |
283,087 |
>= 10.500% |
N/A |
N/A |
|||||||||||
|
Common Equity Tier 1 Capital (To Risk-Weighted Assets) |
293,664 |
10.892 |
% |
188,725 |
>= 7.000% |
N/A |
N/A |
|||||||||||||
|
Tier 1 Capital (To Risk-Weighted Assets) |
293,664 |
10.892 |
% |
229,166 |
>= 8.500% |
N/A |
N/A |
|||||||||||||
|
Tier 1 Capital (To Average Assets) |
293,664 |
7.778 |
% |
151,033 |
>= 4.000% |
N/A |
N/A |
|||||||||||||
|
River Bank: |
||||||||||||||||||||
|
Total Capital (To Risk-Weighted Assets) |
$ |
366,140 |
13.581 |
% |
$ |
283,088 |
>= 10.500% |
$ |
269,607 |
>= 10.00% |
||||||||||
|
Common Equity Tier 1 Capital (To Risk-Weighted Assets) |
332,422 |
12.330 |
% |
188,726 |
>= 7.000% |
175,246 |
>= 6.50% |
|||||||||||||
|
Tier 1 Capital (To Risk-Weighted Assets) |
332,422 |
12.330 |
% |
229,167 |
>= 8.500% |
215,687 |
>= 8.00% |
|||||||||||||
|
Tier 1 Capital (To Average Assets) |
332,422 |
8.804 |
% |
151,032 |
>= 4.000% |
188,790 |
>= 5.00% |
|||||||||||||
|
(1) the prompt corrective action provisions are applicable at the Bank level only. |
||||||||||||||||||||
|
As of December 31, 2024: |
||||||||||||||||||||
|
To Be Well Capitalized |
||||||||||||||||||||
|
Required For Capital |
Under Prompt Corrective |
|||||||||||||||||||
|
Actual |
Adequacy Purposes |
Action Regulations (1) |
||||||||||||||||||
|
Amount |
Ratio |
Amount |
Ratio |
Amount |
Ratio |
|||||||||||||||
|
River Financial Corporation: |
||||||||||||||||||||
|
Total Capital (To Risk-Weighted Assets) |
$ |
336,746 |
13.197 |
% |
$ |
267,929 |
>= 10.500% |
N/A |
N/A |
|||||||||||
|
Common Equity Tier 1 Capital (To Risk-Weighted Assets) |
265,298 |
10.397 |
% |
178,619 |
>= 7.000% |
N/A |
N/A |
|||||||||||||
|
Tier 1 Capital (To Risk-Weighted Assets) |
265,298 |
10.397 |
% |
216,895 |
>= 8.500% |
N/A |
N/A |
|||||||||||||
|
Tier 1 Capital (To Average Assets) |
265,298 |
7.482 |
% |
141,838 |
>= 4.000% |
N/A |
N/A |
|||||||||||||
|
River Bank: |
||||||||||||||||||||
|
Total Capital (To Risk-Weighted Assets) |
$ |
335,441 |
13.152 |
% |
$ |
267,802 |
>= 10.500% |
$ |
255,049 |
>= 10.00% |
||||||||||
|
Common Equity Tier 1 Capital (To Risk-Weighted Assets) |
303,556 |
11.902 |
% |
178,540 |
>= 7.000% |
165,787 |
>= 6.50% |
|||||||||||||
|
Tier 1 Capital (To Risk-Weighted Assets) |
303,556 |
11.902 |
% |
216,798 |
>= 8.500% |
204,046 |
>= 8.00% |
|||||||||||||
|
Tier 1 Capital (To Average Assets) |
303,556 |
8.561 |
% |
141,839 |
>= 4.000% |
177,298 |
>= 5.00% |
|||||||||||||
|
(1) the prompt corrective action provisions are applicable at the Bank level only. |
||||||||||||||||||||
River Financial Corporation's principal source of funds for dividend payments and debt service is dividends received from River Bank. There are statutory limitations on the payment of dividends by River Bank to River Financial Corporation. As of September 30, 2025, the maximum amount the Bank could dividend to River Financial Corporation without prior regulatory authority approval was approximately $70.8 million. In addition to dividend restrictions, federal statutes prohibit unsecured loans from banks to bank holding companies.
During the nine months ending September 30, 2025 there were 9,000 incentive stock options issued with a weighted average exercise price of $31.41 per share. During the same period, there were 15,650 incentive stock options exercised at a weighted average exercise price of $15.24 per share. Included in the 15,650 incentive stock options exercised during the same period were 1,472 cashless stock options. During the same period, there were 7,300 incentive stock options forfeited at a weighted average exercise price of $33.54. During the same period, there were 500 incentive stock options that expired at a weighted average exercise price of $16.00. A total of 321,794 incentive stock options were outstanding as of September 30, 2025 with a weighted average exercise price of $26.08 per share and a weighted average remaining life of 3.81 years.
During the nine months ending September 30, 2025 there were 101,000 restricted stock grants issued with a weighted average issue price of $31.25 per share. During the same time period, there were 14,100 stock grants that vested with a weighted average issue price of $31.84. During the same time period, there were 1,400 stock grants forfeited with a weighted average issue price of $31.24. A total of 135,733 restricted stock grants remained nonvested as of September 30, 2025 with a weighted average remaining life of 2.14 years.
Interest Sensitivity and Market Risk
Management monitors and manages the pricing and maturity of our assets and liabilities in order to diminish the potential adverse impact that changes in interest rates could have on net interest income. The principal monitoring technique employed by the Bank is simulation analysis.
In simulation analysis, we review each asset and liability category and its projected behavior in various different interest rate environments. These projected behaviors are based on management's past experience and on current competitive environments, including the various environments in the different markets in which we compete. Using projected behavior and differing rate scenarios as inputs, the simulation analysis generates projections of net interest income. We also periodically verify the validity of this approach by comparing actual results with those that were projected in previous models.
Another technique used in interest rate management, but to a lesser degree than simulation analysis, is the measurement of the interest sensitivity "gap", which is the positive or negative dollar difference between assets and liabilities that are subject to interest rate repricing within a given period of time. Interest rate sensitivity can be managed by repricing assets and liabilities, selling securities available for sale, replacing an asset or liability at maturity or by adjusting the interest rate during the life of an asset or liability.
We evaluate interest rate sensitivity risk and then formulate guidelines regarding asset generation and repricing, and sources and prices of off-balance sheet commitments in order to maintain interest sensitivity risk at levels deemed prudent by management. We use computer simulations to measure the net income effect of various rate scenarios. The modeling reflects interest rate changes and the related impact on net income over specified periods of time.
The following table illustrates our interest rate sensitivity at September 30, 2025, assuming the relevant assets and liabilities are collected and paid, respectively, based upon historical experience rather than their stated maturities (amounts in thousands).
|
0-1 Mos |
1-3 Mos |
3-12 Mos |
1-2 Yrs |
2-3 Yrs |
>3 Yrs |
Total |
||||||||||||||||||||||
|
Interest earning assets |
||||||||||||||||||||||||||||
|
Loans |
$ |
600,303 |
$ |
142,895 |
$ |
464,307 |
$ |
398,860 |
$ |
299,502 |
$ |
734,350 |
$ |
2,640,217 |
||||||||||||||
|
Securities |
23,217 |
13,118 |
73,647 |
92,111 |
58,197 |
505,987 |
766,277 |
|||||||||||||||||||||
|
Certificates of deposit in banks |
- |
1,250 |
- |
2,500 |
250 |
218 |
4,218 |
|||||||||||||||||||||
|
Cash balances in banks |
166,191 |
- |
- |
- |
- |
- |
166,191 |
|||||||||||||||||||||
|
Federal funds sold |
31,000 |
- |
- |
- |
- |
- |
31,000 |
|||||||||||||||||||||
|
Total interest earning assets |
$ |
820,711 |
$ |
157,263 |
$ |
537,954 |
$ |
493,471 |
$ |
357,949 |
$ |
1,240,555 |
$ |
3,607,903 |
||||||||||||||
|
Interest bearing liabilities |
||||||||||||||||||||||||||||
|
Interest bearing transaction accounts |
$ |
99,509 |
$ |
16,642 |
$ |
74,889 |
$ |
99,851 |
$ |
99,851 |
$ |
438,296 |
$ |
829,038 |
||||||||||||||
|
Savings and money market accounts |
193,178 |
16,800 |
75,594 |
100,792 |
100,792 |
589,597 |
1,076,753 |
|||||||||||||||||||||
|
Time deposits |
84,311 |
158,573 |
483,072 |
38,059 |
3,570 |
3,787 |
771,372 |
|||||||||||||||||||||
|
Securities sold under agreements to repurchase |
- |
- |
- |
- |
- |
- |
- |
|||||||||||||||||||||
|
Federal Home Loan Bank advances |
- |
125,000 |
- |
25,000 |
- |
- |
150,000 |
|||||||||||||||||||||
|
Subordinated debentures, net of loan costs |
- |
- |
- |
- |
- |
39,615 |
39,615 |
|||||||||||||||||||||
|
Total interest bearing liabilities |
$ |
376,998 |
$ |
317,015 |
$ |
633,555 |
$ |
263,702 |
$ |
204,213 |
$ |
1,071,295 |
$ |
2,866,778 |
||||||||||||||
|
Interest sensitive gap |
||||||||||||||||||||||||||||
|
Period gap |
$ |
443,713 |
$ |
(159,752 |
) |
$ |
(95,601 |
) |
$ |
229,769 |
$ |
153,736 |
$ |
169,260 |
$ |
741,125 |
||||||||||||
|
Cumulative gap |
$ |
443,713 |
$ |
283,961 |
$ |
188,360 |
$ |
418,129 |
$ |
571,865 |
$ |
741,125 |
||||||||||||||||
|
Cumulative gap - Rate Sensitive Assets/ Rate |
12.3 |
% |
7.9 |
% |
5.2 |
% |
11.6 |
% |
15.9 |
% |
20.5 |
% |
||||||||||||||||
The Bank generally benefits from increasing market interest rates when it has an asset-sensitive gap (a positive number) and generally benefits from decreasing market interest rates when it is liability sensitive (a negative number). As shown in the table above, the Bank is asset sensitive on a cumulative basis throughout the time frame. The interest sensitivity analysis presents only a static view of the timing and repricing opportunities, without taking into consideration that changes in interest rates do not affect all assets and liabilities equally. For example, rates paid on a substantial portion of core deposits may change contractually within a relatively short time frame, but those are viewed by management as significantly less interest sensitive than market-based rates such as those paid on non-core deposits. For this and other reasons, management relies more upon the simulations analysis (as noted above) in managing interest rate risk. Net interest income may be impacted by other significant factors in a given interest rate environment, including changes in volume and mix of interest earning assets and interest bearing liabilities.
The Bank's earnings are dependent, to a large degree, on its net interest income, which is the difference between interest income earned on all interest earning assets, primarily loans and securities, and interest paid on all interest bearing liabilities, primarily deposits. Market risk is the risk of loss from adverse changes in market prices and interest rates. Our market risk arises primarily from inherent interest rate risk in our lending, investing and deposit gathering activities. We seek to reduce our exposure to market risk through actively monitoring and managing interest rate risk. Management relies on simulations analysis to evaluate the impact of varying levels of prevailing interest rates and the sensitivity of specific earning assets and interest bearing liabilities to changes in those prevailing rates. Simulation analysis consists of evaluating the impact on net interest income given changes from 400 basis points below the current prevailing rates to 400 basis points above current prevailing interest rates. Management makes certain assumptions as to the effect varying levels of interest rates have on certain interest earning assets and interest bearing liabilities, which assumptions consider both historical experience and consensus estimates of outside sources.
The following table illustrates the results of our simulation analysis to determine the extent to which market risk would affect net interest income for the next twelve months if prevailing interest rates increased or decreased by the specified amounts from current rates. As noted above, this model uses estimates and assumptions in asset and liability account rate reactions to changes in prevailing interest rates. However, to isolate the market risk inherent in the balance sheet, the model assumes that no growth in the balance sheet occurs during the projection period. This model also assumes an immediate and parallel shift in interest rates, which would result in no change in the shape or slope of the interest rate yield curve. Because of the inherent use of the estimates and assumptions in the simulation model to derive this market risk information, the actual results of the future impact of market risk on our net interest income may differ from that found in the table. Given the current level of prevailing interest rates, management believes prevailing market rates falling 300 basis points and 400 basis points are not reasonable assumptions. All other simulated prevailing interest rates changes modeled indicate a level of sensitivity of the Bank's net interest income to those changes that is acceptable to management and within established Bank policy limits as of both dates shown.
|
Impact on net interest income |
||||||||
|
As of |
As of |
|||||||
|
September 30, 2025 |
December 31, 2024 |
|||||||
|
Change in prevailing rates: |
||||||||
|
+ 400 basis points |
(6.81 |
)% |
(12.99 |
)% |
||||
|
+ 300 basis points |
(4.20 |
)% |
(9.20 |
)% |
||||
|
+ 200 basis points |
(1.63 |
)% |
(5.35 |
)% |
||||
|
+ 100 basis points |
0.83 |
% |
(1.62 |
)% |
||||
|
+ 0 basis points |
- |
- |
||||||
|
- 100 basis points |
(3.44 |
)% |
(2.13 |
)% |
||||
|
- 200 basis points |
(4.97 |
)% |
(3.85 |
)% |
||||
|
- 300 basis points |
(5.65 |
)% |
(4.96 |
)% |
||||
|
- 400 basis points |
(5.92 |
)% |
(5.16 |
)% |
||||
River Financial Corp. published this content on November 04, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 04, 2025 at 19:10 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]