RIVERVIEW BANCORP INC - Quarter Report: 2021 September (Form 10-Q)

Valuation

Significant Unobservable

Technique

Inputs

Impaired loans

Appraised value

Adjustment for market conditions

Discounted cash flows

Discount rate

5.375 % - 8.000%

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

	For the quarterly period ended September 30, 2021

OR

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

	For the transition period from to

Commission File Number: 000-22957


RIVERVIEW BANCORP, INC.
(Exact name of registrant as specified in its charter)

Washington		91-1838969
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer I.D. Number)

900 Washington St., Ste. 900, Vancouver, Washington		98660
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:		(360) 693-6650

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.01 per share	RVSB	The NASDAQ Stock Market LLC

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

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

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

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒
Smaller reporting company ☒	Emerging growth company ☐

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, $.01 par value per share, 22,164,707 shares outstanding, as of November 12, 2021.

Table of Contents

Form 10-Q

RIVERVIEW BANCORP, INC. AND SUBSIDIARY

INDEX


		Page
Part I.	Financial Information	4

Item 1:	Financial Statements (Unaudited)	4

	Consolidated Balance Sheets as of September 30, 2021 and March 31, 2021	4

	Consolidated Statements of Income for the Three and Six Months Ended September 30, 2021 and 2020	5

	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended September 30, 2021 and 2020	6

	Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended September 30, 2021 and 2020	7

	Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2021 and 2020	8

	Notes to Consolidated Financial Statements	9

Item 2:	Management's Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3:	Quantitative and Qualitative Disclosures About Market Risk	51

Item 4:	Controls and Procedures	51

Part II.	Other Information	52

Item 1:	Legal Proceedings	52

Item 1A:	Risk Factors	52

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	52

Item 3:	Defaults Upon Senior Securities	52

Item 4:	Mine Safety Disclosures	52

Item 5:	Other Information	52

Item 6:	Exhibits	53

SIGNATURES		54

Certifications
	Exhibit 31.1
	Exhibit 31.2
	Exhibit 32

Table of Contents

Forward-Looking Statements

As used in this Form 10-Q, the terms “we,” “our,” “us,” “Riverview” and “Company” refer to Riverview Bancorp, Inc. and its consolidated subsidiaries, including its wholly-owned subsidiary, Riverview Community Bank, unless the context indicates otherwise.

“Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: When used in this Form 10-Q, the words “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook,” or similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would,” and “could,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions, statements about future economic performance and projections of financial items. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated or implied by our forward-looking statements, including, but not limited to: the effect of the novel coronavirus of 2019 (“COVID-19”) pandemic, including on Riverview’s credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID-19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, and consumer and corporate customers, including economic activity, employment levels and market liquidity; the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in the Company’s allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets; changes in general economic conditions, either nationally or in the Company’s market areas; changes in the levels of general interest rates, and the relative differences between short and long-term interest rates, deposit interest rates, the Company’s net interest margin and funding sources; uncertainty regarding the future of the London Interbank Offered Rate ("LIBOR"), and the potential transition away from LIBOR toward new interest rate benchmarks; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in the Company’s market areas; secondary market conditions for loans and the Company’s ability to originate loans for sale and sell loans in the secondary market; results of examinations of our bank subsidiary, Riverview Community Bank, by the Federal Deposit Insurance Corporation, the Washington State Department of Financial Institutions, Division of Banks (“WDFI”) and of the Company by the Board of Governors of the Federal Reserve System, or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require the Company to increase its allowance for loan losses, write-down assets, reclassify its assets, change Riverview Community Bank’s regulatory capital position or affect the Company’s ability to borrow funds or maintain or increase deposits, which could adversely affect its liquidity and earnings; legislative or regulatory changes that adversely affect the Company’s business including changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules, including as a result of Basel III; the Company’s ability to attract and retain deposits; the Company’s ability to control operating costs and expenses; the use of estimates in determining fair value of certain of the Company’s assets, which estimates may prove to be incorrect and result in significant declines in valuation; difficulties in reducing risks associated with the loans on the Company’s consolidated balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect the Company’s workforce and potential associated charges; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; the Company’s ability to retain key members of its senior management team; costs and effects of litigation, including settlements and judgments; the Company’s ability to implement its business strategies; the Company's ability to successfully integrate any assets, liabilities, customers, systems, and management personnel it may acquire into its operations and the Company's ability to realize related revenue synergies and cost savings within expected time frames; future goodwill impairment due to changes in Riverview’s business, changes in market conditions, including as a result of the COVID-19 pandemic or other factors; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; the Company’s ability to pay dividends on its common stock; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting standards, including the Coronavirus Aid, Relief, and Economic Security Act of 2020 ("CARES Act") and the Consolidated Appropriations Act, 2021 (“CAA 2021”); other economic, competitive, governmental, regulatory, and technological factors affecting the Company’s operations, pricing, products and services, including as a result of the CARES Act, CAA 2021, recent COVID-19 vaccination efforts and economic stimulus efforts, and the other risks described from time to time in our filings with the U.S. Securities and Exchange Commission (“SEC”).

The Company cautions readers not to place undue reliance on any forward-looking statements. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company. The Company does not undertake and specifically disclaims any obligation to revise any forward-looking statements included in this report or the reasons why actual results could differ from those contained in such statements, whether as a result of new information or to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for fiscal 2022 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect the Company’s consolidated financial condition and consolidated results of operations as well as its stock price performance.

Table of Contents

Part I. Financial Information

Item 1. Financial Statements (Unaudited)

RIVERVIEW BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2021 AND MARCH 31, 2021


	September 30,		March 31,
(In thousands, except share and per share data) (Unaudited)	2021		2021
ASSETS
Cash and cash equivalents (including interest-earning accounts of $352,187 and $254,205)	$	368,122	$	265,408
Certificates of deposit held for investment		249		249
Investment securities:
Available for sale, at estimated fair value		278,224		216,304
Held to maturity, at amortized cost (estimated fair value of $70,707 and $38,220)		72,109		39,574
Loans receivable (net of allowance for loan losses of $16,500 and $19,178)		898,032		924,057
Prepaid expenses and other assets		11,681		13,189
Accrued interest receivable		4,772		5,236
Federal Home Loan Bank stock (“FHLB”), at cost		1,722		1,722
Premises and equipment, net		16,307		17,824
Financing lease right-of-use assets ("ROU")		1,393		1,432
Deferred income taxes, net		5,467		5,419
Mortgage servicing rights, net		52		81
Goodwill		27,076		27,076
Core deposit intangible ("CDI"), net		557		619
Bank owned life insurance ("BOLI")		30,589		30,968
TOTAL ASSETS	$	1,716,352	$	1,549,158

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
Deposits	$	1,506,679	$	1,346,060
Accrued expenses and other liabilities		20,165		21,906
Advance payments by borrowers for taxes and insurance		650		521
Junior subordinated debentures		26,791		26,748
Finance lease liability		2,307		2,329
Total liabilities		1,556,592		1,397,564

COMMITMENTS AND CONTINGENCIES (See Note 13)

SHAREHOLDERS' EQUITY:
Serial preferred stock, $.01 par value; 250,000 shares authorized; issued and outstanding: none		—		—
Common stock, $.01 par value; 50,000,000 shares authorized
September 30, 2021 – 22,414,615 shares issued and 22,164,707 outstanding		221		223
March 31, 2021 – 22,351,235 shares issued and outstanding
Additional paid-in capital		62,122		63,650
Retained earnings		97,727		87,881
Accumulated other comprehensive loss		(310)		(160)
Total shareholders' equity		159,760		151,594
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,716,352	$	1,549,158

See accompanying notes to consolidated financial statements.

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RIVERVIEW BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2021 AND 2020


	Three Months Ended				Six Months Ended
	September 30,				September 30,
(In thousands, except share and per share data) (Unaudited)	2021		2020		2021		2020
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans receivable	$	11,626	$	11,346	$	22,402	$	22,874
Interest on investment securities – taxable		1,136		505		2,135		1,160
Interest on investment securities – nontaxable		55		17		105		35
Other interest and dividends		148		81		243		118
Total interest and dividend income		12,965		11,949		24,885		24,187

INTEREST EXPENSE:
Interest on deposits		399		657		841		1,515
Interest on borrowings		190		228		384		480
Total interest expense		589		885		1,225		1,995
Net interest income		12,376		11,064		23,660		22,192
Provision for (recapture of) loan losses		(1,100)		1,800		(2,700)		6,300
Net interest income after provision for (recapture of) loan losses		13,476		9,264		26,360		15,892

NON-INTEREST INCOME:
Fees and service charges		1,814		1,663		3,669		3,061
Asset management fees		928		883		1,904		1,857
Net gains on sales of loans held for sale		—		—		—		28
BOLI		234		242		424		432
BOLI death benefit in excess of cash surrender value		21		—		500		—
Other, net		77		31		165		64
Total non-interest income, net		3,074		2,819		6,662		5,442

NON-INTEREST EXPENSE:
Salaries and employee benefits		5,635		5,379		11,389		10,571
Occupancy and depreciation		1,309		1,457		2,718		2,907
Data processing		724		697		1,489		1,358
Amortization of CDI		31		35		62		70
Advertising and marketing		180		110		332		239
FDIC insurance premium		113		84		208		132
State and local taxes		221		204		419		408
Telecommunications		55		85		101		171
Professional fees		343		321		660		641
(Gain)/loss on sale of premises and equipment, net		(1,001)		4		(993)		5
Other		577		460		939		1,019
Total non-interest expense		8,187		8,836		17,324		17,521

INCOME BEFORE INCOME TAXES		8,363		3,247		15,698		3,813
PROVISION FOR INCOME TAXES		1,933		704		3,513		790
NET INCOME	$	6,430	$	2,543	$	12,185	$	3,023

Earnings per common share:
Basic	$	0.29	$	0.11	$	0.55	$	0.14
Diluted		0.29		0.11		0.55		0.14
Weighted average number of common shares outstanding:
Basic		22,179,829		22,261,709		22,261,856		22,259,201
Diluted		22,191,487		22,276,312		22,274,668		22,276,308

See accompanying notes to consolidated financial statements.

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RIVERVIEW BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2021 AND 2020


	Three Months Ended				Six Months Ended
	September 30,				September 30,
(In thousands) (Unaudited)	2021		2020		2021		2020

Net income	$	6,430	$	2,543	$	12,185	$	3,023

Other comprehensive income (loss):
Net unrealized holding gains (losses) from available for sale investment securities arising during the period, net of tax of $420, $8, $48 and ($201), respectively		(1,329)		(24)		(150)		639

Total comprehensive income, net	$	5,101	$	2,519	$	12,035	$	3,662

See accompanying notes to consolidated financial statements.

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RIVERVIEW BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2021 AND 2020


								Accumulated
				Additional				Other
				Paid-In		Retained		Comprehensive
(In thousands, except share and per share data) (Unaudited)	Common Stock			Capital		Earnings		Income (Loss)		Total
	Shares	Amount

For the three months ended September 30, 2020

Balance July 1, 2020	22,245,472	$	222	$	63,254	$	81,240	$	2,762	$	147,478

Net income	—		—		—		2,543		—		2,543
Cash dividends on common stock ($0.05 per share)	—		—		—		(1,117)		—		(1,117)
Restricted stock grants	90,763		—		—		—		—		—
Stock-based compensation expense	—		—		166		—		—		166
Other comprehensive loss, net	—		—		—		—		(24)		(24)
Balance September 30, 2020	22,336,235	$	222	$	63,420	$	82,666	$	2,738	$	149,046

For the six months ended September 30, 2020

Balance April 1, 2020	22,544,285	$	225	$	64,649	$	81,870	$	2,099	$	148,843

Net income	—		—		—		3,023		—		3,023
Cash dividends on common stock ($0.10 per share)	—		—		—		(2,227)		—		(2,227)
Exercise of stock options	5,000		—		9		—		—		9
Stock repurchased	(295,900)		(3)		(1,444)		—		—		(1,447)
Restricted stock grants	90,763		—		—		—		—		—
Restricted stock cancelled	(7,913)		—		—		—		—		—
Stock-based compensation expense	—		—		206		—		—		206
Other comprehensive income, net	—		—		—		—		639		639
Balance September 30, 2020	22,336,235	$	222	$	63,420	$	82,666	$	2,738	$	149,046


For the three months ended September 30, 2021

Balance July 1, 2021	22,277,868	$	222	$	63,213	$	92,522	$	1,019	$	156,976

Net income	—		—		—		6,430		—		6,430
Cash dividends on common stock ($0.055 per share)	—		—		—		(1,224)		—		(1,224)
Exercise of stock options	6,000		—		17		(1)		—		16
Stock repurchased	(176,541)		(1)		(1,230)		—		—		(1,231)
Restricted stock grants	57,380		—		—		—		—		—
Stock-based compensation expense	—		—		122		—		—		122
Other comprehensive loss, net	—		—		—		—		(1,329)		(1,329)
Balance September 30, 2021	22,164,707	$	221	$	62,122	$	97,727	$	(310)	$	159,760


For the six months ended September 30, 2021

Balance April 1, 2021	22,351,235	$	223	$	63,650	$	87,881	$	(160)	$	151,594

Net income	—		—		—		12,185		—		12,185
Cash dividends on common stock ($0.105 per share)	—		—		—		(2,338)		—		(2,338)
Exercise of stock options	6,000		—		17		(1)		—		16
Stock repurchased	(249,908)		(2)		(1,722)		—		—		(1,724)
Restricted stock grants	57,380		—		—		—		—		—
Stock-based compensation expense	—		—		177		—		—		177
Other comprehensive loss, net	—		—		—		—		(150)		(150)
Balance September 30, 2021	22,164,707	$	221	$	62,122	$	97,727	$	(310)	$	159,760

See accompanying notes to consolidated financial statements.

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RIVERVIEW BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2021 AND 2020


(In thousands) (Unaudited)	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	12,185	$	3,023
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,784		1,513
Purchased loans amortization (accretion), net		(4)		122
Provision for (recapture of) loan losses		(2,700)		6,300
Stock-based compensation expense		177		206
Increase (decrease) in deferred loan origination fees, net of amortization		(1,252)		2,351
Origination of loans held for sale		—		(913)
Proceeds from sales of loans held for sale		—		1,214
Net gains on loans held for sale and sales of premises and equipment		(993)		(23)
Income from BOLI		(424)		(432)
BOLI death benefit in excess of cash surrender value		(500)		—
Changes in certain other assets and liabilities:
Prepaid expenses and other assets		1,512		(2,752)
Accrued interest receivable		464		(1,637)
Accrued expenses and other liabilities		(2,005)		(1,429)
Net cash provided by operating activities		8,244		7,543

CASH FLOWS FROM INVESTING ACTIVITIES:
Loan repayments (originations), net		60,358		(62,370)
Purchases of loans receivable		(30,377)		(3,826)
Principal repayments on investment securities available for sale		23,650		19,105
Purchases of investment securities available for sale		(86,621)		—
Proceeds from calls of investment securities available for sale		—		3,000
Principal repayments on investment securities held to maturity		784		4
Purchases of investment securities held to maturity		(33,440)		—
Purchases of premises and equipment and capitalized software		(1,397)		(2,338)
Purchases of FHLB stock, net		—		(1,200)
Proceeds from death benefit on BOLI		1,305		—
Proceeds from sales of REO and premises and equipment		3,427		—
Net cash used in investing activities		(62,311)		(47,625)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits		160,619		209,524
Dividends paid		(2,237)		(2,245)
Proceeds from borrowings		2,000		30,000
Repayment of borrowings		(2,000)		—
Net increase in advance payments by borrowers for taxes and insurance		129		308
Principal payments on finance lease liability		(22)		(19)
Proceeds from exercise of stock options		16		9
Repurchase of common stock		(1,724)		(1,447)
Net cash provided by financing activities		156,781		236,130

NET INCREASE IN CASH AND CASH EQUIVALENTS		102,714		196,048
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		265,408		41,968
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	368,122	$	238,016

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	1,108	$	1,901
Income taxes		2,389		2,292

NONCASH INVESTING AND FINANCING ACTIVITIES:
Dividends declared and accrued in other liabilities	$	1,219	$	1,117
Net unrealized holding gains (losses) from available for sale investment securities		(198)		840
Income tax effect related to other comprehensive income (loss)		48		(201)
ROU lease assets obtained in exchange for operating lease liabilities		—		5,833

See accompanying notes to consolidated financial statements.

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RIVERVIEW BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Quarterly Reports on Form 10-Q and, therefore, do not include all disclosures necessary for a complete presentation of financial condition, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (“generally accepted accounting principles” or “GAAP”). However, all adjustments that are, in the opinion of management, necessary for a fair presentation of the interim unaudited consolidated financial statements have been included. All such adjustments are of a normal recurring nature.

The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Riverview Bancorp, Inc. Annual Report on Form 10-K for the year ended March 31, 2021 (“2021 Form 10-K”). The unaudited consolidated results of operations for the six months ended September 30, 2021 are not necessarily indicative of the results which may be expected for the entire fiscal year ending March 31, 2022.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

In September 2021, Riverview Community Bank (the “Bank”) completed the sale of its former Montavilla branch building and land and recognized a $1.0 million gain on sale which is included in other non-interest expense in the accompanying unaudited statements of income for the three and six months ended September 30, 2021.

Certain prior period amounts have been reclassified to conform to the current period presentation; such reclassifications had no effect on previously reported net income or total shareholders’ equity.

2. PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of Riverview Bancorp, Inc.; its wholly-owned subsidiary, the Bank; and the Bank’s wholly-owned subsidiary, Riverview Services, Inc., and the Bank’s majority-owned subsidiary, Riverview Trust Company (the “Trust Company”) (collectively referred to as the “Company”). All intercompany transactions and balances have been eliminated in consolidation. For the period from April 1, 2017 through December 2019, the Trust Company was a wholly-owned subsidiary of the Bank. In December 2019, the Trust Company issued 1,500 shares of Trust Company stock in conjunction with the exercise of 1,500 Trust Company stock options by the Trust Company’s President and Chief Executive Officer. In October 2020, the Trust Company issued an additional 500 shares of Trust Company stock with the exercise of options for 500 shares of Trust Company common stock by the Trust Company's President and Chief Executive Officer. In May 2021, the Trust Company issued an additional 500 shares of Trust Company stock with the exercise of options for 500 shares of Trust Company common stock by the Trust Company’s President and Chief Executive Officer. As a result of these transactions, the Bank's ownership in the Trust Company decreased from 100% to 97.3%, resulting in a 2.7% noncontrolling interest held by the Trust Company’s President and Chief Executive Officer. The noncontrolling interest was $199,000 and $154,000 as of September 30, 2021 and March 31, 2021, respectively. Net income attributable to the noncontrolling interest was $5,000 and $2,000 for the three months ended September 30, 2021 and 2020, respectively. Net income attributable to the noncontrolling interest was $7,000 and $5,000 for the six months ended September 30, 2021 and 2020. These amounts are not presented separately in the accompanying consolidated financial statements due to their insignificance.

3. STOCK PLANS AND STOCK-BASED COMPENSATION

Stock Option Plans - In July 2003, shareholders of the Company approved the adoption of the 2003 Stock Option Plan (“2003 Plan”). The 2003 Plan was effective in July 2003 and expired in July 2013. Accordingly, no further option awards may be granted under the 2003 Plan; however, any awards granted prior to their respective expiration dates remain

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outstanding subject to their terms. Each option granted under the 2003 Plan has an exercise price equal to the fair market value of the Company’s common stock on the date of the grant, a maximum term of ten years and a vesting period from zero to five years.

In July 2017, the shareholders of the Company approved the Riverview Bancorp, Inc. 2017 Equity Incentive Plan (“2017 Plan”). The 2017 Plan provides for the grant of incentive stock options, non-qualified stock options, restricted stock and restricted stock units. The Company has reserved 1,800,000 shares of its common stock for issuance under the 2017 Plan. The 2003 Plan and the 2017 Plan are collectively referred to as “the Stock Option Plans”.

The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes stock option valuation model. The fair value of all awards is amortized on a straight-line basis over the requisite service periods, which are generally the vesting periods. The expected life of options granted represents the period of time that they are expected to be outstanding. The expected life is determined based on historical experience with similar options, giving consideration to the contractual terms and vesting schedules. Expected volatility is estimated at the date of grant based on the historical volatility of the Company's common stock. Expected dividends are based on dividend trends and the market value of the Company's common stock at the time of grant. The risk-free interest rate for periods within the contractual life of the options is based on the U.S. Treasury yield curve in effect at the time of the grant. There were no stock options granted under the 2017 Stock Option Plan during the six months ended September 30, 2021 and 2020.

As of September 30, 2021, all outstanding stock options were fully vested and there was no remaining unrecognized compensation expense related to stock options granted under the Stock Option Plans. There was no stock-based compensation expense related to stock options for the six months ended September 30, 2021 and 2020 under the Stock Option Plans.

The following table presents the activity related to stock options under the Stock Option Plans for the periods shown:


	Six Months Ended September 30,			Six Months Ended September 30,
	2021			2020
		Weighted			Weighted
		Average			Average
	Number of	Exercise		Number of	Exercise
	Shares	Price		Shares	Price
Balance, beginning of period	23,332	$	2.78	43,332	$	2.69
Options exercised	(6,000)		2.78	(5,000)		1.97
Balance, end of period	17,332	$	2.78	38,332	$	2.78

The following table presents information on stock options outstanding, less estimated forfeitures, as of September 30, 2021 and 2020:


	2021		2020
Stock options fully vested and expected to vest:
Number		17,332		38,332
Weighted average exercise price	$	2.78	$	2.78
Aggregate intrinsic value ⁽¹⁾	$	78,000	$	52,000
Weighted average contractual term of options (years)		1.79		2.60
Stock options fully vested and currently exercisable:
Number		17,332		38,332
Weighted average exercise price	$	2.78	$	2.78
Aggregate intrinsic value ⁽¹⁾	$	78,000	$	52,000
Weighted average contractual term of options (years)		1.79		2.60

(1)

The aggregate intrinsic value of a stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price) that would have been received by the option holders had all option holders exercised. This amount changes based on changes in the market value of the Company’s stock.

The total intrinsic value of stock options exercised was $25,000 and $17,000 for the six months ended September 30, 2021 and 2020, respectively, under the Stock Option Plans.

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The Company may grant restricted stock pursuant to the 2017 Plan of which vesting can either be time based or performance based. Performance based awards are subject to attaining certain performance metrics and all, or a portion of, the performance based awards can subsequently be cancelled for not attaining the predetermined performance metrics. The fair value of restricted stock awards is equal to the fair value of the Company’s stock on the date of grant. The related stock-based compensation expense is recorded over the requisite service period. Stock-based compensation related to restricted stock grants was $122,000 and $155,000 for the three months ended September 30, 2021 and 2020, respectively. Stock-based compensation related to restricted stock grants was $177,000 and $184,000 for the six months ended September 30, 2021 and 2020, respectively. The unrecognized stock-based compensation related to restricted stock was $570,000 and $516,000 at September 30, 2021 and 2020, respectively. The weighted average vesting period for the restricted stock was 1.95 years and 2.12 years at September 30, 2021 and 2020, respectively.

The following tables presents the activity related to restricted stock for the six months ended September 30, 2021:


	Time Based			Performance Based			Total
	Number	Weighted		Number	Weighted		Number	Weighted
	of	Average		of	Average		of	Average
	Unvested	Market		Unvested	Market		Unvested	Market
Six Months Ended September 30, 2021	Shares	Price		Shares	Price		Shares	Price
Balance, beginning of period	45,616	$	6.57	96,772	$	5.27	142,388	$	5.69
Granted	12,298		6.96	45,082		6.96	57,380		6.96
Forfeited	—		—	—		—	—		—
Vested	(29,618)		7.43	(12,732)		8.35	(42,350)		7.71
Cancelled	—		—	—		—	—		—
Balance, end of period	28,296	$	5.83	129,122	$	5.56	157,418	$	5.61


	Time Based			Performance Based			Total
	Number	Weighted		Number	Weighted		Number	Weighted
	of	Average		of	Average		of	Average
	Unvested	Market		Unvested	Market		Unvested	Market
Six Months Ended September 30, 2020	Shares	Price		Shares	Price		Shares	Price
Balance, beginning of period	49,298	$	8.35	33,375	$	8.35	82,673	$	8.35
Granted	19,453		4.17	71,310		4.17	90,763		4.17
Forfeited	—		—	—		—	—		—
Vested	(23,135)		8.35	—		—	(23,135)		8.35
Cancelled	—		—	(7,913)		8.35	(7,913)		8.35
Balance, end of period	45,616	$	6.57	96,772	$	5.27	142,388	$	5.69

Trust Company Stock Options – At September 30, 2021, there were no Trust Company stock options outstanding. At September 30, 2020, there were 1,000 Trust Company stock options outstanding, which had been granted to the President and Chief Executive Officer of the Trust Company. During the three and six months ended September 30, 2021, there was no stock-based compensation expense related to these options. During the three and six months ended September 30, 2020, the Trust Company incurred $11,000 and $22,000 of stock-based compensation expense related to these options, respectively. During the six months ended September 30, 2021, 500 Trust Company stock options were exercised. There were no Trust Company stock options exercised during the six months ended September 30, 2020. There were no Trust Company stock options granted during the six months ended September 30, 2021 and 2020. There was no unrecognized compensation expense and $22,000 related to the Trust Company stock options as of September 30, 2021 and 2020, respectively.

4. EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing net income or loss applicable to common stock by the weighted average number of common shares outstanding during the period, without considering any dilutive items. Nonvested shares of restricted stock are included in the computation of basic EPS because the holder has voting rights and shares in non-forfeitable dividends during the vesting period. Diluted EPS is computed by dividing net income applicable to common stock by the weighted average number of common shares and common stock equivalents for items that are dilutive, net of shares assumed to be repurchased using the treasury stock method at the average share price for the Company’s common

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stock during the period. Common stock equivalents arise from the assumed exercise of outstanding stock options. For the three and six months ended September 30, 2021 and 2020, there were no stock options excluded in computing diluted EPS.

In June 2021, the Company’s Board of Directors adopted a stock repurchase program (the “June 2021 repurchase program”). Under the June 2021 repurchase program, the Company may repurchase up to $5.0 million of the Company’s outstanding shares of common stock, in the open market based on prevailing market prices, or in private negotiated transactions, during the period from June 21, 2021 until the earlier of the completion of the repurchase of $5.0 million of the Company’s common stock or the next six months, depending on market conditions. As of September 30, 2021, the Company had repurchased 249,908 shares under the June 2021 repurchase program totaling $1.7 million at an average price of $6.89 per share. At September 30, 2020, all 500,000 shares repurchased under the expired February 2020 stock repurchase program at an average price of $4.89 per share had been retired.

The following table presents a reconciliation of the components used to compute basic and diluted EPS for the periods indicated:


	Three Months Ended September 30,				Six Months Ended September 30,
	2021		2020		2021		2020
Basic EPS computation:
Numerator-net income	$	6,430,000	$	2,543,000	$	12,185,000	$	3,023,000
Denominator-weighted average common shares outstanding		22,179,829		22,261,709		22,261,856		22,259,201
Basic EPS	$	0.29	$	0.11	$	0.55	$	0.14
Diluted EPS computation:
Numerator-net income	$	6,430,000	$	2,543,000	$	12,185,000	$	3,023,000
Denominator-weighted average common shares outstanding		22,179,829		22,261,709		22,261,856		22,259,201
Effect of dilutive stock options		11,658		14,603		12,812		17,107
Weighted average common shares and common stock equivalents		22,191,487		22,276,312		22,274,668		22,276,308
Diluted EPS	$	0.29	$	0.11	$	0.55	$	0.14

5. INVESTMENT SECURITIES

The amortized cost and approximate fair value of investment securities consisted of the following at the dates indicated (in thousands):


			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
September 30, 2021
Available for sale:
Municipal securities	$	44,244	$	282	$	(606)	$	43,920
Agency securities		47,073		24		(409)		46,688
Real estate mortgage investment conduits⁽¹⁾		53,646		276		(588)		53,334
Residential mortgage-backed securities ⁽¹⁾		92,512		958		(671)		92,799
Other mortgage-backed securities ⁽²⁾		41,157		632		(306)		41,483
Total available for sale	$	278,632	$	2,172	$	(2,580)	$	278,224

Held to maturity:
Municipal securities	$	10,379	$	9	$	(340)	$	10,048
Agency securities		10,658		—		(213)		10,445
Real estate mortgage investment conduits ⁽¹⁾		18,017		—		(264)		17,753
Residential mortgage-backed securities ⁽³⁾		20,806		—		(242)		20,564
Other mortgage-backed securities ⁽²⁾		12,249		—		(352)		11,897
Total held to maturity	$	72,109	$	9	$	(1,411)	$	70,707

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			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
March 31, 2021
Available for sale:
Municipal securities	$	23,883	$	238	$	(555)	$	23,566
Agency securities		25,996		5		(686)		25,315
Real estate mortgage investment conduits ⁽¹⁾		55,826		469		(480)		55,815
Residential mortgage-backed securities ⁽¹⁾		71,787		1,075		(614)		72,248
Other mortgage-backed securities ⁽²⁾		39,022		514		(176)		39,360
Total available for sale	$	216,514	$	2,301	$	(2,511)	$	216,304

Held to maturity:
Municipal securities	$	10,391	$	—	$	(509)	$	9,882
Agency securities		7,688		—		(220)		7,468
Real estate mortgage investment conduits ⁽¹⁾		9,207		—		(141)		9,066
Residential mortgage-backed securities ⁽³⁾		6,175		—		(119)		6,056
Other mortgage-backed securities ⁽²⁾		6,113		—		(365)		5,748
Total held to maturity		39,574	$	—	$	(1,354)	$	38,220

(1)	Comprised of Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and Ginnie Mae (“GNMA”) issued securities.

(2)	Comprised of U.S. Small Business Administration (“SBA”) issued securities and commercial real estate (“CRE”) secured securities issued by FNMA.

(3)	Comprised of FHLMC and FNMA issued securities.

The contractual maturities of investment securities as of September 30, 2021 are as follows (in thousands):


	Available for Sale				Held to Maturity
			Estimated				Estimated
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	—	$	—	$	1	$	1
Due after one year through five years		9,533		9,610		13		13
Due after five years through ten years		78,612		78,730		17,725		17,300
Due after ten years		190,487		189,884		54,370		53,393
Total	$	278,632	$	278,224	$	72,109	$	70,707

Expected maturities of investment securities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.

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The fair value of temporarily impaired investment securities, the amount of unrealized losses and the length of time these unrealized losses existed are as follows at the dates indicated (in thousands):


	Less than 12 months				12 months or longer				Total
	Estimated				Estimated				Estimated
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
September 30, 2021	Value		Losses		Value		Losses		Value		Losses

Available for sale:
Municipal securities	$	37,869	$	(606)	$	—	$	—	$	37,869	$	(606)
Agency securities		35,685		(409)		—		—		35,685		(409)
Real estate mortgage investment conduits ⁽¹⁾		36,942		(588)		—		—		36,942		(588)
Residential mortgage-backed securities		52,675		(671)		—		—		52,675		(671)
Other mortgage-backed securities ⁽²⁾		13,796		(288)		1,331		(18)		15,127		(306)
Total available for sale	$	176,967	$	(2,562)	$	1,331	$	(18)	$	178,298	$	(2,580)

Held to maturity:
Municipal securities	$	6,343	$	(340)	$	—	$	—	$	6,343	$	(340)
Agency securities		10,445		(213)		—		—		10,445		(213)
Real estate mortgage investment conduits ⁽³⁾		17,753		(264)		—		—		17,753		(264)
Residential mortgage-backed securities ⁽⁴⁾		20,547		(242)		—		—		20,547		(242)
Other mortgage-backed securities		11,897		(352)		—		—		11,897		(352)
Total held to maturity	$	66,985	$	(1,411)	$	—	$	—	$	66,985	$	(1,411)

March 31, 2021

Available for sale:
Municipal securities	$	17,529	$	(555)	$	—	$	—	$	17,529	$	(555)
Agency securities		23,306		(686)		—		—		23,306		(686)
Real estate mortgage investment conduits ⁽¹⁾		25,462		(480)		—		—		25,462		(480)
Residential mortgage-backed securities		33,164		(614)		—		—		33,164		(614)
Other mortgage-backed securities ⁽²⁾		5,856		(125)		2,225		(51)		8,081		(176)
Total available for sale	$	105,317	$	(2,460)	$	2,225	$	(51)	$	107,542	$	(2,511)

Held to maturity:
Municipal securities	$	9,882	$	(509)	$	—	$	—	$	9,882	$	(509)
Agency securities		7,468		(220)		—		—		7,468		(220)
Real estate mortgage investment conduits ⁽³⁾		9,066		(141)		—		—		9,066		(141)
Residential mortgage-backed securities ⁽⁴⁾		6,035		(119)		—		—		6,035		(119)
Other mortgage-backed securities		5,748		(365)		—		—		5,748		(365)
Total held to maturity	$	38,199	$	(1,354)	$	—	$	—	$	38,199	$	(1,354)

(1)	Comprised of FHLMC, FNMA and GNMA issued securities.

(2)	Comprised of SBA issued securities.

(3)	Comprised of FNMA issued securities.

(4)	Comprised of FHLMC and FNMA issued securities.

The unrealized losses on the Company’s investment securities were primarily attributable to increases in market interest rates subsequent to their purchase by the Company. The Company expects the fair value of these securities to recover as the securities approach their maturity dates or sooner if market yields for such securities decline. The Company does not believe that these securities are other than temporarily impaired because of their credit quality or related to any issuer or industry specific event. The Company has the ability and intent to hold the investments until the fair value recovers. Based on management’s evaluation and intent, the unrealized losses related to the investment securities in the above tables are considered temporary.

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The Company had no sales and realized no gains or losses on sales of investment securities for the three and six months ended September 30, 2021 and 2020. Investment securities available for sale with an amortized cost of $9.0 million and $5.3 million and an estimated fair value of $9.0 million and $5.4 million at September 30, 2021 and March 31, 2021, respectively, were pledged as collateral for government public funds held by the Bank. Investment securities held to maturity with an amortized cost of $5.7 million and $3.1 million and a fair value of $5.6 million and $3.0 million at September 30, 2021 and March 31, 2021, respectively, were pledged as collateral for government public funds held by the Bank.

6. LOANS RECEIVABLE

Loans receivable are reported net of deferred loan fees. Deferred loan fees at September 30, 2021 and March 31, 2021, totaled $5.3 million and $6.6 million, respectively, of which $1.2 million and $2.7 million, respectively, were related to the SBA Paycheck Protection Program (“PPP”) loans. Loans receivable are also reported net of discounts and premiums totaling $562,000 and $1.6 million, respectively, as of September 30, 2021, compared to $722,000 and $956,000, respectively, as of March 31, 2021. Loans receivable, excluding loans held for sale, consisted of the following at the dates indicated (in thousands):


	September 30,		March 31,
	2021		2021
Commercial and construction
Commercial business ⁽¹⁾	$	206,709	$	265,145
Commercial real estate		567,043		543,467
Land		15,925		14,040
Multi-family		40,455		45,014
Real estate construction		13,621		16,990
Total commercial and construction		843,753		884,656

Consumer
Real estate one-to-four family		69,079		56,405
Other installment		1,700		2,174
Total consumer		70,779		58,579

Total loans		914,532		943,235

Less: Allowance for loan losses		16,500		19,178
Loans receivable, net	$	898,032	$	924,057

(1)SBA PPP loans totaled $32.7 million and $93.4 million at September 30, 2021 and March 31, 2021, respectively.

The Company considers its loan portfolio to have very little exposure to sub-prime mortgage loans since the Company has not historically engaged in this type of lending. At September 30, 2021, loans carried at $478.0 million were pledged as collateral to the Federal Home Loan Bank of Des Moines (“FHLB”) and Federal Reserve Bank of San Francisco (“FRB”) pursuant to borrowing agreements.

Substantially all of the Bank’s business activity is with customers located in the states of Washington and Oregon. Loans and extensions of credit outstanding at one time to one borrower are generally limited by federal regulation to 15% of the Bank’s shareholders’ equity, excluding accumulated other comprehensive income (loss). As of September 30, 2021 and March 31, 2021, the Bank had no loans to any one borrower in excess of the regulatory limit.

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7. ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is maintained at a level sufficient to provide for estimated probable loan losses based on evaluating known and inherent risks in the loan portfolio. The allowance is provided based upon management’s ongoing quarterly assessment of the pertinent factors underlying the quality of the loan portfolio. These factors include changes in the size and composition of the loan portfolio, delinquency levels, actual loan loss experience, current economic conditions and a detailed analysis of individual loans for which full collectability may not be assured. The detailed analysis includes techniques to estimate the fair value of loan collateral and the existence of potential alternative sources of repayment. The allowance consists of specific, general and unallocated components.

The specific component relates to loans that are considered impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows or collateral value (less estimated selling costs, if applicable) of the impaired loan is lower than the carrying value of that loan.

The general component covers non-impaired loans based on the Company’s risk rating system and historical loss experience adjusted for qualitative factors. The Company calculates its historical loss rates using the average of the last four quarterly 24-month periods. The Company calculates and applies its historical loss rates by individual loan types in its loan portfolio. These historical loss rates are adjusted for qualitative and environmental factors.

An unallocated component is maintained to cover uncertainties that the Company believes have resulted in incurred losses that have not yet been allocated to specific elements of the general and specific components of the allowance for loan losses. Such factors include uncertainties in economic conditions, uncertainties in identifying triggering events that directly correlate to subsequent loss rates, changes in appraised value of underlying collateral, risk factors that have not yet manifested themselves in loss allocation factors and historical loss experience data that may not precisely correspond to the current loan portfolio or economic conditions. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the loan portfolio. The appropriate allowance level is estimated based upon factors and trends identified by the Company as of the date of the filing of the consolidated financial statements.

When available information confirms that specific loans or portions thereof are uncollectible, identified amounts are charged against the allowance for loan losses. The existence of some or all of the following criteria will generally confirm that a loss has been incurred: the loan is significantly delinquent and the borrower has not demonstrated the ability or intent to bring the loan current; the Company has no recourse to the borrower, or if it does, the borrower has insufficient assets to pay the debt; and/or the estimated fair value of the loan collateral is significantly below the current loan balance, and there is little or no near-term prospect for improvement.

Management’s evaluation of the allowance for loan losses is based on ongoing, quarterly assessments of the known and inherent risks in the loan portfolio. Loss factors are based on the Company’s historical loss experience with additional consideration and adjustments made for changes in economic conditions, changes in the amount and composition of the loan portfolio, delinquency rates, changes in collateral values, seasoning of the loan portfolio, duration of the current business cycle, a detailed analysis of impaired loans and other factors as deemed appropriate. These factors are evaluated on a quarterly basis. Loss rates used by the Company are affected as changes in these factors increase or decrease from quarter to quarter. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and may require the Company to make additions to the allowance based on their judgment about information available to them at the time of their examinations.

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The following tables present a reconciliation of the allowance for loan losses for the periods indicated (in thousands):


Three months ended	Commercial		Commercial				Multi-		Real Estate
September 30, 2021	Business		Real Estate		Land		Family		Construction		Consumer		Unallocated		Total

Beginning balance	$	2,202	$	12,942	$	237	$	607	$	197	$	712	$	693	$	17,590
Provision for (recapture of) loan losses		59		(1,147)		(5)		(77)		34		119		(83)		(1,100)
Charge-offs		—		—		—		—		—		(4)		—		(4)
Recoveries		—		—		—		—		—		14		—		14
Ending balance	$	2,261	$	11,795	$	232	$	530	$	231	$	841	$	610	$	16,500

Six months ended
September 30, 2021

Beginning balance	$	2,416	$	14,089	$	233	$	638	$	294	$	852	$	656	$	19,178
Provision for (recapture of) loan losses		(155)		(2,294)		(1)		(108)		(63)		(33)		(46)		(2,700)
Charge-offs		—		—		—		—		—		(13)		—		(13)
Recoveries		—		—		—		—		—		35		—		35
Ending balance	$	2,261	$	11,795	$	232	$	530	$	231	$	841	$	610	$	16,500

Three months ended
September 30, 2020

Beginning balance	$	2,011	$	11,323	$	243	$	879	$	692	$	1,281	$	647	$	17,076
Provision for (recapture of) loan losses		169		1,886		2		(134)		28		(116)		(35)		1,800
Charge-offs		—		—		—		—		—		(23)		—		(23)
Recoveries		—		—		—		—		—		13		—		13
Ending balance	$	2,180	$	13,209	$	245	$	745	$	720	$	1,155	$	612	$	18,866

Six months ended
September 30, 2020

Beginning balance	$	2,008	$	6,421	$	230	$	854	$	1,149	$	1,363	$	599	$	12,624
Provision for (recapture of) loan losses		162		6,788		15		(109)		(429)		(140)		13		6,300
Charge-offs		—		—		—		—		—		(88)		—		(88)
Recoveries		10		—		—		—		—		20		—		30
Ending balance	$	2,180	$	13,209	$	245	$	745	$	720	$	1,155	$	612	$	18,866

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The following tables present an analysis of loans receivable and the allowance for loan losses, based on impairment methodology, at the dates indicated (in thousands):


	Allowance for Loan Losses						Recorded Investment in Loans
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated				Evaluated		Evaluated
	for		for				for		for
September 30, 2021	Impairment		Impairment		Total		Impairment		Impairment		Total

Commercial business	$	—	$	2,261	$	2,261	$	110	$	206,599	$	206,709
Commercial real estate		—		11,795		11,795		133		566,910		567,043
Land		—		232		232		—		15,925		15,925
Multi-family		—		530		530		—		40,455		40,455
Real estate construction		—		231		231		—		13,621		13,621
Consumer		9		832		841		515		70,264		70,779
Unallocated		—		610		610		—		—		—
Total	$	9	$	16,491	$	16,500	$	758	$	913,774	$	914,532

March 31, 2021

Commercial business	$	—	$	2,416	$	2,416	$	120	$	265,025	$	265,145
Commercial real estate		—		14,089		14,089		1,468		541,999		543,467
Land		—		233		233		710		13,330		14,040
Multi-family		—		638		638		753		44,261		45,014
Real estate construction		—		294		294		—		16,990		16,990
Consumer		11		841		852		530		58,049		58,579
Unallocated		—		656		656		—		—		—
Total	$	11	$	19,167	$	19,178	$	3,581	$	939,654	$	943,235

Non-accrual loans: Loans are reviewed regularly and it is the Company’s general policy that a loan is past due when it is 30 to 89 days delinquent. In general, when a loan is 90 days delinquent or when collection of principal or interest appears doubtful, it is placed on non-accrual status, at which time the accrual of interest ceases and a reserve for unrecoverable accrued interest is established and charged against operations. As a general practice, payments received on non-accrual loans are applied to reduce the outstanding principal balance on a cost recovery method. Also, as a general practice, a loan is not removed from non-accrual status until all delinquent principal, interest and late fees have been brought current and the borrower has demonstrated a history of performance based upon the contractual terms of the note. A history of repayment performance generally would be a minimum of six months. Interest income foregone on non-accrual loans was $14,000 and $35,000 for the six months ended September 30, 2021 and 2020, respectively.

The following tables present an analysis of loans by aging category at the dates indicated (in thousands):


							Total
			90 Days				Past
			and				Due and				Total
	30-89 Days		Greater				Non-				Loans
September 30, 2021	Past Due		Past Due		Non-accrual		accrual		Current		Receivable

Commercial business	$	1,811	$	95	$	172	$	2,078	$	204,631	$	206,709
Commercial real estate		—		—		133		133		566,910		567,043
Land		—		—		—		—		15,925		15,925
Multi-family		—		—		—		—		40,455		40,455
Real estate construction		—		—		—		—		13,621		13,621
Consumer		27		—		90		117		70,662		70,779
Total	$	1,838	$	95	$	395	$	2,328	$	912,204	$	914,532

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March 31, 2021

Commercial business	$	98	$	175	$	182	$	455	$	264,690	$	265,145
Commercial real estate		—		—		144		144		543,323		543,467
Land		—		—		—		—		14,040		14,040
Multi-family		—		—		—		—		45,014		45,014
Real estate construction		—		—		—		—		16,990		16,990
Consumer		143		1		69		213		58,366		58,579
Total	$	241	$	176	$	395	$	812	$	942,423	$	943,235

Credit quality indicators: The Company monitors credit risk in its loan portfolio using a risk rating system (on a scale of one to nine) for all commercial (non-consumer) loans. The risk rating system is a measure of the credit risk of the borrower based on their historical, current and anticipated future financial characteristics. The Company assigns a risk rating to each commercial loan at origination and subsequently updates these ratings, as necessary, so that the risk rating continues to reflect the appropriate risk characteristics of the loan. Application of appropriate risk ratings is key to management of loan portfolio risk. In determining the appropriate risk rating, the Company considers the following factors: delinquency, payment history, quality of management, liquidity, leverage, earnings trends, alternative funding sources, geographic risk, industry risk, cash flow adequacy, account practices, asset protection and extraordinary risks. Consumer loans, including custom construction loans, are not assigned a risk rating but rather are grouped into homogeneous pools with similar risk characteristics. When a consumer loan is delinquent 90 days, it is placed on non-accrual status and assigned a substandard risk rating. Loss factors are assigned to each risk rating and homogeneous pool based on historical loss experience for similar loans. This historical loss experience is adjusted for qualitative factors that are likely to cause the estimated credit losses to differ from the Company’s historical loss experience. The Company uses these loss factors to estimate the general component of its allowance for loan losses.

Pass – These loans have a risk rating between 1 and 4 and are to borrowers that meet normal credit standards. Any deficiencies in satisfactory asset quality, liquidity, debt servicing capacity and coverage are offset by strengths in other areas. The borrower currently has the capacity to perform according to the loan terms. Any concerns about risk factors such as stability of margins, stability of cash flows, liquidity, dependence on a single product/supplier/customer, depth of management, etc. are offset by strengths in other areas. Typically, these loans are secured by the operating assets of the borrower and/or real estate. The borrower’s management is considered competent. The borrower has the ability to repay the debt in the normal course of business.

Watch – These loans have a risk rating of 5 and are included in the “pass” rating. However, there would typically be some reason for additional management oversight, such as the borrower’s recent financial setbacks and/or deteriorating financial position, industry concerns and failure to perform on other borrowing obligations. Loans with this rating are monitored closely in an effort to correct deficiencies.

Special mention – These loans have a risk rating of 6 and are rated in accordance with regulatory guidelines. These loans have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the credit position at some future date. These loans pose elevated risk but their weakness does not yet justify a “substandard” classification.

Substandard – These loans have a risk rating of 7 and are rated in accordance with regulatory guidelines, for which the accrual of interest may or may not be discontinued. By definition under regulatory guidelines, a “substandard” loan has defined weaknesses which make payment default or principal exposure likely but not yet certain. Repayment of such loans is likely to be dependent upon collateral liquidation, a secondary source of repayment, or an event outside of the normal course of business.

Doubtful – These loans have a risk rating of 8 and are rated in accordance with regulatory guidelines. Such loans are placed on non-accrual status and repayment may be dependent upon collateral which has value that is difficult to determine or upon some near-term event which lacks certainty.

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Loss – These loans have a risk rating of 9 and are rated in accordance with regulatory guidelines. Such loans are charged-off or charged-down when payment is acknowledged to be uncertain or when the timing or value of payments cannot be determined. “Loss” is not intended to imply that the loan or some portion of it will never be paid, nor does it in any way imply that there has been a forgiveness of debt.

The following tables present an analysis of loans by credit quality indicators at the dates indicated (in thousands):


											Total
			Special								Loans
September 30, 2021	Pass		Mention		Substandard		Doubtful		Loss		Receivable

Commercial business	$	206,228	$	168	$	313	$	—	$	—	$	206,709
Commercial real estate		526,127		31,061		9,855		—		—		567,043
Land		15,925		—		—		—		—		15,925
Multi-family		40,404		43		8		—		—		40,455
Real estate construction		13,621		—		—		—		—		13,621
Consumer		70,689		—		90		—		—		70,779
Total	$	872,994	$	31,272	$	10,266	$	—	$	—	$	914,532

March 31, 2021

Commercial business	$	264,564	$	399	$	182	$	—	$	—	$	265,145
Commercial real estate		494,010		42,045		7,412		—		—		543,467
Land		14,040		—		—		—		—		14,040
Multi-family		44,941		49		24		—		—		45,014
Real estate construction		16,990		—		—		—		—		16,990
Consumer		58,510		—		69		—		—		58,579
Total	$	893,055	$	42,493	$	7,687	$	—	$	—	$	943,235

Impaired loans and troubled debt restructurings (“TDRs”): A loan is considered impaired when it is probable that the Company will be unable to collect all amounts when due (principal and interest) according to the contractual terms of the loan agreement. Typically, factors used in determining if a loan is impaired include, but are not limited to, whether the loan is 90 days or more delinquent, internally designated as substandard or worse, on non-accrual status or represents a TDR. The majority of the Company’s impaired loans are considered collateral dependent. When a loan is considered collateral dependent, impairment is measured using the estimated value of the underlying collateral, less any prior liens, and when applicable, less estimated selling costs. For impaired loans that are not collateral dependent, impairment is measured using the present value of expected future cash flows, discounted at the loan’s original effective interest rate. When the estimated net realizable value of the impaired loan is less than the recorded investment in the loan (including accrued interest, net deferred loan fees or costs, and unamortized premium or discount), an impairment is recognized by adjusting an allocation of the allowance for loan losses. Subsequent to the initial allocation of allowance to the individual loan, the Company may conclude that it is appropriate to record a charge-off of the impaired portion of the loan. When a charge-off is recorded, the loan balance is reduced and the specific allowance is eliminated. Generally, when a collateral dependent loan is initially measured for impairment and has not had an appraisal of the collateral in the last six months, the Company obtains an updated market valuation. Subsequently, the Company generally obtains an updated market valuation of the collateral on an annual basis. The collateral valuation may occur more frequently if the Company determines that there is an indication that the market value may have declined.

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The following tables present the total and average recorded investment in impaired loans at the dates and for the periods indicated (in thousands):


	Recorded		Recorded
	Investment		Investment
	with		with						Related
	No Specific		Specific		Total		Unpaid		Specific
	Valuation		Valuation		Recorded		Principal		Valuation
September 30, 2021	Allowance		Allowance		Investment		Balance		Allowance

Commercial business	$	110	$	—	$	110	$	150	$	—
Commercial real estate		133		—		133		186		—
Land		—		—		—		—		—
Multi-family		—		—		—		—		—
Consumer		397		118		515		623		9
Total	$	640	$	118	$	758	$	959	$	9

March 31, 2021

Commercial business	$	120	$	—	$	120	$	157	$	—
Commercial real estate		1,468		—		1,468		1,556		—
Land		710		—		710		740		—
Multi-family		753		—		753		856		—
Consumer		278		252		530		643		11
Total	$	3,329	$	252	$	3,581	$	3,952	$	11


	Three months ended				Three months ended
	September 30, 2021				September 30, 2020
			Interest				Interest
			Recognized				Recognized
	Average		on		Average		on
	Recorded		Impaired		Recorded		Impaired
	Investment		Loans		Investment		Loans

Commercial business	$	112	$	—	$	132	$	—
Commercial real estate		793		—		2,356		15
Land		—		—		714		10
Multi-family		—		—		1,552		22
Consumer		518		6		485		10
Total	$	1,423	$	6	$	5,239	$	57


	Six months ended				Six months ended
	September 30, 2021				September 30, 2020
			Interest				Interest
			Recognized				Recognized
	Average		on		Average		on
	Recorded		Impaired		Recorded		Impaired
	Investment		Loans		Investment		Loans

Commercial business	$	115	$	—	$	134	$	—
Commercial real estate		1,018		16		2,364		30
Land		—		—		714		20
Multi-family		—		—		1,551		44
Consumer		522		12		467		16
Total	$	1,655	$	28	$	5,230	$	110

The cash basis interest income on impaired loans was not materially different than the interest recognized on impaired loans as shown in the above tables.

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TDRs are loans for which the Company, for economic or legal reasons related to the borrower’s financial condition, has granted a concession to the borrower that it would otherwise not consider. A TDR typically involves a modification of terms such as a reduction of the stated interest rate or face amount of the loan, a reduction of accrued interest, and/or an extension of the maturity date(s) at a stated interest rate lower than the current market rate for a new loan with similar risk. TDRs are considered impaired loans and as such, impairment is measured as described for impaired loans above.

The following table presents TDRs by interest accrual status at the dates indicated (in thousands):


	September 30, 2021						March 31, 2021
	Accrual		Nonaccrual		Total		Accrual		Nonaccrual		Total

Commercial business	$	—	$	110	$	110	$	—	$	120	$	120
Commercial real estate		—		133		133		1,324		144		1,468
Land		—		—		—		710		—		710
Multi-family		—		—		—		753		—		753
Consumer		515		—		515		530		—		530
Total	$	515	$	243	$	758	$	3,317	$	264	$	3,581

At September 30, 2021, the Company had no commitments to lend additional funds on TDR loans. At September 30, 2021, all of the Company’s TDRs were paying as agreed. There were no new TDRs for the three and six months ended September 30, 2021. There was one new TDR for the three and six months ended September 30, 2020. This TDR is a consumer real estate loan secured by a one-to-four family property located in Northwest Oregon where the Company granted a three month payment deferral which extended the maturity date by three months. The recorded investment in the loan prior to modification and at September 30, 2020 was $129,000.

In March 2020, the Company began offering short-term loan modifications to assist borrowers during the COVID-19 pandemic. The CARES Act along with a joint agency statement issued by banking regulatory agencies provides that a short-term modification made in response to COVID-19 and which meets certain criteria does not need to be accounted for as a TDR. Accordingly, the Company does not account for such loan modifications as TDRs. See Note 11 – New Accounting Pronouncements.

In accordance with the Company’s policy guidelines, unsecured loans are generally charged-off when no payments have been received for three consecutive months unless an alternative action plan is in effect. Consumer installment loans delinquent six months or more that have not received at least 75% of their required monthly payment in the last 90 days are charged-off. 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. However, charge-offs are postponed if alternative proposals to restructure, obtain additional guarantors, obtain additional assets as collateral or a potential sale of the underlying collateral would result in full repayment of the outstanding loan balance. Once any other potential sources of repayment are exhausted, the impaired portion of the loan is charged-off. Regardless of whether a loan is unsecured or collateralized, once an amount is determined to be a confirmed loan loss it is promptly charged off.

8. GOODWILL

Goodwill and certain other intangibles generally arise from business combinations accounted for under the purchase method of accounting. Goodwill and other intangibles deemed to have indefinite lives generated from business combinations are not subject to amortization and are instead tested for impairment not less than annually. The Company has two reporting units, the Bank and the Trust Company, for purposes of evaluating goodwill for impairment. All of the Company’s goodwill has been allocated to the Bank reporting unit.

The Company performed an impairment assessment as of October 31, 2020 and determined that no impairment of goodwill exists. The goodwill impairment test involves a two-step process. The first step is a comparison of the reporting unit’s fair value to its carrying value. If the reporting unit’s fair value is less than its carrying value, the Company would be required to progress to the second step. In the second step, the Company calculates the implied fair value of goodwill and compares the implied fair value of goodwill to the carrying amount of goodwill in the Company’s consolidated balance sheet. If the

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carrying amount of the goodwill is greater than the implied fair value of that goodwill, an impairment loss must be recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as goodwill recognized in a business combination. 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, a step two analysis was not required; however, no assurance can be given that the Company’s goodwill will not be written down in future periods. As a result of the effects of the COVID-19 pandemic and its impacts on the financial markets and economy, the Company completed a qualitative assessment of goodwill as of September 30, 2021, and concluded that it is more likely than not that the fair value of the Bank (the reporting unit), exceeds its carrying value. If adverse economic conditions or decreases in the Company’s common stock price and market capitalization as a result of the COVID-19 pandemic were sustained in the future rather than temporary, it may significantly affect the fair value of the reporting unit and may trigger future goodwill impairment charges. Any impairment charge could have a material adverse effect on our results of operations and financial condition.

9. JUNIOR SUBORDINATED DEBENTURES

The Company has wholly-owned subsidiary grantor trusts that were established for the purpose of issuing trust preferred securities and common securities. The trust preferred securities accrue and pay distributions periodically at specified annual rates as provided in each trust agreement. The trusts used the net proceeds from each of the offerings to purchase a like amount of junior subordinated debentures (the “Debentures”) of the Company. The Debentures are the sole assets of the trusts. 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 has the right to redeem the Debentures in whole or in part on or after specific dates, at a redemption price specified in the indentures governing the Debentures plus any accrued but unpaid interest to the redemption date. The Company also has the right to defer the payment of interest on each of the Debentures for a period not to exceed 20 consecutive quarters, provided that the deferral period does not extend beyond the stated maturity. During such deferral period, distributions on the corresponding trust preferred securities will also be deferred and the Company may not pay cash dividends to the holders of shares of the Company’s common stock.

The Debentures issued by the Company to the grantor trusts, totaling $26.8 million and $26.7 million at September 30, 2021 and March 31, 2021, respectively, are reported as “junior subordinated debentures” in the consolidated balance sheets. The common securities issued by the grantor trusts were purchased by the Company, and the Company’s investment in the common securities of $836,000 at both September 30, 2021 and March 31, 2021, is included in prepaid expenses and other assets in the consolidated balance sheets. The Company records interest expense on the Debentures in the consolidated statements of income.

The following table is a summary of the terms and the amounts outstanding of the Debentures at September 30, 2021 (dollars in thousands):


Issuance Trust	Issuance Date	Amount Outstanding		Rate Type		Initial Rate		Current Rate		Maturity Date

Riverview Bancorp Statutory Trust I	12/2005	$	7,217	Variable	⁽¹⁾	5.88	%	1.48	%	3/2036
Riverview Bancorp Statutory Trust II	06/2007		15,464	Variable	⁽²⁾	7.03	%	1.47	%	9/2037
Merchants Bancorp Statutory Trust I ⁽⁴⁾	06/2003		5,155	Variable	⁽³⁾	4.16	%	3.23	%	6/2033
			27,836
Fair value adjustment ⁽⁴⁾			(1,045)
Total Debentures		$	26,791

(1)	The trust preferred securities reprice quarterly based on the three-month LIBOR plus 1.36%.

(2)	The trust preferred securities reprice quarterly based on the three-month LIBOR plus 1.35%.

(3)	The trust preferred securities reprice quarterly based on the three-month LIBOR plus 3.10%.

(4)	Amount, net of accretion, attributable to a prior year’s business combination.

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10. FAIR VALUE MEASUREMENTS

Fair value is defined under GAAP as the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. GAAP also establishes a fair value hierarchy which prioritizes the valuation inputs into three broad levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of three levels. These levels are:

Quoted prices in active markets for identical assets (Level 1): Inputs that are quoted unadjusted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Other observable inputs (Level 2): Inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets and inputs derived principally from or corroborated by observable market data by correlation or other means.

Significant unobservable inputs (Level 3): Inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances.

Financial instruments are presented in the tables that follow by recurring or nonrecurring measurement status. Recurring assets are initially measured at fair value and are required to be remeasured at fair value in the consolidated financial statements at each reporting date. Assets measured on a nonrecurring basis are assets that, as a result of an event or circumstance, were required to be remeasured at fair value after initial recognition in the consolidated financial statements at some time during the reporting period.

The following tables present assets that are measured at estimated fair value on a recurring basis at the dates indicated (in thousands):


	Total Estimated		Estimated Fair Value Measurements Using
September 30, 2021	Fair Value		Level 1		Level 2		Level 3

Investment securities available for sale:
Municipal securities	$	43,920	$	—	$	43,920	$	—
Agency securities		46,688		—		46,688		—
Real estate mortgage investment conduits		53,334		—		53,334		—
Residential mortgage-backed securities		92,799		—		92,799		—
Other mortgage-backed securities		41,483		—		41,483		—
Total assets measured at fair value on a recurring basis	$	278,224	$	—	$	278,224	$	—


	Total Estimated		Estimated Fair Value Measurements Using
March 31, 2021	Fair Value		Level 1		Level 2		Level 3

Investment securities available for sale:
Municipal securities	$	23,566	$	—	$	23,566	$	—
Agency securities		25,315		—		25,315		—
Real estate mortgage investment conduits		55,815		—		55,815		—
Residential mortgage-backed securities		72,248		—		72,248		—
Other mortgage-backed securities		39,360		—		39,360		—
Total assets measured at fair value on a recurring basis	$	216,304	$	—	$	216,304	$	—

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There were no transfers of assets into or out of Levels 1, 2 or 3 for the six months ended September 30, 2021 and the year ended March 31, 2021.

The following methods were used to estimate the fair value of financial instruments above:

Investment securities are included within Level 1 of the hierarchy when quoted prices in an active market for identical assets are available. The Company uses a third-party pricing service to assist the Company in determining the fair value of its Level 2 securities, which incorporates pricing models and/or quoted prices of investment securities with similar characteristics. Investment securities are included within Level 3 of the hierarchy when there are significant unobservable inputs.

For Level 2 securities, the independent pricing service provides pricing information by utilizing evaluated pricing models supported with market data information. Standard inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data from market research publications. The Company’s third-party pricing service has established processes for the Company to submit inquiries regarding the estimated fair value. In such cases, the Company’s third-party pricing service will review the inputs to the evaluation in light of any new market data presented by the Company. The Company’s third-party pricing service may then affirm the original estimated fair value or may update the evaluation on a go-forward basis.

Management reviews the pricing information received from the third-party pricing service through a combination of procedures that include an evaluation of methodologies used by the pricing service, analytical reviews and performance analysis of the prices against statistics and trends. Based on this review, management determines whether the current placement of the security in the fair value hierarchy is appropriate or whether transfers may be warranted. As necessary, management compares prices received from the pricing service to discounted cash flow models or by performing independent valuations of inputs and assumptions similar to those used by the pricing service in order to help ensure prices represent a reasonable estimate of fair value.

The following tables present assets that are measured at estimated fair value on a nonrecurring basis at the dates indicated (in thousands):


	Total		Estimated Fair Value
	Estimated		Measurements Using
September 30, 2021	Fair Value		Level 1		Level 2		Level 3

Impaired loans	$	109	$	—	$	—	$	109

March 31, 2021

Impaired loans	$	241	$	—	$	—	$	241

The following table presents quantitative information about Level 3 inputs for financial instruments measured at fair value on a nonrecurring basis at September 30, 2021 and March 31, 2021:

(1)	There were no adjustments to appraised values of impaired loans as of September 30, 2021 and March 31, 2021.

For information regarding the Company’s method for estimating the fair value of impaired loans, see Note 7 – Allowance for Loan Losses.

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In determining the estimated net realizable value of the underlying collateral, the Company primarily uses third-party appraisals which may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available and include consideration of variations in location, size, and income production capacity of the property. Additionally, the appraisals are periodically further adjusted by the Company in consideration of charges that may be incurred in the event of foreclosure and are based on management’s historical knowledge, changes in business factors and changes in market conditions.

Impaired loans are reviewed and evaluated quarterly for additional impairment and adjusted accordingly based on the same factors identified above. Because of the high degree of judgment required in estimating the fair value of collateral underlying impaired loans and because of the relationship between fair value and general economic conditions, the Company considers the fair value of impaired loans to be highly sensitive to changes in market conditions.

The following disclosure of the estimated fair value of financial instruments is made in accordance with GAAP. The Company, using available market information and appropriate valuation methodologies, has determined the estimated fair value amounts. However, considerable judgment is necessary to interpret market data in the development of the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in the future. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The carrying amount and estimated fair value of financial instruments is as follows at the dates indicated (in thousands):



	Carrying								Estimated
September 30, 2021	Amount		Level 1		Level 2		Level 3		Fair Value

Assets:
Cash and cash equivalents	$	368,122	$	368,122	$	—	$	—	$	368,122
Certificates of deposit held for investment		249		—		259		—		259
Investment securities available for sale		278,224		—		278,224		—		278,224
Investment securities held to maturity		72,109		—		70,707		—		70,707
Loans receivable, net		898,032		—		—		894,170		894,170
FHLB stock		1,722		—		1,722		—		1,722

Liabilities:
Certificates of deposit		120,341		—		120,657		—		120,657
Junior subordinated debentures		26,791		—		—		14,301		14,301


	Carrying								Estimated
March 31, 2021	Amount		Level 1		Level 2		Level 3		Fair Value

Assets:
Cash and cash equivalents	$	265,408	$	265,408	$	—	$	—	$	265,408
Certificates of deposit held for investment		249		—		262		—		262
Investment securities available for sale		216,304		—		216,304		—		216,304
Investment securities held to maturity		39,574		—		38,220		—		38,220
Loans receivable, net		924,057		—		—		920,102		920,102
FHLB stock		1,722		—		1,722		—		1,722

Liabilities:
Certificates of deposit		120,625		—		121,610		—		121,610
Junior subordinated debentures		26,748		—		—		14,434		14,434

Fair value estimates were based on existing financial instruments without attempting to estimate the value of anticipated future business. The fair value was not estimated for assets and liabilities that were not considered financial instruments.

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11. NEW ACCOUNTING PRONOUNCEMENTS

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”) as amended by ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10 and ASU 2019-11. ASU 2016-13 replaces the existing incurred losses methodology for estimating allowances with a current expected credit losses methodology with respect to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held to maturity investment securities and off-balance sheet commitments. In addition, ASU 2016-13 requires credit losses relating to available for sale debt securities to be recorded through an allowance for credit losses rather than as a reduction of carrying amount. ASU 2016-13 also changes the accounting for purchased credit impaired debt securities and loans. ASU 2016-13 retains many of the current disclosure requirements in GAAP and expands certain disclosure requirements. As a “smaller reporting company” filer with the U.S. Securities and Exchange Commission, ASU 2016-13 is effective for the Company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Upon adoption, the Company expects a change in the processes and procedures to calculate the allowance for loan losses, including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model. In addition, the current accounting policy and procedures for other-than-temporary impairment of investment securities available for sale will be replaced with an allowance approach. The Company is reviewing the requirements of ASU 2016-13 and has begun developing and implementing processes and procedures to ensure it is fully compliant with the amendments at the adoption date. At this time, management anticipates the allowance for loan losses will increase as a result of the implementation of ASU 2016-13; however, until management's evaluation is complete, the magnitude of the increase will not be known.

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). ASU 2017-04 simplifies the subsequent measurement of goodwill and eliminates Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Under ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. ASU 2017-04 is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2022. Early application of ASU 2017-04 is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of ASU 2017-04 is not expected to have a material impact on the Company's future consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04"). ASU 2020-04 applies to contracts, hedging relationships and other transactions that reference LIBOR or other rate references expected to be discontinued because of reference rate reform. ASU 2020-04 permits an entity to make necessary modifications to eligible contracts or transactions without requiring contract remeasurement or reassessment of a previous accounting determination. The Company's current interest rates on its junior subordinated debentures are based upon the three-month LIBOR plus a spread. In January 2021, ASU 2021-01 updated amendments in ASU 2020-04 to clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU 2021-01 also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification. The amendments in ASU 2021-01 have differing effective dates, beginning with interim periods including and subsequent to March 12, 2020 through December 31, 2022. The Company has not adopted ASU 2020-04 as of September 30, 2021. The adoption of ASU 2020-04 is not expected to have a material impact on the Company's future consolidated financial statements.

The CARES Act, signed into law on March 27, 2020, and the CAA 2021, signed into law on December 27, 2020, which extended the CARES Act treatment of TDRs, amended GAAP with respect to the modification of loans to borrowers affected by the COVID-19 pandemic. Among other criteria, this guidance provided that short-term loan modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not

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TDRs. This includes short-term (e.g., nine months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. To qualify as an eligible loan under the CARES Act, a loan modification must be (1) related to COVID-19; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (a) 60 days after the date of termination of the national emergency by the President or (b) January 1, 2022. As of September 30, 2021, the Company had no loan modifications related to the COVID-19 pandemic. Loan modifications in accordance with the CARES Act are still subject to an evaluation in regard to determining whether or not a loan is deemed to be impaired.

12. REVENUE FROM CONTRACTS WITH CUSTOMERS

In accordance with ASC Topic 606 “Revenues from Contracts with Customers” (“ASC 606”), revenues are recognized when goods or services are transferred to the customer in exchange for the consideration the Company expects to be entitled to receive. The largest portion of the Company’s revenue is from interest income, which is not within the scope of ASC 606. All of the Company's revenue from contracts with customers within the scope of ASC 606 is recognized in non-interest income.

If a contract is determined to be within the scope of ASC 606, the Company recognizes revenue as it satisfies a performance obligation. Payments from customers are generally collected at the time services are rendered, monthly, or quarterly. For contracts with customers within the scope of ASC 606, revenue is either earned at a point in time or revenue is earned over time. Examples of revenue earned at a point in time are automated teller machine (“ATM”) transaction fees, wire transfer fees, overdraft fees and interchange fees. Revenue earned at a point in time is primarily based on the number and type of transactions that are generally derived from transactional information accumulated by the Company’s systems and is recognized immediately as the transactions occur or upon providing the service to complete the customer’s transaction. The Company is generally the principal in these contracts, with the exception of interchange fees, in which case the Company is acting as the agent and records revenue net of expenses paid to the principal. Examples of revenue earned over time, which generally occur on a monthly basis, are deposit account maintenance fees, investment advisory fees, merchant revenue, trust and investment management fees and safe deposit box fees. Revenue is generally derived from transactional information accumulated by the Company’s systems or those of third-parties and is recognized as the related transactions occur or services are rendered to the customer.

Disaggregation of Revenue

The following table includes the Company’s non-interest income, net disaggregated by type of service for the periods shown (in thousands):


	Three Months Ended				Six Months Ended
	September 30,				September 30,
	2021		2020		2021		2020

Asset management fees	$	928	$	883	$	1,904	$	1,857
Debit card and ATM fees		889		816		1,795		1,516
Deposit related fees		417		398		816		751
Loan related fees		311		294		684		529
BOLI ⁽¹⁾		234		242		424		432
Net gains on sales of loans held for sale ⁽¹⁾		—		—		—		28
FHLMC loan servicing fees ⁽¹⁾		21		21		43		49
BOLI death benefit in excess of cash surrender value		21		—		500		—
Other, net		253		165		496		280
Total non-interest income, net	$	3,074	$	2,819	$	6,662	$	5,442

(1)	Not within scope of ASC 606

For the three and six months ended September 30, 2021 and 2020, substantially all of the Company’s revenues within the scope of ASC 606 are for performance obligations satisfied at a point in time.

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Revenues recognized within scope of ASC 606

Asset management fees: Asset management fees are variable, since they are based on the underlying portfolio value, which is subject to market conditions and amounts invested by clients through the Trust Company. Asset management fees are recognized over the period that services are provided, and when the portfolio values are known or can be estimated at the end of each quarter.

Debit card and ATM fees: Debit and ATM interchange income represents fees earned when a debit card issued by the Bank is used. The Bank earns interchange fees from debit cardholder transactions through the MasterCard® payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the cardholders’ debit card. Certain expenses directly associated with the debit cards are recorded on a net basis with the interchange income.

Deposit related fees: Fees are earned on the Bank’s deposit accounts for various products offered to or services performed for the Bank’s customers. Fees include business account fees, non-sufficient fund fees, stop payment fees, wire services, safe deposit box and others. These fees are recognized on a daily, monthly or quarterly basis, depending on the type of service.

Loan related fees: Non-interest loan fee income is earned on loans that the Bank services, excluding loans serviced for the FHLMC which are not within the scope of ASC 606. Loan related fees include prepayment fees, late charges, brokered loan fees, maintenance fees and others. These fees are recognized on a daily, monthly, quarterly or annual basis, depending on the type of service.

Other: Fees earned on other services, such as merchant services or occasional non-recurring type services, are recognized at the time of the event or the applicable billing cycle.

Contract Balances

As of September 30, 2021, the Company had no significant contract liabilities where the Company had an obligation to transfer goods or services for which the Company had already received consideration. In addition, the Company had no material unsatisfied performance obligations as of this date.

13. COMMITMENTS AND CONTINGENCIES

Off-balance sheet arrangements – In the normal course of business, the Company is a party to financial instruments with off-balance sheet risk in order to meet the financing needs of its customers. These financial instruments generally include commitments to originate mortgage, commercial and consumer loans. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. The Company’s maximum exposure to credit loss in the event of nonperformance by the borrower is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments. 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.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third-party. These guarantees are primarily used to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Collateral held varies and is required in instances where the Company deems it necessary.

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Significant off-balance sheet commitments at September 30, 2021 are listed below (in thousands):



	Contract or Notional
	Amount
Commitments to originate loans:
Adjustable-rate	$	9,946
Fixed-rate		20,673
Standby letters of credit		1,870
Undisbursed loan funds and unused lines of credit		140,646
Total	$	173,135

Other Contractual Obligations - In connection with certain asset sales, the Company typically makes representations and warranties about the underlying assets conforming to specified guidelines. If the underlying assets do not conform to the specifications, the Company may have an obligation to repurchase the assets or indemnify the purchaser against loss. At September 30, 2021, loans under warranty totaled $50.8 million, which substantially represents the unpaid principal balance of the Company’s loans serviced for the FHLMC. The Company believes that the potential for loss under these arrangements is remote. At September 30, 2021, the Company had an allowance for FHLMC loans of $12,000.

The Bank is a public depository and, accordingly, accepts deposit and other public funds belonging to, or held for the benefit of, Washington and Oregon states, political subdivisions thereof, and municipal corporations. In accordance with applicable state law, in the event of default of a participating bank, all other participating banks in the state collectively assure that no loss of funds are suffered by any public depositor. Generally, in the event of default by a public depository, the assessment attributable to all public depositories is allocated on a pro rata basis in proportion to the maximum liability of each depository as it existed on the date of loss. The Company has not incurred any losses related to public depository funds for the six months ended September 30, 2021 and 2020.

The Bank has entered into employment contracts with certain key employees, which provide for contingent payments subject to future events.

Litigation – The Company is periodically a party to litigation arising in the ordinary course of business. In the opinion of management, these actions will not have a material effect, if any, on the Company’s future consolidated financial position, results of operations and cash flows.

14. LEASES

The Company has a finance lease for the shell of the building constructed as the Company's operations center which expires in November 2039. The Company is also obligated under various noncancelable operating lease agreements for land, buildings and equipment that require future minimum rental payments. For operating each lease, the Company records an operating lease right-of-use asset (representing the right to use the underlying asset for the lease term) and an operating lease liability (representing the obligation to make lease payments required under the terms of the lease). Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company uses its estimated incremental borrowing rate – derived from information available at the lease commencement date – as the discount rate when determining the present value of lease payments. The Company does not have any operating leases with an initial term of 12 months or less. Certain operating leases contain various provisions for increases in rental rates, based either on changes in the published Consumer Price Index or a predetermined escalation schedule. Certain operating leases provide the Company with the option to extend the lease term one or more times following expiration of the initial term. Lease extensions are not reasonably certain and the Company generally does not include payments occurring during option periods in the calculation of its operating lease right-of-use assets and operating lease liabilities. In accordance with ASC 842, the Company records in the consolidated balance sheet operating lease right-of-use (“ROU”) assets and operating lease liabilities for leases with an initial term of more than 12 months.

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The table below presents the ROU assets and lease liabilities recorded in the consolidated balance sheets at the dates indicated (in thousands):


	September 30,			March 31,			Classification in the
Leases	2021			2021			consolidated balance sheets
Finance lease ROU assets	$	1,393		$	1,432		Financing lease ROU assets
Finance lease liability	$	2,307		$	2,329		Finance lease liability
Finance lease remaining lease term		18.18	years		18.68	years
Finance lease discount rate		7.16	%		7.16	%

Operating lease ROU assets	$	8,129		$	8,782		Prepaid expenses and other assets
Operating lease liabilities	$	8,538		$	9,201		Accrued expenses and other liabilities
Operating lease weighted-average remaining lease term		7.49	years		7.87	years
Operating lease weighted-average discount rate		1.78	%		1.77	%

The table below presents certain information related to the lease costs for operating leases, which are recorded in occupancy and depreciation in the accompanying consolidated statements of income at the dates indicated (in thousands):


	Three months ended		Three months ended
Lease Costs	September 30, 2021		September 30, 2020
Finance lease amortization of right-of-use asset	$	19	$	19
Finance lease interest on lease liability		41		42
Operating lease costs		315		302
Variable lease costs		52		52
Total lease cost ⁽¹⁾	$	427	$	415


	Six months ended		Six months ended
Lease Costs	September 30, 2021		September 30, 2020
Finance lease amortization of right-of-use asset	$	38	$	38
Finance lease interest on lease liability		83		85
Operating lease costs		630		651
Variable lease costs		105		105
Total lease cost ⁽¹⁾	$	856	$	879

(1)	Income related to sub-lease activity is not significant and not presented herein.

Supplemental cash flow information - Operating cash flows paid for operating lease amounts included in the measurement of lease liabilities was $365,000 and $730,000 for the three and six months ended September 30, 2021, respectively, compared to $330,000 and $723,000 for the three and six months ended September 30, 2020, respectively. During the three and six months ended September 30, 2021, the Company did not record any operating lease ROU assets that were exchanged for operating lease liabilities. During the three and six months ended September 30, 2020, the Company recorded operating lease ROU assets that were exchanged for operating lease liabilities of $5.0 million and $5.8 million, respectively.

The following table reconciles the undiscounted cash flows for the periods presented related to the Company’s lease liabilities as of September 30, 2021 (in thousands):


Year Ended March 31:	Operating		Finance
	Leases		Lease
Remaining of 2022	$	718	$	107
2023		1,274		215
2024		1,290		219
2025		1,292		222
2026		1,040		226
Thereafter		3,527		3,174
Total minimum lease payments		9,141		4,163
Less: amount of lease payment representing interest		(603)		(1,856)
Lease liabilities	$	8,538	$	2,307

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In March 2010, the Company sold two of its branch locations. The Company maintains a substantial continuing involvement in the locations through various non-cancellable operating leases that contain certain renewal options. The resulting gain on sale of $2.1 million was deferred and is being amortized over the lives of the respective leases. At September 30, 2021 and March 31, 2021, the remaining deferred gain was $297,000 and $377,000, respectively, and is included in accrued expenses and other liabilities in the accompanying consolidated balance sheets.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This report contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These measures include net interest income on a fully tax equivalent basis and net interest margin on a fully tax equivalent basis. Management uses these non-GAAP measures in its analysis of the Company’s performance. The tax equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets. Management believes that it is a standard practice in the banking industry to present net interest income and net interest margin on a fully tax equivalent basis, and accordingly believes that providing these measures may be useful for peer comparison purposes. These disclosures should not be viewed as substitutes for the results determined to be in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

COVID-19 Related Information

In response to the current global situation surrounding the novel coronavirus of 2019 (“COVID-19”) pandemic, the Company is offering a variety of relief options designed to support our customers and the communities we serve.

Paycheck Protection Program ("PPP") Participation – The Coronavirus Aid, Relief and Economic Security Act of 2020 (“CARES Act”) authorized the Small Business Administration (“SBA”) to temporarily guarantee loans under the PPP which ended August 8, 2020. The Consolidated Appropriations Act, 2021 (“CAA 2021”) reopened the PPP through May 31, 2021 and in January 2021, the Bank began accepting and processing loan applications under PPP round 2 (“PPP2”). As a qualified SBA lender, the Company was automatically authorized to originate PPP loans. The SBA guarantees 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be forgiven and repaid by the SBA provided the borrower meets the SBA loan forgiveness requirements. In addition to the 1% interest earned on these loans, the SBA pays us fees for processing PPP loans. Through the conclusion of the initial PPP, we had funded PPP loans totaling $113.5 million. Through the conclusion of PPP2, we had funded PPP2 loans totaling $54.1 million. These PPP loans were originated primarily to existing customers who are small to midsize businesses as well as independent contractors, sole proprietors, partnerships and not-for-profits as allowed under the PPP guidance. As of September 30, 2021, after receipt of SBA loan forgiveness repayments, there were five loans with a remaining balance totaling $437,000 related to the initial PPP round and 275 loans with a remaining balance totaling $32.2 million related to PPP2.

As of September 30, 2021, the total outstanding loan balance and unamortized fees related to PPP loans totaled $33.9 million and $1.2 million, respectively. The SBA has a simplified forgiveness process for PPP loans of $150,000 or less. As of September 30, 2021, the Bank held 219 PPP loans of $150,000 or less with a combined balance of $10.4 million.

Loan Modifications –As of September 30, 2021, the Company had no commercial or consumer loans on deferral that were impacted by COVID-19. We believe the steps we are taking are necessary to effectively manage our portfolio and assist our customers through the ongoing uncertainty surrounding the duration, impact and government response to the COVID-19 pandemic.

Branch Operations and Additional Customer Support – The Company maintains its commitment to supporting its community and customers during the COVID-19 pandemic and remains focused on keeping our employees safe and the Bank running effectively to serve its customers. We have taken various steps to ensure the safety of our customers and our personnel. Many of our employees are continuing to work remotely or have flexible work schedules. We have established measures within our offices to help ensure the safety of those employees who must work on site. The Company has resumed normal branch activities with specific guidelines in place to help protect the safety of our customers.

Critical Accounting Policies

Critical accounting policies and estimates are discussed in our 2021 Form 10-K under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies.” That discussion highlights estimates that the Company makes that involve uncertainty or potential for substantial change. There have not been any material changes in the Company’s critical accounting policies and estimates as compared to the disclosures contained in the Company’s 2021 Form 10-K.

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Executive Overview

As a progressive, community-oriented financial services business, the Company emphasizes local, personal service to residents of its primary market area. The Company considers Clark, Klickitat and Skamania counties of Washington, and Multnomah, Washington and Marion counties of Oregon as its primary market area. The Company is engaged predominantly in the business of attracting deposits from the general public and using such funds in its primary market area to originate commercial business, commercial real estate, multi-family real estate, land, real estate construction, residential real estate and other consumer loans. The Company’s loans receivable, net, totaled $898.0 million at September 30, 2021 compared to $924.1 million at March 31, 2021.

The Bank's subsidiary, Riverview Trust Company (the “Trust Company”), is a trust and financial services company with one office located in downtown Vancouver, Washington and one office in Lake Oswego, Oregon which provides full-service brokerage activities, trust and asset management services. The Bank’s Business and Professional Banking Division, with two lending offices in Vancouver and one in Portland, offers commercial and business banking services.

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. In pursuit of these goals, the Company will seek to increase the loan portfolio consistent with its strategic plan and asset/liability and regulatory capital objectives, which includes maintaining a significant amount of commercial business and commercial real estate loans in its loan portfolio. Significant portions of our recent loan originations, other than SBA PPP loans, are mainly concentrated in commercial business and commercial real estate loans which carry adjustable rates, higher yields or shorter terms and higher credit risk than traditional fixed-rate consumer real estate one-to-four family mortgages.

Our strategic plan also stresses increased emphasis on non-interest income, including increased fees for asset management through the Trust Company and deposit service charges. The strategic plan is designed to enhance earnings, reduce interest rate risk and provide a more complete range of financial services to customers and the local communities the Company serves. We believe we are well positioned to attract new customers and to increase our market share through our 16 branches, including, among others, nine in Clark County, three in the Portland metropolitan area and three lending centers.

Vancouver is located in Clark County, Washington, which is just north of Portland, Oregon. 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. In addition to this industry base, the Columbia River Gorge Scenic Area and the Portland metropolitan area are sources of tourism, which has helped to transform the area from its past dependence on the timber industry.

Operating Strategy

Fiscal year 2022 marks the 99^th anniversary since the Bank began operations in 1923. The primary business strategy of the Company is to provide comprehensive banking and related financial services within its primary market area. The historical emphasis had been on residential real estate lending. Since 1998, however, the Company has been diversifying its loan portfolio through the expansion of its commercial and construction loan portfolios. At September 30, 2021, commercial and construction loans represented 92.3% of total loans compared to 93.8% at March 31, 2021. Commercial lending, including commercial real estate loans, typically has higher credit risk, greater interest margins and shorter terms than residential lending which can increase the loan portfolio's profitability.

The Company’s goal is to deliver returns to shareholders by increasing higher-yielding assets (in particular, commercial real estate and commercial business loans), increasing core deposit balances, managing problem assets, reducing expenses, hiring experienced employees with a commercial lending focus and exploring expansion opportunities. The Company seeks to achieve these results by focusing on the following objectives:

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Execution of our Business Plan. The Company is focused on increasing its loan portfolio, especially higher yielding commercial and construction loans, and its core deposits by expanding its customer base throughout its primary market areas. 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. To build its core deposit base, the Company will continue to utilize additional product offerings, technology and a focus on customer service in working toward this goal. The Company will also continue to seek to expand its franchise through de novo branches, the selective acquisition of individual branches, loan purchases and whole bank transactions that meet its investment and market objectives. In this regard, the Company previously announced plans for three new branches located in Clark County, Washington, to complement its existing branch network. New branches in both downtown Camas and in the Cascade Park neighborhood of Vancouver opened in fiscal 2021. The third new branch location in Ridgefield is expected to open in the winter of 2021.

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’s approach to credit management uses well defined policies and procedures and disciplined underwriting criteria resulting in our strong asset quality and credit metrics. Although the Company intends to prudently increase the percentage of its assets consisting of higher-yielding commercial real estate, real estate construction and commercial business loans, which offer higher risk-adjusted returns, shorter maturities and more sensitivity to interest rate fluctuations, the Company intends to manage credit exposure through the use of experienced bankers in these areas and a conservative approach to its lending.

Introduction of New Products and Services. The Company continuously reviews new products and services to provide its customers more financial options. All new technology and services are generally reviewed for business development and cost saving purposes. 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 products are tailored to meet the needs of small to medium size businesses and households in the markets we serve. The Company launched MobiMoney™ in January 2021, which allows account holders the ability to control their respective Riverview debit card from a smartphone or tablet. The Company intends to selectively add other products to further diversify revenue sources and to capture more of each customer’s banking relationship by cross selling loan and deposit products and additional services, including services provided through the Trust Company to increase its fee income. Assets under management by the Trust Company totaled $1.3 billion at both September 30, 2021 and March 31, 2021. 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. The Company offers personal checking, savings and money-market accounts, which generally are lower-cost sources of funds than certificates of deposit and are less likely to be withdrawn when interest rates fluctuate. To build its core deposit base, the Company has sought to reduce its dependence on traditional higher cost deposits in favor of stable lower cost core deposits to fund loan growth and decrease its reliance on other wholesale funding sources, including FHLB and FRB advances. The Company believes that its continued focus on building customer relationships will help to increase the level of core deposits and locally-based retail certificates of deposit. In addition, the Company intends to increase demand deposits by growing business banking relationships through expanded product lines tailored to meet its target business customers’ needs. The Company maintains technology-based products to encourage the growth of lower cost deposits, such as personal financial management, business cash management, and business remote deposit products, that enable it to meet its customers’ cash management needs and compete effectively with banks of all sizes. Core branch deposits increased $141.7 million at September 30, 2021 compared to March 31, 2021.

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Recruiting and Retaining Highly Competent Personnel with a Focus on Commercial Lending. The Company’s ability to continue to attract and retain banking professionals with strong community relationships and significant knowledge of its markets will be a key to its success. The Company believes that it enhances its market position and adds profitable growth opportunities by focusing on hiring and retaining experienced bankers focused on owner occupied commercial real estate and commercial lending, and the deposit balances that accompany these relationships. The Company emphasizes to its employees the importance of delivering exemplary customer service and seeking opportunities to build further relationships with its customers. The goal is to compete with other financial service providers by relying on the strength of the Company’s customer service and relationship banking approach. The Company believes that one of its strengths is that its employees are also shareholders through the Company’s employee stock ownership (“ESOP”) and 401(k) plans.

Commercial and Construction Loan Composition

The following tables set forth the composition of the Company’s commercial and construction loan portfolios based on loan purpose at the dates indicated (in thousands):


			Other				Commercial &
	Commercial		Real Estate		Real Estate		Construction
	Business		Mortgage		Construction		Total
September 30, 2021

Commercial business	$	174,043	$	—	$	—	$	174,043
SBA PPP		32,666		—		—		32,666
Commercial construction		—		—		2,793		2,793
Office buildings		—		129,063		—		129,063
Warehouse/industrial		—		96,321		—		96,321
Retail/shopping centers/strip malls		—		80,226		—		80,226
Assisted living facilities		—		761		—		761
Single purpose facilities		—		260,672		—		260,672
Land		—		15,925		—		15,925
Multi-family		—		40,455		—		40,455
One-to-four family construction		—		—		10,828		10,828
Total	$	206,709	$	623,423	$	13,621	$	843,753


March 31, 2021

Commercial business	$	171,701	$	—	$	—	$	171,701
SBA PPP		93,444		—		—		93,444
Commercial construction		—		—		9,810		9,810
Office buildings		—		135,526		—		135,526
Warehouse/industrial		—		87,880		—		87,880
Retail/shopping centers/strip malls		—		85,414		—		85,414
Assisted living facilities		—		854		—		854
Single purpose facilities		—		233,793		—		233,793
Land		—		14,040		—		14,040
Multi-family		—		45,014		—		45,014
One-to-four family construction		—		—		7,180		7,180
Total	$	265,145	$	602,521	$	16,990	$	884,656

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Comparison of Financial Condition at September 30, 2021 and March 31, 2021

Cash and cash equivalents, including interest-earning accounts, totaled $368.1 million at September 30, 2021 compared to $265.4 million at March 31, 2021. The Company’s cash balances fluctuate based upon funding needs, and the Company will deploy a portion of excess cash balances to purchase investment securities to earn higher yields than the nominal yield earned on cash held in interest-earning accounts, based on the Company’s asset/liability management program and liquidity objectives in order to maximize earnings. As a part of this strategy, the Company also invests a portion of its excess cash in short-term certificates of deposit held for investment. All of the certificates of deposit held for investment are fully insured by the FDIC. Certificates of deposits held for investment totaled $249,000 at both September 30, 2021 and March 31, 2021.

Investment securities totaled $350.3 million and $255.9 million at September 30, 2021 and March 31, 2021, respectively. The increase was due to investment purchases partially offset by normal pay downs, calls and maturities. During the six months ended September 30, 2021, purchases of investment securities totaled $120.1 million. During the six months ended September 30, 2020, there were no purchases of investment securities. The Company primarily purchases a combination of securities backed by government agencies (FHLMC, FNMA, SBA or GNMA). At September 30, 2021, the Company determined that none of its investment securities required an other than temporary impairment (“OTTI”) charge. For additional information on the Company’s investment securities, see Note 5 of the Notes to the Consolidated Financial Statements contained in Item 1 of this Form 10-Q.

Loans receivable, net, totaled $898.0 million at September 30, 2021 compared to $924.1 million at March 31, 2021, a decrease of $26.0 million. The decrease was mainly due to the loan forgiveness repayments on SBA PPP loans in addition to a decrease in multi-family and real estate construction loans. These decreases were offset by increase in other commercial business loans, commercial real estate loans and real estate one-to-four family loans. At September 30, 2021, SBA PPP loans, net of deferred fees which are included in the commercial business loan category, totaled $32.7 million as compared to $93.4 million at March 31, 2021. Other types of commercial business loans increased $2.3 million since March 31, 2021. Commercial real estate loans increased $23.6 million which was partially offset by a decrease in multi-family and real estate construction loans of $4.6 million and $3.4 million, respectively. Due to the timing of the completion of these real estate construction projects, balances may fluctuate in these categories. Once these projects are completed, these loans will roll to permanent financing and be classified within a category under other real estate mortgage. Consumer loans increased $12.2 million as a result of the Company purchasing real estate one-to-four family loans totaling $21.8 million as a way to supplement loan originations in this category as the Company transitioned to a model where the Company no longer originates mortgage loans but instead, brokers these loans to third-party mortgage companies. The Company began purchasing commercial loans as a way to supplement loan originations and diversity its commercial loan portfolio. These loans were originated by a third-party located outside the Company’s primary market area and totaled $3.0 million at September 30, 2021. The Company also purchases the guaranteed portion of SBA loans as a way to supplement loan originations, further diversify its loan portfolio and earn a higher yield than earned on its cash or short-term investments. These SBA loans are originated through another financial institution located outside the Company’s primary market area. These loans are purchased with servicing retained by the seller. At September 30, 2021, the Company’s purchased SBA loan portfolio was $43.7 million compared to $47.4 million at March 31, 2021.

Deposits increased $160.6 million to $1.5 billion at September 30, 2021 compared to $1.3 billion at March 31, 2021. The increase was due to proceeds from SBA PPP loans deposited directly into customer accounts and also due to a change in savings and spending habits as a result of COVID-19. The Company had no wholesale-brokered deposits at September 30, 2021 and March 31, 2021. Core branch deposits accounted for 96.5% of total deposits at September 30, 2021 compared to 97.4% at March 31, 2021. The Company plans to continue its focus on core deposits and on building customer relationships as opposed to obtaining deposits through the wholesale markets.

Shareholders' equity increased $8.2 million to $159.8 million at September 30, 2021 from $151.6 million at March 31, 2021. The increase was mainly attributable to net income of $12.2 million. The increase was partially offset by payments of cash dividends totaling $2.3 million and the repurchase of 249,908 shares of common stock totaling $1.7 million during the six months ended September 30, 2021.

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Capital Resources

The Bank is a state-chartered, federally insured institution subject to various regulatory capital requirements administered by the FDIC and WDFI. Failure to meet minimum capital requirements can result in the initiation of certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total and tier I capital to risk-weighted assets, core capital to total assets and tangible capital to tangible assets (set forth in the table below). Management believes the Bank met all capital adequacy requirements to which it was subject as of September 30, 2021.

As of September 30, 2021, the Bank was categorized as “well capitalized” under the FDIC’s regulatory framework for prompt corrective action. The Bank’s actual and required minimum capital amounts and ratios were as follows at the dates indicated (dollars in thousands):


									“Well Capitalized”
					For Capital				Under Prompt
	Actual				Adequacy Purposes				Corrective Action
	Amount		Ratio		Amount		Ratio		Amount		Ratio
September 30, 2021
Total Capital:
(To Risk-Weighted Assets)	$	161,226	17.42	%	$	74,040	8.0	%	$	92,549	10.0	%
Tier 1 Capital:
(To Risk-Weighted Assets)		149,591	16.16			55,530	6.0			74,040	8.0
Common equity tier 1 Capital:
(To Risk-Weighted Assets)		149,591	16.16			41,647	4.5			60,157	6.5
Tier 1 Capital (Leverage):
(To Average Tangible Assets)		149,591	9.08			65,884	4.0			82,355	5.0

March 31, 2021
Total Capital:
(To Risk-Weighted Assets)	$	151,555	17.35	%	$	69,879	8.0	%	$	87,349	10.0	%
Tier 1 Capital:
(To Risk-Weighted Assets)		140,529	16.09			52,409	6.0			69,879	8.0
Common equity tier 1 Capital:
(To Risk-Weighted Assets)		140,529	16.09			39,307	4.5			56,777	6.5
Tier 1 Capital (Leverage):
(To Average Tangible Assets)		140,529	9.63			58,344	4.0			72,930	5.0

In addition to the minimum common equity tier 1 (“CET1”), Tier 1 and total capital ratios, the Bank is required to maintain a capital conservation buffer consisting of additional CET1 capital in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions. The capital conservation buffer is required to be an amount greater than 2.5% of risk-weighted assets. As of September 30, 2021, the Bank’s CET1 capital exceeded the required capital conservation buffer at an amount greater than 2.5%.

For a bank holding company, such as the Company, the capital guidelines apply on a bank only basis. The Federal Reserve expects the holding company’s subsidiary banks to be well capitalized under the prompt corrective action regulations. If the Company was subject to regulatory guidelines for bank holding companies at September 30, 2021, the Company would have exceeded all regulatory capital requirements.

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At periodic intervals, the Company’s banking regulators routinely examine the Company’s financial condition and risk management processes as part of their legally prescribed oversight. Based on their examinations, these regulators can direct that the Company’s consolidated financial statements be adjusted in accordance with their findings. A future examination could include a review of certain transactions or other amounts reported in the Company’s 2022 consolidated financial statements.

Liquidity

Liquidity is essential to our business. The objective of the Bank’s liquidity management is to maintain ample cash flows to meet obligations for depositor withdrawals, to fund the borrowing needs of loan customers, and to fund ongoing operations. Core relationship deposits are the primary source of the Bank’s liquidity. As such, the Bank focuses on deposit relationships with local consumer and business clients who maintain multiple accounts and services at the Bank.

Liquidity management is both a short and long-term responsibility of the Company's management. 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. If the Company requires funds beyond its ability to generate them internally, it has additional diversified and reliable sources of funds with the FHLB, the FRB and other wholesale facilities. These sources of funds may be used on a long or short-term basis to compensate for a reduction in other sources of funds or on a long-term basis to support lending activities.

The Company's primary sources of funds are customer deposits, proceeds from principal and interest payments on loans, proceeds from the sale of loans, maturing securities, FHLB advances and FRB borrowings. While maturities and scheduled amortization of loans and securities are a predictable source of funds, deposit flows and prepayment of mortgage loans and mortgage-backed securities are greatly influenced by general interest rates, economic conditions and competition. Management believes that its focus on core relationship deposits coupled with access to borrowing through reliable counterparties provides reasonable and prudent assurance that ample liquidity is available. However, depositor or counterparty behavior could change in response to competition, economic or market situations or other unforeseen circumstances, which could have liquidity implications that may require different strategic or operational actions.

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 six months ended September 30, 2021, the Bank used its sources of funds primarily to fund loan commitments. At September 30, 2021, cash and cash equivalents, certificates of deposit held for investment and available for sale investment securities totaled $646.6 million, or 37.7% of total assets. 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, including FRB borrowings and FHLB advances consistent with its asset/liability objectives. At September 30, 2021, the Bank had no advances from the FRB and maintains a credit facility with the FRB with available borrowing capacity of $42.9 million, subject to sufficient collateral. At September 30, 2021, the Bank had no advances from the FHLB and had an available borrowing capacity of $238.5 million, subject to sufficient collateral and stock investment. At September 30, 2021, the Bank had sufficient unpledged collateral to allow it to utilize its available borrowing capacity from the FRB and the FHLB. Borrowing capacity may, however, fluctuate based on acceptability and risk rating of loan collateral and counterparties could adjust discount rates applied to such collateral at their discretion.

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 September 30, 2021 and March 31, 2021, the Bank had no wholesale brokered deposits. The Bank also participates in the CDARS and ICS deposit products, which allow the Company to accept deposits in excess of the FDIC insurance limit for that depositor and obtain “pass-through” insurance for the total deposit. The Bank’s CDARS and ICS balances were $56.2 million, or 3.7% of total deposits, and $37.9 million, or 2.8% of total deposits, at September 30, 2021 and March 31, 2021, respectively. In addition, the Bank is enrolled in an internet deposit listing service. Under this listing service, the Bank may post time deposit rates on an internet site where institutional investors have the ability to deposit

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funds with the Bank. At September 30, 2021 and March 31, 2021, the Company had no deposits through this listing service. Although the Company did not originate any internet-based deposits during the six months ended September 30, 2021, the Company may do so in the future consistent with its asset/liability objectives. The combination of all the Bank’s funding sources gives the Bank available liquidity of $1.2 billion, or 67.6% of total assets at September 30, 2021.

At September 30, 2021, the Company had total commitments of $173.1 million, which includes commitments to extend credit of $30.6 million, unused lines of credit totaling $114.2 million, undisbursed construction loans totaling $26.5 million, and standby letters of credit totaling $1.9 million. 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 September 30, 2021 totaled $81.6 million. 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 $40.1 million at September 30, 2021.

Riverview Bancorp, Inc., as a separate legal entity from the Bank, must provide for its own liquidity. Sources of capital and liquidity for Riverview Bancorp, Inc. include distributions from the Bank and the issuance of debt or equity securities. Dividends and other capital distributions from the Bank are subject to regulatory notice. At September 30, 2021, Riverview Bancorp, Inc. had $9.7 million in cash to meet its liquidity needs.

Asset Quality

Nonperforming assets, consisting of nonperforming loans were $490,000 or 0.03% of total assets at September 30, 2021 compared with $571,000 or 0.04% of total assets at March 31, 2021.

The following table sets forth information regarding the Company’s nonperforming loans at the dates indicated (dollars in thousands):


	September 30, 2021			March 31, 2021
	Number of			Number of
	Loans	Balance		Loans	Balance

Commercial business	4	$	267	3	$	357
Commercial real estate	1		133	1		144
Consumer	8		90	5		70
Total	13	$	490	9	$	571

The allowance for loan losses was $16.5 million or 1.80% of total loans at September 30, 2021 compared to $19.2 million or 2.03% of total loans at March 31, 2021. The Company recorded a recapture of loan losses of $2.7 million for the six months ended September 30, 2021 compared to a provision for loan losses of $6.3 million for the six months ended September 30, 2020. The decrease in the allowance for loan losses was primarily due to the continued improvement since March 31, 2021 in the national and local economy associated with the recovery from the COVID-19 pandemic. Our SBA PPP loans were omitted from the calculation of the required allowance for loan losses at September 30, 2021 and 2020 as these loans are fully guaranteed by the SBA and management expects that a majority of SBA PPP borrowers will seek full or partial forgiveness of their loan obligations from the SBA, which in turn, the SBA will reimburse the Bank for the amount forgiven.

The coverage ratio of allowance for loan losses to nonperforming loans was 3367.35% at September 30, 2021 compared to 3358.67% at March 31, 2021. At September 30, 2021, the Company identified $243,000 or 49.56% of its nonperforming loans as impaired and performed a specific valuation analysis on each loan resulting in no specific reserves being required for these impaired loans.

Management considers the allowance for loan losses to be adequate at September 30, 2021 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. However, a decline in national and local economic conditions (including declines as a result of the COVID-19 pandemic), results of examinations by the Company’s banking regulators, or other factors could result in a material increase in the allowance for loan losses and may

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adversely affect the Company’s future financial condition and results of operations. In 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. For further information regarding the Company’s impaired loans and allowance for loan losses, see Note 7 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q.

Troubled debt restructurings (“TDRs”) are loans for which the Company, for economic or legal reasons related to the borrower's financial condition, has granted a concession to the borrower that it would otherwise not consider. A TDR typically involves a modification of terms such as a reduction of the stated interest rate or face amount of the loan, a reduction of accrued interest, and/or an extension of the maturity date(s) at a stated interest rate lower than the current market rate for a new loan with similar risk.

TDRs are considered impaired loans and as such, when a loan is deemed to be impaired, the amount of the impairment is measured using discounted cash flows and the original note rate, except when the loan is collateral dependent. In these cases, the estimated fair value of the collateral (less any selling costs, if applicable) is used. Impairment is recognized as a specific component within the allowance for loan losses if the estimated value of the impaired loan is less than the recorded investment in the loan. When the amount of the impairment represents a confirmed loss, it is charged off against the allowance for loan losses. All of the Company’s TDRs were paying as agreed at September 30, 2021.

The Company has determined that, in certain circumstances, it is appropriate to split a loan into multiple notes. This typically includes a nonperforming charged-off loan that is not supported by the cash flow of the relationship and a performing loan that is supported by the cash flow. These may also be split into multiple notes to align portions of the loan balance with the various sources of repayment when more than one exists. Generally, the new loans are restructured based on customary underwriting standards. In situations where they are not, the policy exception qualifies as a concession, and if the borrower is experiencing financial difficulties, the loans are accounted for as TDRs.

The accrual status of a loan may change after it has been classified as a TDR. The Company’s general policy related to TDRs is to perform a credit evaluation of the borrower’s financial condition and prospects for repayment under the revised terms. This evaluation includes consideration of the borrower’s sustained historical repayment performance for a reasonable period of time. A sustained period of repayment performance generally would be a minimum of six months and may include repayments made prior to the restructuring date. If repayment of principal and interest appears doubtful, it is placed on non-accrual status.

The following table sets forth information regarding the Company’s nonperforming assets at the dates indicated (dollars in thousands):



	September 30, 2021			March 31, 2021

Loans accounted for on a non-accrual basis:
Commercial business	$	172		$	182
Other real estate mortgage		133			144
Consumer		90			69
Total		395			395
Accruing loans which are contractually past due 90 days or more		95			176
Total nonperforming assets	$	490		$	571

Foregone interest on non-accrual loans ⁽¹⁾	$	14		$	49
Total nonperforming loans to total loans		0.05	%		0.06	%
Total nonperforming loans to total assets		0.03	%		0.04	%
Total nonperforming assets to total assets		0.03	%		0.04	%

(1)	Six months ended September 30, 2021 and year ended March 31, 2021.

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The following tables set forth information regarding the Company’s nonperforming assets by loan type and geographical area at the dates indicated (in thousands):


	Southwest
	Washington		Other		Total
September 30, 2021

Commercial business	$	172	$	95	$	267
Commercial real estate		133		—		133
Consumer		87		3		90
Total nonperforming assets	$	392	$	98	$	490


March 31, 2021

Commercial business	$	182	$	175	$	357
Commercial real estate		144		—		144
Consumer		63		7		70
Total nonperforming assets	$	389	$	182	$	571

The composition of land acquisition and development and speculative and custom/presold construction loans by geographical area is as follows at the dates indicated (in thousands):


	Northwest		Other		Southwest
	Oregon		Oregon		Washington		Total
September 30, 2021

Land acquisition and development	$	2,167	$	1,022	$	12,736	$	15,925
Speculative and custom/presold construction		—		162		10,666		10,828
Total	$	2,167	$	1,184	$	23,402	$	26,753


March 31, 2021

Land acquisition and development	$	2,221	$	1,765	$	10,054	$	14,040
Speculative and custom/presold construction		—		450		5,382		5,832
Total	$	2,221	$	2,215	$	15,436	$	19,872

Other loans of concern, which are classified as substandard loans and are not presently included in the non-accrual category, consist of loans where the borrowers have cash flow problems, or the collateral securing the respective loans may be inadequate. In either or both of these situations, the borrowers may be unable to comply with the present loan repayment terms, and the loans may subsequently be included in the non-accrual category. Management considers the allowance for loan losses to be adequate to cover the probable losses inherent in these and other loans.

The following table sets forth information regarding the Company’s other loans of concern at the dates indicated (dollars in thousands):


	September 30, 2021			March 31, 2021
	Number of			Number of
	Loans	Balance		Loans	Balance

Commercial business	2	$	141	—	$	—
Commercial real estate	4		9,722	2		7,268
Multi-family	1		8	2		24
Total	7	$	9,871	4	$	7,292

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At September 30, 2021, loans delinquent 30 - 89 days were 0.20% of total loans compared to 0.03% at March 31, 2021 and were comprised mainly of commercial business and consumer loans. There were no loans 30 - 89 days delinquent in the commercial real estate (“CRE”) portfolio. At September 30, 2021, CRE loans represented the largest portion of the loan portfolio at 62.00% of total loans and commercial business represented 22.60% of total loans.

Off-Balance Sheet Arrangements and Other Contractual Obligations

In the normal course of operations, the Company enters into certain contractual obligations and other commitments. Obligations generally relate to funding of operations through deposits and borrowings as well as leases for premises. Commitments generally relate to lending operations.

The Company has obligations under long-term operating and capital leases, principally for building space and land. Lease terms generally cover five-year periods, with options to extend, and are not subject to cancellation.

The Company has commitments to originate fixed and variable rate mortgage loans to customers. Because some commitments expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Undisbursed loan funds and unused lines of credit include funds not disbursed but committed to construction projects and home equity and commercial lines of credit. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.

For further information regarding the Company’s off-balance sheet arrangements and other contractual obligations, see Notes 13 and 14 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q.

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. Goodwill is presumed to have an indefinite useful life and is tested, at least annually, for impairment at the reporting unit level. The Company has two reporting units, the Bank and the Trust Company, for purposes of evaluating goodwill for impairment. All of the Company’s goodwill has been allocated to the Bank reporting unit. The Company performs an annual review in the third quarter of each fiscal year, or more frequently if indications of potential impairment exist, to determine if the recorded goodwill is impaired. If the fair value exceeds the carrying value, goodwill at the reporting unit level is not considered impaired and no additional analysis is necessary. If the carrying value of the reporting unit is greater than its fair value, there is an indication that impairment may exist and additional analysis must be performed to measure the amount of impairment loss, if any. The amount of impairment is determined by comparing the implied fair value of the reporting unit’s goodwill to the carrying value of the goodwill in the same manner as if the reporting unit was being acquired in a business combination. 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.

A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in our expected future cash flows; a sustained, significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; adverse action or assessment by a regulator; and unanticipated competition. 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, 2020. The goodwill impairment test involves a two-step process. Step one of the goodwill impairment test estimates the fair value of the reporting unit utilizing the allocation of corporate value approach, the income approach, the whole bank transaction approach and the market approach in order to derive an enterprise value of the Company. The allocation of corporate value approach applies the aggregate market value of the Company and divides it among the reporting units. A key assumption in this approach is the control premium applied to the aggregate market value. A control premium is utilized as the value of a company from the perspective of a controlling interest is generally higher than the widely quoted market price per share. The Company used

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an expected control premium of 35%, which was based on comparable transactional history. The income approach uses a reporting unit’s projection of estimated operating results and cash flows that are discounted using a rate that reflects current market conditions. The projection uses management’s best estimates of economic and market conditions over the projected period including growth rates in loans and deposits, estimates of future expected changes in net interest margins and cash expenditures. Assumptions used by the Company in its discounted cash flow model (income approach) included an annual revenue growth rate that approximated 8.1%, a net interest margin that approximated 3.3% and a return on assets that ranged from 0.91% to 1.39% (average of 1.11%). 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 14.86% utilized for our cash flow estimates and a terminal value estimated at 1.43 times the ending book value of the reporting unit. The Company used a build-up approach in developing the discount rate that included: an assessment of the risk-free interest rate, the rate of return expected from publicly traded stocks, the industry the Company operates in and the size of the Company. The whole bank transaction approach estimates fair value by applying key financial variables in transactions involving acquisitions of similar institutions. In applying the whole bank transaction approach method, the Company identified transactions that occurred during the first 10 months of calendar 2020 utilizing a multiple of 1.1 times price to book value. 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. 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 0.8 times tangible book value. The Company calculated a fair value of its reporting unit of $143.0 million using the corporate value approach, $179.0 million using the income approach, $184.0 million using the whole bank transaction approach and $180.0 million using the market approach, with a final concluded value of $181.0 million, with half the weight given to the income approach and one quarter weight given to the whole bank approach and the market approach. No weight was given to the corporate value approach. 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.

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 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. If the Company recorded an impairment charge, its financial position and results of operations would be adversely affected; however, such an impairment charge would have no impact on our liquidity, operations or regulatory capital.

The Company also completed a qualitative assessment of goodwill as of September 30, 2021 and concluded that it is more likely than not that the fair value of the Bank (the reporting unit), exceeds its carrying value at September 30, 2021. If adverse economic conditions or decreases in the Company’s common stock price and market capitalization as a result of the COVID-19 pandemic were deemed sustained in the future rather than temporary, it may significantly affect the fair value of the reporting unit and may trigger future goodwill impairment charges. 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. If the Company recorded an impairment charge, its financial position and results of operations would be adversely affected; however, such an impairment charge would have no impact on our liquidity, operations or regulatory capital.

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Comparison of Operating Results for the Three and Six Months Ended September 30, 2021 and 2020

Net Income. Net income was $6.4 million, or $0.29 per diluted share for the three months ended September 30, 2021, compared to $2.5 million, or $0.11 per diluted share for same prior year period. Net income for the six months ended September 30, 2021 and 2020 was $12.2 million, or $0.55 per diluted share, and $3.0 million, or $0.14 per diluted share, respectively. The Company’s net income increased primarily as a result of increased net interest income and the recapture of loan losses of $1.1 million and $2.7 million for the three and six months ended September 30, 2021, respectively, compared to a provision for loan losses of $1.8 million and $6.3 million for the three and six months ended September 30, 2020, respectively. The Company recognized in other non-interest expense a $1.0 million gain on sale of premises and equipment during the three months ended September 30, 2021 that was not present during the three months ended September 30, 2020. In addition, the Company recognized in other non-interest income a $500,000 BOLI death benefit during the six months ended September 30, 2021 that was not present during the six months ended September 30, 2020.

Net Interest Income. The Company’s profitability depends primarily on its net interest income, which is the difference between the income it receives on interest-earning assets and the interest paid on deposits and borrowings. When the rate earned on interest-earning assets equals or exceeds the rate paid on interest-bearing liabilities, this positive interest rate spread will generate net interest income. The Company’s results of operations are also significantly affected by general economic and competitive conditions, particularly changes in market interest rates, government legislation and regulation, and monetary and fiscal policies.

Net interest income for the three and six months ended September 30, 2021 was $12.4 million and $23.7 million, representing an increase of $1.3 million and $1.5 million, respectively, compared to the three and six months ended September 30, 2020. The net interest margin for the three and six months ended September 30, 2021 was 3.12% and 3.09%, respectively, compared to 3.33% and 3.48% for the three and six months ended September 30, 2020. The decrease in the net interest margin was primarily the result of the continued low interest rate environment putting downward pressure on adjustable rate instruments. Additionally, net interest margin decreased due to the impact of the low loan yields on the SBA PPP loan portfolio and lower yields on new loan originations and investment purchases as compared to the yields on the legacy loan and investment securities portfolios. The increase in low yielding overnight cash balances also caused a decrease in the average yield on interest-earning assets partially offset by the decrease in the average yield on interest-bearing liabilities. Finally, the decrease in net interest margin was due to yields earned on interest-earning assets declining at a faster rate than interest rates paid on interest-bearing liabilities as changes in the average rate paid on interest-bearing deposits tend to lag changes in market interest rate changes.

Interest and Dividend Income. Interest and dividend income for the three and six months ended September 30, 2021 was $13.0 million and $24.9 million, respectively, compared to $11.9 million and $24.2 million, respectively, for the same periods in the prior year. The increase for the three months ended September 30, 2021 was primarily due to the increase in interest on investment securities of $669,000 when compared to the three months ended September 30, 2020 due to the overall increase in average balance of investment securities. In addition, interest income on loans receivable increased $280,000 due to the 10 basis point increase in the average yield on mortgage loans to 5.17% for the three months ended September 30, 2021, which included loan prepayment fees of $645,000, compared to 5.07% for the three months ended September 30, 2020, which included loan prepayment fees of $98,000. Interest and dividend income for the six months ended September 30, 2021 increased primarily due to a $1.0 million increase in interest income on investment securities which offset a $472,000 decrease in interest income on loans receivable. The average yield on non-mortgage related loans increased 149 basis points to 4.94% and 89 basis points to 4.47% for the three and six months ended September 30, 2021, respectively, predominantly from higher deferred SBA PPP loan fees recognized from SBA PPP loans that are forgiven. SBA PPP loans have a favorable impact on our non-mortgage loan yields when SBA PPP loans are forgiven and the remaining deferred fees are recognized. Loan interest income was also impacted by the decline in the average balance of net loans between periods. The substantial increase in the average balance of overnight cash balances as a result of the increase in deposit balances, is negatively impacting the average yield on interest earning assets which decreased 34 basis points to 3.26% for the three months ended September 30, 2021, compared to 3.60% for the three months ended September 30, 2020. The average yield on interest earning assets was 3.25% for the six months ended September 30, 2021, compared to 3.80% for the six months ended September 30, 2020. Interest and dividend income for the three and six months ended September 30, 2021 included $928,000 and $1.8 million, respectively, of interest income and fees earned related to SBA PPP loans, compared to $760,000 and $1.4 million, respectively, for the same periods in the prior year.

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The average balance of net loans decreased $80.8 million and $71.3 million to $903.0 million and $914.0 million for the three and six months ended September 30, 2021, respectively, from $983.7 million and $985.3 million for the same periods in the prior year. The average yield on net loans increased to 5.11% and 4.89%, respectively, for the three and six months ended September 30, 2021 compared to 4.58% and 4.63% for the same periods in the prior year due primarily to loan prepayment fees and remaining deferred fees are recognized upon SBA PPP loan forgiveness. For the three and six months ended September 30, 2021, the average balance of SBA PPP loans was $46.2 million and $63.1 million, respectively, and the average yield on SBA PPP loans was 7.97% and 5.75%, respectively, which included the recognition of the net deferred fees. The impact of SBA PPP loans on loan yields will change during any period based on the volume of prepayments or amounts forgiven by the SBA as certain criteria are met. This increase in the average yield of net loans and the average balance of investment securities between the periods, was the primary reason for overall increase in interest and dividend income.

Interest Expense. Interest expense totaled $589,000 and $1.2 million for the three and six months ended September 30, 2021, respectively, compared to $885,000 and $2.0 million for the three and six months ended September 30, 2020, respectively. Interest expense on deposits decreased $258,000 and $674,000 for the three and six months ended September 30, 2021, respectively, compared to the same periods in the prior year due to the overall decrease in the weighted average interest rate on interest-bearing deposits. The weighted average interest rate on interest-bearing deposits decreased to 0.16% and 0.17% for the three and six months ended September 30, 2021, respectively, compared to 0.33% and 0.39% for the same periods in the prior year. The decrease in the weighted average interest rate on regular savings accounts and certificates of deposits contributed primarily to the overall decrease in the expense on deposits which reflects the market’s response to the 150 basis point reduction in the targeted federal funds rate in March 2020 due to the COVID-19 pandemic. The average balance of interest-bearing deposits increased $199.0 million and $185.3 million for the three and six months ended September 30, 2021, respectively, compared to the same periods in the prior year. The increase in the average balance of interest-bearing deposits is due primarily to proceeds from SBA PPP loans deposited directly into customer accounts, government stimulus checks and an increase in savings trends and a change in spending habits as a result of COVID-19.

Interest expense on borrowings decreased $38,000 and $96,000 for the three and six months ended September 30, 2021, respectively, compared to the same periods in the prior year. The average balance of other interest-bearing liabilities decreased $29.9 million and $25.5 million for the three and six months ended September 30, 2021, respectively, compared to the same periods in the prior year. The weighted average interest rate on other interest-bearing liabilities increased to 2.59% and 2.63% for the three and six months ended September 30, 2021, respectively, compared to 1.53% and 1.75% for the same periods in the prior year due to the higher rate paid on the outstanding junior subordinated debentures as compared to the outstanding FHLB borrowings. Overall, total interest expense is lower due to the decrease in the weighted average interest rate on interest-bearing liabilities for the three and six months ended September 30, 2021 and 2020, respectively, in addition to no outstanding borrowings for the three and six months ended September 30, 2021 compared to $30.0 million in outstanding borrowings for the three and six months ended September 30, 2020.

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The following tables set forth, for the periods indicated, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income earned on average interest-earning assets and interest expense paid on average interest-bearing liabilities, resultant yields, interest rate spread, ratio of interest-earning assets to interest-bearing liabilities and net interest margin (dollars in thousands):


	Three Months Ended September 30,
	2021						2020
			Interest						Interest
	Average		and				Average		and
	Balance		Dividends		Yield/Cost		Balance		Dividends		Yield/Cost

Interest-earning assets:
Mortgage loans	$	677,619	$	8,822	5.17	%	$	684,682	$	8,746	5.07	%
Non-mortgage loans		225,352		2,804	4.94			299,055		2,600	3.45
Total net loans ⁽¹⁾		902,971		11,626	5.11			983,737		11,346	4.58

Investment securities ⁽²⁾		326,100		1,208	1.47			129,090		527	1.62
Daily interest-earning assets		2,845		—	—			42		—	—
Other earning assets		345,736		148	0.17			205,934		81	0.16
Total interest-earning assets		1,577,652		12,982	3.26			1,318,803		11,954	3.60

Non-interest-earning assets:
Office properties and equipment, net		19,415						18,069
Other non-interest-earning assets		79,874						76,617
Total assets	$	1,676,941					$	1,413,489

Interest-bearing liabilities:
Regular savings accounts	$	319,919		64	0.08		$	252,153		91	0.14
Interest checking accounts		280,282		22	0.03			220,190		20	0.04
Money market accounts		273,024		36	0.05			190,635		34	0.07
Certificates of deposit		121,051		277	0.91			132,277		512	1.54
Total interest-bearing deposits		994,276		399	0.16			795,255		657	0.33

Other interest-bearing liabilities		29,113		190	2.59			59,048		228	1.53
Total interest-bearing liabilities		1,023,389		589	0.23			854,303		885	0.41

Non-interest-bearing liabilities:
Non-interest-bearing deposits		475,035						395,296
Other liabilities		18,723						13,489
Total liabilities		1,517,147						1,263,088
Shareholders’ equity		159,794						150,401
Total liabilities and shareholders’ equity	$	1,676,941					$	1,413,489
Net interest income			$	12,393					$	11,069
Interest rate spread					3.03	%					3.19	%
Net interest margin					3.12	%					3.33	%

Ratio of average interest-earning assets to average interest-bearing liabilities					154.16	%					154.37	%

Tax equivalent adjustment ⁽³⁾			$	17					$	5

(1)	Includes non-accrual loans.

(2)	For purposes of the computation of average yield on investment securities available for sale, historical cost balances were utilized; therefore, the yield information does not give effect to changes in fair value that are reflected as a component of shareholders’ equity.

(3)	Tax-equivalent adjustment relates to non-taxable investment interest income and preferred equity securities dividend income.

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	Six Months Ended September 30,
	2021						2020
			Interest						Interest
	Average		and				Average		and
	Balance		Dividend		Yield/Cost		Balance		Dividends		Yield/Cost

Interest-earning assets:
Mortgage loans	$	671,346	$	16,963	5.04	%	$	697,351	$	17,708	5.06	%
Non-mortgage loans		242,660		5,439	4.47			287,917		5,166	3.58
Total net loans (1)		914,006		22,402	4.89			985,268		22,874	4.63

Investment securities (2)		302,699		2,273	1.50			134,309		1,206	1.79
Daily interest-earning assets		2,734		—	—			88		—	—
Other earning assets		309,015		243	0.16			151,342		118	0.16
Total interest-earning assets		1,528,454		24,918	3.25			1,271,007		24,198	3.80

Non-interest-earning assets:
Office properties and equipment, net		19,356						17,787
Other non-interest-earning assets		78,962						77,654
Total assets	$	1,626,772					$	1,366,448

Interest-bearing liabilities:
Regular savings accounts	$	307,858		120	0.08		$	245,976		307	0.25
Interest checking accounts		273,574		43	0.03			211,090		47	0.04
Money market accounts		258,758		71	0.05			186,089		87	0.09
Certificates of deposit		122,099		607	0.99			133,863		1,074	1.60
Total interest-bearing deposits		962,289		841	0.17			777,018		1,515	0.39

Other interest-bearing liabilities		29,097		384	2.63			54,616		480	1.75
Total interest-bearing liabilities		991,386		1,225	0.25			831,634		1,995	0.48

Non-interest-bearing liabilities:
Non-interest-bearing deposits		459,173						371,259
Other liabilities		18,813						13,002
Total liabilities		1,469,372						1,215,895
Shareholders’ equity		157,400						150,553
Total liabilities and shareholders’ equity	$	1,626,772					$	1,366,448
Net interest income			$	23,693					$	22,203
Interest rate spread					3.00	%					3.32	%
Net interest margin					3.09	%					3.48	%

Ratio of average interest-earning assets to average interest-bearing liabilities					154.17	%					152.83	%

Tax equivalent adjustment (3)			$	33					$	11

(1)	Includes non-accrual loans.

(2)	For purposes of the computation of average yield on investment securities available for sale, historical cost balances were utilized; therefore, the yield information does not give effect to changes in fair value that are reflected as a component of shareholders’ equity.

(3)	Tax-equivalent adjustment relates to non-taxable investment interest income and preferred equity securities dividend income.

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The following table sets forth the effects of changing rates and volumes on net interest income of the Company for the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020. Variances that were insignificant have been allocated based upon the percentage relationship of changes in volume and changes in rate to the total net change (in thousands).


	Three Months Ended September 30,						Six Months Ended September 30,
	2021 vs 2020						2021 vs 2020
	Increase (Decrease) Due to						Increase (Decrease) Due to
					Total						Total
					Increase						Increase
	Volume		Rate		(Decrease)		Volume		Rate		(Decrease)
Interest Income:
Mortgage loans	$	(92)	$	168	$	76	$	(674)	$	(71)	$	(745)
Non-mortgage loans		(742)		946		204		(889)		1,162		273
Investment securities ⁽¹⁾		734		(53)		681		1,290		(223)		1,067
Daily interest-earning		—		—		—		—		—		—
Other earning assets		62		5		67		125		—		125
Total interest income		(38)		1,066		1,028		(148)		868		720

Interest Expense:
Regular savings accounts		19		(46)		(27)		63		(250)		(187)
Interest checking accounts		7		(5)		2		10		(14)		(4)
Money market accounts		13		(11)		2		27		(43)		(16)
Certificates of deposit		(41)		(194)		(235)		(87)		(380)		(467)
Other interest-bearing liabilities		(149)		111		(38)		(278)		182		(96)
Total interest expense		(151)		(145)		(296)		(265)		(505)		(770)
Net interest income	$	113	$	1,211	$	1,324	$	117	$	1,373	$	1,490

(1)	Interest is presented on a fully tax-equivalent basis.

Provision for Loan Losses. The Company maintains an allowance for loan losses to provide for probable losses inherent in the loan portfolio consistent with GAAP guidelines. The adequacy of the allowance is evaluated monthly to maintain the allowance at levels sufficient to provide for inherent losses existing at the balance sheet date. The key components to the evaluation are the Company’s internal loan review function by its credit administration, which reviews and monitors the risk and quality of the loan portfolio; as well as the Company’s external loan reviews and its loan classification systems. Credit officers are expected to monitor their portfolios and make recommendations to change loan grades whenever changes are warranted. Credit administration approves any changes to loan grades and monitors loan grades.

In accordance with GAAP, loans acquired from MBank during the fiscal year ended March 31, 2017 were recorded at their estimated fair value, which resulted in a net discount to the loans’ contractual amounts, of which a portion reflects a discount for possible credit losses. Credit discounts are included in the determination of fair value, and, as a result, no allowance for loan losses is recorded for acquired loans at the acquisition date. The discount recorded on the acquired loans is not reflected in the allowance for loan losses or related allowance coverage ratios. However, we believe it should be considered when comparing certain financial ratios of the Company calculated in periods after the MBank transaction, compared to the same financial ratios of the Company in periods prior to the MBank transaction. The net discount on these acquired loans was $562,000 and $722,000 at September 30, 2021 and March 31, 2021, respectively.

The Company recorded a recapture of loan losses of $1.1 million and $2.7 million for the three and six months ended September 30, 2021, respectively, compared to a provision for loan losses of $1.8 million and $6.3 million for the three and six months ended September 30, 2020. The recapture of loan losses for the three and six months ended September 30, 2021 is based primarily upon the improving economic conditions associated with the COVID-19 pandemic since March 31, 2021. The provision for loan losses for the three and six months ended September 30, 2020 was primarily due to the uncertain economic conditions resulting from the COVID-19 pandemic and its expected adverse economic effect on the respective industry exposures within our loan portfolio at that time. Any future decline in national and local economic conditions, as a result of the COVID-19 pandemic or other factors, could result in a material increase in the allowance for loan losses and may adversely affect the Company’s financial condition and results of operations.

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Net recoveries totaled $10,000 and $22,000 for the three and six months ended September 30, 2021, respectively, compared to net charge-offs of $10,000 and $58,000 for the three and six months ended September 30, 2020, respectively. Annualized net recoveries was an insignificant amount for the three and six months ended September 30, 2021, respectively, compared to annualized net charge-offs of 0.00% and 0.01% for the three and six months ended September 30, 2020, respectively. Nonperforming loans were $490,000 at September 30, 2021, compared to $1.3 million at September 30, 2020. The ratio of allowance for loan losses to nonperforming loans was 3367.35% at September 30, 2021 compared to 1479.69% at September 30, 2020. See “Asset Quality” above for additional information related to asset quality that management considers in determining the provision for loan losses.

Impaired loans are subjected to an impairment analysis to determine an appropriate reserve amount to be held against each loan. As of September 30, 2021, the Company had identified $758,000 of impaired loans. Because the significant majority of the impaired loans are collateral dependent, nearly all of the specific allowances are calculated based on the estimated fair value of the collateral. Of those impaired loans, $640,000 have no specific valuation allowance as their estimated collateral value is equal to or exceeds the carrying costs, which in some cases is the result of previous loan charge-offs. At September 30, 2021, charge-offs on these impaired loans totaled $85,000 from their original loan balances. The remaining $118,000 of impaired loans has specific valuation allowances totaling $9,000 at September 30, 2021.

Non-Interest Income. Non-interest income increased $255,000 and $1.2 million to $3.1 million and $6.7 million for the three and six months ended September 30, 2021, respectively, compared to $2.8 million and $5.4 million in the same periods in the prior year primarily due to the increase in fees and service charges and a BOLI death benefit. Fees and service charges increased to $1.8 million and $3.7 million, respectively, for the three and six months ended September 30, 2021 compared to $1.6 million and $3.1 million, respectively, in the same period in the prior year primarily from an increase in customer transactions reflecting improvements in our local economies as businesses reopen in our market area. Non-interest income also included a BOLI death benefit on a former employee of $500,000 during the six months ended September 30, 2021 that was not present during the six months ended September 30, 2020.

Non-Interest Expense. Non-interest expense decreased $649,000 and $197,000 to $8.2 million and $17.3 million for the three and six months ended September 30, 2021, respectively, compared to $8.8 million and $17.5 million in the same periods in the prior year. These decreases were primarily due to the recognition of a $1.0 million gain on sale of premises and equipment related to the sale of a building related to a former branch location. The decrease for the six months ended September 30, 2021 was partially offset by an increase in salaries and employee benefits of $818,000 mainly due to capitalized loan origination costs related to SBA PPP loans incurred during the six months ended September 30, 2020, which are deferred and amortized over the life of the loan. Data processing expense increased $131,000 for the six months ended September 30, 2021 due to the increased cost associated with the increase in the volume of customer transactions being processed related to our core banking platform and continued investments into enhancing our information technology infrastructure and other technology expenditures compared to the same prior year period.

Income Taxes. The provision for income taxes was $1.9 million and $3.5 million for the three and six months ended September 30, 2021, respectively, compared to $704,000 and $790,000 for the same periods in the prior year. The increase in the provision for income taxes was due to higher pre-tax income for the three and six months ended September 30, 2021 compared to the same periods in the prior year. Income before income taxes was $8.4 million and $15.7 million for the three and six months ended September 30, 2021, respectively, compared to $3.2 million and $3.8 million for the same periods in the prior year. The increase was mainly due to the recapture of loan losses for the three and six months ended September 30, 2021 compared to the provision for loan losses for the three and six months ended September 30, 2020. The Company’s effective tax rate for the three and six months ended September 30, 2021 was 23.1% and 22.4%, respectively, compared to 21.7% and 20.7% for the three and six months ended September 30, 2020. The lower effective tax rate for the three and six months ended September 30, 2020 is due to lower pretax income being offset by investments in tax-exempt bank owned life insurance. At September 30, 2021, management deemed that a valuation allowance related to the Company’s deferred tax asset was not necessary. At September 30, 2021, the Company had a net deferred tax asset of $5.5 million compared to $5.4 million at March 31, 2021.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has not been any material change in the market risk disclosures contained in the 2021 Form 10-K.

Item 4. Controls and Procedures

An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13(a) - 15(e) of the Securities Exchange Act of 1934) as of September 30, 2021 was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and several other members of the Company’s senior management. The Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as in effect on September 30, 2021 were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Securities and Exchange Act of 1934 is (i) accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. In the quarter ended September 30, 2021, the Company did not make any changes in its internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, these controls.

While the Company believes the present design of its disclosure controls and procedures is effective to achieve its goal, future events affecting its business may cause the Company to modify its disclosure controls and procedures. The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all errors and fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns in controls or procedures can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any control procedure is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements attributable to errors or fraud may occur and not be detected.

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RIVERVIEW BANCORP, INC. AND SUBSIDIARY

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The 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 effect on the Company’s financial position, results of operations, or liquidity.

Item 1A. Risk Factors

There have been no material changes to the risk factors set forth in Part I. Item 1A of the Company’s Form 10-K for the year ended March 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable.

(b) Not applicable.

(c) The following table provides information about repurchases of common stock by the Company during the quarter ended September 30, 2021:



				Total Number of	Maximum Dollar Value
	Total	Average		Shares 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
July 1, 2021	—	$	—	—	$	4,507,707
July 1, 2021 – July 31, 2021	166,657		6.97	166,657		3,346,108
August 1, 2021 – August 31, 2021	9,884		7.03	9,884		3,276,623
September 1, 2021 – September 30, 2021	—		—	—
Total	176,541	$	6.97	176,541	$	3,276,623

On June 10, 2021, the Company announced that its Board of Directors adopted a stock repurchase program. Under the repurchase program, the Company may repurchase up to $5.0 million of the Company’s outstanding shares of common stock, in the open market, based on prevailing market prices, or in private negotiated transactions, over a period beginning on June 21, 2021 continuing until the earlier of the completion of the repurchase or the next six months, depending on market conditions. During the quarter ended September 30, 2021, the Company repurchased approximately $1.2 million worth of the Company’s outstanding shares under the repurchase authorization, leaving approximately $3.3 million worth of the Company’s outstanding shares available for future repurchase.

Item 3. Defaults Upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

Not applicable

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Item 6. Exhibits

(a) Exhibits:


3.1		Articles of Incorporation of the Registrant (1)
3.2		Bylaws of the Registrant (2)
4.1		Form of Certificate of Common Stock of the Registrant (1)
10.1		Form of Employment Agreement between the Company and the Bank and each of Kevin J. Lycklama, David Lam, Daniel D. Cox, Kim J. Capeloto and Steven P. Plambeck (3)
10.2		Form of Change in Control Agreement between the Company and the Bank and each of Kevin J. Lycklama, David Lam, Daniel D. Cox, Kim J. Capeloto and Steven P. Plambeck (3)
10.3		Form of Employment Agreement between the Company and Chris P. Cline (4)
10.4		Form of Change in Control Agreement between the Company and Chris P. Cline (4)
10.5		Employee Stock Ownership Plan (5)
10.6		2003 Stock Option Plan (6)
10.7		Form of Incentive Stock Option Award Pursuant to 2003 Stock Option Plan (7)
10.8		Form of Non-qualified Stock Option Award Pursuant to 2003 Stock Option Plan (7)
10.9		Deferred Compensation Plan (8)
10.10		2017 Equity Incentive Plan (9)
10.11		Form of Incentive Stock Option Award Agreement under the Riverview Bancorp, Inc. 2017 Equity Incentive Plan (10)
10.12		Form of Non-Qualified Stock Option Award Agreement under the Riverview Bancorp, Inc. 2017 Equity Incentive Plan (10)
10.13		Form of Restricted Stock Award Agreement under the Riverview Bancorp, Inc. 2017 Equity Incentive Plan (10)
10.14		Form of Restricted Stock Unit Award Agreement under the Riverview Bancorp, Inc. 2017 Equity Incentive Plan (10)
31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act *
31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act *
32		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act*
101		The following materials from Riverview Bancorp Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in Inline Extensible Business Reporting Language (XBRL) (a) Consolidated Balance Sheets; (b) Consolidated Statements of Income; (c) Consolidated Statements of Comprehensive Income; (d) Consolidated Statements of Shareholders’ Equity (e) Consolidated Statements of Cash Flows; and (f) Notes to Consolidated Financial Statements *
104		The cover page from Riverview Bancorp Inc’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in Inline XBRL and contained in Exhibit 101

(1)	Filed as an exhibit to the Registrant's Registration Statement on Form S-1 (Registration No. 333-30203) and incorporated herein by reference.

(2)	Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on February 26, 2021 and incorporated herein by reference.

(3)	Filed as an exhibit to the Registrant’s Annual Report on Form 10-K for the year ended March 31, 2019, and incorporated herein by reference.

(4)	Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the year ended March 31, 2017 and incorporated herein by reference.

(5)	Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the year ended March 31, 1998, and incorporated herein by reference.

(6)	Filed as an exhibit to the Registrant’s Definitive Annual Meeting Proxy Statement (000-22957), filed with the Commission on June 5, 2003, and incorporated herein by reference.

(7)	Filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, and incorporated herein by reference.

(8)	Filed as an exhibit to the Registrant’s Annual Report on Form 10-K for the year ended March 31, 2009 and incorporated herein by reference.

(9)	Filed as Appendix A to the Registrant’s Definitive Annual Meeting Proxy Statement (000-22957), filed with the Commission on June 16, 2017, and incorporated herein by reference.

(10)	Filed as an exhibit to the Registrant’s Registration Statement on Form S-8 (Registration No. 333-228099), and incorporated herein by reference.

*	Filed herewith

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		RIVERVIEW BANCORP, INC.


By:	/S/ Kevin J. Lycklama	By:	/S/ David Lam
	Kevin J. Lycklama		David Lam
	President and Chief Executive Officer		Executive Vice President and
	Director		Chief Financial Officer
	(Principal Executive Officer)		(Principal Financial and Accounting Officer)


Date:	November 12, 2021	Date:	November 12, 2021