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What changed in RIVERVIEW BANCORP INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of RIVERVIEW BANCORP INC's 2023 and 2024 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 2024 report.

+416 added−482 removedSource: 10-K (2024-06-14) vs 10-K (2023-06-14)

Top changes in RIVERVIEW BANCORP INC's 2024 10-K

416 paragraphs added · 482 removed · 336 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

138 edited+22 added−48 removed163 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, ​ ​ 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.
Biggest changeThe following table sets forth the breakdown of the ACL by loan category as of the dates indicated (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At March 31, ​ ​ 2024 ​ 2023 ​ ​ ​ ​ ​ Loan Category ​ ​ Allowance ​ ​ ​ ​ ​ Loan Category ​ ​ Allowance ​ ​ ​ ​ ​ ​ as a Percent ​ ​ as a Percent ​ ​ ​ ​ ​ as a Percent ​ ​ as a Percent ​ ​ ​ ​ ​ ​ of Total ​ ​ of Loan ​ ​ ​ ​ ​ of Total ​ ​ of Loan ​ ​ Amount Loans ​ Category ​ ​ Amount Loans ​ Category ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and construction: ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial business ​ $ 5,280 22.40 % ​ 2.30 % ​ $ 3,123 23.08 % ​ 1.34 % Commercial real estate ​ ​ 7,391 ​ 56.98 ​ ​ 1.27 ​ ​ ​ 8,894 ​ 55.95 ​ ​ 1.58 ​ Land ​ ​ 106 ​ 0.56 ​ ​ 1.86 ​ ​ ​ 93 ​ 0.64 ​ ​ 1.44 ​ Multi-family ​ ​ 367 ​ 6.91 ​ ​ 0.52 ​ ​ ​ 798 ​ 5.54 ​ ​ 1.43 ​ Real estate construction ​ 636 3.57 ​ ​ 1.74 ​ ​ 764 4.73 ​ ​ 1.60 ​ Consumer: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate one-to-four family ​ 1,557 9.41 ​ ​ 1.62 ​ ​ 1,087 9.88 ​ ​ 1.09 ​ Other installment ​ 27 0.17 ​ ​ 1.55 ​ ​ 40 0.18 ​ ​ 2.24 ​ Unallocated ​ — — ​ ​ — ​ ​ 510 — ​ ​ — ​ Total allowance for credit losses - loans ​ $ 15,364 100.00 % ​ 1.50 % ​ $ 15,309 100.00 % ​ 1.52 % ​ 14 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, ​ 2024 2023 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ACL/ALLL as a percentage of total loans outstanding at period end ​ ​ 1.50 % ​ 1.52 % ​ 1.47 % ACL/ALLL ​ $ 15,364 ​ $ 15,309 ​ $ 14,523 ​ Total loans outstanding ​ ​ 1,024,013 ​ ​ 1,008,856 ​ ​ 990,408 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-accrual loans as a percentage of total loans outstanding at period end ​ ​ 0.02 % ​ 0.03 % ​ 0.03 % Total non-accrual loans ​ $ 173 ​ $ 283 ​ $ 291 ​ Total loans outstanding ​ ​ 1,024,013 ​ ​ 1,008,856 ​ ​ 990,408 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ACL/ALLL as a percentage of non-accrual loans at period end ​ ​ 8,880.92 % ​ 5,409.54 % ​ 4,990.72 % ACL/ALLL ​ $ 15,364 ​ $ 15,309 ​ $ 14,523 ​ Total non-accrual loans ​ ​ 173 ​ ​ 283 ​ ​ 291 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net charge-offs/(recoveries) during period to average loans outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial business: ​ ​ — % ​ — % ​ 0.03 % Net charge-offs/(recoveries) ​ $ — ​ $ — ​ $ 69 ​ Average loans receivable, net ​ ​ 239,433 ​ ​ 233,884 ​ ​ 225,677 ​ Commercial real estate: ​ ​ — % ​ — % ​ — % Net charge-offs/(recoveries) ​ $ — ​ $ — ​ $ — ​ Average loans receivable, net ​ ​ 563,023 ​ ​ 568,999 ​ ​ 559,275 ​ Land: ​ ​ — % ​ — % ​ — % Net charge-offs/(recoveries) ​ $ — ​ $ — ​ $ — ​ Average loans receivable, net ​ ​ 6,692 ​ ​ 8,486 ​ ​ 13,498 ​ Multi-family: ​ ​ — % ​ — % ​ — % Net charge-offs/(recoveries) ​ $ — ​ $ — ​ $ — ​ Average loans receivable, net ​ ​ 60,412 ​ ​ 57,548 ​ ​ 48,651 ​ Real estate construction: ​ ​ — % ​ — % ​ — % Net charge-offs/(recoveries) ​ $ — ​ $ — ​ $ — ​ Average loans receivable, net ​ ​ 43,864 ​ ​ 38,214 ​ ​ 16,828 ​ Consumer: ​ ​ (0.01) % ​ (0.04) % ​ (0.06) % Net charge-offs/(recoveries) ​ $ (13) ​ $ (36) ​ $ (39) ​ Average loans receivable, net ​ ​ 97,996 ​ ​ 99,914 ​ ​ 70,813 ​ Total loans: ​ ​ — % ​ — % ​ — % Total net recoveries/(recoveries) ​ $ (13) ​ $ (36) ​ $ 30 ​ Total average loans receivable, net ​ ​ 1,011,420 ​ ​ 1,007,045 ​ ​ 934,742 ​ ​ Investment Activities The Board sets the investment policy 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.
The Company employs commissioned brokers who originate mortgage loans (including construction loans) for various mortgage companies. 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.
These contributions could also have an adverse effect on the value of FHLB stock in the future. A reduction in value of the Bank’s FHLB stock may result in a decrease in net income and possibly capital. Insurance of Accounts and Regulation by the FDIC.
These contributions could also have an adverse effect on the value of FHLB stock in the future. A reduction in the value of the Bank’s FHLB stock may result in a decrease in net income and possibly capital. Insurance of Accounts and Regulation by the FDIC.
Many businesses are located in the Vancouver area because of the favorable tax structure and lower energy costs in Washington as compared to Oregon. Companies located in the Vancouver area include: Sharp Microelectronics, Hewlett Packard, Georgia Pacific, Underwriters Laboratory, WaferTech, Nautilus, Barrett Business Services, PeaceHealth and Banfield Pet Hospitals, as well as several support industries.
Many businesses are located in the Vancouver area because of the favorable tax structure and lower energy costs in Washington as compared to Oregon. Companies located in the Vancouver area include: Sharp Microelectronics, Hewlett Packard, Georgia Pacific, Underwriters Laboratory, WaferTech, Barrett Business Services, PeaceHealth and Banfield Pet Hospitals, as well as several support industries.
The home buyer may be identified either during or after the construction period, with the risk that the builder will have to service the speculative construction loan and finance real estate taxes and other carrying costs of the completed home for a significant period of time after the completion of construction until a home buyer is identified.
The home buyer may be identified either during or after the construction period, with the risk that the builder will have to service the speculative construction loan and finance real estate taxes and other carrying costs of the completed home for a significant period after the completion of construction until a home buyer is identified.
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.
The Bank’s compliance training program provides required annual training courses to assure that all employees know the rules applicable to their jobs. ​ 19 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 Company originates other real estate mortgage loans secured by office buildings, warehouse/industrial, retail, assisted living facilities and single-purpose facilities (collectively “commercial real estate loans” or “CRE”) and land and multi-family loans primarily located in its market area, collectively referred to herein as the “other real estate mortgage loan portfolio”.
The Company originates other real estate mortgage loans secured by office buildings, warehouse/industrial, retail, assisted living facilities and single-purpose facilities (collectively “commercial real estate ” or “CRE”) and land and multi-family loans primarily located in its market area, collectively referred to herein as the “other real estate mortgage loan portfolio”.
At March 31, 2023 and 2022, the Company had no speculative construction loans on non-accrual status. Presold construction loans are made to homebuilders who, at the time of construction, have a signed contract with a home buyer who has a commitment for permanent financing for the finished home from the Company or another lender.
At March 31, 2024 and 2023, the Company had no speculative construction loans on non-accrual status. Presold construction loans are made to homebuilders who, at the time of construction, have a signed contract with a home buyer who has a commitment for permanent financing for the finished home from the Company or another lender.
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.
The Company did not have any wholesale-brokered deposits at March 31, 2024 and 2023. 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 2024.
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.
Finally, the law provides additional flexibility for Washington state-chartered commercial and savings banks with respect to interest rates on 24 Table of Contents 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.
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.
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, 2024 and 2023 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.
At March 31, 2023, all of the land loans were secured by properties located in Washington and Oregon. At March 31, 2023 and 2022, the Company had no land loans on non-accrual status. Real Estate Construction. The Company originates three types of residential construction loans: (i) speculative construction loans, (ii) custom/presold construction loans and (iii) construction/permanent loans.
At March 31, 2024, all of the land loans were secured by properties located in Washington and Oregon. At March 31, 2024 and 2023, the Company had no land loans on non-accrual status. Real Estate Construction. The Company originates three types of residential construction loans: (i) speculative construction loans, (ii) custom/presold construction loans and (iii) construction/permanent loans.
Prior to July 2017, Mr. Lam served as Senior Vice President and Controller of the Bank since 2008. He is responsible for accounting, SEC reporting and treasury functions for the Bank and the Company. Prior to joining Riverview, Mr. Lam spent ten years working in the public accounting sector advancing to the level of audit manager. Mr.
Lam served as Senior Vice President and Controller of the Bank since 2008. He is responsible for accounting, SEC reporting and treasury functions for the Bank and the Company. Prior to joining Riverview, Mr. Lam spent ten years working in the public accounting sector advancing to the level of audit manager. Mr.
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.
The Company issues commitments to originate commercial loans, other real estate mortgage loans, construction loans, real estate one-to-four family (“home equity”) 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 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 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, 2024, no investment securities were held for trading purposes. At March 31, 2024, the Company’s investment portfolio consisted of solely debt securities and no equity securities. See Item 7.
Sowers holds an MBA in Finance, Accounting and Investment Banking from Washington University and an undergraduate degree from the University of Missouri. ​ 23 Table of Contents REGULATION General. On April 28, 2021, the Bank converted from a federally chartered savings bank to a Washington state-chartered commercial bank.
Sowers holds an MBA in Finance, Accounting and Investment Banking from Washington University and an undergraduate degree from the University of Missouri. ​ 21 Table of Contents REGULATION General. On April 28, 2021, the Bank converted from a federally chartered savings bank to a Washington state-chartered commercial bank.
Riverview’s common stock is registered with the SEC under Section 12(b) of the Securities Exchange Act of 1934, as amended (“Exchange Act”). The Company is subject to information, proxy solicitation, insider trading restrictions and other requirements under the Exchange Act. ​ 31 Table of Contents
Riverview’s common stock is registered with the SEC under Section 12(b) of the Securities Exchange Act of 1934, as amended (“Exchange Act”). The Company is subject to information, proxy solicitation, insider trading restrictions and other requirements under the Exchange Act. ​ 29 Table of Contents
Upon adoption of CECL, a banking organization must record a one-time adjustment to its credit loss allowances as of the beginning of the fiscal year of adoption equal to the difference, if any, between the amount of credit loss allowances under the current methodology and the amount required under CECL.
Upon adoption of CECL, a banking organization must record a one-time adjustment to its credit loss allowances as of the beginning of the fiscal year of adoption equal to the difference, if any, between the amount of credit loss allowances under the previous methodology and the amount required under CECL.
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.
At March 31, 2024, 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.
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.
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, 2024, the Company owned no privately issued MBS.
“Risk Factors – Risks Related to Our Lending – Commercial and multi-family real estate lending involves higher risks than one-to-four family real estate and other consume lending, which exposes us to increased lending risks.” Land loans represent loans made to developers for the purpose of acquiring raw land and/or for the subsequent development and sale of residential lots.
“Risk Factors – Risks Related to Our Lending Activities – Commercial and multi-family real estate lending involves higher risks than one-to-four family real estate and other consumer lending, which exposes us to increased lending risks.” Land loans represent loans made to developers for the purpose of acquiring raw land and/or for the subsequent development and sale of residential lots.
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.
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.
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.
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.
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.
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 27 Table of Contents and may not conduct its operations in an unsafe or unsound manner.
Although the Company did not originate any internet based deposits during the fiscal year ended March 31, 2023, the Company may do so in the future consistent with its asset/liability objectives. ​ 19 Table of Contents Deposit growth remains a key strategic focus for the Company and our ability to achieve deposit growth, particularly in core deposits, is subject to many risk factors including the effects of competitive pricing pressures, changing customer deposit behavior, and increasing or decreasing interest rate environments.
Although the Company did not originate any internet based deposits during the fiscal year ended March 31, 2024, the Company may do so in the future consistent with its asset/liability objectives. ​ Deposit growth remains a key strategic focus for the Company and our ability to achieve deposit growth, particularly in core deposits, is subject to many risk factors including the effects of competitive pricing pressures, changing customer deposit behavior, and increasing or decreasing interest rate environments.
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.
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.
The federal banking regulators (the Federal Reserve, the OCC and the FDIC) have adopted a rule that gives a banking organization the option to phase in over a three-year period the day-one adverse effects of CECL on its regulatory capital. Prompt Corrective Action.
The federal banking regulators (the Federal Reserve, the OCC and the FDIC) have adopted a rule that gives a banking organization the option to phase in over a three-year period the day-one adverse effects of CECL on its regulatory capital. The Company elected this option. Prompt Corrective Action.
It is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans or advances to members in accordance with policies and procedures established by the Board of Directors of the FHLB, which are subject to the oversight of the Federal Housing Finance Agency.
The FHLB is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. Loans or advances are made to members in accordance with policies and procedures established by the Board of Directors of the FHLB, which are subject to the oversight of the Federal Housing Finance Agency.
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.
For the years ended March 31, 2024 and 2023, there were no charge-offs or recoveries in the residential construction and land acquisition and development loan portfolios.
“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”)).
“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates.” 15 Table of Contents The Company primarily purchases agency securities and a combination of MBS backed by government agencies (FHLMC, Fannie Mae (“FNMA”), SBA or Ginnie Mae (“GNMA”)).
The Company’s obligations under the Debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of the obligations of the trusts. The trust preferred securities are mandatorily redeemable upon maturity of the Debentures or upon earlier redemption as provided in the indentures.
The Company’s obligations under the Debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of the obligations of the trusts. The trust preferred securities are mandatorily 18 Table of Contents redeemable upon maturity of the Debentures or upon earlier redemption as provided in the indentures.
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.
The Company plans to continue to proactively manage its construction loan portfolio in fiscal year 2025 while continuing to originate new construction loans to selected customers.
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.
As of March 31, 2024, 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, 2024, see Note 12 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K.
If the Company makes a determination that there is such deterioration, or if the loan becomes nonperforming, the Company halts any disbursement of those funds identified for use in paying interest. In some cases, additional interest reserves may be taken by use of deposited funds or through credit lines secured by separate and additional collateral.
If the Company determines that there is such deterioration, or if the loan becomes nonperforming, the Company halts any disbursement of those funds identified for use in paying interest. In some cases, additional interest reserves may be taken by use of deposited funds or through credit lines secured by separate and additional collateral.
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.
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 8 Table of Contents 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 28 Table of Contents 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 notification requirements for banking organizations and their service providers for significant cybersecurity incidents.
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.
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, 2024, the Company had outstanding commitments to originate loans of $10.0 million compared to $12.5 million at March 31, 2023. Mortgage Brokerage.
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.
The Bank has not elected to use the CBLR framework as of March 31, 2024. 22 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.
CECL covers a broader range of assets than the current method of recognizing credit losses and generally results in earlier recognition of credit losses.
CECL covers a broader range of assets than the prior method of recognizing credit losses and generally results in earlier recognition of credit losses.
Non-compliance with federal or similar state privacy and cybersecurity laws and regulations could lead to substantial regulatory imposed fines and penalties, damages from private causes of action and/or reputational harm Other Consumer Protection Laws and Regulations.
Non-compliance with federal or similar state privacy and cybersecurity laws and regulations could lead to substantial regulatory imposed fines and penalties, damages from private causes of action and/or reputational harm.
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.
Riverview Services had net income of $12,000 for the fiscal year ended March 31, 2024 and total assets of $1.3 million at March 31, 2024. Riverview Services’ operations are included in the Consolidated Financial Statements of the Company contained in Item 8 of this Form 10-K.
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.
With some exceptions, Riverview and its 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.
Lam holds a Bachelor of Arts degree in business administration with an emphasis in accounting from Oregon State University. Mr. Lam is a CPA, holds a chartered global management accountant designation and is a member of both the American Institute of CPAs and Oregon Society of CPAs. Daniel D.
Lam holds a Bachelor of Arts degree in business administration with an emphasis in accounting from Oregon State University. Mr. Lam is a certified public accountant (CPA), holds a chartered global management accountant designation and is a member of both the American Institute of CPAs and Oregon Society of CPAs.
The Federal Reserve may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve order or any condition imposed by, or written agreement with, the Federal Reserve. Federal Securities Laws.
The Federal Reserve may 28 Table of Contents disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve order or any condition imposed by, or written agreement with, the Federal Reserve. Federal Securities Laws.
Under this listing service, the Company may post certificates of deposit rates on an internet site where institutional investors have the ability to deposit funds with the Company. At March 31, 2023 and 2022, the Company did not have any deposits through this listing service as the Company chose not to utilize these internet-based deposits.
Under this listing service, the Company may post certificates of deposit rates on an internet site where institutional investors have the ability to deposit funds with the Company. At March 31, 2024 and 2023, the Company did not have any deposits through this listing service as the Company chose not to utilize these 17 Table of Contents internet-based deposits.
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.
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, 2024 and 2023, approximately $297.2 million and $225.7 million, respectively, of our deposit portfolio was uninsured.
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.
Employees and Human Capital As of March 31, 2024, the Company had 226 full-time equivalent employees, none of whom are represented by a collective bargaining unit. The Company believes its relationship with its employees is good.
There can be no prediction as to what changes in insurance assessment rates may be made in the future. For the fiscal year ended March 31, 2023, the Bank’s FDIC deposit insurance premiums totaled $534,000.
There can be no prediction as to what changes in insurance assessment rates may be made in the future. For the fiscal year ended March 31, 2024, the Bank’s FDIC deposit insurance premiums totaled $708,000.
At March 31, 2023 and 2022, the Company also had $21.3 million and $25.9 million, respectively, in deposits from public entities located in the States of Washington and Oregon, all of which were fully covered by FDIC insurance or secured by pledged collateral. The Company is enrolled in an internet deposit listing service.
At March 31, 2024 and 2023, the Company also had $13.2 million and $21.3 million, respectively, in deposits from public entities located in the States of Washington and Oregon, all of which were fully covered by FDIC insurance or secured by pledged collateral. The Company is enrolled in an internet deposit listing service.
Other than an investor’s own internet access charges, the Company makes available free of charge through its website the Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after it has electronically filed such material with, or furnished such material to, the Securities and Exchange Commission (“SEC”).
Other than an investor’s own internet access charges, the Company makes available free of charge through its website the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after it has electronically filed such material with, or furnished such material to, the SEC.
Item 1. Business General Riverview Bancorp, Inc., a Washington corporation, is the bank holding company of Riverview Bank. At March 31, 2023, the Company had total assets of $1.6 billion, total deposits of $1.3 billion and total shareholders’ equity of $155.2 million. The Company’s executive offices are located in Vancouver, Washington.
Item 1. Business General Riverview Bancorp, Inc., a Washington corporation, is the bank holding company of Riverview Bank. At March 31, 2024, the Company had total assets of $1.52 billion, total deposits of $1.23 billion and total shareholders’ equity of $155.6 million. The Company’s executive offices are located in Vancouver, Washington.
If the FDIC determines that an institution fails to meet any of these guidelines, it may require an institution to submit to the FDIC an acceptable plan to achieve compliance. Management of the Bank is not aware of any conditions relating to these safety and soundness standards which would require submission of a plan of compliance. Federal Reserve System.
If the FDIC determines that an institution fails to meet any of these guidelines, it may 25 Table of Contents require an institution to submit to the FDIC an acceptable plan to achieve compliance. Management of the Bank is not aware of any conditions relating to these safety and soundness standards which would require submission of a plan of compliance.
The Company’s loans receivable, net, totaled $993.5 million at March 31, 2023 compared to $975.9 million at March 31, 2022. The Company’s strategic plan includes targeting the commercial banking customer base in its primary market area for loan originations and deposit growth, specifically small and medium size businesses, professionals and wealth building individuals.
The Company’s loans receivable, net, totaled $1.01 billion at March 31, 2024 compared to $993.5 million at March 31, 2023. The Company’s strategic plan includes targeting the commercial banking customer base in its primary market area for loan originations and deposit growth, specifically small and medium size businesses, professionals and wealth building individuals.
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.
However, a decline in national and local economic conditions (including a possible 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 ACL and may adversely affect the Company’s future financial condition and results of operations.
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.
At March 31, 2024, the Company had $39.6 million, or 3.22% 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.
Terms typically range from 15 to 30 years. At March 31, 2023, the Company had three residential real estate loans totaling $86,000 on non-accrual status compared to two residential real estate loans totaling $51,000 at March 31, 2022. All of these loans were secured by properties located in Oregon and Washington.
Terms typically range from 15 to 30 years. At March 31, 2024, the Company had one residential real estate loan totaling $36,000 on non-accrual status compared to three residential real estate loans totaling $86,000 at March 31, 2023. All of these loans were secured by properties located in Oregon and Washington.
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.
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.
The largest speculative construction loan at March 31, 2023 was a loan to finance the construction of 36 townhomes totaling $8.1 million that is secured by property located in the Company’s market area. The average balance of loans in the speculative construction loan portfolio at March 31, 2023 was $959,000.
The largest speculative construction loan at March 31, 2024 was a loan to finance the construction of 36 townhomes totaling $8.2 million that is secured by property located in the Company’s market area. The average balance of loans in the speculative construction loan portfolio at March 31, 2024 was $907,000.
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.
At March 31, 2024, the Company’s residential construction and land acquisition and development loan portfolios were $16.2 million and $5.7 million, respectively, as compared to $18.2 million and $6.4 million, respectively, at March 31, 2023. At March 31, 2024 and 2023, there were no nonperforming loans in the residential construction loan portfolio or the land acquisition and development portfolio.
At this date, the Bank’s largest lending relationship with one borrower was $29.5 million, which consisted of a multi-family loan of $17.6 million and a commercial real estate loan of $11.9 million, both of which were performing in accordance with their original payment terms at March 31, 2023. Loan Portfolio Analysis .
At this date, the Bank’s largest lending relationship with one borrower was $28.7 million, which consisted of a multi-family loan of $17.2 million and a commercial real estate loan of $11.5 million, both of which were performing in accordance with their original payment terms at March 31, 2024. Loan Portfolio Analysis .
At March 31, 2023, total assets under management were $890.6 million. The Trust Company’s operations are included in the Consolidated Financial Statements of the Company contained in Item 8 of this Form 10-K. ​ 22 Table of Contents Information about our Executive Officers .
At March 31, 2024, total assets under management were $961.8 million. The Trust Company’s operations are included in the Consolidated Financial Statements of the Company contained in Item 8 of this Form 10-K. ​ 20 Table of Contents Information about our Executive Officers .
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.
There was no ACL and OTTI recorded for investment securities for the years ended March 31, 2024 and 2023, respectively. 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.
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.
At March 31, 2024, the largest commercial construction loan had a balance of $4.7 million and was performing according to its original repayment terms. The average balance of loans in the commercial construction loan portfolio at March 31, 2024 was $1.5 million. At March 31, 2024 and 2023, the Company had no commercial construction loans on non-accrual status.
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 Trust Company is an asset management company providing trust, estate planning and investment management services. The Trust Company had net income of $2.0 million for the fiscal year ended March 31, 2024 and total assets of $10.8 million at March 31, 2024. The Trust Company earns fees on the management of assets held in fiduciary or agency capacity.
Brokered loans totaled $22.0 million and $58.1 million as of March 31, 2023 and 2022, respectively. There were no loans brokered to the Company for the fiscal year ended March 31, 2023 and 2022. Gross fees of $346,000, including brokered loan fees, were earned in the fiscal year ended March 31, 2023.
Brokered loans totaled $21.3 million and $22.0 million as of March 31, 2024 and 2023, respectively. There were no loans brokered to the Company for the fiscal year ended March 31, 2024 and 2023. Gross fees of $213,000 and $346,000, including brokered loan fees, were earned in the fiscal year ended March 31, 2024 and 2023.
Presold construction loans are generally originated for a term of 12 months. At March 31, 2023 and 2022, presold construction loans totaled $4.1 million and $4.5 million, respectively.
Presold construction loans are generally originated for a term of 12 months. At March 31, 2024 and 2023, presold construction loans totaled $2.0 million and $4.1 million, respectively.
Core branch deposits (comprised of all demand, savings, interest checking accounts and all time deposits excluding wholesale-brokered deposits, trust account deposits, Interest on Lawyer Trust Accounts (“IOLTA”), public funds, and internet based deposits) at March 31, 2023 decreased $250.1 million since March 31, 2022 due to deposit pricing pressures in our market and customers seeking higher yielding investment alternatives.
Core branch deposits (comprised of demand, savings, interest checking accounts and certificates of deposit, excluding wholesale-brokered deposits, trust account deposits, Lawyer Trust Accounts (“IOLTA”), public funds, and internet-based deposits) at March 31, 2024 decreased $26.9 million since March 31, 2023 due to deposit pricing pressures in our market and customers seeking higher yielding investment alternatives.
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 considers the ACL to be adequate at March 31, 2024 to cover expected credit 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 ACL in accordance with GAAP.
Accordingly, the repayment of commercial business loans depends primarily on the cash flow and credit-worthiness of the borrower and secondarily on the underlying collateral provided by the borrower. Additionally, the borrower’s cash flow may be unpredictable and collateral securing these loans may fluctuate in value. ​ 6 Table of Contents Other Real Estate Mortgage Lending.
Accordingly, the repayment of commercial business loans depends primarily on the cash flow and credit-worthiness of the borrower and secondarily on the underlying collateral provided by the borrower. Additionally, the borrower’s cash flow may be unpredictable and collateral securing these loans may fluctuate in value.
The following table sets forth certain information concerning the Company’s borrowings for the periods indicated (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended March 31, ​ 2023 2022 2021 Maximum amounts of FHLB advances outstanding at any month end ​ $ 123,754 ​ $ — ​ $ 30,000 ​ Average FHLB advances outstanding ​ 21,045 ​ 3 ​ 15,044 ​ Weighted average rate on FHLB advances ​ 4.88 % 0.31 % 0.31 % Maximum amounts of FRB borrowings outstanding at any month end ​ $ — ​ $ — ​ $ — ​ Average FRB borrowings outstanding ​ 13 ​ 3 ​ — ​ Weighted average rate on FRB borrowings ​ 4.62 % 0.25 % — % ​ ​ 20 Table of Contents At March 31, 2023, the Company had three wholly-owned subsidiary grantor trusts totaling $26.9 million that were established for the purpose of issuing trust preferred securities and common securities.
The following table sets forth certain information concerning the Company’s borrowings for the periods indicated (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended March 31, ​ 2024 2023 2022 Maximum amounts of FHLB advances outstanding at any month end ​ $ 180,454 ​ $ 123,754 ​ $ — ​ Average FHLB advances outstanding ​ 146,555 ​ 21,045 ​ 3 ​ Weighted average rate on FHLB advances ​ 5.40 % 4.88 % 0.31 % Maximum amounts of FRB borrowings outstanding at any month end ​ $ — ​ $ — ​ $ — ​ Average FRB borrowings outstanding ​ 10 ​ 13 ​ 3 ​ Weighted average rate on FRB borrowings ​ 5.40 % 4.62 % 0.25 % ​ At March 31, 2024, the Company had three wholly-owned subsidiary grantor trusts totaling $27.0 million that were established for the purpose of issuing trust preferred securities and common securities.
At March 31, 2023, the balance of the Company’s construction loan portfolio, including undisbursed funds, was $84.3 million compared to $63.2 million at March 31, 2022. The $21.1 million increase was primarily due to a $26.5 million increase in commercial/multi-family construction loans, partially offset by a decrease of $5.0 million in custom/presold construction loans.
At March 31, 2024, the Company’s construction loan portfolio, including undisbursed funds, was $92.5 million compared to $84.3 million at March 31, 2023. The $8.1 million increase was primarily due to a $11.1 million increase in commercial/multi-family construction loans, partially offset by a decrease of $2.1 million in custom/presold construction loans.
The regulatory limit of loans we can make to one borrower is 20% of total risk-based capital, or $36.4 million, at March 31, 2023.
The regulatory limit of loans we can make to one borrower is 20% of total risk-based capital, or $35.5 million, at March 31, 2024.
At March 31, 2023, the commercial business loan portfolio totaled $232.9 million, or 23.1% of total loans. Commercial business loans are typically secured by business equipment, accounts receivable, inventory or other property. The Company’s commercial business loans may be structured as term loans or as lines of credit.
At March 31, 2024, the commercial business loan portfolio totaled $229.4 million, or 22.4% of total loans. Commercial business loans are typically secured by business equipment, accounts receivable, inventory or other property. The Company’s commercial business loans may be structured as term loans or as lines of credit.
See “Mortgage Brokerage” and “Mortgage Loan Servicing” below for more information. At March 31, 2023, the Company had no construction/permanent loans. The Company provides construction financing for non-residential business properties and multi-family dwellings. At March 31, 2023, commercial construction loans totaled $29.6 million, or 61.9% of total real estate construction loans, and 2.9% of total loans.
See “Mortgage Brokerage” and “Mortgage Loan Servicing” below for more information. At March 31, 2024, the Company had no construction/permanent loans. The Company provides construction financing for non-residential business properties and multi-family dwellings. At March 31, 2024, commercial construction loans totaled $20.4 million, or 55.8% of total real estate construction loans, and 2.0% of total loans.
For additional information, see Item 1.A. “Risk Factors – Risks Related to Regulatory and Compliance Matters – Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions” in this report. ​ 30 Table of Contents Stock Repurchases.
For additional information, see Item 1.A. “Risk Factors – Risks Related to Regulatory and Compliance Matters – Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions and limit our ability to get regulatory approval of acquisitions” in this report. Stock Repurchases.
The Company had net recoveries totaling $36,000 during fiscal 2023 compared to net charge-offs of $30,000 during fiscal 2022. The decrease in nonperforming assets is attributed to the progress made in resolving the delay in servicing transfer between two third-party servicers of SBA and United States Department of Agriculture (“USDA”) government guaranteed loans, as further discussed below.
The Company had net recoveries totaling $13,000 and $36,000 during fiscal 2024 and 2023, respectively. The decrease in nonperforming assets is attributed to the progress made in resolving the delay in servicing transfer between two third-party servicers of SBA and United States Department of Agriculture (“USDA”) government guaranteed loans.
Total base assessment rates currently range from 3 to 30 basis points subject to certain adjustments. Extraordinary growth in insured deposits during the first and second quarters of 2020 caused the DIF reserve ratio to decline below the statutory minimum of 1.35 percent as of June 30, 2020.
Total base assessment rates currently range from 2.5 to 32 basis points subject to certain adjustments for institutions considered a “Small Bank” like the Bank. Extraordinary growth in insured deposits during the first and second quarters of 2020 caused the DIF reserve ratio to decline below the statutory minimum of 1.35 percent as of June 30, 2020.
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.
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, 2024, the Company’s net loans receivable totaled $1.01 billion, or 66.3% of total assets at that date.
At March 31, 2023, land loans totaled $6.4 million, or 0.64% of total loans, compared to $11.6 million, or 1.16% of total loans at March 31, 2022. The largest land loan had an outstanding balance at March 31, 2023 of $1.8 million and was performing according to its original payment terms.
At March 31, 2024, land loans totaled $5.7 million, or 0.6% of total loans, compared to $6.4 million, or 0.6% of total loans at March 31, 2023. The largest land loan had an outstanding balance at March 31, 2024 of $2.4 million and was performing according to its original payment terms.
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.
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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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.
Biggest changeA downturn in economic conditions in the market areas we serve be it due to inflation, recessive trends, geopolitical conflicts, adverse weather, or other factors, could have a material adverse impact on our business, financial condition, liquidity and results of operations, including but not limited to: ​ ● Elevated instances of loan delinquencies, problematic assets, and foreclosures ● An increase in our ACL for loans ● Reduced demand for our products and services, potentially leading to a decline in our overall loans or assets. ● Depreciation in collateral values linked to our loans, thereby diminishing borrowing capacities and asset values tied to existing loans. ● Reduced net worth and liquidity of loan guarantors, possibly impairing their ability to meet commitments to us ● Reductions in our low-cost or noninterest-bearing deposits. ​ .
Any decline in available funding in amounts adequate to finance our activities or on terms which are acceptable could adversely impact our ability to originate loans, invest in securities, meet our expenses or fulfill obligations such as repaying our borrowings or meeting deposit withdraw demands, any of which could, in turn, have a material adverse effect on our business, financial condition and results of operations.
Any decline in available funding in amounts adequate to finance our activities on acceptable terms could adversely impact our ability to originate loans, invest in securities, meet our expenses or fulfill obligations such as repaying our borrowings or meeting deposit withdraw demands, any of which could, in turn, have a material adverse effect on our business, financial condition and results of operations.
Item 1A. Risk Factors An investment in our common stock is subject to risks inherent in our business. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included in this report.
Item 1A. Risk Factors An investment in our common stock is subject to risks inherent in our business. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all the other information included in this report.
In addition to the risks and uncertainties described below, other risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and results of operations.
In addition to the risks and uncertainties described below, other risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially and adversely affect our business, financial condition and results of operations.
Our net interest income could be adversely affected if the rates we pay on deposits and borrowings increase more rapidly than the rates we earn on loans. In addition, a substantial amount of our home equity lines of credit have adjustable interest rates.
Our net interest income could be adversely affected if the rates we pay on deposits and borrowings increase more rapidly than the rates we earn on loans and other investments. In addition, a substantial amount of our home equity lines of credit have adjustable interest rates.
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.
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 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.
There were no non-performing real estate construction and land loans at March 31, 2023. A material increase in non-performing real estate construction and land loans could have a material adverse effect on our financial condition and results of operation.
There were no non-performing real estate construction and land loans at March 31, 2024. A material increase in non-performing real estate construction and land loans could have a material adverse effect on our financial condition and results of operation.
Certain accounting policies are critical to presenting the Company’s financial condition and results of operations. They require management to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates.
Certain accounting policies, most notably the ACL, are critical to presenting the Company’s financial condition and results of operations. They require management to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates.
The availability of dividends from the Bank is limited by the Bank’s earnings and capital, as well as various statutes and regulations. In the event the Bank is unable to pay dividends to us, we may not be able to pay dividends on our common stock or make payments on our outstanding debt.
The availability of dividends from the Bank is limited by the Bank’s earnings and capital, as well as various statutes and regulations. In the event the Bank is unable to pay dividends to us, we may not be able to pay dividends on our common stock or make payments on our outstanding 40 Table of Contents debt.
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.
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 and, by extension, our operations.
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.
In addition, any additional capital we obtain may dilute 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.
Additionally, pursuant to our growth strategy, management recognizes that significant new growth in loan portfolios, new loan products and the refinancing of existing loans can result in portfolios comprised of unseasoned loans that may not perform in a historical or projected manner and will increase the risk that our allowance may be insufficient to absorb losses without significant additional provisions.
Management also recognizes that significant new growth in loan portfolios, new loan products and the refinancing of existing loans can result in portfolios comprised of unseasoned loans that may not perform in a historical or projected manner and will increase the risk that our allowance may be insufficient to absorb losses without significant additional provisions.
If our estimates are incorrect, the allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in the need for increases in our allowance for loan losses through the provision for losses on loans which is charged against income.
If our estimates are incorrect, the ACL for loans may not be sufficient to cover losses inherent in our loan portfolio, resulting in the need for increases in our ACL through the provision for credit losses on loans which is charged against income.
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.
However, if the FOMC further increases the targeted federal funds rate, overall interest rates will likely continue to rise, which will negatively impact our net interest income and may negatively impact both the housing market by reducing refinancing activity and new home purchases, and the U.S. economy.
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.
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, including our ability to secure managerial resources, recruit and retain qualified personnel, and execute effective marketing strategies.
We also could be adversely affected to the extent such an agreement is not renewed by the third-party vendor or is renewed on terms less favorable to us. Additionally, the bank regulatory agencies expect financial institutions to be responsible for all aspects of our vendors’ performance, including aspects which they delegate to third parties.
We also could be adversely affected to the extent such an agreement is not renewed by the third-party vendor or is renewed on terms less favorable to us. Additionally, the bank regulatory agencies expect financial institutions to be responsible for all aspects of a vendor’s performance, including aspects which a vendor delegates to third parties.
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.
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. Many of the loans in our portfolio are secured by real estate.
Deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may also require an increase in the allowance for loan losses.
Deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may also require an increase in the ACL.
As a bank, we are susceptible to fraudulent activity that may be committed against us or our clients, which may result in financial losses or increased costs to us or our clients, disclosure or misuse of our information or our client information, misappropriation of assets, privacy breaches against our clients, litigation or damage to our reputation.
The Bank is susceptible to fraudulent activity that may be committed against us or our clients, which may result in financial losses or increased costs to us or our clients, disclosure or misuse of our information or our client information, misappropriation of assets, privacy breaches against our clients, litigation or damage to our reputation.
In general, during periods of rising interest rates, the volume of loans and the amount of brokered loan fees included in non-interest income generally decrease as a result of slower mortgage loan demand.
Generally, during periods of rising interest rates, the volume of loans and the amount of brokered loan fees included in non-interest income decrease as a result of slower mortgage loan demand. Conversely, during periods of falling interest rates, the volume of loans and the amount of brokered loan fees generally increase as a result of the increased mortgage loan demand.
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. ​
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. ​ 41 Table of Contents
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.
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.
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.
As a result, these loans may experience elevated rates of delinquencies, defaults and losses negatively impacting 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.
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.
Collateral evaluation and financial statement analysis in these 31 Table of Contents types of loans requires a more detailed analysis at the time of loan underwriting and on an ongoing basis. At March 31, 2024, we had $654.3 million of commercial and multi-family real estate loans, representing 63.9% of our total loan portfolio.
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.
Our earnings and cash flows are largely dependent upon our net interest income. 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.
At March 31, 2023, we recorded an $18.3 million accumulated other comprehensive loss, which is reflected as a reduction to stockholders’ equity.
At March 31, 2024, we recorded an $16.1 million accumulated other comprehensive loss, which is reflected as a reduction to stockholders’ equity.
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.
This risk is affected by, among other things: ​ ● The cash flow of the borrower or the project being financed. ● For a collateralized loan, uncertainties as to the future value of the collateral. ● The duration of the loan. ● The credit history of the borrower. ● Changes in economic and industry conditions. ​ To address these risks, we maintain an ACL for loans, which is established through a provision for credit losses on loans charged to expense, which we believe is appropriate to provide for lifetime expected credit losses in our loan portfolio.
The financial services industry is extensively regulated. Federal and state banking regulations are designed primarily to protect the deposit insurance funds and consumers, not to benefit a company’s shareholders. These regulations may sometimes impose significant limitations on operations.
We operate in a highly regulated environment and may be adversely affected by changes in federal and state laws and regulations. The financial services industry is extensively regulated. Federal and state banking regulations are designed primarily to protect the deposit insurance funds and consumers, not to benefit a company’s shareholders. These regulations may sometimes impose significant limitations on operations.
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.
Bank regulatory agencies also periodically review our ACL and may require an increase in the provision for possible credit losses or the recognition of further loan charge-offs based on their judgment about information available to them at the time of their examination. If charge-offs in future periods exceed the ACL, we may need additional provisions to increase the ACL.
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.
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 314% of total risk-based capital at March 31, 2024.
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.
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 525 basis points, including 50 basis points during fiscal 2024, to a range of 5.25% to 5.50% as of March 31, 2024.
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 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.
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.
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.
For more information, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates” contained in this Form 10-K. We may experience future goodwill impairment, which could reduce our earnings. We performed our annual goodwill impairment test as of October 31, 2022, and the test concluded that recorded goodwill was not impaired.
For more information, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates” contained in this Form 10-K. We may experience future goodwill impairment, which could reduce our earnings.
Risks Related to our Business and Industry General We rely on other companies to provide key components of our business infrastructure. We rely on numerous external vendors to provide us with products and services necessary to maintain our day-to-day operations.
Any such charge could have a material adverse effect on our results of operations. 38 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 rely on numerous external vendors to provide us with products and services necessary to maintain our day-to-day operations.
Lending money is a substantial part of our business and each loan carries a certain risk that it will not be repaid in accordance with its terms or that any underlying collateral will not be sufficient to assure repayment.
Future additions to our ACL, as well as charge-offs in excess of reserves, will reduce our earnings. Lending money is a substantial part of our business and each loan carries risks, including that it will not be repaid in accordance with its terms or that any underlying collateral will not be sufficient to assure repayment.
While we believe we have implemented policies and procedures with respect to our commercial real estate loan portfolio consistent with this guidance, bank regulators could require us to implement additional policies and procedures consistent with their interpretation of the guidance that may result in additional costs to us. 37 Table of Contents We operate in a highly regulated environment and may be adversely affected by changes in federal and state laws and regulations.
While we believe we have implemented policies and procedures with respect to our commercial real estate loan portfolio consistent with this guidance, bank regulators could require us to implement additional policies and procedures consistent with their interpretation of the guidance that may result in additional costs to us.
Our success depends to a significant degree upon our ability to attract and retain qualified management, loan origination, finance, administrative, marketing and technical personnel and upon the continued contributions of our management and personnel.
Our success depends to a significant degree upon our ability to attract and retain qualified management, loan origination, finance, administrative, marketing and technical personnel and upon the continued contributions of our management and personnel. Our ability to retain and grow our loans, deposits, and fee income depends upon the business generation capabilities, reputation, and relationship management skills of our lenders.
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.
These factors include, but are not limited to, rating agency actions in respect of the securities, defaults by the issuer or adverse events related to the underlying securities, capital market instability, and, as previously mentioned, fluctuations in market interest rates.
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 .
Court of Appeals for the Fifth Circuit granted an administrative stay, temporarily halting the implementation of the SEC's climate rules. 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 .
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.
Moreover, there is a risk that our new branches may not yield the desired success. 39 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 exceedingly high.
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.
At March 31, 2024, real estate construction and land loans totaled $42.2 million, or 4.13% of our total loan portfolio, and were comprised of $16.2 million of speculative and presold construction loans, $5.7 million of land loans and $20.4 million of commercial/multi-family construction loans.
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.
However, attracting such deposits has been challenging with the current interest rate environment. At March 31, 2024, we had $349.1 million in non-interest bearing demand deposits and $179.2 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.
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.
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. Our evaluation of the fair value of goodwill involves a substantial amount of judgement.
We have established processes and procedures intended to identify, measure, monitor, report, analyze and control the types of risk to which we are subject. These risks include, among others, liquidity, credit, market, interest rate, operational, legal and compliance, and reputational risk. Our framework also includes financial or other modeling methodologies that involve management assumptions and judgment.
These risks include, among others, liquidity, credit, market, interest rate, operational, legal and compliance, and reputational risk. Our framework also includes financial or other modeling methodologies that involve management assumptions and judgment. We also maintain a compliance program to identify, measure, assess, and report on our adherence to applicable laws, policies and procedures.
Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of an institution, the classification of assets by the institution and the adequacy of an institution’s allowance for loan losses. These bank regulators also have the ability to impose conditions in the approval of merger and acquisition transactions.
Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of an institution, the classification of assets by the institution and the adequacy of an institution’s ACL.
In return, the Company receives a fee ranging from 1.5% to 2.0% of the loan amount that it shares with the commissioned broker. The prevailing interest rate environment has a strong influence on the loan volume and amount of fees generated from our mortgage brokerage activity.
Instead, the Company receives a fee typically ranging from 1.5% to 2.0% of the loan amount, which is shared with the commissioned broker. The prevailing interest rate environment significantly influences both the volume of loans and the fees generated through our mortgage brokerage activity.
The FDIC, the Federal Reserve and the OCC have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under this guidance, a financial institution that, like us, is actively involved in commercial real estate lending should perform a risk assessment to identify concentrations.
Under this guidance, a financial institution that, like us, is actively involved in commercial real estate lending should perform a risk assessment to identify concentrations.
The amount of this allowance is determined by management through periodic reviews and consideration of several factors, including, but not limited to: ​ ● our general reserve, based on our historical default and loss experience and certain macroeconomic factors based on management’s expectations of future events; ● our specific reserve, based on our evaluation of impaired loans and their underlying collateral or discounted cash flow; and ● an unallocated reserve to provide for other credit losses inherent in our loan portfolio that may not have been contemplated in the other loss factors. ​ The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes.
The appropriate level of the ACL for loans is determined by management through periodic reviews and consideration of several factors, including, but not limited to: ​ ● Our collective loss reserve, for loans evaluated on a pool basis with similar risk characteristics based on our life of loan historical default and loss experience, certain macroeconomic factors, reasonable and supportable forecasts, regulatory requirements, management’s expectations of future events and certain qualitative factors; and ● Our individual loss reserve, based on our evaluation of individual loans that do not share similar risk characteristics and the present value of the expected future cash flows or the fair value of the underlying collateral. ​ The determination of the appropriate level of the ACL inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes.
At March 31, 2023, $99.7 million, or 9.88% of our total loan portfolio, consisted of real estate one-to-four family loans and home equity loans. Our first-lien real estate one-to-four family loans are primarily made based on the repayment ability of the borrower and the collateral securing these loans.
At March 31, 2024, $96.4 million, or 9.41% of our total loan portfolio, consisted of real estate one-to-four family loans and home equity loans. We primarily base our lending decisions on the borrower’s repayment capacity and the collateral securing these loans, particularly with first-lien real estate one-to-four family loans.
Any compromise of our security could deter customers from using our internet banking services that involve the transmission of confidential information. We rely on standard internet security systems to provide the security and authentication necessary to effect secure transmission of data.
Any compromise of our security could deter customers from using our internet banking services that involve the transmission of confidential information.
We may incur losses on our securities portfolio as a result of changes in interest rates. Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities.
We may incur losses on our securities portfolio as a result of changes in interest rates. The fair value of our investment securities is susceptible to significant shifts due to factors beyond our control, potentially leading to adverse changes in their valuation.
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.
Collateral for commercial business loans typically includes equipment, inventory, accounts receivable, or other business assets. For loans secured by accounts receivable, the availability of funds for repayment relies heavily on the borrower’s ability to collect from its customers.
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.
Any increases in the ACL 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. 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.
These regulations, along with the currently existing tax, accounting, securities, insurance, and monetary laws, regulations, rules, standards, policies, and interpretations control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures. These laws, regulations, rules, standards, policies, and interpretations are constantly evolving and may change significantly over time.
These bank regulators also have the ability to impose conditions in the approval of merger and acquisition transactions. 35 Table of Contents These regulations, along with the currently existing tax, accounting, securities, insurance, and monetary laws, regulations, rules, standards, policies, and interpretations control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures.
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.
We make construction and land loans primarily to builders to finance the construction of single and multifamily homes, subdivisions, as well as commercial properties. We originate these loans regardless of whether the property used as collateral in under a sales contract.
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.
In an environment where other market participants are also liquidating securities, our loss could be materially higher than expected, significantly adversely impacting liquidity and capital levels. 34 Table of Contents 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.
Real estate values are affected by various other factors, including changes in general or regional economic conditions, governmental rules or policies and natural disasters such as earthquakes and tornadoes. If we are required to liquidate a significant amount of collateral during a period of reduced real estate values, our financial condition and profitability could be adversely affected.
If we are required to liquidate a significant amount of collateral during a period of reduced real estate values, our financial condition and profitability could be adversely affected.
We cannot assure that such breaches, failures or interruptions will not occur or, if they do occur, that they will be adequately addressed by us or the third parties on which we rely.
Threats to information security also exist in the processing of customer information through various other vendors and their personnel. 37 Table of Contents We cannot assure you that such breaches, failures or interruptions will not occur or, if they do occur, that they will be adequately addressed by us or the third parties on which we rely.
Furthermore, increased ESG related compliance costs could result in increases to our overall operational costs. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, and our stock price.
Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, and our stock price. New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure.
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.
Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses. Consequently, the ability of our business clients to repay their loans may deteriorate quickly, which would adversely impact our results of operations and financial condition.
If we are unable to manage interest rate risk effectively, our business, financial condition and results of operations could be materially affected. Changes in interest rates could also have a negative impact on our results of operations by reducing the ability of borrowers to repay their current loan obligations or by reducing our margins and profitability.
If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. 33 Table of Contents Changes in interest rates could also have a negative impact on our results of operations by reducing the ability of borrowers to repay their current loan obligations or by reducing our margins and profitability.
Recently, several banking institutions have received large fines for non-compliance with these laws and regulations. While we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance can be given that these policies and procedures will be effective in preventing violations of these laws and regulations.
While we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance can be given that these policies and procedures will be effective in preventing violations of these laws and regulations. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us.
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.
Loans with high combined loan -to value-ratios are particularly vulnerable to declining property values, leading to higher default rates and increased severity of losses. Moreover, if borrowers sell their homes, they may struggle to repay their loans in full from the proceeds.
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 mortgage brokerage operations contribute additional non-interest income. The Company employs commissioned brokers who originate mortgage loans (including construction loans) for various mortgage companies. These loans are closed and funded by the purchasing mortgage company and are not considered assets of the Company.
A sustained increase in market interest rates could adversely affect our earnings. A significant portion of our loans have fixed interest rates and longer terms than our deposits and borrowings.
A sustained increase in market interest rates could adversely affect our earnings. A significant portion of our loans have fixed interest rates and longer terms than our deposits and borrowings. As is the case with many financial institutions, we attempt to increase our proportion of deposits that are non-interest bearing or pay a relatively low rate of interest.
If our enterprise risk management framework is not effective at mitigating risk and loss to us, we could suffer unexpected losses and our results of operations could be materially adversely affected. Our enterprise risk management framework seeks to achieve an appropriate balance between risk and return, which is critical to optimizing shareholder value.
Any of these results could have a materially adverse effect on our business, financial condition, results of operations and growth prospects. If our enterprise risk management framework is not effective at mitigating risk and loss to us, we could suffer unexpected losses and our results of operations could be materially adversely affected.
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.
This type of lending activity, while potentially more profitable than one-to-four family lending, is generally more sensitive to regional and local economic conditions, making loss levels more difficult to predict.
Other collateral securing loans may depreciate over time, may be difficult to appraise, may be illiquid and may fluctuate in value based on the specific type of business and equipment.
Additionally, the value of other collateral, such as equipment, may depreciate over time, and could be challenging to appraise or liquidate, varying based on the nature of the business.
To the extent our asset management clients and their assets become adversely affected by weak economic and stock market conditions, they may choose to withdraw the amount of assets managed by us and the value of their assets may decline. Our asset management revenues are based on the value of the assets we manage.
A general decline in economic conditions may adversely affect the fees generated by our asset management company. Should our asset management clients and their assets be adversely impacted by unfavorable economic and stock market conditions, they may choose to withdraw their managed assets, or the value of these assets managed by us may decline.
New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure. Competition with other financial institutions could adversely affect our profitability. Although we consider ourselves competitive in our market areas, we face intense competition in both making loans and attracting deposits.
Competition with other financial institutions could adversely affect our profitability. 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.
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.
At March 31, 2024, commercial business loans totaled $229.4 million, or 22.4% of total loans. These loans are primarily extended based on the borrower’s cash flow, with collateral provided by the borrower, serving as a secondary consideration. However, the predictability of the borrower’s cash flow can vary, and the value of collateral securing these loans may fluctuate.
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.
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.
Any of these factors, among others, could cause other-than-temporary impairments and realized and/or unrealized losses in future periods and declines in other comprehensive income, which could have a material effect on our business, financial condition and results of operations.
Any of these factors, among others, could cause the fair value of these securities to be lower than the amortized cost basis resulting in a credit loss, which could have a material effect on our business, financial condition and results of operations.
Further, our cardholders use their debit and credit cards to make purchases from third parties or through third-party processing services. As such, we are subject to risk from data breaches of such third-party’s information systems or their payment processors. Such a data security breach could compromise our account information.
Additionally, as our cardholders use debit and credit cards for transactions with third parties or through third-party processing services, we face additional risks from data breaches in their system or payment processors. Such breaches could expose our account information, leading to liabilities for fraudulent transactions, fines, and higher transaction fees.
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.
Interest rates do not necessarily move in the same direction or by the same magnitude as the prices of goods and services. 30 Table of Contents ​ 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.
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.
Commercial and multi-family real estate loans typically involve higher principal amounts than other types of loans, and some commercial borrowers maintain multiple loans with us. Consequently, an adverse development in any single loan or credit relationship can significantly heighten our exposure to potential losses, far more than the impact of a similar development in a one-to-four family residential mortgage loan.
If our judgment was incorrect, or if events or circumstances change, and an impairment of goodwill was deemed to exist, we would be required to write down our goodwill resulting in a charge to earnings, which would adversely affect our results of operations, perhaps materially; however, it would have no impact on our liquidity, operations or regulatory capital.
If our judgement was incorrect, or if events or circumstances change, and an impairment of goodwill was deemed to exist, we would be required to record a non-cash charge to earnings in our financial statements during the period in which such impairment is determined to exist.
Replacing these third-party vendors could also entail significant delay and expense. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.
Replacing these third-party vendors could also entail significant delay and expense.
As a result of these characteristics, if we foreclose on a commercial or multi-family real estate loan, our holding period for the collateral typically is longer than for one-to-four family residential mortgage loans because there are fewer potential purchasers of the collateral.
In the event of a foreclosure on a commercial or multi-family real estate loan, our holding period for the collateral tends to be more extended compared to one-to-four family residential loans. This elongated holding period results from a limited pool of potential purchasers for the collateral.

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Item 2. Properties

Properties — owned and leased real estate

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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.
Biggest changeAt March 31, 2024, the Bank operated ten offices located in Clark County, Washington (three 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, 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. ​
In addition, at March 31, 2024, 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. ​ 45 Table of Contents ​ PART II
Biggest changeThe Company is a party to litigation arising in the ordinary course of business. In the opinion of management, these actions will not have a material adverse effect on the financial condition, 43 Table of Contents results of operations, or liquidity of the Company.
Added
For additional information on the Company’s litigation, see Note 16, Commitments and Contingencies – Litigation, of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K ​ Item 4. Mine Safety Disclosures Not applicable. ​ 44 Table of Contents ​ PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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. ​
Biggest changePurchases of Equity Securities by the Issuer and Affiliated Purchases The following table sets forth the Company’s repurchases of its outstanding common stock for the quarter ended March 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 (1) January 1, 2024 - January 31, 2024 ​ — ​ $ — ​ $ — ​ $ — February 1, 2024 - February 29, 2024 ​ — ​ ​ — ​ ​ — ​ ​ — March 1, 2024 - March 31, 2024 ​ — ​ ​ — ​ ​ — ​ ​ — Total — ​ $ — $ — $ — (1) The Company did not have a publicly announced stock repurchase program in place during the three months ended March 31, 2024.
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.
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, 2024, there were 547 stockholders of record and an estimated 2,823 holders in nominee or “street name” through various brokerage firms.
Removed
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”).
Added
Dividends Riverview has historically paid cash dividends to its common shareholders.
Removed
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.
Added
Payments of future cash dividends, if any, will be at the discretion of our Board of Directors after taking into account various factors, including our business, operating results and financial condition, capital requirements, current and anticipated cash needs, plans for expansion, any legal or contractual limitation on our ability to pay dividends and other relevant factors including required payments on our trust preferred securities.
Removed
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.
Added
During fiscal 2024, our Board of Directors declared regular quarterly dividends of $0.06 per share. No assurances can be given that any dividends will be paid or that, if paid, will not be reduced or eliminated in future periods.
Removed
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.
Added
Dividends on common stock from Riverview depend substantially upon receipt of dividends from the Bank, which is Riverview’s predominant source of income. Management’s projections show an expectation that cash dividends will continue for the foreseeable future.
Added
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. ​ Item 6. [Reserved] ​ 45 Table of Contents ​

Item 7. Management's Discussion & Analysis

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

101 edited+29 added−31 removed59 unchanged
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.
Biggest changeLoan fees, net, of $1.3 million, $2.4 million and $5.5 million were included in interest income for the years ended March 31, 2024, 2023 and 2022, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended March 31, ​ ​ 2024 ​ 2023 ​ 2022 ​ ​ ​ ​ 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 ​ $ 758,809 ​ $ 34,523 ​ 4.55 % $ 760,821 ​ $ 34,694 ​ 4.56 % $ 696,700 ​ $ 33,280 ​ 4.78 % Non-mortgage loans ​ 252,611 ​ 11,508 ​ 4.56 ​ 246,224 ​ 10,050 ​ 4.08 ​ 238,042 ​ 10,799 ​ 4.54 ​ Total net loans (1) ​ 1,011,420 ​ 46,031 ​ 4.55 ​ 1,007,045 ​ 44,744 ​ 4.44 ​ 934,742 ​ 44,079 ​ 4.72 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment securities (2) ​ 461,055 ​ 9,315 ​ 2.02 ​ 472,396 ​ 9,129 ​ 1.93 ​ 345,869 ​ 5,314 ​ 1.54 ​ Interest-bearing deposits in other banks ​ 10,956 ​ 566 ​ 5.16 ​ 100,694 ​ 1,773 ​ 1.76 ​ 291,897 ​ 439 ​ 0.15 ​ Other earning assets ​ 8,571 ​ 726 ​ 8.47 ​ 3,696 ​ 103 ​ 2.79 ​ 2,560 ​ 69 ​ 2.70 ​ Total interest-earning assets ​ 1,492,002 ​ 56,638 ​ 3.80 ​ 1,583,831 ​ 55,749 ​ 3.52 ​ 1,575,068 ​ 49,901 ​ 3.17 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Office properties and equipment, net ​ 23,337 ​ ​ ​ ​ ​ ​ 19,621 ​ ​ ​ ​ ​ ​ 18,933 ​ ​ ​ ​ ​ ​ Other non-interest-earning assets ​ 60,044 ​ ​ ​ ​ ​ ​ 63,511 ​ ​ ​ ​ ​ ​ 77,135 ​ ​ ​ ​ ​ ​ Total assets ​ $ 1,575,383 ​ ​ ​ ​ ​ ​ $ 1,666,963 ​ ​ ​ ​ ​ ​ $ 1,671,136 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ Savings accounts ​ $ 217,538 ​ $ 132 0.06 % $ 308,840 ​ $ 219 0.07 % $ 318,885 ​ $ 247 0.08 % Interest checking accounts ​ 243,904 ​ 785 0.32 ​ 286,627 ​ 89 0.03 ​ 279,053 ​ 87 0.03 ​ Money market accounts ​ 233,749 ​ 2,860 1.22 ​ 266,795 ​ 415 0.16 ​ 272,161 ​ 150 0.06 ​ Certificates of deposit ​ 157,126 ​ 4,508 2.87 ​ 103,484 ​ 779 0.75 ​ 117,391 ​ 940 0.80 ​ Total interest-bearing deposits ​ 852,317 ​ 8,285 0.97 ​ 965,746 ​ 1,502 0.16 ​ 987,490 ​ 1,424 0.14 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Junior subordinated debentures ​ 26,959 ​ 2,109 7.82 ​ 26,873 ​ 1,368 5.09 ​ 26,789 ​ 611 2.28 ​ FHLB advances ​ ​ 146,555 ​ ​ 7,917 ​ 5.40 ​ ​ 21,046 ​ ​ 1,027 ​ 4.88 ​ ​ 3 ​ ​ — ​ 0.31 ​ Other interest-bearing liabilities ​ 2,211 ​ 158 7.15 ​ 2,271 ​ 163 7.18 ​ 2,310 ​ 165 7.14 ​ Total interest-bearing liabilities ​ 1,028,042 ​ 18,469 1.80 ​ 1,015,936 ​ 4,060 0.40 ​ 1,016,592 ​ 2,200 0.22 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ Non-interest-bearing deposits ​ 376,694 ​ ​ ​ ​ ​ ​ 480,029 ​ ​ ​ ​ ​ ​ 476,203 ​ ​ ​ ​ ​ ​ Other liabilities ​ 14,510 ​ ​ ​ ​ ​ ​ 16,757 ​ ​ ​ ​ ​ ​ 18,186 ​ ​ ​ ​ ​ ​ Total liabilities ​ 1,419,246 ​ ​ ​ ​ ​ ​ 1,512,722 ​ ​ ​ ​ ​ ​ 1,510,981 ​ ​ ​ ​ ​ ​ Shareholders’ equity ​ 156,137 ​ ​ ​ ​ ​ ​ 154,241 ​ ​ ​ ​ ​ ​ 160,155 ​ ​ ​ ​ ​ ​ Total liabilities and shareholders’ equity ​ $ 1,575,383 ​ ​ ​ ​ ​ ​ $ 1,666,963 ​ ​ ​ ​ ​ ​ $ 1,671,136 ​ ​ ​ ​ ​ ​ Net interest income ​ ​ ​ ​ $ 38,169 ​ ​ ​ ​ ​ ​ $ 51,689 ​ ​ ​ ​ ​ ​ $ 47,701 ​ ​ ​ Interest rate spread ​ ​ ​ ​ 2.00 % ​ ​ ​ 3.12 % ​ ​ ​ 2.95 % Net interest margin ​ ​ ​ ​ 2.56 % ​ ​ ​ 3.26 % ​ ​ ​ 3.03 % Ratio of average interest-earning assets to average interest-bearing liabilities ​ ​ ​ ​ 145.13 % ​ ​ ​ 155.90 % ​ ​ ​ 154.94 % Tax-Equivalent Adjustment (3) ​ ​ ​ ​ $ 83 ​ ​ ​ ​ ​ ​ $ 83 ​ ​ ​ ​ ​ ​ $ 76 ​ ​ ​ ​ (1) Includes non-accrual loans.
The Company adjusts its investments in liquid assets based upon management’s assessment of (i) expected loan demand, (ii) projected loan sales, (iii) expected deposit flows, (iv) yields available on interest-bearing deposits and (v) its asset/liability management program objectives. Excess liquidity is invested generally in interest-bearing overnight deposits and other short-term government and agency obligations.
The Company adjusts its investments in liquid assets based upon management’s assessment of (i) expected loan demand, (ii) projected loan sales, (iii) expected deposit flows, (iv) yields available on interest-bearing deposits and (v) asset/liability management program objectives. Excess liquidity is invested generally in interest-bearing overnight deposits and other short-term government and agency obligations.
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 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.
For additional information on our Level 1, 2 and 3 fair value measurements see Note 15 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K. ​ Goodwill Valuation ​ Goodwill is initially recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired.
For additional information on our Level 1, 2 and 3 fair value measurements see Note 14 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K. ​ Goodwill Valuation ​ Goodwill is initially recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired.
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.
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, 2023. The goodwill impairment test involves a two-step process.
Financial Statements and Supplementary Data." and the following: Operating Strategy and Selected Financial Information Fiscal year 2024 marks the 100th anniversary for Riverview Bank, which opened for business in 1923. Our primary business strategy is to provide comprehensive banking and related financial services within our primary market area.
Financial Statements and Supplementary Data." and the following: Operating Strategy and Selected Financial Information Fiscal year 2024 marked the 100th anniversary for Riverview Bank, which opened for business in 1923. Our primary business strategy is to provide comprehensive banking and related financial services within our primary market area.
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
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 ​
The Company continues to experience growth in customer use of its online banking services, where the Bank provides a full array of traditional cash management products as well as online banking products including mobile banking, mobile deposit, bill pay, e-statements, and text banking.
The Company continues to experience growth in customer use of its online banking services, where the Bank provides a full array of traditional cash management products as well as online banking products including mobile banking, mobile deposit, bill pay, e-statements, and new deposit products.
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.
Assuming continued payment during fiscal year 2025 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, 2024. At March 31, 2024, Riverview had $9.5 million in cash to meet its liquidity needs.
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.
Selected Financial Data: The following financial condition data as of March 31, 2024 and 2023 and operating data and key financial ratios for the fiscal years ended March 31, 2024, 2023, and 2022 have been derived from the Company’s audited consolidated financial statements.
The strategy for liabilities has been to shorten the maturities for both deposits and borrowings. 58 Table of Contents The longer-term objective is to increase the proportion of non-interest-bearing demand deposits, low interest- bearing demand deposits, money market accounts, and savings deposits relative to certificates of deposit to reduce our overall cost of funds.
The strategy for liabilities has been to shorten the maturities for both deposits and borrowings. The longer-term objective is to increase the proportion of non-interest-bearing demand deposits, low interest- bearing demand deposits, money market accounts, and savings deposits relative to certificates of deposit to reduce our overall cost of funds.
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.
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 2024.
(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.
(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, 2024 compared to the fiscal year ended March 31, 2023, and the fiscal year ended March 31, 2023 compared to the fiscal year ended March 31, 2022.
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.
As part of its interest rate risk management strategy, the Company promotes transaction accounts and certificates of deposit with terms up to ten years. 57 Table of Contents The Company has adopted a strategy that is designed to maintain or improve the interest rate sensitivity of assets relative to its liabilities.
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.
Bank holding companies and federally-insured state-chartered banks are required to maintain minimum levels of regulatory capital. At March 31, 2024, Riverview 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.
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 Credit Losses. ​ The ACL 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 ACL.
The information below is qualified in its entirety by the detailed information included elsewhere herein and should be read along with this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8.
The information below is qualified in its entirety by the detailed information included elsewhere 49 Table of Contents herein and should be read along with this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8.
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.
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 ACL, the valuation of investment securities and goodwill valuations.
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.
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.
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.
In addition, by emphasizing total relationship banking, the Company intends 48 Table of Contents 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.
Based on the analysis of the allowance for loan losses, the amount of the allowance for loan losses is increased by the provision for loan losses and decreased by a recapture of loan losses and are charged against current period earnings. ​ The allowance for loan losses is maintained at a level sufficient to provide for probable losses based on evaluating known and inherent risks in the loan portfolio and upon our continuing analysis of the factors underlying the quality of the loan portfolio.
Based on the analysis of the ACL, the amount of the ACL is increased by the provision for credit losses and decreased by a recapture of credit losses and are charged against current period earnings. ​ The ACL is maintained at a level sufficient to provide for expected credit losses based on evaluating known and inherent risks in the loan portfolio and upon our continuing analysis of the factors underlying the quality of the loan portfolio.
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 income approach uses a reporting unit’s projection of estimated operating results and cash 47 Table of Contents flows that are discounted using a rate that reflects current market conditions.
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.
The primary elements of this strategy involve: (i) originating adjustable rate loans; (ii) 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; (iii) matching asset and liability maturities; and (iv) investing in short-term securities.
The provision for loan losses reflects the amount required to maintain the allowance for loan losses at an appropriate level based upon management’s evaluation of the adequacy of general and specific loss reserves. Determining the amount of the allowance for loan losses involves a high degree of judgment.
The provision for credit losses reflects the amount required to maintain the ACL at an appropriate level based upon management’s evaluation of the adequacy of general and specific loss reserves. Determining the amount of the ACL involves a high degree of judgment.
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.
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 15.32% utilized for our cash flow estimates and a terminal value estimated at 1.8 times the ending book value of the reporting unit.
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.
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, 2024, the Company’s purchased SBA loan portfolio was $51.0 million compared to $55.5 million at March 31, 2023. ​ Goodwill was $27.1 million at both March 31, 2024, and 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 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.
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 recently opened three new branches located in Clark County, Washington, to complement its existing branch network. Maintaining Strong Asset Quality .
Assets under management by the Trust Company totaled $890.6 million and $1.3 billion at March 31, 2023 and March 31, 2022, respectively. The Company also offers a third-party identity theft product to its customers. The identity theft product assists our customers in monitoring their credit and includes an identity theft restoration service. Attracting Core Deposits and Other Deposit Products .
Assets under management by the Trust Company totaled $961.8 million and $890.6 million at March 31, 2024 and March 31, 2023, respectively. The Company also offers a third-party identity theft product to its customers. The identity theft product assists our customers in monitoring their credit and includes an identity theft restoration service. Attracting Core Deposits and Other Deposit Products .
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.
At March 31, 2024, the combined investment portfolio carried at $372.7 million had an average life of 6 years. Adjustable rate mortgage-backed securities totaled $2.8 million at March 31, 2024 compared to $3.7 million at March 31, 2023. See Item 1. “Business – Investment Activities” for additional information. Liquidity and Capital Resources Liquidity is essential to our business.
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.
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, 2024 totaled $179.2 million.
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.
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 2025 we expect cash expenditures of approximately $838,000 for capital investment in premises and equipment.
After selecting comparable institutions, the Company derived the fair value of the reporting unit by completing a comparative analysis of the relationship between their financial metrics listed above and their market values utilizing a market multiple of 1.0 times book value, a market multiple of 1.1 times tangible book value and an earnings multiple of 10 times.
After selecting comparable institutions, the Company derived the fair value of the reporting unit by completing a comparative analysis of the relationship between their financial metrics listed above and their market values utilizing a market multiple of 0.87 times book value, a market multiple of 0.93 times tangible book value and an earnings multiple of 9.3 times.
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.
Historically, the Bank has been able to retain a significant amount of its deposits as they mature. Partially offsetting these cash outflows are scheduled loan maturities of less than one year totaling $32.7 million at March 31, 2024.
Impairment was measured based on a number of factors, including recent independent appraisals which are further reduced for estimated selling costs or by estimating the present value of expected future cash flows, discounted at the loan’s effective interest rate.
A reserve for such loans is determined based on a number of factors, including recent independent appraisals which are further reduced for estimated selling costs or by estimating the present value of expected future cash flows, discounted at the loan’s effective interest rate.
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%).
Assumptions used by the Company in its discounted cash flow model (income approach) included an annual revenue growth rate that approximated 9.4%, a net interest margin that approximated 3.2% and a return on assets that ranged from 0.56% to 1.23% (average of 0.89%).
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.
Additionally, the Company will purchase commercial business loans to supplement loan originations and diversify the commercial loan portfolio. Purchased loans are originated by a third-party located outside of the Company’s primary market area and totaled $27.2 million and $26.2 million at March 31, 2024 and 2023, respectively.
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.
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 $1.01 billion at March 31, 2024, compared to $993.5 million at March 31, 2023, an increase of $15.1 million.
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.
Adjustable interest rate loans totaled $435.7 million or 42.55% of total loans at March 31, 2024, as compared to $403.6 million or 40.00% of total loans at March 31, 2023. 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.
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.
The increase was primarily the result of a 140 basis point increase in the weighted average interest rate on interest-bearing liabilities and a $125.5 million increase in the average balance of FHLB advances for the fiscal year ended March 31, 2024 compared to the prior fiscal year.
Core branch deposits decreased $250.1 million at March 31, 2023 compared to March 31, 2022 due to deposit pricing pressures in our markets, resulting in the Company’s use of higher costing FHLB advances during fiscal 2023. Core branch deposits accounted for 97.5% of total deposits at March 31, 2023 compared to 96.8% at March 31, 2022.
Core branch deposits decreased $26.9 million at March 31, 2024 compared to March 31, 2023 due to deposit pricing pressures in our markets, resulting in the Company’s use of higher costing FHLB advances during fiscal 2024. Core branch deposits accounted for 98.0% of total deposits at March 31, 2024 compared to 97.5% at March 31, 2023.
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.
The Bank’s CDARS and ICS balances were $39.6 million, or 3.2% of total deposits, and $22.8 million, or 1.8% of total deposits, at March 31, 2024 and 2023, respectively. The combination of all the Bank’s funding sources gives the Bank available liquidity of $857.4 million, or 56.4% of total assets at March 31, 2024.
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, 2024 and 2023, 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.
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.
See Note 4 of the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding the allowance for credit losses. Non-Interest Income. Non-interest income decreased $2.0 million or 16.4% to $10.2 million for the fiscal year ended March 31, 2024 from $12.2 million for fiscal year 2023.
Additionally, occupancy and depreciation expense for the fiscal year ended March 31, 2023 increased mainly due to an increase in rent expense, depreciation expense and repair and maintenance expense as the Company continues to update and modernize certain branch locations.
Additionally, occupancy and depreciation expense for the fiscal year ended March 31, 2024 increased $701,000 mainly due to increases in depreciation and repair and maintenance expenses as the Company continues to update and modernize certain branch locations.
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.
Interest expense for the fiscal year ended March 31, 2024 totaled $18.5 million, a $14.4 million or 354.9% increase from $4.1 million for the fiscal year ended March 31, 2023.
Commercial lending, including commercial real estate loans, typically involves more credit risk than residential lending, justifying higher interest margins and fees on loans which can increase the loan portfolio’s profitability.
At March 31, 2024, commercial and construction loans represented 90.4% of total loans. Commercial lending, including commercial real estate loans, typically involves more credit risk than residential lending, justifying higher interest margins and fees on loans which can increase the loan portfolio’s profitability.
The decrease in the provision for income taxes was due to lower pre-tax income for the fiscal year ended March 31, 2023 compared to the same period in the prior year. The effective tax rate was 23.7% for the fiscal year ended March 31, 2023 compared to 22.8% for the fiscal year ended March 31, 2022.
The effective tax rate was 17.4% for the fiscal year ended March 31, 2024 compared to 23.7% for the fiscal year ended March 31, 2023. The decrease in the provision for income taxes and effective tax rate is attributable to lower pre-tax income for the fiscal year ended March 31, 2024 compared to the same period in the prior year.
“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.
“Financial Statements and Supplementary Data” included in this Form 10-K. ​ ​ ​ ​ ​ ​ ​ ​ At March 31, ​ ​ 2024 2023 ​ (In thousands) FINANCIAL CONDITION DATA: ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 1,521,529 ​ $ 1,589,712 Loans receivable, net ​ 1,008,649 ​ 993,547 Investment securities available for sale ​ 143,196 ​ 211,499 Investment securities held to maturity ​ 229,510 ​ 243,843 Cash and cash equivalents ​ 23,642 ​ 22,044 Deposits ​ 1,231,679 ​ 1,265,217 FHLB advances ​ ​ 88,304 ​ ​ 123,754 Shareholders’ equity ​ 155,588 ​ 155,239 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended March 31, ​ 2024 2023 2022 ​ (Dollars in thousands, except per share data) OPERATING DATA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest and dividend income ​ $ 56,555 ​ $ 55,666 ​ $ 49,825 Interest expense ​ 18,469 ​ 4,060 ​ 2,200 Net interest income ​ 38,086 ​ 51,606 ​ 47,625 Provision for (recapture of) credit/loan losses ​ — ​ 750 ​ (4,625) Net interest income after provision for (recapture of) credit/loan losses ​ 38,086 ​ 50,856 ​ 52,250 Other non-interest income ​ 10,242 ​ 12,194 ​ 12,744 Non-interest expense ​ 43,727 ​ 39,371 ​ 36,718 Income before income taxes ​ 4,601 ​ 23,679 ​ 28,276 Provision for income taxes ​ 802 ​ 5,610 ​ 6,456 Net income ​ $ 3,799 ​ $ 18,069 ​ $ 21,820 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share: ​ ​ ​ Basic ​ $ 0.18 ​ $ 0.84 ​ $ 0.98 Diluted ​ 0.18 ​ 0.83 ​ 0.98 Dividends per share ​ 0.240 ​ 0.240 ​ 0.215 ​ 50 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For the Years Ended March 31, ​ ​ 2024 2023 2022 KEY FINANCIAL RATIOS: ​ Performance Ratios: ​ Return on average assets ​ 0.24 % 1.08 % 1.31 % Return on average equity ​ 2.43 11.71 13.62 Dividend payout ratio (1) ​ 133.33 28.92 21.94 Interest rate spread ​ 2.00 3.12 2.95 Net interest margin ​ 2.56 3.26 3.03 Non-interest expense to average assets ​ 2.78 2.36 2.20 Efficiency ratio (2) ​ 90.48 61.71 60.82 Average equity to average assets ​ 9.91 9.25 9.58 ​ ​ ​ ​ ​ ​ ​ ​ Asset Quality Ratios: ​ ​ ​ ​ Allowance for credit losses to total loans at end of period ​ 1.50 1.52 1.47 Allowance for credit losses to nonperforming loans ​ 8,631.46 826.62 65.72 Net charge-offs (recoveries) to average outstanding loans during the period ​ — — — ​ ​ ​ ​ ​ ​ ​ ​ Ratio of nonperforming assets to total assets ​ 0.01 0.12 1.27 Ratio of nonperforming loans to total loans ​ 0.02 0.18 2.23 ​ ​ ​ ​ ​ ​ ​ ​ Capital Ratios: ​ ​ ​ ​ Total capital to risk-weighted assets ​ 16.32 16.94 16.38 Tier 1 capital to risk-weighted assets ​ 15.06 15.69 15.12 Common equity tier 1 capital to risk-weighted assets ​ 15.06 15.69 15.12 Leverage ratio ​ 10.29 10.47 9.19 ​ (1) Dividends per share divided by diluted earnings per share.
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 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.
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.
Net income decreased $14.3 million or 79.0% to $3.8 million, or $0.18 per diluted share, for the fiscal year ended March 31, 2024, compared to $18.1 million, or $0.83 per diluted share, for the fiscal year ended March 31, 2023.
(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.
(2) Non-interest expense divided by the sum of net interest income and non-interest income. ​ ​ 51 Table of Contents Comparison of Financial Condition at March 31, 2024 and 2023 Cash and cash equivalents, including interest-earning deposits in other banks, totaled $23.6 million at March 31, 2024 compared to $22.0 million at March 31, 2023.
Specifically, the Company would allocate the fair value to all of the assets and liabilities of the reporting unit, including unrecognized intangible assets, in a hypothetical analysis that would calculate the implied fair value of goodwill. If the implied fair value of goodwill is less than the recorded goodwill, the Company would record an impairment charge for the difference.
Specifically, the Company would allocate the fair value to all of the assets and liabilities of the reporting unit, including unrecognized intangible assets, in a hypothetical analysis that would calculate the implied fair value of goodwill.
The weighted average interest rate on the junior subordinated debentures increased 281 basis points to 5.09% for the fiscal year ended March 31, 2023 compared to 2.28% for the prior fiscal year. ​ Provision for Loan Losses.
Similarly, the weighted average interest rate on the junior subordinated debentures increased 273 basis points to 7.82% for the fiscal year ended March 31, 2024 compared to 5.09% for the prior fiscal year. Provision for credit losses.
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.
Certain loans included in the loan portfolio were evaluated individually for a loss reserve at March 31, 2024. Accordingly, loans evaluated individually were classified as Level 3 in the fair value hierarchy as there is no active market for these loans. Loans that are individually evaluated require judgment and estimates, and the eventual outcomes may differ from those estimates.
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.
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.
Even though the Company determined that there was no goodwill impairment, a sustained decline in the value of its stock price as well as values of other financial institutions, declines in revenue for the Company beyond our current forecasts, significant adverse changes in the operating environment for the financial industry or an increase in the value of our assets without an increase in the value of the reporting unit may result in a future impairment charge.
Even though the Company determined that there was no goodwill impairment, a sustained decline in the value of its stock price as well as values of other financial institutions, declines in revenue for the Company beyond our current forecasts, significant adverse changes in the operating environment for the financial industry or an increase in the value of our assets without an increase in the value of the reporting unit may result in a future impairment charge. ​ It is also possible that changes in circumstances existing at the measurement date or at other times in the future, or in the numerous estimates associated with management’s judgments, assumptions and estimates made in assessing the fair value of our goodwill, could result in an impairment charge of a portion or all of our goodwill.
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.
The results of the Company’s step one test indicated that the reporting unit’s fair value was greater than its carrying value and therefore no impairment of goodwill exists. ​ The Company also completed a qualitative assessment of goodwill as of March 31, 2024 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.
Interest expense on borrowings increased $1.8 million for the fiscal year ended March 31, 2023 compared to the prior fiscal year due to an increase in the average balance of FHLB advances. The average balance of FHLB advances increased to $21.0 million for fiscal year ended March 31, 2023 compared to $3,000 for the same period in the prior year.
Interest expense on borrowings increased $7.6 million for the fiscal year ended March 31, 2024 compared to the prior fiscal year due primarily to an increase in the average balance of FHLB advances.
The specific component relates to loans that been evaluated for impairment because all contractual amounts of principal and interest will not be paid as scheduled. Based on this impairment analysis, a specific reserve may be established.
The qualitative factor methodology involves a blend of quantitative analysis and management judgment, reviewed quarterly. The specific component relates to loans that have been individually evaluated because all contractual amounts of principal and interest will not be paid as scheduled. Based on the individual analysis, a specific reserve may be established.
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.
During the fiscal years ended March 31, 2024 and 2023, deposits decreased $33.5 million and $268.7 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.
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.
At March 31, 2024, the Company had total commitments of $160.8 million, which includes commitments to extend credit of $10.0 million, unused lines of credit totaling $93.3 million, undisbursed construction loans totaling $55.9 million, and standby letters of credit totaling $1.6 million.
Among the material estimates required to establish the allowance for loan losses are: overall economic conditions; value of collateral; strength of guarantors; loss exposure at default; the amount and timing of future cash flows on impaired loans; and determination of loss factors to be applied to the various elements of the portfolio.
Among the material estimates required to establish the ACL are: overall economic conditions; value of collateral; strength of guarantors; loss exposure at default; the amount and timing of future cash flows for loans that are individually evaluated; determination of loss factors to be applied to the various elements of the portfolio; and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets.
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 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, ​ ​ 2024 vs 2023 ​ 2023 vs. 2022 ​ Increase (Decrease) Due to ​ ​ ​ Increase (Decrease) Due to ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Increase ​ ​ ​ ​ ​ ​ ​ Total ​ Volume Rate (Decrease) Volume Rate Increase Interest Income: ​ ​ ​ ​ ​ ​ Mortgage loans ​ $ (94) ​ $ (77) ​ $ (171) ​ $ 2,986 ​ $ (1,572) ​ $ 1,414 Non-mortgage loans ​ 264 ​ 1,194 ​ 1,458 ​ 365 ​ (1,114) ​ (749) Investment securities (1) ​ (226) ​ 412 ​ 186 ​ 2,255 ​ 1,560 ​ 3,815 Interest-earning deposits in other banks ​ (2,542) ​ 1,335 ​ (1,207) ​ (464) ​ 1,798 ​ 1,334 Other earning assets ​ 245 ​ 378 ​ 623 ​ 32 ​ 2 ​ 34 Total interest income ​ (2,353) ​ 3,242 ​ 889 ​ 5,174 ​ 674 ​ 5,848 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest Expense: ​ ​ ​ ​ ​ ​ Regular savings accounts ​ (59) ​ (28) ​ (87) ​ (6) ​ (22) ​ (28) Interest checking accounts ​ (15) ​ 711 ​ 696 ​ 2 ​ — ​ 2 Money market accounts ​ (59) ​ 2,504 ​ 2,445 ​ (3) ​ 268 ​ 265 Certificates of deposit ​ 577 ​ 3,152 ​ 3,729 ​ (105) ​ (56) ​ (161) Junior subordinated debentures ​ ​ 4 ​ 737 ​ ​ 741 ​ ​ 2 ​ ​ 755 ​ ​ 757 FHLB advances ​ ​ 6,770 ​ 120 ​ ​ 6,890 ​ ​ 1,027 ​ ​ — ​ ​ 1,027 Other interest-bearing liabilities ​ (4) ​ (1) ​ (5) ​ (3) ​ 1 ​ (2) Total interest expense ​ 7,214 ​ 7,195 ​ 14,409 ​ 914 ​ 946 ​ 1,860 Net interest income ​ $ (9,567) ​ $ (3,953) ​ $ (13,520) ​ $ 4,260 ​ $ (272) ​ $ 3,988 ​ (1) Interest on municipal securities is presented on a fully tax-equivalent basis.
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.
While we believe the estimates and assumptions used in our determination of the adequacy of the ACL 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.
The weighted average interest rate on FHLB advances increased to 4.88% for the fiscal year ended March 31, 2023 compared to 0.31% for the prior fiscal year .
The average balance of FHLB advances increased to $146.6 million for the fiscal year ended March 31, 2024 compared to $21.0 million for the same period in the prior year. The weighted average interest rate on FHLB advances increased to 5.40% for the fiscal year ended March 31, 2024 compared to 4.88% for the prior fiscal year.
The levels of these assets are dependent on the Company’s operating, financing, lending, and investing activities during any given period. The Bank generally maintains sufficient cash and short-term investments to meet short-term liquidity needs; however, its primary liquidity management practice is to manage short-term borrowings, consistent with its asset/liability objectives.
The Bank generally maintains sufficient cash and short-term investments to meet short-term liquidity needs; however, its primary liquidity management practice is to manage short-term borrowings, consistent with its asset/liability objectives.
The Company plans to continue its focus on core deposits and on building customer relationships as opposed to obtaining deposits through the wholesale markets. 53 Table of Contents FHLB advances increased to $123.8 million at March 31, 2023 and were comprised of overnight advances and a short-term borrowing of $73.8 million and $50.0 million, respectively.
The Company plans to continue its focus on core deposits and on building customer relationships as opposed to obtaining deposits through the wholesale markets. ​ FHLB advances decreased $35.5 million to $88.3 million at March 31, 2024 compared to $123.8 million at March 31, 2023, and was comprised of overnight advances.
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.
The Company calculated a fair value of its reporting unit of $150.0 million using the corporate value approach, $180.0 million using the income approach, $181.0 million using the whole bank transaction approach and $171.0 million using the market approach, with a final concluded value of $177.0 million, with ten percent weight given to the corporate value approach and market approach and forty percent weight given to the whole bank transaction and income approach.
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 .
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 .
At March 31, 2023, SBA PPP loans, net of deferred fees which are included in the commercial business loan category were insignificant compared to $3.1 million at March 31, 2022. The Company no longer originates real estate one-to-four family loans and will from time to time purchase these loans consistent with its asset/liability objectives.
These increases were partially offset by decreases in real estate construction, commercial business, and real estate one-to-four family loans of $11.2 million, $3.5 million, and $3.3 million, respectively, since March 31, 2023. ​ The Company no longer originates real estate one-to-four family loans and will from time to time purchase these loans consistent with its asset/liability objectives.
The decrease was mainly attributable to the increase in the accumulated other comprehensive loss related to the change in unrealized holding losses on securities available for sale, net of tax, of $8.4 million, the repurchase of 975,666 shares of common stock totaling $6.7 million, and the payment of cash dividends totaling $5.2 million.
The increase was mainly attributable to the increase in the accumulated other comprehensive income related to the change in unrealized holding losses on securities available for sale, net of tax, of $2.2 million and net income of $3.8 million during fiscal year 2024.
Although we use the best information available, future adjustments to the allowance for loan losses may be necessary due to economic, operating, regulatory and other conditions beyond our control.
The ACL is based upon factors and trends identified by us at the time financial statements are prepared. Although we use the best information available, future adjustments to the ACL may be necessary due to economic, operating, regulatory and other conditions beyond our control.
The decrease in deposits was attributable to reductions in non-interest-bearing accounts of $89.9 million, regular savings accounts of $84.9 million, money market accounts of $78.0 million and interest checking of $33.3 million. These decreases were partially offset by an increase of $17.5 million in certificates of deposit. The Company had no wholesale-brokered deposits at March 31, 2023 and 2022.
The decrease in deposits was attributable to reductions in regular savings accounts of $62.5 million, non-interest checking accounts of $55.9 million and money market accounts of $12.6 million. These decreases were partially offset by increases of $62.1 million in certificates of deposit accounts and $35.3 million in interest checking accounts.
Core branch deposits accounted for 97.5% of total deposits at March 31, 2023 compared to 96.8% at March 31, 2022.
The Company had no wholesale-brokered deposits at March 31, 2024 and 2023. Core branch deposits accounted for 98.0% of total deposits at March 31, 2024 compared to 97.5% at March 31, 2023.
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.
In addition to these primary sources of funds, the Bank has several secondary borrowing sources available to meet potential funding 58 Table of Contents requirements, including FRB borrowings and FHLB advances.
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 weighted average interest rate on interest-bearing deposits increased 81 basis points to 0.97% for the fiscal year ended March 31, 2024 from 0.16% for the prior fiscal year.
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.
At March 31, 2024, the Bank had no advances from the FRB and maintains a credit facility with the FRB with available borrowing capacity of $284.5 million, subject to sufficient collateral. At March 31, 2024, FHLB advances totaled $88.3 million and the Bank had an available borrowing capacity of $299.5 million, subject to sufficient collateral and stock investment.
A significant amount of judgment is involved in determining if an indicator of impairment has occurred.
If the implied fair value of goodwill is less than the recorded goodwill, the Company would record an impairment charge for the difference. ​ A significant amount of judgment is involved in determining if an indicator of impairment has occurred.
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.
For additional information on our goodwill impairment testing, see “Goodwill Valuation” included in this Item 7. ​ Deposits decreased $33.5 million to $1.2 billion at March 31, 2024 compared to $1.3 billion at March 31, 2023 due to increased competition, pricing and an overall decrease in market liquidity.
These decreases were partially offset by net income of $18.1 million. Comparison of Operating Results for the Years Ended March 31, 2023 and 2022 Net Income.
These increases were partially offset by cash dividend payments totaling $5.1 million and the repurchase of 109,162 shares of common stock totaling $577,000. ​ 52 Table of Contents Comparison of Operating Results for the Years Ended March 31, 2024 and 2023 Net Income.

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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. ​ ​ 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.
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, 2024 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 400 basis points ​ (29.7) % (2.6) % Up 300 basis points (22.8) % 1.0 % Up 200 basis points (15.8) % 4.6 % Up 100 basis points (7.5) % 11.6 % Base case — — % Down 100 basis points ​ 4.6 % 17.4 % Down 200 basis points ​ 8.5 % 16.3 % Down 300 basis points ​ 11.8 % 13.8 % Down 400 basis points 15.1 % 11.3 % ​ 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.
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 ​
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 ​
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.
Specifically, in a rising interest rate environment, net interest income will decrease in year one, as indicated in the table above as our interest-bearing liabilities are expected to continue to increase faster than interest-earning assets.
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.
Conversely, in a falling interest rate environment, our net interest income will be positively impacted as our interest-bearing liabilities reprice 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.
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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.

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