Richmond Mutual Bancorporation, Inc. 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Management’s discussion and analysis of financial condition of the Richmond Mutual Bancorporation, Inc. (the “Company”) at September 30, 2025, and the consolidated results of operations for the three and nine month periods ended September 30, 2025, compared to the same periods in 2024, is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto appearing in Part I, Item 1, of this Form 10-Q. The terms “we,” “our,” “us,” or the “Company” refer to Richmond Mutual Bancorporation, Inc. and its consolidated direct and indirect subsidiaries, including First Bank Richmond, which we sometimes refer to as the “Bank,” unless the context otherwise requires. Cautionary Note Regarding Forward-Looking Statements Certain matters in this Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact, are based on certain assumptions and are generally identified by use of words such as “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook,” or similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would,” and “could.” These forward-looking statements include, but are not limited to: • statements of our goals, intentions and expectations; • statements regarding our business plans, prospects, growth and operating strategies; • statements regarding the quality of our loan and investment portfolios; and • estimates of our risks and future costs and benefits. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These forward-looking statements are based on our current beliefs and expectations and, by their nature, are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Important factors that could cause our actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: • adverse impacts to economic conditions in our local market areas and other markets where we have lending relationships; • effects of employment levels, labor shortages, persistent inflation, recessionary pressures, or slowing economic growth; • changes in interest rate levels and the duration of such changes, including actions by the Board of Governors of the Federal Reserve System (the "Federal Reserve"); • the impact of inflation and monetary and fiscal policy responses thereto, and their impact on consumer behavior; • effects of a federal government shutdown, debt ceiling standoff, or other fiscal policy uncertainty; • changes in the level and direction of loan or lease delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses; • our ability to access cost-effective funding including maintaining the confidence of depositors; 31 • unexpected outflows of uninsured deposits may require us to sell investment securities at a loss; • fluctuations in real estate values, and residential, commercial, and multi-family real estate market conditions; • demand for loans and deposits in our market area; • our ability to implement and change our business strategies; • competition among depository and other financial institutions and equipment financing companies; • bank failures or other adverse developments at banks and related negative press about the banking industry in general on investor and depositor sentiment; • inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on our loans and leases; • adverse changes in the securities or secondary mortgage markets; • changes in the quality or composition of our loan, lease or investment portfolios; • our ability to keep pace with technological changes, including our ability to identify and address cyber-security risks such as data security breaches, "denial of service" attacks, "hacking" and identity theft, and other attacks on our information technology systems or on our third-party vendors; • results of examinations by regulatory authorities and potential requirements to increase credit loss allowances, write-down assets, reclassify assets, change our regulatory capital position, or affect our liquidity and earnings; • the inability of third-party providers to perform as expected; • our ability to manage market risk, credit risk and operational risk in the current economic environment; • our ability to enter new markets successfully and capitalize on growth opportunities; • our ability to attract and retain key employees; • our compensation expense associated with equity allocated or awarded to our employees; • changes in the financial condition, results of operations or future prospects of issuers of securities that we own; • our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto; • changes in consumer spending, borrowing and savings habits; • changes in accounting policies and practices, as may be adopted by banking regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission ("SEC") or the Public Company Accounting Oversight Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; • legislation or regulatory changes, including but not limited to shifts in capital requirements, banking regulation, tax laws, or consumer protection laws; • our ability to pay dividends on our common stock; • our ability to adapt to rapid technological changes, including advancements in artificial intelligence, digital banking, and cybersecurity; 32 • geopolitical developments and international conflicts, including but not limited to tensions or instability in Eastern Europe, the Middle East, and Asia, or the imposition of new or increased tariffs and trade restrictions, which may disrupt financial markets, global supply chains, energy prices, or economic activity in specific industry sectors; • other economic, competitive, governmental, regulatory, and technical factors affecting our operations, pricing, products and services; • the effects of climate change, severe weather, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, civil unrest, and other external events; and • the other risks detailed in this report and from time to time in our other filings with the Securities and Exchange Commission ("SEC"), including our Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 Form 10-K”). We undertake no obligation to publicly update or revise any forward-looking statements included in this report or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this report might not occur and you should not put undue reliance on any forward-looking statements. Overview The Company, a Maryland corporation, is a bank holding company for its wholly owned subsidiary, First Bank Richmond. Substantially all of the Company's business is conducted through First Bank Richmond. The Company is regulated by the Federal Reserve and the Indiana Department of Financial Institutions ("IDFI"). The Company's corporate office is located at 31 North 9th Street, Richmond, Indiana, and its telephone number is (765) 962-2581. First Bank Richmond is an Indiana state-chartered commercial bank headquartered in Richmond, Indiana. The Bank was originally established in 1887 as an Indiana state-chartered mutual savings and loan association and in 1935 converted to a federal mutual savings and loan association, operating under the name First Federal Savings and Loan Association of Richmond. In 1993, the Bank converted to a state-chartered mutual savings bank and changed its name to First Bank Richmond, S.B. In 1998, the Bank, in connection with its non-stock mutual holding company reorganization, converted to a national bank charter operating as First Bank Richmond, National Association. In July 2007, Richmond Mutual Bancorporation-Delaware, the Bank’s then current holding company, acquired Mutual Federal Savings Bank headquartered in Sidney, Ohio. Mutual Federal Savings Bank was operated independently as a separately chartered, wholly owned subsidiary of Richmond Mutual Bancorporation-Delaware until 2016 when it was combined with the bank through an internal merger transaction that consolidated both banks into a single, more efficient commercial bank charter. In 2017, the Bank converted to an Indiana state-chartered commercial bank and changed its name to First Bank Richmond. The former Mutual Federal Savings Bank continues to operate in Ohio under the name Mutual Federal, a division of First Bank Richmond. First Bank Richmond provides a full range of banking services through its seven full- and one limited-service offices located in Cambridge City (1), Centerville (1), Richmond (5) and Shelbyville (1), Indiana, its five full-service offices located in Piqua (2), Sidney (2) and Troy (1), Ohio, and its loan production office in Columbus, Ohio. Administrative, trust and wealth management services are conducted through First Bank Richmond’s Corporate Office/Financial Center located in Richmond, Indiana. As an Indiana-chartered commercial bank, First Bank Richmond is subject to regulation by the IDFI and the Federal Deposit Insurance Corporation (“FDIC”). Our principal business consists of attracting deposits from the general public, as well as brokered deposits, and investing those funds primarily in loans secured by commercial and multi-family real estate, first mortgages on owner-occupied, one- to four-family residences, a variety of consumer loans, direct financing leases and commercial and industrial loans. We also obtain funds by utilizing Federal Home Loan Bank (“FHLB”) advances. Funds not invested in loans generally are invested in investment securities, including mortgage-backed and mortgage-related securities and government sponsored agency and municipal bonds. First Bank Richmond generates commercial, mortgage and consumer loans and leases and gathers deposits primarily within Wayne and Shelby Counties, Indiana and Shelby, Miami, and Franklin (no deposits) Counties, Ohio, which together comprises its primary market area. First Bank Richmond also operates a nationwide equipment leasing business, focusing on direct financing leases for equipment integral to small and mid-sized business operations, including technology, medical, manufacturing, industrial, construction, and transportation equipment. First Bank Richmond's trust and wealth management 33 division provides fiduciary, investment management, and custodial services. Wealth management assets under management and administration totaled $246.0 million at September 30, 2025. Our results of operations are primarily dependent on net interest income, the difference between interest income earned on loans and investments and interest expense paid on deposits and borrowings. Other significant sources of income include service charges on deposit accounts, loan servicing fees, gains on sales of residential mortgage loans, and securities transactions. Changes in market interest rates, the shape of the yield curve, and the mix and volume of interest-earning assets and interest-bearing liabilities significantly affect the Company's net interest margin and profitability. At September 30, 2025, on a consolidated basis, we had $1.5 billion in assets, $1.2 billion in loans and leases, net of allowance, $1.1 billion in deposits, and $140.0 million in stockholders’ equity. At September 30, 2025, First Bank Richmond’s total risk-based capital ratio was 14.36%, exceeding the 10.0% requirement for a well-capitalized institution. For the nine months ended September 30, 2025, net income was $8.2 million, compared with net income of $6.9 million for the nine months ended September 30, 2024. Critical Accounting Estimates We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the United States ("GAAP"). In doing so, we have to make estimates and assumptions. Our critical accounting estimates are those estimates that involve a significant level of uncertainty at the time the estimate was made, and changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. Accordingly, actual results could differ materially from our estimates. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We have reviewed our critical accounting estimates with the audit committee of our Board of Directors. There have been no significant changes during the nine months ended September 30, 2025 to the critical accounting estimates reported in Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2024 Form 10-K. See "Critical Accounting Estimates" included in Part II, Item 7 of our 2024 Form 10-K for a further discussion of our Critical Accounting Estimates. Comparison of Financial Condition at September 30, 2025 and December 31, 2024 General. Total assets increased $20.7 million, or 1.4%, to $1.5 billion at September 30, 2025 from December 31, 2024. The increase was primarily the result of a $19.4 million, or 1.7%, increase in loans and leases, net of allowance for credit losses, to $1.2 billion, and a $12.5 million, or 57.5%, increase in cash and cash equivalents to $34.3 million. These increases were partially offset by an $8.5 million, or 3.2%, decrease in investment securities to $253.2 million, and a $3.1 million decrease in other assets, primarily deferred tax assets. Investment Securities. Investment securities available for sale totaled $250.4 million and $258.2 million, while investment securities held to maturity totaled $2.8 million and $3.5 million at September 30, 2025 and December 31, 2024, respectively. The $7.7 million, or 3.0%, decrease in investment securities available for sale was primarily due to $14.8 million in maturities and principal repayments and $6.8 million in sales of securities, partially offset by a $9.7 million upward mark-to-market adjustment on the investment portfolio resulting from lower market interest rates and $4.8 million in purchases of securities. The $726,000 decrease in investment securities held to maturity was the result of scheduled principal repayments and maturities. The proceeds received from the maturities and repayments of investment securities were primarily used to fund loan growth consistent with the Company's strategy to prioritize higher-yielding assets in a moderating interest rate environment. Loans and Leases. Loans and leases, net of allowance for credit losses on loans and leases, increased $19.4 million, or 1.7%, to $1.2 billion at September 30, 2025 from December 31, 2024. The increase in loans and leases was attributable to increases in commercial real estate, multi-family, and commercial and industrial loans of $49.0 million, $31.1 million, and $12.0 million, respectively. These increases were partially offset by a $65.1 million decrease in construction and development loans. At September 30, 2025, loans held for sale totaled $1.4 million, compared to $1.1 million at December 31, 2024. Nonaccrual loans and leases totaled $6.4 million at September 30, 2025, compared to $5.1 million at December 31, 2024. The increase was primarily due to one commercial real estate loan of $704,000. At September 30, 2025, this loan had a loan to value ratio of 79.1%, and was largely guaranteed by the U.S. Small Business Administration. Accruing loans and leases past due 90 days or more totaled $4.4 million and $1.7 million at September 30, 2025 and December 31, 2024, respectively. 34 The increase in accruing loans past due 90 days or more was primarily due to one multi-family loan of $2.4 million, which was not past due at December 31, 2024. Nonperforming loans and leases, consisting of nonaccrual loans and leases and accruing loans and leases 90 days or more past due, totaled $10.8 million, or 0.90% of total loans and leases, at September 30, 2025, compared to $6.8 million, or 0.58% of total loans and leases, at December 31, 2024. Allowance for Credit Losses. The allowance for credit losses on loans and leases increased $574,000, or 3.6%, to $16.4 million at September 30, 2025 from December 31, 2024. At September 30, 2025, the allowance for credit losses on loans and leases totaled 1.37% of total loans and leases outstanding. The increase in the allowance was primarily due to changes in portfolio composition, primarily growth in commercial real estate, multi-family, and commercial and industrial loans, which generally carry higher reserve requirements relative to other segments. In addition, updated economic forecasts, including expectations for slowing GDP growth and rising unemployment, contributed to a more cautious provisioning approach. At December 31, 2024, the allowance for credit losses on loans and leases totaled $15.8 million, or 1.34% of total loans and leases outstanding. Net charge-offs during the first nine months of 2025 totaled $1.3 million, and were primarily attributable to direct financing leases, compared to net charge-offs of $1.2 million during the first nine months of 2024. Management regularly analyzes conditions within its geographic markets and evaluates its loan and lease portfolio. The Company evaluated its exposure to potential loan and lease losses as of September 30, 2025, which evaluation included consideration of a potential recession due to inflation, stock market volatility, and overall geopolitical tensions. Credit metrics are being reviewed and stress testing is being performed on the loan portfolio on an ongoing basis. For additional information on the allowance for credit losses, see "Allowance for Credit Losses on Loans and Leases" and "Economic Outlook" in "Note 4: Loans, Leases and Allowance" of the "Notes to Condensed Consolidated Financial Statements" in this report. Other Assets . Other assets decreased $3.1 million, or 13.7%, to $19.4 million at September 30, 2025 from $22.5 million at December 31, 2024. The decrease was primarily caused by a reduction in the Company's deferred tax asset, reflecting lower unrealized losses in the available for sale investment portfolio following a decline in market rates. Deposits. Total deposits increased $24.3 million, or 2.2%, to $1.1 billion at September 30, 2025 from December 31, 2024. The increase in deposits primarily was due to increases in retail (non-brokered) time deposits of $16.2 million, interest-bearing demand deposits of $10.4 million, and savings and money market accounts of $6.4 million. These increases were partially offset by a decrease in brokered time deposits of $9.3 million. Brokered deposits totaled $248.3 million, or 22.2% of total deposits, at September 30, 2025, compared to $257.6 million, or 23.5% of total deposits, at December 31, 2024. At September 30, 2025, noninterest-bearing deposits totaled $110.8 million, or 9.9% of total deposits, compared to $110.1 million, or 10.1% of total deposits, at December 31, 2024. Management attributes the shift from transaction accounts to time deposits to customer demand for higher yields, as financial institutions continue to offer competitive rates on certificates of deposit in response to elevated market rate levels during late 2024. Although the Federal Reserve began lowering rates in late 2024, deposit pricing remains responsive to competitive pressures and customer preferences for rate certainty. As of September 30, 2025, approximately $262.3 million of our deposit portfolio, or 23.5% of total deposits, excluding collateralized public deposits, was uninsured. The uninsured amounts are estimated based on the methodologies and assumptions used for First Bank Richmond's regulatory reporting requirements. Borrowings. Total borrowings, consisting solely of FHLB advances, decreased $11.0 million, or 4.2%, to $254.0 million at September 30, 2025, compared to $265.0 million at December 31, 2024. The decrease primarily reflected scheduled maturities of term advances and reduced liquidity needs resulting from deposit growth during the period. The weighted-average interest rate on FHLB advances was 4.05% at September 30, 2025, compared to 3.96% at December 31, 2024. Management strategically utilizes FHLB advances to supplement deposit funding, support loan growth, and manage interest rate risk. During the first nine months of 2025, the Company allowed a portion of higher-cost advances to mature without replacement, consistent with its efforts to reduce wholesale funding reliance and manage funding costs. Management will continue to monitor borrowing needs and adjust FHLB advances as necessary to maintain liquidity and support lending activities. Stockholders’ Equity. Stockholders’ equity totaled $140.0 million at September 30, 2025, an increase of $7.2 million, or 5.4%, from December 31, 2024. The increase primarily resulted from net income of $8.2 million and a $7.7 million decrease in accumulated other comprehensive loss, reflecting improved fair values in the Company's available for sale investment portfolio due to lower market rates of interest. At December 31, 2024, the available for sale portfolio had a net unrealized loss of $58.0 million compared to a net unrealized loss of $48.2 million at September 30, 2025. The after-tax impact of the AOCL on equity was $38.1 million at September 30, 2025 compared to $45.8 million at December 31, 2024. 35 Partially offsetting these increases were dividend payments of $4.4 million and repurchases of $5.6 million of Company common stock. The Company repurchased 425,823 shares of Company common stock at an average price of $13.14 per share during the first nine months of 2025. The Company's equity to asset ratio was 9.18% at September 30, 2025. At September 30, 2025, First Bank Richmond's Tier 1 capital to total assets ratio was 10.85% and its capital was well in excess of all regulatory requirements. Comparison of Results of Operations for the Three Months Ended September 30, 2025 and 2024. General. Net income for the three months ended September 30, 2025 was $3.6 million, a $1.1 million or 45.5% increase from net income of $2.5 million for the three months ended September 30, 2024. Diluted earnings per share were $0.36 for the third quarter of 2025, compared to $0.24 diluted earnings per share for the third quarter of 2024. The increase in net income primarily was the result of an increase in net interest income of $1.9 million, partially offset by a $368,000 increase in the provision for credit losses. In addition, noninterest income declined $27,000, and noninterest expense increased $67,000. Interest Income. Interest income increased $1.6 million, or 7.7%, to $21.8 million during the quarter ended September 30, 2025, compared to $20.3 million during the quarter ended September 30, 2024. Interest income on loans and leases increased $1.6 million, or 8.9%, to $19.7 million for the quarter ended September 30, 2025, from $18.1 million for the comparable quarter in 2024, due to an increase in the average balance of loans and leases of $33.2 million, and an increase of 36 basis points in the average yield earned on loans and leases as new loans and leases were originated at higher rates and existing variable rate loans in the portfolio adjusted upward due to the overall higher interest rate environment. The average outstanding loan and lease balance was $1.2 billion for the quarters ended September 30, 2025 and 2024. The average yield on loans and leases was 6.63% for the quarter ended September 30, 2025, compared to 6.27% for the comparable quarter in 2024. Interest income on investment securities, excluding FHLB stock, decreased $80,000, or 4.7%, to $1.6 million for the third quarter of 2025 from the comparable quarter in 2024. The decrease was due to a $21.0 million decrease in the average balance, primarily as a result of maturities and paydowns on securities being used to fund loan growth, partially offset by an eight basis point increase in the average yield earned on investment securities. The average yield on investment securities, excluding FHLB stock, increased to 2.59% for the third quarter of 2025, compared to 2.51% for the third quarter of 2024. The average balance of investment securities, excluding FHLB stock, decreased to $249.9 million for the quarter ended September 30, 2025, compared to $270.9 million for the quarter ended September 30, 2024. Dividends on FHLB stock increased $12,000, or 4.0%, during the quarter ended September 30, 2025, from the comparable quarter in 2024, resulting in an average yield on FHLB stock of 9.03% for the three months ended September 30, 2025, compared to 8.69% for the three months ended September 30, 2024. Interest income on cash and cash equivalents increased $15,000, or 8.0%, to $203,000 during the quarter ended September 30, 2025 from the comparable quarter in 2024, due to a $5.1 million increase in the average balance of cash and cash equivalents, partially offset by an 87 basis point decrease in the average yield. Interest Expense. Interest expense decreased $310,000, or 2.9%, to $10.5 million for the quarter ended September 30, 2025, compared to $10.8 million for the quarter ended September 30, 2024. Interest expense on deposits decreased $574,000, or 6.9%, to $7.8 million for the quarter ended September 30, 2025, from $8.3 million for the comparable quarter in 2024. The decrease in interest expense on deposits primarily was attributable to a 19 basis point decrease in the average rate paid on interest-bearing deposits and an $11.9 million decrease in the average balance. The average rate paid on interest-bearing deposits was 3.14% for the quarter ended September 30, 2025, compared to 3.33% for the quarter ended September 30, 2024. The average balance of interest-bearing deposits was $989.0 million for the quarter ended September 30, 2025, compared to $1.0 billion in the comparable quarter in 2024. Interest expense on FHLB borrowings increased $264,000, or 10.6%, to $2.8 million in the third quarter of 2025 compared to $2.5 million for the same quarter in 2024, due to an increase in the average rate paid on FHLB borrowings of eight basis points and an increase in the average balance of $21.0 million. The average rate paid on FHLB borrowings was 4.16% for the quarter ended September 30, 2025, compared to 4.08% for the third quarter of 2024. The average balance of FHLB borrowings totaled $265.8 million during the quarter ended September 30, 2025, compared to $244.8 million for the quarter ended September 30, 2024. Management continues to actively evaluate funding mix and pricing strategies to balance interest expense with overall liquidity needs. This includes a focus on deepening core deposit relationships, selectively reducing higher-cost deposits, and managing wholesale borrowings to optimize the cost of funds. 36 Net Interest Income. Net interest income before the provision for credit losses increased $1.9 million, or 19.7%, to $11.3 million for the third quarter of 2025, compared to $9.4 million for the third quarter of 2024. This increase was due to a 49 basis point increase in the average interest rate spread and an $8.2 million increase in average net earning assets. The improved spread reflects a favorable shift in asset yields as loans and investment securities repriced to or were originated at higher market rates, paired with a slight decrease in funding costs. Net interest margin (annualized) was 3.07% for the three months ended September 30, 2025, compared to 2.60% for the three months ended September 30, 2024. The increase in net interest margin was attributable to improved asset yields, particularly on loans and leases, paired with a slight decrease in funding costs. The Company also benefited from a more favorable asset repricing environment following the Federal Reserve's rate cuts in late 2024, which reduced deposit costs while asset yields remained elevated. Average Balances, Interest and Average Yields/Cost. The following table sets forth for the periods indicated, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities, resultant yields, interest rate spread, net interest margin (otherwise known as net yield on interest-earning assets), and the ratio of average interest-earning assets to average interest-bearing liabilities. Average balances have been calculated using daily balances. Non-accruing loans have been included in the table as loans carrying a zero yield. Loan fees are included in interest income on loans and are not material. Three Months Ended September 30, 2025 2024 Average Balance Outstanding Interest Earned/ Paid Yield/ Rate Average Balance Outstanding Interest Earned/ Paid Yield/ Rate (Dollars in thousands) Interest-earning assets: Loans and leases receivable $ 1,186,517 $ 19,676 6.63 % $ 1,153,325 $ 18,071 6.27 % Securities 249,857 1,620 2.59 % 270,857 1,700 2.51 % FHLB stock 13,907 314 9.03 % 13,907 302 8.69 % Cash and cash equivalents and other 20,957 203 3.87 % 15,874 188 4.74 % Total interest-earning assets 1,471,238 21,813 5.93 % 1,453,963 20,261 5.57 % Non-earning assets 39,591 40,485 Total assets 1,510,829 1,494,448 Interest-bearing liabilities: Savings and money market accounts 303,742 1,747 2.30 % 290,108 1,779 2.45 % Interest-bearing checking accounts 145,916 425 1.17 % 140,028 431 1.23 % Certificate accounts 539,389 5,585 4.14 % 570,820 6,121 4.29 % Borrowings 265,793 2,761 4.16 % 244,793 2,497 4.08 % Total interest-bearing liabilities 1,254,840 10,518 3.35 % 1,245,749 10,828 3.48 % Noninterest-bearing demand deposits 108,360 101,239 Other liabilities 14,099 13,200 Stockholders' equity 133,530 134,260 Total liabilities and stockholders' equity 1,510,829 1,494,448 Net interest income $ 11,295 $ 9,433 Net earning assets $ 216,398 $ 208,214 Net interest rate spread (1) 2.58 % 2.09 % Net interest margin (2) 3.07 % 2.60 % Average interest-earning assets to average interest-bearing liabilities 117.25 % 116.71 % _____________ 37 (1) Annualized. Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities. (2) Annualized. Net interest margin represents net interest income divided by average total interest-earning assets. Provision for Credit Losses. A provision for credit losses of $269,000 was recognized during the three months ended September 30, 2025, compared to a reversal of credit losses of $99,000 for the three months ended September 30, 2024. Net charge-offs during the third quarter of 2025 were $317,000, compared to $464,000 in the third quarter of 2024. The increased provision for credit losses during the quarter was primarily due to loan growth in the commercial real estate and commercial and industrial loan portfolios, which generally carry higher estimated loss rates compared to other segments. Additionally, the provision reflected replenishment of the allowance following charge-offs and was influenced by changes in the macroeconomic forecast, including a modest deterioration in projected economic indicators such as national GDP and unemployment rates. While we believe the steps we have taken and continue to take are necessary to effectively manage our portfolio, uncertainties relating to the level of our allowance for credit losses remain heightened as a result of continued concern about a potential recession due to tariffs, inflation, stock market volatility, and overall geopolitical tensions. Noninterest Income. Noninterest income decreased $27,000, or 2.0%, to $1.3 million for the quarter ended September 30, 2025, compared to the same quarter in 2024. The decline resulted primarily from a decrease in net gains on loan and lease sales, partially offset by higher loan and lease servicing fees and other income. Net gains on loan and lease sales decreased $117,000, or 55.3%, to $94,000 during the quarter ended September 30, 2025, compared to $211,000 during the comparable quarter in 2024, primarily due to reduced mortgage banking activity. Loan and lease servicing fees increased $42,000, or 34.3%, to $164,000 for the quarter ended September 30, 2025, compared to $122,000 for the comparable quarter in 2024, due to increased fees received from the payoff of serviced loans. Other income increased $50,000, or 14.2%, to $404,000 for the quarter ended September 30, 2025, compared to $354,000 for the comparable quarter in 2024, due to increased wealth management income driven by improved market performance and a higher amount of client assets under management. Noninterest Expense. Noninterest expense increased $67,000, or 0.8%, to $8.1 million for the three months ended September 30, 2025, compared to the same period in 2024. Salaries and employee benefits decreased $80,000, or 1.8%, to $4.5 million, primarily due to reduced equity compensation expenses. Legal and professional fees increased $77,000, or 16.7%, reflecting higher external consulting and legal service costs. Deposit insurance expense decreased $74,000, or 19.5%, primarily due to shifts in First Bank Richmond's asset and deposit mix and related assessments. Data processing fees increased $61,000, or 6.8%, to $955,000, primarily due to increased software implementation expenses. Income Tax Expense. The provision for income taxes increased $275,000 during the three months ended September 30, 2025, compared to the same period in 2024, as a result of higher pre-tax income. The effective tax rate for the third quarter of 2025 was 15.2% compared to 13.0% for the same quarter a year ago. The increase in the effective tax rate was a result of a higher level of pre-tax income, reducing the favorable impact of tax-exempt interest and deductions. Comparison of Results of Operations for the Nine Months Ended September 30, 2025 and 2024. General. Net income for the nine months ended September 30, 2025 was $8.2 million, a $1.3 million or 18.3% increase from net income of $6.9 million for the nine months ended September 30, 2024. Diluted earnings per share were $0.82 for the first nine months of 2025, compared to $0.68 diluted earnings per share for the first nine months of 2024. The increase in net income primarily was the result of an increase in net interest income of $3.5 million, partially offset by a $1.4 million increase in the provision for credit losses, a $441,000 increase in noninterest expense, and a $349,000 increase in the provision for income taxes. Additionally, noninterest income decreased $26,000. Interest Income. Interest income increased $4.1 million, or 7.0%, to $64.0 million during the nine months ended September 30, 2025, compared to $59.9 million during the nine months ended September 30, 2024. Interest income on loans and leases increased $4.5 million, or 8.5%, to $57.6 million for the nine months ended September 30, 2025, from $53.1 million for the comparable period in 2024, due to an increase in the average balance of loans and leases of $38.9 million, and an increase of 30 basis points in the average yield earned on loans and leases as new loans and leases were originated at higher rates and existing variable rate loans in the portfolio adjusted upward due to the overall higher interest rate environment. The average outstanding loan and lease balance was $1.2 billion for the nine months ended September 30, 2025, compared to $1.1 billion for the same period of 2024. The average yield on loans and leases was 6.50% for the nine months ended September 30, 2025, compared to 6.20% for the comparable period in 2024. Interest income on investment securities, excluding FHLB stock, decreased $349,000, or 6.7%, to $4.9 million for the first nine months of 2025 from the comparable period in 2024. The decrease was due to a $21.4 million decrease in the average 38 balance, which resulted from maturities and paydowns that were used to fund loan growth. The average yield on investment securities, excluding FHLB stock, was 2.56% for both periods. The average balance of investment securities, excluding FHLB stock, decreased to $254.5 million for the nine months ended September 30, 2025, compared to $275.9 million for the nine months ended September 30, 2024. Dividends on FHLB stock decreased $13,000, or 1.4%, during the nine months ended September 30, 2025, from the comparable period in 2024, resulting in an average yield on FHLB stock of 8.95% for the nine months ended September 30, 2025, compared to 9.12% for the nine months ended September 30, 2024. Interest income on cash and cash equivalents increased $32,000, or 5.9%, to $577,000 during the nine months ended September 30, 2025 from the comparable period in 2024, due to a $4.3 million increase in the average balance of cash and cash equivalents, partially offset by an 80 basis point decrease in the average yield. Interest Expense. Interest expense increased $699,000, or 2.3%, to $31.7 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. Interest expense on deposits increased $15,000, or 0.1%, to $23.4 million for the nine months ended September 30, 2025, from the comparable period in 2024. The increase in interest expense on deposits primarily was attributable to a $12.1 million increase in the average balance of interest-bearing deposits, partially offset by a four basis point decrease in the average rate paid, which declined to 3.15% for the nine months ended September 30, 2025, compared to 3.19% for the nine months ended September 30, 2024. The average balance of interest-bearing deposits was $991.3 million for the nine months ended September 30, 2025, compared to $979.2 million in the comparable period in 2024. Interest expense on FHLB borrowings increased $685,000, or 9.0%, to $8.3 million in the first nine months of 2025 compared to $7.6 million for the same period in 2024, primarily due to an increase in the average rate paid on FHLB borrowings of 23 basis points. The average rate paid on FHLB borrowings was 4.14% for the nine months ended September 30, 2025, compared to 3.91% for the first nine months of 2024. The average balance of FHLB borrowings totaled $267.5 million during the nine months ended September 30, 2025, compared to $259.9 million for the period ended September 30, 2024. Net Interest Income. Net interest income before the provision for credit losses increased $3.5 million, or 12.0%, to $32.3 million for the first nine months of 2025, compared to $28.8 million for the first nine months of 2024. This increase was due to a 28 basis point increase in the average interest rate spread, and an increase of $2.2 million in average net earning assets. The improved spread reflects a favorable shift in asset yields outpacing the increase in funding costs, as loans and investment securities repriced or were originated at higher market rates. The decline in average net earning assets was primarily the result of higher average balances of interest-bearing deposits. Net interest margin (annualized) was 2.93% for the nine months ended September 30, 2025, compared to 2.66% for the nine months ended September 30, 2024. The increase in net interest margin primarily was due to the yield on interest-earning assets increasing faster than the rate paid on interest-bearing liabilities. This margin expansion was supported by growth in higher-yielding asset categories, particularly commercial and multi-family loans. 39 Average Balances, Interest and Average Yields/Cost. The following table sets forth for the periods indicated, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities, resultant yields, interest rate spread, net interest margin (otherwise known as net yield on interest-earning assets), and the ratio of average interest-earning assets to average interest-bearing liabilities. Average balances have been calculated using daily balances. Non-accruing loans have been included in the table as loans carrying a zero yield. Loan fees are included in interest income on loans and are not material. Nine Months Ended September 30, 2025 2024 Average Balance Outstanding Interest Earned/ Paid Yield/ Rate Average Balance Outstanding Interest Earned/ Paid Yield/ Rate (Dollars in thousands) Interest-earning assets: Loans and leases receivable $ 1,181,751 $ 57,633 6.50 % $ 1,142,828 $ 53,133 6.20 % Securities 254,513 4,883 2.56 % 275,903 5,232 2.53 % FHLB stock 13,907 934 8.95 % 13,848 947 9.12 % Cash and cash equivalents and other 19,769 577 3.89 % 15,480 545 4.69 % Total interest-earning assets 1,469,940 64,027 5.81 % 1,448,059 59,857 5.51 % Non-earning assets 40,032 42,399 Total assets 1,509,972 1,490,458 Interest-bearing liabilities: Savings and money market accounts 308,212 5,303 2.29 % 279,890 4,961 2.36 % Interest-bearing checking accounts 140,493 1,122 1.06 % 144,157 1,250 1.16 % Certificate accounts 542,573 16,989 4.17 % 555,136 17,188 4.13 % Borrowings 267,484 8,301 4.14 % 259,911 7,617 3.91 % Total interest-bearing liabilities 1,258,762 31,715 3.36 % 1,239,094 31,016 3.34 % Noninterest-bearing demand deposits 105,016 105,564 Other liabilities 13,674 13,718 Stockholders' equity 132,520 132,082 Total liabilities and stockholders' equity 1,509,972 1,490,458 Net interest income $ 32,312 $ 28,841 Net earning assets $ 211,178 $ 208,965 Net interest rate spread (1) 2.45 % 2.17 % Net interest margin (2) 2.93 % 2.66 % Average interest-earning assets to average interest-bearing liabilities 116.78 % 116.86 % _____________ (1) Annualized. Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities. (2) Annualized. Net interest margin represents net interest income divided by average total interest-earning assets. Provision for Credit Losses. A provision for credit losses of $1.7 million was recognized during the nine months ended September 30, 2025, compared to a provision of $355,000 for the nine months ended September 30, 2024. Net charge-offs during the first nine months of 2025 were $1.3 million, compared to $1.2 million in the first nine months of 2024. The increased provision for credit losses during the period was primarily due to loan growth in the commercial real estate and commercial and industrial loan portfolios, which generally carry higher estimated loss rates compared to other segments. Additionally, the provision reflected replenishment of the allowance following charge-offs and was influenced by changes in the macroeconomic forecast, including a modest deterioration in projected economic indicators such as national GDP and unemployment rates. 40 While we believe the steps we have taken and continue to take are necessary to effectively manage our portfolio, uncertainties relating to the level of our allowance for credit losses remain heightened as a result of continued concern about a potential recession due to tariffs, inflation, stock market volatility, and overall geopolitical tensions. Noninterest Income. Noninterest income decreased $26,000, or 0.7%, to $3.5 million for the nine months ended September 30, 2025, compared to the same period in 2024. Net gains on loan and lease sales decreased $130,000, or 30.9%, to $291,000 for the nine months ended September 30, 2025, compared to the comparable period in 2024, primarily due to reduced mortgage banking activity. In addition, net losses on sales of securities increased $106,000 for the first nine months of 2025, compared to the same period in 2024. These decreases were partially offset by an increase in other income of $104,000, or 10.3%, to $1.1 million for the nine months ended September 30, 2025, compared to $1.0 million for the comparable period in 2024, primarily due to increased wealth management income driven by improved market performance and a higher amount of client assets under management. Additionally, card fee income increased $58,000, or 6.5%, to $951,000, due to increased usage reflecting increased transaction volumes and continued growth in debit card usage by retail customers. Noninterest Expense. Noninterest expense increased $441,000, or 1.8%, to $24.6 million for the nine months ended September 30, 2025, compared to $24.1 million for the same period in 2024. Salaries and employee benefits, which represent the largest component of noninterest expense, increased $153,000, or 1.1%, to $14.0 million, reflecting annual merit increases and increased staffing to support business growth and operational needs. Other expenses increased $217,000, or 7.8%, primarily due to one-time expenses associated with contract negotiations related to the renewal of our core service provider agreement. The renegotiated agreement is expected to produce meaningful cost savings over the term of the contract by reducing costs on existing services and adding new products aimed at improving operational efficiency and the customer experience, while reducing reliance on third-party vendors. Deposit insurance expense decreased $214,000, or 18.4%, primarily due to changes in the Company's asset and deposit mix and related assessments. Data processing fees increased $103,000, or 3.8%, to $2.8 million, primarily due to increased software implementation and technology upgrade expenses. Income Tax Expense. The provision for income taxes increased $349,000 during the nine months ended September 30, 2025, compared to the same period in 2024. The effective tax rate for the first nine months of 2025 was 14.4% compared to 12.9% for the same period a year ago. The increase in the effective tax rate was a result of a higher level of pre-tax income, reducing the favorable impact of tax-exempt interest and deductions. Capital and Liquidity Capital. Shareholders' equity totaled $140.0 million at September 30, 2025 and $132.9 million at December 31, 2024. In addition to net income of $8.2 million, other sources of capital during the first nine months of 2025 included $552,000 related to the allocation of ESOP shares, $756,000 related to stock-based compensation, and a $7.7 million reduction in AOCL. Uses of capital during the first nine months of 2025 included $4.4 million of dividends paid on common stock and $5.6 million of stock repurchases. We paid a regular quarterly dividend of $0.15 per common share during the third quarter of 2025, compared to $0.14 per common share during the third quarter of 2024. We currently expect to continue our practice of paying regular quarterly cash dividends on common stock subject to the Board of Directors' discretion to modify or terminate this practice at any time and for any reason without prior notice. Assuming continued payment during 2025 at the current dividend rate of $0.15 per share, our average total dividend paid each quarter would be approximately $1.6 million based on the number of our currently outstanding shares at September 30, 2025. Stock Repurchase Plans. During the nine months ended September 30, 2025, the Company repurchased 425,823 shares of its common stock at an average price of $13.14 per share, for an aggregate purchase price of $5.6 million, under its existing stock repurchase program. The program, which was last extended by the Board of Directors on May 16, 2024, expired on June 6, 2025, with approximately 47,121 shares remaining available for repurchase at that date. Stock repurchase programs are utilized from time to time to manage the Company's capital position, enhance shareholder value, and offset dilution from stock-based compensation awards. See Part II, Item 2 - "Unregistered Sales of Equity Securities and Use of Proceeds." Liquidity. Liquidity measures the ability to meet current and future cash flow needs as they become due. The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits and to take advantage of interest rate market opportunities. The ability of a financial institution to meet its current financial obligations is a function of its balance sheet structure, its ability to liquidate assets and its access to alternative sources of funds. The objective of our liquidity management is to manage cash flow and liquidity reserves so that they are adequate to fund our operations and to meet obligations and other commitments on a timely basis and at a reasonable cost. We seek to achieve this objective and ensure that funding needs are met by maintaining an appropriate level of liquid funds through asset/liability management, which 41 includes managing the mix and time to maturity of financial assets and financial liabilities on our balance sheet. Our liquidity position is enhanced by our ability to raise additional funds as needed in the wholesale markets. Asset liquidity is provided by liquid assets which are readily marketable or pledgeable or which will mature in the near future. Liquid assets generally include cash, interest-bearing deposits in banks, securities available for sale, maturities and cash flow from securities held to maturity, sales of fixed rate residential mortgage loans in the secondary market, and federal funds sold and resell agreements. Liability liquidity generally is provided by access to funding sources which include core deposits and advances from the FHLB and other borrowing relationships with third party financial institutions. Our liquidity position is continuously monitored and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Liquidity risk management is an important element in our asset/liability management process. We regularly model liquidity stress scenarios to assess potential liquidity outflows or funding problems resulting from economic disruptions, volatility in the financial markets, unexpected credit events or other significant occurrences deemed problematic by management. These scenarios are incorporated into our contingency funding plan, which provides the basis for the identification of our liquidity needs. Our liquid assets in the form of cash and cash equivalents and investments available for sale totaled $284.7 million at September 30, 2025. Certificates of deposit scheduled to mature in less than one year from September 30, 2025 totaled $424.2 million. Historically, First Bank Richmond has been able to retain a significant amount of its deposits as they mature. As of September 30, 2025, we had approximately $19.0 million held in an interest-bearing account at the Federal Reserve. We also have the ability to borrow funds as a member of the FHLB. As of September 30, 2025, based upon available, pledgeable collateral, our total remaining borrowing capacity with the FHLB was approximately $105.6 million. Furthermore, at September 30, 2025, we had approximately $137.5 million in securities that were unencumbered by a pledge and could be used to support additional borrowings through repurchase agreements or the Federal Reserve discount window, as needed. As of September 30, 2025, management was not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on us. Our cash flows are comprised of three primary classifications: operating activities, investing activities, and financing activities. Net cash provided by operating activities was $13.3 million for the nine months ended September 30, 2025, compared to $8.0 million provided by operating activities for the nine months ended September 30, 2024. The increase in operating cash flows primarily reflected higher net income and changes in operating assets and liabilities, including a smaller volume of loans originated for sale and higher proceeds from loan sales during the 2025 period, partially offset by a larger increase in interest payable. Net cash used in investing activities totaled $4.3 million for the nine months ended September 30, 2025, compared to $30.3 million used in the same period of 2024. The significantly lower cash usage in 2025 was primarily due to reduced net loan growth compared to the prior-year period. This was partially offset by new investment security purchases and capital expenditures related to facility and technology investments. Net cash provided by financing activities was $3.5 million for the nine months ended September 30, 2025, compared to $21.7 million provided during the same period in 2024. The change primarily reflected lower net deposit inflows, particularly in certificates of deposit, and the repurchase of $5.6 million of common stock, as well as dividend payments of $4.4 million. These outflows were partially offset by increases in demand and savings deposits and a net increase in FHLB advances. Management believes the capital sources are adequate to meet all reasonably foreseeable short-term and long-term cash requirements and there has not been a material change in our liquidity and capital resources since the information disclosed in our 2024 Form 10-K other than set forth above. Richmond Mutual Bancorporation is a separate legal entity from First Bank Richmond and must provide for its own liquidity. In addition to its own operating expenses, Richmond Mutual Bancorporation is responsible for paying for any stock repurchases, dividends declared to its stockholders and other general corporate expenses. Since Richmond Mutual Bancorporation is a holding company and does not conduct operations, its primary sources of liquidity are interest on investment securities purchased with proceeds from our initial public offering, dividends up-streamed from First Bank Richmond and borrowings from outside sources. Banking regulations may limit the amount of dividends that may be paid to us by First Bank Richmond. At September 30, 2025, Richmond Mutual Bancorporation, on an unconsolidated basis, had $1.2 million in cash, noninterest-bearing deposits, and liquid investments generally available for its cash needs. 42 Regulatory Capital Requirements. First Bank Richmond is subject to minimum capital requirements imposed by the FDIC. The FDIC may require us to have additional capital above the specific regulatory levels if it believes we are subject to increased risk due to asset problems, high interest rate risk and other risks. At September 30, 2025, First Bank Richmond’s regulatory capital exceeded the FDIC regulatory requirements, and First Bank Richmond was well-capitalized under regulatory prompt corrective action standards. Consistent with our goals to operate a sound and profitable organization, our policy is for First Bank Richmond to maintain well-capitalized status. Actual Minimum for Capital Adequacy Purposes Categorized as "Well-Capitalized" Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio (Dollars in thousands) As of September 30, 2025 Total risk-based capital (to risk weighted assets) $ 184,296 14.4 % $ 102,651 8.0 % $ 128,314 10.0 % Tier 1 risk-based capital (to risk weighted assets) 168,248 13.1 76,988 6.0 102,651 8.0 Common equity tier 1 capital (to risk weighted assets) 168,248 13.1 57,741 4.5 83,404 6.5 Tier 1 leverage (core) capital (to adjusted tangible assets) 168,248 10.9 62,002 4.0 77,502 5.0 As of December 31, 2024 Total risk-based capital (to risk weighted assets) $ 181,415 14.2 % $ 102,014 8.0 % $ 127,518 10.0 % Tier 1 risk-based capital (to risk weighted assets) 165,471 13.0 76,511 6.0 102,014 8.0 Common equity tier 1 capital (to risk weighted assets) 165,471 13.0 57,383 4.5 82,887 6.5 Tier 1 leverage (core) capital (to adjusted tangible assets) 165,471 10.7 61,579 4.0 76,974 5.0 Pursuant to the capital regulations of the FDIC and the other federal banking agencies, First Bank Richmond must maintain a capital conservation buffer consisting of additional common equity tier 1 (“CET1”) capital greater than 2.5% of risk-weighted assets above the required minimum levels of risk-based CET1 capital, tier 1 capital and total capital. Failure to maintain the required buffer could result in limitations on First Bank Richmond's ability to pay dividends and discretionary bonuses and the Company's ability to repurchase shares based on specified percentages of eligible retained income. At September 30, 2025, First Bank Richmond’s capital exceeded the conservation buffer. For a bank holding company with less than $3.0 billion in assets, the capital guidelines apply on a bank only basis and the Federal Reserve Board expects the holding company’s subsidiary banks to be well capitalized under the prompt corrective action regulations. If Richmond Mutual Bancorporation was subject to regulatory guidelines for bank holding companies with $3.0 billion or more in assets, at September 30, 2025, it would have exceeded all regulatory capital requirements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK There has not been any material change in the market risk disclosures contained in our 2024 Form 10-K.