UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒~~QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~


x			QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2020~~March 31, 2021

☐~~TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~


o			TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to ________

Commission file number: 001-38956

RICHMOND MUTUAL BANCORPORATION, INC.

(Exact name of registrant as specified in its charter)

~~Maryland~~	~~36-4926041~~
Maryland		36-4926041
(State or other jurisdiction of incorporation of organization)		(I.R.S. Employer Identification No.)

31 North 9th Street, Richmond, Indiana47374

(Address of principal executive offices; Zip Code)

(~~765~~)

(765) 962-2581

(Registrant's telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	RMBI	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 and 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

[ ]

Accelerated filer

[ ]

Non-accelerated filer ~~[X]~~

[X]

Smaller reporting company ☒

[X]

Emerging growth company ☒

[X]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐o No [X]

There were ~~13,526,625~~12,883,803 shares of Registrant’s common stock, par value of $0.01 per share, issued and outstanding as of ~~August 13, 2020.~~

May 14, 2021.

RICHMOND MUTUAL BANCORPORATION, INC. AND SUBSIDIARY

10-Q

TABLE OF CONTENTS

			~~Page~~ ~~Number~~
PART I FINANCIAL INFORMATION					1

~~Item 1.~~			~~Financial Statements~~		1
							Page
Item 1.					Condensed Consolidated Balance Sheets at ~~June 30, 2020~~March 31, 2021 (Unaudited) and December 31, ~~2019~~2020	1

		Condensed Consolidated Statements of Income (Unaudited) for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~	2

		~~Condensed~~ Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the Three Months Ended March 31, 2021 and ~~Six Months~~2020 ~~Ended June 30, 2020 and 2019~~	3

		~~Condensed~~ Consolidated Statements of Changes in Stockholders' Equity (Unaudited) for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~	4

		~~Condensed~~ Consolidated Statements of Cash Flows (Unaudited) for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~	5

		Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations			28 26

Item 3.	Quantitative and Qualitative Disclosures about Market Risk			44 38

Item 4.	Controls and Procedures			45 38

PART II OTHER INFORMATION					46

Item 1.			Legal Proceedings		46 39

Item 1A.	Risk Factors			46 39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			47 39

Item 3.	Defaults Upon Senior Securities			47 39

Item 4.	Mine Safety Disclosures			47 39

Item 5	Other Information			47 39
Item 6.			Exhibits				40
~~Item 6.~~			~~Exhibits~~		48
Signatures
~~SIGNATURES~~41			49

PART I. FINANCIAL INFORMATION

ITEM 1.~~FINANCIAL~~1.FINANCIAL STATEMENTS

Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Balance Sheets

June 30, 2020

December 31, 2019

(Unaudited)

Assets

Cash and due from banks
$
30,817,153

$
9,088,398
Interest-bearing demand deposits
79,789,311

31,508,479
Cash and cash equivalents
110,606,464

40,596,877
Investment securities - available for sale
221,204,068

201,783,851
Investment securities - held to maturity
13,319,819

15,917,394
Loans and leases, net of allowance for losses of $8,521,000
and $7,089,000, respectively
752,922,965

687,258,190
Premises and equipment, net
14,439,763

14,087,169
Federal Home Loan Bank stock
9,079,700

7,600,400
Interest receivable
4,721,040

3,052,380
Mortgage-servicing rights
1,405,128

1,033,217
Cash surrender value of life insurance
3,899,832

3,839,911
Other assets
8,613,962

10,872,682

Total assets
$
1,140,212,741

$
986,042,071

Liabilities

Non-interest bearing deposits
$
89,921,951

$
60,297,443
Interest bearing deposits
649,209,179

556,921,370
Total deposits
739,131,130

617,218,813
Federal Home Loan Bank advances
180,000,000

154,000,000
Advances by borrowers for taxes and insurance
498,170

545,498
Interest payable
348,300

296,774
Multi-employer pension plan liability
17,454,709

17,454,709
Other liabilities
6,644,530

8,738,831
Total liabilities
944,076,839

798,254,625

Commitments and Contingent Liabilities
-

-

Stockholders' Equity

Common stock, $0.01 par value
Authorized - 90,000,000 shares
Issued and outstanding - 13,526,625 shares
135,266

135,266
Additional paid-in capital
132,563,670

132,601,876
Retained earnings
74,446,405

70,111,434
Unearned employee stock ownership plan (ESOP)
(14,032,728
)
(14,400,386)
Accumulated other comprehensive income (loss)
3,023,289

(660,744)
Total stockholders' equity
196,135,902

187,787,446

Total liabilities and stockholders' equity
$
1,140,212,741

$
986,042,071


	March 31, 2021		December 31, 2020
	(Unaudited)
Assets
Cash and due from banks	$	13,713,168	$	16,748,093
Interest-bearing demand deposits	51,810,044		32,020,364
Cash and cash equivalents	65,523,212		48,768,457
Investment securities - available for sale	258,158,592		244,505,189
Investment securities - held to maturity	10,211,437		12,225,275
Loans and leases, net of allowance for losses of $10,959,000 and $10,586,000, respectively	763,731,414		736,400,098
Premises and equipment, net	14,718,289		14,892,110
Federal Home Loan Bank stock	9,049,600		9,049,600
Interest receivable	4,203,991		4,703,604
Mortgage-servicing rights	1,658,879		1,712,138
Cash surrender value of life insurance	3,548,371		3,525,736
Other assets	10,102,117		8,410,450

Total assets	$	1,140,905,902	$	1,084,192,657

Liabilities
Noninterest-bearing deposits	118,075,878		98,724,887
Interest bearing deposits	638,997,768		594,320,508
Total deposits	757,073,646		693,045,395
Federal Home Loan Bank advances	170,000,000		170,000,000
Advances by borrowers for taxes and insurance	535,910		492,524
Interest payable	207,893		222,118
Multi-employer pension plan liability	17,454,709		17,454,709
Other liabilities	6,114,110		10,265,203
Total liabilities	951,386,268		891,479,949

Commitments and Contingent Liabilities	0		0

Stockholders' Equity
Common stock, $0.01 par value
Authorized - 90,000,000 shares
Issued and outstanding - 13,050,996 shares and 13,193,760 shares at March 31, 2021 and December 31, 2020, respectively	130,510		131,938
Additional paid-in capital	122,814,920		124,246,425
Retained earnings	80,005,652		78,290,113
Unearned employee stock ownership plan (ESOP)	(13,479,847)		(13,664,373)
Accumulated other comprehensive income	48,399		3,708,605
Total stockholders' equity	189,519,634		192,712,708

Total liabilities and stockholders' equity	$	1,140,905,902	$	1,084,192,657

See Notes to Condensed Consolidated Statements.

Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Statements of Income

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Interest Income

Loans and leases
$
9,308,495

$
9,163,223

$
18,372,062

$
17,929,352
Investment securities
1,178,483

956,816

2,441,420

1,898,477
Other
11,447

278,462

136,477

327,569
Total interest income
10,498,425

10,398,501

20,949,959

20,155,398

Interest Expense

Deposits
1,704,310

2,107,460

3,529,008

3,994,160
Borrowings
770,304

808,565

1,509,645

1,558,827
Total interest expense
2,474,614

2,916,025

5,038,653

5,552,987

Net Interest Income
8,023,811

7,482,476

15,911,306

14,602,411
Provision for losses on loans and leases
1,320,000

485,000

1,530,000

1,010,000

Net Interest Income After Provision for Losses on Loans and Leases
6,703,811

6,997,476

14,381,306

13,592,411

Non-Interest Income

Service charges on deposit accounts
105,618

251,795

360,269

483,444
Card fee income
201,748

185,903

381,355

352,489
Loan and lease servicing fees
301,230

98,931

235,538

212,203
Net gains on securities (includes $9,874, $36,426,
$79,013 and $61,232, respectively, related to accumulated
other comprehensive loss reclassifications)
9,874

36,426

79,013

61,232
Net gains on loan and lease sales
1,030,668

123,573

1,258,876

210,798
Other loan fees
244,702

88,394

327,576

243,034
Other income
188,797

114,883

393,078

241,160
Total non-interest income
2,082,637

899,905

3,035,705

1,804,360

Non-Interest Expenses

Salaries and employee benefits
3,270,311

5,316,221

6,633,996

8,791,954
Net occupancy expenses
284,981

256,564

574,990

549,945
Equipment expenses
280,855

233,500

536,703

475,645
Data processing fees
472,071

423,974

948,874

838,166
Deposit insurance expense
60,000

158,000

116,000

293,000
Printing and office supplies
32,097

27,262

58,640

69,020
Legal and professional fees
326,815

208,975

568,181

505,754
Advertising expense
80,256

173,259

189,813

296,676
Bank service charges
28,465

32,593

65,820

64,269
Real estate owned expense
989

22,573

3,166

37,393
Loss on sale of real estate owned
-

6,493

-

6,493
Other expenses
810,857

744,542

1,475,131

1,480,682
Total non- interest expenses
5,647,697

7,603,956

11,171,314

13,408,997

Income Before Income Tax Expense (Benefit)
3,138,751

293,425

6,245,697

1,987,774
Provision (benefit) for income taxes (includes $2,503,
$9,520, $20,026 and $16,003, respectively, related to income
tax expense from reclassification of items)
632,574

(41,700

)
1,287,374

280,400

Net Income
$
2,506,177

$             335,125

$          4,958,323

$
1,707,374

Earnings Per Share

Basic
$
0.20

N/A

$                   0.40

N/A
Diluted
$
0.20

N/A

$                   0.40

N/A


	Three Months Ended March 31,
	2021		2020
Interest Income
Loans and leases	$	9,628,305	$	9,063,567
Investment securities	1,009,239		1,262,937
Other	6,904		125,030
Total interest income	10,644,448		10,451,534
Interest Expense
Deposits	1,187,272		1,824,698
Borrowings	693,951		739,341
Total interest expense	1,881,223		2,564,039
Net Interest Income	8,763,225		7,887,495
Provision for losses on loans and leases	400,000		210,000
Net Interest Income After Provision for Losses on Loans and Leases	8,363,225		7,677,495
Non-Interest Income
Service charges on deposit accounts	194,439		254,651
Card fee income	242,515		179,607
Loan and lease servicing fees	(105,450)		(65,692)
Net gains on securities (includes $0 and $69,139, respectively, related to accumulated other comprehensive loss reclassifications)	0		69,139
Net gains on loan and lease sales	964,817		228,208
Other loan fees	247,891		82,874
Other income	222,372		204,281
Total non-interest income	1,766,584		953,068
Non-Interest Expenses
Salaries and employee benefits	4,445,732		3,363,685
Net occupancy expenses	330,640		290,009
Equipment expenses	336,564		255,848
Data processing fees	526,173		476,803
Deposit insurance expense	71,000		56,000
Printing and office supplies	31,414		26,543
Legal and professional fees	346,518		241,366
Advertising expense	84,044		109,557
Bank service charges	30,751		37,355
Real estate owned expense	2,332		2,177
Loss on sale of real estate owned	1,278		0
Other expenses	771,210		664,274
Total non-interest expenses	6,977,656		5,523,617
Income Before Income Tax Expense	3,152,153		3,106,946
Provision for income taxes (includes $0 and $17,522, respectively, related to income tax expense from reclassification of items)	589,667		654,800
Net Income	$	2,562,486	$	2,452,146
Earnings Per Share
Basic	$	0.22	$	0.20
Diluted	$	0.22	$	0.20

See Notes to Condensed Consolidated Statements.

Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Loss)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Net Income
$
2,506,177

$
335,125

$
4,958,323

$
1,707,374

Other Comprehensive Income

Unrealized gain on available-for-sale securities, net of tax expense of $312,821, $559,911, $1,270,737 and $1,237,814, respectively.
921,429

1,582,470

3,743,020

3,498,417
Less: reclassification adjustment for realized gains
included in net income, net of tax expense of $2,503,
$9,520, $20,026 and $16,003, respectively.
7,371

26,906

58,987

45,229
914,058

1,555,564

3,684,033

3,453,188

Comprehensive Income
$
3,420,235

$
1,890,689

$
8,642,356

$
5,160,562


	Three Months Ended March 31,
	2021		2020

Net Income	$	2,562,486	$	2,452,146

Other Comprehensive Income (Loss)
Unrealized gain (loss) on available-for-sale securities, net of tax (benefit) expense of $(972,966) and $957,976, respectively.	(3,660,206)		2,821,591
Less: reclassification adjustment for realized gains included in net income, net of tax expense of $0 and $17,523, respectively.	0		51,616
	(3,660,206)		2,769,975

Comprehensive (Loss) Income	$	(1,097,720)	$	5,222,121

See Notes to Condensed Consolidated Statements.

Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

Accumulated

Common Stock

Additional

Unearned

Other

Shares

Paid-in

Retained

ESOP

Comprehensive

Outstanding

Amount

Capital

Earnings

Shares

Income/(Loss)

Total

Balances, March 31, 2020
13,526,625

$
135,266

$
132,604,734

$
72,563,580

$
(14,216,557
)
$
2,109,231

$
193,196,254

Net income
-

-

-

2,506,177

-

-

2,506,177

Other comprehensive income
-

-

-

-

-

914,058

914,058

ESOP shares earned
-

-

(41,064
)
-

183,829

-

142,765

Common stock dividends ($0.05 per share)
-

-

-

(623,352
)
-

-

(623,352
)

Balances, June 30, 2020
13,526,625

$
135,266

$
132,563,670

$
74,446,405

$
(14,032,728
)
$
3,023,289

$
196,135,902

Accumulated

Common Stock

Additional

Unearned

Other

Shares

Paid-in

Retained

ESOP

Comprehensive

Outstanding

Amount

Capital

Earnings

Shares

Income/(Loss)

Total

Balances, December 31, 2019
13,526,625

$
135,266

$
132,601,876

$
70,111,434

$
(14,400,386
)
$
(660,744
)
$
187,787,446

Net income
-

-

-

4,958,323

-

-

4,958,323

Other comprehensive income
-

-

-

-

-

3,684,033

3,684,033

ESOP shares earned
-

-

(38,206
)
-

367,658

-

329,452

Common stock dividends ($0.05 per share)
-

-

-

(623,352
)
-

-

(623,352
)

Balances, June 30, 2020
13,526,625

$
135,266

$
132,563,670

$
74,446,405

$
(14,032,728
)
$
3,023,289

$
196,135,902

Accumulated

Common Stock

Additional

Unearned

Other

Shares

Paid-in

Retained

ESOP

Comprehensive

Outstanding

Amount

Capital

Earnings

Shares

Income/(Loss)

Total

Balances, March 31, 2019
100

$
1

$
12,750,999

$
78,852,567

$
-

$
(2,480,662
)
$
89,122,905

Net income
-

-

-

335,125

-

-

335,125

Other comprehensive income
-

-

-

-

-

1,555,564

1,555,564

Balances, June 30, 2019
100

$
1

$
12,750,999

$
79,187,692

$
-

$
(925,098
)
$
91,013,594

Accumulated

Common Stock

Additional

Unearned

Other

Shares

Paid-in

Retained

ESOP

Comprehensive

Outstanding

Amount

Capital

Earnings

Shares

Income/(Loss)

Total

Balances, December 31, 2018
100

$
1

$
12,750,999

$
77,480,318

$
-

$
(4,378,286
)
$
85,853,032

Net income
-

-

-

1,707,374

-

-

1,707,374

Other comprehensive income
-

-

-

-

-

3,453,188

3,453,188

Balances, June 30, 2019
100

$
1

$
12,750,999

$
79,187,692

$
-

$
(925,098
)
$
91,013,594


	Common Stock			Additional Paid-in Capital		Retained Earnings		Unearned ESOP Shares		Accumulated Other Comprehensive Income/(Loss)		Total
	Shares Outstanding	Amount

Balances, December 31, 2020	13,193,760	$	131,938	$	124,246,425	$	78,290,113	$	(13,664,373)	$	3,708,605	$	192,712,708
Net income	—	—		—		2,562,486		—		—		2,562,486
Other comprehensive loss	—	—		—		—		—		(3,660,206)		(3,660,206)
ESOP shares earned	—	—		(1,821)		—		184,526		—		182,705
Stock based compensation	—	—		507,624		—		—		—		507,624
Common stock dividends ($0.07 per share)	—	—		—		(846,947)		—		—		(846,947)
Repurchase of common stock	(142,764)	(1,428)		(1,937,308)		—		—		—		(1,938,736)
Balances, March 31, 2021	13,050,996	$	130,510	$	122,814,920	$	80,005,652	$	(13,479,847)	$	48,399	$	189,519,634


	Common Stock			Additional Paid-in Capital		Retained Earnings		Unearned ESOP Shares		Accumulated Other Comprehensive Income/(Loss)		Total
	Shares Outstanding	Amount

Balances, December 31, 2019	13,526,625	$	135,266	$	132,601,876	$	70,111,434	$	(14,400,386)	$	(660,744)	$	187,787,446
Net income	—	—		—		2,452,146		—		—		2,452,146
Other comprehensive income	—	—		—		—		—		2,769,975		2,769,975
ESOP shares earned	—	—		2,858		—		183,829		—		186,687
Balances, March 31, 2020	13,526,625	$	135,266	$	132,604,734	$	72,563,580	$	(14,216,557)	$	2,109,231	$	193,196,254

See Notes to Condensed Consolidated Statements.

Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Six Months Ended June 30,

2020

2019

Operating Activities

Net income
$
4,958,323

$
1,707,374

Items not requiring (providing) cash

Provision for loan losses
1,530,000

1,010,000

Depreciation and amortization
484,092

458,622

Deferred income tax
357,938

(779,000
)
Investment securities (accretion) amortization, net
1,133,521

375,216

Investment securities gains
(79,013
)

(61,232
)
Gain on sale of loans and leases held for sale
(1,258,876
)

(210,798
)
Loss on sale of real estate owned
-

6,493

Accretion of loan origination fees
(447,817
)

(88,088
)
Amortization of mortgage-servicing rights
167,578

74,407

ESOP shares expense
329,452

-

Increase in cash surrender value of life insurance
(59,921
)

(60,211
)
Loans originated for sale
(45,705,608
)

(7,564,068
)
Proceeds on loans sold
49,041,089

8,057,168

Net change in

Interest receivable
(1,668,660
)

(247,254
)
Other assets
715,669

1,616,150

Other liabilities
(2,094,301
)

21,335

Interest payable
51,526

202,352

Net cash provided by operating activities
7,454,992

4,518,466

Investing Activities

Purchases of securities available for sale
(82,597,349
)

(35,162,200
)
Proceeds from maturities and paydowns of securities available for sale
44,676,712

5,041,948

Proceeds from sales of securities available for sale
22,177,542

22,456,675

Proceeds from maturities and paydowns of securities held to maturity
2,585,037

1,445,000

Net change in loans
(69,212,998
)

(37,636,795
)
Purchases of premises and equipment
(836,686
)

(373,266
)
Purchase of FHLB stock
(1,479,300
)

(949,800
)
Net cash used in investing activities
(84,687,042
)

(45,089,657
)

Financing Activities

Net change in

Demand and savings deposits
60,126,140

202,452,437

Certificates of deposit
61,786,177

4,539,605

Advances by borrowers for taxes and insurance
(47,328
)

28,283

Proceeds from FHLB advances
40,000,000

57,000,000

Repayment of FHLB advances
(14,000,000
)

(36,000,000
)
Dividends paid
(623,352
)

—

Net cash provided by financing activities
147,241,637

228,020,325

Net Change in Cash and Cash Equivalents
70,009,587

187,449,134

Cash and Cash Equivalents, Beginning of Period
40,596,877

14,971,170

Cash and Cash Equivalents, End of Period
$
110,606,464

$
202,420,304

Additional Cash Flows and Supplementary Information

Interest paid
$
4,987,127

$
5,350,635

Transfers from loans to other real estate owned
31,548

5,400


	Three Months Ended March 31,
	2021		2020
Operating Activities
Net income	$	2,562,486	$	2,452,146
Items not requiring (providing) cash
Provision for loan losses	400,000		210,000
Depreciation and amortization	293,402		238,330
Deferred income tax	(93,250)		(84,000)
Stock based compensation	507,624		0
Investment securities amortization, net	712,845		486,500
Investment securities gains	0		(69,139)
Net gains on loan and lease sales	(964,817)		(228,208)
Loss on sale of real estate owned	1,278		0
Accretion of loan origination fees	(881,097)		(38,827)
Amortization of mortgage-servicing rights	128,288		67,132
ESOP shares expense	182,705		186,687
Increase in cash surrender value of life insurance	(21,361)		(30,106)
Loans originated for sale	(27,868,042)		(6,807,172)
Proceeds on loans sold	26,770,692		8,147,368
Net change in
Interest receivable	499,613		(195,661)
Other assets	(500,776)		354,702
Other liabilities	(4,151,093)		26,550
Interest payable	(14,225)		53,692
Net cash (used in) provided by operating activities	(2,435,728)		4,769,994

Investing Activities
Purchases of securities available for sale	(37,779,114)		(70,744,743)
Proceeds from maturities and paydowns of securities available for sale	18,783,517		25,505,906
Proceeds from sales of securities available for sale	0		11,461,388
Proceeds from maturities and paydowns of securities held to maturity	2,010,016		2,140,036
Net change in loans	(25,020,579)		(1,169,710)
Proceeds from sales of real estate owned	30,270		0
Purchases of premises and equipment	(119,581)		(158,241)
Purchase of FHLB stock	0		(1,030,400)
Net cash used in investing activities	(42,095,471)		(33,995,764)

Financing Activities
Net change in
Demand and savings deposits	50,062,196		(8,410,494)
Certificates of deposit	13,966,055		(3,572,941)
Advances by borrowers for taxes and insurance	43,386		68,073
Proceeds from FHLB advances	0		30,000,000
Repayment of FHLB advances	0		(2,000,000)
Repurchase of common stock	(1,938,736)		0
Dividends paid	(846,947)		0
Net cash provided by financing activities	61,285,954		16,084,638

Net Change in Cash and Cash Equivalents	16,754,755		(13,141,132)
Cash and Cash Equivalents, Beginning of Period	48,768,457		40,596,877
Cash and Cash Equivalents, End of Period	$	65,523,212	$	27,455,745
Additional Cash Flows and Supplementary Information
Interest paid	$	1,895,448	$	2,510,347
Transfers from loans to other real estate owned	0		31,548

See Notes to Condensed Consolidated Statements.

Richmond Mutual Bancorporation, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Table Dollar Amounts in ~~Thousands)~~

Thousands except shares and per share amounts)

Note 1: Basis of Presentation

On July 1, 2019, Richmond Mutual Bancorporation, Inc., a Delaware corporation (“RMB-Delaware”), completed its reorganization from a mutual holding company form of organization to a stock form of organization (“corporate reorganization”). RMB-Delaware, which owned 100% of First Bank Richmond (the “Bank”), was succeeded by Richmond Mutual Bancorporation, Inc., a new Maryland corporation (“~~the Company”~~RMB-Maryland”). As part of the corporate reorganization, First Mutual of Richmond, Inc.’s (“MHC”) ownership interest in RMB-Delaware was sold in a public offering. Gross proceeds from the offering were $130.3 million. In conjunction with the corporate reorganization, ~~the Company~~RMB-Maryland contributed 500,000 shares and $1.25 million of cash to a newly formed charitable foundation, First Bank Richmond, Inc. Community Foundation (the “Foundation”). Additionally, a “liquidation account” was established for the benefit of certain depositors of the Bank in an amount equal to MHC’s ownership interest in the retained earnings of RMB-Delaware as of December 31, 2017 and March 31, 2019.

In certain circumstances, where appropriate, the terms “Company”, “we”, “us” and “our” refer collectively to (i) RMB-Delaware and First Bank Richmond with respect to discussions in this document involving matters occurring prior to completion of the corporate reorganization and (ii) RMB-Maryland and First Bank Richmond with respect to discussions in this document involving matters occurring post-corporate reorganization, in each case unless the context indicates another meaning.

The costs of the corporate reorganization and the issuance of the common stock have been deducted from the sales proceeds of the offering.

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include information or note disclosures necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the Securities and Exchange Commission (“SEC”) on March ~~30, 2020~~31, 2021 (SEC File No. 001-38956). However, in the opinion of management, all adjustments which are necessary for a fair presentation of the consolidated financial statements have been included. Those adjustments consist only of normal recurring adjustments. The results of operations for the period are not necessarily indicative of the results to be expected for the full year.

In certain circumstances, where appropriate, the terms “we”, “us” and “our” refer collectively to (i) RMB-Delaware and First Bank Richmond with respect to discussions in this document involving matters occurring prior to completion of the corporate reorganization and (ii) the Company and First Bank Richmond with respect to discussions in this document involving matters occurring post-corporate reorganization, in each case unless the context indicates another meaning.

Loans

For all loan classes, the accrual of interest is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. 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, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

The Company charges off residential and consumer loans, or portions thereof, when the Company reasonably determines the amount of the loss. The Company adheres to timeframes established by applicable regulatory guidance, which provides for the charge-down of 1-4 family first and junior lien mortgages to the net realizable value, less costs to sell when the loan is 120 days past due, charge-off of unsecured open-end loans when the loan is 90 days past due, and charge down to the net realizable value when other secured loans are 90 days past due. Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.

For all classes, all interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

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

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

Note 2: Accounting Pronouncements

In March 2020, the novel coronavirus disease of 2019 ("COVID-19") was identified as a global pandemic and began affecting the health of large populations around the world. As a result of the spread of COVID-19, economic uncertainties arose which can ultimately affect the financial position, results of operations and cash flows of the Company, as well as the Company's customers. In response to economic concerns over COVID-19, in March 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was passed into law by the United States Congress ("Congress"). The ~~JOBS~~CARES Act included relief for individual Americans, health care workers, small businesses and certain industries hit hard by the COVID-19 pandemic. The 2021 Consolidated Appropriations Act, passed by Congress in December 2020, extended certain provisions of the CARES Act affecting the Company into 2021.

The CARES Act included several provisions designed to help financial institutions like the Company in working with their customers. Section 4013 of the CARES Act, as extended, allows a financial institution to elect to suspend generally accepted accounting principles and regulatory determinations with respect to qualifying loan modifications related to COVID-19 that would otherwise be categorized as a troubled debt restructuring ("TDR") until January 1, 2022. The Company has taken advantage of this provision to extend certain payment modifications to loan customers in need. As of March 31, 2021, the Company has 33 loans outstanding for $24.6 million that were modified under the CARES Act guidance.

The CARES Act also approved the Paycheck Protection Program ("PPP"), administered by the Small Business Administration ("SBA") with funding provided by financial institutions. The 2021 Consolidated Appropriations Act approved a new round of PPP loans in 2021. The PPP provides loans to eligible businesses through financial institutions like the Company, with loans being eligible for forgiveness of some or all of the principal amount by the SBA if the borrower meets certain requirements. The SBA guarantees repayment of the loans to the Company if the borrower's loan is not forgiven and is then not repaid by the borrower. The Company earns a 1% interest rate on PPP loans, plus a processing fee from the SBA for processing and originating a loan. The Company has originated a total of approximately $100.0 million in PPP loans as of March 31, 2021, of which approximately $54.7 million were outstanding at March 31, 2021.

The Jumpstart Our Business Startups Act (the "JOBS Act"), which was enacted in April 2012, has made numerous changes to the federal securities laws to facilitate access to capital markets. Under the JOBS Act, a company with total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year qualifies as an “emerging growth company.” The Company qualifies as and has elected to be an emerging growth company under the JOBS Act. An emerging growth company may elect to comply with new or amended accounting pronouncements in the same manner as a private company, but must make such election when the company is first required to file a registration statement. Such an election is irrevocable during the period a company is an emerging growth company. The Company has elected to comply with new or amended accounting pronouncements in the same manner as a private company.

In June 2016, the Financial Accounting Standards Board ~~(“FASB”~~("FASB") issued Accounting Standards Update ~~(“ASU”~~("ASU") No. 2016-13, Financial Instruments-Credit Losses (Topic 326). The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements.

In May 2019, the FASB issued ASU No. 2019-05, “Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief” (ASU 2019-05). This ASU provides transition relief for entities adopting the FASB’s credit losses standard, ASU 2016-13 and allows companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option for certain financial instruments. In April 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” (ASU 2019-04). This

ASU clarifies certain aspects of accounting for credit losses, hedging activities, and financial instruments. In October 2019, the FASB voted to extend the implementation of ASU No. 2016-13 for certain financial institutions including smaller reporting companies. As a result, ASU 2016-13 will be effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.

The Company is evaluating its current expected loss methodology on the loan and investment portfolios to identify the necessary modifications in accordance with this standard. The Company has not quantified the impact of these ASUs. The Company is in the early stages of evaluating its historical data available for use in adoption of the new credit loss standards. Additionally, we ~~are forming~~have formed an implementation team that ~~will meet~~meets on a regular basis to coordinate efforts of our accounting, credit and operations areas. We will continue to evaluate methodologies available to us under the new standard.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of ~~reference~~Reference Rate Reform on Financial Reporting. This ASU applies to contracts, hedging relationships and other transactions that reference LIBOR or other rate references expected to be discontinued because of reference rate reform. The ASU permits an entity to make necessary modifications to eligible contracts or transactions without requiring contract remeasurement or reassessment of a previous accounting determination. This ASU is effective for all entities as of March 12, 2020 through December 31, 2022. The ~~Company does not expect the~~ adoption of ASU 2020-04 todid not have a material impact on ~~its~~the Company's consolidated financial statements.

In October 2020, the FASB issued ASU 2020-08, “Receivables – Nonrefundable Fees and Other Costs” (“ASU 2020-08”). ASU 2020-08 clarifies that the Company should reevaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 for each reporting period. ASU 2020-08 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The adoption of ASU 2020-08 did not have a material impact on the Company's consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 provides that state franchise or similar taxes that are based, at least in part on an entity’s income, be included in an entity’s income tax recognized as income-based taxes. The ASU further clarifies that the effect of any change in tax laws or rates used in the computation of the annual effective tax rate are required to be reflected in the first interim period that includes the enactment date of the legislation. Technical changes to eliminate exceptions to Topic 740 related to intra-period tax allocations for entities with losses from continuing operations, deferred tax liabilities related to change in ownership of foreign entities, and interim-period tax allocations for businesses with losses where the losses are expected to be realized. The amendments in ASU 2019-12 are effective for public business entities with fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The ~~Company does not expect ASU 2019-12 to have a material impact on its consolidated financial statements.~~

~~In August 2018, the FASB issued ASU No. 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement~~. This ASU contains some technical adjustments related to the fair value disclosure requirements of public companies. Included in this ASU is the additional disclosure requirement of unrealized gains and losses for the period in recurring level 3 fair value disclosures and the range and weighted average of significant unobservable inputs, among other technical changes. The Company adopted ASU 2018-13 on January 1, 2020. The adoption of ASU ~~2018-13~~2019-12 did not have a material impact on the ~~Company’s~~Company's consolidated financial statements.

In February 2016, the FASB ~~has~~ issued ASU No. 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases, with the exception of short-term leases, at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. For the Company, the amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, ~~2020.~~2021. Based on leases outstanding as of December 31, ~~2019,~~2020, the new standard will not have a material impact on the Company’s balance sheet or income statement. ~~We will begin evaluating the current leases and their respective lease term and conditions to quantify the potential impact to our financial statements upon adoption.~~ In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), Targeted Improvements, which provide entities with an additional (and optional) transition method to adopt the new lease standard. Under this new transition method, an entity initially applies the new lease standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new lease standard will continue to be in accordance with current GAAP (Topic 842, Leases). The amendments in ASU 2018-11 also provide lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component if the non-lease components otherwise would be accounted for under the new revenue guidance (Topic 606) and certain criteria are met.

Note 3: Investment Securities

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

June 30, 2020

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

Cost

Gains

Losses

Value
Available for sale

SBA Pools
$
22,911

$
75

$
215

$
22,771
Federal agencies
7,511

14

6

7,519
State and municipal obligations
60,681

1,642

126

62,197
Mortgage-backed securities -

government-sponsored enterprises

(GSE) residential
126,261

2,471

28

128,704
Equity securities
13

-

-

13

217,377

4,202

375

221,204
Held to maturity

State and municipal obligations
13,320

344

-

13,664

13,320

344

-

13,664

Total investment securities
$
230,697

$
4,546

$
375

$
234,868

December 31, 2019

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

Cost

Gains

Losses

Value
Available for sale

U.S. Treasury securities
$
2,997

$
-

$
6

$
2,991
SBA Pools
14,497

-

114

14,383
Federal agencies
21,765

-

119

21,646
State and municipal obligations
45,635

357

152

45,840
Mortgage-backed securities -

government-sponsored enterprises

(GSE) residential
117,769

111

969

116,911
Equity securities
13

-

-

13

202,676

468

1,360

201,784
Held to maturity

State and municipal obligations
15,917

244

5

16,156

15,917

-

5

16,156

Total investment securities
$
218,593

$
712

$
1,365

$
217,940


	March 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale

SBA Pools	$	15,647	$	36	$	155	$	15,528
Federal agencies	7,756		5		228		7,533
State and municipal obligations	100,347		1,599		1,610		100,336
Mortgage-backed securities - government-sponsored enterprises (GSE) residential	134,335		1,618		1,204		134,749
Equity securities	13		0		0		13
	258,098		3,258		3,197		258,159
Held to maturity
State and municipal obligations	10,211		234		0		10,445
	10,211		234		0		10,445

Total investment securities	$	268,309	$	3,492	$	3,197	$	268,604


	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale

SBA Pools	$	16,283	$	111	$	94	$	16,300
Federal agencies	5,760		12		15		5,757
State and municipal obligations	93,616		2,778		109		96,285
Mortgage-backed securities - government-sponsored enterprises (GSE) residential	124,139		2,080		69		126,150
Equity securities	13		0		0		13
	239,811		4,981		287		244,505
Held to maturity
State and municipal obligations	12,225		295		0		12,520
	12,225		295		0		12,520

Total investment securities	$	252,036	$	5,276	$	287	$	257,025

The amortized cost and fair value of securities at ~~June 30, 2020,~~March 31, 2021, 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.

Available for Sale

Held to Maturity

Amortized

Fair

Amortized

Fair

Cost

Value

Cost

Value

Within one year
$
443

$
444

$
2,858

$
2,875
One to five years
6,005

6,175

7,233

7,424
Five to ten years
27,793

28,115

2,169

2,283
After ten years
56,862

57,753

1,060

1,082

91,103

92,487

13,320

13,664
Mortgage-backed securities -

GSE residential
126,261

128,704

-

-
Equity securities
13

13

-

-

Totals
$
217,377

$
221,204

$
13,320

$
13,664


	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value

Within one year	$	954	$	959	$	1,751	$	1,766
One to five years	6,331		6,520		5,373		5,491
Five to ten years	28,444		28,660		2,027		2,118
After ten years	88,021		87,258		1,060		1,070
	123,750		123,397		10,211		10,445
Mortgage-backed securities –GSE residential	134,335		134,749		0		0
Equity securities	13		13		—		—

Totals	$	258,098	$	258,159	$	10,211	$	10,445

Securities with a carrying value of ~~$119,773,000~~$74,171,000 and ~~$114,907,000~~$88,370,000 were pledged at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, to secure certain deposits and for other purposes as permitted or required by law.

Proceeds from sales of securities available for sale for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020 were ~~$10,716,000~~$0 and ~~$22,178,000, respectively. For the three and six months ended June 30, 2019, proceeds from sales of securities were $10,989,000 and $22,457,000~~$11,461,000, respectively. Gross gains were recognized on the sale of securities available-for-sale for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020 of $0 and ~~2019 of $66,000, $136,000, $37,000 and $62,000,~~$74,000, respectively. Gross losses were recognized on the sale of securities available for sale for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020 of ~~$56,000. There were no gross losses realized from sales of securities available for sale for the three~~$0 and ~~six months ended June 30, 2019.~~

$5,000, respectively.

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 ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 was ~~$40,703,000~~$120,426,000 and ~~$138,391,000,~~$45,299,000, respectively, which is approximately ~~17%~~45% and ~~63%~~18% of the Company’s aggregated available-for-sale and held-to-maturity investment portfolio at those dates, respectively. These declines primarily resulted from changes in market interest rates since their purchase.

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

Should the impairment of any other securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

The following tables show the Company’s investments by gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~

June 30, 2020

Less Than 12 Months

12 Months or More

Total
Description of
Fair

Unrealized

Fair

Unrealized

Fair

Unrealized
Securities
Value

Losses

Value

Losses

Value

Losses

Available-for-sale

SBA Pools
$
19,099

$
215

$
-

$
-

$
19,099

$
215
Federal agencies
4,240

6

-

-

4,240

6
State and municipal obligations
8,932

126

-

-

8,932

126
Mortgage-backed securities -

GSE residential
6,874

25

1,478

3

8,352

28
Total available-for-sale
39,145

372

1,478

3

40,623

375

Held-to-maturity

State and municipal obligations
80

-

-

-

80

-

Total temporarily

impaired securities
$
39,225

$
372

$
1,478

$
3

$
40,703

$
375

December 31, 2019

Less Than 12 Months

12 Months or More

Total
Description of
Fair

Unrealized

Fair

Unrealized

Fair

Unrealized
Securities
Value

Losses

Value

Losses

Value

Losses

Available-for-sale

U.S. Treasury securities
$
2,991

$
6

$
-

$
-

$
2,991

$
6
SBA Pools
14,262

114

-

-

14,262

114
Federal agencies
9,657

109

2,990

10

12,647

119
State and municipal obligations
12,606

130

2,948

22

15,554

152
Mortgage-backed securities -

GSE residential
57,928

464

34,344

505

92,272

969
Total available-for-sale
97,444

823

40,282

537

137,726

1,360

Held-to-maturity

State and municipal obligations
665

5

-

-

665

5

Total temporarily

impaired securities
$
98,109

$
828

$
40,282

$
537

$
138,391

$
1,365

2020:

Description of
Securities March 31, 2021
Less Than 12 Months 12 Months or More Total
Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses
Available-for-sale
SBA Pools $ 4,318 $ 83 $ 7,984 $ 72 $ 12,302 $ 155
Federal agencies 6,773 228 0 0 6,773 228
State and municipal obligations 45,177 1,505 1,475 105 46,652 1,610
Mortgage-backed securities - GSE residential 54,165 1,202 534 2 54,699 1,204
Total temporarily impaired securities $ 110,433 $ 3,018 $ 9,993 $ 179 $ 120,426 $ 3,197

Description of
Securities December 31, 2020
Less Than 12 Months 12 Months or More Total
Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses
Available-for-sale
SBA Pools $ 5,213 $ 46 $ 5,687 $ 48 $ 10,900 $ 94
Federal agencies 985 15 0 0 985 15
State and municipal obligations 8,587 109 0 0 8,587 109
Mortgage-backed securities - GSE residential 24,013 67 684 2 24,697 69
Total available-for-sale 38,798 237 6,371 50 45,169 287
Held-to-maturity
State and municipal obligations 130 0 0 0 130 0
Total temporarily impaired securities $ 38,928 $ 237 $ 6,371 $ 50 $ 45,299 $ 287

Federal Agencies. The unrealized losses on the Company’s investments in direct obligations of U.S. federal agencies were caused by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at ~~June 30, 2020.~~

March 31, 2021.

Mortgage-Backed Securities – GSE Residential and SBA Pools. The unrealized losses on the Company’s investment in mortgage-backed securities and SBA pools were caused by interest rate changes and illiquidity. The Company expects to recover the amortized cost basis over the term of the securities. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at ~~June 30, 2020.~~

March 31, 2021.

State and Municipal Obligations. The unrealized losses on the Company’s investments in securities of state and municipal obligations were caused by interest rate changes and illiquidity. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at ~~June 30, 2020.~~

March 31, 2021.

Note 4: Loans, Leases and Allowance

~~Categories~~

The following table shows the composition of ~~loans~~the loan and lease portfolio at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019 include:~~

June 30,

December 31,

2020

2019

Commercial mortgage
$
242,036

$
229,410
Commercial and industrial
141,184

84,549
Construction and development
62,372

53,426
Multi-family
58,709

66,002
Residential mortgage
126,146

131,294
Home equity
6,522

6,996
Direct financing leases
114,352

109,592
Consumer
12,550

13,534
763,871

694,803
Less

Allowance for loan and lease losses
8,521

7,089
Deferred loan fees
2,427

456

$
752,923

$
687,258

2020:


	March 31, 2021		December 31, 2020

Commercial mortgage	$	254,561	$	247,564
Commercial and industrial	128,126		122,831
Construction and development	67,728		58,424
Multi-family	60,608		55,998
Residential mortgage	128,947		127,108
Home equity	6,104		5,982
Direct financing leases	117,725		117,171
Consumer	13,183		13,257
	776,982		748,335
Less
Allowance for loan and lease losses	10,959		10,586
Deferred loan fees	2,292		1,349

	$	763,731	$	736,400

The following tables present the activity in the allowance for loan and lease losses for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~

Commercial

Commercial

and

Residential

Mortgage (1)

Industrial

Mortgage (2)

Leases

Consumer

Total

Three Months Ended June 30, 2020:

Balance, beginning of period
$
4,668

$
1,772

$
148

$
583

$
135

$
7,306

Provision (credit) for losses
844

(94
)

172

378

20

1,320

Charge-offs
-

-

(20
)

(134
)

(16
)

(170
)
Recoveries
5

32

8

11

9

65

Balance, end of period
$
5,517

$
1,710

$
308

$
838

$
148

$
8,521

Six Months Ended June 30, 2020:

Balance, beginning of period
$
4,564

$
1,852

$
109

$
426

$
138

$
7,089

Provision (credit) for losses
917

(182
)

210

569

16

1,530

Charge-offs
-

-

(35
)

(190
)

(21
)

(246
)
Recoveries
36

40

24

33

15

148

Balance, end of period
$
5,517

$
1,710

$
308

$
838

$
148

$
8,521

2020:


	Commercial Mortgage (1)		Commercial and Industrial		Residential Mortgage (2)		Leases		Consumer		Total

Three Months Ended March 31, 2021:
Balance, beginning of period	$	7,797	$	1,248	$	270	$	1,054	$	217	$	10,586
Provision (credit) for losses	561		(133)		(19)		75		(84)		400
Charge-offs	0		0		0		(194)		(11)		(205)
Recoveries	1		23		6		94		54		178

Balance, end of period	$	8,359	$	1,138	$	257	$	1,029	$	176	$	10,959

(1)Commercial mortgage includes commercial and multifamily real estate ~~loans.~~

~~(2) Residential mortgage includes one- to four-family~~loans and ~~home equity~~commercial construction and development loans.

Commercial

Commercial

and

Residential

Mortgage (1)

Industrial

Mortgage (2)

Leases

Consumer

Total

Three Months Ended June 30, 2019:

Balance, beginning of period
$
3,420

$
1,790

$
117

$
392

$
117

$
5,836

Provision (credit) for losses
466

(26
)

30

12

3

485

Charge-offs
-

-

(34
)

(95
)

(15
)

(144
)
Recoveries
6

4

9

76

9

104

Balance, end of period
$
3,892

$
1,768

$
122

$
385

$
114

$
6,281

Six Months Ended June 30, 2019:

Balance, beginning of period
$
3,147

$
1,817

$
139

$
389

$
108

$
5,600

Provision (credit) for losses
735

195

(7
)

50

37

1,010

Charge-offs
-

(250
)

(36
)

(177
)

(49
)

(512
)
Recoveries
10

6

26

123

18

183

Balance, end of period
$
3,892

$
1,768

$
122

$
385

$
114

$
6,281

~~(1) Commercial mortgage includes commercial and multifamily real estate loans.~~

(2)Residential mortgage includes one- to four-family and home equity loans

and residential construction and development loans.


	Commercial Mortgage (1)		Commercial and Industrial		Residential Mortgage (2)		Leases		Consumer		Total

Three Months Ended March 31, 2020:
Balance, beginning of period	$	4,564	$	1,852	$	109	$	426	$	138	$	7,089
Provision (credit) for losses	72		(87)		38		190		(4)		210
Charge-offs	0		0		(15)		(55)		(5)		(75)
Recoveries	32		7		16		22		6		83

Balance, end of period	$	4,668	$	1,772	$	148	$	583	$	135	$	7,306

(1)Commercial mortgage includes commercial and multifamily real estate loans and commercial construction and development loans.

(2)Residential mortgage includes one- to four-family and home equity loans and residential construction and development loans.

The following tables present the balance in the allowance for loan and lease losses and the recorded investment in loans and leases based on portfolio segment and impairment method as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~

2020:

June 30, 2020

Commercial

Commercial

and

Residential

Mortgage (1)

Industrial

Mortgage (2)

Leases

Consumer

Total

Allowance for loan and lease losses:

Individually evaluated
   for impairment
$
1

$
201

$
-

$
-

$
-

$
202
Collectively evaluated
   for impairment
5,516

1,509

308

838

148

8,319

Balance, June 30
$
5,517

$
1,710

$
308

$
838

$
148

$
8,521

Loans and leases:

Individually evaluated
   for impairment
$
698

$
617

$
225

$
-

$
-

$
1,540
Collectively evaluated
   for impairment
392,835

131,344

107,114

114,352

16,686

762,331
Ending balance:
   June 30
$
393,533

$
131,961

$
107,339

$
114,352

$
16,686

$
763,871


	March 31, 2021
	Commercial Mortgage (1)		Commercial and Industrial		Residential Mortgage (2)		Leases		Consumer		Total

Allowance for loan and lease losses:
Individually evaluated for impairment	$	811	$	52	$	0	$	0	$	0	$	863
Collectively evaluated for impairment	7,548		1,086		257		1,029		176		10,096

Balance, March 31	$	8,359	$	1,138	$	257	$	1,029	$	176	$	10,959

Loans and leases:
Individually evaluated for impairment	5,581		450		178		0		0		6,209
Collectively evaluated for impairment	427,822		111,660		96,465		117,725		17,101		770,773
Ending Balance, March 31	$	433,403	$	112,110	$	96,643	$	117,725	$	17,101	$	776,982

(1)Commercial mortgage includes commercial and multifamily real estate loans and commercial construction and development loans.

(2)Residential mortgage includes one- to four-family and home equity loans

and residential construction and development loans.

December 31, 2019

Commercial

Commercial

and

Residential

Mortgage (1)

Industrial

Mortgage (2)

Leases

Consumer

Total

Allowance for loan and lease losses:

Individually evaluated
   for impairment
$
-

$
202

$
-

$
-

$
-

$
202
Collectively evaluated
   for impairment
4,564

1,650

109

426

138

6,887

Balance, December 31
$
4,564

$
1,852

$
109

$
426

$
138

$
7,089

Loans and leases:

Individually evaluated
   for impairment
$
803

$
694

$
347

$
-

$
-

$
1,844
Collectively evaluated
   for impairment
377,494

73,920

114,061

109,592

17,892

692,959
Ending balance:
   December 31
$
378,297

$
74,614

$
114,408

$
109,592

$
17,892

$
694,803


	December 31, 2020
	Commercial Mortgage (1)		Commercial and Industrial		Residential Mortgage (2)		Leases		Consumer		Total

Allowance for loan and lease losses:
Individually evaluated for impairment	$	150	$	52	$	0	$	0	$	0	$	202
Collectively evaluated for impairment	7,647		1,196		270		1,054		217		10,384

Balance, December 31	$	7,797	$	1,248	$	270	$	1,054	$	217	$	10,586

Loans and leases:
Individually evaluated for impairment	701		493		269		0		0		1,463
Collectively evaluated for impairment	404,278		106,794		101,380		117,171		17,249		746,872
Ending Balance, December 31	$	404,979	$	107,287	$	101,649	$	117,171	$	17,249	$	748,335

(1)Commercial mortgage includes commercial and multifamily real estate loans and commercial construction and development loans.

(2)Residential mortgage includes one- to four-family and home equity loans and residential construction and development loans.

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

Grade 1 – Exceptional

Exceptional loans and leases are top-quality loans to individuals whose financial credentials are well known to the Company. These loans and leases have excellent sources of repayment, are well documented and/or virtually free of risk (i.e., CD secured loans).

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. 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.

Grade 3 – Acceptable Loans

This category is for “average” quality ~~loans.~~loans and leases. These loans and leases have adequate sources of repayment with little identifiable risk of collection and they conform to Company policy and IDFI/FDIC regulations.

Grade 4 – Acceptable but Monitored

Loans and leases in this category may have a greater than average risk due to financial weakness or uncertainty but do not appear to require classification as special mention or substandard loans. Loans and leases rated “4” need to be monitored on a regular basis to ascertain that the reasons for placing them in this category do not advance or worsen.

Grade 5 – Special Mention

Loans and leases in this category have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or lease or in the Company’s credit position at some future date. Special Mention loans and leases are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. 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.

Grade 6 – Substandard

Loans and leases in this category are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans and leases so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Substandard loans and leases have a high probability of payment default, or they have other well-defined weaknesses. Such loans and leases have a distinct potential for loss; however, an individual loan’s or lease’s potential for loss does not have to be distinct for the loan or lease to be rated substandard.

The following are examples of situations that might cause a loan or lease to be graded a “6”:

·

•Cash flow deficiencies (losses) jeopardize future loan or lease payments.

·

•Sale of non-collateral assets has become a primary source of loan or lease repayment.

·

•The relationship has deteriorated to the point that sale of collateral is now the Company’s primary source of repayment, unless this was the original source of loan or lease repayment.

·

•The borrower is bankrupt or for any other reason future repayment is dependent on court action.

Grade 7 – Doubtful

A loan or lease classified as doubtful has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current existing facts, conditions, and values, highly questionable and improbable. A doubtful loan or lease has a high probability of total or substantial loss. Doubtful borrowers are usually in default, lack adequate liquidity or capital, and lack the resources necessary to remain an operating entity. Because of high probability of loss, nonaccrual accounting treatment will be required for doubtful ~~loans.~~

loans and leases.

Grade 8 – Loss

Loans and leases classified loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loan or lease has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan or lease even though partial recovery may be effected in the future.

The risk characteristics of each loan and lease portfolio segment are as follows:

Commercial and Industrial

Commercial and industrial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may include a personal guarantee. Short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial Mortgage including Construction

Loans in this segment include commercial loans, commercial construction loans, and multi-family loans. This segment also includes loans secured by 1-4 family residences which were made for investment purposes. Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The characteristics of properties securing the Company’s commercial real estate portfolio are diverse, but with geographic location almost entirely in the Company’s market area. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. In general, the Company avoids financing single purpose projects unless other underwriting factors are

present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate versus nonowner-occupied loans.

Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews and financial analysis of the developers and property owners. Construction loans are generally based on estimates of costs and value associated with the complete project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

Residential, Brokered and Consumer

Residential, brokered and consumer loans consist of three segments – residential mortgage loans, brokered mortgage loans and personal loans. For residential mortgage loans that are secured by 1-4 family residences and are generally owner-occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Brokered mortgages are purchased residential mortgage loans meeting the Company’s criteria established for originating residential mortgage loans. Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer personal loans are secured by consumer personal assets, such as automobiles or recreational vehicles. Some consumer personal loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Leases

Lease financing consists of direct financing leases and are used by commercial customers to finance capital purchases of equipment. The credit decisions for these transactions are based upon an assessment of the overall financial capacity of the applicant. A determination is made as to the applicant’s financial condition and ability to repay in accordance with the proposed terms as well as an overall assessment of the risks involved.

The following tables present the credit risk profile of the Company’s loan and lease portfolio based on rating category and payment activity as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~

2020:

June 30, 2020

Commercial
Construction

Commercial
and
and
Multi-
Residential
Home

Mortgage
Industrial
Development
Family
Mortgage
Equity
Leases
Consumer
Total
      1-4 Pass
$
233,028
$
134,189
$
62,372
$
58,709
$
123,225
$
6,370
$
114,190
$
12,533
$
744,616
         5 Special Mention
7,432
4,171
-
-
176
64
-
-
11,843
         6 Substandard
1,576
2,824
-
-
2,745
88
59
17
7,309
         7 Doubtful
-
-
-
-
-
-
103
-
103
         8 Loss
-
-
-
-
-
-
-
-
-

$
242,036
$
141,184
$
62,372
$
58,709
$
126,146
$
6,522
$
114,352
$
12,550
$
763,871


	March 31, 2021
	Commercial Mortgage		Industrial		Construction and Development		Multi- Family		Residential Mortgage		Home Equity		Leases		Consumer		Total

1-4 Pass	$	246,578	$	121,798	$	62,828	$	60,608	$	126,766	$	6,033	$	117,661	$	12,867	$	755,139
5 Special Mention	6,939		3,514		0		0		0		0		0		0		10,453
6 Substandard	1,044		2,814		4,900		0		2,181		71		11		316		11,337
7 Doubtful	0		0		0		0		0		0		53		0		53
8 Loss	0		0		0		0		0		0		0		0		0

	$	254,561	$	128,126	$	67,728	$	60,608	$	128,947	$	6,104	$	117,725	$	13,183	$	776,982

December 31, 2019

Commercial
Construction

Commercial
and
and
Multi-
Residential
Home

Mortgage
Industrial
Development
Family
Mortgage
Equity
Leases
Consumer
Total
      1-4 Pass
$
220,240
$
   75,814
$
53,426
$
66,002
$
127,888
$
6,871
$
109,424
$
13,519
$
673,184
         5 Special Mention
7,489
5,731
-
-
189
64
-
-
13,473
         6 Substandard
1,681
3,004
-
-
3,217
61
94
15
8,072
         7 Doubtful
-
-
-
-
-
-
74
-
74
         8 Loss
-
-
-
-
-
-
-
-
-

$
229,410
$
84,549
$
53,426
$
66,002
$
131,294
$
6,996
$
109,592
$
13,534
$
694,803


	December 31, 2020
	Commercial Mortgage		Industrial		Construction and Development		Multi- Family		Residential Mortgage		Home Equity		Leases		Consumer		Total

1-4 Pass	$	239,055	$	114,411	$	53,524	$	55,998	$	123,963	$	5,916	$	117,136	$	13,256	$	723,259
5 Special Mention	6,976		5,542		4,900		0		0		0		0		0		17,418
6 Substandard	1,533		2,878		0		0		3,145		66		15		1		7,638
7 Doubtful	0		0		0		0		0		0		20		0		20
8 Loss	0		0		0		0		0		0		0		0		0

	$	247,564	$	122,831	$	58,424	$	55,998	$	127,108	$	5,982	$	117,171	$	13,257	$	748,335

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, 2020~~March 31, 2021 and December 31, ~~2019:~~

June 30, 2020

Delinquent Loans

Total

Total Loans

30-59 Days
Past Due

60-89 Days
Past Due

90 Days and
Over

Total Past
Due

Current

Portfolio
Loans and
Leases

and Leases
> 90 Days
Accruing

Commercial mortgage
$
-

$
-

$
76

$
76

$
241,960

$
242,036

$
-
Commercial and industrial
-

-

467

467

140,717

141,184

55
Construction and development
40

1,586

-

1,626

60,746

62,372

-
Multi-family
-

-

1,047

1,047

57,662

58,709

1,047
Residential mortgage
567

507

2,261

3,335

122,811

126,146

2,133
Home equity
-

43

45

88

6,434

6,522

45
Leases
22

115

4

141

114,211

114,352

4
Consumer
174

11

17

202

12,348

12,550

17

Totals
$
803

$
2,262

$
3,917

$
6,982

$
756,889

$
763,871

$
3,301

December 31, 2019

Delinquent Loans

Total

Total Loans

30-59 Days
Past Due

60-89 Days
Past Due

90 Days and
Over

Total Past
Due

Current

Portfolio
Loans and
Leases

and Leases
> 90 Days
Accruing

Commercial mortgage
$
217

$
-

$
184

$
401

$
229,009

$
229,410

$
-
Commercial and industrial
220

1,092

438

1,750

82,799

84,549

3
Construction and development
-

257

249

506

52,920

53,426

249
Multi-family
-

-

-

-

66,002

66,002

-
Residential mortgage
762

240

2,452

3,454

127,840

131,294

2,256
Home equity
189

36

15

240

6,756

6,996

15
Leases
108

29

79

216

109,376

109,592

49
Consumer
271

35

15

321

13,213

13,534

15

Totals
$
1,767

$
1,689

$
3,432

$
6,888

$
687,915

$
694,803

$
2,587

2020:


	March 31, 2021
	Delinquent Loans								Current		Total Portfolio Loans and Leases		Total Loans and Leases > 90 Days Accruing
	30-59 Days Past Due		60-89 Days Past Due		90 Days and Over		Total Past Due

Commercial mortgage	$	431	$	0	$	210	$	641	$	253,920	$	254,561	$	134
Commercial and industrial	0		24		397		421		127,705		128,126		0
Construction and development	0		0		4,900		4,900		62,828		67,728		0
Multi-family	0		0		0		0		60,608		60,608		0
Residential mortgage	2,071		142		2,154		4,367		124,580		128,947		2,029
Home equity	7		0		31		38		6,066		6,104		31
Leases	136		21		0		157		117,568		117,725		0
Consumer	140		277		316		733		12,450		13,183		315

Totals	$	2,785	$	464	$	8,008	$	11,257	$	765,725	$	776,982	$	2,509


	December 31, 2020
	Delinquent Loans								Current		Total Portfolio Loans and Leases		Total Loans and Leases > 90 Days Accruing
	30-59 Days Past Due		60-89 Days Past Due		90 Days and Over		Total Past Due

Commercial mortgage	$	340	$	0	$	1,177	$	1,517	$	246,047	$	247,564	$	1,100
Commercial and industrial	1,251		203		439		1,893		120,938		122,831		0
Construction and development	0		4,900		0		4,900		53,524		58,424		0
Multi-family	0		0		0		0		55,998		55,998		0
Residential mortgage	1,913		243		2,680		4,836		122,272		127,108		2,554
Home equity	138		15		25		178		5,804		5,982		25
Leases	234		65		0		299		116,872		117,171		0
Consumer	318		129		317		764		12,493		13,257		317

Totals	$	4,194	$	5,555	$	4,638	$	14,387	$	733,948	$	748,335	$	3,996

The following tables present the Company’s impaired loans and specific valuation allowance at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~

June 30, 2020

Unpaid

Recorded

Principal

Specific

Balance

Balance

Allowance

Loans without a specific

valuation allowance

Commercial mortgage
$
218

$
258

$
-
Commercial and industrial
412

738

-
Residential mortgage
225

440

-

$
855

$
1,436

$
-

Loans with a specific

valuation allowance

Commercial mortgage
$
480

$
480

$
1
Commercial and industrial

205


214


201

$
685

$
694

$
202

Total impaired loans

Commercial mortgage
$
698

$
738

$
1
Commercial and industrial
617

952

201
Residential mortgage
225

440

-

Total impaired loans
$
1,540

$
2,130

$
202
2020:


	March 31, 2021
	Recorded Balance		Unpaid Principal Balance		Specific Allowance

Impaired loans without a specific valuation allowance
Commercial mortgage	$	77	$	86	$	—
Commercial and industrial	397		731		—
Residential mortgage	124		246		—
	$	598	$	1,063	$	—

Impaired loans with a specific valuation allowance
Commercial mortgage	$	5,504	$	5,504	$	811
Commercial and industrial	53		64		52
Residential mortgage	54		54		0
	$	5,611	$	5,622	$	863

Total impaired loans
Commercial mortgage	$	5,581	$	5,590	$	811
Commercial and industrial	450		795		52
Residential mortgage	178		300		0
Total impaired loans	$	6,209	$	6,685	$	863


	December 31, 2020
	Recorded Balance		Unpaid Principal Balance		Specific Allowance

Impaired loans without a specific valuation allowance
Commercial mortgage	$	76	$	86	$	—
Commercial and industrial	439		770		—
Residential mortgage	269		491		—
	$	784	$	1,347	$	—

Impaired loans without a specific valuation allowance
Commercial mortgage	$	625	$	625	$	150
Commercial and industrial	54		64		52
	$	679	$	689	$	202

Total impaired loans
Commercial mortgage	$	701	$	711	$	150
Commercial and industrial	493		834		52
Residential mortgage	269		491		0
Total impaired loans	$	1,463	$	2,036	$	202

December 31, 2019

Unpaid

Recorded

Principal

Specific

Balance

Balance

Allowance

Loans without a specific

valuation allowance

Commercial mortgage
$
803

$
1,256

$
-
Commercial and industrial
435

3,220

-
Residential mortgage
347

614

-

$
1,585

$
5,090

$
-

Loans with a specific

valuation allowance

Commercial and industrial
$
259

$
266

$
202

$
259

$
266

$
202

Total impaired loans

Commercial mortgage
$
803

$
1,256

$
-
Commercial and industrial
694

3,486

202
Residential mortgage
347

614

-

Total impaired loans
$
1,844

$
5,356

$
202

The following tables present the Company’s average investment in impaired loans and interest income recognized for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~

Average

Investment in

Interest

Impaired

Income

Loans

Recognized

Three Months Ended June 30, 2020:

Total impaired loans

Commercial mortgage

$
745

$
11
Commercial and industrial

645

14
Residential mortgage

265

1

Total impaired loans

$
1,655

$
26

Average

Investment in

Interest

Impaired

Income

Loans

Recognized

Six Months Ended June 30, 2020:

Total impaired loans

Commercial mortgage

$
765

$
18
Commercial and industrial

661

28
Residential mortgage

292

6

Total impaired loans

$
1,718

$
52

2020:


	Average Investment in Impaired Loans		Interest Income Recognized

Three Months Ended March 31, 2021:
Total impaired loans
Commercial mortgage	$	3,141	$	7
Commercial and industrial	471		4
Residential mortgage	180		1
Total impaired loans	$	3,792	$	12

Average

Investment in

Interest

Impaired

Income

Loans

Recognized

Three Months Ended June 30, 2019:

Total impaired loans

Commercial mortgage

$
703

$
7
Commercial and industrial

889

30
Residential mortgage

377

4

Total impaired loans

$
1,969

$
41

Average

Investment in

Interest

Impaired

Income

Loans

Recognized

Six Months Ended June 30, 2019:

Total impaired loans

Commercial mortgage

$
716

$
22
Commercial and industrial

985

40
Residential mortgage

381

8

Total impaired loans

$
2,082

$
70


	Average Investment in Impaired Loans		Interest Income Recognized

Three Months Ended March 31, 2020:
Total impaired loans
Commercial mortgage	$	797	$	7
Commercial and industrial	684		14
Residential mortgage	326		5
Total impaired loans	$	1,807	$	26

The following table presents the Company’s nonaccrual loans and leases at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~

June 30,

December 31,

2020

2019

Commercial mortgage

$
218

$
342
Commercial and industrial

468

494
Residential mortgage

225

315
Leases

103

74

$
1,014

$
1,225

2020:


	March 31, 2021		December 31, 2020

Commercial mortgage	$	77	$	76
Commercial and industrial	450		493
Construction	4,900		0
Residential mortgage	124		214
Leases	53		20

	$	5,604	$	803

During the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ there were no0 newly classified troubled debt restructured loans or leases (“TDRs”). For the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company recorded no0 charge-offs related to TDRs. As of both ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, TDRs had a related allowance of $52,000. During the three ~~and six~~ months ended ~~June 30, 2020,~~March 31, 2021, there were no0 TDRs for which there was a payment default within the first 12 months of the modification.

The ~~Coronavirus Aid, Relief, and Economic Security~~CARES Act ~~of 2020 ("CARES Act")~~ provided guidance around the modification of loans as a result of the COVID-19 pandemic, which outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs. This includes short-term (e.g. six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers are considered current under the CARES Act if they are less than 30 days past due on their contractual payments at the time a modification program is implemented.

In March 2020, the Company began offering short-term loan modifications to assist borrowers during the COVID-19 pandemic. As of ~~June 30, 2020,~~March 31, 2021, the Company had ~~approved 752~~33 loan and lease modifications outstanding related to the COVID-19 pandemic with an outstanding loan balance totaling ~~$175.1~~$24.6 million in accordance with the CARES Act. Accordingly, the Company does not account for such loan modifications as TDRs. Loan modifications in accordance with the CARES Act and related regulatory guidance are still subject to an evaluation in regard to determining whether or not a loan is deemed to be impaired.

At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the balance of real estate owned includes ~~$32,000~~$0 and ~~$0,~~$32,000, respectively, of foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property. At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds were in process was $520,000 and $283,000, ~~and $190,000,~~ respectively.

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

June 30,

December 31,

2020

2019

Total minimum lease payments to be received

$
127,851

$
120,570

Initial direct costs

4,425

5,720

132,276

126,290

Less: Unearned income

(17,924
)

(16,698
)

Net investment in direct finance leases

$
114,352

$
109,592

~~The amount of leases~~


	March 31, 2021		December 31, 2020

Total minimum lease payments to be received	$	129,865	$	129,114
Initial direct costs	6,639		6,353
	136,504		135,467
Less: Unearned income	(18,779)		(18,296)

Net investment in direct finance leases	$	117,725	$	117,171

Leases serviced by First Bank Richmond for the benefit of others ~~was~~totaled approximately ~~$336,000~~$22,000 and ~~$715,000~~$86,000 at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. Additionally, certain leases have been sold with partial recourse. First Bank Richmond estimates and records its obligation based upon historical loss percentages. At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, First Bank Richmond has recorded a recourse obligation on leases sold with recourse of $0, and has a maximum exposure of ~~$411,000~~$22,000 and $86,000, respectively, for these leases.

The following table summarizes the future minimum lease payments receivable subsequent to ~~June 30, 2020:~~

2020
$
25,648
2021
43,071
2022
29,713
2023
18,018
2024
9,201
Thereafter
2,200

$
127,851

March 31, 2021:


2021	$	38,107
2022	39,561
2023	27,108
2024	16,659
2025	7,405
Thereafter	1,025

	$	129,865

Note 5: Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1Quoted prices in active markets for identical assets or liabilities

Level 2Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3Unobservable inputs supported by little or no market activity that are significant to the fair value of the assets or liabilities

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 ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~

Fair Value Measurements Using

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Fair

Assets

Inputs

Inputs

Value

(Level 1)

(Level 2)

(Level 3)

June 30, 2020

Available-for-sale securities

SBA Pools
$
22,771

$
-

$
22,771

$
-
Federal agencies
7,519

-

7,519

-
State and municipal obligations
62,197

-

62,197

-
Mortgage-backed securities -

   GSE residential
128,704

-

128,704

-
Equity securities
13

13

-

-

$
221,204

$
13

$
221,191

$
-

2020:


			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

March 31, 2021
Available-for-sale securities

SBA Pools	$	15,528	$	0	$	15,528	$	0
Federal agencies	7,533		0		7,533		0
State and municipal obligations	100,336		0		100,336		0
Mortgage-backed securities - GSE residential	134,749		0		134,749		0
Equity securities	13		13		0		0
	$	258,159	$	13	$	258,146	$	0

Fair Value Measurements Using

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Fair

Assets

Inputs

Inputs

Value

(Level 1)

(Level 2)

(Level 3)

December 31, 2019

Available-for-sale securities

U.S. Treasury securities
$
2,991

$
-

$
2,991

$
-
SBA Pools
14,383

-

14,383

-
Federal agencies
21,646

-

21,646

-
State and municipal obligations
45,840

-

45,840

-
Mortgage-backed securities -

   GSE residential
116,911

-

116,911

-
Equity securities
13

13

-

-

$
201,784

$
13

$
201,771

$
-


			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

December 31, 2020
Available-for-sale securities

SBA Pools	$	16,300	$	0	$	16,300	$	0
Federal agencies	5,757		0		5,757		0
State and municipal obligations	96,285		0		96,285		0
Mortgage-backed securities - GSE residential	126,150		0		126,150		0
Equity securities	13		13		0		0
	$	244,505	$	13	$	244,492	$	0

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 ~~six~~three months ended ~~June 30, 2020.~~

March 31, 2021.

Available-for-Sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy, which includes equity securities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. Level 2 securities include agency securities, obligations of state and political subdivisions, and mortgage-backed securities. Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities without relying exclusively on quoted prices for specific investment securities but rather relying on the investment securities’ relationship to other benchmark quoted investment securities. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

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 ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~

Fair Value Measurements Using

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Fair

Assets

Inputs

Inputs

Value

(Level 1)

(Level 2)

(Level 3)

June 30, 2020

Impaired loans, collateral dependent
$
483

$
-

$
-

$
483
Mortgage-servicing rights
1,405

-

-

1,405

December 31, 2019

Impaired loans, collateral dependent
$
57

$
-

$
-

$
57
Mortgage-servicing rights
1,033

-

-

1,033
2020:


			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

March 31, 2021
Impaired loans, collateral dependent	$	4,748	$	0	$	0	$	4,748
Mortgage-servicing rights	1,659		0		0		1,659

December 31, 2020
Impaired loans, collateral dependent	$	532	$	0	$	0	$	532
Mortgage-servicing rights	1,712		0		0		1,712

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Collateral-Dependent Impaired Loans, Net of ALLL

The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell. Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by management. Appraisals are reviewed for accuracy and consistency by management. Appraisers are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by management by comparison to historical results.

Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment. Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral-dependent loans.

Mortgage-Servicing Rights

Mortgage-servicing rights do not trade in an active, open market with readily observable prices. Accordingly, fair value is estimated using discounted cash flow models having significant inputs of discount rate, prepayment speed and default rate. Due to the nature of the valuation inputs, mortgage-servicing rights are classified within Level 3 of the hierarchy.

Mortgage-servicing rights are tested for impairment on a quarterly basis based on an independent valuation. The valuation is reviewed by management for accuracy and for potential impairment.

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 ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~

Fair Value at

June 30,

Valuation

Unobservable

2020

Technique

Inputs

Range

Collateral-dependent
$
483

Appraisal

Marketability

0% - 11%
impaired loans

discount

Mortgage-servicing rights
$
1,405

Discounted

Discount rate

10%

cash flow

Fair Value at

December 31,

Valuation

Unobservable

2019

Technique

Inputs

Range

Collateral-dependent
$
57

Appraisal

Marketability

0% - 75%
impaired loans

discount

Mortgage-servicing rights
$
1,033

Discounted

Discount rate

10%

cash flow

2020:

Fair Value at March 31, 2021

Valuation
Technique

Unobservable
Inputs

Range

Collateral-dependent impaired loans

4,748

Appraisal

Marketability discount

0 - 16%

Mortgage-servicing rights

1,659

Discounted cash flow

Discount rate

10%

Fair Value at December 31, 2020

Valuation
Technique

Unobservable
Inputs

Range

Collateral-dependent impaired loans

532

Appraisal

Marketability discount

0 - 12%

Mortgage-servicing rights

1,712

Discounted cash flow

Discount rate

10%

Fair Value of Financial Instruments

The following tables present estimated fair values of the Company’s financial instruments at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~

Fair Value Measurements Using

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Carrying

Assets

Inputs

Inputs

Value

(Level 1)

(Level 2)

(Level 3)
June 30, 2020

Financial assets

   Cash and cash equivalents
$
110,606

$
110,606

$
-

$
-
   Available-for-sale securities
221,204

13

221,191

-
   Held-to-maturity securities
13,320

-

13,664

-
   Loans and leases receivable, net
752,923

-

-

762,060
   Federal Reserve and FHLB stock
9,080

-

9,080

-
   Interest receivable
4,721

-

4,721

-

Financial liabilities

   Deposits
739,131

-

742,215

-
   FHLB advances
180,000

-

187,403

-
   Interest payable
348

-

348

-

Fair Value Measurements Using

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Carrying

Assets

Inputs

Inputs

Value

(Level 1)

(Level 2)

(Level 3)
December 31, 2019

Financial assets

   Cash and cash equivalents
$
40,597

$
40,597

$
-

$
-
   Available-for-sale securities
201,784

13

201,771

-
   Held-to-maturity securities
15,917

-

16,156

-
   Loans and leases receivable, net
687,258

-

-

687,789
   Federal Reserve and FHLB stock
7,600

-

7,600

-
   Interest receivable
3,052

-

3,052

-

Financial liabilities

   Deposits
617,219

-

619,635

-
   FHLB advances
154,000

-

155,304

-
   Interest payable
297

-

297

-

2020:


			Fair Value Measurements Using
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2021
Financial assets
Cash and cash equivalents	$	65,523	$	65,523	$	0	$	0
Available-for-sale securities	258,159		13		258,146		0
Held-to-maturity securities	10,211		0		10,445		0
Loans and leases receivable, net	763,731		0		0		781,646
Federal Reserve and FHLB stock	9,050		0		9,050		0
Interest receivable	4,204		0		4,204		0
Financial liabilities
Deposits	757,074		0		759,129		0
FHLB advances	170,000		0		177,192		0
Interest payable	208		0		208		0


			Fair Value Measurements Using
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2020
Financial assets
Cash and cash equivalents	$	48,768	$	48,768	$	0	$	0
Available-for-sale securities	244,505		13		244,492		0
Held-to-maturity securities	12,225		0		12,520		0
Loans and leases receivable, net	736,400		0		0		751,151
Federal Reserve and FHLB stock	9,050		0		9,050		0
Interest receivable	4,704		0		4,704		0
Financial liabilities
Deposits	693,045		0		695,216		0
FHLB advances	170,000		0		178,015		0
Interest payable	222		0		222		0

Note 6: Earnings per Share

Basic EPS is computed by dividing net income allocated to common stock by the weighted average number of common shares outstanding during the period which excludes the participating securities. Diluted EPS includes the dilutive effect of additional potential common shares from stock compensation awards, but excludes awards considered participating securities. ESOP shares are not considered outstanding for EPS until they are earned. The following table presents the computation of basic and diluted EPS for the periods indicated:

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2020

Net income
$
2,506

$
4,958
Shares outstanding for Basic EPS:

Average shares outstanding
13,526,625

13,526,625
Less: average unearned ESOP Shares
1,045,892

1,052,656
Shares outstanding for Basic EPS
12,480,733

12,473,969

Additional Dilutive Shares
-

-

Shares outstanding for Diluted EPS
12,480,733

12,473,969

Basic Earnings Per Share
$
0.20

$
0.40
Diluted Earnings Per Share
$
0.20

$
0.40


	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020

Net income	$	2,562	$	2,452
Shares outstanding for Basic EPS:
Average shares outstanding	13,124,015		13,526,625
Less: average restricted stock award shares not vested	431,501		0
Less: average unearned ESOP Shares	1,005,311		1,059,419
Shares outstanding for Basic EPS	11,687,203		12,467,206

Additional Dilutive Shares	176,705		0

Shares outstanding for Diluted EPS	11,863,908		12,467,206

Basic Earnings Per Share	$	0.22	$	0.20
Diluted Earnings Per Share	$	0.22	$	0.20

Note 7: Benefit Plans

401(k)

The Company has a retirement savings 401(k) plan, in which substantially all employees may participate. The Company matches employees' contributions at the rate of 50 percent for the first 6 percent of base salary contributed by participants. The Company’s expense for the plan was $52,000 and $49,000 for the three months ended March 31, 2021 and 2020, respectively.

Pension Plan

The Company participates in the Pentegra Defined Benefit Plan for Financial Institutions (the “DB Plan”), an industry-wide, tax-qualified defined-benefit pension plan. As previously disclosed, the Company has frozen and intends to terminate the Bank’s participation in the DB Plan, which will require it to pay an amount based on the underfunded status of the plan. As of March 31, 2021 the Company has accrued $17.5 million for this expense. The actual termination expense of the DB Plan may be higher or lower than the amount currently accrued for by the Company depending on a number of factors, including but not limited to the interest rate environment and the valuation of plan assets. Due to the current low interest rate environment, terminating the DB Plan at this time would require the Company to incur a substantial additional expense over and above the amount presently accrued. As a result, the Company’s Board of Directors will continue to monitor and evaluate the timing of, and costs associated with, termination of the DB Plan. Any additional expenses associated with the termination of the DB Plan will negatively impact our results of operations in the future.

Employee Stock Ownership Plan

As part of the ~~corporate~~ reorganization and related stock offering, the Company established an Employee Stock Ownership Plan, ~~(ESOP)~~or ESOP, covering substantially all employees. The ESOP acquired 1,082,130 shares of Company common stock at an average price of $13.59 per share on the open market with funds provided by a loan from the Company. Dividends on unallocated shares used to repay the loan for the Company are recorded as a reduction of the loan or accrued interest, as applicable. Dividends on allocated shares paid to participants are reported as compensation expense. 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, ~~$14,706,000~~$13,479,847 and $13,664,373 of common stock acquired by the ESOP was shown as a reduction of stockholders’ ~~equity.~~equity at March 31, 2021 and December 31, 2020, respectively. Shares are released to participants proportionately as the loan is repaid.

ESOP expense for the three ~~and six~~ months ended March 31, 2021 and 2020 was $183,000 and $187,000, respectively.


	March 31, 2021		March 31, 2020

Earned ESOP shares	90,196		22,545
Unearned ESOP shares	991,934		1,059,585
Total ESOP shares	1,082,130		1,082,130

Quoted per share price	$	13.56	$	10.22
Fair value of earned shares	$	1,223	$	230
Fair value of unearned shares	$	13,451	$	10,829

Richmond Mutual Bancorporation, Inc. 2020 Equity Incentive Plan

On September 15, 2020, the Company's stockholders approved the Richmond Mutual Bancorporation, Inc. 2020 Equity Incentive Plan ("2020 EIP") which provides for the grant to eligible participants of up to (i) 1,352,662 shares of Company common stock to be issued upon the exercise of stock options and stock appreciation rights and (ii) 541,065 shares of Company common stock to participants as restricted stock awards (which may be in the form of shares of common stock or share units giving the participant the right to receive shares of common stock at a specified future date).

Restricted Stock Awards. On October 1, 2020, the Company awarded 449,086 shares of common stock under the 2020 EIP with a grant date fair value of $10.53 per share (total fair value of $4.7 million at issuance) to eligible participants. These awards vest in five equal annual installments with the first vesting occurring on June 30, 2021. Forfeited shares may be awarded to other eligible recipients in future grants until the 2020 EIP terminates in September 2030.

Total compensation cost recognized in the income statement for restricted stock awards during the three months ended March 31, 2021 was $303,000 and the related tax benefit recognized was $64,000. As of March 31, 2021, unrecognized compensation expense related to restricted stock awards was $4.0 million.

Stock Option Plan. On October 1, 2020, the Company awarded options to purchase 1,095,657 of common stock under the 2020 EIP with an exercise price of $10.53 per share, the fair market value of a share of the Company's common stock on the date of

grant, to eligible participants. These options awarded vest in five equal annual installments with the first vesting occurring on June 30, 2021. Forfeited options may be awarded to other eligible recipients in future grants until the 2020 EIP terminates in September 2030.

The following table summarizes the stock option activity in the 2020 EIP during the three months ended March 31, 2021.


	March 31, 2021
	Number of Shares	Weighted-Average Exercise Price

Balance at beginning of year	1,095,657	$	10.53
Granted	0	0
Exercised	0	0
Forfeited/expired	0	0
Balance at end of year	1,095,657	10.53
Exercisable at end of period(1)	40,580	$	10.53

(1) As a result of the acceleration of option vesting upon the death of a recipient.

A summary of the status of the Company stock option shares as of March 31, 2021 is presented below.


	Shares	Weighted Average Grant Date Fair Value

Non-vested, beginning of year	1,055,077	$	2.91
Vested	0	0
Granted	0	0
Forfeited	0	0
Non-vested, March 31	1,055,077	$	2.91

Total compensation cost recognized in the income statement for option-based payment arrangements during 2020 was ~~$143,000~~$205,000 and ~~$329,000, respectively.~~

June 30, 2020
Earned ESOP shares
49,598
Unearned ESOP shares
1,032,532
Total ESOP shares
1,082,130

Quoted per share price
$
11.24
Fair value of earned shares
$
557
Fair value of unearned shares
$
11,606
the related tax benefit recognized was $23,000. As of March 31, 2021, unrecognized compensation expense related to the stock option awards was $2.7 million.

Note 8: Subsequent Event

~~On July 8, 2020,~~

Subsequent to March 31, 2021 through May 14, 2021 the Company ~~announced that its Board of Directors authorized a~~purchased 167,193 shares under the existing stock repurchase program, leaving 249,392 shares available for ~~up to 676,331 shares, or approximately 5% of its currently outstanding shares.~~

future repurchase.

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, 2020,~~March 31, 2021, and the consolidated results of operations for the three ~~and six month periods~~months ended ~~June 30, 2020,~~March 31, 2021, compared to the same ~~periods~~period in ~~2019~~2020 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 subsidiary, 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:

·

•the effect of the novel coronavirus disease of 2019 (“COVID-19”), including on the ~~Company’~~Company’s credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID-19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, and consumer and corporate clients, including economic activity, employment levels and market liquidity;

·

•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;

·

•fluctuations in real estate values, and ~~both~~ residential, commercial, and ~~commercial~~multifamily real estate market conditions;

·~~risks associated with the relatively unseasoned nature of a significant portion of our loan portfolio;~~

·•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 the proposed~~and intended termination of our frozen defined benefit plan;

·~~the deductibility of our contribution to the charitable foundation for tax purposes;~~

·

•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 laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements, including as a result of Basel III;~~

·

•changes in the quality or composition of our loan, lease or investment portfolios;

·

•our ability to keep pace with technological changes, ~~that may be more difficult~~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 ~~expensive than expected;~~

·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;

·

•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 or the Public Company Accounting Oversight ~~Board;~~

·~~our ability to retain key employees;~~

·~~our compensation expense associated with equity allocated or awarded to our employees;~~

·~~changes in~~Board, including additional guidance and interpretation on accounting issues and details of the ~~financial condition, results~~implementation of ~~operations or future prospects~~new accounting methods; including as a result of ~~issuers of securities that we own;~~

·~~other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services including~~ the Coronavirus Aid, Relief, and Economic Security Act of 2020 ("CARES Act") ; and

·the Consolidated Appropriations Act, 2021 ("CAA 2021");

•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 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 including as a result of the CAA 2021 and recent COVID vaccination effort; and

•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, ~~2019~~2020 (“~~2019~~2020 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

On February 6, 2019, the Board of Directors of First Mutual of Richmond, Inc. (the “MHC”), the parent mutual holding company of Richmond Mutual Bancorporation-Delaware, adopted a Plan of Reorganization and Stock Offering (the “Plan”). The Plan was approved by the Board of Governors of the Federal Reserve System (the “FRB”) and by the Indiana Department of Financial Institutions (the “IDFI”), as well as the voting members of the MHC at a special meeting of members held on June 19, 2019. Pursuant to the Plan, upon completion of the transaction, the MHC would convert from a mutual holding company to the stock holding company corporate structure, the MHC and Richmond Mutual Bancorporation-Delaware would cease to exist, and First Bank Richmond would become a wholly owned subsidiary of the Company, a newly formed Maryland corporation. The transaction was completed on July 1, 2019. In connection with the related stock offering, which was also completed on July 1, 2019, the Company sold 13,026,625 shares of common stock at $10.00 per share, for gross offering proceeds of approximately $130.3 million in its subscription offering and contributed 500,000 shares and $1.25 million to a newly formed charitable foundation, First Bank Richmond, Inc. Community Foundation (the “Foundation”).

In certain circumstances, where appropriate, the terms “we”, “us”, “our” and the “Company” refer collectively to (i) RMB-Delaware and First Bank Richmond with respect to discussions in this document involving matters occurring prior to completion of the corporate reorganization and (ii) the Company and First Bank Richmond with respect to discussions in this document involving matters occurring post-corporate reorganization, in each case unless the context indicates another meaning.

The Company is regulated by the FRB and the IDFI. Our corporate office is located at 31 North 9th Street, Richmond, Indiana, and our 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~~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 ~~$167.0~~$151.3 million at ~~June 30, 2020.~~

March 31, 2021.

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 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. Because the length of the COVID-19 pandemic and the efficacy of the extraordinary measures being put in place to address its economic consequences are still unknown, including the ~~recent~~ 150 basis point reduction in the targeted federal funds rate in March 2020, until the pandemic further subsides, the Company expects its net interest income and net interest margin will be adversely affected in ~~2020~~2021 and possibly longer.

At ~~June 30, 2020,~~March 31, 2021, on a consolidated basis, we had $1.1 billion in assets, ~~$752.9~~$763.7 million in loans and leases, net of allowance, ~~$739.1~~$757.1 million in deposits and ~~$196.1~~$189.5 million in stockholders’ equity. At ~~June 30, 2020,~~March 31, 2021, First Bank Richmond’s total risk-based capital ratio was ~~13.4%~~20.8%, exceeding the 10.0% requirement for a well-capitalized institution. For the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, net income was ~~$5.0~~$2.6 million, compared with net income of ~~$1.7~~$2.5 million for the ~~six~~three months ended ~~June 30, 2019.~~

March 31, 2020.

Critical Accounting Policies

Certain accounting policies are important to the portrayal of our financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Management believes that its critical accounting policies include determining the allowance for loan and lease losses, the valuation of foreclosed assets, mortgage servicing rights, valuation of intangible assets and securities, deferred tax asset and income tax accounting.

Allowance for Loan and Lease Losses. We maintain an allowance for loan and lease losses to cover probable incurred credit losses at the balance sheet date. Loan and lease losses are charged against the allowance when management believes the uncollectibility of a loan 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 loan and lease losses is charged to operations based on our periodic evaluation of the necessary allowance balance.

We have an established process to determine the adequacy of the allowance for loan and lease 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 impaired loans, estimated losses on other classified loans and pools of homogeneous loans, and consideration of past loan loss experience, 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.

~~Foreclosed Assets.~~ Foreclosed assets are carried at the lower of cost or fair value less estimated selling costs. Management estimates the fair value of the properties based on current appraisal information. Fair value estimates are particularly susceptible to significant changes in the economic environment, market conditions and real estate market. A worsening or protracted economic decline would increase the likelihood of a decline in property values and could create the need to write down the properties through current operations.

Mortgage Servicing Rights (“MSRs”). MSRs associated with loans originated and sold, where servicing is retained, are capitalized and included in the consolidated balance sheet. The value of the capitalized servicing rights represents the fair value of the right to service loans in the portfolio. Critical accounting policies for MSRs relate to the initial valuation and subsequent impairment tests. The methodology used to determine the valuation of MSRs requires the development and use of a number of estimates, including anticipated principal amortization and prepayments of that principal balance. Events that may significantly affect the estimates used are changes in interest rates, mortgage loan prepayment speeds and the payment performance of the underlying loans. The carrying value of the MSRs is periodically reviewed for impairment based on a determination of fair value. For purposes of measuring impairment, the servicing rights are compared to a valuation prepared based on a discounted cash flow methodology, utilizing current prepayment speeds and discount rates. Impairment, if any, is recognized through a valuation allowance and is recorded as a reduction in loan servicing fee income.

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 other-than-temporary-impairments (“OTTI”) exist pursuant to guidelines established in ASC 320. In evaluating the possible impairment of securities, consideration is given to the length of time and the extent to which the fair value has been 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 OTTI, we must then determine the amount of the OTTI to be recognized in earnings. 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 less any current period loss, the OTTI will be separated into the amount representing the credit loss and the amount related to all other factors. The amount of OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the OTTI related to other factors will be recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings will become the new amortized cost basis of the investment. If management intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the OTTI will be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. Any recoveries related to the value of these securities are recorded as an unrealized gain (as accumulated other comprehensive income (loss) in stockholders’ equity) and not recognized in income until the security is ultimately sold.

From time to time we may dispose of an impaired security 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.

Deferred Tax Asset. We have evaluated our deferred tax asset to determine if it is more likely than not that the asset will be utilized in the future. Our most recent evaluation has determined that we will more likely than not be able to utilize our remaining deferred tax asset.

Income Tax Accounting. We file a consolidated federal income tax return. The provision for income taxes is based upon income in our consolidated financial statements, rather than amounts reported on our income tax return. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on our deferred tax assets and liabilities is recognized as income or expense in the period that includes the enactment date.

COVID 19 Response

~~In response~~

The Company continues to ~~the COVID-19 pandemic, the Company is offering~~offer a number of options designed to support our customers and the communities that we ~~serve.~~

serve during the ongoing COVID-19 pandemic.

Paycheck Protection Program ("PPP"). The ~~Coronavirus Aid, Relief and Economic Security Act, or~~ CARES Act was signed into law on March 27, 2020, and authorized the ~~Small Business Administration (“SBA”)~~SBA to temporarily guarantee loans under a ~~new~~ loan program called the Paycheck Protection Program, or PPP. ~~The goal of the PPP is to avoid as many layoffs as possible, and to encourage small businesses to maintain payrolls.~~ As a qualified SBA lender, the Company was automatically authorized to originate PPP loans upon commencement of the program in April 2020. ~~PPP loans have: (a) an interest rate of 1.0%, (b) a two-year loan term to maturity; and (c) principal and interest payments deferred for six months from the date of disbursement.~~ The SBA guarantees 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be forgiven and repaid by the SBA. The ~~deadline~~initial PPP concluded on August 8, 2020 and was then reopened through May 31, 2021.

During the first quarter of 2021, the Company continued its participation in the initial SBA PPP by processing applications for PPP loan ~~applications to the SBA has been extended to August 8, 2020. The Bank continued to accept new PPP applications based on this extended~~

~~deadline and is assisting small businesses with other borrowing options as they become available, including SBA and other government sponsored lending programs, as appropriate.~~

forgiveness. As of ~~June 30, 2020, we have processed 465~~March 31, 2021, the Company has received SBA forgiveness for 413 PPP loans totaling ~~$64.3 million. There were $72,000~~$47.0 million out of the $64.9 million in PPP loans ~~approved awaiting funding as~~funded during the first PPP program. During the first quarter of ~~June 30,~~2021, the Company began accepting and processing loan applications under the second PPP program enacted in December 2020. ~~Many~~As of March 31, 2021, the PPP applications have been from our existing clients but we are also serving those who have not had a banking relationship with us in the past. In addition to the 1% interest earned on these loans, the SBA pays us fees for processingBank has funded 329 PPP loans intotaling $35.2 million under the ~~following amounts: (i) five (5) percent~~second PPP program. As of March 31, 2021, there was a total of 408 PPP loans outstanding totaling $54.7 million. We expect to continue accepting and processing applications for the second round of PPP loans through its expiration date of not more than $350,000; (ii) three (3) percent for loans of more than $350,000 and less than $2,000,000; and one (1) percent for loans of at least $2,000,000. We may not collect any fees from the loan applicants.

May 31, 2021.

We may utilize the FRB's Paycheck Protection Program Liquidity Facility (“PPPLF”), pursuant to which the Company would pledge its PPP loans as collateral to obtain FRB non-recourse loans. The PPPLF will take the PPP loans as collateral at face value. As of ~~June 30,2020,~~March 31, 2021, we had not utilized the PPPLF.

Loan Modifications.~~Beginning in March 2020 we started receiving requests from our~~We offer payment and financial relief programs for borrowers ~~for~~impacted by COVID-19, primarily through loan and lease ~~deferrals related to the effects~~payment deferments of ~~the COVID-19 pandemic. At June 30, 2020, 752 loans aggregating $175.1 million, or 22.9% of total loans and leases, were modified. Modifications include payment deferrals, interest only or~~ principal and interest of up to ~~primarily~~ 90 days, ~~fee waivers, extensions~~although requests for payment relief during the first quarter of ~~repayment terms of up~~2021 declined significantly from 2020. We continue to ~~six months, or other delays in payment that~~monitor our loan portfolio and strive to work with our customers and communities. Deferred loans are ~~considered insignificant. These modifications were not classified as TDRs~~re-evaluated at ~~June 30, 2020 in accordance with~~ the ~~guidance~~end of the ~~CARES Act~~initial deferral period and ~~related regulatory banking guidance. The CARES Act provides that~~will either return to the short-term modification of loans as a result of the COVID-19 pandemic, made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs. This includes short-term (e.g. six months) modifications such as payment deferrals, fee waivers, extensions of repaymentoriginal loan terms or other delays in payment that are insignificant. Borrowers are considered current under the CARES Act and related regulatory banking guidance if they are less than 30 days past due on their contractual payments at the time a modification program is implemented. All loans modified due to COVID-19 will be separately monitored and any request for continuation of relief beyond the initial modification will be reassessed at that time to determine if a further modification should be granted and if a downgrade in risk rating is appropriate. ~~We believe~~At March 31, 2021, the ~~steps we are taking are necessary~~number of loans and leases granted payment deferrals was 33, representing $24.6 million in loans and leases outstanding, compared to ~~effectively manage our portfolio~~48 loans and ~~assist our clients through~~leases at December 31, 2020 totaling $54.7 million. The decrease in the ~~ongoing uncertainty surrounding~~outstanding deferred loan and lease amounts was primarily attributable to $21.0 million in commercial mortgage loans and $8.9 million in multi-family loans returning to their normal payment terms. Of the ~~duration, impact~~loans and ~~government response to the COVID-19 pandemic.~~

leases currently deferred at March 31, 2021, six loans, representing $2.3 million in loans and leases outstanding, were new deferrals and 27 loans, representing $22.3 million in loans and leases outstanding, were repeat deferrals. The following table summarizes information relating to ~~forbearance requests granted~~loan deferments at ~~June 30, 2020 and~~ March 31, 2021 and December 31, 2020:

June 30, 2020

March 31, 2020
($ in thousands)

Number of Loans

Balance

Number of Loans

Balance
Commercial mortgage

70

$
98,010

21

$
27,050
Commercial and industrial

27

12,692

10

1,730
Construction and development

3

10,098

—

—
Multi-Family

13

21,197

5

4,465
Residential mortgage

88

11,198

8

1,379
Home equity

7

215

—

—
Direct financing leases

507

21,080

176

8,058
Consumer

37

597

—

—
Total Loans

752

$
175,087

220

$
42,682

March 31, 2021 December 31, 2020
($ in thousands) Number of Loans Balance Number of Loans Balance
Commercial mortgage 8 23,372 18 44,352
Commercial and industrial — — 1 770
Multi-Family — — 4 8,868
Residential mortgage 5 450 3 163
Direct financing leases 19 756 20 494
Consumer 1 4 2 18
Total Loans 33 24,582 48 54,665

The following table summarizes information relating to hospitality loan deferments (which are included in the commercial mortgage balance in the table above) at March 31, 2021 and December 31, 2020:

March 31, 2021 December 31, 2020
($ in thousands) Number
of Loans Balance Percent of total
loans in category Number
of Loans Balance Percent of total
loans in category
Restaurants — $ — — % 1 $ 375 6.78 %
Hotels 5 16,350 23.15 % 12 37,056 56.17 %
Total Loans 5 $ 16,350 21.74 % 13 $ 37,431 52.35 %

Branch Operations and Additional Client Support

~~Many of our~~

The Company remains focused on keeping its employees continue to work remotely or have flexible work schedules, and we have established protective measures within our offices to help ensure the safety of those employees who must work on-site. We have also taken steps to resume more normal branch activities with specific guidelines in place to ensure the safety of our clients and our personnel. This includes the installation of counter shields and hand sanitizing stations, limiting the number of clients in a branch at any one time, requiring social distancingsafe and the ~~wearing of masks within the~~Bank running effectively to serve its clients. The Bank is managing branch ~~diligent disinfecting of common area high touchpoints~~access and occupancy levels in relation to cases and close contact scenarios, following governmental restrictions and public health authority guidelines, and encouraging remote work and supporting employees with paid time off. As of March 31, 2021, all of the ~~use of our digital and electronic banking channels.~~Bank's branch lobbies were open. We continuously monitor and conform our practices based on updates from the Center for Disease Control, World Health Organization, Financial Regulatory Agencies, and local and state health departments.

~~In addition, certain late fees are being waived for those customers experiencing a hardship as a result of the COVID 19 pandemic.~~

Comparison of Financial Condition at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~

2020

General.Total assets increased ~~$154.2~~$56.7 million, or ~~15.6%~~5.2%, to $1.1 billion at ~~June 30, 2020~~March 31, 2021 from ~~$986.0 million~~$1.1 billion at December 31, ~~2019.~~2020. The increase was primarily a result of a ~~$65.7~~$27.3 million, or ~~9.6%~~3.7%, increase in loans and leases, net of allowance to ~~$752.9~~$763.7 million at ~~June 30, 2020~~March 31, 2021 from ~~$687.3~~$736.4 million at December 31, ~~2019,~~2020; and a ~~$70.0~~$11.6 million, or ~~172.5%~~4.5%, increase in investment securities to $268.4 million at March 31, 2021, compared to $256.7 million at December 31, 2020. The balance of the increase in assets was attributable to a $16.8 million, or 34.4%, increase in cash and cash equivalents to ~~$110.6~~$65.5 million at ~~June 30, 2020, compared to $40.6~~March 31, 2021, from $48.8 million at December 31, ~~2019. The increase in cash and cash equivalents primarily was the result of an increase in brokered deposits and FHLB borrowings as part of the Company’s strategy to increase liquidity.~~

2020.

Loans and Leases.Our loan and lease portfolio, net of allowance for loan and lease losses, increased ~~$65.7~~$27.3 million, to ~~$752.9~~$763.7 million at ~~June 30, 2020~~March 31, 2021 from ~~$687.3~~$736.4 million at December 31, ~~2019.~~2020. The increase in loans and leases was attributable to PPP loans, which accounted for $64.3 million of the $65.7 million increase. From December 31, 2019 to June 30, 2020, commercial and industrial loans increased $56.6 million or 67.0%, commercial real estate loans increased $12.6 million or 5.5%, and construction and development loans increased $8.9 million or 16.7%. PPP loans accounted for all of the increasesan increase in commercial and industrial loans ~~offsetting~~of $5.3 million (consisting of an increase of $11.4 million in PPP loans and a ~~decline~~decrease of ~~$7.7~~$6.1 million of ~~non-PPP loans. Partially offsetting these increases were decreases in multi-family real estate loans of $7.3 million or 11.0%,~~ non-PPP commercial and industrial loans), an increase in commercial mortgage loans of ~~$7.7~~$7.0 million, ~~residential real estate loans, including home equity~~and an increase in construction and development loans of ~~$5.6 million or 4.1%, and consumer loans of $984,000 or 7.3%. Leases grew $4.8 million, or 4.3%, from December 31, 2019 to June 30, 2020.~~

$9.3 million.

Nonperforming loans and leases, consisting of nonaccrual loans and leases and accruing loans and leases more than 90 days past due, totaled ~~$4.3~~$8.1 million or ~~0.57%~~1.05% of total loans and leases at ~~June 30, 2020,~~March 31, 2021, compared to ~~$4.3~~$4.8 million or ~~0.61% of total loans at March 31, 2020, and $3.8 million or 0.55%~~0.64% of total loans and leases at December 31, ~~2019.~~2020. The increase in nonperforming loans and leases was the result of a $4.9 million non-accruing commercial real estate loan more than 90 days past due that is currently subject to litigation. At the time of origination, this loan had a loan to value ratio of 73%. Accruing loans and leases past due more than 90 days at ~~June 30, 2020,~~March 31, 2021, totaled ~~$3.3~~$2.5 million, compared to ~~$3.1 million at March 31, 2020, and $2.6~~$4.0 million at December 31, ~~2019.~~

2020.

At ~~June 30, 2020,~~March 31, 2021, TDRs totaled ~~$569,000,~~$528,000, compared to ~~$598,000~~$541,000 at December 31, 2019. At June 30, 2020 and December 31, 2019, the Company had TDRs that were accruing and performing in accordance with their modified terms of $569,000 and $598,000, respectively. Performing TDRs are not considered nonperforming assets as they continue to accrue interest despite being considered impaired due to the restructured status.2020. The CARES Act amended generally accepted accounting principles with respect to the modification of loans to borrowers affected by the COVID-19 pandemic. Among other criteria, this guidance provided that short-term loan modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs. As of ~~June 30, 2020,~~March 31, 2021, the Company had ~~approved 752~~outstanding 33 loan and lease modifications qualifying under the CARES Act related to the COVID-19 pandemic with an outstanding loan and lease balance totaling ~~$175.1~~$24.6 million. This was a decrease from 48 loans and leases with modifications totaling $54.7 million at December 31, 2020. Loan and lease modifications in accordance with the CARES Act and related regulatory guidance are still subject to an evaluation in regards to determining whether or not a loan or lease is deemed to be impaired.

Allowance for Loan and Lease Losses.The allowance for loan and lease losses increased ~~$1.4 million,~~$372,000, or ~~20.2%~~3.5%, to ~~$8.5~~$11.0 million at ~~June 30, 2020~~March 31, 2021 from ~~$7.1~~$10.6 million at December 31, ~~2019.~~2020. At ~~June 30, 2020,~~March 31, 2021, the allowance for loan and lease losses totaled ~~1.12%~~1.41% of total loans and leases outstanding compared to ~~1.02%~~1.42% at December 31, ~~2019. Excluding the $64.3 million of PPP loans from the $763.9 million of total loans and leases at June 30, 2020, the~~2020. The allowance for loan and lease losses to total loans at March 31, 2021 and ~~leases was 1.22%~~December 31, 2020 would increase eleven and eight basis points, respectively, if PPP loans, which totaled $54.7 million and $43.3 million at ~~June 30, 2020.~~March 31, 2021 and December 31, 2020, respectively, are excluded from the calculation. PPP loans are fully guaranteed by the SBA and management expects that the vast majority of PPP borrowers will seek full or partial forgiveness of their loan obligations from the SBA within a short time frame, which in turn will reimburse the Bank for the amount forgiven. Net charge-offs during the first ~~six~~three months of ~~2020~~2021 were ~~$98,000~~$27,000 or ~~0.03%~~0.01% of average loans and leases outstanding, compared to net ~~charge-offs~~recoveries of ~~$329,000, or 0.10% of average loans and leases outstanding~~$7,000 during the first ~~six~~three months of ~~2019.~~2020. The allowance for loan and lease losses to non-performing loans and leases was ~~197.5%~~135.1% at ~~June 30, 2020,~~March 31, 2021, compared to ~~186.0%~~220.6% at December 31, ~~2019.~~

2020.

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, 2020,~~March 31, 2021, which evaluation included consideration of potential credit losses due to the deteriorating economic conditions driven by the impact of the COVID-19 pandemic. The full impact of the pandemic on the Company’s deposit and loan and lease customers is still ~~unknown.~~uncertain. The Company has increased its qualitative factors when determining the adequacy of its allowance for loan and lease losses. Credit

metrics are being reviewed and stress testing is being performed on the loan portfolio. Potentially higher risk segments of the portfolio, such as hotels and restaurants, are being closely monitored as are loan payment deferrals.

Deposits. Total deposits increased ~~$121.9~~$64.0 million, or ~~19.8%~~9.2%, to ~~$739.1~~$757.1 million at ~~June 30, 2020,~~March 31, 2021, from ~~$617.2~~$693.0 million at December 31, ~~2019. This~~2020. The increase in deposits from December 31, 2020 primarily was ~~primarily~~ due to ~~an increase~~overall changes in ~~brokered deposits (as the Company sought to increase its liquidity position) and an increase in demand deposit~~spending and savings ~~accounts primarily related to disbursements of PPP loan funds to borrowers’ deposit accounts as well as reduced withdrawals reflecting changes in customer spending~~ habits by business and consumers due to the COVID-19 ~~pandemic.~~pandemic as well as additional PPP funds and government stimulus payments made to customers in December 2020 and first quarter 2021. Brokered deposits increased ~~$64.0~~$3.4 million to ~~$120.7~~$26.7 million, or ~~16.3%~~3.5% of total deposits, at ~~June 30, 2020,~~March 31, 2021, compared to ~~$56.7~~$23.3 million, or ~~9.2%~~3.4% of total deposits, at December 31, ~~2019.~~2020. Demand deposit and savings accounts increased ~~$60.1~~$50.1 million to ~~$395.9~~$500.6 million at ~~June 30, 2020,~~March 31, 2021, compared to ~~$335.8~~$450.6 million at December 31, ~~2019.~~2020. At ~~June 30, 2020,~~March 31, 2021, noninterest bearing deposits totaled ~~$89.9~~$118.1 million, or ~~12.2%~~15.6% of total deposits, compared to ~~$60.3~~$98.7 million or ~~9.8%~~14.2% of total deposits at December 31, ~~2019.~~

2020.

Borrowings.Total borrowings, consisting solely of FHLB advances, ~~increased $26.0 million, or 16.9%, to $180.0~~were steady at $170.0 million at ~~June 30, 2020 from $154.0 million at~~March 31, 2021 and December 31, ~~2019~~2020, consistent with the Company’s strategy to ~~increase liquidity.~~

maintain excess liquidity in light of the ongoing COVID-19 pandemic and continuing economic uncertainty.

Stockholders’ Equity. Stockholders’ equity totaled ~~$196.1~~$189.5 million at ~~June 30, 2020, an increase~~March 31, 2021, a decrease of ~~$8.3~~$3.2 million, or ~~4.4%~~1.7%, from December 31, ~~2019.~~2020. The ~~increase~~decrease in ~~stockholders’~~stockholders' equity ~~primarily~~from year-end 2020 was the result of a reduction in accumulated comprehensive income of $3.7 million, the repurchase of $1.9 million of Company common stock and the payment of $847,000 in dividends to Company stockholders during the current quarter, partially offset by net income of ~~$5.0~~$2.6 million in the first ~~half~~quarter, an increase of ~~2020~~$508,000 due to the Company's equity incentive plan, and a ~~$3.7~~$183,000 increase due to ESOP shares earned. The Company repurchased 142,764 shares of Company common stock at an average price of $13.58 per share for a total of $1.9 million ~~improvement in accumulated other comprehensive income, partially offset by $623,000 in dividends paid to shareholders.~~during the first quarter of 2021. The Company’s equity to asset ratio was ~~17.2%~~16.6% at ~~June 30, 2020.~~March 31, 2021. At ~~June 30, 2020,~~March 31, 2021, the Bank’s Tier 1 capital to total assets ratio was ~~13.4%~~14.2% 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, 2020~~March 31, 2021 and ~~2019.~~

2020.

General.Net income for the three months ended ~~June 30, 2020~~March 31, 2021 was ~~$2.5~~$2.6 million, a ~~$2.2 million, or 647.8%~~$110,000 increase from net income of ~~$335,000~~$2.5 million for the three months ended ~~June 30, 2019.~~March 31, 2020. The ~~$2.5~~$2.6 million in earnings equaled $0.22 diluted earnings per share for the first quarter of 2021, compared to $0.20 diluted earnings per share for the ~~second~~first quarter of 2020. There is no comparison of earnings per share to the second quarter of 2019, as the Company’s reorganization from the mutual to stock form of ownership and related stock offering was not completed until July 1, 2019.

Interest Income. Interest income increased ~~$100,000,~~$193,000, or ~~1.0%~~1.8%, to $10.6 million during the quarter ended March 31, 2021, compared to $10.5 million during the quarter ended ~~June 30, 2020, compared to $10.4 million during the quarter ended June 30, 2019.~~March 31, 2020. Interest income on loans and leases increased ~~$145,000,~~$565,000, or ~~1.6%~~6.2%, to ~~$9.3~~$9.6 million for the quarter ended ~~June 30, 2020,~~March 31, 2021, from ~~$9.2~~$9.1 million for the comparable quarter in ~~2019,~~2020, due to higher average balances in the loan and lease ~~balances.~~portfolio as well as higher yield. The average outstanding loan and lease ~~balance was $747.9~~balances were $718.0 million for the quarter ended ~~June 30, 2020,~~March 31, 2021, compared to ~~$687.0~~$686.2 million for the quarter ended ~~June 30, 2019.~~March 31, 2020. The average yield on loans and leases was ~~4.98%~~5.36% for the quarter ended ~~June 30, 2020,~~March 31, 2021, compared to ~~5.33%~~5.28% for the comparable quarter in ~~2019.~~2020. Interest income also included $772,000 in fees earned related to PPP loans in the quarter ended March 31, 2021 compared to none during the same quarter in 2020. As of March 31, 2021, total unrecognized fees on PPP loans were $1.9 million.

Interest income on investment securities, including FHLB stock, decreased $254,000, or 20.1%, to $1.0 million during the quarter ended March 31, 2021, from $1.3 million during the comparable quarter in 2020. The decrease in interest income on investment securities from the comparable period in 2020 was due to a decrease in the weighted average yield of 68 basis points, partially offset by an increase in the average balances of investment securities including FHLB stock. The average balance of investment securities, including FHLB stock, was $269.8 million for the quarter ended March 31, 2021, compared to $232.2 million for the quarter ended March 31, 2020. The average yield on investment securities, including FHLB stock, was 1.50% for the first quarter of 2021, compared to 2.18% for the first quarter of 2020. Interest income earned on cash and cash equivalents decreased to $7,000 in the first quarter of 2021 compared to $125,000 in the comparable quarter of 2020. The decrease in interest income earned on cash and cash equivalents in the first quarter of 2021 compared to the comparable quarter of 2020 was due to the significantly lower yield earned on funds at the Federal Reserve after the rate reductions experienced in March 2020.

Interest Expense. Interest expense decreased $683,000, or 26.6%, to $1.9 million for the quarter ended March 31, 2021, from $2.6 million for the quarter ended March 31, 2020. Interest expense on deposits decreased $637,000, or 34.9%, to $1.2 million for the quarter ended March 31, 2021, from $1.8 million for the comparable quarter in 2020. This decrease in interest expense was attributable to the lower weighted average rate paid on interest-bearing deposits, partially offset by higher

average deposit balances. The weighted average rate paid on interest-bearing deposits was 0.77% for the quarter ended March 31, 2021, compared to 1.34% for the quarter ended March 31, 2020. Average balance of interest-bearing deposits increased to $614.4 million, or 12.4%, in the quarter ended March 31, 2021, compared to $546.5 million in the comparable quarter in 2020. Interest expense on FHLB borrowings decreased $45,000, or 6.1%, to $694,000 in the first quarter of 2021 compared to $739,000 for the same quarter in 2020. The average balance of FHLB borrowings totaled $170.0 million during the quarter ended March 31, 2021, compared to $164.1 million for the quarter ended March 31, 2020. The weighted average rate paid on FHLB borrowings was 1.63% for the quarter ended March 31, 2021, a 17 basis point decline from 1.80% for the comparable quarter in 2020.

Net Interest Income. Net interest income before the provision for loan and lease losses increased $876,000, or 11.1%, to $8.8 million in the first quarter of 2021, compared to $7.9 million for the first quarter of 2020. This increase was primarily due to an increase in average interest-earning assets during the first quarter of 2021 compared to the comparable period in 2020. Net interest margin (annualized) was 3.44% for the three months ended March 31, 2021, compared to 3.32% for the three months ended March 31, 2020. The increase in net interest margin was primarily due to yields earned on interest-earning assets declining at a slower rate than rates paid on interest-bearing liabilities. The yield on the ~~loan~~loans and lease portfolio was impacted by the PPP loan activity during the ~~second~~first quarter of ~~2020~~2021 as PPP loans are originated at an interest rate of 1%, although the effective yield is ~~slightly~~ higher as a result of the origination fees paid to us by the SBA. The average yield on PPP loans was ~~3.22%~~7.85%, including the recognition of ~~the net~~ deferred fees, ~~reducing average yield on loans and leases by 12~~resulting in a positive impact to net interest margin of 17 basis points ~~for the three months ended June 30, 2020.~~

~~Interest income on investment securities, including FHLB stock, increased $222,000, or 23.2%, to $1.2 million~~ during the quarter ended June 30, 2020, from $957,000 during the comparable quarter in 2019. The increase in interest income on investment securities from the comparable period in 2019 was due to higher average balances, partially offset by a lower weighted average yield. The average balance of investment securities, including FHLB stock, was $256.6 million for the quarter ended June 30, 2020,March 31, 2021, compared to $157.8 million for the quarter ended June 30, 2019. The average yield on investment securities, including FHLB stock, was 1.84% for the second quarter of 2020, compared to 2.45% for the second quarter of 2019. Interest income earned on cash and cash equivalents decreased to $11,000 in the second quarter of 2020 compared to $278,000 in the comparable quarter of 2019. This was due to the significantly lower yield earned on funds at the Federal Reserve after the rate reductions experienced in the second half of 2019 and in March 2020.

~~Interest Expense.~~ Interest expense decreased $441,000, or 15.1%, to $2.5 million for the quarter ended June 30, 2020, from $2.9 million for the quarter ended June 30, 2019. Interest expense on deposits decreased $403,000, or 19.1%, to $1.7 million for the quarter ended June 30, 2020, from $2.1 million for the comparable quarter in 2019. This decrease in interest expense was attributable to the lower weighted average rate paid on interest-bearing deposits, partially offset by higher average deposit balances. The weighted average rate paid on interest-bearing deposits was 1.13% for the quarter ended June 30, 2020, compared to 1.40% for the quarter ended June 30, 2019. Average balances of interest-bearing deposits increased slightly to $602.3 million in the quarter ended June 30, 2020, compared to $600.1 millionno impact in the comparable quarter in ~~2019. Interest expense on FHLB borrowings decreased $38,000, or 4.7%, to $770,000 in the second quarter of~~ 2020 compared to the same quarter in 2019. The average balance of FHLB borrowings totaled $181.8 million during the quarter ended June 30, 2020, compared to $147.4 million for the quarter ended June 30, 2019. The weighted average rate paid on FHLB borrowings was 1.69% for the quarter ended June 30, 2020, a 51 basis point decline from 2.20% for the comparable quarter in 2019.

~~Net Interest Income.~~ Net interest income before the provision for loan and lease losses increased $541,000, or 7.2%, to $8.0 million in the second quarter of 2020, compared to $7.5 million for the second quarter of 2019. This increase was primarily due to an increase in average interest-earning assets during the second quarter of 2020 compared to the comparable period in 2019. Our net interest margin was 3.03% for three months ended June 30, 2020, compared to 3.27% for the three months ended June 30, 2019. The decrease in net interest margin was primarily due to yields earned on interest-earning assets declining at a faster rate than interest rates paid on interest-bearing liabilities. The market’s response to lowering deposit pricing to reflect the targeted federal funds rate decrease over the past year typically lags declines in the yield on interest earning assets. The average yield onas no PPP loans was 3.22% during the three months ended June 30, 2020, including the recognition of the net deferred fees, resulting in a negative impact on net interest margin of 12 basis points for the three months ended June 30, 2020.

were originated at that time.

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 quarterly 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,

2020

2019

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

$
747,865


$
9,308

4.98
%

$
687,023

$

9,163

5.33
%

Securities

247,594

1,120

1.81
%

150,640

867

2.30
%

FHLB stock

9,035

58

2.57
%

7,143

91

5.10
%

Cash and cash equivalents and other

54,806

11

0.08
%

70,744

278

1.57
%

  Total interest-earning assets

1,059,300

10,497

3.96
%

915,550

10,399

4.54
%

Interest-bearing liabilities:

Savings and money market accounts

183,415

253

0.55
%

180,514

346

0.77
%

Interest-bearing checking accounts

115,091

66

0.23
%

102,280

98

0.38
%

Certificate accounts

303,805

1,385

1.82
%

317,299

1,663

2.10
%

Borrowings

181,824

770

1.69
%

147,375

809

2.20
%

  Total interest-bearing liabilities

784,135

2,474

1.26
%

747,468

2,916

1.56
%

Net interest income

$
8,023

$

7,483

Net earning assets

$
275,165

$
168,082

Net interest rate spread(1)

2.70
%

2.98
%

Net interest margin(2)

3.03
%

3.27
%

Average interest-earning assets to
  average interest-bearing liabilities

135.09
%

122.49
%


	Three Months Ended March 31,
	2021							2020
	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	$	717,980		$	9,628	5.36	%	$	686,180		$	9,064	5.28	%
Securities	260,763			940		1.44	%	224,300			1,182		2.11	%
FHLB stock	9,050			69		3.05	%	7,922			81		4.09	%
Cash and cash equivalents and other	31,595			7		0.09	%	32,277			125		1.55	%
Total interest-earning assets	1,019,388			10,644		4.18	%	950,679			10,452		4.40	%

Interest-bearing liabilities:
Savings and money market accounts	223,560			278		0.50	%	163,948			292		0.71	%
Interest-bearing checking accounts	142,457			81		0.23	%	104,154			82		0.31	%
Certificate accounts	248,360			828		1.33	%	278,434			1,451		2.08	%
Borrowings	170,000			694		1.63	%	164,066			739		1.80	%
Total interest-bearing liabilities	784,377			1,881		0.96	%	710,602			2,564		1.44	%

Net interest income				$	8,763						$	7,888
Net earning assets	$	235,011						$	240,077

Net interest rate spread(1)						3.22	%						2.96	%
Net interest margin(2)						3.44	%						3.32	%
Average interest-earning assets to average interest-bearing liabilities	129.96		%					133.79		%

_____________

(1)Annualized. Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2)Annualized. Net interest margin represents net interest income divided by average total interest-earning assets.

Provision for Loan and Lease Losses.The provision for loan and lease losses for the three months ended ~~June 30, 2020~~March 31, 2021 totaled ~~$1.3 million~~$400,00 compared to ~~$485,000~~$210,000 for the three months ended ~~June 30, 2019,~~March 31, 2020, a ~~$835,000~~$190,000 or ~~172.2%~~90.5% increase. The ~~increased~~increase in the provision for loan and lease losses was primarily due to the ~~continued uncertainty of~~increase in non-performing loans experienced in the ~~economic impact of the COVID-19 pandemic on the Bank’s loan portfolio.~~quarter. Net charge-offs during the ~~second~~first quarter of ~~2020~~2021 were ~~$106,000,~~$27,000, compared to net ~~charge-offs~~recoveries of ~~$40,000~~$7,000 in the ~~second~~first quarter of ~~2019. As the COVID-19 pandemic continues, we expect to see continued pressure on asset quality. As management continues to monitor the loan portfolio, additional provisions may be required.~~

2020.

Non-Interest Income. Non-interest income increased ~~$1.2 million~~$814,000 or ~~131.4%~~85.4%, to ~~$2.1~~$1.8 million for the quarter ended ~~June 30, 2020,~~March 31, 2021, compared to ~~$900,000~~$953,000 for the comparable quarter in ~~2019~~2020. The increase in noninterest income resulted primarily from the increase in the gain on sale of loans and leases, which increased ~~$907,000,~~$737,000, or ~~734.1%~~322.8%, to ~~$1.0 million~~$965,000 during the ~~second~~first quarter of ~~2020,~~2021, compared to ~~$124,000~~$228,000 during the first quarter of 2020 as a result of ~~increased~~continued strong mortgage banking activity during the current quarter due to ~~lower~~continuing low interest rates. There was no gain on the sale of securities recorded in the first quarter of 2021 while the Company recognized a net gain on the sale of securities of $69,000 in the first quarter of 2020. Card fee income increased $63,000, or 35.0%, to $243,000 in the first quarter of 2021 from $180,000 in the first quarter of 2020 due to increased debit card usage. Loan and lease servicing income ~~increased $202,000, or 20.5%,~~decreased $40,000, to ~~$301,000~~a loss of $105,000 for the ~~second~~first quarter of ~~2020~~2021 compared to ~~$99,000~~a loss of $66,000 for the comparable quarter in ~~2019. In the second quarter~~2020, due to a larger impairment of ~~2020, the Company recorded a recovery to the value of its~~ mortgage servicing rights in the first quarter of ~~$296,000, while no~~2021 compared to the first quarter of 2020. An impairment ~~recovery or charge~~write down of $158,000 was recorded in the ~~second~~first quarter of 2019. Other loan fees increased $156,000, or 176.8%, to $245,000 due to increased letter of credit fees of $58,000 and loan interest rate modification fees of $76,000. Service fees on deposit accounts decreased $146,000, or 58.1%, to $106,000 for the quarter ended June 20, 2020, compared to $252,000 for the quarter ended June 30, 2019 as a result of the waiving of overdraft fees.

~~Non-Interest Expense.~~ Non-interest expense decreased $2.0 million, or 25.7%, to $5.6 million for the three months ended June 30, 2020, from $7.6 million for the same period in 2019. Salaries and employee benefits decreased $2.0 million, or 38.5%, to $3.3 million for the quarter ended June 30, 2020 from $5.3 million for the quarter ended June 30, 2019. The $2.0 million decrease from the second quarter of 2019 was primarily attributable to the $1.7 million pre-tax expense related to the adoption of a nonqualified deferred compensation plan during the second quarter of 2019. Excluding this expense, salaries and employee benefits decreased $369,000, or 10.3%, for the three months ended June 30, 2020, compared to the three months ended June 30, 2019. Data processing expenses increased $48,000, or 11.3%, in the second quarter of 2020 compared to the second quarter of 2019, due to normal price increases associated with information technology services and additional digital services and products offered by the Company. Deposit insurance expense decreased $98,000, or 62.0%, to $60,000, in the second quarter of 2020 compared to the second quarter of 2019. The decrease from the second quarter of 2019 was due to the Bank’s higher capital ratios resulting from the Company’s injection of capital into the Bank in connection with our reorganization to a stock holding company and related stock offering. Legal and professional fees increased $118,000, or 56.4%, to $327,000 for the quarter ended June 30, 2020 from $209,000 for the comparable quarter in 2019. The increase in legal and professional fees was due to the establishment of an out-of-state subsidiary of First Bank for investment management purposes in the second quarter of 2020.

~~Income Tax Expense.~~ Income tax expense increased $674,000 during the three months ended June 30, 2020, compared to the same period in 2019, primarily due to a $2.8 million increase in pre-tax income. The effective tax rate for the second quarter of 2020 was 20.2%2021 compared to a ~~14.3% benefit for the same quarter a year ago.~~

~~Comparison~~write down of ~~Results of Operations for the Six Months Ended June 30, 2020 and 2019.~~

~~General.~~Net income for the six months ended June 30, 2020 totaled $5.0 million, a $3.3 million or 190.4% increase from net income of $1.7 million for the comparable period in 2019. The $5.0 million in earnings equaled $0.40 diluted earnings per share for the first half of 2020. There is no comparison of earnings per share to the first half of 2019, as the Company’s reorganization from the mutual to stock form of ownership and related stock offering was not completed until July 1, 2019.

~~Interest Income.~~ Interest income increased $795,000, or 3.9%, to $20.9 million during the six months ended June 30, 2020, compared to $20.2 million for the comparable period in 2019. Interest income on loans and leases increased $443,000, or 2.5%, to $18.4 million for the first six months of 2020, compared to $17.9 million for the comparable period in 2019, due to higher average loan and lease balances and a slightly higher average yield. The average outstanding loan and lease balance was $692.1 million for the first half of the year of 2020, compared to $677.7 million for the first half of 2019. The average yield on loans and leases was 5.31% for the first six months of 2020, compared to 5.29% for the first six months of 2019. The yield on the loan and lease portfolio was impacted by the PPP loan activity which occurred during the second quarter of 2020 as PPP loans are originated at an interest rate of 1%, although the effective yield is slightly higher as a result of the origination fees paid to us by the SBA. The average yield on PPP loans was 3.22%$114,000 in the first ~~half of 2020, including the recognition of the net deferred fees, reducing average yield on loans and leases by eight basis points during the six months ended June 30, 2020.~~

Interest income on investment securities, including FHLB stock, increased $543,000, or 28.6%, to $2.4 million during the six months ended June 30, 2020, compared to $1.9 million during the comparable period in 2019. The increase in the interest income on investment securities was due to higher average balances, partially offset by a lower weighted average yield. The average balance of investment securities, including FHLB stock, was $244.4 million for the first six months of 2020, compared to $153.6 million for the first six months of 2019. The average yield on investment securities, including FHLB stock, was 2.00% for the first half of 2020, compared to 2.47% for the first half of 2019. Interest income earned on cash and cash equivalents decreased to $136,000 in the first half of 2020 compared to $328,000 in the first half of 2019. This was due to the significantly lower yield earned on funds at the Federal Reserve after the rate reductions experienced in the second half of 2019 and in March 2020.

~~Interest Expense.~~ Interest expense decreased $514,000, or 9.3%, to $5.0 million for the six months ended June 30, 2020, compared to $5.6 million for the six months ended June 30, 2019. Interest expense on deposits decreased $465,000, or 11.6%, to $3.5 million for the first half of 2020, compared to $4.0 million in the first half of 2019. This decrease in interest expense on deposits was primarily attributable to the lower weighted average rate paid on interest-bearing deposits, as well as a decline in average balances of interest-bearing deposits. The weighted average rate paid on interest-bearing deposits was 1.23% for the six months ended June 30, 2020, compared to 1.37% for the six months ended June 30, 2019. Average balances of interest-bearing deposits declined $12.5 million, or 2.1%, to $574.4 million in the first six months of 2020 compared to the first six months of 2019. Interest expense on FHLB borrowings decreased $49,000, or 3.2%, to $1.5 million in the first half of 2020 compared to the first half of 2019. The average balance of FHLB borrowings totaled $172.9 million during the first six months of 2020, compared to $141.7 million for the first six months of 2019. The weighted average rate paid on FHLB borrowings was 1.75% for the first half of 2020, a 45 basis point decline from 2.20% for the first half of 2019.

~~Net Interest Income.~~ Net interest income before the provision for loan and lease losses increased $1.3 million, or 9.0%, to $15.9 million in the first half of 2020, compared to $14.6 million for the first half of 2019. This increase was primarily due to an increase in average interest-earning assets during the first half of 2020 compared to the same period in 2019. Our net interest margin was 3.25% for six months ended June 30, 2020, compared to 3.35% for the six months ended June 30, 2019. The decrease in net interest margin was primarily due to yields earned on interest-earning assets declining at a faster rate than interest rates paid on interest-bearing liabilities. The market’s response to lowering deposit pricing to reflect the targeted federal funds rate decrease over the past year typically lags declines in the yield on interest earning assets. The average yield on PPP loans was 3.22% during the six months ended June 30, 2020, including the recognition of the net deferred fees, resulting in a negative impact on net interest margin of eight basis points for the six months ended June 30, 2020.

~~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 quarterly 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.

Six Months Ended June 30,

2020

2019

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

$
692,055


$
18,372

5.31
%

$
677,688

$

17,929

5.29
%

Securities

235,947

2,302

1.95
%

146,667

1,715

2.34
%

FHLB stock

8,479

139

3.28
%

6,916

183

5.29
%

Cash and cash equivalents and other

43,541

136

0.62
%

40,379

328

1.62
%

  Total interest-earning assets

980,022

20,949

4.28
%

871,650

20,155

4.62
%

Interest-bearing liabilities:

Savings and money market accounts

173,352

545

0.63
%

171,736

628

0.73
%

Interest-bearing checking accounts

109,622

148

0.27
%

100,834

163

0.32
%

Certificate accounts

291,449

2,836

1.95
%

314,309

3,203

2.04
%

Borrowings

172,945

1,510

1.75
%

141,713

1,559

2.20
%

  Total interest-bearing liabilities

747,368

5,039

1.35
%

728,592

5,553

1.52
%

Net interest income

$
15,910

$

14,602

Net earning assets

$
232,654

$
143,058

Net interest rate spread(1)

2.93
%

3.10
%

Net interest margin(2)

3.25
%

3.35
%

Average interest-earning assets to
  average interest-bearing liabilities

131.13
%

119.63
%

~~___________________~~

~~(1) 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) Net interest margin represents net interest income divided by average total interest-earning assets.~~

~~Provision for Loan and Lease Losses.~~The provision for loan and lease losses for the six months ended June 30, 2020 totaled $1.5 million compared to $1.0 million for the six months ended June 30, 2019, a $520,000 or 51.5% increase. The increased provision was primarily due to the continued uncertainty of the economic impact of the COVID-19 pandemic on the Bank’s loan portfolio. Net charge-offs during the first half of 2020 were $98,000, compared to net charge-offs of $329,000 in the first half of 2019. As the COVID-19 pandemic continues, we expect to see continued pressure on asset quality. As management continues to monitor the loan portfolio, additional provisions may be required.

~~Non-Interest Income.~~ Non-interest income increased $1.2 million, or 68.2%, to $3.0 million for the first six months of 2020, compared to $1.8 million for the same period in 2019. Gain on sale of loans and leases increased $1.0 million in the first half of 2020 to $1.3 million compared to $211,000 in the comparable period of 2019 as a result of increased mortgage banking activity due to lower rates. Service charges on deposit accounts declined $123,000, or 25.5%, in the first six months of 2020 compared to the first six months of 2019. This decrease was the result of waiving overdraft charges in the second quarter of 2020. Other loan fees increased ~~$85,000,~~$165,000, or ~~34.8%~~199.1%, to $248,000 in the first ~~half~~quarter of 2021 compared to the comparable quarter of 2020 primarily due to ~~a $58,000~~an increase in ~~letter of credit fees and a $27,000 increase in~~commercial loan processing ~~fees. Trust income increased $46,000,~~fees of $168,000 over the comparable quarter of 2020. Service fees on deposit accounts decreased $60,000, or ~~21.5%~~23.6%, to $194,000 for the quarter ended March 31, 2021, compared to $255,000 for the quarter ended March 31, 2020. The decrease in service fees on deposit accounts during the first ~~six months~~quarter of ~~2020~~2021 compared to the first ~~six months~~quarter of ~~2019 due to an increase~~2020 was the result of higher customer balances maintained in ~~assets under management.~~

deposit accounts.

Non-Interest Expense. Non-interest expense ~~decreased $2.2~~increased $1.5 million, or ~~16.7%~~26.3%, to ~~$11.2~~$7.0 million ~~during~~for the ~~first six~~three months ~~of 2020 compared to $13.4~~ended March 31, 2021, from $5.5 million ~~during~~for the same period in ~~2019.~~2020. Salaries and employee benefits ~~declined $2.2~~increased $1.1 million, or ~~24.5%~~32.2%, to $4.4 million for the quarter ended March 31, 2021 from $3.4 million for the quarter ended March 31, 2020. The increase in salaries and benefits from the first quarter of 2020 primarily was due to $508,000 of expenses associated with equity awards granted during the fourth quarter of 2020 following shareholder approval of the Company's equity incentive plan, increased pension expense of $182,000, and increased compensation expense of $380,000 primarily as a result of annual merit increases and additional staff. Net occupancy expense increased $41,000, or 14.0% to $331,000 from $290,000 in the ~~first half~~same quarter of 2020, primarily as a result of higher building maintenance expenses. Equipment expense increased $81,000, or 31.5% to $337,000 from the comparable period in 2020, primarily due to increased depreciation expense associated with replacing the Bank's ATM machines during the last quarter of 2020. Deposit insurance expense increased $15,000, or 26.8% compared to the first ~~half~~quarter of ~~2019. This decrease was~~2020 primarily due to growth in the ~~$1.7 million pre-tax expense related~~Bank's balance sheet and subsequent decline in its leverage ratio. Legal and professional fees increased $105,000, or 43.6% to the adoption of a nonqualified deferred compensation plan during the second quarter of 2019. Excluding this expense, salaries and employee benefits decreased $456,000, or 6.4%, for the first half of 2020$347,000 compared to the same quarter in 2020 primarily due to expenses associated with the contract renewal of the Company's data core processing, and routine litigation matters. Advertising expense declined $26,000 or 23.3%, from the first ~~half~~quarter of ~~2019. Salary expense~~2020, primarily due to less media advertising during the first quarter of 2021. Other expenses increased ~~$49,000,~~$107,000, or ~~1.1%~~16.1%, to $771,000 in the first ~~half~~quarter of ~~2020, while benefit expense declined $505,000 in the first half of 2020~~2021 compared to the ~~first half~~same quarter of ~~2019~~2020 primarily due to ~~the lower cost of the ESOP compared to the Company’s~~loan related expenses increasing $40,000, debit card expenses increasing $8,000, and franchise tax expense increasing $70,000.

The Company froze its defined benefit plan ~~which was frozen~~(“DB Plan”) in October 2019 with the intent to terminate ~~it in December 2019.~~it. The freezing of the ~~plan is expected to reduce,~~DB Plan has reduced, but not ~~eliminate,~~eliminated, the ongoing expenses associated with the DB Plan until it is terminated. Freezing the DB plan resulted in some immediate cost savings because future benefit accruals were stopped. However, the freeze did not impact unfunded liabilities or eliminate cost volatility. The frozen DB Plan remains subject to the interest rate, investment and demographic risks that apply to ongoing defined benefit ~~plan until~~plans. In addition, the ~~plan~~frozen DB Plan is ~~terminated. Data processing expenses increased $111,000, or 13.2%,~~still subject to the same minimum funding, compliance, administrative and fiduciary requirements as an ongoing defined benefit plan. The Company still intends to terminate the Bank’s participation in the ~~first half~~DB Plan, which will require it to pay an amount based on the underfunded status of ~~2020~~the plan. As of March 31, 2021, the Company has accrued $17.5 million for this expense. The actual termination expense of the DB Plan may be higher or lower than the amount currently accrued for by the Company depending on a number of factors, including but not limited to the interest rate environment and the valuation of plan assets. Due to the current low interest rate environment, terminating the DB Plan at this time would require the Company to incur a substantial additional expense over and above the amount presently accrued. As a result, the Company’s Board of Directors will continue

to monitor and evaluate the timing of, and costs associated with, termination of the DB Plan. Any additional expenses associated with the termination of the DB Plan will negatively impact our results of operations in the future.

Income Tax Expense. Income tax expense decreased $65,000 during the three months ended March 31, 2021, compared to the first half of 2019, due to normal price increases associated with information technology services and additional digital services offered by the Company. Deposit insurance expense decreased $177,000, or 60.4%,same period in ~~the first six months of~~ 2020, compared to the first six months of 2019 due to the Bank’s higher capital ratios resulting from the Company’s injection of capital into the Bank in connection with our reorganization to a stock holding company and related stock offering. We also experienced an increase of $62,000, or 12.3%, in legal and professional fees due to the establishment of an out-of-state subsidiary of First Bank for investment management purposes; and a $107,000, or 36.0%, decline in advertising expenses.

~~Income Tax Expense.~~ ~~Income tax expense increased $1.0 million during the first half of 2020, compared to the first half of 2019,~~ primarily due to a ~~$4.3 million increase in pre-tax income.~~lower tax rate. The effective tax rate for the first ~~half~~quarter of ~~2020~~2021 was ~~20.6%~~18.7% compared to ~~14.1% in~~21.1% for the ~~first half of 2019.~~

same quarter a year ago.

Liquidity

We are required to have enough cash and investments that qualify as liquid assets in order to maintain sufficient liquidity to ensure safe and sound operations. Liquidity may increase or decrease depending upon the availability of funds and comparative yields on investments in relation to the return on loans. Historically, liquid assets have been maintained above levels believed to be adequate to meet the requirements of normal operations, including potential deposit outflows. Cash flow projections are regularly reviewed and updated to assure that adequate liquidity is maintained.

Liquidity management involves the matching of cash flow requirements of customers, who may be either depositors desiring to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs and our ability to manage those requirements. We strive to maintain an adequate liquidity position by managing the balances and maturities of interest-earning assets and interest-bearing liabilities so that the balance in short-term investments at any given time will cover adequately any reasonably anticipated immediate need for funds. Additionally, First Bank Richmond maintains a relationship with the FHLB of Indianapolis which could provide funds on short-term notice if needed.

Liquidity management is both a daily and long-term function of the management of our business. It is overseen by the Asset and Liability Management Committee. Excess liquidity is generally invested in short-term investments, such as overnight deposits and holding excess funds at the Federal Reserve Bank. On a long-term basis, we maintain a strategy of investing in various lending products and investment securities, including mortgage-backed and municipal securities. First Bank Richmond can also generate funds from borrowings, primarily FHLB advances. In addition, we have historically sold eligible long-term, fixed-rate residential mortgage loans in the secondary market in order to reduce interest rate risk and to create another source of liquidity. At ~~June 30, 2020,~~March 31, 2021, the Bank had ~~$204.1~~$249.8 million in cash and unpledged available-for-sale investment securities for its cash needs. The Bank had the ability to borrow an additional ~~$41.7~~$34.2 million in FHLB advances based on existing collateral pledged. First Bank Richmond’s liquidity may be supplemented ~~in the second half of 2020~~ if it participates in the FRB’s PPPLF pursuant to which First Bank Richmond would pledge PPP loans as collateral to obtain FRB non-recourse loans. At ~~June 30, 2020,~~March 31, 2021, we had no borrowings from the PPPLF, with the ability to borrow up to ~~$64.3~~$54.7 million based on PPP loans unpledged at that date.

First Bank Richmond uses its sources of funds primarily to meet its ongoing commitments, pay maturing deposits, fund deposit withdrawals and fund loan and lease commitments. At ~~June 30, 2020,~~March 31, 2021, outstanding loan and lease commitments, including unused lines and letters of credit, totaled ~~$133.9~~$167.3 million, including ~~$55.6~~$88.0 million of undisbursed construction and land loans. Certificates of deposit scheduled to mature in one year or less at ~~June 30, 2020,~~March 31, 2021, totaled ~~$265.2~~$54.4 million. It is management’s policy to offer deposit rates that are competitive with other local financial institutions. Based on this management strategy, we believe that a majority of maturing deposits will remain with the Bank.

Liquidity, represented by cash, cash equivalents, and investment securities, is a product of our operating, investing and financing activities. Primary sources of funds are deposits, amortization, prepayments and maturities of outstanding loans and mortgage-backed securities, maturities of investment securities and other short-term investments and funds provided from operations. While scheduled payments from the amortization of loans and mortgage-backed securities and maturing investment securities and short-term investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. In addition, excess funds are invested in short-term interest-earning assets, which provide liquidity to meet lending requirements. Cash is also generated through borrowings. FHLB advances are utilized to leverage our capital base and provide funds for lending and investment activities, as well as to enhance interest rate risk management.

Cash and cash equivalents increased ~~$70.0~~$16.8 million to ~~$110.6~~$65.5 million as of ~~June 30, 2020,~~March 31, 2021, from ~~$40.6~~$48.8 million as of December 31, ~~2019.~~2020. Net cash ~~provided by~~used in operating activities was ~~$7.2~~$2.4 million for the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021. Net cash used in investing activities totaled ~~$84.5~~$42.1 million during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and consisted primarily of increases in net loans and available-for-sale securities. The ~~$147.2~~$61.3 million of net cash provided by financing activities during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 was primarily the result of a ~~$121.9~~$64.0 million net increase in ~~deposits and $26.0 million net increase in FHLB advances.~~

deposits.

As a separate legal entity from the Bank, the Company must provide for its own liquidity. At ~~June 30, 2020,~~March 31, 2021, the Company, on an unconsolidated basis, had ~~$42.5~~$29.6 million in cash, noninterest-bearing deposits and liquid investments generally available for its cash needs. The Company’s principal source of liquidity is dividends and ESOP loan repayments from the Bank.

Management believes that its primary liquidity sources of loan repayments, maturing investment securities, available FHLB borrowing, possible utilization of the PPPLF facility, and access to the brokered CD market are sufficient in the economic environment created by the COVID-19 pandemic.

Except as set forth above, management is not aware of any trends, events, or uncertainties that will have, or that are reasonably likely to have a material impact on liquidity, capital resources or operations. Further, management is not aware of any current recommendations by regulatory agencies, which, if they were to be implemented, would have this effect.

~~Off-Balance Sheet Activities~~

In the normal course of operations, we engage in a variety of financial transactions that are not recorded in our financial statements, including commitments to extend credit and unused lines of credit. These transactions involve varying degrees of off-balance sheet risks. While these commitments are contractual obligations and represent our potential future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At ~~June 30, 2020,~~March 31, 2021, we had ~~$133.9~~$167.4 million in loan and lease commitments and unused lines of credit.

Capital Resources

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, 2020~~March 31, 2021 First Bank Richmond’s regulatory capital exceeded the FDIC regulatory requirements, and First Bank Richmond was well-capitalized under regulatory prompt corrective action standards. Consistent with our goals to operate a sound and profitable organization, our policy is for First Bank Richmond to maintain well-capitalized status.

Required for

To Be Well

Actual

Adequate Capital

Capitalized

Amount

Ratio

Amount

Ratio

Amount

Ratio

As of June 30, 2020

(Dollars in thousands)

Total risk-based capital (to risk weighted assets)

$
115,769

20.1
%

$
62,079

8.0
%

$
77,599

10.0
%
Tier 1 risk-based capital (to risk weighted assets)

147,248

19.0

46,559

6.0

62,079

8.0

Common equity tier 1 capital (to risk weighted assets)

147,248

19.0

34,920

4.5

50,439

6.5

Tier 1 leverage (core) capital (to adjusted tangible assets)

147,248

13.4

43,860

4.0

54,824

5.0

As of December 31, 2019

Total risk-based capital (to risk weighted assets)

$
149,137

19.5
%

$
61,304

8.0
%

$
76,629

10.0
%
Tier 1 risk-based capital (to risk weighted assets)

142,048

18.5

45,978

6.0

61,304

8.0

Common equity tier 1 capital (to risk weighted assets)

142,048

18.5

34,483

4.5

49,809

6.5

Tier 1 leverage (core) capital (to adjusted tangible assets)

142,048

14.6

39,027

4.0

48,784

5.0


	Actual				Required for Adequate Capital				To Be Well Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
As of March 31, 2021
Total risk-based capital (to risk weighted assets)	$	166,493	20.8	%	$	64,114	8.0	%	$	80,143	10.0	%
Tier 1 risk-based capital (to risk weighted assets)	156,464		19.5		48,086		6.0		64,114		8.0
Common equity tier 1 capital (to risk weighted assets)	156,464		19.5		36,064		4.5		52,093		6.5
Tier 1 leverage (core) capital (to adjusted tangible assets)	156,464		14.2		44,120		4.0		55,150		5.0

As of December 31, 2020
Total risk-based capital (to risk weighted assets)	$	162,624	21.9	%	$	59,416	8.0	%	$	74,270	10.0	%
Tier 1 risk-based capital (to risk weighted assets)	153,325		20.6		44,562		6.0		59,416		8.0
Common equity tier 1 capital (to risk weighted assets)	153,325		20.6		33,422		4.5		48,276		6.5
Tier 1 leverage (core) capital (to adjusted tangible assets)	153,325		14.3		42,939		4.0		53,673		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, 2020~~March 31, 2021 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 FRB 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, 2020,~~March 31, 2021, it would have exceeded all regulatory capital requirements.

Impact of Inflation

The effects of price changes and inflation can vary substantially for most financial institutions. While management believes that inflation affects the economic value of total assets, it believes that it is difficult to assess the overall impact. Management believes this to be the case due to the fact that generally neither the timing nor the magnitude of inflationary changes in the economy coincides with changes in interest rates. Since virtually all of our assets and liabilities are monetary in nature, interest rates generally have a more significant impact on our performance than does inflation.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

There has not been any material change in the market risk disclosures contained in our ~~2019~~2020 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

An evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Act”)) as of ~~June 30, 2020,~~March 31, 2021, was carried out under the supervision and with the

participation of our Chief Executive Officer, Chief Financial Officerand several other members of senior management. Our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures in effect as of ~~June 30, 2020,~~March 31, 2021, were effective.In addition, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Act) that occurred during the quarter ended ~~June 30, 2020,~~March 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We do not expect that our disclosure controls and procedures and internal control over financial reporting will prevent all errors and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls may be circumvented by the individual acts of some persons, by collusion of two or more people, or by override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not involved in any pending legal proceedings as a plaintiff or defendant other than routine legal proceedings occurring in the ordinary course of business, and at ~~June 30, 2020,~~March 31, 2021, we were not involved in any legal proceedings the outcome of which would be material to our financial condition or results of operations.

ITEM 1A. RISK FACTORS

~~In light of recent developments relating to COVID-19,~~

There have been no material changes in the ~~Company is supplementing its risk factors contained~~Risk Factors previously disclosed in Item 1A of ~~its 2019~~the Company's 2020 Form 10-K. ~~The following risk factor should be read in conjunction with the risk factors described in the 2019 Form 10-K.~~

The COVID-19 pandemic has impacted the way we conduct business which may adversely impact our financial results and those of our customers. The ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.

The COVID-19 pandemic has significantly affected the way we provide banking services to businesses which may adversely affect our operations. As an essential business, we continue to provide banking and financial services to our customers through our drive-up facilities and in-person services available by appointment. In addition, we continue to provide access to banking and financial services through online banking, ATMs and by telephone. If the COVID-19 pandemic worsens it could limit or disrupt our ability to provide banking and financial services to our customers.

Although the stay-at-home orders in Indiana and Oho have terminated and phased re-opening of businesses has commenced, the majority of our employees with the ability to work remotely have been encouraged to continue doing so while continuing to provide banking services to our customers. Heightened cybersecurity, information security and operational risks may result from these remote work-from-home arrangements. We also could be adversely affected if key personnel or a significant number of employees were to become unavailable due to the effects and restrictions of the COVID-19 pandemic. We also rely upon our third-party vendors to conduct business and to process, record and monitor transactions. If any of these vendors are unable to continue to provide us with these services, it could negatively impact our ability to serve our customers. Although we have business continuity plans and other safeguards in place, there is no assurance that such plans and safeguards will be effective.

There is pervasive uncertainty surrounding the future economic conditions that will emerge in the months and years following the start of the pandemic. As a result, management is confronted with a significant and unfamiliar degree of uncertainty in estimating the impact of the pandemic on credit quality, revenues and asset values. To date, the COVID-19 pandemic has resulted in declines in loan demand and loan originations, other than through government sponsored programs such as the Payroll Protection Program, deposit availability, market interest rates and negatively impacted many of our business and consumer borrower’s ability to make their loan payments. Because the length of the pandemic and the efficacy of the extraordinary measures being put in place to address its economic consequences are unknown, including a continued low targeted federal funds rate, until the pandemic subsides, we expect our net interest income and net interest margin will be adversely affected in the near term, if not longer. Many of our borrowers have become unemployed or may face unemployment, and certain businesses are at risk of insolvency as their revenues decline precipitously, especially in businesses related to travel, hospitality, leisure and physical personal services. Businesses may ultimately not reopen as there is a significant level of uncertainty regarding the level of economic activity that will return to our markets over time, the impact of governmental assistance, the speed of economic recovery, the resurgence of COVID-19 in subsequent seasons and changes to demographic and social norms that will take place.

The impact of the pandemic is expected to continue to adversely affect us during 2020 and possibly longer as the ability of many of our customers to make loan payments has been significantly affected. Although the Company makes estimates of loan losses related to the pandemic as part of its evaluation of the allowance for loan losses, such estimates involve significant judgment and are made in the context of significant uncertainty as to the impact the pandemic will have on the credit quality of our loan portfolio. It is likely that increased loan delinquencies, adversely classified loans and loan charge-offs will increase in the future as a result of the pandemic. Consistent with guidance provided by banking regulators, we have modified loans by providing various loan payment deferral options to our borrowers affected by the COVID-19 pandemic. Notwithstanding these modifications, these borrowers may not be able to resume making full payments on their loans once the COVID-19 pandemic is resolved. Any increases in the allowance for credit losses will result in a decrease in net income and, most likely, capital, and may have a material negative effect on our financial condition and results of operations.

As of June 30, 2020, we hold and service a portfolio of approximately 752 PPP loans with a balance of $75.1 million. The PPP loans are subject to the provisions of the CARES Act and to complex and evolving rules and guidance issued by the SBA and other government agencies. We expect that the vast majority of our PPP borrowers will seek full or partial forgiveness of their loan obligations. We could face additional risks in our administrative capabilities to service our PPP loans and risk with respect to the determination of loan forgiveness depending on the final procedures for determining loan forgiveness. Further, since the commencement of the PPP, several larger banks have been subject to litigation regarding their processing of PPP loan applications. The Bank may be exposed to the risk of similar litigation, from both customers and non-customers that approached the Bank seeking PPP loans. PPP lenders, including the Bank, may also be subject to the risk of litigation in connection with other aspects of the PPP, including but not limited to borrowers seeking forgiveness of their loans and PPP agents seeking fees from PPP lenders for assisting borrowers in securing PPP loans. If any such litigation is filed against the Bank, it may result in significant financial or reputational harm to us.

Even after the COVID-19 pandemic subsides, the U.S. economy will likely require some time to recover from its effects, the length of which is unknown. and during which we may experience a recession. As a result, we anticipate our business may be materially and adversely affected during this recovery. To the extent the effects of the COVID-19 pandemic adversely impact our business, financial condition, liquidity or results of operations, it may also have the effect of heightening many of the other risks described in the section entitled "Risk Factors" in our 2019 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)Not applicable

(b)Not applicable

(c)On October 21, 2020, the Board of Directors of the Company authorized a stock repurchase program for the repurchase of up to 664,969 shares, or approximately 5% of the Company’s then outstanding common shares. This repurchase program will expire on November 16, 2021, unless completed sooner. The ~~Company did not make any stock~~following table sets forth information with respect to our repurchases of our outstanding common shares during the ~~quarter~~three months ended ~~June 30, 2020, and as of that date did not have any publicly announced stock repurchase programs.~~

March 31, 2021:


	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
January 1, 2021 - January 31, 2021	44,491	$	13.63	44,491	514,858
February 1, 2021 - February 28, 2021	42,705	13.08		42,705	472,153
March 1, 2021 - March 31, 2021	55,568	13.92		55,568	416,585
	142,764	$	13.58	142,764	416,585

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Nothing to report.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Nothing to report.

ITEM 6. EXHIBITS

Exhibit

~~2.0~~	~~Plan of Reorganization and Stock Offering of First Mutual of Richmond, Inc.~~ ~~(incorporated by reference to Exhibit 2.0 of the Company’s Registration Statement on Form S-1 (Commission File No. 333-230184))~~

3.1	Charter of Richmond Mutual Bancorporation, Inc. ~~(incorporated~~(incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1 (Commission File No. 333-230184))

3.2	Bylaws of Richmond Mutual Bancorporation, Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-1 (Commission File No. 333-230184))

44.0	Form of Common Stock Certificate of Richmond Mutual Bancorporation, Inc. (incorporated by reference to Exhibit 4.0 of the Company’s Registration Statement on Form S-1 (Commission File No. 333-230184))
		10.1	Form of Non-Qualified Deferred Compensation Plan for Garry Kleer (incorporated by reference to Exhibit 10.1 of the Company's Registration Statement on Form S-1 (Commission File No. 333-230184))
		10.2	Richmond Mutual Bancorporation, Inc. 2020 Equity Incentive Plan (included as Appendix A to the Registrant’s definitive proxy statement filed with the SEC on July 28, 2020 (File No. 001-38956) and incorporated herein by reference).
~~31.1~~		10.3	Form of Incentive Stock Option Award Agreement under the 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 of the Company’s Registration Statement on Form S-8 (Commission File No. 333-248862)).
		10.4	Form of Non-qualified Stock Option Award Agreement under the 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 of the Company’s Registration Statement on Form S-8 (Commission File No. 333-248862)).
		10.5	Form of Restricted Stock Award Agreement under the 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 of the Company’s Registration Statement on Form S-8 (Commission File No. 333-248862)).
		31.1	Rule 13a-14(a) Certifications (Chief Executive Officer)

31.2	Rule 13a-14(a) Certifications (Chief Financial Officer)

32.0	Section 1350 Certifications

101.0	The following materials for the quarter ended ~~June 30, 2020,~~March 31, 2021, formatted in XBRL (Extensible Business Reporting Language): (i) ~~Condensed~~ Consolidated Balance Sheets, (ii) the ~~Condensed~~ Consolidated Statements of Income, (iii) ~~Condensed~~ Consolidated Statements of Comprehensive Income, (iv) ~~Condensed~~ Consolidated Statements of Changes in Shareholders’ Equity (v) ~~Condensed~~ Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements
		104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	RICHMOND MUTUAL BANCORPORATION, INC.


Date: ~~August 13, 2020~~ May 14, 2021	By:	/s/ Garry D. Kleer
		Garry D. Kleer
		Chairman, President and CEO
		(Duly Authorized Officer)

Date: ~~August 13, 2020~~ May 14, 2021	By:	/s/ Donald A. Benziger
		Donald A. Benziger
		Executive Vice President and CFO
		(Principal Financial and Accounting Officer)

	June 30, 2020			December 31, 2019
	(Unaudited)

Assets
Cash and due from banks	$	30,817,153		$	9,088,398
Interest-bearing demand deposits	79,789,311			31,508,479
Cash and cash equivalents	110,606,464			40,596,877
Investment securities - available for sale	221,204,068			201,783,851
Investment securities - held to maturity	13,319,819			15,917,394
Loans and leases, net of allowance for losses of $8,521,000 and $7,089,000, respectively	752,922,965			687,258,190
Premises and equipment, net	14,439,763			14,087,169
Federal Home Loan Bank stock	9,079,700			7,600,400
Interest receivable	4,721,040			3,052,380
Mortgage-servicing rights	1,405,128			1,033,217
Cash surrender value of life insurance	3,899,832			3,839,911
Other assets	8,613,962			10,872,682

Total assets	$	1,140,212,741		$	986,042,071

Liabilities
Non-interest bearing deposits	$	89,921,951		$	60,297,443
Interest bearing deposits	649,209,179			556,921,370
Total deposits	739,131,130			617,218,813
Federal Home Loan Bank advances	180,000,000			154,000,000
Advances by borrowers for taxes and insurance	498,170			545,498
Interest payable	348,300			296,774
Multi-employer pension plan liability	17,454,709			17,454,709
Other liabilities	6,644,530			8,738,831
Total liabilities	944,076,839			798,254,625

Commitments and Contingent Liabilities	-			-

Stockholders' Equity
Common stock, $0.01 par value Authorized - 90,000,000 shares Issued and outstanding - 13,526,625 shares	135,266			135,266
Additional paid-in capital	132,563,670			132,601,876
Retained earnings	74,446,405			70,111,434
Unearned employee stock ownership plan (ESOP)	(14,032,728		)	(14,400,386)
Accumulated other comprehensive income (loss)	3,023,289			(660,744)
Total stockholders' equity	196,135,902			187,787,446

Total liabilities and stockholders' equity	$	1,140,212,741		$	986,042,071

	Three Months Ended June 30,					Six Months Ended June 30,
	2020		2019			2020		2019

Interest Income
Loans and leases	$	9,308,495	$	9,163,223		$	18,372,062	$		17,929,352
Investment securities	1,178,483		956,816			2,441,420		1,898,477
Other	11,447		278,462			136,477		327,569
Total interest income	10,498,425		10,398,501			20,949,959		20,155,398

Interest Expense
Deposits	1,704,310		2,107,460			3,529,008		3,994,160
Borrowings	770,304		808,565			1,509,645		1,558,827
Total interest expense	2,474,614		2,916,025			5,038,653		5,552,987

Net Interest Income	8,023,811		7,482,476			15,911,306		14,602,411
Provision for losses on loans and leases	1,320,000		485,000			1,530,000		1,010,000

Net Interest Income After Provision for Losses on Loans and Leases	6,703,811		6,997,476			14,381,306		13,592,411

Non-Interest Income
Service charges on deposit accounts	105,618		251,795			360,269		483,444
Card fee income	201,748		185,903			381,355		352,489
Loan and lease servicing fees	301,230		98,931			235,538		212,203
Net gains on securities (includes $9,874, $36,426, $79,013 and $61,232, respectively, related to accumulated other comprehensive loss reclassifications)	9,874		36,426			79,013		61,232
Net gains on loan and lease sales	1,030,668		123,573			1,258,876		210,798
Other loan fees	244,702		88,394			327,576		243,034
Other income	188,797		114,883			393,078		241,160
Total non-interest income	2,082,637		899,905			3,035,705		1,804,360

Non-Interest Expenses
Salaries and employee benefits	3,270,311		5,316,221			6,633,996		8,791,954
Net occupancy expenses	284,981		256,564			574,990		549,945
Equipment expenses	280,855		233,500			536,703		475,645
Data processing fees	472,071		423,974			948,874		838,166
Deposit insurance expense	60,000		158,000			116,000		293,000
Printing and office supplies	32,097		27,262			58,640		69,020
Legal and professional fees	326,815		208,975			568,181		505,754
Advertising expense	80,256		173,259			189,813		296,676
Bank service charges	28,465		32,593			65,820		64,269
Real estate owned expense	989		22,573			3,166		37,393
Loss on sale of real estate owned	-		6,493			-		6,493
Other expenses	810,857		744,542			1,475,131		1,480,682
Total non- interest expenses	5,647,697		7,603,956			11,171,314		13,408,997

Income Before Income Tax Expense (Benefit)	3,138,751		293,425			6,245,697		1,987,774
Provision (benefit) for income taxes (includes $2,503, $9,520, $20,026 and $16,003, respectively, related to income tax expense from reclassification of items)	632,574		(41,700		)	1,287,374		280,400

Net Income	$	2,506,177	$ 335,125			$ 4,958,323		$	1,707,374

Earnings Per Share
Basic	$	0.20	N/A			$ 0.40		N/A
Diluted	$	0.20	N/A			$ 0.40		N/A

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019

Net Income	$	2,506,177	$	335,125	$	4,958,323	$	1,707,374

Other Comprehensive Income
Unrealized gain on available-for-sale securities, net of tax expense of $312,821, $559,911, $1,270,737 and $1,237,814, respectively.	921,429		1,582,470		3,743,020		3,498,417
Less: reclassification adjustment for realized gains included in net income, net of tax expense of $2,503, $9,520, $20,026 and $16,003, respectively.	7,371		26,906		58,987		45,229
	914,058		1,555,564		3,684,033		3,453,188

Comprehensive Income	$	3,420,235	$	1,890,689	$	8,642,356	$	5,160,562

													Accumulated
	Common Stock			Additional						Unearned			Other
	Shares			Paid-in			Retained			ESOP			Comprehensive
	Outstanding	Amount		Capital			Earnings			Shares			Income/(Loss)		Total

Balances, March 31, 2020	13,526,625	$	135,266	$	132,604,734		$	72,563,580		$	(14,216,557	)	$	2,109,231	$	193,196,254
Net income	-	-		-			2,506,177			-			-		2,506,177
Other comprehensive income	-	-		-			-			-			914,058		914,058
ESOP shares earned	-	-		(41,064		)	-			183,829			-		142,765
Common stock dividends ($0.05 per share)	-	-		-			(623,352		)	-			-		(623,352		)

Balances, June 30, 2020	13,526,625	$	135,266	$	132,563,670		$	74,446,405		$	(14,032,728	)	$	3,023,289	$	196,135,902

	June 30, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Available for sale
SBA Pools	$	22,911	$	75	$	215	$	22,771
Federal agencies	7,511		14		6		7,519
State and municipal obligations	60,681		1,642		126		62,197
Mortgage-backed securities -
government-sponsored enterprises
(GSE) residential	126,261		2,471		28		128,704
Equity securities	13		-		-		13
	217,377		4,202		375		221,204
Held to maturity
State and municipal obligations	13,320		344		-		13,664
	13,320		344		-		13,664

Total investment securities	$	230,697	$	4,546	$	375	$	234,868

	June 30, 2020
	Less Than 12 Months				12 Months or More				Total
Description of	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Securities	Value		Losses		Value		Losses		Value		Losses

Available-for-sale
SBA Pools	$	19,099	$	215	$	-	$	-	$	19,099	$	215
Federal agencies	4,240		6		-		-		4,240		6
State and municipal obligations	8,932		126		-		-		8,932		126
Mortgage-backed securities -
GSE residential	6,874		25		1,478		3		8,352		28
Total available-for-sale	39,145		372		1,478		3		40,623		375

Held-to-maturity
State and municipal obligations	80		-		-		-		80		-

Total temporarily
impaired securities	$	39,225	$	372	$	1,478	$	3	$	40,703	$	375


Description of Securities	March 31, 2021
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available-for-sale
SBA Pools	$	4,318	$	83	$	7,984	$	72	$	12,302	$	155
Federal agencies	6,773		228		0		0		6,773		228
State and municipal obligations	45,177		1,505		1,475		105		46,652		1,610
Mortgage-backed securities - GSE residential	54,165		1,202		534		2		54,699		1,204





Total temporarily impaired securities	$	110,433	$	3,018	$	9,993	$	179	$	120,426	$	3,197

	June 30,		December 31,
	2020		2019

Commercial mortgage	$	242,036	$	229,410
Commercial and industrial	141,184		84,549
Construction and development	62,372		53,426
Multi-family	58,709		66,002
Residential mortgage	126,146		131,294
Home equity	6,522		6,996
Direct financing leases	114,352		109,592
Consumer	12,550		13,534
	763,871		694,803
Less
Allowance for loan and lease losses	8,521		7,089
Deferred loan fees	2,427		456

	$	752,923	$	687,258

			Commercial
	Commercial		and			Residential
	Mortgage (1)		Industrial			Mortgage (2)			Leases			Consumer			Total

Three Months Ended June 30, 2020:
Balance, beginning of period	$	4,668	$	1,772		$	148		$	583		$	135		$	7,306
Provision (credit) for losses	844		(94		)	172			378			20			1,320
Charge-offs	-		-			(20		)	(134		)	(16		)	(170		)
Recoveries	5		32			8			11			9			65

Balance, end of period	$	5,517	$	1,710		$	308		$	838		$	148		$	8,521

Six Months Ended June 30, 2020:
Balance, beginning of period	$	4,564	$	1,852		$	109		$	426		$	138		$	7,089
Provision (credit) for losses	917		(182		)	210			569			16			1,530
Charge-offs	-		-			(35		)	(190		)	(21		)	(246		)
Recoveries	36		40			24			33			15			148

Balance, end of period	$	5,517	$	1,710		$	308		$	838		$	148		$	8,521

	December 31, 2019
	Delinquent Loans										Total		Total Loans
	30-59 Days Past Due		60-89 Days Past Due		90 Days and Over		Total Past Due		Current		Portfolio Loans and Leases		and Leases > 90 Days Accruing

Commercial mortgage	$	217	$	-	$	184	$	401	$	229,009	$	229,410	$	-
Commercial and industrial	220		1,092		438		1,750		82,799		84,549		3
Construction and development	-		257		249		506		52,920		53,426		249
Multi-family	-		-		-		-		66,002		66,002		-
Residential mortgage	762		240		2,452		3,454		127,840		131,294		2,256
Home equity	189		36		15		240		6,756		6,996		15
Leases	108		29		79		216		109,376		109,592		49
Consumer	271		35		15		321		13,213		13,534		15

Totals	$	1,767	$	1,689	$	3,432	$	6,888	$	687,915	$	694,803	$	2,587

	June 30, 2020
			Unpaid
	Recorded		Principal		Specific
	Balance		Balance		Allowance

Loans without a specific
valuation allowance
Commercial mortgage	$	218	$	258	$	-
Commercial and industrial	412		738		-
Residential mortgage	225		440		-

	$	855	$	1,436	$	-

Loans with a specific
valuation allowance
Commercial mortgage	$	480	$	480	$	1
Commercial and industrial		205		214		201

	$	685	$	694	$	202

Total impaired loans
Commercial mortgage	$	698	$	738	$	1
Commercial and industrial	617		952		201
Residential mortgage	225		440		-

Total impaired loans	$	1,540	$	2,130	$	202

	Average
	Investment in		Interest
	Impaired		Income
	Loans		Recognized

Three Months Ended June 30, 2020:
Total impaired loans
Commercial mortgage	$	745	$	11
Commercial and industrial	645		14
Residential mortgage	265		1

Total impaired loans	$	1,655	$	26


2020	$	25,648
2021	43,071
2022	29,713
2023	18,018
2024	9,201
Thereafter	2,200

	$	127,851

			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	Fair		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)

June 30, 2020
Available-for-sale securities
SBA Pools	$	22,771	$	-	$	22,771	$	-
Federal agencies	7,519		-		7,519		-
State and municipal obligations	62,197		-		62,197		-
Mortgage-backed securities -
GSE residential	128,704		-		128,704		-
Equity securities	13		13		-		-

	$	221,204	$	13	$	221,191	$	-

	Fair Value at
	June 30,		Valuation	Unobservable
	2020		Technique	Inputs	Range

Collateral-dependent	$	483	Appraisal	Marketability	0% - 11%
impaired loans				discount

Mortgage-servicing rights	$	1,405	Discounted	Discount rate	10%
			cash flow

	June 30, 2020

Earned ESOP shares	49,598
Unearned ESOP shares	1,032,532
Total ESOP shares	1,082,130

Quoted per share price	$	11.24
Fair value of earned shares	$	557
Fair value of unearned shares	$	11,606

	June 30, 2020			March 31, 2020
($ in thousands)	Number of Loans	Balance		Number of Loans	Balance
Commercial mortgage	70	$	98,010	21	$	27,050
Commercial and industrial	27	12,692		10	1,730
Construction and development	3	10,098		—	—
Multi-Family	13	21,197		5	4,465
Residential mortgage	88	11,198		8	1,379
Home equity	7	215		—	—
Direct financing leases	507	21,080		176	8,058
Consumer	37	597		—	—
Total Loans	752	$	175,087	220	$	42,682

						Required for					To Be Well
	Actual					Adequate Capital					Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio

As of June 30, 2020	(Dollars in thousands)

Total risk-based capital (to risk weighted assets)	$	115,769		20.1	%	$	62,079		8.0	%	$	77,599		10.0	%
Tier 1 risk-based capital (to risk weighted assets)		147,248		19.0			46,559		6.0			62,079		8.0
Common equity tier 1 capital (to risk weighted assets)		147,248		19.0			34,920		4.5			50,439		6.5
Tier 1 leverage (core) capital (to adjusted tangible assets)		147,248		13.4			43,860		4.0			54,824		5.0

As of December 31, 2019

Total risk-based capital (to risk weighted assets)	$	149,137		19.5	%	$	61,304		8.0	%	$	76,629		10.0	%
Tier 1 risk-based capital (to risk weighted assets)		142,048		18.5			45,978		6.0			61,304		8.0
Common equity tier 1 capital (to risk weighted assets)		142,048		18.5			34,483		4.5			49,809		6.5
Tier 1 leverage (core) capital (to adjusted tangible assets)		142,048		14.6			39,027		4.0			48,784		5.0