What changed in this filing

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Item 1. Business

2023-03-31 compared with 2022-03-30 · 137 added, 94 removed, 941 unchanged (20% of the section changed)

The disclosures set forth in this item are qualified by Item 1A.

Risk Factors and the section captioned “Special Note Regarding Forward-Looking Statements” in Item 7.

Risk Factors and the section captioned “Cautionary Note Regarding Forward-Looking Statements” in Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report and other cautionary statements set forth elsewhere in this report.

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We also recognize income from the sale of investment securities.

At December 31, 2021, on a consolidated basis, we had $1.3 billion in assets, $832.8 million in loans and leases, net of allowance, $900.2 million in deposits and $180.5 million in stockholders’ equity.

First Insurance Management, Inc., a Nevada corporation, was formed in 2022 as a pooled captive insurance company subsidiary of the Company.

The purpose of this company is to provide additional property and casualty insurance coverage to the Company and its subsidiaries and reinsurance to 16 other third party insurance captives for which insurance may not be currently available or economically feasible in today's insurance marketplace.

FB Richmond Holdings, Inc., a Nevada corporation, was formed in 2020 as a subsidiary of First Bank Richmond.

FB Richmond Holdings holds substantially all of the Bank’s investment portfolio.

As of December 31, 2022, the market value of securities held was $290.6 million.

FB Richmond Properties, Inc., a Delaware corporation, was formed in 2020 as a subsidiary of FB Richmond Holdings, Inc.

FB Richmond Properties holds certain residential mortgages and commercial real estate loans.

As of December 31, 2022, FB Richmond Properties held approximately $101.8 million in residential mortgages and commercial real estate loans.

At December 31, 2022, on a consolidated basis, we had $1.3 billion in assets, $961.7 million in loans and leases, net of allowance, $1.0 billion in deposits and $133.0 million in stockholders’ equity.

At December 31, 2022, First Bank Richmond’s total risk-based capital ratio was 14.3%, exceeding the 10.0% requirement for a well-capitalized institution.

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Wayne County had an estimated population in 2022 of 66,500 with a median household income of approximately $50,100.

The unemployment rate in December 2021 was 1.4% in Wayne County, as compared to the national and state unemployment rates of 3.7% and 1.3%, respectively.

The unemployment rate in December 2022 was 2.5% in Wayne County, as compared to the national

and state unemployment rates of 3.3% and 2.4%, respectively.

The top employers in Wayne County include Reid Health, Richmond Community Schools, Belden Wire & Cable, Sugar Creek Brandworthy Food Solutions, Richmond State Hospital, and Primex Plastics Corporation.

First Bank Richmond operates eight banking offices in Wayne County, including five in Richmond, which is the largest city in Wayne County.

First Bank Richmond operates seven banking offices in Wayne County, including five in Richmond, which is the largest city in Wayne County.

Richmond is a city in east central Indiana and the county seat of Wayne County.

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The Columbus metropolitan area had an estimated population of 2.2 million and ranked as the 32nd most populous metropolitan area in the United States and the second most populous metropolitan area in Ohio, just behind the Cincinnati metropolitan area and slightly ahead of the Cleveland metropolitan area.

The unemployment rate in December 2021 was 2.8% for the entire Columbus metropolitan area and 2.9% for Franklin County, compared to 4.4% for the entire Columbus metropolitan area and 4.7% for Franklin County in December 2020.

The unemployment rate in December 2022 was 3.1%

for the entire Columbus metropolitan area and 3.1% for Franklin County, compared to 2.9% for the entire Columbus metropolitan area and 3.0% for Franklin County in December 2021.

Lending Activities

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We also engage in lease financing which consists of direct financing leases and is used by our commercial customers to finance purchases of equipment.

We offer consumer loans, predominantly as an accommodation to

our customers, secured by personal assets such as automobiles or recreational vehicles.

We offer consumer loans, predominantly as an accommodation to our customers, secured by personal assets such as automobiles or recreational vehicles.

Some consumer loans are unsecured, such as small installment loans and certain lines of credit.

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As of December 31, 2022, First Bank Richmond was in compliance with the loans-to-one-borrower limitations.

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.

At December 31, 2022, our largest lending relationship with one borrower was for $17.3 million consisting of four commercial real estate loans secured by properties in the Columbus, Ohio area.

All of these loans were performing in accordance with their repayment terms at December 31, 2022.

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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.

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.

See “- Loan Originations, Purchases, Sales, Repayments and Servicing.”

We also make a limited amount of Federal Housing Administration (“FHA”) loans, U.S.

During the year ended December 31, 2022, we originated $41.3 million

one- to four-family fixed-rate mortgage loans and $24.0 million one- to four-family adjustable-rate mortgage (“ARM”) loans, and sold $28.1 million of these loans without recourse to Fannie Mae and the FHLB of Indianapolis.

See “- Originations, Sales and Purchases of Loans.”

We also, from time to time, make a limited amount of Federal Housing Administration (“FHA”) loans, U.S.

Department of Veterans Affairs (“VA”) loans and U.S.

Department of Agriculture (“USDA”) loans, all of which we originate for sale on a servicing-released, non-recourse basis in accordance with FHA, VA and USDA guidelines.

During the year ended December 31, 2021, we originated and sold $624,000 in the aggregate of FHA, VA and USDA loans.

During the year ended December 31, 2022, we did not originate or sell any FHA, VA or USDA loans, compared to $624,000 of FHA, VA and USDA loans originated and sold during the year ended December 31, 2021.

Substantially all of the one- to four-family residential mortgage loans we retain in our portfolio consist of fixed-rate loans that do not satisfy acreage limits, income, credit, conforming loan limits (i.e., jumbo mortgages) or various other requirements imposed by Fannie Mae or are adjustable-rate loans.

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If the loan to value ratio on the property is sufficient, regardless of the improvements to be made, the proceeds may be disbursed directly to the borrower.

When the appraised value is dependent on the improvements to meet the loan to value requirement, the proceeds are held by us until we receive reasonable assurance that the improvements have been completed.

When the appraised value is dependent on the improvements to meet the

loan to value requirement, the proceeds are held by us until we receive reasonable assurance that the improvements have been completed.

The loan officers, at their discretion, may use a limited appraisal or a recertification of value on these types of loans.

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When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions.

In evaluating the property securing the loan, the factors we consider include the net operating income of the mortgaged property before debt service and depreciation, the ratio of the loan amount to the appraised value of the mortgaged property and the debt service coverage ratio (the ratio of net operating income to debt service).

net operating income to debt service).

We generally require a debt service ratio of at least 1.10x.

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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, 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.

At December 31, 2022, the average loan size of our outstanding multi-family and commercial real estate loans was $1.1 million, and the largest of such loans was a $11.8 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, 2022.

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Other 5,804 14,545 2,300 22,649 5.4

Total $ 160,331 $ 205,507 $ 2,785 $ 368,623 100.0 %

$ 182,604 $ 237,358 $ 3,039 $ 423,001 100.0 %

(1) Ohio total includes $154.5 million of commercial and multi-family loans secured by property located in the Columbus, Ohio market.

Commercial and Industrial Lending .

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Lines of credit and term loans typically are reviewed annually.

As of December 31, 2021, we had $99.7 million of commercial and industrial loans, representing 11.8% of our total loan and lease portfolio, including $16.0 million of unsecured commercial and industrial loans (which includes PPP loans discussed below).

Included in the $99.7 million of commercial and industrial loans discuss above are $9.4 million of loans originated under the Paycheck Protection Program (“PPP”), a specialized low-interest loan program funded by the U.S.

As of December 31, 2022, we had $100.4 million of commercial and industrial loans, representing 10.3% of our total loan and lease portfolio, including $6.3 million of unsecured commercial and industrial loans (which includes Paycheck Protection Program ("PPP") loans discussed below).

At December 31, 2022, we had $944,000 of loans originated under the PPP, a specialized low-interest loan program funded by the U.S.

Treasury Department and administered by the Small Business Administration (“SBA”).

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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 892 PPP loans totaling $103.1 million during the program.

The PPP expired on May 31, 2021.

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

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The increased risk in commercial and industrial loans derives from the expectation that such loans generally are serviced principally from the operations of the business, and those operations may not be successful.

Any interruption or discontinuance of operating cash flows from the business, which may be influenced by events not under the control of the borrower such as economic events and changes in governmental regulations, could materially affect the ability of the borrower to repay the loan.

Any interruption or discontinuance

of operating cash flows from the business, which may be influenced by events not under the control of the borrower such as economic events and changes in governmental regulations, could materially affect the ability of the borrower to repay the loan.

In addition, the collateral securing commercial and industrial loans generally includes moveable property such as equipment and inventory, which may decline in value more rapidly than we anticipate, exposing us to increased credit risk.

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This loan was performing in accordance with its repayment terms at December 31, 2022.

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.

We had 20 other commercial and industrial loans with an outstanding balance in excess of $1.0 million at December 31, 2022, all but one of which were performing in accordance with their repayment terms at that date.

Construction and Development Lending.

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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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These land loans also involve additional risks because the loan amount is based on the projected value of the lots after development.

We make these loans for up to 65% of the estimated value of raw land and up to 75% of the estimated value of developed land, with a term of up to two years with interest only payments, payable monthly.

We make these loans for up to 65% of

the estimated value of raw land and up to 75% of the estimated value of developed land, with a term of up to two years with interest only payments, payable monthly.

Construction loans generally involve greater credit risk than long-term financing on improved, owner occupied real estate.

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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, 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, 2022, our largest construction and land development loan had an outstanding balance of $10.9 million and was secured by an apartment building located in Columbus, Ohio.

At December 31, 2022, this loan was performing according to its repayment terms.

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We rely solely on brokers and other third-party originators to generate our lease transactions.

The nature of our business requires the use of brokers and third-party originators as it focuses on transactions generally ranging between $2,500 and $200,000 (with an average size of $45,000) with terms of 24 to 72 months.

Our risk management profile centers on internally rated “A” quality credits.

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

At December 31, 2022, our direct finance leasing portfolio totaled $133.5 million, or 13.7% of our total loan and lease portfolio, with lease contracts located throughout the United States.

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.

To generate deal flow, we actively 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 fewer than 25 referral sources.

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

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

In addition to an evaluation of the applicant’s financial condition, a determination is made of the probable adequacy of the primary and secondary sources of repayment, such as personal guarantees, to be relied upon in the transaction.

In addition to an evaluation of the applicant’s financial condition, a determination is made of the probable adequacy of the primary

and secondary sources of repayment, such as personal guarantees, to be relied upon in the transaction.

Credit agency reports of the applicant’s credit history supplement the analysis of the applicant’s creditworthiness.

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However, failure to perfect a security interest risks avoidance of the security interest in bankruptcy or subordination to the claims of third parties.

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.

At December 31, 2022, approximately $41.7 million or 31.2% of the aggregate dollar amount of our lease portfolio was concentrated in four states:

California at 9.4%;

New York at 9.3%;

Florida at 6.3% and Arkansas at 6.2%.

Our largest leasing relationship at that date was with the State of Arkansas which consisted of more than 3,000 leases totaling approximately $7.6 million in lease receivables, all of which were performing in accordance with the lease terms.

Our second largest leasing relationship was with a drilled pile foundation company located in Florida consisting of four contracts 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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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.

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.

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

As reflected in the tables above, loan and lease originations decreased $47.4 million or 8.9%, to $486.3 million during 2022 compared to $533.7 million during 2021, primarily due to decreases in residential mortgage loans as a result of a slowdown in the refinancing and sales of housing in our area due to rising market interest rates, multifamily and commercial real estate loans also due to increasing interest rates, and commercial and industrial loans as a result of the expiration of the PPP in May 2021.

Construction and development loan originations increased year over year in line with management’s strategy to expand this portfolio.

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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For the years ended December 31, 2022 and 2021, we sold $28.1 million and $76.2 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, 2022, we had 50 loans totaling $69.4 million in which we were not the lead lender.

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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.

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.

Nonaccrual 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.

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

When we acquire real estate as a result of foreclosure, the real estate is classified as foreclosed assets or Other Real Estate Owned.

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Nonperforming loans and leases totaled $9.1 million or 0.94% of total loans and leases at December 31, 2022 and $8.1 million or 0.95% of total loans and leases at December 31, 2021.

The increase in nonperforming loans was primarily attributable to a $1.3 million increase in commercial and industrial loans, primarily due to one loan of $1.3 million secured by business assets and a second mortgage, past due more than 90 days and still accruing.

At December 31, 2022, our largest nonperforming loan was a $4.9 million nonaccrual commercial construction and development loan that is subject to litigation between the developer and other parties.

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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No additional loan commitments were outstanding to our troubled debt restructured borrowers at December 31, 2022.

Loans on non-accrual status at the date of modification are initially classified as non-accrual troubled debt restructurings.

At December 31, 2021, we had $456,000 in non-accrual troubled debt restructurings, none of which were in the process of foreclosure at December 31, 2021.

Loans on nonaccrual status at the date of modification are initially classified as non-accrual troubled debt restructurings.

At December 31, 2022, we had $428,000 in nonaccrual troubled debt restructurings, none of which were in the process of foreclosure at December 31, 2022.

Our policy provides that troubled debt restructured loans are returned to accrual status after a period of satisfactory and reasonable future payment performance under the terms of the restructuring.

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

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,

(Dollars in thousands)

Non-accrual loans and leases:

Nonaccrual loans and leases:

Residential mortgage (1)

Commercial real estate 128 76

Commercial mortgage — 128

Construction and development 4,900 4,900

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Home equity lines of credit 30 12

Commercial real estate — 1,100

Consumer 33 22

Commercial and industrial 1,285 —

Total accruing loans and leases delinquent more than 90 days 3,173 1,847

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Troubled debt restructurings (accruing):

Total trouble debt restructuring (accruing) $ — $ —

Total trouble debt restructuring $ — $ —

Total non-performing loans to total loans 0.94 % 0.95 %

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

(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.

(2) Nonaccrual loans and leases include $428,000 and $456,000 of troubled debt restructurings for the years ended December 31, 2022 and 2021, 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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(In thousands)

Watch and special mention $ 12,222 $ 17,418

Special mention $ 4,034 $ 12,222

Substandard 12,710 8,453

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Average balances of residential loans include loans held for sale.

At and For the

Years Ended December 31,

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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)

Commercial mortgage (0.02) % — %

Net recoveries during the period $ (53) $ (3)

Average amount outstanding $ 285,404 $ 253,938

Commercial and industrial (0.13) % (0.09) %

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

Net recoveries during the period $ (130) $ (104)

Average amount outstanding $ 98,630 $ 117,528

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Residential mortgage (0.01) % (0.21) %

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

Net recoveries during the period $ (13) $ (273)

Average amount outstanding $ 138,147 $ 129,205

Home equity (0.11) % — %

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

Net recoveries during the period $ (10) $ —

Average amount outstanding $ 9,212 $ 6,488

Leases 0.29 % 0.21 %

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

Net charge-offs during the period $ 371 $ 257

Average amount outstanding $ 129,252 $ 119,827

Consumer 0.71 % 0.21 %

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

Net charge-offs during the period $ 130 $ 31

Average amount outstanding $ 18,402 $ 14,637

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Average amount outstanding $ 897,918 $ 786,686

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.

The increase in our allowance for loan and lease losses at December 31, 2022 as compared to December 31, 2021 primarily was driven by a $129.0 million increase in our loan portfolio.

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

See “Management’s Discussion and Analysis-Financial Condition at December 31, 2022 Compared

to December 31, 2021” 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.

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We also are required to maintain an investment in Federal Home Loan Bank of Indianapolis stock.

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.

invested funds within the context of our interest rate and credit risk objectives.

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.

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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Portfolio Maturities and Yields.

The following table sets forth the stated maturities and weighted average yields of investment securities, excluding Federal Reserve Bank and FHLB stock, at December 31, 2021.

The following table sets forth the weighted average yields of investment securities at various ranges of maturities, excluding Federal Reserve Bank and FHLB stock, at December 31, 2022.

Weighted average yields on tax-exempt securities are presented on a tax-equivalent basis using a federal tax rate of approximately 21.0%.

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Corporate obligations — — 3.97 4.09

Other — — — —

Total securities available for sale 3.11 2.09 2.37 2.06

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State and municipal obligations 2.79 3.14 4.88 5.05

Other — — — —

Total securities held to maturity 2.79 3.14 4.88 5.05

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

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.

At December 31, 2022, our core deposits, which are deposits other than certificates of deposit of $250,000 or more and brokered deposits, totaled $702.9 million, representing 69.9% of total deposits, compared to $716.4 million, representing 79.6% of total deposits, at December 31, 2021.

Our largest banking office based on deposits is our main office in Richmond, Indiana, which had total deposits of $539.7 million or 53.7% of our total deposits at December 31, 2022.

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Beginning balance $ 900,175 $ 693,045

Net deposits (withdrawals) 202,194 69,443

Net deposits 97,958 202,194

Interest credited 7,128 4,936

Ending balance $ 1,005,261 $ 900,175

Net increase (decrease) $ 207,130 $ 75,826

Percent increase (decrease) 29.9 % 12.3 %

Net increase $ 105,086 $ 207,130

Percent increase 11.7 % 29.9 %

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

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The following table indicates the time deposit accounts classified by rate and maturity at December 31, 2022.

3.00% Total Percent

4.00% Over 4.00% Total Percent

(Dollars in thousands)

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2026 18,000 1.57 %

2026 23,000 1.52 %

Thereafter 88,000 1.59 %

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Subsidiary and Other Activities

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

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.

At December 31, 2022, Richmond Mutual Bancorporation had two subsidiaries, First Bank Richmond and First Insurance Management, Inc.

First Bank Richmond is our wholly owned banking subsidiary.

First Insurance Management, Inc.

was formed in 2022 as a pooled captive insurance company subsidiary of the Company, incorporated in the State of Nevada, for the purpose of providing additional insurance coverage for the Company and its subsidiaries related to the operations of the Company for which insurance may not be economically feasible.

As of December 31, 2022, First Insurance Management provided us with various liability and property damage policies for the Company and its related subsidiaries.

First Insurance Management is regulated by the State of Nevada Division of Insurance.

At December 31, 2022, First Bank Richmond had an active investment subsidiary, FB Richmond Holdings, which is a Nevada corporation that holds substantially all of First Bank Richmond's investment portfolio.

As of December 31, 2022, the market value of securities managed was $290.5 million.

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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.

Based on the most recent data provided by the FDIC, there are approximately 11 and 19 other commercial banks and savings banks operating in our Indiana and Ohio market areas, respectively.

Additionally, there are approximately 14 and seven credit unions operating in these same respective market areas.

As of June 30, 2022 (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 22.1% and 1.3%, respectively, and in Shelby and Miami Counties, in Ohio, was approximately 8.7% and 4.2%, respectively.

We do not accept deposits at our loan production office located in Columbus, Ohio.

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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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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.

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Failure to implement such a plan can result in further enforcement action, including the issuance of a cease-and-desist order or the imposition of civil money penalties.

Commercial Real Estate Lending Concentrations .

The federal banking agencies have issued guidance on sound risk management practices for concentrations in commercial real estate lending.

The particular focus is on exposure to commercial real estate loans that are dependent on the cash flow from the real estate held as collateral and that are likely to be sensitive to conditions in the commercial real estate market (as opposed to real estate collateral held as a secondary source of repayment or as an abundance of caution).

The purpose of the guidance is not to limit a bank’s commercial real estate lending but to guide banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations.

The guidance directs the FDIC and other bank regulatory agencies to focus their supervisory resources on institutions that may have significant commercial real estate loan concentration risk.

A bank that has experienced rapid growth in commercial real estate lending, has notable exposure to a specific type of commercial real estate loan, or is approaching or exceeding the following supervisory criteria may be identified for further supervisory analysis with respect to real estate concentration risk:

Total reported loans for construction, land development and other land represent 100% or more of the bank’s total regulatory capital;

Total commercial real estate loans (as defined in the guidance) represent 300% or more of the bank’s total regulatory capital and the outstanding balance of the bank’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months.

The guidance provides that the strength of an institution’s lending and risk management practices with respect to such concentrations will be taken into account in supervisory guidance on evaluation of capital adequacy.

As of December 31, 2022, the Bank’s aggregate recorded loan balances for construction, land development and land loans were 84.9% of total regulatory capital.

In addition, at December 31, 2022, the Bank’s loans secured by commercial real estate (as defined in the guidance) represented 338.5% of total regulatory capital.

Investment Activities.

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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.

In addition, the aggregate amount of

extensions of credit by a financial institution to insiders cannot exceed the institution’s unimpaired capital and surplus.

Section 22(g) of the Federal Reserve Act places additional restrictions on loans to executive officers.

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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.

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

In September 2020, the FDIC Board of Directors adopted a Restoration Plan to restore the reserve ratio to at least 1.35 percent within eight years, absent extraordinary circumstances, as required by the Federal Deposit Insurance Act.

The Restoration Plan maintained the assessment rate schedules in place at the time and required the FDIC to update its analysis and projections for the deposit insurance fund balance and reserve ratio at least semiannually.

In the semiannual update for the Restoration Plan in June 2022, the FDIC projected that the reserve ratio was at risk of not reaching the statutory minimum of 1.35 percent by September 30, 2028, the statutory deadline to restore the reserve ratio.

Based on this update, the FDIC Board approved an Amended Restoration Plan, and concurrently proposed an increase in initial base deposit insurance assessment rate schedules by 2 basis points, applicable to all insured depository institutions.

In October 2022, the FDIC Board finalized the increase with an effective date of January 1, 2023, applicable to the first quarterly assessment period of 2023.

The revised assessment rate schedules are intended to increase the likelihood that the reserve ratio of the DIF reaches the statutory minimum level of 1.35 percent by September 30, 2028.

For the fiscal year ended December 31, 2022, First Bank Richmond paid $414,000 in FDIC premiums.

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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.

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.

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Under the Community Reinvestment Act, or CRA, as implemented by the Federal Deposit Insurance Corporation, a state non-member bank, such as First Bank Richmond, has a continuing and affirmative obligation, consistent with its safe and sound operation, to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods.

The CRA does not establish specific lending requirements or programs for financial institutions, nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA.

best suited to its particular community, consistent with the CRA.

The CRA requires the Federal Deposit Insurance Corporation, in connection with its examination of a state non-member bank, to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution, including applications to acquire branches and other financial institutions.

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Kleer (age 67).

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

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

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 & Girls Clubs Man and Youth Award.

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

Kleer is a member of the Large Community Bank Council of the Independent Community Bankers of America.

During 2022, Mr.

Kleer served as Chairman of the Indiana Bankers Association (“IBA”) and continues to serve on its board as immediate past chairman.

Kleer was named a Sagamore of the Wabash and inducted into the IBA Leaders in Banking Excellence in 2022.

Kleer’s community involvement includes service on the boards of the Boys & Girls Clubs of Wayne County, Reid Health Foundation, Richmond Symphony Orchestra, Reid Health, and Wayne County Foundation.

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

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.

He attended the ABA Graduate School of Commercial Lending and graduated with honors from the Stonier Graduate School of Banking.

Kleer is a graduate of Indiana University, the ABA Graduate School of Commercial Lending and the Stonier Graduate School of Banking.

With 40+ years of experience working in the banking industry, his service on the boards of numerous community organizations and his extensive involvement in our community, Mr.

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Witte (age 51).

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.

He also provides direction and oversight to the Leasing Department, as needed, and generally is responsible for the review of larger leasing credit applications.

Witte, employed by First Bank Richmond since 1996, was promoted to President/Chief Operating Officer of the Bank in January 2023.

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

Witte manages the lending and operations functions of the Bank.

Witte is a graduate of Ball State University with a B.S.

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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