10-Q: Richmond Mutual Bancorp Reports Strong Q3 Earnings Growth

Richmond Mutual Bancorporation, Inc. announced a significant increase in net income for the third quarter and first nine months of 2025, driven by robust net interest income growth and improved asset yields.

Summary

• Net income for the three months ended September 30, 2025, increased 45.5% to $3,597,006 ($0.36 diluted EPS) from $2,471,878 ($0.24 diluted EPS) in the comparable period of 2024.
• Net income for the nine months ended September 30, 2025, rose 18.3% to $8,167,314 ($0.82 diluted EPS) from $6,901,373 ($0.68 diluted EPS) in the comparable period of 2024.
• Total assets increased 1.4% to $1,525,565,364 at September 30, 2025, from $1,504,874,860 at December 31, 2024.
• Loans and leases, net of allowance for credit losses, grew 1.7% to $1,178,231,605, primarily driven by commercial real estate, multi-family, and commercial and industrial loans.
• Total deposits increased 2.2% to $1,118,258,347, with a shift from transaction accounts to higher-yielding time deposits.
• Stockholders' equity increased 5.4% to $140,035,176, benefiting from net income and a $7.7 million reduction in accumulated other comprehensive loss (AOCL).
• Net interest income before provision for credit losses increased 19.7% to $11,294,961 in Q3 2025 and 12.0% to $32,312,474 for the nine months ended September 30, 2025.
• Net interest margin (annualized) improved to 3.07% in Q3 2025 from 2.60% in Q3 2024, and to 2.93% for the nine months from 2.66%.
• Provision for credit losses increased to $268,674 in Q3 2025 (from a reversal of $98,848 in Q3 2024) and to $1,744,459 for the nine months (from $354,758).
• Nonperforming loans and leases increased to $10.8 million (0.90% of total loans) at September 30, 2025, from $6.8 million (0.58%) at December 31, 2024.
• The allowance for credit losses on loans and leases increased 3.6% to $16,364,629, representing 1.37% of total loans and leases outstanding.

Sentiment

Score: 7

Explanation: The company reported strong net income and net interest income growth, along with an improved net interest margin and increased stockholders' equity. However, these positives are tempered by an increase in nonperforming loans and a higher provision for credit losses, reflecting a more cautious macroeconomic outlook.

Positives

• Net income increased significantly by 45.5% in Q3 2025 to $3.6 million and 18.3% for the nine months ended September 30, 2025, to $8.2 million.
• Net interest income grew substantially, up 19.7% in Q3 to $11.3 million and 12.0% for the nine months to $32.3 million.
• Net interest margin expanded to 3.07% in Q3 2025 and 2.93% for the nine months, indicating improved profitability from lending activities.
• Loan and lease portfolio grew 1.7% to $1.178 billion, driven by commercial real estate, multi-family, and commercial and industrial loans.
• Stockholders' equity increased 5.4% to $140.0 million, partly due to a $7.7 million reduction in accumulated other comprehensive loss (AOCL), reflecting improved fair values in the investment portfolio.
• First Bank Richmond's total risk-based capital ratio of 14.36% significantly exceeds the 10.0% requirement for a well-capitalized institution.
• Wealth management income increased by 14.2% in Q3 and 10.3% for the nine months, driven by improved market performance and higher client assets under management.
• Deposit insurance expense decreased by 19.5% in Q3 and 18.4% for the nine months due to shifts in asset and deposit mix.
• A renegotiated core service provider agreement is expected to produce meaningful cost savings and improve operational efficiency.

Negatives

• Nonperforming loans and leases increased to $10.8 million (0.90% of total loans) at September 30, 2025, from $6.8 million (0.58%) at December 31, 2024.
• Accruing loans and leases past due 90 days or more increased to $4.4 million from $1.7 million, primarily due to one multi-family loan of $2.4 million.
• Provision for credit losses increased significantly to $268,674 in Q3 2025 (from a reversal of $98,848 in Q3 2024) and to $1,744,459 for the nine months (from $354,758), reflecting loan growth in higher-risk segments and a modest deterioration in macroeconomic forecasts.
• Investment securities available for sale decreased by $7.7 million, with proceeds used to fund loan growth.
• Brokered deposits still represent 22.2% of total deposits at September 30, 2025, although they decreased by $9.3 million.
• Interest expense on FHLB borrowings increased by 10.6% in Q3 and 9.0% for the nine months due to higher average rates and balances.
• Net gains on loan and lease sales decreased by 55.3% in Q3 and 30.9% for the nine months, primarily due to reduced mortgage banking activity.
• Net losses on sales of securities increased by $106,000 for the first nine months of 2025.
• Legal and professional fees increased by 16.7% in Q3, reflecting higher external consulting and legal service costs.
• Data processing fees increased by 6.8% in Q3 and 3.8% for the nine months due to increased software implementation and technology upgrade expenses.

Risks

• Adverse impacts to economic conditions in local market areas and other markets where lending relationships exist.
• 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.
• 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.
• Ability to access cost-effective funding including maintaining the confidence of depositors.
• Unexpected outflows of uninsured deposits may require selling 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 the market area.
• Ability to implement and change 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 margins and yields, mortgage banking revenues, the fair value of financial instruments or the level of loan originations, or increase the level of defaults, losses and prepayments on loans and leases.
• Adverse changes in the securities or secondary mortgage markets.
• Changes in the quality or composition of loan, lease or investment portfolios.
• Ability to keep pace with technological changes, including identifying and addressing cyber-security risks such as data security breaches, 'denial of service' attacks, 'hacking' and identity theft, and other attacks on information technology systems or on third-party vendors.
• Results of examinations by regulatory authorities and potential requirements to increase credit loss allowances, write-down assets, reclassify assets, change regulatory capital position, or affect liquidity and earnings.
• Inability of third-party providers to perform as expected.
• Ability to manage market risk, credit risk and operational risk in the current economic environment.
• Ability to enter new markets successfully and capitalize on growth opportunities.
• Ability to attract and retain key employees.
• Compensation expense associated with equity allocated or awarded to employees.
• Changes in the financial condition, results of operations or future prospects of issuers of securities that are owned.
• Ability to successfully integrate into operations any assets, liabilities, customers, systems and management personnel that may be acquired and 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 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.
• Ability to pay dividends on common stock.
• 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 operations, pricing, products and services.
• 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.
• Potential economic volatility could materially affect the loan and lease portfolio, including the allowance for credit losses, with future estimates expected to fluctuate throughout the remainder of 2025.

Future Outlook

The overall economic outlook remains complex and uncertain, creating a challenging environment requiring continued vigilance and adaptability. Potential economic volatility could materially affect the loan and lease portfolio, including the allowance for credit losses, with future estimates expected to fluctuate throughout the remainder of 2025. The company expects to continue its practice of paying regular quarterly cash dividends on common stock, subject to Board discretion. Management will continue to monitor borrowing needs and adjust FHLB advances as necessary to maintain liquidity and support lending activities. The renegotiated core service provider agreement is expected to produce meaningful cost savings over its term.

Management Comments

• 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.
• While steps taken and continuing to be taken are necessary to effectively manage the portfolio, uncertainties relating to the level of the 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.
• Management considers it more likely than not that the Company will not be required to sell investments with unrealized losses before recovery of the amortized cost basis, which may be the maturity dates of the securities.
• Management believes 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 liquidity and capital resources since the information disclosed in the 2024 Form 10-K other than set forth above.
• Management is not aware of any events that are reasonably likely to have a material adverse effect on liquidity, capital resources or operations.
• Management is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on the Company.

Industry Context

The banking industry continues to navigate a complex economic environment characterized by persistent inflation, slowing economic growth, and labor market uncertainty. The Federal Reserve's rate cuts in late 2024 have influenced deposit pricing, leading to customer demand for higher-yielding time deposits. Regional banks like Richmond Mutual Bancorporation are focusing on deepening core deposit relationships and managing funding costs while facing increased competition and potential economic volatility. The company's strategic focus on growth markets in Columbus, Cincinnati/Dayton/Springfield, Ohio, and Indianapolis, Indiana, aligns with broader trends of targeting regions with above-average population and employment growth, and resilient real estate fundamentals.

Comparison to Industry Standards

• NA

Corporate Governance

Legal Proceedings

• Not involved in any pending legal proceedings as a plaintiff or defendant other than routine legal proceedings occurring in the ordinary course of business.
• Not involved in any legal proceedings the outcome of which would be material to financial condition or results of operations at September 30, 2025.

Stakeholder Impact

• Shareholders: Positive impact from increased net income, improved EPS, and continued quarterly cash dividends ($0.15 per share). Stock repurchases ($5.6 million for 425,823 shares) also aim to enhance shareholder value. Potential negative impact from increased nonperforming loans and higher credit loss provisions.
• Employees: Benefit from the Employee Stock Ownership Plan (ESOP) and the 2020 Equity Incentive Plan (restricted stock awards and stock options). Compensation expense for 401(k) plan and ESOP.
• Customers (Depositors): Shift from transaction accounts to higher-yielding time deposits reflects customer demand for competitive rates. Uninsured deposits represent 23.5% of total deposits, which could be a concern in a volatile banking environment.
• Customers (Borrowers): Loan growth in commercial real estate, multi-family, and commercial and industrial loans indicates continued lending activity. Increased provision for credit losses and nonperforming loans suggest some borrowers are experiencing financial difficulty.
• Creditors (FHLB): FHLB advances decreased by $11.0 million, reflecting reduced liquidity needs, but the weighted-average interest rate on FHLB advances increased.
• Regulatory Authorities: First Bank Richmond's capital ratios exceed all regulatory requirements, maintaining 'well-capitalized' status. The company is adapting to new accounting standards post-EGC status.

Next Steps

• Continue to monitor borrowing needs and adjust FHLB advances to maintain liquidity and support lending activities.
• Management will continue to evaluate macroeconomic assumptions used in the allowance for credit losses model to ensure they reflect current and expected economic conditions.
• Future estimates for the allowance for credit losses are expected to fluctuate throughout the remainder of 2025.
• The company expects to continue its practice of paying regular quarterly cash dividends on common stock.
• The renegotiated core service provider agreement is expected to produce meaningful cost savings over its term.

Key Dates

Recommendation

The company demonstrated strong financial performance with significant increases in net income and net interest margin, indicating effective management of its core banking operations in a challenging interest rate environment. The capital position remains robust, exceeding regulatory requirements. However, the notable increase in nonperforming loans and the higher provision for credit losses, coupled with a cautious economic outlook, suggest potential headwinds. While the core business is performing well, these credit quality concerns warrant a 'hold' recommendation, advising investors to monitor the loan portfolio's performance and macroeconomic conditions closely before making further investment decisions.

Keywords

Banking, Financial Services, Commercial Banking, Community Banking, Loans, Deposits, Net Interest Income, Net Interest Margin, Credit Quality, Nonperforming Loans, Allowance for Credit Losses, Stockholders Equity, Capital Ratios, SEC Filing, 10-Q, Regional Bank, Indiana, Ohio, Mortgage-backed securities, FHLB advances, Wealth Management, Equipment Leasing