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Item 7. Management’s Discussion and Analysis

2026-03-23 compared with 2025-03-27 · 119 added, 89 removed, 369 unchanged (36% of the section changed)

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Cautionary Note Regarding Forward-Looking Statements

Certain matters in this Form 10-K 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:

Certain statements contained in this Form 10-K 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 and are based on certain assumptions and expectations regarding future events.

These statements are generally identified by words such as “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook,” or similar expressions, or by future or conditional verbs such as “may,” “will,” “should,” “would,” or “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;

• statements regarding the quality of our loan, lease, and investment portfolios;

• statements regarding the expected benefits of proposed transactions, including our proposed merger with Farmers Bancorp;

• 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.

These statements are based on our current beliefs and expectations and are inherently subject to significant business, economic, competitive, and regulatory uncertainties and contingencies, many of which are beyond our control.

They are also subject to assumptions regarding 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:

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• effects of employment levels, labor shortages and inflation, a recession, or slowed economic growth;

• changes in the interest rate environment, including increases or decreases in the Federal Reserve benchmark rate and the duration of such changed levels;

• the impact of inflation and the Federal Reserve monetary policies;

• effects of any federal government shutdown;

• changes in the interest rate levels and volatility, and the timing and pace of such changes including actions by the Federal Reserve in response thereto;

• the impact of inflation and the monetary and fiscal policy responses thereto, and their impact on consumer and business behavior;

• the 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;

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• 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;

• the impact of bank failures or other adverse developments at banks and related negative publicity 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;

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• changes in consumer spending, borrowing and savings habits;

• changes in accounting policies and practices, as may be adopted by the bank 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;

• legislative or regulatory changes, including changes in banking, securities, tax law, regulatory policies, and principles;

• 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;

• legislative 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;

• the potential imposition of new tariffs or changes to existing trade policies that could affect economic activity or specific industry sectors;

• our ability to adapt to rapid technological changes, including advancements related to artificial intelligence, digital banking platforms, and cybersecurity;

• geopolitical developments and international conflicts, or the imposition of new or increased tariffs and trade restrictions, which may disrupt financial markets, global supply chains, commodity 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;

• the effects of climate change, severe weather, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, domestic political unrest, and other external events;

• the other risks described elsewhere in this Form 10 K and our other reports filed with and furnished to the U.S.

Securities and Exchange Commission (“SEC”).

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.

Further, statements regarding the potential effects of the proposed merger with Farmers Bancorp on our business, financial results and condition may also constitute forward-looking statements.

Actual results may differ materially due to risks and uncertainties, including:

• events, changes, or circumstances that could give rise to the right of either party to terminate the merger agreement;

• the possibility that the merger may not be completed on the anticipated terms, within the expected timeframe, or at all;

• failure to obtain required regulatory or shareholder approvals, or the imposition of conditions that could adversely affect the combined company or expected benefits;

• challenges in meeting expectations regarding the timing, completion, accounting, and tax treatment of the merger;

• the potential that anticipated cost savings, synergies, or revenue enhancements may not be realized to the extent anticipated, or at all, or may take longer to achieve;

• higher-than-expected transaction costs, integration costs, or unexpected events related to the transaction and subsequent integration;

• dilution from the issuance of additional Richmond Mutual common stock in connection with the merger;

• potential litigation or other legal proceedings related to the merger;

• restrictions during the pendency of the transaction that may limit business opportunities or strategic initiatives;

• the ability to successfully integrate operations, systems, personnel, and technologies post-merger;

• disruption to customer, employee, or vendor relationships, including key community relationships;

• diversion of management’s attention from ongoing operations and strategic initiatives;

• lower-than-expected revenues or profitability following the merger;

• changes in credit, capital markets, or economic, political, or regulatory conditions;

• competition from banks and other financial service providers;

• the Company’s, Farmers Bancorp’s or the combined company’s success at managing the risks involved in the foregoing items;

• other factors detailed in Richmond Mutual’s filings with the SEC.

These forward-looking statements are based on information known to us as of the date of this Form 10-K and speak only as of that date.

We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances, except as required by law.

In light of the risks and uncertainties described above, actual results may differ materially from those expressed or implied in the forward-looking statements.

Additional factors that may affect our results are discussed under Part I, Item 1A in this document under the heading “Risk Factors.”

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Net interest income is the difference between interest income, which is the income that is earned on loans and investments, and interest expense, which is the interest that is paid on deposits and borrowings.

Other significant sources of pre-tax income are service charges (mostly from service charges

on deposit accounts and loan servicing fees), and fees from the sale of residential mortgage loans originated for sale in the secondary market.

Other significant sources of pre-tax income are service charges (mostly from service charges on deposit accounts and loan servicing fees), and fees from the sale of residential mortgage loans originated for sale in the secondary market.

We may also recognize income from the sale of investment securities.

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A provision for credit losses for loans and leases is charged to operations based on our periodic evaluation of the necessary balance in the allowance.

Determining the appropriateness of the allowance for credit losses is complex and requires judgement by management on future factors that are unknown.

Determining the appropriateness of the allowance for credit losses is complex and requires judgment by management on future factors that are unknown.

We have an established process to determine the adequacy of the allowance for credit losses.

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Our goal is to maintain asset quality while continuing to build our strong capital position while looking for growth opportunities in the markets we serve.

In furtherance of these objectives, we have entered into a definitive agreement to merge with Farmers Bancorp, which we believe will enhance our scale, expand our market presence, and improve our ability to serve customers across a broader geographic footprint.

To achieve these goals, we will focus on the following strategies:

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We seek quality commercial loan opportunities in our existing markets and purchase loan participations that complement our existing portfolios.

We will continue to focus our efforts on our existing markets as well as to further develop the Columbus, Ohio market through our loan production office.

We will continue to focus our efforts on our existing markets.

In connection with our pending merger, we expect to expand our commercial and consumer lending presence into the markets served by Farmers Bancorp and evaluate opportunities to leverage combined lending expertise and customer relationships.

We anticipate that the majority of our commercial and multi-family real estate and commercial construction loan originations will range in size from $1.0 million to $8.0 million, while the majority of our commercial and industrial loan originations will range in size from $250,000 to $1.5 million.

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We intend to continue to focus on increasing core deposits (which we define as all deposits except for certificates of deposit of $250,000 or more and brokered certificates of deposit) in our primary market area, with a particular emphasis on noninterest-bearing deposits.

We will continue

to enhance our offering of retail deposit products to maintain and increase our market share, while continuing to build our product offering of commercial deposit products to strengthen our relationships with our business customers.

We will continue to enhance our offering of retail deposit products to maintain and increase our market share, while continuing to build our product offering of commercial deposit products to strengthen our relationships with our business customers.

Following the completion of the pending acquisition, we expect to leverage the combined branch network and customer base to enhance core deposit growth and broaden our funding base.

Core deposits represented 71.3% of our total deposits as of December 31, 2025.

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Accordingly, we intend to increase, on a managed basis, our assets and liabilities, particularly loans and deposits.

The pending merger is expected to accelerate balance sheet growth and provide opportunities for cost efficiencies and operating leverage, subject to regulatory approval and successful integration.

Asset Quality.

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Our strategy for credit risk management focuses on an experienced team of credit professionals, well-defined credit policies and procedures, appropriate loan underwriting criteria and active credit monitoring.

Non-performing loans increased during 2025 compared to the prior year, primarily reflecting stress in certain commercial real estate relationships and the migration of a limited number of commercial credits to nonaccrual status.

We are actively monitoring these credits and have taken steps, including enhanced oversight and collection efforts, to address these matters.

Our non-performing loans to total loans ratio was 1.46% at December 31, 2025.

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We believe that maintaining a strong capital position safeguards the long-term interests of First Bank Richmond.

We expect to maintain capital levels consistent with "well-capitalized" regulatory standards following the completion of the pending merger.

Interest Rate Risk Management.

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As such, fluctuations in interest rates have a significant impact not only upon our net income but also upon the cash flows related to those assets and liabilities and the market value of our assets and liabilities.

In order to maintain what we believe to be acceptable levels of net interest income in varying interest rate environments, we actively manage our interest rate risk and assume a moderate amount of interest rate risk consistent with board policies.

To maintain what we believe to be acceptable levels of net interest income in varying interest rate environments, we actively manage our interest rate risk and assume a moderate amount of interest rate risk consistent with board policies.

We will evaluate the combined balance sheet profile following the completion of the merger to ensure continued alignment with our board-approved interest rate risk parameters.

Selected Consolidated Financial and Other Data

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The increase was driven by a $17.9 million, or 1.5%, increase in the loan and lease portfolio, net of allowance for credit losses on loans and leases, partially offset by a $7.0 million, or 2.7% decrease in investment securities.

The increase in loans and leases was primarily funded by a $52.8 million, or 5.1%, increase in deposits.

The increase in loans and leases was primarily funded by a $21.0 million, or 1.9%, increase in deposits, driven largely by growth in core retail deposit categories and a reduction in reliance on brokered deposits.

Loans and Leases.

Our loan and lease portfolio, net of allowance for credit losses on loans and leases, increased $17.9 million, or 1.5%, to $1.2 billion at December 31, 2025 from $1.2 billion at December 31, 2024.

The majority of the growth occurred in multi-family loans which increased $47.1 million, or 33.9%, to $185.9 million, and in commercial real estate loans which increased $30.1 million, or 8.8%, to $371.7 million at December 31, 2024 compared to the prior year.

We also experienced a $10.9 million, or 9.5%, increase in commercial and industrial loans, and a $16.4 million, or 9.5%, increase in residential real estate loans (including home equity lines of credit).

Offsetting these increases were a $25.2 million, or 16.0%, decrease in construction and development loans, an $8.5 million, or 5.4%, decrease in direct financing leases, and a $2.0 million, or 8.8%, decrease in consumer loans.

The majority of the growth occurred in commercial real estate loans which increased $42.6 million, or 11.5%, to $414.3 million, and in multi-family loans which increased $23.0 million, or 12.4%, to $208.9 million at December 31, 2025 compared to the prior year.

We also experienced a $16.1 million, or 12.8%, increase in commercial and industrial loans, and a $1.7 million, or 0.9%, increase in residential real estate loans (including home equity lines of credit), which was attributable to a $3.3 million increase in home equity lines of credit, partially offset by a $1.6 million decrease in residential mortgage loans.

Offsetting these increases were a $60.7 million, or 45.9%, decrease in construction and development loans, a $2.3 million, or 1.6%, decrease in direct financing leases, and a $1.9 million, or 9.1%, decrease in consumer loans.

The decrease in construction and development loans was primarily due to completed projects converting to permanent financing.

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

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(1) Includes $8.6 million and $8.3 million of loans secured by second mortgages on residential properties at December 31, 2025 and 2024, respectively.

Nonperforming loans and leases, consisting of nonaccrual loans and leases and accruing loan and leases more than 90 days past due, totaled $6.8 million, or 0.58% of total loans and leases at December 31, 2024, compared to $8.0 million, or 0.72% of total loans and leases at December 31, 2023.

The decrease in nonperforming loans and leases was primarily attributable to a $1.2 million decrease in commercial and industrial loans, primarily due to one loan of $1.2 million secured by business assets, previously nonaccruing, that was paid off in 2024.

At December 31, 2024, our largest nonperforming loan was a $4.9 million nonaccrual commercial construction and development loan that is currently subject to litigation between the developer and other parties.

At the time of origination, this loan had a loan to value ratio of 73%.

Nonperforming loans and leases, consisting of nonaccrual loans and leases and accruing loan and leases 90 days or more past due, totaled $17.4 million, or 1.46% of total loans and leases at December 31, 2025, compared to $6.8 million, or 0.58% of total loans and leases at December 31, 2024.

Nonaccrual loans and leases totaled $13.2 million at December 31, 2025, compared to $5.1 million at December 31, 2024.

The increase was primarily attributable to one commercial real estate loan of $6.7 million, which had a loan-to-value ratio of approximately 32.2% and was in the process of foreclosure proceedings.

Accruing loans and leases past due 90 days or more totaled $4.2 million at December 31, 2025, up from $1.7 million at December 31, 2024.

The increase was largely due to one multi-family loan of $2.4 million that became 90 days past due during 2025 but remained accruing at December 31, 2025 due to an anticipated payoff.

The loan was placed on nonaccrual status in early 2026 as a result of no payment being received by the bank.

Allowance for Credit Losses.

On January 1, 2023, the Company adopted the accounting standard referred to as CECL.

As a result of the change in methodology from the incurred loss method to the CECL method, on January 1, 2023 the Company recorded a one-time adjustment from equity into the allowance for credit losses on loans and leases in the amount of $2.0 million, net of tax.

The allowance for credit losses on loans and leases totaled $16.5 million, or 1.38% of total loans and leases outstanding at December 31, 2025, compared to $15.8 million, or 1.34%, of total loans and leases at December 31, 2024.

Net charge-offs during 2024 were $1.5 million, compared to net charge-offs of $678,000 during 2023.

The Company's allowance for credit losses on unfunded commitments, which is reported in other liabilities on the Condensed Consolidated Balance Sheets, totaled $558,000 and $1.6 million at December 31, 2024 and December 31, 2023, respectively.

Net charge-offs during 2025 were $1.7 million, compared to net charge-offs of $1.5 million during 2024.

The Company's allowance for credit losses on unfunded commitments, which is reported in other liabilities on the Condensed Consolidated Balance Sheets, totaled $328,000 and $558,000 at December 31, 2025 and December 31, 2024, respectively.

The decrease in the allowance for credit losses on unfunded commitments was primarily due to lower unfunded loan commitments.

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Investment securities decreased $7.0 million, or 2.7%, to $254.7 million at December 31, 2025, from $261.7 million at December 31, 2024.

The decrease was primarily due to maturities and paydowns of securities of $22.1 million, the sale of $6.9 million of available-for-sale securities, and a $3.5 million downward mark-to-market adjustment in the fair value of securities available for sale, partially offset by the purchase of $7.5 million of new securities.

The decrease was primarily due to maturities and paydowns of securities of $19.3 million and the sale of $6.8 million of available-for-sale securities, partially offset by a $14.2 million upward mark-to-market adjustment in the fair value of securities available for sale due to a reduction in market rates of interest.

Total deposits increased $21.0 million, or 1.9%, to $1.1 billion at December 31, 2025 compared to December 31, 2024.

This increase was primarily due to an increase in savings and money-market accounts of $44.5 million, or 17.3%, as well as an increase in non-brokered time deposits of $40.3 million, or 16.2%.

These increases were partially offset by a decrease of $20.8 million, or 7.8%, in demand deposit accounts, and an $11.3 million, or 4.2%, decrease in brokered time deposits.

Management attributes the shift in funds from transaction accounts to retail certificates of deposit, which primarily occurred during the first nine months of 2024, to customers taking advantage of higher rates being paid on time deposits as a result of interest rate hikes instituted by the Federal Reserve.

This increase was primarily due to increases in retail (non-brokered) time deposits of $26.0 million, or 9.0%, savings and money market accounts of $18.0 million, or 6.0%, and interest-bearing demand deposits of $8.6 million, or 6.3%.

These increases were partially offset by a decrease of $21.6 million, or 8.4%, in brokered time deposits, and a $10.0 million, or 10.0%, decrease in noninterest-bearing demand deposits.

At December 31, 2025, brokered deposits equaled $235.9 million, or 21.2% of total deposits compared to $257.6 million, or 23.5% of total deposits at December 31, 2024.

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

Borrowings, consisting solely of FHLB advances, totaled $265.0 million at December 31, 2024, compared to $271.0 million at December 31, 2023.

Borrowings, consisting primarily of FHLB advances, totaled $252.0 million at December 31, 2025, compared to $265.0 million at December 31, 2024.

In addition to FHLB advances, other borrowings, consisting entirely of federal funds purchased, totaled $12.0 million at December 31, 2025.

There were no federal funds purchased at December 31, 2024.

Stockholders’ Equity.

Stockholders’ equity totaled $132.9 million at December 31, 2024, a decrease of $2.0 million, or 1.5%, from December 31, 2023.

The decrease in stockholders’ equity primarily was the result of the payment of $5.7 million in dividends to Company stockholders, the repurchase of $5.0 million of Company common stock, and an increase in Accumulated Other Comprehensive Loss ("AOCL") of $2.8 million, partially offset by net income of $9.4 million.

The increase in AOCL was primarily due to reductions in mark-to-market values associated with our available for sale investment securities portfolio, due to increases in market interest rates.

Stockholders’ equity totaled $145.8 million at December 31, 2025, an increase of $12.9 million, or 9.7%, from December 31, 2024.

The increase in stockholders’ equity primarily was the result of net income of $11.6 million and an $11.2 million decrease in Accumulated Other Comprehensive Loss ("AOCL"), partially offset by the payment of $5.8 million in dividends to Company stockholders and the repurchase of $5.6 million of Company common stock.

The decrease in AOCL was primarily due to increases in mark-to-market values associated with our available for sale investment securities portfolio, resulting from a reduction in market rates of interest.

At December 31, 2025, the available for sale portfolio had a net unrealized loss of $43.7 million compared to a net unrealized loss of $58.0 million at December 31, 2024.

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Comparison of Results of Operations for the Years Ended December 31, 2025 and 2024

Net income totaled $9.4 million for 2024 compared to $9.5 million in 2023, a decrease of $109,000 or 1.2%.

The decrease in net income was due to a $1.3 million, or 4.3%, increase in non-interest expense, partially offset by a $1.0 million, or 2.8%, increase in net interest income, a $147,000, or 3.2%, increase in non-interest income, and a $30,000, or 1.9%, decrease in income tax expense.

Net income totaled $11.6 million for 2025 compared to $9.4 million in 2024, an increase of $2.2 million or 23.5%.

The increase in net income was due to a $5.1 million, or 13.3%, increase in net interest income and a $304,000 increase in noninterest income, partially offset by a $1.6 million, or 291.3%, increase in provision for credit losses, a $1.1 million, or 3.3%, increase in noninterest expense, and a $590,000, or 39.7%, increase in income tax expense.

Interest Income .

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Interest earned on investment securities, excluding FHLB stock, decreased $401,000, or 5.8%, due to an $18.9 million decrease in the average balance of the portfolio.

Dividends on FHLB stock increased $381,000, or 44.8%, during 2024 compared to the prior year.

The average yield on FHLB stock during 2024 was 8.89%, up 97 basis points from 7.92% during the prior year, while the average balance of FHLB stock outstanding during 2024 was $13.9 million, up from $10.8 million during 2023.

Interest on cash and cash equivalents increased $265,000 due to a 50 basis point increase in the average yield.

Dividends on FHLB stock increased $4,000 during 2025 compared to the prior year.

The average yield on FHLB stock during 2025 and 2024 was 8.89%, while the average balance of FHLB stock outstanding during 2025 and 2024 was $13.9 million.

Interest on cash and cash equivalents decreased $9,000 due to a 74 basis point decrease in the average yield, partially offset by a $3.2 million increase in the average balance.

Interest Expense .

Total interest expense increased $12.1 million, or 40.6%, to $41.8 million during 2024 compared to $29.7 million during 2023.

The increase primarily was the result of an increase in the average rate paid on certificate of deposit accounts, savings and money market accounts, and borrowings and, to a lesser extent, an increase in average balance of certificate of deposit accounts and borrowings.

The average rate paid on certificate of deposit accounts increased 89 basis points to 4.18% from 3.29% in 2023, while the average balance of certificate of deposit accounts increased $47.9 million, or 9.4%, to $557.2 million in 2024 compared to $509.3 million in 2023, resulting in a $6.5 million increase in interest expense.

The average rate paid on savings and money market accounts increased 57 basis points to 2.39% from 1.82% in 2023, while the average balance of those accounts increased $11.4 million, or 4.2%, to $285.9 million in 2024 compared to $274.5 million in 2023, resulting in a $1.8 million increase in interest expense.

The average balance of interest-bearing checking accounts decreased $6.1 million, or 4.1%, to $141.9 million in 2024 from $148.0 million in 2023, while the average rate paid on interest-bearing checking accounts increased 42 basis points to 1.13% in 2024 from 0.71% in 2023, resulting in a $555,000 increase in interest expense.

Interest expense on borrowings, consisting solely of FHLB advances, increased $3.1 million, or 45.1%, due to a 75 basis point increase in the average rate paid to 3.93% in 2024 from 3.18% in 2023, and a $37.9 million, or 17.4%, increase in the average balance of borrowings to $256.0 million in 2024 from $218.0 million in 2023.

Total interest expense increased $242,000, or 0.6%, to $42.1 million during 2025 compared to $41.8 million during 2024.

The increase primarily was the result of an increase in the average rate paid on borrowings, and an increase in average balance of borrowings and savings and money market accounts.

The average rate paid on borrowings, consisting primarily of FHLB advances, increased 20 basis points to 4.13% from 3.93% in 2024, while the average balance of borrowings increased $6.1 million, or 2.4%, to $262.1 million in 2025 compared to $256.0 million in 2024, resulting in a $745,000 increase in interest expense.

The average rate paid on savings and money market accounts decreased nine basis points to 2.30% from 2.39% in 2024, while the average balance of those accounts increased $26.3 million, or 9.2%, to $312.3 million in 2025 compared to $285.9 million in 2024, resulting in a $341,000 increase in interest expense.

The average balance of certificate of deposit accounts decreased $13.5 million, or 2.4%, to $543.7 million in 2025 from $557.2 million in 2024, while the average rate paid on certificate of deposit accounts decreased three basis points to 4.15% in 2025 from 4.18% in 2024, resulting in a $742,000 decrease in interest expense.

The average balance of interest-bearing checking accounts decreased $748,000, or 0.5%, to $141.2 million in 2025 from $141.9 million in 2024, while the average rate paid on interest-bearing checking accounts decreased six basis points to 1.07% in 2025 from 1.13% in 2024, resulting in a $102,000 decrease in interest expense.

Net Interest Income .

Net interest income before the provision for credit losses increased $1.0 million, or 2.8%, to $38.7 million in 2024 compared to $37.7 million in 2023, primarily due to growth in interest-earning assets, which more than offset the impact of a lower net interest margin.

Our net interest margin in 2024 was 2.67%, a decrease of 11 basis points compared to 2023, as the rate paid on interest-bearing liabilities rose faster than the yield on interest-earning assets.

Between March 2022 and July 2023, in response to elevated inflation, the Federal Open Market Committee (“FOMC”) of the Federal Reserve increased interest rates by a total of 525 basis points, bringing the target range to 5.25% to 5.50%.

On September 18, 2024, the FOMC reduced the target range to 4.75% to 5.00%, marking the first rate cut since March 2020.

This was followed by additional reductions of 25 basis points in both November and December 2024, bringing the target range down to 4.25% to 4.50% as of year-end.

These rate cuts were implemented in response to signs of economic softening, including a cooling labor market and moderating inflation.

While interest income benefited from the repricing impact of the higher interest rate environment on earning asset yields earlier in the year, these benefits were offset by the higher cost of interest-bearing deposit accounts and borrowings, which tend to reprice or reset faster than assets.

The gradual rate reductions in late 2024 began to ease funding cost pressures;

however, competitive deposit pricing and the lag in asset yield adjustments limited the immediate benefit to net interest income.

Net interest income before the provision for credit losses increased $5.1 million, or 13.3%, to $43.8 million in 2025 compared to $38.7 million in 2024, primarily due to a 31 basis point increase in the average interest rate spread, and a $4.1 million increase 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.

Net interest margin was 2.97% for 2025, compared to 2.67% for 2024.

The increase in net interest margin was primarily driven by higher yields on interest-earning assets and, to a lesser extent, lower rates paid on interest-bearing liabilities.

This margin expansion was supported by growth in higher-yielding asset categories, particularly commercial and multi-family loans.

During 2025, interest rate trends were influenced by monetary policy actions taken by the Federal Open Market Committee (“FOMC”) of the Federal Reserve.

In the second half of calendar 2025, the FOMC reduced the target range for the federal funds rate three times, most recently to a range of 3.50% to 3.75% at December 31, 2025.

Despite the decline in market rates, asset yields increased due to the origination of new loans at higher rates and upward repricing of adjustable-rate loans.

At the same time, funding costs declined at a slower pace, which moderated the overall benefit to our net interest margin.

Provision for Credit Losses .

The provision for credit losses in 2024 was $550,000, an $18,000, or 3.4%, increase compared to $532,000 in 2023.

Net charge-offs during 2024 were $1.5 million, compared to net charge-offs of $678,000 in 2023.

The provision for credit losses in 2025 was $2.2 million, a $1.6 million, or 291.3%, increase compared to $550,000 in 2024.

The provision for credit losses reflects the amount required to maintain the allowance for credit losses at an appropriate level based upon management’s evaluation of the adequacy of collective and individual loss reserves and reflects higher required reserves driven by the significant increase in nonperforming loans during 2025.

Additionally, growth in the commercial real estate, multi-family, and commercial and industrial loan portfolios increased the allowance, as these portfolios generally carry higher reserve requirements relative to other segments.

Net charge-offs during 2025 were $1.7 million, compared to net charge-offs of $1.5 million in 2024.

The allowance for credit losses on loans and leases as a percentage of the total loan and lease portfolio was 1.38% at year-end 2025, compared to 1.34% at year-end 2024.

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Total non-interest income increased $304,000, or 6.4%, to $5.1 million for 2025 compared to $4.8 million for 2024.

The increase was primarily driven by an increase in service charges on deposit accounts of $124,000, or 11.1%, to $1.2 million in 2024 from $1.1 million in 2023, due to higher transaction activity and account maintenance fees,

coupled with year-over-year deposit growth.

The increase was primarily driven by an increase in other income and loan and lease servicing fees.

Other income increased $230,000, or 17.5%, to $1.5 million in 2025 as compared to 2024, due to increased wealth management income.

Net gains on loan and lease sales increased $37,000, or 7.1%, to $555,000 in 2024 as compared to 2023, due to increased mortgage banking activity resulting from a decrease in market interest rates during the second half of 2024 and improved housing inventory.

Loan and lease servicing fees increased $15,000, or 3.4%, to $463,000 in 2024 as compared to 2023, due to increased mortgage originations.

Partially offsetting these increases were net losses recognized on the sale of securities available-for-sale of $51,000, compared to no losses or gains recognized in 2023.

In addition, card fee income decreased $22,000, or 1.7%, due to lower contract fees in 2024 as compared to 2023.

Loan and lease servicing fees increased $217,000, or 46.9%, to $681,000 in 2025 as compared to 2024, due to increased fees from the payoff of serviced loans.

Partially offsetting these increases were net losses recognized on the sale of securities available-for-sale of $156,000, compared to net losses of $51,000 recognized in 2024.

Net gains on loan and lease sales decreased $145,000, or 26.2%, to $409,000 in 2025 as compared to 2024, due to reduced mortgage banking activity.

Non-interest Expenses .

Total non-interest expense increased $1.3 million, or 4.3%, to $32.1 million during 2024 compared to 2023, primarily due to increases in salaries and employee benefits, deposit insurance expense, data processing fees, and legal and professional fees, partially offset by decreases in equipment expenses and other expenses.

Salaries and employee benefits increased $909,000, or 5.2%, to $18.3 million in 2024 from $17.4 million in 2023, primarily due to higher health insurance and compensation costs.

Deposit insurance expense increased $367,000, or 31.6%, to $1.5 million in 2024 from $1.2 million in 2023, due to a change in our asset and deposit mix.

Data processing fees increased $267,000, or 8.0%, to $3.6 million in 2024 from $3.3 million in 2023, primarily due to increased software and core provider expenses.

Legal and professional fees increased $224,000, or 14.0%, to $1.8 million in 2024 from $1.6 million in 2023, primarily due to other professional service expenses related to auditing and internal process enhancements.

Equipment expenses decreased $201,000, or 17.8%, to $927,000 in 2024 from $1.1 million in 2023, primarily due to reduced depreciation expense.

Other expenses decreased $264,000, or 6.7%, to $3.7 million in 2024 from $3.9 million in 2023, primarily due to a decrease in loan closing expenses and reduced losses due to fraud.

Total non-interest expense increased $1.1 million, or 3.3%, to $33.1 million during 2025 compared to 2024, primarily due to increases in other expenses, salaries and employee benefits, data processing fees, and net occupancy expenses, partially offset by a decrease in deposit insurance expense.

Other expenses increased $836,000, or 22.9%, to $4.5 million in 2025 from $3.7 million in 2024, primarily due to $467,000 of merger-related expenses associated with the pending acquisition of Farmers Bancorp, as well as one-time expenses associated with contract negotiations related to the renewal of our core service provider agreement.

Salaries and employee benefits increased $196,000, or 1.1%, to $18.5 million in 2025 from $18.3 million in 2024, primarily due to annual merit increases and increased staffing to support business growth and operational needs.

Data processing fees increased $174,000, or 4.8%, to $3.8 million in 2025 from $3.6 million in 2024, primarily due to increased software implementation and and technology upgrade expenses.

Net occupancy expenses increased $101,000, or 7.4%, to $1.5 million in 2025 from $1.4 million in 2024, primarily due to increased building maintenance expenses.

Deposit insurance expense decreased $337,000, or 22.0%, to $1.2 million in 2025 from $1.5 million in 2024, due to shifts in the Bank's asset and deposit mix and related assessments.

Equipment expenses increased $74,000, or 8.0%, to $1.0 million in 2025 from $927,000 in 2024, primarily due to equipment expenses associated with our Columbus, Ohio branch opening.

Income Tax Expense .

Income tax expense decreased $30,000 in 2024 compared to 2023.

This decrease in income tax expense was primarily due to pretax income decreasing $139,000, or 1.3%.

Income tax expense increased $590,000 in 2025 compared to 2024.

This increase in income tax expense was primarily due to pretax income increasing $2.8 million, or 25.7%.

The effective tax rate for the year ended 2025 was 15.2% compared to 13.7% in 2024.

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Shareholders' equity totaled $145.8 million at December 31, 2025 and $132.9 million at December 31, 2024.

In addition to net income of $9.4 million, other sources of capital during 2024 included $661,000 related to the allocation of ESOP shares during the year and $1.5 million related to stock-based compensation.

Uses of capital during 2024 included $5.7 million of dividends paid on common stock, $5.0 million of stock repurchases, and an increase in AOCL of $2.8 million.

The increase in AOCL primarily was due to the reduction in mark-to-market values associated with the Company's available-for-sale investment securities portfolio.

We paid regular quarterly cash dividends of $0.14 per common share during both 2024 and 2023.

In addition to net income of $11.6 million, other sources of capital during 2025 included an $11.2 million decrease in AOCL, $738,000 related to the allocation of ESOP shares during the year, and $816,000 related to stock-based compensation.

The decrease in AOCL primarily was due to the improvement in mark-to-market values associated with the Company's available-for-sale investment securities portfolio.

Uses of capital during 2025 included $5.8 million of dividends paid on common stock and $5.6 million of stock repurchases.

We paid regular quarterly cash dividends of $0.15 per common share during 2025, compared to $0.14 per common share in 2024.

This equates to a dividend payout ratio of 50.4% in 2025 and 60.8% in 2024.

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The amount of dividends, if any, we may pay may be limited as more fully discussed in "Note 18:

Dividend and Capital Restrictions" and "Note 19:

Regulatory Capital" in the accompanying notes to consolidated financial statements contained in Item 8 of this Form 10-K.

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On June 6, 2023, the Company announced that the Board of Directors approved an amendment to the Company's existing stock repurchase program authorizing the purchase of up to 321,386 shares of the Company's issued and outstanding common stock in addition to the 827,554 shares that remained available for the repurchase at that date under the existing program, and extended the stock repurchase program's expiration date to June 6, 2024, unless completed sooner.

On May 16, 2024, the Company announced that the Board of Directors approved an extension of the Company's existing stock repurchase program, now set to expire on June 6, 2025.

As of December 31, 2024, the Company had approximately 472,944 shares available for repurchase under its existing stock repurchase program.

The repurchase program does not obligate the Company to purchase any particular number of shares.

On May 16, 2024, the Company announced that the Board of Directors approved an extension of the Company's existing stock repurchase program, which expired on June 6, 2025.

As of December 31, 2025, the Company did not have a publicly announced stock repurchase program in place.

See Part II, Item 5 - "Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities."

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These include payments related to (i) long-term borrowings (Note 12:

Federal Home Loan Bank Advances), (ii) time deposits with stated maturity dates (Note 10:

Borrowings), (ii) time deposits with stated maturity dates (Note 11:

Deposits) and (iii) commitments to extend credit and standby letters of credit (Note 15:

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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.

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 upstreamed 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.

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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 7. Management’s Discussion and Analysis