Richmond Mutual Bancorporation Inc.
05/12/2026 | Press release | Distributed by Public on 05/12/2026 14:37
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
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 March 31, 2026, and the consolidated results of operations for the three month periods ended March 31, 2026, compared to the same periods in 2025, is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto appearing in Part I, Item 1, of this Form 10-Q.
The terms "we," "our," "us," or the "Company" refer to Richmond Mutual Bancorporation, Inc. and its consolidated direct and indirect subsidiaries, including First Bank Richmond, which we sometimes refer to as the "Bank," unless the context otherwise requires.
Cautionary Note Regarding Forward-Looking Statements
Certain matters in this Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact, are based on certain assumptions and are generally identified by use of words such as "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook," or similar expressions or future or conditional verbs such as "may," "will," "should," "would," and "could." These forward-looking statements include, but are not limited to:
•statements of our goals, intentions and expectations;
•statements regarding our business plans, prospects, growth and operating strategies;
•statements regarding the quality of our loan and investment portfolios; and
•estimates of our risks and future costs and benefits.
You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These forward-looking statements are based on our current beliefs and expectations and, by their nature, are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.
Important factors that could cause our actual results to differ materially from the results anticipated or projected include, but are not limited to, the following:
•adverse impacts to economic conditions in our local market areas and other markets where we have lending relationships;
•effects of employment levels, labor shortages, persistent inflation, recessionary pressures, or slowing economic growth;
•changes in interest rate levels and the duration of such changes, including actions by the Board of Governors of the Federal Reserve System (the "Federal Reserve");
•the impact of inflation and monetary and fiscal policy responses thereto, and their impact on consumer behavior;
•effects of a federal government shutdown, debt ceiling standoff, or other fiscal policy uncertainty;
•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 credit losses;
•our ability to access cost-effective funding including maintaining the confidence of depositors;
•unexpected outflows of uninsured deposits may require us to sell investment securities at a loss;
•fluctuations in real estate values, and residential, commercial, and multi-family real estate market conditions;
•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;
•bank failures or other adverse developments at banks and related negative press about the banking industry in general on investor and depositor sentiment;
•inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on our loans and leases;
•adverse changes in the securities or secondary mortgage markets;
•changes in the quality or composition of our loan, lease or investment portfolios;
•our ability to keep pace with technological changes, including our ability to identify and address cyber-security risks such as data security breaches, "denial of service" attacks, "hacking" and identity theft, and other attacks on our information technology systems or on our third-party vendors;
•results of examinations by regulatory authorities and potential requirements to increase credit loss allowances, write-down assets, reclassify assets, change our regulatory capital position, or affect our liquidity and earnings;
•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 attract and 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 banking regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission ("SEC") or the Public Company Accounting Oversight Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods;
•legislation or regulatory changes, including but not limited to shifts in capital requirements, banking regulation, tax laws, or consumer protection laws;
•our ability to pay dividends on our common stock;
•our ability to adapt to rapid technological changes, including advancements in artificial intelligence, digital banking, and cybersecurity;
•geopolitical developments and international conflicts, including but not limited to tensions or instability in Eastern Europe, the Middle East, and Asia, or the imposition of new or increased tariffs and trade restrictions, which may disrupt financial markets, global supply chains, energy prices, or economic activity in specific industry sectors;
•other economic, competitive, governmental, regulatory, and technical factors affecting our operations, pricing, products and services;
•the effects of climate change, severe weather, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, civil unrest, and other external events; and
•the other risks detailed in this report and from time to time in our other filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2025 ("2025 Form 10-K").
Further, statements about the potential effects of the Company's proposed merger with The Farmers Bancorp, Frankfort, Indiana ("Farmers Bancorp") on the Company's business, financial results, and condition may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in the forward-looking statements due to factors and future developments which are uncertain, unpredictable and in many cases beyond the Company's control, including the following:
•events, changes, or circumstances that could give rise to the right of either party to terminate the merger agreement;
•the possibility that the merger may not be completed on the anticipated terms, within the expected timeframe, or at all;
•failure to obtain shareholder approvals;
•challenges in meeting expectations regarding the timing, completion, accounting, and tax treatment of the merger;
•the potential that anticipated cost savings, synergies, or revenue enhancements may not be realized to the extent anticipated, or at all, or may take longer to achieve;
•higher-than-expected transaction costs, integration costs, or unexpected events related to the transaction and subsequent integration;
•dilution from the issuance of additional Richmond Mutual common stock in connection with the merger;
•potential litigation or other legal proceedings related to the merger;
•restrictions during the pendency of the transaction that may limit business opportunities or strategic initiatives;
•the ability to successfully integrate operations, systems, personnel, and technologies post-merger;
•disruption to customer, employee, or vendor relationships, including key community relationships;
•diversion of management's attention from ongoing operations and strategic initiatives;
•lower-than-expected revenues or profitability following the merger;
•changes in credit, capital markets, or economic, political, or regulatory conditions;
•competition from banks and other financial service providers;
•the Company's, Farmers Bancorp's or the combined company's success at managing the risks involved in the foregoing items; and
•other factors detailed in Richmond Mutual's filings with the SEC.
These forward-looking statements are based on information known to us as of the date of this Form 10-Q and speak only as of that date. 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.
Additional factors that may affect our results are discussed under Part II, Item 1A in this document under the heading "Risk Factors."
Overview
The Company, a Maryland corporation, is a bank holding company for its wholly owned subsidiary, First Bank Richmond. Substantially all of the Company's business is conducted through First Bank Richmond. The Company is regulated by the Federal Reserve and the Indiana Department of Financial Institutions ("IDFI"). The Company's corporate office is located at 31 North 9th Street, Richmond, Indiana, and its telephone number is (765) 962-2581.
First Bank Richmond is an Indiana state-chartered commercial bank headquartered in Richmond, Indiana. The Bank was originally established in 1887 as an Indiana state-chartered mutual savings and loan association and in 1935 converted to a federal mutual savings and loan association, operating under the name First Federal Savings and Loan Association of Richmond. In 1993, the Bank converted to a state-chartered mutual savings bank and changed its name to First Bank Richmond, S.B. In 1998, the Bank, in connection with its non-stock mutual holding company reorganization, converted to a national bank charter operating as First Bank Richmond, National Association. In July 2007, Richmond Mutual Bancorporation-Delaware, the Bank's then current holding company, acquired Mutual Federal Savings Bank headquartered in Sidney, Ohio. Mutual Federal Savings Bank was operated independently as a separately chartered, wholly owned subsidiary of Richmond Mutual Bancorporation-Delaware until 2016 when it was combined with the bank through an internal merger transaction that consolidated both banks into a single, more efficient commercial bank charter. In 2017, the Bank converted to an Indiana state-chartered commercial bank and changed its name to First Bank Richmond. The former Mutual Federal Savings Bank continues to operate in Ohio under the name Mutual Federal, a division of First Bank Richmond.
First Bank Richmond provides a full range of banking services through its seven full- and one limited-service offices located in Cambridge City (1), Centerville (1), Richmond (5) and Shelbyville (1), Indiana and its six full-service offices located in Piqua (2), Sidney (2), Troy (1), and Columbus (1), 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 gathers deposits primarily within Wayne and Shelby Counties, Indiana and Shelby, Miami, and Franklin Counties, Ohio, which together comprises its primary market area. First Bank Richmond also operates a nationwide equipment leasing business, focusing on direct financing leases for equipment integral to small and mid-sized business operations, including technology, medical, manufacturing, industrial, construction, and transportation equipment. First Bank Richmond's trust and wealth management division provides fiduciary, investment management, and custodial services. Wealth management assets under management and administration totaled $249.9 million at March 31, 2026.
Our results of operations are primarily dependent on net interest income, the difference between interest income earned on loans and investments and interest expense paid on deposits and borrowings. Other significant sources of income include service charges on deposit accounts, loan servicing fees, gains on sales of residential mortgage loans, and securities transactions. Changes in market interest rates, the shape of the yield curve, and the mix and volume of interest-earning assets and interest-bearing liabilities significantly affect the Company's net interest margin and profitability.
At March 31, 2026, on a consolidated basis, we had $1.5 billion in assets, $1.2 billion in loans and leases, net of allowance, $1.1 billion in deposits, and $144.9 million in stockholders' equity. At March 31, 2026, First Bank Richmond's total risk-based capital ratio was 14.62%, exceeding the 10.0% requirement for a well-capitalized institution. For the three months ended March 31, 2026, net income was $2.8 million, compared with net income of $2.0 million for the three months ended March 31, 2025.
Proposed Merger with The Farmers Bancorp, Frankfort, Indiana
On November 11, 2025, the Company entered into an Agreement and Plan of Merger (the "merger agreement") with Farmers Bancorp, pursuant to which Farmers Bancorp will merge with and into the Company, with the Company as the surviving corporation (the "merger"). Immediately following the merger, The Farmers Bank will merge with and into First Bank Richmond, with First Bank Richmond as the surviving institution.
The transaction has been approved by the boards of directors of both companies, and all required regulatory approvals have been received. A special meeting of Farmers Bancorp shareholders to approve the merger agreement and related transactions is scheduled for May 26, 2026. The Company will seek shareholder approval of the issuance of its shares in the transaction at its annual meeting of shareholders to be held on May 27, 2026. The transaction is expected to be completed at or around the end of the second quarter of 2026, subject to shareholder approvals and the satisfaction of customary closing conditions.
Under the terms of the merger agreement, holders of Farmers Bancorp common stock will receive 3.40 shares of Company common stock for each share of Farmers Bancorp common stock. The total value of the transaction will fluctuate based on the Company's stock price prior to closing. Upon completion of the transaction, Farmers Bancorp shareholders are expected to own approximately 38% of the Company.
The combined company will continue to trade on the Nasdaq Capital Market under the ticker symbol "RMBI." The holding company will operate under the name "Richmond Mutual Bancorporation, Inc.," and the combined bank, subject to regulatory approval, will operate under the new name "First Bank Midwest". The administrative headquarters of the combined company will be located in Richmond, Indiana, and the administrative headquarters of the combined bank will be located in Frankfort, Indiana.
Critical Accounting Estimates
We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the United States ("GAAP"). In doing so, we have to make estimates and assumptions. Our critical accounting estimates are those estimates that involve a significant level of uncertainty at the time the estimate was made, and changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. Accordingly, actual results could differ materially from our estimates. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We have reviewed our critical accounting estimates with the audit committee of our Board of Directors.
There have been no significant changes during the three months ended March 31, 2026 to the critical accounting estimates reported in Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2025 Form 10-K. See "Critical Accounting Estimates" included in Part II, Item 7 of our 2025 Form 10-K for a further discussion of our Critical Accounting Estimates.
Comparison of Financial Condition at March 31, 2026 and December 31, 2025
General. Total assets decreased $6.6 million, or 0.4%, to $1.5 billion at March 31, 2026 from December 31, 2025. The decrease was primarily the result of a $6.8 million, or 2.7%, decrease in investment securities, to $247.9 million, and a $2.7 million, or 0.2%, decrease in loans and leases, net of allowance for credit losses, to $1.2 billion, partially offset by a $1.7 million, or 5.0%, increase in cash and cash equivalents to $34.8 million.
Investment Securities. Investment securities available for sale totaled $245.5 million and $251.9 million, while investment securities held to maturity totaled $2.4 million and $2.7 million at March 31, 2026 and December 31, 2025, respectively. The $6.4 million, or 2.5%, decrease in investment securities available for sale was primarily due to $4.0 million in maturities and principal repayments and a $3.1 million downward mark-to-market adjustment on the investment portfolio, partially offset by $955,000 in purchases of securities. The $395,000 decrease in investment securities held to maturity was the
result of scheduled principal repayments and maturities. The proceeds received from the maturities and repayments of investment securities were primarily used to fund loan growth consistent with the Company's strategy to prioritize higher-yielding assets in a moderating interest rate environment.
Loans and Leases. Loans and leases, net of allowance for credit losses on loans and leases, decreased $2.7 million, or 0.2%, to $1.2 billion at March 31, 2026 from December 31, 2025, resulting from decreases in residential mortgage, direct financing leases, and consumer loans of $4.8 million, $2.8 million, and $1.1 million, respectively. These decreases were partially offset by a $2.7 million increase in commercial and industrial loans, and a $2.6 million increase in construction and development loans. At March 31, 2026, loans held for sale totaled $835,000, compared to $828,000 at December 31, 2025.
Nonaccrual loans and leases totaled $15.9 million at March 31, 2026, compared to $13.2 million at December 31, 2025. The increase was primarily due to one multi-family loan of $2.4 million, which was past due 90 days or more and accruing at December 31, 2025. Accruing loans and leases past due 90 days or more totaled $1.7 million and $4.2 million at March 31, 2026 and December 31, 2025, respectively. The decrease in accruing loans past due 90 days or more was primarily due to the transfer of the previously mentioned multi-family loan to nonaccrual. Nonperforming loans and leases, consisting of nonaccrual loans and leases and accruing loans and leases 90 days or more past due, totaled $17.6 million, or 1.48% of total loans and leases, at March 31, 2026, compared to $17.4 million, or 1.46% of total loans and leases, at December 31, 2025.
Allowance for Credit Losses. The allowance for credit losses on loans and leases increased $274,000, or 1.7%, to $16.7 million at March 31, 2026 from December 31, 2025. At March 31, 2026, the allowance for credit losses on loans and leases totaled 1.41% of total loans and leases outstanding. At December 31, 2025, the allowance for credit losses on loans and leases totaled $16.5 million, or 1.38% of total loans and leases outstanding. Net charge-offs during the first three months of 2026 totaled $347,000, and were primarily attributable to direct financing leases, compared to net charge-offs of $395,000 during the first three months of 2025.
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 March 31, 2026, which evaluation included consideration of a potential recession due to inflation, stock market volatility, and overall geopolitical tensions. Credit metrics are being reviewed and stress testing is being performed on the loan portfolio on an ongoing basis. For additional information on the allowance for credit losses, see "Allowance for Credit Losses on Loans and Leases" and "Economic Outlook" in "Note 5: Loans, Leases and Allowance" of the "Notes to Condensed Consolidated Financial Statements" in this report.
Other Assets. Other assets increased $489,000, or 2.6%, to $19.3 million at March 31, 2026 from $18.8 million at December 31, 2025. The increase was primarily caused by an increase in the Company's deferred tax asset, reflecting higher unrealized losses in the available for sale investment portfolio.
Deposits. Total deposits decreased $8.5 million, or 0.8%, to $1.1 billion at March 31, 2026 from December 31, 2025. The decrease in deposits primarily was due to decreases in retail (non-brokered) time deposits of $13.9 million, and savings and money market accounts of $3.1 million. These decreases were partially offset by an increase in interest-bearing demand deposits of $8.6 million. Brokered deposits totaled $236.5 million, or 21.4% of total deposits, at March 31, 2026, compared to $235.9 million, or 21.2% of total deposits, at December 31, 2025. At March 31, 2026, noninterest-bearing deposits totaled $99.4 million, or 9.0% of total deposits, compared to $100.1 million, or 9.0% of total deposits, at December 31, 2025.
As of March 31, 2026, approximately $247.9 million of our deposit portfolio, or 22.4% of total deposits, excluding collateralized public deposits, was uninsured. The uninsured amounts are estimated based on the methodologies and assumptions used for First Bank Richmond's regulatory reporting requirements.
Borrowings. Total borrowings increased $4.0 million, or 1.6%, to $256.0 million at March 31, 2026, compared to $252.0 million at December 31, 2025, reflecting a modest increase in FHLB advances. However, the average balance of FHLB borrowings decreased $4.9 million to $241.1 million during the first quarter of 2026 compared to the fourth quarter of 2025, as the Company continued to reduce its reliance on wholesale funding over the course of the quarter. The weighted-average interest rate on FHLB advances was 4.09% at March 31, 2026, compared to 3.96% at December 31, 2025.
Management strategically utilizes FHLB advances to supplement deposit funding, support loan growth, and manage interest rate risk. Management will continue to monitor borrowing needs and adjust FHLB advances as necessary to maintain liquidity and support lending activities.
Stockholders' Equity. Stockholders' equity totaled $144.9 million at March 31, 2026, a decrease of $871,000, or 0.6%, from December 31, 2025. The decrease primarily resulted from a $2.5 million increase in accumulated other comprehensive loss as a result of a reduction in fair values in the Company's available for sale investment portfolio, and the payment of $1.5 million in dividends to stockholders, partially offset by net income of $2.8 million.
The available-for-sale portfolio had a net unrealized loss of $46.9 million at March 31, 2026, compared to $43.7 million at December 31, 2025. The after-tax impact of the AOCL on equity was $37.0 million at March 31, 2026, compared to $34.6 million at December 31, 2025.
The Company's equity to asset ratio was 9.54% at March 31, 2026. At March 31, 2026, First Bank Richmond's Tier 1 capital to total assets ratio was 11.10% and its capital was well in excess of all regulatory requirements.
Comparison of Results of Operations for the Three Months Ended March 31, 2026 and 2025.
General. Net income for the three months ended March 31, 2026 was $2.8 million, an $817,000 or 41.5% increase from net income of $2.0 million for the three months ended March 31, 2025. Diluted earnings per share were $0.28 for the first quarter of 2026, compared to $0.20 diluted earnings per share for the first quarter of 2025. The increase in net income primarily was the result of an increase in net interest income of $1.2 million and an increase in noninterest income of $136,000, partially offset by an increase in noninterest expense of $331,000 and income tax expense of $214,000.
Interest Income. Interest income increased $294,000, or 1.4%, to $21.2 million during the quarter ended March 31, 2026, compared to $20.9 million during the quarter ended March 31, 2025. The increase was primarily driven by growth in interest income on loans and leases, partially offset by a decrease in interest income from other earning assets.
Interest income on loans and leases increased $337,000, or 1.8%, to $19.1 million for the quarter ended March 31, 2026, from $18.8 million for the comparable quarter in 2025. The increase was primarily driven by a 10 basis point improvement in the average yield, which rose to 6.46% from 6.36%, as new loans and leases were originated at higher rates than the average yield in the existing loan and lease portfolio and existing variable rate loans adjusted upward during the period due to the overall higher interest rate environment. The average outstanding loan and lease balance was relatively stable at approximately $1.2 billion for both periods.
Interest income on investment securities, excluding FHLB stock, decreased $70,000, or 4.2%, to $1.6 million for the first quarter of 2026 from the comparable quarter in 2025. The decrease was due to a $5.3 million decrease in the average balance, primarily as a result of maturities and paydowns on securities, and a six basis point decrease in the average yield earned on investment securities. The average yield on investment securities, excluding FHLB stock, decreased to 2.46% for the first quarter of 2026, compared to 2.52% for the first quarter of 2025. The average balance of investment securities, excluding FHLB stock, decreased to $256.8 million for the quarter ended March 31, 2026, compared to $262.1 million for the quarter ended March 31, 2025.
Dividends on FHLB stock decreased $20,000, or 6.4%, during the quarter ended March 31, 2026, from the comparable quarter in 2025, resulting in an average yield on FHLB stock of 8.37% for the three months ended March 31, 2026, compared to 8.95% for the three months ended March 31, 2025. Interest income on cash and cash equivalents increased $47,000, or 35.9%, to $178,000 during the quarter ended March 31, 2026 from the comparable quarter in 2025, due to a $6.7 million increase in the average balance of cash and cash equivalents, partially offset by a 29 basis point decrease in the average yield.
Interest Expense. Interest expense decreased $894,000, or 8.4%, to $9.7 million for the quarter ended March 31, 2026, compared to $10.6 million for the quarter ended March 31, 2025. The decrease reflected lower funding costs across both deposit and borrowing categories.
Interest expense on deposits decreased $546,000, or 7.0%, to $7.3 million for the quarter ended March 31, 2026, from $7.8 million for the comparable quarter in 2025. The decrease primarily was attributable to a 28 basis point decrease in the average rate paid on interest-bearing deposits, which fell to 2.89% from 3.17%. The average balance of interest-bearing deposits increased to $1.0 billion from $989.4 million, partially offsetting the rate-driven reduction in expense.
Interest expense on FHLB borrowings decreased $348,000, or 12.6%, to $2.4 million in the first quarter of 2026 compared to $2.8 million for the same quarter in 2025. The decrease was primarily attributable to a $33.6 million reduction in the average balance of borrowings, which declined to $241.1 million from $274.7 million, reflecting reduced reliance on
wholesale funding. The average rate paid on FHLB borrowings was relatively unchanged at 4.01%, compared to 4.03% for the comparable quarter of 2025.
Management continues to actively evaluate funding mix and pricing strategies to balance interest expense with overall liquidity needs. This includes a focus on deepening core deposit relationships, selectively reducing higher-cost deposits, and managing wholesale borrowings to optimize the cost of funds.
Net Interest Income. Net interest income before the provision for credit losses increased $1.2 million, or 11.6%, to $11.4 million for the first quarter of 2026, compared to $10.3 million for the first quarter of 2025. This increase was due to a 32 basis point increase in the average interest rate spread and a $16.0 million increase in average net earning assets. The improved spread reflects a favorable shift in asset yields as loans and investment securities repriced to or were originated at higher market rates, paired with a decrease in funding costs.
Net interest margin (annualized) was 3.10% for the three months ended March 31, 2026, compared to 2.79% for the three months ended March 31, 2025. The increase in net interest margin was attributable to improved asset yields, particularly on loans and leases, paired with a decrease in funding costs. The Federal Open Market Committee maintained the target range at 3.50% to 3.75% through the first quarter of 2026 following rate reductions implemented in late 2025.
Average Balances, Interest and Average Yields/Cost. The following table sets forth for the periods indicated, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities, resultant yields, interest rate spread, net interest margin (otherwise known as net yield on interest-earning assets), and the ratio of average interest-earning assets to average interest-bearing liabilities. Average balances have been calculated using daily balances. Non-accruing loans have been included in the table as loans carrying a zero yield. Loan fees are included in interest income on loans and are not material.
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
|
Average Balance Outstanding |
Interest Earned/ Paid |
Yield/ Rate |
Average Balance Outstanding |
Interest Earned/ Paid |
Yield/ Rate |
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| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||||||||||
| Loans and leases receivable | $ | 1,183,134 | $ | 19,111 | 6.46 | % | $ | 1,180,647 | $ | 18,774 | 6.36 | % | |||||||||||||||||||||||
| Securities | 256,758 | 1,582 | 2.46 | % | 262,089 | 1,652 | 2.52 | % | |||||||||||||||||||||||||||
| FHLB stock | 13,907 | 291 | 8.37 | % | 13,907 | 311 | 8.95 | % | |||||||||||||||||||||||||||
| Cash and cash equivalents and other | 20,812 | 178 | 3.42 | % | 14,121 | 131 | 3.71 | % | |||||||||||||||||||||||||||
| Total interest-earning assets | 1,474,611 | 21,162 | 5.74 | % | 1,470,764 | 20,868 | 5.68 | % | |||||||||||||||||||||||||||
| Non-earning assets | 38,366 | 40,016 | |||||||||||||||||||||||||||||||||
| Total assets | 1,512,977 | 1,510,780 | |||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Savings and money market accounts | 320,500 | 1,660 | 2.07 | % | 304,482 | 1,723 | 2.26 | % | |||||||||||||||||||||||||||
| Interest-bearing checking accounts | 146,683 | 397 | 1.08 | % | 134,461 | 323 | 0.96 | % | |||||||||||||||||||||||||||
| Certificate accounts | 543,612 | 5,241 | 3.86 | % | 550,425 | 5,798 | 4.21 | % | |||||||||||||||||||||||||||
| Borrowings | 241,089 | 2,418 | 4.01 | % | 274,667 | 2,766 | 4.03 | % | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | 1,251,884 | 9,716 | 3.10 | % | 1,264,035 | 10,610 | 3.36 | % | |||||||||||||||||||||||||||
| Noninterest-bearing demand deposits | 98,362 | 99,236 | |||||||||||||||||||||||||||||||||
| Other liabilities | 14,310 | 13,733 | |||||||||||||||||||||||||||||||||
| Stockholders' equity | 148,421 | 133,776 | |||||||||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | 1,512,977 | 1,510,780 | |||||||||||||||||||||||||||||||||
| Net interest income | $ | 11,446 | $ | 10,258 | |||||||||||||||||||||||||||||||
| Net earning assets | $ | 222,727 | $ | 206,729 | |||||||||||||||||||||||||||||||
|
Net interest rate spread(1)
|
2.64 | % | 2.32 | % | |||||||||||||||||||||||||||||||
|
Net interest margin(2)
|
3.10 | % | 2.79 | % | |||||||||||||||||||||||||||||||
|
Average interest-earning assets to average interest-bearing liabilities
|
117.79 | % | 116.35 | % | |||||||||||||||||||||||||||||||
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(1)Annualized. Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.
(2)Annualized. Net interest margin represents net interest income divided by average total interest-earning assets.
Provision for Credit Losses. A provision for credit losses of $693,000 was recorded during the three months ended March 31, 2026, compared to $731,000 for the three months ended March 31, 2025. Net charge-offs during the first quarter of 2026 were $347,000 compared to $395,000 in the first quarter of 2025. The decreased provision for credit losses during the quarter was primarily due to reduced charge-offs as compared to the prior year.
While we believe the steps we have taken and continue to take are necessary to effectively manage our portfolio, uncertainties relating to the level of our allowance for credit losses remain heightened as a result of continued concern about a potential recession due to tariffs, inflation, stock market volatility, and overall geopolitical tensions.
Noninterest Income. Noninterest income increased $136,000, or 11.7%, to $1.3 million for the quarter ended March 31, 2026, compared to the same quarter in 2025. The increase resulted primarily from an increase in net gains on loan and lease sales and other income.
Net gains on loan and lease sales increased $78,000, or 82.0%, to $173,000 during the quarter ended March 31, 2026, compared to $95,000 during the comparable quarter in 2025, primarily due to higher mortgage banking activity. Other income increased $32,000, or 8.8%, to $392,000 for the quarter ended March 31, 2026, compared to $360,000 for the comparable quarter in 2025, due to increased wealth management income driven by improved market performance and a higher amount of client assets under management. Partially offsetting these increases was a decrease in loan and lease servicing fees of $19,000, or 16.7%, to $94,000 for the quarter ended March 31, 2026, compared to $112,000 for the comparable quarter in 2025.
Noninterest Expense. Noninterest expense increased $331,000, or 4.0%, to $8.7 million for the three months ended March 31, 2026, compared to the same period in 2025. The increase reflected higher data processing costs and elevated other expenses due to nonrecurring items, partially offset by decreases in salaries and employee benefits, legal and professional fees, and deposit insurance expense.
Salaries and employee benefits, the largest component of noninterest expense, decreased $148,000, or 3.1%, to $4.6 million, primarily due to reduced equity compensation expenses. Data processing fees increased $290,000, or 32.2%, to $1.2 million, primarily due to one-time core processor fees of $188,000 related to new product implementations. Other expenses increased $213,000, or 19.5%, to $1.3 million. The current quarter included $263,000 in check fraud losses related to a single customer and $150,000 in real estate taxes paid on a nonaccrual loan, both of which are nonrecurring in nature. These items were partially offset by approximately $200,000 in decreases related to contract negotiation expenses with our core provider recognized in the first quarter of 2025. Legal and professional fees decreased $72,000, or 13.6%, to $459,000. Deposit insurance expense decreased $54,000, or 15.9%, to $285,000, primarily due to shifts in First Bank Richmond's asset and deposit mix and related impact on FDIC assessments.
Income Tax Expense. The provision for income taxes increased $214,000, or 61.5%, to $562,000 during the three months ended March 31, 2026, compared to $348,000 for the same period in 2025. The effective tax rate was 16.8% for the current quarter, compared to 15.0% for the comparable quarter in 2025. The increase in the effective tax rate reflected higher pre-tax income, which reduced the relative benefit of fixed tax-exempt income and deductions as a percentage of total pre-tax earnings.
Capital and Liquidity
Capital. Shareholders' equity totaled $144.9 million at March 31, 2026, compared to $145.8 million at December 31, 2025, a decrease of $871,000. Equity was positively impacted during the first quarter of 2026 by net income of $2.8 million, $188,000 related to the allocation of ESOP shares, and $87,000 of stock-based compensation expense. These increases were more than offset by a $2.4 million increase in AOCL and $1.5 million in dividends paid to stockholders.
We paid a regular quarterly dividend of $0.15 per common share during the first quarter of 2026 and the first quarter of 2025. We currently expect to continue our practice of paying regular quarterly cash dividends on common stock subject to the Board of Directors' discretion to modify or terminate this practice at any time and for any reason without prior notice. Assuming continued payment during 2026 at the current dividend rate of $0.15 per share, our average total dividend paid each quarter would be approximately $1.6 million based on the number of outstanding shares at March 31, 2026.
Stock Repurchase Plans. During the three months ended March 31, 2026, the Company did not have an existing stock repurchase program, and did not repurchase any shares of its common stock. Stock repurchase programs are utilized from time to time to manage the Company's capital position, enhance shareholder value, and offset dilution from stock-based compensation awards. See Part II, Item 2 - "Unregistered Sales of Equity Securities and Use of Proceeds."
Liquidity. Liquidity measures the ability to meet current and future cash flow needs as they become due. The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits and to take advantage of interest rate market opportunities. The ability of a financial institution to meet its current financial obligations is a function of its balance sheet structure, its ability to liquidate assets and its access to alternative sources of funds. The objective of our liquidity management is to manage cash flow and liquidity reserves so that they are adequate to fund our operations and to meet obligations and other commitments on a timely basis and at a reasonable cost. We seek to achieve this objective and ensure that funding needs are met by maintaining an appropriate level of liquid funds through asset/liability management, which includes managing the mix and time to maturity of financial assets and financial liabilities on our balance sheet. Our liquidity position is enhanced by our ability to raise additional funds as needed in the wholesale markets.
Asset liquidity is provided by liquid assets which are readily marketable or pledgeable or which will mature in the near future. Liquid assets generally include cash, interest-bearing deposits in banks, securities available for sale, maturities and cash
flow from securities held to maturity, sales of fixed rate residential mortgage loans in the secondary market, and federal funds sold and resell agreements. Liability liquidity generally is provided by access to funding sources which include core deposits and advances from the FHLB and other borrowing relationships with third party financial institutions.
Our liquidity position is continuously monitored and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Liquidity risk management is an important element in our asset/liability management process. We regularly model liquidity stress scenarios to assess potential liquidity outflows or funding problems resulting from economic disruptions, volatility in the financial markets, unexpected credit events or other significant occurrences deemed problematic by management. These scenarios are incorporated into our contingency funding plan, which provides the basis for the identification of our liquidity needs.
Our liquid assets in the form of cash and cash equivalents and investments available for sale totaled $283.1 million at March 31, 2026. Certificates of deposit scheduled to mature in less than one year from March 31, 2026 totaled $382.8 million. Historically, First Bank Richmond has been able to retain a significant amount of its deposits as they mature.
As of March 31, 2026, we had approximately $23.8 million held in an interest-bearing account at the Federal Reserve. We also have the ability to borrow funds as a member of the FHLB. As of March 31, 2026, based upon available, pledgeable collateral, our total remaining borrowing capacity with the FHLB was approximately $113.4 million. Furthermore, at March 31, 2026, we had approximately $136.2 million in securities that were unencumbered by a pledge and could be used to support additional borrowings through repurchase agreements or the Federal Reserve discount window, as needed. As of March 31, 2026, management was not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on us.
Our cash flows are comprised of three primary classifications: operating activities, investing activities, and financing activities. Net cash provided by operating activities was $2.8 million for the three months ended March 31, 2026, compared to $2.2 million provided by operating activities for the three months ended March 31, 2025. The increase in operating cash flows primarily reflected higher net income and changes in operating assets and liabilities.
Net cash provided by investing activities totaled $4.8 million for the three months ended March 31, 2026, compared to $12.0 million used in the same period of 2025. The significantly lower cash usage in the first quarter of 2026 was primarily due to reduced net loan growth compared to the prior-year period, as net loans decreased $2.3 million in the current quarter compared to growth of $16.0 million in the first quarter of 2025.
Net cash used in financing activities was $5.9 million for the three months ended March 31, 2026, compared to $15.1 million provided by financing activities during the same period in 2025. The change primarily reflected higher net deposit outflows, particularly in certificates of deposit, which decreased $13.4 million in the first quarter of 2026 compared to an increase of $11.5 million in the prior-year period. Additionally, the Company repaid $12.0 million in other borrowings during the first quarter of 2026 with no comparable activity in the prior-year period. These outflows were partially offset by increases in demand and savings deposits and a net increase in FHLB advances of $16.0 million in the current quarter compared to $9.0 million in the prior-year period. The first quarter of 2025 also included $4.2 million in common stock repurchases under the Company's repurchase program, with no comparable activity in the current quarter.
Management believes the capital sources are adequate to meet all reasonably foreseeable short-term and long-term cash requirements and there has not been a material change in our liquidity and capital resources since the information disclosed in our 2025 Form 10-K other than set forth above.
Richmond Mutual Bancorporation is a separate legal entity from First Bank Richmond and must provide for its own liquidity. In addition to its own operating expenses, Richmond Mutual Bancorporation is responsible for paying for any stock repurchases, dividends declared to its stockholders and other general corporate expenses. Since Richmond Mutual Bancorporation is a holding company and does not conduct operations, its primary sources of liquidity are interest on investment securities purchased with proceeds from our initial public offering, dividends up-streamed from First Bank Richmond and borrowings from outside sources. Banking regulations may limit the amount of dividends that may be paid to us by First Bank Richmond. At March 31, 2026, Richmond Mutual Bancorporation, on an unconsolidated basis, had $3.0 million in cash, noninterest-bearing deposits, and liquid investments generally available for its cash needs.
Regulatory Capital Requirements. First Bank Richmond is subject to minimum capital requirements imposed by the FDIC. The FDIC may require us to have additional capital above the specific regulatory levels if it believes we are subject to
increased risk due to asset problems, high interest rate risk and other risks. At March 31, 2026, 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.
| Actual | Minimum for Capital Adequacy Purposes | Categorized as "Well-Capitalized" Under Prompt Corrective Action Provisions | |||||||||||||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| As of March 31, 2026 | |||||||||||||||||||||||||||||||||||
| Total risk-based capital (to risk weighted assets) | $ | 187,015 | 14.6 | % | $ | 102,351 | 8.0 | % | $ | 127,939 | 10.0 | % | |||||||||||||||||||||||
| Tier 1 risk-based capital (to risk weighted assets) | 171,009 | 13.4 | 76,763 | 6.0 | 102,351 | 8.0 | |||||||||||||||||||||||||||||
| Common equity tier 1 capital (to risk weighted assets) | 171,009 | 13.4 | 57,573 | 4.5 | 83,160 | 6.5 | |||||||||||||||||||||||||||||
| Tier 1 leverage (core) capital (to adjusted tangible assets) | 171,009 | 11.1 | 61,640 | 4.0 | 77,050 | 5.0 | |||||||||||||||||||||||||||||
| As of December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Total risk-based capital (to risk weighted assets) | $ | 186,532 | 14.6 | % | $ | 101,960 | 8.0 | % | $ | 127,451 | 10.0 | % | |||||||||||||||||||||||
| Tier 1 risk-based capital (to risk weighted assets) | 170,591 | 13.4 | 76,470 | 6.0 | 101,960 | 8.0 | |||||||||||||||||||||||||||||
| Common equity tier 1 capital (to risk weighted assets) | 170,591 | 13.4 | 57,353 | 4.5 | 82,843 | 6.5 | |||||||||||||||||||||||||||||
| Tier 1 leverage (core) capital (to adjusted tangible assets) | 170,591 | 11.0 | 62,290 | 4.0 | 77,862 | 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. Failure to maintain the required buffer could result in limitations on First Bank Richmond's ability to pay dividends and discretionary bonuses and the Company's ability to repurchase shares based on specified percentages of eligible retained income. At March 31, 2026, First Bank Richmond's capital exceeded the conservation buffer.
For a bank holding company with less than $3.0 billion in assets, the capital guidelines apply on a bank only basis and the Federal Reserve Board expects the holding company's subsidiary banks to be well capitalized under the prompt corrective action regulations. If Richmond Mutual Bancorporation was subject to regulatory guidelines for bank holding companies with $3.0 billion or more in assets, at March 31, 2026, it would have exceeded all regulatory capital requirements.
Richmond Mutual Bancorporation Inc. published this content on May 12, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 12, 2026 at 20:37 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]