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Income Statement Summary

Net interest income before the (recovery of)/provision for credit losses decreased $143,000, or 1.5%, to $9.4 million in the third quarter of 2024, compared to $9.6 million in the second quarter of 2024, and increased $305,000, or 3.3%, from $9.1 million in the third quarter of 2023. The decrease from the second quarter of 2024 was due to a seven basis point decrease in the average interest rate spread, partially offset by a $4.2 million increase in average net earning assets.  The increase from the comparable quarter in 2023 was due to an $80.0 million increase in average interest earning assets, partially offset by a 13 basis point decrease in the average interest rate spread. Between March 2022 and January 2024, in response to continuing elevated inflation, the Federal Open Market Committee of the Federal Reserve hiked interest rates a total of 11 times, to a range of 5.25% to 5.50% until September 18, 2024 when the rates were reduced to the range of 4.75% to 5.00%. While interest income benefited from the repricing impact of the higher interest rate environment on earning asset yields, the benefits were offset by the higher cost of interest-bearing deposit accounts and borrowings, which tend to be shorter in duration than our assets and re-price or reset faster than assets.

Interest income increased $176,000, or 0.9%, to $20.3 million during the quarter ended September 30, 2024, compared to the quarter ended June 30, 2024, and increased $2.8 million, or 16.4%, compared to the quarter ended September 30, 2023.

Interest income on loans and leases increased $260,000, or 1.5%, to $18.1 million for the quarter ended September 30, 2024, compared to $17.8 million in the second quarter of 2024, due to a $3.9 million increase in the average balance of loans and leases, and an increase of seven basis points to 6.27% in the average yield earned on loans and leases. Interest income on loans and leases increased $2.8 million, or 18.3%, in the third quarter of 2024 compared to the third quarter of 2023, due to an increase in the average balance of loans and leases of $84.3 million and an increase of 56 basis points in the average yield earned on loans and leases.

Interest income on investment securities, excluding FHLB stock, decreased $34,000, or 2.0%, to $1.7 million during the quarter ended September 30, 2024, compared to the quarter ended June 30, 2024, and decreased $102,000, or 5.7%, from the comparable quarter in 2023. The decrease compared to the second quarter of 2024 was due to a $2.3 million decrease in the average balance and a three basis point decrease in the average yield earned on investment securities. The decrease compared to the third quarter of 2023 was due to a $12.7 million decrease in the average balance, primarily as a result of proceeds received from maturities and paydowns on securities being used to fund loan growth, and a three basis point decrease in the average yield earned on investment securities. Dividends on FHLB stock decreased $20,000, or 6.2%, to $302,000 during the quarter ended September 30, 2024 compared to the quarter ended June 30, 2024, and increased $63,000, or 26.4%, compared to the quarter ended September 30, 2023, due to changes in the amount of FHLB stock held during the periods. Interest income on cash and cash equivalents decreased $30,000, or 13.6%, during the quarter ended September 30, 2024, compared to the quarter ended June 30, 2024, and increased $86,000, or 84.3%, compared to the quarter ended September 30, 2023.  The decrease in interest income on cash and cash equivalents in the third quarter of 2024 from the second quarter of 2024 was due to a nine basis point decrease in the average yield and a $618,000 decrease in the average balance.  The increase in interest income on cash and cash equivalents in the third quarter of 2024 from the third quarter of 2023 was due to an 81 basis point increase in the average yield along with a $5.5 million increase in the average balance of cash and cash equivalents.

Interest expense increased $319,000, or 3.0%, to $10.8 million for the quarter ended September 30, 2024 compared to the quarter ended June 30, 2024, and increased $2.5 million, or 30.7%, compared to the quarter ended September 30, 2023. Interest expense on deposits increased $330,000, or 4.1%, to $8.3 million for the quarter ended September 30, 2024, compared to the previous quarter and increased $2.0 million, or 31.9%, from the comparable quarter in 2023. The increase from the previous quarter was primarily due to a 10 basis point increase in the average rate paid on, and a $9.8 million increase in the average balances of, interest-bearing deposits. The increase from the comparable quarter in 2023 was due to an increase of $61.8 million in average balance of, and a 64 basis point increase in the average rate paid on, interest-bearing deposits. The average rate paid on interest-bearing deposits was 3.33% for the quarter ended September 30, 2024, compared to 3.23% and 2.69% for the quarters ended June 30, 2024 and September 30, 2023, respectively.

Interest expense on FHLB borrowings decreased $11,000, or 0.5%, to $2.5 million for the third quarter of 2024 compared to the previous quarter and increased $529,000, or 26.9%, from the comparable quarter in 2023. The decrease from the previous quarter was primarily due to a $13.1 million decrease in the average balance of FHLB borrowing, partially offset by a 19 basis point increase in the average rate paid. The increase from the comparable quarter in 2023 was primarily due to an increase of 58 basis points in the average rate paid on FHLB borrowings and an increase in the average balance of FHLB borrowings of $20.0 million. The average balance of FHLB borrowings totaled $244.8 million during the quarter ended September 30, 2024, compared to $257.9 million and $224.8 million for the quarters ended June 30, 2024 and September 30, 2023, respectively. The average rate paid on FHLB borrowings was 4.08% for the quarter ended September 30, 2024, 3.89% for the quarter ended June 30, 2024, and 3.50% for the third quarter of 2023.

Annualized net interest margin decreased to 2.60% for the third quarter of 2024, compared to 2.64% for the second quarter of 2024, and from 2.66% for the third quarter of 2023. The decrease in the net interest margin was primarily due to greater increases in the rates paid and average balances of our interest-bearing liabilities as compared to our interest-earning assets.

A reversal of the provision for credit losses of $99,000 was recognized in the third quarter of 2024, compared to a provision for credit losses of $270,000 for the quarter ended June 30, 2024, and $50,000 for the quarter ended September 30, 2023. Net charge-offs during the third quarter of 2024 were $464,000, compared to $450,000 during the second quarter of 2024 and $299,000 during the third quarter of 2023. The reversal of provision for credit losses during the quarter was due to the availability of increased details within certain loan categories, which allowed for more precise risk profiling. Additionally, macroeconomic inputs, credit metrics, and refreshed loss driver data were updated to further refine our allowance calculation.

Noninterest income increased $213,000, or 19.2%, to $1.3 million for the quarter ended September 30, 2024 compared to the quarter ended June 30, 2024, and increased $168,000, or 14.5%, from the comparable quarter in 2023. The increase in noninterest income from the second quarter of 2024 primarily resulted from an increase in net gains on loan and lease sales, which increased $121,000, or 133.7%, to $211,000 in the third quarter of 2024 compared to the prior quarter. Service charges on deposit accounts increased $15,000, or 5.1%, to $325,000 for the quarter ended September 30, 2024, compared to $310,000 for the second quarter of 2024. Other income increased $13,000, or 3.8%, to $354,000 in the third quarter of 2024 compared to $341,000 in the previous quarter. The increase in noninterest income from the comparable quarter in 2023 was primarily due to an increase in net gains on loan and lease sales and service charges on deposit accounts, partially offset by a decrease in other income. Net gains on loan and lease sales increased $122,000, or 135.8%, compared to the same quarter in 2023, due to increased mortgage banking activity. Service fees on deposit accounts increased $51,000, or 18.5%, in the third quarter of 2024 from the comparable quarter in 2023, due to higher transaction activity and early withdraw fees, coupled with year-over-year deposit growth. Other income decreased $24,000, or 6.3%, to $354,000 for the quarter ended September 30, 2024, compared to $378,000 for the comparable quarter in 2023 due to fees earned from our participation in a loan hedging program with a correspondent bank in 2023.

Total noninterest expense decreased $36,000, or 0.5%, to $8.0 million for the three months ended September 30, 2024, compared to the second quarter of 2024, and increased $3,000 compared to the same period in 2023. Salaries and employee benefits decreased $91,000, or 2.0%, to $4.6 million for the quarter ended September 30, 2024, compared to the second quarter of 2024, and increased $204,000 compared to the quarter ended September 30, 2023. The decrease in salaries and benefits from the second quarter of 2024 was primarily a result of a reduction in the number of full-time equivalent employees due to employee retirements, while the increase from the third quarter of 2023 was due to increased compensation and insurance expenses. Deposit insurance expense remained flat at $380,000 for the quarter ended September 30, 2024, compared to the second quarter of 2024, and increased $100,000, or 35.7%, from the comparable quarter in 2023 primarily due to changes in the asset and deposit mix. Legal and professional fees decreased $18,000, or 3.7%, to $463,000 for the quarter ended September 30, 2024, compared to the second quarter of 2024 and decreased $65,000, or 12.3%, from the comparable quarter in 2023 primarily due to decreased accounting and audit expenses.  Other expenses increased $44,000, or 5.1%, in the third quarter of 2024 compared to the prior quarter, and decreased $236,000, or 20.4%, compared to the same quarter of 2023. The decrease in other expenses from the comparable quarter of 2023 primarily was due to a reduction in losses due to fraud, and a decrease in loan closing expenses.

Income tax expense increased $64,000 during the three months ended September 30, 2024 compared to the quarter ended June 30, 2024, and increased $95,000 compared to the quarter ended September 30, 2023, due to increases in pre-tax income. The effective tax rate for the third quarter of 2024 was 13.0%, compared to 12.9% and 12.3% in the second quarter of 2024 and the third quarter a year ago, respectively.

Balance Sheet Summary

Total assets increased $31.5 million, or 2.2%, to $1.5 billion at September 30, 2024 from December 31, 2023. The increase was primarily the result of a $50.9 million, or 4.7%, increase in loans and leases, net of allowance for credit losses, to $1.1 billion, partially offset by a $16.3 million, or 5.7%, decrease in investment securities to $271.3 million at September 30, 2024.

The increase in loans and leases was attributable to an increase in multi-family loans, commercial and industrial loans, residential mortgage loans, and commercial real estate loans of $45.0 million, $11.2 million, $10.8 million and $6.8 million, respectively.

Nonperforming loans and leases, consisting of nonaccrual loans and leases and accruing loans and leases more than 90 days past due, totaled $6.7 million, or 0.58% of total loans and leases, at September 30, 2024, compared to $8.0 million, or 0.72%, at December 31, 2023. Accruing loans past due more than 90 days totaled $1.6 million at September 30, 2024, compared to $1.7 million at December 31, 2023.

The allowance for credit losses on loans and leases increased $110,000, or 0.7%, to $15.8 million at September 30, 2024 from $15.7 million at December 31, 2023. At September 30, 2024 the allowance for credit losses on loans and leases totaled 1.36% of total loans and leases outstanding, compared to 1.42% at December 31, 2023.  Net charge-offs during the first nine months of 2024 were $1.2 million, compared to net charge-offs of $436,000 during the comparable period of 2023.

Management regularly analyzes conditions within its geographic markets and evaluates its loan and lease portfolio. The Company evaluated its exposure to potential credit losses as of September 30, 2024, which included consideration of a potential recession due to inflation, stock market volatility, and overall geopolitical tensions.  Credit metrics are being reviewed and stress testing is being performed on the loan portfolio on an ongoing basis.

Investment securities decreased $16.3 million, or 5.7%, to $271.3 million at September 30, 2024 compared to $287.6 million at December 31, 2023. Investment securities decreased primarily due to $14.6 million in maturities and principal repayments and the sale of $6.9 million of available-for-sale securities. The proceeds received from maturities, repayments, and sales of securities were used to fund loan growth.

Total deposits increased $48.0 million, or 4.6%, to $1.1 billion at September 30, 2024, compared to December 31, 2023. The increase in deposits from December 31, 2023 primarily was due to an increase in non-brokered time deposits of $41.6 million, which were used primarily to fund loan demand, and savings and money-market accounts of $27.0 million, partially offset by a decrease in demand deposit accounts of $31.4 million. Brokered time deposits totaled $279.6 million, or 25.7% of total deposits, at September 30, 2024, compared to $268.8 million, or 25.8% of total deposits at December 31, 2023. Noninterest-bearing demand deposits decreased $15.9 million to $98.5 million at September 30, 2024 compared to $114.4 million at December 31, 2023, and totaled 9.0% of total deposits at September 30, 2024. Management attributes the shift in funds from transaction accounts to retail certificates of deposit to customers taking advantage of higher rates being paid on time deposits as a result of interest rate hikes enacted by the Federal Reserve.

As of September 30, 2024, approximately $224.6 million of our deposit portfolio, or 20.6% 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.

Stockholders' equity totaled $140.0 million at September 30, 2024, an increase of $5.2 million, or 3.8%, from December 31, 2023. The increase in stockholders' equity primarily was the result of net income of $6.9 million and a $4.1 million decrease in accumulated other comprehensive loss, partially offset by the payment of $4.3 million in dividends to Company stockholders, and the repurchase of $3.1 million of Company common stock.

During the quarter ended September 30, 2024, the Company repurchased a total of 71,306 shares of Company common stock at an average price of $12.42 per share. As of September 30, 2024, the Company had approximately 606,802 shares available for repurchase under its existing stock repurchase program. Subsequent to quarter end, the Company repurchased an additional 22,084 shares.

About Richmond Mutual Bancorporation, Inc.

Richmond Mutual Bancorporation, Inc., headquartered in Richmond, Indiana, is the holding company for First Bank Richmond, a community-oriented financial institution offering traditional financial and trust services within its local communities through its eight locations in Richmond, Centerville, Cambridge City and Shelbyville, Indiana, its five locations in Sidney, Piqua and Troy, Ohio, and its loan production office in Columbus, Ohio.

FORWARD-LOOKING STATEMENTS:

This document and other filings by the Company with the Securities and Exchange Commission (the "SEC"), as well as press releases or other public or stockholder communications released by the Company, may contain forward-looking statements, including, but not limited to, (i) statements regarding the financial condition, results of operations and business of the Company, (ii) statements about the Company's plans, objectives, expectations and intentions and other statements that are not historical facts and (iii) other statements identified by the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions that are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current beliefs and expectations of the Company's management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. When considering forward-looking statements, keep in mind these risks and uncertainties. Undue reliance should not be placed on any forward-looking statement, which speaks only as of the date made.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: adverse economic conditions in our local market areas or other markets where we have lending relationships; employment levels, labor shortages and the effects of inflation, a recession or slowed economic growth; changes in the interest rate environment, including the increases and decrease in the Federal Reserve benchmark rate and duration at which such interest rate levels are maintained, which could adversely affect our revenues and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity; the impact of inflation and the current and future monetary policies of the Federal Reserve in response thereto; the effects of any federal government shutdown; 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; legislative changes; changes in policies by regulatory agencies; fluctuations in interest rates; the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; the Company's ability to access cost-effective funding, including maintaining the confidence of depositors; fluctuations in real estate values and both residential and commercial real estate market conditions; demand for loans and deposits in the Company's market area; changes in management's business strategies, including expectations regarding key growth initiatives and strategic priorities; changes in the regulatory and tax environments in which the Company operates; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, civil unrest, and other external events on our business; and other factors described in the Company's latest Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other reports filed with or furnished to the Securities and Exchange Commission - that are available on our website at www.firstbankrichmond.com and on the SEC's website at www.sec.gov.

The factors listed above could materially affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake - and specifically declines any obligation - to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

The following table summarizes information relating to our loan and lease portfolio at the dates indicated:

The following table summarizes information relating to our deposits at the dates indicated:

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.

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SOURCE Richmond Mutual Bancorporation, Inc.