What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-10 compared with 2023-05-15 · 203 added, 115 removed, 772 unchanged (29% of the section changed)

4 unchanged sentences

Cash and due from banks $ 9,488,299 $ 7,782,348

Interest-bearing demand deposits 7,708,212 8,139,745

Interest-earning demand deposits 7,975,753 8,139,745

Cash and cash equivalents 17,464,052 15,922,093

Interest-bearing time deposits 490,000 490,000

Interest-earning time deposits 490,000 490,000

Investment securities - available for sale 281,345,560 284,899,665

22 unchanged sentences

Authorized - 90,000,000 shares

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

Issued and outstanding - 11,448,621 shares and 11,784,246 shares at June 30, 2023 and December 31, 2022, respectively

114,486 117,842

8 unchanged sentences

Condensed Consolidated Statements of Income

Three Months Ended March 31,

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

2023 2022 2023 2022

Interest Income

15 unchanged sentences

Net gains on loan and lease sales 154,038 221,778 309,601 464,764

Gain on sale of other assets 1,921 —

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

Other income 325,192 226,202 576,107 558,395

11 unchanged sentences

Real estate owned expense 23,876 5,785 23,823 8,286

Loss on sale of real estate owned — 847 — 847

Other expenses 916,937 790,669 1,865,435 1,746,910

8 unchanged sentences

Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

Condensed Consolidated Statements of Comprehensive (Loss) Income

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Net Income $ 2,692,127 $ 3,485,342 $ 5,596,173 $ 6,502,934

Other Comprehensive (Income) Loss

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

Other Comprehensive (Loss) Income

Unrealized (loss) gain on available-for-sale securities, net of tax of $( 1,227,830 ), $( 3,695,140 ), $ 412,287 , and $( 10,108,049 ), respectively.

( 4,618,979 ) ( 13,900,763 ) 1,550,985 ( 38,025,519 )

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

Comprehensive (Loss) Income $ ( 1,926,852 ) $ ( 10,415,421 ) $ 7,147,158 $ ( 31,522,585 )

See Notes to Condensed Consolidated Statements.

1 unchanged sentence

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended June 30, 2023

Common Stock Additional

4 unchanged sentences

Outstanding Amount

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

Net income — — — 2,692,127 — — 2,692,127

Other comprehensive loss — — — — — ( 4,618,979 ) ( 4,618,979 )

ESOP shares earned — — ( 42,880 ) — 183,830 — 140,950

Stock based compensation — — 383,612 — — — 383,612

Common stock dividends ($ 0.14 per share)

— — — ( 1,483,666 ) — — ( 1,483,666 )

Repurchase of common stock ( 237,072 ) ( 2,371 ) ( 2,428,902 ) — — — ( 2,431,273 )

Balances, June 30, 2023 11,448,621 $ 114,486 $ 103,216,869 $ 87,523,266 $ ( 11,825,384 ) $ ( 48,200,190 ) $ 130,829,047

Six Months Ended June 30, 2023

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

7 unchanged sentences

Repurchase of common stock ( 335,625 ) ( 3,356 ) ( 3,578,851 ) — — — ( 3,582,207 )

Balances, June 30, 2023 11,448,621 $ 114,486 $ 103,216,869 $ 87,523,266 $ ( 11,825,384 ) $ ( 48,200,190 ) $ 130,829,047

Three Months Ended June 30, 2022

Common Stock Additional

Capital Retained

Earnings Unearned

Shares Accumulated

Comprehensive

Outstanding Amount

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

Net income — — — 3,485,342 — — 3,485,342

Other comprehensive loss — — — — — ( 13,900,763 ) ( 13,900,763 )

ESOP shares earned — — 23,775 — 183,829 — 207,604

Stock based compensation — — 383,637 — — — 383,637

Common stock dividends ($ 0.10 per share)

— — — ( 1,099,243 ) — — ( 1,099,243 )

Repurchase of common stock ( 461,891 ) ( 4,619 ) ( 7,469,917 ) — — — ( 7,474,536 )

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

Six Months Ended June 30, 2022

Common Stock Additional

12 unchanged sentences

Repurchase of common stock ( 552,082 ) ( 5,521 ) ( 8,968,023 ) — — — ( 8,973,544 )

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

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

See Notes to Condensed Consolidated Statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

Operating Activities

7 unchanged sentences

Net gains on loan and lease sales ( 309,601 ) ( 464,764 )

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

(Gain) Loss on sale of real estate owned ( 1,921 ) 847

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

50 unchanged sentences

Administrative, trust and wealth management services are conducted through First Bank Richmond's Corporate Office/Financial Center located in Richmond, Indiana.

As an Indiana-chartered commercial bank, First Bank Richmond is subject to regulation by the IDFI and the FDIC.

As an Indiana-chartered commercial bank, First Bank Richmond is subject to regulation by the Indiana Department of Financial Institutions ("IDFI") and the Federal Deposit Insurance Corporation ("FDIC").

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.

14 unchanged sentences

Past due status is based on contractual terms of the loan.

For all loan classes, the entire balance of the loan is considered past due if the minimum payment contractually required to be paid is not received by the contractual due date.

For all loan classes, the entire balance of the loan is considered past due if the minimum payment contractually required to be paid is not received by the

contractual due date.

For all loan classes, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

36 unchanged sentences

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.

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.

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

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

4 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 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.

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 CECL amendments in ASU 2016-13.

In March 2020, the FASB issued ASU No.

9 unchanged sentences

Investment Securities

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

March 31, 2023

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

June 30, 2023

Available for sale

23 unchanged sentences

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

The amortized cost and fair value of securities at March 31, 2023, by contractual maturity, are shown below.

The amortized cost and fair value of investment securities at June 30, 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 $ 342,359 $ 281,346 $ 5,751 $ 5,659

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.

Investment securities with a carrying value of $ 155,514,000 and $ 134,302,000 were pledged at June 30, 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 and six months ended June 30, 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 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.

Total fair value of these investments at June 30, 2023 and December 31, 2022 was $ 284,544,000 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.

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.

The Company does not consider available-for-sale securities with unrealized losses to be experiencing credit losses at June 30, 2023.

Management considers it more likely than not that the Company will not be required to sell these securities 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.

1 unchanged sentence

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:

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

As of June 30, 2023, there was no allowance for credit losses recognized on the Company's securities held to maturity portfolio.

The following table summarizes the amortized cost of held to maturity securities by credit quality indicator, as of June 30, 2023:

State and municipal obligations

1 unchanged sentence

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

The following tables show the Company’s investments by gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2023 and December 31, 2022:

The following tables show the Company’s investment securities 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 June 30, 2023 and December 31, 2022:

Description of

Securities March 31, 2023

Securities June 30, 2023

Less Than 12 Months 12 Months or More Total

38 unchanged sentences

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

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.

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 securities.

It is not more likely than not the Company will be required to sell the securities 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, 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.

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 matur ity.

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

The Company does not intend to sell the securities and it is not more likely than not the Company will be required to sell the securities before recovery of their amortized cost basis, which may be maturity.

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 March 31, 2023 and December 31, 2022:

The following table shows the composition of the loan and lease portfolio at June 30, 2023 and December 31, 2022:

2023 December 31,

16 unchanged sentences

Grade 2 – Quality Loans and Leases

These loans and leases have excellent sources of repayment with no identifiable risk of collection, and they conform in all respects to Company policy and Indiana Department of Financial Institutions (“IDFI”) and Federal Deposit Insurance Corporation (“FDIC”) regulations.

These loans and leases have excellent sources of repayment with no identifiable risk of collection, and they conform in all respects to Company policy and IDFI and FDIC regulations.

Documentation exceptions are minimal or are in the process of being corrected and are not of a type that could subsequently expose the Company to risk of loss.

10 unchanged sentences

This special mention rating is designed to identify a specific level of risk and concern about an asset’s quality.

Although a special mention loan or leases has a higher probability of default than a pass rated loan or lease, its default is not imminent.

Although a special mention loan or lease has a higher probability of default than a pass rated loan or lease, its default is not imminent.

Grade 6 – Substandard

19 unchanged sentences

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:

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 June 30, 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:

As of June 30, 2023:

Commercial mortgage

Pass $ 21,787 $ 84,026 $ 70,984 $ 39,301 $ 46,903 $ 68,686 $ 8,365 $ 340,052

Special Mention — — — — — 892 — 892

Substandard — — — — — 1,423 — 1,423

36 unchanged sentences

Total current period gross charge-offs $ 26 $ 80 $ 298 $ 27 $ 2 $ 1 $ — $ 434

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

For the three months ended June 30, 2023, the Company did not have any revolving loans convert to term loans.

Pass Special Mention Substandard Doubtful Loss Total

9 unchanged sentences

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 March 31, 2023 and December 31, 2022:

March 31, 2023

The following tables present the Company’s loan and lease portfolio aging analysis of the recorded investment in loans and leases as of June 30, 2023 and December 31, 2022:

June 30, 2023

Delinquent Loans and Leases Current Total

27 unchanged sentences

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

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:

The following table presents information on the Company’s nonaccrual loans and leases at June 30, 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

Nonaccrual loans and leases Nonaccrual loans and leases without an allowance for credit losses Nonaccrual loans and leases

Commercial and industrial $ 593 $ — $ 961

3 unchanged sentences

Total nonaccrual loans and leases $ 5,607 $ 114 $ 6,003

During the three and six months ended June 30, 2023, the Company recognized $ 2,000 and $ 3,000 , respectively, of interest income on nonaccrual loans and leases.

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

3 unchanged sentences

Residential mortgage 109 —

Direct financing leases — —

Total $ 6,982 $ 1,079

4 unchanged sentences

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.

During the three months ended June 30, 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 and six months ended June 30, 2023 and that 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.

During the three and six months ended June 30, 2022, there were no newly classified TDRs.

For the three and six months ended June 30, 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.

During the three and six months ended June 30, 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.

At June 30, 2023 and December 31, 2022, the balance of real estate owned included $ 167,000 and $ 57,000 , respectively, of foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property.

At June 30, 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

6 unchanged sentences

Net investment in direct finance leases $ 152,181 $ 133,469

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

There were no leases serviced by the Company for the benefit of others at June 30, 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:

At both June 30, 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 June 30, 2023:

Remainder of 2023 $ 31,761

7 unchanged sentences

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.

Significant factors affecting the calculation are the segmenting of loans and leases 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.

2 unchanged sentences

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

The following table summarizes changes in the allowance for credit losses by segment for the three and six months ended June 30, 2023:

Balances, March 31, 2023 Provision (reversal) for credit losses Charge-offs Recoveries Balances, June 30, 2023

Commercial mortgage $ 4,728 $ 232 $ — $ 3 $ 4,963

7 unchanged sentences

Total $ 15,495 $ 111 $ ( 305 ) $ 90 $ 15,391

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.

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, June 30, 2023

Commercial mortgage $ 4,776 $ ( 395 ) $ 4,381 $ 569 $ — $ 13 $ 4,963

Commercial and industrial 1,291 360 1,651 ( 51 ) — 23 1,623

Construction and development 2,855 784 3,639 ( 673 ) — — 2,966

Multi-family 1,955 ( 99 ) 1,856 125 — — 1,981

Residential mortgage 76 1,439 1,515 86 — 22 1,623

Home equity 23 89 112 ( 10 ) — — 102

Direct financing leases 1,196 422 1,618 353 ( 366 ) 209 1,814

Consumer 241 64 305 52 ( 68 ) 30 319

Total $ 12,413 $ 2,664 $ 15,077 $ 451 $ ( 434 ) $ 297 $ 15,391

During the second quarter of 2023, the allowance for credit losses on loans and leases decreased from $ 15.5 million at March 31, 2023, to $ 15.4 million at June 30, 2023.

The decrease was attributable to net charge-offs totaling $ 215,000 , while adding a net total of $ 111,000 to the provision over the course of the second quarter.

Multiple loan categories experienced loan growth, while a few declined slightly.

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.

Since there were more commercial construction loans completed, the total balance in this segment decreased.

The balance in commercial and industrial loans increased contributing to an overall increase in the allowance within this segment.

The remaining portfolio segments saw an increase in their respective allowances due to loan growth, with the exception of home equity loans.

• Commercial Mortgage – allowance increased due to loan balances increasing $ 20.2 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.

• Commercial & Industrial – allowance increased due to loan balances increasing $ 16.3 million.

• Construction & Development – allowance decreased due to loan balances decreasing $ 8.5 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 .

• Multi-Family – allowance increased due to loan balances increasing $ 9.1 million.

• Residential Mortgage – allowance increased due to loan balances increasing $ 7.4 million.

• Home Equity – allowance decreased due to loan balances decreasing $ 431,000 .

• Leases – allowance increased due to lease balances increasing $ 8.9 million with net charge-offs totaling $ 236,000 .

• Consumer – allowance increased slightly due to loan balances increasing $ 1.1 million with net charge-offs totaling $ 5,000 .

Economic Outlook

2 unchanged sentences

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.

As of June 30, 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 and lease portfolio for the remainder of 2023 and potentially into 2024.

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.

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.

• Columbus, Ohio – The market region is forecasting estimated job growth to be lower for the remainder of 2023, however job growth is expected to exceed the national average and most other market region averages.

Furthermore, the forecasted unemployment rate for the region is slightly below the national unemployment rate estimate.

• Dayton/Springfield, Ohio – The economic outlook for this region remains positive, although concerns about a potential recession occurring in the last half of 2023 remain a factor.

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

3 unchanged sentences

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.

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

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

1 unchanged sentence

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:

The following table summarizes changes in the allowance for loan and lease losses under the Incurred Loss Method by segment for the three and six months ended June 30, 2022:

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

Three Months Ended March 31, 2022:

Three Months Ended June 30, 2022:

Commercial mortgage $ 4,730 $ 40 $ — $ 34 $ 4,804

7 unchanged sentences

Total $ 12,317 $ 200 $ ( 219 ) $ 83 $ 12,381

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

Six Months Ended June 30, 2022:

Commercial mortgage $ 4,742 $ 21 $ — $ 41 $ 4,804

Commercial and industrial 1,639 ( 172 ) — 37 1,504

Construction and development 2,286 137 — — 2,423

Multi-family 1,875 171 — — 2,046

Residential mortgage 263 ( 86 ) — 19 196

Home equity 29 5 — — 34

Leases 1,079 241 ( 199 ) 18 1,139

Consumer 195 83 ( 54 ) 11 235

Total $ 12,108 $ 400 $ ( 253 ) $ 126 $ 12,381

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:

31 unchanged sentences

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

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:

The following table presents the Company’s average investment in impaired loans and leases, and interest income recognized for the three and six months ended June 30, 2022 under the incurred loss method:

Investment in

Loans and Leases Interest

Three Months Ended March 31, 2022:

Three Months Ended June 30, 2022:

Total impaired loans

4 unchanged sentences

Total impaired loans and leases $ 6,049 $ 6

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.

Investment in

Loans and Leases Interest

Six Months Ended June 30, 2022:

Total impaired loans

Commercial mortgage $ 81 $ 12

Commercial and industrial 982 12

Construction and development 4,900 —

Residential mortgage 117 2

Total impaired loans and leases $ 6,080 $ 26

Allowance for Credit Losses on Unfunded Commitments

The allowance for credit losses on unfunded commitments is included in other liabilities on the Condensed Consolidated Balance Sheets.

The estimate of expected losses on unfunded commitments is calculated based on the loss rate for the loan or lease segment in which the loan or lease 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

The following table details activity in the allowance for credit losses on unfunded commitments during the three and six months ended June 30, 2023:

Three Months Ended June 30, 2023

Balance, March 31, 2023 $ 2,204

Recovery of provision for credit losses ( 103 )

Balance, June 30, 2023 $ 2,101

Six Months Ended June 30, 2023

Balance, December 31, 2022 $ —

Impact of adopting ASC 326 2,374

Provision for credit losses ( 170 )

Balance, March 31, 2023 $ 2,204

Recovery of provision for credit losses ( 273 )

Balance, June 30, 2023 $ 2,101

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 March 31, 2023 and December 31, 2022:

Fair Value Measurements Using

2 unchanged sentences

(Level 2) Significant

March 31, 2023

June 30, 2023

Available-for-sale securities

20 unchanged sentences

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

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

There have been no significant changes in the valuation techniques during the six months ended June 30, 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 March 31, 2023 and December 31, 2022:

Fair Value Measurements Using

2 unchanged sentences

(Level 2) Significant

March 31, 2023

June 30, 2023

Collateral-dependent loans $ 1,645 $ — $ — $ 1,645

20 unchanged sentences

Unobservable (Level 3) Inputs

The following tables present the fair value measurement of assets recognized in the accompanying consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2023 and December 31, 2022:

Fair Value at March 31,

Fair Value at June 30,

2023 Valuation

7 unchanged sentences

Fair Value of Financial Instruments

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

The following tables present estimated fair values of the Company’s financial instruments at June 30, 2023 and December 31, 2022:

Fair Value Measurements Using

2 unchanged sentences

(Level 2) Significant

March 31, 2023

June 30, 2023

Financial assets

3 unchanged sentences

Held-to-maturity securities 5,751 — 5,659 —

Loans held for sale 340 — — 314

Loans and leases receivable, net 1,043,024 — — 943,604

28 unchanged sentences

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

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

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022

Net income $ 2,692 $ 3,485

8 unchanged sentences

Diluted Earnings Per Share $ 0.26 $ 0.31

Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

Net income $ 5,596 $ 6,503

Shares outstanding for Basic EPS:

Average shares outstanding 11,651,976 12,196,976

average restricted stock award shares not vested 260,810 347,914

average unearned ESOP Shares 890,298 944,405

Shares outstanding for Basic EPS 10,500,868 10,904,657

Additional Dilutive Shares 80,455 395,650

Shares outstanding for Diluted EPS 10,581,323 11,300,307

Basic Earnings Per Share $ 0.53 $ 0.60

Diluted Earnings Per Share $ 0.53 $ 0.58

Benefit Plans

1 unchanged sentence

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

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

The Company’s expense for the plan was $ 66,000 , $ 104,000 , $ 55,000 and $ 108,000 for the three and six months ended June 30, 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, $ 12,009,214 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.

Accordingly, $ 11,825,384 and $ 12,193,043 of common stock acquired by the ESOP was shown as a reduction of stockholders’ equity at June 30, 2023 and December 31, 2022, respectively.

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

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

ESOP expense for the three and six months ended June 30, 2023 and 2022 was approximately $ 141,000 , $ 311,000 , $ 208,000 , and $ 434,000 , respectively.

2023 December 31,

14 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 three months ended March 31, 2023.

Three Months Ended March 31, 2023

The following table summarizes the restricted stock activity in the 2020 EIP during the six months ended June 30, 2023.

Six Months Ended June 30, 2023

Number of Restricted Shares Weighted Average Grant Date Fair Value

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

Vested ( 87,099 ) 10.56

Forfeited — —

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.

Non-vested, June 30, 2023 174,192 10.56

Total compensation cost recognized in the income statement for restricted stock awards during the three and six months ended June 30, 2023 was $ 229,000 and $ 456,000 , and the related tax benefit recognized was $ 48,000 and $ 96,000 , respectively.

As of June 30, 2023, unrecognized compensation expense related to restricted stock awards was $ 1.8 million.

Stock Option Plan.

3 unchanged sentences

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

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

Three Months Ended March 31, 2023

The following table summarizes the stock option activity in the 2020 EIP during the six months ended June 30, 2023.

Six Months Ended June 30, 2023

Number of Shares Weighted-Average Exercise Price

2 unchanged sentences

Forfeited/expired — —

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

Balance, June 30, 2023 1,050,961 10.56

Exercisable at end of period 625,737 $ 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 March 31, 2023 is presented below.

A summary of the status of the Company stock option shares as of June 30, 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, 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.

Non-vested, June 30, 2023 425,224 $ 2.91

Total compensation cost recognized in the income statement for option-based payment arrangements for the three and six months ended June 30, 2023 was $ 154,000 and $ 307,000 , and the related tax benefit recognized was $ 17,000 and $ 34,000 , respectively.

As of June 30, 2023, unrecognized compensation expense related to the stock option awards was $ 1.2 million.

Subsequent Event

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.

Subsequent to June 30, 2023 through August 10, 2023, the Company purchased 25,546 shares of the Company's common stock pursuant to the existing stock repurchase program, leaving 1,082,611 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