What changed in this filing

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Item 1. Financial Statements

2020-11-13 compared with 2020-08-13 · 207 added, 143 removed, 595 unchanged (37% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

June 30, 2020

September 30, 2020

December 31, 2019

4 unchanged sentences

Investment securities - held to maturity

Loans and leases, net of allowance for losses of $ 8,521,000

and $ 7,089,000 , respectively

Loans and leases, net of allowance for losses of $ 9,809,000 and

$ 7,089,000 , respectively

Premises and equipment, net

18 unchanged sentences

Issued and outstanding – 12,944,546 shares

and 13,526,625 shares, respectively

Additional paid-in capital

2 unchanged sentences

( 13,848,900 )

( 14,400,386 )

Accumulated other comprehensive income (loss)

4 unchanged sentences

Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Statements of Income

Three Months Ended June 30,

Six Months Ended June 30,

Condensed Consolidated Statements of Income (Loss)

Three Months Ended September 30,

Nine Months Ended September 30,

Interest Income

6 unchanged sentences

Provision for losses on loans and leases

Net Interest Income After Provision for Losses on Loans and Leases

Net Interest Income After Provision for Losses

on Loans and Leases

Non-Interest Income

3 unchanged sentences

Net gains on securities (includes $ 117,304 , $ 21,827 ,

$ 79,013 and $ 61,232 , respectively, related to accumulated

other comprehensive loss reclassifications)

$ 196,317 and $ 83,059 , respectively, related to

accumulated other comprehensive loss

reclassifications)

Net gains on loan and lease sales

13 unchanged sentences

Loss on sale of real estate owned

Donation to establish First Bank Richmond Charitable Foundation

Other expenses

2 unchanged sentences

Provision (benefit) for income taxes (includes $ 24,634 ,

$ 9,520 , $ 20,026 and $ 16,003 , respectively, related to income

tax expense from reclassification of items)

Earnings Per Share

$ 5,661 , $ 41,226 and $ 21,544 , respectively, related to

income tax expense from reclassification of items)

Net Income (Loss)

$ ( 3,250,335

Earnings (Loss) Per Share

See Notes to Condensed Consolidated Statements.

Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Statements of Comprehensive Income

Condensed Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net Income (Loss)

Other Comprehensive Income

Unrealized gain on available-for-sale securities, net of tax expense of $ 312,821 , $ 559,911 , $ 1,270,737 and $ 1,237,814 , respectively.

Unrealized gain on available-for-sale securities, net of tax

expense of $ 45,101 , $ 175,173 , $ 1,040,994 and $ 1,400,357 ,

respectively.

reclassification adjustment for realized gains

1 unchanged sentence

$ 41,226 and $ 21,544 , respectively.

Comprehensive Income

Comprehensive Income (Loss)

See Notes to Condensed Consolidated Statements.

3 unchanged sentences

Income/(Loss)

Balances, March 31, 2020

Balances, June 30, 2020

Other comprehensive income

1 unchanged sentence

Common stock dividends ($0.05 per share)

Balances, June 30, 2020

Repurchase of common stock

Balances, September 30, 2020

Comprehensive

4 unchanged sentences

Common stock dividends ($0.05 per share)

Balances, June 30, 2020

Repurchase of common stock

Balances, September 30, 2020

Comprehensive

Income/(Loss)

Balances, March 31, 2019

Other comprehensive income

Balances, June 30, 2019

Other comprehensive income

ESOP shares earned

Issuance of common stock, net of offering costs

Stock contributed to charitable foundation

Reorganization of Richmond Mutual Bancorporation

Balances, September 30, 2019

Comprehensive

2 unchanged sentences

Other comprehensive income

Balances, June 30, 2019

ESOP shares earned

Issuance of common stock, net of offering costs

Stock contributed to charitable foundation

Reorganization of Richmond Mutual Bancorporation

Balances, September 30, 2019

See Notes to Condensed Consolidated Statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

Operating Activities

9 unchanged sentences

Amortization of mortgage-servicing rights

Common stock contributed to Foundation

ESOP shares expense

9 unchanged sentences

Purchases of securities available for sale

( 129,901,076

( 109,895,626

Proceeds from maturities and paydowns of securities available for sale

3 unchanged sentences

Purchases of premises and equipment

Proceeds from sales of real estate owned

Purchase of FHLB stock

7 unchanged sentences

Repayment of FHLB advances

Repayment of other borrowings

Proceeds from stock conversion

Repurchase of common stock

Dividends paid

12 unchanged sentences

On July 1, 2019, Richmond Mutual Bancorporation, Inc., a Delaware corporation (“RMB-Delaware”), completed its reorganization from a mutual holding company form of organization to a stock form of organization (“corporate reorganization”).

RMB-Delaware, which owned 100% of First Bank Richmond (the “Bank”), was succeeded by Richmond Mutual Bancorporation, Inc., a new Maryland corporation (“the Company”).

RMB-Delaware, which owned 100% of First Bank Richmond (the “Bank”), was succeeded by Richmond Mutual Bancorporation, Inc., a new Maryland corporation (“RMB-Maryland”).

As part of the corporate reorganization, First Mutual of Richmond, Inc.’s (“MHC”) ownership interest in RMB-Delaware was sold in a public offering.

Gross proceeds from the offering were $ 130.3 million.

In conjunction with the corporate reorganization, the Company contributed 500,000 shares and $1.25 million of cash to a newly formed charitable foundation, First Bank Richmond, Inc.

In conjunction with the corporate reorganization, RMB-Maryland contributed 500,000 shares and $ 1.25 million of cash to a newly formed charitable foundation, First Bank Richmond, Inc.

Community Foundation (the “Foundation”).

Additionally, a “liquidation account” was established for the benefit of certain depositors of the Bank in an amount equal to MHC’s ownership interest in the retained earnings of RMB-Delaware as of December 31, 2017 and March 31, 2019.

In certain circumstances, where appropriate, the terms “Company”, “we”, “us” and “our” refer collectively to (i) RMB-Delaware and First Bank Richmond with respect to discussions in this document involving matters occurring prior to completion of the corporate reorganization and (ii) RMB-Maryland and First Bank Richmond with respect to discussions in this document involving matters occurring post-corporate reorganization, in each case unless the context indicates another meaning.

The costs of the corporate reorganization and the issuance of the common stock have been deducted from the sales proceeds of the offering.

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include information or note disclosures necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles.

Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for year ended December 31, 2019 filed with the Securities and Exchange Commission (“SEC”) on March 30, 2020 (SEC File No.

Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission (“SEC”) on March 30, 2020 (SEC File No.

However, in the opinion of management, all adjustments which are necessary for a fair presentation of the consolidated financial statements have been included.

1 unchanged sentence

The results of operations for the period are not necessarily indicative of the results to be expected for the full year.

In certain circumstances, where appropriate, the terms “we”, “us” and “our” refer collectively to (i) RMB-Delaware and First Bank Richmond with respect to discussions in this document involving matters occurring prior to completion of the corporate reorganization and (ii) the Company and First Bank Richmond with respect to discussions in this document involving matters occurring post-corporate reorganization, in each case unless the context indicates another meaning.

For all loan classes, the accrual of interest is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection.

12 unchanged sentences

Accounting Pronouncements

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which provides relief from certain accounting and financial reporting requirements under U.S.

Section 4013 of the CARES Act provides temporary relief from the accounting and reporting requirements for troubled debt restructurings (TDRs) under ASC 310-40 for loan modifications related to the novel coronavirus disease of 2019 (“COVID-19”) pandemic.

In addition, on April 7, 2020, a group of banking agencies issued an interagency statement (“Interagency Statement”) for evaluating whether loan modifications that occur in response to the COVID-19 pandemic are TDRs.

The Interagency Statement was originally issued on March 22, 2020, but the banking agencies revised it to address the relationship between their TDR accounting and disclosure guidance and the TDR guidance in Section 4013 of the CARES Act.

Section 4013 of the CARES Act permits the suspension of ASC 310-40 for loan modifications that are made by financial institutions in response to the COVID-19 pandemic if (1) the borrower was not more than 30 days past due as of December 31, 2019, and (2) the modifications are related to arrangements that defer or delay the payment of principal or interest, or change the interest rate on the loan.

The Interagency Statement indicates that a lender can conclude that a borrower is not experiencing financial difficulty if either (1) short-term (e.g., six months) modifications are made in response to COVID-19, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant related to loans in which the borrower is less than 30 days past due on its contractual payments at the time a modification program is implemented, or (2) the modification or deferral program is mandated by the federal government or a state government.

Accordingly, any loan modification made in response to the COVID-19 pandemic that meets either of these practical expedients would not be considered a TDR.

The Company adopted this guidance effective March 27, 2020.

In October 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-08, “Receivables – Nonrefundable Fees and Other Costs” (“ASU 2020-08”).

ASU 2020-08 clarifies that the Company should reevaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 for each reporting period.

ASU 2020-08 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

The Company does not expect the adoption of ASU 2020-08 to have a material impact on its consolidated financial statements.

The JOBS Act, which was enacted in April 2012, has made numerous changes to the federal securities laws to facilitate access to capital markets.

3 unchanged sentences

The Company has elected to comply with new or amended accounting pronouncements in the same manner as a private company.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326).

9 unchanged sentences

Targeted Transition Relief” (ASU 2019-05).

This ASU provides transition relief for entities adopting the FASB’s credit losses standard, ASU 2016-13 and allows companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option for certain financial instruments.

This ASU provides transition relief for entities adopting

the FASB’s credit losses standard, ASU 2016-13 and allows companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option for certain financial instruments.

In April 2019, the FASB issued ASU No.

37 unchanged sentences

Based on leases outstanding as of December 31, 2019, the new standard will not have a material impact on the Company’s balance sheet or income statement.

We will begin evaluating the current leases and their respective lease term and conditions to quantify the potential impact to our financial statements upon adoption.

In July 2018, the FASB issued ASU No.

5 unchanged sentences

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows:

June 30, 2020

September 30, 2020

Available for sale

treasury securities

Federal agencies

19 unchanged sentences

Total investment securities

The amortized cost and fair value of securities at June 30, 2020, by contractual maturity, are shown below.

The amortized cost and fair value of securities at September 30, 2020, by contractual maturity, are shown below.

Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

8 unchanged sentences

Equity securities

Securities with a carrying value of $ 119,773 ,000 and $ 114,907 ,000 were pledged at June 30, 2020 and December 31, 2019, respectively, to secure certain deposits and for other purposes as permitted or required by law.

Proceeds from sales of securities available for sale for the three and six months ended June 30, 2020 were $ 10,716 ,000 and $ 22,178 ,000, respectively.

For the three and six months ended June 30, 2019, proceeds from sales of securities were $ 10,989 ,000 and $ 22,457 ,000 respectively.

Gross gains were recognized on the sale of securities available-for-sale for the three and six months ended June 30, 2020 and 2019 of $ 66 ,000, $ 136 ,000, $ 37 ,000 and $ 62 ,000, respectively.

Gross losses were recognized on the sale of securities available for sale for the three and six months ended June 30, 2020 of $ 56 ,000.

There were no gross losses realized from sales of securities available for sale for the three and six months ended June 30, 2019.

Securities with a carrying value of $ 99,128 ,000 and $ 114,907 ,000 were pledged at September 30, 2020 and December 31, 2019, respectively, to secure certain deposits and for other purposes as permitted or required by law.

Proceeds from sales of securities available for sale for the three and nine months ended September 30, 2020 were $ 12,560 ,000 and $ 34,738 ,000, respectively.

For the three and nine months ended September 30, 2019, proceeds from sales of securities were $ 35,247 ,000 and $ 57,704 ,000 respectively.

Gross gains were recognized on the sale of securities available-for-sale for the three and nine months ended September 30, 2020 and 2019 of $ 120 ,000, $ 255 ,000, $ 104 ,000 and $ 170 ,000, respectively.

Gross losses were recognized on the sale of securities available for sale for the three and nine months ended September 30, 2020 of $ 3 ,000 and $ 59 ,000, respectively.

Gross losses were recognized on the sale of securities available for sale for the three and nine months ended September 30, 2019 of $ 82 ,000 and $ 87 ,000, respectively.

Certain investments in debt securities, as reflected in the table below, are reported in the condensed consolidated financial statements and notes at an amount less than their historical cost.

Total fair value of these investments at June 30, 2020 and December 31, 2019 was $ 40,703 ,000 and $ 138,391 ,000, respectively, which is approximately 17 % and 63 % of the Company’s aggregated available-for-sale and held-to-maturity investment portfolio at those dates, respectively.

Total fair value of these investments at September 30, 2020 and December 31, 2019 was $ 42,956 ,000 and $ 138,391 ,000, respectively, which is approximately 18 % and 63 % of the Company’s aggregated available-for-sale and held-to-maturity investment portfolio at those dates, respectively.

These declines primarily resulted from changes in market interest rates since their purchase.

1 unchanged sentence

Should the impairment of any other securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

The following tables show the Company’s investments by gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2020 and December 31, 2019:

June 30, 2020

September 30, 2020

Less Than 12 Months

7 unchanged sentences

Total available-for-sale

Held-to-maturity

State and municipal obligations

Total temporarily

19 unchanged sentences

The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments.

Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2020.

Mortgage-Backed Securities – GSE Residential and SBA Pools.

1 unchanged sentence

The Company expects to recover the amortized cost basis over the term of the securities.

Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2020.

State and Municipal Obligations.

1 unchanged sentence

The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments.

Loans, Leases and Allowance

Categories of loans at June 30, 2020 and December 31, 2019 include:

The following table shows the composition of the loan and lease portfolio at September 30, 2020 and December 31, 2019:

September 30,

Commercial mortgage

5 unchanged sentences

Deferred loan fees

The following tables present the activity in the allowance for loan and lease losses for the three and six months ended June 30, 2020 and 2019.

Three Months Ended June 30, 2020:

The following tables present the activity in the allowance for loan and lease losses for the three and nine months ended September 30, 2020 and 2019.

Three Months Ended September 30, 2020:

Balance, beginning of period

1 unchanged sentence

Balance, end of period

Six Months Ended June 30, 2020:

Nine Months Ended September 30, 2020:

Balance, beginning of period

3 unchanged sentences

(2) Residential mortgage includes one- to four-family and home equity loans.

Three Months Ended June 30, 2019:

Three Months Ended September 30, 2019:

Balance, beginning of period

1 unchanged sentence

Balance, end of period

Six Months Ended June 30, 2019:

Nine Months Ended September 30, 2019:

Balance, beginning of period

3 unchanged sentences

(2) Residential mortgage includes one- to four-family and home equity loans.

The following tables present the balance in the allowance for loan and lease losses and the recorded investment in loans and leases based on portfolio segment and impairment method as of June 30, 2020 and December 31, 2019:

June 30, 2020

September 30, 2020

Allowance for loan and lease losses:

Individually evaluated

for impairment

Collectively evaluated

for impairment

Balance, June 30

Individually evaluated for impairment

Collectively evaluated for impairment

Balance, September 30

Loans and leases:

Individually evaluated

for impairment

Collectively evaluated

for impairment

Ending balance:

Individually evaluated for impairment

Collectively evaluated for impairment

Ending balance:September 30

(1) Commercial mortgage includes commercial and multifamily real estate loans.

2 unchanged sentences

Allowance for loan and lease losses:

Individually evaluated

for impairment

Collectively evaluated

for impairment

Individually evaluated for impairment

Collectively evaluated for impairment

Balance, December 31

Loans and leases:

Individually evaluated

for impairment

Collectively evaluated

for impairment

Ending balance:

Individually evaluated for impairment

Collectively evaluated for impairment

Ending balance:December 31

(1) Commercial mortgage includes commercial and multifamily real estate loans.

(2) Residential mortgage includes one- to four-family and home equity loans.

The Company rates all loans by credit quality using the following designations:

The Company rates all loans and leases by credit quality using the following designations:

Grade 1 – Exceptional

Exceptional loans are top-quality loans to individuals whose financial credentials are well known to the Company.

These loans have excellent sources of repayment, are well documented and/or virtually free of risk (i.e., CD secured loans).

Grade 2 – Quality Loans

These loans have excellent sources of repayment with no identifiable risk of collection, and they conform in all respects to Company policy and Indiana Department of Financial Institutions (“IDFI”) and Federal Deposit Insurance Corporation (“FDIC”) regulations.

Exceptional loans and leases are top-quality loans to individuals whose financial credentials are well known to the Company.

These loans and leases have excellent sources of repayment, are well documented and/or virtually free of risk (i.e., CD secured loans).

Grade 2 – Quality Loans and Leases

These loans and leases have excellent sources of repayment with no identifiable risk of collection, and they conform in all respects to Company policy and Indiana Department of Financial Institutions (“IDFI”) and Federal Deposit Insurance Corporation (“FDIC”) regulations.

Documentation exceptions are minimal or are in the process of being corrected and are not of a type that could subsequently expose the Company to risk of loss.

Grade 3 – Acceptable Loans

This category is for “average” quality loans.

These loans have adequate sources of repayment with little identifiable risk of collection and they conform to Company policy and IDFI/FDIC regulations.

This category is for “average” quality loans and leases.

These loans and leases have adequate sources of repayment with little identifiable risk of collection and they conform to Company policy and IDFI/FDIC regulations.

Grade 4 – Acceptable but Monitored

Loans in this category may have a greater than average risk due to financial weakness or uncertainty but do not appear to require classification as special mention or substandard loans.

Loans rated “4” need to be monitored on a regular basis to ascertain that the reasons for placing them in this category do not advance or worsen.

Loans and leases in this category may have a greater than average risk due to financial weakness or uncertainty but do not appear to require classification as special mention or substandard loans.

Loans and leases rated “4” need to be monitored on a regular basis to ascertain that the reasons for placing them in this category do not advance or worsen.

Grade 5 – Special Mention

Loans in this category have potential weaknesses that deserve management’s close attention.

If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Company’s credit position at some future date.

Special Mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Loans and leases in this category have potential weaknesses that deserve management’s close attention.

If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or lease or in the Company’s credit position at some future date.

Special Mention loans and leases are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

This special mention rating is designed to identify a specific level of risk and concern about an asset’s quality.

Although a special mention loan has a higher probability of default than a pass rated loan, its default is not imminent.

Although a special mention loan or leases has a higher probability of default than a pass rated loan or lease, its default is not imminent.

Grade 6 – Substandard

Loans in this category are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.

Loans so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt.

Loans and leases in this category are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.

Loans and leases so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt.

They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Substandard loans have a high probability of payment default, or they have other well-defined weaknesses.

Such loans have a distinct potential for loss;

however, an individual loan’s potential for loss does not have to be distinct for the loan to be rated substandard.

The following are examples of situations that might cause a loan to be graded a “6”:

· Cash flow deficiencies (losses) jeopardize future loan payments.

· Sale of non-collateral assets has become a primary source of loan repayment.

· The relationship has deteriorated to the point that sale of collateral is now the Company’s primary source of repayment, unless this was the original source of loan repayment.

Substandard loans and leases have a high probability of payment default, or they have other well-defined weaknesses.

Such loans and leases have a distinct potential for loss;

however, an individual loan’s or lease’s potential for loss does not have to be distinct for the loan or lease to be rated substandard.

The following are examples of situations that might cause a loan or lease to be graded a “6”:

· Cash flow deficiencies (losses) jeopardize future loan or lease payments.

· Sale of non-collateral assets has become a primary source of loan or lease repayment.

· The relationship has deteriorated to the point that sale of collateral is now the Company’s primary source of repayment, unless this was the original source of loan or lease repayment.

· The borrower is bankrupt or for any other reason future repayment is dependent on court action.

Grade 7 – Doubtful

A loan classified as doubtful has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current existing facts, conditions, and values, highly questionable and improbable.

A doubtful loan has a high probability of total or substantial loss.

A loan or lease classified as doubtful has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current existing facts, conditions, and values, highly questionable and improbable.

A doubtful loan or lease has a high probability of total or substantial loss.

Doubtful borrowers are usually in default, lack adequate liquidity or capital, and lack the resources necessary to remain an operating entity.

Because of high probability of loss, nonaccrual accounting treatment will be required for doubtful loans.

Because of high probability of loss, nonaccrual accounting treatment will be required for doubtful loans and leases.

Grade 8 – Loss

Loans classified loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted.

This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan even though partial recovery may be effected in the future.

The risk characteristics of each loan portfolio segment are as follows:

Loans and leases classified loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted.

This classification does not mean that the loan or lease has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan or lease even though partial recovery may be effected in the future.

The risk characteristics of each loan and lease portfolio segment are as follows:

Commercial and Industrial

23 unchanged sentences

For residential mortgage loans that are secured by 1-4 family residences and are generally owner-occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded.

Brokered mortgages are purchased residential mortgage loans meeting the Company’s criteria established for originating residential mortgage loans.

Brokered mortgages are purchased residential mortgage loans meeting the Company’s criteria established

for originating residential mortgage loans.

Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer personal loans are secured by consumer personal assets, such as automobiles or recreational vehicles.

6 unchanged sentences

A determination is made as to the applicant’s financial condition and ability to repay in accordance with the proposed terms as well as an overall assessment of the risks involved.

The following tables present the credit risk profile of the Company’s loan and lease portfolio based on rating category and payment activity as of June 30, 2020 and December 31, 2019:

June 30, 2020

The following tables present the credit risk profile of the Company’s loan and lease portfolio based on rating category and payment activity as of September 30, 2020 and December 31, 2019:

September 30, 2020

5 Special Mention

3 unchanged sentences

6 Substandard

The following tables present the Company’s loan and lease portfolio aging analysis of the recorded investment in loans and leases as of June 30, 2020 and December 31, 2019:

June 30, 2020

The following tables present the Company’s loan and lease portfolio aging analysis of the recorded investment in loans and leases as of September 30, 2020 and December 31, 2019:

September 30, 2020

Delinquent Loans

9 unchanged sentences

Residential mortgage

The following tables present the Company’s impaired loans and specific valuation allowance at June 30, 2020 and December 31, 2019:

June 30, 2020

Loans without a specific

The following tables present the Company’s impaired loans and specific valuation allowance at September 30, 2020 and December 31, 2019:

September 30, 2020

Impaired loans without a specific

valuation allowance

2 unchanged sentences

Residential mortgage

Loans with a specific

Impaired loans with a specific

valuation allowance

1 unchanged sentence

Commercial and industrial

Residential mortgage

Total impaired loans

4 unchanged sentences

December 31, 2019

Loans without a specific

Impaired loans without a specific

valuation allowance

2 unchanged sentences

Residential mortgage

Loans with a specific

Impaired loans with a specific

valuation allowance

5 unchanged sentences

Total impaired loans

The following tables present the Company’s average investment in impaired loans and interest income recognized for the three and six months ended June 30, 2020 and 2019.

The following tables present the Company’s average investment in impaired loans and interest income recognized for the three and nine months ended September 30, 2020 and 2019.

Investment in

Three Months Ended June 30, 2020:

Three Months Ended September 30, 2020:

Total impaired loans

4 unchanged sentences

Investment in

Six Months Ended June 30, 2020:

Nine Months Ended September 30, 2020:

Total impaired loans

4 unchanged sentences

Investment in

Three Months Ended June 30, 2019:

Three Months Ended September 30, 2019:

Total impaired loans

4 unchanged sentences

Investment in

Six Months Ended June 30, 2019:

Nine Months Ended September 30, 2019:

Total impaired loans

3 unchanged sentences

Total impaired loans

The following table presents the Company’s nonaccrual loans and leases at June 30, 2020 and December 31, 2019:

The following table presents the Company’s nonaccrual loans and leases at September 30, 2020 and December 31, 2019:

September 30,

Commercial mortgage

1 unchanged sentence

Residential mortgage

During the three and six months ended June 30, 2020 and 2019, there were no newly classified troubled debt restructured loans or leases (“TDRs”).

For the three and six months ended June 30, 2020 and 2019, the Company recorded no charge-offs related to TDRs.

As of both June 30, 2020 and December 31, 2019, TDRs had a related allowance of $ 52,000 .

During the three and six months ended June 30, 2020, there were no TDRs for which there was a payment default within the first 12 months of the modification.

During the three and nine months ended September 30, 2020 and 2019, there were no newly classified troubled debt restructured loans or leases (“TDRs”).

For the three and nine months ended September 30, 2020 and 2019, the Company recorded no charge-offs related to TDRs.

As of both September 30, 2020 and December 31, 2019, TDRs had a related allowance of $ 52 ,000.

During the three and nine months ended September 30, 2020, there were no TDRs for which there was a payment default within the first 12 months of the modification.

The Coronavirus Aid, Relief, and Economic Security Act of 2020 ("CARES Act") provided guidance around the modification of loans as a result of the COVID-19 pandemic, which outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs.

3 unchanged sentences

In March 2020, the Company began offering short-term loan modifications to assist borrowers during the COVID-19 pandemic.

As of June 30, 2020, the Company had approved 752 loan and lease modifications related to the COVID-19 pandemic with an outstanding loan balance totaling $175.1 million in accordance with the CARES Act.

As of September 30, 2020, the Company had 70 loan and lease modifications outstanding related to the COVID-19 pandemic with an outstanding loan balance totaling $35.3 million in accordance with the CARES Act.

Accordingly, the Company does not account for such loan modifications as TDRs.

Loan modifications in accordance with the CARES Act and related regulatory guidance are still subject to an evaluation in regard to determining whether or not a loan is deemed to be impaired.

At June 30, 2020 and December 31, 2019, the balance of real estate owned includes $ 32,000 and $ 0 , respectively, of foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property.

At June 30, 2020 and December 31, 2019, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds were in process was $ 283,000 and $ 190,000 , respectively.

At September 30, 2020 and December 31, 2019, the balance of real estate owned includes $ 32 ,000 and $ 0 , respectively, of foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property.

At September 30, 2020 and December 31, 2019, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds were in process was $ 283 ,000 and $ 190 ,000, respectively.

The following lists the components of the net investment in direct financing leases:

September 30,

Total minimum lease payments to be received

2 unchanged sentences

Net investment in direct finance leases

The amount of leases serviced by First Bank Richmond for the benefit of others was approximately $ 336,000 and $ 715,000 at June 30, 2020 and December 31, 2019, respectively.

Leases serviced by First Bank Richmond for the benefit of others totaled approximately $ 189,000 and $ 715,000 at September 30, 2020 and December 31, 2019, respectively.

Additionally, certain leases have been sold with partial recourse.

First Bank Richmond estimates and records its obligation based upon historical loss percentages.

At June 30, 2020 and December 31, 2019, First Bank Richmond has recorded a recourse obligation on leases sold with recourse of $ 0 , and has a maximum exposure of $ 411,000 for these leases.

The following table summarizes the future minimum lease payments receivable subsequent to June 30, 2020:

At September 30, 2020 and December 31, 2019, First Bank Richmond has recorded a recourse obligation on leases sold with recourse of $ 0 , and has a maximum exposure of $ 411,000 for these leases.

The following table summarizes the future minimum lease payments receivable subsequent to September 30, 2020:

Fair Value of Financial Instruments

8 unchanged sentences

Recurring Measurements

The following tables present the fair value measurements of assets recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2020 and December 31, 2019:

Fair Value Measurements Using

Quoted Prices

June 30, 2020

September 30, 2020

Available-for-sale securities

Treasury securities

Federal agencies

14 unchanged sentences

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

There have been no significant changes in the valuation techniques during the six months ended June 30, 2020.

There have been no significant changes in the valuation techniques during the nine months ended September 30, 2020.

Available-for-Sale Securities

2 unchanged sentences

Level 2 securities include agency securities, obligations of state and political subdivisions, and mortgage-backed securities.

Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities without relying exclusively on quoted prices for specific investment securities but rather relying on the investment securities’ relationship to other benchmark quoted investment securities.

benchmark quoted investment securities.

In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Nonrecurring Measurements

The following table presents the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2020 and December 31, 2019:

Fair Value Measurements Using

Quoted Prices

June 30, 2020

September 30, 2020

Impaired loans, collateral dependent

23 unchanged sentences

Unobservable (Level 3) Inputs

The following tables present the fair value measurement of assets recognized in the accompanying consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2020 and December 31, 2019:

Fair Value at

September 30,

Collateral-dependent

10 unchanged sentences

Fair Value of Financial Instruments

The following tables present estimated fair values of the Company’s financial instruments at June 30, 2020 and December 31, 2019.

The following tables present estimated fair values of the Company’s financial instruments at September 30, 2020 and December 31, 2019.

Fair Value Measurements Using

Quoted Prices

June 30, 2020

September 30, 2020

Financial assets

27 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2020

Nine Months Ended

September 30, 2020

Shares outstanding for Basic EPS:

6 unchanged sentences

Diluted Earnings Per Share

For the Period

July 2, 2019 to

July 2, 2019 to September 30, 2019

September 30, 2019

Net income (loss)

Shares outstanding for Basic EPS:

Average shares outstanding

average unearned ESOP Shares

Shares outstanding for Basic EPS

Additional Dilutive Shares

Shares outstanding for Diluted EPS

Basic Earnings (loss) Per Share

Diluted Earnings (loss) Per Share

Employee Stock Ownership Plan

3 unchanged sentences

Shares are released to participants proportionately as the loan is repaid.

ESOP expense for the three and six months ended June 30, 2020 was $143,000 and $329,000, respectively.

June 30, 2020

ESOP expense for the three months ended September 30, 2020 and 2019 was $151,548 and $121,000, respectively.

ESOP expense for the nine months ended September 30, 2020 was $481,000 and $121,000, respectively.

September 30, 2020

September 30, 2019

Earned ESOP shares

4 unchanged sentences

Fair value of unearned shares

Benefit Plans

The Company participates in the Pentegra Defined Benefit Plan for Financial Institutions (the “DB Plan”), an industry-wide, tax-qualified defined-benefit pension plan.

As previously disclosed, the Company has frozen and intends to terminate the Bank’s participation in the DB Plan, which will require it to pay an amount based on the underfunded status of the plan.

As of September 30, 2020, the Company has accrued $17.5 million for this expense.

The actual termination expense of the DB Plan may be higher or lower than the amount currently accrued for by the Company depending on a number of factors, including but not limited to the interest rate environment and the valuation of plan assets.

Due to the current low interest rate environment, terminating the DB Plan at this time would require the Company to incur a substantial additional expense, in the range of approximately $8.0 million to $10.0 million, over and above the amount presently accrued.

As a result, the Company’s Board of Directors will continue to monitor and evaluate the timing of, and costs associated with, termination of the DB Plan.

Any additional expenses associated with the termination of the DB Plan will negatively impact our results of operations in the future.

Subsequent Event

On July 8, 2020, the Company announced that its Board of Directors authorized a stock repurchase program for up to 676,331 shares, or approximately 5% of its currently outstanding shares.

Subsequent to September 30, 2020, the Company completed its previously announced stock repurchase program, repurchasing the remaining 94,232 shares at an average price of $11.07 per share.

On October 21, 2020, the Board of Directors of the Company authorized a second stock repurchase program for up to 664,969 shares, or approximately 5%, of its outstanding shares.

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

What changed 10-Q

Item 1. Financial Statements