Interest income on investment securities, including FHLB stock, decreased $161,000, or 13.7%, to $1.0 million during the quarter ended September 30, 2020, compared to $1.2 million during the quarter ended June 30, 2020, and increased $155,000, or 18.0%, from $862,000 during the comparable quarter in 2019. The decrease in interest income on investment securities, including FHLB stock, from the previous quarter was due to a decrease in the weighted average yield, while the increase 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 $256.2 million for the quarter ended September 30, 2020, compared to $256.6 million and $166.3 million for the quarters ended June 30, 2020 and September 30, 2019, respectively. The average yield on investment securities, including FHLB stock, was 1.59% for the third quarter of 2020, compared to 1.84% and 2.07% for the previous quarter of 2020 and the third quarter of 2019, respectively. Interest income earned on cash and cash equivalents decreased to $9,000 in the third quarter of 2020 compared to $11,000 in the second quarter of 2020 and $627,000 in the comparable quarter of 2019. The decrease in interest income earned on cash and cash equivalents in the third quarter of 2020 compared to the comparable quarter of 2019 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, as well as a $61.5 million decline in the average balance of cash and cash equivalents outstanding during the comparable periods.

Interest expense decreased $166,000, or 6.7%, to $2.3 million for the quarter ended September 30, 2020, compared to $2.5 million the second quarter of 2020, and decreased $590,000, or 20.3%, from $2.9 million for the quarter ended September 30, 2019. Interest expense on deposits decreased $159,000, or 9.3%, to $1.5 million for the quarter ended September 30, 2020, from $1.7 million in the previous quarter and decreased $488,000, or 24.0%, from $2.0 million for the comparable quarter in 2019. This decrease in interest expense on deposits from the previous quarter was attributable to the lower weighted average rate paid on interest-bearing deposits and lower average deposit balances. The decrease in interest expense on deposits from the comparable quarter in 2019 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 1.04% for the quarter ended September 30, 2020, compared to 1.13% and 1.44% for the quarters ended June 30, 2020 and September 30, 2019, respectively. Interest expense on FHLB borrowings decreased $7,000, or 0.9%, to $763,000 for the third quarter of 2020 compared to $770,000 during the previous quarter and decreased $102,000, or 11.8%, from $865,000 for the comparable quarter in 2019. The average balance of FHLB borrowings totaled $180.9 million during the quarter ended September 30, 2020, compared to $181.8 million and $147.3 million for the quarters ended June 30, 2020 and September 30, 2019, respectively. The weighted average rate paid on FHLB borrowings was 1.69% for the quarters ended September 30, 2020 and June 30, 2020, and 2.35% for the comparable quarter in 2019.

Annualized net interest margin was 3.18% for the third quarter of 2020, compared to 3.03% and 3.31% for the second quarter of 2020 and third quarter of 2019, respectively. The increase in the net interest margin for the third quarter of 2020 compared to the second quarter was due to increased yields on loans and leases, and FHLB stock along with a seven basis point decline in the rate paid on interest bearing liabilities. The decline in the net interest margin for the current quarter compared to the comparable quarter in 2019 was due to yields earned on interest-earning assets declining at a faster rate than interest rates paid on interest-bearing liabilities.

The provision for loan and lease losses for both the three months ended September 30, 2020 and June 30, 2020 totaled $1.3 million, compared to $705,000 for the quarter ended September 30, 2019. The continued elevated level of provision for loan and lease losses 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 third quarter of 2020 were $12,000, compared to net charge-offs of $106,000 during the second quarter of 2020 and net charge-offs of $90,000 in the third 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.

Total noninterest income increased $73,000, or 3.5%, to $2.2 million for the quarter ended September 30, 2020 compared to $2.1 million for the quarter ended June 30, 2020, and increased $1.0 million, or 87.9%, from $1.1 million for the comparable quarter in 2019. The increase in noninterest income resulted primarily from the increase in the gain on sale of loans and leases, which increased $297,000, or 28.8%, to $1.3 million during the third quarter of 2020, compared to $1.0 million during the second quarter of 2020 and increased $1.1 million, or 473.4%, from $232,000 in the comparable period of 2019 as a result of increased mortgage banking activity during the current quarter due to lower rates. Loan and lease servicing income decreased $343,000 to a loss of $42,000 for the quarter ended September 30, 2020 compared to income of $301,000 for the quarter ended June 30, 2020 and decreased $110,000 from income of $68,000 for the comparable quarter in 2019. In the third quarter of 2020, the Company recorded a recovery to the value of its mortgage servicing rights of $6,000, compared to a $296,000 recovery recorded in the second quarter of 2020, and no impairment recovery or charge recorded in the third quarter of 2019. Other loan fees decreased $71,000, or 29.0%, to $174,000 in the third quarter of 2020 compared to the quarter ended June 30, 2020, and decreased $37,000, or 17.7%, over the comparable quarter in 2019. The decrease during the current quarter compared to the prior quarter was primarily due to letter of credit fees of $58,000 and interest rate modification fees of $76,000 that were earned in the second quarter of 2020. The decrease in the third quarter of 2020 compared to the third quarter of 2019 was attributable to increased loan processing fees of $80,000, or 96.3%, offset by decreased miscellaneous loan fees of $118,000, or 91.8%. Service fees on deposit accounts increased $45,000, or 42.6%, to $151,000 for the quarter ended September 30, 2020, compared to $106,000 for the second quarter of 2020, and decreased $145,000, or 49.1% from $296,000 for the quarter ended September 30, 2019. The increase in the third quarter of 2020 was the result of the Company re-instituting its overdraft fees effective September 1, 2020. The decrease in the third quarter of 2020 versus the comparable period in 2019 was the result of the Company’s waiving of overdraft fees for the first two months of the third quarter of 2020, and only re-instituting overdraft fees in September 2020.

Total noninterest expense increased $337,000, or 6.0%, to $6.0 million for the three months ended September 30, 2020 compared to $5.6 million for the second quarter of 2020, and decreased $6.5 million, or 52.1%, from $12.5 million for the same period in 2019. Salaries and employee benefits increased $377,000, or 11.5%, to $3.6 million for the quarter ended September 30, 2020, compared to $3.3 million in the second quarter of 2020, and decreased $193,000, or 5.0%, from $3.8 million for the quarter ended September 30, 2019. The increase from the second quarter of 2020 was primarily due to increases in retirement costs associated with administrative fees of the frozen defined benefit plan as well as Pension Benefit Guarantee Corporation fees, while the decrease from the comparable period in 2019 was primarily due to lower retirement costs in the third quarter of 2020 compared to the third quarter of 2019 as a result of the freezing of the Company’s defined benefit plan. Deposit insurance expense increased $20,000, or 33.3% to $80,000, in the third quarter of 2020 compared to the second quarter of 2020, and increased $56,000, or 233.6% compared to the third quarter of 2019 as a result of the Bank having previously utilized all of its remaining small bank credit awarded by the FDIC. Advertising expense declined $9,000 or 11.4%, in the third quarter of 2020 compared to the prior quarter, and $127,000 or 64.1% from the comparable quarter of 2019. This reflects a reduction of advertising occurring in 2020. The Company did not record any expense attributable to the First Bank Richmond Charitable Foundation (“Foundation”) in the third quarter of 2020. In the third quarter of 2019, the Company incurred a $6.3 million expense associated with the establishment and funding of the Foundation.

Income tax expense decreased $19,000 during the three months ended September 30, 2020, compared to the prior quarter despite slightly higher pre-tax income due to a lower effective federal tax rate compared to the prior quarter. Income tax expense increased $1.5 million during the three months ended September 30, 2020, compared to the same period in 2019, primarily due to a $7.3 million increase in pre-tax income. The effective tax rate for the third quarter of 2020 was 19.5% compared to 20.2% for the second quarter of 2020 and a 21.7% benefit for the same quarter a year ago.

About Richmond Mutual Bancorporation, Inc.

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

FORWARD-LOOKING STATEMENTS:

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

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: the effect of the COVID-19 pandemic, including on the Company’s credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties such as the extent and duration of the impact of the pandemic on public health, the U.S. and global economies, and on consumer and corporate customers, including economic activity, employment levels and market liquidity: legislative changes; changes in policies by regulatory agencies; fluctuations in interest rates; the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; the Company's ability to access cost-effective funding; fluctuations in real estate values and both residential and commercial real estate market conditions; demand for loans and deposits in the Company's market area; changes in management's business strategies; changes in the regulatory and tax environments in which the Company operates; and other factors set forth in the Company's filings with the SEC.

The factors listed above could materially affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not undertake - and specifically declines any obligation - to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. When considering forward-looking statements, keep in mind these risks and uncertainties. Undue reliance should not be placed on any forward-looking statement, which speaks only as of the date made. Refer to the Company's periodic and current reports filed with the SEC for specific risks that could cause actual results to be significantly different from those expressed or implied by any forward-looking statements.

Financial Highlights (unaudited)

(1)  Earnings (loss) per share for the three months ended September 30, 2019 is for the period from July 2, 2019 to September 30, 2019.

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

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

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

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

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

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

Contacts

Richmond Mutual Bancorporation, Inc.

Garry D. Kleer, Chairman, President and Chief Executive Officer

Donald A. Benziger, Exec. VP/Chief Financial Officer
(765) 962-2581