SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended March 31, ~~2016~~2017 OR

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

Commission File Number: ~~0-22957~~000-22957

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

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

900 Washington St., Ste. 900, Vancouver, Washington	98660	~~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:

Common Stock, Par Value $.01 per share	Nasdaq Stock Market LLC
(Title of Each Class)	(Name of Each Exchange on Which Registered)


Securities registered pursuant to Section 12(g) of the Act:		None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐[ ] No ☒[X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ☐[ ] No ☒[X]

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒[X] No ☐[ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and disclosure will not be contained, to the best of the registrant's knowledge, in any definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K ☒[X]

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

Large accelerated filer ☐ [ ]Accelerated filer ☒[X] Non-accelerated filer ☐ [ ]

Smaller ~~Reporting Company~~reporting company [ ] ☐Emerging growth company [ ]

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

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

The aggregate market value of the voting stock held by non-affiliates of the registrant, based on the closing sales price of the registrant's Common Stock as quoted on the Nasdaq Global Select Market System under the symbol "RVSB" on September 30, ~~2015~~2016 was ~~$106,912,478~~$121,092,448 (22,507,890 shares at ~~$4.75~~$5.38 per share). As of ~~May 31, 2016,~~June 5, 2017, there were issued and outstanding ~~22,507,890~~22,510,890 shares of the registrant's common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of registrant's Definitive Proxy Statement for the ~~2016~~2017 Annual Meeting of Stockholders (Part III).

Table of Contents
PART I		PAGE
Item 1.	Business	4
Item 1A.	Risk Factors	32
Item 1B.	Unresolved Staff Comments	4243
Item 2.	Properties	4243
Item 3.	Legal Proceedings	4243
Item 4.	Mine Safety Disclosures	4243
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	4344
Item 6.	Selected Financial Data	4546
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4748
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	63
Item 8.	Financial Statements and Supplementary Data	65
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	~~104~~107
Item 9A.	Controls and Procedures	~~104~~107
Item 9B.	Other Information	~~107~~110
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	~~107~~110
Item 11.	Executive Compensation	~~107~~110
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related ~~Stockholders~~Stockholder Matters	~~108~~111
Item 13.	Certain Relationships and Related Transactions, and Director Independence	~~108~~111
Item 14.	Principal Accounting Fees and Services	~~108~~111
PART IV
Item 15.	Exhibits and Financial Statement Schedules	~~109~~112
Signatures		~~110~~113
Exhibit Index		~~111~~114

Forward-Looking Statements

As used in this Form 10-K, 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-K, 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; 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, including from our recent purchase of certain assets and assumption of certain liabilities of MBank and Merchants Bancorp; 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; computer systems on which the Company depends could fail or experience a security breach; 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 methods; other economic, competitive, governmental, regulatory, and technological factors affecting the Company's operations, pricing, products and ~~services,~~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 ~~2017~~2018 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

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, ~~2016,~~2017, the Company had total assets of ~~$921.2 million,~~$1.1 billion, total deposits of ~~$779.8~~$980.1 million and shareholders' equity of ~~$108.3~~$111.3 million. The Company's executive offices are located in Vancouver, Washington.

The Company is subject to regulation by the Board of Governors of the Federal Reserve Systems ("Federal Reserve"). Substantially all of the Company's business is conducted through the Bank which is regulated by the Office of the Comptroller of the Currency ("OCC"), its primary regulator, and by the Federal Deposit Insurance Corporation ("FDIC"), the insurer of its deposits. The Bank's deposits are insured by the FDIC up to applicable legal limits under the Deposit Insurance Fund ("DIF"). The Bank has been a member of the Federal Home Loan Bank System ~~("FHLB")~~ 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, Cowlitz, Klickitat and Skamania counties of Washington, and Multnomah, Washington and Marion counties of Oregon as its primary market area. ~~The counties of Multnomah, Clark and Skamania are part of the Portland metropolitan area as defined by the U.S. Census Bureau.~~ 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 loan portfolio totaled ~~$614.9~~$768.9 million at March 31, ~~2016~~2017 compared to ~~$569.0~~$614.9 million a year ago.

~~Most recently,~~The Bank's subsidiary, Riverview Trust Company (the "Trust Company"), formerly known as Riverview Asset Management Corp., is a trust and financial services company located in downtown Vancouver, Washington, and provides full-service brokerage activities, trust and asset management services. In April 2017, the ~~Company's primary focus has been on increasing commercial business loans and owner occupied commercial real estate loans with~~Trust Company opened a ~~specific focus on medical professionals and the medical industry. Beginning~~second office in ~~2014, the Company began purchasing from time~~Lake Oswego, Oregon. On May 24, 2016, Riverview Asset Management Corp. changed its name to time pools of automobile loans from another financial institution as a way to further diversify its loan portfolio and to earn a higher yield than earned on its cash or short-term investments. These automobile loans are originated through a single dealership group located outside the Company's primary market area. The collateral for these loans is comprised of a mix of used automobiles. These loans are purchased with servicing retained by the sellerRiverview Trust Company.

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, commercial~~ real estate and ~~multifamily~~real estate construction 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.

~~At March 31, 2016, checking accounts totaled $323.9 million, or 41.5% of our total deposit mix compared to $267.4 million or 37.1% a year ago.~~ Our strategic plan also stresses increased emphasis on non-interest income, including increased fees for asset management through the ~~Bank's subsidiary, Riverview Asset Management Corp. ("RAMCorp"), a trust and financial services company,~~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 19 branches, including ten in Clark County, four in the Portland metropolitan area and three lending centers.

On February 17, 2017, the Company completed the purchase and assumption transaction in which the Company purchased certain assets and assumed certain liabilities of MBank, the wholly-owned subsidiary of Merchants Bancorp, including $115.3 million in loans and $130.6 million of deposits (the "MBank transaction"). In addition, as part of the MBank transaction, Riverview Bancorp, Inc. assumed the obligations of Merchant Bancorp's trust preferred securities.

Market Area

The Company conducts operations from its home office in Vancouver Washington and 1719 branch offices located in Camas, Washougal, Stevenson, White Salmon, Battle Ground, Goldendale, Vancouver (seven branch offices) and Longview, Washington and Portland (two branch offices), Gresham, Tualatin and Aumsville, Oregon. We believe we are well positioned to attract new customers and to increase our market share through our branch network. ~~RAMCorp is located~~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 ~~lending office~~ in Portland, ~~Oregon~~ offers commercial and business banking services. The Bank also operates a lending office for mortgage banking activities in Vancouver.

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, Wafer Tech, Nautilus, Barrett Business Services, PeaceHealth, ~~and~~ Fisher Investments 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 ~~continued to improve~~improved from the recent recessionary ~~downturn.~~downturn and over the last year. According to the Washington State Employment Security Department, unemployment in Clark County decreased to 5.5% at March 31, 2017 compared to 6.3% at March 31, ~~2016 compared to 6.7% at March 31, 2015.~~2016. According to the Oregon Employment Department, unemployment in Portland decreased to 3.2% at March 31, 2017 compared to 3.9% at March 31, ~~2016 compared to 4.8% at March 31, 2015.~~2016. According to the Regional Multiple Listing Services ("RMLS"), residential home inventory levels in Portland, Oregon have ~~decreased to~~remained at 1.3 months at both March 31, ~~2016 compared to 1.9 months at~~2017 and March 31, ~~2015.~~2016. Residential home inventory levels in Clark County have decreased to 1.6 months at March 31, 2017 compared to 1.7 months at March 31, ~~2016 compared to 2.6 months at March 31, 2015.~~2016. According to the RMLS, closed home sales in March ~~2016~~2017 in Clark County ~~increased 14.2%~~decreased 8.2% compared to March ~~2015.~~2016. Closed home sales during March ~~2016~~2017 in Portland ~~increased 4.4%~~decreased 2.8% compared to March ~~2015.~~2016. The Company has also seen an increase in sales activity for building lots during the past twelve months. Commercial real estate leasing activity and the residential real estate market in the Portland/Vancouver area have been thriving and the vacancy rates in the Portland/Vancouver area have been relatively low.

Lending Activities

General. At March 31, ~~2016,~~2017, the Company's net loans receivable totaled ~~$614.9~~$768.9 million, or ~~66.8%~~67.8% 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.

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,																										At March 31,
		2016					2015					2014					2013					2012						2017					2016					2015					2014					2013
		Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent				Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent

Commercial and construction:
Commercial business		$	69,397		11.11	%	$	77,186		13.31	%	$	71,632		13.43	%	$	71,935		13.42	%	$	87,238		12.74	%		$	107,371		13.78	%	$	69,397		11.11	%	$	77,186		13.31	%	$	71,632		13.43	%	$	71,935		13.42	%
Other real estate mortgage ⁽¹⁾			399,527		63.94			345,506		59.60			324,881		60.90			355,397		66.30			434,763		63.49				506,661		65.00			399,527		63.94			345,506		59.60			324,881		60.90			355,397		66.30
Real estate construction			26,731		4.28			30,498		5.26			19,482		3.65			9,675		1.81			25,791		3.76				46,157		5.92			26,731		4.28			30,498		5.26			19,482		3.65			9,675		1.81
Total commercial and construction			495,655		79.33			453,190		78.17			415,995		77.98			437,007		81.53			547,792		79.99				660,189		84.70			495,655		79.33			453,190		78.17			415,995		77.98			437,007		81.53
Consumer:
Real estate one-to-four family			88,780		14.21			89,801		15.49			93,007		17.43			97,140		18.12			134,975		19.71				92,865		11.91			88,780		14.21			89,801		15.49			93,007		17.43			97,140		18.12
Other installment			40,384		6.46			36,781		6.34			24,486		4.59			1,865		0.35			2,042		0.30				26,378		3.39			40,384		6.46			36,781		6.34			24,486		4.59			1,865		0.35
Total consumer			129,164		20.67			126,582		21.83			117,493		22.02			99,005		18.47			137,017		20.01				119,243		15.30			129,164		20.67			126,582		21.83			117,493		22.02			99,005		18.47
Total loans			624,819		100.00	%		579,772		100.00	%		533,488		100.00	%		536,012		100.00	%		684,809		100.00	%			779,432		100.00	%		624,819		100.00	%		579,772		100.00	%		533,488		100.00	%		536,012		100.00	%
Less:
Allowance for loan losses			9,885					10,762					12,551					15,643					19,921						10,528					9,885					10,762					12,551					15,643
Total loans receivable, net		$	614,934				$	569,010				$	520,937				$	520,369				$	664,888					$	768,904				$	614,934				$	569,010				$	520,937				$	520,369

⁽¹⁾ Other real estate mortgage consists of commercial real estate, land and multi-family loans.	⁽¹⁾ Other real estate mortgage consists of commercial real estate, land and multi-family loans.																										⁽¹⁾ Other real estate mortgage consists of commercial real estate, land and multi-family loans.

Construction lending affords the Company the opportunity to achieve higher interest rates and fees with shorter terms to maturity than the rates and fees generated by its single-family permanent mortgage lending. Construction lending, however, generally involves a higher degree of risk than single-family permanent mortgage lending because of the inherent difficulty in estimating both a property's value at completion of the project and the estimated cost of the project, as well as the time needed to sell the property at completion. The nature of these loans is such that they are generally more difficult to evaluate and monitor. Because of the uncertainties inherent in estimating construction costs, as well as the market value of the completed project and the effects of governmental regulation of real property, it is relatively difficult to evaluate accurately the total funds required to complete a project and the related loan-to-value ratio. Changes in the demand, such as for new housing and higher than anticipated building costs may cause actual results to vary significantly from those estimated. This type of lending also typically involves higher loan principal amounts and is often concentrated with a small number of builders. As a result, construction loans often involve the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project and the ability of the borrower to sell or lease the property or refinance the indebtedness, rather than the ability of the borrower or guarantor to repay principal and interest. If the appraisal of the value of the completed project proves to be overstated, we may have inadequate security for the repayment of the loan upon completion of construction of the project and may incur a loss. Increases in market rates of interest may have a more pronounced effect on construction loans by rapidly increasing the end-purchasers' borrowing costs, thereby reducing the overall demand for the project. Properties under construction are often difficult to sell and typically must be completed in order to be successfully sold which also complicates the process of working out problem construction loans. This may require us to advance additional funds and/or contract with another builder to complete construction. Further, in the case of speculative construction loans, there is the added risk associated with identifying an end-purchaser for the finished project. For additional information concerning the risks related to construction lending, see Item 1A. "Risk Factors – Our real estate construction and land acquisition or development loans expose us to risk."

When the Company classifies problem assets as either substandard or doubtful, we may establish a specific allowance in an amount we deem prudent to address the risk specifically or we may allow the loss to be addressed in the general allowance. General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been specifically allocated to particular problem assets. 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.

loans during the year totaling $1.1 million. The coverage ratio of allowance for loan losses to nonperforming loans was 382.98% at March 31, 2017 compared to 364.22% at March 31, ~~2016 compared to 202.37% at March 31, 2015. This coverage ratio increased from March 31, 2015 primarily as a result of the decrease in nonperforming loans.~~2016. The Company's general valuation allowance to non-impaired loans was ~~1.60%~~1.36% and ~~1.90%~~1.60% at March 31, ~~2016~~2017 and ~~2015,~~2016, respectively.

The Company's allowance consists of specific, general and unallocated components. The Company's specific allowance decreased from the prior year due to a decrease in the balance of impaired loans during the year. The general component also decreased from the prior year due to a decrease in the balance of classified and nonperforming loans and a decrease in charge-offs during the year. The unallocated component also decreased from the prior year as a result of the economic improvement noted in the Company's primary market area.

~~Effective January 1, 2015 (with some changes transitioned into full effectiveness over two to four years), the Bank is subject to the new~~ capital ~~requirements adopted by the OCC. These new requirements create~~including, a ~~new required ratio for~~ common equity Tier 1 ("CET1") capital ~~increase the minimum leverage and~~to risk-based assets ratio, a Tier 1 capital ~~ratios, change~~to risk-based assets ratio, a total capital to risk-based assets ratio and a Tier 1 capital to total assets leverage ratio. The existing capital requirements were effective January 1, 2015 and are the ~~risk-weightings~~result of certain assets for purposes of the risk-based capital ratios, create an additional capital conservation buffer over the required capital ratios and change what qualifies as capital for purposes of meeting these various capital requirements. These regulations implementa final rule implementing the regulatory capital reforms required by the Dodd Frank Act and the "Basel III" requirements. ~~Under~~

~~In addition to the minimum CET1, Tier 1 and total capital ratios, the~~The Bank ~~will have to~~also must maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum levels 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. ~~This new~~The capital conservation buffer requirement iswas subject to ~~being phased~~a phase in period, which began in January 2016 at 0.625% of risk-weighted assets and will increase each year until fully implemented in January 2019.

~~adjustments as described above).~~on their assessment base beginning July 1, 2016. If the DIF reserve ratio ~~for~~has not reached 1.35% by December 31, 2018, the ~~prior~~FDIC plans to impose a shortfall assessment period is equal to, or greater than 2.0% and less than 2.5%, the assessment rates may range from two basis points to 28 basis points and if the reserve ratio for the prior assessment period is greater than 2.5%, the assessment rates may range from one basis point to 25 basis points (in each case subject to adjustments as described above). No institution may pay a dividend if it is in default on ~~its federal deposit insurance assessment.~~

~~The FDIC has authority~~will automatically apply an established small institution's assessment credits to ~~increase~~reduce its regular deposit insurance assessments. ~~Any significant increases would have an adverse effect on the operating expenses and results of operations of the Bank. No predictions can be made as to what assessment rates will be in the future.~~

proposed capital distribution) or that will exceed these net income-based limitations, it must obtain the OCC's approval prior to making such distribution. In addition, the Bank must file a prior written notice of a dividend with the Federal Reserve. The Federal Reserve or the OCC may object to a capital distribution based on safety and soundness concerns. Additional restrictions on Bank dividends may apply if the Bank fails the QTL test. In addition, as noted above, ~~beginning in 2016,~~ if the Bank does not have the required capital conservation buffer, its ability to pay dividends to the Company would be limited, which may limit the ability of the Company to pay dividends to its ~~stockholders~~stockholders.

In connection with its deposit-taking, lending and other activities, the Bank is subject to a number of federal laws designed to protect consumers and promote lending to various sectors of the economy and population. The CFPB issues regulations and standards under these federal consumer protection laws, which include the Equal Credit Opportunity Act, the Truth-in-Lending Act, the Home Mortgage Disclosure Act and the Real Estate Settlement Procedures Act. Through its rulemaking authority, the CFPB has promulgated several proposed and final regulations under these laws that will affect our consumer businesses. Among these regulatory initiatives, are final regulations setting "ability to repay" and "qualified mortgage" standards for residential mortgage loans and establishing new mortgage loan servicing and loan originator compensation standards. The Bank is evaluating these recent CFPB regulations and proposals and devotes substantial compliance, legal and operational business resources to ensure compliance with these consumer protection standards. In addition, the OCC has enacted customer privacy regulations that limit the ability of the Bank to disclose nonpublic consumer information to non-affiliated third parties. The regulations require disclosure of privacy policies and allow consumers to prevent certain personal information from being shared with non-affiliated ~~parties~~parties.

~~Sarbanes-Oxley Act of 2002.~~ The Sarbanes-Oxley Act was enacted in 2002 in response to public concerns regarding corporate accountability in connection with recent accounting scandals. The stated goals of the Sarbanes-Oxley Act are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. The Sarbanes-Oxley Act generally applies to all companies, both U.S. and non-U.S., that file or are required to file periodic reports with the SEC under the Securities Exchange Act of 1934, including the Company.

The Sarbanes-Oxley Act includes very specific additional disclosure requirements and new corporate governance rules, and requires the SEC and securities exchanges to adopt extensive additional disclosure, corporate governance and related rules. The Sarbanes-Oxley Act represents significant federal involvement in matters traditionally left to state regulatory systems, such as the regulation of the accounting profession, and to state corporate law, such as the relationship between a board of directors and management and between a board of directors and its committees.

Dividends and Stock Repurchases. The Federal Reserve's policy statement on the payment of cash dividends applicable to savings and loan holding companies, which expresses its view that although there are no specific regulations restricting dividend payments other than state corporate laws, a savings and loan holding company must maintain an adequate capital position and generally should not pay cash dividends unless the company's net income for the past year is sufficient to fully fund the cash dividends and that the prospective rate of earnings appears consistent with the company's capital needs, asset quality, and overall financial condition. The Federal Reserve policy statement also indicates that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends. In addition, a savings and loan holding company 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.

Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act was enacted in 2002 in response to public concerns regarding corporate accountability in connection with recent accounting scandals. The stated goals of the Sarbanes-Oxley Act are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. The Sarbanes-Oxley Act generally applies to all companies, both U.S. and non-U.S., that file or are required to file periodic reports with the SEC under the Securities Exchange Act of 1934, including the Company.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. On July 21, 2010, the Dodd-Frank Act was signed into law. The Dodd-Frank-Act imposes new restrictions and an expanded framework of regulatory oversight for financial institutions, including depository institutions and implements new capital regulations discussed above under "- Regulation and Supervision of the Bank - Capital Requirements." In addition, among other changes, the Dodd-Frank Act requires public companies, such as the Company, to (i) provide their shareholders with a non-binding vote (a) at least once every three years on the compensation paid to executive officers and (b) at least once every six years on whether they should have a "say on pay" vote every one, two or three years; (ii) have a separate, non-binding shareholder vote regarding golden parachutes for named executive officers when a shareholder vote takes place on mergers, acquisitions, dispositions or other transactions that would trigger the parachute payments; (iii) provide disclosure in annual proxy materials concerning the relationship between the executive compensation paid and the financial performance of the issuer; and (iv) amend Item 402 of Regulation S-K to require companies to disclose the ratio of the Chief Executive Officer's annual total compensation to the median annual total compensation of all other employees. For certain of these changes, the implementing regulations have not been promulgated, so the full impact of the Dodd-Frank Act on public companies cannot be determined at this time.

Item 1A. Risk Factors

An investment in our common stock is subject to risks inherent in our business. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included in this report. In addition to the risks and uncertainties described below, other risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and results of operations. The value or market price of our common stock could decline due to any of these identified or other risks, and you could lose all or part of your investment. The risks below also include forward-looking statements. This report is qualified in its entirety by these risk factors.

Our business may be adversely affected by downturns in the national and the regional economies on which we depend.

Substantially all of our loans are to businesses and individuals in the states of Washington and Oregon. A decline in the economies of the seven counties in which we operate, including the Portland, Oregon metropolitan area, which we consider to be our primary market area, could have a material adverse effect on our business, financial condition, results of operations and prospects. Weakness in the global economy has adversely affected many businesses operating in our markets that are dependent upon international trade and it is not known how the recent withdrawal by the United States from the Trans-Pacific Partnership trade agreement may also affect these businesses.

While real estate values and unemployment rates have recently improved, a ~~prolonged slow economic recovery or~~ deterioration in economic conditions in the market areas we serve could result in the following consequences, any of which could have a materially adverse impact on our business, financial condition and results of operations:

·	loan delinquencies, problem assets and foreclosures may increase;

·	we may increase our allowance for loan losses;

·	the slowing of sales of foreclosed assets;

·	demand for our products and services may decline possibly resulting in a decrease in our total loans or assets;

·	collateral for loans made may decline further in value, exposing us to increased risk loans, reducing customers' borrowing power, and reducing the value of assets and collateral associated with existing loans;

·	the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; and

·	the amount of our low-cost or non-interest bearing deposits may decrease.

A decline in local economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are geographically diverse. If we are required to liquidate a significant amount of collateral during a period of reduced real estate values, our financial condition and profitability could be adversely ~~affected.~~affected:

A return of recessionary conditions could result in increases in our level of nonperforming loans and/or reduce demand for our products and services, which could have an adverse effect on our results of operations.

Economic conditions have improved since the end of the economic recession that officially ended in June 2009; however, economic growth has been slow and uneven and concerns still exist over the federal deficit, government spending and global geopolitical risks which have all contributed to diminished expectations for the economy. A return of recessionary conditions and/or negative developments in the domestic and international credit markets may significantly affect the markets in which we do business, the value of our loans and investments, and our ongoing operations, costs and profitability. Declines in real estate values and sales volumes and high unemployment levels may result in higher than expected loan delinquencies and a decline in demand for our products and services. These negative events may cause us to incur losses and may adversely affect our capital, liquidity, and financial condition.

Furthermore, the Board of Governors of the Federal Reserve System, in an attempt to help the economy, has, among other things, kept interest rates low through its targeted federal funds rate and the purchase of U.S. Treasury and mortgage-backed securities. The Federal Reserve Board has recently increased the federal funds rate by 25 basis points and indicated further increases in the federal funds rate would occur in 2016. As the federal funds rate increases, market interest rates would likely rise, which may negatively affect the housing markets and the U.S. economic recovery. In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of underlying collateral securing loans, which could negatively affect our financial performance.

Our real estate construction and land acquisition or development loans expose us to risk.

We originate real estate construction loans to individuals and builders, primarily for the construction of residential properties. We originate these loans whether or not the collateral property underlying the loan is under contract for sale. At March 31, ~~2016,~~2017, construction loans totaled ~~$26.7~~$46.2 million, or ~~4.3%~~5.92% of our total loan portfolio, of which ~~$10.0~~$19.1 million were for residential real estate projects. Undisbursed funds for construction projects totaled ~~$42.7~~$47.3 million at March 31, ~~2016.~~2017. Land loans, which are loans made with land as security, totaled ~~$12.0~~$15.9 million, or ~~1.9%,~~2.04% of our total loan portfolio at March 31, ~~2016.~~2017. Land loans include raw land and land acquisition and development loans.

In general, construction and land lending involves additional risks because of the inherent difficulty in estimating a property's value both before and at completion of the project as well as the estimated cost of the project ~~as well as~~and the time needed to sell the property at completion. ~~The nature of these loans is such that they are generally more difficult to evaluate and monitor.~~ Construction costs may exceed original estimates as a result of increased materials, labor or other costs. Because of the uncertainties inherent in estimating construction costs, as well as the market value of the completed project and the effects of governmental regulation ofon real property, it is relatively difficult to evaluate accurately the total funds required to complete a project and the related loan-to-value ratio. Changes in the demand, such as for new housing and higher than anticipated building costs may cause actual results to vary significantly from those estimated. ~~This~~For these reasons, this type of lending also typically involves higher loan principal amounts and is often concentrated with a small number of builders. A downturn in housing, or the real estate market, could increase loan delinquencies, defaults and foreclosures, and significantly impair the value of our collateral and our ability to sell the collateral upon foreclosure. Some of our builders have more than one loan outstanding with us and also have residential mortgage loans for rental properties with us. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss.

In addition, during the term of most of our construction loans, no payment from the borrower is required since the accumulated interest is added to the principal of the loan through an interest reserve. As a result, construction loans often involve the disbursement of substantial funds with repayment dependent ~~in part,~~ on the success of the ultimate project and the ability of the borrower to sell or lease the property or refinance the indebtedness, rather than the ability of the borrower or guarantor to repay principal and interest. If the appraisal of the value of the completed project proves to be overstated, we may have inadequate security for the repayment of the loan upon completion of construction of the project and may incur a loss. Because construction loans require active monitoring of the building process, including cost comparisons and on-site inspections, these loans are more difficult and costly to monitor. Increases in market rates of interest may have a more pronounced effect on construction loans by rapidly increasing the end-purchasers' borrowing costs, thereby reducing the overall demand for the project. Properties under construction are often difficult to sell and typically must be completed in order to be successfully sold which also complicates the process of working out problem construction loans. This may require us to advance additional funds and/or contract with another builder to complete construction. Further, in the case of speculative construction loans, there is the added risk associated with identifying an end-purchaser for the finished project, and thus pose a greater potential risk than construction loans to individuals on their personal residences. Loans on land under development or held for future construction as well as lot loans made to individuals for the future construction of a residence also pose additional risk because of the lack of income being produced by the property and the potential illiquid nature of the collateral. These risks can also be significantly impacted by supply and demand conditions.

At March 31, 2017, total committed construction and land loans totaled $109.3 million comprised mainly of $7.9 million of speculative construction loans, $15.9 million of land acquisition and development loans, $59.6 million of commercial/multi-family construction loans and $20.7 million of custom/presold construction loans.

Our emphasis on commercial real estate lending may expose us to increased lending risks.

Our current business strategy is focused on the expansion of commercial real estate lending. This type of lending activity, while potentially more profitable than single-family residential lending, is generally more sensitive to regional and local economic conditions, making loss levels more difficult to predict. Collateral evaluation and financial statement analysis in these types of loans requires a more detailed analysis at the time of loan underwriting and on an ongoing basis. Many of our commercial borrowers have more than one loan outstanding with us. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss.

At March 31, ~~2016,~~2017, we had ~~$387.5~~$490.8 million of commercial and multi-family real estate mortgage loans, representing ~~62.0%~~62.97% of our total loan portfolio. These loans typically involve higher principal amounts than other types of loans and ~~repayment~~some of our commercial borrowers have more than one loan outstanding with us. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss compared to an adverse development with respect to a one-to-four family residential loan. Repayment on these loans is dependent upon income generated, or expected to be generated, by the property securing the loan in amounts sufficient to cover operating expenses and debt service, which may be adversely affected by changes in the economy or local market conditions. For example, if the cash flow from the borrower's project is reduced as a result of leases not being obtained or renewed, the borrower's ability to repay the loan may be impaired. Commercial and multi-family mortgage loans also expose a lender to greater credit risk than loans secured by one-to-four family residential real estate because the collateral securing these loans typically cannot be sold as easily as residential real estate. In addition, many of our commercial and multi-family real estate loans are not fully amortizing and contain large balloon payments upon maturity. ~~Balloon~~Such balloon payments may require the borrower to either

sell or refinance the underlying property in order to make the payment, which may increase the risk of default or non-payment.

A secondary market for most types of commercial real estate and multi-family loans is not readily liquid, so we have less opportunity to mitigate credit risk by selling part or all of our interest in these loans. As a result of these characteristics, if we foreclose on a commercial or multi-family real estate loan, our holding period for the collateral typically is longer than for one-to-four family residential mortgage loans because there are fewer potential purchasers of the collateral. Accordingly, charge-offs on commercial and multi-family real estate loans may be larger on a per loan basis than those incurred with our residential or consumer loan portfolios.

The level of our commercial real estate loan portfolio may subject us to additional regulatory scrutiny.

The FDIC, the Federal Reserve and the Office of the Comptroller of the Currency have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under this guidance, a financial institution that, like us, is actively involved in commercial real estate lending should perform a risk assessment to identify concentrations. A financial institution may have a concentration in commercial real estate lending if, among other factors (i) total reported loans for construction, land development, and other land represent 100% or more of total capital, or (ii) total reported loans secured by multi-family and non-farm residential properties, loans for construction, land development and other land, and loans otherwise sensitive to the general commercial real estate market, including loans to commercial real estate related entities, represent 300% or more of total capital. Based on these criteria, the Bank has a concentration in commercial real estate lending as total loans for multifamily, non-farm/non-residential, construction, land development and other land represented ~~285%~~349% of total risk-based capital at March 31, ~~2016.~~2017. The particular focus of the guidance is on exposure to commercial real estate loans that are dependent on the cash flow from the real estate held as collateral and that are likely to be at greater risk to conditions in the commercial real estate market (as opposed to real estate collateral held as a secondary source of repayment or as an abundance of caution). The purpose of the guidance is to guide banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations. The guidance states that management should employ heightened risk management practices including board and management oversight and strategic planning, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing.

Our business may be adversely affected by credit risk associated with residential property.

At March 31, ~~2016, $88.8~~2017, $92.9 million, or ~~14.2%~~11.91% of our total loan portfolio, was secured by one-to-four family mortgage loans and home equity loans. This type of lending is generally sensitive to regional and local economic conditions that significantly impact the ability of borrowers to meet their loan payment obligations, making loss levels difficult to predict. A decline in residential real estate values resulting from a downturn in the Washington and Oregon housing markets in which we operate may reduce the value of the real estate collateral securing these types of loans and increase our risk of loss if borrowers default on their loans. ~~Recessionary conditions or declines~~Declines in the volume of real estate sales and/or the sales prices coupled with elevated unemployment rates may result in higher than expected loan delinquencies or problem assets, and a decline in demand for our products and services. These potential negative events may cause us to incur losses, adversely affect our capital and liquidity and damage our financial condition and business operations.

Many of our one-to-four family loans and home equity lines of credit are secured by liens on mortgage ~~properties in which the borrowers' equity has been reduced because of these declines in home values in our primary market area.~~properties. Residential loans with high combined loan-to-value ratios will be more sensitive to declining property values than those with lower combined loan-to-value ratios and therefore may experience a higher incidence of default and severity of losses. In addition, if the borrowers sell their homes, they may be unable to repay their loans in full from the sale. Further, the majority of our home equity lines of credit consist of second mortgage loans. For those home equity lines secured by a second mortgage, it is unlikely that we will be successful in recovering all or a portion of our loan proceeds in the event of default unless we are prepared to repay the first mortgage loan and such repayment and the costs associated with a foreclosure are justified by the value of the property.

Repayment of our commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value.

At March 31, ~~2016,~~2017, we had ~~$69.4~~$107.4 million, or ~~11.1%~~13.78% of total loans, in commercial business loans. Commercial lending involves risks that are different from those associated with residential and commercial real estate lending. Real estate lending is generally considered to be collateral based lending with loan amounts based on predetermined loan to collateral values and liquidation of the underlying real estate collateral being viewed as the primary source of repayment in the event of borrower default. Our commercial loans are primarily made based on the cash flow of the borrower and secondarily on

the underlying collateral provided by the borrower. The borrowers' cash flow may be unpredictable, and collateral securing these loans may fluctuate in value. ~~Although commercial loans are often collateralized by~~This collateral may consist of equipment, inventory, accounts receivable, or other business ~~assets,~~assets. In the ~~liquidation~~case of ~~collateral in the event of default is often an insufficient source of repayment because~~loans secured by accounts receivable, the availability of funds for the repayment of these loans may be ~~uncollectible and inventories~~substantially dependent on the ability of the borrower to collect amounts due from its customers. Other collateral securing loans may depreciate over time, may be ~~obsolete or~~difficult to appraise, may be illiquid and may fluctuate in value based on the specific type of ~~limited use, among other things. Accordingly,~~business and equipment. As a result, the availability of funds for the repayment of commercial business loans ~~depends primarily~~may be substantially dependent on the ~~cash flow and credit worthiness~~success of the ~~borrower~~business itself which, in turn, is often dependent in part upon general economic conditions and secondarily on the underlying collateral provided by the borrower.

Our allowance for loan losses may prove to be insufficient to absorb losses in our loan portfolio.

Lending money is a substantial part of our business and each loan carries a certain risk that it will not be repaid in accordance with its terms or that any underlying collateral will not be sufficient to assure repayment. This risk is affected by, among other things:

·	the cash flow of the borrower and/or the project being financed;

·	in the case of a collateralized loan, the changes and uncertainties as to the future value of the collateral;

·	the duration of the loan;

·	the credit history of a particular borrower; and

·	changes in economic and industry conditions.

We maintain an allowance for loan losses, which is a reserve established through a provision for loan losses charged to expense, which we believe is appropriate to provide for probable losses in our loan portfolio. The amount of this allowance is determined by management through periodic reviews and consideration of several factors, including, but not limited to:

·	our general reserve, based on our historical default and loss experience and certain macroeconomic factors based on management's expectations of future events;

·	our specific reserve, based on our evaluation of nonperforming loans and their underlying collateral; and

·	an unallocated reserve to provide for other credit losses inherent in our portfolio that may not have been contemplated in the other loss factors.

The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the allowance for loan losses.

The Financial Accounting Standards Board has adopted a new accounting standard update ("ASU") that will be effective for our first fiscal year after December 15, 2019. This standard, referred to as "Current Expected Credit Loss", or "CECL", will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans and recognize the expected credit losses as allowances for credit losses at inception of the loan. This will change the current method of providing allowances for credit losses that are probable of having been incurred, which may require us to increase our allowance for loan losses, and may greatly increase the types of data we would need to collect and review to determine the appropriate level of the allowance for credit losses. For more on this ASU, see Note 1 of the Notes to Consolidated Financial Statements - Recently Issued Accounting Pronouncements contained in Item 8 of this report. In addition, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for possible loan losses or the recognition of further loan charge-offs based on judgments different than those of management. ~~In addition, if~~If charge-offs in future periods exceed the allowance for loan losses, we may need additional provisions to replenish the allowance for loan losses. Any increases in the allowance for loan losses will result in a decrease in net income and, most likely, capital, and may have a material negative effect on our financial condition and results of operations.

Our consumer loan portfolio has increased risk due to the substantial amount of indirect automobile loans.

Our consumer loan portfolio includes a substantial number of indirect loans which are automobile loans purchased by us from another financial institution as well as other installment consumer loans. These indirect automobile loans were originated through a single dealership group located outside the Company's primary market area. Unlike a direct loan where

the borrower makes an application directly to the lender, in these loans the dealer, who has a direct financial interest in the loan transaction, assists the borrower in preparing the loan application. Indirect automobile loans we purchased are underwritten by us using substantially similar guidelines to our internal guidelines. However, because these loans are originated through a third party and not directly by us, we do not have direct contact with the borrower and therefore these loans may be more susceptible to a material misstatement on the loan application and present greater risks than other types of lending activities. The collateral for these loans is comprised of a mix of used automobiles. These loans are purchased with servicing retained by the seller. At March 31, ~~2016,~~2017, our other installment consumer loans totaled ~~$40.4~~$26.4 million, or ~~6.5%~~3.38% of our total loan portfolio, of which indirect automobile loans totaled ~~$37.4~~$23.6 million, representing ~~92.6%~~89.4% of total consumer loans. At March 31, ~~2016, eight~~2017, thirteen of the purchased automobile loans were on non-accrual status totaling ~~$83,000.~~$108,000.

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. At March 31, ~~2016~~2017 and ~~2015,~~2016, excluding the purchased automobile loans noted above, the Company had no installment loans on non-accrual status.

Consumer loans generally entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly, such as mobile homes, automobiles, boats and recreational vehicles. In these cases, we face the risk that any collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance. Thus, the recovery and sale of such property could be insufficient to compensate us for the principal outstanding on these loans. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit our ability to recover on such loans. Finally, because indirect automobile loan applications are originated by automobile dealerships, we underwrite the loans and we assume the risks associated with unsatisfactory origination procedures, including compliance with federal, state and local laws. In addition, since a third party services these loans for us, any failure of our third party servicer to timely pursue repossession action may adversely affect our ability to limit our credit losses. As a result of these factors, it may become necessary to increase our provision for loan losses in the event our losses on these loans increase, which could negatively affect our results of operations.

If our investments in real estate are not properly valued or sufficiently reserved to cover actual losses, or if we are required to increase our valuation reserves, our earnings could be reduced.

We obtain updated valuations in the form of appraisals and broker price opinions when a loan has been foreclosed and the property is taken in as REO and at certain other times during the assets' holding ~~period.~~periods. Our net book value ("NBV") in the loan at the time of foreclosure and thereafter is compared to the updated market value of the foreclosed property less estimated selling costs (fair value). A charge-off is recorded for any excess in the asset's NBV over its fair value. If our valuation process is incorrect, or if property values decline, the fair value of the investments in real estate may not be sufficient to recover our carrying value in such assets, resulting in the need for additional write-downs. Significant write-downs to our investments in real estate could have a material adverse effect on our financial condition, liquidity and results of operations.

In addition, bank regulators periodically review our REO and may require us to recognize further write-downs. Any increase in our write-downs, as required by the bank regulators, may have a material adverse effect on our financial condition, liquidity and results of operations.

Our securities portfolio may be negatively impacted by fluctuations in market value and interest rates.

Our securities portfolio may be impacted by fluctuations in market value, potentially reducing accumulated other comprehensive income and/or earnings. Fluctuations in market value may be caused by changes in market interest rates, lower market prices for securities and limited investor demand. Our securities portfolio is evaluated for ~~other-than-temporary impairment.~~OTTI. If this evaluation shows impairment to the actual or projected cash flows associated with one or more securities, a potential loss to earnings may occur. Changes in interest rates can also have an adverse effect on our financial condition, as our available-for-sale securities are reported at their estimated fair value, and therefore are impacted by fluctuations in interest rates. We increase or decrease our shareholders' equity by the amount of change in the estimated fair value of the available-for-sale securities, net of taxes. There can be no assurance that the declines in market value will not result in ~~other-than-temporary impairments~~OTTI of these assets, which would lead to accounting charges that could have a material adverse effect on our net income and capital levels.

Changes in interest rates may reduce our net interest income, and may result in higher defaults in a rising rate environment.

Our ~~profitability is~~earnings and cash flows are largely dependent ~~to a large extent~~ upon our net interest income, which is the difference, or spread, between the interest earned on loans, securities and other interest-earning assets and the interest paid on deposits, borrowings, and

other interest-bearing liabilities. ~~Because~~Interest rates are highly sensitive to many factors that are beyond our control, including domestic and international economic conditions and policies of various governmental and regulatory agencies and, in particular, the ~~differences in maturities and repricing characteristics of our interest-earning assets and interest-bearing liabilities, changes in~~Federal Reserve. In an attempt to help the overall economy, the Federal Reserve has kept interest rates ~~do not produce equivalent changes in~~low through its targeted Fed Funds rate. In December 2016 and March 2017, the Federal Reserve slightly increased the Fed Funds rate by 25 basis points at each date and intends further increases during 2017 subject to economic conditions. As the Federal Reserve increases the Fed Funds rate, overall interest ~~income earned~~rates will likely rise, which may negatively impact the housing markets and the U.S. economic recovery. In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on ~~interest-earning assets~~our borrowers, especially our business borrowers, and ~~interest paid on interest-bearing liabilities.~~ the values of collateral securing loans, which could negatively affect our financial performance.

We principally manage interest rate risk by managing our volume and mix of our earning assets and funding liabilities. ~~In a changing interest rate environment, we may not be able to manage this risk effectively.~~ Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and investments and the amount of interest we pay on deposits and borrowings, but also can affect: (1) our ability to originate and/or sell loans; (2) the fair value of our financial assets and liabilities, which could negatively impact shareholders' equity, and our ability to realize gains from the sale of such assets; (3) our ability to obtain and retain deposits in competition with other available investment alternatives; (4) the ability of our borrowers to repay adjustable or variable rate loans; and (5) the average duration of our mortgage backed securities portfolio and other interest-earning assets.

A prolonged period of exceptionally low market interest rates, such as we are currently experiencing limits our ability to lower our interest expense, while the average yield on our loan portfolio may decrease as our loans reprice or are originated at these low market rates, which could have an adverse effect on our results of operations. As a result of the exceptionally low interest rate environment, an increasing percentage of our deposits have been comprised of deposits bearing no or a relatively low rate of interest. At March 31, 2016, we had $76.8 million in certificates of deposit that mature within one year and $179.1 million in non-interest bearing demand deposits. We would incur a higher cost of funds to retain these deposits in a rising interest rate environment. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings. In a changing interest rate environment, we may not be able to manage this risk effectively. If we are unable to manage interest rate risk effectively, our business, financial condition and results of operations could be materially affected.

A sustained increase in market interest rates could adversely affect our earnings. A significant portion of our loans have fixed interest rates and longer terms than our deposits and borrowings. As a result of the relatively low interest rate environment, an increasing percentage of our deposits have been comprised of certificates of deposit and other deposits yielding no or a relatively low rate of interest having a shorter duration than our assets. At March 31, 2017, we had $99.9 million in certificates of deposit that mature within one year and $242.7 million in non-interest bearing demand deposits. We would incur a higher cost of funds to retain these deposits in a rising interest rate environment. Our net interest income could be adversely affected if the rates we pay on deposits and borrowings increase more rapidly than the rates we earn on loans. In addition, a substantial amount of our ~~mortgage loans and~~ home equity lines of credit have adjustable interest rates. As a result, these loans may experience a higher rate of default in a rising interest rate environment.

Although management believes it has implemented effective asset and liability management strategies to reduce the potential effects of changes in interest rates on our results of operations, any substantial, unexpected or prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations. Also, our interest rate risk modeling techniques and assumptions likely may not fully predict or capture the impact of actual interest rate changes on our consolidated balance sheet or projected operating results. See Item 7A., "Quantitative and Qualitative Disclosures About Market Risk," of this Form 10-K.

Liquidity risk could impair our ability to fund operations and jeopardize our financial condition, growth and prospects.

Liquidity is essential to our ~~business.~~business; therefore, the inability to obtain adequate funding may negatively affect growth and, consequently, our earnings capability and capital levels. An inability to raise funds through deposits, borrowings, the sale of loans ~~and~~or investment securities, or other sources could have a substantial negative effect on our liquidity. ~~We rely~~Our access to funding sources in amounts adequate to finance our activities on ~~customer deposits and, as needed, advances from the FHLB, borrowings from the Federal Reserve Bank of San Francisco ("FRB") and other borrowings~~terms that are acceptable to ~~fund our operations. Although we have historically been able to replace maturing deposits and advances if desired, we may not~~us could be ~~able to replace such funds in the future if, among other things, our financial condition,~~impaired by factors that affect us specifically or the financial ~~condition of the FHLB~~services industry or ~~FRB, or market conditions change.~~economy in general. Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity as a result of a downturn in the Washington or Oregon markets ~~where~~in which our loans are concentrated, negative operating results, or adverse regulatory action against us.

Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial ~~flexibility will~~markets or negative views and expectations about the prospects for the financial services industry and the continued uncertainty in credit markets. In particular, our liquidity position could be ~~severely~~significantly constrained if we are unable to ~~maintain our~~ access tofunds from the FHLB, the Federal Reserve Bank of San Francisco or other wholesale funding sources, or if adequate financing is not available ~~to accommodate future growth~~ at acceptable interest rates. Although we consider our sources of funds adequate for our liquidity needs, we may seek additional debt in the future to achieve our long‑term business objectives. Additional borrowings, if sought, may not be available to us or, if available, may not be available on reasonable terms. If additional financing sources are unavailable, or are not available on reasonable terms, our financial condition, results of operations, growth and future prospects could be materially adversely affected. Finally, if we are required to rely more heavily on more expensive funding sources, ~~to support future growth,~~ our revenues may not increase proportionately to cover our costs. In this case, our results of operations and financial condition would be negatively affected.

An increase in interest rates, change in the programs offered by governmental sponsored entities ("GSE") or our ability to qualify for such programs may reduce our mortgage revenues, which would negatively impact our non-interest income.

Our mortgage banking operations provide a significant portion of our non-interest income. We generate mortgage revenues primarily from gains on the sale of single-family mortgage loans pursuant to programs currently offered by ~~Fannie Mae, Freddie Mac, Ginnie Mae~~FNMA, FHLMC,

GNMA and ~~non-GSE investors.~~non-GSE entities. These entities account for a substantial portion of the secondary market in residential mortgage loans. Any future changes in these programs, our eligibility to participate in such programs, the criteria for loans to be accepted or laws that significantly affect the activity of such entities could, in turn, materially adversely affect our results of operations. Mortgage banking is generally considered a volatile source of income because it depends largely on the level of loan volume which, in turn, depends largely on prevailing market interest rates. In a rising or higher interest rate environment, our originations of mortgage loans may decrease, resulting in fewer loans that are available to be sold to investors. This would result in a decrease in mortgage banking revenues and a corresponding decrease in non-interest income. In addition, our results of operations are affected by the amount of non-interest expense associated with mortgage banking activities, such as salaries and employee benefits, occupancy, equipment and data processing expense and other operating costs. During periods of reduced loan demand, our results of operations may be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in loan originations. In addition, although we sell loans into the secondary market without recourse, we are required to give customary representations and warranties about the loans to the buyers. If we breach those representations and warranties, the buyers may require us to repurchase the loans and we may incur a loss on the repurchase.

We may be adversely affected by risks associated with completed and potential acquisitions.

As part of our general growth strategy, we have recently expanded our business through the purchase and assumption transaction in which the Company purchased certain assets and assumed certain liabilities of MBank, the wholly owned subsidiary of Merchants Bancorp. Although our business strategy emphasizes organic expansion, we continue, from time to time in the ordinary course of business, to engage in preliminary discussions with potential acquisition targets. There can be no assurance that, in the future, we will successfully identify suitable acquisition candidates, complete acquisitions and successfully integrate acquired operations into our existing operations or expand into new markets. The consummation of any future acquisitions may dilute shareholder value or may have an adverse effect upon our operating results while the operations of the acquired business are being integrated into our operations. In addition, once integrated, acquired operations may not achieve levels of profitability comparable to those achieved by our existing operations, or otherwise perform as expected. Further, transaction-related expenses may adversely affect our earnings. These adverse effects on our earnings and results of operations may have a negative impact on the value of our common stock. Acquiring banks, bank branches or businesses involves risks commonly associated with acquisitions, including:

·	We may be exposed to potential asset quality issues or unknown or contingent liabilities of the banks, businesses, assets, and liabilities we acquire. If these issues or liabilities exceed our estimates, our results of operations and financial condition may be materially negatively affected;

·	Higher than expected deposit attrition;

·	Our strategic efforts may divert resources or management's attention from ongoing business operations and may subject us to additional regulatory scrutiny;

·	Prices at which acquisitions can be made may not be acceptable to us;

The acquisition of other entities generally requires integration of systems, procedures and personnel of the acquired entity into our company to make the transaction economically successful. This integration process is complicated and time consuming and can also be disruptive to the customers of the acquired business. If the integration process is not conducted successfully and with minimal adverse effect on the acquired business and its customers, we may not realize the anticipated economic benefits of particular acquisitions within the expected time frame, and we may lose customers or employees of the acquired business. We may also experience greater than anticipated customer losses even if the integration process is successful;

To the extent our costs of an acquisition exceed the fair value of the net assets acquired, the acquisition will generate goodwill. As discussed below, we are required to assess our goodwill for impairment at least annually, and any goodwill impairment charge could have a material adverse effect on our results of operations and financial condition;

·	To finance an acquisition, we may borrow funds, thereby increasing our leverage and diminishing our liquidity, or raise additional capital, which could dilute the interests of our existing shareholders; and

We expect our net income will increase following our acquisitions, however, we also expect our general and administrative expenses and consequently our efficiency rates will also increase. Ultimately, we would expect our efficiency ratio to improve; however, if we are not successful in our integration process, this may not occur, and our acquisitions or branching activities may not be accretive to earnings in the short or long-term.

The required accounting treatment of loans we acquire through acquisitions could result in higher net interest margins and interest income in current periods and lower net interest margins and interest income in future periods.

Under GAAP, we are required to record loans acquired through acquisitions, including purchase credit-impaired loans, at fair value. Estimating the fair value of such loans requires management to make estimates based on available information and facts and circumstances on the acquisition date. Actual performance could differ from management's initial estimates. If these loans outperform our original fair value estimates, the difference between our original estimate and the actual performance of the loan (the "discount") is accreted into net interest income. Thus, our net interest margins may initially increase due to the discount accretion. We expect the yields on our loans to decline as our acquired loan portfolio pays down or matures and the discount decreases, and we expect downward pressure on our interest income to the extent that the runoff on our acquired loan portfolio is not replaced with comparable high-yielding loans. This could result in higher net interest margins and interest income in current periods and lower net interest rate margins and lower interest income in future periods.

A general decline in economic conditions may adversely affect the fees generated by our asset management company.

To the extent our asset management clients and their assets become adversely affected by weak economic and stock market conditions, they may choose to withdraw the amount of assets managed by us and the value of their assets may decline. Our asset management revenues are based on the value of the assets we manage. If our clients withdraw assets or the value of their assets decline, the revenues generated by ~~Riverview Asset Management Corp.~~the Trust Company will be adversely affected.

Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed or the cost of that capital may be very high.

We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside our control, and on our financial condition and performance. Accordingly, we cannot make assurances that we will be able to raise additional capital if needed on terms that are acceptable to us, or at all. If we cannot raise additional capital when needed, our ability to further expand our operations could be materially impaired and our financial condition and liquidity could be materially and adversely affected. In addition, any additional capital we obtain may result in the dilution of the interests of existing holders of our common stock. Further, if we are unable to raise additional capital when required by our bank regulators, we may be subject to adverse regulatory action.

We may experience future goodwill impairment, which could reduce our earnings.

In accordance with GAAP, we record assets acquired and liabilities assumed in a business combination at their fair values with the excess of the purchase consideration over the net assets acquired resulting in the recognition of goodwill. As a result, business combinations typically result in recording goodwill. We perform a goodwill evaluation at least annually to test for goodwill impairment. We performed our annual goodwill impairment test during the quarter-ended December 31, ~~2015,~~2016, but no impairment was identified. Our assessment of the fair value of goodwill is based on an evaluation of current purchase transactions, discounted cash flows from forecasted earnings, our current market capitalization, and a valuation of our assets. Our evaluation of the fair value of goodwill involves a substantial amount of judgment. If our judgment was incorrect and an impairment of goodwill was deemed to exist, we would be required to write down our ~~assets~~goodwill resulting in a charge to earnings, which could adversely affect our results of operations, perhaps materially; however, it would have no impact on our liquidity, operations or regulatory capital. The recent MBank transaction has increased our goodwill.

We operate in a highly regulated environment and may be adversely affected by changes in federal and state laws and regulations that are expected to increase our costs of operations.

The financial services industry is extensively regulated. The Bank is subject to extensive examination, supervision and comprehensive regulation by the OCC and the FDIC, and Riverview is subject to examination, supervision and ~~supervision~~regulation by the Federal Reserve. ~~The OCC, FDIC~~Such regulation and ~~the Federal Reserve govern~~supervision governs the activities in which wean institution and its holding company may engage, and are intended primarily for the protection of ~~depositors~~the deposit insurance fund and ~~the Deposit Insurance Fund.~~consumers and not to benefit our shareholders. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on ~~an institution's~~our operations, ~~reclassify~~the classification of our assets, ~~determine~~ the ~~adequacy~~determination of ~~an institution's~~the level of our allowance for loan losses, and ~~determine~~ the level of deposit insurance premiums assessed. ~~The~~Additionally, actions by regulatory agencies or significant ~~federal~~litigation against us could require us to devote significant time and ~~state banking regulations~~resources to defend our business and may lead to penalties that materially affect ~~us are described in this report under the heading "Item 1. Business-Regulation."~~us. These regulations, along with the currently existing tax, accounting, securities, insurance, and monetary laws,

regulations, rules, standards, policies, and interpretations control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures. ~~These~~Because our business is highly regulated, the applicable laws, rules and regulations are subject to constant modification and change, and the laws, rules, ~~standards, policies,~~ and ~~interpretations are constantly evolving and may change significantly over time. Such changes~~regulations adopted in the future could ~~subject us to additional costs, limit the types of~~make compliance more difficult or expensive or otherwise adversely affect our business, financial ~~services and products we may offer, restrict mergers and acquisitions, investments, access to capital, the location of banking offices, and/~~condition, or ~~increase the ability of non-banks to offer competing financial services and products, among other things.~~prospects. Further, changes in accounting standards can be both difficult to predict and involve judgment and discretion in their interpretation by us and our independent accounting firms. These changes could materially impact, potentially even retroactively, how we report our financial condition and results of our operations as could our interpretation of those changes.

~~Additionally,~~As discussed under "Business-Regulation" in Item I of this form 10-K, the Dodd-Frank ~~Wall Street Reform and Consumer Protection~~ Act ~~(the "Dodd-Frank Act")~~ has significantly changed the bank regulatory structure and has affected the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies. The Dodd-Frank Act requires various federal agencies to adopt a broad range of new implementing rules and regulations, and to prepare numerous studies and reports for Congress. The federal agencies are given significant discretion in drafting and implementing rules and regulations, and consequently, many of the details and much of the impact of the Dodd-Frank Act may not be known for many months or years.

~~Certain provisions of~~It is difficult at this time to predict when or how any new standards will ultimately be applied to us or what specific impact the Dodd-Frank Act ~~are~~and the yet to be written implementing rules and regulations will have on community banks. However, it is expected ~~to have~~that at a near term impact on us. For example, a provision of the Dodd-Frank Act eliminates the federal prohibitions on paying interest on demand deposits, thus allowing businesses to have interest bearing checking accounts. Depending on competitive responses, this significant change to existing lawminimum they will increase our operating and compliance costs and could ~~have an adverse impact on~~increase our interest expense.

The CFPB, which was created under the Dodd-Frank Act, created a new Consumer Financial Protection Bureau ("CFPB") with broad powers to supervise and enforce consumer protection laws. The CFPB has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit "unfair, deceptive or abusive" acts and practices. The CFPB has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Financial institutions such as the Bank with $10 billion or less in assets will continue to be examined for compliance with the consumer laws by their primary bank regulators but are subject to the rules of the CFPB.

~~The CFPB~~ has issued a number of final regulations and changes to certain consumer protections under existing ~~laws.~~laws and continues to issue new rules. These final rules (including the qualified mortgage rule), generally prohibit creditors from extending mortgage loans without regard for the ~~consumer's~~consumers' ability-to-repay and add restrictions and requirements to mortgage origination and servicing practices. In addition, these rules limit prepayment penalties and require ~~the creditor~~creditors to retain evidence of compliance with the ability-to-repay requirement for three years. Compliance with these rules has increased our overall regulatory compliance costs and may require changes to our underwriting practices with respect to mortgage loans. This includes compliance with ~~The~~the Truth in Lending Act and the Real Estate Settlement Procedures Act Integrated Disclosure ~~(TRID)~~("TRID") rule, which combines certain disclosures that consumers receive in connection with applying for and closing a mortgage loan. Moreover, these rules may adversely affect the volume of mortgage loans that we underwrite and may subject us to increased potential liabilities related to such residential loan origination activities.

The ~~Dodd-Frank Act requires minimum leverage (Tier 1)~~CFPB has adopted a number of additional requirements and ~~risk-based capital requirements for bank holding companies~~issued additional guidance, including with respect to appraisals, escrow accounts and ~~savings~~servicing, each of which entails increased compliance costs. We will continue to monitor these developments and ~~loan holding companies that are no less stringent than those applicable to banks, which will limit~~analyze the expected impacts on our ability to borrow at the holding company level and invest the proceeds from such borrowings as capital in the Banks, and will exclude certain instruments that previously have been eligible for inclusion by bank holding companies as Tier 1 capital, such as trust preferred securities.

It is difficult to predict at this time what specific impact the Dodd-Frank Act and the yet to be written implementing rules and regulations will have on community banks. However, it is expected that at a minimum they will increase our operating and compliance costs, which could adversely affect key operating efficiency ratios, and could increase our interest expense.

business.

Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions and limit our ability to get regulatory approval of acquisitions.

The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury's Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions and limit our ability to get regulatory approval of acquisitions. Recently several banking institutions have received large fines for non-compliance with these laws and regulations. While we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance can be given that these policies and procedures will be effective in preventing violations of these laws and regulations.

Competition with other financial institutions could adversely affect our profitability.

Although we consider ourselves competitive in our market areas, we face intense competition in both making loans and attracting deposits. Price competition for loans and deposits might result in our earning less on our loans and paying more on our deposits, which reduces net interest income. Some of the institutions with which we compete have substantially greater resources than we have and may offer services that we do not provide. We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. Our profitability will depend upon our continued ability to compete successfully in our market areas.

We are subject to certain risks in connection with our use of technology.

Our security measures may not be sufficient to mitigate the risk of a cyber-attack. Communications and information systems are essential to the conduct of our business, as we use such systems to manage our customer relationships, our general ledger and virtually all other aspects of our business. Our operations rely on the secure processing, storage, and transmission of confidential and other information in our computer systems and networks. Although we take protective measures and endeavor to modify them as circumstances warrant, the security of our computer systems, software, and networks may be vulnerable to breaches, unauthorized access, misuse, computer viruses, or other malicious code and cyber-attacks that could have a security impact. If one or more of these events occur, this could jeopardize our or our customers' confidential and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our operations or the operations of our customers or counterparties. We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us. We could also suffer significant reputational damage.

Security breaches in our internet banking activities could further expose us to possible liability and damage our reputation. Any compromise of our security also could deter customers from using our internet banking services that involve the transmission of confidential information. We rely on standard internet security systems to provide the security and authentication necessary to effect secure transmission of data. These precautions may not protect our systems from compromises or breaches of our security measures, and could result in significant legal liability and significant damage to our reputation and our business.

Our security measures may not protect us from system failures or interruptions. While we have established policies and procedures to prevent or limit the impact of systems failures and interruptions, there can be no assurance that such events will not occur or that they will be adequately addressed if they do. In addition, we outsource certain aspects of our data processing and other operational functions to certain third-party providers. If our third-party providers encounter difficulties, or if we have difficulty in communicating with them, our ability to adequately process and account for transactions could be affected, and our business operations could be adversely impacted. Replacing these third-party vendors could also entail significant delay and expense. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.

The occurrence of any failures or interruptions may require us to identify alternative sources of such services, and we cannot assure you that we could negotiate terms that are as favorable to us, or could obtain services with similar functionality as found in our existing systems without the need to expend substantial resources, if at all. Further, the occurrence of any systems failure or interruption could damage our reputation and result in a loss of customers and business, could subject us to additional regulatory scrutiny, or could expose us to legal liability. Any of these occurrences could have a material adverse effect on our financial condition and results of operations.

~~We rely on other companies to provide key components of our business infrastructure.~~

Third-party vendors provide key components of our business infrastructure such as internet connections, network access and core application processing. While we have selected these third-party vendors carefully, we do not control their actions. Any problems caused by these third-parties, including as a result of their not providing us their services for any reason or their performing their services poorly, could adversely affect our ability to deliver products and services to our customers or otherwise conduct our business efficiently and effectively. Replacing these third-party vendors could also entail significant delay and expense.

We are dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect our prospects.

Competition for qualified employees and personnel in the banking industry is intense and there are a limited number of qualified persons with knowledge of, and experience in, the community banking industry where the Bank conducts its business. The process of recruiting personnel with the combination of skills and attributes required to carry out our strategies is often lengthy. Our success depends to a significant degree upon our ability to attract and retain qualified management, loan origination, finance, administrative, marketing and technical personnel and upon the continued contributions of our management and personnel. In particular, our success has been and continues to be highly dependent upon the abilities of key executives, including our President, and certain other employees. In addition, our success has been and continues to be highly dependent upon the services of our directors, many of whom are at or nearing retirement age, and we may not be able to identify and attract suitable candidates to replace such directors.

Our exposure to operational risks may adversely affect us.

Similar to other financial institutions, we are exposed to many types of operational risk, including reputational risk, legal and compliance risk, the risk of fraud or theft by employees or outsiders, the risk that sensitive customer or Company data is compromised, unauthorized transactions by employees or operational errors, including clerical or record-keeping errors. While we have policies and procedures designed to prevent such losses, there can be no assurance that such losses will not occur. If any of these risks occur, it could result in material adverse consequences for us.

Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes.

Our loans to businesses and individuals and our deposit relationships and related transactions are subject to exposure to the risk of loss due to fraud and other financial crimes. Nationally, reported incidents of fraud and other financial crimes have increased. We have also experienced losses due to apparent fraud and other financial crimes. While we have policies and procedures designed to prevent such losses, there can be no assurance that such losses will not occur.

Managing reputational risk is important to attracting and maintaining customers, investors and employees.

Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality or operational failures due to integration or conversion challenges as a result of acquisitions we undertake, compliance deficiencies, and questionable or fraudulent activities of our customers. We have policies and procedures in place to protect our reputation and promote ethical conduct, but these policies and procedures may not be fully effective. Negative publicity regarding our business, employees, or customers, with or without merit, may result in the loss of customers, investors and employees, costly litigation, a decline in revenues and increased governmental regulation.

We rely on dividends from the Bank for substantially all of our revenue at the holding company level.

We are an entity separate and distinct from our principal subsidiary, the Bank, and derive substantially all of our revenue at the holding company level in the form of dividends from that subsidiary. Accordingly, we are, and will be, dependent upon dividends from the Bank to pay the principal of and interest on our indebtedness, to satisfy our other cash needs and to pay dividends on our common stock. The Bank's ability to pay dividends is subject to its ability to earn net income and to meet certain regulatory requirements. In the event the Bank is unable to pay dividends to us, we may not be able to pay dividends on our common stock. Also, our right to participate in a distribution of assets upon a subsidiary's liquidation or reorganization is subject to the prior claims of the subsidiary's creditors.

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Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

The executive offices of the Company are located in downtown Vancouver, Washington at 900 Washington Street. The Company's operational center is also located in Vancouver, Washington (both offices are leased). At March 31, ~~2016,~~2017, the Bank had 10 offices located in Clark County, Washington (five of which are leased), one office in Cowlitz County, Washington, two offices in Klickitat County, Washington and one office in Skamania County, Washington. The Bank also had ~~two~~four offices in Multnomah County, Oregon, one leased office in Washington County, Oregon and one office in Marion County, Oregon. The Trust Company had one office as part of the executive offices lease and one leased office in Clackamas County, Oregon.

Item 3. Legal Proceedings

Periodically, there have been various claims and lawsuits involving the Company, such as claims to enforce liens, condemnation proceedings on properties in which the Company holds security interests, claims involving the making and servicing of real property loans and other issues incident to the Company's business. The Company is not a party to any pending legal proceedings that it believes would have a material adverse effect on the financial condition, results of operations or liquidity of the Company.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

At March 31, ~~2016,~~2017, there were ~~22,507,890~~22,510,890 shares of Company common stock issued and outstanding, ~~691~~638 stockholders of record and an estimated ~~2,207~~2,397 holders in nominee or "street name." Under Washington law, the Company is prohibited from paying a dividend if, as a result of its payment, the Company would be unable to pay its debts as they become due in the normal course of business, or if the Company's total liabilities would exceed its total assets. The principal source of funds for the Company is dividend payments from the Bank. OCC regulations require the Bank to give the OCC 30 days advance notice of any proposed declaration of dividends to the Company, and the OCC has the authority under its supervisory powers to prohibit the payment of dividends to the Company. The OCC imposes certain limitations on the payment of dividends from the Bank to the Company, which utilize a three-tiered approach that permits various levels of distributions based primarily upon a savings association's capital level. In addition, the Company may not declare or pay a cash dividend on its capital stock if the effect thereof would be to reduce the regulatory capital of the Bank below the amount required for the liquidation account established pursuant to the Bank's conversion from the mutual stock form of organization. See Item 1. "Business-Regulation-Federal Regulation of Savings Institutions-Limitations on Capital Distributions." and Note 1 of the Notes to the Consolidated Financial Statements contained in Item 8 of this Form 10-K.

The common stock of the Company is traded on the Nasdaq Global Select Market under the symbol "RVSB". The following table sets forth the high and low trading prices, as reported by Nasdaq, and cash dividends for each quarter during the 2017 and 2016 ~~and 2015~~ fiscal ~~years.~~years:

Fiscal Year Ended March 31, 2016 High Low
Cash
Dividends
Declared

Quarter ended March 31, 2016 $ 4.76 $ 4.20 $ 0.02000
Quarter ended December 31, 2015 5.11 4.35 0.01750
Quarter ended September 30, 2015 4.75 4.15 0.01500
Quarter ended June 30, 2015 4.52 4.08 0.01250

Fiscal Year Ended March 31, 2017	High		Low		Cash Dividends Declared

Quarter ended March 31, 2017	$	7.90	$	6.87	$	0.0200
Quarter ended December 31, 2016		7.61		5.23		0.0200
Quarter ended September 30, 2016		5.41		4.69		0.0200
Quarter ended June 30, 2016		4.89		4.30		0.0200

Fiscal Year Ended March 31, 2015 High Low
Cash
Dividends
Declared

Quarter ended March 31, 2015 $ 4.74 $ 4.32 $ 0.01125
Quarter ended December 31, 2014 4.49 3.84 -
Quarter ended September 30, 2014 3.99 3.67 -
Quarter ended June 30, 2014 4.03 3.38 -

Fiscal Year Ended March 31, 2016	High		Low		Cash Dividends Declared

Quarter ended March 31, 2016	$	4.76	$	4.20	$	0.02000
Quarter ended December 31, 2015		5.11		4.35		0.01750
Quarter ended September 30, 2015		4.75		4.15		0.01500
Quarter ended June 30, 2015		4.52		4.08		0.01250

Stock Repurchase

The Company may repurchase shares of its common stock from time-to-time in open market transactions. The timing, volume and price of purchases are made at our discretion and are also contingent upon our overall financial condition, as well as general market conditions. The Company did not repurchase any shares of its common stock during the years ended March 31, 2017, 2016 ~~2015~~ or ~~2014.~~2015.

Securities for Equity Compensation Plans

Please refer to Item 12 in this Form 10-K for a listing of securities authorized for issuance under equity compensation plans.

4344

		3/31/11*		3/31/12		3/31/13		3/31/14		3/31/15		3/31/16		3/31/12*	3/31/13	3/31/14	3/31/15	3/31/16	3/31/17

Riverview Bancorp, Inc.	Riverview Bancorp, Inc.		100.00		74.34		86.84		112.68		148.03		139.84	100.00	116.81	151.57	199.12	188.10	325.05
S & P 500			100.00		108.54		123.69		150.73		169.92		172.95	100.00	113.96	138.87	156.55	159.34	186.71
NASDAQ Bank			100.00		102.54		116.46		152.32		154.05		156.55	100.00	113.96	149.97	151.78	152.87	217.87

Recruiting and Retaining Highly Competent Personnel with a Focus on Commercial ~~Lending.~~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 significant shareholders through the Company's employee stock ownership ("ESOP") and 401(k) plans.

Shareholders' equity increased ~~$4.5~~$3.0 million to $111.3 million at March 31, 2017 from $108.3 million at March 31, ~~2016 from $103.8 million at March 31, 2015.~~2016. The increase was mainly attributable to net income of ~~$6.4~~$7.4 million. ~~Partially offsetting this~~The increase ~~were~~was partially offset by cash dividends declared of ~~$1.5~~$1.8 million and a decrease in other comprehensive income (loss) related to unrealized holding loss on securities available for sale of $2.8 million for the year ended March 31, 2016. Additional paid-in capital and noncontrolling interest decreased by a total of $1.4 million primarily as a result of RAMCorp's purchase of the remaining shares from its noncontrolling interest owner during the quarter-ended December 31, 2015. The purchase price of these shares was based on two appraisals of RAMCorp. Upon repurchase, these shares were retired. This transaction resulted in the Bank's ownership in RAMCorp increasing from 90% at September 30, 2015 to 100% at December 31, 2015.2017.

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 ~~RAMCorp,~~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 ~~during the quarter-ended December~~as of October 31, ~~2015.~~2016. 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 ~~and~~ 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 isare 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 ~~9.0%~~8.0%, a net interest margin that approximated ~~4.2%~~4.0% and a return on assets that ranged from 0.83% to ~~1.24%~~1.23% (average of ~~1.06%~~1.04%). In addition to utilizing the above projections of estimated operating results, key assumptions used to determine the fair value estimate under the income approach were the discount rate of ~~14.2%~~13.85% utilized for our cash flow estimates and a terminal value estimated at ~~1.95~~1.56 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 eight publicly traded comparable institutions based on a variety of financial metrics (tangible equity, leverage ratio, return on assets, return on equity, net interest margin, nonperforming assets, net charge-offs, and reserves for loan losses) and other relevant qualitative factors (geographical location, lines of business, business model, risk profile, availability of financial information, etc.). 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 ~~1.10~~1.0 times tangible book value. The Company calculated a fair value of its reporting unit of ~~$143.0~~$159.3 million using the corporate value approach, ~~$147.1~~$151.8 million using the income approach and ~~$140.7~~$150.0 million using the market approach, with a final concluded value of ~~$142.0~~$152.0 million, with primary weight given to the market 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 beyond our current forecasts, significant adverse changes in the operating environment for the financial industry or an increase in the value of our assets without an increase in the value of the reporting unit may result in a future impairment charge.

It is possible that changes in circumstances existing at the measurement date or at other times in the future, or in the numerous estimates associated with management's judgments, assumptions and estimates made in assessing the fair value of our goodwill, could result in an impairment charge of a portion or all of our goodwill. If the Company recorded an impairment charge, its financial position and results of operations would be adversely affected; however, such an impairment charge would have no impact on our liquidity, operations or regulatory capital.

Estimated Fair Value of Level 3 Assets

The Company determines the estimated fair value of certain assets that are classified as Level 3 under the fair value hierarchy established ~~by accounting standards.~~under GAAP. These Level 3 assets are valued using significant unobservable inputs that are supported by little or no market activity and that are significant to the estimated fair value of the assets. These Level 3 assets include certain ~~available for sale securities,~~ loans measured for impairment and REO for which there is neither an active market for identical assets from which to determine fair value, nor is there sufficient, current market information about similar assets to use as observable, corroborated data for all significant inputs in a valuation model. Under these circumstances, the estimated fair values of these assets are determined using pricing models, discounted cash flow methodologies, appraisals, and other valuation methods in accordance with accounting standards, for which the determination of fair value requires significant management judgment or estimation.

Valuations using models or other techniques are dependent upon assumptions used for the significant inputs. Where market data is available, the inputs used for valuation reflect that information as of the valuation date. In periods of extreme volatility, lessened liquidity or in illiquid markets, there may be more variability in market pricing or a lack of market data to use in the valuation process. Judgment is then applied in formulating those inputs.

At March 31, 2016, the market for the Company's collateralized debt obligation ("CDO"), which is secured by trust preferred securities issued by other bank holding companies, was determined to be inactive based on management's judgment. This determination was made by the Company after considering the last known trade date for this specific security, the low number of transactions for similar types of securities, the bid-ask spread in the brokered markets in which these securities trade, the low number of new issuances for similar securities, the implied liquidity risk premium for similar securities, the lack of information that is released publicly and discussions with third-party industry analysts. Due to the inactivity in the market, observable market data was not readily available for all significant inputs for this security. Accordingly, the CDO was classified as Level 3 in the fair value hierarchy. Consistent with previous valuations, the Company determined that an income approach valuation technique (using cash flows and present value techniques) that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs was the most appropriate valuation technique. Management used significant unobservable inputs that reflect our assumptions of what a market participant would use to price this security. Significant unobservable inputs included selecting an appropriate discount rate, default rate and repayment assumptions. The Company estimated the discount rate by comparing rates for similarly rated corporate bonds, with additional consideration given to market liquidity. The default rates and repayment assumptions were estimated based on the individual issuer's financial conditions, historical repayment information, as well as the current capital market conditions.

Additionally, the Company received two independent Level 3 valuation estimates for this security. Those valuation estimates were based on proprietary pricing models utilizing significant unobservable inputs. The Company's estimate of fair value was at the upper end of the range of valuations provided; however, the magnitude in the range of fair value estimates further supported the difficulty in estimating the fair value for these types of securities in the current environment. Additionally, the Company believes that some of the assumptions used by one of the independent parties were overly aggressive and unrealistic. Therefore, the Company believes the use of its internally developed valuation model at March 31, 2016 was reasonable.

Certain loans included in the loan portfolio were deemed impaired at March 31, ~~2016.~~2017. Accordingly, loans measured for impairment were classified as Level 3 in the fair value hierarchy as there is no active market for these loans. Measuring impairment of a loan requires judgment and estimates, and the eventual outcomes may differ from those estimates. Impairment was measured based on a number of factors, including recent independent appraisals which are further reduced for estimated selling costs or by estimating the present value of expected future cash flows, discounted at the loan's effective interest rate.

In addition, REO was classified as Level 3 in the fair value hierarchy. Management generally determines fair value based on a number of factors, including third-party appraisals of fair value less estimated costs to sell. The valuation of REO is subject to significant external and internal judgment, and the eventual outcomes may differ from those estimates.

For additional information on our Level 1, 2 and 3 fair value measurements see Note 1617 of the Notes to the Consolidated Financial Statements contained in Item 8 of this Form 10-K.

Comparison of Operating Results for the Years Ended March 31, ~~2016~~2017 and ~~2015~~2016

Net Income. Net income was $7.4 million, or $0.33 per diluted share, for the year ended March 31, 2017, compared to $6.4 million, or $0.28 per diluted share, for the year ended March 31, ~~2016, compared to $4.5 million, or $0.20 per diluted share,~~2016. The earnings for the year ended March 31, ~~2015. The earnings for the years ended March 31, 2016 and 2015 reflect~~2017 improved due to an ~~improvement~~increase in net interest income and ~~continued improvement in asset quality. Further, earnings improved for the year ended March 31, 2016 due to~~non-interest income, which was partially offset by an increase in non-interest income, primarily due to increased fees and service charges and a decrease in non-interest expenses, primarily due to the decrease in REO expenses, FDIC insurance premium expense, professional fees expense and salaries and employee benefits.expense. In addition, net income for the year ended March 31, ~~2016 included~~2017 did not include any provision or recapture of loan loss compared to a recapture of loan losses of $1.2 million ~~compared to $1.8 million~~ for the ~~same~~ prior fiscal ~~year period.~~year.

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 fiscal year 2017 increased $4.6 million, or 15.6%, to $33.8 million compared to $29.2 million in fiscal year 2016. The net interest margin for the fiscal year ended March 31, 2017 was 3.79% compared to 3.67% for the prior fiscal year. This increase in the net interest margin was primarily the result of the increase in the average balance of loans receivable and investment securities.

Interest and Dividend Income. Interest and dividend income was $35.6 million for the fiscal year ended March 31, 2017 compared to $30.9 million for the fiscal year ended March 31, 2016. The increase was due primarily to the increase in the average balance of loans receivable and investment securities which resulted in an increase in interest income of $3.8 million and $866,000, respectively, for the fiscal year ended March 31, 2017 compared to the prior fiscal year.

The average balance of net loans increased $69.7 million to $663.1 million for the fiscal year ended March 31, 2017 from $593.4 million for the prior fiscal year. The average yield on net loans was 4.77% for the year ended March 31, 2017 compared to 4.68% for the prior fiscal year. The average balance of investment securities increased $41.4 million to $175.9 million at March 31, 2017 compared to $134.4 million at March 31, 2016.

Interest Expense. Interest expense for the fiscal year ended March 31, 2017 totaled $1.9 million, a $127,000 or 7.29% increase from $1.7 million for the fiscal year ended March 31, 2016. The increase in interest expense was primarily the result of an increase in interest expense related to variable rate subordinated debentures, which repriced quarterly based on the three-month LIBOR, and an increase in the average balance of interest-bearing deposits. The weighted average interest rate on other interest-bearing liabilities increased to 2.76% for the fiscal year ended March 31, 2017 compared to 2.27% for the prior fiscal year. The average balance of interest-bearing deposits increased $56.0 million to $628.9 million for the fiscal year ended March 31, 2017 compared to $572.9 million for the fiscal year ended March 31, 2016. The weighted average interest rate on interest-bearing deposits decreased to 0.18% for fiscal year ended March 31, 2017 from 0.20% for the prior fiscal year.

Provision for Loan Losses. There was no provision for or recapture of loan losses for the fiscal year 2017 as a result of adequate reserves already in place and overall net recoveries. The recapture of loan losses totaled $1.2 million for the fiscal year ended 2016. The recapture of loan losses for fiscal year 2016 was primarily a result of a decrease in charge-offs and the decline in the level of delinquent, nonperforming and classified loans, as well as the stabilization of real estate values in our market areas.

In accordance with business combination accounting, loans acquired from MBank 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. Although the discount recorded on the acquired loans is not reflected in the allowance for loan losses, or related allowance coverage ratios, we believe the ratio of the allowance for loan losses to total loans including acquired loans, a non-GAAP financial measure, should be considered by investors when comparing the Company's allowance for loan losses to total loans in periods prior to the MBank transaction. At March 31, 2017, the Company had an allowance for loan losses of $10.5 million, or 1.35% of total loans, compared to $9.9 million, or 1.58% at March 31, 2016. If the allowance for loan losses and loans were grossed up to account for loans acquired from MBank and the remaining acquisition loan discount as of March 31, 2017, the adjusted allowance for loan losses to adjusted loans would have been 1.73%. See Note 1 and Note 3 of the Notes to the Consolidated Financial Statements contained in Item 8 of this Form 10-K.

Net recoveries for the year ended March 31, 2017 and 2016 were $643,000 and $273,000, respectively. Net recoveries to average net loans for the year ended March 31, 2017 and 2016 were (0.10)% and (0.05)%, respectively. Nonperforming loans remained at $2.7 million at both March 31, 2017 and 2016. The allowance as a percentage of nonperforming loans increased to 382.98% at March 31, 2017 compared to 364.22% at March 31, 2016.

Impaired loans are subjected to an impairment analysis to determine an appropriate reserve amount to be held against each loan. As of March 31, 2017, the Company had identified $11.9 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, $10.7 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. The remaining $1.2 million have specific valuation allowances totaling $88,000. Charge-offs on these impaired loans totaled $83,000 from their original loan balances. Based on a comprehensive analysis, management deemed the allowance for loan losses of $10.5 million at March 31, 2017 adequate to cover probable losses inherent in the loan portfolio. See Note 6 of the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding the allowance for loan losses.

Non-Interest Income. Non-interest income increased $639,000 to $10.0 million for the year ended March 31, 2017 from $9.4 million for fiscal year 2016. The increase in non-interest income was primarily due to the increase in fees and service charges and net gains on sales of loans held for sale of $331,000 and $131,000, respectively. Additionally, other non-interest

income in fiscal year 2017 increased $411,000 due primarily to a BOLI death benefit on a former employee of $423,000. These increases were partially offset by a decrease in asset management fees of $224,000 for the year ended March 31, 2017 compared to the prior fiscal year. Other non-interest income for the year ended March 31, 2017 included a $240,000 OTTI charge related to a collateralized debt obligation security which was not present for the year ended March 31, 2016. Additionally, losses on sales of REO, which is included in other non-interest income, decreased $182,000 for the year ended March 31, 2017 compared to the prior fiscal year.

Non-Interest Expense. Non-interest expense increased $3.0 million to $33.0 million for fiscal year ended March 31, 2017 compared to $29.9 million for fiscal year ended March 31, 2016. Salaries and employee benefits increased $1.7 million for the year ended March 31, 2017 compared to the prior fiscal year partially due to additional staffing as a result of the MBank transaction. Professional fees increased $724,000 for the year ended March 31, 2017 primarily due to $653,000 in professional fees incurred related to the MBank transaction. Data processing expense increased $336,000 for the year ended March 31, 2017 compared to the prior fiscal year reflecting additional costs required to operate an additional core banking system as well as costs for conversion and integration of these two core banking systems associated with the MBank transaction. Litigation settlement costs related to an REO property increased $400,000 for the year ended March 31, 2017 compared to the prior fiscal year and the litigation was final settled in fiscal year 2017. In addition, advertising and marketing expense increased $85,000 for the year ended March 31, 2017 compared to the prior fiscal year. Offsetting these increases was a decrease in REO expenses (which include operating costs and write-downs on property) of $513,000 for fiscal year 2017 compared to fiscal year 2016. This decrease was primarily due to the decrease in REO balances as well as the stabilization of real estate values in the Company's market area. In addition, the Company's FDIC insurance premiums also decreased $144,000 compared to the prior fiscal year reflecting a decrease in the Bank's FDIC assessment rates.

Income Taxes. The provision for income taxes was $3.4 million for the fiscal years ended March 31, 2017 and 2016. The effective tax rate was 31.4% for the year ended March 31, 2017 compared to 34.8% for the year ended March 31, 2016. As of March 31, 2017, management deemed that a deferred tax asset valuation allowance related to the Company's deferred tax asset was not necessary. At March 31, 2017, the Company had a deferred tax asset of $7.6 million which included $1.1 million for federal and state net operating loss carryforwards, which will expire in 2032 through 2034. See Note 12 of the Notes to the Consolidated Financial Statements contained in Item 8 of this Form 10-K for further discussion of the Company's income taxes.

Comparison of Operating Results for the Years Ended March 31, 2016 and 2015

Net Income. Net income was $6.4 million, or $0.28 per diluted share, for the year ended March 31, 2016, compared to $4.5 million, or $0.20 per diluted share, for the year ended March 31, 2015. The earnings for the years ended March 31, 2016 and 2015 reflected an improvement in net interest income and continued improvement in asset quality. Further, earnings improved for the year ended March 31, 2016 due to an increase in non-interest income, primarily due to increased fees and service charges and a decrease in non-interest expenses, primarily due to the decrease in REO expenses, FDIC insurance premium expense, professional fees expense and salaries and employee benefits. In addition, net income for the year ended March 31, 2016 included a recapture of loan losses of $1.2 million compared to $1.8 million for the prior fiscal year.

Net Interest Income. Net interest income for fiscal year 2016 increased $2.5 million, or 9.3%, to $29.2 million compared to $26.7 million in fiscal year 2015. The net interest margin for the fiscal year ended March 31, 2016 was 3.67% compared to 3.59% for the ~~same~~ prior ~~year period.~~fiscal year. This increase in the net interest margin was primarily the result of the increase in the average balance of loans receivable and investment securities.

The Company generally achieves better net interest margins in a stable or increasing interest rate environment as a result of the balance sheet being slightly asset interest rate sensitive. Approximately 6.26% of our loan portfolio was adjustable (floating) at March 31, 2016. At March 31, 2016, $22.8 million, or 58.20% of our adjustable (floating) loan portfolio contained interest rate floors, below which the loan's contractual interest rate may not adjust. The inability of these loans to adjust downward has contributed to increased income in the current low interest rate environment; however, net interest income will be reduced in a rising interest rate environment until such time as the current rate exceeds these interest rate floors. At March 31, 2016, $10.7 million, or 1.71% of the loans in the Company's loan portfolio were at the floor interest rate of which $8.1 million, or 75.55% had yields that would begin floating again once the Wall Street Journal Prime Rate increases at least 150 basis points.

Interest and Dividend Income. Interest and dividend income was $30.9 million for the fiscal year ended March 31, 2016 compared to $28.6 million for the fiscal year ended March 31, 2015. The increase was due primarily to the increase in the average balance of loans receivable and investment securities which resulted in an increase in interest income of $1.9 million and $435,000, respectively, for the fiscal year ended March 31, 2016 compared to the ~~same~~prior fiscal ~~prior year period.~~year.

The average balance of net loans increased $36.0 million to $593.4 million for the fiscal year ended March 31, 2016 from $557.4 million for the ~~same~~ prior fiscal ~~year period.~~year. The average yield on net loans was 4.68% for the year ended March 31, 2016 compared to 4.65% for the ~~same~~ prior ~~year period.~~year. During the year ended March 31, 2016, the Company also reversed $9,000 of interest income on nonperforming loans compared to $39,000 for the ~~same~~ prior fiscal ~~year period.~~year. The average balance of investment securities increased $11.8 million to $134.4 million at March 31, 2016 compared to $122.6 million at March 31, 2015.

5456

Interest Expense. Interest expense for the fiscal year ended March 31, 2016 totaled $1.7 million, a $174,000 or 9.1% decrease from $1.9 million for the fiscal year ended March 31, 2015. The decrease in interest expense was primarily the result of declining deposit costs due to the Company's decision to maintain low interest offerings on its deposit products in addition to the decline in the percentage of deposits representing certificates of deposit that yield a higher interest rate compared to savings and demand deposits that yield a lower interest rate. The weighted average interest rate on interest-bearing deposits decreased to 0.20% for fiscal year ended March 31, 2016 from 0.24% for the ~~same~~ prior fiscal ~~year period.~~year.

Provision for Loan Losses. The recapture of loan losses for the fiscal years 2016 and 2015 totaled $1.2 million and $1.8 million, respectively. The recapture of loan losses was primarily a result of a decrease in charge-offs and the decline in the level of delinquent, nonperforming and classified loans, as well as the stabilization of real estate values in our market areas.

Net recoveries for the year ended March 31, 2016 and 2015 were $273,000 and $11,000, respectively. Net recoveries to average net loans for the year ended March 31, 2016 and 2015 were (0.05)% and 0.00%, respectively. Nonperforming loans decreased to $2.7 million at March 31, 2016 compared to $5.3 million at March 31, 2015. The ratio of allowance for loan losses to total loans was 1.58% at March 31, 2016 compared to 1.86% at March 31, 2015. The allowance as a percentage of nonperforming loans increased to 364.22% at March 31, 2016 compared to 202.37% at March 31, 2015.

~~Impaired loans are subjected to an impairment analysis to determine an appropriate reserve amount to be held against each loan.~~ As of March 31, 2016, the Company had identified $14.2 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, $13.0 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. The remaining $1.2 million have specific valuation allowances totaling $110,000. Charge-offs on these impaired loans totaled $83,000 from their original loan balances. Based on a comprehensive analysis, management deemed the allowance for loan losses of $9.9 million at March 31, 2016 adequate to cover probable losses inherent in the loan portfolio. See Note 56 of the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding the allowance for loan losses.

Non-Interest Income. Non-interest income increased $500,000 to $9.4 million for the year ended March 31, 2016 from $8.9 million for ~~the same period in~~fiscal year 2015. The increase in non-interest income was primarily due to the increase in fees and service charges of $529,000 in fiscal year 2016 compared to fiscal year 2015 primarily as a result of an increase in prepayment penalties on loan payoffs. Offsetting these increases was a decrease in other non-interest income of $249,000 for the year ended March 31, 2016 compared to ~~same~~the prior fiscal year ~~period~~ primarily due to the Company recording a gain on the sale of investment securities of $158,000 in the year ended March 31, 2015 that was not present for the year ended March 31, 2016.

Non-Interest Expense. Non-interest expense decreased $797,000 to $29.9 million for fiscal year ended March 31, 2016 compared to $30.7 million for fiscal year ended March 31, 2015. Salaries and employee benefits decreased $111,000 for the year ended March 31, 2016 compared to the ~~same~~ prior ~~year period.~~fiscal year. REO expenses (which include operating costs and write-downs on property) decreased $427,000 for fiscal year 2016 compared to fiscal year 2015. This decrease was primarily due to the decrease in REO balances as well as the stabilization of real estate values in the Company's market area. Professional fess expenses decreased $185,000 for the ~~year-ended~~year ended March 31, 2016 compared to the ~~same~~ prior ~~year period.~~fiscal year. In addition, the Company's FDIC insurance premiums also decreased $127,000 compared to the ~~same period in the~~ prior fiscal year reflecting the Bank's improved financial condition. Offsetting these decreases was an increase in advertising and marketing expense of $41,000 for the year ended March 31, 2016 compared to the ~~same~~ prior ~~year period.~~fiscal year. Furthermore, other non-interest expense increased due to an increase in stock related expenses of $114,000 compared to the ~~same~~ prior ~~year period.~~fiscal year.

Income Taxes. The provision for income taxes was $3.4 million and $2.2 million for the fiscal years ended March 31, 2016 and March 31, 2015, respectively. As of March 31, 2016, management deemed that a deferred tax asset valuation allowance related to the Company's deferred tax asset was not necessary. At March 31, 2016, the Company had a deferred tax asset of $9.2 million which included $4.8 million for federal and state net operating loss ~~carryforwards, which will expire in 2032 through 2034.~~carryforwards. See Note ~~11 of the Notes to the Consolidated Financial Statements contained in Item 8 of this Form 10-K for further discussion of the Company's income taxes.~~

~~Comparison of Operating Results for the Years Ended March 31, 2015 and 2014~~

~~Net Income.~~ Net income was $4.5 million, or $0.20 per diluted share for the year ended March 31, 2015, compared to $19.4 million, or $0.87 per diluted share for the year ended March 31, 2014. The earnings for the year ended March 31, 2014 included the reversal of the valuation allowance on the Company's deferred tax assets totaling $15.1 million. The earnings for the year ended March 31, 2015 reflects an improvement in net interest income and an improvement in asset quality which reduced non-interest expenses, primarily due to the decrease in REO expense. In addition, net income for the year ended March 31, 2015 included a recapture of loan losses of $1.8 million compared to $3.7 million for the same prior year period.

~~Net Interest Income.~~ Net interest income for fiscal year 2015 increased $2.5 million, or 10.2%, to $26.7 million compared to $24.2 million in fiscal year 2014. The net interest margin for the fiscal year ended March 31, 2015 was 3.59% compared to 3.37% for the same prior year period. This increase was primarily the result of the increase in the average balance of loans receivable and short term investments as well as the decrease in average cost of interest bearing deposits.

~~Interest Income.~~ Interest income was $28.6 million for the fiscal year ended March 31, 2015 compared to $26.8 million for the fiscal year ended March 31, 2014. The increase was due primarily to the increase in the average balance of loans receivable and mortgage-backed securities which resulted in an increase in interest income of $473,000 and $1.5 million, respectively for the fiscal year ended March 31, 2015 compared the same fiscal prior year period.

~~Interest Expense.~~ Interest expense for the fiscal year ended March 31, 2015 totaled $1.9 million, a $652,000 or 25.4% decrease from $2.6 million for the fiscal year ended March 31, 2014. The decrease in interest expense was primarily the result of declining deposit costs, due to the Company's decision to further reduce its deposit rate offerings in light of the continued low interest rate environment, and to a lesser extent a decline in the average balance of higher costing certificates of deposit. The Company has continued to lower its deposit costs throughout the year on many of its deposit products. The weighted average interest rate on interest-bearing deposits decreased to 0.24% for fiscal year ended March 31, 2015 from 0.36% for the same prior fiscal year period.

~~Provision for Loan Losses.~~ The recapture of loan losses for the fiscal years 2015 and 2014 totaled $1.8 million and $3.7 million, respectively. The recapture of loan losses was primarily a result of a decrease in charge-offs and the decline in the level of delinquent, nonperforming and classified loans, as well as the stabilization of real estate values in our market areas.

Net recoveries for the year ended March 31, 2015 and 2014 were $11,000 and $608,000, respectively. Net recoveries to average net loans for the year ended March 31, 2015 and 2014 were 0.00% and (0.12)%, respectively. Nonperforming loans decreased to $5.3 million at March 31, 2015 compared to $14.1 million at March 31, 2014. The ratio of allowance for loan losses to total loans was 1.86% at March 31, 2015 compared to 2.35% at March 31, 2014. The allowance as a percentage of nonperforming loans increased to 202.37% at March 31, 2015 compared to 89.25% at March 31, 2014.

Impaired loans are subjected to an impairment analysis to determine an appropriate reserve amount to be held against each loan. As of March 31, 2015, the Company had identified $22.4 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 fair value of the collateral. Of those impaired loans, $21.0 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. The remaining $1.3 million have specific valuation allowances totaling $147,000. Charge-offs on these impaired loans totaled $354,000 from their original loan balance. Based on a comprehensive analysis, management deemed the allowance for loan losses of $10.8 million at March 31, 2015 adequate to cover probable losses inherent in the loan portfolio. See Note 5 of the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding the allowance for loan losses.

~~Non-Interest Income.~~ Non-interest income increased $508,000 to $8.9 million for the year ended March 31, 2015 from $8.4 million for the same period in 2014. The increase in non-interest income was primarily due to the increase in asset management fees of $345,000 in fiscal year 2015 compared to fiscal year 2014. The increase in asset management fees was primarily a result of an increase in assets under management of RAMCorp, which totaled $409.3 million at March 31, 2015 compared to $359.7 million at March 31, 2014. Furthermore, the increase in non-interest income was also due to the increase in the cash surrender value of bank owned life insurance policies of $163,000 in fiscal year 2015 compared to fiscal year 2014.

~~Non-Interest Expense.~~ Non-interest expense decreased $1.2 million to $30.7 million for fiscal year ended March 31, 2015 compared to $32.0 million for fiscal year ended March 31, 2014. REO expenses (which include operating costs and write-downs on property) decreased $1.8 million for fiscal year 2015 compared to fiscal year 2014. This decrease was primarily due to the decrease in REO balances as well as the stabilization of real estate values in the Company's market area. Data processing expenses decreased $251,000 for the year-ended March 31, 2015 compared to the same prior year period as a result of conversion related expenses in the prior year for the Company's core operating system conversion. In addition, the Company's FDIC insurance premiums also decreased $860,000 compared to the same period in prior year reflecting the Bank's improved financial condition. Offsetting these decreases was an increase in salaries and employee benefits of $2.1 million for the year ended March 31, 2015 compared to the same prior year period. The increase in salaries and employee benefits was due to an increase in staffing as well as the reinstatement of incentive plans for the Company.

~~Income Taxes.~~ The provision for income taxes was $2.2 million for the fiscal year ended March 31, 2015 compared to a benefit for income taxes of $15.1 million for the fiscal year ended March 31, 2014. The $17.2 million increase in provision for income taxes was primarily due to the reversal of the valuation allowance on the Company's deferred tax assets of $15.4 million which resulted in a benefit for income taxes for the fiscal year ended March 31, 2014. During fiscal 2014, the Company reversed its deferred tax asset valuation allowance related to the Company's deferred tax assets as management deemed that it was no longer appropriate to carry a deferred tax asset valuation allowance as a result of changes in the factors considered by management when the Company initially established the valuation allowance. In making this conclusion, management considered, among other factors, the Company's earnings during the past three years, including the Company's recent financial performance, the improvement in the Company's asset quality and financial condition, as well as projected earnings and the impact from the Company's balance sheet restructure.

As of March 31, 2015, management deemed that a deferred tax asset valuation allowance related to the Company's deferred tax asset was not necessary. At March 31, 2015, the Company had a deferred tax asset of $12.6 million which included $8.2 million for federal and state net operating loss carryforwards, which will expire in 2032 through 2035. See Note 1112 of the Notes to the Consolidated Financial Statements contained in Item 8 of this Form 10-K for further discussion of the Company's income taxes.

Average Balance Sheet. The following table sets 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. Average balances for a period have been calculated using monthly average balances during such period. Non-accruing loans were included in the average loan amounts outstanding. Loan fees of $1.3 million, $980,000 ~~$767,000~~ and ~~$799,000~~$767,000 were included in interest income for the years ended March 31, 2017, 2016 and 2015, ~~and 2014,~~ respectively.

Year Ended March 31,
2016 2015 2014

Average
Balance

Interest
and
Dividends

Yield/
Cost

Average
Balance

Interest
and
Dividends

Yield/
Cost

Average
Balance

Interest
and
Dividends

Yield/
Cost

(Dollars in thousands)
Interest-earning assets:
Mortgage loans $ 463,023 $ 22,120 4.78 % $ 429,420 $ 20,102 4.68 % $ 433,110 $ 20,553 4.75 %
Non-mortgage loans 130,392 5,675 4.35 128,020 5,794 4.53 89,696 4,870 5.43
Total net loans ⁽¹⁾
593,415 27,795 4.68 557,440 25,896 4.65 522,806 25,423 4.86

Investment securities ⁽²⁾
134,449 2,709 2.01 122,618 2,274 1.85 42,107 695 1.65
Daily interest-bearing assets 735 - - 1,749 - - 1,316 - -
Other earning assets 67,276 444 0.66 62,063 456 0.73 152,573 686 0.45
Total interest-earning assets 795,875 30,948 3.89 743,870 28,626 3.85 718,802 26,804 3.73

Non-interest-earning assets:
Office properties and
   equipment, net
15,019 15,987 17,200
Other non-interest-earning assets 71,361 71,530 53,342
Total assets $ 882,255 $ 831,387 $ 789,344

Interest-bearing liabilities:
Regular savings accounts $ 84,485 $ 85 0.10 $ 71,202 $ 71 0.10 $ 59,844 $ 87 0.15
Interest checking accounts 127,161 99 0.08 104,719 79 0.08 93,395 102 0.11
Money market accounts 231,873 272 0.12 229,840 277 0.12 224,689 477 0.21
Certificates of deposit 129,427 717 0.55 148,573 899 0.61 174,522 1,307 0.75
Total interest-bearing deposits 572,946 1,173 0.20 554,334 1,326 0.24 552,450 1,973 0.36

Other interest-bearing liabilities 25,061 569 2.27 25,293 590 2.33 25,093 595 2.37
Total interest-bearing liabilities 598,007 1,742 0.29 579,627 1,916 0.33 577,543 2,568 0.44

Non-interest-bearing liabilities:
Non-interest-bearing deposits 170,612 140,949 120,290
Other liabilities 6,503 9,096 9,653
Total liabilities 775,122 729,672 707,486
Shareholders' equity 107,133 101,715 81,858
Total liabilities and
    shareholders' equity
$ 882,255 $ 831,387 $ 789,344
Net interest income $ 29,206 $ 26,710 $ 24,236
Interest rate spread 3.60 % 3.52 % 3.29 %
Net interest margin 3.67 % 3.59 % 3.37 %
Ratio of average interest-earning
   assets to average interest-
   bearing liabilities
133.09 % 128.34 % 124.46 %

⁽¹⁾ Includes non-accrual loans.

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

	Years Ended March 31,
	2017							2016							2015
	Average Balance		Interest and Dividends		Yield/ Cost			Average Balance		Interest and Dividends		Yield/ Cost			Average Balance		Interest and Dividends		Yield/ Cost
	(Dollars in thousands)
Interest-earning assets:
Mortgage loans	$	547,609	$	26,609		4.86	%	$	463,023	$	22,120		4.78	%	$	429,420	$	20,102		4.68	%
Non-mortgage loans		115,460		5,000		4.33			130,392		5,675		4.35			128,020		5,794		4.53
Total net loans ⁽¹⁾		663,069		31,609		4.77			593,415		27,795		4.68			557,440		25,896		4.65

Investment securities ⁽²⁾		175,862		3,589		2.04			134,449		2,709		2.01			122,618		2,274		1.85
Daily interest- bearing assets		238		-		-			735		-		-			1,749		-		-
Other earning assets		51,547		443		0.86			67,276		444		0.66			62,063		456		0.73
Total interest- earning assets		890,716		35,641		4.00			795,875		30,948		3.89			743,870		28,626		3.85

Non-interest-earning assets:
Office properties and equipment, net		14,435							15,019							15,987
Other non-interest- earning assets		70,906							71,361							71,530
Total assets	$	976,057						$	882,255						$	831,387

Interest-bearing liabilities:
Regular savings accounts	$	106,324	$	110		0.10		$	84,485	$	85		0.10		$	71,202	$	71		0.10
Interest checking accounts		151,801		98		0.06			127,161		99		0.08			104,719		79		0.08
Money market accounts		252,040		309		0.12			231,873		272		0.12			229,840		277		0.12
Certificates of deposit		118,769		634		0.53			129,427		717		0.55			148,573		899		0.61
Total interest- bearing deposits		628,934		1,151		0.18			572,946		1,173		0.20			554,334		1,326		0.24

Other interest- bearing liabilities		25,977		718		2.76			25,061		569		2.27			25,293		590		2.33
Total interest- bearing liabilities		654,911		1,869		0.28			598,007		1,742		0.29			579,627		1,916		0.33

Non-interest- bearing liabilities:
Non-interest- bearing deposits		202,376							170,612							140,949
Other liabilities		7,560							6,503							9,096
Total liabilities		864,847							775,122							729,672
Shareholders' equity		111,210							107,133							101,715
Total liabilities and shareholders' equity	$	976,057						$	882,255						$	831,387
Net interest income			$	33,772						$	29,206						$	26,710
Interest rate spread						3.72	%						3.60	%						3.52	%
Net interest margin						3.79	%						3.67	%						3.59	%
Ratio of average interest-earning assets to average interest- bearing liabilities						136.01	%						133.09	%						128.34	%
Tax Equivalent Adjustment ⁽³⁾			$	14						$	-						$	-

⁽¹⁾ Includes non-accrual loans.
⁽²⁾ For purposes of the computation of average yield on investments available for sale, historical cost balances were utilized; therefore, the yield information does not give effect to change 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.

Rate/Volume Analysis

The following table sets forth the effects of changing rates and volumes on net interest income of the Company. Information is provided with respect to: (i) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate); (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume); and (iii) changes in rate/volume (change in rate multiplied by change in volume). Rate/volume variance was allocated based on the percentage relationship of changes in volume and changes in rate to the total net change (in thousands).

		Year Ended March 31,																			Year Ended March 31,
		2016 vs. 2015									2015 vs. 2014										2017 vs. 2016									2016 vs. 2015

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

Interest Income:
Mortgage loans		$	1,586		$	432		$	2,018		$	(165	)	$	(286	)	$	(451	)		$	4,113		$	376		$	4,489		$	1,586		$	432		$	2,018
Non-mortgage loans			108			(227	)		(119	)		1,829			(905	)		924				(649	)		(26	)		(675	)		108			(227	)		(119	)
Investment securities ⁽¹⁾			230			205			435			1,497			82			1,579				840			40			880			230			205			435
Daily interest-bearing			-			-			-			-			-			-				-			-			-			-			-			-
Other earning assets			35			(47	)		(12	)		(529	)		299			(230	)			(118	)		117			(1	)		35			(47	)		(12	)
Total interest income			1,959			363			2,322			2,632			(810	)		1,822				4,186			507			4,693			1,959			363			2,322

Interest Expense:
Regular savings accounts			14			-			14			16			(32	)		(16	)			25			-			25			14			-			14
Interest checking accounts			20			-			20			10			(33	)		(23	)			22			(23	)		(1	)		20			-			20
Money market deposit accounts			(5	)		-			(5	)		11			(211	)		(200	)			37			-			37			(5	)		-			(5	)
Certificates of deposit			(103	)		(79	)		(182	)		(181	)		(227	)		(408	)			(58	)		(25	)		(83	)		(103	)		(79	)		(182	)
Other interest-bearing liabilities			(5	)		(16	)		(21	)		5			(10	)		(5	)			22			127			149			(5	)		(16	)		(21	)
Total interest expense			(79	)		(95	)		(174	)		(139	)		(513	)		(652	)			48			79			127			(79	)		(95	)		(174	)
Net interest income		$	2,038		$	458		$	2,496		$	2,771		$	(297	)	$	2,474			$	4,138		$	428		$	4,566		$	2,038		$	458		$	2,496

⁽¹⁾ Interest is presented on a fully tax-equivalent basis under a tax rate of 34%	⁽¹⁾ Interest is presented on a fully tax-equivalent basis under a tax rate of 34%																			⁽¹⁾ Interest is presented on a fully tax-equivalent basis under a tax rate of 34%

	Commercial		Other Real Estate Mortgage		Real Estate Construction		Commercial & Construction Total
March 31, 2016

Commercial business	$	69,397	$	-	$	-	$	69,397
Commercial construction		-		-		16,716		16,716
Office buildings		-		107,986		-		107,986
Warehouse/industrial		-		55,830		-		55,830
Retail/shopping centers/strip malls		-		61,600		-		61,600
Assisted living facilities		-		1,809		-		1,809
Single purpose facilities		-		126,524		-		126,524
Land		-		12,045		-		12,045
Multi-family		-		33,733		-		33,733
One-to-four family construction		-		-		10,015		10,015
Total	$	69,397	$	399,527	$	26,731	$	495,655

March 31, 2015
									Commercial		Other Real Estate Mortgage		Real Estate Construction		Commercial & Construction Total
March 31, 2017

Commercial business	$	77,186	$	-	$	-	$	77,186	$	107,371	$	-	$	-	$	107,371
Commercial construction		-		-		27,967		27,967		-		-		27,050		27,050
Office buildings		-		86,813		-		86,813		-		121,983		-		121,983
Warehouse/industrial		-		42,173		-		42,173		-		74,671		-		74,671
Retail/shopping centers/strip malls		-		60,736		-		60,736		-		78,757		-		78,757
Assisted living facilities		-		1,846		-		1,846		-		3,686		-		3,686
Single purpose facilities		-		108,123		-		108,123		-		167,974		-		167,974
Land		-		15,358		-		15,358		-		15,875		-		15,875
Multi-family		-		30,457		-		30,457		-		43,715		-		43,715
One-to-four family construction		-		-		2,531		2,531		-		-		19,107		19,107
Total	$	77,186	$	345,506	$	30,498	$	453,190	$	107,371	$	506,661	$	46,157	$	660,189

March 31, 2016

Commercial business	$	69,397	$	-	$	-	$	69,397
Commercial construction		-		-		16,716		16,716
Office buildings		-		107,986		-		107,986
Warehouse/industrial		-		55,830		-		55,830
Retail/shopping centers/strip malls		-		61,600		-		61,600
Assisted living facilities		-		1,809		-		1,809
Single purpose facilities		-		126,524		-		126,524
Land		-		12,045		-		12,045
Multi-family		-		33,733		-		33,733
One-to-four family construction		-		-		10,015		10,015
Total	$	69,397	$	399,527	$	26,731	$	495,655

	At March 31,										At March 31,
	2016					2015					2017					2016
	Amount ⁽¹⁾		Percent			Amount ⁽¹⁾		Percent			Amount ⁽¹⁾		Percent			Amount ⁽¹⁾		Percent

Speculative construction	$	6,089		8.76	%	$	885		1.71	%	$	7,915		8.47	%	$	6,089		8.76	%
Commercial/multi-family construction		50,174		72.22			45,096		87.15			59,599		63.80			50,174		72.22
Custom/presold construction		10,529		15.16			4,098		7.92			20,697		22.16			10,529		15.16
Construction/permanent		2,681		3.86			1,666		3.22			5,202		5.57			2,681		3.86
Total	$	69,473		100.00	%	$	51,745		100.00	%	$	93,413		100.00	%	$	69,473		100.00	%

	Northwest Oregon		Other Oregon		Southwest Washington		Total		Northwest Oregon		Other Oregon		Southwest Washington		Total
March 31, 2016
March 31, 2017

Land development	$	97	$	2,766	$	9,182	$	12,045	$	223	$	2,523	$	13,129	$	15,875
Speculative construction		400		-		7,711		8,111		945		3		14,492		15,440
Total land development and speculative construction	$	497	$	2,766	$	16,893	$	20,156	$	1,168	$	2,526	$	27,621	$	31,315

	Within 1 Year		1 – 3 Years		After 3 – 5 Years		After 5 – 10 Years		Beyond 10 Years		Total		Within 1 Year		1 – 3 Years		After 3 – 5 Years		After 5 – 10 Years		Beyond 10 Years		Total
Commercial and construction:
Commercial business	$	14,926	$	16,548	$	9,364	$	24,724	$	3,835	$	69,397	$	20,810	$	15,279	$	11,626	$	50,363	$	9,293	$	107,371
Other real estate mortgage		31,303		92,794		22,907		182,610		69,913		399,527		54,622		35,047		16,981		301,614		98,397		506,661
Real estate construction		7,755		2,567		-		7,916		8,493		26,731		18,090		778		2,047		18,024		7,218		46,157
Total commercial and construction		53,984		111,909		32,271		215,250		82,241		495,655		93,522		51,104		30,654		370,001		114,908		660,189
Consumer:
Real estate one-to-four family		801		893		2,283		5,212		79,591		88,780		415		1,970		1,676		5,586		83,218		92,865
Other installment		1,445		3,060		28,198		7,619		62		40,384		249		8,277		17,569		223		60		26,378
Total consumer		2,246		3,953		30,481		12,831		79,653		129,164		664		10,247		19,245		5,809		83,278		119,243
Total loans	$	56,230	$	115,862	$	62,752	$	228,081	$	161,894	$	624,819	$	94,186	$	61,351	$	49,899	$	375,810	$	198,186	$	779,432

	Fixed Rate		Adjustable Rate		Total		Fixed Rate		Adjustable Rate		Total

Commercial and construction:
Commercial business	$	32,135	$	22,336	$	54,471	$	34,254	$	52,307	$	86,561
Other real estate mortgage		122,739		245,485		368,224		127,468		324,571		452,039
Real estate construction		4,319		14,657		18,976		12,010		16,057		28,067
Total commercial and construction		159,193		282,478		441,671		173,732		392,935		566,667
Consumer:
Real estate one-to-four family		65,372		22,607		87,979		66,306		26,144		92,450
Other installment		38,475		464		38,939		25,172		957		26,129
Total consumer		103,847		23,071		126,918		91,478		27,101		118,579
Total loans	$	263,040	$	305,549	$	568,589	$	265,210	$	420,036	$	685,246

March 31, 2015
March 31, 2016

Commercial real estate	$	993	$	1,372	$	926	$	-	$	-	$	3,291	$	269	$	1,290	$	-	$	-	$	-	$	1,559
Land		-		801		-		-		-		801		-		801		-		-		-		801
Consumer		440		14		489		265		18		1,226		112		-		139		-		103		354
Total nonperforming loans		1,433		2,187		1,415		265		18		5,318		381		2,091		139		-		103		2,714
REO		706		-		852		45		-		1,603		271		-		26		298		-		595
Total nonperforming assets	$	2,139	$	2,187	$	2,267	$	310	$	18	$	6,921	$	652	$	2,091	$	165	$	298	$	103	$	3,309

	At or For the Year						At or For the Year
	Ended March 31,						Ended March 31,
	2016			2015			2017			2016

Classified loans	$	4,294		$	13,321		$	10,008		$	4,294

General loss allowances		9,775			10,615			10,440			9,775
Specific loss allowances		110			147			88			110
Net recoveries		(273	)		(11	)		(643	)		(273	)

	March 31,
	2017			2016			2015

Loans receivable (GAAP)	$	779,432		$	624,819		$	579,772
Net loan discount on acquired loans		3,010			-			-
Adjusted loans (non-GAAP)	$	782,442		$	624,819		$	579,772

Allowance for loan losses (GAAP)	$	10,528		$	9,885		$	10,762
Net loan discount on acquired loans		3,010			-			-
Adjusted allowance for loan losses (non-GAAP)	$	13,538		$	9,885		$	10,762

Allowance for loan losses/Total loans (GAAP)		1.35	%		1.58	%		1.86	%
Adjusted allowance for loan losses/Adjusted total loans (non-GAAP)		1.73	%		1.58	%		1.86	%

	One to Five Years					More Than Five to Ten Years					More Than Ten Years					One to Five Years					More Than Five to Ten Years					More Than Ten Years
	Amount		Weighted Average Yield ⁽¹⁾			Amount		Weighted Average Yield ⁽¹⁾			Amount		Weighted Average Yield ⁽¹⁾			Amount		Weighted Average Yield ⁽¹⁾			Amount		Weighted Average Yield ⁽¹⁾			Amount		Weighted Average Yield ⁽¹⁾

Trust preferred securities	$	-		-	%	$	-		-	%	$	1,808		5.11	%
Municipal securities																$	-		-	%	$	2,154		1.70	%	$	665		2.60	%
Agency securities		16,559		1.17			3,010		1.29			-		-			13,956		1.20			2,852		1.75			-		-
REMICs		2,538		2.13			2,973		2.35			38,413		1.98			2,499		2.14			4,944		2.33			35,717		2.21
Mortgage-backed securities		-		-			8,000		1.89			68,428		2.09
Other mortgage-backed securities		-		-			3,714		2.22			5,322		1.98
MBS																	-		-			13,910		1.93			82,765		2.34
Other MBS																	-		-			11,548		2.11			29,268		2.11
Total	$	19,097		1.30	%	$	17,697		1.93	%	$	113,971		2.10	%	$	16,455		1.34	%	$	35,408		2.01	%	$	148,415		2.26	%

Maturity Period	Amount		Weighted Average Rate			Amount		Weighted Average Rate

Three months or less	$	11,514		0.27	%	$	15,110		0.48	%
Over three through six months		10,828		0.29			14,269		0.66
Over six through 12 months		16,996		0.40			25,743		0.62
Over 12 months		23,907		1.20			26,164		1.06
Total	$	63,245		0.66	%	$	81,286		0.74	%

Name	Age ⁽¹⁾⁽¹⁾	Position
Patrick Sheaffer	7677	Chairman of the Board and Chief Executive Officer
Ronald A. Wysaske	6364	President and Chief Operating Officer
Kevin J. Lycklama	3839	Executive Vice President and Chief Financial Officer
Daniel D. Cox	3839	Executive Vice President and Chief Credit Officer
Richard S. Michalek	7172	Executive Vice President and Chief Lending Officer
~~John A. Karas~~Christopher P. Cline	6756	President and Chief Executive ~~Vice President~~Officer of Riverview Trust Company
Kim J. Capeloto	5455	Executive Vice President and Chief Retail Banking Officer

Fiscal Year Ended March 31, 2015	High		Low		Cash Dividends Declared

Quarter ended March 31, 2015	$	4.74	$	4.32	$	0.01125
Quarter ended December 31, 2014		4.49		3.84		-
Quarter ended September 30, 2014		3.99		3.67		-
Quarter ended June 30, 2014		4.03		3.38		-

Earnings (loss) per share:
Basic	$	0.28	$	0.20	$	0.87	$	0.12	$	(1.42	)
Diluted		0.28		0.20		0.87		0.12		(1.42	)
Dividends per share		0.06500		0.01125		-		-		-

	At March 31,										At March 31,
	2016		2015		2014		2013		2012		2017		2016		2015		2014		2013

Loans accounted for on a non-accrual basis:
Commercial business	$	-	$	-	$	452	$	1,349	$	3,930	$	294	$	-	$	-	$	452	$	1,349
Other real estate mortgage		2,360		4,092		10,881		16,550		28,562		2,143		2,360		4,092		10,881		16,550
Real estate construction		-		-		-		175		7,756		-		-		-		-		175
Consumer		334		1,226		2,729		3,059		3,915		278		334		1,226		2,729		3,059
Total		2,694		5,318		14,062		21,133		44,163		2,715		2,694		5,318		14,062		21,133
Accruing loans which are contractually past due 90 days or more		20		-		-		-		-		34		20		-		-		-
Total nonperforming loans		2,714		5,318		14,062		21,133		44,163		2,749		2,714		5,318		14,062		21,133
REO		595		1,603		7,703		15,638		18,731		298		595		1,603		7,703		15,638
Total nonperforming assets	$	3,309	$	6,921	$	21,765	$	36,771	$	62,894	$	3,047	$	3,309	$	6,921	$	21,765	$	36,771

Foregone interest on non-accrual loans	$	112	$	433	$	949	$	1,420	$	2,313	$	81	$	112	$	433	$	949	$	1,420

	At March 31,															At March 31,
	2016					2015					2014					2017					2016					2015
	Carrying Value		Percent of Portfolio			Carrying Value		Percent of Portfolio			Carrying Value		Percent of Portfolio			Carrying Value		Percent of Portfolio			Carrying Value		Percent of Portfolio			Carrying Value		Percent of Portfolio

Available for sale (at estimated fair value):
Municipal securities																$	2,819		1.41	%	$	-		-	%	$	-		-	%
Trust preferred securities	$	1,808		1.20	%	$	1,812		1.61	%	$	1,903		1.86	%		-		-			1,808		1.20			1,812		1.61
Agency securities		19,569		12.98			13,939		12.38			21,491		21.06			16,808		8.39			19,569		12.98			13,939		12.38
REMICs		43,924		29.14			22,709		20.18			7,150		7.00			43,160		21.55			43,924		29.14			22,709		20.18
Mortgage-backed securities		76,353		50.64			68,514		60.87			65,413		64.09
Other mortgage-backed securities		9,036		5.99			5,489		4.88			6,012		5.89
MBS																	96,611		48.24			76,353		50.64			68,514		60.87
Other MBS																	40,816		20.38			9,036		5.99			5,489		4.88
		150,690		99.95			112,463		99.92			101,969		99.90			200,214		99.97			150,690		99.95			112,463		99.92

Held to maturity (at amortized cost):
Mortgage-backed securities		75		0.05			86		0.08			101		0.10
MBS																	64		0.03			75		0.05			86		0.08

Total investment securities	$	150,765		100.00	%	$	112,549		100.00	%	$	102,070		100.00	%	$	200,278		100.00	%	$	150,765		100.00	%	$	112,549		100.00	%


	At or For the Year Ended March 31,															At or For the Years Ended March 31,
	2016			2015			2014			2013			2012				2017		2016		2015		2014		2013

KEY FINANCIAL RATIOS:

Performance Ratios:
Return (loss) on average assets		0.72	%		0.54	%		2.46	%		0.33	%		(3.64	)%
Return (loss) on average equity		5.93			4.42			23.73			3.41			(30.19	)
Return on average assets																	0.76	%	0.72	%	0.54	%	2.46	%	0.33	%
Return on average equity																	6.66		5.93		4.42		23.73		3.41
Dividend payout ratio ⁽¹⁾		23.21			5.63			-			-			-			24.24		23.21		5.63		-		-
Interest rate spread		3.60			3.52			3.29			3.95			4.17			3.72		3.60		3.52		3.29		3.95
Net interest margin		3.67			3.59			3.37			4.06			4.33			3.79		3.67		3.59		3.37		4.06
Non-interest expense to average assets		3.39			3.70			4.05			4.30			3.95			3.38		3.39		3.70		4.05		4.30
Efficiency ratio ⁽²⁾		77.62			86.40			98.03			90.70			85.01			75.35		77.62		86.40		98.03		90.70
Average equity to average assets		12.14			12.23			10.37			9.55			12.04			11.39		12.14		12.23		10.37		9.55

Asset Quality Ratios:
Allowance for loan losses to total net loans at end of period		1.58			1.86			2.35			2.92			2.91			1.35		1.58		1.86		2.35		2.92
Allowance for loan losses to nonperforming loans		364.22			202.37			89.25			74.02			45.11			382.98		364.22		202.37		89.25		74.02
Net charge-offs (recoveries) to average outstanding loans during the period		(0.05	)		-			(0.12	)		0.86			3.51			(0.10	)	(0.05	)	-		(0.12	)	0.86
Ratio of nonperforming assets to total assets		0.36			0.81			2.64			4.73			7.35			0.27		0.36		0.81		2.64		4.73
Ratio of nonperforming loans to total loans		0.43			0.92			2.64			3.94			6.45			0.35		0.43		0.92		2.64		3.94
Capital Ratios:
Total capital to risk-weighted assets		16.07			15.89			16.66			15.29			12.11			14.06		16.07		15.89		16.66		15.29
Tier 1 capital to risk-weighted assets		14.81			14.63			15.40			14.02			10.84			12.81		14.81		14.63		15.40		14.02
Common equity tier 1 capital to risk-weighted assets		14.81			14.63			N/	A		N/	A		N/	A		12.81		14.81		14.63		N/A		N/A
Leverage ratio		11.18			10.89			10.71			9.99			8.76			10.21		11.18		10.89		10.71		9.99

	Within 1 Year		Over 1 - 3 Years		Over 3 - 5 Years		After 5 Years		Total Balance		Within 1 Year		Over 1 - 3 Years		Over 3 - 5 Years		After 5 Years		Total Balance
Certificates of deposit	$	76,823	$	31,062	$	7,380	$	4,117	$	119,382	$	99,893	$	40,502	$	5,949	$	3,456	$	149,800
Operating leases		1,382		2,545		1,862		1,981		7,770		1,660		2,993		1,564		2,612		8,829
Capital leases		21		51		74		2,329		2,475		23		62		86		2,283		2,454
Junior subordinates debentures		-		-		-		22,681		22,681		-		-		-		27,836		27,836
Total other contractual obligations	$	78,226	$	33,658	$	9,316	$	31,108	$	152,308	$	101,576	$	43,557	$	7,599	$	36,187	$	188,919

Change in interest rates(1)	Percent change in net interest income (12 months)	Percent change in net interest income (24 months)		Percent change in net interest income (12 months)	Percent change in net interest income (24 months)

Up 300 basis points	(3.5)%	7.1%		(3.0)%	8.6%
Up 200 basis points	(1.6)%	2.8%		(1.8)%	6.4%
Up 100 basis points				(0.7)%	4.2%
Base case	-	0.2%		-	0.9%
Down 100 basis points ⁽¹⁾	(1.5)%	(5.3)%
Down 100 basis points				(1.5)%	(4.2)%

⁽¹⁾ The current federal funds rate is 0.50%. No rates in this model are allowed to go below zero and therefore a down 200 and 300 basis point scenario would not be plausible.
⁽¹⁾ The current federal funds rate is 1.00%. No rates in this model are allowed to go below zero and therefore a down 200 and 300 basis point scenario would not be plausible.			⁽¹⁾ The current federal funds rate is 1.00%. No rates in this model are allowed to go below zero and therefore a down 200 and 300 basis point scenario would not be plausible.

	Average Rate			Within 1 Year			After 1 - 3 Years			After 3 - 5 Years			After 5 - 10 Years		Beyond 10 Years		Total			Average Rate			Within 1 Year			After 1 - 3 Years			After 3 - 5 Years			After 5 - 10 Years		Beyond 10 Years		Total

Interest-Sensitive Assets:

Loans receivable		4.27	%	$	56,230		$	115,862		$	62,752		$	228,081	$	161,894	$	624,819			4.49	%	$	94,186		$	61,351		$	49,899		$	375,810	$	198,186	$	779,432
Investments securities and
other interest-earning assets		1.64			71,058			28,915			88,683			19,195		-		207,851
Investments securities and other																			Investments securities and other
interest-earning assets																					1.90			68,677			21,353			73,147			71,948		22,440		257,565
FHLB stock		0.30			212			424			424			-		-		1,060			0.67			237			472			472			-		-		1,181
Total assets				$	127,500		$	145,201		$	151,859		$	247,276	$	161,894	$	833,730					$	163,100		$	83,176		$	123,518		$	447,758	$	220,626	$	1,038,178

Interest-Sensitive Liabilities:																			Interest-Sensitive Liabilities:

Interest checking		0.07		$	28,948		$	57,896		$	57,896		$	-	$	-	$	144,740			0.07		$	34,230		$	68,461		$	68,461		$	-	$	-	$	171,152
Savings accounts		0.10			19,398			38,798			38,798			-		-		96,994			0.13			25,274			50,548			50,548			-		-		126,370
Money market accounts		0.12			47,908			95,818			95,818			-		-		239,544			0.14			58,000			115,999			115,999			-		-		289,998
Certificate accounts		0.55			76,823			31,062			7,380			4,117		-		119,382			0.65			99,893			40,502			5,949			3,450		6		149,800
FHLB advances		-			-			-			-			-		-		-
FRB borrowings		-			-			-			-			-		-		-
Subordinated debentures		1.99			-			-			-			-		22,681		22,681			2.73			-			-			-			-		27,836		27,836
Obligations under capital lease		7.16			21			51			74			309		2,020		2,475			7.16			23			62			86			351		1,932		2,454
Total liabilities					173,098			223,625			199,966			4,426		24,701		625,816						217,420			275,572			241,043			3,801		29,774		767,610
Interest sensitivity gap					(45,598	)		(78,424	)		(48,107	)		242,850		137,193	$	207,914						(54,320	)		(192,396	)		(117,525	)		443,957		190,852	$	270,568
Cumulative interest sensitivity gap				$	(45,598	)	$	(124,022	)	$	(172,129	)	$	70,721	$	207,914							$	(54,320	)	$	(246,716	)	$	(364,241	)	$	79,716	$	270,568
Off-Balance Sheet Items:

Commitments to extend credit				$	41,875		$	-		$	-		$	-	$	-	$	41,875					$	45,259		$	-		$	-		$	-	$	-	$	45,259
Unused lines of credit				$	101,623		$	-		$	-		$	-	$	-	$	101,623					$	119,763		$	-		$	-		$	-	$	-	$	119,763

TABLE OF CONTENTS

	Page
Report of Independent Registered Public Accounting Firm – Delap LLP	66

Report of Independent Registered Public Accounting Firm – Deloitte & Touche LLP	67

Consolidated Balance Sheets as of March 31, ~~2016~~2017 and ~~2015~~2016	68

Consolidated Statements of Income for the Years Ended March 31, 2017, 2016 ~~2015~~ and ~~2014~~2015	69

Consolidated Statements of Comprehensive Income for the Years Ended March 31, 2017, 2016 ~~2015~~ and ~~2014~~2015	70

Consolidated Statements of Equity for the Years Ended March 31, 2017, 2016 ~~2015~~ and ~~2014~~2015	71

Consolidated Statements of Cash Flows for the Years Ended March 31, 2017, 2016 ~~2015~~ and ~~2014~~2015	72

Notes to Consolidated Financial Statements	73

(In thousands, except share and per share data)		2016			2015		2017			2016
ASSETS
Cash and cash equivalents (including interest-earning accounts of $40,317 and $45,490)	$	55,400		$	58,659
Cash and cash equivalents (including interest-earning accounts of $46,245 and $40,317)							$	64,613		$	55,400
Certificates of deposit held for investment		16,769			25,969			11,042			16,769
Loans held for sale		503			778			478			503
Investment securities:
Available for sale, at estimated fair value		150,690			112,463			200,214			150,690
Held to maturity, at amortized cost (estimated fair value of $76 and $88)		75			86
Loans receivable (net of allowance for loan losses of $9,885 and $10,762)		614,934			569,010
Held to maturity, at amortized cost (estimated fair value of $66 and $76)								64			75
Loans receivable (net of allowance for loan losses of $10,528 and $9,885)								768,904			614,934
Real estate owned		595			1,603			298			595
Prepaid expenses and other assets		3,405			3,238			3,815			3,405
Accrued interest receivable		2,384			2,139			2,941			2,384
Federal Home Loan Bank stock, at cost		1,060			5,924			1,181			1,060
Premises and equipment, net		14,595			15,434			16,232			14,595
Deferred income taxes, net		9,189			12,568			7,610			9,189
Mortgage servicing rights, net		380			399			398			380
Goodwill		25,572			25,572			27,076			25,572
Core deposit intangible ("CDI"), net								1,335			-
Bank owned life insurance ("BOLI")		25,678			24,908			27,738			25,678
TOTAL ASSETS	$	921,229		$	858,750		$	1,133,939		$	921,229

LIABILITIES AND EQUITY
LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
Deposits	$	779,803		$	720,850		$	980,058		$	779,803
Accrued expenses and other liabilities		7,388			8,111			13,080			7,388
Advance payments by borrowers for taxes and insurance		609			495			693			609
Junior subordinated debentures		22,681			22,681			26,390			22,681
Capital lease obligation		2,475			2,276			2,454			2,475
Total liabilities		812,956			754,413			1,022,675			812,956
COMMITMENTS AND CONTINGENCIES (See Note 17)
EQUITY:
Shareholders' equity:
COMMITMENTS AND CONTINGENCIES (See Note 18)
SHAREHOLDERS' EQUITY:
Serial preferred stock, $.01 par value; 250,000 authorized; issued and outstanding: none		-			-			-			-
Common stock, $.01 par value; 50,000,000 authorized
March 31, 2017 – 22,510,890 issued and outstanding								225			225
March 31, 2016 – 22,507,890 issued and outstanding		225			225
March 31, 2015 – 22,489,890 issued and outstanding
Additional paid-in capital		64,418			65,268			64,468			64,418
Retained earnings		42,728			37,830			48,335			42,728
Unearned shares issued to employee stock ownership plan ("ESOP")		(181	)		(284	)		(77	)		(181	)
Accumulated other comprehensive income		1,083			762
Accumulated other comprehensive income (loss)								(1,687	)		1,083
Total shareholders' equity		108,273			103,801			111,264			108,273

Noncontrolling interest		-			536
Total equity		108,273			104,337
TOTAL LIABILITIES AND EQUITY	$	921,229		$	858,750
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY							$	1,133,939		$	921,229

(In thousands)		2016		2015			2014	2017			2016		2015

Net income	$	6,358	$	4,491		$	19,423	$	7,404		$	6,358	$	4,491

Other comprehensive income:
Net unrealized holding gain from available for sale investment securities arising
during the period, net of tax of ($203), ($778) and ($189), respectively		321		1,513			366
Other comprehensive income (loss):
Net unrealized holding gain (loss) from available for sale investment securities arising
during the period, net of tax of $1,581, ($203) and ($778), respectively									(2,872	)		321		1,513

Reclassification adjustment for other than temporary impairment ("OTTI") of available for
sale investment security included in income, net of tax of ($85), $0 and $0, respectively									155			-		-

Reclassification adjustment of net gain from sale of available for sale investment
securities included in income, net of tax of $0, $54 and $0, respectively		-		(104	)		-

Total other comprehensive income, net		321		1,409			366
securities included in income, net of tax of $29, $0 and $54, respectively									(53	)		-		(104	)
Total other comprehensive income (loss), net									(2,770	)		321		1,409

Noncontrolling interest		47		65			81		-			47		65
Total comprehensive income	$	6,726	$	5,965		$	19,870	$	4,634		$	6,726	$	5,965

(In thousands, except share data)	Common Stock					Additional Paid-In Capital			Retained Earnings			Unearned Shares Issued to ESOP			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest			Total
(In thousands, except share data)																		Noncontrolling Interest		Common Stock						Additional Paid-In			Retained				Unearned Shares Issued to				Accumulated Other Comprehensive				Noncontrolling
(In thousands, except share data)		Shares		Amount		Additional Paid-In Capital	Additional Paid-In Capital		Retained Earnings		Retained Earnings	Unearned Shares Issued to ESOP			Accumulated Other Comprehensive Income (Loss)	Unearned Shares Issued to ESOP			Accumulated Other Comprehensive Income (Loss)		Total		Noncontrolling Interest		Total			Shares			Amount				Capital				Earnings				ESOP			Income (Loss)			Interest		Total
(In thousands, except share data)
Balance April 1, 2013		22,471,890	$	225	$	65,551	Additional Paid-In Capital		$	14,169	Retained Earnings		$	(490	)	Unearned Shares Issued to ESOP	$	(1,013	Accumulated Other Comprehensive Income (Loss)	)	$	603	Noncontrolling Interest	$	Total	79,045

Net income		-		-		-			19,423			-			-			-			19,423
Purchase of subsidiary shares from noncontrolling interest		-		-		(399	)		-			-			-			(213	)		(612	)
Stock-based compensation expense		-		-		78			-			-			-			-			78
Earned ESOP shares		-		-		(35	)		-			103			-			-			68
Unrealized holding gain on investment securities available for sale		-		-		-			-			-			366			-			366
Noncontrolling interest		-		-		-			-			-			-			81			81

Balance March 31, 2014		22,471,890		225		65,195			33,592			(387	)		(647	)		471			98,449
Balance April 1, 2014																									22,471,890		$	225		$	65,195			$	33,592			$	(387	)		$	(647	)	$	471		$	98,449

Net income		-		-		-			4,491			-			-			-			4,491				-			-			-				4,491				-				-			-			4,491
Cash dividend on common stock ($0.01125 per share)		-		-		-			(253	)		-			-			-			(253	)			-			-			-				(253	)			-				-			-			(253	)
Exercise of stock options		18,000		-		48			-			-			-			-			48				18,000			-			48				-				-				-			-			48
Stock-based compensation expense		-		-		26			-			-			-			-			26				-			-			26				-				-				-			-			26
Earned ESOP shares		-		-		(1	)		-			103			-			-			102				-			-			(1	)			-				103				-			-			102
Unrealized holding gain on investment securities available for sale		-		-		-			-			-			1,409			-			1,409
Other comprehensive income, net																									-			-			-				-				-				1,409			-			1,409
Noncontrolling interest		-		-		-			-			-			-			65			65				-			-			-				-				-				-			65			65

Balance March 31, 2015		22,489,890		225		65,268			37,830			(284	)		762			536			104,337				22,489,890			225			65,268				37,830				(284	)			762			536			104,337

Net income		-		-		-			6,358			-			-			-			6,358				-			-			-				6,358				-				-			-			6,358
Purchase of subsidiary shares from noncontrolling interest		-		-		(919	)		-			-			-			(583	)		(1,502	)			-			-			(919	)			-				-				-			(583	)		(1,502	)
Cash dividend on common stock ($0.065 per share)		-		-		-			(1,460	)		-			-			-			(1,460	)			-			-			-				(1,460	)			-				-			-			(1,460	)
Exercise of stock options		18,000		-		62			-			-			-			-			62				18,000			-			62				-				-				-			-			62
Earned ESOP shares		-		-		7			-			103			-			-			110				-			-			7				-				103				-			-			110
Unrealized holding gain on investment securities available for sale		-		-		-			-			-			321			-			321
Other comprehensive income, net																									-			-			-				-				-				321			-			321
Noncontrolling interest		-		-		-			-			-			-			47			47				-			-			-				-				-				-			47			47

Balance March 31, 2016		22,507,890	$	225	$	64,418		$	42,728		$	(181	)	$	1,083		$	-		$	108,273				22,507,890			225			64,418				42,728				(181	)			1,083			-			108,273

Net income																									-			-			-				7,404				-				-			-			7,404
Cash dividend on common stock ($0.08 per share)																									-			-			-				(1,797	)			-				-			-			(1,797	)
Exercise of stock options																									3,000			-			11				-				-				-			-			11
Earned ESOP shares																									-			-			39				-				104				-			-			143
Other comprehensive loss, net																									-			-			-				-				-				(2,770	)		-			(2,770	)

Balance March 31, 2017																									22,510,890		$	225		$	64,468			$	48,335			$	(77	)		$	(1,687	)	$	-		$	111,264

	At February 17, 2017
	Book Value		Fair Value Adjustment			Estimated Fair Value

Cash consideration transferred						$	12,080

Recognized amounts of identifiable assets acquired and liabilities assumed
Identifiable assets acquired
Cash and cash equivalents	$	27,196	$	-		$	27,196
Loans receivable		115,283		(3,258	)		112,025
CDI		-		1,363			1,363
Premises and equipment		1,769		399			2,168
BOLI		2,113		-			2,113
Accrued interest receivable and other assets		431		90			521
Total identifiable assets acquired		146,792		(1,406	)		145,386

Liabilities assumed
Deposits		130,572		235			130,807
Junior subordinated debentures		5,155		(1,468	)		3,687
Accrued expenses and other liabilities		293		23			316
Total liabilities assumed		136,020		(1,210	)		134,810
Total identifiable net assets	$	10,772	$	(196	)		10,576
Goodwill recognized						$	1,504

	For the Year Ended March 31,
Unaudited Pro Forma	2017		2016

Total revenues (net interest income plus non-interest income)	$	49,290	$	45,261
Net income		9,277		8,260

	For the Year Ended March 31, 2017

Salaries and employee benefit	$	26
Occupancy and depreciation		6
Data processing		63
Professional fees		653
Total impact of acquisition related costs to noninterest expense	$	748

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
March 31, 2016
Available for sale:
Trust preferred	$	1,919	$	-	$	(111	)	$	1,808
Agency securities		19,520		63		(14	)		19,569
Real estate mortgage investment conduits ⁽¹⁾		43,293		632		(1	)		43,924
Mortgage-backed securities ⁽¹⁾		75,404		980		(31	)		76,353
Other mortgage-backed securities ⁽²⁾		8,875		185		(24	)		9,036
Total available for sale	$	149,011	$	1,860	$	(181	)	$	150,690

Held to maturity:
Mortgage-backed securities ⁽³⁾	$	75	$	1	$	-		$	76

		Available for Sale				Held to Maturity			Available for Sale				Held to Maturity
		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due after one year through five years	$	18,982	$	19,097	$	-	$	-	$	16,487	$	16,455	$	-	$	-
Due after five years through ten years		17,418		17,631		66		67		35,852		35,350		58		59
Due after ten years		112,611		113,962		9		9		150,491		148,409		6		7
Total	$	149,011	$	150,690	$	75	$	76	$	202,830	$	200,214	$	64	$	66

		Less than 12 months					12 months or longer					Total					Less than 12 months						12 months or longer						Total
		Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses				Estimated Fair Value		Unrealized Losses				Estimated Fair Value		Unrealized Losses				Estimated Fair Value		Unrealized Losses
March 31, 2016
March 31, 2017

Available for sale:
Trust preferred		$	-	$	-		$	1,808	$	(111	)	$	1,808	$	(111	)
Municipal securities																		$	2,819	$	(117	)		$	-	$	-			$	2,819	$	(117	)
Agency securities			5,508		(6	)		4,991		(8	)		10,499		(14	)			15,785		(203	)			-		-				15,785		(203	)
Real estate mortgage investment conduits ⁽¹⁾			1,636		(1	)		-		-			1,636		(1	)			32,221		(399	)			-		-				32,221		(399	)
Mortgage-backed securities ⁽²⁾			831		(10	)		3,051		(21	)		3,882		(31	)			74,388		(1,232	)			602		(10	)			74,990		(1,242	)
Other mortgage-backed securities ⁽³⁾	Other mortgage-backed securities ⁽³⁾		1,891		(6	)		1,229		(18	)		3,120		(24	)			36,754		(803	)			2,840		(45	)			39,594		(848	)
Total available for sale		$	9,866	$	(23	)	$	11,079	$	(158	)	$	20,945	$	(181	)		$	161,967	$	(2,754	)		$	3,442	$	(55	)		$	165,409	$	(2,809	)

⁽¹⁾ Comprised of FHLMC and FNMA issued securities.																	⁽¹⁾ Comprised of FHLMC and FNMA issued securities.
⁽²⁾ Comprised of FHLMC, FNMA and GNMA issued securities.																	⁽²⁾ Comprised of FHLMC, FNMA and GNMA issued securities.
⁽³⁾ Comprised of SBA issued and CRE secured securities issued by FNMA.																	⁽³⁾ Comprised of SBA issued and CRE secured securities issued by FNMA.

		March 31, 2016		March 31, 2015
Commercial and construction
Commercial business	$	69,397	$	77,186
Commercial real estate		353,749		299,691
Land		12,045		15,358
Multi-family		33,733		30,457
Real estate construction		26,731		30,498
Total commercial and construction		495,655		453,190

Consumer
Real estate one-to-four family		88,780		89,801
Other installment ⁽¹⁾		40,384		36,781
Total consumer		129,164		126,582

Total loans		624,819		579,772

Less: Allowance for loan losses		9,885		10,762
Loans receivable, net	$	614,934	$	569,010

⁽¹⁾ Consists primarily of purchased automobile loans totaling $37.4 million and $34.7 million at March 31, 2016 and 2015, respectively.

	March 31, 2017		March 31, 2016
Commercial and construction
Commercial business	$	107,371	$	69,397
Commercial real estate		447,071		353,749
Land		15,875		12,045
Multi-family		43,715		33,733
Real estate construction		46,157		26,731
Total commercial and construction		660,189		495,655

Consumer
Real estate one-to-four family		92,865		88,780
Other installment ⁽¹⁾		26,378		40,384
Total consumer		119,243		129,164

Total loans		779,432		624,819

Less: Allowance for loan losses		10,528		9,885
Loans receivable, net	$	768,904	$	614,934

⁽¹⁾ Consists primarily of purchased automobile loans totaling $23.6 million and $37.4 million at March 31, 2017 and 2016, respectively.

March 31, 2015
March 31, 2017																							Commercial Business			Commercial Real Estate			Land			Multi- Family			Real Estate Construction		Consumer			Unallocated			Total

Beginning balance	$	2,409		$	5,269		$	340		$	203	$	387	$	2,653		$	1,290		$	12,551		$	1,048		$	4,273		$	325		$	712		$	416	$	2,403		$	708		$	9,885
Provision for (recapture of) loan losses		(1,060	)		(768	)		(72	)		145		382		(164	)		(263	)		(1,800	)		(121	)		926			(558	)		(415	)		298		(110	)		(20	)		-
Charge-offs		(120	)		(233	)		-			-		-		(111	)		-			(464	)		(1	)		(117	)		-			-			-		(340	)		-			(458	)
Recoveries		34			-			271			-		-		170			-			475			492			2			461			-			-		146			-			1,101
Ending balance	$	1,263		$	4,268		$	539		$	348	$	769	$	2,548		$	1,027		$	10,762		$	1,418		$	5,084		$	228		$	297		$	714	$	2,099		$	688		$	10,528

March 31, 2014
March 31, 2016

Beginning balance	$	2,128		$	5,979		$	2,019		$	541		$	221		$	2,949		$	1,806		$	15,643		$	1,263		$	4,268	$	539		$	348	$	769		$	2,548		$	1,027		$	10,762
Provision for (recapture of) loan losses		95			(417	)		(2,439	)		(338	)		173			(258	)		(516	)		(3,700	)		(245	)		5		(545	)		364		(359	)		(51	)		(319	)		(1,150	)
Charge-offs		(340	)		(316	)		(90	)		-			(11	)		(349	)		-			(1,106	)		-			-		-			-		-			(274	)		-			(274	)
Recoveries		526			23			850			-			4			311			-			1,714			30			-		331			-		6			180			-			547
Ending balance	$	2,409		$	5,269		$	340		$	203		$	387		$	2,653		$	1,290		$	12,551		$	1,048		$	4,273	$	325		$	712	$	416		$	2,403		$	708		$	9,885

	Allowance for Loan Losses						Recorded Investment in Loans
March 31, 2016	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total

Commercial business	$	-	$	1,048	$	1,048	$	192	$	69,205	$	69,397
Commercial real estate		-		4,273		4,273		9,802		343,947		353,749
Land		-		325		325		801		11,244		12,045
Multi-family		-		712		712		1,731		32,002		33,733
Real estate construction		-		416		416		-		26,731		26,731
Consumer		110		2,293		2,403		1,678		127,486		129,164
Unallocated		-		708		708		-		-		-
Total	$	110	$	9,775	$	9,885	$	14,204	$	610,615	$	624,819

March 31, 2016	30-89 Days Past Due		90 Days and Greater Past Due		Non-accrual		Total Past Due and Non- accrual		Current		Total Loans Receivable
March 31, 2017													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	$	-	$	-	$	-	$	-	$	69,397	$	69,397	$	13	$	-	$	294	$	307	$	107,064	$	107,371
Commercial real estate		-		-		1,559		1,559		352,190		353,749		-		-		1,342		1,342		445,729		447,071
Land		-		-		801		801		11,244		12,045		-		-		801		801		15,074		15,875
Multi-family		-		-		-		-		33,733		33,733		-		-		-		-		43,715		43,715
Real estate construction		-		-		-		-		26,731		26,731		-		-		-		-		46,157		46,157
Consumer		611		20		334		965		128,199		129,164		228		34		278		540		118,703		119,243
Total	$	611	$	20	$	2,694	$	3,325	$	621,494	$	624,819	$	241	$	34	$	2,715	$	2,990	$	776,442	$	779,432