RIVERVIEW BANCORP INC 10-K

Item 1. Business General Riverview Bancorp, Inc., a Washington corporation, is the savings and loan holding company of Riverview Community Bank (the “Bank”). At March 31, 2021, the Company had total assets of $1.5 billion, total deposits of $1.3 billion and total shareholders' equity of $151.6 million. The Company’s executive offices are located in Vancouver, Washington. The Bank's subsidiary, Riverview Trust Company (the “Trust Company”), is a trust and financial services company located in downtown Vancouver, Washington, and provides full-service brokerage activities, trust and asset management services. Substantially all of the Company’s business is conducted through the Bank, which until April 28, 2021, was a federal savings bank subject to extensive regulation by the Office of the Comptroller of the Currency (“OCC”). The Bank converted from a federally chartered savings bank to a Washington state-chartered commercial bank on April 28, 2021. As a Washington state-chartered commercial bank, the Bank’s regulators are the Washington State Department of Financial Institutions (“WDFI”) and the Federal Deposit Insurance Corporation ("FDIC"), the insurer of its deposits. The Bank's deposits are insured up to applicable limits by the FDIC. The Board of Governors of the Federal Reserve System (“Federal Reserve”) remains the primary federal regulator for the Company. In connection with the Bank’s charter conversion, the Company converted from a Savings and Loan Holding Company to a Bank Holding Company. The Bank is also a member of the Federal Home Loan Bank of Des Moines ("FHLB") which is one of the 11 regional banks in the Federal Home Loan Bank System (“FHLB System”). 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 $924.1 million at March 31, 2021 compared to $898.9 million at March 31, 2020. Since COVID-19 was declared a pandemic in March 2020, COVID-19 has significantly affected our communities, customers, and operations. Efforts to limit the spread of COVID-19 led to shelter-in-place orders, the temporary closure of non-essential businesses, travel restrictions, supply chain disruptions and prohibitions on public gatherings, among other things, throughout many parts of the United States and, in particular, the markets in which we operate. Although many of these restrictions have been lifted and society has begun to re-open, the COVID-19 pandemic is ongoing and additional uncertainties exist which may continue to impact our customers, employees and vendors; the financial services and banking industry; and the economy as a whole. These uncertainties include, among other things, the extent and severity of the spread of COVID-19 including COVID-19 variants, the length of the outbreak, the extent of distribution and efficacy of vaccines, the lifting of pandemic-related restrictions including social distancing and the use of facemasks, and future actions taken by governmental authorities to contain the outbreak or to mitigate its impact. In light of the uncertainties and continuing developments related the COVID-19 pandemic, the ultimate adverse impact of COVID-19 cannot be reliably estimated at this time, but it has been and is expected to continue to be material. For our customers, the Company is continuing to offer payment and financial relief programs for borrowers impacted by COVID-19. We continue to work with our customers to originate and renew commercial business loans and through its conclusion in May 2021, originated loans through the Paycheck Protection Program (“PPP”), a lending program administered by the U.S. Small Business Administration (“SBA”) and established as part of the CARES Act. As of March 31, 2021, the Company held SBA PPP loans with a total outstanding balance of $93.4 million. For additional discussion of impacts to our business from the COVID-19 pandemic, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments Related to COVID-19." 4 The Company’s strategic plan includes targeting the commercial banking customer base in its primary market area for loan originations and deposit growth, specifically small and medium size businesses, professionals and wealth building individuals. In pursuit of these goals, the Company will seek to increase the loan portfolio consistent with its strategic plan and asset/liability and regulatory capital objectives, which includes maintaining a significant amount of commercial business and commercial real estate loans in its loan portfolio. Significant portions of our recent loan originations, other than SBA PPP loans, are mainly concentrated in commercial business and commercial real estate loans which carry adjustable rates, higher yields or shorter terms and higher credit risk than traditional fixed-rate consumer real estate one-to-four family mortgages. Our strategic plan also stresses increased emphasis on non-interest income, including increased fees for asset management through the Trust Company and deposit service charges. The strategic plan is designed to enhance earnings, reduce interest rate risk and provide a more complete range of financial services to customers and the local communities the Company serves. We believe we are well positioned to attract new customers and to increase our market share through our 17 branches, including, among others, nine in Clark County, four in the Portland metropolitan area and three lending centers. Market Area The Company conducts operations from its home office in Vancouver, Washington and 17 branch offices located in Camas, Washougal, Stevenson, White Salmon, Battle Ground, Goldendale, and Vancouver, Washington (six branch offices) and Portland (two branch offices), Gresham, Tualatin and Aumsville, Oregon. The Trust Company has two locations, one in downtown Vancouver, Washington and one in Lake Oswego, Oregon, and provides full-service brokerage activities, trust and asset management services. Riverview Mortgage, a mortgage broker division of the Bank, originates mortgage loans for various mortgage companies predominantly in the Vancouver/Portland metropolitan areas, as well as for the Bank. The Bank’s Business and Professional Banking Division, with two lending offices located in Vancouver and one in Portland, offers commercial and business banking services. 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 were generally positive until the recent COVID-19 pandemic. According to the Washington State Employment Security Department, unemployment in Clark County increased to 6.2% at March 31, 2021 compared to 4.3% at March 31, 2020. According to the Oregon Employment Department, unemployment in Portland increased to 7.0% at March 31, 2021 compared to 3.4% at March 31, 2020. According to the Regional Multiple Listing Services (“RMLS”), residential home inventory levels in Portland, Oregon have decreased to 0.8 months at March 31, 2021 compared to 1.8 months at March 31, 2020. Residential home inventory levels in Clark County have decreased to 0.5 months at March 31, 2021 compared to 2.1 months at March 31, 2020. According to the RMLS, closed home sales in March 2021 in Clark County increased 21.8% compared to March 2020. Closed home sales during March 2021 in Portland increased 8.5% compared to March 2020. Lending Activities General . At March 31, 2021, the Company's net loans receivable totaled $924.1 million, or 59.6% of total assets at that date. The principal lending activity of the Company is the origination of loans collateralized by commercial properties and commercial business loans. A substantial portion of the Company's loan portfolio is secured by real estate, either as primary or secondary collateral, located in its primary market area. The Company’s lending activities are subject to the written, non-discriminatory, underwriting standards and loan origination procedures established by the Bank’s Board of Directors (“Board”) and management. The customary sources of loan originations are realtors, walk-in customers, referrals and existing customers. The Bank also uses commissioned loan brokers and print advertising to market its products and services. Loans are approved at various levels of management, depending upon the amount of the loan. Our current loan policy generally limits the maximum amount of loans we can make to one borrower to the greater of $500,000 or 15% of unimpaired capital and surplus (except for loans fully secured by certain readily marketable collateral, in which case this limit is increased to 25% of unimpaired capital and surplus). The regulatory limit of loans we can make to one borrower is 20% of total risk-based capital, or $30.3 million, at March 31, 2021. At this date, the Bank’s largest lending relationship with one borrower was $16.5 million, which consisted of two commercial real estate loans of $14.1 million and $2.4 million. Both loans were performing in accordance with their original payment terms at March 31, 2021. 5 Loan Portfolio Analysis . The following table sets forth the composition of the Company's loan portfolio, excluding loans held for sale, by type of loan at the dates indicated (dollars in thousands): At March 31, 2021 2020 2019 2018 2017 Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent Commercial and construction: Commercial business $ 265,145 28.11 % $ 179,029 19.64 % $ 162,796 18.58 % $ 137,672 16.97 % $ 107,371 13.78 % Other real estate mortgage (1) 602,521 63.88 580,271 63.66 530,029 60.50 529,014 65.20 506,661 65.00 Real estate construction 16,990 1.80 64,843 7.12 90,882 10.37 39,584 4.88 46,157 5.92 Total commercial and construction 884,656 93.79 824,143 90.42 783,707 89.45 706,270 87.05 660,189 84.70 Consumer: Real estate one-to-four family 56,405 5.98 83,150 9.12 84,053 9.60 90,109 11.10 92,865 11.91 Other installment 2,174 0.23 4,216 0.46 8,356 0.95 14,997 1.85 26,378 3.39 Total consumer 58,579 6.21 87,366 9.58 92,409 10.55 105,106 12.95 119,243 15.30 Total loans 943,235 100.00 % 911,509 100.00 % 876,116 100.00 % 811,376 100.00 % 779,432 100.00 % Less: Allowance for loan losses 19,178 12,624 11,457 10,766 10,528 Total loans receivable, net $ 924,057 $ 898,885 $ 864,659 $ 800,610 $ 768,904 (1) Other real estate mortgage consists of commercial real estate, land and multi-family loans. 6 Loan Portfolio Composition. The following tables set forth the composition of the Company's commercial and construction loan portfolio based on loan purpose at the dates indicated (in thousands): Commercial Business Other Real Estate Mortgage Real Estate Construction Commercial & Construction Total March 31, 2021 Commercial business $ 171,701 $ - $ - $ 171,701 SBA PPP 93,444 - - 93,444 Commercial construction - - 9,810 9,810 Office buildings - 135,526 - 135,526 Warehouse/industrial - 87,880 - 87,880 Retail/shopping centers/strip malls - 85,414 - 85,414 Assisted living facilities - 854 - 854 Single purpose facilities - 233,793 - 233,793 Land acquisition and development - 14,040 - 14,040 Multi-family - 45,014 - 45,014 One-to-four family construction - - 7,180 7,180 Total $ 265,145 $ 602,521 $ 16,990 $ 884,656 March 31, 2020 Commercial business $ 179,029 $ - $ - $ 179,029 Commercial construction - - 52,608 52,608 Office buildings - 113,433 - 113,433 Warehouse/industrial - 91,764 - 91,764 Retail/shopping centers/strip malls - 76,802 - 76,802 Assisted living facilities - 1,033 - 1,033 Single purpose facilities - 224,839 - 224,839 Land acquisition and development - 14,026 - 14,026 Multi-family - 58,374 - 58,374 One-to-four family construction - - 12,235 12,235 Total $ 179,029 $ 580,271 $ 64,843 $ 824,143 Commercial Business Lending. At March 31, 2021, the commercial business loan portfolio totaled $265.1 million, or 28.1% of total loans. Commercial business loans are typically secured by business equipment, accounts receivable, inventory or other property. The Company’s commercial business loans may be structured as term loans or as lines of credit. Commercial term loans are generally made to finance the purchase of assets and usually have maturities of five years or less. Commercial lines of credit are typically made for the purpose of providing working capital and usually have a term of one year or less. Lines of credit are made at variable rates of interest equal to a negotiated margin above an index rate and term loans are at either a variable or fixed rate. The Company also generally obtains personal guarantees from financially capable parties based on a review of personal financial statements. Beginning in the first quarter of fiscal year 2021, the Company began to offer PPP loans which are fully guaranteed by the SBA, to existing and new customers as a result of the COVID-19 pandemic. These PPP loans are subject to the provisions of the CARES Act as well as complex and evolving rules and guidance issued by the SBA and the U.S. Department of the Treasury. The entire principal amount of the borrower's PPP loan, including any accrued interest, is eligible to be forgiven and repaid by the SBA if the borrower meets the PPP conditions. The CAA 2021 renewed and extended the PPP until May 31, 2021 by authorizing an additional $284.5 billion for the program. As of March 31, 2021, the Company held SBA PPP loans with a total outstanding balance of $93.4 million. The Company expects that the great majority of its PPP borrowers will seek full or partial forgiveness of their loan obligations. For additional information regarding these loans, see