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Item 2. Management’s Discussion and Analysis

2022-08-12 compared with 2022-05-13 · 214 added, 117 removed, 222 unchanged (60% of the section changed)

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Management’s discussion and analysis of financial condition of the Richmond Mutual Bancorporation, Inc.

(the “Company”) at March 31, 2022, and the consolidated results of operations for the three month period ended March 31, 2022, compared to the same period in 2021, is intended to assist in understanding the financial condition and results of operations of the Company.

(the “Company”) at June 30, 2022, and the consolidated results of operations for the three and six month periods ended June 30, 2022, compared to the same periods in 2021, 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, First Bank Richmond, which we sometimes refer to as the “Bank” and FB Richmond Holdings, Inc., unless the context otherwise requires.

and its consolidated direct and indirect subsidiaries, First Bank Richmond, which we sometimes refer to as the “Bank”, First Insurance Management, Inc., FB Richmond Holdings, Inc.

and FB Richmond Properties, Inc., unless the context otherwise requires.

Cautionary Note Regarding Forward-Looking Statements

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• potential adverse impacts to economic conditions in the Company's local market areas, other markets where the Company has lending relationships, or other aspects of the Company's business operations or financial markets, generally, resulting from the novel coronavirus disease 2019 (“COVID-19") pandemic and any governmental or societal responses thereto;

• supply chain disruptions due to COVID-19 employee absences, as well as the ongoing war in Ukraine, could adversely impact the ability of our borrowers to manage their cash flow and ultimately to repay their loans;

• changes in economic conditions, either nationally or in our market area;

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• 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, 2021 (“2021 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.

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.

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We also provide trust and wealth management services, including serving as executor and trustee under wills and deeds and as guardian and custodian of employee benefits, and manage private investment accounts for individuals and institutions.

Total wealth management assets under management and administration were $149.4 million at March 31, 2022.

Total wealth management assets under management and administration were $134.4 million at June 30, 2022.

Our results of operations are primarily dependent on net interest income.

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We also recognize income from the sale of investment securities.

and shareholders’ equity, usually have the largest impact on changes in our net interest spread, net interest margin and net interest income during a reporting period.

At March 31, 2022, on a consolidated basis, we had $1.3 billion in assets, $850.0 million in loans and leases, net of allowance, $909.5 million in deposits and $157.3 million in stockholders’ equity.

At March 31, 2022, First Bank Richmond’s total risk-based capital ratio was 16.81%, exceeding the 10.0% requirement for a well-capitalized institution.

For the three months ended March 31, 2022, net income was $3.0 million, compared with net income of $2.6 million for the three months ended March 31, 2021.

Changes in market interest rates, the slope of the yield curve, and interest we earn on interest-earning assets or pay on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and noninterest-bearing liabilities and shareholders’ equity, usually have the largest impact on changes in our net interest spread, net interest margin and net interest income during a reporting period.

First Insurance Management, Inc., a wholly-owned subsidiary of the Company which was formed and began operations in June 2022, is a Nevada-based captive insurance company that insures against certain risks unique to the operations of the Company and its subsidiaries and for which insurance may not be currently available or economically feasible in today's insurance marketplace.

First Insurance Management, Inc.

is subject to the regulations of the State of Nevada and undergoes periodic examinations by the Nevada Division of Insurance.

FB Richmond Holdings, Inc., a wholly-owned subsidiary of First Bank Richmond which was formed and began operations in April 2020, is a Nevada corporation that holds and manages substantially all of First Bank Richmond's investment portfolio.

FB Richmond Holdings, Inc.

has one active subsidiary, FB Richmond Properties, Inc., a Delaware corporation which holds loans on behalf of the Bank.

At June 30, 2022, on a consolidated basis, we had $1.3 billion in assets, $891.9 million in loans and leases, net of allowance, $945.3 million in deposits and $138.9 million in stockholders’ equity.

At June 30, 2022, First Bank Richmond’s total risk-based capital ratio was 16.72%, exceeding the 10.0% requirement for a well-capitalized institution.

For the six months ended June 30, 2022, net income was $6.5 million, compared with net income of $5.3 million for the six months ended June 30, 2021.

Critical Accounting Policies

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The classification of securities is significant since it directly impacts the accounting for unrealized gains and losses on securities.

Debt securities are classified as held to maturity and carried at amortized cost when management has the positive intent and we have the ability to hold the securities to maturity.

Debt securities are classified as held to maturity and carried at

amortized cost when management has the positive intent and we have the ability to hold the securities to maturity.

Securities not classified as held to maturity are classified as available for sale and are carried at fair value, with the unrealized holding gains and losses, net of tax, reported in other comprehensive income and which do not affect earnings until realized.

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The effect of a change in tax rates on our deferred tax assets and liabilities is recognized as income or expense in the period that includes the enactment date.

COVID-19 Impact to the Company

The Company is actively monitoring and responding to the effects of the rapidly-changing COVID 19 pandemic.

The Company maintains its commitment to supporting its community and customers during the COVID-19 pandemic and remains focused on keeping its employees safe and the Bank running effectively to serve its customers.

As of March 31, 2022, all banking branches are open with normal hours and substantially all employees have returned to their routine working environments.

The Bank will continue to monitor branch access and occupancy levels in relation to cases and close contact scenarios and follow governmental restrictions and public health authority guidelines.

Comparison of Financial Condition at March 31, 2022 and December 31, 2021

Total assets decreased $11.5 million, or 0.9%, to $1.3 billion at March 31, 2022 from December 31, 2021.

The decrease was primarily the result of a $31.6 million, or 8.6%, decrease in investment securities to $335.0 million and a $3.5 million, or 15.0% decrease in cash and cash equivalents to $19.6 million at March 31, 2022.

These decreases were partially offset by increases of $17.1 million, or 2.1%, in loans and leases, net of allowance, to $850.0 million and $6.9 million, or 64.2%, in other assets to $17.8 million at March 31, 2022.

Comparison of Financial Condition at June 30, 2022 and December 31, 2021

Total assets increased $4.0 million, or 0.3%, to $1.3 billion at June 30, 2022 from December 31, 2021.

The increase was primarily the result of increases of $59.0 million, or 7.1% in loans and leases, net of allowance, to $891.9 million and $9.4 million, or 86.9%, in other assets to $20.2 million at June 30, 2022.

These increases were partially offset by a $55.8 million, or 15.2%, decrease in investment securities to $310.8 million and an $8.6 million, or 37.4% decrease in cash and cash equivalents to $14.4 million at June 30, 2022.

Investment Securities.

Investment securities available-for-sale decreased $30.7 million, or 8.6%, to $326.8 million, while investment securities held-to-maturity decreased $894,000, or 9.9%, to $8.1 million at March 31, 2022 compared to December 31, 2021.

The decrease in investment securities available-for-sale was primarily the result of a portion of the

maturing securities and payments on securities being used to fund growth in the loan and lease portfolio, as well as greater mark-to-market adjustments to the portfolio due to increases in unrealized losses.

Investment securities available-for-sale decreased $54.9 million, or 15.4%, to $302.6 million, while investment securities held-to-maturity decreased $897,000, or 9.9%, to $8.1 million at June 30, 2022 compared to December 31, 2021.

The decrease in investment securities available-for-sale was primarily the result of a portion of the maturing securities and payments on securities being used to fund growth in the loan and lease portfolio, as well as greater mark-to-market adjustments to the portfolio due to increases in unrealized losses.

The decrease in investment securities held-to-maturity was the result of scheduled principal repayments and maturities.

Loans and Leases.

Our loan and lease portfolio, net of allowance for loan and lease losses, increased $17.1 million, or 2.1%, to $850.0 million at March 31, 2022 from $832.8 million at December 31, 2021.

The increase in loans and leases was attributable to increases in multi-family loans of $9.0 million, construction and development loans of $8.4 million and leases of $3.7 million, partially offset by declines in commercial mortgage loans of $3.4 million and commercial and industrial loans of $3.1 million.

The decline in commercial and industrial loans was due to a decrease in PPP loans of $3.4 million to $6.0 million at March 31, 2022, resulting from PPP loan forgiveness by the SBA.

Loans held for sale totaled $583,000 and $558,000 at March 31, 2022 and December 31, 2021, respectively.

Nonperforming loans and leases, consisting of nonaccrual loans and leases and accruing loans and leases more than 90 days past due, totaled $8.0 million or 0.92% of total loans and leases at March 31, 2022, compared to $8.0 million or 0.95% of total loans and leases at December 31, 2021.

Accruing loans and leases past due more than 90 days totaled $1.8 million at both dates.

At March 31, 2022, troubled debt restructurings ("TDRs") totaled $442,000, compared to $456,000 at December 31, 2021.

The CARES Act amended generally accepted accounting principles with respect to the modification of loans to borrowers affected by the COVID-19 pandemic.

Among other criteria, this guidance provided that short-term loan 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.

As of March 31, 2022, the Company had no outstanding loan and lease modifications qualifying under the CARES Act related to the COVID-19 pandemic.

Our loan and lease portfolio, net of allowance for loan and lease losses, increased $59.0 million, or 7.1%, to $891.9 million at June 30, 2022 from $832.8 million at December 31, 2021.

The increase in loans and leases was attributable primarily to increases in commercial real estate loans of $17.3 million, multi-family loans of $14.0 million, and construction and development loans of $11.2 million.

Commercial and industrial loans increased $6.7 million despite a decrease of $2.3 million in Paycheck Protection Program ("PPP") loans resulting from loan forgiveness by the U.S.

Small Business Administration ("SBA").

PPP loans totaled $3.7 million at June 30, 2022.

Loans held for sale totaled $1.1 million and $558,000 at June 30, 2022 and December 31, 2021, respectively.

Nonperforming loans and leases, consisting of nonaccrual loans and leases and accruing loans and leases more than 90 days past due, totaled $8.1 million or 0.89% of total loans and leases at June 30, 2022, compared to $8.0 million or 0.95% of total loans and leases at December 31, 2021.

Accruing loans and leases past due more than 90 days totaled $2.1 million at June 30, 2022, compared to $1.8 million at December 31, 2021.

At June 30, 2022, troubled debt restructurings ("TDRs") totaled $432,000, compared to $456,000 at December 31, 2021, all of which were on nonaccrual status as of such dates.

Allowance for Loan and Lease Losses.

The allowance for loan and lease losses increased $209,000, or 1.7%, to $12.3 million at March 31, 2022 from $12.1 million at December 31, 2021.

At both March 31, 2022 and December 31, 2021 the allowance for loan and lease losses totaled 1.43% of total loans and leases outstanding.

Net recoveries during the first quarter of 2022 were $9,000, compared to net charge-offs of $27,000 during the first quarter of 2021.

The allowance for loan and lease losses to non-performing loans and leases was 154.9% at March 31, 2022, compared to 150.8% at December 31, 2021.

The allowance for loan and lease losses increased $273,000, or 2.3%, to $12.4 million at June 30, 2022 from $12.1 million at December 31, 2021.

At June 30, 2022, the allowance for loan and lease losses totaled 1.37% of total loans and leases outstanding, compared to 1.43% at December 31, 2021.

Net charge-offs during the first half of 2022 were $127,000, compared to net charge-offs of $85,000 during the first half of 2021.

The allowance for loan and lease losses to non-performing loans and leases was 153.3% at June 30, 2022, compared to 150.8% at December 31, 2021.

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 March 31, 2022, which evaluation included consideration of potential credit losses due to economic conditions driven by any lingering impact of the COVID-19 pandemic.

Any lingering impact of the pandemic on the Company’s deposit and loan customers is still not fully known at this time.

The Company evaluated its exposure to potential loan and lease losses as of June 30, 2022, which evaluation included consideration of potential credit losses due to economic conditions driven by any lingering impact of the COVID-19 pandemic, particularly concerning the ongoing difficulty businesses are having in hiring sufficient employees and the supply chain disruptions this has caused, as well as supply chain disruptions caused by the war in Ukraine.

Any lingering impact of the pandemic and the war on the Company’s deposit and loan customers is still not fully known at this time.

Credit metrics are being reviewed and stress testing is being performed on the loan portfolio on an ongoing basis.

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Other Assets .

Other assets increased $6.9 million, or 64.2%, to $17.8 million at March 31, 2022 from $10.8 million at December 31, 2021, primarily as a result of a $6.4 million increase in deferred tax assets due to the mark-to-market adjustment on the available-for-sale investment portfolio.

Total deposits increased $9.3 million, or 1.0%, to $909.5 million at March 31, 2022, from $900.2 million at December 31, 2021.

The increase in deposits primarily was due to an increase in savings and money market accounts of $21.2 million, partially offset by a decrease in time deposits of $13.8 million.

Management attributes the shift in funds to customers anticipating potentially higher rates being paid on time deposits in 2022 in connection with the expected interest rate hikes by the Federal Reserve this year.

Brokered deposits decreased $1.7 million to $120.1 million, or 13.2% of total deposits, at March 31, 2022, compared to $121.8 million, or 13.5% of total deposits, at December 31, 2021.

At March 31, 2022, noninterest-bearing deposits totaled $113.7 million, or 12.5% of total deposits, compared to $114.3 million or 12.7% of total deposits at December 31, 2021.

Total borrowings, consisting solely of FHLB advances, increased $2.0 million to $182.0 million at March 31, 2022, compared to $180.0 million at December 31, 2021, which together with the increase in deposits, were used to fund loan growth.

Other assets increased $9.4 million, or 86.9%, to $20.2 million at June 30, 2022 from $10.8 million at December 31, 2021, primarily as a result of a $10.1 million increase in deferred tax assets due to the mark-to-market adjustment on the available-for-sale investment portfolio.

Total deposits increased $45.2 million, or 5.0%, to $945.3 million at June 30, 2022, from $900.2 million at December 31, 2021.

The increase in deposits primarily was due to an increase in brokered time deposits of $31.2 million and

savings and money market accounts of $30.8 million, partially offset by a decrease in other time deposits of $21.7 million.

Management attributes the shift in funds to customers anticipating potentially higher rates being paid on time deposits in 2022 in connection with the recent and expected future interest rate hikes by the Federal Reserve this year.

Brokered deposits totaled $153.0 million, or 16.2% of total deposits, at June 30, 2022, compared to $121.8 million, or 13.5% of total deposits, at December 31, 2021.

At June 30, 2022, noninterest-bearing deposits totaled $116.8 million, or 12.4% of total deposits, compared to $114.3 million or 12.7% of total deposits at December 31, 2021.

Total borrowings, consisting solely of FHLB advances, were steady at $180.0 million at June 30, 2022 and December 31, 2021.

Stockholders’ Equity.

Stockholders’ equity totaled $157.3 million at March 31, 2022, a decrease of $23.1 million, or 12.8%, from December 31, 2021.

The decrease in stockholders' equity from year-end 2021 resulted from an accumulated other comprehensive loss of $24.1 million due to a greater mark-to-market adjustment to the investment portfolio as a result of higher interest rates, the payment of $1.1 million in dividends to Company stockholders, and the repurchase of $1.5 million of

Company common stock, partially offset by net income of $3.0 million.

The Company repurchased 90,191 shares of Company common stock at an average price of $16.62 per share for a total of $1.5 million during the first three months of 2022.

The Company’s equity to asset ratio was 12.5% at March 31, 2022.

At March 31, 2022, the Bank’s Tier 1 capital to total assets ratio was 12.6% and the Bank’s capital was well in excess of all regulatory requirements.

Comparison of Results of Operations for the Three Months Ended March 31, 2022 and 2021.

Net income for the three months ended March 31, 2022 was $3.0 million, a $455,000 or 17.8% increase from net income of $2.6 million for the three months ended March 31, 2021.

The $3.0 million in earnings equaled $0.26 diluted earnings per share for the first quarter of 2022, compared to $0.22 diluted earnings per share for the first quarter of 2021.

Stockholders’ equity totaled $138.9 million at June 30, 2022, a decrease of $41.5 million, or 23.0%, from December 31, 2021.

The decrease in stockholders' equity from year-end 2021 resulted from an increase in accumulated other comprehensive loss of $38.0 million due to a greater mark-to-market adjustment to the investment portfolio

as a result of higher interest rates, the payment of $2.2 million in dividends to Company stockholders, and the repurchase of $9.0 million of Company common stock, partially offset by net income of $6.5 million.

The Company repurchased 552,082 shares of Company common stock at an average price of $16.25 per share for a total of $9.0 million during the first six months of 2022.

The Company’s equity to asset ratio was 10.9% at June 30, 2022.

At June 30, 2022, the Bank’s Tier 1 capital to total assets ratio was 12.7% and the Bank’s capital was well in excess of all regulatory requirements.

Comparison of Results of Operations for the Three Months Ended June 30, 2022 and 2021.

Net income for the three months ended June 30, 2022 was $3.5 million, a $704,000 or 25.3% increase from net income of $2.8 million for the three months ended June 30, 2021.

The $3.5 million in earnings equaled $0.31 diluted earnings per share for the second quarter of 2022, compared to $0.24 diluted earnings per share for the second quarter of 2021.

The increase in net income was primarily the result of a $1.4 million increase in net interest income and a $330,000 decrease in the provision for loan losses, partially offset by a $464,000 decrease in noninterest income and a $278,000 increase in noninterest expense.

Interest Income.

Interest income increased $1.1 million, or 9.7%, to $11.9 million during the quarter ended March 31, 2022, compared to $10.9 million during the quarter ended March 31, 2021.

Interest income on loans and leases increased $399,000, or 4.0%, to $10.3 million for the quarter ended March 31, 2022, from $9.9 million for the comparable quarter in 2021, due to higher average balances in the loan and lease portfolio, partially offset by a decrease in the average loan and lease yield of 34 basis points.

The average outstanding loan and lease balances were $849.9 million for the quarter ended March 31, 2022, compared to $763.8 million for the quarter ended March 31, 2021.

The average yield on loans and leases was 4.83% for the quarter ended March 31, 2022, compared to 5.17% for the comparable quarter in 2021.

Interest income also included $174,000 in fees earned related to PPP loans in the quarter ended March 31, 2022 compared to $773,000 during the same quarter in 2021.

As of March 31, 2022, total unrecognized fees on PPP loans were $210,000.

For the three months ended March 31, 2022, average PPP loans were $7.8 million and the average yield was 9.92%.

The impact of PPP loans on loan yields will change during any period based on the volume of prepayments or amounts forgiven by the SBA as certain criteria are met, but will cease completely after the maturity of the loans.

Interest income on investment securities, including FHLB stock, increased $659,000, or 65.3%, to $1.7 million during the quarter ended March 31, 2022, compared to the same quarter in 2021.

Interest income increased $1.3 million, or 12.0%, to $12.4 million during the quarter ended June 30, 2022, compared to $11.1 million during the quarter ended June 30, 2021.

Interest income on loans and leases increased $826,000, or 8.4%, to $10.7 million for the quarter ended June 30, 2022, from $9.9 million for the comparable quarter in 2021, due to higher average balances in the loan and lease portfolio, partially offset by a decrease in the average loan and lease yield of 19 basis points.

The average outstanding loan and lease balances were $875.8 million for the quarter ended June 30, 2022, compared to $778.4 million for the quarter ended June 30, 2021.

The average yield on loans and leases was 4.88% for the quarter ended June 30, 2022, compared to 5.07% for the comparable quarter in 2021.

Interest income included $91,000 in fees earned related to PPP loans in the quarter ended June 30, 2022 compared to $696,000 during the same quarter in 2021.

As of June 30, 2022, total unrecognized fees on PPP loans were approximately $119,000.

Interest income on investment securities, including FHLB stock, increased $485,000, or 38.8%, to $1.7 million during the quarter ended June 30, 2022, compared to the same quarter in 2021.

The increase in interest income on investment securities from the comparable period in 2021 was due to an increase in the average balances of $10.5 million and a 53 basis point increase in the average yield earned on investment securities.

The average balance of investment securities, including FHLB stock, was $363.2 million for the quarter ended March 31, 2022, compared to $269.8 million for the quarter ended March 31, 2021.

The average yield on investment securities, including FHLB stock, was 1.84% for the first quarter of 2022, compared to 1.50% for the first quarter of 2021.

The average balance of investment securities, including FHLB stock, was $332.9 million for the quarter ended June 30, 2022, compared to $322.4 million for the quarter ended June 30, 2021.

The average yield on investment securities, including FHLB stock, was 2.08% for the second quarter of 2022, compared to 1.55% for the second quarter of 2021.

Interest Expense.

Interest expense remained relatively flat at $1.9 million for the quarter ended March 31, 2022, compared to the quarter ended March 31, 2021.

Interest expense on deposits increased $61,000, or 5.2%, to $1.2 million for the quarter ended March 31, 2022, from the comparable quarter in 2021.

The increase in interest expense on deposits primarily was attributable to a $179.0 million increase in average interest-bearing deposit balances, partially offset by a 43 basis point decrease in the average rate paid on certificate of deposit accounts.

The average rate paid on interest-bearing deposits was 0.63% for the quarter ended March 31, 2022, compared to 0.77% for the quarter ended March 31, 2021.

The average balance of interest-bearing deposits increased to $793.4 million, or 29.1%, in the quarter ended March 31, 2022, compared to $614.4 million in the comparable quarter in 2021.

Interest expense on FHLB borrowings decreased $54,000, or 7.8%, to $640,000 in the first quarter of 2022 compared to $694,000 for the same quarter in 2021, due to a 23 basis point decline in the average rate paid on borrowings to 1.40% during the three months ended March 31, 2022, from 1.63% for the comparable quarter in 2021, partially offset by a $13.5 million increase in the average outstanding balance of borrowings during the current quarter compared to the same period in 2021.

Interest expense remained relatively flat at $1.9 million for the quarter ended June 30, 2022, compared to the quarter ended June 30, 2021.

Interest expense on deposits increased $53,000, or 4.4%, to $1.3 million for the quarter ended June 30, 2022, from the comparable quarter in 2021.

The increase in interest expense on deposits primarily was attributable to a $150.2 million increase in average interest-bearing deposit balances, partially offset by a 35 basis point decrease in the average rate paid on certificate of deposit accounts to 0.86% during the three months ended June 30, 2022, from 1.21% for the comparable quarter in 2021.

The average rate paid on interest-bearing deposits was 0.62% for the quarter ended June 30, 2022, compared to 0.72% for the quarter ended June 30, 2021.

The average balance of interest-bearing deposits increased to $826.3 million, or 22.2%, in the quarter ended June 30, 2022, compared to $676.2 million in the comparable quarter in 2021.

Interest expense on FHLB borrowings decreased $76,000, or 10.9%, to $624,000 in the second quarter of 2022 compared to $701,000 for the same quarter in 2021, due to a 15 basis point decline in the average rate paid on borrowings to 1.47% during the three months ended June 30, 2022, from 1.62% for the comparable quarter in 2021, and a $2.8 million decrease in the average outstanding balance of borrowings during the current quarter compared to the same period in 2021.

Net Interest Income.

Net interest income before the provision for loan and lease losses increased $1.1 million, or 11.7%, to $10.1 million in the first quarter of 2022, compared to $9.0 million for the first quarter of 2021.

This increase was due to an increase in average interest-earning assets, partially offset by a two basis point decrease in the average interest rate spread during the first quarter of 2022 compared to the comparable quarter in 2021.

Net interest margin (annualized) was 3.26% for the three months ended March 31, 2022, compared to 3.38% for the three months ended March 31, 2021.

The decrease in net interest margin was primarily due to the yield on interest-earning assets dropping faster than the rate paid on interest-bearing liabilities.

The average yield on PPP loans, including the recognition of deferred fees, resulted in a positive impact to the yield on loans and leases of five basis points during the quarter ended March 31, 2022, compared to a positive impact of 17 basis points to the yield on loans and leases in the comparable quarter in 2021.

Net interest income before the provision for loan and lease losses increased $1.4 million, or 14.8%, to $10.5 million in the second quarter of 2022, compared to $9.2 million for the second quarter of 2021.

This increase was due to an increase in average interest-earning assets and a 26 basis point increase in the average interest rate spread during the second quarter of 2022 compared to the comparable quarter in 2021.

Net interest margin (annualized) was 3.45% for the three months ended June 30, 2022, compared to 3.27% for the three months ended June 30, 2021.

The increase in net interest margin was primarily due to the yield on interest-earning assets increasing 11 basis points while the rate paid on interest-bearing liabilities dropped 15 basis points.

The average yield on PPP loans, including the recognition of deferred fees, resulted in a positive impact to the yield on loans and leases of three basis points during the quarter ended June 30, 2022, identical to the comparable quarter in 2021.

Average Balances, Interest and Average Yields/Cost.

The following tables set 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 June 30,

Outstanding Interest

(Dollars in thousands)

Interest-earning assets:

Loans and leases receivable $ 875,801 $ 10,682 4.88 % $ 778,430 $ 9,857 5.07 %

Securities 323,078 1,656 2.05 % 313,327 1,185 1.51 %

FHLB stock 9,781 78 3.19 % 9,050 64 2.83 %

Cash and cash equivalents and other 15,254 32 0.84 % 22,839 6 0.11 %

Total interest-earning assets 1,223,914 12,448 4.07 % 1,123,646 11,112 3.96 %

Non-earning assets 41,860 47,649

Total assets 1,265,774 1,171,295

Interest-bearing liabilities:

Savings and money market accounts 296,224 388 0.52 % 253,086 317 0.50 %

Interest-bearing checking accounts 169,618 111 0.26 % 152,596 88 0.23 %

Certificate accounts 360,498 776 0.86 % 270,497 816 1.21 %

Borrowings 170,264 624 1.47 % 173,077 701 1.62 %

Total interest-bearing liabilities 996,604 1,899 0.76 % 849,256 1,922 0.91 %

Noninterest-bearing demand deposits 113,887 112,279

Other liabilities 8,323 25,363

Stockholders' equity 146,960 184,397

Total liabilities and stockholders' equity 1,265,774 1,171,295

Net interest income $ 10,549 $ 9,190

Net earning assets $ 227,310 $ 274,390

Net interest rate spread (1)

3.31 % 3.05 %

Net interest margin (2)

3.45 % 3.27 %

Average interest-earning assets to average interest-bearing liabilities

122.81 % 132.31 %

_____________

(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 Loan and Lease Losses.

The provision for loan and lease losses for the three months ended June 30, 2022 totaled $200,000 compared to $530,000 for the three months ended June 30, 2021, a $330,000 or 62.3% decrease.

The decrease primarily was due to improvement in the overall economy from the effects of the COVID-19 pandemic and the continued positive effects of the government's response to the pandemic on the Bank's loan portfolio, partially offset by the increase in the loan portfolio.

Net charge-offs during the second quarter of 2022 were $136,000, compared to net charge-offs of $58,000 in the second quarter of 2021.

While we believe the steps we have taken and continue to take are necessary to effectively manage our portfolio and assist our clients through the ongoing uncertainty surrounding the duration and impact of the COVID-19 pandemic, uncertainties relating to our allowance for loan losses are heightened as a result of any possible continuing effects of the COVID-19 pandemic, the recent dramatic rise in inflation and interest rates and potential supply chain disruptions due to the war in Ukraine.

Noninterest Income.

Noninterest income decreased $464,000 or 28.3%, to $1.2 million for the quarter ended June 30, 2022, compared to $1.6 million for the comparable quarter in 2021.

The decrease in noninterest income resulted primarily from a $348,000 or 61.1% decrease in net gains on loan and lease sales to $222,000 during the second quarter of 2022, compared to $569,000 during the second quarter of 2021.

The decrease in net gains on loan and lease sales was due to declining mortgage banking activity primarily resulting from lower refinancing activity and a lower supply of houses for sale in the Bank's market area.

During the three months ended June 30, 2022, the Company sold $9.9 million of loans compared to the sale of $19.2 million of loans during the three months ended June 30, 2021.

Card fee income increased $27,000, or 9.9%, to $302,000 in the second quarter of 2022 from $275,000 in the second quarter of 2021 due to increased debit card usage.

Loan and lease servicing income decreased $71,000, or 28.4%, to $178,000 for the second quarter of 2022 compared to $249,000 for the comparable quarter in 2021 as the Company recorded a recovery of $76,000 to the value of its mortgage servicing rights in the second quarter of 2022, compared to a recovery of $178,000 in the second quarter of 2021.

Service fees on deposit accounts increased $50,000, or 25.0%, to $248,000 for the quarter ended June 30, 2022, compared to $199,000 for the quarter ended June 30, 2021.

The increase in service fees on deposit accounts during the second quarter of 2022 compared to the second quarter of 2021 was primarily the result of increased overdraft fees, many of which were waived in the second quarter of 2021.

Noninterest Expense.

Noninterest expense increased $278,000, or 4.0%, to $7.2 million for the three months ended June 30, 2022, from $6.9 million for the same period in 2021.

Salaries and employee benefits increased $201,000, or 4.7%, to $4.5 million for the quarter ended June 30, 2022, compared to the same quarter in 2021.

Other expenses decreased $85,000, or 9.7%, to $791,000 in the second quarter of 2022 compared to the same quarter of 2021 primarily due to decreased loan expenses, franchise tax expense and expenses related to employee professional development, partially offset by a decrease in fraud losses compared to the same quarter of 2021.

Income Tax Expense.

Income tax expense increased $243,000 during the three months ended June 30, 2022, compared to the same period in 2021 due to a higher level of pre-tax income and a higher effective tax rate.

The effective tax rate for the second quarter of 2022 was 20.2% compared to 18.7% for the same quarter a year ago.

Comparison of Results of Operations for the Six Months Ended June 30, 2022 and 2021.

Net income for the six months ended June 30, 2022 was $6.5 million, a $1.2 million or 21.7%, increase from net income of $5.3 million for the six months ended June 30, 2021.

The $6.5 million in earnings equaled $0.58 diluted earnings per share for the first six months of 2022, compared to $0.45 diluted earnings per share for the first six months of 2021.

The increase in net income was primarily the result of a $2.4 million increase in net interest income and a $530,000 decrease in the provision for loan losses, partially offset by a $876,000 decrease in noninterest income and a $634,000 increase in noninterest expense.

Interest Income.

Interest income increased $2.4 million, or 10.9%, to $24.4 million during the six months ended June 30, 2022, compared to $22.0 million during the six months ended June 30, 2021.

Interest income on loans and leases increased $1.2 million, or 6.2%, to $20.9 million for the six months ended June 30, 2022, from $19.7 million for the comparable period in 2021, due to higher average balances in the loan and lease portfolio, partially offset by a decrease in the average loan and lease yield of 26 basis points.

The average outstanding loan and lease balances were $862.9 million for the first six months of 2022, compared to $771.1 million for the first six months of 2021.

The average yield on loans and leases was 4.86% for the six months ended June 30, 2022, compared to 5.12% for the comparable period in 2021.

Interest income also included $259,000 in fees earned related to PPP loans in the six months ended June 30, 2022 compared to $1.3 million during the same period in 2021.

As of June 30, 2022, total unrecognized fees on PPP loans were $119,000.

Interest income on investment securities, including FHLB stock, increased $1.1 million, or 50.7%, to $3.4 million during the six months ended June 30, 2022, compared to the same period in 2021.

The increase in interest income on investment securities from the comparable period in 2021 was due to an increase in the average balances of $51.9 million and a 43 basis point increase in the average yield earned on investment securities.

The average balance of investment securities, including FHLB stock, was $348.1 million for the six months ended June 30, 2022, compared to $296.2 million for the six months ended June 30, 2021.

The average yield on investment securities, including FHLB stock, was 1.95% for the first half of 2022, compared to 1.52% for the first half of 2021.

Interest Expense.

Interest expense remained relatively flat at $3.8 million for the six months ended June 30, 2022, compared to the six months ended June 30, 2021.

Interest expense on deposits increased $115,000, or 4.8%, to $2.5 million for the six months ended June 30, 2022, from the comparable period in 2021.

The increase in interest expense on deposits primarily was attributable to a $164.5 million increase in average interest-bearing deposit balances, partially offset by a 39 basis point decrease in the average rate paid on certificate of deposit accounts to 0.88% during the six months ended June 30, 2022, from

1.27% for the comparable period in 2021.

The average rate paid on interest-bearing deposits was 0.62% for the six months ended June 30, 2022, compared to 0.75% for the six months ended June 30, 2021.

The average balance of interest-bearing deposits increased to $810.0 million, or 25.5%, in the six months ended June 30, 2022, compared to $645.4 million in the comparable period in 2021.

Interest expense on FHLB borrowings decreased $131,000, or 9.3%, to $1.3 million in the first half of 2022 compared to $1.4 million for the same period in 2021, due to a 20 basis point decline in the average rate paid on borrowings to 1.43% during the six months ended June 30, 2022, from 1.63% for the comparable period in 2021, partially offset by a $5.3 million increase in the average outstanding balance of borrowings during the current period compared to the same period in 2021.

Net Interest Income.

Net interest income before the provision for loan and lease losses increased $2.4 million, or 13.3%, to $20.6 million in the first six months of 2022, compared to $18.2 million for the first six months of 2021.

This increase was due to an increase in average interest-earning assets and an 11 basis point increase in the average interest rate spread during the first six months of 2022 compared to the comparable period in 2021.

Net interest margin (annualized) was 3.36% for the six months ended June 30, 2022, compared to 3.32% for the six months ended June 30, 2021.

The increase in net interest margin was primarily due to the yield on interest-earning assets dropping slower than the rate paid on interest-bearing liabilities.

The average yield on PPP loans, including the recognition of deferred fees, resulted in a positive impact to the yield on loans and leases of four basis points during the six months ended June 30, 2022, compared to a positive impact of eight basis points to the yield on loans and leases in the comparable period in 2021.

Average Balances, Interest and Average Yields/Cost.

The following tables set 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.

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Loan fees are included in interest income on loans and are not material.

Three Months Ended March 31,

Six Months Ended June 30,

Outstanding Interest

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Total interest-earning assets 1,228,043 24,390 3.97 % 1,094,564 21,995 4.02 %

Non-earning assets 38,818 43,869

Total assets 1,266,861 1,138,433

Interest-bearing liabilities:

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Total interest-bearing liabilities 986,799 3,788 0.77 % 816,996 3,803 0.93 %

Noninterest-bearing demand deposits 112,393 108,420

Other liabilities 7,450 25,018

Stockholders' equity 160,219 187,999

Total liabilities and stockholders' equity 1,266,861 1,138,433

Net interest income $ 20,602 $ 18,192

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Provision for Loan and Lease Losses.

The provision for loan and lease losses for the three months ended March 31, 2022 totaled $200,000 compared to $400,000 for the three months ended March 31, 2021, a $200,000 or 50.0% decrease.

The decrease was primarily due to improvement in the overall economy from the effects of the COVID-19 pandemic and the positive effects of the government's response to the pandemic on the Bank's loan portfolio, partially offset by the increase in the loan portfolio.

Net recoveries during the first quarter of 2022 were $9,000, compared to net charge-offs of $27,000 in the first quarter of 2021.

The provision for loan and lease losses for the six months ended June 30, 2022 totaled $400,000 compared to $930,000 for the six months ended June 30, 2021, a $530,000 or 57.0% decrease.

The decrease primarily was due to improvement in the overall economy from the effects of the COVID-19 pandemic and the positive effects of the government's response to the pandemic on the Bank's loan portfolio, partially offset by the increase in the loan portfolio.

Net charge-offs during the first half of 2022 were $127,000, compared to net charge-offs of $85,000 in the first half of 2021.

Noninterest Income.

Noninterest income decreased $412,000 or 27.0%, to $1.1 million for the quarter ended March 31, 2022, compared to $1.5 million for the comparable quarter in 2021.

The decrease in noninterest income resulted primarily from a $722,000 or 74.8% decrease in net gains on loan and lease sales to $243,000 during the first quarter of 2022, compared to $965,000 during the first quarter of 2021.

Noninterest income decreased $876,000, or 27.7%, to $2.3 million for the six months ended June 30, 2022, compared to $3.2 million for the comparable period in 2021.

The decrease in noninterest income resulted primarily from a $1.1 million or 69.7% decrease in net gains on loan and lease sales to $465,000 during the first half of 2022, compared to $1.5 million during the first half of 2021.

During the three months ended March 31, 2022, the Company sold $10.6 million of loans compared to the sale of $25.8 million of loans during the three months ended March 31, 2021.

Card fee income increased $35,000, or 14.5%, to $278,000 in

the first quarter of 2022 from $243,000 in the first quarter of 2021 due to increased debit card usage.

Loan and lease servicing income increased $133,000, to a gain of $28,000 for the first quarter of 2022 compared to a loss of $105,000 for the comparable quarter in 2021, as the Company recorded an impairment of $111,000 to the value of its mortgage servicing rights in the first quarter of 2022, compared to an impairment of $158,000 in the first quarter of 2021.

Service fees on deposit accounts increased $40,000, or 20.6%, to $235,000 for the quarter ended March 31, 2022, compared to $194,000 for the quarter ended March 31, 2021.

The increase in service fees on deposit accounts during the first quarter of 2022 compared to the first quarter of 2021 was primarily the result of increased overdraft fees, many of which were waived in the first quarter of 2021.

During the six months ended June 30, 2022, the Company sold $20.5 million of loans compared to the sale of $45.1 million of loans during the six months ended June 30, 2021.

Card fee income increased $63,000, or 12.1%, to $580,000 in the first half of 2022 from $517,000 in the first half of 2021 due to increased debit card usage.

Loan and lease servicing income increased $63,000 to $206,000 for the first half of 2022 compared to $143,000 for the comparable period in 2021 adversely impacted by a recorded impairment of $35,000 to the value of its mortgage servicing rights in the first half of

2022, compared to a recovery of $20,000 in the first half of 2021.

Service fees on deposit accounts increased $90,000, or 22.8%, to $483,000 for the six months ended June 30, 2022, compared to $393,000 for the six months ended June 30, 2021.

The increase in service fees on deposit accounts during the first half of 2022 compared to the first half of 2021 was primarily the result of increased overdraft fees, many of which were waived in the first half of 2021.

Noninterest Expense.

Noninterest expense increased $356,000, or 5.1%, to $7.3 million for the three months ended March 31, 2022, from $7.0 million for the same period in 2021.

Salaries and employee benefits were relatively steady at $4.5 million for the quarter ended March 31, 2022, compared to the same quarter in 2021.

Data processing fees increased $133,000, or 25.2%, to $659,000 in the first quarter of 2022 compared to the same quarter of 2021, primarily due to the upgrading of our digital banking products.

Other expenses increased $185,000, or 24.0%, to $956,000 in the first quarter of 2022 compared to the same quarter of 2021 primarily due to increased loan expenses, franchise tax expense, and expenses related to employee professional development.

Noninterest expense increased $634,000, or 4.6%, to $14.5 million for the six months ended June 30, 2022, from $13.9 million for the same period in 2021.

Salaries and employee benefits increased $207,000, or 2.4%, to $9.0 million for the six months ended June 30, 2022, compared to the same period in 2021.

Data processing fees increased $138,000, or 12.7%, to $1.2 million in the first six months of 2022 compared to the same period of 2021, primarily due to the upgrading of our digital banking products.

Net occupancy expenses increased $87,000, or 13.9%, to $711,000 the first six months of 2022 compared to the same period of 2021, primarily due to higher property taxes, utilities expense, and maintenance expense.

Other expenses increased $100,000, or 6.1%, to $1.7 million in the first half of 2022 compared to the same period of 2021 primarily due to increased loan expenses, franchise tax expense, expenses related to employee professional development, and expenses related to brokered certificates of deposit, partially offset by a reduction in fraud losses.

Income Tax Expense.

Income tax expense increased $28,000 during the three months ended March 31, 2022, compared to the same period in 2021 due to a higher level of pre-tax income, partially offset by a lower effective tax rate.

The effective tax rate for the first quarter of 2022 was 17.0% compared to 18.7% for the same quarter a year ago.

Income tax expense increased $271,000 during the six months ended June 30, 2022, compared to the same period in 2021 due to a higher level of pre-tax income.

The effective tax rate for the first half of 2022 was 18.7%, the same as the first half of 2021.

Capital and Liquidity

Shareholders' equity totaled $157.3 million at March 31, 2022 and $180.5 million at December 31, 2021.

In addition to net income of $3.0 million, other sources of capital during the first quarter of 2022 included $226,000 related to the allocation of ESOP shares during the year and $379,000 related to stock-based compensation.

Uses of capital during the first three months of 2022 included $1.1 million of dividends paid on common stock, other comprehensive loss, net of tax, of $24.1 million and $1.5 million of stock repurchases.

The decrease in the accumulated other comprehensive income/loss component of shareholders' equity was caused by changes to the unrealized gains and losses on available-for-sale securities.

We paid a regular quarterly dividend of $0.10 per common share during the first quarter of 2022, and regular quarterly dividends of $0.07 per common share and a special dividend of $0.50 per common share during 2021.

Shareholders' equity totaled $138.9 million at June 30, 2022 and $180.5 million at December 31, 2021.

In addition to net income of $6.5 million, other sources of capital during the first six months of 2022 included $434,000 related to the allocation of ESOP shares during the year and $763,000 related to stock-based compensation.

Uses of capital during the first six months of 2022 included $2.2 million of dividends paid on common stock, $38.0 million of other comprehensive loss, net of tax, and $9.0 million of stock repurchases.

The decrease in the accumulated other comprehensive income/loss component of shareholders' equity was due to an increase in the unrealized loss on available-for-sale securities reflecting the increase in market interest rates during the current quarter.

We paid a regular quarterly dividend of $0.10 per common share during the first half of 2022, and regular quarterly dividends of $0.07 per common share and a special dividend of $0.50 per common share during 2021.

We currently expect to continue the current 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.

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Shares purchased under such plans also provide us with shares of common stock necessary to satisfy obligations related to stock compensation awards.

On May 19, 2021, the Board of Directors authorized a third stock repurchase program for up to 1,263,841 shares, or approximately 10% of its outstanding shares.

This repurchase program commenced on July 3, 2021, and will expire on July 3, 2022 unless completed sooner.

On May 19, 2021, the Board of Directors authorized a third stock repurchase program for up to 1,263,841 shares, or approximately 10% of our outstanding shares, which was completed on July 7, 2022.

On July 21, 2022, the Company announced a fourth stock repurchase program for up to 1,184,649 shares, or approximately 10% of the Company's then outstanding shares, which program will expire in July 2023 unless completed sooner.

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

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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.

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These scenarios are incorporated into our contingency funding plan, which provides the basis for the identification of our liquidity needs.

As of March 31, 2022, we had approximately $10.9 million held in an interest-bearing account at the Federal Reserve.

As of June 30, 2022, we had approximately $3.6 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 March 31, 2022, based upon available, pledgeable collateral, our total remaining borrowing capacity with the FHLB was approximately $70.0 million.

Furthermore, at March 31, 2022, we had approximately $204.5 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 March 31, 2022, management is not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources or operations.

As of June 30, 2022, based upon available, pledgeable collateral, our total remaining borrowing capacity with the FHLB was approximately $70.0 million.

Furthermore, at June 30, 2022, we had approximately $206.2 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 June 30, 2022, management is 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.

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cash flows from operating activities, investing activities, and financing activities.

Net cash provided by operating activities for the three months ended March 31, 2022 was $3.9 million, compared to $2.4 million used in operating activities for the three months ended March 31, 2021.

During the three months ended March 31, 2022, net cash used in investing activities was $16.1 million, which consisted primarily of net change in loans receivable, compared to $42.1 million of cash used in investing activities for the three months ended March 31, 2021.

Net cash provided by financing activities for the three months ended March 31, 2022 was $8.7 million, which was comprised primarily of net change in deposits, compared to $61.3 million provided by financing activities during the three months ended March 31, 2021.

Net cash provided by operating activities for the six months ended June 30, 2022 was $10.0 million, compared to $2.5 million of net cash used in operating activities for the six months ended June 30, 2021.

During the six months ended June 30, 2022, net cash used in investing activities was $52.5 million, which consisted primarily of net change in loans receivable, compared to $133.4 million of net cash used in investing activities for the six months ended June 30, 2021.

Net cash provided by financing activities for the six months ended June 30, 2022 was $33.9 million, which was comprised primarily of net change in deposits, compared to $104.2 million of net cash provided by financing activities during the six months ended June 30, 2021.

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 2021 Form 10-K other than set forth above.

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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 to us paid by First Bank Richmond.

At March 31, 2022, Richmond Mutual Bancorporation, on an unconsolidated basis, had $18.2 million in cash, noninterest-bearing deposits and liquid investments generally available for its cash needs.

Banking regulations may limit the amount of dividends that may be paid by First Bank Richmond.

At June 30, 2022, Richmond Mutual Bancorporation, on an unconsolidated basis, had $8.9 million in cash, noninterest-bearing deposits and liquid investments generally available for its cash needs.

Regulatory Capital Requirements.

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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 March 31, 2022, First Bank Richmond’s regulatory capital exceeded the FDIC regulatory requirements, and First Bank Richmond was well-capitalized under regulatory prompt corrective action standards.

At June 30, 2022, 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.

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(Dollars in thousands)

As of March 31, 2022

As of June 30, 2022

Total risk-based capital (to risk weighted assets) $ 177,431 16.7 % $ 84,899 8.0 % $ 106,124 10.0 %

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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 in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses.

At March 31, 2022, the Bank’s CET1 capital exceeded the required capital conservation buffer.

At June 30, 2022, the Bank’s CET1 capital exceeded the required capital 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 March 31, 2022, it would have exceeded all regulatory capital requirements.

If Richmond Mutual Bancorporation were subject to regulatory guidelines for bank holding companies with $3.0 billion or more in assets, at June 30, 2022, it would have exceeded all regulatory capital requirements.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

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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-Q

Item 2. Management’s Discussion and Analysis