Richmond Mutual Bancorporation, Inc. (RMBI) is a Maryland-based bank holding company that has been serving its local communities through its wholly-owned subsidiary, First Bank Richmond, for over a century. The company's journey has been marked by strategic expansions, navigating economic fluctuations, and a steadfast commitment to providing personalized financial services to its customers.

Business Overview and History

Richmond Mutual Bancorporation, Inc. has a rich history dating back to 1887 when it was established as an Indiana state-chartered mutual savings and loan association. The company has undergone several transformations throughout its existence to adapt to the changing financial landscape. In 1935, it converted to a federal mutual savings and loan association, operating under the name First Federal Savings and Loan Association of Richmond.

A significant milestone occurred in 1993 when the company converted to a state-chartered mutual savings bank and changed its name to First Bank Richmond, S.B. This was followed by another important development in 1998 when the company underwent a non-stock mutual holding company reorganization and converted to a national bank charter, operating as First Bank Richmond, National Association.

The company's growth strategy included strategic acquisitions, as evidenced by the 2007 purchase of Mutual Federal Savings Bank headquartered in Sidney, Ohio. This acquisition was carried out by Richmond Mutual Bancorporation-Delaware, the company's holding company at the time. Mutual Federal Savings Bank initially operated independently as a separately chartered, wholly-owned subsidiary until 2016 when it was combined with the bank through an internal merger transaction. This consolidation resulted in a single, more efficient commercial bank charter.

In 2017, the company made another significant change by converting to an Indiana state-chartered commercial bank and changing 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. This strategic move allowed the company to streamline its operations while maintaining its presence in both Indiana and Ohio markets.

Today, Richmond Mutual Bancorporation operates through First Bank Richmond, providing full banking services through its seven full-service and one limited-service offices located in Indiana, as well as five full-service offices in Ohio. The company also maintains a loan production office in Columbus, Ohio. With a focus on community banking, First Bank Richmond offers a range of traditional financial and trust services to its local communities.

Financial Strength and Stability

Financials

As of September 30, 2024, Richmond Mutual Bancorporation reported total assets of $1.50 billion, a 2.20% increase from the previous year's $1.46 billion. The company's loan and lease portfolio, net of allowance for credit losses, grew by 4.70% to $1.14 billion, driven by increases in multi-family loans ($45.0 million), commercial and industrial loans ($11.2 million), residential mortgage loans ($10.8 million), and commercial real estate loans ($6.8 million).

The company's deposit base also experienced growth, increasing by 4.60% to $1.09 billion as of September 30, 2024. This growth was primarily attributed to a $41.60 million increase in non-brokered time deposits and a $27.00 million increase in savings and money-market accounts, partially offset by a $31.40 million decrease in demand deposit accounts. Brokered deposits comprised 25.70% of total deposits at the end of the third quarter.

For the most recent fiscal year (2023), Richmond Mutual Bancorporation reported revenue of $42.07 million and net income of $9.49 million. The company generated operating cash flow of $12.11 million and free cash flow of $11.49 million. In the most recent quarter (Q3 2024), revenue reached $21.59 million with net income of $2.47 million. Year-over-year revenue growth was impressive at 24.30%, primarily driven by higher interest income on loans and leases due to an increase in average loan and lease balances and higher interest rates.

The allowance for credit losses on loans and leases increased slightly to $15.8 million at September 30, 2024, compared to $15.7 million at December 31, 2023. This increase reflects management's ongoing evaluation of potential risks, particularly related to a potential economic slowdown. Nonaccrual loans and leases totaled $5.1 million at September 30, 2024, down from $6.3 million at year-end 2023, as the company worked through problem credits.

Liquidity

Richmond Mutual Bancorporation's capital position remains strong, with a Tier 1 capital to total assets ratio of 10.73% as of September 30, 2024, well in excess of regulatory requirements. The company's equity to asset ratio stood at 9.38% at the end of the third quarter of 2024, showcasing its financial stability and ability to support continued growth.

The company's liquidity profile is robust, with a debt-to-equity ratio of 1.80 and cash and cash equivalents of $19.57 million. As a member of the Federal Home Loan Bank (FHLB), the Bank had approximately $120.70 million in remaining borrowing capacity as of September 30, 2024, based on available, pledgeable collateral. The current ratio and quick ratio both stand at 1.29, indicating the company's ability to meet its short-term obligations.

To supplement its deposit funding, the company also utilizes borrowings, primarily through advances from the FHLB. FHLB advances decreased to $252.0 million at September 30, 2024, from $271.0 million at the end of 2023, as the growth in deposits reduced the need for additional borrowings.

Operational Efficiency and Profitability

For the nine months ended September 30, 2024, Richmond Mutual Bancorporation reported net income of $6.90 million, a decrease of 8.50% compared to the same period in 2023. This decline was primarily due to a $1.40 million increase in noninterest expense and a $127,000 increase in the provision for credit losses, partially offset by a $510,000 increase in net interest income and a $134,000 increase in noninterest income.

The company's net interest margin, a key measure of profitability, decreased to 2.66% for the nine-month period ended September 30, 2024, compared to 2.82% for the same period in 2023. This decline was largely attributed to the rate paid on interest-bearing liabilities increasing faster than the yield on interest-earning assets, as the Federal Reserve implemented a series of interest rate hikes during this time.

Despite the pressure on net interest margin, Richmond Mutual Bancorporation has maintained a strong focus on operational efficiency. The company's noninterest expense ratio, which measures noninterest expense as a percentage of average assets, stood at 1.73% for the nine months ended September 30, 2024, compared to 1.68% for the same period in 2023, demonstrating its ability to manage costs effectively.

Geographic Diversification and Growth Initiatives

Richmond Mutual Bancorporation's footprint extends beyond its Indiana roots, with a strategic presence in the Ohio market through its Mutual Federal division. This geographic diversification has allowed the company to tap into new growth opportunities and expand its customer base.

In addition to its established markets, the company has identified Columbus, Ohio, Dayton-Springfield, Ohio, and Indianapolis, Indiana as key focus areas for future growth. These high-growth regions, which specialize in commercial real estate loans, are expected to contribute to the company's continued expansion and profitability.

To support its growth initiatives, Richmond Mutual Bancorporation has been actively investing in technology and digital banking capabilities to enhance the customer experience and streamline operations. The company's commitment to innovation and adaptability has been crucial in navigating the evolving banking landscape and meeting the needs of its diverse client base.

Navigating Challenges and Risks

Like any financial institution, Richmond Mutual Bancorporation faces a range of challenges and risks that require prudent management. One of the key concerns is the impact of the ongoing interest rate environment, as the Federal Reserve's actions to combat inflation have put pressure on the company's net interest margin.

To address this challenge, the company has been actively managing its asset-liability mix and pricing strategies to optimize its interest rate spread. Additionally, the company has been diversifying its revenue streams by focusing on fee-based services, such as trust and wealth management, to supplement its interest income.

Another risk factor is the potential for economic volatility and its effect on the company's loan portfolio. Richmond Mutual Bancorporation has been closely monitoring its credit quality, conducting stress tests, and making proactive adjustments to its underwriting and risk management practices to mitigate the impact of any economic downturns.

Furthermore, the company, like many financial institutions, must navigate the evolving regulatory landscape and ensure compliance with various banking regulations. Richmond Mutual Bancorporation has dedicated resources to staying informed about regulatory changes and implementing necessary adjustments to its policies and procedures.

Despite these challenges, the company's long-standing history, experienced management team, and commitment to serving its local communities have been instrumental in navigating turbulent times and positioning the organization for continued success.

Investment Securities and Portfolio Management

In addition to its loan portfolio, Richmond Mutual Bancorporation invests funds in various investment securities, including U.S. government and agency securities, mortgage-backed securities, and state and municipal obligations. The investment securities portfolio totaled $271.3 million at September 30, 2024, down from $287.6 million at the end of 2023, as the company used investment portfolio proceeds to fund loan growth.

The available-for-sale investment portfolio had a net unrealized loss of $49.3 million at the end of the third quarter, an improvement from the $54.5 million unrealized loss at year-end 2023 as interest rates moderated somewhat. This strategic management of the investment portfolio demonstrates the company's ability to adapt to changing market conditions and optimize its balance sheet structure.

Industry Trends and Competitive Positioning

The banking industry has seen a compound annual growth rate (CAGR) in total assets of approximately 4% over the past 5 years. This growth has been driven by factors such as rising interest rates, increased lending activity, and growth in deposits. Richmond Mutual Bancorporation's performance aligns well with these industry trends, as evidenced by its strong revenue growth and solid financial metrics.

The company's focus on community banking, coupled with its strategic expansion into high-growth markets, positions it well to capitalize on industry trends and maintain its competitive edge. By offering personalized services and leveraging its local market knowledge, Richmond Mutual Bancorporation can differentiate itself from larger national banks and continue to attract and retain customers in its target markets.

Outlook and Conclusion

As Richmond Mutual Bancorporation looks to the future, the company remains focused on executing its strategic growth initiatives, enhancing operational efficiency, and maintaining a strong capital position to support its long-term sustainability.

The company's geographic diversification, investment in technology, and emphasis on tailored financial solutions for its customers are expected to be key drivers of its future performance. Additionally, the company's disciplined approach to risk management and its ability to adapt to changing market conditions position it well to navigate the evolving banking landscape.

While the interest rate environment and potential economic volatility present ongoing challenges, Richmond Mutual Bancorporation's proven track record, experienced leadership, and customer-centric focus provide a solid foundation for continued growth and value creation for its shareholders.

Overall, Richmond Mutual Bancorporation's financial performance, strong liquidity position, and strategic initiatives demonstrate its resilience and potential for future success in the competitive banking industry. The company's ability to grow its loan portfolio, manage credit quality, and adapt to changing market conditions bodes well for its long-term prospects as it continues to serve its communities and create value for stakeholders.