06/12/2025 | Press release | Distributed by Public on 06/12/2025 15:21
Management's Discussion and Analysis of Financial Condition and Results of Operations
General
Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the Consolidated Financial Statements and accompanying Notes thereto contained in Item 8 of this Form 10-K and the other sections contained in this Form 10-K.
Critical Accounting Estimates
We prepare our consolidated financial statements in accordance with GAAP. In doing so, we have to make estimates and assumptions. Our critical accounting estimates are those estimates that involve a significant level of uncertainty at the time the estimate was made, and changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. Accordingly, actual results could differ materially from our estimates. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We have reviewed our critical accounting estimates with the audit committee of our Board of Directors.
The Company has identified policies that due to the significant level of judgement, estimation and assumptions inherent in those policies are critical to an understanding of the Company's consolidated financial statements. These policies include our accounting policies related to the methodology for the determination of the ACL, the valuation of investment securities and goodwill valuations. The following is a discussion of the critical accounting estimates involved with those accounting policies.
Allowance for Credit Losses
The ACL is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the economic environment that could result in changes to the amount of the recorded ACL. The provision for credit losses reflects the amount required to maintain the ACL at an appropriate level based upon management's evaluation of the adequacy of general and specific loss reserves. Determining the amount of the ACL involves a high degree of judgment. Among the material estimates required to establish the ACL are: overall economic conditions; value of collateral; strength of guarantors; loss exposure at default; the amount and timing of future cash flows for loans that are individually evaluated; determination of loss factors to be applied to the various elements of the portfolio; and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. All of these estimates are susceptible to significant change. Based on the analysis of the ACL, the amount of the ACL is increased by the provision for credit losses and decreased by a recapture of credit losses and are charged against current period earnings.
The ACL is maintained at a level sufficient to provide for expected credit losses based on evaluating known and inherent risks in the loan portfolio and upon our continuing analysis of the factors underlying the quality of the loan portfolio. The ACL is comprised of a general component and a specific component. The general component establishes a reserve rate using historical life-of-loan default rates, current loan portfolio information, economic forecasts, and business cycle data. Statistical analysis determines life-of-loan default and loss rates for the quantitative component, while qualitative factors adjust expected loss rates for current and forecasted conditions. The qualitative factor methodology involves a blend of quantitative analysis and management judgment, reviewed quarterly. The specific component relates to loans that have been individually evaluated because all contractual amounts of principal and interest will not be paid as scheduled. Based on the individual analysis, a specific reserve may be established. The ACL is based upon factors and trends identified by us at the time financial statements are prepared. Although we use the best information available, future adjustments to the ACL may be necessary due to economic, operating, regulatory and other conditions beyond our control. While we believe the estimates and assumptions used in our determination of the adequacy of the ACL are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of future provisions will not exceed the amount of past provisions or that any increased provisions that may be required will not adversely impact our financial condition and results of operations. For additional information see Item 1A. "Risk Factors - Risk Related to Our Lending Activities - Our ACL may prove to be insufficient to absorb losses in our loan portfolio. Future additions to our ACL, as well as charge-offs in excess of reserves, will reduce our earnings," in this Form 10-K.
Fair Value Accounting and Measurement
The Company determines the estimated fair value of certain assets that are classified as Level 3 under the fair value hierarchy established 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 are certain loans measured for impairment 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.
Certain loans included in the loan portfolio were evaluated individually for a loss reserve at March 31, 2025. Accordingly, loans evaluated individually were classified as Level 3 in the fair value hierarchy as there is no active market for these loans. Loans that are individually evaluated require judgment and estimates, and the eventual outcomes may differ from those estimates. A reserve for such loans is determined 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.
For additional information on our Level 1, 2 and 3 fair value measurements see Note 14 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K.
Goodwill Valuation
Goodwill is initially recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. Goodwill is presumed to have an indefinite useful life and is tested, at least annually, for impairment at the reporting unit level. The Company has two reporting units, the Bank and the Trust Company, for purposes of evaluating goodwill for impairment. All of the Company's goodwill has been allocated to the Bank reporting unit. The Company performs an annual review in the third quarter of each fiscal year, or more frequently if indications of potential impairment exist, to determine if the recorded goodwill is impaired. If the fair value exceeds the carrying value, goodwill at the reporting unit level is not considered impaired and no additional analysis is necessary. If the carrying value of the reporting unit is greater than its fair value, there is an indication that impairment may exist and additional analysis must be performed to measure the amount of impairment loss, if any. The amount of impairment is determined by comparing the implied fair value of the reporting unit's goodwill to the carrying value of the goodwill in the same manner as if the reporting unit was being acquired in a business combination. Specifically, the Company would allocate the fair value to all of the assets and liabilities of the reporting unit, including unrecognized intangible assets, in a hypothetical analysis that would calculate the implied fair value of goodwill. If the implied fair value of goodwill is less than the recorded goodwill, the Company would record an impairment charge for the difference.
A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in our expected future cash flows; a sustained, significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; adverse action or assessment by a regulator; and unanticipated competition. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on the Company's consolidated financial statements.
The Company performed its annual goodwill impairment test as of October 31, 2024. The goodwill impairment test estimates the fair value of the reporting unit utilizing the allocation of corporate value approach, the income approach, the whole bank transaction approach and the market approach in order to derive an enterprise value of the Company. The allocation of corporate value approach applies the aggregate market value of the Company and divides it among the reporting units. A key assumption in this approach is the control premium applied to the aggregate market value. A control premium is utilized as the value of a company from the perspective of a controlling interest is generally higher than the widely quoted market price per share. The Company used an expected control premium of 30%, which was based on comparable transactional history. The income approach uses a reporting unit's projection of estimated operating results and cash flows that are discounted using a rate that reflects current
market conditions. The projection uses management's best estimates of economic and market conditions over the projected period including growth rates in loans and deposits, estimates of future expected changes in net interest margins and cash expenditures. Assumptions used by the Company in its discounted cash flow model (income approach) included an annual revenue growth rate that approximated 10.0%, a net interest margin that approximated 3.3% and a return on assets that ranged from 0.32% to 1.14% (average of 0.78%). 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 13.84% utilized for our cash flow estimates and a terminal value estimated at 1.8 times the ending book value of the reporting unit. The Company used a build-up approach in developing the discount rate that included: an assessment of the risk-free interest rate, the rate of return expected from publicly traded stocks, the industry the Company operates in and the size of the Company. The whole bank transaction approach estimates fair value by applying key financial variables in transactions involving acquisitions of similar institutions. In applying the whole bank transaction approach method, the Company identified transactions that occurred during the calendar 2024 and other relevant published data utilizing a multiple of 1.25 times price to book value. The market approach estimates fair value by applying tangible book value multiples to the reporting unit's operating performance. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics of the reporting unit. In applying the market approach method, the Company selected four publicly traded comparable institutions. After selecting comparable institutions, the Company derived the fair value of the reporting unit by completing a comparative analysis of the relationship between their financial metrics listed above and their market values utilizing a market multiple of 0.90 times book value, a market multiple of 1.00 times tangible book value, due to comparable bank volatility its belief that earnings multiples do not give meaningful results. The Company calculated a fair value of its reporting unit of $128.0 million using the corporate value approach, $177.0 million using the income approach, $186.0 million using the whole bank transaction approach and $200.0 million using the market approach, with a final concluded value of $182.0 million, with ten percent weight given to the corporate value approach and thirty percent weight given to the whole bank transaction, market approach and income approach. The results of the Company's step one test indicated that the reporting unit's fair value was greater than its carrying value and therefore no impairment of goodwill exists.
The Company also completed a qualitative assessment of goodwill as of March 31, 2025, and concluded that it is more likely than not that the fair value of the Bank (the reporting unit), exceeds its carrying value at that date. Accordingly, no goodwill impairment was recognized. However, future impairment charges could occur if adverse events or changes in circumstances arise, including, but not limited to: (i) a sustained decline in the Company's stock price or that of peer institutions, (ii) revenue declines beyond current forecasts, (iii) significant adverse changes in the operating environment for the financial industry, or (iv) increases in the value of the Company's assets without a corresponding increase in the value of the reporting unit .
Additionally, changes in circumstances at or after the measurement date, or changes in the assumptions and estimates used in assessing goodwill, could result in a partial or full impairment of goodwill. While any such impairment charge would adversely affect the Company's financial condition and results of operations, it would not impact the Company's liquidity, operations, or regulatory capital ratios.
For additional information concerning critical accounting policies, see Note 1 of the Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data." and the following:
Operating Strategy and Selected Financial Information
Fiscal year 2025 marked the 101stanniversary for Riverview Bank, which opened for business in 1923. Our primary business strategy is to provide comprehensive banking and related financial services within our primary market area. The Company's goal is to deliver returns to shareholders by increasing higher-yielding assets (in particular, commercial real estate and commercial business loans), increasing core deposit balances, managing problem assets, reducing expenses, hiring experienced employees with a commercial lending focus and exploring expansion opportunities. The Company seeks to achieve these results by focusing on the following objectives:
Execution of our Business Plan. The Company remains focused on expanding its loan portfolio, particularly higher-yielding commercial and construction loans, and growing its core deposit base by deepening client relationships throughout its primary market areas. While residential real estate lending was historically a primary focus, the Company has diversified its loan portfolio in recent years through the strategic growth of its commercial and construction loan portfolios. In fiscal year 2021, the Company ceased originating one-to-four family residential real estate loans but continues to purchase such loans consistent with its asset/liability management objectives. At March 31, 2025, commercial and construction loans represented 89.5% of total loans. Commercial lending, including CRE, generally involves greater credit risk than residential lending. However, these risks are often compensated by higher interest margins and fee income, contributing to enhanced loan portfolio profitability. To support its growth and profitability objectives, the Company is committed to a relationship-based banking model designed to strengthen client
loyalty, identify new lending opportunities, and improve client-level profitability through cross-selling deposit, treasury management, and other banking services. The Company continues to build its core deposit base by offering competitive products, enhancing digital banking capabilities, and prioritizing high-quality client service. Additionally, the Company seeks to expand its banking franchise through de novo branch development, selective acquisitions of branches or loan portfolios, and whole bank transactions that align with its strategic and financial goals.
Maintaining Strong Asset Quality. The Company believes that strong asset quality is a key to long-term financial success. The Company has actively managed delinquent loans and nonperforming assets by aggressively pursuing the collection of consumer debts, marketing saleable properties upon foreclosure or repossession, and through work-outs of classified assets and loan charge-offs. The Company's approach to credit management uses well defined policies and procedures and disciplined underwriting criteria resulting in our strong asset quality and credit metrics in fiscal year 2025. Although the Company intends to prudently increase the percentage of its assets consisting of higher-yielding commercial real estate, real estate construction and commercial business loans, which offer higher risk-adjusted returns, shorter maturities and more sensitivity to interest rate fluctuations, the Company intends to manage credit exposure through the use of experienced bankers in these areas and a conservative approach to its lending.
Introduction of New Products and Services. The Company continuously reviews new products and services to provide its clients more financial options. All new technology and services are generally reviewed for business development and cost saving purposes. The Company continues to experience growth in client use of its online banking services, where the Bank provides a full array of traditional cash management products as well as online banking products including mobile banking, mobile deposit, bill pay, e-statements, and new deposit products. The products are tailored to meet the needs of small to medium size businesses and households in the markets we serve. The Company intends to selectively add other products to further diversify revenue sources and to capture more of each client's banking relationship by cross selling loan and deposit products and additional services, including services provided through the Trust Company to increase its fee income. Assets under management by the Trust Company totaled $877.9 million and $961.8 million at March 31, 2025 and March 31, 2024, respectively. The Company also offers a third-party identity theft product to its clients. The identity theft product assists our clients in monitoring their credit and includes an identity theft restoration service.
Attracting Core Deposits and Other Deposit Products.The Company offers a variety of deposit products, including personal checking, savings, and money market accounts, which generally represent lower-cost and more stable sources of funding compared to certificates of deposit. These core deposits are less sensitive to interest rate fluctuations and play a key role in supporting the Company's funding and liquidity strategy. To strengthen its funding base, the Company continues to prioritize the growth of core deposits over higher-cost funding sources, such as brokered deposits, FHLB advances, and FRB borrowings. This approach supports loan growth while helping to manage interest expense and reduce reliance on more volatile wholesale funding sources. A key element of this strategy is enhancing and deepening client relationships. The Company believes its continued focus on relationship banking will support the expansion of both core deposits and locally sourced retail certificates of deposit. In particular, the Company seeks to grow demand deposits by building business banking relationships, supported by a suite of expanded product offerings tailored to meet the specific needs of its business clients. To further encourage growth in lower-cost deposits, the Company has invested in technology-based solutions designed to improve the client experience and support cash management needs. These include personal financial management tools, business cash management services, and remote deposit capture products, which allow the Company to effectively compete with financial institutions of all sizes. As of March 31, 2025, core branch deposits increased $2.2 million compared to March 31, 2024, reflecting the Company's concentrated efforts to retain and grow deposits in light of the strong completion within its market area. Core branch deposits accounted for 98.1% of total deposits at March 31, 2025 compared to 98.0% at March 31, 2024.
Recruiting and Retaining Highly Competent Personnel with a Focus on Commercial Lending.The Company's ability to continue to attract and retain banking professionals with strong community relationships and significant knowledge of its markets will be a key to its success. The Company believes that it enhances its market position and adds profitable growth opportunities by focusing on hiring and retaining experienced bankers focused on owner occupied commercial real estate and commercial lending, and the deposit balances that accompany these relationships. The Company emphasizes to its employees the importance of delivering exemplary client service and seeking opportunities to build further relationships with its clients. The goal is to compete with other financial service providers by relying on the strength of the Company's client service and relationship banking approach. The Company believes that one of its strengths is that its employees are also shareholders through the Company's ESOP and 401(k) plans.
Selected Financial Data:The following financial condition data as of March 31, 2025 and 2024 and operating data and key financial ratios for the fiscal years ended March 31, 2025, 2024, and 2023 have been derived from the Company's audited consolidated financial statements. The information below is qualified in its entirety by the detailed information included elsewhere herein and should be read along with this "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 8. "Financial Statements and Supplementary Data" included in this Form 10-K.
|
|
|
|
|
|
|
|
At March 31, |
|||||
|
|
2025 |
2024 |
|||
|
(In thousands) |
|||||
FINANCIAL CONDITION DATA: |
|
|
||||
|
|
|
|
|
|
|
Total assets |
|
$ |
1,513,323 |
|
$ |
1,521,529 |
Loans receivable, net |
|
1,047,086 |
|
1,008,649 |
||
Investment securities available for sale |
|
119,436 |
|
143,196 |
||
Investment securities held to maturity |
|
203,079 |
|
229,510 |
||
Cash and cash equivalents |
|
29,414 |
|
23,642 |
||
Deposits |
|
1,232,328 |
|
1,231,679 |
||
FHLB advances |
|
|
76,400 |
|
|
88,304 |
Shareholders' equity |
|
160,014 |
|
155,588 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
||||||||
|
2025 |
2024 |
2023 |
||||||
|
(Dollars in thousands, except per share data) |
||||||||
OPERATING DATA: |
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
Interest and dividend income |
|
$ |
58,962 |
|
$ |
56,555 |
|
$ |
55,666 |
Interest expense |
|
22,618 |
|
18,469 |
|
4,060 |
|||
Net interest income |
|
36,344 |
|
38,086 |
|
51,606 |
|||
Provision for credit/loan losses (1) |
|
100 |
|
- |
|
750 |
|||
Net interest income after provision for credit/loan losses |
|
36,244 |
|
38,086 |
|
50,856 |
|||
Other non-interest income |
|
14,256 |
|
10,242 |
|
12,194 |
|||
Non-interest expense |
|
44,262 |
|
43,727 |
|
39,371 |
|||
Income before income taxes |
|
6,238 |
|
4,601 |
|
23,679 |
|||
Provision for income taxes |
|
1,335 |
|
802 |
|
5,610 |
|||
Net income |
|
$ |
4,903 |
|
$ |
3,799 |
|
$ |
18,069 |
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
||||||
Basic |
|
$ |
0.23 |
|
$ |
0.18 |
|
$ |
0.84 |
Diluted |
|
0.23 |
|
0.18 |
|
0.83 |
|||
Dividends per share |
|
0.080 |
|
0.240 |
|
0.240 |
(1) | The Company adopted the CECL methodology on April 1, 2023, in accordance with ASC 326. Financial results and disclosures for periods prior to adoption continue to reflect the incurred loss methodology under previously applicable GAAP. As a result, amounts reported for prior periods are not directly comparable to those calculated under the CECL methodology. |
|
|
|
|
|
|
|
|
|
At or For the Years Ended March 31, |
|
|||||
|
2025 |
2024 |
2023 |
||||
KEY FINANCIAL RATIOS: |
|
||||||
Performance Ratios: |
|
||||||
Return on average assets |
|
0.32 |
% |
0.24 |
% |
1.08 |
% |
Return on average equity |
|
3.09 |
2.43 |
11.71 |
|||
Dividend payout ratio (1) |
|
34.78 |
133.33 |
28.92 |
|||
Interest rate spread |
|
1.88 |
2.00 |
3.12 |
|||
Net interest margin |
|
2.54 |
2.56 |
3.26 |
|||
Non-interest expense to average assets |
|
2.91 |
2.78 |
2.36 |
|||
Efficiency ratio (2) |
|
87.47 |
90.48 |
61.71 |
|||
Average equity to average assets |
|
10.43 |
9.91 |
9.25 |
|||
|
|
|
|
|
|
|
|
Asset Quality Ratios: |
|
|
|
|
|||
Allowance for credit/loan losses to total loans at end of period (3) |
|
1.45 |
1.50 |
1.52 |
|||
Allowance for credit/loan losses to nonperforming loans (3) |
|
9,918.71 |
8,631.46 |
826.62 |
|||
Net charge-offs (recoveries) to average outstanding loans during the period |
|
(0.01) |
- |
- |
|||
|
|
|
|
|
|
|
|
Ratio of nonperforming assets to total assets |
|
0.01 |
0.01 |
0.12 |
|||
Ratio of nonperforming loans to total loans |
|
0.01 |
0.02 |
0.18 |
|||
|
|
|
|
|
|
|
|
Capital Ratios: |
|
|
|
|
|||
Total capital to risk-weighted assets |
|
16.48 |
16.32 |
16.94 |
|||
Tier 1 capital to risk-weighted assets |
|
15.23 |
15.06 |
15.69 |
|||
Common equity tier 1 capital to risk-weighted assets |
|
15.23 |
15.06 |
15.69 |
|||
Leverage ratio |
|
11.10 |
10.29 |
10.47 |
(1) | Dividends per share divided by diluted earnings per share. |
(2) | Non-interest expense divided by the sum of net interest income and non-interest income. |
(3) | The Company adopted the CECL methodology on April 1, 2023, in accordance with ASC 326. Financial results and disclosures for periods prior to adoption continue to reflect the incurred loss methodology under previously applicable GAAP. As a result, amounts reported for prior periods are not directly comparable to those calculated under the CECL methodology. |
Comparison of Financial Condition at March 31, 2025 and 2024
Cash and cash equivalents, including interest-earning deposits in other banks, totaled $29.4 million at March 31, 2025 compared to $23.6 million at March 31, 2024. Fluctuations in cash balances are typical due to funding requirements, deposit activity and investments in securities. In accordance with the Company's asset/liability management strategy and liquidity objectives, surplus cash may be used to acquire investment securities, contingent on prevailing interest rates and other factors. Additionally, a portion of excess cash is invested in short-term certificates of deposit for investment purposes, all of which are fully insured by the FDIC. There were no certificates of deposits held for investment at both March 31, 2025 and 2024.
Investment securities totaled $322.5 million and $372.7 million at March 31, 2025 and 2024, respectively. The decrease was due to normal pay downs, calls and maturities. The Company did not make any purchases of investment securities during fiscal 2025, instead prioritizing deployment of available funds into its loan portfolio. For additional information on the Company's investment securities, see Note 3 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K.
Loans receivable, net, totaled $1.05 billion at March 31, 2025, compared to $1.01 billion at March 31, 2024, an increase of $38.4 million. The increase was primarily attributable to increases in multi-family loans of $20.7 million, commercial real estate loans of $8.7 million and commercial business loans of $3.5 million, consistent with the Company's strategic focus on expanding its commercial lending platform. In addition, other installment loans increased of $12.8 million due to purchased consumer loans of $15.6 million during the fiscal year ended 2025. These increases were partially offset by a decrease in real estate construction loans of $7.4 million reflecting the completion and pay-off of projects originated in prior periods.
The Company no longer originates real estate one-to-four family loans but may, from time to time, purchase such loans consistent with its asset/liability management objectives. Additionally, the Company supplements its commercial loan originations and enhances portfolio diversification through the purchase of commercial business loans. These purchased loans are originated by third-parties located outside of the Company's primary market area and totaled $35.3 million and $27.2 million at March 31, 2025 and 2024, respectively.
The Company also purchases the guaranteed portion of SBA originated loans as part of its strategy to diversify the loan portfolio and enhance yields relative to cash and other short-term investments. These SBA loans are originated by other financial institutions outside of the Company's primary market area and are purchased with servicing retained by the seller. Because the purchased portions are fully guaranteed by the U.S. government, they carry minimal credit risk. At March 31, 2025, the Company's purchased SBA loan portfolio was $46.7 million compared to $51.0 million at March 31, 2024.
Goodwill was $27.1 million at both March 31, 2025, and 2024. For additional information on our goodwill impairment testing, see "Goodwill Valuation" included in this Item 7.
Deposits totaled $1.23 billion at both March 31, 2025 and 2024. While overall deposit levels remained stable, there was a shift in the composition of the deposits. Increases in certificates of deposits of $36.5 million and money market accounts of $26.9 million were partially offset by decreases in non-interest checking accounts of $33.6 million, regular savings accounts of $24.4 million, and interest checking accounts of $4.8 million. The migration away from lower- or non-interest-bearing accounts toward time deposits and money market products is consistent with industry trends, as depositors seek to optimize returns on their funds. The Company had no wholesale-brokered deposits at March 31, 2025 and 2024. Core branch deposits accounted for 98.1% of total deposits at March 31, 2025 compared to 98.0% at March 31, 2024. The Company remains focused on building and retaining core deposit relationships through targeted client engagement strategies and competitive product offerings, rather than relying on wholesale funding sources.
FHLB advances decreased $11.9 million to $76.4 million at March 31, 2025 compared to $88.3 million at March 31, 2024. FHLB advances at March 31, 2025 were comprised of overnight advances and short-term borrowings of $51.4 million and $25.0 million, respectively. In contrast, all FHLB advances at March 31, 2024 were comprised entirely of overnight advances. While overall FHLB borrowing declined, the Company continued to strategically utilize available FHLB advances, particularly short-tern advances, to support loan originations and manage liquidity in accordance with its asset/liability objectives.
Shareholders' equity increased $4.4 million to $160.0 million at March 31, 2025 from $155.6 million at March 31, 2024. The increase was mainly attributable to net income of $4.9 million recorded during fiscal year 2025 and an improvement in other comprehensive income of $2.8 million, which reflected a reduction in unrealized holding losses on securities available for sale, net of tax. These increases were partially offset by cash dividend payments totaling $1.7 million and the repurchase of 358,631 shares of common stock at a total cost of $2.0 million.
Comparison of Operating Results for the Years Ended March 31, 2025 and 2024
Net Income. Net income was $4.9 million, or $0.23 per diluted share, for the fiscal year ended March 31, 2025, compared to $3.8 million, or $0.18 per diluted share, for the fiscal year ended March 31, 2024. The Company's net income increased primarily as a result of an increase in interest income of $2.4 million and non-interest income on $4.0 million. The increase in non-interest income was primarily due to a loss on sales of available for sale investment securities of $2.7 million as part of a balance sheet restructure completed during the fourth quarter of fiscal 2024, that was not present during fiscal year ended March 31, 2025. In addition, net income was also impacted by an increase in interest expense of $4.1 million for fiscal year ended March 31, 2025 compared to the prior fiscal year due to increased interest paid on deposits, partially offset by a decrease in interest paid on borrowings.
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 2025 decreased $1.7 million, or 4.57%, to $36.3 million compared to $38.1 million in fiscal 2024. The decrease was primarily due to increased interest expense on deposits. Net interest margin for the fiscal year ended March 31, 2025 was 2.54% compared to 2.56% for the prior fiscal year. The decrease in the net interest margin was primarily attributable the increase in interest expense on deposits and the decrease in total average interest earning assets.
Interest and Dividend Income.Interest and dividend income increased $2.4 million to $59.0 million for the fiscal year ended March 31, 2025 from $56.6 million for the fiscal year ended March 31, 2024. The increase was primarily related to the increase in interest and fees on loans receivable due to the overall increase in average balance of and yield on total net loans. Interest and fees on loans receivable increased $4.6 million to $50.6 million at March 31, 2025 compared to $46.0 million at March 31, 2024. The average balance of loans receivable increased $33.0 million to $1.04 billion compared to $1.01 billion at March 31, 2024. The average yield on loans increased 30 basis points to 4.85% at March 31, 2025 compared to 4.55% at March 31, 2024.
Interest earned on investment securities decreased $2.1 million for the fiscal year ended March 31, 2025, compared to the prior fiscal year. The decrease was primarily the result of a $91.0 million decline in the average balance of investment securities to $370.0 million for fiscal year ended March 31, 2025, compared to $461.1 million for fiscal year ended March 31, 2024. This decline reflects, in part, the Company's balance sheet restructuring during the fourth quarter of fiscal 2024, which included the sale of approximately $46.2 million of lower-yielding available for sale investment securities. The remaining decrease in the investment portfolio resulted from normal paydowns and maturities. The average yield on investment securities was 1.96% for the fiscal year ended March 31, 2025 compared to 2.02% for the prior fiscal year.
Interest Expense.Interest expense for the fiscal year ended March 31, 2025 totaled $22.6 million, a $4.1 million or 22.46% increase from $18.5 million for the fiscal year ended March 31, 2024.
Interest expense on deposits increased $7.0 million for fiscal year ended March 31, 2025, compared to the prior fiscal year primarily due to the increase in the average rates paid on all deposit accounts, as well as an increase in the average balance of certificates of deposits. The average rate paid on certificates of deposit increased 91 basis points to 3.78% for the fiscal year ended March 31, 2025 compared to 2.87% for the prior fiscal year. The average balance of certificates of deposit increased $64.6 million for the fiscal year ended March 31, 2025 compared to the prior fiscal year. The average rate paid on all interest bearing deposits increased 77 basis points to 1.74% for fiscal year ended March 31, 2025, compared to 0.97% for the prior fiscal year.
Interest expense on borrowings decreased $2.9 million for the fiscal year ended March 31, 2025 compared to the prior fiscal year due primarily to a decrease in the average balance of FHLB advances. The average balance of FHLB advances decreased to $99.0 million for fiscal year ended March 31, 2025 compared to $146.6 million for the same period in the prior year. The weighted average interest rate on FHLB advances decreased to 5.17% for the fiscal year ended March 31, 2025 compared to 5.40% for the prior fiscal year.
Provision for credit losses. The Company recorded a provision for credit losses of $100,000 for the fiscal year ended March 31, 2025 compared to no provision for credit losses for the fiscal year ended March 31, 2024. The provision recorded in fiscal 2025, primarily reflects growth in the loan portfolio. In contrast, the absence of a provision in fiscal 2024 was based on management's assumptions related to the economic outlook, including the impact of national and global events, such as regional bank failures, which influenced the forecast at that time. Expected credit loss estimates incorporate a variety of qualitative and quantitative factors, including borrower-specific information, changes in internal risk ratings, projected delinquencies, and the anticipated effects of economic conditions on borrowers' ability to repay.
At March 31, 2025, the Company had an ACL of $15.4 million, or 1.45% of total loans, compared to $15.4 million, or 1.50% of total loans at March 31, 2024. Net charge-offs totaled $90,000 for the fiscal year ended March 31, 2025, compared to net recoveries of $13,000 for the prior fiscal year. At March 31, 2025, the Company's ACL was more than sufficient to cover nonperforming loans, with a coverage ratio exceeding 9,900%, compared to 8,600% at the end of the prior fiscal year.
Non-Interest Income.Non-interest income increased $4.0 million to $14.3 million for the fiscal year ended March 31, 2025 from $10.2 million for fiscal year 2024. The increase was primarily attributable to the absence of a $2.7 million loss on the sale of available for sale investment securities that occurred in fiscal 2024 as part of a balance sheet restructuring. In addition, fiscal 2025 results included approximately $844,000 in other non-interest income related to a legal expense recovery from settled litigation in the prior year and $261,000 in income related to a BOLI death benefit. The Company also recorded an increase of $578,000 in asset management fee income. These increases were partially offset by a $267,000 decrease in fees and service charges, due to lower transaction activity.
Non-Interest Expense.Non-interest expense increased $535,000 million to $44.3 million for the year ended March 31, 2025 from $43.7 million for fiscal 2024. The increase was primarily due to higher salaries and employee benefits of $1.9 million, which reflected merit-based salary adjustments. Additionally, occupancy and depreciation expense increased $688,000, mainly due to higher computer software, depreciation, repair and maintenance expenses as the Company continues to update and modernize certain branch locations. A one-time lease termination fee was also incurred in September 2024 in connection with the Company's purchase of its Orchards branch location. Professional fees increased $425,000 due to additional consulting fees. These increases were partially offset by a $2.6 million decrease in other non-interest expense, primarily reflecting the absence of litigation related accruals that were recognized in the prior fiscal year, as well as higher recoveries of previously expensed fraud losses. This decrease was partially offset by increased accruals for business and occupation taxes. For further information regarding litigation, see "Note 16. Commitments and Contingencies."
Income Taxes.The provision for income taxes was $1.3 million and $802,000 for the fiscal years ended March 31, 2025 and 2024, respectively. The increase in the provision for income taxes was due to higher pre-tax income for the fiscal year ended March 31, 2025 compared to the same period in the prior year. The effective tax rate was 21.4% for the fiscal year ended March 31, 2025 compared to 17.8% for the fiscal year ended March 31, 2024. The year-over-year increase in the effective tax rate was primarily attributable to changes in the mix of taxable income across state and local jurisdictions, which impacts the overall apportionment of income and related tax liability. At March 31, 2025, the Company reported a net deferred tax asset of $8.6 million. Management evaluated the realizability of this asset and concluded that no valuation allowance was required, as it is more likely than not that the deferred tax asset will be fully realized based on projected future taxable income and available tax planning strategies. See "Note 10. Income Taxes" for further discussion of the Company's income taxes.
Comparison of Operating Results for the Years Ended March 31, 2024 and 2023
See Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024, previously filed with the SEC.
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 daily average balances during such period. Non-accruing loans were included in the average loan amounts outstanding. Loan fees, net, of $1.4 million, $1.3 million and $2.4 million were included in interest income for the years ended March 31, 2025, 2024 and 2023, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended March 31, |
||||||||||||||||||||||||
|
|
2025 |
|
2024 |
|
2023 |
|||||||||||||||||||
|
|
|
|
Interest |
|
|
|
|
Interest |
|
|
|
|
Interest |
|
||||||||||
|
|
Average |
|
and |
|
Yield/ |
|
Average |
|
and |
|
Yield/ |
|
Average |
|
and |
|
Yield/ |
|||||||
|
Balance |
Dividends |
Cost |
Balance |
Dividends |
Cost |
Balance |
Dividends |
Cost |
||||||||||||||||
|
|
(Dollars in thousands) |
|||||||||||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|||||||||||||||||
Mortgage loans |
|
$ |
780,947 |
|
$ |
37,882 |
|
4.85 |
% |
$ |
758,809 |
|
$ |
34,523 |
|
4.55 |
% |
$ |
760,821 |
|
$ |
34,694 |
|
4.56 |
% |
Non-mortgage loans |
|
263,423 |
|
12,739 |
|
4.84 |
|
252,611 |
|
11,508 |
|
4.56 |
|
246,224 |
|
10,050 |
|
4.08 |
|
||||||
Total net loans (1) |
|
1,044,370 |
|
50,621 |
|
4.85 |
|
1,011,420 |
|
46,031 |
|
4.55 |
|
1,007,045 |
|
44,744 |
|
4.44 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities (2) |
|
370,027 |
|
7,260 |
|
1.96 |
|
461,055 |
|
9,315 |
|
2.02 |
|
472,396 |
|
9,129 |
|
1.93 |
|
||||||
Interest-bearing deposits in other banks |
|
12,429 |
|
600 |
|
4.83 |
|
10,956 |
|
566 |
|
5.16 |
|
100,694 |
|
1,773 |
|
1.76 |
|
||||||
Other earning assets |
|
6,244 |
|
563 |
|
9.02 |
|
8,571 |
|
726 |
|
8.47 |
|
3,696 |
|
103 |
|
2.79 |
|
||||||
Total interest-earning assets |
|
1,433,070 |
|
59,044 |
|
4.12 |
|
1,492,002 |
|
56,638 |
|
3.80 |
|
1,583,831 |
|
55,749 |
|
3.52 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Office properties and equipment, net |
|
23,198 |
|
|
|
|
|
|
23,337 |
|
|
|
|
|
|
19,621 |
|
|
|
|
|
|
|||
Other non-interest-earning assets |
|
64,714 |
|
|
|
|
|
|
60,044 |
|
|
|
|
|
|
63,511 |
|
|
|
|
|
|
|||
Total assets |
|
$ |
1,520,982 |
|
|
|
|
|
|
$ |
1,575,383 |
|
|
|
|
|
|
$ |
1,666,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
||||||||||||||||||
Savings accounts |
|
$ |
175,102 |
|
$ |
170 |
0.10 |
% |
$ |
217,538 |
|
$ |
132 |
0.06 |
% |
$ |
308,840 |
|
$ |
219 |
0.07 |
% |
|||
Interest checking accounts |
|
261,475 |
|
2,606 |
1.00 |
|
243,904 |
|
785 |
0.32 |
|
286,627 |
|
89 |
0.03 |
|
|||||||||
Money market accounts |
|
224,076 |
|
4,162 |
1.86 |
|
233,749 |
|
2,860 |
1.22 |
|
266,795 |
|
415 |
0.16 |
|
|||||||||
Certificates of deposit |
|
221,725 |
|
8,375 |
3.78 |
|
157,126 |
|
4,508 |
2.87 |
|
103,484 |
|
779 |
0.75 |
|
|||||||||
Total interest-bearing deposits |
|
882,378 |
|
15,313 |
1.74 |
|
852,317 |
|
8,285 |
0.97 |
|
965,746 |
|
1,502 |
0.16 |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Junior subordinated debentures |
|
27,045 |
|
2,029 |
7.50 |
|
26,959 |
|
2,109 |
7.82 |
|
26,873 |
|
1,368 |
5.09 |
|
|||||||||
FHLB advances |
|
|
99,020 |
|
|
5,123 |
|
5.17 |
|
|
146,555 |
|
|
7,917 |
|
5.40 |
|
|
21,046 |
|
|
1,027 |
|
4.88 |
|
Other interest-bearing liabilities |
|
2,147 |
|
153 |
7.13 |
|
2,211 |
|
158 |
7.15 |
|
2,271 |
|
163 |
7.18 |
|
|||||||||
Total interest-bearing liabilities |
|
1,010,590 |
|
22,618 |
2.24 |
|
1,028,042 |
|
18,469 |
1.80 |
|
1,015,936 |
|
4,060 |
0.40 |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing liabilities: |
|
|
|
|
|
|
|
||||||||||||||||||
Non-interest-bearing deposits |
|
337,741 |
|
|
|
|
|
|
376,694 |
|
|
|
|
|
|
480,029 |
|
|
|
|
|
|
|||
Other liabilities |
|
14,081 |
|
|
|
|
|
|
14,510 |
|
|
|
|
|
|
16,757 |
|
|
|
|
|
|
|||
Total liabilities |
|
1,362,412 |
|
|
|
|
|
|
1,419,246 |
|
|
|
|
|
|
1,512,722 |
|
|
|
|
|
|
|||
Shareholders' equity |
|
158,570 |
|
|
|
|
|
|
156,137 |
|
|
|
|
|
|
154,241 |
|
|
|
|
|
|
|||
Total liabilities and shareholders' equity |
|
$ |
1,520,982 |
|
|
|
|
|
|
$ |
1,575,383 |
|
|
|
|
|
|
$ |
1,666,963 |
|
|
|
|
|
|
Net interest income |
|
|
|
|
$ |
36,426 |
|
|
|
|
|
|
$ |
38,169 |
|
|
|
|
|
|
$ |
51,689 |
|
|
|
Interest rate spread |
|
|
|
|
1.88 |
% |
|
|
|
2.00 |
% |
|
|
|
3.12 |
% |
|||||||||
Net interest margin |
|
|
|
|
2.54 |
% |
|
|
|
2.56 |
% |
|
|
|
3.26 |
% |
|||||||||
Ratio of average interest-earning assets to average interest-bearing liabilities |
|
|
|
|
141.81 |
% |
|
|
|
145.13 |
% |
|
|
|
155.90 |
% |
|||||||||
Tax-Equivalent Adjustment (3) |
|
|
|
|
$ |
82 |
|
|
|
|
|
|
$ |
83 |
|
|
|
|
|
|
$ |
83 |
|
|
|
(1) | Includes non-accrual loans. |
(2) | For purposes of the computation of average yield on investment securities available for sale, historical cost balances were utilized; therefore, the yield information does not give effect to changes in fair value that are reflected as a component of shareholders' equity. |
(3) | Tax-equivalent adjustment relates to non-taxable investment interest income calculated based on a combined federal and state tax rate of 24% for all three years. |
Rate/Volume Analysis
The following table sets forth the effects of changing rates and volumes on net interest income of the Company for the fiscal year ended March 31, 2025 compared to the fiscal year ended March 31, 2024, and the fiscal year ended March 31, 2024 compared to the fiscal year ended March 31, 2023. 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). Variances that were insignificant have been allocated based upon the percentage relationship of changes in volume and changes in rate to the total net change (in thousands). The changes noted in the table below include tax equivalent adjustments, and as a result, will not agree to the amounts reflected on the Company's consolidated statements of income for the categories that have been adjusted to reflect tax equivalent income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
||||||||||||||||
|
|
2025 vs 2024 |
|
2024 vs. 2023 |
||||||||||||||
|
Increase (Decrease) Due to |
|
|
|
Increase (Decrease) Due to |
|
|
|
||||||||||
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase |
|
|
|
|
|
|
|
Total |
||
|
Volume |
Rate |
(Decrease) |
Volume |
Rate |
Increase |
||||||||||||
Interest Income: |
|
|
|
|
|
|
||||||||||||
Mortgage loans |
|
$ |
1,030 |
|
$ |
2,329 |
|
$ |
3,359 |
|
$ |
(94) |
|
$ |
(77) |
|
$ |
(171) |
Non-mortgage loans |
|
506 |
|
725 |
|
1,231 |
|
264 |
|
1,194 |
|
1,458 |
||||||
Investment securities (1) |
|
(1,786) |
|
(269) |
|
(2,055) |
|
(226) |
|
412 |
|
186 |
||||||
Interest-earning deposits in other banks |
|
72 |
|
(38) |
|
34 |
|
(2,542) |
|
1,335 |
|
(1,207) |
||||||
Other earning assets |
|
(207) |
|
44 |
|
(163) |
|
245 |
|
378 |
|
623 |
||||||
Total interest income |
|
(385) |
|
2,791 |
|
2,406 |
|
(2,353) |
|
3,242 |
|
889 |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense: |
|
|
|
|
|
|
||||||||||||
Regular savings accounts |
|
(30) |
|
68 |
|
38 |
|
(59) |
|
(28) |
|
(87) |
||||||
Interest checking accounts |
|
59 |
|
1,762 |
|
1,821 |
|
(15) |
|
711 |
|
696 |
||||||
Money market accounts |
|
(124) |
|
1,426 |
|
1,302 |
|
(59) |
|
2,504 |
|
2,445 |
||||||
Certificates of deposit |
|
2,183 |
|
1,684 |
|
3,867 |
|
577 |
|
3,152 |
|
3,729 |
||||||
Junior subordinated debentures |
|
|
7 |
|
(87) |
|
|
(80) |
|
|
4 |
|
|
737 |
|
|
741 |
|
FHLB advances |
|
|
(2,470) |
|
(324) |
|
|
(2,794) |
|
|
6,770 |
|
|
120 |
|
|
6,890 |
|
Other interest-bearing liabilities |
|
(5) |
|
- |
|
(5) |
|
(4) |
|
(1) |
|
(5) |
||||||
Total interest expense |
|
(380) |
|
4,529 |
|
4,149 |
|
7,214 |
|
7,195 |
|
14,409 |
||||||
Net interest income |
|
$ |
(5) |
|
$ |
(1,738) |
|
$ |
(1,743) |
|
$ |
(9,567) |
|
$ |
(3,953) |
|
$ |
(13,520) |
(1) | Interest on municipal securities is presented on a fully tax-equivalent basis. |
Asset and Liability Management
The Company's principal financial objective is to achieve long-term profitability while reducing its exposure to fluctuating market interest rates. The Company has sought to reduce the exposure of its earnings to changes in market interest rates by attempting to manage the difference between asset and liability maturities and interest rates. The principal element in achieving this objective is to increase the interest rate sensitivity of the Company's interest-earning assets and interest-bearing liabilities. Interest rate sensitivity increases by originating and purchasing portfolio loans with interest rates subject to periodic adjustment to market conditions and fixed rate loans with shorter terms to maturity. The Company relies on retail deposits as its primary source of funds, but also has access to FHLB advances, FRB borrowings, and other wholesale facilities, as needed. Management believes retail deposits reduce the effects of interest rate fluctuations because they generally represent a stable source of funds. As part of its interest rate risk management strategy, the Company promotes transaction accounts and certificates of deposit with terms up to ten years.
The Company has adopted a strategy that is designed to maintain or improve the interest rate sensitivity of assets relative to its liabilities. The primary elements of this strategy involve: (i) originating adjustable rate loans; (ii) increasing commercial loans, consumer loans that are adjustable rate and other short-term loans as a portion of total net loans receivable because of their generally shorter terms and higher yields than real estate one-to-four family loans; (iii) matching asset and liability maturities; and (iv) investing in short-term securities. The strategy for liabilities has been to shorten the maturities for both deposits and borrowings. The longer-term objective is to increase the proportion of non-interest-bearing demand deposits, low interest- bearing
demand deposits, money market accounts, and savings deposits relative to certificates of deposit to reduce our overall cost of funds.
Consumer loans, such as home equity lines of credit and installment loans, commercial loans and construction loans typically have shorter terms and higher yields than real estate one-to-four family loans, and accordingly reduce the Company's exposure to fluctuations in interest rates. Adjustable interest rate loans totaled $477.8 million or 44.97% of total loans at March 31, 2025, as compared to $435.7 million or 42.55% of total loans at March 31, 2024. Although the Company has sought to originate adjustable rate loans, the ability to originate and purchase such loans depends to a great extent on market interest rates and borrowers' preferences. Particularly in lower interest rate environments, borrowers often prefer to obtain fixed-rate loans. See Item 1. "Business - Lending Activities - Real Estate Construction " and "- Lending Activities - Consumer Lending."
The Company may also invest in short-term to medium-term U.S. Government securities as well as mortgage-backed securities issued or guaranteed by U.S. Government agencies. At March 31, 2025, the combined investment portfolio carried at $322.5 million had an average life of 5.7 years. Adjustable rate mortgage-backed securities totaled $2.2 million at March 31, 2025 compared to $2.8 million at March 31, 2024. See Item 1. "Business - Investment Activities" for additional information.
Liquidity and Capital Resources
Liquidity is essential to our business. The objective of the Bank's liquidity management is to maintain ample cash flows to meet obligations for depositor withdrawals, to fund the borrowing needs of loan clients, and to fund ongoing operations. Core relationship deposits are the primary source of the Bank's liquidity. As such, the Bank focuses on deposit relationships with local consumer and business clients who maintain multiple accounts and services at the Bank.
Liquidity management is both a short and long-term responsibility of the Company's management. The Company adjusts its investments in liquid assets based upon management's assessment of (i) expected loan demand, (ii) projected loan sales, (iii) expected deposit flows, (iv) yields available on interest-bearing deposits and (v) asset/liability management program objectives. Excess liquidity is invested generally in interest-bearing overnight deposits and other short-term government and agency obligations. If the Company requires funds beyond its ability to generate them internally, it has additional diversified and reliable sources of funds with the FHLB, the FRB and other wholesale facilities. These sources of funds may be used on a long or short-term basis to compensate for a reduction in other sources of funds or on a long-term basis to support lending activities.
The Company's primary sources of funds are client deposits, proceeds from principal and interest payments on loans, proceeds from the sale of loans, maturing securities, FHLB advances and FRB borrowings. While maturities and scheduled amortization of loans and securities are a predictable source of funds, deposit flows and prepayment of mortgage loans and mortgage-backed securities are greatly influenced by general interest rates, economic conditions and competition. Management believes that its focus on core relationship deposits coupled with access to borrowing through reliable counterparties provides reasonable and prudent assurance that ample liquidity is available. However, depositor or counterparty behavior could change in response to competition, economic or market situations or other unforeseen circumstances, which could have liquidity implications that may require different strategic or operational actions.
The Company must maintain an adequate level of liquidity to ensure the availability of sufficient funds for loan originations, deposit withdrawals and continuing operations, satisfy other financial commitments and take advantage of investment opportunities. During the fiscal year ended March 31, 2025, deposits remained relatively stable; however, the Bank utilized its funding sources primarily to support loan commitments and manage deposit withdrawals influenced by competitive and pricing pressures. At March 31, 2025, cash and cash equivalents and available for sale investment securities totaled $148.9 million, or 9.8% of total assets. Management believes that the Company's security portfolio is of high quality and generally marketable. The level of liquid assets is influenced by the Company's operating, financing, lending, and investing activities during any given period. The Bank generally maintains sufficient cash and short-term investments to meet short-term liquidity needs. Its primary liquidity management strategy is to manage short-term borrowings, consistent with its asset/liability objectives. In addition to these primary sources of funds, the Bank has several secondary borrowing sources available to meet potential funding requirements, including FRB borrowings and FHLB advances. At March 31, 2025, the Bank had no advances from the FRB and maintained a credit facility with the FRB with available borrowing capacity of $297.3 million, subject to sufficient collateral. FHLB advances totaled $76.4 million at the same date, with additional borrowing capacity of $174.0 million, also subject to adequate collateral and stock investment. At March 31, 2025, the Bank had sufficient unpledged collateral to allow it to utilize its available borrowing capacity from the FRB and the FHLB. Borrowing capacity may, however, fluctuate based on the quality and risk rating of pledged loan collateral, and counterparties may adjust discount rates applied to such collateral at their discretion.
During the fiscal years ended March 31, 2025, deposits increased $649,000 compared to a decrease of $33.5 million for the fiscal year ended March 31, 2024. An additional source of wholesale funding includes brokered certificates of deposit. While the Company has utilized brokered deposits from time to time, the Company historically has not extensively relied on brokered deposits to fund its operations. At March 31, 2025 and 2024, the Bank had no wholesale brokered deposits. The Bank also participates in the CDARS and ICS deposit products, which allow the Company to accept deposits in excess of the FDIC insurance limit for a depositor and obtain "pass-through" insurance for the total deposit. The Bank's CDARS and ICS balances were $36.0 million, or 2.9% of total deposits, and $39.6 million, or 3.2% of total deposits, at March 31, 2025 and 2024, respectively. The combination of all the Bank's funding sources gives the Bank available liquidity of $812.6 million, or 53.7% of total assets at March 31, 2025.
At March 31, 2025, the Company had total commitments of $102.6 million, which included commitments to extend credit of $5.5 million, unused lines of credit totaling $79.0 million, undisbursed construction loans totaling $16.6 million, and standby letters of credit totaling $1.6 million. For additional information regarding future financial commitments, see Note 16 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K. The Company anticipates that it will have sufficient funds available to meet current loan commitments. Certificates of deposit that are scheduled to mature in less than one year from March 31, 2025 totaled $222.1 million. Historically, the Bank has been able to retain a significant amount of its deposits as they mature. Partially offsetting these cash outflows are scheduled loan maturities of less than one year totaling $52.9 million at March 31, 2025.
The Company incurs capital expenditures on an ongoing basis to expand and improve our product offerings, enhance and modernize our technology infrastructure, and to introduce new technology-based products to compete effectively in our markets. We evaluate capital expenditure projects based on a variety of factors, including expected strategic impacts (such as forecasted impact on revenue growth, productivity, expenses, service levels and client retention) and our expected return on investment. The amount of capital investment is influenced by, among other things, current and projected demand for our services and products, cash flow generated by operating activities, cash required for other purposes and regulatory considerations. Based on our current capital allocation objectives, during fiscal 2026 we expect cash expenditures of approximately $2.1 million for capital investment in premises and equipment.
Riverview, as a separate legal entity from the Bank, must provide for its own liquidity. Sources of capital and liquidity for Riverview include distributions from the Bank and the issuance of debt or equity securities. Dividends and other capital distributions from the Bank are subject to regulatory notice. Management currently expects to continue the Company's current practice of paying quarterly cash dividends on its common stock subject to the Board of Directors' discretion to modify or terminate this practice at any time and for any reason without prior notice. The current quarterly common stock dividend rate is $0.02 per share, as approved by the Board of Directors, which management believes is a dividend rate per share which enables the Company to balance our multiple objectives of managing and investing in the Bank and returning a substantial portion of the Company's cash to its shareholders. Assuming continued payment during fiscal year 2026 at this rate of $0.02 per share, average total dividends paid each quarter would be approximately $420,000 based on the number of the Company's outstanding shares at March 31, 2025. At March 31, 2025, Riverview had $5.7 million in cash to meet its liquidity needs.
Bank holding companies and federally-insured state-chartered banks are required to maintain minimum levels of regulatory capital. At March 31, 2025, Riverview and the Bank were in compliance with all applicable capital requirements. For additional information, see Note 12 of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K and Item 1. Business - Regulation and Supervision of the Bank.
New Accounting Pronouncements
For a discussion of new accounting pronouncements and their impact on the Company, see Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.