RVSB 10-Q Quarterly Report Dec. 31, 2019

RVSB 10-Q Quarter ended Dec. 31, 2019

Exhibits

Exhibits

RIVERVIEW BANCORP INC

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10-Q 1 riv10q123119.htm FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2019

[ ]	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 [X] 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 [X] 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 [X] Non-accelerated filer [ ]

Smaller reporting company [X] E merging 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 [X]

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, 22,748,385 shares outstanding as of February 7, 2020.

Form 10-Q

RIVERVIEW BANCORP, INC. AND SUBSIDIARY

INDEX

Part I.	Financial Information	Page

Item 1:	Financial Statements (Unaudited)

	Consolidated Balance Sheets as of December 31, 2019 and March 31, 2019	2

	Consolidated Statements of Income for the Three and Nine months Ended December 31, 2019 and 2018	3

	Consolidated Statements of Comprehensive Income for the Three and Nine months Ended December 31, 2019 and 2018	4

	Consolidated Statements of Shareholders’ Equity for the Three and Nine months Ended December 31, 2019 and 2018	5

	Consolidated Statements of Cash Flows for the Nine months Ended December 31, 2019 and 2018	6

	Notes to Consolidated Financial Statements	7

Item 2:	Management's Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3:	Quantitative and Qualitative Disclosures About Market Risk	41

Item 4:	Controls and Procedures	41

Part II.	Other Information	42-43

Item 1:	Legal Proceedings

Item 1A:	Risk Factors

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

Item 3:	Defaults Upon Senior Securities

Item 4:	Mine Safety Disclosures

Item 5:	Other Information

Item 6:	Exhibits

SIGNATURES		44

Certifications
	Exhibit 31.1 Exhibit 31.2 Exhibit 32

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 and statements about future performance. 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, including, but not limited to: 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; 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 sell loans in the secondary market; results of examinations of our bank subsidiary, Riverview Community Bank, by the Office of the Comptroller of the Currency 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; increases in premiums for deposit insurance; 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 and any goodwill charges related thereto; 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 and interest or principal payments on its junior subordinated debentures; 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; other economic, competitive, governmental, regulatory, and technological factors affecting the Company’s operations, pricing, products and services; and the other risks described from time to time in our filings with the Securities and Exchange Commission.

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 year 2020 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.

Part I. Financial Information

Item 1. Financial Statements (Unaudited)

RIVERVIEW BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2019 AND MARCH 31, 2019

(In thousands, except share and per share data) (Unaudited)	December 31, 2019			March 31, 2019
ASSETS
Cash and cash equivalents (including interest-earning accounts of $48,781 and $5,844)	$	62,123		$	22,950
Certificates of deposit held for investment		249			747
Loans held for sale		-			909
Investment securities:
Available for sale, at estimated fair value		155,757			178,226
Held to maturity, at amortized cost (estimated fair value of $30 and $35)		29			35
Loans receivable (net of allowance for loan losses of $11,433 and $11,457)		875,100			864,659
Prepaid expenses and other assets		8,330			4,596
Accrued interest receivable		3,729			3,919
Federal Home Loan Bank stock (“FHLB”), at cost		1,380			3,644
Premises and equipment, net		16,021			15,458
Deferred income taxes, net		3,416			4,195
Mortgage servicing rights, net		215			296
Goodwill		27,076			27,076
Core deposit intangible (“CDI”), net		799			920
Bank owned life insurance (“BOLI”)		29,876			29,291
TOTAL ASSETS	$	1,184,100		$	1,156,921

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES:
Deposits	$	990,464		$	925,068
Accrued expenses and other liabilities		18,483			12,536
Advanced payments by borrowers for taxes and insurance		329			631
FHLB advances		-			56,586
Junior subordinated debentures		26,640			26,575
Finance lease liability		2,378			2,403
Total liabilities		1,038,294			1,023,799

COMMITMENTS AND CONTINGENCIES (See Note 14)

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
December 31, 2019 – 22,748,385 shares issued and outstanding		227			226
March 31, 2019 – 22,607,712 shares issued and outstanding
Additional paid-in capital		65,637			65,094
Retained earnings		80,103			70,428
Accumulated other comprehensive loss		(161	)		(2,626	)
Total shareholders’ equity		145,806			133,122

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,184,100		$	1,156,921

See accompanying notes to consolidated financial statements .

RIVERVIEW BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND NINE MONTHS ENDED

DECEMBER 31, 2019 AND 2018

	Three Months Ended December 31,				Nine Months Ended December 31,
(In thousands, except share and per share data) (Unaudited)	2019		2018		2019		2018
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans receivable	$	11,699	$	11,182	$	35,146	$	33,261
Interest on investment securities – taxable		851		1,110		2,589		3,424
Interest on investment securities – nontaxable		27		37		100		110
Other interest and dividends		189		60		369		271
Total interest and dividend income		12,766		12,389		38,204		37,066

INTEREST EXPENSE:
Interest on deposits		942		240		1,953		759
Interest on borrowings		332		416		1,570		1,126
Total interest expense		1,274		656		3,523		1,885
Net interest income		11,492		11,733		34,681		35,181
Provision for loan losses		-		-		-		50
Net interest income after provision for loan losses		11,492		11,733		34,681		35,131

NON-INTEREST INCOME:
Fees and service charges		1,661		1,458		5,050		4,544
Asset management fees		1,136		935		3,369		2,804
Net gains on sales of loans held for sale		68		82		210		278
BOLI		188		192		585		545
Other, net		110		62		254		267
Total non-interest income, net		3,163		2,729		9,468		8,438

NON-INTEREST EXPENSE:
Salaries and employee benefits		5,941		5,794		17,353		16,655
Occupancy and depreciation		1,461		1,306		4,058		4,016
Data processing		637		621		1,986		1,874
Amortization of CDI		40		45		121		137
Advertising and marketing		181		151		689		609
FDIC insurance premium		-		85		81		246
State and local taxes		126		125		495		475
Telecommunications		84		85		246		266
Professional fees		267		449		855		1,120
Other		511		142		1,561		1,339
Total non-interest expense		9,248		8,803		27,445		26,737

INCOME BEFORE INCOME TAXES		5,407		5,659		16,704		16,832
PROVISION FOR INCOME TAXES		1,279		1,271		3,850		3,773
NET INCOME	$	4,128	$	4,388	$	12,854	$	13,059

Earnings per common share:
Basic	$	0.18	$	0.19	$	0.57	$	0.58
Diluted		0.18		0.19		0.57		0.58
Weighted average number of common shares outstanding:
Basic		22,665,712		22,598,712		22,642,883		22,582,956
Diluted		22,718,255		22,663,919		22,701,415		22,658,153

See accompanying notes to consolidated financial statements .

RIVERVIEW BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED

DECEMBER 31, 2019 AND 2018

	Three Months Ended December 31,					Nine Months Ended December 31,
(In thousands) (Unaudited)	2019			2018		2019			2018

Net income	$	4,128		$	4,388	$	12,854		$	13,059

Other comprehensive income (loss):
Net unrealized holding gain (loss) from available for sale investment securities arising
during the period, net of tax of $112, ($673), ($786) and ($134), respectively		(359	)		2,188		2,488			434

Reclassification adjustment of net gain from sale of available for sale investment
securities included in income, net of tax of $7, $0, $7, and $0, respectively		(23	)		-		(23	)		-
Total other comprehensive income (loss), net		(382	)		2,188		2,465			434

Total comprehensive income, net	$	3,746		$	6,576	$	15,319		$	13,493

See accompanying notes to consolidated financial statements.

RIVERVIEW BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

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

For the three months ended December 31, 2018

Balance October 1, 2018		22,598,712	$	226	$	65,044	$	63,642		$	(6,502	)	$	122,410

Net income		-		-		-		4,388			-			4,388
Cash dividends on common stock ($0.040 per share)		-		-		-		(904	)		-			(904	)
Stock-based compensation expense		-		-		12		-			-			12
Other comprehensive income, net		-		-		-		-			2,188			2,188
Balance December 31, 2018		22,598,712	$	226	$	65,056	$	67,126		$	(4,314	)	$	128,094

For the nine months ended December 31, 2018

Balance April 1, 2018		22,570,179	$	226	$	64,871	$	56,552		$	(4,748	)	$	116,901

Net income		-		-		-		13,059			-			13,059
Cash dividends on common stock ($0.110 per share)		-		-		-		(2,485	)		-			(2,485	)
Exercise of stock options		28,533		-		151		-			-			151
Stock-based compensation expense		-		-		34		-			-			34
Other comprehensive income, net		-		-		-		-			434			434
Balance December 31, 2018		22,598,712	$	226	$	65,056	$	67,126		$	(4,314	)	$	128,094

For the three months ended December 31, 2019

Balance October 1, 2019	22,748,385	$	227	$	65,559	$	77,112		$	221		$	143,119

Net income	-		-		-		4,128			-			4,128
Cash dividends on common stock ($0.050 per share)	-		-		-		(1,137	)		-			(1,137	)
Exercise of stock options	-		-		10		-			-			10
Stock-based compensation expense	-		-		68		-			-			68
Other comprehensive loss, net	-		-		-		-			(382	)		(382	)
Balance December 31, 2019	22,748,385	$	227	$	65,637	$	80,103		$	(161	)	$	145,806


For the nine months ended December 31, 2019

Balance April 1, 2019	22,607,712	$	226	$	65,094	$	70,428		$	(2,626	)	$	133,122

Net income	-		-		-		12,854			-			12,854
Cash dividends on common stock ($0.140 per share)	-		-		-		(3,179	)		-			(3,179	)
Exercise of stock options	58,000		1		226		-			-			227
Restricted stock grants	82,673		-		-		-			-			-
Stock-based compensation expense	-		-		317		-			-			317
Other comprehensive income, net	-		-		-		-			2,465			2,465
Balance December 31, 2019	22,748,385	$	227	$	65,637	$	80,103		$	(161	)	$	145,806

See accompanying notes to consolidated financial statements.

RIVERVIEW BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019 AND 2018

(In thousands) (Unaudited)		2019			2018

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	12,854		$	13,059
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,244			2,045
Purchased loans amortization (accretion), net		21			(47	)
Provision for loan losses		-			50
Stock-based compensation expense		317			34
Increase in deferred loan origination fees, net of amortization		49			599
Origination of loans held for sale		(7,178	)		(8,944	)
Proceeds from sales of loans held for sale		8,219			9,303
Net gains on sales of loans held for sale, sales of investment securities available for sale and sales of premises and equipment		(313	)		(644	)
Income from BOLI		(585	)		(545	)
Changes in certain other assets and liabilities:
Prepaid expenses and other assets		1,775			(261	)
Accrued interest receivable		190			(312	)
Accrued expenses and other liabilities		81			6,326
Net cash provided by operating activities		17,674			20,663

CASH FLOWS FROM INVESTING ACTIVITIES:
Loan repayments (originations), net		4,745			(36,726	)
Purchases of loans receivable		(15,198	)		(20,318	)
Principal repayments on investment securities available for sale		21,676			20,591
Purchases of investment securities available for sale		(18,125	)		-
Proceeds from calls, maturities and sales of investment securities available for sale		21,122			10,000
Principal repayments on investment securities held to maturity		6			6
Purchases of premises and equipment and capitalized software		(1,348	)		(304	)
Redemption of certificates of deposit held for investment		498			5,220
Redemption (purchase) of FHLB stock, net		2,264			(1,382	)
Proceeds from sales of real estate owned (“REO”) and premises and equipment		81			975
Net cash provided by (used in) investing activities		15,721			(21,938	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits		65,409			(52,067	)
Dividends paid		(2,945	)		(2,259	)
Proceeds from borrowings		214,897			166,255
Repayment of borrowings		(271,483	)		(131,712	)
Net decrease in advance payments by borrowers for taxes and insurance		(302	)		(445	)
Principal payments on finance lease liability		(25	)		(21	)
Proceeds from exercise of stock options		227			151
Net cash provided by (used in) financing activities		5,778			(20,098	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		39,173			(21,373	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		22,950			44,767
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	62,123		$	23,394

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	3,406		$	1,811
Income taxes		2,945			5,063

NONCASH INVESTING AND FINANCING ACTIVITIES:
Dividends declared and accrued in other liabilities	$	1,138		$	904
Other comprehensive income		3,244			568
Income tax effect related to other comprehensive income		(779	)		(134	)
Right-of-use lease assets obtained in exchange for operating lease liabilities		5,603			-

See accompanying notes to consolidated financial statements.

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, 2019 (“2019 Form 10-K”). The unaudited consolidated results of operations for the nine months ended December 31, 2019 are not necessarily indicative of the results which may be expected for the entire fiscal year ending March 31, 2020.

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.

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 equity.

2.	PRINCIPLES OF CONSOLIDATION

The accompanying unaudited consolidated financial statements include the accounts of Riverview Bancorp, Inc.; its wholly-owned subsidiary, Riverview Community Bank (the “Bank”); 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 inter-company transactions and balances have been eliminated in consolidation. During the quarter ended December 31, 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, creating a noncontrolling interest. As a result of this transaction, the Bank’s ownership in the Trust Company decreased from 100% to 98% at December 31, 2019. Noncontrolling interest was $104,000 as of December 31, 2019, and net income attributable to the noncontrolling interest was $2,000 for both the three and nine months ended December 31, 2019. These amounts are disclosed herein and not presented separately in the accompanying unaudited consolidated financial statements due to their insignificance.

3.	STOCK PLANS AND STOCK-BASED COMPENSATION

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 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”.

As of December 31, 2019 and 2018, the Trust Company had 1,000 and 2,500, respectively, of Trust Company stock options outstanding which had been granted to the President and Chief Executive Officer of the Trust Company. During the three months ended December 31, 2019, 1,500 Trust Company stock options were exercised. During both the three and nine months ended December 31, 2019 and 2018, the Trust Company incurred $11,000 and $33,000, respectively, of stock-based compensation expense related to these options.

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 three and nine months ended December 31, 2019 and 2018.

As of December 31, 2019, all outstanding stock options were fully vested and there was no remaining unrecognized compensation expense under the Stock Option Plans. Unrecognized compensation expense related to the Trust Company stock options totaled $55,000 as of December 31, 2019. There was no stock-based compensation expense related to stock options for the three and nine months ended December 31, 2019 and 2018 under the Stock Option Plans.

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

	Nine Months Ended December 31, 2019				Nine Months Ended December 31, 2018
	Number of Shares			Weighted Average Exercise Price	Number of Shares			Weighted Average Exercise Price
Balance, beginning of period	101,332		$	3.26	141,365		$	3.77
Options exercised	(58,000	)		3.69	(28,533	)		5.30
Expired	-			-	(2,500	)		8.12
Balance, end of period	43,332			2.69	110,332		$	3.27

The following table presents information on stock options outstanding under the Stock Option Plans as of December 31, 2019 and 2018:

	2019		2018
Stock options fully vested and expected to vest:
Number		43,332		110,332
Weighted average exercise price	$	2.69	$	3.27
Aggregate intrinsic value ⁽¹⁾	$	239,000	$	442,000
Weighted average contractual term of options (years)		3.05		2.44
Stock options fully vested and currently exercisable:
Number		43,332		110,332
Weighted average exercise price	$	2.69	$	3.27
Aggregate intrinsic value ⁽¹⁾	$	239,000	$	442,000
Weighted average contractual term of options (years)		3.05		2.44

⁽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 under the Stock Option Plans was $238,000 and $118,000 for the nine months ended December 31, 2019 and 2018, respectively.

During the nine months ended December 31, 2019, the Company granted 82,673 shares of restricted stock pursuant to the 2017 Plan. The fair value of restricted stock awards is equal to the fair value of the Company’s stock on the date of grant. Stock-based compensation expense is recorded over the requisite service period. Stock-based compensation related to restricted stock grants was $57,000 and $284,000 for the three and nine months ended December 31, 2019. There was no stock-based compensation related to restricted stock for the three and nine months ended December 31, 2018. The unrecognized stock-based compensation related to restricted stock was $406,000 at December 31, 2019. The weighted average vesting period for the restricted stock was 1.98 years at December 31, 2019.

The following table presents the activity related to restricted stock as of December 31, 2019:

	Time Based			Performance Based			Total
	Number of Unvested Shares		Weighted Average Market Price	Number of Unvested Shares		Weighted Average Market Price	Number of Unvested Shares		Weighted Average Market Price
Balance, beginning of period	-	$	-	-	$	-	-	$	-
Granted	49,298		8.35	33,375		8.35	82,673		8.35
Forfeited	-		-	-		-	-		-
Vested	-		-	-		-	-		-
Balance, end of period	49,298	$	8.35	33,375	$	8.35	82,673	$	8.35

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. Diluted EPS is computed by dividing net income or loss 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 stock during the period. Common stock equivalents arise from the assumed exercise of outstanding stock options and assumed vesting of restricted stock. For the three and nine months ended December 31, 2019 and 2018, there were no stock options excluded in computing diluted EPS.

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

		Three Months Ended December 31,				Nine Months Ended December 31,
		2019		2018		2019		2018
Basic EPS computation:
Numerator-net income	$	4,128,000	$	4,388,000	$	12,854,000	$	13,059,000
Denominator-weighted average common shares outstanding		22,665,712		22,598,712		22,642,883		22,582,956
Basic EPS	$	0.18	$	0.19	$	0.57	$	0.58
Diluted EPS computation:
Numerator-net income	$	4,128,000	$	4,388,000	$	12,854,000	$	13,059,000
Denominator-weighted average common shares outstanding		22,665,712		22,598,712		22,642,883		22,582,956
Effect of dilutive stock options and restricted stock		52,543		65,207		58,532		75,197
Weighted average common shares and common stock equivalents		22,718,255		22,663,919		22,701,415		22,658,153
Diluted EPS	$	0.18	$	0.19	$	0.57	$	0.58

5.	INVESTMENT SECURITIES

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2019
Available for sale:
Municipal securities	$	4,746	$	160	$	-		$	4,906
Agency securities		9,431		76		(41	)		9,466
Real estate mortgage investment conduits ⁽¹⁾		44,577		166		(158	)		44,585
Residential mortgage-backed securities ⁽¹⁾		61,823		194		(256	)		61,761
Other mortgage-backed securities ⁽²⁾		35,391		54		(406	)		35,039
Total available for sale	$	155,968	$	650	$	(861	)	$	155,757

Held to maturity:
Residential mortgage-backed securities ⁽³⁾	$	29	$	1	$	-		$	30

March 31, 2019
Available for sale:
Municipal securities	$	8,885	$	30	$	(34	)	$	8,881
Agency securities		12,426		22		(107	)		12,341
Real estate mortgage investment conduits ⁽¹⁾		40,835		-		(673	)		40,162
Residential mortgage-backed securities ⁽¹⁾		77,402		7		(1,588	)		75,821
Other mortgage-backed securities ⁽²⁾		42,133		12		(1,124	)		41,021
Total available for sale	$	181,681	$	71	$	(3,526	)	$	178,226

Held to maturity:
Residential mortgage-backed securities ⁽³⁾	$	35	$	-	$	-		$	35

⁽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 December 31, 2019 are as follows (in thousands):

	Available for Sale				Held to Maturity
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	1,001	$	1,008	$	-	$	-
Due after one year through five years		5,953		5,934		26		27
Due after five years through ten years		35,598		35,789		3		3
Due after ten years		113,416		113,026		-		-
Total	$	155,968	$	155,757	$	29	$	30

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

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 Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
December 31, 2019

Available for sale:
Municipal securities	$	-	$	-		$	-	$	-		$	-	$	-
Agency securities		1,998		(11	)		2,969		(30	)		4,967		(41	)
Real estate mortgage investment conduits ⁽¹⁾		22,033		(140	)		2,850		(18	)		24,883		(158	)
Residential mortgage-backed securities ⁽¹⁾		8,707		(18	)		25,116		(238	)		33,823		(256	)
Other mortgage-backed securities ⁽²⁾		15,987		(246	)		8,509		(160	)		24,496		(406	)
Total available for sale	$	48,725	$	(415	)	$	39,444	$	(446	)	$	88,169	$	(861	)

March 31, 2019

Available for sale:
Municipal securities	$	-	$	-	$	6,554	$	(34	)	$	6,554	$	(34	)
Agency securities		-		-		6,861		(107	)		6,861		(107	)
Real estate mortgage investment conduits ⁽¹⁾		-		-		40,126		(673	)		40,126		(673	)
Residential mortgage-backed securities ⁽¹⁾		-		-		74,288		(1,588	)		74,288		(1,588	)
Other mortgage-backed securities ⁽²⁾		-		-		40,409		(1,124	)		40,409		(1,124	)
Total available for sale	$	-	$	-	$	168,238	$	(3,526	)	$	168,238	$	(3,526	)

⁽¹⁾ Comprised of FHLMC, FNMA and GNMA issued securities.
⁽²⁾ Comprised of SBA issued securities and CRE secured securities issued by FNMA.

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. Based on management’s evaluation and intent, the unrealized losses related to the investment securities in the above tables are considered temporary.

Proceeds from the sale of investment securities totaled $17.8 million for both the three and nine months ended December 31, 2019. Net realized gains on sales of investment securities totaled $30,000 for both the three and nine months ended December 31, 2019. The Company had no sales and realized no gains or losses on investment securities for both the three and nine months ended December 31, 2018. Investment securities available for sale with an amortized cost of $6.9 million and $5.8 million and an estimated fair value of $6.9 million and $5.7 million at December 31, 2019 and March 31, 2019, respectively, were pledged as collateral for government public funds held by the Bank. There were no held to maturity securities pledged as collateral for government public funds held by the Bank at December 31, 2019 and March 31, 2019.

6. LOANS RECEIVABLE

Loans receivable as of both December 31, 2019 and March 31, 2019 are reported net of deferred loan fees totaling $4.0 million. Loans receivable are also reported net of discounts and premiums totaling $1.1 million and $1.5 million, respectively, as of December 31, 2019, compared to $1.5 million and $1.8 million, respectively, as of March 31, 2019. Loans receivable, excluding loans held for sale, consisted of the following at the dates indicated (in thousands):

	December 31, 2019		March 31, 2019
Commercial and construction
Commercial business	$	165,526	$	162,796
Commercial real estate		470,163		461,432
Land		15,163		17,027
Multi-family		57,792		51,570
Real estate construction		88,872		90,882
Total commercial and construction		797,516		783,707

Consumer
Real estate one-to-four family		83,978		84,053
Other installment ⁽¹⁾		5,039		8,356
Total consumer		89,017		92,409

Total loans		886,533		876,116

Less: Allowance for loan losses		11,433		11,457
Loans receivable, net	$	875,100	$	864,659

⁽¹⁾ Includes purchased automobile loans totaling $2.5 million and $5.8 million at December 31, 2019 and March 31, 2019, 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 December 31, 2019, loans carried at $471.6 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.

Most 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 December 31, 2019 and March 31, 2019, the Bank had no loans to any one borrower in excess of the regulatory limit.

7.	ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is maintained at a level sufficient to provide for estimated 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 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 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 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.

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

Three months ended December 31, 2019	Commercial Business		Commercial Real Estate			Land		Multi- Family			Real Estate Construction		Consumer			Unallocated		Total

Beginning balance	$	2,051	$	5,038		$	219	$	779		$	1,381	$	1,347		$	621	$	11,436
Provision for (recapture of) loan losses		-		(20	)		16		(14	)		86		(76	)		8		-
Charge-offs		-		-			-		-			-		(13	)		-		(13	)
Recoveries		-		-			-		-			-		10			-		10
Ending balance	$	2,051	$	5,018		$	235	$	765		$	1,467	$	1,268		$	629	$	11,433

Nine months ended December 31, 2019

Beginning balance	$	1,808		$	5,053		$	254		$	728	$	1,457	$	1,447		$	710		$	11,457
Provision for (recapture of) loan losses		246			(35	)		(19	)		37		10		(158	)		(81	)		-
Charge-offs		(3	)		-			-			-		-		(67	)		-			(70	)
Recoveries		-			-			-			-		-		46			-			46
Ending balance	$	2,051		$	5,018		$	235		$	765	$	1,467	$	1,268		$	629		$	11,433

Three months ended December 31, 2018	Commercial Business		Commercial Real Estate			Land		Multi- Family		Real Estate Construction		Consumer			Unallocated			Total

Beginning balance	$	1,858	$	5,361		$	237	$	696	$	1,007	$	1,641		$	713		$	11,513
Provision for (recapture of) loan losses		84		(80	)		31		19		186		(177	)		(63	)		-
Charge-offs		-		-			-		-		-		(52	)		-			(52	)
Recoveries		-		-			-		-		-		41			-			41
Ending balance	$	1,942	$	5,281		$	268	$	715	$	1,193	$	1,453		$	650		$	11,502

Nine months ended December 31, 2018

Beginning balance	$	1,668	$	4,914		$	220	$	822		$	618	$	1,809		$	715		$	10,766
Provision for (recapture of) loan losses		274		(456	)		48		(107	)		575		(219	)		(65	)		50
Charge-offs		-		-			-		-			-		(236	)		-			(236	)
Recoveries		-		823			-		-			-		99			-			922
Ending balance	$	1,942	$	5,281		$	268	$	715		$	1,193	$	1,453		$	650		$	11,502

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
December 31, 2019	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total

Commercial business	$	-	$	2,051	$	2,051	$	144	$	165,382	$	165,526
Commercial real estate		-		5,018		5,018		2,392		467,771		470,163
Land		-		235		235		716		14,447		15,163
Multi-family		-		765		765		1,563		56,229		57,792
Real estate construction		-		1,467		1,467		-		88,872		88,872
Consumer		8		1,260		1,268		439		88,578		89,017
Unallocated		-		629		629		-		-		-
Total	$	8	$	11,425	$	11,433	$	5,254	$	881,279	$	886,533

March 31, 2019

Commercial business	$	-	$	1,808	$	1,808	$	160	$	162,636	$	162,796
Commercial real estate		-		5,053		5,053		2,482		458,950		461,432
Land		-		254		254		728		16,299		17,027
Multi-family		-		728		728		1,598		49,972		51,570
Real estate construction		-		1,457		1,457		-		90,882		90,882
Consumer		22		1,425		1,447		697		91,712		92,409
Unallocated		-		710		710		-		-		-
Total	$	22	$	11,435	$	11,457	$	5,665	$	870,451	$	876,116

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 nine months. Interest income foregone on non-accrual loans was $57,000 and $75,000 for the nine months ended December 31, 2019 and 2018, respectively.

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

December 31, 2019	30-89 Days Past Due		90 Days and Greater Past Due		Non- accrual		Total Past Due and Non- accrual		Current		Total Loans Receivable

Commercial business	$	-	$	-	$	299	$	299	$	165,227	$	165,526
Commercial real estate		-		-		1,019		1,019		469,144		470,163
Land		-		-		-		-		15,163		15,163
Multi-family		-		-		-		-		57,792		57,792
Real estate construction		-		-		-		-		88,872		88,872
Consumer		505		8		191		704		88,313		89,017
Total	$	505	$	8	$	1,509	$	2,022	$	884,511	$	886,533

March 31, 2019

Commercial business	$	-	$	-	$	225	$	225	$	162,571	$	162,796
Commercial real estate		-		-		1,081		1,081		460,351		461,432
Land		-		-		-		-		17,027		17,027
Multi-family		-		-		-		-		51,570		51,570
Real estate construction		-		-		-		-		90,882		90,882
Consumer		345		3		210		558		91,851		92,409
Total	$	345	$	3	$	1,516	$	1,864	$	874,252	$	876,116

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.

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):

December 31, 2019	Pass		Special Mention		Substandard		Doubtful		Loss		Total Loans Receivable

Commercial business	$	162,291	$	1,375	$	1,860	$	-	$	-	$	165,526
Commercial real estate		469,080		64		1,019		-		-		470,163
Land		15,163		-		-		-		-		15,163
Multi-family		57,725		32		35		-		-		57,792
Real estate construction		88,872		-		-		-		-		88,872
Consumer		88,826		-		191		-		-		89,017
Total	$	881,957	$	1,471	$	3,105	$	-	$	-	$	886,533

March 31, 2019

Commercial business	$	159,997	$	840	$	1,959	$	-	$	-	$	162,796
Commercial real estate		454,013		4,030		3,389		-		-		461,432
Land		16,299		-		728		-		-		17,027
Multi-family		51,093		457		20		-		-		51,570
Real estate construction		90,882		-		-		-		-		90,882
Consumer		92,199		-		210		-		-		92,409
Total	$	864,483	$	5,327	$	6,306	$	-	$	-	$	876,116

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 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 nine 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.

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

December 31, 2019	Recorded Investment with No Specific Valuation Allowance		Recorded Investment with Specific Valuation Allowance		Total Recorded Investment		Unpaid Principal Balance		Related Specific Valuation Allowance

Commercial business	$	144	$	-	$	144	$	173	$	-
Commercial real estate		2,392		-		2,392		3,410		-
Land		716		-		716		748		-
Multi-family		1,563		-		1,563		1,676		-
Consumer		298		141		439		552		8
Total	$	5,113	$	141	$	5,254	$	6,559	$	8

March 31, 2019

Commercial business	$	160	$	-	$	160	$	182	$	-
Commercial real estate		2,482		-		2,482		3,424		-
Land		728		-		728		766		-
Multi-family		1,598		-		1,598		1,709		-
Consumer		281		416		697		807		22
Total	$	5,249	$	416	$	5,665	$	6,888	$	22

	Three months ended December 31, 2019				Three months ended December 31, 2018
	Average Recorded Investment		Interest Recognized on Impaired Loans		Average Recorded Investment		Interest Recognized on Impaired Loans

Commercial business	$	147	$	-	$	166	$	-
Commercial real estate		2,401		16		2,539		16
Land		718		10		735		2
Multi-family		1,567		22		1,613		22
Consumer		443		7		709		9
Total	$	5,276	$	55	$	5,762	$	49

	Nine months ended December 31, 2019				Nine months ended December 31, 2018
	Average Recorded Investment		Interest Recognized on Impaired Loans		Average Recorded Investment		Interest Recognized on Impaired Loans

Commercial business	$	152	$	-	$	377	$	-
Commercial real estate		2,431		47		2,639		48
Land		722		30		746		2
Multi-family		1,579		68		1,626		66
Consumer		509		21		1,065		35
Total	$	5,393	$	166	$	6,453	$	151

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.

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):

	December 31, 2019						March 31, 2019
	Accrual		Nonaccrual		Total		Accrual		Nonaccrual		Total

Commercial business	$	-	$	144	$	144	$	-	$	160	$	160
Commercial real estate		1,373		1,019		2,392		1,401		1,081		2,482
Land		716		-		716		728		-		728
Multi-family		1,563		-		1,563		1,598		-		1,598
Consumer		414		25		439		697		-		697
Total	$	4,066	$	1,188	$	5,254	$	4,424	$	1,241	$	5,665

At December 31, 2019, the Company had no commitments to lend additional funds on TDR loans. At December 31, 2019, all of the Company’s TDRs were paying as agreed except for one commercial real estate loan of $851,000 which is classified as nonaccrual.

There were no new TDRs for the three months ended December 31, 2019. There was one new TDR for the nine months ended December 31, 2019. The new TDR is a consumer real estate loan secured by a 1-4 family property located in Southwest Washington, whereby the Company granted a rate reduction to market interest rates and extended the maturity date by 10 years. The recorded investment in the loan prior to modification and at December 31, 2019 was $27,000 and $25,000, respectively. There were no new TDRs for the three and nine months ended December 31, 2018.

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.

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, 2019 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 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.

9. FEDERAL HOME LOAN BANK ADVANCES

FHLB advances are summarized as follows (dollars in thousands):

		December 31, 2019			March 31, 2019
FHLB advances ⁽¹⁾	$	-		$	56,586
Weighted average interest rate on FHLB advances ⁽²⁾		2.54	%		2.58	%

⁽¹⁾ Consisted of overnight borrowings. ⁽²⁾ Computed based on the borrowing activity for the nine months ended December 31, 2019 and the fiscal year ended March 31, 2019, respectively.

10. JUNIOR SUBORDINATED DEBENTURES

The Company has three 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 $26.6 million at both December 31, 2019 and March 31, 2019, 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 December 31, 2019 and March 31, 2019, is included in prepaid expenses and other assets in the accompanying 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 December 31, 2019 (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	%	3.25	%	3/2036
Riverview Bancorp Statutory Trust II	06/2007		15,464		Variable ⁽²⁾	7.03	%	3.24	%	9/2037
Merchants Bancorp Statutory Trust I ⁽⁴⁾	06/2003		5,155		Variable ⁽³⁾	4.16	%	5.05	%	6/2033
			27,836
Fair value adjustment ⁽⁴⁾			(1,196	)
Total Debentures		$	26,640

⁽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 the purchase and assumption transaction of Merchants Bancorp’s trust preferred security on February 17, 2017.

11.	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):

			Estimated Fair Value Measurements Using
December 31, 2019	Total Estimated Fair Value		Level 1		Level 2		Level 3

Investment securities available for sale:
Municipal securities	$	4,906	$	-	$	4,906	$	-
Agency securities		9,466		-		9,466		-
Real estate mortgage investment conduits		44,585		-		44,585		-
Residential mortgage-backed securities		61,761		-		61,761		-
Other mortgage-backed securities		35,039		-		35,039		-
Total assets measured at fair value on a recurring basis	$	155,757	$	-	$	155,757	$	-

			Estimated Fair Value Measurements Using
March 31, 2019	Total Estimated Fair Value		Level 1		Level 2		Level 3

Investment securities available for sale:
Municipal securities	$	8,881	$	-	$	8,881	$	-
Agency securities		12,341		-		12,341		-
Real estate mortgage investment conduits		40,162		-		40,162		-
Residential mortgage-backed securities		75,821		-		75,821		-
Other mortgage-backed securities		41,021		-		41,021		-
Total assets measured at fair value on a recurring basis	$	178,226	$	-	$	178,226	$	-

There were no transfers of assets into or out of Levels 1, 2 or 3 for the nine months ended December 31, 2019 and the year ended March 31, 2019.

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):

			Estimated Fair Value Measurements Using
December 31, 2019	Total Estimated Fair Value		Level 1		Level 2		Level 3

Impaired loans	$	132	$	-	$	-	$	132

March 31, 2019

Impaired loans	$	394	$	-	$	-	$	394

The following table presents quantitative information about Level 3 inputs for financial instruments measured at fair value on a nonrecurring basis at December 31, 2019 and March 31, 2019:

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

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):

December 31, 2019	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Assets:
Cash and cash equivalents	$	62,123	$	62,123	$	-	$	-	$	62,123
Certificates of deposit held for investment		249		-		256		-		256
Investment securities available for sale		155,757		-		155,757		-		155,757
Investment securities held to maturity		29		-		30		-		30
Loans receivable, net		875,100		-		-		871,950		871,950
FHLB stock		1,380		-		1,380		-		1,380

Liabilities:
Certificates of deposit		131,373		-		131,790		-		131,790
Junior subordinated debentures		26,640		-		-		13,119		13,119
Finance lease liability		2,378		-		2,378		-		2,378


	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
March 31, 2019
Assets:
Cash and cash equivalents	$	22,950	$	22,950	$	-	$	-	$	22,950
Certificates of deposit held for investment		747		-		746		-		746
Loans held for sale		909		-		909		-		909
Investment securities available for sale		178,226		-		178,226		-		178,226
Investment securities held to maturity		35		-		35		-		35
Loans receivable, net		864,659		-		-		862,429		862,429
FHLB stock		3,644		-		3,644		-		3,644

Liabilities:
Certificates of deposit		86,006		-		84,455		-		84,455
FHLB advances		56,586		-		56,586		-		56,586
Junior subordinated debentures		26,575		-		-		15,468		15,468
Finance lease liability		2,403		-		2,403		-		2,403

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.

12. NEW ACCOUNTING PRONOUNCEMENTS

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases” (“ASU 2016-02”). ASU 2016-02 created FASB Accounting Standards Codification (“ASC”) Topic 842 ("ASC 842") related to leases and is intended to increase transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities in the balance sheet and disclosure of key information about leasing arrangements. The principal change required by ASU 2016-02 relates to lessee accounting, and is that for operating leases, a lessee is required to (1) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position, (2) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term generally on a straight-line basis, and (3) classify all cash payments within operating activities in the statement of cash flows. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. ASU 2016-02 also changes disclosure requirements related to leasing activities and requires certain qualitative disclosures along with specific quantitative disclosures. ASU 2016-02 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842) Targeted Improvements” (“ASU 2018-11”). The amendments in this ASU provide entities with an additional (and optional) transition method to adopt ASU 2016-02. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new leases standard will continue to be in accordance with current GAAP. The Company adopted the provisions of ASC 842 effective April 1, 2019 utilizing the transition method allowed under ASU 2018-11 and will not restate comparative periods. The Company elected the package of practical expedients permitted under ASC 842's transition guidance, which allows the Company to carryforward its historical lease classifications and its assessment as to whether a contract is or contains a lease. The Company also elected to not recognize lease assets and lease liabilities for leases with an initial term of 12 months or less. See Note 15 for additional discussion.

In June 2016, the FASB issued 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 Securities Exchange Commission smaller reporting company filer, 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 its 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, 2019. 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 August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 modifies the disclosure requirements for fair value measurements. The following disclosure requirements were removed from ASC Topic 820 – Fair Value Measurement: (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; (2) the policy for timing of transfers between levels; and (3) the valuation processes for Level 3 fair value measurements. ASU 2018-13 clarifies that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. In addition, ASU 2018-13 adds new disclosure requirements for Level 3 measurements. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for any removed or modified disclosures. The adoption of ASU 2018-13 is not expected to have a material impact on the Company's future consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” (“ASU 2018-15”). The amendments in ASU 2018-15 broaden the scope of ASC Subtopic 350-40 to include costs incurred to implement a hosting arrangement that is a service contract. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The costs are capitalized or expensed depending on the nature of the costs and the project stage during which they are incurred, consistent with the accounting for internal-use software costs. The amendments in ASU 2018-15 result in consistent capitalization of implementation costs of a hosting arrangement that is a service contract and implementation costs incurred to develop or obtain internal use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in ASU 2018-15. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of ASU 2018-15 is not expected to have a material impact on the Company's future consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The adoption of ASU 2019-12 is not expected to have a material impact on the Company's future consolidated financial statements.

13. 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 with the exception of gains on sales of REO, which are included in non-interest expense.

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 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 interchanges 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 disaggregated by type of service for the three and nine months ended December 31, 2019 and 2018 (in thousands):

	Three Months Ended December 31,				Nine Months Ended December 31,
	2019		2018		2019		2018

Asset management fees	$	1,136	$	935	$	3,369	$	2,804
Debit card and ATM fees		758		799		2,403		2,382
Deposit related fees		559		436		1,691		1,313
Loan related fees		202		85		474		384
BOLI ⁽¹⁾		188		192		585		545
Net gains on sales of loans held for sale ⁽¹⁾		68		82		210		278
FHLMC loan servicing fees ⁽¹⁾		31		41		113		102
Other, net		221		159		623		630
Total non-interest income	$	3,163	$	2,729	$	9,468	$	8,438

⁽¹⁾ Not within the scope of ASC 606

For the nine months ended December 31, 2019 and 2018, substantially all of the Company’s revenues within the scope of ASC 606 are for performance obligations satisfied at a specified date.

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 card 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 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 December 31, 2019, 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.

14. 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.

Significant off-balance sheet commitments at December 31, 2019 are listed below (in thousands):

		Contract or Notional Amount
Commitments to originate loans:
Adjustable-rate	$	14,318
Fixed-rate		12,903
Standby letters of credit		2,070
Undisbursed loan funds and unused lines of credit		126,465
Total	$	155,756

At December 31, 2019, the Company had firm commitments to sell $322,000 of residential loans to the FHLMC. Typically, these agreements are short-term fixed-rate commitments and no material gain or loss is likely.

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 December 31, 2019, loans under warranty totaled $103.0 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 December 31, 2019, 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 nine months ended December 31, 2019 and 2018.

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.

15.

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 obligated under various noncancelable operating lease agreements for land, buildings and equipment that require future minimum rental 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 recognize payments occurring during option periods in the calculation of its operating lease right-of-use assets and operating lease liabilities. The Company adopted the requirements of ASC Topic 842 effective April 1, 2019, which required the Company to record in the consolidated balance sheet an operating lease right-of-use asset and an operating lease liability for leases with an initial term of more than 12 months for leases that existed as of April 1, 2019. The periods prior to the date of adoption are accounted for under superseded ASC Topic 840; therefore, the following disclosures include only the period for which ASC Topic 842 was effective.

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 December 31, 2019, the remaining deferred gain was $577,000 and is included in accrued expenses and other liabilities in the accompanying consolidated balance sheets.

The table below presents the lease right-of-use assets and lease liabilities recorded in the consolidated balance sheet at December 31, 2019 (in thousands):

Leases				Classification in the consolidated balance sheets
Finance lease right-of-use asset	$	1,528		Premises and equipment, net
Finance lease liability	$	2,378		Finance lease liability
Finance lease remaining lease term		19.93	years
Finance lease discount rate		7.16	%

Operating lease right-of-use assets	$	4,325		Prepaid expenses and other assets
Operating lease liabilities	$	4,419		Accrued expenses and other liabilities
Operating lease weighted-average remaining lease term		4.16	years
Operating lease weighted-average discount rate		2.77	%

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, for the periods indicated (in thousands):

	Three Months Ended December 31, 2019		Nine Months Ended December 31, 2019
Lease Costs
Finance lease amortization of right-of-use asset	$	19		58
Finance lease interest on lease liability		43		128
Operating lease costs		362		1,153
Variable lease costs		52		157
Total lease cost ⁽¹⁾	$	476		1,496
⁽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 $409,000 and $1.3 million for the three and nine months ended December 31, 2019, respectively. During the three and nine months ended December 31, 2019, the Company did not record any lease right-of-use assets that were exchanged for operating lease liabilities.

The following table reconciles the undiscounted cash flows for the periods presented related to the Company’s lease liabilities as of December 31, 2019 (in thousands):

Year Ending March 31:	Operating Leases			Finance Lease
Remaining of 2020	$	404		$	52
2021		1,011			208
2022		747			212
2023		573			215
2024		583			219
Thereafter		1,507			3,622
Total minimum lease payments		4,825			4,528
Less: amount of lease payment representing interest		(406	)		(2,150	)
Lease liabilities	$	4,419		$	2,378

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 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.

Critical Accounting Policies

Critical accounting policies and estimates are discussed in our 2019 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 2019 Form 10-K.

Executive Overview

As a progressive, community-oriented financial services company, 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 $875.1 million at December 31, 2019 compared to $864.7 million at March 31, 2019.

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 new loan originations – which are mainly concentrated in commercial business and commercial real estate loans – 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 18 branches, including, among others, ten in Clark County, four 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.

Economic conditions in the Company’s market areas have generally been positive. According to the Washington State Employment Security Department, unemployment in Clark County decreased to 4.7% at November 30, 2019 compared to 5.3% at March 31, 2019 and 5.0% at December 31, 2018. According to the Oregon Employment Department, unemployment in Portland, Oregon decreased to 3.4% at November 30, 2019 compared to 3.9% at both March 31, 2019 and December 31, 2018. According to the Regional Multiple Listing Services (“RMLS”), residential home inventory levels in Portland, Oregon have decreased to 1.8 months at December 31, 2019 compared to 2.2 months at March 31, 2019 and 2.5 months at December 31, 2018. Residential home inventory levels in Clark County decreased to 1.8 months at December 31, 2019 compared to 2.4 months at March 31, 2019 and 2.9 months at December 31, 2018. According to the RMLS, closed home sales in Clark County increased 32.2% in December 2019 compared to December 2018. Closed home sales during December 2019 in Portland, Oregon increased 19.9% compared to December 2018. Commercial real estate leasing

activity and the residential real estate market in the Portland/Vancouver area has been strong and the vacancy rates in the Portland/Vancouver area have been relatively low.

Operating Strategy

Fiscal year 2020 marks the 97 ^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 December 31, 2019, commercial and construction loans represented 90.0% of total loans compared to 89.5% at March 31, 2019. 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:

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 the selective acquisition of individual branches, loan purchases and whole bank transactions that meet its investment and market objectives.

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. As a result of these efforts and the application of more stringent underwriting practices over the last several years, the percentage of nonperforming loans to total loans was reduced to 0.17% at December 31, 2019 compared to 0.92% at March 31, 2015. 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.

Implementation of a Profit Improvement Plan (“PIP”) . The Company’s PIP committee is comprised of several members of management and the Board of Directors with the purpose of undertaking several initiatives to reduce non-interest expense and continue on-going efforts to identify cost saving opportunities throughout all aspects of the Company’s operations. The PIP committee’s mission is not only to find additional cost saving opportunities but also to search for and implement revenue enhancements and additional areas for improvement. As a result, the Company has improved its efficiency ratio over the last several years from 98.0% at March 31, 2014 to 62.2% at December 31, 2019.

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, whereby 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, text banking and mobile payments. The products are tailored to meet the needs of small to medium size businesses and households in the markets we serve. Recently, the Company launched a new online mortgage origination platform in June 2019. The Bank has implemented remote check capture at all of its branches and for selected customers of the Bank. The Company also 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 to Bank customers, including services provided through the Trust Company to increase its fee income. Assets under management by the Trust Company increased substantially to $1.2 billion at December 31, 2019 compared to $646.0 million at March 31, 2019, due primarily to a single large client added during the three months ended December 31, 2019. The Company also offers a third-party identity theft product to assist our customers in monitoring their credit that 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 (comprised of all demand, savings, interest checking accounts and all time deposits excluding wholesale-brokered deposits, trust account deposits, Interest on Lawyer Trust Accounts (“IOLTA”), public funds, and internet based deposits) increased $58.6 million at December 31, 2019 compared to March 31, 2019 reflecting the Company’s commitment to increasing core deposits versus relying on wholesale funding.

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):

	Commercial Business		Other Real Estate Mortgage		Real Estate Construction		Commercial & Construction Total
December 31, 2019
Commercial business	$	165,526	$	-	$	-	$	165,526
Commercial construction		-		-		79,034		79,034
Office buildings		-		109,517		-		109,517
Warehouse/industrial		-		99,167		-		99,167
Retail/shopping centers/strip malls		-		67,874		-		67,874
Assisted living facilities		-		1,075		-		1,075
Single purpose facilities		-		192,530		-		192,530
Land		-		15,163		-		15,163
Multi-family		-		57,792		-		57,792
One-to-four family construction		-		-		9,838		9,838
Total	$	165,526	$	543,118	$	88,872	$	797,516

March 31, 2019

Commercial business	$	162,796	$	-	$	-	$	162,796
Commercial construction		-		-		70,533		70,533
Office buildings		-		118,722		-		118,722
Warehouse/industrial		-		91,787		-		91,787
Retail/shopping centers/strip malls		-		64,934		-		64,934
Assisted living facilities		-		2,740		-		2,740
Single purpose facilities		-		183,249		-		183,249
Land		-		17,027		-		17,027
Multi-family		-		51,570		-		51,570
One-to-four family construction		-		-		20,349		20,349
Total	$	162,796	$	530,029	$	90,882	$	783,707

Comparison of Financial Condition at December 31, 2019 and March 31, 2019

Cash and cash equivalents, including interest-earning accounts, totaled $62.1 million at December 31, 2019 compared to $23.0 million at March 31, 2019. Cash and cash equivalents increased due to the increase in deposit balances. 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 and $747,000 at December 31, 2019 and March 31, 2019, respectively.

Investment securities totaled $155.8 million and $178.3 million at December 31, 2019 and March 31, 2019, respectively. The decrease was primarily due to regular scheduled investment securities repayments, investment sales and investments maturing during the nine months ended December 31, 2019. During the nine months ended December 31, 2019, purchases of investment securities totaled $18.1 million which was partially offset by investment sales totaling $17.8 million. The Company primarily purchases a combination of securities backed by government agencies (FHLMC, FNMA, SBA or GNMA). At December 31, 2019, 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 $875.1 million at December 31, 2019 compared to $864.7 million at March 31, 2019, an increase of $10.4 million. The Company has had steady loan demand in its market areas and anticipates continued organic loan growth. The increase was mainly concentrated in commercial real estate loans which increased $8.7 million or 1.9%. In addition, commercial business loans increased $2.7 million, or 1.7%, and multi-family loans increased $6.2 million, or 12.1%. Partially offsetting these increases were decreases in real estate construction loans of $2.0 million, or 2.2%, consumer loans of $3.4 million, or 3.7%, and land loans of $1.9 million, or 10.9%. Due to the timing of the completion of these real estate construction projects, balances may fluctuate between periods. Once construction projects are completed, these loans will roll to permanent financing and be classified within a category under other real estate mortgage. 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 December 31, 2019, the Company’s purchased SBA loan portfolio was $69.3 million compared to $67.9 million at March 31, 2019. During the nine months ended December 31, 2019, the Bank purchased $8.7 million of SBA loans, including premiums.

Deposits increased $65.4 million to $990.5 million at December 31, 2019 compared to $925.1 million at March 31, 2019. The increase was due a concentrated effort by the Company to increase deposits. The Company increased interest rates on certain deposit products to be more competitive in its market area. The Company had no wholesale-brokered deposits at December 31, 2019 and March 31, 2019. Core branch deposits accounted for 97.6% of total deposits at December 31, 2019 compared to 98.2% at March 31, 2019. The Company plans to continue its focus on core deposits and on building customer relationships as opposed to obtaining deposits through the wholesale markets.

The Bank had no advances from the FHLB at December 31, 2019 compared to $56.6 million at March 31, 2019. Based upon the increase in deposit balances, the Company was able to pay off its outstanding FHLB balances during the second fiscal quarter of 2020.

Shareholders' equity increased $12.7 million to $145.8 million at December 31, 2019 from $133.1 million at March 31, 2019. The increase was mainly attributable to net income of $12.9 million and an increase in the accumulated other comprehensive income related to the unrealized holding gain on securities available for sale, net of tax, of $2.5 million for the nine months ended December 31, 2019. These increases were partially offset by cash dividends declared of $3.2 million. The Company did not repurchase any shares of common stock during the nine months ended December 31, 2019 and 2018.

Capital Resources

The Bank is subject to various regulatory capital requirements administered by the Office of the Comptroller of the Currency (“OCC”) . 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 December 31, 2019.

As of December 31, 2019, the most recent notification from the OCC categorized the Bank as “well capitalized” under the 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):

		Actual				For Capital Adequacy Purposes				“Well Capitalized” Under Prompt Corrective Action
	Amount		Ratio			Amount	Ratio			Amount	Ratio
December 31, 2019
Total Capital:
(To Risk-Weighted Assets)	$	146,532	17.66	%	$	67,286	8.0	%	$	84,107	10.0	%
Tier 1 Capital:
(To Risk-Weighted Assets)		138,002	16.41			50,464	6.0			67,286	8.0
Common equity tier 1 Capital:
(To Risk-Weighted Assets)		138,002	16.41			37,848	4.5			54,670	6.5
Tier 1 Capital (Leverage):
(To Average Tangible Assets)		138,002	12.05			45,812	4.0			57,265	5.0

		Actual				For Capital Adequacy Purposes				“Well Capitalized” Under Prompt Corrective Action
	Amount		Ratio			Amount	Ratio			Amount	Ratio
March 31, 2019
Total Capital:
(To Risk-Weighted Assets)	$	140,062	16.88	%	$	66,379	8.0	%	$	82,974	10.0	%
Tier 1 Capital:
(To Risk-Weighted Assets)		129,671	15.63			49,784	6.0			66,379	8.0
Common equity tier 1 Capital:
(To Risk-Weighted Assets)		129,671	15.63			37,338	4.5			53,933	6.5
Tier 1 Capital (Leverage):
(To Average Tangible Assets)		129,671	11.56			44,874	4.0			56,092	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 December 31, 2019, the Bank’s CET1 capital exceeded the required capital conservation buffer at an amount greater than 2.5%.

For a savings and loan 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 December 31, 2019, the Company would have exceeded all regulatory capital requirements.

At periodic intervals, the OCC and the FDIC routinely examine the Bank’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 by the OCC or the FDIC could include a review of certain transactions or other amounts reported in the Company’s 2019 consolidated financial statements.

Liquidity and Capital Resources

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, fund the borrowing needs of loan customers, and 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 nine months ended December 31, 2019, the Bank used its sources of funds primarily to fund loan commitments. At December 31, 2019, cash and cash equivalents, certificates of deposit held for investment and available for sale investment securities totaled $218.1 million, or 18.4% 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 increase or decrease short-term borrowings, including FRB borrowings and FHLB advances. At December 31, 2019, the Bank had no advances from the FRB and had a borrowing capacity of $58.7 million from the FRB, subject to sufficient collateral. At December 31, 2019, the Bank had no advances from the FHLB and had an available borrowing capacity of $217.3 million from the FHLB, subject to sufficient collateral and stock investment. At December 31, 2019, 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 December 31, 2019 and March 31, 2019, 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 $6.7 million, or 0.68% of total deposits, and $14.5 million, or 1.6% of total deposits, at December 31, 2019 and March 31, 2019, 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 funds with the Bank. At December 31, 2019 and March 31, 2019, the Company had no deposits through this listing service. Although the Company did not originate any internet based deposits during the nine months ended December 31, 2019, 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 $676.4 million, or 57.1% of total assets at December 31, 2019.

At December 31, 2019, the Company had total commitments of $155.8 million, which includes commitments to extend credit of $27.2 million, unused lines of credit totaling $88.8 million, undisbursed construction loans totaling $37.7 million, and standby letters of credit totaling $2.1 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 December 31, 2019 totaled $67.7 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 $51.2 million at December 31, 2019.

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 December 31, 2019, Riverview Bancorp, Inc. had $6.3 million in cash to meet its liquidity needs.

Asset Quality

Nonperforming assets, consisting of nonperforming loans, were $1.5 million or 0.13% of total assets at both December 31, 2019 and March 31, 2019. The following table sets forth information regarding the Company’s nonperforming loans at the dates indicated (dollars in thousands):

	December 31, 2019				March 31, 2019
	Number of Loans		Balance		Number of Loans		Balance

Commercial business		3	$	299		2	$	225
Commercial real estate		2		1,019		2		1,081
Consumer		11		199		16		213
Total		16	$	1,517		20	$	1,519

The allowance for loan losses was $11.4 million or 1.29% of total loans at December 31, 2019 compared to $11.5 million or 1.31% of total loans at March 31, 2019. The balance of the allowance for loan losses at December 31, 2019 reflects the lower levels of delinquent, nonperforming and classified loans, low levels of net charge offs, as well as stable real estate values in our market areas. The Company recorded no provision for loan losses for the nine months ended December 31, 2019. The Company recorded a $50,000 provision for loan losses for the nine months ended December 31, 2018.

The coverage ratio of allowance for loan losses to nonperforming loans was 753.66% at December 31, 2019 compared to 754.25% at March 31, 2019. At December 31, 2019, the Company identified $1.2 million or 78.35% 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 December 31, 2019 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 local economic conditions, results of examinations by the Company’s regulators, or other factors could result in a material increase in the allowance for loan losses and may adversely affect the Company’s future financial condition and results of operations. 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 using 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 December 31, 2019 with the exception of one commercial real estate loan totaling $851,000 which is classified as nonaccrual. The related amount of interest income recognized on TDRs was $166,000 and $151,000 for the nine months ended December 31, 2019 and 2018, respectively.

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 nine 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):

	December 31, 2019			March 31, 2019

Loans accounted for on a non-accrual basis:
Commercial business	$	299		$	225
Commercial real estate		1,019			1,081
Consumer		191			210
Total		1,509			1,516
Accruing loans which are contractually past due 90 days or more		8			3
Total nonperforming assets	$	1,517		$	1,519

Foregone interest on non-accrual loans ⁽¹⁾	$	57		$	94
Total nonperforming loans to total loans		0.17	%		0.17	%
Total nonperforming loans to total assets		0.13	%		0.13	%
Total nonperforming assets to total assets		0.13	%		0.13	%

⁽¹⁾ Nine months ended December 31, 2019 and year ended March 31, 2019.

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

	Northwest Oregon		Other Oregon		Southwest Washington		Other		Total
December 31, 2019

Commercial business	$	-	$	-	$	299	$	-	$	299
Commercial real estate		-		851		168		-		1,019
Consumer		-		-		179		20		199
Total nonperforming assets	$	-	$	851	$	646	$	20	$	1,517

March 31, 2019

Commercial business	$	65	$	-	$	160	$	-	$	225
Commercial real estate		-		896		185		-		1,081
Consumer		-		-		169		44		213
Total nonperforming assets	$	65	$	896	$	514	$	44	$	1,519

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 Oregon		Other Oregon		Southwest Washington		Total
December 31, 2019

Land acquisition and development	$	2,175	$	1,852	$	11,136	$	15,163
Speculative and custom/presold construction		278		-		9,496		9,774
Total	$	2,453	$	1,852	$	20,632	$	24,937

March 31, 2019

Land acquisition and development	$	2,184	$	1,908	$	12,935	$	17,027
Speculative and custom/presold construction		1,680		104		15,284		17,068
Total	$	3,864	$	2,012	$	28,219	$	34,095

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):

	December 31, 2019				March 31, 2019
	Number of Loans		Balance		Number of Loans		Balance

Commercial business		5	$	1,561		9	$	1,734
Commercial real estate		-		-		3		2,308
Land		-		-		1		728
Multi-family		3		35		2		20
Total		8	$	1,596		15	$	4,790

Loans delinquent 30 - 89 days were 0.06% and 0.04% of total loans at December 31, 2019 and March 31, 2019, respectively. At December 31, 2019, loans 30 - 89 days delinquent in the consumer portfolio totaled $505,000. There were no loans 30-89 days delinquent in any other loan category at December 31, 2019. At that date, commercial real estate loans represented the largest portion of the loan portfolio at 53.03% of total loans and commercial business and consumer loans represented 18.67% and 10.04% of total loans, respectively.

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 14 and 15 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, 2019. 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 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 an expected control premium of 30%, 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 5.3%, a net interest margin that approximated 4.0% and a return on assets that ranged from 1.24% to 1.34% (average of 1.29%). In addition to utilizing the above projections of estimated operating results, key assumptions used to determine the fair value estimate under the income approach were the discount rate of 15.54% 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 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 1.1 times tangible book value. The Company calculated a fair value of its reporting unit of $217.0 million using the corporate value approach, $170.0 million using the income approach and $253.0 million using the market approach, with a final concluded value of $216.0 million, with equal weight given to the corporate value approach and market approach and slightly less weight to the income 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 decline in the value of its stock price as well as values of other financial institutions, declines in revenue for the Company, 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.

Comparison of Operating Results for the Three and Nine Months Ended December 31, 2019 and 2018

Net Income. Net income was $4.1 million, or $0.18 per diluted share for the three months ended December 31, 2019, compared to $4.4 million, or $0.19 per diluted share for same prior year period. Net income for the nine months ended December 31, 2019 and 2018 was $12.9 million, or $0.57 per diluted share, and $13.1 million, or $0.58 per diluted share, respectively. The Company’s earnings for the three and nine months ended December 31, 2019 compared to the same prior year periods decreased; however, increases in both interest and non-interest income were offset by increases in interest expense compared to the respective prior year periods. Additionally, a one-time $355,000 gain on sale of land and building, which occurred in December 2018 and recorded in non-interest expense, related to our Longview branch closure was not present in the current three and nine month periods ended December 31, 2019.

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 nine months ended December 31, 2019 was $11.5 million and $34.7 million, respectively, representing a $241,000 and $500,000 decrease, respectively, compared to the three and nine months ended December 31, 2018. The net interest margin for the three and nine months ended December 31, 2019 was 4.23% and 4.31%, respectively, compared to 4.41% and 4.42% for the three and nine months ended December 31, 2018. These decreases in net interest margin were due primarily to increases in the cost of total interest-bearing deposits.

Interest and Dividend Income. Interest and dividend income for the three and nine months ended December 31, 2019 was $12.8 million and $38.2 million, respectively, compared to $12.4 million and $37.1 million, respectively, for the same periods in the prior year. The increase was due primarily to an increase in interest on loans receivable of $517,000 and $1.9 million for the three and nine months ended December 31, 2019, respectively, due primarily to higher average balances of net loans partially offset by a decrease in interest on investment securities of $269,000 and $845,000, respectively, for the same prior year periods due primarily to lower average balances on investment securities.

The average balance of net loans increased $24.3 million and $46.1 million to $878.7 million and $881.8 million for the three and nine months ended December 31, 2019, respectively, from $854.4 million and $835.7 million for the same prior year periods. The average yield on net loans was 5.30% for the three and nine months ended December 31, 2019 compared to 5.19% and 5.28% for the same three and nine month periods in the prior year, respectively. The average yield on net loans was negatively impacted by a 25 basis point decrease in the targeted Fed Funds Rate in the current quarter.

Interest Expense. Interest expense increased $618,000 and $1.6 million to $1.3 million and $3.5 million for the three and nine months ended December 31, 2019, respectively, compared to $656,000 and $1.9 million for the three and nine months ended December 31, 2018, respectively. The increase in interest expense was primarily attributable to the increase of 40 basis points and 24 basis points in the weighted average interest rate on interest-bearing deposits for the three and nine months ended December 31, 2019, respectively, compared to the same prior year periods. In addition, interest expense for the nine months ended December 31, 2019 increased compared to the same period last year due to the increase in the Company’s utilization of FHLB advances for its funding needs. The weighted average interest rate on interest-bearing deposits increased to 0.54% and 0.39% for the three and nine months ended December 31, 2019, respectively, from 0.14% and 0.15% for the three and nine months ended December 31, 2018, respectively. The increase in the weighted average interest rate on regular savings accounts and certificates of deposit primarily contributed to the overall increase in the expense related to interest-bearing deposits, reflecting increased deposit rates to remain competitive in the Company’s market area.

The average balance of interest-bearing deposits increased $27.6 million for the three months ended December 31, 2019 compared to the same period in the prior year. Offsetting the increase in the average balance of interest-bearing deposits was a decrease in the average balance of FHLB advances of $9.0 million to zero for the three months ended December 31, 2019 compared to the same prior year period as no FHLB advances were utilized during the three months ended December 31, 2019. The average interest rate on FHLB advances was zero for the three months ended December 31, 2019 compared to 2.58% for the same prior year period. The overall increase in weighted average interest rate on interest-bearing deposits contributed to the increase in the average cost of interest-bearing liabilities to 0.70% for the three months ended December 31, 2019 compared to 0.37% for the same prior year period.

The average balance of interest-bearing deposits decreased $18.6 million for the nine months ended December 31, 2019 compared to the same period in the prior year. The decreases in the average balance of interest-bearing deposits were offset by the utilization of FHLB advances which increased the average balance of FHLB advances $23.0 million for the nine months ended December 31, 2019 compared to the same prior year period. The average balance of FHLB advances was $27.3 million for the nine months ended December 31, 2019 compared to $4.3 million for the same prior year period. The average interest rate on FHLB advances was 2.54% for the nine months ended December 31, 2019 compared to 2.39% for the same prior year period. The overall increase in weighted average interest rate on interest-bearing deposits and the utilization of FHLB advances to supplement the decrease in average interest-bearing deposits contributed significantly to the increase in the average cost of interest-bearing liabilities to 0.65% for the nine months ended December 31, 2019 compared to 0.35% for the same prior year period.

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 December 31,
	2019						2018
	Average Balance		Interest and Dividends		Yield/Cost		Average Balance		Interest and Dividends		Yield/Cost

Interest-earning assets:
Mortgage loans	$	692,227	$	9,478	5.45	%	$	670,116	$	9,001	5.33	%
Non-mortgage loans		186,429		2,221	4.74			184,252		2,181	4.70
Total net loans ⁽¹⁾		878,656		11,699	5.30			854,368		11,182	5.19

Investment securities ⁽²⁾		159,356		887	2.21			193,171		1,158	2.38
Daily interest-earning assets		105		-	-			73		-	-
Other earning assets		44,112		189	1.70			9,587		60	2.48
Total interest-earning assets		1,082,229		12,775	4.70			1,057,199		12,400	4.65

Non-interest-earning assets:
Office properties and equipment, net		15,811						15,256
Other non-interest-earning assets		76,116						65,643
Total assets	$	1,174,156					$	1,138,098

Interest-bearing liabilities:
Regular savings accounts	$	208,486		354	0.68		$	137,862		35	0.10
Interest checking accounts		176,856		24	0.05			182,055		26	0.06
Money market accounts		184,194		54	0.12			248,305		74	0.12
Certificates of deposit		127,747		510	1.59			101,415		105	0.41
Total interest-bearing deposits		697,283		942	0.54			669,637		240	0.14

Other interest-bearing liabilities		29,011		332	4.55			37,981		416	4.35
Total interest-bearing liabilities		726,294		1,274	0.70			707,618		656	0.37

Non-interest-bearing liabilities:
Non-interest-bearing deposits		289,773						297,609
Other liabilities		11,999						7,619
Total liabilities		1,028,066						1,012,846
Shareholders’ equity		146,090						125,252
Total liabilities and shareholders’ equity	$	1,174,156					$	1,138,098

Net interest income			$	11,501					$	11,744

Interest rate spread					4.00	%					4.28	%

Net interest margin					4.23	%					4.41	%

Ratio of average interest-earning assets to average interest-bearing liabilities					149.01	%					149.40	%

Tax equivalent adjustment ⁽³⁾			$	9					$	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.

	Nine Months Ended December 31,
	2019						2018
	Average Balance		Interest and Dividends		Yield/Cost		Average Balance		Interest and Dividends		Yield/Cost

Interest-earning assets:
Mortgage loans	$	693,776	$	28,586	5.48	%	$	655,929	$	26,963	5.46	%
Non-mortgage loans		188,003		6,560	4.64			179,768		6,298	4.65
Total net loans ⁽¹⁾		881,779		35,146	5.30			835,697		33,261	5.28

Investment securities ⁽²⁾		168,266		2,721	2.15			204,194		3,568	2.32
Daily interest-earning assets		115		-	-			47		1	2.82
Other earning assets		22,424		369	2.19			16,812		270	2.13
Total interest-earning assets		1,072,584		38,236	4.74			1,056,750		37,100	4.66

Non-interest-earning assets:
Office properties and equipment, net		15,569						15,535
Other non-interest-earning assets		74,157						66,451
Total assets	$	1,162,310					$	1,138,736

Interest-bearing liabilities:
Regular savings accounts	$	179,494		744	0.55		$	136,763		103	0.10
Interest checking accounts		179,794		75	0.06			180,723		76	0.06
Money market accounts		200,170		177	0.12			256,203		233	0.12
Certificates of deposit		105,550		957	1.21			109,915		347	0.42
Total interest-bearing deposits		665,008		1,953	0.39			683,604		759	0.15

Other interest-bearing liabilities		56,337		1,570	3.71			33,286		1,126	4.49
Total interest-bearing liabilities		721,345		3,523	0.65			716,890		1,885	0.35

Non-interest-bearing liabilities:
Non-interest-bearing deposits		288,410						291,691
Other liabilities		10,911						7,857
Total liabilities		1,020,666						1,016,438
Shareholders’ equity		141,644						122,298
Total liabilities and shareholders’ equity	$	1,162,310					$	1,138,736

Net interest income			$	34,713					$	35,215

Interest rate spread					4.09	%					4.31	%

Net interest margin					4.31	%					4.42	%

Ratio of average interest-earning assets to average interest-bearing liabilities					148.69	%					147.41	%

Tax equivalent adjustment ⁽³⁾			$	32					$	34

⁽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.

The following table sets forth the effects of changing rates and volumes on net interest income of the Company for the periods ended December 31, 2019 compared to the periods ended December 31, 2018. 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 December 31,									Nine Months Ended December 31,
	2019 vs. 2018									2019 vs. 2018

	Increase (Decrease) Due to									Increase (Decrease) Due to
							Total Net									Total Net
	Volume			Rate			Increase (Decrease)			Volume			Rate			Increase (Decrease)

Interest Income:
Mortgage loans	$	284		$	193		$	477		$	1,526		$	97		$	1,623
Non-mortgage loans		23			17			40			277			(15	)		262
Investment securities ⁽¹⁾		(192	)		(79	)		(271	)		(598)			(249	)		(847	)
Daily interest-bearing		-			-			-			-			(1	)		(1	)
Other earning assets		153			(24	)		129			91			8			99
Total interest income		268			107			375			1,296			(160	)		1,136

Interest Expense:
Regular savings accounts		26			293			319			42			599			641
Interest checking accounts		-			(2	)		(2	)		(1	)		-			(1	)
Money market accounts		(20	)		-			(20	)		(56	)		-			(56	)
Certificates of deposit		33			372			405			(15	)		625			610
Other interest-bearing liabilities		(102	)		18			(84	)		667			(223	)		444
Total interest expense		(63	)		681			618			637			1,001			1,638
Net interest income	$	331		$	(574	)	$	(243	)	$	659		$	(1,161	)	$	(502	)

⁽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 the purchase and assumption transaction of MBank (“MBank transaction”) 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 $1.1 million and $1.5 million at December 31, 2019 and March 31, 2019, respectively.

There was no provision for loan losses for the nine months ended December 31, 2019, compared to a provision for loan losses of $50,000 for the nine months ended December 31, 2018. The lack of a provision for loan losses for the nine months ended December 31, 2019 compared to 2018 was based primarily upon the low level of charge-offs, recoveries of previously charged off loans, decline in classified loans and stable real estate values in our market areas.

Net charge-offs for the three and nine months ended December 31, 2019 totaled $3,000 and $24,000, respectively. This compares to net charge-offs of $11,000 and net recoveries of $686,000 for the three and nine months ended December 31, 2018, respectively.

Annualized net charge-offs to average net loans for the three and nine month periods ended December 31, 2019 was not meaningful. Annualized net charge-offs to average net loans for the three and nine month periods ended December 31, 2018 was 0.01% and (0.11)%, respectively. Nonperforming loans were $1.5 million at December 31, 2019, compared to $1.6 million at December 31, 2018. The ratio of allowance for loan losses to nonperforming loans was 753.66% at December 31, 2019 compared to 713.52% at December 31, 2018. Classified loans decreased to $3.1 million at December 31, 2019 compared to $6.0 million at December 31, 2018. The classified asset to total capital ratio was 2.1% at December 31, 2019 compared to 4.4% a year earlier. 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 December 31, 2019, the Company had identified $5.3 million 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, $5.1 million 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 December 31, 2019, charge-offs on these impaired loans totaled $460,000 from their original loan balances. The remaining $141,000 of impaired loans had specific valuation allowances totaling $8,000 at December 31, 2019.

Non-Interest Income. Non-interest income increased $434,000 and $1.0 million to $3.2 million and $9.5 million for the three and nine months ended December 31, 2019, respectively, compared to the same prior year periods. The increase in non-interest income for the three and nine months ended December 31, 2019, compared to the same prior year periods was primarily due to the increases in fees and service charges of $203,000 and $506,000, respectively, in addition to increases in asset management fees of $201,000 and $565,000, respectively, reflecting the increase in the Trust Company’s assets under management. These increases were partially offset by decreases in net gains on sales of loans held for sale of $14,000 and $68,000, for the three and nine months ended December 31, 2019, respectively, compared to the same prior year periods.

Non-Interest Expense. Non-interest expense increased $445,000 and $708,000 to $9.2 million and $27.4 million for the three and nine months ended December 31, 2019, respectively, compared to the same prior year periods. The increase in non-interest expense for the three and nine months ended December 31, 2019, compared to the same prior year periods was primarily due to increases in salaries and employee benefits of $147,000 and $698,000, respectively, and data processing expense of $16,000 and $112,000, respectively, due to additional staffing attributable to the overall growth of the Company and continued investments into enhancing our information technology infrastructure, including investments in our digital product offerings. In addition, other non-interest expense increased $369,000 and $222,000 for the three and nine months ended December 31, 2019, respectively, as a result of a $355,000 gain on sale of land and building, which occurred in December 2018, related to our Longview branch closure. These increases were offset by decreases in professional fees of $182,000 and $265,000 and FDIC insurance premiums of $85,000 and $165,000 for the three and nine months ended December 31, 2019, respectively, compared to the same prior year periods. The decrease in FDIC insurance premium expense is attributable to credits for previously paid deposit insurance premiums which were a result of the FDIC exceeding its stated Deposit Insurance Fund Reserve Ratio. The Company has $122,000 in credits on future assessments remaining as of December 31, 2019, which may be recognized in future periods when allowed for by the FDIC upon insurance fund levels being met.

Income Taxes. The provision for income taxes was $1.3 million and $3.9 million for the three and nine months ended December 31, 2019, respectively, compared to $1.3 million and $3.8 million for the three and nine months ended December 31, 2018, respectively. The Company’s effective tax rate for the three and nine months ended December 31, 2019 was 23.7% and 23.0%, respectively, compared to 22.5% and 22.4% for the three and nine months ended December 31, 2018, respectively. As of December 31, 2019, management deemed that a valuation allowance related to the Company’s deferred tax asset was not necessary. At December 31, 2019, the Company had a net deferred tax asset of $3.4 million compared to $4.2 million at March 31, 2019.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has not been any material change in the market risk disclosures contained in the 2019 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 December 31, 2019 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 December 31, 2019 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 December 31, 2019, 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 control. 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.

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, 2019.

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

None.

Item 3. Defaults Upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

Not applicable

Item 6. Exhibits

	(a)	Exhibits:

	2.1	Purchase and Assumption Agreement among Riverview Community Bank, a federal savings bank, and Riverview Bancorp, Inc. a Washington corporation, and MBank, an Oregon state-chartered commercial bank, and Merchants Bancorp, an Oregon corporation (1)
	3.1	Articles of Incorporation of the Registrant (2)
	3.2	Bylaws of the Registrant (3)
	4.1	Form of Certificate of Common Stock of the Registrant (2)
	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 (4)
	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 (4)
	10.3	Form of Employment Agreement between the Company and Chris P. Cline (5)
	10.4	Form of Change in Control Agreement between the Company and Chris P. Cline (5)
	10.5	Employee Stock Ownership Plan (6)
	10.6	2003 Stock Option Plan (7)
	10.7	Form of Incentive Stock Option Award Pursuant to 2003 Stock Option Plan (8)
	10.8	Form of Non-qualified Stock Option Award Pursuant to 2003 Stock Option Plan (8)
	10.9	Deferred Compensation Plan (9)
	10.10	2017 Equity Incentive Plan (10)
	10.11	Form of Incentive Stock Option Award Agreement under the Riverview Bancorp, Inc. 2017 Equity Incentive Plan (11)
	10.12	Form of Non-Qualified Stock Option Award Agreement under the Riverview Bancorp, Inc. 2017 Equity Incentive Plan (11)
	10.13	Form of Restricted Stock Award Agreement under the Riverview Bancorp, Inc. 2017 Equity Incentive Plan (11)
	10.14	Form of Restricted Stock Unit Award Agreement under the Riverview Bancorp, Inc. 2017 Equity Incentive Plan (11)
	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 December 31, 2019, formatted on 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 *

(1)	Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on September 29, 2016 and incorporated herein by reference.

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

(3)	Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on May 3, 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, 2019, 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, 2017 and incorporated herein by reference.

(6)	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.

(7)	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.

(8)	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.

(9)	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.

(10)	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.

(11)	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

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:	February 7, 2020	Date:	February 7, 2020

EXHIBIT INDEX

31.1

Certifications of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act

31.2

Certifications of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act

Certifications of the 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 December 31, 2019, formatted on Extensible Business Reporting Language (XBRL) (a) Consolidated Balance Sheets; (b) Consolidated Statements of Income; (c) Consolidated Statements of Shareholders’ Equity (d) Consolidated Statements of Cash Flows; and (e) Notes to Consolidated Financial Statements

TABLE OF CONTENTS

Part I. Financial Information Item 1. Financial Statements (unaudited)Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II. Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Item 6. Exhibits

31.1 Certifications of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act 31.2 Certifications of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act 32 Certifications of the Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act

Valuation Technique

Significant Unobservable Inputs

Impaired loans

Appraised value

Discounted cash flows

Adjustment for market conditions

Discount rate

N/A ⁽¹⁾

6.25% to 8.00%

⁽¹⁾ There were no adjustments to appraised values of impaired loans as of December 31, 2019 and March 31, 2019.