What changed in this filing

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Item 1. Financial Statements

2023-05-15 compared with 2022-11-10 · 299 added, 372 removed, 588 unchanged (53% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

2023 December 31,

2 unchanged sentences

Cash and cash equivalents 17,389,702 15,922,093

Interest-bearing time deposits 490,000 490,000

Investment securities - available for sale 291,745,454 284,899,665

1 unchanged sentence

Loans held for sale — 473,700

Loans and leases, net of allowance for losses of $ 12,556,000 and $ 12,108,000 , respectively

Loans and leases, net of allowance for credit losses of $ 15,495,419 and $ 12,413,035 , respectively

989,116,525 961,690,677

18 unchanged sentences

Authorized - 90,000,000 shares

Issued and outstanding - 11,802,424 shares and 12,400,195 shares at September 30, 2022 and December 31, 2021, respectively

Issued and outstanding - 11,685,693 shares and 11,784,246 shares at March 31, 2023 and December 31, 2022, respectively

116,857 117,842

8 unchanged sentences

Condensed Consolidated Statements of Income

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Interest Income

8 unchanged sentences

Net Interest Income 9,870,810 10,053,614

Provision for losses on loans and leases 200,000 500,000 600,000 1,430,000

Net Interest Income After Provision for Losses on Loans and Leases 10,312,773 9,458,054 30,515,039 26,719,864

Provision for credit losses 170,106 200,000

Net Interest Income After Provision for Credit Losses 9,700,704 9,853,614

Noninterest Income

2 unchanged sentences

Loan and lease servicing fees 120,072 27,868

Net gains on securities (includes $ 0 , $ 17,887 , $ 0 , and $ 55,799 , respectively, related to accumulated other comprehensive income reclassifications)

— 17,887 — 55,799

Net gains on loan and lease sales 155,563 242,986

Gain on sale of other assets 1,921 —

Other income 250,915 332,193

11 unchanged sentences

Real estate owned expense — 2,501

Loss on sale of real estate owned — — 847 1,278

Other expenses 948,445 956,241

1 unchanged sentence

Income Before Income Tax Expense 3,436,240 3,635,157

Provision for income taxes (includes $ 0 , $ 3,756 , $ 0 , and $ 11,718 , respectively, related to income tax expense from reclassification of items)

615,515 676,414 2,115,198 1,905,571

Provision for income taxes 532,194 617,565

Net Income $ 2,904,046 $ 3,017,592

4 unchanged sentences

Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income

Condensed Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net Income $ 2,904,046 $ 3,017,592

Other Comprehensive (Loss) Income

Unrealized (loss) gain on available-for-sale securities, net of tax (benefit) expense of $( 4,245,908 ), $( 774,714 ), $( 14,353,958 ), and $( 1,310,569 ), respectively.

( 15,972,703 ) ( 2,914,399 ) ( 53,998,222 ) ( 4,930,236 )

reclassification adjustment for realized gains included in net income, net of tax expense of $ 0 , $ 3,756 , $ 0 , and $ 11,718 , respectively.

Other Comprehensive (Income) Loss

Unrealized gain (loss) on available-for-sale securities, net of tax of $( 1,640,117 ), and $ 6,412,910 , respectively.

6,169,964 ( 24,124,756 )

Comprehensive (Loss) Income $ ( 12,814,475 ) $ 153,745 $ ( 44,337,060 ) $ 3,451,791

Comprehensive Income (Loss) $ 9,074,010 $ ( 21,107,164 )

See Notes to Condensed Consolidated Statements.

1 unchanged sentence

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended September 30, 2022

Common Stock Additional

4 unchanged sentences

Outstanding Amount

Balances, June 30, 2022 11,848,113 $ 118,481 $ 106,200,912 $ 84,423,594 $ ( 12,560,701 ) $ ( 39,237,530 ) $ 138,944,756

Net income — — — 3,158,228 — — 3,158,228

Other comprehensive loss — — — — — ( 15,972,703 ) ( 15,972,703 )

ESOP shares earned — — 3,986 — 183,829 — 187,815

Stock based compensation — — 387,840 — — — 387,840

Common stock dividends ($ 0.10 per share)

— — — ( 1,086,112 ) — — ( 1,086,112 )

Repurchase of common stock ( 45,689 ) ( 457 ) ( 647,012 ) — — — ( 647,469 )

Balances, September 30, 2022 11,802,424 $ 118,024 $ 105,945,726 $ 86,495,710 $ ( 12,376,872 ) $ ( 55,210,233 ) $ 124,972,355

Nine Months Ended September 30, 2022

Common Stock Additional

Capital Retained

Earnings Unearned

Shares Accumulated

Comprehensive

Outstanding Amount

Balances, December 31, 2022 11,784,246 $ 117,842 $ 106,088,897 $ 88,715,782 $ ( 12,193,043 ) $ ( 49,751,175 ) $ 132,978,303

Net income — — — 2,904,046 — — 2,904,046

Other comprehensive loss — — — — — ( 53,998,222 ) ( 53,998,222 )

ESOP shares earned — — 70,053 — 551,487 — 621,540

Stock based compensation — — 1,150,898 — — — 1,150,898

Common stock dividends ($ 0.30 per share)

— — — ( 3,323,345 ) — — ( 3,323,345 )

Repurchase of common stock ( 597,771 ) ( 5,978 ) ( 9,615,035 ) — — — ( 9,621,013 )

Balances, September 30, 2022 11,802,424 $ 118,024 $ 105,945,726 $ 86,495,710 $ ( 12,376,872 ) $ ( 55,210,233 ) $ 124,972,355

Three Months Ended September 30, 2021

Common Stock Additional

Capital Retained

Earnings Unearned

Shares Accumulated

Comprehensive

Income/(Loss) Total

Outstanding Amount

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

Net income — — — 3,082,275 — — 3,082,275

Other comprehensive loss — — — — — ( 2,928,530 ) ( 2,928,530 )

Other comprehensive income — — — — — 6,169,964 6,169,964

ESOP shares earned — — ( 13,318 ) — 183,829 — 170,511

Impact of ASU 2016-13 adoption — — — ( 3,785,168 ) — — ( 3,785,168 )

Stock based compensation — — 379,408 — — — 379,408

Exercise of stock options 12,116 121 127,460 — — — 127,581

Common stock dividends ($ 0.14 per share)

1 unchanged sentence

Repurchase of common stock ( 98,553 ) ( 985 ) ( 1,149,948 ) — — — ( 1,150,933 )

Balances, September 30, 2021 12,432,184 $ 124,322 $ 114,653,448 $ 78,237,829 $ ( 13,112,188 ) $ ( 1,265,712 ) $ 178,637,699

Nine Months Ended September 30, 2021

Balances, March 31, 2023 11,685,693 $ 116,857 $ 105,305,039 $ 86,314,805 $ ( 12,009,214 ) $ ( 43,581,211 ) $ 136,146,276

Common Stock Additional

3 unchanged sentences

Comprehensive

Income/(Loss) Total

Outstanding Amount

3 unchanged sentences

ESOP shares earned — — 42,292 — 183,829 — 226,121

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

Stock based compensation — — 379,421 — — — 379,421

Exercise of stock options 12,116 121 127,460 — — — 127,581

Common stock dividends ($ 0.10 per share)

1 unchanged sentence

Repurchase of common stock ( 90,191 ) ( 902 ) ( 1,498,106 ) — — — ( 1,499,008 )

Balances, September 30, 2021 12,432,184 $ 124,322 $ 114,653,448 $ 78,237,829 $ ( 13,112,188 ) $ ( 1,265,712 ) $ 178,637,699

Balances, March 31, 2022 12,310,004 $ 123,100 $ 113,263,417 $ 82,037,495 $ ( 12,744,530 ) $ ( 25,336,767 ) $ 157,342,715

See Notes to Condensed Consolidated Statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

Operating Activities

1 unchanged sentence

Items not requiring (providing) cash

Provision for loan losses 600,000 1,430,000

Provision for credit losses 170,106 200,000

Depreciation and amortization 261,665 265,213

2 unchanged sentences

Investment securities amortization, net 296,954 451,165

Investment securities gains — ( 55,799 )

Net gains on loan and lease sales ( 155,563 ) ( 242,986 )

Loss on sale of real estate owned 847 1,278

Gain on sale of real estate owned ( 1,921 ) —

Gain on sale of premises and equipment ( 1,800 ) —

Accretion of loan origination fees ( 283,473 ) ( 460,332 )

13 unchanged sentences

Proceeds from maturities and paydowns of securities available for sale 7,766,832 12,061,563

Proceeds from sales of securities available for sale — 5,296,929

Proceeds from maturities and paydowns of securities held to maturity 918,473 891,488

2 unchanged sentences

Purchases of premises and equipment ( 86,375 ) ( 63,778 )

Change in FHLB stock 90,100 ( 492,800 )

Proceeds from sale of premises and equipment 1,800 —

(Purchase) Proceeds from sale of FHLB stock ( 134,900 ) 211,500

Net cash used in investing activities ( 27,853,935 ) ( 16,081,106 )

7 unchanged sentences

Repurchase of common stock ( 1,150,933 ) ( 1,499,008 )

Proceeds from stock option exercises — 127,581

Dividends paid ( 1,519,855 ) ( 1,137,990 )

11 unchanged sentences

Basis of Presentation

The accompanying financial information is unaudited and has been prepared from the consolidated financial statements of Richmond Mutual Bancorporation, Inc., and its wholly owned direct and indirect subsidiaries, First Bank Richmond, First Insurance Management, Inc., and FB Richmond Holdings, Inc.

and FB Richmond Properties, Inc.

References in this document to Richmond Mutual Bancorporation refer to Richmond Mutual Bancorporation, Inc.

References to “we,” “us,” and “our” or the “Company” refers to Richmond Mutual Bancorporation and its wholly-owned direct and indirect subsidiaries, First Bank Richmond, First Insurance Management, Inc., FB Richmond Holdings, Inc.

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

unless the context otherwise requires.

First Bank Richmond is an Indiana state-chartered commercial bank headquartered in Richmond, Indiana and the wholly owned banking subsidiary of Richmond Mutual Bancorporation.

13 unchanged sentences

The results of operations for the period are not necessarily indicative of the results to be expected for the full year.

Use of Estimates in Preparation of Financial Statements

Financial statements prepared in accordance with generally accepted accounting principles in the United States ("GAAP") require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period.

Actual results could differ from those estimates.

For all loan classes, the accrual of interest is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection.

4 unchanged sentences

The Company adheres to timeframes established by applicable regulatory guidance, which provides for the charge-down of 1-4 family first and junior lien mortgages to the net realizable value, less costs to sell when the loan is 120 days past due, charge-off of unsecured open-end loans when the loan is 90 days past due, and charge down to the net realizable value when other secured loans are 90 days past due.

Loans at these respective delinquency thresholds for which the Company can

clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.

Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.

For all classes, all interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income.

2 unchanged sentences

The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

When cash payments are received on impaired loans in each loan class, the Company records the payment as interest income unless collection of the remaining recorded principal amount is doubtful, at which time payments are used to reduce the principal balance of the loan.

Troubled debt restructured loans recognize interest income on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms, no principal reduction has been granted and the loan has demonstrated the ability to perform in accordance with the renegotiated terms for a period of at least six months.

On occasion, the Company will provide modifications to loans and leases to borrowers experiencing financial difficulty, by providing payment delays, term extensions, or interest-rate reductions.

In some cases, combinations of modifications may be made to the same loan or lease.

If determined that the value of the modified loan or lease is less than the recorded investment in the loan, a charge-off is recognized to the allowance for credit losses on loans and leases.

Accounting Pronouncements

In March 2020, the novel coronavirus disease of 2019 ("COVID-19") was identified as a global pandemic and began affecting the health of large populations around the world.

As a result of the spread of COVID-19, economic uncertainties arose which can ultimately affect the financial position, results of operations and cash flows of the Company, as well as the Company's customers.

In response to economic concerns over COVID-19, in March 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was passed into law by the U.S.

The CARES Act included relief for individual Americans, health care workers, small businesses and certain industries hit hard by the COVID-19 pandemic.

The 2021 Consolidated Appropriations Act , passed by Congress in December 2020, extended certain provisions of the CARES Act affecting the Company into 2022.

The CARES Act included several provisions designed to help financial institutions like the Company in working with their customers.

Section 4013 of the CARES Act, as extended, allows a financial institution to elect to suspend generally accepted accounting principles and regulatory determinations with respect to qualifying loan modifications related to COVID-19 that would otherwise be categorized as a troubled debt restructuring ("TDR") until January 1, 2022.

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

As of September 30, 2022 the Company had no loans outstanding 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.

The 2021 Consolidated Appropriations Act approved a new round of PPP loans in 2021.

The PPP provides loans to eligible businesses through financial institutions like First Bank Richmond, with loans being eligible for forgiveness of some or all of the principal amount by the SBA if the borrower meets certain requirements.

The SBA guarantees repayment of the loans if the borrower's loan is not forgiven and is then not repaid by the member.

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 originated $ 38.2 million in PPP loans during 2021, of which $ 1.2 million were outstanding at September 30, 2022.

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

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.

Under the JOBS Act, a company with total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year qualifies as an “emerging growth company.” The Company qualifies as and has elected to be an emerging growth company under the JOBS Act.

7 unchanged sentences

Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates.

Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit

Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses.

Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances.

10 unchanged sentences

2016-13 for certain financial institutions including smaller reporting companies.

As a result, ASU 2016-13 will be effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.

The Company is evaluating its current expected credit loss ("CECL") methodology on the loan and investment portfolios to identify the necessary modifications in accordance with ASU 2016-13.

A CECL implementation team consisting of management from multiple areas of the Company have been involved in evaluating loss estimation methods and application of these methods to the specific segments and subsegments of the loan portfolio.

Management has been actively monitoring FASB developments and evaluating the use of the different methods allowed.

Due to continuing development of our methodology, additional time is required to quantify the effect of CECL on the Company's Consolidated Financial Statements.

The Company continues to refine its modeling and will finalize a method or methods of adoption in time for the effective date.

As a result, ASU 2016-13 became effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.

The Company adopted ASU No.

2016-13 on January 1, 2023.

As a result of the change in methodology from the incurred loss methodology to the current expected credit loss methodology ("CECL"), the Company recorded a one-time cumulative-effect adjustment of $ 2.0 million from retained earnings, net of tax, into the allowance for credit losses on loans and leases.

The allowance increased $ 2.7 million, or 21.5 %, on January 1, 2023 from December 31, 2022 as a result of adoption.

Additionally, as a part of CECL adoption, the Company established an allowance for credit losses on off-balance sheet commitments by recording a one-time adjustment of $ 1.8 million from retained earnings, net of tax, into the allowance for credit losses on off-balance sheet commitments.

As of January 1, 2023, this allowance totaled $ 2.4 million, as compared to no allowance at December 31, 2022.

This allowance is reported in other liabilities on the Condensed Consolidated Balance Sheets.

In March 2022 the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326):

2 unchanged sentences

Additionally, the ASU requires public business entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases.

This ASU will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, upon the Company’s adoption of the amendments in ASU 2016-13, which is commonly referred to as the current expected credit loss methodology.

This ASU became effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, upon the Company’s adoption of the amendments in ASU 2016-13, which is commonly referred to as the current expected credit loss methodology.

In March 2020, the FASB issued ASU No.

1 unchanged sentence

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

This ASU applies to contracts, hedging relationships and other transactions that reference LIBOR or other rate references expected to be discontinued because of reference rate reform.

This ASU applies to contracts, hedging relationships and other transactions that reference the London Interbank Offer Rate ("LIBOR") or other rate references expected to be discontinued because of reference rate reform.

The ASU permits an entity to make necessary modifications to eligible contracts or transactions without requiring contract remeasurement or reassessment of a previous accounting determination.

This ASU is effective for all entities as of March 12, 2020 through December 31, 2022.

In December of 2022, the FASB issued ASU No.

2022-06 which extended the period of time preparers can utilize the reference rate reform relief guidance in Topic 848.

The guidance ensures the relief in Topic 848 covers the period of time during which a significant number of modifications may take place and the ASU defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024.

The Company does not expect the adoption of ASU No.

2020-04 to have a material impact on its consolidated financial statements.

In October 2020, the FASB issued ASU No.

2020-08, “Receivables – Nonrefundable Fees and Other Costs”.

2020-08 clarifies that the Company should reevaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 for each reporting period.

2020-08 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

The adoption of ASU No.

2020-08 did not have a material impact on the Company's consolidated financial statements.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

2019-12 provides that state franchise or similar taxes that are based, at least in part on an entity’s income, be included in an entity’s income tax recognized as income-based taxes.

The ASU further clarifies that the effect of any change in tax laws or rates used in the computation of the annual effective tax rate are required to be reflected in the first interim period that includes the enactment date of the legislation.

Technical changes to eliminate exceptions to Topic 740 related to intra-period tax allocations for entities with losses from continuing operations, deferred tax liabilities related to change in ownership of foreign entities, and interim-period tax allocations for businesses with losses where the losses are expected to be realized.

The amendments in ASU No.

2019-12 are effective for public business entities with fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

The Company adopted ASU No.

2019-12 on January 1, 2021.

The adoption of ASU No.

2019-12 did not have a material impact on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement .

This ASU contains some technical adjustments related to the fair value disclosure requirements of public companies.

Included in this ASU is the additional disclosure requirement of unrealized

gains and losses for the period in recurring level 3 fair value disclosures and the range and weighted average of significant unobservable inputs, among other technical changes.

The Company adopted ASU No.

2018-13 on January 1, 2020.

The adoption of ASU No.

2018-13 did not have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842).

Under the new guidance, lessees are required to recognize the following for all leases, with the exception of short-term leases, at the commencement date:

(1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis;

and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Under the new guidance, lessor accounting is largely unchanged.

For the Company, the amendments in this update became effective for annual periods and interim periods within those annual periods beginning after December 15, 2021.

The Company adopted the amendments to ASU No.

2016-02 on January 1, 2022.

The adoption of the amendments did not have a material impact on the Company's consolidated financial statements.

Investment Securities

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

September 30, 2022

March 31, 2023

Available for sale

12 unchanged sentences

Available for sale

treasury securities $ 3,487 $ — $ 27 $ 3,460

SBA Pools 6,768 1 634 6,135

3 unchanged sentences

Corporate obligations 11,500 — 1,867 9,633

Equity securities 13 — — 13

347,876 5 62,981 284,900

3 unchanged sentences

Total investment securities $ 354,548 $ 22 $ 63,093 $ 291,477

The amortized cost and fair value of securities at September 30, 2022, by contractual maturity, are shown below.

The amortized cost and fair value of securities at March 31, 2023, 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.

8 unchanged sentences

Totals $ 346,911 $ 291,745 $ 5,752 $ 5,720

Securities with a carrying value of $ 168,356,000 and $ 136,463,000 were pledged at September 30, 2022 and December 31, 2021, respectively, to secure certain deposits and for other purposes as permitted or required by law.

There were no sales of securities available for sale for the three and nine months ended September 30, 2022.

Proceeds from sales of securities available for sale for the three and nine months ended September 30, 2021 were $ 1,316,000 and $ 5,297,000 , respectively.

Gross gains were recognized on the sale of securities available-for-sale for the three and nine months ended September 30, 2021 of $ 18,000 and $ 56,000 , respectively.

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

Securities with a carrying value of $ 142,062,000 and $ 134,302,000 were pledged at March 31, 2023 and December 31, 2022, respectively, to secure certain deposits and for other purposes as permitted or required by law.

There were no sales of securities available for sale for the three months ended March 31, 2023 and 2022.

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 September 30, 2022 and December 31, 2021 was $ 285,249,000 and $ 223,842,000 , respectively, which is approximately 99 % and 61 % 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 March 31, 2023 and December 31, 2022 was $ 294,926,000 and $ 288,846,000 , respectively, which is approximately 99 % and 99 % 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.

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary.

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 September 30, 2022 and December 31, 2021:

The Company does not consider available-for-sale securities with unrealized losses to be experiencing credit losses at March 31, 2023, and therefore recognized no resulting allowance for credit losses.

Management considers it more likely than not that the Company will not be required to sell these investments before recovery of the amortized cost basis, which may be the maturity dates of the securities.

Held to maturity securities are financial assets measured at amortized cost.

With the adoption of CECL, held to maturity securities are required to have an established allowance for credit losses that represents the portion of the amortized cost basis of a financial asset that is not expected to be collectable.

The Company estimates expected credit losses on a collective basis by security type, with consideration given to historical information, credit ratings, and the statistical probability of future losses.

The Company monitors the credit quality of investment securities held to maturity through the use of credit ratings quarterly.

As of March 31, 2023, there was no allowance for credit losses recognized on the Company's held to maturity investment portfolio.

The following table summarizes the amortized cost of held to maturity investment securities by credit quality indicator, as of March 31, 2023:

State and municipal obligations

Not rated 2,325

The Company has elected to exclude accrued interest receivable from the calculation of the allowance for credit losses.

Description of

Securities September 30, 2022

Securities March 31, 2023

Less Than 12 Months 12 Months or More Total

12 unchanged sentences

State and municipal obligations 3,101 37 458 14 3,559 51

Total temporarily impaired securities $ 151,977 $ 27,702 $ 133,272 $ 42,453 $ 285,249 $ 70,155

Total impaired securities $ 23,108 $ 857 $ 271,818 $ 54,379 $ 294,926 $ 55,236

Description of

5 unchanged sentences

Available-for-sale

Treasury securities $ 3,460 $ 27 $ — $ — $ 3,460 $ 27

SBA Pools 1,237 145 4,234 489 5,471 634

6 unchanged sentences

State and municipal obligations 4,995 108 413 4 5,408 112

Total temporarily impaired securities $ 206,296 $ 4,005 $ 17,546 $ 535 $ 223,842 $ 4,540

Total impaired securities $ 126,168 $ 17,001 $ 162,678 $ 46,092 $ 288,846 $ 63,093

Federal Agency Obligations.

2 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 September 30, 2022.

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.

SBA Pools and Mortgage-Backed Securities - GSE Residential.

The unrealized losses on the Company’s investment in mortgage-backed securities and SBA pools were caused by interest rate changes and illiquidity.

The unrealized losses on the Company’s investment in mortgage-backed securities and SBA pools were caused by interest rate changes.

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

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 September 30, 2022.

The decline in fair value is attributable to changes in interest rates and not credit quality, and the Company does not intend to sell the investments.

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.

State, Municipal, and Corporate Obligations.

The unrealized losses on the Company’s investments in securities of state and municipal obligations were caused by interest rate changes and illiquidity.

The unrealized losses on the Company’s investments in securities of state, municipal, and corporate obligations were caused by interest rate changes.

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 September 30, 2022.

The Company expects the fair value of the securities as described above to recover as the securities approach their maturity or reset date.

Loans, Leases and Allowance

The following table shows the composition of the loan and lease portfolio at September 30, 2022 and December 31, 2021:

September 30,

The following table shows the composition of the loan and lease portfolio at March 31, 2023 and December 31, 2022:

2023 December 31,

4 unchanged sentences

Residential mortgage 152,376 146,129

Home equity 9,750 7,146

Home equity lines of credit 10,923 11,010

Direct financing leases 143,281 133,469

1 unchanged sentence

1,005,306 975,000

Allowance for loan and lease losses 12,556 12,108

Allowance for credit losses on loans and leases 15,495 12,413

Deferred loan fees 694 896

$ 989,117 $ 961,691

The following tables present the activity in the allowance for loan and lease losses for the three and nine months ended September 30, 2022 and 2021:

Balance, beginning of period Provision (credit) for losses Charge-offs Recoveries Balance, end of period

Three Months Ended September 30, 2022:

Commercial mortgage $ 4,804 $ ( 36 ) $ — $ 7 $ 4,775

Commercial and industrial 1,504 ( 105 ) — 26 1,425

Construction and development 2,423 565 — — 2,988

Multi-family 2,046 ( 254 ) — — 1,792

Residential mortgage 196 5 ( 17 ) 6 190

Home equity 34 — — — 34

Leases 1,139 ( 59 ) ( 105 ) 112 1,087

Consumer 235 84 ( 60 ) 6 265

Total $ 12,381 $ 200 $ ( 182 ) $ 157 $ 12,556

Nine Months Ended September 30, 2022:

Commercial mortgage $ 4,742 $ ( 15 ) $ — $ 48 $ 4,775

Commercial and industrial 1,639 ( 277 ) — 63 1,425

Construction and development 2,286 702 — — 2,988

Multi-family 1,875 ( 83 ) — — 1,792

Residential mortgage 263 ( 81 ) ( 17 ) 25 190

Home equity 29 5 — — 34

Leases 1,079 182 ( 304 ) 130 1,087

Consumer 195 167 ( 114 ) 17 265

Total $ 12,108 $ 600 $ ( 435 ) $ 283 $ 12,556

Balance, beginning of period Provision (credit) for losses Charge-offs Recoveries Balance, end of period

Three Months Ended September 30, 2021:

Commercial mortgage $ 4,517 $ 156 $ ( 25 ) $ 7 $ 4,655

Commercial and industrial 1,951 ( 214 ) — 21 1,758

Construction and development 2,009 88 — — 2,097

Multi-family 1,353 273 — — 1,626

Residential mortgage 368 138 ( 80 ) 16 442

Home equity 23 5 — — 28

Leases 1,010 59 ( 31 ) 9 1,047

Consumer 200 ( 5 ) ( 8 ) 9 196

Total $ 11,431 $ 500 $ ( 144 ) $ 62 $ 11,849

Nine Months Ended September 30, 2021:

Commercial mortgage $ 4,628 $ 33 $ ( 25 ) $ 19 $ 4,655

Commercial and industrial 2,271 ( 580 ) ( 3 ) 70 1,758

Construction and development 1,068 1,029 — — 2,097

Multi-family 1,039 587 — — 1,626

Residential mortgage 323 126 ( 80 ) 73 442

Home equity 18 10 — — 28

Leases 1,054 201 ( 396 ) 188 1,047

Consumer 185 24 ( 83 ) 70 196

Total $ 10,586 $ 1,430 $ ( 587 ) $ 420 $ 11,849

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 September 30, 2022 and December 31, 2021:

Allowance for loan and lease losses:

Loans and leases:

Individually evaluated for impairment Collectively evaluated for impairment Balance Individually evaluated for impairment Collectively evaluated for impairment Balance

As of September 30, 2022:

Commercial mortgage $ — $ 4,775 $ 4,775 $ — $ 282,758 $ 282,758

Commercial and industrial 296 1,129 1,425 963 95,757 96,720

Construction and development 750 2,238 2,988 4,900 135,135 140,035

Multi-family — 1,792 1,792 — 107,640 107,640

Residential mortgage — 190 190 114 141,048 141,162

Home equity — 34 34 — 9,750 9,750

Leases — 1,087 1,087 — 129,884 129,884

Consumer — 265 265 — 20,806 20,806

Total $ 1,046 $ 11,510 $ 12,556 $ 5,977 $ 922,778 $ 928,755

Allowance for loan and lease losses:

Loans and leases:

Individually evaluated for impairment Collectively evaluated for impairment Balance Individually evaluated for impairment Collectively evaluated for impairment Balance

As of December 31, 2021:

Commercial mortgage $ — $ 4,742 $ 4,742 $ 128 $ 261,074 $ 261,202

Commercial and industrial 299 1,340 1,639 995 98,687 99,682

Construction and development 750 1,536 2,286 4,900 88,778 93,678

Multi-family — 1,875 1,875 — 107,421 107,421

Residential mortgage — 263 263 119 134,036 134,155

Home equity — 29 29 — 7,146 7,146

Leases — 1,079 1,079 — 126,762 126,762

Consumer — 195 195 — 15,905 15,905

Total $ 1,049 $ 11,059 $ 12,108 $ 6,142 $ 839,809 $ 845,951

The Company rates all loans and leases by credit quality using the following designations:

37 unchanged sentences

This classification does not mean that the loan or lease has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan or lease even though partial recovery may be effected in the future.

No material changes have been made to the risk characteristics pertaining to the loan and lease portfolio contained in the Company's 2021 Form 10-K.

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 September 30, 2022 and December 31, 2021:

Pass Special Mention Substandard Doubtful Loss Total

As of September 30, 2022:

No material changes have been made to the risk characteristics discussed above contained in the Company's 2022 Form 10-K.

The following tables present the credit risk profile of the Company’s loan and lease portfolio based on rating category, payment activity, and origination year as of March 31, 2023 and rating category as of December 31, 2022:

2023 2022 2021 2020 2019 Prior Revolving loans amortized cost basis Total

As of March 31, 2023:

Commercial mortgage

Pass $ 9,702 $ 74,237 $ 74,185 $ 30,209 $ 47,339 $ 70,727 $ 13,473 $ 319,872

Special Mention — — — — — 892 — 892

Substandard — — — — — 550 — 550

Total Commercial mortgage 9,702 74,237 74,185 30,209 47,339 72,169 13,473 321,314

Current period gross charge-offs — — — — — — — —

Commercial and industrial

Pass 9,681 14,760 20,937 6,186 1,976 12,421 24,892 90,853

Special Mention — 29 125 — — 1,689 525 2,368

Substandard — — — 589 — 215 3,855 4,659

Total Commercial and industrial 9,681 14,789 21,062 6,775 1,976 14,325 29,272 97,880

Current period gross charge-offs — — — — — — — —

Construction and development

Multi-family 107,640 — — — — 107,640

Pass 7,171 44,858 25,365 11,453 564 976 30,234 120,621

Substandard — — — — 4,900 — — 4,900

Total Construction and development 7,171 44,858 25,365 11,453 5,464 976 30,234 125,521

Current period gross charge-offs — — — — — — — —

Pass 2,052 37,528 34,853 6,761 7,485 18,841 24,887 132,407

Total Multi-family 2,052 37,528 34,853 6,761 7,485 18,841 24,887 132,407

Current period gross charge-offs — — — — — — — —

Residential mortgage

Home equity 9,692 — 58 — — 9,750

Leases 129,553 173 125 33 — 129,884

Consumer 20,717 — 89 — — 20,806

Total $ 909,889 $ 10,876 $ 7,957 $ 33 $ — $ 928,755

Pass 9,885 35,313 38,193 17,458 9,300 40,436 — 150,585

Substandard — — — — 150 1,641 — 1,791

Total Residential mortgage 9,885 35,313 38,193 17,458 9,450 42,077 — 152,376

Current period gross charge-offs — — — — — — — —

Pass 12 — 295 — — — 10,588 10,895

Substandard — — — — — — 28 28

Total Home equity lines of credit 12 — 295 — — — 10,616 10,923

Current period gross charge-offs — — — — — — — —

Direct financing leases

Pass 24,622 54,890 36,552 17,619 7,199 2,237 — 143,119

Substandard — — 139 17 — — — 156

Doubtful — — — — 6 — — 6

Total Direct financing leases 24,622 54,890 36,691 17,636 7,205 2,237 — 143,281

Current period gross charge-offs — — 80 5 — — — 85

Pass 2,853 10,972 5,265 1,256 763 468 — 21,577

Substandard — 5 13 — 8 1 — 27

Total Consumer 2,853 10,977 5,278 1,256 771 469 — 21,604

Current period gross charge-offs 7 19 17 — 1 — — 44

Total Loans and Leases $ 65,978 $ 272,592 $ 235,922 $ 91,548 $ 79,690 $ 151,094 $ 108,482 $ 1,005,306

Total current period gross charge-offs $ 7 $ 19 $ 97 $ 5 $ 1 $ — $ — $ 129

For the three months ended March 31, 2023, the Company did not have any revolving loans convert to term loans.

Pass Special Mention Substandard Doubtful Loss Total

6 unchanged sentences

Home equity 10,958 — 52 — — 11,010

Leases 126,707 — 13 42 — 126,762

Direct financing leases 133,254 152 34 29 — 133,469

Consumer 21,015 — 33 — — 21,048

Total $ 958,227 $ 4,034 $ 12,710 $ 29 $ — $ 975,000

The following tables present the Company’s loan and lease portfolio aging analysis of the recorded investment in loans and leases as of September 30, 2022 and December 31, 2021:

September 30, 2022

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, 2023 and December 31, 2022:

March 31, 2023

Delinquent Loans and Leases Current Total

9 unchanged sentences

Home equity 200 — 9 209 10,714 10,923 9

Leases 135 63 54 252 129,632 129,884 54

Direct financing leases 488 93 7 588 142,693 143,281 7

Consumer 116 104 27 247 21,357 21,604 27

12 unchanged sentences

Home equity — — 30 30 10,980 11,010 30

Leases 144 82 — 226 126,536 126,762 —

Direct financing leases 204 25 — 229 133,240 133,469 —

Consumer 171 59 33 263 20,785 21,048 33

Totals $ 673 $ 213 $ 9,103 $ 9,989 $ 965,011 $ 975,000 $ 3,173

The following tables present the Company’s impaired loans and specific valuation allowance at September 30, 2022 and December 31, 2021:

September 30, 2022

Balance Unpaid

Balance Specific

Impaired loans without a specific valuation allowance

The following table presents information on the Company’s nonaccrual loans and leases at and for the three months ended March 31, 2023, and at December 31, 2022:

2023 December 31,

Nonaccrual loans and leases Nonaccrual loans and leases without an allowance for credit losses Interest income recognized on nonaccrual loans and leases Nonaccrual loans and leases

Commercial and industrial $ 594 $ — $ 1 $ 961

Construction 4,900 — — 4,900

Residential mortgage 112 112 — 113

Direct financing leases 6 6 — 29

Total nonaccrual loans and leases $ 5,612 $ 118 $ 1 $ 6,003

The following table presents the Company's amortized cost basis of collateral dependent loans, which are individually analyzed to determine expected credit losses:

Amortized Cost Basis Allowance on Collateral Dependent Loans

Commercial and industrial $ 594 $ 293

Construction 4,900 750

Residential mortgage 112 —

Direct financing leases — —

Total $ 5,606 $ 1,043

Loan Modification Disclosures under ASU 2022-02

In certain situations, the Company may modify the terms of a loan to a borrower experiencing financial difficulty.

These modifications may include payment delays, term extensions, or interest-rate reductions.

In some cases, combinations of modifications may be made to the same loan.

If a determination is made that a modified loan has been deemed uncollectible, the loan (or portion of the loan) is charged-off, reducing the amortized cost basis of the loan and adjusting the allowance for credit losses.

During the three months ended March 31, 2023, the Company had no new modifications to borrowers experiencing financial difficulty.

There were no modified loans and leases that had a payment default during the three months ended March 31, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.

Troubled Debt Restructuring (TDR) Disclosures Prior to the Adoption of ASU 2022-02

During the three months ended March 31, 2022, there were no newly classified TDRs.

For the three months ended March 31, 2022, the Company recorded no charge-offs related to TDRs.

As of December 31, 2022, TDRs had a related allowance of $ 0 .

During the three months ended March 31, 2022, there were no TDRs for which there was a payment default within the first 12 months of the modification.

Other Real Estate Owned

At March 31, 2023 and December 31, 2022, the balance of real estate owned included $ 367,000 and $ 57,000 , respectively, of foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property.

At March 31, 2023 and December 31, 2022, the recorded investment in consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process was $ 431,000 and $ 1,071,000 , respectively.

Direct Financing Leases

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

2023 December 31,

Total minimum lease payments to be received $ 159,788 $ 147,520

Initial direct costs 8,937 8,058

168,725 155,578

Impaired loans with a specific valuation allowance

Unearned income ( 25,444 ) ( 22,109 )

Net investment in direct finance leases $ 143,281 $ 133,469

There were no leases serviced by the Company for the benefit of others at March 31, 2023 and December 31, 2022.

Certain leases have been sold from time to time by the Company with partial recourse.

The Company estimates and records its obligation based upon historical loss percentages.

At both March 31, 2023 and December 31, 2022, the Company did not have any recorded recourse obligations on leases sold.

The following table summarizes the future minimum lease payments receivable subsequent to March 31, 2023:

Remainder of 2023 $ 43,905

Thereafter 1,479

Allowance for Credit Losses on Loans and Leases

The allowance for credit losses on loans and leases is established for current expected credit losses on the Company's loan and lease portfolios in accordance with ASC Topic 326.

This requires significant judgement to estimate credit losses measured on a collective pool basis when similar risk characteristics exist, and for loans evaluated individually.

The company estimates expected future losses for the loan's entire contractual term, taking into account expected payments when appropriate.

The allowance is an estimation based on management's evaluation of expected losses related to the Company's financial assets measured at amortized cost.

It considers relevant available information from internal and external sources relating to the historical loss experience, current conditions and reasonable and supportable forecasts for the Company's outstanding loan and lease balances.

The Company utilizes a cash flow analysis method of estimating expected losses, which relies on key inputs and assumptions.

Significant factors affecting the calculation are the segmenting of loans based upon similar risk characteristics, applied loss rates based upon reasonable and supportable forecasts, and contractual term adjustments, including prepayment and curtailment adjustments.

To ensure the allowance is maintained at an adequate level, a detailed analysis is performed on a quarterly basis, with an appropriate provision made to adjust the allowance.

The Company has elected to exclude accrued interest receivable from the calculation of the allowance for credit losses, as it is the Company's policy to write off accrued interest in a timely manner as it is deemed uncollectible by reversing interest income.

The Company categorizes its loan portfolios into eight segments based on similar risk characteristics.

Loans within each segment are collectively evaluated using either a loss-rate methodology or remaining life methodology.

The following table summarizes changes in the allowance for credit losses by segment for the three months ended March 31, 2023:

Balances, December 31, 2022 Impact of adopting ASC 326 Balances, January 1, 2023 Post-ASC 326 adoption Provision (reversal) for credit losses Charge-offs Recoveries Balances, March 31, 2023

Commercial mortgage $ 4,776 $ ( 395 ) $ 4,381 $ 337 $ — $ 10 $ 4,728

Commercial and industrial 1,291 360 1,651 ( 125 ) — 12 1,538

Construction and development 2,855 784 3,639 ( 164 ) — — 3,475

$ 5,496 $ 5,543 $ 1,046

Total impaired loans

Multi-family 1,955 ( 99 ) 1,856 111 — — 1,967

Residential mortgage 76 1,439 1,515 71 — 10 1,596

Home equity 23 89 112 — — — 112

Direct financing leases 1,196 422 1,618 68 ( 85 ) 164 1,765

Consumer 241 64 305 42 ( 44 ) 11 314

Total $ 12,413 $ 2,664 $ 15,077 $ 340 $ ( 129 ) $ 207 $ 15,495

Subsequent to the adoption of ASC 326 on January 1, 2023, the allowance for credit losses increased during the three months ended March 31, 2023.

The increase was driven by loan growth in multiple categories, including commercial mortgage, direct financing leases, and multi-family loans.

The commercial mortgage portfolio increased due to commercial construction loans being completed and termed out to permanent financing.

Correspondingly, as more commercial construction loans were completed, the total balance in this segment decreased.

The balance in commercial and industrial loans increased slightly, but the decrease in the historical loss rate contributed to an overall decrease in the allowance within this segment.

The remaining portfolio segments increased the allowance driven by loan growth within each category.

• Commercial Mortgage – allowance increased due to loan balances increasing $ 16.6 million.

• Commercial & Industrial – allowance decreased due to the historical loss rate decreasing 0.1285 % in this segment even though loan balances increased $ 3.7 million.

• Construction & Development – allowance decreased due to loan balances decreasing $ 13.7 million.

• Multi-Family – allowance increased due to balances increasing $ 7.5 million.

• Residential Mortgage – allowance increased due to balances increasing $ 6.0 million.

• Home Equity – no change to the allowance.

• Leases – allowance increased due to balances increasing $ 9.8 million.

• Consumer – allowance increased slightly due to balances increasing $ 649,000 .

Economic Outlook

Due to the future-focused nature of the calculation for the allowance for credit losses, management must make significant assumptions.

Estimating an appropriate allowance requires management to use relevant forward-looking information drawn from reasonable and supportable forecasts.

Economic factors are a consequential part of these forecasts, and as such are evaluated periodically for developments that may impact the Company's allowance for credit losses and loan and lease portfolio.

As of March 31, 2023, the most significant economic factors affecting the Company's loan portfolio are persistent inflation, higher interest rates, a weakened economic growth and unemployment outlook, and increased geopolitical risk.

These key factors are impacting and will continue to adversely impact the Company’s loan portfolio.

Also, recent market liquidity events have added additional unpredictability into the economic environment and the potential for tighter credit conditions could impact economic conditions in the future.

For several years, the Company has targeted loan opportunities in three growth market regions, Columbus, Ohio, Dayton/Springfield, Ohio, and Indianapolis, Indiana.

These market regions specialize in commercial real estate loans, and their respective forecasts are described below:

• Columbus, Ohio – The market region is forecasting estimated job growth to be considerably lower in 2023.

However, the forecasted unemployment rate is slightly below the national unemployment rate estimate as of February 2023.

• Dayton/Springfield, Ohio – The economic outlook for this region is positive, though concerns are present about a potential recession occurring in the last half of 2023.

The region has one of the lowest unemployment rates in the state, just above the Columbus market region.

• Indianapolis, Indiana – The market region is forecasting a material economic growth rate decrease in 2023.

The forecast estimates have been lowered primarily due to inflation and rising interest rates, which have dampened demand and are impacting economic growth.

The Company’s assumption of future economic slowdown could potentially have an adverse impact on the loan and lease portfolio and the allowance for credit losses in the near future;

however, there are numerous potential outcomes, and the variances could be significant and volatile.

As a result, the Company’s future estimates may vary for the remainder of 2023.

Allowance for Loan Losses under prior GAAP ("Incurred Loss Method")

Prior to the adoption of ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326) on January 1, 2023, the Company maintained an allowance for loan and lease losses in accordance with the Incurred Loss Method.

The following table summarizes changes in the allowance for loan and lease losses under the Incurred Loss Method by segment for the three months ended March 31, 2022:

Balance, beginning of period Provision (reversal) for losses Charge-offs Recoveries Balance, end of period

Three Months Ended March 31, 2022:

Commercial mortgage $ 4,742 $ ( 19 ) $ — $ 7 $ 4,730

Commercial and industrial 1,639 ( 97 ) — 15 1,557

Construction and development 2,286 148 — — 2,434

Multi-family 1,875 157 — — 2,032

Residential mortgage 263 ( 6 ) — 6 263

Total impaired loans $ 5,977 $ 6,352 $ 1,046

Home equity 29 6 — — 35

Leases 1,079 ( 15 ) ( 10 ) 10 1,064

Consumer 195 26 ( 24 ) 5 202

Total $ 12,108 $ 200 $ ( 34 ) $ 43 $ 12,317

The following table presents 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 under the incurred loss method as of December 31, 2022:

Allowance for loan and lease losses:

Loans and leases:

Individually evaluated for impairment Collectively evaluated for impairment Balance, December 31 Individually evaluated for impairment Collectively evaluated for impairment Balance, December 31

As of December 31, 2022:

Commercial mortgage $ — $ 4,776 $ 4,776 $ — $ 298,087 $ 298,087

Commercial and industrial 281 1,010 1,291 961 99,459 100,420

Construction and development 750 2,105 2,855 4,900 135,023 139,923

Multi-family — 1,955 1,955 — 124,914 124,914

Residential mortgage — 76 76 113 146,016 146,129

Home equity — 23 23 — 11,010 11,010

Leases — 1,196 1,196 — 133,469 133,469

Consumer — 241 241 — 21,048 21,048

Total $ 1,031 $ 11,382 $ 12,413 $ 5,974 $ 969,026 $ 975,000

The following table presents the Company’s impaired loans and specific valuation allowance at December 31, 2022 under the Incurred Loss Method:

December 31, 2022

16 unchanged sentences

Total impaired loans $ 5,974 $ 6,410 $ 1,031

The following tables present the Company’s average investment in impaired loans and leases, and interest income recognized for the three and nine months ended September 30, 2022 and 2021:

Investment in

Loans and Leases Interest

Three Months Ended September 30, 2022:

Total impaired loans

Commercial and industrial $ 967 $ 6

Construction and development 4,900 —

Residential mortgage 115 1

Total impaired loans and leases $ 5,982 $ 7

Investment in

Loans and Leases Interest

Nine Months Ended September 30, 2022:

Total impaired loans

Commercial mortgage $ 61 $ 12

Commercial and industrial 976 18

Construction and development 4,900 —

Residential mortgage 117 3

Total impaired loans and leases $ 6,054 $ 33

Investment in

Loans and Leases Interest

Three Months Ended September 30, 2021:

Total impaired loans

Commercial mortgage $ 171 $ 13

Commercial and industrial 1,022 13

Construction and development 4,900 —

Residential mortgage 190 4

Total impaired loans and leases $ 6,283 $ 30

The following table presents the Company’s average investment in impaired loans and leases, and interest income recognized for the three months ended March 31, 2022 under the incurred loss method:

Investment in

Loans and Leases Interest

Nine Months Ended September 30, 2021:

Three Months Ended March 31, 2022:

Total impaired loans

4 unchanged sentences

Total impaired loans and leases $ 6,127 $ 20

The following table presents the Company’s nonaccrual loans and leases at September 30, 2022 and December 31, 2021:

September 30,

2022 December 31,

Commercial mortgage $ — $ 128

Commercial and industrial 962 995

Construction 4,900 4,900

Residential mortgage 114 119

Total nonaccrual loans and leases $ 6,009 $ 6,184

During the three and nine months ended September 30, 2022 and 2021, there were no newly classified TDRs.

For the three and nine months ended September 30, 2022 and 2021, the Company recorded no charge-offs related to TDRs.

As of September 30, 2022 and December 31, 2021, TDRs had a related allowance of $ 46,000 and $ 49,000 , respectively.

During the three and nine months ended September 30, 2022, there were no TDRs for which there was a payment default within the first 12 months of the modification.

At September 30, 2022 and December 31, 2021, the balance of real estate owned included $ 68,000 and $ 27,000 , respectively, of foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property.

At September 30, 2022 and December 31, 2021, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process was $ 1.0 million and $ 885,000 , respectively.

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

September 30,

2022 December 31,

Total minimum lease payments to be received $ 142,893 $ 140,214

Initial direct costs 7,807 7,035

150,700 147,249

Unearned income ( 20,816 ) ( 20,487 )

Net investment in direct finance leases $ 129,884 $ 126,762

There were no leases serviced by the Company for the benefit of others at September 30, 2022 and December 31, 2021.

Certain leases have been sold from time to time by the Company with partial recourse.

The Company estimates and records its obligation based upon historical loss percentages.

At both September 30, 2022 and December 31, 2021, the Company did not have any recorded recourse obligations on leases sold.

The following table summarizes the future minimum lease payments receivable subsequent to September 30, 2022:

Remainder of 2022 $ 14,836

Thereafter 3,126

Allowance for Credit Losses on Off-Balance Sheet Commitments

The allowance for credit losses on off-balance sheet commitments is included in other liabilities on the Condensed Consolidated Balance Sheets.

The estimate of expected losses on off-balance sheet commitments is calculated based on the loss rate for the loan segment which the loan commitments would be classified if funded, adjusted for the estimate of funding probability.

Additional provisions applied to the allowance are recognized in the provision for credit losses on the Condensed Consolidated Statements of Income.

The following table details activity in the allowance for credit losses on off-balance sheet commitments during the three months ended March 31, 2023:

Three Months Ended March 31, 2023

Balance, December 31, 2022 $ —

Impact of adopting ASC 326 2,374

Provision for credit losses ( 170 )

Balance, March 31, 2023 $ 2,204

Fair Value of Financial Instruments

8 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 September 30, 2022 and December 31, 2021:

Fair Value Measurements Using

2 unchanged sentences

(Level 2) Significant

September 30, 2022

March 31, 2023

Available-for-sale securities

12 unchanged sentences

Available-for-sale securities

Treasury securities $ 3,460 $ 3,460 $ — $ —

SBA Pools 6,135 — 6,135 —

3 unchanged sentences

Corporate obligations 9,633 — 9,633 —

Equity securities 13 13 — —

$ 284,900 $ 3,460 $ 281,440 $ —

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 nine months ended September 30, 2022.

There have been no significant changes in the valuation techniques during the three months ended March 31, 2023.

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 September 30, 2022 and December 31, 2021:

Fair Value Measurements Using

2 unchanged sentences

(Level 2) Significant

September 30, 2022

Impaired loans, collateral dependent $ 300 $ — $ — $ 300

Mortgage-servicing rights 1,739 — — 1,739

March 31, 2023

Collateral-dependent loans $ 300 $ — $ — $ 300

December 31, 2022

3 unchanged sentences

For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Collateral-Dependent Impaired Loans, Net of ALLL

The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell.

Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.

Collateral-Dependent Loans, Net of Allowance for Credit Losses

The estimated fair value of collateral-dependent loans is based on the appraised fair value of the collateral, less estimated cost to sell.

Collateral-dependent loans are classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value.

4 unchanged sentences

These discounts and estimates are developed by management by comparison to historical results.

Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment.

Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral-dependent loans.

Mortgage-Servicing Rights

5 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 September 30, 2022 and December 31, 2021:

Fair Value at September 30,

Fair Value at March 31,

2023 Valuation

Technique Unobservable

Collateral-dependent impaired loans $ 300 Appraisal Marketability discount 0 - 44 %

Mortgage-servicing rights $ 1,739 Discounted cash flow Discount rate 10 %

Collateral-dependent loans $ 300 Appraisal Marketability discount 0 - 44 %

Fair Value at December 31,

1 unchanged sentence

Technique Unobservable

Collateral-dependent impaired loans $ 4,587 Appraisal Marketability discount 0 - 39 %

Impaired loans, collateral-dependent $ 314 Appraisal Marketability discount 0 - 42 %

Mortgage-servicing rights $ 2,012 Discounted cash flow Discount rate 10 %

Fair Value of Financial Instruments

The following tables present estimated fair values of the Company’s financial instruments at September 30, 2022 and December 31, 2021:

The following tables present estimated fair values of the Company’s financial instruments at March 31, 2023 and December 31, 2022:

Fair Value Measurements Using

2 unchanged sentences

(Level 2) Significant

September 30, 2022

March 31, 2023

Financial assets

Cash and cash equivalents $ 17,390 $ 17,390 $ — $ —

Interest-earning time deposits 490 — 489 —

Available-for-sale securities 291,745 3,466 288,279 —

Held-to-maturity securities 5,752 — 5,720 —

Loans held for sale 78 — — 69

Loans and leases receivable, net 989,117 — — 904,924

12 unchanged sentences

Cash and cash equivalents $ 15,922 $ 15,922 $ — $ —

Interest-earning time deposits 490 — 490 —

Available-for-sale securities 284,900 3,460 281,440 —

13 unchanged sentences

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

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021

Net income $ 3,158 $ 3,082

Shares outstanding for Basic EPS:

Average shares outstanding 11,823,889 12,499,455

average restricted stock award shares not vested 261,291 348,395

average unearned ESOP Shares 924,154 978,260

Shares outstanding for Basic EPS 10,638,444 11,172,800

Additional Dilutive Shares 197,173 300,652

Shares outstanding for Diluted EPS 10,835,617 11,473,452

Basic Earnings Per Share $ 0.30 $ 0.28

Diluted Earnings Per Share $ 0.29 $ 0.27

Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022

Net income $ 2,904 $ 3,018

11 unchanged sentences

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 $ 62,000 , $ 170,000 , $ 49,000 , and $ 165,000 for the three and nine months ended September 30, 2022 and 2021, respectively.

The Company’s expense for the plan was $ 37,000 and $ 53,000 for the three months ended March 31, 2023 and 2022, respectively.

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, $ 12,376,872 and $ 12,928,359 of common stock acquired by the ESOP was shown as a

reduction of stockholders’ equity at September 30, 2022 and December 31, 2021, respectively.

Accordingly, $ 12,009,214 and $ 12,193,043 of common stock acquired by the ESOP was shown as a reduction of stockholders’ equity at March 31, 2023 and December 31, 2022, respectively.

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

ESOP expense for the three and nine months ended September 30, 2022 and 2021 was $ 188,000 , $ 622,000 , $ 207,000 , and $ 581,000 , respectively.

September 30,

ESOP expense for the three months ended March 31, 2023 and 2022 was $ 171,000 and $ 226,000 , respectively.

2023 December 31,

3 unchanged sentences

Quoted per share price $ 10.37 $ 13.01

Fair value of earned shares $ 2,301 $ 2,099

Fair value of unearned shares $ 12,232 $ 15,269

Fair value of earned shares (in thousands) $ 2,058 $ 2,405

Fair value of unearned shares (in thousands) $ 9,164 $ 11,673

Richmond Mutual Bancorporation, Inc.

7 unchanged sentences

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

The following table summarizes the restricted stock awards activity in the 2020 EIP during the nine months ended September 30, 2022.

Nine Months Ended September 30, 2022

The following table summarizes the restricted stock awards activity in the 2020 EIP during the three months ended March 31, 2023.

Three Months Ended March 31, 2023

Number of Restricted Shares Weighted Average Grant Date Fair Value

Non-vested, beginning of period 261,291 $ 10.56

Vested ( 87,104 ) 10.56

Forfeited — —

Non-vested, September 30, 2022 261,291 10.56

Total compensation cost recognized in the income statement for restricted stock awards during the three and nine months ended September 30, 2022 was $ 232,000 and $ 688,000 , respectively, and the related tax benefit recognized was $ 49,000 and $ 144,000 , respectively.

As of September 30, 2022, unrecognized compensation expense related to restricted stock awards was $ 2.5 million.

Non-vested, March 31, 2023 261,291 10.56

Total compensation cost recognized in the income statement for restricted stock awards during the three months ended March 31, 2023 was $ 227,000 , and the related tax benefit recognized was $ 48,000 .

As of March 31, 2023, unrecognized compensation expense related to restricted stock awards was $ 2.1 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 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.

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 nine months ended September 30, 2022.

Nine Months Ended September 30, 2022

The following table summarizes the stock option activity in the 2020 EIP during the three months ended March 31, 2023.

Three Months Ended March 31, 2023

Number of Shares Weighted-Average Exercise Price

2 unchanged sentences

Forfeited/expired — —

Balance, September 30, 2022 1,050,961 10.56

Balance, March 31, 2023 1,050,961 10.56

Exercisable at end of period 413,120 $ 10.56

5 unchanged sentences

Expected life of options 6.1 years

A summary of the status of the Company stock option shares as of September 30, 2022 is presented below.

A summary of the status of the Company stock option shares as of March 31, 2023 is presented below.

Shares Weighted Average Grant Date Fair Value

Non-vested, beginning of year 637,841 $ 2.91

Vested ( 212,617 ) 2.91

Forfeited — —

Non-vested, September 30, 2022 637,841 $ 2.91

Total compensation cost recognized in the income statement for option-based payment arrangements for the three and nine months ended September 30, 2022 was $ 156,000 and $ 463,000 , respectively, and the related tax benefit recognized was $ 17,000 and $ 51,000 , respectively.

As of September 30, 2022, unrecognized compensation expense related to the stock option awards was $ 1.7 million.

Non-vested, March 31, 2023 637,841 $ 2.91

Total compensation cost recognized in the income statement for option-based payment arrangements for the three months ended March 31, 2023 was $ 153,000 , and the related tax benefit recognized was $ 17,000 .

As of March 31, 2023, unrecognized compensation expense related to the stock option awards was $ 1.4 million.

Subsequent Event

Subsequent to September 30, 2022 through November 10, 2022, the Company purchased 7,186 shares of the Company's common stock pursuant to its existing stock repurchase programs, leaving 1,133,388 shares available for future repurchase.

Subsequent to March 31, 2023 through May 15, 2023 the Company purchased 140,770 shares of the Company's common stock pursuant to the existing stock repurchase program, leaving 883,073 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