Richmond Mutual Bancorporation, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; comparative figures are for FY2020. The company is a bank holding company whose principal subsidiary, First Bank Richmond, operates in Indiana and Ohio. Results are primarily driven by net interest income.
Key financial and operating metrics
| Metric | FY2021 / Dec. 31, 2021 | FY2020 / Dec. 31, 2020 |
|---|---|---|
| Total assets | $1,267.6 million | $1,084.2 million |
| Gross loans and leases | $846.0 million | $746.3 million |
| Loans and leases, net | $832.8 million | $734.4 million |
| Deposits | $900.2 million | $693.0 million |
| FHLB advances | $180.0 million | $170.0 million |
| Stockholders’ equity | $180.5 million | $192.7 million |
| Net interest income | $38.2 million | $33.5 million |
| Net income | $11.1 million | $10.0 million |
| Basic / diluted EPS | $0.98 / $0.96 | $0.82 / $0.82 |
| Net interest margin | 3.34% | 3.28% |
| Return on average assets / equity | 0.94% / 6.03% | 0.95% / 5.21% |
Interest income rose 7.2% to $45.9 million, while interest expense fell 18.2% to $7.7 million. The provision for loan and lease losses declined to $1.4 million from $3.8 million. Non-interest income fell 20.4% to $5.4 million, while non-interest expense rose 19.3% to $28.6 million. The efficiency ratio increased to 65.70% from 59.91%.
Cash used in operating activities was $9.6 million, versus $16.6 million provided in 2020; investing activities used $212.2 million, and financing activities provided $196.1 million. Cash and cash equivalents declined $25.7 million to $23.0 million. Liquidity sources included $219.9 million of unencumbered securities and approximately $93.4 million of remaining FHLB borrowing capacity. The Bank reported a 17.3% total risk-based capital ratio and was categorized as well-capitalized.
Material changes versus FY2020
- Assets increased 16.9%; net loans and leases grew 13.4%, led by multi-family lending, up 91.8%, and construction and development lending, up 60.3%.
- Deposits rose 29.9%. Brokered deposits increased to $121.8 million, or 13.5% of deposits, from $23.3 million, or 3.4%.
- Net income increased 11.3%, supported by higher net interest income and a lower loan-loss provision, but partly offset by lower loan-sale gains and higher expenses.
- Non-performing loans and leases rose to $8.0 million, or 0.95% of gross loans and leases, from $4.8 million, or 0.64%. The increase was principally a $4.9 million non-accrual construction and development loan subject to litigation.
- Equity declined $12.2 million, reflecting $11.9 million of share repurchases, $9.3 million of dividends, and a $4.9 million after-tax decline in accumulated other comprehensive income, partly offset by net income.
Outlook, risks and unusual items
Management described a strategy of managed balance-sheet growth, expansion of commercial and multi-family lending (including development of the Columbus, Ohio market), and growth in core deposits. The filing provides no specific earnings, revenue, margin, or loan-growth guidance. Management expected to continue quarterly dividends at the then-current rate, subject to Board discretion and regulatory limits.
- Credit concentration and quality: Commercial real estate, multi-family, commercial and industrial, and construction lending are significant exposures; commercial loans were 66.4% of total loans and leases. Management noted that much of the commercial portfolio is relatively unseasoned. Hotels and restaurants were identified for close monitoring.
- Litigation-related loan: A $4.9 million non-accrual construction loan is in litigation. Management’s stated total non-performing assets were $8.1 million; the specific outcome and recoveries remain uncertain.
- Interest-rate risk: The filing’s model estimated year-one net interest income would decline 10.67% under an immediate +400-basis-point rate shock; estimated economic value of equity would decline 46.44%. These are model scenarios, not forecasts.
- Funding and liquidity: Deposit growth included a substantial increase in brokered deposits. The company warns that reduced funding access or deposit outflows could constrain growth and liquidity.
- COVID-19 and operations: Pandemic effects on borrowers remained uncertain; the Bank reported no COVID-modified loans outstanding at year-end. Cybersecurity, third-party vendor, operational, and local economic risks remain relevant.
- Accounting and securities: Management expects to adopt CECL in 2023 but had not quantified its impact. Available-for-sale securities had $4.5 million of gross unrealized losses; management considered the declines temporary and reported no securities deemed impaired.
- Unusual items: FY2021 included $665,000 of expense related to termination of the defined benefit plan. The multi-employer pension liability of $17.5 million reported at year-end 2020 was no longer on the 2021 balance sheet. Mortgage-servicing-right impairment also reduced servicing income.
Important facts for investors to verify
- Review the status, collateral value, legal proceedings, and allowance treatment for the $4.9 million non-accrual construction loan.
- Track commercial real estate and construction portfolio growth, delinquency trends, and allowance coverage as the loan portfolio seasons.
- Assess the cost, maturity, and concentration implications of brokered deposits and the Bank’s ability to maintain core deposits.
- Reconcile cash-flow trends and the defined benefit plan termination, including the timing and cash impact of pension-related payments.
- Monitor unrealized securities losses, capital and liquidity buffers, interest-rate sensitivity, and the eventual CECL adoption impact.
- Confirm future dividends and repurchases against earnings, capital needs, and regulatory restrictions.
Audit and controls: BKD, LLP issued an unqualified opinion on the consolidated financial statements. Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2021; the auditor did not provide an internal-control attestation.