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What changed in RIVERVIEW BANCORP INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of RIVERVIEW BANCORP INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+435 added−439 removedSource: 10-K (2023-06-14) vs 10-K (2022-06-15)

Top changes in RIVERVIEW BANCORP INC's 2023 10-K

435 paragraphs added · 439 removed · 342 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

155 edited+28 added−23 removed166 unchanged
Biggest changeIn addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for loan losses will be adequate or that substantial increases will not be necessary should the quality of any loans deteriorate or should collateral values decline as a result of the factors discussed elsewhere in this document. 15 Table of Contents The following table sets forth the breakdown of the allowance for loan losses by loan category as of the dates indicated (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At March 31, ​ ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ Loan Category ​ ​ ​ ​ Loan Category ​ ​ ​ ​ ​ ​ as a Percent ​ ​ ​ ​ as a Percent ​ ​ Amount of Total Loans Amount of Total Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and construction: ​ ​ Commercial business ​ $ 2,422 23.03 % $ 2,416 28.11 % Commercial real estate ​ ​ 9,037 ​ 58.85 ​ ​ 14,089 ​ 57.62 ​ Land ​ ​ 168 ​ 1.16 ​ ​ 233 ​ 1.49 ​ Multi-family ​ ​ 845 ​ 6.08 ​ ​ 638 ​ 4.77 ​ Real estate construction ​ 393 2.44 ​ 294 1.80 ​ Consumer: ​ ​ ​ ​ ​ Real estate one-to-four family ​ 905 8.28 ​ 794 5.98 ​ Other installment ​ 38 0.16 ​ 58 0.23 ​ Unallocated ​ 715 — ​ 656 — ​ Total allowance for loan losses ​ $ 14,523 100.00 % $ 19,178 100.00 % ​ Investment Activities The Board sets the investment policy of the Company.
Biggest changeIn addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for loan losses will be adequate or that substantial increases will not be necessary should the quality of any loans deteriorate or should collateral values decline as a result of the factors discussed elsewhere in this document. 15 Table of Contents The following table sets forth the breakdown of the allowance for loan losses by loan category as of the dates indicated (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At March 31, ​ ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ Loan Category ​ ​ ​ ​ Loan Category ​ ​ ​ ​ ​ ​ as a Percent ​ ​ ​ ​ as a Percent ​ ​ Amount of Total Loans Amount of Total Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and construction: ​ ​ Commercial business ​ $ 3,123 23.08 % $ 2,422 23.03 % Commercial real estate ​ ​ 8,894 ​ 55.95 ​ ​ 9,037 ​ 58.85 ​ Land ​ ​ 93 ​ 0.64 ​ ​ 168 ​ 1.16 ​ Multi-family ​ ​ 798 ​ 5.54 ​ ​ 845 ​ 6.08 ​ Real estate construction ​ 764 4.73 ​ 393 2.44 ​ Consumer: ​ ​ ​ ​ ​ ​ ​ Real estate one-to-four family ​ 1,087 9.88 ​ 905 8.28 ​ Other installment ​ 40 0.18 ​ 38 0.16 ​ Unallocated ​ 510 — ​ 715 — ​ Total allowance for loan losses ​ $ 15,309 100.00 % $ 14,523 100.00 % ​ 16 Table of Contents The following table shows certain credit ratios at and for the periods indicated and each component of the ratio’s calculations. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For the Year Ended March 31, ​ 2023 2022 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses as a percentage of total loans outstanding at period end ​ ​ 1.52 % ​ 1.47 % ​ 2.03 % Allowance for loan losses ​ $ 15,309 ​ $ 14,523 ​ $ 19,178 ​ Total loans outstanding ​ ​ 1,008,856 ​ ​ 990,408 ​ ​ 943,235 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-accrual loans as a percentage of total loans outstanding at period end ​ ​ 0.03 % ​ 0.03 % ​ 0.04 % Total non-accrual loans ​ $ 283 ​ $ 291 ​ $ 395 ​ Total loans outstanding ​ ​ 1,008,856 ​ ​ 990,408 ​ ​ 943,235 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses as a percentage of non-accrual loans at period end ​ ​ 5,409.54 % ​ 4,990.72 % ​ 4,855.19 % Allowance for loan losses ​ $ 15,309 ​ $ 14,523 ​ $ 19,178 ​ Total non-accrual loans ​ ​ 283 ​ ​ 291 ​ ​ 395 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net charge-offs/(recoveries) during period to average loans outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial business: ​ ​ — % ​ 0.03 % ​ — % Net charge-offs/(recoveries) ​ $ — ​ $ 69 ​ $ (10) ​ Average loans receivable, net ​ ​ 233,884 ​ ​ 225,677 ​ ​ 268,363 ​ Commercial real estate: ​ ​ — % ​ — % ​ (0.06) % Net charge-offs/(recoveries) ​ $ — ​ $ — ​ $ (332) ​ Average loans receivable, net ​ ​ 568,999 ​ ​ 559,275 ​ ​ 526,965 ​ Land: ​ ​ — % ​ — % ​ — % Net charge-offs/(recoveries) ​ $ — ​ $ — ​ $ — ​ Average loans receivable, net ​ ​ 8,486 ​ ​ 13,498 ​ ​ 13,765 ​ Multi-family: ​ ​ — % ​ — % ​ — % Net charge-offs/(recoveries) ​ $ — ​ $ — ​ $ — ​ Average loans receivable, net ​ ​ 57,548 ​ ​ 48,651 ​ ​ 50,489 ​ Real estate construction: ​ ​ — % ​ — % ​ — % Net charge-offs/(recoveries) ​ $ — ​ $ — ​ $ — ​ Average loans receivable, net ​ ​ 38,214 ​ ​ 16,828 ​ ​ 32,834 ​ Consumer: ​ ​ (0.04) % ​ (0.06) % ​ 0.12 % Net charge-offs/(recoveries) ​ $ (36) ​ $ (39) ​ $ 88 ​ Average loans receivable, net ​ ​ 99,914 ​ ​ 70,813 ​ ​ 73,654 ​ Total loans: ​ ​ — % ​ — % ​ (0.03) % Total net recoveries/(recoveries) ​ $ (36) ​ $ 30 ​ $ (254) ​ Total average loans receivable, net ​ ​ 1,007,045 ​ ​ 934,742 ​ ​ 966,070 ​ ​ Investment Activities The Board sets the investment policy of the Company.
Service providers are required under the rule to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect the banking organization’s customers for four or more hours. Compliance with the new rule is required by May 1, 2022.
Service providers are required under the rule to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect the banking organization’s customers for four or more hours. Compliance with the new rule was required by May 1, 2022.
Loans are reviewed regularly and it is the Company’s general policy that when a loan is 90 days delinquent or when collection of principal or interest appears doubtful, it is placed on non-accrual status, at which time the accrual of interest ceases and a reserve for any unrecoverable accrued interest is established and charged against operations.
Loans are reviewed regularly and it is the Company’s general policy that when a loan is 90 days or more delinquent or when collection of principal or interest appears doubtful, it is placed on non-accrual status, at which time the accrual of interest ceases and a reserve for any unrecoverable accrued interest is established and charged against operations.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies.” 14 Table of Contents In accordance with GAAP, loans acquired from MBank during the fiscal year ended March 31, 2017 were recorded at their estimated fair value, which resulted in a net discount to the loans’ contractual amounts, of which a portion reflects a discount for possible credit losses.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates.” 14 Table of Contents In accordance with GAAP, loans acquired from MBank during the fiscal year ended March 31, 2017 were recorded at their estimated fair value, which resulted in a net discount to the loans’ contractual amounts, of which a portion reflects a discount for possible credit losses.
The Bank’s compliance training program provides required annual training courses to assure that all employees know the rules applicable to their jobs. ​ 20 Table of Contents Corporate Information The Company’s principal executive offices are located at 900 Washington Street, Vancouver, Washington 98660. Its telephone number is (360) 693-6650. The Company maintains a website with the address www.riverviewbank.com.
The Bank’s compliance training program provides required annual training courses to assure that all employees know the rules applicable to their jobs. ​ 21 Table of Contents Corporate Information The Company’s principal executive offices are located at 900 Washington Street, Vancouver, Washington 98660. Its telephone number is (360) 693-6650. The Company maintains a website with the address www.riverviewbank.com.
In order to be considered well-capitalized under the prompt corrective action regulations, the Bank must maintain a CET1 risk-based ratio of 6.5%, a Tier 1 risk-based ratio of 8%, a total risk-based capital ratio of 10% and a leverage ratio of 5%, and the Bank must not be subject to an individualized order, directive or agreement under which its primary federal banking regulator requires it to maintain a specific capital level.
In order to be considered well-capitalized under the prompt corrective action regulations described below, the Bank must maintain a CET1 risk-based ratio of 6.5%, a Tier 1 risk-based ratio of 8%, a total risk-based capital ratio of 10% and a leverage ratio of 5%, and the Bank must not be subject to an individualized order, directive or agreement under which its primary federal banking regulator requires it to maintain a specific capital level.
At the time of this change, Riverview Bancorp, Inc. was considered “well capitalized” as defined for a bank holding company with a total risk-based capital ratio of 10.0% or more and a Tier 1 risk-based capital ratio of 8.0% or more, and was not subject to an individualized order, directive or agreement under which the Federal Reserve requires it to maintain a specific capital level.
At the time of this change, Riverview was considered “well capitalized” as defined for a bank holding company with a total risk-based capital ratio of 10.0% or more and a Tier 1 risk-based capital ratio of 8.0% or more, and was not subject to an individualized order, directive or agreement under which the Federal Reserve requires it to maintain a specific capital level.
While not exhaustive, these laws and regulations include the Truth-in-Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Home Mortgage Disclosure Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Right to Financial Privacy Act, the Home Ownership and Equity Protection Act, the Consumer Leasing Act, the Fair Credit Billing Act, the Homeowners Protection Act, the Check Clearing for 27 Table of Contents the 21st Century Act, laws governing flood insurance, laws governing consumer protections in connection with the sale of insurance, federal and state laws prohibiting unfair and deceptive business practices and various regulations that implement some or all of the foregoing.
While not exhaustive, these laws and regulations include the Truth-in-Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Home Mortgage Disclosure Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Right to Financial Privacy Act, the Home Ownership and Equity Protection Act, the Consumer Leasing Act, the Fair Credit Billing Act, the Homeowners Protection Act, the Check Clearing for the 21st Century Act, laws governing flood insurance, laws governing consumer protections in connection with the sale of insurance, federal and state laws prohibiting unfair and deceptive business practices and various regulations that implement some or all of the foregoing.
Additional programs include quarterly or annual incentive opportunities, a Company sponsored Employee Stock Ownership Plan (“ESOP”), a Company-matched 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, and employee assistance programs including educational reimbursement opportunities. The success of our business is fundamentally connected to the well-being of our people.
Benefit programs include quarterly or annual incentive opportunities, a Company sponsored Employee Stock Ownership Plan (“ESOP”), a Company-matched 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, and employee assistance programs including educational reimbursement opportunities. The success of our business is fundamentally connected to the well-being of our people.
Any such legislation or regulatory changes in the future could have an adverse effect on our operations and financial condition. We cannot predict whether any such changes may occur. The WDFI and FDIC have extensive enforcement authority over all Washington state-chartered commercial banks, including the Bank. The Federal Reserve has the same type of authority over Riverview Bancorp, Inc.
Any such legislation or regulatory changes in the future could have an adverse effect on our operations and financial condition. We cannot predict whether any such changes may occur. The WDFI and FDIC have extensive enforcement authority over all Washington state-chartered commercial banks, including the Bank. The Federal Reserve has the same type of authority over Riverview.
To the extent that legal uncertainty exists in this area, all creditors, including the Bank, that have made loans secured by properties with potential hazardous waste contamination (such as petroleum contamination) could be subject to liability for cleanup costs, which could substantially exceed the value of the collateral property. Anti-Money Laundering and Customer Identification.
To the extent that legal uncertainty exists in this area, all creditors, including the Bank, that have made loans secured by properties with potentially hazardous waste contamination (such as petroleum contamination) could be subject to liability for cleanup costs, which could substantially exceed the value of the collateral property. Anti-Money Laundering and Customer Identification.
Cox joined Riverview in August 2002 and spent five years as a commercial lender and progressed through the credit administration function, most recently serving as Senior Vice President of Credit Administration. He holds a Bachelor of Arts degree from Washington State University and was an Honor Roll graduate of the Pacific Coast Banking School. Mr.
Cox joined the Bank in August 2002 and spent five years as a commercial lender and progressed through the credit administration function, most recently serving as Senior Vice President of Credit Administration. He holds a Bachelor of Arts degree from Washington State University and was an Honor Roll graduate of the Pacific Coast Banking School. Mr.
The Company did not have any wholesale-brokered deposits at March 31, 2022 and 2021. The Company continues to focus on core deposits and growth generated by customer relationships as opposed to obtaining deposits through the wholesale markets, although the Company continued to experience competition for customer deposits within its market area during fiscal year 2022.
The Company did not have any wholesale-brokered deposits at March 31, 2023 and 2022. The Company continues to focus on core deposits and growth generated by customer relationships as opposed to obtaining deposits through the wholesale markets, although the Company continued to experience competition for customer deposits within its market area during fiscal year 2023.
Generally, the new loans are restructured based on customary underwriting standards. In situations where they are not, the policy exception qualifies as a concession, and if the borrower is experiencing financial difficulties, the loans are accounted for as TDRs. At March 31, 2022, no loans had been restructured in this manner.
Generally, the new loans are restructured based on customary underwriting standards. In situations where they are not, the policy exception qualifies as a concession, and if the borrower is experiencing financial difficulties, the loans are accounted for as TDRs. At March 31, 2023, no loans had been restructured in this manner.
The common securities issued by the grantor trusts are held by the Company, and the Company’s investment in the common securities of $836,000 at both March 31, 2022 and 2021 is included in prepaid expenses and other assets in the Consolidated Balance Sheets included in the Consolidated Financial Statements contained in Item 8 of this Form 10-K.
The common securities issued by the grantor trusts are held by the Company, and the Company’s investment in the common securities of $836,000 at both March 31, 2023 and 2022 is included in prepaid expenses and other assets in the Consolidated Balance Sheets included in the Consolidated Financial Statements contained in Item 8 of this Form 10-K.
According to Washington law, the Bank may not declare or pay a cash dividend on its capital stock if it would cause its net worth to be reduced below (1) the amount required for liquidation accounts or (2) the net worth requirements, if any, imposed by the Director of the WDFI.
Under Washington law, the Bank may not declare or pay a cash dividend on its capital stock if it would cause its net worth to be reduced below (1) the amount required for liquidation accounts or (2) the net worth requirements, if any, imposed by the Director of the WDFI.
No regulations have yet been proposed by the Federal Reserve to implement the source of strength provisions required by the Dodd-Frank Act. Riverview Bancorp, Inc. and any subsidiaries that it may control are considered “affiliates” within the meaning of the Federal Reserve Act, and transactions between the Bank and affiliates are subject to numerous restrictions.
No regulations have yet been proposed by the Federal Reserve to implement the source of strength provisions required by the Dodd-Frank Act. Riverview and any subsidiaries that it may control are considered “affiliates” within the meaning of the Federal Reserve Act, and transactions between the Bank and affiliates are subject to numerous restrictions.
These loans have been charged down to the estimated fair market value of the collateral less selling costs or carry a specific reserve to reduce the net carrying value. There were no reserves associated with these nonperforming loans that were measured for impairment at March 31, 2022.
These loans have been charged down to the estimated fair market value of the collateral less selling costs or carry a specific reserve to reduce the net carrying value. There were no reserves associated with these nonperforming loans that were measured for impairment at March 31, 2023.
Management considers the allowance for loan losses to be adequate at March 31, 2022 to cover probable losses inherent in the loan portfolio based on the assessment of various factors affecting the loan portfolio, and the Company believes it has established its existing allowance for loan losses in accordance with GAAP.
Management considers the allowance for loan losses to be adequate at March 31, 2023 to cover probable losses inherent in the loan portfolio based on the assessment of various factors affecting the loan portfolio, and the Company believes it has established its existing allowance for loan losses in accordance with GAAP.
Management reviews investment securities quarterly for the presence of other than temporary impairment (“OTTI”), taking into consideration current market conditions, the extent and nature of changes in estimated fair value, issuer rating changes and trends, financial condition of the underlying issuers, current analysts’ evaluations, the Company’s ability and intent to hold investments until a recovery of estimated fair value, which may be maturity, as well as other factors.
Management reviews investment securities quarterly for the presence of other than temporary impairment (“OTTI”), taking into consideration current market conditions, the extent and nature of changes in estimated fair value, issuer rating changes and trends, financial condition of the underlying issuers, current analysts’ evaluations, the Company’s ability and intent to hold investments 18 Table of Contents until a recovery of estimated fair value, which may be maturity, as well as other factors.
The ethnicity of our workforce was 84.1% White, 5.1% Asian, 4.3% Hispanic or Latinx, 2.6% two or more races, 1.7 % American Indian or Alaskan Native, 1.3% Native Hawaiian or Pacific Islander and 0.9% African American or Black.
The ethnicity of our workforce was 84.0% White, 5.4% Asian, 4.6% Hispanic or Latinx, 1.3% two or more races, 1.7% American Indian or Alaskan Native, 1.3% Native Hawaiian or Pacific Islander and 1.7% African American or Black.
Riverview Bancorp, Inc. and the Bank are separate and distinct legal entities. The Bank is an affiliate of Riverview Bancorp, Inc. and any non-bank subsidiary of Riverview Bancorp, Inc., federal laws strictly limit the ability of banks to engage in certain transactions with their affiliates.
Riverview and the Bank are separate and distinct legal entities. The Bank is an affiliate of Riverview and any non-bank subsidiary of Riverview, federal laws strictly limit the ability of banks to engage in certain transactions with their affiliates.
At March 31, 2022, the Bank had no outstanding borrowings from the Federal Reserve. Commercial Real Estate Lending Concentrations . The federal banking agencies have issued guidance on sound risk management practices for concentrations in commercial real estate lending.
At March 31, 2023, the Bank had no outstanding borrowings from the Federal Reserve. Commercial Real Estate Lending Concentrations . The federal banking agencies have issued guidance on sound risk management practices for concentrations in commercial real estate lending.
Accordingly, Riverview Bancorp, Inc. is required to file semi-annual reports with the Federal Reserve and provide additional information as the Federal Reserve may require. The Federal Reserve may examine Riverview Bancorp, Inc., and any of its subsidiaries, and charge Riverview Bancorp, Inc. for the cost of the examination.
Accordingly, Riverview is required to file semi-annual reports with the Federal Reserve and provide additional information as the Federal Reserve may require. The Federal Reserve may examine Riverview, and any of its subsidiaries, and charge Riverview for the cost of the examination.
FHLMC and FNMA securities are not backed by the full faith and credit of the U.S. government, while SBA and GNMA securities are backed by the full faith and credit of the U.S. government. At March 31, 2022, the Company owned no privately issued MBS.
FHLMC and FNMA securities are not backed by the full faith and credit of the U.S. government, while SBA and GNMA securities are backed by the full faith and credit of the U.S. government. At March 31, 2023, the Company owned no privately issued MBS.
However, charge-offs 13 Table of Contents are postponed if alternative proposals to restructure, obtain additional guarantors, obtain additional assets as collateral or a potential sale of the underlying collateral would result in full repayment of the outstanding loan balance. Once any other potential sources of repayment are exhausted, the impaired portion of the loan is charged-off.
However, charge-offs are postponed if alternative proposals to restructure, obtain additional guarantors, obtain additional assets as collateral or a potential sale of the underlying collateral would result in full repayment of the outstanding loan balance. Once any other potential sources of repayment are exhausted, the impaired portion of the loan is charged-off.
At the completion of construction, the Company may either originate a fixed-rate mortgage loan or an adjustable rate mortgage (“ARM”) loan or use its mortgage brokerage capabilities to obtain permanent financing for the customer with another lender. For adjustable rate loans, the interest rates adjust on their first adjustment date.
At the completion of construction, the Company may either originate a fixed-rate mortgage loan or an adjustable rate mortgage (“ARM”) loan or use its mortgage 8 Table of Contents brokerage capabilities to obtain permanent financing for the customer with another lender. For adjustable rate loans, the interest rates adjust on their first adjustment date.
Further, a bank’s CRA performance must be considered in 25 Table of Contents connection with a bank’s application, to among other things, establish a new branch office that will accept deposits, relocate an existing office or merge or consolidate with, or acquire the assets or assume the liabilities of, a federally regulated financial institution.
Further, a bank’s CRA performance must be considered in connection with a bank’s application, to among other things, establish a new branch office that will accept deposits, relocate an existing office or merge or consolidate with, or acquire the assets or assume the liabilities of, a federally regulated financial institution.
For more information, see also Note 9 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K. Taxation For details regarding the Company’s taxes, see Note 10 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K.
For more information, see also Note 10 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K. Taxation For details regarding the Company’s taxes, see Note 11 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K.
Finally, the law provides additional flexibility for Washington state-chartered commercial and savings banks with respect to interest rates on loans and other extensions of credit. Specifically, they may charge the maximum interest rate allowable for loans and other extensions of credit by federally-chartered financial institutions to Washington residents. Transactions with Affiliates.
Finally, the law provides additional flexibility for Washington state-chartered commercial and savings banks with respect to interest rates on loans and other extensions of credit. Specifically, they may charge the maximum interest rate allowable for loans and other extensions of credit by federally-chartered financial institutions to Washington residents. 26 Table of Contents Transactions with Affiliates.
The related amount of interest income recognized on these TDR loans was $24,000 for the year ended March 31, 2022. The Company has determined that, in certain circumstances, it is appropriate to split a loan into multiple notes.
The related amount of interest income recognized on these TDR loans was $24,000 for the fiscal year ended March 31, 2023. The Company has determined that, in certain circumstances, it is appropriate to split a loan into multiple notes.
In addition, loans discharged in bankruptcy proceedings are charged-off. Loans under bankruptcy protection with no payments received for four consecutive months are charged-off. The outstanding balance of a secured loan that is in excess of the net realizable value is generally charged-off if no payments are received for four to five consecutive months.
In addition, loans discharged in bankruptcy proceedings are charged-off. Loans under bankruptcy protection with no payments 13 Table of Contents received for four consecutive months are charged-off. The outstanding balance of a secured loan that is in excess of the net realizable value is generally charged-off if no payments are received for four to five consecutive months.
For the years ended March 31, 2022 and 2021, there were no charge-offs or recoveries in the residential construction and land acquisition and development loan portfolios.
For the years ended March 31, 2023 and 2022, there were no charge-offs or recoveries in the residential construction and land acquisition and development loan portfolios.
The remaining deficiency often does not warrant further collection efforts against the borrower beyond obtaining a deficiency judgment. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability and are more likely to be adversely 9 Table of Contents affected by job loss, divorce, illness or personal bankruptcy.
The remaining deficiency often does not warrant further collection efforts against the borrower beyond obtaining a deficiency judgment. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability and are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.
The Company plans to continue to proactively manage its construction loan portfolio in fiscal year 2023 while continuing to originate new construction loans to selected customers.
The Company plans to continue to proactively manage its construction loan portfolio in fiscal year 2024 while continuing to originate new construction loans to selected customers.
As of March 31, 2022, the Bank met the requirements to be “well capitalized” and met the fully phased-in capital conservation buffer requirement. For a complete description of the Bank’s required and actual capital levels on March 31, 2022, see Note 12 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K.
As of March 31, 2023, the Bank met the requirements to be “well capitalized” and met the fully phased-in capital conservation buffer requirement. For a complete description of the Bank’s required and actual capital levels on March 31, 2023, see Note 13 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K.
Loan demand within the Company’s market area was competitive in fiscal year 2022 as economic conditions and competition for strong credit-worthy borrowers remained high. At March 31, 2022, the Company had one commercial real estate loan of $122,000 on non-accrual status. At March 31, 2021, the Company had one commercial real estate loan of $144,000 on non-accrual status.
Loan demand within the Company’s market area was competitive in fiscal year 2023 as economic conditions and competition for strong credit-worthy borrowers remained high. At March 31, 2023, the Company had one commercial real estate loan of $100,000 on non-accrual status. At March 31, 2022, the Company had one commercial real estate loan of $122,000 on non-accrual status.
However, we believe it should be considered when comparing certain financial ratios of the Company calculated in periods after the MBank transaction, compared to the same financial ratios of the Company in periods prior to the MBank transaction. The net discount on these acquired loans was $371,000 and $722,000 at March 31, 2022 and 2021, respectively.
However, we believe it should be considered when comparing certain financial ratios of the Company calculated in periods after the MBank transaction, compared to the same financial ratios of the Company in periods prior to the MBank transaction. The net discount on these acquired loans was $228,000 and $371,000 at March 31, 2023 and 2022, respectively.
The Federal Reserve requires all depository institutions to maintain reserves at specified levels against their transaction accounts, primarily checking accounts. In response to the COVID-19 pandemic, the Federal Reserve reduced reserve requirement ratios to zero percent effective on March 26, 2020, to support lending to households and businesses.
The Federal Reserve requires all depository institutions to maintain reserves at specified levels against their transaction accounts, primarily checking accounts. In response to the COVID-19 pandemic, the Federal Reserve reduced 27 Table of Contents reserve requirement ratios to zero percent effective on March 26, 2020, to support lending to households and businesses.
Construction/permanent loans are originated to the homeowner rather than the homebuilder along with a commitment by the Company to originate a permanent loan to the homeowner to repay 8 Table of Contents the construction loan at the completion of construction. The construction phase of a construction/permanent loan generally lasts six to nine months.
Construction/permanent loans are originated to the homeowner rather than the homebuilder along with a commitment by the Company to originate a permanent loan to the homeowner to repay the construction loan at the completion of construction. The construction phase of a construction/permanent loan generally lasts six to nine months.
In addition, on November 18, 2021, the federal banking agencies announced the adoption of a final rule providing for new notification requirements for banking organizations and their service providers for significant cybersecurity incidents.
In addition, on November 18, 2021, the federal banking agencies announced the adoption of a final rule providing for new 28 Table of Contents notification requirements for banking organizations and their service providers for significant cybersecurity incidents.
Riverview Bancorp, Inc., as sole shareholder of the Bank, is a bank holding company registered with the Federal Reserve. Bank holding companies are subject to comprehensive regulation by the Federal Reserve under the Bank Holding Company Act of 1956, as amended (“BHCA”), and the regulations of the FRB.
Riverview as sole shareholder of the Bank, is a bank holding company registered with the Federal Reserve. Bank holding companies are subject to comprehensive regulation by the Federal Reserve under the Bank Holding Company Act of 1956, as amended (“BHCA”), and the regulations of the Federal Reserve.
Commitments to originate loans are conditional and are honored for up to 45 days subject to the Company’s usual terms and conditions. Collateral is not required to support commitments. At March 31, 2022, the Company had outstanding commitments to originate loans of $20.0 million compared to $12.7 million at March 31, 2021. Mortgage Brokerage.
Commitments to originate loans are conditional and are honored for up to 45 days subject to the Company’s usual terms and conditions. Collateral is not required to support commitments. At March 31, 2023, the Company had outstanding commitments to originate loans of $12.5 million compared to $20.0 million at March 31, 2022. Mortgage Brokerage.
The Bank has not elected to use the CBLR framework as of March 31, 2022. 23 Table of Contents Certain changes in what constitutes regulatory capital, including the phasing out of certain instruments as qualifying capital, are subject to transition periods, most of which have expired. The Bank does not have any such instruments.
The Bank has not elected to use the CBLR framework as of March 31, 2023. 24 Table of Contents Certain changes in what constitutes regulatory capital, including the phasing out of certain instruments as qualifying capital, are subject to transition periods, most of which have expired. The Bank does not have any such instruments.
Riverview Services had net income of $36,000 for the fiscal year ended March 31, 2022 and total assets of $1.3 million at March 31, 2022. Riverview Services’ operations are included in the Consolidated Financial Statements of the Company contained in Item 8 of this Form 10-K.
Riverview Services had net income of $21,000 for the fiscal year ended March 31, 2023 and total assets of $1.3 million at March 31, 2023. Riverview Services’ operations are included in the Consolidated Financial Statements of the Company contained in Item 8 of this Form 10-K.
In late 2021, Guidehouse, under their contract with the SBA, declined to continue the DRC program. After declining to continue the DRC program, all payments under the DRC program began to be held by Guidehouse or Colson until the DRC program could 11 Table of Contents be unwound and the DRC holdings converted into normal pass through certificates.
In late 2021, Guidehouse, under their contract with the SBA, declined to continue the DRC program. After declining to continue the DRC program, all payments under the DRC program began to be held by Guidehouse or Colson until the DRC program could be unwound and the DRC holdings converted into normal pass through certificates.
The Company issues commitments to originate commercial loans, other real estate mortgage loans, construction loans, residential mortgage loans and other installment loans conditioned upon the occurrence of certain events. The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments.
The Company issues commitments to originate commercial loans, other real estate mortgage loans, construction loans, real estate one-to-four family loans and other installment loans conditioned upon the occurrence of certain events. The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments.
There was no OTTI charge for investment securities for the years ended March 31, 2022, 2021 or 2020. See Note 3 of the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding investment securities. 17 Table of Contents Deposit Activities and Other Sources of Funds General.
There was no OTTI charge for investment securities for the years ended March 31, 2023, 2022 or 2021. See Note 3 of the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding investment securities. Deposit Activities and Other Sources of Funds General.
The Federal Reserve must approve the acquisition (or acquisition of control) of a bank or other FDIC-insured depository institution by a bank holding company, and the appropriate federal banking regulator must approve a bank’s acquisition (or acquisition of control) of another bank or other FDIC-insured institution. ​ 28 Table of Contents Acquisition of Control of a Bank Holding Company.
The Federal Reserve must approve the acquisition (or acquisition of control) of a bank or other FDIC-insured depository institution by a bank holding company, and the appropriate federal banking regulator must approve a bank’s acquisition (or acquisition of control) of another bank or other FDIC-insured institution. Acquisition of Control of a Bank Holding Company.
We believe we are well positioned to attract new customers and to increase our market share through our seventeen branc hes, including, among others, ten in Clark County, three in the Portland metropolitan area and three lending centers. ​ 4 Table of Contents Market Area The Company conducts operations from its home office in Vancouver, Washington and seventeen branch offices located in Camas, Washougal, Stevenson, White Salmon, Battle Ground, Goldendale, Ridgefield and Vancouver, Washington (six branch offices), and Portland, Gresham, Tualatin and Aumsville, Oregon.
We believe we are well positioned to attract new customers and to increase our market share through our 17 branch locations, including, among others, 10 in Clark County, three in the Portland metropolitan area and three lending centers. ​ 4 Table of Contents Market Area The Company conducts operations from its home office in Vancouver, Washington and 17 branch offices located in Camas, Washougal, Stevenson, White Salmon, Battle Ground, Goldendale, Ridgefield and Vancouver, Washington (six branch offices), and Portland, Gresham, Tualatin and Aumsville, Oregon.
In either or both of these situations, the borrowers may be unable to comply with the present loan repayment terms, and the loans 12 Table of Contents may subsequently be included in the non-accrual category. Management considers the allowance for loan losses to be adequate at March 31, 2022, to cover the probable losses inherent in these and other loans.
In either or both of these situations, the borrowers may be unable to comply with the present loan repayment terms, and the loans may subsequently be included in the non-accrual category. Management considers the allowance for loan losses to be adequate at March 31, 2023, to cover the probable losses inherent in these and other loans.
Adverse developments with respect to any of these risk factors could limit the Company’s ability to attract and retain deposits and could have a material negative impact on the Company’s future financial condition, results of operations and cash flows. As of March 31, 2022 and 2021, approximately $320.0 million and $244.5 million, respectively, of our deposit portfolio was uninsured.
Adverse developments with respect to any of these risk factors could limit the Company’s ability to attract and retain deposits and could have a material negative impact on the Company’s future financial condition, results of operations and cash flows. As of March 31, 2023 and 2022, approximately $225.7 million and $320.0 million, respectively, of our deposit portfolio was uninsured.
Our REMICS are MBS issued by FHLMC, FNMA and GNMA and our CRE MBS are issued by FNMA. The Company does not believe that it has any exposure to sub-prime lending in its investment securities portfolio.
Our REMICS are MBS issued by FHLMC, FNMA and GNMA and our 17 Table of Contents CRE MBS are issued by FNMA. The Company does not believe that it has any exposure to sub-prime lending in its investment securities portfolio.
In pursuit of these goals, the Company will seek to increase the loan portfolio consistent with its strategic plan and asset/liability and regulatory capital objectives, which includes maintaining a significant amount of commercial business and commercial real estate loans in its loan portfolio which carry adjustable rates, higher yields or shorter terms and higher credit risk than traditional fixed-rate consumer real estate one-to-four family mortgages.
In pursuit of these goals, the Company will seek to increase the loan portfolio consistent with its strategic plan and asset/liability and regulatory capital objectives, which includes maintaining a significant amount of commercial business and commercial real estate loans in its loan portfolio which typically carry adjustable rates, higher yields and shorter terms, as well as higher credit risk, compared to traditional fixed-rate consumer real estate one-to-four family loans.
Employees and Human Capital As of March 31, 2022, the Company had 224 full-time equivalent employees, none of whom are represented by a collective bargaining unit. The Company believes its relationship with its employees is good.
Employees and Human Capital As of March 31, 2023, the Company had 229 full-time equivalent employees, none of whom are represented by a collective bargaining unit. The Company believes its relationship with its employees is good.
As part of unwinding the DRC program, Colson has requested investors who had received payments in advance of the borrower actually remitting payment return advanced funds before they will process the conversion of certificates. The Bank continues to work with Colson on the reconciliation and transfer of these loans.
As part of unwinding the DRC program, Colson has requested investors who had received payments in advance of the borrower actually remitting payment return advanced funds before they will process the conversion of certificates. The Bank 11 Table of Contents continues to work with Colson on the reconciliation and transfer of the two remaining loans.
The Federal Reserve has a policy that a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary bank and may not conduct its operations in an unsafe or unsound manner.
Under the BHCA, Riverview is supervised by the Federal Reserve. The Federal Reserve has a policy that a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary bank and may not conduct its operations in an unsafe or unsound manner.
At March 31, 2022, the Bank was not required to maintain any reserve balances.
At March 31, 2023, the Bank was not required to maintain any reserve balances.
At March 31, 2022, loans 30 – 89 days past due were comprised of SBA government guaranteed loans (which are included in commercial business), real estate construction and consumer loans. The SBA government guaranteed loans comprise a substantial amount of the total loans 30-89 days past due at March 31, 2022.
At March 31, 2023, loans 30 – 89 days past due were comprised of SBA government guaranteed loans (which are included in commercial business), commercial business and consumer loans. The SBA government guaranteed loans comprise a substantial amount of the total loans 30-89 days past due at March 31, 2023.
Prior to the fiscal year ended March 31, 2021, the Company historically sold its fixed-rate residential one-to-four family mortgage loans that it originated with maturities of 15 years or more and balloon mortgages to the FHLMC as part of its asset/liability strategy.
Mortgage Loan Servicing. The Company is a qualified servicer for the FHLMC. Prior to the fiscal year ended March 31, 2021, the Company historically sold its fixed-rate residential one-to-four family mortgage loans that it originated with maturities of 15 years or more and balloon mortgages to the FHLMC as part of its asset/liability strategy.
At March 31, 2022, the largest commercial construction loan had a balance of $4.5 million and was performing according to its original repayment terms. The average balance of loans in the commercial construction loan portfolio at March 31, 2022 was $1.4 million. At March 31, 2022 and 2021, the Company had no commercial construction loans on non-accrual status.
At March 31, 2023, the largest commercial construction loan had a balance of $6.6 million and was performing according to its original repayment terms. The average balance of loans in the commercial construction loan portfolio at March 31, 2023 was $2.1 million. At March 31, 2023 and 2022, the Company had no commercial construction loans on non-accrual status.
The following table sets forth certain information regarding the executive officers of the Company and its subsidiaries: ​ ​ ​ ​ ​ Name Age (1) Position Kevin J. Lycklama 44 President and Chief Executive Officer David Lam 45 Executive Vice President and Chief Financial Officer Daniel D. Cox 44 Executive Vice President and Chief Credit Officer Steven P.
The following table sets forth certain information regarding the executive officers of the Company and its subsidiaries: ​ ​ ​ ​ ​ Name Age (1) Position Kevin J. Lycklama 45 President and Chief Executive Officer David Lam 46 Executive Vice President and Chief Financial Officer Daniel D. Cox 45 Executive Vice President and Chief Credit Officer Tracie L.
These nonperforming government guaranteed loans are not considered to be nonaccrual loans because there is no concern of the collectability of the full principal and interest given the Company purchased the guaranteed portion of these loans which is backed by government guaranteed interest certificates.
These nonperforming government guaranteed loans are not considered non-accrual loans because there is no concern of the collectability of the full principal and interest given the Company purchased the guaranteed portion of these loans which is backed by government guaranteed interest certificates.
With some exceptions, Riverview Bancorp, Inc. and its subsidiaries are prohibited from tying the provision of various services, such as extensions of credit, to other services offered by Riverview Bancorp, Inc. or by its affiliates. Acquisitions.
With some exceptions, Riverview and its 29 Table of Contents subsidiaries are prohibited from tying the provision of various services, such as extensions of credit, to other services offered by Riverview or by its affiliates. Acquisitions.
One-to-four family residences located in the Company’s primary market area secure the majority of the residential loans. Underwriting standards require that one-to-four family portfolio loans generally be owner occupied and that originated loan amounts not exceed 80% (95% with private mortgage insurance) of the lesser of current appraised value or cost of the underlying collateral.
The majority of our real estate one-to-four family loans are located in the Company’s primary market area. Underwriting standards require that real estate one-to-four family loans generally be owner occupied and that originated loan amounts not exceed 80% (95% with private mortgage insurance) of the lesser of current appraised value or cost of the underlying collateral.
At March 31, 2022, the Company’s residential construction and land acquisition and development loan portfolios were $11.4 million and $11.6 million, respectively, as compared to $7.2 million and $14.0 million, respectively, at March 31, 2021. At March 31, 2022 and 2021, there were no nonperforming loans in the residential construction loan portfolio or the land acquisition and development portfolio.
At March 31, 2023, the Company’s residential construction and land acquisition and development loan portfolios were $18.2 million and $6.4 million, respectively, as compared to $11.4 million and $11.6 million, respectively, at March 31, 2022. At March 31, 2023 and 2022, there were no nonperforming loans in the residential construction loan portfolio or the land acquisition and development portfolio.
The Bank expects the reconciliation and unwinding process to continue and until these processes are completed for all loans being transferred, all of these loans will be reflected as past due.
The Bank expects the reconciliation and unwinding process to continue and until these processes are completed for all loans being transferred, with such loans continuing to be reflected as past due.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies.” The Company primarily purchases agency securities with maturities of five years or less and purchases a combination of MBS backed by government agencies (FHLMC, Fannie Mae (“FNMA”), SBA or Ginnie Mae (“GNMA”)).
“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates.” The Company primarily purchases agency securities and a combination of MBS backed by government agencies (FHLMC, Fannie Mae (“FNMA”), SBA or Ginnie Mae (“GNMA”)).
Environmental Issues Associated with Real Estate Lending. The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), is a federal statute that generally imposes strict liability on all prior and present “owners and operators” of sites containing hazardous waste.
The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), is a federal statute that generally imposes strict liability on all prior and present “owners and operators” of sites containing hazardous waste.
The Trust Company is an asset management company providing trust, estate planning and investment management services. The Trust Company had net income of $719,000 for the fiscal year ended March 31, 2022 and total assets of $8.7 million at March 31, 2022. The Trust Company earns fees on the management of assets held in fiduciary or agency capacity.
The Trust Company is an asset management company providing trust, estate planning and investment management services. The Trust Company had net income of $860,000 for the fiscal year ended March 31, 2023 and total assets of $9.0 million at March 31, 2023. The Trust Company earns fees on the management of assets held in fiduciary or agency capacity.
The aggregate amount of the Company’s classified loans (comprised entirely of substandard loans), general loss allowances, specific loss allowances and net charge-offs (recoveries) were as follows at the dates indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ At or For the Year ​ ​ Ended March 31, ​ 2022 2021 ​ ​ ​ ​ ​ ​ ​ Classified loans ​ $ 6,405 ​ $ 7,687 General loss allowances ​ 14,515 ​ 19,167 Specific loss allowances ​ 8 ​ 11 Net charge-offs (recoveries) ​ 30 ​ (254) ​ All of the loans on non-accrual status as of March 31, 2022 were categorized as classified loans with the exception of one commercial business loan for $18,000 which is fully guaranteed by the SBA.
The aggregate amount of the Company’s classified loans (comprised entirely of substandard loans), general loss allowances, specific loss allowances and net charge-offs (recoveries) were as follows at the dates indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ At or For the Year ​ ​ Ended March 31, ​ 2023 2022 ​ ​ ​ ​ ​ ​ ​ Classified loans ​ $ 2,647 ​ $ 6,405 General loss allowances ​ 15,303 ​ 14,515 Specific loss allowances ​ 6 ​ 8 Net charge-offs (recoveries) ​ (36) ​ 30 ​ All loans on non-accrual status as of March 31, 2023 were categorized as classified loans with the exception of one commercial business loan for $18,000 which is fully guaranteed by the SBA.
At March 31, 2022, the Company had $66.3 million, or 4.32% of total deposits, in Certificate of Deposit Account Registry Service (“CDARS”) and Insured Cash Sweep (“ICS”) deposits, which were gathered from customers within the Company’s primary market-area. CDARS and ICS deposits allow customers access to FDIC insurance on deposits exceeding the $250,000 FDIC insurance limit.
At March 31, 2023, the Company had $22.8 million, or 1.80% of total deposits, in Certificate of Deposit Account Registry Service (“CDARS”) and Insured Cash Sweep (“ICS”) deposits, which were gathered from customers within the Company’s primary market-area. CDARS and ICS deposits allow customers access to FDIC insurance on deposits exceeding the $250,000 FDIC insurance limit.
Subsidiary Activities Riverview Bancorp, Inc. has one operating subsidiary, the Bank. The Bank has one wholly-owned subsidiary, Riverview Services, Inc. (“Riverview Services”) and a majority-owned subsidiary, the Trust Company. Riverview Services acts as a trustee for deeds of trust on mortgage loans granted by the Bank and receives a reconveyance fee for each deed of trust.
Subsidiary Activities Riverview has one operating subsidiary, the Bank. The Bank has two wholly-owned subsidiaries, Riverview Services and the Trust Company. Riverview Services acts as a trustee for deeds of trust on mortgage loans granted by the Bank and receives a reconveyance fee for each deed of trust.
These nonperforming government guaranteed loans are not considered classified as there is no well-defined weakness and do not include the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected in regard to these loans.
As discussed earlier, nonperforming SBA and USDA government guaranteed loans totaled $1.6 million. These nonperforming government guaranteed loans are not considered classified as there is no well-defined weakness and do not include the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected in regard to these loans.
At March 31, 2022, the Company had TDRs totaling $717,000, of which $495,000 were on accrual status. The $222,000 of TDRs accounted for on a non-accrual basis at March 31, 2022 are included as nonperforming loans in the nonperforming asset table above. All of the Company’s TDRs were paying as agreed at March 31, 2022.
At March 31, 2023, the Company had TDRs totaling $629,000, of which $450,000 were on accrual status. The $179,000 of TDRs accounted for on a non-accrual basis at March 31, 2023 are included as nonperforming loans in the nonperforming asset table above. All of the Company’s TDRs were paying as agreed at March 31, 2023.
In addition to this industry base, the Columbia River Gorge Scenic Area and the Portland metropolitan area are sources of tourism. Lending Activities General . At March 31, 2022, the Company’s net loans receivable totaled $975.9 million, or 56.1% of total assets at that date.
In addition to this industry base, the Columbia River Gorge Scenic Area and the Portland metropolitan area are sources of tourism. Lending Activities General . At March 31, 2023, the Company’s net loans receivable totaled $993.5 million, or 62.5% of total assets at that date.
However, a decline in national and local economic conditions (including declines as a result of the COVID-19 pandemic), results of examinations by the Company’s banking regulators, or other factors could result in a material increase in the allowance for loan losses and may adversely affect the Company’s future financial condition and results of operations.
However, a decline in national and local economic conditions (including a recession and continued inflationary pressures), results of examinations by the Company’s banking regulators, or other factors could result in a material increase in the allowance for loan losses and may adversely affect the Company’s future financial condition and results of operations.
The policy also dictates the criteria for classifying investment securities into one of three categories: held to maturity, available for sale or trading. At March 31, 2022, no investment securities were held for trading purposes. At March 31, 2022, the Company’s investment portfolio consists of debt securities and does not include any equity securities. See Item 7.
The policy also dictates the criteria for classifying investment securities into one of three categories: held to maturity, available for sale or trading. At March 31, 2023, no investment securities were held for trading purposes. At March 31, 2023, the Company’s investment portfolio consisted of solely debt securities and no equity securities. See Item 7.
The following table sets forth information regarding the Company’s nonperforming loans at the dates indicated (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 March 31, 2021 ​ ​ Number of ​ ​ ​ ​ Number of ​ ​ ​ ​ Loans Balance Loans Balance ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial business 1 ​ $ 100 3 ​ $ 357 Commercial real estate 1 ​ 122 1 ​ 144 Consumer 2 ​ 51 5 ​ 70 Subtotal ​ 4 ​ ​ 273 ​ 9 ​ ​ 571 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SBA Government Guaranteed ​ 66 ​ ​ 21,826 ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total 70 ​ $ 22,099 9 ​ $ 571 ​ The Company continues its efforts to work out problem loans, seek full repayment or pursue foreclosure proceedings and is making progress in regards to the SBA and USDA government guaranteed loan servicing transfer.
The following table sets forth information regarding the Company’s nonperforming loans at the dates indicated (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2023 March 31, 2022 ​ ​ Number of ​ ​ ​ ​ Number of ​ ​ ​ ​ Loans Balance Loans Balance ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial business 1 ​ $ 79 1 ​ $ 100 Commercial real estate 1 ​ 100 1 ​ 122 Consumer 3 ​ 86 2 ​ 51 Subtotal ​ 5 ​ ​ 265 ​ 4 ​ ​ 273 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SBA and USDA Government Guaranteed ​ 6 ​ ​ 1,587 ​ 66 ​ ​ 21,826 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total 11 ​ $ 1,852 70 ​ $ 22,099 ​ The Company continues its efforts to work out problem loans, seek full repayment or pursue foreclosure proceedings and has made significant progress in regards to the SBA and USDA government guaranteed loan servicing transfer.
At March 31, 2022, all of the Company’s nonperforming loans exclusive of the SBA and USDA government guaranteed loans are to borrowers with properties located in Southwest Washington. At March 31, 2022, 1.01% of the Company’s nonperforming loans, totaling $222,000 were measured for impairment.
At March 31, 2023, all of the Company’s nonperforming loans exclusive of the SBA and USDA government guaranteed loans are to borrowers with properties located in Southwest Washington. At March 31, 2023, 9.69% of the Company’s nonperforming loans, totaling $179,000 were measured for impairment.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeDeterioration in economic conditions in the market areas we serve as a result of COVID-19 or other factors could result in the following consequences, any of which could have a materially adverse impact on our business, financial condition and results of operations: ​ ● loan delinquencies, problem assets and foreclosures may increase; ● we may increase our allowance for loan losses; ● the slowing of sales of foreclosed assets; ● demand for our products and services may decline possibly resulting in a decrease in our total loans or assets; ● collateral for loans made may decline further in value, exposing us to increased risk loans, reducing customers’ borrowing power, and reducing the value of assets and collateral associated with existing loans; ● the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; and ● the amount of our low-cost or non-interest bearing deposits may decrease. ​ A decline in local economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are geographically diverse.
Biggest changeA deterioration in economic conditions in the market areas we serve could result in the following consequences, any of which could have a materially adverse impact on our business, financial condition, liquidity and results of operations: ​ ● loan delinquencies, problem assets and foreclosures may increase; ● we may increase our allowance for loan losses; ● demand for our products and services may decline possibly resulting in a decrease in our total loans or assets; ● collateral for loans, especially real estate, may decline in value, thereby reducing customers’ future borrowing power, and reducing the value of assets and collateral associated with existing loans; ● the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; and ● the amount of our low-cost or non-interest bearing deposits may decrease. ​ Many of the loans in our portfolio are secured by real estate.
Loans on land under development or raw land held for future construction, including lot loans made to individuals for the future construction of a residence also pose additional risk because of the lack of income being produced by the property and the potential illiquid nature of the collateral. These risks can also be significantly impacted by supply and demand conditions.
Loans on land under development or raw land held for future construction, including lot loans made to individuals for the future construction of a residence also pose additional risk because of the lack of income being produced by the property and the potential illiquid nature of the collateral. These risks can be significantly impacted by supply and demand conditions.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies, in particular, the Federal Reserve.
Because construction loans require active monitoring of the building process, including cost comparisons and on-site inspections, these loans are more difficult and costly to monitor. Increases in market rates of interest may have a more pronounced effect on construction loans by rapidly increasing the end-purchasers’ borrowing costs, thereby reducing the overall demand for the project.
Because construction loans require active monitoring of the building process, including cost comparisons and on-site inspections, these loans are more difficult and costly to monitor. Increases in market rates of interest also may have a more pronounced effect on construction loans by rapidly increasing the end-purchasers’ borrowing costs, thereby reducing the overall demand for the project.
If the appraisal of the value of the completed project proves to be overstated, we may have inadequate security for the repayment of the loan upon completion of construction of the project and may incur a loss.
If our appraisal of the value of a completed project proves to be overstated, we may have inadequate security for the repayment of the loan upon completion of construction of the project and may incur a loss.
Although we have developed and continue to invest in systems and processes that are designed to detect and prevent security breaches and cyber-attacks and periodically test our security, these precautions may not protect our systems from compromises or breaches of our security measures, and could result in losses to us or our clients, our loss of business and/or clients, damage to our reputation, the incurrence of additional expenses, disruption to our business, our inability to grow our online services or other businesses, additional regulatory scrutiny or penalties, or our 38 Table of Contents exposure to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, financial condition and results of operations.
Although we have developed and continue to invest in systems and processes that are designed to detect and prevent security breaches and cyber-attacks and periodically test our security, these precautions may not protect our systems from compromises or breaches of our security measures, and could result in losses to us or our clients, our loss of business and/or clients, damage to our reputation, the incurrence of additional expenses, disruption to our business, our inability to grow our online services or other businesses, additional regulatory scrutiny or penalties, or our exposure to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, financial condition and results of operations.
In addition, our success has been and continues to be highly dependent upon the services of our directors, many of whom are at or nearing retirement age, and we may not be able to identify and attract suitable candidates to replace such directors. 41 Table of Contents Managing reputational risk is important to attracting and maintaining customers, investors and employees.
In addition, our success has been and continues to be highly dependent upon the services of our directors, many of whom are at or nearing retirement age, and we may not be able to identify and attract suitable candidates to replace such directors. 43 Table of Contents Managing reputational risk is important to attracting and maintaining customers, investors and employees.
Further, the occurrence of any systems failure or interruption could damage our reputation and result in a loss of customers and business, could subject us to additional regulatory scrutiny, or could expose us to legal liability. Any of these occurrences could have a material adverse effect on our financial condition and results of operations.
Further, the occurrence of any systems failure or interruption could damage our reputation and result in a loss of customers and business, could subject us to additional regulatory scrutiny, or could expose us to legal liability. Any of these occurrences could have a materially adverse effect on our financial condition and results of operations.
This risk is affected by, among other things: ​ ● the cash flow of the borrower and/or the project being financed; ● in the case of a collateralized loan, the changes and uncertainties as to the future value of the collateral; ● the duration of the loan; ● the credit history of a particular borrower; and ● changes in economic and industry conditions. ​ We maintain an allowance for loan losses, which is a reserve established through a provision for loan losses charged to expense, which we believe is appropriate to provide for probable losses in our loan portfolio.
This risk is affected by, among other things: ​ ● the cash flow of the borrower and/or the project being financed; ● in the case of a collateralized loan, the changes and uncertainties as to the future value of the collateral; ● the duration of the loan; 34 Table of Contents ● the credit history of a particular borrower; and ● changes in economic and industry conditions. ​ We maintain an allowance for loan losses, which is a reserve established through a provision for loan losses charged to expense, which we believe is appropriate to provide for probable losses in our loan portfolio.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could have a materially adverse effect on our business, financial condition, results of operations and growth prospects.
A decline in the economies of the seven counties in which we operate, including the Portland, Oregon metropolitan area, which we consider to be our primary market area, could have a material adverse effect on our business, financial condition, results of operations and prospects.
A decline in the economies of the seven counties in which we operate, including the Portland, Oregon metropolitan area, which we consider to be our primary market area, could have a materially adverse effect on our business, financial condition, results of operations and prospects.
Residential loans with high combined loan-to-value ratios will be more sensitive to declining property values than those with lower combined loan-to-value ratios and therefore may experience a higher incidence of default and severity of losses. In addition, if the borrowers sell their homes, they may be unable to repay their loans in full from the sale.
Residential loans with high combined loan-to-value ratios generally will be more sensitive to declining property values than those with lower combined loan-to-value ratios and therefore may experience a higher incidence of default and severity of losses. In addition, if the borrowers sell their homes, the borrowers may be unable to repay their loans in full from the sale proceeds.
As is the case with many financial institutions, our emphasis on 35 Table of Contents increasing the development of core deposits, those deposits bearing no or a relatively low rate of interest with no stated maturity date, has resulted in our having a significant amount of these deposits which have a shorter duration than our assets.
As is the case with many financial institutions, our emphasis on increasing the development of core deposits, those deposits bearing no or a relatively low rate of interest with no stated maturity date, has resulted in our having a significant amount of these deposits which have a shorter duration than our assets.
Finally, there is a risk that our new branches will not be successful even after they have been established. Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed or the cost of that capital may be very high.
Finally, there is a risk that our new branches will not be successful even after they have been established. 42 Table of Contents Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed or the cost of that capital may be very high.
Repayment on these loans is dependent upon income generated, or expected to be generated, by the property securing the loan in amounts sufficient to cover operating expenses and debt service, which may be adversely affected by changes in the economy or local market conditions.
Repayment on these loans is dependent upon income generated, or expected to be generated, by the property securing the loan in amounts sufficient to cover operating expenses and debt service, which may be 33 Table of Contents adversely affected by changes in the economy or local market conditions.
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity” of this Form 10-K. 40 Table of Contents Additionally, collateralized public funds are bank deposits of state and local municipalities.
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity” of this Form 10-K. Additionally, collateralized public funds are bank deposits of state and local municipalities.
These factors include, but are not limited to, rating agency actions in respect to the securities, defaults by, or other adverse events affecting, the issuer or with respect to the underlying securities, and changes in market interest rates and continued instability in the capital markets.
These factors include, but are not limited to, rating agency actions in respect to the 36 Table of Contents securities, defaults by, or other adverse events affecting, the issuer or with respect to the underlying securities, and changes in market interest rates and continued instability in the capital markets.
As a result, these loans may experience a higher rate of default in a rising interest rate environment. Changes in interest rates also affect the value of our interest-earning assets and in particular our securities portfolio. Generally, the fair value of fixed-rate securities fluctuates inversely with changes in interest rates.
As a result, these loans may experience a higher rate of default in a rising interest rate environment. Changes in interest rates also affect the value of our securities portfolio. Generally, the fair value of fixed-rate securities fluctuates inversely with changes in interest rates.
In general, construction and land lending involves additional risks because of the inherent difficulty in estimating a property’s value both before and at completion of the project, as well as the estimated cost of the project and the time needed to sell the property at completion.
In general, construction and land lending involve additional risks when compared with other lending because of the inherent difficulty in estimating a property’s value both before and at completion of the project, as well as the estimated cost of the project and the time needed to sell the property at completion.
Disruptions or failures in the physical infrastructure or operating systems that support our business and clients, or cyber-attacks or security breaches of the networks, systems or devices that our clients use to access our products and services could result in client attrition, regulatory fines, penalties or intervention, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs, any of which could materially adversely affect our results of operations or financial condition.
Disruptions or failures in the physical infrastructure or operating systems that support our business and clients, or cyber-attacks or security breaches of the networks, systems or devices that our clients use to access our products and services could result in client attrition, regulatory fines, penalties or intervention, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs, any of which could materially adversely affect our results of operations or financial condition. 41 Table of Contents We will be required to transition from the use of LIBOR in the future.
These loans typically involve higher principal amounts than other types of loans and some of our commercial borrowers have more than one loan outstanding with us.
Commercial and multi-family real estate loans typically involve higher principal amounts than other types of loans and some of our commercial borrowers have more than one loan outstanding with us.
In addition, deflationary pressures, while possibly lowering our operational costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of collateral securing loans, which could negatively affect our financial performance. We principally manage interest rate risk by managing our volume and mix of our earning assets and funding liabilities.
In addition, as previously discussed, inflationary pressures will increase our operational costs and could have a significant negative effect on our borrowers, especially our business borrowers, and the values of collateral securing loans which could negatively affect our financial performance. We principally manage interest rate risk by managing our volume and mix of our earning assets and funding liabilities.
In addition, any additional capital we obtain may result in the dilution of the interests of existing holders of our common stock. Further, if we are unable to raise additional capital when required by our bank regulators, we may be subject to adverse regulatory action. Competition with other financial institutions could adversely affect our profitability.
In addition, any additional capital we obtain may result in the dilution of the interests of existing holders of our common stock. Further, if we are unable to raise additional capital when required by our bank regulators, we may be subject to adverse regulatory action.
We may also be subject to potentially adverse regulatory consequences. 37 Table of Contents Risks Related to Cybersecurity, Data and Fraud We are subject to certain risks in connection with our use of technology. Our security measures may not be sufficient to mitigate the risk of a cyber-attack .
Risks Related to Cybersecurity, Data and Fraud We are subject to certain risks in connection with our use of technology. Our security measures may not be sufficient to mitigate the risk of a cyber-attack .
Insider or employee cyber and security threats are increasingly a concern for companies, including ours.
Insider or employee cyber and security threats are increasingly a concern for 39 Table of Contents companies, including ours.
Many of the loans in our portfolio are secured by real estate. Deterioration in the real estate markets where collateral for a mortgage loan is located could negatively affect the borrower’s ability to repay the loan and the value of the collateral securing the loan.
Deterioration in the real estate markets where collateral for a mortgage loan is located could negatively affect the borrower’s ability to repay the loan and the value of the collateral securing the loan.
At March 31, 2022, we had $494.8 million in non-interest bearing demand deposits and $77.2 million in certificates of deposit that mature within one year. We would incur a higher cost of funds to retain these deposits in a rising interest rate environment.
At March 31, 2023, we had $404.9 million in non-interest bearing demand deposits and $84.6 million in certificates of deposit that mature within one year. We would incur a higher cost of funds to retain these deposits in a rising interest rate environment.
The FOMC has indicated further increases are to be expected this year. If the FOMC further increases the targeted federal funds rates, overall interest rates will likely rise, which will positively impact our net interest income but may negatively impact both the housing market by reducing refinancing actively and new home purchases and the U.S. economy.
If the FOMC further increases the targeted federal funds rates, overall interest rates will likely continue to rise, which will positively impact our net interest income but may negatively impact the housing market by reducing refinancing activity, new home purchases and the U.S. economy.
In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.
This collateral may consist of equipment, inventory, accounts receivable, or other business assets. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.
Based on these criteria, the Bank has a concentration in commercial real estate lending as total loans for multifamily, non-farm/non-residential, construction, land development and other land represented 310% of total risk-based capital at March 31, 2022.
Based on these criteria, the Bank determined that it did not have a concentration in commercial real estate lending as total loans for multifamily, non-farm/non-residential, construction, land development and other land represented 285% of total risk-based capital at March 31, 2023.
As a result, the availability of funds for the repayment of commercial business loans may be substantially dependent on the success of the business itself which, in turn, is often dependent in part upon general economic conditions and secondarily on the underlying collateral provided by the borrower. 33 Table of Contents Our allowance for loan losses may prove to be insufficient to absorb losses in our loan portfolio.
As a result, the availability of funds for the repayment of commercial business loans may be substantially dependent on the success of the business itself which, in turn, is often dependent in part upon general economic conditions and secondarily on the underlying collateral provided by the borrower.
There can be no assurance that the declines in market value will not result in other-than-temporary impairments of these assets, and would lead to accounting charges that could have a material adverse effect on our net income and capital levels.
There can be no assurance that the declines in market value will not result in other-than-temporary impairments of these assets, and would lead to accounting charges that could have a material adverse effect on our net income and capital levels. For the fiscal year ended March 31, 2023, we did not incur any other-than-temporary impairments on our securities portfolio.
Our mortgage brokerage operations provide a significant portion of our non-interest income. The Company employs commissioned brokers who originate mortgage loans (including construction loans) for various mortgage companies. The loans brokered to mortgage companies are closed in the name of, and funded by, the purchasing mortgage company and are not originated as an asset of the Company.
The Company employs commissioned brokers who originate mortgage loans (including construction loans) for various mortgage companies. The loans brokered to mortgage companies are closed in the name of, and funded by, the purchasing mortgage company and are not originated as an asset of the Company.
Our profitability will depend upon our continued ability to compete successfully in our market areas. Our ability to retain and recruit key management personnel and bankers is critical to the success of our business strategy and any failure to do so could impair our customer relationships and adversely affect our business and results of operations.
Our ability to retain and recruit key management personnel and bankers is critical to the success of our business strategy and any failure to do so could impair our customer relationships and adversely affect our business and results of operations.
As a result, construction loans often involve the disbursement of substantial funds with repayment dependent on the success of the ultimate project and the ability of the borrower to sell or lease the property or refinance the indebtedness, rather than the ability of the borrower or guarantor to repay principal and interest.
As a result, this type of lending often involves the disbursement of substantial funds with repayment dependent on the success of the ultimate project and the ability of the borrower to develop, sell or lease the property, rather than the ability of the borrower or guarantor to independently repay principal and interest.
We make construction and land acquisition and development loans primarily to builders to finance the construction of single and multifamily homes, subdivisions, as well as commercial properties. We originate these loans whether or not the collateral property underlying the loan is under contract for sale.
We make construction and land loans primarily to builders to finance the construction of single and multifamily homes, subdivisions, as well as commercial properties, a portion of which are originated whether or not the collateral property underlying 32 Table of Contents the loan is under contract for sale.
Although these funds historically have been a relatively stable source of funds for us, availability depends on the individual municipality’s fiscal policies and cash flow needs. Our branching strategy may cause our expenses to increase faster than revenues. We recently opened three new branches in Clark County, Washington and may open additional branches in our market area in the future.
Although these funds historically have been a relatively stable source of funds for us, availability depends on the individual municipality’s fiscal policies and cash flow needs. Our branching strategy may cause our expenses to increase faster than revenues.
Weakness in the global economy has adversely affected many businesses operating in our markets that are dependent upon international trade and it is not known how changes in tariffs being imposed on international trade may also affect these businesses. Changes in agreements or relationships between the U.S. and other countries may also affect these businesses.
Weakness in the global economy and global supply chain issues have adversely affected many businesses operating in our markets that are dependent upon international trade. Changes in agreements or relationships between the U.S. and other countries may also affect these businesses.
We rely on numerous external vendors to provide us with products and services necessary to maintain our day-to-day operations. Accordingly, our operations are exposed to risk that these vendors will not perform in accordance with the contracted arrangements under service level agreements.
Accordingly, our operations are exposed to risk that these vendors will not perform in accordance with the contracted arrangements under service level agreements.
If our risk management framework proves ineffective, we could suffer unexpected losses and our business, financial condition, results of operations or growth prospects could be materially adversely affected.
If our risk management framework proves ineffective, we could suffer unexpected losses and our business, financial condition, results of operations or growth prospects could be materially adversely affected. We may also be subject to potentially adverse regulatory consequences. Climate change and related legislative and regulatory initiatives may materially affect the Company’s business and results of operations.
Our commercial business loans are primarily made based on the cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. The borrowers’ cash flow may be unpredictable, and collateral securing these loans may fluctuate in value. This collateral may consist of equipment, inventory, accounts receivable, or other business assets.
At March 31, 2023, commercial business loans totaled $232.9 million, or 23.08% of total loans. Our commercial business loans are primarily made based on the cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. The borrowers’ cash flow may be unpredictable, and collateral securing these loans may fluctuate in value.
The success of our branch expansion strategy is contingent upon numerous factors, such as our ability to secure managerial resources, hire and retain qualified personnel and implement effective marketing strategies.
Since June 2020, we opened three new branches in Clark County, Washington and may open additional branches in our market area in the future. The success of our branch expansion strategy is contingent upon numerous factors, such as our ability to secure managerial resources, hire and retain qualified personnel and implement effective marketing strategies.
If charge-offs in future periods exceed the allowance for loan losses, we may need additional provisions to replenish the allowance for loan losses. Any increases in the allowance for loan losses will result in a decrease in net income and, most likely, capital, and may have a material negative effect on our financial condition and results of operations.
Any increases in the provision for loan losses will result in a decrease in net income and may have a material adverse effect on our financial condition, results of operations, liquidity and capital.
For the year ended March 31, 2022, we did not incur any other-than-temporary impairments on our securities portfolio Revenue from broker loan fees are sensitive to changes in economic conditions, decreased economic activity, a slowdown in the housing market, higher interest rates or new legislation which may adversely impact our financial condition and results of operations.
Revenue from broker loan fees is sensitive to changes in economic conditions, decreased economic activity, a slowdown in the housing market, higher interest rates or new legislation which may adversely impact our financial condition and results of operations. Our mortgage brokerage operations provide additional non-interest income.
Further, in the case of speculative construction loans, there is the added risk associated with identifying an end-purchaser for the finished project, and thus pose a greater potential risk than construction loans to individuals on their personal residences.
Furthermore, in the case of speculative construction loans, there is the added risk associated with identifying an end-purchaser for the finished project.
Our test of goodwill for potential impairment is based on a qualitative assessment by management that takes into consideration macroeconomic conditions, industry and market conditions, cost or margin factors, financial performance and share price. 39 Table of Contents Risks Related to our Business and Industry General We rely on other companies to provide key components of our business infrastructure.
We performed a qualitative assessment of goodwill at March 31, 2023 and concluded that recorded goodwill was not impaired. Our test of goodwill for potential impairment is based on a qualitative assessment by management that takes into consideration macroeconomic conditions, industry and market conditions, cost or margin factors, financial performance and share price.
A decline in residential real estate values resulting from a downturn in the Washington and Oregon housing markets in which we operate may reduce the value of the real estate collateral securing these types of loans and increase our risk of loss if borrowers default on their loans.
A downturn in the economy or the housing market in our market areas or a rapid increase in interest rates may reduce the value of the real estate collateral securing these types of loans and increase the risk that we would incur losses if borrowers default on their loans.
Accordingly, charge-offs on commercial and multi-family real estate loans may be larger on a per loan basis than those incurred with our residential or consumer loan portfolios. 32 Table of Contents The level of our commercial real estate loan portfolio may subject us to additional regulatory scrutiny.
Accordingly, charge-offs on commercial and multi-family real estate loans may be larger on a per loan basis than those incurred with our residential or consumer loan portfolios. Our business may be adversely affected by credit risk associated with residential property and declining property values.
Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss. 31 Table of Contents In addition, during the term of most of our construction loans, no payment from the borrower is required since the accumulated interest is added to the principal of the loan through an interest reserve.
Moreover, during the term of most of our construction loans, no payment from the borrower is required since the accumulated interest is added to the principal of the loan through an interest reserve.
Collateral evaluation and financial statement analysis in these types of loans requires a more detailed analysis at the time of loan underwriting and on an ongoing basis. Many of our commercial borrowers have more than one loan outstanding with us.
Collateral evaluation and financial statement analysis in these types of loans requires a more detailed analysis at the time of loan underwriting and on an ongoing basis. At March 31, 2023, we had $620.3 million of commercial and multi-family real estate loans, representing 61.49% of our total loan portfolio.
If our clients withdraw assets or the value of their assets decline, the revenues generated by the Trust Company will be adversely affected. 36 Table of Contents Risks Related to Regulatory, Legal and Compliance Matters We operate in a highly regulated environment and may be adversely affected by changes in federal and state laws and regulations.
If our clients withdraw assets or the value of their assets decline, the revenues generated by the Trust Company will be adversely affected. Risks Related to Regulatory, Legal and Compliance Matters The continued focus on increasing our commercial real estate loan portfolio may subject us to additional regulatory scrutiny.
Any increase in our write-downs, as required by the bank regulators, may have a material adverse effect on our financial condition, liquidity and results of operations. Risks Related to Market and Interest Rate Changes Changes in interest rates may reduce our net interest income and may result in higher defaults in a rising rate environment.
Risks Related to Market and Interest Rate Changes Changes in interest rates may reduce our net interest income and may result in higher defaults in a rising rate environment.
Some of the institutions with which we compete have substantially greater resources than we have and may offer services that we do not provide. We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry.
We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. Our profitability will depend upon our continued ability to compete successfully in our market areas.
We rely on dividends from the Bank for substantially all of our revenue at the holding company level. We are an entity separate and distinct from our principal subsidiary, the Bank, and derive substantially all of our revenue at the holding company level in the form of dividends from that subsidiary.
We rely on dividends from the Bank for substantially all of our revenue at the holding company level. Riverview is a separate legal entity from its subsidiaries and does not have significant operations of its own.
Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss. At March 31, 2022, we had $643.0 million of commercial and multi-family real estate mortgage loans, representing 64.9% of our total loan portfolio.
Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss.
This standard, referred to as “Current Expected Credit Loss”, or “CECL”, will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans and recognize the expected credit losses as allowances for credit losses at inception of the loan. This will change the current method of providing allowances for credit losses that are probable.
In addition, the FASB has adopted an accounting standard referred to as Current Expected Credit Loss, or CECL, which requires financial institutions to determine periodic estimates of lifetime expected credit losses on loans and recognize the expected credit losses as allowances for credit losses.
For those home equity lines secured by a second mortgage, it is unlikely that we will be successful in recovering all or a portion of our loan proceeds in the event of default unless we are prepared to repay the first mortgage loan and such repayment and the costs associated with a foreclosure are justified by the value of the property.
Home equity lines of credit generally entail greater risk than do real estate one-to-four family loans where we are in the first-lien position. For those home equity lines secured by a second mortgage, it is less likely that we will be successful in recovering all of our loan proceeds in the event of default.
In the event the Bank is unable to pay dividends to us, we may not be able to pay dividends on our common stock. Also, our right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. ​ ​ ​ 42 Table of Contents Item 1B.
Consequently, the inability to receive dividends from the Bank could adversely affect our financial condition, results of operations, and future prospects. Also, our right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. ​ 44 Table of Contents Item 1B. Unresolved Staff Comments None. ​
Substantially all of our loans are to businesses and individuals in the states of Washington and Oregon.
Risks Related to Macroeconomic Conditions Our business may be adversely affected by downturns in the national and the regional economies on which we depend. Substantially all of our loans are to businesses and individuals in the states of Washington and Oregon.
Our current business strategy is focused on the expansion of commercial real estate lending. This type of lending activity, while potentially more profitable than single-family residential lending, is generally more sensitive to regional and local economic conditions, making loss levels more difficult to predict.
Commercial and multi-family real estate lending involves higher risks than real estate one-to-four family and other consumer lending, which exposes us to increased lending risks. While commercial and multi-family real estate lending is typically more profitable than real estate one-to-four family lending, it is generally more sensitive to regional and local economic conditions, making loss levels more difficult to predict.
We anticipate that our allowance for loan losses will increase as a result of the implementation of CECL, however, until our evaluation is complete, the magnitude of the increase will be unknown. For more information, see Note 1 of the Notes to Consolidated Financial Statements - Recently Issued Accounting Pronouncements contained in Item 8 of this report.
See also, Note 1 of the Notes to Consolidated Financial Statements - Recently Issued Accounting Pronouncements contained in Item 8 of this report.
While we have policies and procedures designed to prevent such losses, there can be no assurance that such losses will not occur. Risks Related to Accounting Matters We may experience future goodwill impairment, which could reduce our earnings. We performed our annual goodwill impairment test as of October 31, 2021, and the test concluded that recorded goodwill was not impaired.
While we have policies and procedures designed to prevent such losses, there can be no assurance that such losses will not occur. 40 Table of Contents Risks Related to Accounting Matters The Company’s reported financial results depend on management’s selection of accounting methods and certain assumptions and estimates, which, if incorrect, could cause unexpected losses in the future.
Repayment of our commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value. At March 31, 2022, we had $225.0 million, or 22.7% of total loans, in commercial business loans other than SBA PPP loans.
As a result, these loans may experience higher rates of delinquencies, defaults and losses, which will in turn adversely affect our financial condition and results of operations. Repayment of our commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value.
At March 31, 2022, real estate construction and land acquisition and development loans totaled $35.7 million comprised mainly of $11.4 million of speculative and presold construction loans, $11.6 million of land acquisition and development loans and $12.7 million of commercial/multi-family construction loans. Our emphasis on commercial real estate lending may expose us to increased lending risks.
At March 31, 2023, real estate construction and land loans totaled $54.2 million, or 5.37% of our total loan portfolio, and was comprised of $18.2 million of speculative and presold construction loans, $6.4 million of land loans and $29.6 million of commercial/multi-family construction loans.
Although we consider ourselves competitive in our market areas, we face intense competition in both making loans and attracting deposits. Price competition for loans and deposits might result in our earning less on our loans and paying more on our deposits, which reduces net interest income.
Price competition for loans and deposits might result in our earning less on our loans and paying more on our deposits, which reduces net interest income. Some of the institutions with which we compete have substantially greater resources than we have and may offer services that we do not provide.
In addition, a decline in national and local economic conditions, including as a result of the COVID-19 pandemic, results of the bank regulatory agencies’ periodic review of our allowance for loan losses or other factors may require an increase in the provision for loan losses or the recognition of further loan charge-offs.
Further, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for possible loan losses or the recognition of further loan charge-offs based on their judgment about information available to them at the time of their examination.
However, the FOMC has recently begun to increase rates. In March 2022, in response to inflation, the FOMC commenced increasing the target range for the federal funds rate by implementing a 25 basis point increase to a range of 0.25% to 0.50%. In May 2022, the FOMC implemented a 50 basis point increase to a range of 0.75% to 1.00%.
Since March 2022, in response to inflation, the Federal Open Market Committee (“FOMC”) of the Federal Reserve has increased the target range for the federal funds rate by 475 basis points, including 50 basis points during the first quarter of 2023, to a range of 4.75% to 5.00% as of March 31, 2023.
Removed
Risks Related to Macroeconomic Conditions The COVID-19 pandemic has adversely affected our ability to conduct business and is expected to adversely impact our future financial results and those of our customers.
Added
A decline in local economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are geographically diverse.
Removed
The ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the COVID-19 pandemic. The COVID-19 pandemic continues to negatively impact economic and commercial activity and financial markets, both globally and within the United States.
Added
Inflationary pressures and rising prices may affect our results of operations and financial condition. ​ Inflation has risen sharply since the end of 2021 to levels not seen in more than 40 years.
Removed
In our market areas, stay-at-home orders, travel restrictions and closure of non-essential businesses and similar orders imposed across the United States to restrict the spread of COVID-19 in 2020 resulted in significant business and operational disruptions, including business closures, supply chain disruptions, and significant layoffs and furloughs.
Added
Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economies of scale to mitigate cost pressures compared to larger businesses.
Removed
Although local jurisdictions have subsequently lifted stay-at-home orders and moved to the opening of businesses, worker shortages, vaccine and testing requirements, new variants of COVID-19 and other health and safety recommendations have impacted the ability of businesses to return to pre-pandemic levels of activity and employment.
Added
Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition.
Removed
While the overall economy has improved, disruptions to supply chains continue and significant inflation has been seen in the market.
Added
Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which could adversely affect our results of operations and financial condition. ​ Risks Related to our Lending Activities Our real estate construction loans are based upon estimates of costs and the value of the completed project, and as with land loans may be more difficult to liquidate, if necessary.
Removed
If these effects continue for a prolonged period or result in sustained economic stress or recession, many of the risk factors identified in our Form 10-K could be exacerbated, including the following risks of COVID-19, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations of the Company: ● effects on key employees, including operational management personnel and those charged with preparing, monitoring and evaluating our financial reporting and internal controls; ● declines in demand for loans and other banking services and products, as well as a decline in the credit quality of our loan portfolio, owing to the effects of COVID-19 in the markets served by us; ● if the economy is unable to remain open in an efficient manner, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; ● collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; ● our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect net income; ● the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments; ● higher operating costs, increased cybersecurity risks and potential loss of productivity as the result of an increase in the number of employees working remotely; ● increasing or protracted volatility in the price of the Company’s common stock, which may also impair our goodwill; and ● risks to the capital markets that may impact the performance of our investment securities portfolio, as well as limit our access to capital markets and other funding sources. ​ Because there have been no comparable recent global pandemics that resulted in similar global impact, we do not yet know the full extent of COVID-19’s effects on our business, operations, or the global economy as a whole.
Added
Construction loans often involve the disbursement of funds with repayment substantially dependent on the success of the ultimate project and the ability of the borrower to sell or lease the property or obtain permanent take-out financing, rather than the ability of the borrower or guarantor to repay principal and interest.
Removed
Any future development will be highly uncertain and cannot be predicted, including the scope and duration of the pandemic, possible future virus variants, the effectiveness of any work-from-home arrangements, third party providers’ ability to support our operations, and any actions taken by governmental authorities and other third parties in response to the pandemic.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAt March 31, 2022, the Bank had ten offices located in Clark County, Washington (five of which are leased), two offices in Klickitat County, Washington and one office in Skamania County, Washington. The Bank also has two offices in Multnomah County, Oregon, one leased office in Washington County, Oregon and one office in Marion County, Oregon.
Biggest changeAt March 31, 2023, the Bank had ten offices located in Clark County, Washington (four of which are leased), two offices in Klickitat County, Washington and one office in Skamania County, Washington. The Bank also has two offices in Multnomah County, Oregon, one leased office in Washington County, Oregon and one office in Marion County, Oregon.
In addition, at March 31, 2022, the Trust Company had one office as part of the executive offices leased and one leased office in Clackamas County, Oregon. In the opinion of management, all properties are adequately covered by insurance, are in a good state of repair and are appropriately designed for their present and future use. ​
In addition, at March 31, 2023, the Trust Company had one office as part of the executive offices leased and one leased office in Clackamas County, Oregon. In the opinion of management, all properties are adequately covered by insurance, are in a good state of repair and are appropriately designed for their present and future use. ​

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe Company is not a party to any pending legal proceedings that it believes would have a material adverse effect on the financial condition, results of operations or liquidity of the Company. ​ Item 4. Mine Safety Disclosures Not applicable. ​ ​ ​ 43 Table of Contents PART II
Biggest changeThe Company is not a party to any pending legal proceedings that it believes would have a material adverse effect on the financial condition, results of operations or liquidity of the Company. ​ Item 4. Mine Safety Disclosures Not applicable. ​ 45 Table of Contents ​ PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 43 ​ ​ ​ PART II ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 44 Item 6. [Reserved] 45 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 46 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 60 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 45 ​ ​ ​ PART II ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 46 Item 6. [Reserved] 46 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 47 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 61 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of March 31, 2022, the Company repurchased $216,000 worth of the Company’s outstanding shares at an average price of $7.63 per share under this stock repurchase program. ​ The following table sets forth the Company’s repurchases of its outstanding common stock under the March 2022 repurchase program during the three months ended March 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Dollar ​ Maximum Dollar Value ​ ​ Total ​ Average ​ Value Purchased ​ of Shares that ​ ​ Number of ​ Price ​ as Part of Publicly ​ May Yet Be Purchased ​ ​ Shares ​ Paid per ​ Announced Stock ​ Under the Stock Period ​ Purchased ​ Share ​ Repurchase Program ​ Repurchase Program January 1, 2022 - January 31, 2022 ​ — ​ $ — ​ $ — ​ $ — February 1, 2022 - February 28, 2022 ​ — ​ ​ — ​ ​ — ​ ​ — March 1, 2022 - March 31, 2022 ​ 28,240 ​ ​ 7.63 ​ ​ 215,552 ​ ​ 4,784,448 Total 28,240 ​ $ 7.63 $ 215,552 $ 4,784,448 ​ ​ Securities for Equity Compensation Plans Please refer to Item 12 in this Form 10-K for a listing of securities authorized for issuance under equity compensation plans.
Biggest changeThe share repurchase program does not obligate us to acquire any specific number of shares in any period, and may be expanded, extended, modified or discontinued by our Board of Directors at any time. ​ The following table sets forth the Company’s repurchases of its outstanding common stock under the November 2022 repurchase program during the three months ended March 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Dollar ​ Maximum Dollar Value ​ ​ Total ​ Average ​ Value Purchased ​ of Shares that ​ ​ Number of ​ Price ​ as Part of Publicly ​ May Yet Be Purchased ​ ​ Shares ​ Paid per ​ Announced Stock ​ Under the Stock Period ​ Purchased ​ Share ​ Repurchase Program ​ Repurchase Program January 1, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 2,418,939 January 1, 2023 - January 31, 2023 ​ 42,814 ​ $ 7.33 ​ $ 313,862 ​ ​ 2,105,077 February 1, 2023 - February 28, 2023 ​ 105,791 ​ ​ 7.31 ​ ​ 773,668 ​ ​ 1,331,409 March 1, 2023 - March 31, 2023 ​ 125,770 ​ ​ 6.00 ​ ​ 754,000 ​ ​ 577,409 Total 274,375 ​ $ 6.71 $ 1,841,530 $ 577,409 ​ Equity Compensation Plan Information The equity compensation plan information presented in Part III, Item 12 of this Form 10-K is incorporated herein by reference. ​
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s common stock is traded on the Nasdaq Global Market under the symbol “RVSB.” At June 15, 2022, the number of shares of Company common stock issued and outstanding were 22,157,147 and 22,128,907, and there were 573 stockholders of record (not including the number of persons or entities holding stock in nominee or street name through various brokerage firms) and an estimated 3,314 holders in nominee or “street name”.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders The Company’s common stock is traded on the Nasdaq Global Market under the symbol “RVSB.” At June 14, 2023, there were 554 stockholders of record and an estimated 2,999 holders in nominee or “street name” through various brokerage firms.
Under both the June 2021 repurchase program and March 2022 repurchase program, the Company was authorized to repurchase up to $5.0 million of the Company’s outstanding shares of common stock, in the open market or in privately negotiated transactions.
Under the November 2022 repurchase program, the Company was authorized to repurchase up to $2.5 million of the Company’s outstanding shares of common stock, in the open market or in privately negotiated transactions, over a period beginning on November 28, 2022 and continuing until the earlier of the completion of the authorized level of repurchases or May 28, 2023, depending upon market conditions.
The June 2021 repurchase program was effective from June 21, 2021 continuing until the earlier of the completion of the repurchase or December 21, 2021. As of the December 21, 2021, the termination date for the June 2021 repurchase program, the Company had repurchased $1.7 million worth of the Company’s outstanding shares at an average price of $6.89 per share.
As of March 31, 2023, the Company had repurchased 285,172 shares, or $1.9 million, of the Company’s outstanding shares at an average price of $6.74 per share.
During fiscal year 2022, the Company announced that its Board of Directors authorized two stock repurchase programs (the “June 2021 repurchase program” and “March 2022 repurchase program”).
Purchases of Equity Securities by the Issuer and Affiliated Purchases On November 17, 2022, the Company announced that its Board of Directors authorized a stock repurchase program (the “November 2022 repurchase program”).
Removed
Stock Repurchase The Company may repurchase shares of its common stock from time-to-time in open market transactions. The timing, volume and price of purchases are made at our discretion and are also contingent upon our overall financial condition, as well as general market conditions.
Added
Shares repurchased under the November 2022 repurchase program are retired as settled. ​ The actual timing, number and value of shares repurchased under the November 2022 repurchase program will depend on a number of factors, including constraints specified in any Rule 10b5-1 plan, price, general business and market conditions, and alternative investment opportunities.
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The March 2022 repurchase program is effective from March 21, 2022 continuing until the earlier of the completion of the repurchase or September 9, 2022.
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Five-Year Stock Performance Graph The following graph compares the cumulative total shareholder return on our common stock with the cumulative total return on the Standard & Poor’s 500 Stock Index and The NASDAQ Bank Index.
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The graph assumes that total return includes the reinvestment of all dividends and that the value of the investment in Riverview’s common stock and each index was $100 on March 31, 2017, and is the base amount used in the graph.
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The closing price of Riverview’s common stock on March 31, 2022 was $7.55. 44 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3/31/17* 3/31/18 3/31/19 3/31/20 3/31/21 3/31/22 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Riverview Bancorp, Inc. 100.00 132.18 105.20 73.80 106.24 119.16 S & P 500 Index 100.00 113.99 124.82 116.11 181.54 209.94 NASDAQ Bank Index 100.00 118.95 93.66 62.57 117.30 123.98 *$100 invested on 3/31/17 in stock or index-including reinvestment of dividends.
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Copyright © 2022, Standard & Poor’s, a division of S&P Global. All rights reserved. www.researchdatagroup.com/S&P.htm ​ ​ ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

105 edited+23 added−38 removed63 unchanged
Biggest changeLoan fees, net, of $5.5 million, $4.5 million and $1.5 million were included in interest income for the years ended March 31, 2022, 2021 and 2020, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended March 31, ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ ​ ​ Interest ​ ​ ​ ​ Interest ​ ​ ​ ​ Interest ​ ​ ​ Average ​ and ​ Yield/ ​ Average ​ and ​ Yield/ ​ Average ​ and ​ Yield/ ​ Balance Dividends Cost Balance Dividends Cost Balance Dividends Cost ​ ​ (Dollars in thousands) Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ Mortgage loans ​ $ 696,700 ​ $ 33,280 ​ 4.78 % $ 681,999 ​ $ 33,989 ​ 4.98 % $ 695,930 ​ $ 37,721 5.42 % Non-mortgage loans ​ 238,042 ​ 10,799 ​ 4.54 ​ 284,071 ​ 11,509 ​ 4.05 ​ 188,568 ​ 8,684 4.61 ​ Total net loans (1) ​ 934,742 ​ 44,079 ​ 4.72 ​ 966,070 ​ 45,498 ​ 4.71 ​ 884,498 ​ 46,405 5.25 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment securities (2) ​ 345,869 ​ 5,314 ​ 1.54 ​ 156,723 ​ 2,592 ​ 1.65 ​ 164,028 ​ 3,594 2.19 ​ Interest-bearing deposits in other banks ​ 291,897 ​ 439 ​ 0.15 ​ 194,456 ​ 198 ​ 0.10 ​ 23,734 ​ 376 1.58 ​ Other earning assets ​ 2,560 ​ 69 ​ 2.70 ​ 2,860 ​ 97 ​ 3.39 ​ 3,038 ​ 157 5.17 ​ Total interest-earning assets ​ 1,575,068 ​ 49,901 ​ 3.17 ​ 1,320,109 ​ 48,385 ​ 3.67 ​ 1,075,298 ​ 50,532 4.70 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ Office properties and equipment, net ​ 18,933 ​ ​ ​ ​ ​ ​ 18,469 ​ ​ ​ ​ ​ ​ 15,830 ​ ​ Other non-interest-earning assets ​ 77,135 ​ ​ ​ ​ ​ ​ 77,775 ​ ​ ​ ​ ​ ​ 74,591 ​ ​ Total assets ​ $ 1,671,136 ​ ​ ​ ​ ​ ​ $ 1,416,353 ​ ​ ​ ​ ​ ​ $ 1,165,719 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ Savings accounts ​ $ 318,885 ​ $ 247 0.08 % $ 257,285 ​ $ 418 0.16 % $ 189,207 ​ $ 1,054 0.56 % Interest checking accounts ​ 279,053 ​ 87 0.03 ​ 225,579 ​ 85 0.04 ​ 180,969 ​ 100 0.06 ​ Money market accounts ​ 272,161 ​ 150 0.06 ​ 204,931 ​ 153 0.07 ​ 194,061 ​ 229 0.12 ​ Certificates of deposit ​ 117,391 ​ 940 0.80 ​ 129,928 ​ 1,888 1.45 ​ 112,282 ​ 1,507 1.34 ​ Total interest-bearing deposits ​ 987,490 ​ 1,424 0.14 ​ 817,723 ​ 2,544 0.31 ​ 676,519 ​ 2,890 0.43 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Junior subordinated debentures ​ 26,789 ​ 611 2.28 ​ 26,703 ​ 667 2.50 ​ 26,617 ​ 1,180 4.43 ​ Other interest-bearing liabilities ​ 2,313 ​ 165 7.13 ​ 17,394 ​ 216 1.24 ​ 22,956 ​ 694 3.02 ​ Total interest-bearing liabilities ​ 1,016,592 ​ 2,200 0.22 ​ 861,820 ​ 3,427 0.40 ​ 726,092 ​ 4,764 0.66 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ Non-interest-bearing deposits ​ 476,203 ​ ​ ​ ​ ​ ​ 387,579 ​ ​ ​ ​ ​ ​ 284,748 ​ ​ Other liabilities ​ 18,186 ​ ​ ​ ​ ​ ​ 15,304 ​ ​ ​ ​ ​ ​ 11,226 ​ ​ Total liabilities ​ 1,510,981 ​ ​ ​ ​ ​ ​ 1,264,703 ​ ​ ​ ​ ​ ​ 1,022,066 ​ ​ Shareholders’ equity ​ 160,155 ​ ​ ​ ​ ​ ​ 151,650 ​ ​ ​ ​ ​ ​ 143,652 ​ ​ Total liabilities and shareholders’ equity ​ $ 1,671,136 ​ ​ ​ ​ ​ ​ $ 1,416,353 ​ ​ ​ ​ ​ ​ $ 1,165,718 ​ ​ Net interest income ​ ​ ​ ​ $ 47,701 ​ ​ ​ ​ ​ ​ $ 44,958 ​ ​ ​ ​ $ 45,768 ​ Interest rate spread ​ ​ ​ ​ 2.95 % ​ ​ ​ 3.27 % ​ 4.04 % Net interest margin ​ ​ ​ ​ 3.03 % ​ ​ ​ 3.41 % ​ 4.26 % Ratio of average interest-earning assets to average interest-bearing liabilities ​ ​ ​ ​ 154.94 % ​ ​ ​ 153.18 % ​ 148.09 % Tax-Equivalent Adjustment (3) ​ ​ ​ ​ $ 76 ​ ​ ​ ​ ​ ​ $ 41 ​ ​ ​ ​ $ 37 ​ ​ (1) Includes non-accrual loans.
Biggest changeLoan fees, net, of $2.4 million, $5.5 million and $4.5 million were included in interest income for the years ended March 31, 2023, 2022 and 2021, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended March 31, ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ Interest ​ ​ ​ ​ Interest ​ ​ ​ ​ Interest ​ ​ ​ Average ​ and ​ Yield/ ​ Average ​ and ​ Yield/ ​ Average ​ and ​ Yield/ ​ Balance Dividends Cost Balance Dividends Cost Balance Dividends Cost ​ ​ (Dollars in thousands) Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ Mortgage loans ​ $ 760,821 ​ $ 34,694 ​ 4.56 % $ 696,700 ​ $ 33,280 ​ 4.78 % $ 681,999 ​ $ 33,989 ​ 4.98 % Non-mortgage loans ​ 246,224 ​ 10,050 ​ 4.08 ​ 238,042 ​ 10,799 ​ 4.54 ​ 284,071 ​ 11,509 ​ 4.05 ​ Total net loans (1) ​ 1,007,045 ​ 44,744 ​ 4.44 ​ 934,742 ​ 44,079 ​ 4.72 ​ 966,070 ​ 45,498 ​ 4.71 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment securities (2) ​ 472,396 ​ 9,129 ​ 1.93 ​ 345,869 ​ 5,314 ​ 1.54 ​ 156,723 ​ 2,592 ​ 1.65 ​ Interest-bearing deposits in other banks ​ 100,694 ​ 1,773 ​ 1.76 ​ 291,897 ​ 439 ​ 0.15 ​ 194,456 ​ 198 ​ 0.10 ​ Other earning assets ​ 3,696 ​ 103 ​ 2.79 ​ 2,560 ​ 69 ​ 2.70 ​ 2,860 ​ 97 ​ 3.39 ​ Total interest-earning assets ​ 1,583,831 ​ 55,749 ​ 3.52 ​ 1,575,068 ​ 49,901 ​ 3.17 ​ 1,320,109 ​ 48,385 ​ 3.67 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Office properties and equipment, net ​ 19,621 ​ ​ ​ ​ ​ ​ 18,933 ​ ​ ​ ​ ​ ​ 18,469 ​ ​ ​ ​ ​ ​ Other non-interest-earning assets ​ 63,511 ​ ​ ​ ​ ​ ​ 77,135 ​ ​ ​ ​ ​ ​ 77,775 ​ ​ ​ ​ ​ ​ Total assets ​ $ 1,666,963 ​ ​ ​ ​ ​ ​ $ 1,671,136 ​ ​ ​ ​ ​ ​ $ 1,416,353 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ Savings accounts ​ $ 308,840 ​ $ 219 0.07 % $ 318,885 ​ $ 247 0.08 % $ 257,285 ​ $ 418 0.16 % Interest checking accounts ​ 286,627 ​ 89 0.03 ​ 279,053 ​ 87 0.03 ​ 225,579 ​ 85 0.04 ​ Money market accounts ​ 266,795 ​ 415 0.16 ​ 272,161 ​ 150 0.06 ​ 204,931 ​ 153 0.07 ​ Certificates of deposit ​ 103,484 ​ 779 0.75 ​ 117,391 ​ 940 0.80 ​ 129,928 ​ 1,888 1.45 ​ Total interest-bearing deposits ​ 965,746 ​ 1,502 0.16 ​ 987,490 ​ 1,424 0.14 ​ 817,723 ​ 2,544 0.31 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Junior subordinated debentures ​ 26,873 ​ 1,368 5.09 ​ 26,789 ​ 611 2.28 ​ 26,703 ​ 667 2.50 ​ FHLB advances ​ ​ 21,046 ​ ​ 1,027 ​ 4.88 ​ ​ 3 ​ ​ — ​ 0.31 ​ ​ 15,044 ​ ​ 47 ​ 0.31 ​ Other interest-bearing liabilities ​ 2,271 ​ 163 7.18 ​ 2,310 ​ 165 7.14 ​ 2,350 ​ 169 7.19 ​ Total interest-bearing liabilities ​ 1,015,936 ​ 4,060 0.40 ​ 1,016,592 ​ 2,200 0.22 ​ 861,820 ​ 3,427 0.40 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ Non-interest-bearing deposits ​ 480,029 ​ ​ ​ ​ ​ ​ 476,203 ​ ​ ​ ​ ​ ​ 387,579 ​ ​ ​ ​ ​ ​ Other liabilities ​ 16,757 ​ ​ ​ ​ ​ ​ 18,186 ​ ​ ​ ​ ​ ​ 15,304 ​ ​ ​ ​ ​ ​ Total liabilities ​ 1,512,722 ​ ​ ​ ​ ​ ​ 1,510,981 ​ ​ ​ ​ ​ ​ 1,264,703 ​ ​ ​ ​ ​ ​ Shareholders’ equity ​ 154,241 ​ ​ ​ ​ ​ ​ 160,155 ​ ​ ​ ​ ​ ​ 151,650 ​ ​ ​ ​ ​ ​ Total liabilities and shareholders’ equity ​ $ 1,666,963 ​ ​ ​ ​ ​ ​ $ 1,671,136 ​ ​ ​ ​ ​ ​ $ 1,416,353 ​ ​ ​ ​ ​ ​ Net interest income ​ ​ ​ ​ $ 51,689 ​ ​ ​ ​ ​ ​ $ 47,701 ​ ​ ​ ​ ​ $ 44,958 ​ ​ ​ Interest rate spread ​ ​ ​ ​ 3.12 % ​ ​ ​ 2.95 % ​ ​ ​ 3.27 % Net interest margin ​ ​ ​ ​ 3.26 % ​ ​ ​ 3.03 % ​ ​ ​ 3.41 % Ratio of average interest-earning assets to average interest-bearing liabilities ​ ​ ​ ​ 155.90 % ​ ​ ​ 154.94 % ​ ​ ​ 153.18 % Tax-Equivalent Adjustment (3) ​ ​ ​ ​ $ 83 ​ ​ ​ ​ ​ ​ $ 76 ​ ​ ​ ​ ​ $ 41 ​ ​ ​ ​ (1) Includes non-accrual loans.
Certain loans included in the loan portfolio were deemed impaired at March 31, 2022. Accordingly, loans measured for impairment were classified as Level 3 in the fair value hierarchy as there is no active market for these loans. Measuring impairment of a loan requires judgment and estimates, and the eventual outcomes may differ from those estimates.
Certain loans included in the loan portfolio were deemed impaired at March 31, 2023. Accordingly, loans measured for impairment were classified as Level 3 in the fair value hierarchy as there is no active market for these loans. Measuring impairment of a loan requires judgment and estimates, and the eventual outcomes may differ from those estimates.
The current quarterly common stock dividend rate is $0.055 per share, as approved by the Board of Directors, which management believes is a dividend rate per share which enables the Company to balance our multiple objectives of managing and investing in the Bank, and returning a substantial portion of the Company’s cash to its shareholders.
The current quarterly common stock dividend rate is $0.06 per share, as approved by the Board of Directors, which management believes is a dividend rate per share which enables the Company to balance our multiple objectives of managing and investing in the Bank, and returning a substantial portion of the Company’s cash to its shareholders.
These qualitative factors include: lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices; national and local economic trends and conditions; nature and volume of the portfolio and terms of loans; experience, ability, and depth of lending management and staff; volume and severity of past due, classified and nonaccrual loans as well as other loan modifications; quality of the Company’s loan review system; existence and effect of any concentrations of credit and changes in the level of such concentrations; changes in the value of underlying collateral; and other external factors.
These qualitative factors include: lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices; national and local economic trends and conditions; nature and volume of the portfolio and terms of loans; experience, ability, and depth of lending management and staff; volume and severity of past due, classified and non-accrual loans as well as other loan modifications; quality of the Company’s loan review system; existence and effect of any concentrations of credit and changes in the level of such concentrations; changes in the value of underlying collateral; and other external factors.
To build its core deposit base, the Company has sought to reduce its dependence on traditional higher cost deposits in favor of stable lower cost core deposits to fund loan growth and decrease its reliance on other wholesale funding sources, including FHLB and FRB advances.
To build its core deposit base, the Company has sought to reduce its dependence on traditional higher cost deposits in favor of stable lower cost core deposits to fund loan growth and decrease its reliance on other wholesale funding sources, including brokered deposits, FHLB advances and FRB borrowings.
Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on the Company’s consolidated financial statements. The Company performed its annual goodwill impairment test as of October 31, 2021. The goodwill impairment test involves a two-step process.
Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on the Company’s consolidated financial statements. The Company performed its annual goodwill impairment test as of October 31, 2022. The goodwill impairment test involves a two-step process.
Business - Regulation and Supervision of the Bank. New Accounting Pronouncements For a discussion of new accounting pronouncements and their impact on the Company, see Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K. ​ ​ ​ ​ 59 Table of Contents
Business – Regulation and Supervision of the Bank. New Accounting Pronouncements For a discussion of new accounting pronouncements and their impact on the Company, see Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K. ​ 60 Table of Contents
Charge-offs on these impaired loans totaled $85,000 from their original loan balances. Based on a comprehensive analysis, management deemed the allowance for loan losses adequate to cover probable losses inherent in the loan portfolio at March 31, 2022.
Charge-offs on these impaired loans totaled $85,000 from their original loan balances. Based on a comprehensive analysis, management deemed the allowance for loan losses adequate to cover probable losses inherent in the loan portfolio at March 31, 2023.
Riverview Bancorp, Inc., as a separate legal entity from the Bank, must provide for its own liquidity. Sources of capital and liquidity for Riverview Bancorp, Inc. include distributions from the Bank and the issuance of debt or equity securities. Dividends and other capital distributions from the Bank are subject to regulatory notice.
Riverview, as a separate legal entity from the Bank, must provide for its own liquidity. Sources of capital and liquidity for Riverview include distributions from the Bank and the issuance of debt or equity securities. Dividends and other capital distributions from the Bank are subject to regulatory notice.
By emphasizing total relationship banking, the Company intends to deepen the relationships with its customers and increase individual customer profitability through cross-marketing programs, which allows the Company to better identify lending opportunities and services for customers.
In addition, by emphasizing total relationship banking, the Company intends to deepen the relationships with its customers and increase individual customer profitability through cross-marketing programs, which allows the Company to better identify lending opportunities and services for customers.
The Company also purchases the guaranteed portion of SBA loans as a way to supplement loan originations, further diversifying its loan portfolio and earn a higher yield than earned on its cash or short-term investments.
The Company also purchases the guaranteed portion of SBA loans as a way to supplement loan originations, to further diversify its loan portfolio and earn a higher yield than earned on its cash or short-term investments.
The Company primarily purchases a combination of securities backed by government agencies (FHLMC, FNMA, SBA or GNMA). At March 31, 2022, the Company determined that none of its investment securities required an OTTI charge.
The Company primarily purchases a combination of securities backed by government agencies (FHLMC, FNMA, SBA or GNMA). At March 31, 2023, the Company determined that none of its investment securities required an OTTI charge.
Selected Financial Data: The following financial condition data as of March 31, 2022 and 2021 and operating data and key financial ratios for the fiscal years ended March 31, 2022, 2021, and 2020 have been derived from the Company’s audited consolidated financial statements.
Selected Financial Data: The following financial condition data as of March 31, 2023 and 2022 and operating data and key financial ratios for the fiscal years ended March 31, 2023, 2022, and 2021 have been derived from the Company’s audited consolidated financial statements.
The Company must maintain an adequate level of liquidity to ensure the availability of sufficient funds for loan originations, deposit withdrawals and continuing operations, satisfy other financial commitments and take advantage of investment opportunities. During the year ended March 31, 2022, the Bank used its sources of funds primarily to fund loan commitments and investment purchases.
The Company must maintain an adequate level of liquidity to ensure the availability of sufficient funds for loan originations, deposit withdrawals and continuing operations, satisfy other financial commitments and take advantage of investment opportunities. During the fiscal year ended March 31, 2023, the Bank used its sources of funds primarily to fund loan commitments and investment purchases.
As a part of this strategy, the Company also invests a portion of its excess cash in short-term certificates of deposit held for investment. All of the certificates of deposit held for investment are fully insured by the FDIC. Certificates of deposits held for investment totaled $249,000 at both March 31, 2022 and 2021.
As a part of this strategy, the Company also invests a portion of its excess cash in short-term certificates of deposit held for investment, all of which are fully insured by the FDIC. Certificates of deposits held for investment totaled $249,000 at both March 31, 2023 and 2022.
An unallocated portion is established for 46 Table of Contents uncertainties that may not be identified in either the general or specific component of the allowance for loan losses. The allowance for loan losses is based upon factors and trends identified by us at the time financial statements are prepared.
An unallocated portion is established for uncertainties that may not be identified in either the general or specific component of the allowance for loan losses. The allowance for loan losses is based upon factors and trends identified by us at the time financial statements are prepared.
The Company’s approach to credit management uses well defined policies and procedures and disciplined underwriting criteria resulting in our strong asset quality and credit metrics in fiscal year 2022.
The Company’s approach to credit management uses well defined policies and procedures and disciplined underwriting criteria resulting in our strong asset quality and credit metrics in fiscal year 2023.
(3) Tax-equivalent adjustment relates to non-taxable investment interest income calculated based on a combined federal and state tax rate of 24% for all three years. ​ ​ 56 Table of Contents Rate/Volume Analysis The following table sets forth the effects of changing rates and volumes on net interest income of the Company for the fiscal year ended March 31, 2022 compared to the fiscal year ended March 31, 2021, and the fiscal year ended March 31, 2021 compared to the fiscal year ended March 31, 2020.
(3) Tax-equivalent adjustment relates to non-taxable investment interest income calculated based on a combined federal and state tax rate of 24% for all three years. ​ ​ 57 Table of Contents Rate/Volume Analysis The following table sets forth the effects of changing rates and volumes on net interest income of the Company for the fiscal year ended March 31, 2023 compared to the fiscal year ended March 31, 2022, and the fiscal year ended March 31, 2022 compared to the fiscal year ended March 31, 2021.
The primary elements of this strategy involve: the origination of adjustable rate loans; increasing commercial loans, consumer loans that are adjustable rate and other short-term loans as a portion of total net loans receivable because of their generally shorter terms and higher yields than other one-to-four family residential mortgage loans; matching asset and liability maturities; and investing in short-term securities.
The primary elements of this strategy involve: the origination of adjustable rate loans; increasing commercial loans, consumer loans that are adjustable rate and other short-term loans as a portion of total net loans receivable because of their generally shorter terms and higher yields than real estate one-to-four family loans; matching asset and liability maturities; and investing in short-term securities.
Average balances for a period have been calculated using monthly average balances during such period. Non-accruing loans were included in the average loan amounts outstanding.
Average balances for a period have been calculated using daily average balances during such period. Non-accruing loans were included in the average loan amounts outstanding.
In addition to utilizing the above projections of estimated operating results, key assumptions used to determine the fair value estimate under the income approach were the discount rate of 15.71% utilized for our cash flow estimates and a terminal value estimated at 1.43 times the ending book value of the reporting unit.
In addition to utilizing the above projections of estimated operating results, key assumptions used to determine the fair value estimate under the income approach were the discount rate of 18.33% utilized for our cash flow estimates and a terminal value estimated at 1.43 times the ending book value of the reporting unit.
As of March 31, 2022, management deemed that a deferred tax asset valuation allowance related to the Company’s deferred tax asset was not necessary. See Note 10 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K for further discussion of the Company’s income taxes. ​ 55 Table of Contents Average Balance Sheet .
As of March 31, 2023, management deemed that a deferred tax asset valuation allowance related to the Company’s deferred tax asset was not necessary. See Note 11 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K for further discussion of the Company’s income taxes. ​ 56 Table of Contents Average Balance Sheet .
These SBA loans are originated through another financial institution located outside of the Company’s primary market area and are purchased with servicing retained by the seller. At March 31, 2022, the Company’s purchased SBA loan portfolio was $59.4 million compared to $47.4 million at March 31, 2021. Goodwill was $27.1 million at both March 31, 2022 and 2021.
These SBA loans are originated through another financial institution located outside of the Company’s primary market area and are purchased with servicing retained by the seller. At March 31, 2023, the Company’s purchased SBA loan portfolio was $55.5 million compared to $59.4 million at March 31, 2022. Goodwill was $27.1 million at both March 31, 2023 and 2022.
Bank holding companies and federally-insured state-chartered banks are required to maintain minimum levels of regulatory capital. At March 31, 2022, Riverview Bancorp, Inc. and the Bank were in compliance with all applicable capital requirements. For additional information, see Note 12 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K and Item 1.
Bank holding companies and federally-insured state-chartered banks are required to maintain minimum levels of regulatory capital. At March 31, 2023, Riverview and the Bank were in compliance with all applicable capital requirements. For additional information, see Note 13 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K and Item 1.
At March 31, 2022, the combined investment portfolio carried at $418.9 million had an average life of 6.7 years. Adjustable rate mortgage-backed securities totaled $5.5 million at March 31, 2022 compared to $7.6 million at March 31, 2021. See Item 1. “Business – Investment Activities” for additional information. Liquidity and Capital Resources Liquidity is essential to our business.
At March 31, 2023, the combined investment portfolio carried at $455.3 million had an average life of 6.1 years. Adjustable rate mortgage-backed securities totaled $3.7 million at March 31, 2023 compared to $5.5 million at March 31, 2022. See Item 1. “Business – Investment Activities” for additional information. Liquidity and Capital Resources Liquidity is essential to our business.
The amount of capital investment is influenced by, among other things, current and projected demand for our services and products, cash flow generated by operating activities, cash required for other purposes and regulatory considerations. Based on our current capital allocation objectives, during fiscal 2023 we expect cash expenditures of approximately $2.1 million for capital investment in premises and equipment.
The amount of capital investment is influenced by, among other things, current and projected demand for our services and products, cash flow generated by operating activities, cash required for other purposes and regulatory considerations. Based on our current capital allocation objectives, during fiscal 2024 we expect cash expenditures of approximately $3.7 million for capital investment in premises and equipment.
In addition to these primary sources of funds, the Bank has several secondary borrowing sources available to meet potential funding requirements, including FRB borrowings and FHLB advances. At March 31, 2022, the Bank had no advances from the FRB and maintains a credit facility with the FRB with available borrowing capacity of $59.9 million, subject to sufficient collateral.
In addition to these primary sources of funds, the Bank has several secondary borrowing sources available to meet potential funding requirements, including FRB borrowings and FHLB advances. At March 31, 2023, the Bank had no advances from the FRB and maintains a credit facility with the FRB with available borrowing capacity of $57.4 million, subject to sufficient collateral.
For additional information regarding future financial commitments, see Note 16 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K. The Company anticipates that it will have sufficient funds available to meet current loan commitments. Certificates of deposit that are scheduled to mature in less than one year from March 31, 2022 totaled $77.2 million.
For additional information regarding future financial commitments, see Note 17 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K. The Company anticipates that it will have sufficient funds available to meet current loan commitments. Certificates of deposit that are scheduled to mature in less than one year from March 31, 2023 totaled $84.6 million.
Financial Statements and Supplementary Data." and the following: Provision and Allowance for Loan Losses ​ The allowance for loan losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the economic environment that could result in changes to the amount of the recorded allowance for loan losses.
Allowance for Loan Losses ​ The allowance for loan losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the economic environment that could result in changes to the amount of the recorded allowance for loan losses.
Historically, the Bank has been able to retain a significant amount of its deposits as they mature. Offsetting these cash outflows are scheduled loan maturities of less than one year totaling $44.2 million at March 31, 2022.
Historically, the Bank has been able to retain a significant amount of its deposits as they mature. Offsetting these cash outflows are scheduled loan maturities of less than one year totaling $37.0 million at March 31, 2023.
The Company will also continue to seek to expand its franchise through de novo branches, the selective acquisition of individual branches, loan purchases and whole bank transactions that meet its investment and market objectives. In this regard, the Company previously announced plans for three new branches located in Clark County, Washington, to complement its existing branch network.
The Company will also continue to seek to expand its franchise through de novo branches, the selective acquisition of individual branches, loan purchases and whole bank 49 Table of Contents transactions that meet its investment and market objectives. In this regard, the Company recently opened three new branches located in Clark County, Washington, to complement its existing branch network.
(2) Non-interest expense divided by the sum of net interest income and non-interest income. ​ ​ 49 Table of Contents Comparison of Financial Condition at March 31, 2022 and 2021 Cash and cash equivalents, including interest-earning accounts, totaled $241.4 million at March 31, 2022 compared to $265.4 million at March 31, 2021.
(2) Non-interest expense divided by the sum of net interest income and non-interest income. ​ ​ 52 Table of Contents Comparison of Financial Condition at March 31, 2023 and 2022 Cash and cash equivalents, including interest-earning accounts, totaled $22.0 million at March 31, 2023 compared to $241.4 million at March 31, 2022.
For additional information on the Company’s investment securities, see Note 3 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K. ​ Loans receivable, net, totaled $975.9 million at March 31, 2022, compared to $924.1 million at March 31, 2021, an increase of $51.8 million.
For additional information on the Company’s investment securities, see Note 3 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K. ​ Loans receivable, net, totaled $993.5 million at March 31, 2023, compared to $975.9 million at March 31, 2022, an increase of $17.6 million.
Adjustable interest rate loans totaled $438.1 million or 44.23% of total loans at March 31, 2022 as compared to $461.1 million or 48.89% at March 31, 2021. Although the Company has sought to originate adjustable rate loans, the ability to originate and purchase such loans depends to a great extent on market interest rates and borrowers’ preferences.
Adjustable interest rate loans totaled $403.6 million or 40.00% of total loans at March 31, 2023 as compared to $438.1 million or 44.23% at March 31, 2022. Although the Company has sought to originate adjustable rate loans, the ability to originate and purchase such loans depends to a great extent on market interest rates and borrowers’ preferences.
Assumptions used by the Company in its discounted cash flow model (income approach) included an annual revenue growth rate that approximated 8.1%, a net interest margin that approximated 3.0% and a return on assets that ranged from 1.06% to 1.37% (average of 1.20%).
Assumptions used by the Company in its discounted cash flow model (income approach) included an annual revenue growth rate that approximated 2.0%, a net interest margin that approximated 3.7% and a return on assets that ranged from 1.22% to 1.30% (average of 1.26%).
Core branch deposits accounted for 96.8% of total deposits at March 31, 2022 compared to 97.4% at March 31, 2021.
Core branch deposits accounted for 97.5% of total deposits at March 31, 2023 compared to 96.8% at March 31, 2022.
The net interest margin for the fiscal year ended March 31, 2022 was 3.03% compared to 3.41% for the prior fiscal year.
The net interest margin for the fiscal year ended March 31, 2023 was 3.26% compared to 3.03% for the prior fiscal year.
Interest and dividend income included $3.0 million and $4.5 million of interest and fees related to SBA PPP loans for the fiscal years ended March 31, 2022 and 2021, respectively.
Interest and dividend income included $102,000 and $3.0 million of interest and fees related to SBA PPP loans for the fiscal years ended March 31, 2023 and 2022, respectively.
See Note 5 of the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding the allowance for loan losses. Non-Interest Income. Non-interest income increased $1.6 million to $12.7 million for the year ended March 31, 2022 from $11.1 million for fiscal year 2021.
See Note 5 of the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding the allowance for loan losses. Non-Interest Income. Non-interest income decreased $550,000 to $12.2 million for the fiscal year ended March 31, 2023 from $12.7 million for fiscal year 2022.
The weighted average interest rate on interest-bearing deposits decreased to 0.14% for the fiscal year ended March 31, 2022 from 0.31% for the prior fiscal year. The average balance of interest-bearing deposits increased $169.8 million to $987.5 million for the fiscal year ended March 31, 2022 compared to $817.7 million for the fiscal year ended March 31, 2021.
The weighted average interest rate on interest-bearing deposits increased to 0.16% for the fiscal year ended March 31, 2023 from 0.14% for the prior fiscal year. The average balance of interest-bearing deposits decreased $21.7 million to $965.7 million for the fiscal year ended March 31, 2023 compared to $987.5 million for the fiscal year ended March 31, 2022.
The Company’s results of operations are also significantly affected by general economic and competitive conditions, particularly changes in market interest rates, government legislation and regulation, and monetary and fiscal policies. Net interest income for fiscal year 2022 increased $2.7 million, or 6.03%, to $47.6 million compared to $44.9 million in fiscal year 2021.
The Company’s results of operations are also significantly affected by general economic and competitive conditions, particularly changes in market interest rates, government legislation and regulation, and monetary and fiscal policies. Net interest income for fiscal year 2023 increased $4.0 million, or 8.4%, to $51.6 million compared to $47.6 million in fiscal year 2022.
At March 31, 2022, cash and cash equivalents, certificates of deposit held for investment and available for sale investment securities totaled $407.5 million, or 23.4% of total assets. Management believes that the Company’s security portfolio is of high quality and its securities would therefore be marketable.
At March 31, 2023, cash and cash equivalents, certificates of deposit held for investment and available for sale investment securities totaled $233.8 million, or 14.7% of total assets. Management believes that the Company’s security portfolio is of high quality and its securities would therefore be marketable.
Of those impaired loans, $481,000 have no specific valuation allowance as their estimated net collateral value is equal to or exceeds the carrying amount of the loan, which in some cases is the result of previous loan charge-offs. The remaining $236,000 of impaired loans have specific valuation allowances totaling $8,000.
Of those impaired loans, $534,000 have no specific valuation allowance as their estimated net collateral value is equal to or exceeds the carrying amount of the loan, which in some cases is the result of previous loan charge-offs. The remaining impaired loan of $95,000 has a specific valuation allowance of $6,000.
Investment securities totaled $418.9 million and $255.9 million at March 31, 2022 and 2021, respectively. The increase was due to investment purchases offset by normal pay downs, calls and maturities. During the fiscal years ended March 31, 2022 and 2021, purchases of investment securities totaled $224.6 million and $160.2 million, respectively.
Investment securities totaled $ 455.3 million and $418.9 million at March 31, 2023 and 2022, respectively. The increase was due to investment purchases, partially offset by normal pay downs, calls and maturities. During the fiscal years ended March 31, 2023 and 2022, purchases of investment securities totaled $81.8 million and $224.6 million, respectively.
At March 31, 2022 and 2021, the Bank had no wholesale brokered deposits. The Bank also participates in the CDARS and ICS deposit products, which allow the Company to accept deposits in excess of the FDIC insurance limit for a depositor and obtain “pass-through” insurance for the total deposit.
The Bank also participates in the CDARS and ICS deposit products, which allow the Company to accept deposits in excess of the FDIC insurance limit for a depositor and obtain “pass-through” insurance for the total deposit.
At March 31, 2022, the Company had an allowance for loan losses of $14.5 million, or 1.47% of total loans, compared to $19.2 million, or 2.03% at March 31, 2021. Net charge-offs were $30,000 for the year ended March 31, 2022 compared to net recoveries of $254,000 for the year ended March 31, 2021.
At March 31, 2023, the Company had an allowance for loan losses of $15.3 million, or 1.52% of total loans, compared to $14.5 million, or 1.47% of total loans at March 31, 2022. Net recoveries were $36,000 for the fiscal year ended March 31, 2023 compared to net charge-offs of $30,000 for the fiscal year ended March 31, 2022.
The Bank’s CDARS and ICS balances were $66.3 million, or 4.3% of total deposits, and $37.9 million, or 2.8% of total deposits, at March 31, 2022 and 2021, respectively. The combination of all the Bank’s funding sources gives the Bank available liquidity of $986.5 million, or 56.7% of total assets at March 31, 2022.
The Bank’s CDARS and ICS balances were $22.8 million, or 1.8% of total deposits, and $66.3 million, or 4.3% of total deposits, at March 31, 2023 and 2022, respectively. The combination of all the Bank’s funding sources gives the Bank available liquidity of $702.5 million, or 44.2% of total assets at March 31, 2023.
At March 31, 2022, the Bank had no advances from the FHLB and had an available borrowing capacity of $294.1 million, subject to sufficient collateral and stock investment. At March 31, 2022, the Bank had sufficient unpledged collateral to allow it to utilize its available borrowing capacity from the FRB and the FHLB.
At March 31, 2023, FHLB advances totaled $123.8 million and the Bank had an available borrowing capacity of $315.4 million, subject to sufficient collateral and stock investment. At March 31, 2023, the Bank had sufficient unpledged collateral to allow it to utilize its available borrowing capacity from the FRB and the FHLB.
The Company’s net income increased primarily as a result of increased net interest income and the recapture of loan losses of $4.6 million for the fiscal year ended March 31, 2022 compared to a $6.3 million provision for loan losses for the fiscal year ended March 31, 2021.
The Company’s net income decreased primarily as a result of a provision for loan losses of $750,000 for the fiscal year ended March 31, 2023 compared to a $4.6 million recapture of loan losses for the fiscal year ended March 31, 2022.
Net income was $21.8 million, or $0.98 per diluted share, for the fiscal year ended March 31, 2022, compared to $10.5 million, or $0.47 per diluted share, for the fiscal year ended March 31, 2021.
Net income was $18.1 million, or $0.83 per diluted share, for the fiscal year ended March 31, 2023, compared to $21.8 million, or $0.98 per diluted share, for the fiscal year ended March 31, 2022.
Interest and dividend income increased $1.5 million to $49.8 million for the fiscal year ended March 31, 2022 from $48.3 million for the fiscal year ended March 31, 2021.
Interest and Dividend Income. Interest and dividend income increased $5.8 million to $55.7 million for the fiscal year ended March 31, 2023 from $49.8 million for the fiscal year ended March 31, 2022.
“Financial Statements and Supplementary Data” included in this Form 10-K. ​ ​ ​ ​ ​ ​ ​ ​ At March 31, ​ ​ 2022 2021 ​ (In thousands) FINANCIAL CONDITION DATA: ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 1,740,096 ​ $ 1,549,158 Loans receivable, net ​ 975,885 ​ 924,057 Investment securities available for sale ​ 165,782 ​ 216,304 Investment securities held to maturity ​ 253,100 ​ 39,574 Cash and cash equivalents ​ 241,424 ​ 265,408 Deposits ​ 1,533,878 ​ 1,346,060 Shareholders’ equity ​ 157,249 ​ 151,594 ​ ​ ​ ​ ​ ​ ​ ​ 48 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended March 31, ​ 2022 2021 2020 ​ (Dollars in thousands, except per share data) OPERATING DATA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest and dividend income ​ $ 49,825 ​ $ 48,344 ​ $ 50,495 Interest expense ​ 2,200 ​ 3,427 ​ 4,764 Net interest income ​ 47,625 ​ 44,917 ​ 45,731 Provision for (recapture of) loan losses ​ (4,625) ​ 6,300 ​ 1,250 Net interest income after provision for (recapture of) loan losses ​ 52,250 ​ 38,617 ​ 44,481 Other non-interest income ​ 12,744 ​ 11,090 ​ 12,360 Non-interest expense ​ 36,718 ​ 36,254 ​ 36,263 Income before income taxes ​ 28,276 ​ 13,453 ​ 20,578 Provision for income taxes ​ 6,456 ​ 2,981 ​ 4,830 Net income ​ $ 21,820 ​ $ 10,472 ​ $ 15,748 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share: ​ ​ ​ Basic ​ $ 0.98 ​ $ 0.47 ​ $ 0.69 Diluted ​ 0.98 ​ 0.47 ​ 0.69 Dividends per share ​ 0.02150 ​ 0.20000 ​ 0.19000 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For the Years Ended March 31, ​ 2022 2021 2020 KEY FINANCIAL RATIOS: ​ Performance Ratios: ​ Return on average assets ​ 1.31 % 0.74 % 1.35 % Return on average equity ​ 13.62 6.91 10.96 Dividend payout ratio (1) ​ 21.94 42.55 27.54 Interest rate spread ​ 2.95 3.27 4.04 Net interest margin ​ 3.03 3.41 4.26 Non-interest expense to average assets ​ 2.20 2.56 3.11 Efficiency ratio (2) ​ 60.82 64.73 62.42 Average equity to average assets ​ 9.58 10.71 12.32 ​ ​ ​ ​ ​ ​ ​ ​ Asset Quality Ratios: ​ ​ Allowance for loan losses to total loans at end of period ​ 1.47 2.03 1.38 Allowance for loan losses to nonperforming loans ​ 65.72 3,358.67 904.95 Net charge-offs (recoveries) to average outstanding loans during the period ​ — (0.03) 0.01 ​ ​ ​ ​ ​ ​ ​ ​ Ratio of nonperforming assets to total assets ​ 1.27 0.04 0.12 Ratio of nonperforming loans to total loans ​ 2.23 0.06 0.15 ​ ​ ​ ​ ​ ​ ​ ​ Capital Ratios: ​ ​ Total capital to risk-weighted assets ​ 16.38 17.35 17.01 Tier 1 capital to risk-weighted assets ​ 15.12 16.09 15.76 Common equity tier 1 capital to risk-weighted assets ​ 15.12 16.09 15.76 Leverage ratio ​ 9.19 9.63 11.79 ​ (1) Dividends per share divided by diluted earnings per share.
“Financial Statements and Supplementary Data” included in this Form 10-K. 50 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ At March 31, ​ ​ 2023 2022 ​ (In thousands) FINANCIAL CONDITION DATA: ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 1,589,712 ​ $ 1,740,096 Loans receivable, net ​ 993,547 ​ 975,885 Investment securities available for sale ​ 211,499 ​ 165,782 Investment securities held to maturity ​ 243,843 ​ 253,100 Cash and cash equivalents ​ 22,044 ​ 241,424 Deposits ​ 1,265,217 ​ 1,533,878 FHLB advances ​ ​ 123,754 ​ ​ — Shareholders’ equity ​ 155,239 ​ 157,249 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended March 31, ​ 2023 2022 2021 ​ (Dollars in thousands, except per share data) OPERATING DATA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest and dividend income ​ $ 55,666 ​ $ 49,825 ​ $ 48,344 Interest expense ​ 4,060 ​ 2,200 ​ 3,427 Net interest income ​ 51,606 ​ 47,625 ​ 44,917 Provision for (recapture of) loan losses ​ 750 ​ (4,625) ​ 6,300 Net interest income after provision for (recapture of) loan losses ​ 50,856 ​ 52,250 ​ 38,617 Other non-interest income ​ 12,194 ​ 12,744 ​ 11,090 Non-interest expense ​ 39,371 ​ 36,718 ​ 36,254 Income before income taxes ​ 23,679 ​ 28,276 ​ 13,453 Provision for income taxes ​ 5,610 ​ 6,456 ​ 2,981 Net income ​ $ 18,069 ​ $ 21,820 ​ $ 10,472 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share: ​ ​ ​ Basic ​ $ 0.84 ​ $ 0.98 ​ $ 0.47 Diluted ​ 0.83 ​ 0.98 ​ 0.47 Dividends per share ​ 0.240 ​ 0.215 ​ 0.200 ​ 51 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For the Years Ended March 31, ​ 2023 2022 2021 KEY FINANCIAL RATIOS: ​ Performance Ratios: ​ Return on average assets ​ 1.08 % 1.31 % 0.74 % Return on average equity ​ 11.71 13.62 6.91 Dividend payout ratio (1) ​ 28.92 21.94 42.55 Interest rate spread ​ 3.12 2.95 3.27 Net interest margin ​ 3.26 3.03 3.41 Non-interest expense to average assets ​ 2.36 2.20 2.56 Efficiency ratio (2) ​ 61.71 60.82 64.73 Average equity to average assets ​ 9.25 9.58 10.71 ​ ​ ​ ​ ​ ​ ​ ​ Asset Quality Ratios: ​ ​ ​ Allowance for loan losses to total loans at end of period ​ 1.52 1.47 2.03 Allowance for loan losses to nonperforming loans ​ 826.62 65.72 3,358.67 Net charge-offs (recoveries) to average outstanding loans during the period ​ — — (0.03) ​ ​ ​ ​ ​ ​ ​ ​ Ratio of nonperforming assets to total assets ​ 0.12 1.27 0.04 Ratio of nonperforming loans to total loans ​ 0.18 2.23 0.06 ​ ​ ​ ​ ​ ​ ​ ​ Capital Ratios: ​ ​ ​ Total capital to risk-weighted assets ​ 16.94 16.38 17.35 Tier 1 capital to risk-weighted assets ​ 15.69 15.12 16.09 Common equity tier 1 capital to risk-weighted assets ​ 15.69 15.12 16.09 Leverage ratio ​ 10.47 9.19 9.63 ​ (1) Dividends per share divided by diluted earnings per share.
The Company’s ability to continue to attract and retain banking professionals with strong community relationships and significant knowledge of its markets will be a key to its success.
Recruiting and Retaining Highly Competent Personnel with a Focus on Commercial Lending . The Company’s ability to continue to attract and retain banking professionals with strong community relationships and significant knowledge of its markets will be a key to its success.
Additionally, the Company began purchasing commercial business loans as a way to supplement loan originations and diversity in the commercial loan portfolio. These loans were originated by a third-party located outside of the Company’s primary market area and totaled $14.7 million at March 31, 2022.
Additionally, the Company will purchase commercial business loans to supplement loan originations and diversify the commercial loan portfolio. These loans were originated by a third-party located outside of the Company’s primary market area and totaled $26.2 million and $14.7 million at March 31, 2023 and 2022, respectively.
For additional information on our goodwill impairment testing, see “Goodwill Valuation” included in this Item 7. Prepaid expenses and other assets decreased $793,000 to $12.4 million at March 31, 2022 compared to $13.2 million at March 31, 2021.
For additional information on our goodwill impairment testing, see “Goodwill Valuation” included in this Item 7. Prepaid expenses and other assets increased $3.6 million to $16.0 million at March 31, 2023 compared to $12.4 million at March 31, 2022.
The market approach estimates fair value by applying tangible book value multiples to the reporting unit’s operating performance. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics of the reporting unit. In applying the market approach method, the Company selected four publicly traded comparable institutions.
The whole bank transaction approach estimates fair value by applying key financial variables in transactions involving acquisitions of similar institutions. The market approach estimates fair value by applying tangible book value multiples to the reporting unit’s operating performance. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics of the reporting unit.
The information contained in this section should be read in conjunction with the Consolidated Financial Statements and accompanying Notes thereto contained in Item 8 of this Form 10-K and the other sections contained in this Form 10-K. This section contains certain financial information determined by methods other than in accordance with GAAP.
The information contained in this section should be read in conjunction with the Consolidated Financial Statements and accompanying Notes thereto contained in Item 8 of this Form 10-K and the other sections contained in this Form 10-K. ​ Critical Accounting Estimates We prepare our consolidated financial statements in accordance with GAAP.
As a result of the effects of the COVID-19 pandemic and its impacts on the financial markets and economy, the Company also completed a qualitative assessment of goodwill as of March 31, 2022 and concluded that it is more likely than not that the fair value of the Bank (the reporting unit), exceeds its carrying value at March 31, 2022.
The Company also completed a qualitative assessment of goodwill as of March 31, 2023 and concluded that it is more likely than not that the fair value of the Bank (the reporting unit), exceeds its carrying value at that date.
Assuming continued payment during 2022 at this rate of $0.055 per share, average total dividend paid each quarter would be approximately $1.2 million based on the number of the Company’s current outstanding shares. At March 31, 2022, Riverview Bancorp, Inc. had $10.9 million in cash to meet its liquidity needs.
Assuming continued payment during fiscal year 2024 at this rate of $0.06 per share, average total dividends paid each quarter would be approximately $1.3 million based on the number of the Company’s outstanding shares at March 31, 2023. At March 31, 2023, Riverview had $5.5 million in cash to meet its liquidity needs.
As of March 31, 2022, the Company had identified $717,000 of impaired loans. Because the significant majority of the impaired loans are collateral dependent, nearly all of the specific allowances are calculated based on the estimated fair value of the collateral.
Because the significant majority of the impaired loans are collateral dependent, nearly all of the specific allowances are calculated based on the estimated fair value of the collateral.
The Company has actively managed delinquent loans and nonperforming assets by aggressively pursuing the collection of consumer debts, marketing saleable properties upon foreclosure or repossession, and through work-outs of classified assets and loan charge-offs.
Maintaining Strong Asset Quality . The Company believes that strong asset quality is a key to long-term financial success. The Company has actively managed delinquent loans and nonperforming assets by aggressively pursuing the collection of consumer debts, marketing saleable properties upon foreclosure or repossession, and through work-outs of classified assets and loan charge-offs.
The Company has identified policies that due to judgments, estimates and assumptions inherent in those policies are critical to an understanding of the Company’s Consolidated Financial Statements. These policies relate to the methodology for the determination of the allowance for loan losses, the valuation of investment securities, goodwill valuation and the calculation of income taxes.
The Company has identified policies that due to the significant level of judgement, estimation and assumptions inherent in those policies are critical to an understanding of the Company’s consolidated financial statements. These policies include our accounting policies related to the methodology for the determination of the allowance for loan losses, the valuation of investment securities and goodwill valuations.
Advertising and marketing expense increased $148,000 due to additional sponsorships and events as our local economy began to reopen when compared to the prior fiscal year. FDIC insurance premium expense increased $120,000 compared to the prior fiscal year due to the overall increase in total assets.
Advertising and marketing expense increased $309,000 due to additional sponsorships and events as our local economy began to reopen when compared to the prior fiscal year. FDIC insurance premium expense increased $95,000 compared to the prior fiscal year primarily due to the increased FDIC assessment rate.
The increase for the fiscal year ended March 31, 2022 was primarily related to the increase in interest income on the investment securities portfolio due to the overall increase in average balance of investment securities. Interest income on investment securities increased $2.7 million to $5.2 million at March 31, 2022 compared to $2.5 million at March 31, 2021.
The increase was primarily related to the increase in interest income on the investment securities portfolio due to the overall increase in average balance of and yield on investment securities. Interest income on investment securities increased $3.8 million to $9.0 million at March 31, 2023 compared to $5.2 million at March 31, 2022.
Net charge-offs to average net loans were insignificant for the year ended March 31, 2022 compared to net recoveries of (0.03%) for the year ended March 31, 2021. Impaired loans are subjected to an impairment analysis to determine an appropriate reserve amount to be held against each loan.
Net recoveries and net charge-offs to average net loans were insignificant for the years ended March 31, 2023 and 2022, respectively. Impaired loans are subjected to an impairment analysis to determine an appropriate reserve amount to be held against each loan. As of March 31, 2023, the Company had identified $629,000 of impaired loans.
The Company calculated a fair value of its reporting unit of $213.0 million using the corporate value approach, $204.0 million using the income approach, $249.0 51 Table of Contents million using the whole bank transaction approach and $230.0 million using the market approach, with a final concluded value of $224.0 million, with equal weight given to the income approach, the whole bank approach, the market approach and the corporate value approach.
The Company calculated a fair value of its reporting unit of $192.0 million using the corporate value approach, $169.2 million using the income approach and $230.0 million using the market approach, with a final concluded value of $197.0 million, with equal weight given to the income approach, the market approach and the corporate value approach.
During the years ended March 31, 2022 and 2021 deposits increased by $187.8 million, and $355.6 million, respectively. An additional source of wholesale funding includes brokered certificates of deposit. While the Company has utilized brokered deposits from time to time, the Company historically has not extensively relied on brokered deposits to fund its operations.
An additional source of wholesale funding includes brokered certificates of deposit. While the Company has utilized brokered deposits from time to time, the Company historically has not extensively relied on brokered deposits to fund its operations. At March 31, 2023 and 2022, the Bank had no wholesale brokered deposits.
Interest expense for the fiscal year ended March 31, 2022 totaled $2.2 million, a $1.2 million or 35.8% decrease from $3.4 million for the fiscal year ended March 31, 2021.
Interest expense for the fiscal year ended March 31, 2023 totaled $4.1 million, a $1.9 million or 84.5% increase from $2.2 million for the fiscal year ended March 31, 2022.
The Company has two reporting units, the Bank and the Trust Company, for purposes of evaluating goodwill for impairment. All of the Company’s goodwill has been allocated to the Bank reporting unit.
Goodwill is presumed to have an indefinite useful life and is tested, at least annually, for impairment at the reporting unit level. The Company has two reporting units, the Bank and the Trust Company, for purposes of evaluating goodwill for impairment. All of the Company’s goodwill has been allocated to the Bank reporting unit.
The decrease in interest expense was primarily the result of a 17 basis point decrease in the weighted average interest rate on interest-bearing liabilities for the year ended March 31, 2022 compared to the prior fiscal year.
The increase was primarily the result of an 18 basis point increase in the weighted average interest rate on interest-bearing liabilities and a $21.0 million increase in the average balance of FHLB advances for the fiscal year ended March 31, 2023 compared to the prior fiscal year.
Any future decline in national and local economic conditions, as a result of the COVID-19 pandemic or other factors, could result in a material increase in the allowance for loan losses and may adversely affect the Company’s financial condition and results of operations.
The recapture of loan losses for fiscal year 2022 was primarily due to the improving economic conditions associated with the COVID-19 pandemic since March 31, 2021. Any future decline in national and local economic conditions could result in a material increase in the allowance for loan losses and may adversely affect the Company’s financial condition and results of operations.
At March 31, 2022, the Company had total commitments of $159.3 million, which includes commitments to extend credit of $20.0 million, unused lines of credit totaling $98.5 million, undisbursed construction loans totaling $39.0 million, and standby letters of credit totaling $1.8 million.
At March 31, 2023, the Company had total commitments of $144.4 million, which includes commitments to extend credit of $12.5 million, unused lines of credit totaling $93.7 million, undisbursed construction loans totaling $36.6 million, and standby letters of credit totaling $1.6 million.
If the Company recorded an impairment charge, its financial position and results of operations would be adversely affected; however, such an impairment charge would have no impact on our liquidity, operations or regulatory capital.
If the Company recorded an impairment charge, its financial position and results of operations would be adversely affected; however, such an impairment charge would have no impact on our liquidity, operations or regulatory capital. For additional information concerning critical accounting policies, see Note 1 of the Notes to Consolidated Financial Statements contained in "Item 8.
Additionally, non-interest income also included a BOLI death benefit on a former employee of $500,000 during the fiscal year ended March 31, 2022. Non-Interest Expense. Non-interest expense increased $464,000 to $36.7 million for the year ended March 31, 2022 from $36.3 million for fiscal year 2021.
Additionally, non-interest income also included a BOLI death benefit on a former employee of $500,000 during the fiscal year ended March 31, 2022 that was not present for the fiscal year ended March 31, 2023. ​ 55 Table of Contents Non-Interest Expense.
The income approach uses a reporting unit’s projection of estimated operating results and cash flows that are discounted using a rate that reflects current market conditions. The projection uses management’s best estimates of economic and market conditions over the projected period including growth rates in loans and deposits, estimates of future expected changes in net interest margins and cash expenditures.
The projection uses management’s best estimates of 48 Table of Contents economic and market conditions over the projected period including growth rates in loans and deposits, estimates of future expected changes in net interest margins and cash expenditures.
While we believe the estimates and assumptions used in our determination of the adequacy of the allowance for loan losses are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of future provisions will not exceed the amount of past provisions or that any increased provisions that may be required will not adversely impact our financial condition and results of operations. ​ Operating Strategy Fiscal year 2022 marked the 99th anniversary since the Bank began operations in 1923.
While we believe the estimates and assumptions used in our determination of the adequacy of the allowance for loan losses are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of future provisions will not exceed the amount of past provisions or that any increased provisions that may be required will not adversely impact our financial condition and results of operations. ​ ​ 47 Table of Contents Valuation of Investment Securities. ​ The Company determines the estimated fair value of certain assets that are classified as Level 3 under the fair value hierarchy established under GAAP.
The Company has adopted a strategy that is designed to maintain or improve the interest rate sensitivity of assets relative to its liabilities.
As part of its interest rate risk management strategy, the Company promotes transaction accounts and certificates of deposit with terms up to ten years. The Company has adopted a strategy that is designed to maintain or improve the interest rate sensitivity of assets relative to its liabilities.
Non-interest expense remained relatively unchanged at $36.7 million for the fiscal year ended March 31, 2022, compared to $36.3 million for the prior fiscal year as the Company recognized in other non-interest expense a $1.0 million gain on sale of premises and equipment during the fiscal year ended March 31, 2022.
Non-interest expense increased to $39.4 million for the fiscal year ended March 31, 2023, compared to $36.7 million for the prior fiscal year as the Company recognized a $1.0 million gain on sale of premises and equipment during the fiscal year ended March 31, 2022, that was not present during the fiscal year ended March 31, 2023, as well as year over year increases in salary and employee benefits, occupancy and depreciation, and advertising and marketing expense.
The changes noted in the table below include tax equivalent adjustments, and as a result, will not agree to the amounts reflected on the Company’s consolidated statements of income for the categories that have been adjusted to reflect tax equivalent income. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended March 31, ​ ​ 2022 vs. 2021 ​ 2021 vs. 2020 ​ Increase (Decrease) Due to ​ ​ ​ Increase (Decrease) Due to ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Increase ​ ​ ​ ​ ​ ​ ​ Total ​ Volume Rate (Decrease) Volume Rate Increase Interest Income: ​ ​ ​ ​ ​ ​ Mortgage loans ​ $ 705 ​ $ (1,414) ​ $ (709) ​ $ (738) ​ $ (2,994) ​ $ (3,732) Non-mortgage loans ​ (2,000) ​ 1,290 ​ (710) ​ 3,982 ​ (1,157) ​ 2,825 Investment securities (1) ​ 2,906 ​ (184) ​ 2,722 ​ (153) ​ (849) ​ (1,002) Interest-bearing deposits in other banks ​ 121 ​ 121 ​ 242 ​ 464 ​ (642) ​ (178) Other earning assets ​ (9) ​ (20) ​ (29) ​ (9) ​ (51) ​ (60) Total interest income ​ 1,723 ​ (207) ​ 1,516 ​ 3,546 ​ (5,693) ​ (2,147) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest Expense: ​ ​ ​ ​ ​ ​ Regular savings accounts ​ 78 ​ (249) ​ (171) ​ 294 ​ (930) ​ (636) Interest checking accounts ​ 23 ​ (21) ​ 2 ​ 24 ​ (39) ​ (15) Money market accounts ​ 26 ​ (29) ​ (3) ​ 14 ​ (90) ​ (76) Certificates of deposit ​ (168) ​ (780) ​ (948) ​ 250 ​ 131 ​ 381 Junior subordinated debentures ​ ​ 2 ​ ​ (58) ​ ​ (56) ​ ​ 4 ​ ​ (517) ​ ​ (513) Other interest-bearing liabilities ​ (324) ​ 273 ​ (51) ​ (139) ​ (339) ​ (478) Total interest expense ​ (363) ​ (864) ​ (1,227) ​ 447 ​ (1,784) ​ (1,337) Net interest income ​ $ 2,086 ​ $ 657 ​ $ 2,743 ​ $ 3,099 ​ $ (3,909) ​ $ (810) ​ (1) Interest on municipal securities is presented on a fully tax-equivalent basis.
The changes noted in the table below include tax equivalent adjustments, and as a result, will not agree to the amounts reflected on the Company’s consolidated statements of income for the categories that have been adjusted to reflect tax equivalent income. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended March 31, ​ ​ 2023 vs. 2022 ​ 2022 vs. 2021 ​ Increase (Decrease) Due to ​ ​ ​ Increase (Decrease) Due to ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Increase ​ ​ ​ ​ ​ ​ ​ Total ​ Volume Rate (Decrease) Volume Rate Increase Interest Income: ​ ​ ​ ​ ​ ​ Mortgage loans ​ $ 2,986 ​ $ (1,572) ​ $ 1,414 ​ $ 705 ​ $ (1,414) ​ $ (709) Non-mortgage loans ​ 365 ​ (1,114) ​ (749) ​ (2,000) ​ 1,290 ​ (710) Investment securities (1) ​ 2,255 ​ 1,560 ​ 3,815 ​ 2,906 ​ (184) ​ 2,722 Interest-bearing deposits in other banks ​ (464) ​ 1,798 ​ 1,334 ​ 121 ​ 121 ​ 242 Other earning assets ​ 32 ​ 2 ​ 34 ​ (9) ​ (20) ​ (29) Total interest income ​ 5,174 ​ 674 ​ 5,848 ​ 1,723 ​ (207) ​ 1,516 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest Expense: ​ ​ ​ ​ ​ ​ Regular savings accounts ​ (6) ​ (22) ​ (28) ​ 78 ​ (249) ​ (171) Interest checking accounts ​ 2 ​ — ​ 2 ​ 23 ​ (21) ​ 2 Money market accounts ​ (3) ​ 268 ​ 265 ​ 26 ​ (29) ​ (3) Certificates of deposit ​ (105) ​ (56) ​ (161) ​ (168) ​ (780) ​ (948) Junior subordinated debentures ​ ​ 2 ​ ​ 755 ​ ​ 757 ​ ​ 2 ​ ​ (58) ​ ​ (56) FHLB advances ​ ​ 1,027 ​ ​ — ​ ​ 1,027 ​ ​ (47) ​ ​ — ​ ​ (47) Other interest-bearing liabilities ​ (3) ​ 1 ​ (2) ​ (3) ​ (1) ​ (4) Total interest expense ​ 914 ​ 946 ​ 1,860 ​ (89) ​ (1,138) ​ (1,227) Net interest income ​ $ 4,260 ​ $ (272) ​ $ 3,988 ​ $ 1,812 ​ $ 931 ​ $ 2,743 ​ (1) Interest on municipal securities is presented on a fully tax-equivalent basis.
The average yield on non-mortgage related loans increased 49 basis points to 4.54% for the year ended March 31, 2022, predominantly from higher deferred SBA PPP loan fees recognized from SBA PPP loans that were forgiven.
The impact of the increase in the average net loans was offset by the decrease in the average yield on net loans by 28 basis points to 4.44% for the fiscal year ended March 31, 2023, predominantly from higher deferred SBA PPP loan fees recognized from SBA PPP loans that were forgiven.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeActual results may significantly differ from simulated results due to timing, magnitude and frequency of interest rate changes and changes in market conditions and specific strategies among other factors. ​ 60 Table of Contents The following table shows the approximate percentage change in net interest income as of March 31, 2022 over a 12 and 24-month period under several rate scenarios: ​ ​ ​ ​ ​ ​ ​ ​ ​ Percent change in net ​ Percent change in net ​ ​ interest income (12 ​ interest income (24 Change in interest rates (1) months) months) ​ ​ ​ ​ ​ ​ Up 300 basis points 3.2 % 10.8 % Up 200 basis points 0.6 % 5.8 % Up 100 basis points 1.4 % 5.2 % Base case — 1.2 % Down 100 basis points (3.1) % (7.0) % ​ (1) The target federal funds rate as of March 31, 2022 was between 0.25% - 0.50%.
Biggest changeActual results may significantly differ from simulated results due to timing, magnitude and frequency of interest rate changes and changes in market conditions and specific strategies among other factors. ​ ​ 61 Table of Contents The following table shows the approximate percentage change in net interest income as of March 31, 2023 over a 12 and 24-month period under several instantaneous changes in interest rate scenarios: ​ ​ ​ ​ ​ ​ ​ ​ ​ Percent change in net ​ Percent change in net ​ ​ interest income (12 ​ interest income (24 Change in interest rates months) months) ​ ​ ​ ​ ​ ​ Up 300 basis points (13.0) % (3.2) % Up 200 basis points (9.1) % (0.9) % Up 100 basis points (4.2) % 4.0 % Base case — 7.2 % Down 100 basis points ​ 0.4 % 5.7 % Down 200 basis points ​ (0.1) % 2.3 % Down 300 basis points (1.6) % (2.8) % ​ In general, interest-earning assets reprice faster than interest-bearing liabilities in a given period.
However, due to a number of loans in our loan portfolio with interest rate floors, our net interest income will be negatively impacted in a rising interest rate environment until such time as the current rate exceeds these interest rate floors.
However, due to a number of loans in our loan portfolio with fixed interest rates, our net interest income will be negatively impacted in a rising interest rate environment.
Net interest income will increase in year one as set forth in the table above as our interest-earning assets are expected to continue to reprice faster than interest-bearing liabilities. In a falling interest rate environment, our net interest income will be negatively impacted as our deposit costs are currently relatively low and interest rates paid cannot decrease significantly.
In a rising interest rate environment, net interest income will decrease in year one as set forth in the table above as our interest-bearing liabilities are expected to continue to increase faster than interest-earning assets.
For example, although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates.
As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates.
Furthermore, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from certificates could deviate significantly from those assumed in calculating the table. 61 Table of Contents The following table shows the Company’s financial instruments that are sensitive to changes in interest rates, categorized by expected maturity, and the instruments’ fair values at March 31, 2022.
Furthermore, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from certificates could deviate significantly from those assumed in calculating the table. ​ ​ 62 Table of Contents ​
We attempt to limit our interest rate risk through managing the repricing characteristics of our assets and liabilities. As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing table.
In a falling interest rate environment, our net interest income will be positively impacted in the first 100 basis point movement as our interest-bearing liabilities decrease faster in relation to our interest-earning assets. We attempt to limit our interest rate risk through managing the repricing characteristics of our assets and liabilities.
Removed
No rates in this model are allowed to go below zero and therefore a down 200 and down 300 basis point scenario would not be plausible. Our consolidated balance sheet continues to be asset sensitive, meaning that interest-earning assets reprice faster than interest-bearing liabilities in a given period.
Removed
Market risk sensitive instruments are generally defined as on- and off-balance sheet derivatives and other financial instruments (dollars in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ After ​ After ​ After ​ Beyond ​ ​ ​ ​ ​ Average ​ Within ​ 1 – 3 ​ 3 – 5 ​ 5 – 10 ​ 10 ​ ​ ​ ​ Rate 1 Year Years Years Years Years Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-Sensitive Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans receivable ​ 3.97 % $ 44,195 ​ $ 45,709 ​ $ 113,307 ​ $ 525,444 ​ $ 261,753 ​ $ 990,408 Investment securities and other interest-earning assets ​ 1.25 ​ 230,992 ​ 7,811 ​ 31,112 ​ 99,081 ​ 274,723 ​ 643,719 FHLB stock ​ 2.87 ​ 403 ​ 808 ​ 808 ​ — ​ — ​ 2,019 Total assets ​ ​ ​ ​ $ 275,590 ​ $ 54,328 ​ $ 145,227 ​ $ 624,525 ​ $ 536,476 ​ $ 1,636,146 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-Sensitive Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest checking ​ 0.03 ​ $ 57,573 ​ $ 115,144 ​ $ 115,144 ​ $ — ​ $ — ​ $ 287,861 Savings accounts ​ 0.08 ​ 68,016 ​ 136,030 ​ 136,030 ​ — ​ — ​ 340,076 Money market accounts ​ 0.06 ​ 59,948 ​ 119,895 ​ 119,895 ​ — ​ — ​ 299,738 Certificate accounts ​ 0.57 ​ 77,179 ​ 29,470 ​ 3,680 ​ 1,043 ​ — ​ 111,372 Subordinated debentures ​ 2.47 ​ — ​ — ​ — ​ — ​ 26,833 ​ 26,833 Finance lease liability ​ 7.16 ​ 53 ​ 131 ​ 167 ​ 564 ​ 1,368 ​ 2,283 Total liabilities ​ ​ ​ ​ 262,769 ​ 400,670 ​ 374,916 ​ 1,607 ​ 28,201 ​ 1,068,163 Interest sensitivity gap ​ ​ ​ ​ 12,821 ​ (346,342) ​ (229,689) ​ 622,918 ​ 508,275 ​ $ 567,983 Cumulative interest sensitivity gap ​ ​ ​ ​ $ 12,821 ​ $ (333,521) ​ $ (563,210) ​ $ 59,708 ​ $ 567,983 ​ Off-Balance Sheet Items: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commitments to extend credit ​ ​ ​ ​ $ 20,020 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 20,020 Unused lines of credit ​ ​ ​ ​ $ 137,460 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 137,460 ​ ​ 62 Table of Contents

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