Richmond Mutual Bancorporation, Inc. 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Management’s discussion and analysis of financial condition of the Richmond Mutual Bancorporation, Inc. (the “Company”) at June 30, 2023, and the consolidated results of operations for the three and six month periods ended June 30, 2023, compared to the same periods in 2022, is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto appearing in Part I, Item 1, of this Form 10-Q. The terms “we,” “our,” “us,” or the “Company” refer to Richmond Mutual Bancorporation, Inc. and its consolidated direct and indirect subsidiaries, including First Bank Richmond, which we sometimes refer to as the “Bank,” unless the context otherwise requires. Cautionary Note Regarding Forward-Looking Statements Certain matters in this Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact, are based on certain assumptions and are generally identified by use of words such as “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would,” and “could.” These forward-looking statements include, but are not limited to: • statements of our goals, intentions and expectations; • statements regarding our business plans, prospects, growth and operating strategies; • statements regarding the quality of our loan and investment portfolios; and • estimates of our risks and future costs and benefits. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These forward-looking statements are based on our current beliefs and expectations and, by their nature, are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Important factors that could cause our actual results to differ materially from the results anticipated or projected, include, but are not limited to, the following: • potential adverse impacts to economic conditions in the Company's local market areas, other markets where the Company has lending relationships, or other aspects of the Company's business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation, a potential recession, or slowed economic growth caused by increasing political instability from acts of war including Russia's invasion of Ukraine, as well as supply chain disruptions; • higher inflation and the impact of current and future monetary policies of the Federal Reserve in response thereto; • general economic conditions, either nationally or in our market areas, that are worse than expected; • changes in the level and direction of loan or lease delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan and lease losses; • our ability to access cost-effective funding including maintaining the confidence of depositors; • unexpected outflows of uninsured deposits may require us to sell investment securities at a loss; • fluctuations in real estate values, and residential, commercial, and multifamily real estate market conditions; 31 • demand for loans and deposits in our market area; • our ability to implement and change our business strategies; • competition among depository and other financial institutions and equipment financing companies; • the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; • inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans and leases we have made and make; • adverse changes in the securities or secondary mortgage markets; • changes in the quality or composition of our loan, lease or investment portfolios; • our ability to keep pace with technological changes, including our ability to identify and address cyber-security risks such as data security breaches, "denial of service" attacks, "hacking" and identity theft, and other attacks on our information technology systems or on the third-party vendors who perform several of our critical processing functions; • the inability of third-party providers to perform as expected; • our ability to manage market risk, credit risk and operational risk in the current economic environment; • the transition away from the London Interbank Offer Rate ("LIBOR") toward new interest rate benchmarks; • our ability to enter new markets successfully and capitalize on growth opportunities; • our ability to retain key employees; • our compensation expense associated with equity allocated or awarded to our employees; • changes in the financial condition, results of operations or future prospects of issuers of securities that we own; • our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto; • changes in consumer spending, borrowing and savings habits; • changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission ("SEC") or the Public Company Accounting Oversight Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; • legislative or regulatory changes such as the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") and its implementing regulations that may adversely affect our business, and the availability of resources to address such changes; • our ability to pay dividends on our common stock; • other economic, competitive, governmental, regulatory, and technical factors affecting our operations, pricing, products and services; and 32 • the other risks detailed in this report and from time to time in our other filings with the Securities and Exchange Commission ("SEC"), including our Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 Form 10-K”). We undertake no obligation to publicly update or revise any forward-looking statements included in this report or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this report might not occur and you should not put undue reliance on any forward-looking statements. Overview The Company, a Maryland corporation, is a bank holding company for its wholly owned subsidiary, First Bank Richmond. Substantially all of the Company's business is conducted through First Bank Richmond. The Company is regulated by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and the Indiana Department of Financial Institutions ("IDFI"). The Company's corporate office is located at 31 North 9th Street, Richmond, Indiana, and its telephone number is (765) 962-2581. First Bank Richmond is an Indiana state-chartered commercial bank headquartered in Richmond, Indiana. The Bank was originally established in 1887 as an Indiana state-chartered mutual savings and loan association and in 1935 converted to a federal mutual savings and loan association, operating under the name First Federal Savings and Loan Association of Richmond. In 1993, the Bank converted to a state-chartered mutual savings bank and changed its name to First Bank Richmond, S.B. In 1998, the Bank, in connection with its non-stock mutual holding company reorganization, converted to a national bank charter operating as First Bank Richmond, National Association. In July 2007, Richmond Mutual Bancorporation-Delaware, the Bank’s then current holding company, acquired Mutual Federal Savings Bank headquartered in Sidney, Ohio. Mutual Federal Savings Bank was operated independently as a separately chartered, wholly owned subsidiary of Richmond Mutual Bancorporation-Delaware until 2016 when it was combined with the bank through an internal merger transaction that consolidated both banks into a single, more efficient commercial bank charter. In 2017, the Bank converted to an Indiana state-chartered commercial bank and changed its name to First Bank Richmond. The former Mutual Federal Savings Bank continues to operate in Ohio under the name Mutual Federal, a division of First Bank Richmond. First Bank Richmond provides full banking services through its seven full- and one limited-service offices located in Cambridge City (1), Centerville (1), Richmond (5) and Shelbyville (1), Indiana, its five full-service offices located in Piqua (2), Sidney (2) and Troy (1), Ohio, and its loan production office in Columbus, Ohio. 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 Federal Deposit Insurance Corporation (“FDIC”). Our principal business consists of attracting deposits from the general public, as well as brokered deposits, and investing those funds primarily in loans secured by commercial and multi-family real estate, first mortgages on owner-occupied, one- to four-family residences, a variety of consumer loans, direct financing leases and commercial and industrial loans. We also obtain funds by utilizing Federal Home Loan Bank (“FHLB”) advances. Funds not invested in loans generally are invested in investment securities, including mortgage-backed and mortgage-related securities and government sponsored agency and municipal bonds. First Bank Richmond generates commercial, mortgage and consumer loans and leases and receives deposits from customers located primarily in Wayne and Shelby Counties, in Indiana and Shelby, Miami and Franklin (no deposits) Counties, in Ohio. We sometimes refer to these counties as our primary market area. First Bank Richmond’s loans are generally secured by specific items of collateral including real property, consumer assets and business assets. Our leasing operation consists of direct investments in equipment that we lease (referred to as direct finance leases) to small businesses located throughout the United States. Our lease portfolio consists of various kinds of equipment, generally technology-related, such as computer systems, medical equipment and general manufacturing, industrial, construction and transportation equipment. We seek leasing transactions where we believe the equipment leased is integral to the lessee's business. We also provide trust and wealth management services, including serving as executor and trustee under wills and deeds and as guardian and custodian of employee benefits, and manage private investment accounts for individuals and institutions. Total wealth management assets under management and administration were $150.2 million at June 30, 2023. Our results of operations are primarily dependent on net interest income. Net interest income is the difference between interest income, which is the income that is earned on loans and investments, and interest expense, which is the interest that is paid on 33 deposits and borrowings. Other significant sources of pre-tax income are service charges (mostly from service charges on deposit accounts and loan servicing fees), and fees from sale of residential mortgage loans originated for sale in the secondary market. We also recognize income from the sale of investment securities. Changes in market interest rates, the slope of the yield curve, and interest we earn on interest-earning assets or pay on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and noninterest-bearing liabilities and shareholders’ equity, usually have the largest impact on changes in our net interest spread, net interest margin and net interest income during a reporting period. At June 30, 2023, on a consolidated basis, we had $1.4 billion in assets, $1.0 billion in loans and leases, net of allowance, $1.0 billion in deposits and $130.8 million in stockholders’ equity. At June 30, 2023, First Bank Richmond’s total risk-based capital ratio was 14.0%, exceeding the 10.0% requirement for a well-capitalized institution. For the six months ended June 30, 2023, net income was $5.6 million, compared with net income of $6.5 million for the six months ended June 30, 2022. Critical Accounting Estimates We prepare our consolidated financial statements in accordance with GAAP. In doing so, we have to make estimates and assumptions. Our critical accounting estimates are those estimates that involve a significant level of uncertainty at the time the estimate was made, and changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. Accordingly, actual results could differ materially from our estimates. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We have reviewed our critical accounting estimates with the audit committee of our Board of Directors. There have been no significant changes during the six months ended June 30, 2023 to the critical accounting estimates reported in Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Form 10-K, with the exception of the adoption on January 1, 2023 of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), commonly referred to as Current Expected Credit Loss, or CECL, as discussed below. See "Critical Accounting Estimates" included in Part II, Item 7 of our 2022 Form 10-K for a further discussion of our Critical Accounting Estimates. Allowance for Credit Losses. The allowance for credit losses applies to all financial instruments carried at amortized cost. We maintain an allowance for credit losses on loans and leases based on expected future credit losses at the balance sheet date. Loan and lease losses are charged against the allowance when management believes the uncollectibility of a loan or lease balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in our judgment, should be charged-off. A provision for credit losses for loans and leases is charged to operations based on our periodic evaluation of the necessary balance in the allowance. Determining the appropriateness of the allowance for credit losses is complex and requires judgement by management on future factors that are unknown. We have an established process to determine the adequacy of the allowance for credit losses. The determination of the allowance is inherently subjective, as it requires significant estimates, including the amounts and timing of expected future cash flows on similarly-risked loans in their respective segments, the amounts and timing of expected future cash flows on collateral-dependent loans, movement through risk-ratings, economic forecasts, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and other factors, all of which may be susceptible to significant change. At January 1, 2023, we established an allowance for credit losses on unfunded commitments as part of our transition to CECL. This allowance is held and monitored separately from our allowance for credit losses on loans and leases and is periodically adjusted. Significant estimates are used to determine the allowance, including expected future losses of the loan and lease portfolio, changes in composition, information about specific borrower situations and risk-rating adjustments, probability of funding, economic conditions and other factors, all of which may be susceptible to significant change. A provision for credit losses for unfunded commitments is charged to operations periodically upon evaluation of the necessary balance in the allowance. 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 34 cost basis of a financial asset that is not expected to be collectable. The Company follows the requirements of ASC 326 in determining the potential reserve needed on its held to maturity portfolio. Available for Sale Securities. Under Financial Accounting Standards Board (“FASB”) Codification Topic 320 (ASC 320), Investments-Debt, investment securities must be classified as held to maturity, available for sale or trading. Management determines the appropriate classification at the time of purchase. The classification of securities is significant since it directly impacts the accounting for unrealized gains and losses on securities. Debt securities are classified as held to maturity and carried at amortized cost when management has the positive intent and we have the ability to hold the securities to maturity. Securities not classified as held to maturity are classified as available for sale and are carried at fair value, with the unrealized holding gains and losses, net of tax, reported in other comprehensive income and which do not affect earnings until realized. The fair values of our securities are generally determined by reference to quoted prices from reliable independent sources utilizing observable inputs. Certain of our fair values of securities are determined using models whose significant value drivers or assumptions are unobservable and are significant to the fair value of the securities. These models are utilized when quoted prices are not available for certain securities or in markets where trading activity has slowed or ceased. When quoted prices are not available and are not provided by third party pricing services, management judgment is necessary to determine fair value. As such, fair value is determined using discounted cash flow analysis models, incorporating default rates, estimation of prepayment characteristics and implied volatilities. We evaluate all securities on a quarterly basis, and more frequently when economic conditions warrant additional evaluations, for determining if any impairment exists as defined in ASC 326. If an impairment has occurred, it must be determined if the impairment is due to credit or non-credit related factors. In evaluating the possible impairment of securities, consideration is given to the extent to which the fair value is less than cost, the financial condition and near-term prospects of the issuer, and our ability and intent to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, we may consider whether the securities are issued by the federal government or its agencies or government sponsored agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. If management determines that an investment experienced an impairment that is credit-related, it must then be determined if we intend to sell the security, or if it is more likely than not that we will be required to sell the security, before the recovery of its amortized cost basis. If either of these circumstances are present, then the impairment will be recognized in earnings with a corresponding adjustment to the amortized cost basis of the security. If we do not intend to sell the security and it is more likely than not that we will not be required to sell the security before recovery of its amortized cost basis, the present values of expected cash flows to be collected from the security will be compared against the amortized cost basis of the security. If the amortized cost basis of the security is greater than the present cash flows expected from the security, a credit loss would exist and it would determine the amount of allowance, if any, that would be deemed needed. A needed allowance would result in an allowance recognized on the balance sheet, with a corresponding adjustment to earnings, limited to the amount that fair value is less than the amortized cost basis of the security. After recognizing a credit loss through an allowance, periodic assessments are necessary to determine increases or decreases to the credit loss, which require adjustments to the allowance. Any adjustments would be recognized through earnings, not to exceed the net amount of the allowance as limited to the amount that amortized cost exceeds fair value. From time to time, we may dispose of a security in a loss position in response to asset/liability management decisions, future market movements, business plan changes, or if the net proceeds can be reinvested at a rate of return that is expected to recover the loss within a reasonable period of time. Comparison of Financial Condition at June 30, 2023 and December 31, 2022 General. Total assets increased $80.6 million, or 6.1%, to $1.4 billion at June 30, 2023 from December 31, 2022. The increase was primarily the result of an $81.3 million, or 8.5%, increase in loans and leases, net of allowance for credit losses, to $1.0 billion at June 30, 2023, partially offset by a decrease of $4.5 million, or 1.5%, in investment securities to $287.1 million at June 30, 2023. Investment Securities. Investment securities available-for-sale decreased $3.6 million, or 1.2%, to $281.3 million, while investment securities held-to-maturity decreased $921,000, or 13.8%, to $5.8 million at June 30, 2023, compared to December 31, 2022. The decrease in investment securities available-for-sale was primarily due to maturities and paydowns of $12.0 million, partially offset by purchases of securities available-for-sale of $7.1 million. The decrease in investment securities held-to-maturity was the result of scheduled principal repayments and maturities. 35 Loans and Leases. Loans and leases, net of allowance for credit losses on loans and leases, increased $81.3 million, or 8.5%, to $1.0 billion at June 30, 2023 from $961.7 million at December 31, 2022. The increase in loans and leases was attributable to an increase in commercial real estate loans, direct financing leases and multi-family loans of $43.4 million, $18.7 million and $16.6 million, respectively. At June 30, 2023, loans held for sale totaled $340,000, compared to $474,000 at December 31, 2022. Nonperforming loans and leases, consisting of nonaccrual loans and leases and accruing loans and leases 90 days or more past due, totaled $8.5 million or 0.81% of total loans and leases at June 30, 2023, compared to $9.2 million or 0.94% of total loans and leases at December 31, 2022. Accruing loans and leases past due 90 days or more totaled $2.9 million at June 30, 2023, compared to $3.2 million at December 31, 2022. At June 30, 2023, troubled loan modifications totaled $59,000, compared to $428,000 at December 31, 2022, all of which were on nonaccrual status as of such dates. Allowance for Credit Losses. On January 1, 2023, the Bank adopted the accounting standard referred to as CECL. As a result of the change in methodology from the incurred loss method to the CECL method, on January 1, 2023 the Company recorded a one-time adjustment from equity into the allowance for credit losses on loans and leases in the amount of $2.0 million, net of tax. The allowance for credit losses on loans and leases totaled $15.4 million, or 1.45% of total loans and leases outstanding at June 30, 2023. At December 31, 2022, prior to the adoption of CECL, the allowance for loan and lease losses totaled $12.4 million, or 1.27% of total loans and leases outstanding. Additionally, as a part of CECL adoption, the Bank established an allowance for credit losses on unfunded commitments by recording a one-time adjustment from equity of $1.8 million. This allowance, which is reported in other liabilities on the Condensed Consolidated Balance Sheets, totaled $2.1 million at June 30, 2023. Net charge-offs during the first half of 2023 were $137,000 compared to net charge-offs of $127,000 during the first half of 2022. Management regularly analyzes conditions within its geographic markets and evaluates its loan and lease portfolio. The Company evaluated its exposure to potential loan and lease losses as of June 30, 2023, which evaluation included consideration of a potential recession due to inflation, rising interest rates, stock market volatility, and the Russia-Ukraine conflict. Credit metrics are being reviewed and stress testing is being performed on the loan portfolio on an ongoing basis. Potentially higher risk segments of the portfolio, such as hotels and restaurants, are being closely monitored. For additional information on the allowance for credit losses, see "Allowance for Credit Losses on Loans and Leases" and "Economic Outlook" in "Note 4 Loans, Leases and Allowance" of the "Notes to Condensed Consolidated Financial Statements" in this report. Other Assets . Other assets increased $1.2 million, or 5.0%, to $25.7 million at June 30, 2023 from $24.5 million at December 31, 2022, primarily as a result of an increase in deferred tax assets due to the one-time adjustment for CECL in the first quarter of 2023. Deposits. Total deposits increased $34.3 million, or 3.4%, to $1.0 billion at June 30, 2023, compared to December 31, 2022. The increase in deposits primarily was due to an increase in brokered time deposits of $33.1 million and other time deposits of $23.6 million, partially offset by a decrease in savings and money market accounts of $13.0 million. Management attributes the shift in funds to customers taking advantage of higher rates being paid on time deposits in 2023 as a result of interest rate hikes enacted by the Federal Reserve. Brokered deposits increased $33.1 million to $291.0 million, or 28.0% of total deposits, at June 30, 2023, compared to $257.9 million, or 25.7% of total deposits, at December 31, 2022. At June 30, 2023, noninterest-bearing deposits totaled $104.7 million or 10.1% of total deposits, compared to $106.4 million or 10.6% of total deposits at December 31, 2022. As of June 30, 2023, approximately $206.9 million of our deposit portfolio or 19.9% of total deposits, excluding collateralized public deposits, was uninsured. The uninsured amounts are estimated based on the methodologies and assumptions used for First Bank Richmond's regulatory reporting requirements. Borrowings. Total borrowings, consisting solely of FHLB advances, increased $46.0 million to $226.0 million at June 30, 2023, compared to $180.0 million at December 31, 2022, which together with the increase in deposits were used to fund loan growth. Stockholders’ Equity. Stockholders’ equity totaled $130.8 million at June 30, 2023, a decrease of $2.1 million or 1.6% from December 31, 2022. The decrease in stockholders' equity from year-end 2022 resulted from the repurchase of $3.6 million of Company common stock, the payment of $3.0 million in dividends to Company stockholders and the one-time 36 adjustment to retained earnings of $3.8 million for the adoption of CECL during the previous quarter, partially offset by $5.6 million in net income and a $1.5 million reduction in accumulated other comprehensive loss due to improvement in the fair market value of the available-for-sale investment portfolio. The Company repurchased 335,625 shares of Company common stock at an average price of $10.67 per share for a total of $3.6 million during the first six months of 2023. The Company’s equity to asset ratio was 9.28% at June 30, 2023. At June 30, 2023, the Bank’s Tier 1 capital to total assets ratio was 10.8% and the Bank’s capital was well in excess of all regulatory requirements. Comparison of Results of Operations for the Three Months Ended June 30, 2023 and 2022. General. Net income for the three months ended June 30, 2023 was $2.7 million, a $793,000 or 22.8% decrease from net income of $3.5 million for the three months ended June 30, 2022. Diluted earnings per share were $0.26 for the second quarter of 2023, compared to $0.31 diluted earnings per share for the second quarter of 2022. The decrease in net income was the result of a decrease in net interest income of $1.2 million and an increase in noninterest expense of $178,000, partially offset by a decrease in the provision for credit losses of $192,000 and the provision for income taxes of $407,000. Interest Income. Interest income increased $3.8 million, or 30.3%, to $16.2 million during the quarter ended June 30, 2023, compared to $12.4 million during the quarter ended June 30, 2022. Interest income on loans and leases increased $3.4 million, or 32.0%, to $14.1 million for the quarter ended June 30, 2023, from $10.7 million for the comparable quarter in 2022, due to an increase in the average balance of loans and leases of $153.4 million, and an increase of 60 basis points in the average yield earned on loans and leases. The average outstanding loan and lease balance was $1.0 billion for the quarter ended June 30, 2023, compared to $875.8 million for the quarter ended June 30, 2022. The average yield on loans and leases was 5.48% for the quarter ended June 30, 2023, compared to 4.88% for the comparable quarter in 2022. Interest income on investment securities, including FHLB stock, increased $256,000, or 14.8%, to $2.0 million during the quarter ended June 30, 2023, compared to the same quarter in 2022. The increase in interest income on investment securities from the comparable period in 2022 was due to a 53 basis point increase in the average yield earned on investment securities. The average yield on investment securities, including FHLB stock, was 2.62% for the second quarter of 2023, compared to 2.08% for the second quarter of 2022. The average balance of investment securities, including FHLB stock, was $304.2 million for the quarter ended June 30, 2023, compared to $332.9 million for the quarter ended June 30, 2022. Interest Expense. Interest expense increased $5.0 million, or 262.8%, to $6.9 million for the quarter ended June 30, 2023, compared to the quarter ended June 30, 2022. Interest expense on deposits increased $4.3 million, or 334.9%, to $5.5 million for the quarter ended June 30, 2023, from the comparable quarter in 2022. The increase in interest expense on deposits primarily was attributable to a $115.8 million increase in the average balance of, and a 173 basis point increase in the average rate paid on, interest-bearing deposits. The average rate paid on interest-bearing deposits was 2.35% for the quarter ended June 30, 2023, compared to 0.62% for the quarter ended June 30, 2022. The average balance of interest-bearing deposits increased $115.8 million, or 14.0%, to $942.2 million in the quarter ended June 30, 2023, compared to $826.3 million in the comparable quarter in 2022. Interest expense on FHLB advances increased $721,000, or 115.5%, to $1.3 million in the second quarter of 2023 compared to $624,000 for the same quarter in 2022, due to an increase in the average rate paid on and, to a lesser extent, the average balance of FHLB advances. The average rate paid on FHLB borrowings was 2.73% for the quarter ended June 30, 2023, compared to 1.47% for the second quarter of 2022. The average balance of FHLB borrowings totaled $197.1 million during the quarter ended June 30, 2023, compared to $170.3 million for the quarter ended June 30, 2022. Net Interest Income. Net interest income before the provision for credit losses decreased $1.2 million, or 11.5%, to $9.3 million in the second quarter of 2023, compared to $10.5 million for the second quarter of 2022. This decrease was due to a 91 basis point decrease in the average interest rate spread, partially offset by a $122.1 million increase in average interest earning assets. Net interest margin (annualized) was 2.77% for the three months ended June 30, 2023, compared to 3.45% for the three months ended June 30, 2022. The decrease in net interest margin was primarily due to the higher rate paid on interest-bearing liabilities which tend to be shorter in duration than our assets and re-price or reset faster than assets. Since March 2022, in response to inflation, the Federal Open Market Committee ("FOMC") of the Federal Reserve System has increased the target range for the federal funds rate by 500 basis points, including 25 basis points during the second quarter of 2023, to a range of 5.00% to 5.25%. Subsequent to June 30, 2023, the FOMC increased the target range for the federal funds rate by an additional 25 basis points. Average Balances, Interest and Average Yields/Cost. The following tables set forth for the periods indicated, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities, resultant yields, interest rate spread, 37 net interest margin (otherwise known as net yield on interest-earning assets), and the ratio of average interest-earning assets to average interest-bearing liabilities. Average balances have been calculated using daily balances. Non-accruing loans have been included in the table as loans carrying a zero yield. Loan fees are included in interest income on loans and are not material. Three Months Ended June 30, 2023 2022 Average Balance Outstanding Interest Earned/ Paid Yield/ Rate Average Balance Outstanding Interest Earned/ Paid Yield/ Rate (Dollars in thousands) Interest-earning assets: Loans and leases receivable $ 1,029,162 $ 14,098 5.48 % $ 875,801 $ 10,682 4.88 % Securities 294,076 1,810 2.46 % 323,078 1,656 2.05 % FHLB stock 10,136 180 7.10 % 9,781 78 3.19 % Cash and cash equivalents and other 12,646 135 4.24 % 15,254 32 0.84 % Total interest-earning assets 1,346,020 16,223 4.82 % 1,223,914 12,448 4.07 % Non-earning assets 43,557 41,860 Total assets 1,389,577 1,265,774 Interest-bearing liabilities: Savings and money market accounts 288,124 1,356 1.88 % 296,224 388 0.52 % Interest-bearing checking accounts 146,396 236 0.64 % 169,618 111 0.26 % Certificate accounts 507,630 3,953 3.11 % 360,498 776 0.86 % Borrowings 197,137 1,345 2.73 % 170,264 624 1.47 % Total interest-bearing liabilities 1,139,287 6,890 2.42 % 996,604 1,899 0.76 % Noninterest-bearing demand deposits 103,231 113,887 Other liabilities 13,315 8,323 Stockholders' equity 133,744 146,960 Total liabilities and stockholders' equity 1,389,577 1,265,774 Net interest income $ 9,333 $ 10,549 Net earning assets $ 206,733 $ 227,310 Net interest rate spread (1) 2.40 % 3.31 % Net interest margin (2) 2.77 % 3.45 % Average interest-earning assets to average interest-bearing liabilities 118.15 % 122.81 % _____________ (1) Annualized. Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities. (2) Annualized. Net interest margin represents net interest income divided by average total interest-earning assets. Provision for Credit Losses. The provision for credit losses for the three months ended June 30, 2023 totaled $8,000, compared to a $200,000 provision for loan and lease losses for the three months ended June 30, 2022, a $198,000 or 95.9% decrease. As a result of the adoption of CECL on January 1, 2023, the provision for credit losses calculated prior to that date was determined using the previously applied incurred loss methodology rather than the CECL methodology, and as a result the amounts are not directly comparable. Net charge-offs during the second quarter of 2023 were $215,000 compared to net charge-offs of $136,000 in the second quarter of 2022. While we believe the steps we have taken and continue to take are necessary to effectively manage our portfolio, uncertainties relating to the level of our allowance for credit losses remain heightened as a result of continued concern about a potential recession due to inflation, rising interest rates, stock market volatility and the Russia-Ukraine conflict. Noninterest Income. Noninterest income increased $2,000, or 0.1%, to $1.2 million for the quarter ended June 30, 2023, compared to the same quarter in 2022. The increase in noninterest income resulted primarily from an increase in other 38 income of $99,000, or 43.8%, to $325,000 and an increase in service charges on deposit accounts of $27,000, or 11.0%, to $276,000. The increase in other income was due to fees earned from our participation in a loan hedging program with a correspondent bank, along with increased wealth management income. The increase in service fees on deposit accounts during the second quarter of 2023 compared to the second quarter of 2022 was primarily due to increased early withdrawal fees. Net gains on loan and lease sales decreased $68,000, or 30.5%, to $154,000 for the quarter ended June 30, 2023 as compared to the comparable quarter in 2022. The decrease in net gains on loan and lease sales was due to increased mortgage rates causing decreased mortgage banking activity. During the three months ended June 30, 2023, the Company sold $5.8 million of loans compared to the sale of $9.9 million of loans during the three months ended June 30, 2022. Card fee income increased $11,000, or 3.8%, to $313,000 in the second quarter of 2023 from $302,000 in the second quarter of 2022 due to increased card usage. Loan and lease servicing income decreased $68,000, to $110,000 for the second quarter of 2023 compared to $178,000 for the comparable quarter in 2022 due to a recovery of $76,000 recognized in the second quarter of 2022. Noninterest Expense. Noninterest expense increased $178,000, or 2.5%, to $7.3 million for the three months ended June 30, 2023, from $7.2 million for the same period in 2022. Salaries and employee benefits decreased $243,000, or 5.4%, to $4.3 million for the quarter ended June 30, 2023, from $4.5 million for the same quarter in 2022. The decrease in salaries and benefits in the second quarter of 2023 from the second quarter of 2022 was primarily due to decreased bonus expense. Data processing fees increased $254,000, or 44.7%, to $822,000 in the second quarter of 2023 compared to the same quarter of 2022, primarily due to increased software and core provider expenses. Deposit insurance expense increased $111,000, or 137.0% from the comparable quarter in 2022 primarily due to a change in the asset and deposit mix and an increase in the FDIC assessment rate in 2023. Income Tax Expense. Income tax expense decreased $407,000 during the three months ended June 30, 2023, compared to the same period in 2022, due to a lower level of pre-tax income. The effective tax rate for the second quarter of 2023 was 15.0% compared to 20.2% for the same quarter a year ago. The decrease in the effective tax rate was a result of the use of a captive insurance company, which allows the Company to assume more control over insurance risks and resulted in a more tax-efficient structure. Comparison of Results of Operations for the Six Months Ended June 30, 2023 and 2022. General. Net income for the six months ended June 30, 2023 was $5.6 million, a $907,000 or 13.9%, decrease from net income of $6.5 million for the six months ended June 30, 2022. Diluted earnings per share were $0.53 for the first six months of 2023, compared to $0.58 diluted earnings per share for the first six months of 2022. The decrease in net income was primarily the result of a $1.4 million decrease in net interest income, a $17,000 decrease in noninterest income, and a $206,000 increase in noninterest expense, partially offset by a $222,000 decrease in the provision for credit losses. Interest Income. Interest income increased $7.0 million, or 28.8%, to $31.4 million during the six months ended June 30, 2023, compared to $24.4 million during the six months ended June 30, 2022. Interest income on loans and leases increased $6.3 million, or 30.3%, to $27.3 million for the six months ended June 30, 2023, from $20.9 million for the comparable period in 2022, due to a higher average balance of loans and leases and an increase in the average loan and lease yield of 56 basis points. The average outstanding loan and lease balance was $1.0 billion for the first six months of 2023, compared to $862.9 million for the first six months of 2022. The average yield on loans and leases was 5.42% for the six months ended June 30, 2023, compared to 4.86% for the comparable period in 2022. Interest income on investment securities, including FHLB stock, increased $522,000, or 15.3%, to $3.9 million during the six months ended June 30, 2023, compared to the same period in 2022. The increase in interest income on investment securities from the comparable period in 2022 was due to an increase of 62 basis points in the average yield earned on investment securities, partially offset by a decrease in the average balance of investment securities of $43.5 million. The average yield on investment securities, including FHLB stock, was 2.58% for the first half of 2023, compared to 1.95% for the first half of 2022. The average balance of investment securities, including FHLB stock, was $304.6 million for the six months ended June 30, 2023, compared to $348.1 million for the six months ended June 30, 2022. Interest Expense. Interest expense increased $8.4 million, or 222.4%, to $12.2 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. Interest expense on deposits increased $7.0 million, or 279.3%, to $9.6 million for the six months ended June 30, 2023, from the comparable period in 2022. The increase in interest expense on deposits primarily was attributable to a $111.7 million increase in average interest-bearing deposit balances and a 190 basis point increase in the average rate paid on certificate of deposit accounts to 2.78% during the six months ended June 30, 2023, from 0.88% for the comparable period in 2022. The average rate paid on interest-bearing deposits was 2.08% for the six months ended June 30, 2023, compared to 0.62% for the six months ended June 30, 2022. The average balance of interest-bearing 39 deposits totaled $921.7 million in the six months ended June 30, 2023, compared to $810.0 million in the comparable period in 2022. Interest expense on FHLB advances increased $1.4 million, or 108.9%, to $2.6 million in the first half of 2023 compared to $1.3 million for the same period in 2022, due to a 124 basis point increase in the average rate paid on advances to 2.67% during the six months ended June 30, 2022, from 1.43% for the comparable period in 2022, and a $21.0 million increase in the average balance of FHLB advances during the six months ended June 30, 2023 as compared to the first six months of 2022. Net Interest Income. Net interest income before the provision for credit losses decreased $1.4 million, or 6.8%, to $19.2 million in the first six months of 2023, compared to $20.6 million for the first six months of 2022. This decrease was primarily due to a 63 basis point decrease in the average interest rate spread during the first six months of 2023 compared to the comparable period in 2022. Net interest margin (annualized) was 2.90% for the six months ended June 30, 2023, compared to 3.36% for the six months ended June 30, 2022. The decrease in net interest margin was primarily due to the increased rate paid on interest-bearing liabilities which tend to be shorter in duration than our assets and re-price or reset faster than assets. Average Balances, Interest and Average Yields/Cost. The following tables set forth for the periods indicated, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities, resultant yields, interest rate spread, net interest margin (otherwise known as net yield on interest-earning assets), and the ratio of average interest-earning assets to average interest-bearing liabilities. Average balances have been calculated using daily balances. Non-accruing loans have been included in the table as loans carrying a zero yield. Loan fees are included in interest income on loans and are not material. 40 Six Months Ended June 30, 2023 2022 Average Balance Outstanding Interest Earned/ Paid Yield/ Rate Average Balance Outstanding Interest Earned/ Paid Yield/ Rate (Dollars in thousands) Interest-earning assets: Loans and leases receivable $ 1,006,806 $ 27,291 5.42 % $ 862,940 $ 20,948 4.86 % Securities 294,510 3,606 2.45 % 338,289 3,242 1.92 % FHLB stock 10,087 318 6.31 % 9,844 161 3.27 % Cash and cash equivalents and other 11,114 200 3.60 % 16,970 39 0.46 % Total interest-earning assets 1,322,517 31,415 4.75 % 1,228,043 24,390 3.97 % Non-earning assets 43,909 38,818 Total assets 1,366,426 1,266,861 Interest-bearing liabilities: Savings and money market accounts 283,840 2,353 1.66 % 280,313 725 0.52 % Interest-bearing checking accounts 149,787 425 0.57 % 167,630 208 0.25 % Certificate accounts 488,034 6,792 2.78 % 362,011 1,591 0.88 % Borrowings 197,823 2,641 2.67 % 176,845 1,264 1.43 % Total interest-bearing liabilities 1,119,484 12,211 2.18 % 986,799 3,788 0.77 % Noninterest-bearing demand deposits 100,271 112,393 Other liabilities 13,660 7,450 Stockholders' equity 133,011 160,219 Total liabilities and stockholders' equity 1,366,426 1,266,861 Net interest income $ 19,204 $ 20,602 Net earning assets $ 203,033 $ 241,244 Net interest rate spread (1) 2.57 % 3.20 % Net interest margin (2) 2.90 % 3.36 % Average interest-earning assets to average interest-bearing liabilities 118.14 % 124.45 % _____________ (1) Annualized. Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities. (2) Annualized. Net interest margin represents net interest income divided by average total interest-earning assets. Provision for Credit Losses. The provision for credit losses for the six months ended June 30, 2023 totaled $178,000, compared to a $400,000 provision for loan and lease losses for the six months ended June 30, 2022, a $222,000 or 55.4% decrease. As a result of the adoption of CECL on January 1, 2023, the provision for credit losses calculated prior to that date was determined using the previously applied incurred loss methodology rather than the CECL methodology, and as a result the amounts are not directly comparable. Net charge-offs during the first half of 2023 were $137,000 compared to net charge-offs of $127,000 in the first half of 2022. While we believe the steps we have taken and continue to take are necessary to effectively manage our portfolio, uncertainties relating to the level of our allowance for credit losses remain heightened as a result of continued concern about a potential recession due to inflation, rising interest rates, stock market volatility and the Russia-Ukraine conflict. Noninterest Income. Noninterest income decreased $17,000, or 0.7%, to $2.3 million for the six months ended June 30, 2023, compared to the same period in 2022. The decrease in noninterest income resulted primarily from a $155,000, or 33.4%, decrease in net gains on loan and lease sales to $310,000 during the first half of 2023, compared to $465,000 during the first half of 2022. The decrease in net gains on loan and lease sales was due to increased mortgage rates causing decreased 41 mortgage banking activity. During the six months ended June 30, 2023, the Company sold $11.3 million of loans compared to the sale of $20.5 million of loans during the six months ended June 30, 2022. Card fee income increased $21,000, or 3.6%, to $601,000 in the first half of 2023 from $580,000 in the first half of 2022 due to increased debit card usage. Loan and lease servicing income increased $24,000, or 11.5%, to $230,000 for the first half of 2023 compared to $206,000 for the comparable period in 2022. Service fees on deposit accounts increased $74,000, or 15.3%, to $557,000 for the six months ended June 30, 2023, compared to $483,000 for the six months ended June 30, 2022. The increase in service fees on deposit accounts during the first half of 2023 compared to the first half of 2022 was primarily the result of increased early withdrawal fees. Noninterest Expense. Noninterest expense increased $206,000, or 1.4%, to $14.7 million for the six months ended June 30, 2023, from $14.5 million for the same period in 2022. Salaries and employee benefits decreased $452,000, or 5.0%, to $8.5 million for the six months ended June 30, 2023, compared to the same period in 2022 primarily due to decreased bonus expense. Data processing fees increased $432,000, or 35.2%, to $1.7 million in the first six months of 2023 compared to the same period of 2022, primarily due to increased software and core provider expenses. Deposit insurance expense increased $198,000, or 122.2%, to $360,000 in the first six months of 2023 compared to the same period of 2022, primarily due to a change in the asset and deposit mix and a higher FDIC assessment rate during 2023. Other expenses increased $119,000, or 6.8%, to $1.9 million in the first half of 2023 compared to the same period of 2022 primarily due to increased expenses related to brokered deposits and employee related expenses. Income Tax Expense. Income tax expense decreased $492,000 during the six months ended June 30, 2023, compared to the same period in 2022 due to a lower level of pre-tax income. The effective tax rate for the first half of 2023 was 15.3%, compared to 18.7% for the first half of 2022. The decrease in the effective tax rate was the result of the use of a captive insurance company, which allows the Company to assume more control over insurance risks and resulted in a more tax-efficient structure. Capital and Liquidity Capital. Shareholders' equity totaled $130.8 million at June 30, 2023 and $133.0 million at December 31, 2022. In addition to net income of $5.6 million, other sources of capital during the first six months of 2023 included other comprehensive income, net of tax, of $1.6 million, $311,000 related to the allocation of ESOP shares during the year and $763,000 related to stock-based compensation. Uses of capital during the first six months of 2023 included $3.0 million of dividends paid on common stock, $3.6 million of stock repurchases, and $3.8 million due to the one-time adjustment to retained earnings for the adoption of CECL. The increase in the accumulated other comprehensive income/loss component of shareholders' equity was caused by changes to the unrealized gains and losses on available-for-sale securities. We paid a regular quarterly dividend of $0.14 per common share during the first half of 2023, and regular quarterly dividends of $0.10 per common share during 2022. We currently expect to continue the current practice of paying regular quarterly cash dividends on common stock subject to the Board of Directors' discretion to modify or terminate this practice at any time and for any reason without prior notice. Assuming continued payment during 2023 at the current dividend rate of $0.14 per share, our average total dividend paid each quarter would be approximately $1.6 million based on the number of our currently outstanding shares at June 30, 2023. Stock Repurchase Plans. From time to time, our board of directors has authorized stock repurchase plans. In general, stock-repurchase plans allow us to proactively manage our capital position and return excess capital to shareholders. Shares purchased under such plans also provide us with shares of common stock necessary to satisfy obligations related to stock compensation awards. On June 6, 2023, the Company announced that the Board of Directors approved an amendment to the Company's existing stock repurchase program authorizing the purchase of up to 321,386 shares of the Company’s issued and outstanding common stock in addition to the 827,554 shares remaining available for repurchase at that date under the existing program, and extending the stock repurchase program's expiration date to June 6, 2024, unless completed sooner. As of June 30, 2023, the Company had approximately 1,108,157 shares available for repurchase under its existing stock repurchase program. The repurchase program does not obligate the Company to purchase any particular number of shares. See Part II, Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds. Liquidity. Liquidity measures the ability to meet current and future cash flow needs as they become due. The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits and to take advantage of interest rate market opportunities. The ability of a financial institution to meet its current financial obligations is a function of its balance sheet structure, its ability to liquidate assets and its access to alternative sources of funds. The objective 42 of our liquidity management is to manage cash flow and liquidity reserves so that they are adequate to fund our operations and to meet obligations and other commitments on a timely basis and at a reasonable cost. We seek to achieve this objective and ensure that funding needs are met by maintaining an appropriate level of liquid funds through asset/liability management, which includes managing the mix and time to maturity of financial assets and financial liabilities on our balance sheet. Our liquidity position is enhanced by our ability to raise additional funds as needed in the wholesale markets. Asset liquidity is provided by liquid assets which are readily marketable or pledgeable or which will mature in the near future. Liquid assets generally include cash, interest-bearing deposits in banks, securities available for sale, maturities and cash flow from securities held to maturity, sales of fixed rate residential mortgage loans in the secondary market, and federal funds sold and resell agreements. Liability liquidity generally is provided by access to funding sources which include core deposits and advances from the FHLB and other borrowing relationships with third party financial institutions. Our liquidity position is continuously monitored and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Liquidity risk management is an important element in our asset/liability management process. We regularly model liquidity stress scenarios to assess potential liquidity outflows or funding problems resulting from economic disruptions, volatility in the financial markets, unexpected credit events or other significant occurrences deemed problematic by management. These scenarios are incorporated into our contingency funding plan, which provides the basis for the identification of our liquidity needs. Our liquid assets in the form of cash and cash equivalents, interest earning time deposits and investments available-for-sale totaled $299.3 million at June 30, 2023. Certificates of deposit that are scheduled to mature in less than one year from June 30, 2023 totaled $350.8 million. Historically, the Bank has been able to retain a significant amount of its deposits as they mature. As of June 30, 2023, we had approximately $5.8 million held in an interest-bearing account at the Federal Reserve. We also have the ability to borrow funds as a member of the FHLB. As of June 30, 2023, based upon available, pledgeable collateral, our total remaining borrowing capacity with the FHLB was approximately $51.6 million. Furthermore, at June 30, 2023, we had approximately $119.9 million in securities that were unencumbered by a pledge and could be used to support additional borrowings of up to $116.9 million through repurchase agreements or the Federal Reserve discount window, as needed. As of June 30, 2023, management was not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on us. Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities for the six months ended June 30, 2023 was $6.4 million, compared to $10.0 million provided by operating activities for the six months ended June 30, 2022. During the six months ended June 30, 2023, net cash used in investing activities was $78.6 million, which consisted primarily of net change in loans receivable, compared to $52.5 million of cash used in investing activities for the six months ended June 30, 2022. Net cash provided by financing activities for the six months ended June 30, 2023 was $73.8 million, which was comprised primarily of net change in borrowings, compared to $33.9 million provided by financing activities during the six months ended June 30, 2022. Management believes the capital sources are adequate to meet all reasonably foreseeable short-term and long-term cash requirements and there has not been a material change in our liquidity and capital resources since the information disclosed in our 2022 Form 10-K other than set forth above. Richmond Mutual Bancorporation is a separate legal entity from First Bank Richmond and must provide for its own liquidity. In addition to its own operating expenses, Richmond Mutual Bancorporation is responsible for paying for any stock repurchases, dividends declared to its stockholders and other general corporate expenses. Since Richmond Mutual Bancorporation is a holding company and does not conduct operations, its primary sources of liquidity are interest on investment securities purchased with proceeds from our initial public offering, dividends up-streamed from First Bank Richmond and borrowings from outside sources. Banking regulations may limit the amount of dividends that may be paid to us by First Bank Richmond. At June 30, 2023, Richmond Mutual Bancorporation, on an unconsolidated basis, had $18.6 million in cash, noninterest-bearing deposits and liquid investments generally available for its cash needs. Regulatory Capital Requirements. First Bank Richmond is subject to minimum capital requirements imposed by the FDIC. The FDIC may require us to have additional capital above the specific regulatory levels if it believes we are subject to increased risk due to asset problems, high interest rate risk and other risks. At June 30, 2023, First Bank Richmond’s regulatory capital exceeded the FDIC regulatory requirements, and First Bank Richmond was well-capitalized under regulatory prompt 43 corrective action standards. Consistent with our goals to operate a sound and profitable organization, our policy is for First Bank Richmond to maintain well-capitalized status. Actual Minimum for Capital Adequacy Purposes Categorized as "Well-Capitalized" Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio (Dollars in thousands) As of June 30, 2023 Total risk-based capital (to risk weighted assets) $ 169,748 14.0 % $ 96,835 8.0 % $ 121,043 10.0 % Tier 1 risk-based capital (to risk weighted assets) 154,589 12.8 72,626 6.0 96,835 8.0 Common equity tier 1 capital (to risk weighted assets) 154,589 12.8 54,470 4.5 78,678 6.5 Tier 1 leverage (core) capital (to adjusted tangible assets) 154,589 10.8 57,202 4.0 71,503 5.0 As of December 31, 2022 Total risk-based capital (to risk weighted assets) $ 164,804 14.3 % $ 92,134 8.0 % $ 115,168 10.0 % Tier 1 risk-based capital (to risk weighted assets) 152,391 13.2 69,101 6.0 92,134 8.0 Common equity tier 1 capital (to risk weighted assets) 152,391 13.2 51,826 4.5 74,859 6.5 Tier 1 leverage (core) capital (to adjusted tangible assets) 152,391 11.2 54,421 4.0 68,026 5.0 Pursuant to the capital regulations of the FDIC and the other federal banking agencies, First Bank Richmond must maintain a capital conservation buffer consisting of additional common equity tier 1 (“CET1”) capital greater than 2.5% of risk-weighted assets above the required minimum levels of risk-based CET1 capital, tier 1 capital and total capital in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses. At June 30, 2023, the Bank’s CET1 capital exceeded the required capital conservation buffer. For a bank holding company with less than $3.0 billion in assets, the capital guidelines apply on a bank only basis and the Federal Reserve Board expects the holding company’s subsidiary banks to be well capitalized under the prompt corrective action regulations. If Richmond Mutual Bancorporation was subject to regulatory guidelines for bank holding companies with $3.0 billion or more in assets, at June 30, 2023, it would have exceeded all regulatory capital requirements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK There has not been any material change in the market risk disclosures contained in our 2022 Form 10-K.