Richmond Mutual Bancorporation, Inc. — Q1 2024 Form 10-Q
Reporting period: Unaudited quarter ended March 31, 2024; income and cash flow comparisons are against Q1 2023. Balance-sheet comparisons are against December 31, 2023. The company operates First Bank Richmond, serving Indiana and Ohio, and provides banking, commercial and consumer lending, equipment leasing, and wealth management services.
Financial performance and position
| Metric | Q1 2024 / March 31, 2024 | Comparison |
|---|---|---|
| Total assets | $1.488 billion | Up 1.8% from year-end |
| Loans and leases, net | $1.123 billion | Up $33.1 million, or 3.0%, from year-end |
| Deposits | $1.070 billion | Up $28.5 million, or 2.7%, from year-end |
| FHLB advances | $273.0 million | Up $2.0 million from year-end |
| Stockholders’ equity | $132.4 million; 8.90% equity-to-assets | Down $2.5 million from year-end |
| Net interest income | $9.83 million | Down 0.4% from $9.87 million |
| Net interest margin | 2.74% | Down from 3.04% |
| Net income / diluted EPS | $2.37 million / $0.23 | Down from $2.90 million / $0.27 |
| Operating cash flow | $2.16 million provided | Versus $3.59 million provided |
- Income and expenses: Interest income rose 28.4% to $19.51 million, while interest expense rose 81.8% to $9.68 million. Noninterest income increased 2.9% to $1.13 million; noninterest expense increased 9.5% to $8.06 million. Pretax income was $2.72 million, versus $3.44 million.
- Drivers: Loan and lease income increased with higher average balances and yields. Higher deposit and FHLB funding costs outweighed asset-yield gains and reduced the net interest margin. Increased employee benefits, data-processing fees, and deposit-insurance expense contributed to higher operating costs.
- Credit: The allowance for loan and lease losses was $15.8 million, or 1.39% of loans and leases, versus 1.42% at year-end. Nonperforming loans and leases were $6.9 million, or 0.61% of the portfolio, versus $8.0 million, or 0.72%, at year-end. Q1 net charge-offs were $324,000, compared with net recoveries of $78,000 a year earlier.
- Cash flow and funding: Investing activities used $30.2 million, primarily reflecting loan growth; financing activities provided $28.1 million, primarily from deposit growth. Cash and cash equivalents ended the quarter at $20.3 million.
Material changes and liquidity
- Commercial, multifamily, residential mortgage, and commercial-and-industrial lending drove loan growth. Commercial lending categories represented 68.5% of the loan and lease portfolio.
- Brokered deposits rose to $291.3 million, or 27.2% of deposits, from $268.8 million, or 25.8%, at year-end. Estimated uninsured deposits were $206.9 million, or 19.3% of deposits, excluding collateralized public deposits. Noninterest-bearing deposits fell to 10.2% of deposits from 11.0%.
- Management reported $296.6 million of cash, cash equivalents, and available-for-sale securities; $91.3 million of remaining FHLB borrowing capacity; and $145.1 million of unpledged securities available to support additional funding. Certificates of deposit maturing within one year totaled $325.4 million.
- The Bank’s total risk-based capital ratio was 14.1%, above the 10.0% well-capitalized threshold; its Tier 1 leverage ratio was 10.7%. The Bank exceeded the required capital conservation buffer.
- Available-for-sale securities had $58.1 million of gross unrealized losses at quarter-end, versus $54.6 million at year-end. The company attributed the decline in value to interest rates, not credit quality, and said it did not expect to be required to sell securities before recovery of their amortized cost.
Outlook, risks, and other notable items
- The filing provides no specific earnings or margin guidance. Management said economic volatility could materially and unpredictably affect credit-loss estimates during the remainder of 2024.
- Management cited persistent inflation, elevated interest rates, geopolitical risk, modest economic growth, a weaker employment outlook, and potentially tighter market liquidity as relevant risks. It also highlighted commercial real estate conditions in its growth markets and the possibility of deposit outflows or higher funding costs.
- Management said it regularly stress-tests liquidity and credit exposures and was not aware of events likely to materially adversely affect liquidity, capital resources, or operations. It expects to continue quarterly cash dividends at the current $0.14 per share, subject to Board discretion.
- The company repurchased 92,613 shares for $1.1 million in Q1. It reported buying another 50,428 shares after quarter-end through May 14, when 724,995 shares remained available under the program. There were no new loan modifications to financially distressed borrowers in Q1 and no material pending legal proceedings reported.
Important facts for investors to verify
- Whether deposit pricing and funding mix continue to pressure net interest margin, especially given the increase in brokered deposits and the upcoming certificate maturities.
- Trends in uninsured deposits, available liquidity, and actual access to the stated FHLB and other borrowing capacity.
- Credit performance in commercial and multifamily real estate and other commercial lending, including delinquencies, nonperforming assets, net charge-offs, and allowance adequacy.
- How unrealized securities losses and interest-rate movements affect equity, funding flexibility, and the ability to avoid selling securities at a loss.
- Whether earnings, capital, and holding-company liquidity support planned dividends and continued share repurchases.