What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2024-06-14 compared with 2023-06-14 · 138 added, 205 removed, 656 unchanged (34% of the section changed)

8 unchanged sentences

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.

As a Washington state-chartered commercial bank, the Bank’s regulators are the WDFI and the 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.

The 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.

3 unchanged sentences

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 $993.5 million at March 31, 2023 compared to $975.9 million at March 31, 2022.

The Company’s loans receivable, net, totaled $1.01 billion at March 31, 2024 compared to $993.5 million at March 31, 2023.

The Company’s strategic plan includes targeting the commercial banking customer base in its primary market area for loan originations and deposit growth, specifically small and medium size businesses, professionals and wealth building individuals.

10 unchanged sentences

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.

Sharp Microelectronics, Hewlett Packard, Georgia Pacific, Underwriters Laboratory, WaferTech, 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.

Lending Activities

At March 31, 2023, the Company’s net loans receivable totaled $993.5 million, or 62.5% of total assets at that date.

At March 31, 2024, the Company’s net loans receivable totaled $1.01 billion, or 66.3% 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.

17 unchanged sentences

Total consumer

Allowance for loan losses

ACL / Allowance for loan and lease losses ("ALLL")

Total loans receivable, net

1 unchanged sentence

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 and

Commercial Business

Commercial Real Estate Mortgage

Real Estate Construction

Commercial and Construction Total

March 31, 2024

28 unchanged sentences

Additionally, the borrower’s cash flow may be unpredictable and collateral securing these loans may fluctuate in value.

At March 31, 2024, the Company had one commercial business loan totaling $58,000 on non-accrual status compared to two commercial business loans totaling $97,000 at March 31, 2023.

Other Real Estate Mortgage Lending.

The Company originates other real estate mortgage loans secured by office buildings, warehouse/industrial, retail, assisted living facilities and single-purpose facilities (collectively “commercial real estate loans” or “CRE”) and land and multi-family loans primarily located in its market area, collectively referred to herein as the “other real estate mortgage loan portfolio”.

At March 31, 2023, the other real estate mortgage loan portfolio totaled $564.5 million, or 56.0% of total loans.

The Company originates other real estate mortgage loans secured by office buildings, warehouse/industrial, retail, assisted living facilities and single-purpose facilities (collectively “commercial real estate ” or “CRE”) and land and multi-family loans primarily located in its market area, collectively referred to herein as the “other real estate mortgage loan portfolio”.

At March 31, 2024, the commercial real estate and multi-family real estate mortgage loan portfolios totaled $583.5 million and $70.8 million, or 57.0% and 6.9% of total loans, respectively.

At March 31, 2024, owner occupied properties accounted for 25.1% and non-owner occupied properties accounted for 74.9% of the Company’s commercial real estate loans.

8 unchanged sentences

Rates and other terms on such loans generally depend on our assessment of credit risk after considering such factors as the borrower’s financial condition and credit history, loan-to-value ratio, DSC ratio and other factors.

The Company actively pursues commercial real estate loans.

Loan demand within the Company’s market area was competitive in fiscal year 2023 as economic conditions and competition for strong credit-worthy borrowers remained high.

At March 31, 2023, the Company had one commercial real estate loan of $100,000 on non-accrual status.

At March 31, 2022, the Company had one commercial real estate loan of $122,000 on non-accrual status.

The Company had one commercial real estate loan of $79,000 and $100,000 on non-accrual status at March 31, 2024 and 2023, respectively.

For more information concerning risks related to commercial real estate loans, see Item 1A.

“Risk Factors – Risks Related to Our Lending – Commercial and multi-family real estate lending involves higher risks than one-to-four family real estate and other consume lending, which exposes us to increased lending risks.”

“Risk Factors – Risks Related to Our Lending Activities – Commercial and multi-family real estate lending involves higher risks than one-to-four family real estate and other consumer lending, which exposes us to increased lending risks.”

Land loans represent loans made to developers for the purpose of acquiring raw land and/or for the subsequent development and sale of residential lots.

15 unchanged sentences

(1) Includes undisbursed funds of $55.9 million and $36.6 million at March 31, 2024 and 2023, respectively.

At March 31, 2023, the balance of the Company’s construction loan portfolio, including undisbursed funds, was $84.3 million compared to $63.2 million at March 31, 2022.

At March 31, 2024, the Company’s construction loan portfolio, including undisbursed funds, was $92.5 million compared to $84.3 million at March 31, 2023.

The $8.1 million increase was primarily due to a $11.1 million increase in commercial/multi-family construction loans, partially offset by a decrease of $2.1 million in custom/presold construction loans.

1 unchanged sentence

Speculative construction loans are made to home builders and are termed “speculative” because the home builder does not have, at the time of loan origination, a signed contract with a home buyer who has a commitment for permanent financing with either the Company or another lender for the finished home.

The home buyer may be identified either during or after the construction period, with the risk that the builder will have to service the speculative construction loan and finance real estate taxes and other carrying costs of the completed home for a significant period of time after the completion of construction until a home buyer is identified.

The home buyer may be identified either during or after the construction period, with the risk that the builder will have to service the speculative construction loan and finance real estate taxes and other carrying costs of the completed home for a significant period after the completion of construction until a home buyer is identified.

The largest speculative construction loan at March 31, 2024 was a loan to finance the construction of 36 townhomes totaling $8.2 million that is secured by property located in the Company’s market area.

11 unchanged sentences

Construction/permanent loans are originated to the homeowner rather than the homebuilder along with a commitment by the Company to originate a permanent loan to the homeowner to repay the construction loan at the completion of construction.

The construction phase of a construction/permanent loan generally lasts six to nine months.

At the completion of construction, the Company may either originate a fixed-rate mortgage loan or an adjustable rate mortgage (“ARM”) loan or use its mortgage

brokerage capabilities to obtain permanent financing for the customer with another lender.

construction phase of a construction/permanent loan generally lasts six to nine months.

At the completion of construction, the Company may either originate a fixed-rate mortgage loan or an adjustable rate mortgage (“ARM”) loan or use its mortgage brokerage capabilities to obtain permanent financing for the customer with another lender.

For adjustable rate loans, the interest rates adjust on their first adjustment date.

14 unchanged sentences

The Company allows disbursements of this interest component as long as the project is progressing as originally projected and if there has been no deterioration in the financial standing of the borrower or the underlying project.

If the Company makes a determination that there is such deterioration, or if the loan becomes nonperforming, the Company halts any disbursement of those funds identified for use in paying interest.

If the Company determines that there is such deterioration, or if the loan becomes nonperforming, the Company halts any disbursement of those funds identified for use in paying interest.

In some cases, additional interest reserves may be taken by use of deposited funds or through credit lines secured by separate and additional collateral.

For additional information concerning the risks related to construction lending, see Item 1A.

“Risk Factors – Risks Related to our Lending Activities – Our real estate construction and land acquisition and development loans expose us to risk.”

“Risk Factors – Risks Related to our Lending Activities – Our real estate construction loans are based upon estimates of costs and the value of the completed project, and as with land loans may be more difficult to liquidate, if necessary.”

Consumer Lending.

3 unchanged sentences

Terms typically range from 15 to 30 years.

At March 31, 2023, the Company had three residential real estate loans totaling $86,000 on non-accrual status compared to two residential real estate loans totaling $51,000 at March 31, 2022.

At March 31, 2024, the Company had one residential real estate loan totaling $36,000 on non-accrual status compared to three residential real estate loans totaling $86,000 at March 31, 2023.

All of these loans were secured by properties located in Oregon and Washington.

The Company no longer originates real estate one-to-four family loans.

During the fiscal year 2023, the Company purchased $26.8 million real estate one-to-four family loans as a way to supplement loan originations in this category.

The Company also originates a variety of installment loans, including loans for debt consolidation and other purposes, automobile loans, boat loans and savings account loans.

9 unchanged sentences

The following table sets forth certain information at March 31, 2024 regarding the dollar amount of loans maturing in the loan portfolio based on their contractual terms to maturity, but does not include potential prepayments.

loans, loans having no stated schedule of repayments or stated maturity and overdrafts are reported as due in one year or less.

Demand loans, loans having no stated schedule of repayments or stated maturity and overdrafts are reported as due in one year or less.

Loan balances are reported net of deferred fees (in thousands):

17 unchanged sentences

Loan Commitments .

The Company issues commitments to originate commercial loans, other real estate mortgage loans, construction loans, real estate one-to-four family loans and other installment loans conditioned upon the occurrence of certain events.

The Company issues commitments to originate commercial loans, other real estate mortgage loans, construction loans, real estate one-to-four family (“home equity”) loans and other installment loans conditioned upon the occurrence of certain events.

The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments.

4 unchanged sentences

The Company employs commissioned brokers who originate mortgage loans (including construction loans) for various mortgage companies.

The loans brokered to mortgage companies are closed in the name of, and funded by, the purchasing mortgage company and are not originated as an asset of the Company.

Loans brokered to mortgage companies are closed in the name of, and funded by, the purchasing mortgage company and are not originated as an asset of the Company.

In return, the Company receives a fee ranging from 1.5% to 2.0% of the loan amount that it shares with the commissioned broker.

4 unchanged sentences

There were no loans brokered to the Company for the fiscal year ended March 31, 2024 and 2023.

Gross fees of $346,000, including brokered loan fees, were earned in the fiscal year ended March 31, 2023.

For the fiscal year ended March 31, 2022, gross fees earned were $1.1 million, which included brokered loan fees and fees for loans sold to the FHLMC.

Gross fees of $213,000 and $346,000, including brokered loan fees, were earned in the fiscal year ended March 31, 2024 and 2023.

The interest rate environment has a strong influence on the loan volume and amount of fees generated from the mortgage broker activity.

9 unchanged sentences

Nonperforming Assets.

Nonperforming assets were $1.9 million or 0.12% of total assets at March 31, 2023 compared with $22.1 million or 1.27% of total assets at March 31, 2022.

The Company had net recoveries totaling $36,000 during fiscal 2023 compared to net charge-offs of $30,000 during fiscal 2022.

The decrease in nonperforming assets is attributed to the progress made in resolving the delay in servicing transfer between two third-party servicers of SBA and United States Department of Agriculture (“USDA”) government guaranteed loans, as further discussed below.

Non-performing SBA government guaranteed loans totaled $1.6 million at March 31, 2023 compared to $21.8 million at March 31, 2022.

Nonperforming assets were $178,000 or 0.01% of total assets at March 31, 2024 compared with $1.9 million or 0.12% of total assets at March 31, 2023.

The Company had net recoveries totaling $13,000 and $36,000 during fiscal 2024 and 2023, respectively.

Non-performing SBA and USDA government guaranteed loans totaled $5,000 at March 31, 2024 compared to $1.6 million at March 31, 2023.

Loans are reviewed regularly and it is the Company’s general policy that when a loan is 90 days or more delinquent or when collection of principal or interest appears doubtful, it is placed on non-accrual status, at which time the accrual of interest ceases and a reserve for any unrecoverable accrued interest is established and charged against operations.

10 unchanged sentences

SBA and USDA Government Guaranteed

The Company continues its efforts to work out problem loans, seek full repayment or pursue foreclosure proceedings and has made significant progress in regards to the SBA and USDA government guaranteed loan servicing transfer.

At March 31, 2023, the Bank holds approximately $1.6 million of the government guaranteed portion of SBA and USDA loans originated by other banks that, when purchased, were placed into a Direct Registration Certificate (“DRC”) program by the SBA’s former fiscal transfer agent, Colson Inc.

(“Colson”) that remain to be reconciled.

Under the DRC program, Colson was required to remit monthly payments to the investor holding the guaranteed balance, whether or not a payment had actually been received from the borrower.

In 2020, Colson did not successfully retain its existing contract as the SBA’s fiscal transfer agent and began transitioning servicing over to a new company called Guidehouse.

In late 2021, Guidehouse, under their contract with the SBA, declined to continue the DRC program.

After declining to continue the DRC program, all payments under the DRC program began to be held by Guidehouse or Colson until the DRC program could be unwound and the DRC holdings converted into normal pass through certificates.

As part of unwinding the DRC program, Colson has requested investors who had received payments in advance of the borrower actually remitting payment return advanced funds before they will process the conversion of certificates.

continues to work with Colson on the reconciliation and transfer of the two remaining loans.

The Bank expects the reconciliation and unwinding process to continue and until these processes are completed for all loans being transferred, with such loans continuing to be reflected as past due.

These nonperforming government guaranteed loans are not considered non-accrual loans because there is no concern of the collectability of the full principal and interest given the Company purchased the guaranteed portion of these loans which is backed by government guaranteed interest certificates.

At March 31, 2023, all of the Company’s nonperforming loans exclusive of the SBA and USDA government guaranteed loans are to borrowers with properties located in Southwest Washington.

At March 31, 2023, 9.69% of the Company’s nonperforming loans, totaling $179,000 were measured for impairment.

At March 31, 2024, all of the Company’s nonperforming loans exclusive of the SBA and USDA government guaranteed loan are to borrowers with properties located in Southwest Washington.

At March 31, 2024, 79.0% of the Company’s nonperforming loans, totaling $137,000 were individually evaluated for loss reserves.

These loans have been charged down to the estimated fair market value of the collateral less selling costs or carry a specific reserve to reduce the net carrying value.

There were no reserves associated with these nonperforming loans that were measured for impairment at March 31, 2023.

At March 31, 2023, the largest single nonperforming loan was a USDA government guaranteed loan for $879,000.

The largest single nonperforming loan exclusive of the SBA and USDA government guaranteed loans was a commercial real estate loan for $100,000 at March 31, 2023.

There were no reserves associated with these nonperforming loans that were individually evaluated at March 31, 2024.

At March 31, 2024, the largest single nonperforming loan was a commercial real estate loan for $79,000.

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

March 31, 2024

March 31, 2023

Loans accounted for on a non-accrual basis:

6 unchanged sentences

Foregone interest on non-accrual loans

(1) Includes $18,000 of SBA and USDA government guaranteed loans at March 31, 2023.

(2) Consists entirely of SBA and USDA government guaranteed loans at both March 31, 2024 and 2023.

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

9 unchanged sentences

Total nonperforming assets

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 at March 31, 2023, 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):

March 31, 2023

March 31, 2022

Commercial business

Commercial real estate

At March 31, 2024 and 2023, loans delinquent 30 – 89 days were 0.17% and 0.20% of total loans, respectively..

At March 31, 2023, loans 30 – 89 days past due were comprised of SBA government guaranteed loans (which are included in commercial business), commercial business and consumer loans.

The SBA government guaranteed loans comprise a substantial amount of the total loans 30-89 days past due at March 31, 2023.

At March 31, 2022, loans 30 – 89 days past due were comprised of SBA government guaranteed loans, residential real estate construction and consumer loans.

There were no commercial real estate (“CRE”) loans 30 – 89 days past at March 31, 2023 or March 31, 2022.

There were no CRE loans 30 – 89 days past at March 31, 2024 or March 31, 2023.

At March 31, 2024, CRE loans represent the largest portion of our loan portfolio at 57.0% of total loans and commercial business loans represent 22.4% of total loans.

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 when a loan is deemed to be impaired, the amount of the impairment is measured using discounted cash flows and the original note rate, except when the loan is collateral dependent.

In these cases, the estimated fair value of the collateral (less any selling costs, if applicable) is used.

Impairment is recognized as a specific component within the allowance for loan losses if the estimated value of the impaired loan is less than the recorded investment in the loan.

When the amount of the impairment represents a confirmed loss, it is charged-off against the allowance for loan losses.

At March 31, 2023, the Company had TDRs totaling $629,000, of which $450,000 were on accrual status.

The $179,000 of TDRs accounted for on a non-accrual basis at March 31, 2023 are included as nonperforming loans in the nonperforming asset table above.

All of the Company’s TDRs were paying as agreed at March 31, 2023.

The related amount of interest income recognized on these TDR loans was $24,000 for the fiscal year ended March 31, 2023.

The Company has determined that, in certain circumstances, it is appropriate to split a loan into multiple notes.

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.

At March 31, 2023, no loans had been restructured in this manner.

The accrual status of a loan may change after it has been classified as a TDR.

The Company’s general policy related to TDRs is to perform a credit evaluation of the borrower’s financial condition and prospects for repayment under the revised terms.

This evaluation includes consideration of the borrower’s sustained historical repayment performance for a reasonable period of time.

A sustained period of repayment performance generally would be a minimum of six months and may include repayments made prior to the restructuring date.

If repayment of principal and interest appears doubtful, it is placed on non-accrual status.

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.

1 unchanged sentence

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.

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.

11 unchanged sentences

When a problem asset is classified by us as a loss, we are required to charge off the asset in the period in which it is deemed uncollectible.

The aggregate amount of the Company’s classified loans (comprised entirely of substandard loans), general loss allowances, specific loss allowances and net charge-offs (recoveries) were as follows at the dates indicated (in thousands):

The aggregate amount of the Company’s classified loans (comprised entirely of substandard loans), general loss allowances, specific loss allowances and net recoveries were as follows at the dates indicated (in thousands):

At or For the Year

3 unchanged sentences

Specific loss allowances

Net charge-offs (recoveries)

All loans on non-accrual status as of March 31, 2023 were categorized as classified loans with the exception of one commercial business loan for $18,000 which is fully guaranteed by the SBA.

Classified loans at March 31, 2023 were comprised of three commercial business loans totaling $117,000, three commercial real estate loans totaling $2.4 million (the largest of which was $1.5 million) and three one-to-four family real estate loans totaling $86,000.

The net decrease in classified loans is primarily attributed to the upgrade of one commercial real estate loan totaling $3.6 million.

As discussed earlier, nonperforming SBA and USDA government guaranteed loans totaled $1.6 million.

These nonperforming government guaranteed loans are not considered classified as there is no well-defined weakness and do not include the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected in regard to these loans.

The Company purchased the guaranteed portion of these loans which is backed by government guaranteed interest certificates and expects to receive all principal and interest on these loans.

Allowance for Loan Losses.

The Company maintains an allowance for loan losses to provide for probable losses inherent in the loan portfolio consistent with accounting principles generally accepted in the United States of America (“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 loan portfolios and make recommendations to change loan grades whenever changes are warranted.

Credit administration approves any changes to loan grades and monitors loan grades.

For additional discussion of the Company’s methodology for assessing the appropriate level of the allowance for loan losses see Item 7.

Net recoveries

All loans on non-accrual status as of March 31, 2024 were categorized as classified loans.

Classified loans at March 31, 2024 were comprised of two commercial business loans totaling $58,000, two commercial real estate loans totaling $599,000, two multi-family real estate loans totaling $29,000 and one one-to-four family real estate loan for $36,000.

The net decrease in classified loans is primarily attributed to the payoff of one commercial real estate loan for $1.5 million during fiscal 2024.

The Company maintains an ACL to provide for expected credit losses inherent in the loan portfolio consistent with accounting principles generally accepted in the United States of America (“GAAP”) guidelines.

The adequacy of the ACL is evaluated monthly to maintain levels sufficient to provide for expected credit losses existing at the balance sheet date.

For additional discussion of the Company’s methodology for assessing the appropriate level of the ACL see Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates.”

In accordance with GAAP, loans acquired from MBank during the fiscal year ended March 31, 2017 were recorded at their estimated fair value, which resulted in a net discount to the loans’ contractual amounts, of which a portion reflects a discount for possible credit losses.

Credit discounts are included in the determination of fair value, and, as a result, no allowance for loan losses is recorded for acquired loans at the acquisition date.

The discount recorded on the acquired loans is not reflected in the allowance for loan losses or related allowance coverage ratios.

However, we believe it should be considered when comparing certain financial ratios of the Company calculated in periods after the MBank transaction, compared to the same financial ratios of the Company in periods prior to the MBank transaction.

The net discount on these acquired loans was $228,000 and $371,000 at March 31, 2023 and 2022, respectively.

The Company recorded a provision for loan losses of $750,000 for the fiscal year ended March 31, 2023 compared to a recapture of loan losses of $4.6 million for the fiscal year ended March 31, 2022.

The increase in the allowance for loan losses in fiscal year 2023 is mainly attributed to an isolated downgrade of a commercial real estate loan for $15.9 million that occurred in the fourth quarter.

At March 31, 2023, the Company had an allowance for loan losses of $15.3 million, or 1.52% of total loans, compared to $14.5 million, or 1.47% of total loans at March 31, 2022.

Net recoveries totaled $36,000 for the fiscal year ended March 31, 2023 compared to net charge-offs of $30,000 in the prior fiscal year.

The Company recorded no provision or recapture of credit losses for the fiscal year ended March 31, 2024 compared to a provision for loan losses of $750,000 for the fiscal year ended March 31, 2023.

This was primarily due to credit upgrades, payoffs of higher credit risk loans, updates to economic forecasts, changes in loan portfolio balances, composition, and characteristics.

At March 31, 2024, the ACL was $15.4 million, or 1.50% of total loans, compared to $15.3 million, or 1.52% of total loans at March 31, 2023.

Net recoveries totaled $13,000 for the fiscal year ended March 31, 2024, compared to $36,000 for the prior fiscal year.

The coverage ratio of ACL to nonperforming loans was 8631.46% at March 31, 2024 compared to 826.62% at March 31, 2023.

The Company’s general valuation allowance to pooled or “collectively evaluated” loans was 1.50% and 1.52% at March 31, 2024 and 2023, respectively.

Criticized loans, which are comprised of watch and special mention loans, increased $17.6 million to $36.7 million at March 31, 2024 from $19.1 million at March 31, 2023.

Classified loans decreased $3.8 million to $2.6 million at March 31, 2023 compared to $6.4 million at March 31, 2022.

The net increase in criticized loans is mainly attributed to the downgrade of the $15.9 million commercial real estate loan mentioned above offset by the upgrade to a pass rating of a $6.6 million commercial real estate loan that was part of the criticized total at March 31, 2022.

Additionally, the criticized balance at March 31, 2023 includes three commercial business loans and one commercial real estate loan totaling $1.3 million to a related borrower that were downgraded in the third quarter.

The decrease in classified loans is mainly due to the upgrade to a pass rating of a $3.6 million commercial real estate loan.

The coverage ratio of allowance for loan losses to nonperforming loans was 826.62% at March 31, 2023 compared to 65.72% at March 31, 2022, and excluding SBA and USDA government guaranteed loans was 5777.0% at March 31, 2023.

The Company’s general valuation allowance to non-impaired loans was 1.52% and 1.47% at March 31, 2023 and 2022, respectively.

Management considers the allowance for loan losses to be adequate at March 31, 2023 to cover probable losses inherent in the loan portfolio based on the assessment of various factors affecting the loan portfolio, and the Company believes it has established its existing allowance for loan losses in accordance with GAAP.

However, a decline in national and local economic conditions (including a recession and continued inflationary pressures), results of examinations by the Company’s banking regulators, or other factors could result in a material increase in the allowance for loan losses and may adversely affect the Company’s future financial condition and results of operations.

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.

The following table sets forth the breakdown of the allowance for loan losses by loan category as of the dates indicated (dollars in thousands):

The net increase in criticized loans is mainly attributed to the downgrade of five commercial real estate loans totaling $15.0 million, the largest of which was $5.3 million, and one commercial business loan for $2.5 million.

Two of the downgraded commercial real estate loans totaling $8.0 million, including the previously mentioned $5.3 million loan, were to a related borrower.

The remaining four loans downgraded in fiscal 2024 totaling $7.9 million were to another related borrower.

The $7.9 million includes the previously mentioned $2.5 million commercial business loan along with a $3.8 million commercial real estate loan.

The criticized loan balance at March 31, 2024 includes a $15.6 million commercial real estate loan that was downgraded to special mention in fiscal year 2023.

The increases in the criticized loans balance at March 31, 2024 compared to March 31, 2023 were partially offset by normal paydowns, payoffs and grade changes totaling $1.9 million.

Classified loans decreased $1.9 million to $723,000 at March 31, 2024 compared to $2.6 million at March 31, 2023.

The decrease in classified loans is mainly due to the payoff of a $1.5 million commercial real estate loan that was classified at March 31, 2023.

Management considers the ACL to be adequate at March 31, 2024 to cover expected credit losses inherent in the loan portfolio based on the assessment of various factors affecting the loan portfolio, and the Company believes it has established its existing ACL in accordance with GAAP.

However, a decline in national and local economic conditions (including a possible recession and continued inflationary pressures), results of examinations by the Company’s banking regulators, or other factors could result in a material increase in the ACL and may adversely affect the Company’s future financial condition and results of operations.

In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing ACL 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.

The following table sets forth the breakdown of the ACL by loan category as of the dates indicated (dollars in thousands):

Loan Category

of Total Loans

Commercial and construction:

4 unchanged sentences

Other installment

Total allowance for loan losses

Total allowance for credit losses - loans

The following table shows certain credit ratios at and for the periods indicated and each component of the ratio’s calculations.

At or For the Year Ended March 31,

Allowance for loan losses as a percentage of total loans outstanding at period end

Allowance for loan losses

ACL/ALLL as a percentage of total loans outstanding at period end

Total loans outstanding

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Total loans outstanding

Allowance for loan losses as a percentage of non-accrual loans at period end

Allowance for loan losses

ACL/ALLL as a percentage of non-accrual loans at period end

Total non-accrual loans

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At March 31, 2024, the Company owned no privately issued MBS.

Our REMICS are MBS issued by FHLMC, FNMA and GNMA and our

CRE MBS are issued by FNMA.

Our REMICS are MBS issued by FHLMC, FNMA and GNMA and our CRE MBS are issued by FNMA.

The Company does not believe that it has any exposure to sub-prime lending in its investment securities portfolio.

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Yields on tax-exempt investments are not calculated on a fully tax equivalent basis.

Management reviews investment securities quarterly for the presence of other than temporary impairment (“OTTI”), taking into consideration current market conditions, the extent and nature of changes in estimated fair value, issuer rating changes and trends, financial condition of the underlying issuers, current analysts’ evaluations, the Company’s ability and intent to hold investments

until a recovery of estimated fair value, which may be maturity, as well as other factors.

There was no OTTI charge for investment securities for the years ended March 31, 2023, 2022 or 2021.

Management reviews investment securities quarterly to determine if an ACL is required, taking into consideration current market conditions, the extent and nature of changes in estimated fair value, issuer rating changes and trends, financial condition of the underlying issuers, current analysts’ evaluations, the Company’s ability and intent to hold investments until a recovery of estimated fair value, which may be maturity, as well as other factors.

There was no ACL and OTTI recorded for investment securities for the years ended March 31, 2024 and 2023, respectively.

See Note 3 of the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding investment securities.

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In determining the terms of its deposit accounts, the Company considers the rates offered by its competition, profitability to the Company, matching deposit and loan products and customer preferences and concerns.

The following table sets forth the average balances of deposit accounts held by the Company at the dates indicated (dollars in thousands):

The following table sets forth the average balances and interest rates of deposit accounts held by the Company at the dates indicated (dollars in thousands):

Year Ended March 31,

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The Company continues to focus on core deposits and growth generated by customer relationships as opposed to obtaining deposits through the wholesale markets, although the Company continued to experience competition for customer deposits within its market area during fiscal year 2024.

Core branch deposits (comprised of all demand, savings, interest checking accounts and all time deposits excluding wholesale-brokered deposits, trust account deposits, Interest on Lawyer Trust Accounts (“IOLTA”), public funds, and internet based deposits) at March 31, 2023 decreased $250.1 million since March 31, 2022 due to deposit pricing pressures in our market and customers seeking higher yielding investment alternatives.

Core branch deposits (comprised of demand, savings, interest checking accounts and certificates of deposit, excluding wholesale-brokered deposits, trust account deposits, Lawyer Trust Accounts (“IOLTA”), public funds, and internet-based deposits) at March 31, 2024 decreased $26.9 million since March 31, 2023 due to deposit pricing pressures in our market and customers seeking higher yielding investment alternatives.

At March 31, 2024, the Company had $39.6 million, or 3.22% of total deposits, in Certificate of Deposit Account Registry Service (“CDARS”) and Insured Cash Sweep (“ICS”) deposits, which were gathered from customers within the Company’s primary market-area.

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Under this listing service, the Company may post certificates of deposit rates on an internet site where institutional investors have the ability to deposit funds with the Company.

At March 31, 2023 and 2022, the Company did not have any deposits through this listing service as the Company chose not to utilize these internet-based deposits.

At March 31, 2024 and 2023, the Company did not have any deposits through this listing service as the Company chose not to utilize these

internet-based deposits.

Although the Company did not originate any internet based deposits during the fiscal year ended March 31, 2024, the Company may do so in the future consistent with its asset/liability objectives.

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The Company relies upon advances from the FHLB and borrowings from the Federal Reserve Bank of San Francisco (“FRB”), as needed, to supplement its supply of lendable funds and to meet deposit withdrawal requirements.

Advances from the FHLB and borrowings from the FRB are typically secured by the Bank’s commercial business loans, commercial real estate loans and real estate one-to-four family loans.

At March 31, 2023, the Bank had FHLB advances totaling $123.8 million and no FRB borrowings.

At March 31, 2022, the Bank did not have any FHLB advances or FRB borrowings.

Advances from the FHLB and borrowings from the FRB are typically secured by the Bank’s commercial business loans, commercial real estate loans, one-to-four family real estate loans, and pledged securities.

At March 31, 2024, the Bank had FHLB advances totaling $88.3 million and no FRB borrowings compared to $123.8 million in FHLB advances and no FRB borrowings at March 31, 2023.

The FHLB functions as a central reserve bank providing credit for member financial institutions.

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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 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.

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The Company believes its relationship with its employees is good.

To facilitate talent attraction and retention, we strive to make the Bank an inclusive, safe and healthy workplace, with opportunities for our employees to grow and develop in their careers, supported by competitive compensation and benefits programs.

Approximately 65.8% of our workforce was female and 34.2% male, 58.0% of our management roles were held by females and 42.0% were held by males and our average tenure was seven years.

The ethnicity of our workforce was 84.0% White, 5.4% Asian, 4.6% Hispanic or Latinx, 1.3% two or more races, 1.7% American Indian or Alaskan Native, 1.3% Native Hawaiian or Pacific Islander and 1.7% African American or Black.

To attract and retain talent, we strive to create an inclusive, safe and healthy workplace, with opportunities for our employees to grow and develop in their careers, supported by competitive compensation and benefits programs.

Our workforce is comprised of approximately 66.8% women and 33.2% men, with 58.0% of our management roles held by women and 42.0% by men.

The average tenure of our employees is 7.4 years.

The ethnicity of our workforce was 80.9% White, 5.8% Asian, 5.8% Hispanic or Latinx, 2.5% African American or Black, 2.1% two or more races, 1.7% American Indian or Alaskan Native, and 1.2% Native Hawaiian or Pacific Islander.

Benefit programs include quarterly or annual incentive opportunities, a Company sponsored Employee Stock Ownership Plan (“ESOP”), a Company-matched 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, and employee assistance programs including educational reimbursement opportunities.

The success of our business is fundamentally connected to the well-being of our people.

Accordingly, we are committed to the health, safety, and wellness of our employees.

In support of our commitment, we have onsite gym facilities at our operations center to promote health and wellness.

In response to the COVID-19 pandemic, we implemented significant operating environment changes that we determined were in the best interest of our employees, as well as the communities in which we operate, and which comply with government regulations.

We continue to utilize a hybrid work model which is supported by technology that promotes flexibility to work remotely while also recognizing the benefits of in-person collaboration.

The Company recognizes that the skills and knowledge of its employees are critical to the success of the organization, and promotes training and continuing education as an ongoing function for its employees.

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The information contained on the Company’s website is not included as a part of, or incorporated by reference into, this Annual Report on Form 10-K.

Other than an investor’s own internet access charges, the Company makes available free of charge through its website the Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after it has electronically filed such material with, or furnished such material to, the Securities and Exchange Commission (“SEC”).

Other than an investor’s own internet access charges, the Company makes available free of charge through its website the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after it has electronically filed such material with, or furnished such material to, the SEC.

Subsidiary Activities

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The Trust Company is an asset management company providing trust, estate planning and investment management services.

The Trust Company had net income of $860,000 for the fiscal year ended March 31, 2023 and total assets of $9.0 million at March 31, 2023.

The Trust Company had net income of $2.0 million for the fiscal year ended March 31, 2024 and total assets of $10.8 million at March 31, 2024.

The Trust Company earns fees on the management of assets held in fiduciary or agency capacity.

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The following table sets forth certain information regarding the executive officers of the Company and its subsidiaries:

President and Chief Executive Officer

Acting President/Chief Executive Officer and Chief Operating Officer

Executive Vice President and Chief Financial Officer

Executive Vice President and Chief Credit Officer

Executive Vice President and Chief Retail Banking Officer

Michael Sventek

Executive Vice President and Chief Lending Officer

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(1) At March 31, 2024

Lycklama is President and Chief Executive Officer of the Company, positions he has held since April 2018.

Prior to assuming the role of President and Chief Executive Officer, Mr.

Lycklama served as Executive Vice President and Chief Operating Officer of the Company, positions he had held since July 2017.

Prior to July 2017, Mr.

Lycklama served as Executive Vice President and Chief Financial Officer of the Company since 2008 and Vice President and Controller of the Bank since 2006.

Prior to joining Riverview, Mr.

Lycklama spent five years with a local public accounting firm advancing to the level of audit manager.

He holds a Bachelor of Arts degree from Washington State University, is a graduate of the Pacific Coast Banking School and is a certified public accountant (CPA).

Lycklama is a member of the Washington State University Vancouver Advisory Council.

Cox is Acting President/Chief Executive Officer and Chief Operating Officer of the Company.

Cox joined the Bank in August 2002 and spent five years as a commercial lender and progressed through the credit administration function, most recently serving as Executive Vice President and Chief Credit Officer.

Cox holds a Bachelor of Arts in Business Administration with a major emphasis in Finance from Washington State University and was an Honor Roll graduate of the Pacific Coast Banking School.

Cox is an active mentor in the local schools and was the Past Treasurer and Endowment Chair for the Washougal Schools Foundation and Past Board Member of Camas-Washougal Chamber of Commerce.

David Lam is Executive Vice President and Chief Financial Officer of the Company, positions he has held since July 2017.

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Lam holds a Bachelor of Arts degree in business administration with an emphasis in accounting from Oregon State University.

Lam is a CPA, holds a chartered global management accountant designation and is a member of both the American Institute of CPAs and Oregon Society of CPAs.

Cox is Executive Vice President and Chief Credit Officer of the Bank and is responsible for credit administration related to the Bank’s commercial, mortgage and consumer loan activities.

Cox joined the Bank in August 2002 and spent five years as a commercial lender and progressed through the credit administration function, most recently serving as Senior Vice President of Credit Administration.

He holds a Bachelor of Arts degree from Washington State University and was an Honor Roll graduate of the Pacific Coast Banking School.

Cox is an active mentor in the local schools and was the Past Treasurer and Endowment Chair for the Washougal Schools Foundation and Past Board Member of Camas-Washougal Chamber of Commerce.

Jellison is Executive Vice President and Chief Retail Banking Officer of the Bank, a position she has held since June 2022.

Jellison is responsible for the oversight of the bank’s retail branches.

Prior to June 2022, Mrs.

Jellison served as Senior Vice President and Commercial Lending Team Leader of the Portland Commercial Lending Team.

Jellison has spent her entire professional career working in banking and is passionate about delivering high level service to all clients.

Jellison attended The University of San Diego, studying music, and is a graduate of Flight Safety.

Plambeck is Executive Vice President and Chief Lending Officer of the Bank, a position he has held since March 2018.

Plambeck is responsible for all loan production including commercial, consumer, mortgage and builder/developer construction loans.

Plambeck joined the Bank in January 2011 as Director of Medical Banking.

For the past two years Mr.

Plambeck served as Senior Vice President and Team Leader for the Portland Commercial Team.

Plambeck holds a Bachelor of Science degree in Accounting from the University of Wyoming and is also a graduate of the Pacific Coast Banking School.

Plambeck is a board member for the Providence St.

Vincent Council of Trustees, Providence Heart and Vascular Institute and the Providence Brain and Spine Institute.

Plambeck is also a member of the Medical and Dental Advisory Team.

Lam is a certified public accountant (CPA), holds a chartered global management accountant designation and is a member of both the American Institute of CPAs and Oregon Society of CPAs.

Robert Benke is Executive Vice President and Chief Credit Officer of the Bank.

Previously, Mr.

Benke was Senior Vice President/Senior Credit Administrator, a position he has held since March 2016.

Benke joined Riverview in July 2004 and spent five years as a commercial lender and progressed through the credit administration function starting in 2012 most recently serving as Senior Vice President of Credit Administration.

He is responsible for credit administration related to the Bank’s commercial, and consumer loan activities.

He holds a Masters of Business Administration (MBA) from Washington State University, a Bachelor of Arts in Physics from Whitman College, and is a 2015 graduate of the Pacific Coast Banking School.

Benke is an active board member of the Washington State University – Vancouver MAP Program.

Michael Sventek is Executive Vice President and Chief Lending Officer of the Bank.

Sventek has over 32 years of experience in community banking, having most recently served as Commercial Banking Market Director for Umpqua Bank.

Prior to that, he served as Commercial Banking President for BBVA USA.

Throughout his career, Mr.

Sventek served as a highly visible finance leader for community banks and brings a vast amount of experience in commercial banking and lending.

Sventek graduated with a Bachelor of Science in Computer Science Engineering from Northern Arizona University and is a graduate of the Pacific Coast Banking School.

Evan Sowers is President and Chief Executive Officer of the Trust Company, a wholly-owned subsidiary of the Bank.

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For a complete description of the Bank’s required and actual capital levels on March 31, 2024, see Note 12 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K.

The Financial Accounting Standards Board (“FASB”) has adopted a new accounting standard for GAAP that is effective for us for our first fiscal year beginning after December 15, 2022.

This standard, referred to as Current Expected Credit Loss (“CECL”) requires FDIC-insured institutions and their holding companies (banking organizations) to recognize credit losses expected over the life of certain financial assets.

CECL covers a broader range of assets than the current method of recognizing credit losses and generally results in earlier recognition of credit losses.

Upon adoption of CECL, a banking organization must record a one-time adjustment to its credit loss allowances as of the beginning of the fiscal year of adoption equal to the difference, if any, between the amount of credit loss allowances under the current methodology and the amount required under CECL.

For a banking organization, implementation of CECL may reduce retained earnings, and to affect other items, in a manner that reduces its regulatory capital.

On April 1, 2023, the company adopted a new accounting standard for GAAP referred to as Current Expected Credit Loss (“CECL”) which requires FDIC-insured institutions and their holding companies (banking organizations) to recognize credit losses expected over the life of certain financial assets.

CECL covers a broader range of assets than the prior method of recognizing credit losses and generally results in earlier recognition of credit losses.

Upon adoption of CECL, a banking organization must record a one-time adjustment to its credit loss allowances as of the beginning of the fiscal year of adoption equal to the difference, if any, between the amount of credit loss allowances under the previous methodology and the amount required under CECL.

For a banking organization, implementation of CECL may reduce retained earnings, and affect other items, in a manner that reduces its regulatory capital.

The Company recorded a one-time adjustment to its allowance for credit losses of $42,000 with the adoption of CECL.

The federal banking regulators (the Federal Reserve, the OCC and the FDIC) have adopted a rule that gives a banking organization the option to phase in over a three-year period the day-one adverse effects of CECL on its regulatory capital.

The Company elected this option.

Prompt Corrective Action.

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The Bank is a member of the FHLB, which is one of 11 regional Federal Home Loan Banks that administer the home financing credit function of savings institutions, each of which serves as a reserve or central bank for its members within its assigned region.

It is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System.

It makes loans or advances to members in accordance with policies and procedures established by the Board of Directors of the FHLB, which are subject to the oversight of the Federal Housing Finance Agency.

The FHLB is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System.

Loans or advances are made to members in accordance with policies and procedures established by the Board of Directors of the FHLB, which are subject to the oversight of the Federal Housing Finance Agency.

All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB.

In addition, all long-term advances are required to provide funds for residential home financing.

See Business – “Deposit Activities and Other Sources of Funds – Borrowings.” As a member, the Bank is required to purchase and maintain stock in the FHLB.

At March 31, 2023, the Bank held $6.9 million

in FHLB stock, which is comprised of $1.9 million of membership stock and $5.0 million of activity stock from borrowing activities.

See Business – “Deposit Activities and Other Sources of

Funds – Borrowings.” As a member, the Bank is required to purchase and maintain stock in the FHLB.

At March 31, 2024, the Bank held $4.9 million in FHLB stock, which is comprised of $953,000 of membership stock and $4.0 million of activity stock from borrowing activities.

At March 31, 2024, the Bank is in compliance with FHLB stock requirements.

During the fiscal year ended March 31, 2023, the Bank redeemed $102,000 of FHLB membership stock at par due to the decrease in the Bank’s consolidated assets at December 31, 2022 as compared to December 31, 2021.

During the fiscal year ended March 31, 2024, the Bank redeemed $964,000 of FHLB membership stock at par due to the decrease in the Bank’s consolidated assets at December 31, 2023 as compared to December 31, 2022 along with a reduction of capital stock requirement percentage from 0.12% to 0.06% of the Bank’s consolidated assets.

The FHLB continues to contribute to low- and moderately-priced housing programs through direct loans or interest subsidies on advances targeted for community investment and low- and moderate-income housing projects.

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These contributions could also have an adverse effect on the value of FHLB stock in the future.

A reduction in value of the Bank’s FHLB stock may result in a decrease in net income and possibly capital.

A reduction in the value of the Bank’s FHLB stock may result in a decrease in net income and possibly capital.

Insurance of Accounts and Regulation by the FDIC.

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No institution may pay a dividend if it is in default on its federal deposit insurance assessment.

Total base assessment rates currently range from 3 to 30 basis points subject to certain adjustments.

Total base assessment rates currently range from 2.5 to 32 basis points subject to certain adjustments for institutions considered a “Small Bank” like the Bank.

Extraordinary growth in insured deposits during the first and second quarters of 2020 caused the DIF reserve ratio to decline below the statutory minimum of 1.35 percent as of June 30, 2020.

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Primarily, the law affords Washington state-chartered commercial banks the same powers as Washington state-chartered savings banks and provides that Washington state-chartered commercial banks may exercise any of the powers that the Federal Reserve has determined to be closely related to the business of banking and the powers of national banks, subject to the approval of the Director of the WDFI in certain situations.

Finally, the law provides additional flexibility for Washington state-chartered commercial and savings banks with respect to interest rates on loans and other extensions of credit.

Finally, the law provides additional flexibility for Washington state-chartered commercial and savings banks with respect to interest rates on

loans and other extensions of credit.

Specifically, they may charge the maximum interest rate allowable for loans and other extensions of credit by federally-chartered financial institutions to Washington residents.

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The Bank received a “satisfactory” rating during its most recent CRA examination.

On May 5, 2022, the federal bank regulatory agencies overhauled the CRA and jointly issued a proposal to strengthen and modernize regulations implementing the CRA.

The proposed regulations included major changes from the current regulation and will be effective on the first day of the first calendar quarter that begins at least 60 days after the publication date of the final rules.

The new rules as proposed are intended to, (1) provide expanded access to credit, investment, and basic banking services in low- and moderate-income communities, (2) address changes in the banking industry, including internet and mobile banking, (3) yield greater clarity, consistency, and transparency, (4) tailor CRA evaluations and data collection to bank size and type, and (5) maintain a unified approach amongst the regulating agencies.

On October 24, 2023, the FDIC and other federal banking agencies issued a final rule to strengthen and modernize the CRA regulations.

The changes are designed to encourage banks to expand access to credit, investment, and banking services in low- and moderate-income communities, adapt to changes in the banking industry, including mobile and internet banking, provide greater clarity and consistency in the application of the CRA regulations and tailor CRA evaluations and data collection to bank size and type.

The final rule establishes a revised regulatory framework for the CRA that, like the current framework, is based on bank asset size and business model.

Under the final rule, banks (such as the Bank) with assets of at least $600 million as of December 31 in both of the prior two calendar years and less than $2 billion as of December 31 in either of the prior two calendar years will be an “intermediate bank.” Intermediate banks will be evaluated under the new Retail Lending Test, and either the current rule’s community development test or, at the Bank’s option, the new Community Development Financing Test.

The applicability date for the majority of the provisions in the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027.

The amount of dividends payable by the Bank to Riverview depends upon the Bank’s earnings and capital position, and is limited by federal and state laws, regulations and policies.

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The guidelines prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director, or principal shareholder.

If the FDIC determines that an institution fails to meet any of these guidelines, it may require an institution to submit to the FDIC an acceptable plan to achieve compliance.

If the FDIC determines that an institution fails to meet any of these guidelines, it may

require an institution to submit to the FDIC an acceptable plan to achieve compliance.

Management of the Bank is not aware of any conditions relating to these safety and soundness standards which would require submission of a plan of compliance.

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The Federal Reserve requires all depository institutions to maintain reserves at specified levels against their transaction accounts, primarily checking accounts.

In response to the COVID-19 pandemic, the Federal Reserve reduced

reserve requirement ratios to zero percent effective on March 26, 2020, to support lending to households and businesses.

At March 31, 2024, the Bank was not required to maintain any reserve balances.

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In addition, Washington State and other federal and state cybersecurity and data privacy laws and regulations may expose the Bank to risk and result in certain risk management costs.

In addition, on November 18, 2021, the federal banking agencies announced the adoption of a final rule providing for new

notification requirements for banking organizations and their service providers for significant cybersecurity incidents.

In addition, on November 18, 2021, the federal banking agencies announced the adoption of a final rule providing for new notification requirements for banking organizations and their service providers for significant cybersecurity incidents.

Specifically, the new rule requires a banking organization to notify its primary federal regulator as soon as possible, and no later than 36 hours after, the banking organization determines that a “computer-security incident” rising to the level of a “notification incident” has occurred.

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Non-compliance with federal or similar state privacy and cybersecurity laws and regulations could lead to substantial regulatory imposed fines and penalties, damages from private causes of action and/or reputational harm.

In July 2023, the SEC adopted rules requiring registrants to disclose material cybersecurity incidents they experience and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy, and governance.

The new rules require registrants to disclose on Form 8-K any cybersecurity incident they determine to be material and to describe the material aspects of the incident's nature, scope, and timing, as well as its material impact or reasonably likely material impact on the registrant.

Other Consumer Protection Laws and Regulations.

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Under the BHCA, Riverview is supervised by the Federal Reserve.

The Federal Reserve has a policy that a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary bank and may not conduct its operations in an unsafe or unsound manner.

The Federal Reserve has a policy that a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary bank

and may not conduct its operations in an unsafe or unsound manner.

In addition, the Dodd-Frank Act and earlier Federal Reserve policy provide that a bank holding company should serve as a source of strength to its subsidiary bank by having the ability to provide financial assistance to its subsidiary bank during periods of financial distress to the bank.

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Riverview and any subsidiaries that it may control are considered “affiliates” within the meaning of the Federal Reserve Act, and transactions between the Bank and affiliates are subject to numerous restrictions.

With some exceptions, Riverview and its

subsidiaries are prohibited from tying the provision of various services, such as extensions of credit, to other services offered by Riverview or by its affiliates.

With some exceptions, Riverview and its subsidiaries are prohibited from tying the provision of various services, such as extensions of credit, to other services offered by Riverview or by its affiliates.

Acquisitions.

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For additional information, see Item 1.A.

“Risk Factors – Risks Related to Regulatory and Compliance Matters – Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions” in this report.

Stock Repurchases.

A bank holding company, except for certain “well-capitalized” and highly rated bank holding companies, is required to give the Federal Reserve prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding twelve months, is equal to 10% or more of its consolidated net worth.

The Federal Reserve may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve order or any condition imposed by, or written agreement with, the Federal Reserve.

The Federal Reserve may

disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve order or any condition imposed by, or written agreement with, the Federal Reserve.

Federal Securities Laws.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business