What changed in this filing

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Item 1. Financial Statements

2021-08-13 compared with 2021-05-14 · 204 added, 97 removed, 760 unchanged (28% of the section changed)

8 unchanged sentences

Investment securities - held to maturity 9,852,918 12,225,275

Loans held for sale 602,910 1,986,650

Loans and leases, net of allowance for losses of $ 11,431,000 and $ 10,586,000 , respectively

20 unchanged sentences

Authorized - 90,000,000 shares

Issued and outstanding - 13,050,996 shares and 13,193,760 shares at March 31, 2021 and December 31, 2020, respectively

Issued and outstanding - 12,684,977 shares and 13,193,760 shares at June 30, 2021 and December 31, 2020, respectively

126,850 131,938

8 unchanged sentences

Condensed Consolidated Statements of Income

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Interest Income

10 unchanged sentences

Net Interest Income After Provision for Losses on Loans and Leases 8,395,362 6,703,811 16,758,587 14,381,306

Non-Interest Income

Noninterest Income

Service charges on deposit accounts 198,782 105,618 393,221 360,269

1 unchanged sentence

Loan and lease servicing fees 248,738 301,230 143,288 235,538

Net gains on securities (includes $ 0 and $ 69,139 , respectively, related to accumulated other comprehensive loss reclassifications)

Net gains on securities (includes $ 37,912 , $ 9,874 , $ 37,912 , and $ 79,013 , respectively, related to accumulated other comprehensive income reclassifications)

37,912 9,874 37,912 79,013

Net gains on loan and lease sales 569,411 1,030,668 1,534,228 1,258,876

1 unchanged sentence

Other income 240,384 188,797 462,756 393,078

Total non-interest income 1,766,584 953,068

Non-Interest Expenses

Total noninterest income 1,904,955 2,082,637 3,671,539 3,035,705

Noninterest Expenses

Salaries and employee benefits 4,313,870 3,270,311 8,759,602 6,633,996

10 unchanged sentences

Other expenses 875,991 810,857 1,647,201 1,475,131

Total non-interest expenses 6,977,656 5,523,617

Total noninterest expenses 6,879,480 5,647,697 13,857,136 11,171,314

Income Before Income Tax Expense 3,420,837 3,138,751 6,572,990 6,245,697

7 unchanged sentences

Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Net Income $ 2,781,347 $ 2,506,177 $ 5,343,833 $ 4,958,323

Other Comprehensive Income (Loss)

Unrealized gain (loss) on available-for-sale securities, net of tax (benefit) expense of $( 972,966 ) and $ 957,976 , respectively.

Unrealized gain (loss) on available-for-sale securities, net of tax expense (benefit) of $ 437,111 , $ 312,821 , $( 535,855 ), and $ 1,270,737 , respectively.

1,644,369 921,429 ( 2,015,837 ) 3,743,020

1 unchanged sentence

29,950 7,371 29,950 58,987

Comprehensive (Loss) Income $ ( 1,097,720 ) $ 5,222,121

1,614,419 914,058 ( 2,045,787 ) 3,684,033

Comprehensive Income $ 4,395,766 $ 3,420,235 $ 3,298,046 $ 8,642,356

See Notes to Condensed Consolidated Statements.

6 unchanged sentences

Comprehensive

Outstanding Amount

Balances, March 31, 2021 13,050,996 $ 130,510 $ 122,814,920 $ 80,005,652 $ ( 13,479,847 ) $ 48,399 $ 189,519,634

Net income — — — 2,781,347 — — 2,781,347

Other comprehensive income — — — — — 1,614,419 1,614,419

ESOP shares earned — — 6,978 — 183,830 — 190,808

Granting of restricted stock awards 4,000 40 ( 40 ) — — — —

Stock based compensation — — 527,759 — — — 527,759

Common stock dividends ($ 0.07 per share)

— — — ( 828,417 ) — — ( 828,417 )

Common stock dividends ($ 0.50 per share)

— — — ( 6,001,447 ) — — ( 6,001,447 )

Repurchase of common stock ( 370,019 ) ( 3,700 ) ( 5,231,093 ) — — — ( 5,234,793 )

Balances, June 30, 2021 12,684,977 $ 126,850 $ 118,118,524 $ 75,957,135 $ ( 13,296,017 ) $ 1,662,818 $ 182,569,310

Common Stock Additional

Capital Retained

Earnings Unearned

Shares Accumulated

Comprehensive

Income/(Loss) Total

4 unchanged sentences

ESOP shares earned — — 5,158 — 368,356 — 373,514

Granting of restricted stock awards 4,000 40 ( 40 ) — — — —

Stock based compensation — — 1,035,383 — — — 1,035,383

1 unchanged sentence

— — — ( 1,675,364 ) — — ( 1,675,364 )

Common stock dividends ($ 0.50 per share)

— — — ( 6,001,447 ) — — ( 6,001,447 )

Repurchase of common stock ( 512,783 ) ( 5,128 ) ( 7,168,402 ) — — — ( 7,173,530 )

Balances, June 30, 2021 12,684,977 $ 126,850 $ 118,118,524 $ 75,957,135 $ ( 13,296,017 ) $ 1,662,818 $ 182,569,310

Common Stock Additional

Capital Retained

Earnings Unearned

Shares Accumulated

Comprehensive

Outstanding Amount

Balances, March 31, 2020 13,526,625 $ 135,266 $ 132,604,734 $ 72,563,580 $ ( 14,216,557 ) $ 2,109,231 $ 193,196,254

Net income — — — 2,506,177 — — 2,506,177

Other comprehensive income — — — — — 914,058 914,058

ESOP shares earned — — ( 41,064 ) — 183,829 — 142,765

Common stock dividends ($ 0.05 per share)

— — — ( 623,352 ) 0 — ( 623,352 )

Balances, June 30, 2020 13,526,625 $ 135,266 $ 132,563,670 $ 74,446,405 $ ( 14,032,728 ) $ 3,023,289 $ 196,135,902

Common Stock Additional

9 unchanged sentences

ESOP shares earned — — ( 38,206 ) — 367,658 — 329,452

Balances, March 31, 2020 13,526,625 $ 135,266 $ 132,604,734 $ 72,563,580 $ ( 14,216,557 ) $ 2,109,231 $ 193,196,254

Common stock dividends ($ 0.05 per share)

— — — ( 623,352 ) 0 — ( 623,352 )

Balances, June 30, 2020 13,526,625 $ 135,266 $ 132,563,670 $ 74,446,405 $ ( 14,032,728 ) $ 3,023,289 $ 196,135,902

See Notes to Condensed Consolidated Statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

Operating Activities

50 unchanged sentences

Notes to Condensed Consolidated Financial Statements

(Table Dollar Amounts in Thousands except shares and per share amounts)

(Table Dollar Amounts in Thousands except per share amounts)

Basis of Presentation

36 unchanged sentences

The Company has taken advantage of this provision to extend certain payment modifications to loan customers in need.

As of March 31, 2021, the Company has 33 loans outstanding for $ 24.6 million that were modified under the CARES Act guidance.

As of June 30, 2021, the Company has six loans outstanding for $ 2.5 million that were modified under the CARES Act guidance.

The CARES Act also approved the Paycheck Protection Program ("PPP"), administered by the Small Business Administration ("SBA") with funding provided by financial institutions.

3 unchanged sentences

The Company earns a 1% interest rate on PPP loans, plus a processing fee from the SBA for processing and originating a loan.

The Company has originated a total of approximately $ 100.0 million in PPP loans as of March 31, 2021, of which approximately $ 54.7 million were outstanding at March 31, 2021.

The Company has originated a total of approximately $ 103.1 million in PPP loans as of June 30, 2021, of which approximately $ 34.6 million were outstanding at June 30, 2021.

The Jumpstart Our Business Startups Act (the "JOBS Act"), which was enacted in April 2012, has made numerous changes to the federal securities laws to facilitate access to capital markets.

24 unchanged sentences

The Company has not quantified the impact of these ASUs.

The Company is in the early stages of evaluating its historical data available for use in adoption of the new credit loss standards.

The Company is evaluating its historical data available for use in adoption of the new credit loss standards.

Additionally, we have formed an implementation team that meets on a regular basis to coordinate efforts of our accounting, credit and operations areas.

32 unchanged sentences

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

March 31, 2021

June 30, 2021

Available for sale

3 unchanged sentences

Mortgage-backed securities - government-sponsored enterprises (GSE) residential 167,386 1,458 999 167,845

Corporate obligations 1,250 20 — 1,270

Equity securities 13 — — 13

16 unchanged sentences

Total investment securities $ 252,036 $ 5,276 $ 287 $ 257,025

The amortized cost and fair value of securities at March 31, 2021, by contractual maturity, are shown below.

The amortized cost and fair value of securities at June 30, 2021, by contractual maturity, are shown below.

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

9 unchanged sentences

Totals $ 327,672 $ 329,777 $ 9,853 $ 10,069

Securities with a carrying value of $ 74,171,000 and $ 88,370,000 were pledged at March 31, 2021 and December 31, 2020, respectively, to secure certain deposits and for other purposes as permitted or required by law.

Proceeds from sales of securities available for sale for the three months ended March 31, 2021 and 2020 were $ 0 and $ 11,461,000 , respectively.

Gross gains were recognized on the sale of securities available-for-sale for the three months ended March 31, 2021 and 2020 of $ 0 and $ 74,000 , respectively.

Gross losses were recognized on the sale of securities available for sale for the three months ended March 31, 2021 and 2020 of $ 0 and $ 5,000 , respectively.

Securities with a carrying value of $ 159,483,000 and $ 88,370,000 were pledged at June 30, 2021 and December 31, 2020, respectively, to secure certain deposits and for other purposes as permitted or required by law.

Proceeds from sales of securities available for sale for both the three and six months ended June 30, 2021 were $ 3,981,000 .

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

Gross gains were recognized on the sale of securities available-for-sale for the three and six months ended June 30, 2021 and 2020 of $ 38,000 , $ 38,000 , $ 66,000 , and $ 136,000 , respectively.

There were no gross losses recognized on the sale of securities available for sale for the three and six months ended June 30, 2021.

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

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

Total fair value of these investments at March 31, 2021 and December 31, 2020 was $ 120,426,000 and $ 45,299,000 , respectively, which is approximately 45 % and 18 % of the Company’s aggregated available-for-sale and held-to-maturity investment portfolio at those dates, respectively.

Total fair value of these investments at June 30, 2021 and December 31, 2020 was $ 141,724,000 and $ 45,299,000 , respectively, which is approximately 42 % and 18 % of the Company’s aggregated available-for-sale and held-to-maturity investment portfolio at those dates, respectively.

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

1 unchanged sentence

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

The following tables show the Company’s investments by gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2021 and December 31, 2020:

Description of

Securities March 31, 2021

Securities June 30, 2021

Less Than 12 Months 12 Months or More Total

27 unchanged sentences

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

Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at March 31, 2021.

Mortgage-Backed Securities – GSE Residential and SBA Pools.

1 unchanged sentence

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

Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at March 31, 2021.

Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2021.

State and Municipal Obligations.

1 unchanged sentence

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

Loans, Leases and Allowance

The following table shows the composition of the loan and lease portfolio at March 31, 2021 and December 31, 2020:

The following table shows the composition of the loan and lease portfolio at June 30, 2021 and December 31, 2020:

2021 December 31,

11 unchanged sentences

$ 785,339 $ 734,413

The following tables present the activity in the allowance for loan and lease losses for the three months ended March 31, 2021 and 2020:

The following tables present the activity in the allowance for loan and lease losses for the three and six months ended June 30, 2021 and 2020:

Mortgage (1) Commercial

1 unchanged sentence

Mortgage (2) Leases Consumer Total

Three Months Ended March 31, 2021:

Three Months Ended June 30, 2021:

Balance, beginning of period $ 8,359 $ 1,138 $ 257 $ 1,029 $ 176 $ 10,959

3 unchanged sentences

Balance, end of period $ 8,917 $ 982 $ 291 $ 1,013 $ 228 $ 11,431

Six Months Ended June 30, 2021:

Balance, beginning of period $ 7,797 $ 1,248 $ 270 $ 1,054 $ 217 $ 10,586

Provision (credit) for losses 1,118 ( 322 ) ( 36 ) 145 25 930

Charge-offs — ( 3 ) — ( 365 ) ( 75 ) ( 443 )

Recoveries 2 59 57 179 61 358

Balance, end of period $ 8,917 $ 982 $ 291 $ 1,013 $ 228 $ 11,431

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

3 unchanged sentences

Mortgage (2) Leases Consumer Total

Three Months Ended March 31, 2020:

Three Months Ended June 30, 2020:

Balance, beginning of period $ 4,668 $ 1,772 $ 148 $ 583 $ 135 $ 7,306

3 unchanged sentences

Balance, end of period $ 5,517 $ 1,710 $ 308 $ 838 $ 148 $ 8,521

Six Months Ended June 30, 2020:

Balance, beginning of period $ 4,564 $ 1,852 $ 109 $ 426 $ 138 $ 7,089

Provision (credit) for losses 917 ( 182 ) 210 569 16 1,530

Charge-offs — — ( 35 ) ( 190 ) ( 21 ) ( 246 )

Recoveries 36 40 24 33 15 148

Balance, end of period $ 5,517 $ 1,710 $ 308 $ 838 $ 148 $ 8,521

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

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

The following tables present the balance in the allowance for loan and lease losses and the recorded investment in loans and leases based on portfolio segment and impairment method as of March 31, 2021 and December 31, 2020:

March 31, 2021

June 30, 2021

Mortgage (1) Commercial

4 unchanged sentences

Collectively evaluated for impairment 8,017 930 291 1,013 228 10,479

Balance, March 31 $ 8,359 $ 1,138 $ 257 $ 1,029 $ 176 $ 10,959

Balance, June 30 $ 8,917 $ 982 $ 291 $ 1,013 $ 228 $ 11,431

Loans and leases:

1 unchanged sentence

Collectively evaluated for impairment 466,337 94,604 91,533 121,006 18,945 792,425

Ending Balance, March 31 $ 433,403 $ 112,110 $ 96,643 $ 117,725 $ 17,101 $ 776,982

Ending Balance, June 30 $ 472,041 $ 95,028 $ 91,710 $ 121,006 $ 18,945 $ 798,730

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

68 unchanged sentences

Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria.

In general, the Company avoids financing single purpose projects unless other underwriting factors are

present to help mitigate risk.

In general, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk.

In addition, management tracks the level of owner-occupied commercial real estate versus nonowner-occupied loans.

17 unchanged sentences

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

The following tables present the credit risk profile of the Company’s loan and lease portfolio based on rating category and payment activity as of March 31, 2021 and December 31, 2020:

March 31, 2021

The following tables present the credit risk profile of the Company’s loan and lease portfolio based on rating category and payment activity as of June 30, 2021 and December 31, 2020:

June 30, 2021

Mortgage Industrial Construction

21 unchanged sentences

$ 247,564 $ 122,831 $ 58,424 $ 55,998 $ 125,121 $ 5,982 $ 117,171 $ 13,257 $ 746,348

The following tables present the Company’s loan and lease portfolio aging analysis of the recorded investment in loans and leases as of March 31, 2021 and December 31, 2020:

March 31, 2021

The following tables present the Company’s loan and lease portfolio aging analysis of the recorded investment in loans and leases as of June 30, 2021 and December 31, 2020:

June 30, 2021

Delinquent Loans Current Total

27 unchanged sentences

Totals $ 4,194 $ 5,555 $ 4,638 $ 14,387 $ 731,961 $ 746,348 $ 3,996

The following tables present the Company’s impaired loans and specific valuation allowance at March 31, 2021 and December 31, 2020:

March 31, 2021

The following tables present the Company’s impaired loans and specific valuation allowance at June 30, 2021 and December 31, 2020:

June 30, 2021

Balance Unpaid

8 unchanged sentences

Commercial and industrial 52 64 52

Residential mortgage 54 54 —

$ 5,556 $ 5,568 $ 952

12 unchanged sentences

$ 784 $ 1,347 $ —

Impaired loans without a specific valuation allowance

Impaired loans with a specific valuation allowance

Commercial mortgage $ 625 $ 625 $ 150

6 unchanged sentences

Total impaired loans $ 1,463 $ 2,036 $ 202

The following tables present the Company’s average investment in impaired loans and interest income recognized for the three months ended March 31, 2021 and 2020:

The following tables present the Company’s average investment in impaired loans and leases, and interest income recognized for the three and six months ended June 30, 2021 and 2020:

Investment in

Loans Interest

Three Months Ended March 31, 2021:

Loans and Leases Interest

Three Months Ended June 30, 2021:

Total impaired loans

2 unchanged sentences

Residential mortgage 178 2

Total impaired loans and leases $ 6,257 $ 12

Investment in

Loans and Leases Interest

Six Months Ended June 30, 2021:

Total impaired loans

Commercial mortgage $ 3,996 $ 17

Commercial and industrial 455 4

Residential mortgage 179 3

Total impaired loans and leases $ 4,630 $ 24

Investment in

Loans Interest

Three Months Ended March 31, 2020:

Loans and Leases Interest

Three Months Ended June 30, 2020:

Total impaired loans

2 unchanged sentences

Residential mortgage 265 1

Total impaired loans and leases $ 1,655 $ 26

Investment in

Loans and Leases Interest

Six Months Ended June 30, 2020:

Total impaired loans

The following table presents the Company’s nonaccrual loans and leases at March 31, 2021 and December 31, 2020:

Commercial mortgage $ 765 $ 18

Commercial and industrial 661 28

Residential mortgage 292 6

Total impaired loans and leases $ 1,718 $ 52

The following table presents the Company’s nonaccrual loans and leases at June 30, 2021 and December 31, 2020:

2021 December 31,

4 unchanged sentences

$ 5,734 $ 803

During the three months ended March 31, 2021 and 2020, there were no newly classified troubled debt restructured loans or leases (“TDRs”).

For the three months ended March 31, 2021 and 2020, the Company recorded no charge-offs related to TDRs.

As of both March 31, 2021 and December 31, 2020, TDRs had a related allowance of $ 52,000 .

During the three months ended March 31, 2021, there were no TDRs for which there was a payment default within the first 12 months of the modification.

During the three and six months ended June 30, 2021 and 2020, there were no newly classified troubled debt restructured loans or leases (“TDRs”).

For the three and six months ended June 30, 2021 and 2020, the Company recorded no charge-offs related to TDRs.

As of both June 30, 2021 and December 31, 2020, TDRs had a related allowance of $ 52,000 .

During the three and six months ended June 30, 2021, there were no TDRs for which there was a payment default within the first 12 months of the modification.

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

3 unchanged sentences

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

As of March 31, 2021, the Company had 33 loan and lease modifications outstanding related to the COVID-19 pandemic with an outstanding loan balance totaling $ 24.6 million in accordance with the CARES Act.

As of June 30, 2021, the Company had six loan and lease modifications outstanding related to the COVID-19 pandemic with an

outstanding loan balance totaling $ 2.5 million in accordance with the CARES Act.

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

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

At March 31, 2021 and December 31, 2020, the balance of real estate owned includes $ 0 and $ 32,000 , respectively, of foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property.

At March 31, 2021 and December 31, 2020, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds were in process was $ 520,000 and $ 283,000 , respectively.

At June 30, 2021 and December 31, 2020, the balance of real estate owned included $ 0 and $ 32,000 , respectively, of foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property.

At June 30, 2021 and December 31, 2020, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds were in process was $ 442,000 and $ 283,000 , respectively.

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

5 unchanged sentences

Net investment in direct finance leases $ 121,006 $ 117,171

Leases serviced by First Bank Richmond for the benefit of others totaled approximately $ 22,000 and $ 86,000 at March 31, 2021 and December 31, 2020, respectively.

Leases serviced by First Bank Richmond for the benefit of others totaled approximately $ 0 and $ 86,000 at June 30, 2021 and December 31, 2020, respectively.

Additionally, certain leases have been sold with partial recourse.

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

At March 31, 2021 and December 31, 2020, First Bank Richmond has recorded a recourse obligation on leases sold with recourse of $ 0 , and has a maximum exposure of $ 22,000 and $ 86,000 , respectively, for these leases.

The following table summarizes the future minimum lease payments receivable subsequent to March 31, 2021:

At both June 30, 2021 and December 31, 2020, First Bank Richmond recorded a recourse obligation on leases sold of $ 0 , and had a maximum exposure of $ 0 and $ 86,000 , respectively, for these leases.

The following table summarizes the future minimum lease payments receivable subsequent to June 30, 2021:

2021 $ 26,903

10 unchanged sentences

Recurring Measurements

The following tables present the fair value measurements of assets recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2021 and December 31, 2020:

Fair Value Measurements Using

2 unchanged sentences

(Level 2) Significant

March 31, 2021

June 30, 2021

Available-for-sale securities

3 unchanged sentences

Mortgage-backed securities - GSE residential 167,845 — 167,845 —

Corporate obligations 1,270 — 1,270 —

Equity securities 13 13 — —

13 unchanged sentences

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

There have been no significant changes in the valuation techniques during the three months ended March 31, 2021.

There have been no significant changes in the valuation techniques during the six months ended June 30, 2021.

Available-for-Sale Securities

5 unchanged sentences

Nonrecurring Measurements

The following table presents the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2021 and December 31, 2020:

Fair Value Measurements Using

2 unchanged sentences

(Level 2) Significant

March 31, 2021

June 30, 2021

Impaired loans, collateral dependent $ 4,658 $ — $ — $ 4,658

23 unchanged sentences

Unobservable (Level 3) Inputs

The following tables present the fair value measurement of assets recognized in the accompanying consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2021 and December 31, 2020:

Fair Value at March 31, 2021 Valuation

Fair Value at June 30,

2021 Valuation

Technique Unobservable

1 unchanged sentence

Mortgage-servicing rights $ 1,917 Discounted cash flow Discount rate 10 %

Fair Value at December 31, 2020 Valuation

Fair Value at December 31,

2020 Valuation

Technique Unobservable

2 unchanged sentences

Fair Value of Financial Instruments

The following tables present estimated fair values of the Company’s financial instruments at March 31, 2021 and December 31, 2020:

The following tables present estimated fair values of the Company’s financial instruments at June 30, 2021 and December 31, 2020:

Fair Value Measurements Using

2 unchanged sentences

(Level 2) Significant

March 31, 2021

June 30, 2021

Financial assets

2 unchanged sentences

Held-to-maturity securities 9,853 — 10,069 —

Loans held for sale 603 — — 608

Loans and leases receivable, net 785,339 — — 802,520

14 unchanged sentences

Held-to-maturity securities 12,225 — 12,520 —

Loans held for sale 1,987 — — 2,021

Loans and leases receivable, net 734,413 — — 749,130

10 unchanged sentences

The following table presents the computation of basic and diluted EPS for the periods indicated:

Three Months Ended March 31, 2021 Three Months Ended March 31, 2020

Three Months Ended June 30, 2021 Three Months Ended June 30, 2020

Net income $ 2,781 $ 2,506

8 unchanged sentences

Diluted Earnings Per Share $ 0.24 $ 0.20

Six Months Ended June 30, 2021 Six Months Ended June 30, 2020

Net income $ 5,344 $ 4,958

Shares outstanding for Basic EPS:

Average shares outstanding 13,009,766 13,526,625

average restricted stock award shares not vested 433,031 —

average unearned ESOP Shares 998,511 1,052,656

Shares outstanding for Basic EPS 11,578,224 12,473,969

Additional Dilutive Shares 212,869 —

Shares outstanding for Diluted EPS 11,791,093 12,473,969

Basic Earnings Per Share $ 0.46 $ 0.40

Diluted Earnings Per Share $ 0.45 $ 0.40

Benefit Plans

1 unchanged sentence

The Company matches employees' contributions at the rate of 50 percent for the first six percent of base salary contributed by participants.

The Company’s expense for the plan was $ 52,000 and $ 49,000 for the three months ended March 31, 2021 and 2020, respectively.

The Company’s expense for the plan was $ 64,000 , $ 116,000 , $ 57,000 , and $ 106,000 for the three and six months ended June 30, 2021 and 2020, respectively.

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

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

As of March 31, 2021 the Company has accrued $ 17.5 million for this expense.

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

Due to the current low interest rate environment, terminating the DB Plan at this time would require the Company to incur a substantial additional expense over and above the amount presently accrued.

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

The Company is in the process of terminating its participation in the Pentegra Defined Benefits Plan, which will require a payment of an amount based on the underfunded status of the plan, referred to

as a withdrawal liability.

In 2019, the Company estimated and accrued approximately $ 17.5 million for this withdrawal liability.

This estimated withdrawal liability was calculated by plan administrators based on an interest rate of 2.35 %, Pri-2012 mortality tables with white collar adjustments, and an assumed December 31, 2019 withdrawal date.

The Company’s actual termination expense will be based on the cost of purchasing annuities through an insurance company, and may be higher or lower depending on a number of factors, including the interest rate environment and the valuation of plan assets.

Due to the current low interest rate environment, terminating the DB Plan at this time would require the Company to incur a substantial additional expense over and above the amount presently accrued, as interest rates are even lower now than they were in 2019.

As a result, the Company’s Board of Directors will continue to monitor and evaluate the timing of, and costs associated with, termination of the DB Plan, and it is currently uncertain when the termination of the DB Plan will be completed or what the actual costs of such termination will be.

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

We recorded ongoing expenses of $ 173,000 for the quarter ended June 30, 2021, in connection with the freezing of the DB Plan.

Employee Stock Ownership Plan

4 unchanged sentences

Unearned ESOP shares which have not yet been allocated to ESOP participants are excluded from the computation of average shares outstanding for earnings per share calculation.

Accordingly, $ 13,479,847 and $ 13,664,373 of common stock acquired by the ESOP was shown as a reduction of stockholders’ equity at March 31, 2021 and December 31, 2020, respectively.

Accordingly, $ 13,296,017 and $ 13,664,373 of common stock acquired by the ESOP was shown as a reduction of stockholders’ equity at June 30, 2021 and December 31, 2020, respectively.

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

ESOP expense for the three months ended March 31, 2021 and 2020 was $ 183,000 and $ 187,000 , respectively.

March 31, 2021 March 31, 2020

ESOP expense for the three and six months ended June 30, 2021 and 2020 was $ 191,000 , $ 374,000 , $ 143,000 , and $ 329,000 , respectively.

2021 December 31,

Earned ESOP shares 103,722 76,669

10 unchanged sentences

On October 1, 2020, the Company awarded 449,086 shares of common stock under the 2020 EIP with a grant date fair value of $ 10.53 per share (total fair value of $ 4.7 million at issuance) to eligible participants.

On April 1, 2021, the Company awarded an additional 4,000 shares of common stock under the 2020 EIP with a grant date fair value of $ 13.86 (total fair value of $ 55,000 ) to eligible participants.

These awards vest in five equal annual installments with the first vesting occurring on June 30, 2021.

Forfeited shares may be awarded to other eligible recipients in future grants until the 2020 EIP terminates in September 2030.

Total compensation cost recognized in the income statement for restricted stock awards during the three months ended March 31, 2021 was $ 303,000 and the related tax benefit recognized was $ 64,000 .

As of March 31, 2021, unrecognized compensation expense related to restricted stock awards was $ 4.0 million.

The following table summarizes the restricted stock awards activity in the 2020 EIP during the six months ended June 30, 2021.

Six Months Ended June 30, 2021

Number of Restricted Shares Weighted Average Grant Date Fair Value

Non-vested, beginning of period 431,501 $ 10.53

Granted 4,000 13.86

Vested ( 87,106 ) 10.56

Forfeited — —

Non-vested, June 30 348,395 10.56

Total compensation cost recognized in the income statement for restricted stock awards during the three and six months ended June 30, 2021 was $ 317,000 and $ 619,000 , respectively, and the related tax benefit recognized was $ 66,000 and $ 130,000 , respectively.

As of June 30, 2021, unrecognized compensation expense related to restricted stock awards was $ 3.7 million.

Stock Option Plan.

On October 1, 2020, the Company awarded options to purchase 1,095,657 of common stock under the 2020 EIP with an exercise price of $ 10.53 per share, the fair market value of a share of the Company's common stock on the date of

grant, to eligible participants.

On October 1, 2020, the Company awarded options to purchase 1,095,657 of common stock under the 2020 EIP with an exercise price of $ 10.53 per share, the fair value of a share of the Company's common stock on the date of grant, to eligible participants.

On April 1, 2021, the Company awarded options to purchase 8,000 shares of common stock under the 2020 EIP with an exercise price of $ 13.86 per share, the fair value of a share of the Company's common stock on the date of the grant, to eligible participants.

These options awarded vest in five equal annual installments with the first vesting occurring on June 30, 2021.

Forfeited options may be awarded to other eligible recipients in future grants until the 2020 EIP terminates in September 2030.

The following table summarizes the stock option activity in the 2020 EIP during the three months ended March 31, 2021.

March 31, 2021

The following table summarizes the stock option activity in the 2020 EIP during the six months ended June 30, 2021.

Six Months Ended June 30, 2021

Number of Shares Weighted-Average Exercise Price

Balance at beginning of year 1,095,657 $ 10.53

Balance at beginning of period 1,095,657 $ 10.53

Granted 8,000 13.86

Exercised — —

Forfeited/expired — —

Balance at end of year 1,095,657 10.53

Balance, June 30 1,103,657 10.55

Exercisable at end of period 253,199 $ 10.55

40,580 $ 10.53

(1) As a result of the acceleration of option vesting upon the death of a recipient.

A summary of the status of the Company stock option shares as of March 31, 2021 is presented below.

The fair value of options granted is estimated on the date of the grant using a Black Scholes model with the following assumptions:

April 1, 2021

Dividend yields 1.90 %

Volatility factors of expected market price of common stock 26.98 %

Risk-free interest rates 1.16 %

Expected life of options 6.1 years

A summary of the status of the Company stock option shares as of June 30, 2021 is presented below.

Shares Weighted Average Grant Date Fair Value

Non-vested, beginning of year 1,055,077 $ 2.91

Vested ( 212,619 ) 2.91

Granted 8,000 3.02

Forfeited — —

Non-vested, March 31 1,055,077 $ 2.91

Total compensation cost recognized in the income statement for option-based payment arrangements during 2020 was $ 205,000 and the related tax benefit recognized was $ 23,000 .

As of March 31, 2021, unrecognized compensation expense related to the stock option awards was $ 2.7 million.

Non-vested, June 30 850,458 $ 2.91

Total compensation cost recognized in the income statement for option-based payment arrangements for the three and six months ended June 30, 2021 was $ 211,000 and $ 416,000 , respectively, and the related tax benefit recognized was $ 23,000 and $ 46,000 , respectively.

As of June 30, 2021, unrecognized compensation expense related to the stock option awards was $ 2.5 million.

Subsequent Event

Subsequent to March 31, 2021 through May 14, 2021 the Company purchased 167,193 shares under the existing stock repurchase program, leaving 249,392 shares available for future repurchase.

Subsequent to June 30, 2021 through August 13, 2021 the Company purchased 214,096 shares of the Company's common stock pursuant to the existing stock repurchase program, leaving 1,096,311 shares available for future repurchase.

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

What changed 10-Q

Item 1. Financial Statements