What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-03-30 compared with 2021-03-31 · 204 added, 462 removed, 831 unchanged (44% of the section changed)

13 unchanged sentences

Community Foundation (the “Foundation”).

Richmond Mutual Bancorporation-Maryland is regulated by the Federal Reserve Board and the IDFI.

Richmond Mutual Bancorporation-Maryland is regulated by the Federal Reserve Board.

Our corporate office is located at 31 North 9th Street, Richmond, Indiana, and our telephone number is (765) 962-2581 .

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At December 31, 2021, First Bank Richmond’s total risk-based capital ratio was 17.3%, exceeding the 10.0% requirement for a well-capitalized institution.

For the year ended December 31, 2020, we reported net income of $10.0 million, compared to a net loss of $14.1 million for the year ended December 31, 2019.

Our results of operations for the year ended December 31, 2019 were affected by the following non-recurring charges:

(i) a $14.3 million estimated after tax charge associated with the freezing and intended termination of our defined benefit plan;

(ii) an after tax charge of $4.9 million associated with our contribution to the Foundation which was formed in connection with our reorganization and stock offering completed on July 1, 2019, and (iii) an after tax charge of $1.3 million related to the adoption of a nonqualified deferred compensation plan in the second quarter of 2019.

For the year ended December 31, 2021, we reported net income of $11.1 million, compared to net income of $10.0 million for the year ended December 31, 2020.

Our primary market area includes Wayne and Shelby counties in Indiana and Shelby, Miami, and Franklin counties in Ohio.

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As of December 31, 2021, First Bank Richmond was in compliance with the loans-to-one-borrower limitations.

At December 31, 2020, our largest lending relationship with one borrower was for $16.5 million consisting of five commercial real estate loans secured by five separate hotels, three in the Dayton, Ohio area and two in the Cincinnati, Ohio area, all with a common guarantor.

At December 31, 2021, our largest lending relationship with one borrower was for $22.2 million consisting of seven commercial real estate loans secured by six separate hotels, three in the Dayton, Ohio area, one in the Columbus, Ohio area and two in the Cincinnati, Ohio area, all with a common guarantor.

All of these loans were performing in accordance with their repayment terms at December 31, 2021.

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All loan approval amounts are based on the aggregate debt, including total commitments outstanding and the proposed loan to the individual borrower and any related entity.

In compiling the aggregate debt for determining the adequacy of an officer’s loan authority for commercial lending and leases, the following may be excluded:

(i) consumer debt not to exceed $100,000, as long as the collateral is in the primary borrower’s name;

and (ii) permanent first mortgage on the borrower’s primary residence, as long as the primary residence is in the name of the borrower.

First Bank Richmond’s board of directors has the responsibility for approving, on an annual basis, specific lending authority for individual officers, combinations of officers, or loan committees.

Garry Kleer, President and Chief Executive Officer of First Bank Richmond, has individual authorization to approve any loan up to $1.5 million.

Dean Weinert, President of Mutual Federal, a division of First Bank Richmond based in Ohio, has individual authorization to approve residential mortgage, commercial and consumer loans up to $1.5 million.

The lending authorities of our other officers range from $50,000 to $1.0 million, and is granted based upon the ability and experience and need of the individual loan officers, relative to the degree of risk and level of expertise required for handling the different types of loans.

Loans that exceed the lending authority of the individual loan officer with exposure up to $1.5 million can be approved by the recommending loan officer and by any one of four designated senior loan officers.

Additionally, loans in excess of $1.5 million and up to $2.5 million can be approved by the recommending loan officer and two designated senior loan officers.

Loans in excess of $2.5 million up to $5.0 million must be approved by (i) a majority vote of the members of the Officer Loan Committee present at the meeting (which committee currently consists of 12 bank officers), or (ii) if occurring outside an Officer Loan Committee meeting, five individuals, two of whom must be Garry Kleer, Paul Witte or Dean Weinert, plus the recommending loan officer and two additional members of the Officer Loan Committee.

All new loans or renewals to relationships graded “substandard” or below in the amount of (i) $250,000 or less must be approved by one of four designated senior loan officers and (ii) over $250,000 but up to and including $1.0 million must be approved by the Officer Loan Committee.

Loans in excess of $5.0 million up to our legal lending limit must be approved by (i) a majority vote of the members of the Executive Loan Committee present at the meeting (which committee consists of the First Bank Richmond board of directors (excluding Director Jeffrey Jackson), Dean Weinert, Paul Witte and two members of the Mutual Federal Advisory Board), or (ii) if occurring outside an Executive Loan Committee meeting, five members of the Executive Loan Committee.

All new loans or renewals to relationships graded “substandard” or below in excess of $1.0 million must be approved by the Executive Loan Committee.

Loan and Lease Portfolio Composition.

The following table presents information concerning the composition of our loan and lease portfolio in dollar amounts and in percentages (before deductions for loans in process, deferred fees and discounts and allowances for loan and lease losses) as of the dates indicated.

At December 31,

2020 2019 2018 2017 2016

Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent

(Dollars in thousands)

Real estate loans:

Residential (1)

$ 127,108 16.99 % $ 131,294 18.90 % $ 132,492 20.05 % $ 128,773 22.86 % $ 129,336 27.64 %

Home equity lines of credit

5,982 0.80 6,996 1.01 7,214 1.09 7,245 1.29 7,370 1.58

Multi-family 55,998 7.48 66,002 9.50 43,816 6.63 63,701 11.31 32,624 6.97

Commercial 247,564 33.08 229,410 33.01 211,237 31.97 162,218 28.80 120,098 25.67

Construction and development

58,424 7.81 53,426 7.69 72,955 11.04 27,944 4.96 18,788 4.02

Total real estate loans

495,076 66.16 487,128 70.11 467,714 70.78 389,881 69.22 308,216 65.88

Consumer loans 13,257 1.77 13,534 1.95 13,520 2.05 11,628 2.06 10,858 2.32

Commercial business loans and leases:

Commercial and industrial

122,831 16.41 84,549 12.17 71,854 10.87 61,753 10.97 55,352 11.83

Direct financing leases

117,171 15.66 109,592 15.77 107,735 16.30 99,940 17.75 93,433 19.97

Total commercial business loans and leases

240,002 32.07 194,141 27.94 179,589 27.17 161,693 28.72 148,785 31.80

Total loans and leases 748,335 100.00 % 694,803 100.00 % 660,823 100.00 % 563,202 100.00 % 467,859 100.00 %

Deferred fees and discounts

1,349 456 468 473 436

Allowance for loan and lease losses

10,586 7,089 5,600 4,800 5,246

Total loans and leases receivable, net

$ 736,400 $ 687,258 $ 654,755 $ 557,929 $ 462,177

(1) Includes $3.6 million and $4.5 million of loans secured by second mortgages on residential properties at December 31, 2020 and 2019, respectively.

Loan Maturity and Repricing.

The following table sets forth certain information at December 31, 2020 regarding the dollar amount of loans maturing in our portfolio based on their contractual terms to maturity, but does not include scheduled payments or potential prepayments.

The following tables set forth certain information at December 31, 2021 regarding the dollar amount of loans maturing in our portfolio based on their contractual terms to maturity, but does not include scheduled payments or potential prepayments.

Loans with scheduled maturities are reported in the maturity category in which the loan is due.

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Loan balances do not include undisbursed loan proceeds, unearned discounts, unearned income and allowance for loan and lease losses.

Consumer Commercial and

Industrial Construction Total

Due During Years Ending

December 31, Amount Weighted

Rate Amount Weighted

Due in 1 Year or Less Weighted Average Yield Due After 1 Year Through 5 Years Weighted Average Yield Due After 5 Years Through 15 Years Weighted Average Yield Due After 15 Years Weighted Average Yield Total Loans and Leases Weighted Average Yield

(Dollars in thousands)

$ 1,560 4.09 % $ 25,590 4.26 % $ 17,000 4.46 % $ 44,150 4.34 %

2022 1,205 5.08 4,112 4.44 7,746 4.25 13,063 4.39

2023 1,897 5.25 4,694 4.34 5,916 4.28 12,507 4.45

2024 and 2025 5,607 4.89 59,455 2.02 2,844 3.97 67,906 2.34

2026 to 2030 1,879 4.24 8,702 4.47 17,170 4.53 27,751 4.49

2031 to 2035 1,068 6.01 10,032 5.34 3,862 5.54 14,962 5.44

2036 and following 41 3.75 10,246 4.61 3,886 4.41 14,173 4.55

Total $ 13,257 4.86 % $ 122,831 3.32 % $ 58,424 4.48 % $ 194,512 3.77 %

(1) Includes demand loans, loans having no stated maturity and overdraft loans.

The total amount of loans set forth in the table above due after December 31, 2021 which have pre-determined or fixed interest rates is $84.9 million, while the total amount of loans due after this date which have floating or adjustable interest rates is $65.4 million.

Commercial mortgage $ 9,490 5.4 % $ 28,892 4.0 % $ 109,101 4.4 % $ 113,719 4.6 % $ 261,202 4.3 %

Commercial and industrial 26,562 4.2 30,019 3.3 27,988 4.7 15,113 4.6 99,682 4.0

Construction and development 35,297 4.2 26,943 4.1 24,440 3.8 6,998 4.1 93,678 3.9

Multi-family 2,100 4.3 26,093 3.8 54,452 3.9 24,776 4.2 107,421 3.9

Residential mortgage 2,840 2.3 7,193 4.5 39,138 4.1 84,984 4.3 134,155 4.1

Home equity lines of credit 1,105 4.3 2,561 4.5 3,480 3.6 — — 7,146 3.9

Leases 6,610 6.5 119,862 6.8 291 5.5 — — 126,762 6.8

Consumer 1,265 3.8 8,983 5.2 5,618 4.8 39 3.8 15,905 4.7

Total loans and leases $ 85,269 $ 250,546 $ 264,508 $ 245,629 $ 845,951

Amount due after one year at fixed interest rates:

Amount due after one year at variable interest rates:

(Dollars in thousands)

Commercial mortgage $ 36,210 $ 215,502

Commercial and industrial 32,547 40,573

Construction and development 12,329 46,052

Multi-family 13,033 92,288

Residential 83,248 48,067

Home equity lines of credit 1,650 4,391

Leases 120,152 —

Consumer 14,640 —

Total loans and leases $ 313,809 $ 446,873

Residential Mortgage Lending .

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We typically sell most of the conforming, fixed-rate one- to four-family loans we originate into the secondary market to Fannie Mae and, to a lesser extent, the FHLB of Indianapolis.

Loans that are sold into the secondary market to Fannie Mae or the FHLB of Indianapolis are sold with the servicing retained to maintain the client relationship and to generate noninterest income.

Loans that are sold into the secondary market to Fannie Mae or the FHLB of Indianapolis are sold with the servicing retained to maintain the client relationship and to generate non-interest income.

The sale of mortgage loans provides a source of non-interest income through the gain on sale, reduces our interest rate risk, provides a stream of servicing income, enhances liquidity and enables us to originate more loans at our current capital level than if we held the loans in our loan portfolio.

Our pricing strategy for mortgage loans includes establishing interest rates that are competitive with other financial institutions and consistent with our internal asset and liability management objectives.

During the year ended December 31, 2021, we originated $101.5 million one- to four-family fixed-rate mortgage loans and $19.9 million one- to four-family adjustable-rate mortgage (“ARM”) loans, and sold $73.5 million of these loans without recourse to Fannie Mae and the FHLB of Indianapolis.

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We may require additional collateral or lower loan-to-value ratios to reduce the risk of these loans.

We believe that these loans satisfy the needs

of borrowers in our market area.

We believe that these loans satisfy the needs of borrowers in our market area.

As a result, subject to market conditions, we intend to continue to originate these types of loans.

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We do not engage in originating interest only, negative amortization, option adjustable rate or subprime loans and have no established program to originate or purchase these loans.

Subprime loans are defined as loans that at the time of loan

origination had a FICO credit score of less than 660.

Of the $129.8 million in one- to four- family loans, including home equity loans and lines of credit, originated in 2020, only $1.7 million, or 1.3%, were to borrowers with a credit score under 660.

Subprime loans are defined as loans that at the time of loan origination had a FICO credit score of less than 660.

Of the $141.3 million in one- to four- family loans, including home equity loans and lines of credit, in our portfolio as of December 31, 2021, $8.3 million, or 5.9%, were to borrowers with a credit score under 660.

Multi-family and Commercial Real Estate Lending .

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For loans less than $1.0 million but greater than $150,000, a full Phase I Environmental Audit is not required, although an environmental investigation is typically performed by qualified bank personnel or a third party to determine if a full Phase I Environmental Audit should be done.

At December 31, 2020, the average loan size of our outstanding multi-family and commercial real estate loans was $750,000, and the largest of such loans was a $10.4 million loan secured by a first mortgage on an office building located in the Columbus, Ohio metropolitan area.

At December 31, 2021, the average loan size of our outstanding multi-family and commercial real estate loans was $908,000, and the largest of such loans was a $12.0 million loan secured by a first mortgage on a parking garage and apartment building located in the Columbus, Ohio metropolitan area.

This loan was performing in accordance with its repayment terms at December 31, 2021.

We had 33 other commercial and multi-family real estate loans with an outstanding balance in excess of $3.0 million at December 31, 2021, all of which were performing in accordance with their repayment terms at December 31, 2021.

Our largest lending relationship with one borrower at December 31, 2020 was for $16.5 million consisting of five commercial real estate

loans secured by five separate hotels, three in the Dayton, Ohio area and two in the Cincinnati, Ohio area, all with a common guarantor.

Our largest lending relationship with one borrower at December 31, 2021 was for $22.2 million consisting of seven commercial real estate loans secured by six separate hotels, three in the Dayton, Ohio area, one in the Columbus, Ohio area and two in the Cincinnati, Ohio area, all with a common guarantor.

All of these loans were performing in accordance with their repayment terms at December 31, 2021.

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The SBA guarantees 100% of the PPP loans made to eligible borrowers.

The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business are maintained and the loan

proceeds are used for other qualifying expenses.

We originated 482 PPP loans totaling $64.9 million during 2020.

At December 31, 2020, we have submitted 263 PPP loans for a total of $40.0 million to the SBA for forgiveness, of which $21.6 million has been forgiven by the SBA as of December 31, 2020.

We originated 892 PPP loans totaling $103.1 million during the program.

The terms of our commercial and industrial loans, excluding PPP loans, vary by purpose and by type of underlying collateral.

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This loan was performing in accordance with its repayment terms at December 31, 2021.

We had seven other commercial and industrial loans with an outstanding balance in excess of $3.0 million at December 31, 2020, all of which were performing in accordance with their repayment terms at that date.

We had four other commercial and industrial loans with an outstanding balance in excess of $3.0 million at December 31, 2021, all of which were performing in accordance with their repayment terms at that date.

Construction and Development Lending.

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At December 31, 2021, our construction and development loan portfolio totaled $93.7 million, or 11.1% of our total loan and lease portfolio, consisting of $89.3 million in commercial construction loans and $4.4 million in residential construction loans.

At December 31, 2020, we had unfunded construction loan commitments totaling $52.1 million and $761,000 in commercial and residential construction loans, respectively.

At December 31, 2021, we had unfunded construction loan commitments totaling $43.2 million and $2.9 million in commercial and residential construction loans, respectively.

Our commercial construction loans are typically made to builders/developers that have an established record of successful project completion and loan repayment.

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The average outstanding loan size in our commercial construction loan portfolio was approximately $1.4 million at December 31, 2021.

Commercial construction loans on property built for speculative purposes that has not sold in a period of eighteen months after completion will require re-margining at no more than 89% of current appraised value and monthly amortization

based on a 25-year payout.

At December 31, 2021, $18.3 million, or 20.5%, of our total commercial construction loan portfolio consisted of speculative construction loans.

We finance the construction of pre-sold owner occupied, one- to four-family residential properties in our market areas to builders and prospective homeowners.

Our residential construction loans are originated primarily on a construction/permanent basis with such loans converting to an amortizing loan following the completion of the construction phase.

Our residential construction loans are originated primarily on a construction/

permanent basis with such loans converting to an amortizing loan following the completion of the construction phase.

Our residential construction loans generally provide for the payment of interest only during the construction phase, which is typically up to nine months.

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No assurances, however, can be given that these practices will be successful in mitigating the risks of construction and development lending.

At December 31, 2020, our largest construction and land development loan had an outstanding balance of $5.3 million and was secured by a first mortgage on a 108-unit apartment development in the Columbus, Ohio metropolitan area.

At December 31, 2021, our largest construction and land development loan had an outstanding balance of $8.7 million and was secured by a first mortgage on an office building located in Fairborn, Ohio.

At December 31, 2021, this loan was performing according to its repayment terms.

We had six other construction and development loans with an outstanding balance in excess of $3.0 million at December 31, 2020, all of which were performing in accordance with their repayment terms at that date.

We had 14 other construction and development loans with an outstanding balance in excess of $3.0 million at December 31, 2021, all of which were performing in accordance with their repayment terms at that date except for one $4.9 million loan that is subject to litigation between the developer and other parties.

Lease Financing.

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At December 31, 2021, our direct finance leasing portfolio totaled $126.8 million, or 15.0% of our total loan and lease portfolio.

At lease inception, we record an asset (net investment) representing the aggregate future minimum lease payments and deferred incremental direct costs less unearned income.

At lease inception, we record an asset (net investment) representing the aggregate future minimum lease payments and deferred indirect costs less unearned income.

Income is recognized over the life of the lease to approximate a level rate of return on the net investment.

To generate deal flow, we work with over 100 brokers and third-party originators across the country, some of which are one person shops and others more established companies, with most of the volume coming from less than 20 referral sources that we know well.

We have operated with this model since we commenced leasing operations in 1989 and have developed strong procedures to minimize fraud and concentration risk.

sources that we know well.

We have operated with this model since we commenced leasing operations in 1989 and have developed procedures to minimize fraud and concentration risk.

The leases are processed by us through our lease origination software, which allows brokers to populate the fields with customer information and attach credit documentation, streamlining the data collection process.

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At December 31, 2021, our largest leasing relationship was with the State of Arkansas consisting of more than 3,000 leases totaling approximately $9.4 million in lease receivables, all of which were performing in accordance with the lease terms.

Our second largest leasing relationship was with a recycling company consisting of 3 leases totaling approximately $1.6 million in lease receivables, all of which were performing in accordance with the lease terms.

Consumer Lending.

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During the year ended December 31, 2021, we originated $315.1 million of fixed rate loans and leases and $218.7 million of adjustable-rate loans, compared to $274.7 million of fixed rate loans and leases and $129.9 million of adjustable-rate loans during the year ended December 31, 2020.

The following tables provide information regarding our origination for the dates indicated:

The following tables provide information regarding our origination for the periods indicated:

Fixed Rate Floating or

1 unchanged sentence

(Dollars in thousands)

Residential real estate (1)

Residential mortgage (1)

$ 101,512 $ 19,860 $ 121,372

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Commercial and Industrial 55,857 25,384 81,241

Direct finance leasing 61,122 — 61,122

Leases 70,733 — 70,733

Total $ 315,053 $ 218,665 $ 533,718

(1) Includes $1.0 million of fixed-rate and no adjustable-rate loans secured by second mortgages on residential properties.

(1) Includes $1.8 million of fixed-rate and $25,000 of adjustable-rate loans secured by second mortgages on residential properties.

Fixed Rate Floating or

1 unchanged sentence

(Dollars in thousands)

Residential real estate (1)

Residential mortgage (1)

$ 113,553 $ 11,200 $ 124,753

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Commercial and Industrial 71,834 24,588 96,422

Direct finance leasing 51,501 — 51,501

Leases 61,122 — 61,122

Total $ 274,665 $ 129,894 $ 404,559

(1) Includes $1.0 million of fixed-rate and no adjustable-rate loans secured by second mortgages on residential properties.

As reflected in the tables above, loan and lease originations increased $165.6 million or 69.3%, to $404.6 million during 2020 compared to $239.0 million during 2019, primarily due to increases in residential real estate loan and commercial and industrial loan originations.

Demand for one-to-four family loans grew significantly in 2020 as homeowners, taking advantage of historically low interest rates, refinanced their homes.

In addition, the pandemic increased demand for single-family homes and away from large apartment complexes and city living.

The increase in commercial and industrial loan originations was due to PPP loans.

As reflected in the tables above, loan and lease originations increased $129.2 million or 31.9%, to $533.7 million during 2021 compared to $404.6 million during 2020, primarily due to increases in multi-family and commercial real estate originations and loan participation purchases.

We consider our balance sheet as well as market conditions on an ongoing basis in making decisions as to whether to hold residential loans we originate for investment or to sell these loans to investors, choosing the strategy that is most advantageous to us from a profitability and risk management standpoint.

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All FHA, VA and USDA loans we originate are sold on a servicing-released, non-recourse basis in accordance with FHA, VA and USDA guidelines.

For the years ended December 31, 2020, 2019 and 2018, we sold $103.9 million, $27.2 million, and $20.7 million of one- to four-family residential real estate loans, respectively.

For the years ended December 31, 2021 and 2020, we sold $76.2 million and $103.9 million of one- to four-family residential real estate loans, respectively.

We recognize, at the time of sale, the cash gain or loss on the sale of the loans based on the difference between the net cash proceeds received and the carrying value of the loans sold.

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From time to time, we may purchase loan participations secured by properties within and outside of our primary lending market area in which we are not the lead lender.

In these circumstances, we follow our customary loan underwriting and approval policies.

In these circumstances, we follow our customary loan underwriting

and approval policies.

At December 31, 2021, we had 38 loans totaling $54.7 million in which we were not the lead lender.

All of these participation loans were performing in accordance with their original repayment terms at December 31, 2020, except for a $1.1 million commercial real estate participation loan more than 90 days past due and still accruing that is working towards resolution by the lead bank.

All of these participation loans were performing in accordance with their original repayment terms at December 31, 2021.

We also have sold portions of loans we originate that exceeded our loans-to-one borrower legal lending limit or for risk diversification.

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Delinquencies and Non-Performing Assets

Delinquency Procedures for Owner Occupied One- to Four-Family Residential and Consumer Loans.

Prior to an owner-occupied residential real estate or consumer loan payment reaching 30 days past due, our loan officers and/or members of our loan collection department typically will contact the customer.

If a loan payment becomes 30 days past due, we mail a late notice and we also place telephone calls to the borrower.

These loan collection efforts continue until a loan becomes more than 90 days past due, at which point we would generally refer the loan for foreclosure proceedings unless management determines that it is in the best interest of First Bank Richmond to work further with the borrower to arrange a workout plan.

A workout plan generally is done if we believe that the borrower will be able to keep the loan current and in no event more often than one time per year, and two times in a three-year period.

Once the loan is more than 90 days past due, a demand notice will be sent to the borrower requiring payments to be brought current within 10 days for non-real estate secured loans and 30 days for real estate secured loans.

The foreclosure process generally would begin when a loan becomes 120 days delinquent.

From time to time we may accept deeds in lieu of foreclosure.

Foreclosed real estate will be booked into other real estate owned.

In most cases, the real estate will be listed with a realtor for sale if an accepted purchase offer is not received within 30 days of the bank taking title.

For equipment and titled vehicles, if the borrower is unwilling to surrender the collateral voluntarily, a repossession company will be hired to repossess the collateral.

Vehicles and other personal property will be sold in a commercially reasonable manner according to the property.

Delinquency Procedures for Commercial and Multi-family and Commercial Real Estate Loans and Leases.

When a commercial loan or commercial or multi-family real estate loan or lease becomes 10 days past due, we contact the customer by mailing a late notice.

The loan officer assigned to the account may also contact the borrower.

If the loan continues past due, the loan officer will continue to contact the borrower to determine the cause of the past due payment(s) and arrange for payments.

This information will be discussed with the commercial loan manager to determine the nature of the past due payment and, if necessary, to develop a plan to bring the past due payment(s) current and determine if the likelihood of repayment is in question.

The loan will also be evaluated for a change to the risk rating.

Depending on the circumstances, the lender and commercial loan manager may develop a plan to protect First Bank Richmond’s interest in the loan.

If necessary, First Bank Richmond will engage an attorney to pursue further collection efforts.

Loan officers are required to complete a “problem loan workout report” on all loans over $500,000 that are rated as criticized or classified.

The plans outlined in these reports detail the specific strategies proposed to resolve the defined credit weaknesses, the current condition of the relationship, identify the specific sources of repayment, give a current valuation of all collateral, the position we hold in all collateral, an analysis of all current financial information including cash flows, a timeline for specific actions to occur in the workout plan and set guidelines that would trigger consideration for grading changes.

The reports also include an up-to-date accounting for any expenses that have been incurred on that account.

Additional trigger dates for legal proceedings and or foreclosure action are generally discussed in the report in detail.

In most cases a decision to foreclose or pursue other legal action on a problem credit will be determined at 120 days past due.

In some cases, however, it may be in First Bank Richmond’s best interests to delay such action.

The reason for delays is discussed and a trigger date established for final action.

Loans and Leases Past Due and Nonperforming Assets .

Loans and leases are reviewed on a regular basis.

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When a loan or lease is determined to be impaired, the measurement of the loan or lease in the allowance for loan and lease losses is based on present value of expected future cash flows, except that all collateral-dependent loans are measured for impairment based on the fair value of the collateral.

accrual loans and leases are loans and leases for which collectability is questionable and, therefore, interest on such loans will no longer be recognized on an accrual basis.

Non-accrual loans and leases are loans and leases for which collectability is questionable and, therefore, interest on such loans will no longer be recognized on an accrual basis.

All loans and leases that become 90 days or more delinquent are placed on non-accrual status unless the loan is well secured and in the process of collection.

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After acquisition, all costs incurred in maintaining the property are expensed.

Delinquent Loans and Leases .

The following table shows our delinquent loans and leases by the type of loan or lease and number of days delinquent as of December 31, 2020.

Loans Delinquent For:

60-89 Days 90 Days and Over Total Loans Delinquent

60 Days or More

Number Amount Percent

Category Number Amount Percent

(Dollars in thousands)

Real Estate Loans:

Residential (1)

7 $ 243 0.2 % 53 $ 2,680 2.1 % 60 $ 2,923 2.3 %

Home equity lines of credit 1 15 0.3 2 25 0.4 3 40 0.7

Multi-family — — — — — — — — —

Commercial — — — 2 1,177 0.5 2 1,177 0.5

Construction or development 1 4,900 8.4 — — — 1 4,900 8.4

Total Real Estate Loans 9 5,158 1.0 57 3,882 0.8 66 9,040 1.8

Consumer 4 129 1.0 6 317 2.4 10 446 3.4

Commercial and industrial 2 203 0.2 4 439 0.4 6 641 0.5

Direct financing leases 2 65 0.1 — — — 2 65 0.1

Total 17 $ 5,555 0.7 % 67 $ 4,638 0.6 % 84 $ 10,193 1.4 %

(1) Includes loans secured by first and second mortgages on residential properties.

Nonperforming Loans and Leases.

We generally cease accruing interest on our loans and leases when contractual payments of principal or interest have become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan or lease is currently performing.

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Nonperforming loans and leases totaled $8.1 million or 0.95% of total loans and leases at December 31, 2021 and $4.8 million or 0.64% of total loans and leases at December 31, 2020.

Troubled Debt Restructurings.

Loans are accounted for as troubled debt restructurings when a borrower is experiencing financial difficulties that lead to a restructuring of the loan, and First Bank Richmond grants a concession to the borrower that it would not otherwise consider.

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At December 31, 2021, we had no loans or leases classified as accruing troubled debt restructurings.

Foreclosed Assets .

Foreclosed assets consist of property acquired through formal foreclosure, in-substance foreclosure or by deed in lieu of foreclosure, and are recorded at the lower of recorded investment or fair value less estimated costs to sell.

2 unchanged sentences

We had $27,000 in foreclosed assets at December 31, 2021.

Nonperforming Assets .

The table below sets forth the amounts and categories of our non-performing assets at the dates indicated.

The improvement in total non-performing assets from 2016 through 2020 resulted primarily from the resolution of older non-performing commercial real estate loans most of which were secured by property located outside our primary market area.

Foreclosed assets include assets acquired in settlement of loans.

The increase in total non-performing assets in 2021 resulted primarily from a $4.9 million non-accruing construction and development loan more than 90 days past due that is currently subject to litigation between the developer and other parties.

At December 31,

2020 2019 2018 2017 2016

(Dollars in thousands)

Non-accrual loans and leases:

Residential (1)

$ 214 $ 315 $ 357 $ 320 $ 844

Residential mortgage (1)

Commercial real estate 128 76

Construction and development 4,900 —

Commercial and industrial 995 493

Direct financing leases 20 74 202 25 124

Total non-accruing loans and leases (2)

803 1,225 2,479 3,135 5,557

Accruing loans and leases delinquent more than 90 days:

Residential (1)

2,554 2,256 1,913 1,310 1,961

Residential mortgage (1)

Home equity lines of credit 12 25

Commercial real estate — 1,100

Construction and development — 249 — — —

Consumer 22 317

Commercial and industrial — 3 130 68 8

Direct financing leases — 49 — — —

Total accruing loans and leases delinquent more than 90 days 1,847 3,996

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Foreclosed assets:

Residential (1)

32 — 176 34 72

Commercial real estate — — — — 3,672

Residential mortgage (1)

Total foreclosed assets 27 32

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Troubled debt restructurings (accruing):

Commercial and industrial — — — — 152

Total trouble debt restructuring (accruing) $ — $ —

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(1) Includes loans secured by first and second mortgages on residential properties.

(2) Non-accrual loans and leases include $541,000, $598,000, $1.6 million, $2.7 million and $2.8 million, of troubled debt restructurings for the years ended December 31, 2020, 2019, 2018, 2017 and 2016, respectively.

Interest income that would have been recorded for the year ended December 31, 2020 had non-accruing loans been current according to their original terms amounted to $69,000, of which none was recorded.

Other Loans and Leases of Concern.

Other loans and leases of concern are those loans and leases that are currently accruing interest and are not considered impaired, but which we are monitoring because the financial information of the borrower causes us concerns as to their ability to comply with their loan repayment terms.

Potential problem loans and leases, not included in the non-performing asset table above, totaled $4.3 million at December 31, 2020, with the largest other loan of concern totaling $1.0 secured by a second mortgage on an office building in Indianapolis, Indiana.

(2) Non-accrual loans and leases include $456,000 and $541,000 of troubled debt restructurings for the years ended December 31, 2021 and 2020, respectively.

Classified Assets .

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When an insured institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge off such amount.

Our determination as to the classification of our assets and the amount of our valuation allowances is subject to review by our regulators, which may order the establishment of additional general or specific loss allowances.

Our determination as to the classification of our assets and

the amount of our valuation allowances is subject to review by our regulators, which may order the establishment of additional general or specific loss allowances.

In accordance with our loan policy, we regularly review the problem loans in our portfolio to determine whether any loans require classification in accordance with applicable regulations.

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At December 31,

2020 2019 2018

(In thousands)

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The following table sets forth an analysis of our allowance for loan and lease losses at the dates and for the periods indicated.

Average balances of residential loans include loans held for sale.

Years Ended December 31,

2020 2019 2018 2017 2016

(Dollars in thousands)

Balance at beginning of period:

$ 7,089 $ 5,600 $ 4,800 $ 5,394 $ 5,246

Real estate loans:

Residential (1)

36 66 121 1,842 772

Home equity — — — — —

Multi-family — — — — —

Commercial — 15 — — 81

Construction and development — — — — 15

Total real estate loans 36 81 121 1,842 868

Consumer loans 151 123 57 57 92

Commercial business:

Allowance for loan and lease losses to total loans outstanding 1.43 % 1.42 %

Allowance for loan and lease losses $ 12,108 $ 10,586

Total loans outstanding $ 845,951 $ 746,348

Nonaccrual loans to total loans outstanding 0.73 % 0.11 %

Nonaccrual loans $ 6,184 $ 803

Total loans outstanding $ 845,951 $ 746,348

Allowance for loan and lease losses to nonaccrual loans 195.80 % 1,318.31 %

Allowance for loan and lease losses $ 12,108 $ 10,586

Nonaccrual loans $ 6,184 $ 803

Net charge-offs/(recoveries) during the period to average loans outstanding:

Commercial real estate — % (0.01) %

Net charge-offs/(recoveries) during the period $ (3) $ (37)

Average amount outstanding $ 253,938 $ 253,181

Commercial and industrial (0.09) % (0.06) %

Direct financing leases 408 315 454 304 345

Total commercial business loans and leases 408 1,224 1,487 569 570

Total charge offs 595 1,428 1,665 2,468 1,530

Real estate loans:

Residential (1)

43 64 137 101 57

Home equity 4 — 2 2 2

Multi-family — — — — —

Commercial 37 19 308 38 141

Net charge-offs/(recoveries) during the period $ (104) $ (69)

Average amount outstanding $ 117,528 $ 118,683

Construction and development — % (0.07) %

Total real estate loans 111 83 464 176 217

Consumer loans 21 26 31 29 30

Commercial business:

Commercial and industrial 69 10 26 21 40

Direct financing leases 121 198 264 278 236

Total commercial business loans and leases 190 208 290 299 276

Total recoveries 322 317 785 504 523

Net charge-offs 273 1,111 880 1,964 1,007

Additions charged to operations 3,770 2,600 1,680 1,370 1,155

Balance at end of period $ 10,586 $ 7,089 $ 5,600 $ 4,800 $ 5,394

Net charge-offs during the period to average loans outstanding during the period 0.04 % 0.16 % 0.14 % 0.38 % 0.23 %

Net charge-offs during the period to average non-performing assets 6.57 % 26.10 % 18.93 % 24.77 % 7.89 %

Allowance as a percentage of non- performing assets 220.57 % 185.97 % 117.87 % 105.56 % 47.70 %

Allowance as a percentage of total gross loans and leases receivable (end of period) 1.42 % 1.02 % 0.85 % 0.85 % 1.15 %

(1) Includes loans secured by first and second mortgages on residential properties.

Net charge-offs/(recoveries) during the period $ — $ (27)

Average amount outstanding $ 63,634 $ 40,772

Multi-family — % — %

Net charge-offs/(recoveries) during the period $ — $ —

Average amount outstanding $ 81,429 $ 65,059

Residential mortgage (0.21) % (0.01) %

Net charge-offs/(recoveries) during the period $ (273) $ (8)

Average amount outstanding $ 129,205 $ 126,296

Home equity — % (0.05) %

Net charge-offs/(recoveries) during the period $ — $ (3)

Average amount outstanding $ 6,488 $ 6,350

Leases 0.21 % 0.25 %

Net charge-offs/(recoveries) during the period $ 257 $ 287

Average amount outstanding $ 119,827 $ 112,649

Consumer 0.21 % 1.00 %

Net charge-offs/(recoveries) during the period $ 31 $ 130

Average amount outstanding $ 14,637 $ 12,969

Total loans (0.01) % 0.04 %

Net charge-offs/(recoveries) during the period $ (92) $ 273

Average amount outstanding $ 786,686 $ 735,959

Changes to our allowance for loan and lease losses and the related ratios at December 31, 2021 as compared to December 31, 2020 were driven by a $99.6 million increase in our loan portfolio, a $5.4 million increase in nonaccrual loans, and an increase in recoveries during 2021.

The growth in the balance of loans and leases primarily occurred in the multi-family and construction and development categories, which is in line with management's strategy to expand these portfolios.

The increase in nonaccrual loans was primarily the result of a $4.9 million construction and development loan that is currently subject to litigation between the developer and other parties.

See “Management’s Discussion and Analysis-Financial Condition at December 31, 2021 Compared to December 31, 2020” contained in Part II, Item 7 of this Form 10-K for additional information regarding changes in our loans, leases, and related allowances.

Allocation of Allowance for Loan and Lease Losses.

The following table sets forth the allowance for loan and lease losses allocated by category, the total balances by category, and the percent of loans and leases in each category to total loans and leases at the dates indicated.

The allowance for loan and lease losses allocated to each category is not necessarily indicative

of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

The allowance for loan and lease losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

At the dates indicated, we had no unallocated allowance for loan and lease losses.

At December 31,

2020 2019 2018 2017 2016

Amount Percent of

total loans Amount Percent of

(Dollars in thousands)

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Real estate loans:

Residential (1)

$ 270 18.3 % $ 109 20.0 % $ 139 21.1 % $ 257 24.2 % $ 359 29.2 %

Commercial (2)

7,797 47.8 4,564 50.1 3,147 49.7 2,424 45.0 1,829 36.7

Residential mortgage $ 263 15.9 % $ 323 16.8 %

Home equity lines of credit 29 0.8 18 0.8

Multi-family 1,875 12.7 1,039 7.5

Commercial mortgage 4,742 30.9 4,628 33.2

Construction and development 2,286 11.1 1,068 7.8

Total real estate loans 9,195 71.4 7,076 66.1

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Commercial and industrial 1,639 11.8 2,271 16.4

Direct financing leases 1,054 15.7 426 15.8 389 16.3 337 17.7 1,657 20.0

Leases 1,079 15.0 1,054 15.7

Total commercial business loans and leases 2,718 26.8 3,325 32.1

Total loans and leases $ 12,108 100.0 % $ 10,586 100.0 %

(1) Includes residential mortgage loans, home equity loans and lines of credit, and residential construction loans.

(2) Includes commercial and multi-family real estate loans and commercial construction loans.

Although we believe that we use the best information available to establish the allowance for loan and lease losses, future adjustments to the allowance may be necessary and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations.

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Any material increase in the allowance for loan and lease losses may adversely affect our financial condition and results of operations.

For additional information regarding our allowance for loan and lease losses, see "Note 5:

Loans, Leases and Allowance" of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K.

Investment Activities

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The objectives of our investment policy are to provide and maintain liquidity to meet deposit withdrawal and loan funding needs, to help mitigate interest rate and market risk, to diversify our assets, and to maximize the rate of return on invested funds within the context of our interest rate and credit risk objectives.

First Bank Richmond’s board of directors is responsible for adopting our investment policy.

The strategies utilized to meet the objective of our investment policy are established by our Asset/Liability Committee, which consists of at least three board members, the President and Chief Executive Officer, and the Chief Financial Officer of First Bank Richmond.

The Asset/Liability Committee meets quarterly, or more often if necessary, to ensure that investment policies and strategies are consistent with both First Bank Richmond’s investment guidelines and market conditions.

The Asset/Liability Committee reviews the investment policy at least annually and recommends any revisions, if necessary, to the board of directors of First Bank Richmond.

Various factors are considered when making decisions regarding our investment portfolio, including the marketability, maturity and tax consequences of the proposed investment.

The maturity structure of investments will be affected by various market conditions, including the current and anticipated slope of the yield curve, the level of interest rates, the trend of new deposit inflows, and the anticipated demand for funds via deposit withdrawals and loan originations and purchases.

All investment transactions are reviewed at the next regularly scheduled meeting of the board of directors.

The maturity structure of investments will be affected by various market conditions, including the current and

anticipated slope of the yield curve, the level of interest rates, the trend of new deposit inflows, and the anticipated demand for funds via deposit withdrawals and loan originations and purchases.

Our investment securities are usually classified as available-for-sale;

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We may be required to purchase additional FHLB stock if we increase borrowings in the future.

The table below sets forth information regarding the composition of our securities portfolio and other investments at the dates indicated.

At December 31, 2020, our securities portfolio did not contain securities of any issuer with an aggregate book value in excess of 10% of our equity capital, excluding those issued by the United States Government or its agencies.

At December 31,

2020 2019 2018

(In thousands)

Securities available for sale:

SBA pools and federal agencies $ 22,043 $ 22,057 $ 39,259 $ 39,020 $ 40,812 $ 38,010

State and municipal obligations 93,616 96,285 45,635 45,840 30,531 29,789

Government sponsored mortgage-backed securities 124,139 126,150 117,769 116,911 56,945 54,670

Other 13 13 13 13 13 13

Total securities available for sale 239,811 244,505 202,676 201,784 128,301 122,482

Securities held to maturity:

State and municipal obligations 12,225 12,520 15,917 16,156 18,580 18,543

— — — — 2,500 5,110

Total securities held to maturity 12,225 12,520 15,917 16,156 21,080 23,653

FHLB stock 9,050 9,050 7,600 7,600 6,561 6,561

Total investment securities $ 261,086 $ 266,075 $ 226,193 $ 225,540 $ 155,942 $ 152,696

(1) Consisted of trust preferred securities issued by the MHC through a statutory trust.

Following completion of the reorganization and stock offering on July 1, 2019, we redeemed these trust preferred securities utilizing a portion of the net proceeds from our initial public offering.

See “–Source of Funds - Borrowed Funds” below.

Portfolio Maturities and Yields.

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Weighted average yield calculations on investment securities available for sale do not give effect to changes in fair value that are reflected as a component of equity.

1 year or less Over 1 year to 5 years Over 5 to 10 years Over 10 years Total Securities

Cost Weighted

Yield Amortized

Cost Weighted

Yield Amortized

Cost Weighted

Yield Amortized

Cost Weighted

Yield Amortized

Cost Weighted

(Dollars in thousands)

At December 31, 2021

Weighted-Average Yield

Due in 1 Year or Less Due After 1 Through 5 Years Due After 5 Through 10 Years Due After 10 Years

Securities available for sale:

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Government sponsored mortgage-backed securities — 1.12 1.34 1.35

Corporate obligations — — 3.25 3.88

Other — — — —

2 unchanged sentences

State and municipal obligations 2.61 3.01 4.58 5.05

— — — — — — — — — — —

Other — — — —

Total securities held to maturity 2.61 3.01 4.58 5.05

Total investment securities 1.88 % 2.43 % 1.65 % 1.74 %

For additional information regarding our investment securities, see "Note 4:

Investment Securities" of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K.

Sources of Funds

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Our reliance on brokered deposits may increase our overall cost of funds.

Interest rates, maturity terms, service fees and withdrawal penalties are established on a periodic basis.

Deposit rates and terms are based primarily on current operating strategies and market rates, liquidity requirements, rates paid by competitors and growth goals.

The flow of deposits is influenced significantly by general economic conditions, changes in interest rates and competition.

The variety of deposit accounts that we offer allows us to be competitive in generating deposits and to respond with flexibility to changes in our customers’ demands.

Our ability to gather deposits is impacted by the competitive markets in which we operate, which include numerous financial institutions of varying sizes offering a wide range of products.

We believe that deposits are a stable source of funds, but our ability to attract and maintain deposits at favorable rates will be affected by market conditions, including competition and prevailing interest rates.

Additionally, we concentrate on gathering deposits from both existing commercial loan clients and new commercial prospects which positively impacts our lower cost deposits and assists in retaining full-service clients.

At December 31, 2021, our core deposits, which are deposits other than certificates of deposit of $250,000 or more and brokered deposits, totaled $716.4 million, representing 79.6% of total deposits.

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Years Ended December 31,

2020 2019 2018

(Dollars in thousands)

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Percent increase (decrease) 29.9 % 12.3 %

The following tables set forth the distribution of total deposit accounts, by account type, for the periods indicated.

The following table sets forth the distribution of total deposit accounts, by account type, for the periods indicated.

At December 31,

2020 2019 2018

Amount Percent

of Total Amount Percent

(Dollars in thousands)

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Demand deposits:

Non-interest bearing $ 114,303 12.7 % $ 98,725 14.2 %

Interest bearing 164,356 18.3 141,991 20.5

Savings 113,510 12.6 95,033 13.7

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Total deposits $ 900,175 100.0 % $ 693,045 100.0 %

The following table sets forth, for the periods indicated, the average amount of and the average rate paid on deposit categories that are in excess of 10 percent of average total deposits.

At December 31,

Average Balance Outstanding Weighted Average Rate Average Balance Outstanding Weighted Average Rate

(Dollars in thousands)

Demand deposits:

Non-interest bearing $ 131,876 — % $ 124,044 — %

Interest bearing 154,938 0.23 118,668 0.3

Savings 110,706 0.84 83,253 1.0

Money market 136,725 0.24 105,126 0.2

Certificate accounts 287,051 1.16 278,018 1.8

Total deposits $ 821,296 0.60 % 709,109 0.9 %

The following table indicates the time deposit accounts classified by rate and maturity at December 31, 2021.

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Percent of total 70.64 % 21.38 % 5.43 % 2.55 % 100.00 %

The following table indicates the amount of certificates of deposit by time remaining until maturity at December 31, 2020.

Jumbo certificates of deposit require minimum deposits of $100,000.

12 Months Total

(In thousands)

Certificates of deposit less than $100,000 $ 9,543 $ 53,652 $ 13,022 $ 24,718 $ 100,935

Certificates of deposit of $100,000 or more 16,216 70,191 10,770 25,378 122,555

Public funds (1)

1,352 15,885 602 1,140 18,979

Total certificates of deposit $ 27,111 $ 139,728 $ 24,394 $ 51,236 $ 242,469

(1) Deposits from government and other public entities.

As of December 31, 2021 and 2020, approximately $225.3 million and $187.2 million, respectively, of our deposit portfolio was uninsured.

The uninsured amounts are estimated based on the methodologies and assumptions used for First Bank Richmond's regulatory reporting requirements.

The following table sets forth the portion of our time deposits that are in excess of the FDIC insurance limit, by remaining time until maturity, as of December 31, 2021 (dollars in thousands).

3 months or less $ 11,128

Over 3 through 6 months 10,821

Over 6 through 12 months 25,147

Over 12 months 14,200

For additional information regarding our deposits, see "Note 8:

Deposits" of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K.

Borrowed Funds.

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Based on current collateral levels, at December 31, 2021 we could borrow an additional $83.4 million from the FHLB of Indianapolis at prevailing interest rates.

FHLB advances totaling $131.0 million at a weighted, fixed interest rate of 1.38% are subject to an option by the FHLB of Indianapolis to convert, at a specified date in the future, the entire fixed-rate advance to a periodic adjustable rate.

The adjustable rate would be for the remaining term of the advance at a predetermined rate based on LIBOR (London Interbank

If the FHLB exercises its option to convert the advance to an adjustable rate, the advance will be pre-payable at our option, at par and without a penalty.

We also have an available line of credit with the FHLB of Indianapolis totaling $10.0 million.

The line of credit expires March 2021;

however, it is renewed annually, and bears interest at a rate equal to the current variable advance rate.

At December 31, 2020, the current interest rate was 0.46%.

There were no amounts outstanding on the line at December 31, 2020 or 2019.

The following tables sets forth information concerning balances and interest rates on our borrowings at and for the periods shown.

The tables include both long- and short-term borrowings.

Years Ended December 31,

The following table presents the maturity of term borrowings, which consist entirely of FHLB advances, along with associated weighted average rates as of December 31, 2021.

Maturity by Fiscal Year FHLB Advances Weighted Average Rate

2022 $ 6,000 2.11 %

(Dollars in thousands)

Maximum balance:

FHLB advances $ 194,000 $ 159,100 $ 136,500

Average balances:

FHLB advances $ 175,060 $ 144,201 $ 112,678

Weighted average interest rate:

FHLB advances 1.72 % 1.87 % 2.22 %

At December 31,

2023 2,000 3.01 %

(Dollars in thousands)

Balance outstanding at end of period:

FHLB advances $ 170,000 $ 154,000 $ 136,100

Weighted average interest rate:

FHLB advances 1.63 % 1.87 % 2.22 %

2024 44,000 1.79 %

2025 16,000 2.63 %

2026 23,000 1.52 %

Thereafter 89,000 0.91 %

$ 180,000 1.42 %

Trust and Financial Services

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At December 31, 2021, Richmond Mutual Bancorporation had one subsidiary, First Bank Richmond.

At December 31, 2020, First Bank Richmond had an active investment subsidiary, FB Richmond Holdings, which is a Nevada corporation that holds and manages a substantially all of First Bank Richmond's investment portfolio.

At December 31, 2021, First Bank Richmond had an active investment subsidiary, FB Richmond Holdings, which is a Nevada corporation that holds and manages substantially all of First Bank Richmond's investment portfolio.

As of December 31, 2021, the market value of securities managed was $366.6 million.

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We face significant competition within our market both in making loans and leases and attracting deposits.

Our market area has a high concentration of financial institutions, including large money center and regional banks, community banks and

credit unions.

Our market area has a high concentration of financial institutions, including large money center and regional banks, community banks and credit unions.

Our competition for loans and deposits comes principally from commercial banks, savings institutions, mortgage banking firms, equipment financing companies, consumer finance companies and credit unions.

We face additional competition for deposits from short-term money market funds, brokerage firms, mutual funds and insurance companies.

Based on the most recent data provided by the FDIC, there are approximately 14 and 23 other commercial banks and savings banks, and approximately 11 and eight credit unions operating in our Indiana and Ohio market areas, respectively.

We also compete with financial technology, or fintech companies.

Recent technology advances and other changes have allowed parties to effect financial transactions that previously required the involvement of banks.

For example, consumers can maintain funds in brokerage accounts or mutual funds that would have historically been held as bank deposits.

Consumers can also complete transactions such as paying bills and transferring funds directly without the assistance of banks.

Based on the most recent data provided by the FDIC, there are approximately 12 and 19 other commercial banks and savings banks, and approximately 10 and five credit unions operating in our Indiana and Ohio market areas, respectively.

As of June 30, 2021 (the most recent branch deposit data provided by the FDIC), First Bank Richmond’s share of bank deposits in Wayne and Shelby Counties, in Indiana, was approximately 22.7% and 5.8%, respectively, and in Shelby and Miami Counties, in Ohio, was approximately 8.1% and 4.3%, respectively.

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Its deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation.

First Bank Richmond is subject to extensive regulation by the IDFI, as its chartering agency, and by the Federal Deposit Insurance Corporation, as its deposit insurer.

First Bank Richmond is subject to extensive regulation by the IDFI, as its chartering agency, and by the Federal Deposit Insurance Corporation, as its deposit insurer and primary federal regulator.

First Bank Richmond is required to file reports with, and is periodically examined by, the Federal Deposit Insurance Corporation and the IDFI concerning its activities and financial condition and must obtain regulatory approvals before entering into certain transactions, including, but not limited to, mergers with or acquisitions of other financial institutions.

In addition, First Bank Richmond is a member of and owns stock in the FHLB of Indianapolis, which is one of the 11 regional banks in the Federal Home Loan Bank System.

The regulations and supervision of First Bank Richmond establish a comprehensive framework of activities in which an institution can engage and are intended primarily for the protection of depositors and borrowers and, for purposes of the Federal Deposit Insurance Corporation, the protection of the insurance fund.

The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes.

As a bank holding company, Richmond Mutual Bancorporation is subject to examination and supervision by, and is required to file certain reports with, the Federal Reserve Board.

Richmond Mutual Bancorporation is also be subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.

Set forth below are certain material regulatory requirements that are applicable to First Bank Richmond and Richmond Mutual Bancorporation.

As a bank holding company, Richmond Mutual Bancorporation is subject to examination and supervision by the Federal Reserve Board.

Richmond Mutual Bancorporation is also subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.

Set forth below is a description of certain laws and regulations that are applicable to First Bank Richmond and Richmond Mutual Bancorporation.

This description of statutes and regulations is not intended to be a complete description of such statutes and regulations and their effects on First Bank Richmond and Richmond Mutual Bancorporation.

Any change in these laws or regulations, whether by Congress or the applicable regulatory agencies, could have a material adverse impact on Richmond Mutual Bancorporation, First Bank Richmond and their operations.

Dodd-Frank Act.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) made significant changes to the regulatory structure for depository institutions and their holding companies.

However, the Dodd-Frank Act’s changes go well beyond that and affect the lending, investments and other operations of all depository institutions.

The Dodd-Frank Act created a new Consumer Financial Protection Bureau with broad powers to supervise and enforce consumer protection laws.

The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions such as First Bank Richmond, including the authority to prohibit “unfair, deceptive or abusive” acts and practices.

The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets.

Banks and savings institutions with $10 billion or less in assets continue to be examined for compliance by their applicable bank regulators.

This legislation gave state attorneys general the ability to enforce applicable federal consumer protection laws.

In addition to creating the Consumer Financial Protection Bureau, the Dodd-Frank Act, among other things, directed changes in the way that institutions are assessed for deposit insurance, mandated the imposition of tougher consolidated capital requirements on holding companies, required the issuance of regulations requiring originators of securitized loans to retain a percentage of the risk for the transferred loans, imposed regulatory rate-setting for certain debit card interchange fees, repealed restrictions on the payment of interest on commercial demand deposits and contained a number of reforms related to mortgage originations.

Many provisions of the Dodd-Frank Act involve delayed effective dates and/or require implementing regulations.

The implementation of the legislation is an ongoing process.

The Dodd-Frank Act has resulted in, and may continue to result in, an increased regulatory burden and increased compliance, operating and interest expense for First Bank Richmond.

Indiana Banking Regulation.

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The prior approval of the IDFI is required if the total of all dividends declared in a calendar year would exceed the total of its net income for that year combined with its retained net income for the preceding two years.

See “- Federal Banking Regulation — Capital Requirements,” “— Prompt Corrective Action” and “- Holding Company Regulation” for restrictions on dividends under federal law.

See “- Federal Banking Regulation — Capital Requirements” and “- Holding Company Regulation” for restrictions on dividends under federal law.

As an Indiana state-chartered commercial bank, First Bank Richmond is required to pay to the IDFI a general assessment fee in connection with the regulation and supervision of First Bank Richmond.

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Any Indiana bank that does not operate according to the regulations, policies and directives of the IDFI may be subject to sanctions for non-compliance, including seizure of the property and business of the bank and suspension or revocation of its charter.

The IDFI may, under certain circumstances, suspend or remove officers or directors who have violated the law, conducted the bank’s business in a manner which is unsafe, unsound or contrary to the depositors' interests or been negligent in the performance of their duties.

The IDFI may, under certain circumstances, suspend or remove

officers or directors who have violated the law, conducted the bank’s business in a manner which is unsafe, unsound or contrary to the depositors' interests or been negligent in the performance of their duties.

In addition, upon finding that a bank has engaged in an unfair or deceptive act or practice, the IDFI may issue an order to cease and desist and impose a fine on the bank.

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a common equity Tier 1 capital to risk-based assets ratio, a Tier 1 capital to risk-based assets ratio, a total capital to risk-based assets and a Tier 1 capital to total assets leverage ratio.

These capital requirements were effective January 1, 2015 and are the result of a final rule implementing regulatory amendments based on recommendations of the Basel Committee on Banking Supervision and certain requirements of the Dodd-Frank Act.

The capital standards require the maintenance of common equity Tier 1 capital, Tier 1 capital and total capital to risk-weighted assets of at least 4.5%, 6% and 8%, respectively.

The regulations also establish a minimum required leverage ratio of at least 4% of Tier 1 capital.

Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings.

Tier 1 capital is generally defined as common equity Tier 1 and Additional Tier 1 capital.

Additional Tier 1 capital generally includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries.

Total capital includes Tier 1 capital (common equity Tier 1 capital plus Additional Tier 1

capital) and Tier 2 capital.

Tier 2 capital is comprised of capital instruments and related surplus meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt.

Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised a one-time opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.

Institutions that have not exercised the AOCI opt-out have AOCI incorporated into common equity Tier 1 capital (including unrealized gains and losses on available-for-sale-securities).

First Bank Richmond did exercise the opt-out election.

Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.

In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, an institution’s assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests), are multiplied by a risk weight factor assigned by regulations based on the risk deemed inherent in the type of asset.

Higher levels of capital are required for asset categories believed to present greater risk.

For example, a risk weight of 0% is assigned to cash and U.S.

government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one- to four-family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weight of between 0% to 600% is assigned to certain equity interests, depending on certain specified factors.

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of common equity Tier 1 capital to risk-weighted assets more than 2.5% above the amount necessary to meet its minimum risk-based capital requirements.

The Economic Growth, Regulatory Relief and Consumer Protection Act ("EGRRCPA"), enacted in May 2018, required the federal banking agencies, including the FDIC, to establish for institutions with assets of less than $10 billion a “community bank leverage ratio” of between 8 to 10%.

Institutions with capital meeting or exceeding the ratio and otherwise complying with the specified requirements (including off-balance sheet exposures of 25% or less of total assets and trading assets and liabilities of 5% or less of total assets) and electing the alternative framework are considered to comply with the applicable regulatory capital requirements, including the risk-based requirements.

The community bank leverage ratio was established at 9% Tier 1 capital to total average assets, effective January 1, 2020.

A qualifying institution may opt in and out of the community bank leverage ratio framework on its quarterly call report.

An institution that temporarily ceases to meet any qualifying criteria is provided with a two-quarter grace period to again achieve compliance.

Failure to meet the qualifying criteria within the grace period or maintain a leverage ratio of 8% or greater requires the institution to comply with the generally applicable capital requirements.

Section 4012 of the CARES Act required that the community bank leverage ratio be temporarily lowered to 8%.

The federal regulators issued a rule making the reduced ratio effective for the second calendar quarter of 2020.

The rule also established a two-quarter grace period for a qualifying community bank whose leverage ratio falls below the 8% community bank leverage ratio requirement, or fails to meet other qualifying criteria, so long as the bank maintains a leverage ratio of 7% or greater.

Another rule was issued to transition back to the 9% community bank leverage ratio by increasing the ratio to 8.5% for calendar year 2021 and to 9% thereafter.

The Bank did not elect to use the community bank leverage ratio.

At December 31, 2020, First Bank Richmond’s capital exceeded all applicable requirements including the applicable capital conservation buffer.

At December 31, 2021, First Bank Richmond’s capital exceeded all applicable requirements.

See “Management’s Discussion and Analysis-Capital Resources” contained in Part II, Item 7 and “Note 16:

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

Under the federal prompt corrective action rules, the Federal Deposit Insurance Corporation is required to take supervisory actions against undercapitalized institutions under its jurisdiction, the severity of which depends upon the institutions's level of capital.

An institution that has a total risk-based capital ratio of 10% or more, a Tier 1 risk-based ratio of 8.0% or more, a common equity Tier 1 ratio of 6.5% or more and a leverage ratio of 5.0% or more is considered "well capitalized," provided that it is not subject to an agreement, order or directive issued by the Federal Deposit Insurance Corporation requiring it to meet and maintain a specific capital level.

Institutions that are not well capitalized are subject to certain restrictions on brokered deposits and interest rates on deposits.

At December 31, 2021, First Bank Richmond met the criteria to be considered "well capitalized."

Standards for Safety and Soundness.

Federal law requires each federal banking agency to prescribe certain standards for all insured depository institutions.

These standards relate to, among other things, internal controls, information systems and audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, compensation and

other operational and managerial standards as the agency deems appropriate.

Interagency guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired.

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In addition, the Federal Deposit Insurance Corporation is authorized to permit such a state bank to engage in state-authorized activities or investments not permissible for national banks (other than non-subsidiary equity investments) if it meets all applicable capital requirements and it is determined that such activities or investments do not pose a significant risk to the Deposit Insurance Fund.

The Federal Deposit Insurance Corporation has adopted procedures for institutions seeking approval to engage in such activities or investments.

In addition, a nonmember bank may control a subsidiary that engages in activities as principal that would only be permitted for a national bank to conduct in a “financial subsidiary” if a bank meets specified conditions and deducts its investment in the subsidiary for regulatory capital purposes.

Interstate Banking and Branching.

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Interstate mergers of banks are also authorized, subject to regulatory approval and other specified conditions.

In addition, among other things, the Dodd-Frank Act permits banks to establish de novo branches on an interstate basis provided that the branch location is permissible under the law of the host state for banks chartered by that state.

Prompt Corrective Action .

An institution that has a total risk-based capital ratio of 10% or more, a Tier 1 risk-based ratio of 8.0% or more, a common equity Tier 1 ratio of 6.5% or more and a leverage ratio of 5.0% or more is considered “well capitalized,” provided that it is not subject to an agreement, order or directive issued by the Federal Deposit Insurance Corporation requiring it to meet and maintain a specific capital level.

Institutions that are not well capitalized are subject to certain restrictions on brokered deposits and interest rates on deposits.

An institution that meets the minimum capital ratios described under “Capital Requirements” above (but is not well capitalized) is considered to be “adequately capitalized.” An institution that has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a common equity Tier 1 ratio of less than 4.5% or a leverage ratio of less than 4% is considered to be “undercapitalized.” An institution that has total risk-based capital of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a common equity Tier 1 ratio of less than 3.0% or a leverage ratio that is less than 3.0% is considered to be “significantly undercapitalized.” An institution that has a tangible equity ratio equal to or less than 2.0% is deemed to be “critically undercapitalized.”

At each successive lower capital category, an insured depository institution is subject to more restrictions and prohibitions, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on payment of dividends, and restrictions on the acceptance of brokered deposits.

Furthermore, if an insured depository institution is classified in one of the undercapitalized categories, it is required to submit a capital restoration plan to the appropriate federal banking agency, and the holding company must guarantee the performance of that plan.

Based upon its capital levels, a bank that is classified as well-capitalized, adequately capitalized, or undercapitalized may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition, or an unsafe or unsound practice, warrants such treatment.

An undercapitalized bank’s compliance with a capital restoration plan is required to be guaranteed by any company that controls the undercapitalized institution in an amount equal to the lesser of 5.0% of the institution’s total assets when deemed undercapitalized or the amount necessary to achieve the status of adequately capitalized.

If an “undercapitalized” bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” banks must comply with one or more of a number of additional restrictions, including but not limited to an order by the Federal Deposit Insurance Corporation to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, cease receipt of deposits from correspondent banks or dismiss directors or officers, and restrictions on interest rates paid on deposits, compensation of executive officers and capital distributions by the parent holding company.

“Critically undercapitalized” institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after it obtains such status.

At December 31, 2020, First Bank Richmond met the criteria to be considered “well capitalized.”

In addition, banks may establish de novo branches on an interstate basis provided that the branch location is permissible under the law of the host state for banks chartered by that state.

Transaction with Affiliates and Regulation W of the Federal Reserve Regulations.

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Sections 22(h) and (g) of the Federal Reserve Act place restrictions on loans to a bank’s insiders, i.e., executive officers, directors and principal shareholders.

Under Section 22(h) of the Federal Reserve Act, loans to a director, an executive officer and to a greater than 10.0% shareholder of a financial institution, and certain affiliated interests of these, together with all other outstanding loans to such person and affiliated interests, may not exceed specified limits.

Section 22(h) of the Federal Reserve Act also requires that loans to directors, executive officers and principal shareholders be made on terms substantially the same as offered in comparable transactions to other persons and also requires prior board approval for certain loans.

Section 22(h) of the Federal Reserve Act requires that loans to directors, executive officers and principal shareholders be made on terms substantially the same as offered in comparable transactions to other persons and also requires prior board approval for certain loans.

In addition, the aggregate amount of extensions of credit by a financial institution to insiders cannot exceed the institution’s unimpaired capital and surplus.

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Deposit accounts in First Bank Richmond are insured up to a maximum of $250,000 for each separately insured depositor.

The Federal Deposit Insurance Corporation imposes an assessment for deposit insurance on all depository institutions.

Under its risk-based assessment system, assessment rates for an insured institution with assets of less than $10 billion are based on the institution’s examination ratings.

These assessment rates currently range from 3 to 30 basis points (subject to certain adjustments) applied to the institution’s total assets less tangible capital.

The Federal Deposit Insurance Corporation may increase or decrease the scale uniformly, except that no adjustment can deviate more than two basis points from the base scale without notice and comment rulemaking.

The Dodd-Frank Act increased the minimum target Deposit Insurance Fund ratio from 1.15% of estimated insured deposits to 1.35% of estimated insured deposits.

The Federal Deposit Insurance Corporation must seek to achieve the 1.35% ratio by September 30, 2020.

Insured institutions with assets of $10 billion or more are to fund the increase.

The Dodd-Frank Act eliminated the 1.5% maximum fund ratio, instead leaving it to the discretion of the Federal Deposit Insurance Corporation.

It has recently exercised that discretion by establishing a long-range fund ratio of 2%.

On September 30, 2018, the Deposit Insurance Fund reserve ratio reached 1.36 percent, exceeding the statutorily required minimum reserve ratio of 1.35 percent ahead of the September 30, 2020, deadline required under the Dodd-

Federal Deposit Insurance Corporation regulations provide for two changes to deposit insurance assessments upon reaching the minimum:

(1) surcharges on insured depository institutions with total consolidated assets of $10 billion or more (large banks) will cease;

and (2) small banks will receive assessment credits for the portion of their assessments that contributed to the growth in the reserve ratio from between 1.15 percent and 1.35 percent, to be applied when the reserve ratio is at or above 1.38 percent.

The Deposit Insurance Fund ratio stood at 1.29% at December 31, 2020.

The Federal Deposit Insurance Corporation has authority to increase insurance assessments.

A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of operations of First Bank Richmond.

Future insurance assessment rates cannot be predicted.

Insurance of deposits may be terminated by the Federal Deposit Insurance Corporation upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or regulatory condition imposed in writing.

We do not know of any practice, condition or violation that might lead to termination of First Bank Richmond’s deposit insurance.

Privacy Regulations.

Federal Deposit Insurance Corporation regulations generally require that First Bank Richmond disclose its privacy policy, including identifying with whom it shares a customer’s “non-public personal information,” to customers at the time of establishing the customer relationship and annually thereafter.

In addition, First Bank Richmond is required to provide its customers with the ability to “opt-out” of having their personal information shared with unaffiliated third parties and not to disclose account numbers or access codes to non-affiliated third parties for marketing purposes.

First Bank Richmond currently has a privacy protection policy in place and believes that such policy is in compliance with the regulations.

The FDIC assesses deposit insurance premiums on all FDIC-insured institutions quarterly based on annualized rates.

Under these rules, assessment rates for an institution with total assets of less than $10 billion are determined by weighted average CAMELS composite ratings and certain financial ratios, and range from 1.5 to 30.0 basis points, subject to certain adjustments.

For the fiscal year ended December 31, 2021, First Bank Richmond paid $283,000 in FDIC premiums.

Assessment rates are applied to an institution's assessment base, which is its average consolidated total assets minus its average tangible equity during the assessment period.

The FDIC has authority to increase insurance assessments, and in a banking industry emergency the FDIC may also impose a special assessment.

Any significant increases in insurance assessment may have an adverse effect on the

operating expenses and results of operations of Richmond Mutual Bancorporation and First Bank Richmond.

Management cannot predict what assessment rates will be in the future.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

We do not currently know of any practice, condition, or violation that may lead to termination of First Bank Richmond’s deposit insurance.

Community Reinvestment Act .

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Certain of these statutes, including Section 5 of the Federal Trade Commission Act, which prohibits unfair and deceptive acts and practices against consumers, authorize private individual and class action lawsuits and the award of actual, statutory and punitive damages and attorneys’ fees for certain types of violations.

The Dodd-Frank prohibits unfair, deceptive or abusive acts or practices against consumers, which can be enforced by the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation and state Attorneys General.

The Dodd-Frank Act prohibits unfair, deceptive or abusive acts or practices against consumers, which can be enforced by the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation and state Attorneys General.

USA Patriot Act.

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Member institutions are required to acquire and hold shares of capital stock in the FHLB.

First Bank Richmond complied with this requirement at December 31, 2020.

This stock has no quoted market value and is carried at cost.

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A bank holding company is generally prohibited from engaging in non-banking activities, or acquiring direct or indirect control of more than 5% of the voting securities of any company engaged in non-banking activities.

One of the principal exceptions to this prohibition is for activities found by the Federal Reserve Board to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.

Some of the principal activities that the Federal Reserve Board has determined by regulation to be so closely related to banking are:

(i) making or servicing loans;

(ii) performing certain data processing services;

(iii) providing discount brokerage services;

(iv) acting as fiduciary, investment or financial advisor;

(v) leasing personal or real property;

(vi) making investments in corporations or projects designed primarily to promote community welfare;

and (vii) acquiring a savings and loan association whose direct and indirect activities are limited to those permitted for bank holding companies.

The Gramm-Leach-Bliley Act of 1999 authorized a bank holding company that meets specified conditions, including being “well capitalized” and “well managed,” to opt to become a “financial holding company” and thereby engage in a broader array of financial activities than previously permitted.

Such activities can include insurance underwriting and investment banking.

The Dodd-Frank Act required the Federal Reserve Board to establish for all bank and savings and loan holding companies, minimum consolidated capital requirements that are as stringent as those required for the insured depository subsidiaries.

The Federal Reserve Board is required to establish for all bank and savings and loan holding companies, minimum consolidated capital requirements that are as stringent as those required for the insured depository subsidiaries.

Consolidated regulatory capital requirements identical to those applicable to the subsidiary banks apply to bank holding companies with less than $3.0 billion of consolidated assets.

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The policies also require that a bank holding company serve as a source of financial strength to its subsidiary banks (referred to as the source of strength doctrine) by standing ready to use available resources to provide adequate capital funds to those banks during periods of financial stress or adversity and by maintaining the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks where necessary.

The Dodd-Frank Act codified the source of strength doctrine.

Under the prompt corrective action laws, the ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized.

However, the ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized.

These regulatory policies could affect the ability of Richmond Mutual Bancorporation to pay dividends or otherwise engage in capital distributions.

Under the Federal Deposit Insurance Act, depository institutions are liable to the Federal Deposit Insurance Corporation for losses suffered or anticipated by the Federal Deposit Insurance Corporation in connection with the default of a commonly controlled depository institution or any assistance provided by the Federal Deposit Insurance Corporation to such an institution in danger of default.

The status of Richmond Mutual Bancorporation as a registered bank holding company under the Bank Holding Company Act of 1956 will not exempt it from certain federal and state laws and regulations applicable to corporations generally, including, without limitation, certain provisions of the federal securities laws.

Federal Securities Laws.

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An emerging growth company also is not subject to the requirement that its auditors attest to the effectiveness of the company’s internal control over financial reporting and can provide scaled disclosure regarding executive compensation.

Richmond Mutual Bancorporation is also not subject to the auditor attestation requirement or additional executive compensation disclosure so long as it remains a “smaller reporting company” under Securities and Exchange Commission regulations (generally (i) a public float of less than $250 million or (ii) annual revenues of less than $100 million and either no public float or a public float of less than $700 million).

Finally, an emerging growth company may elect to comply with new or amended accounting pronouncements in the same manner as a private company, but must make such election when the company is first required to file a registration statement.

Finally, an emerging growth company may elect to comply with new or amended accounting pronouncements in the same manner as a private company.

Such an election is irrevocable during the period a company is an emerging growth company.

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(iii) the date on which such company has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt;

or (iv) the date on which such company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, at least $700 million of voting and non-voting equity held by non-affiliates).

Recent Regulatory Reform

In response to the COVID-19 pandemic, the United States Congress, through the enactment of the CARES Act, and the federal banking agencies, though rulemaking, interpretive guidance and modifications to agency policies and procedures, have taken a series of actions to provide national emergency economic relief measures including, among others, the following:

• The CARES Act allows banks to elect to suspend requirements under GAAP for loan modifications related to the COVID-19 pandemic (for loans that were not more than 30 days past due as of December 31, 2019) that would otherwise be categorized as a TDR, including impairment for accounting purposes, until the earlier of 60 days after the termination date of the national emergency or December 31, 2020.

The suspension of GAAP is applicable for the entire term of the modification.

The federal banking agencies also issued guidance to encourage banks to make loan modifications for borrowers affected by COVID-19 by providing that short-term modifications 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 the loans in which the borrower is less than 30 days past due on its contractual payments at the time a modification is implemented is not a TDR.

We are applying this guidance to qualifying COVID-19 modifications.

Management’s Discussion and Analysis of Financial Condition and Results of Operations – COVID-19 Response” for further information about the COVID-19 modifications completed by the Bank.

• The CARES Act amended the SBA’s loan program, in which we participate, to create a guaranteed, unsecured loan program, the PPP, to fund payroll and operational costs of eligible businesses, organizations and self-employed persons during COVID-19.

The loans are provided through participating financial institutions, such as the Bank, that process loan applications and service the loans and are eligible for SBA repayment and loan forgiveness if the borrower meets the PPP conditions.

The application period for a SBA PPP loan closed on August 8, 2020.

The SBA began approving PPP forgiveness applications and remitting forgiveness payments to PPP lenders on October 2, 2020.

The CAA, 2021 which was signed into law on December 27, 2020, renews and extends the PPP until March 31, 2021.

As a result, as a participating lender, the Bank began originating PPP loans again in January 2021 and will continue to monitor legislative, regulatory, and supervisory developments related to the PPP.

As the on-going COVID-19 pandemic evolves, federal regulatory authorities continue to issue additional guidance with respect to the implementation, lifecycle, and eligibility requirements for the various CARES Act programs as well as industry-specific recovery procedures for COVID-19.

In addition, it is possible that the United States Congress will enact supplementary COVID-19 response legislation.

We continue to assess the impact of the CARES Act and other statues, regulations and supervisory guidance related to the COVID-19 pandemic.

For additional information regarding actions taken by regulatory agencies to provide relief to consumers who have been adversely impacted by the COVID-19 pandemic, see the discussion below under "Item 1A.

Risk Factors - Risks Related to our Business."

or (iv) the date on which such company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations.

The following discussion of federal and state taxation is intended only to summarize material income tax matters and is not a comprehensive description of the tax rules applicable to Richmond Mutual Bancorporation and First Bank Richmond.

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

As of December 31, 2020, approximately 70% of our workforce was female and 30% male, and our average tenure was 10.5 years, a decrease of 4.5% from an average tenure of 11 years as of December 31, 2019.

As of December 31, 2021, approximately 71.1% of our workforce was female and 28.9% male, and our average tenure was 10.4 years.

As part of our compensation philosophy, we believe that we must offer and maintain market competitive total rewards programs for our employees in order to attract and retain superior talent.

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This approach has yielded loyalty and commitment in our employee base which in turn grows our business, our products, and our customers, while adding new employees and external ideas supports a continuous improvement mindset.

We believe that our average tenure — 10.5 years as of the end of the fiscal year 2020 — reflects the engagement of our employees in this core talent system tenet.

We believe that our 10.4 year average tenure reflects the engagement of our employees in this core talent system tenet.

Information about our Executive Officers

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Kleer (age 66).

Kleer has served as Chairman of the Board, President and Chief Executive Officer of Richmond Mutual Bancorporation since its formation in February 2019.

Kleer joined First Bank Richmond in May 1994 and currently serves as the Chairman of the Board, President and Chief Executive Officer.

He has served as President and Chief Executive Officer of First Bank Richmond since 2001 and was appointed Chairman of the Board in January 2019.

Kleer also serves as Chairman of the Mutual Federal advisory board of directors.

Kleer began his banking career in 1978 at American Fletcher National Bank in the Career Associates Program and was promoted to Vice President and Branch Manager in 1983.

In 1986, American Fletcher National Bank, the second largest banking company in Indiana at the time, was acquired by Bank One where Mr.

Kleer served as a Vice President until he joined First Bank Richmond as Vice President of Commercial Lending.

His community involvement includes serving on the Boards of the Richmond Symphony Orchestra, Wayne County Revolving Loan Fund, Reid Health Foundation, Boys & Girls Club of Wayne County, Indiana Bankers Association and Wayne County Foundation.

Kleer has also served as Past President of the Boys and Girls Clubs of Wayne County.

He has been recognized with the Indiana University East Chancellor’s Medallion, Junior Achievement Business Hall of Fame, Richmond/Wayne County Distinguished Community Leader, and Boys and Girls Club Man and Youth Award.

Kleer currently serves as Chairman, President and Chief Executive Officer of Richmond Mutual Bancorporation and First Bank Richmond.

Kleer joined the Bank in 1994 as Vice President of Commercial Lending and was promoted in 2001 to President and Chief Executive Officer.

He also serves as Chairman of the Mutual Federal advisory board of directors.

Kleer’s community involvement includes his election to the Board of Directors of the Indiana Bankers Association as Chairman for 2022.

He also serves on the boards of the Boys & Girls Clubs of Wayne County, Reid Health Foundation, Richmond Symphony Orchestra and Wayne County Foundation.

In 2020, he was awarded the Indiana University Bicentennial Medal for distinguished service.

Kleer earned a Bachelor of Science degree in Finance from Indiana University in 1978.

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Witte (age 50).

Witte, employed by First Bank Richmond since 1996, currently serves as Senior Vice President of Commercial Lending and Commercial Leasing.

Witte has served as Senior Vice President of Commercial Lending since 2014 and Commercial Leasing since 2006.

Witte, employed by First Bank Richmond since 1996, currently serves as Executive Vice President/Chief Lending Officer.

Witte has served as Senior Vice President of Commercial Lending since 2014 and Commercial Leasing since 2006 and was promoted to Executive Vice President in January 2022.

Witte manages First Bank Richmond’s Commercial Lending Department and is co-chair of the Officer’s Loan Committee and member of the Executive Loan Committee.

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He is a graduate of the Graduate School of Banking at the University of Wisconsin-Madison and has attended the Financial Managers School sponsored by the Graduate School of Banking at the University of Wisconsin-Madison.

Our website addresses are www.firstbankrichmond.com and www.mutualbancorp.com .

Our website addresses are www.firstbankrichmond.com and www.mutualfederal.com .

The information contained on our websites are not included as a part of, or incorporated by reference into, this Annual Report on Form 10-K.

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

What changed 10-K

Item 1. Business