UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~[X]~~

☒QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2019~~

~~[ ]~~2020

☐TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to ________

Commission file number: ~~333-230184~~

001-38956

RICHMOND MUTUAL BANCORPORATION, INC.

(Exact name of registrant as specified in its charter)

Maryland		36-4926041
(State or other jurisdiction of incorporation of organization)		(I.R.S. Employer Identification No.)

31 North 9th Street, Richmond, Indiana47374

(Address of principal executive offices; Zip Code)

~~(765)~~

(765) 962-2581

(Registrant's telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	RMBI	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 and 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]				Accelerated filer [ ]

Non-accelerated filer [X]				Smaller reporting company ~~[X]~~☒

Emerging growth company ~~[X]~~☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

~~[ ]~~

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ~~[ ]~~☐ No [X]

There were 13,526,625 shares of Registrant’s common stock, par value of $0.01 per share, issued and outstanding as of ~~November 14, 2019~~.

August 13, 2020.

RICHMOND MUTUAL BANCORPORATION, INC. AND SUBSIDIARY

10-Q

TABLE OF CONTENTS

			Page Number
PART I FINANCIAL INFORMATION			1

Item 1.	Financial Statements		1

		Condensed Consolidated Balance Sheets at ~~September~~June 30, ~~2019~~2020 (Unaudited) and December 31, ~~2018~~2019	1

		Condensed Consolidated Statements of ~~Operation~~Income (Unaudited) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	2

		Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	3

		Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	4

		Condensed Consolidated Statements of Cash Flows (Unaudited) for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	5

		Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		25 28

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		38 44

Item 4.	Controls and Procedures		38 45

PART II OTHER INFORMATION			39 46

Item 1.	Legal Proceedings		39 46

Item 1A.	Risk Factors		39 46

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		39 47

Item 3.	Defaults Upon Senior Securities		39 47

Item 4.	Mine Safety Disclosures		39 47

Item 5	Other Information		39 47

Item 6.	Exhibits		40 48

SIGNATURES			41 49

PART I. FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Balance Sheets

September 30, December 31,
Assets 2019 2018
(Unaudited)

Cash and due from banks $ 10,513,957 $ 10,112,422
Interest-bearing demand deposits 30,863,289 4,858,748
Cash and cash equivalents 41,377,246 14,971,170
Investment securities - available for sale 168,289,560 122,482,487
Investment securities - held to maturity 16,729,471 21,079,974
Loans and leases, net of allowance for losses of $6,896,000 and
     $5,600,000, respectively
694,744,985 654,755,066
Premises and equipment, net 14,014,239 14,025,476
Federal Home Loan Bank stock 7,600,400 6,560,600
Interest receivable 2,800,042 2,686,010
Mortgage-servicing rights 1,214,660 1,227,356
Cash surrender value of life insurance 3,809,526 3,718,219
Other assets 5,639,888 8,112,005

Total assets $ 956,220,017 $ 849,618,363

Liabilities
Non-interest bearing deposits $ 54,810,363 $ 58,044,369
Interest bearing deposits 552,997,714 562,592,451
Total deposits 607,808,077 620,636,820
Federal Home Loan Bank advances 141,000,000 136,100,000
Advances by borrowers for taxes and insurance 626,358 543,527
Interest payable 554,278 550,749
Other liabilities 5,877,399 5,934,235
Total liabilities 755,866,112 763,765,331

Commitments and Contingent Liabilities

Stockholders' Equity
Common stock, $.01 par value
     Authorized - 90,000,000 shares and 500 shares, respectively
     Issued and outstanding - 13,526,625 shares and 100
     shares, respectively
135,266 1
Additional paid-in capital 132,590,923 12,750,999
Retained earnings 82,652,959 77,480,318
Unearned employee stock ownership plan (ESOP) (14,584,215 ) -
Accumulated other comprehensive loss (441,028 ) (4,378,286 )
Total stockholders' equity 200,353,905 85,853,032

Total liabilities and stockholders' equity $ 956,220,017 $ 849,618,363

	June 30, 2020			December 31, 2019
	(Unaudited)

Assets
Cash and due from banks	$	30,817,153		$	9,088,398
Interest-bearing demand deposits	79,789,311			31,508,479
Cash and cash equivalents	110,606,464			40,596,877
Investment securities - available for sale	221,204,068			201,783,851
Investment securities - held to maturity	13,319,819			15,917,394
Loans and leases, net of allowance for losses of $8,521,000 and $7,089,000, respectively	752,922,965			687,258,190
Premises and equipment, net	14,439,763			14,087,169
Federal Home Loan Bank stock	9,079,700			7,600,400
Interest receivable	4,721,040			3,052,380
Mortgage-servicing rights	1,405,128			1,033,217
Cash surrender value of life insurance	3,899,832			3,839,911
Other assets	8,613,962			10,872,682

Total assets	$	1,140,212,741		$	986,042,071

Liabilities
Non-interest bearing deposits	$	89,921,951		$	60,297,443
Interest bearing deposits	649,209,179			556,921,370
Total deposits	739,131,130			617,218,813
Federal Home Loan Bank advances	180,000,000			154,000,000
Advances by borrowers for taxes and insurance	498,170			545,498
Interest payable	348,300			296,774
Multi-employer pension plan liability	17,454,709			17,454,709
Other liabilities	6,644,530			8,738,831
Total liabilities	944,076,839			798,254,625

Commitments and Contingent Liabilities	-			-

Stockholders' Equity
Common stock, $0.01 par value Authorized - 90,000,000 shares Issued and outstanding - 13,526,625 shares	135,266			135,266
Additional paid-in capital	132,563,670			132,601,876
Retained earnings	74,446,405			70,111,434
Unearned employee stock ownership plan (ESOP)	(14,032,728		)	(14,400,386)
Accumulated other comprehensive income (loss)	3,023,289			(660,744)
Total stockholders' equity	196,135,902			187,787,446

Total liabilities and stockholders' equity	$	1,140,212,741		$	986,042,071

See ~~accompanying notes.~~

Notes to Condensed Consolidated Statements.

Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Statements of ~~Operation~~

Income

(Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2020		2019			2020		2019

Interest Income
Loans and leases	$	9,308,495	$	9,163,223		$	18,372,062	$		17,929,352
Investment securities	1,178,483		956,816			2,441,420		1,898,477
Other	11,447		278,462			136,477		327,569
Total interest income	10,498,425		10,398,501			20,949,959		20,155,398

Interest Expense
Deposits	1,704,310		2,107,460			3,529,008		3,994,160
Borrowings	770,304		808,565			1,509,645		1,558,827
Total interest expense	2,474,614		2,916,025			5,038,653		5,552,987

Net Interest Income	8,023,811		7,482,476			15,911,306		14,602,411
Provision for losses on loans and leases	1,320,000		485,000			1,530,000		1,010,000

Net Interest Income After Provision for Losses on Loans and Leases	6,703,811		6,997,476			14,381,306		13,592,411

Non-Interest Income
Service charges on deposit accounts	105,618		251,795			360,269		483,444
Card fee income	201,748		185,903			381,355		352,489
Loan and lease servicing fees	301,230		98,931			235,538		212,203
Net gains on securities (includes $9,874, $36,426, $79,013 and $61,232, respectively, related to accumulated other comprehensive loss reclassifications)	9,874		36,426			79,013		61,232
Net gains on loan and lease sales	1,030,668		123,573			1,258,876		210,798
Other loan fees	244,702		88,394			327,576		243,034
Other income	188,797		114,883			393,078		241,160
Total non-interest income	2,082,637		899,905			3,035,705		1,804,360

Non-Interest Expenses
Salaries and employee benefits	3,270,311		5,316,221			6,633,996		8,791,954
Net occupancy expenses	284,981		256,564			574,990		549,945
Equipment expenses	280,855		233,500			536,703		475,645
Data processing fees	472,071		423,974			948,874		838,166
Deposit insurance expense	60,000		158,000			116,000		293,000
Printing and office supplies	32,097		27,262			58,640		69,020
Legal and professional fees	326,815		208,975			568,181		505,754
Advertising expense	80,256		173,259			189,813		296,676
Bank service charges	28,465		32,593			65,820		64,269
Real estate owned expense	989		22,573			3,166		37,393
Loss on sale of real estate owned	-		6,493			-		6,493
Other expenses	810,857		744,542			1,475,131		1,480,682
Total non- interest expenses	5,647,697		7,603,956			11,171,314		13,408,997

Income Before Income Tax Expense (Benefit)	3,138,751		293,425			6,245,697		1,987,774
Provision (benefit) for income taxes (includes $2,503, $9,520, $20,026 and $16,003, respectively, related to income tax expense from reclassification of items)	632,574		(41,700		)	1,287,374		280,400

Net Income	$	2,506,177	$ 335,125			$ 4,958,323		$	1,707,374

Earnings Per Share
Basic	$	0.20	N/A			$ 0.40		N/A
Diluted	$	0.20	N/A			$ 0.40		N/A

See Notes to Condensed Consolidated Statements.

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Interest Income
    Loans and leases $ 9,318,054 $ 8,067,685 $ 27,247,406 $ 23,047,744
    Investment securities 862,331 876,642 2,760,808 2,572,381
    Other 626,705 27,120 954,274 109,412
        Total interest income 10,807,090 8,971,447 30,962,488 25,729,537

Interest Expense
    Deposits 2,033,000 1,474,865 6,027,160 3,984,264
    Borrowings 864,957 556,553 2,423,784 1,443,803
        Total interest expense 2,897,957 2,031,418 8,450,944 5,428,067

Net Interest Income 7,909,133 6,940,029 22,511,544 20,301,470
    Provision for losses on loans and leases 705,000 450,000 1,715,000 1,350,000

Net Interest Income After Provision for Losses
     on Loans and Leases

7,204,133 6,490,029 20,796,544 18,951,470

Other Income
    Service charges on deposit accounts 295,703 284,501 779,147 810,475
    Card fee income 189,583 168,769 542,072 504,811
    Loan and lease servicing fees 68,079 81,203 280,282 225,369
    Net gains on securities (includes $21,827
       and $0, $83,059 and $11,952, related to
       accumulated other comprehensive loss
       reclassifications)
21,827 - 83,059 11,952
    Net gains on loan and lease sales 231,534 154,686 442,332 355,102
    Other loan fees 211,249 103,302 454,283 333,597
    Other income 129,121 213,806 370,281 505,420
        Total other income 1,147,096 1,006,267 2,951,456 2,746,726

Other Expenses
    Salaries and employee benefits 3,840,806 3,417,559 12,632,760 10,269,584
    Net occupancy expenses 275,535 256,422 825,480 812,066
    Equipment expenses 250,173 224,790 725,818 681,412
    Data processing fees 442,082 344,741 1,280,248 1,089,534
    Deposit insurance expense 23,983 172,000 316,983 434,000
    Printing and office supplies 45,099 28,265 114,119 106,744
    Legal and professional fees 310,561 146,800 816,315 428,617
    Advertising expense 197,799 122,807 494,475 358,375
    Bank service charges 29,383 28,569 93,652 80,504
    Real estate owned expense 7,481 10,297 44,874 29,015
    Loss on sale of real estate owned 5,287 3,650 11,780 3,650
    Donation to establish First Bank
        Richmond Charitable Foundation
6,250,000 - 6,250,000 -
    Loan tax and insurance expense 81,061 5,980 130,788 103,010
    Other expenses 740,514 719,627 2,171,469 2,072,981
        Total other expenses 12,499,764 5,481,507 25,908,761 16,469,492

Income Before Income Tax Expense (Benefit) (4,148,535 ) 2,014,789 (2,160,761 ) 5,228,704
    Provision (benefit) for income taxes (includes $5,661
        and $0, $21,543 and $3,124, related to
        income tax expense from reclassification
        of items)
(898,200 ) 394,700 (617,800 ) 1,021,300

Net Income (Loss) $ (3,250,335 ) $ 1,620,089 $ (1,542,961 ) $ 4,207,404

Earnings (Loss) Per Share
    Basic (for period July 2, 2019 to
        September 30, 2019)
$ (0.26 ) N/A $ (0.26 ) N/A
    Diluted (for period July 2, 2019 to
        September 30, 2019)
$ (0.26 ) N/A $ (0.26 ) N/A

~~See accompanying notes.~~

Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019

Net Income	$	2,506,177	$	335,125	$	4,958,323	$	1,707,374

Other Comprehensive Income
Unrealized gain on available-for-sale securities, net of tax expense of $312,821, $559,911, $1,270,737 and $1,237,814, respectively.	921,429		1,582,470		3,743,020		3,498,417
Less: reclassification adjustment for realized gains included in net income, net of tax expense of $2,503, $9,520, $20,026 and $16,003, respectively.	7,371		26,906		58,987		45,229
	914,058		1,555,564		3,684,033		3,453,188

Comprehensive Income	$	3,420,235	$	1,890,689	$	8,642,356	$	5,160,562

See Notes to Condensed Consolidated Statements.

Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018

Net Income (Loss) $ (3,250,335 ) $ 1,620,089 $ (1,542,961 ) $ 4,207,404

Other Comprehensive Income (Loss)
    Unrealized gain (loss) on available-for-sale securities,
        net of tax expense (benefit) of $175,173 and ($187,520),
        $1,400,357 and ($1,039,305).
500,236 (529,985 ) 3,998,774 (2,937,374 )
    Less: reclassification adjustment for realized gains included
        in net income, net of tax expense of $5,661 and $0, $21,544
        and $3,124.
16,166 - 61,516 8,828
484,070 (529,985 ) 3,937,258 (2,946,202 )

Comprehensive Income (Loss) $ (2,766,265 ) $ 1,090,104 $ 2,394,297 $ 1,261,202

~~See accompanying notes.~~

Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

													Accumulated
	Common Stock			Additional						Unearned			Other
	Shares			Paid-in			Retained			ESOP			Comprehensive
	Outstanding	Amount		Capital			Earnings			Shares			Income/(Loss)		Total

Balances, March 31, 2020	13,526,625	$	135,266	$	132,604,734		$	72,563,580		$	(14,216,557	)	$	2,109,231	$	193,196,254
Net income	-	-		-			2,506,177			-			-		2,506,177
Other comprehensive income	-	-		-			-			-			914,058		914,058
ESOP shares earned	-	-		(41,064		)	-			183,829			-		142,765
Common stock dividends ($0.05 per share)	-	-		-			(623,352		)	-			-		(623,352		)

Balances, June 30, 2020	13,526,625	$	135,266	$	132,563,670		$	74,446,405		$	(14,032,728	)	$	3,023,289	$	196,135,902

													Accumulated
	Common Stock			Additional						Unearned			Other
	Shares			Paid-in			Retained			ESOP			Comprehensive
	Outstanding	Amount		Capital			Earnings			Shares			Income/(Loss)			Total

Balances, December 31, 2019	13,526,625	$	135,266	$	132,601,876		$	70,111,434		$	(14,400,386	)	$	(660,744	)	$	187,787,446
Net income	-	-		-			4,958,323			-			-			4,958,323
Other comprehensive income	-	-		-			-			-			3,684,033			3,684,033
ESOP shares earned	-	-		(38,206		)	-			367,658			-			329,452
Common stock dividends ($0.05 per share)	-	-		-			(623,352		)	-			-			(623,352		)

Balances, June 30, 2020	13,526,625	$	135,266	$	132,563,670		$	74,446,405		$	(14,032,728	)	$	3,023,289		$	196,135,902

										Accumulated
	Common Stock			Additional				Unearned		Other
	Shares			Paid-in		Retained		ESOP		Comprehensive
	Outstanding	Amount		Capital		Earnings		Shares		Income/(Loss)			Total

Balances, March 31, 2019	100	$	1	$	12,750,999	$	78,852,567	$	-	$	(2,480,662	)	$	89,122,905
Net income	-	-		-		335,125		-		-			335,125
Other comprehensive income	-	-		-		-		-		1,555,564			1,555,564

Balances, June 30, 2019	100	$	1	$	12,750,999	$	79,187,692	$	-	$	(925,098	)	$	91,013,594

										Accumulated
	Common Stock			Additional				Unearned		Other
	Shares			Paid-in		Retained		ESOP		Comprehensive
	Outstanding	Amount		Capital		Earnings		Shares		Income/(Loss)			Total

Balances, December 31, 2018	100	$	1	$	12,750,999	$	77,480,318	$	-	$	(4,378,286	)	$	85,853,032
Net income	-	-		-		1,707,374		-		-			1,707,374
Other comprehensive income	-	-		-		-		-		3,453,188			3,453,188

Balances, June 30, 2019	100	$	1	$	12,750,999	$	79,187,692	$	-	$	(925,098	)	$	91,013,594

See Notes to Condensed Consolidated Statements.

Accumulated
Preferred Stock Common Stock Additional Unearned Other
Shares Shares Paid-in Retained ESOP Comprehensive
Outstanding Amount Outstanding Amount Capital Earnings Shares Loss Total

Balances, June 30, 2019 - $ - 100 $ 1 $ 12,750,999 $ 79,187,692 $ - $ (925,098 ) $ 91,013,594
    Net loss
- - - - - (3,250,335 ) - - (3,250,335 )
    Other comprehensive income - - - - - - - 484,070 484,070
    ESOP shares earned - - - - (751 ) - 122,100 - 121,349
    Issuance of common stock,
        net of offering costs
- - 13,026,625 130,266 127,596,674 - (14,706,315 ) - 113,020,625
    Stock contributed to
        charitble foundation
- - 500,000 5,000 4,995,000 - - - 5,000,000
    Reorganization of Richmond
        Mutual Bancorporation
- - (100 ) (1 ) (12,750,999 ) 6,715,602 - - (6,035,398 )

Balances, September 30, 2019 - $ - 13,526,625 $ 135,266 $ 132,590,923 $ 82,652,959 $ (14,584,215 ) $ (441,028 ) $ 200,353,905

Accumulated
Preferred Stock Common Stock Additional Unearned Other
Shares Shares Paid-in Retained ESOP Comprehensive
Outstanding Amount Outstanding Amount Capital Earnings Shares Loss Total

Balances, December 31, 2018 - $ - 100 $ 1 $ 12,750,999 $ 77,480,318 $ - $ (4,378,286 ) $ 85,853,032
    Net loss - - - - - (1,542,961 ) - - (1,542,961 )
    Other comprehensive income - - - - - - - 3,937,258 3,937,258
    ESOP shares earned - - - - (751 ) - 122,100 - 121,349
    Issuance of common stock,
        net of offering costs
- - 13,026,625 130,266 127,596,674 - (14,706,315 ) - 113,020,625
    Stock contributed to
       charitble foundation
- - 500,000 5,000 4,995,000 - - - 5,000,000
    Reorganization of Richmond
        Mutual Bancorporation
- - (100 ) (1 ) (12,750,999 ) 6,715,602 - - (6,035,398 )

Balances, September 30, 2019 - $ - 13,526,625 $ 135,266 $ 132,590,923 $ 82,652,959 $ (14,584,215 ) $ (441,028 ) $ 200,353,905

~~See accompanying notes.~~

Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended September 30,
2019 2018
Operating Activities
    Net income (loss)
$ (1,542,961 ) $ 4,207,404
    Items not requiring (providing) cash
        Provision for loan losses 1,715,000 1,350,000
        Depreciation and amortization 681,666 673,750
        Deferred income tax (792,858 ) (894,493 )
        Investment securities (accretion) amortization, net 678,412 679,567
        Investment securities gains (83,059 ) (11,952 )
        Gain on sale of loans and leases held for sale (442,332 ) (355,102 )
        Loss on sale of real estate owned 11,780 3,650
        Accretion of loan origination fees (141,547 ) (141,348 )
        Amortization of mortgage-servicing rights 144,522 181,201
        Common stock contributed to Foundation 5,000,000 -
        ESOP shares expense 121,349 -
        Increase in cash surrender value of life insurance (91,306 ) (90,224 )
    Loans originated for sale (17,573,565 ) (16,630,173 )
    Proceeds on loans sold 18,314,415 16,513,423
    Net change in
        Interest receivable (114,032 ) (266,667 )
        Other assets (173,475 )
2,412,544
        Other liabilities 1,203,832

(1,219,402 )
        Interest payable 3,529 267,610
            Net cash provided by operating activities 6,919,370 6,679,788

Investing Activities
    Net change in interest-bearing time deposits - 200,000
    Purchases of securities available for sale (109,895,626 ) (15,784,501 )
    Proceeds from maturities and paydowns of securities available for sale 11,047,791 7,826,755
    Proceeds from sales of securities available for sale 57,703,608 1,507,529
    Proceeds from maturities and paydowns of securities held to maturity 4,314,977 2,874,972
    Net change in loans (42,036,916 ) (67,271,809 )
    Proceeds from sales of real estate owned 95,644 30,550
    Purchases of premises and equipment (670,429 ) (1,015,326 )
    Purchase of FHLB stock (1,039,800 ) -
            Net cash used in investing activities (80,480,751 ) (71,631,830 )

Financing Activities
    Net change in
        Demand and savings deposits 8,739,009 (2,018,056 )
        Certificates of deposit (21,567,752 ) 34,428,965
        Advances by borrowers for taxes and insurance 82,831 42,313
    Proceeds from FHLB advances 71,000,000 255,400,000
    Repayment of FHLB advances (66,100,000 ) (228,900,000 )
    Repayment of other borrowings
(5,207,256 ) -
    Proceeds from stock conversion 113,020,625 -
    Dividends paid - (500,000 )
            Net cash provided by financing activities 99,967,457 58,453,222

Net Change in Cash and Cash Equivalents 26,406,076 (6,498,820 )

Cash and Cash Equivalents, Beginning of Period 14,971,170 16,169,754

Cash and Cash Equivalents, End of Period $ 41,377,246 $ 9,670,934

Additional Cash Flows and Supplementary Information
    Interest paid $ 8,447,415 $ 5,160,457
    Transfers from loans to other real estate owned 5,400 71,458

	Six Months Ended June 30,
	2020			2019

Operating Activities
Net income	$	4,958,323		$	1,707,374
Items not requiring (providing) cash
Provision for loan losses	1,530,000			1,010,000
Depreciation and amortization	484,092			458,622
Deferred income tax	357,938			(779,000		)
Investment securities (accretion) amortization, net	1,133,521			375,216
Investment securities gains	(79,013		)	(61,232		)
Gain on sale of loans and leases held for sale	(1,258,876		)	(210,798		)
Loss on sale of real estate owned	-			6,493
Accretion of loan origination fees	(447,817		)	(88,088		)
Amortization of mortgage-servicing rights	167,578			74,407
ESOP shares expense	329,452			-
Increase in cash surrender value of life insurance	(59,921		)	(60,211		)
Loans originated for sale	(45,705,608		)	(7,564,068		)
Proceeds on loans sold	49,041,089			8,057,168
Net change in
Interest receivable	(1,668,660		)	(247,254		)
Other assets	715,669			1,616,150
Other liabilities	(2,094,301		)	21,335
Interest payable	51,526			202,352
Net cash provided by operating activities	7,454,992			4,518,466

Investing Activities
Purchases of securities available for sale	(82,597,349		)	(35,162,200		)
Proceeds from maturities and paydowns of securities available for sale	44,676,712			5,041,948
Proceeds from sales of securities available for sale	22,177,542			22,456,675
Proceeds from maturities and paydowns of securities held to maturity	2,585,037			1,445,000
Net change in loans	(69,212,998		)	(37,636,795		)
Purchases of premises and equipment	(836,686		)	(373,266		)
Purchase of FHLB stock	(1,479,300		)	(949,800		)
Net cash used in investing activities	(84,687,042		)	(45,089,657		)

Financing Activities
Net change in
Demand and savings deposits	60,126,140			202,452,437
Certificates of deposit	61,786,177			4,539,605
Advances by borrowers for taxes and insurance	(47,328		)	28,283
Proceeds from FHLB advances	40,000,000			57,000,000
Repayment of FHLB advances	(14,000,000		)	(36,000,000		)
Dividends paid	(623,352		)	—
Net cash provided by financing activities	147,241,637			228,020,325

Net Change in Cash and Cash Equivalents	70,009,587			187,449,134

Cash and Cash Equivalents, Beginning of Period	40,596,877			14,971,170

Cash and Cash Equivalents, End of Period	$	110,606,464		$	202,420,304

Additional Cash Flows and Supplementary Information
Interest paid	$	4,987,127		$	5,350,635
Transfers from loans to other real estate owned	31,548			5,400

See ~~accompanying notes.~~

Notes to Condensed Consolidated Statements.

Richmond Mutual Bancorporation, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Table Dollar Amounts in Thousands)

Note 1: Basis of Presentation

~~In 1998, First Bank Richmond's mutual predecessor reorganized into the~~

On July 1, 2019, Richmond Mutual Bancorporation, Inc., a Delaware corporation (“RMB-Delaware”), completed its reorganization from a mutual holding company form of organization ~~by forming First Mutual~~to a stock form of ~~Richmond, Inc. ("First Mutual of Richmond-MHC"~~organization (“corporate reorganization”)~~, a mutual holding company that had no stockholders and was controlled by its members. First Mutual of Richmond-MHC~~. RMB-Delaware, which owned 100% of ~~the outstanding shares of common stock of Richmond Mutual Bancorporation-Delaware ("RMB-Delaware"). RMB-Delaware owned 100% of the outstanding shares of common stock of First Bank Richmond.~~

On July 1, 2019, pursuant to the terms of our plan of reorganization and stock offering, First Mutual of Richmond-MHC converted from a mutual holding company to the stock holding company corporate structure. Upon the completion of the transaction, First Mutual of Richmond-MHC and RMB-Delaware ceased to exist, and First Bank Richmond ~~became a wholly-owned subsidiary of~~(the “Bank”), was succeeded by Richmond Mutual Bancorporation, Inc., a ~~newly formed~~new Maryland corporation ~~(the "Company"~~(“the Company”).

~~The~~ As part of the corporate reorganization, of First Mutual of ~~Richmond-MHC to a stock holding company and dissolution of First Mutual of Richmond-MHC~~Richmond, Inc.’s (“MHC”) ownership interest in RMB-Delaware was treated as a transfer as assets and liabilities under common control and accounted for prospectively on July 1, 2019, the date of reorganization and stock offering, resulting in the acquisition of First Bank Richmond by the Company and the dissolution of RMB-Delaware. The net assets and liabilities transferred of $6,035,398 resultedsold in a ~~deemed distribution as part of the reorganization which is included in the condensed consolidated statement of changes in stockholders' equity for the three and nine months ended September 30, 2019.~~

Simultaneously with the reorganization and stock offering, the common stock and additional paid in capital of RMB-Delaware totaling $12,751,000 was reclassified to retained earnings. The dissolution of First Mutual of Richmond-MHC included a repayment of trust preferred securities of $5,207,000 using the netpublic offering. Gross proceeds from the ~~stock~~ offering which is included in the financing activities of the condensed consolidated statement of cash flows for the nine months ended September 30, 2019. All of the outstanding common stock of First Bank Richmond is owned by Richmond Mutual Bancorporation-Maryland, and all of the outstanding common stock of Richmond Mutual Bancorporation-Maryland is owned by public shareholders.

~~The costs of corporate reorganization and the issuance of common stock have been deducted from the sales proceeds of the offering.~~

were $130.3 million. In conjunction with the corporate reorganization, the Company contributed 500,000 shares and $1.25 million of cash to a newly formed charitable foundation, First Bank Richmond, Inc. Community Foundation (the ~~"Foundation"~~“Foundation”).

Additionally, a “liquidation account” was established for the benefit of certain depositors of the Bank in an amount equal to MHC’s ownership interest in the retained earnings of RMB-Delaware as of December 31, 2017 and March 31, 2019.

The costs of the corporate reorganization and the issuance of the common stock have been deducted from the sales proceeds of the offering.

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include information or note disclosures necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for ~~RMB-Delaware’s~~ year ended December 31, ~~2018 included in the prospectus~~2019 filed with the Securities and Exchange Commission (“SEC”) ~~pursuant to Rule 424(b) of the Securities Act of 1933, as amended,~~ on ~~May 16, 2019~~March 30, 2020 (SEC File No. ~~333-230184)~~001-38956). However, in the opinion of management, all adjustments which are necessary for a fair presentation of the consolidated financial statements have been included. Those adjustments consist only of normal recurring adjustments.

The interim consolidated financial statements at September 30, 2019 and for the three and nine months ended September 30, 2019 and 2018, have not been audited by independent accountants, but in the opinion of management, reflect all adjustments necessary to present fairly the financial position, results of operations and cash flows for such periods. The results of operations for the period are not necessarily indicative of the results to be expected for the full year.

~~The Consolidated Balance Sheet of RMB-Delaware as of December 31, 2018 has been derived from the audited Consolidated Balance Sheet of RMB-Delaware as of that date.~~

In certain circumstances, where appropriate, the terms “we”, “us” and “our” refer collectively to (i) RMB-Delaware and First Bank Richmond with respect to discussions in this document involving matters occurring prior to completion of the corporate reorganization and (ii) the Company and First Bank Richmond with respect to discussions in this document involving matters ~~to occur~~occurring post-corporate reorganization, in each case unless the context indicates another meaning.

Loans

For all loan classes, the accrual of interest is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Past due status is based on contractual terms of the loan. For all loan classes, the entire balance of the loan is considered past due if the minimum payment contractually required to be paid is not received by the contractual due date. For all loan classes, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

The Company charges off residential and consumer loans, or portions thereof, when the Company reasonably determines the amount of the loss. The Company adheres to timeframes established by applicable regulatory guidance, which provides for the charge-down of 1-4 family first and junior lien mortgages to the net realizable value, less costs to sell when the loan is 120 days past due, charge-off of unsecured open-end loans when the loan is 90 days past due, and charge down to the net realizable value when other secured loans are 90 days past due. Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.

For all classes, all interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

When cash payments are received on impaired loans in each loan class, the Company records the payment as interest income unless collection of the remaining recorded principal amount is doubtful, at which time payments are used to reduce the principal balance of the loan. Troubled debt restructured loans recognize interest income on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms, no principal reduction has been granted and the loan has demonstrated the ability to perform in accordance with the renegotiated terms for a period of at least six months.

Note 2: Accounting Pronouncements

~~Richmond Mutual Bancorporation - Maryland~~

The JOBS Act, which was enacted in April 2012, has made numerous changes to the federal securities laws to facilitate access to capital markets. Under the JOBS Act, a company with total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year qualifies as an “emerging growth company.” The Company qualifies as and has elected to be an emerging growth company under the JOBS Act. An emerging growth company may elect to comply with new or amended accounting pronouncements in the same manner as a private company, but must make such election when the company is first required to file a registration statement. Such an election is irrevocable during the period a company is an emerging growth ~~company and as such will be subject~~company. The Company has elected to ~~the effective dates noted for the private companies if they differ from the effective dates noted for public companies.~~

~~Revenue Recognition — Accounting Standards Codification 606, “Revenue from Contracts~~comply with ~~Customers” (ASC 606) provides that an entity should recognize revenue to depict the transfer of promised goods~~new or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance enumerates five steps that entities should follow in achieving this core principle. Revenue generated from financial instruments, including loans and investment securities, are not includedamended accounting pronouncements in the ~~scope of ASC 606. The Company elected early adoption of ASC 606 in 2018. The adoption of ASC 606 did not result in~~same manner as a change to the accounting of any of the Company’s revenue streams that are within the scope of the amendments. Revenue-gathering activities that are within the scope of ASC 606 and that are presented as non-interest income in the Company’s consolidated statements of income include:

- Service charges on deposit accounts – these include general service fees charged for deposit account maintenance and activity and transaction-based fees charged for certain services, such as debit card, wire transfer and overdraft activities. Revenue is recognized when the performance obligation is completed, which is generally after a transaction is completed or monthly for account maintenance services.

- Card fee income – this includes debit card fees charged based on the volume and number of debit card transactions. Revenue is recognized when the performance obligation is completed, which is generally after a transaction is completed or monthly for account maintenance services.

private company.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326). The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better ~~form~~inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. In May 2019, the FASB issued ASU No. 2019-05, ~~“Financial~~“Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief” ~~(ASU~~(ASU 2019-05). This ASU provides transition relief for entities adopting the FASB’s credit losses standard, ASU 2016-13 and allows companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option for certain financial instruments. In April 2019, the FASB issued ASU No. 2019-04, ~~“Codification~~“Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” (ASU 2019-04). This ASU clarifies certain aspects of accounting for credit losses, hedging activities, and financial instruments. ~~The amendments in these ASUs are~~In October 2019, the FASB voted to extend the implementation of ASU No. 2016-13 for certain financial institutions including smaller reporting companies. As a result, ASU 2016-13 will be effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2022, assuming the adoption of an ASU implementing the FASB board decision in October 2019 extending the adoption date for certain registrants, including the Company, with early adoption permitted.~~2022. The Company is evaluating its current expected loss methodology on the loan and investment portfolios to identify the necessary modifications in accordance with this standard. The Company has not quantified the impact of these ASUs.

The Company is in the early stages of evaluating its historical data available for use in adoption of the new credit loss standards. Additionally, we are forming an implementation team that will meet on a regular basis to coordinate efforts of our accounting, credit and operations areas. We will continue to evaluate methodologies available to us under the new standard.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of reference Rate Reform on Financial Reporting. This ASU applies to contracts, hedging relationships and other transactions that reference LIBOR or other rate references expected to be discontinued because of reference rate reform. The ASU permits an entity to make necessary modifications to eligible contracts or transactions without requiring contract remeasurement or reassessment of a previous accounting determination. This ASU is effective for all entities as of March 12, 2020 through December 31, 2022. The Company does not expect the adoption of ASU 2020-04 to have a material impact on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes . ASU 2019-12 provides that state franchise or similar taxes that are based, at least in part on an entity’s income, be included in an entity’s income tax recognized as income-based taxes. The ASU further clarifies that the effect of any change in tax laws or rates used in the computation of the annual effective tax rate are required to be reflected in the first interim period that includes the enactment date of the legislation. Technical changes to eliminate exceptions to Topic 740 related to intra-period tax allocations for entities with losses from continuing operations, deferred tax liabilities related to change in ownership of foreign entities, and interim-period tax allocations for businesses with losses where the losses are expected to be realized. The amendments in ASU 2019-12 are effective for public business entities with fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company does not expect ASU 2019-12 to have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This ASU contains some technical adjustments related to the fair value disclosure requirements of public companies. Included in this ASU is the additional disclosure requirement of unrealized gains and losses for the period in recurring level 3 fair value disclosures and the range and weighted average of significant unobservable inputs, among other technical changes. The Company adopted ASU 2018-13 on January 1, 2020. The adoption of ASU 2018-13 did not have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB has issued ASU No. 2016-02, Leases ~~(Topic~~(Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases, with the exception of short-term leases, at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. For the Company, the amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, ~~2019.~~2020. Based on leases outstanding as of December 31, ~~2018,~~2019, the new standard will not have a material impact on the Company’s balance sheet or income statement.

We will begin evaluating the current leases and their respective lease term and conditions to quantify the potential impact to our financial statements upon adoption. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), Targeted Improvements,, which provide entities with an additional (and optional) transition method to adopt the new lease standard. Under this new transition method, an entity initially applies the new lease standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new ~~leases~~lease standard will continue to be in accordance with current GAAP (Topic 842, Leases). The amendments in ASU 2018-11 also provide lessors with a practical expedient, by class of underlying asset, to not separate ~~nonlease~~non-lease components from the associated lease component and, instead, to account for those components as a single component if the ~~nonlease~~non-lease components otherwise would be accounted for under the new revenue guidance (Topic 606) and certain criteria are met.

Note 3: Investment Securities

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows:

	June 30, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Available for sale
SBA Pools	$	22,911	$	75	$	215	$	22,771
Federal agencies	7,511		14		6		7,519
State and municipal obligations	60,681		1,642		126		62,197
Mortgage-backed securities -
government-sponsored enterprises
(GSE) residential	126,261		2,471		28		128,704
Equity securities	13		-		-		13
	217,377		4,202		375		221,204
Held to maturity
State and municipal obligations	13,320		344		-		13,664
	13,320		344		-		13,664

Total investment securities	$	230,697	$	4,546	$	375	$	234,868

	December 31, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Available for sale
U.S. Treasury securities	$	2,997	$	-	$	6	$	2,991
SBA Pools	14,497		-		114		14,383
Federal agencies	21,765		-		119		21,646
State and municipal obligations	45,635		357		152		45,840
Mortgage-backed securities -
government-sponsored enterprises
(GSE) residential	117,769		111		969		116,911
Equity securities	13		-		-		13
	202,676		468		1,360		201,784
Held to maturity
State and municipal obligations	15,917		244		5		16,156
	15,917		-		5		16,156

Total investment securities	$	218,593	$	712	$	1,365	$	217,940

September 30, 2019
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available for sale
    U.S. treasury securities $ 5,000 $ 3 $ 8 $ 4,995
    SBA Pools 11,975 - 79 11,896
    Federal agencies 26,193 - 64 26,129
    State and municipal obligations 33,654 339 102 33,891
    Mortgage-backed securities - government-
        sponsored enterprises (GSE) residential
92,050 141 825 91,366
    Equity securities 13 - - 13
168,885 483 1,078 168,290
Held to maturity
    State and municipal obligations 16,729 236 8 16,957
16,729 236 8 16,957

        Total investment securities $ 185,614 $ 719 $ 1,086 $ 185,247

December 31, 2018
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available for sale
    Federal agencies $ 40,812 $ - $ 2,802 $ 38,010
    State and municipal obligations 30,531 34 776 29,789
    Mortgage-backed securities - government-
        sponsored enterprises GSE residential
56,945 11 2,286 54,670
    Equity securities 13 - - 13
128,301 45 5,864 122,482
Held to maturity
    State and municipal obligations 18,580 70 107 18,543
    Corporate obligations 2,500 2,610 - 5,110
21,080 2,680 107 23,653

        Total investment securities $ 149,381 $ 2,725 $ 5,971 $ 146,135

The amortized cost and fair value of securities at ~~September~~June 30, ~~2019,~~2020, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Available for Sale Held to Maturity
Amortized Fair Amortized Fair
Cost Value Cost Value

Within one year $ 308 $ 309 $ 3,214 $ 3,218
One to five years 17,785 17,807 8,587 8,678
Five to ten years 35,995 35,953 3,589 3,676
After ten years 22,734 22,842 1,339 1,385
76,822 76,911 16,729 16,957
Mortgage-backed securities -
GSE residential
92,050 91,366 - -
Equity securities 13 13 - -

Totals $ 168,885 $ 168,290 $ 16,729 $ 16,957

	Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value

Within one year	$	443	$	444	$	2,858	$	2,875
One to five years	6,005		6,175		7,233		7,424
Five to ten years	27,793		28,115		2,169		2,283
After ten years	56,862		57,753		1,060		1,082
	91,103		92,487		13,320		13,664
Mortgage-backed securities -
GSE residential	126,261		128,704		-		-
Equity securities	13		13		-		-

Totals	$	217,377	$	221,204	$	13,320	$	13,664

Securities with a carrying value of ~~$69,475,000~~$119,773,000 and ~~$86,267,000~~$114,907,000 were pledged at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, to secure certain deposits and for other purposes as permitted or required by law.

Proceeds from sales of securities available for sale for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 were ~~$35,246,933~~$10,716,000 and ~~$57,703,608,~~$22,178,000, respectively. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, proceeds from sales of securities ~~available for sale~~ were $0$10,989,000 and ~~$1,507,529,~~$22,457,000 respectively. Gross gains were recognized on the sale of securities ~~available for sale~~available-for-sale for the three and ~~nine~~six months ended ~~September~~June 30, 2020 and 2019 of ~~$104,000~~$66,000, $136,000, $37,000 and ~~$170,000, respectively. Gross gains were recognized on the sale of securities available for sale for the three and nine months ended September 30, 2018 of $0 and $12,000,~~$62,000, respectively. Gross losses were recognized on the sale of securities available for sale for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 of ~~$82,000 and $87,000, respectively.~~$56,000. There were no gross losses realized from sales of securities available for sale for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018.~~

2019.

Certain investments in debt securities, as reflected in the table below, are reported in the condensed consolidated financial statements and notes at an amount less than their historical cost. Total fair value of these investments at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 was ~~$109,059,000~~$40,703,000 and ~~$126,736,000,~~$138,391,000, respectively, which is approximately ~~58%~~17% and ~~88%, respectively,~~63% of the Company’s aggregated available-for-sale and held-to-maturity investment ~~portfolio.~~portfolio at those dates, respectively. These declines primarily resulted from changes in market interest rates since their purchase.

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary.

Should the impairment of any other securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

The following tables show the Company’s investments by gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018:~~

September 30, 2019
Less Than 12 Months 12 Months or More Total
Description of Fair Unrealized Fair Unrealized Fair Unrealized
Securities Value Losses Value Losses Value Losses

Available-for-sale
    U.S. treasury securities $ 3,002 $ 8 $ - $ - $ 3,002 $ 8
    SBA Pools 11,820 79 - - 11,820 79
    Federal agencies 5,948 45 2,980 19 8,928 64
    State and municipal obligations 3,264 22 8,642 80 11,906 102
    Mortgage-backed securities -
        GSE residential
31,644 173 39,517 652 71,161 825
            Total available-for-sale 55,678 327 51,139 751 106,817 1,078

Held-to-maturity
    State and municipal obligations 664 7 1,578 1 2,242 8

    Total temporarily
         impaired securities
$ 56,342 $ 334 $ 52,717 $ 752 $ 109,059 $ 1,086

December 31, 2018
Less Than 12 Months 12 Months or More Total
Description of Fair Unrealized Fair Unrealized Fair Unrealized
Securities Value Losses Value Losses Value Losses

Available-for-sale
    Federal agencies $ - $ - $ 38,010 $ 2,802 $ 38,010 $ 2,802
    State and municipal obligations 4,516 26 21,529 750 26,045 776
    Mortgage-backed securities -
        GSE residential
5,872 30 45,676 2,256 51,548 2,286
            Total available-for-sale 10,388 56 105,215 5,808 115,603 5,864

Held-to-maturity
    State and municipal obligations 3,271 11 7,862 96 11,133 107

        Total temporarily
             impaired securities
$ 13,659 $ 67 $ 113,077 $ 5,904 $ 126,736 $ 5,971

2019:

	June 30, 2020
	Less Than 12 Months				12 Months or More				Total
Description of	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Securities	Value		Losses		Value		Losses		Value		Losses

Available-for-sale
SBA Pools	$	19,099	$	215	$	-	$	-	$	19,099	$	215
Federal agencies	4,240		6		-		-		4,240		6
State and municipal obligations	8,932		126		-		-		8,932		126
Mortgage-backed securities -
GSE residential	6,874		25		1,478		3		8,352		28
Total available-for-sale	39,145		372		1,478		3		40,623		375

Held-to-maturity
State and municipal obligations	80		-		-		-		80		-

Total temporarily
impaired securities	$	39,225	$	372	$	1,478	$	3	$	40,703	$	375

	December 31, 2019
	Less Than 12 Months				12 Months or More				Total
Description of	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Securities	Value		Losses		Value		Losses		Value		Losses

Available-for-sale
U.S. Treasury securities	$	2,991	$	6	$	-	$	-	$	2,991	$	6
SBA Pools	14,262		114		-		-		14,262		114
Federal agencies	9,657		109		2,990		10		12,647		119
State and municipal obligations	12,606		130		2,948		22		15,554		152
Mortgage-backed securities -
GSE residential	57,928		464		34,344		505		92,272		969
Total available-for-sale	97,444		823		40,282		537		137,726		1,360

Held-to-maturity
State and municipal obligations	665		5		-		-		665		5

Total temporarily
impaired securities	$	98,109	$	828	$	40,282	$	537	$	138,391	$	1,365

Federal ~~Agencies and U.S. Treasury Securities.~~ Agencies. The unrealized losses on the Company’s investments in direct obligations of U.S. federal agencies ~~and treasury securities~~ were caused by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at ~~September~~June 30, ~~2019.~~

~~SBA Pools and~~ 2020.

Mortgage-Backed Securities -– GSE ~~Residential.~~ Residential and SBA Pools. The unrealized losses on the Company’s investment in mortgage-backed securities and SBA pools ~~and mortgage-backed securities~~ were caused by interest rate changes and illiquidity. The Company expects to recover the amortized cost basis over the term of the securities. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at ~~September~~June 30, ~~2019.~~

2020.

State and Municipal Obligations. The unrealized losses on the Company’s investments in securities of state and municipal obligations were caused by interest rate changes and illiquidity. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at ~~September~~June 30, ~~2019.~~

2020.

Note 4: Loans, Leases and Allowance

Categories of loans at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 include:

	June 30,		December 31,
	2020		2019

Commercial mortgage	$	242,036	$	229,410
Commercial and industrial	141,184		84,549
Construction and development	62,372		53,426
Multi-family	58,709		66,002
Residential mortgage	126,146		131,294
Home equity	6,522		6,996
Direct financing leases	114,352		109,592
Consumer	12,550		13,534
	763,871		694,803
Less
Allowance for loan and lease losses	8,521		7,089
Deferred loan fees	2,427		456

	$	752,923	$	687,258

September 30, December 31,
2019 2018

Commercial mortgage $ 233,643 $ 211,237
Commercial and industrial 81,109 71,854
Construction and development 55,362 72,955
Multi-family 70,613 43,816
Residential mortgage 132,628 132,492
Home equity 7,385 7,214
Direct financing leases 107,349 107,735
Consumer 14,009 13,520
702,098 660,823
Less
Allowance for loan and lease losses 6,896 5,600
Deferred loan fees 457 468

$ 694,745 $ 654,755

The following tables present the activity in the allowance for loan and lease losses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~

2019.

			Commercial
	Commercial		and			Residential
	Mortgage (1)		Industrial			Mortgage (2)			Leases			Consumer			Total

Three Months Ended June 30, 2020:
Balance, beginning of period	$	4,668	$	1,772		$	148		$	583		$	135		$	7,306
Provision (credit) for losses	844		(94		)	172			378			20			1,320
Charge-offs	-		-			(20		)	(134		)	(16		)	(170		)
Recoveries	5		32			8			11			9			65

Balance, end of period	$	5,517	$	1,710		$	308		$	838		$	148		$	8,521

Six Months Ended June 30, 2020:
Balance, beginning of period	$	4,564	$	1,852		$	109		$	426		$	138		$	7,089
Provision (credit) for losses	917		(182		)	210			569			16			1,530
Charge-offs	-		-			(35		)	(190		)	(21		)	(246		)
Recoveries	36		40			24			33			15			148

Balance, end of period	$	5,517	$	1,710		$	308		$	838		$	148		$	8,521

(1) Commercial mortgage includes commercial and multifamily real estate loans.

(2) Residential mortgage includes one- to four-family and home equity loans.

			Commercial
	Commercial		and			Residential
	Mortgage (1)		Industrial			Mortgage (2)			Leases			Consumer			Total

Three Months Ended June 30, 2019:
Balance, beginning of period	$	3,420	$	1,790		$	117		$	392		$	117		$	5,836
Provision (credit) for losses	466		(26		)	30			12			3			485
Charge-offs	-		-			(34		)	(95		)	(15		)	(144		)
Recoveries	6		4			9			76			9			104

Balance, end of period	$	3,892	$	1,768		$	122		$	385		$	114		$	6,281

Six Months Ended June 30, 2019:
Balance, beginning of period	$	3,147	$	1,817		$	139		$	389		$	108		$	5,600
Provision (credit) for losses	735		195			(7		)	50			37			1,010
Charge-offs	-		(250		)	(36		)	(177		)	(49		)	(512		)
Recoveries	10		6			26			123			18			183

Balance, end of period	$	3,892	$	1,768		$	122		$	385		$	114		$	6,281

(1) Commercial mortgage includes commercial and multifamily real estate loans.

(2) Residential mortgage includes one- to four-family and home equity loans

Commercial
Commercial and Residential
Mortgage Industrial Mortgage Leases Consumer Total

Three Months Ended September 30, 2019:
    Balance, beginning of period $ 3,892 $ 1,768 $ 122 $ 385 $ 114 $ 6,281
        Provision (credit) for losses 586 11 (34 ) 71 71 705
        Charge-offs (14 ) - (6 ) (107 ) (51 ) (178 )
        Recoveries 4 2 22 54 6 88

    Balance, end of period $ 4,468 $ 1,781 $ 104 $ 403 $ 140 $ 6,896

Nine Months Ended September 30, 2019:
    Balance, beginning of period $ 3,147 $ 1,817 $ 139 $ 389 $ 108 $ 5,600
        Provision (credit) for losses 1,321 206 (41 ) 121 108 1,715
        Charge-offs (14 ) (250 ) (42 ) (284 ) (100 ) (690 )
        Recoveries 14 8 48 177 24 271

    Balance, end of period $ 4,468 $ 1,781 $ 104 $ 403 $ 140 $ 6,896

Commercial
Commercial and Residential
Mortgage Industrial Mortgage Leases Consumer Total

Three Months Ended September 30, 2018:
    Balance, beginning of period $ 3,157 $ 1,854 $ 173 $ 344 $ 105 $ 5,633
        Provision (credit) for losses (231 ) 594 (27 ) 106 8 450
        Charge-offs - (400 ) (40 ) (122 ) (9 ) (571 )
        Recoveries 22 5 43 41 5 116

    Balance, end of period $ 2,948 $ 2,053 $ 149 $ 369 $ 109 $ 5,628

Nine Months Ended September 30, 2018:
    Balance, beginning of period $ 2,424 $ 1,663 $ 257 $ 337 $ 119 $ 4,800
        Provision (credit) for losses 496 815 (146 ) 181 4 1,350
        Charge-offs (7 ) (447 ) (89 ) (316 ) (39 ) (898 )
        Recoveries 35 22 127 167 25 376

    Balance, end of period $ 2,948 $ 2,053 $ 149 $ 369 $ 109 $ 5,628

The following tables present the balance in the allowance for loan and lease losses and the recorded investment in loans and leases based on portfolio segment and impairment method as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018:~~2019:

	June 30, 2020
			Commercial
	Commercial		and		Residential
	Mortgage (1)		Industrial		Mortgage (2)		Leases		Consumer		Total

Allowance for loan and lease losses:
Individually evaluated for impairment	$	1	$	201	$	-	$	-	$	-	$	202
Collectively evaluated for impairment	5,516		1,509		308		838		148		8,319

Balance, June 30	$	5,517	$	1,710	$	308	$	838	$	148	$	8,521

Loans and leases:
Individually evaluated for impairment	$	698	$	617	$	225	$	-	$	-	$	1,540
Collectively evaluated for impairment	392,835		131,344		107,114		114,352		16,686		762,331
Ending balance: June 30	$	393,533	$	131,961	$	107,339	$	114,352	$	16,686	$	763,871

(1) Commercial mortgage includes commercial and multifamily real estate loans.

(2) Residential mortgage includes one- to four-family and home equity loans

September 30, 2019
Commercial
Commercial and Residential
Mortgage Industrial Mortgage Leases Consumer Total

Allowance for loan losses:
    Individually evaluated for impairment $ 300 $ 142 $ - $ - $ - $ 442
    Collectively evaluated for impairment 4,168 1,639 104 403 140 6,454

  Balance, September 30 $ 4,468 $ 1,781 $ 104 $ 403 $ 140 $ 6,896

Loans:
    Individually evaluated for impairment $ 675 $ 847 $ 356 $ - $ - $ 1,878
    Collectively evaluated for impairment 383,946 74,028 116,347 107,349 18,550 700,220
    Ending balance: September 30 $ 384,621 $ 74,875 $ 116,703 $ 107,349 $ 18,550 $ 702,098

	December 31, 2019
			Commercial
	Commercial		and		Residential
	Mortgage (1)		Industrial		Mortgage (2)		Leases		Consumer		Total

Allowance for loan and lease losses:
Individually evaluated for impairment	$	-	$	202	$	-	$	-	$	-	$	202
Collectively evaluated for impairment	4,564		1,650		109		426		138		6,887

Balance, December 31	$	4,564	$	1,852	$	109	$	426	$	138	$	7,089

Loans and leases:
Individually evaluated for impairment	$	803	$	694	$	347	$	-	$	-	$	1,844
Collectively evaluated for impairment	377,494		73,920		114,061		109,592		17,892		692,959
Ending balance: December 31	$	378,297	$	74,614	$	114,408	$	109,592	$	17,892	$	694,803

December 31, 2018
Commercial
Commercial and Residential
Mortgage Industrial Mortgage Leases Consumer Total

Allowance for loan losses:
    Individually evaluated for impairment $ 300 $ 394 $ - $ - $ - $ 694
    Collectively evaluated for impairment 2,847 1,423 139 389 108 4,906

    Balance, December 31 $ 3,147 $ 1,817 $ 139 $ 389 $ 108 $ 5,600

Loans:
    Individually evaluated for impairment $ 743 $ 1,177 $ 389 $ - $ - $ 2,309
    Collectively evaluated for impairment 358,593 58,203 117,258 107,735 16,725 658,514
    Ending balance: December 31 $ 359,336 $ 59,380 $ 117,647 $ 107,735 $ 16,725 $ 660,823

(1) Commercial mortgage includes commercial and multifamily real estate loans.

(2) Residential mortgage includes one- to four-family and home equity loans.

The Company rates all loans by credit quality using the following designations:

Grade 1 -– Exceptional

Exceptional loans are top-quality loans to individuals whose financial credentials are well known to the Company. These loans have excellent sources of repayment, are well documented and/or virtually free of risk (i.e., CD secured loans).

Grade 2 -– Quality Loans

These loans have excellent sources of repayment with no identifiable risk of collection, and they conform in all respects to Company policy and Indiana Department of Financial Institutions (“IDFI”) and Federal Deposit Insurance Corporation (“FDIC”) regulations. Documentation exceptions are minimal or are in the process of being corrected and are not of a type that could subsequently expose the Company to risk of loss.

Grade 3 -– Acceptable Loans

This category is for “average” quality loans. These loans have adequate sources of repayment with little identifiable risk of collection and they conform to Company policy and IDFI/FDIC regulations.

Grade 4 -– Acceptable but Monitored

Loans in this category may have a greater than average risk due to financial weakness or uncertainty but do not appear to require classification as special mention or substandard loans. Loans rated “4” need to be monitored on a regular basis to ascertain that the reasons for placing them in this category do not advance or worsen.

Grade 5 -– Special Mention

Loans in this category have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Company’s credit position at some future date. Special Mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. This special mention rating is designed to identify a specific level of risk and concern about an asset’s quality. Although a special mention loan has a higher probability of default than a pass rated loan, its default is not imminent.

Grade 6 -– Substandard

Loans in this category are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Substandard loans have a high probability of payment default, or they have other well-defined weaknesses. Such loans have a distinct potential for loss; however, an individual loan’s potential for loss does not have to be distinct for the loan to be rated substandard.

The following are examples of situations that might cause a loan to be graded a “6”:

·Cash flow deficiencies (losses) jeopardize future loan payments.

·Sale of ~~noncollateral~~non-collateral assets has become a primary source of loan repayment.

·The relationship has deteriorated to the point that sale of collateral is now the Company’s primary source of repayment, unless this was the original source of loan repayment.

·The borrower is bankrupt or for any other reason future repayment is dependent on court action.

Grade 7 -– Doubtful

A loan classified as doubtful has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current existing facts, conditions, and values, highly questionable and improbable. A doubtful loan has a high probability of total or substantial loss. Doubtful borrowers are usually in default, lack adequate liquidity or capital, and lack the resources necessary to remain an operating entity. Because of high probability of loss, nonaccrual accounting treatment will be required for doubtful loans.

Grade 8 -– Loss

Loans classified loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan even though partial recovery may be ~~affected~~effected in the future.

The risk characteristics of each loan portfolio segment are as follows:

Commercial and Industrial

Commercial and industrial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may include a personal guarantee. Short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial Mortgage including Construction

Loans in this segment include commercial loans, commercial construction loans, and multi-family loans. This segment also includes loans secured by 1-4 family residences which were made for investment purposes. Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The characteristics of properties securing the Company’s commercial real estate portfolio are diverse, but with geographic location almost entirely in the Company’s market area. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. In general, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate versus nonowner-occupied loans.

Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews and financial analysis of the developers and property owners. Construction loans are generally based on estimates of costs and value associated with the complete project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan

commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

Residential, Brokered and Consumer

Residential, brokered and consumer loans consist of three segments -– residential mortgage loans, brokered mortgage loans and personal loans. For residential mortgage loans that are secured by 1-4 family residences and are generally owner-occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Brokered mortgages are purchased residential mortgage loans meeting the ~~Company's~~Company’s criteria established for originating residential mortgage loans. Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer personal loans are secured by consumer personal assets, such as automobiles or recreational vehicles. Some consumer personal loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Leases

Lease financing consists of direct financing leases and are used by commercial customers to finance capital purchases of equipment. The credit decisions for these transactions are based upon an assessment of the overall financial capacity of the applicant. A determination is made as to the applicant’s financial condition and ability to repay in accordance with the proposed terms as well as an overall assessment of the risks involved.

The following tables present the credit risk profile of the Company’s loan and lease portfolio based on rating category and payment activity as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018:~~2019:

	June 30, 2020
			Commercial		Construction
	Commercial		and		and		Multi-		Residential		Home
	Mortgage		Industrial		Development		Family		Mortgage		Equity		Leases		Consumer		Total

1-4 Pass	$	233,028	$	134,189	$	62,372	$	58,709	$	123,225	$	6,370	$	114,190	$	12,533	$	744,616
5 Special Mention	7,432		4,171		-		-		176		64		-		-		11,843
6 Substandard	1,576		2,824		-		-		2,745		88		59		17		7,309
7 Doubtful	-		-		-		-		-		-		103		-		103
8 Loss	-		-		-		-		-		-		-		-		-

	$	242,036	$	141,184	$	62,372	$	58,709	$	126,146	$	6,522	$	114,352	$	12,550	$	763,871

	December 31, 2019
			Commercial		Construction
	Commercial		and		and		Multi-		Residential		Home
	Mortgage		Industrial		Development		Family		Mortgage		Equity		Leases		Consumer		Total

1-4 Pass	$	220,240	$	75,814	$	53,426	$	66,002	$	127,888	$	6,871	$	109,424	$	13,519	$	673,184
5 Special Mention	7,489		5,731		-		-		189		64		-		-		13,473
6 Substandard	1,681		3,004		-		-		3,217		61		94		15		8,072
7 Doubtful	-		-		-		-		-		-		74		-		74
8 Loss	-		-		-		-		-		-		-		-		-

	$	229,410	$	84,549	$	53,426	$	66,002	$	131,294	$	6,996	$	109,592	$	13,534	$	694,803

   September 30, 2019
Commercial Construction
   Commercial and and Multi- Residential Home
   Mortgage Industrial Development Family Mortgage Equity Leases Consumer Total

1-4 Pass $ 224,089 $ 71,696 $ 55,362 $ 70,613 $ 129,555 $ 7,259 $ 107,182 $ 13,991 $ 679,747
5 Special Mention 8,008 6,269 - - 195 64 - - 14,536
6 Substandard 1,546 3,144 - - 2,878 62 65 18 7,713
7 Doubtful - - - - - - 102 - 102
8 Loss - - - - - - - - -

   $ 233,643 $ 81,109 $ 55,362 $ 70,613 $ 132,628 $ 7,385 $ 107,349 $ 14,009 $ 702,098

   December 31, 2018
Commercial Construction
   Commercial and and Multi- Residential Home
   Mortgage Industrial Development Family Mortgage Equity Leases Consumer Total

1-4 Pass $ 210,158 $ 68,568 $ 72,955 $ 40,890 $ 128,665 $ 7,059 $ 107,382 $ 13,467 $ 649,144
5 Special Mention 492 35 - 2,926 264 65 - - 3,782
6 Substandard 587 3,251 - - 3,563 90 151 53 7,695
7 Doubtful - - - - - - 202 - 202
8 Loss - - - - - - - - -

   $ 211,237 $ 71,854 $ 72,955 $ 43,816 $ 132,492 $ 7,214 $ 107,735 $ 13,520 $ 660,823

The following tables present the Company’s loan and lease portfolio aging analysis of the recorded investment in loans and leases as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018:~~

September 30, 2019
Delinquent Loans Total Total Loans
30-59 Days 60-89 Days 90 Days and Total Past Portfolio > 90 Days
Past Due Past Due Over Due Current Loans Accruing

Commercial mortgage $ 155 $ 321 $ 184 $ 660 $ 232,983 $ 233,643 $ -
Commercial and industrial 557 - 787 1,344 79,765 81,109 -
Construction and development - 232 - 232 55,130 55,362 -
Multi-family - - - - 70,613 70,613 -
Residential mortgage 617 622 2,388 3,627 129,001 132,628 2,151
Home equity 67 - 15 82 7,303 7,385 15
Leases 10 54 8 72 107,277 107,349 -
Consumer 66 22 18 106 13,903 14,009 18

Totals $ 1,472 $ 1,251 $ 3,400 $ 6,123 $ 695,975 $ 702,098 $ 2,184

December 31, 2018
Delinquent Loans Total Total Loans
30-59 Days 60-89 Days 90 Days and Total Past Portfolio > 90 Days
Past Due Past Due Over Due Current Loans Accruing

Commercial mortgage $ - $ 412 $ 78 $ 490 $ 210,747 $ 211,237 $ -
Commercial and industrial 321 328 1,243 1,892 69,962 71,854 130
Construction and development - - - - 72,955 72,955 -
Multi-family 1,684 - - 1,684 42,132 43,816 -
Residential mortgage 1,147 807 2,193 4,147 128,345 132,492 1,913
Home equity 99 - 15 114 7,100 7,214 15
Leases 110 89 - 199 107,536 107,735 -
Consumer 67 24 38 129 13,391 13,520 38

Totals $ 3,428 $ 1,660 $ 3,567 $ 8,655 $ 652,168 $ 660,823 $ 2,096

2019:

	June 30, 2020
	Delinquent Loans										Total		Total Loans
	30-59 Days Past Due		60-89 Days Past Due		90 Days and Over		Total Past Due		Current		Portfolio Loans and Leases		and Leases > 90 Days Accruing

Commercial mortgage	$	-	$	-	$	76	$	76	$	241,960	$	242,036	$	-
Commercial and industrial	-		-		467		467		140,717		141,184		55
Construction and development	40		1,586		-		1,626		60,746		62,372		-
Multi-family	-		-		1,047		1,047		57,662		58,709		1,047
Residential mortgage	567		507		2,261		3,335		122,811		126,146		2,133
Home equity	-		43		45		88		6,434		6,522		45
Leases	22		115		4		141		114,211		114,352		4
Consumer	174		11		17		202		12,348		12,550		17

Totals	$	803	$	2,262	$	3,917	$	6,982	$	756,889	$	763,871	$	3,301

	December 31, 2019
	Delinquent Loans										Total		Total Loans
	30-59 Days Past Due		60-89 Days Past Due		90 Days and Over		Total Past Due		Current		Portfolio Loans and Leases		and Leases > 90 Days Accruing

Commercial mortgage	$	217	$	-	$	184	$	401	$	229,009	$	229,410	$	-
Commercial and industrial	220		1,092		438		1,750		82,799		84,549		3
Construction and development	-		257		249		506		52,920		53,426		249
Multi-family	-		-		-		-		66,002		66,002		-
Residential mortgage	762		240		2,452		3,454		127,840		131,294		2,256
Home equity	189		36		15		240		6,756		6,996		15
Leases	108		29		79		216		109,376		109,592		49
Consumer	271		35		15		321		13,213		13,534		15

Totals	$	1,767	$	1,689	$	3,432	$	6,888	$	687,915	$	694,803	$	2,587

The following tables present the Company’s impaired loans and specific valuation allowance at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018:~~

2019:

	June 30, 2020
			Unpaid
	Recorded		Principal		Specific
	Balance		Balance		Allowance

Loans without a specific
valuation allowance
Commercial mortgage	$	218	$	258	$	-
Commercial and industrial	412		738		-
Residential mortgage	225		440		-

	$	855	$	1,436	$	-

Loans with a specific
valuation allowance
Commercial mortgage	$	480	$	480	$	1
Commercial and industrial		205		214		201

	$	685	$	694	$	202

Total impaired loans
Commercial mortgage	$	698	$	738	$	1
Commercial and industrial	617		952		201
Residential mortgage	225		440		-

Total impaired loans	$	1,540	$	2,130	$	202

September 30, 2019
Unpaid
Recorded Principal Specific
Balance Balance Allowance
Loans without a specific
    valuation allowance
    Commercial mortgage $ 353 $ 426 $ -
    Commercial and industrial 654 2,437 -
    Residential mortgage 356 617 -

$ 1,363 $ 3,480 $ -

Loans with a specific
    valuation allowance
    Commercial mortgage $ 322 $ 377 $ 300
    Commercial and industrial 193 859 142

$ 515 $ 1,236 $ 442

Total impaired loans
    Commercial mortgage $ 675 $ 803 $ 300
    Commercial and industrial 847 3,296 142
    Residential mortgage 356 617 -

        Total impaired loans $ 1,878 $ 4,716 $ 442

December 31, 2018
Unpaid
Recorded Principal Specific
Balance Balance Allowance
Loans without a specific
    valuation allowance
    Commercial mortgage $ 397 $ 453 $ -
    Commercial and industrial 485 829 -
    Residential mortgage 389 688 -

$ 1,271 $ 1,970 $ -

Loans with a specific
    valuation allowance
    Commercial mortgage $ 346 $ 387 $ 300
    Commercial and industrial 692 2,495 394

$ 1,038 $ 2,882 $ 694

Total impaired loans
    Commercial mortgage $ 743 $ 840 $ 300
    Commercial and industrial 1,177 3,324 394
    Residential mortgage 389 688 -

        Total impaired loans $ 2,309 $ 4,852 $ 694

	December 31, 2019
			Unpaid
	Recorded		Principal		Specific
	Balance		Balance		Allowance

Loans without a specific
valuation allowance
Commercial mortgage	$	803	$	1,256	$	-
Commercial and industrial	435		3,220		-
Residential mortgage	347		614		-

	$	1,585	$	5,090	$	-

Loans with a specific
valuation allowance
Commercial and industrial	$	259	$	266	$	202

	$	259	$	266	$	202

Total impaired loans
Commercial mortgage	$	803	$	1,256	$	-
Commercial and industrial	694		3,486		202
Residential mortgage	347		614		-

Total impaired loans	$	1,844	$	5,356	$	202

The following tables present the Company’s average investment in impaired loans and interest income recognized for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~

2019.

	Average
	Investment in		Interest
	Impaired		Income
	Loans		Recognized

Three Months Ended June 30, 2020:
Total impaired loans
Commercial mortgage	$	745	$	11
Commercial and industrial	645		14
Residential mortgage	265		1

Total impaired loans	$	1,655	$	26

	Average
	Investment in		Interest
	Impaired		Income
	Loans		Recognized

Six Months Ended June 30, 2020:
Total impaired loans
Commercial mortgage	$	765	$	18
Commercial and industrial	661		28
Residential mortgage	292		6

Total impaired loans	$	1,718	$	52

Average
Investment in Interest
Impaired Income
Loans Recognized
Three Months Ended September 30, 2019:
    Total impaired loans
        Commercial mortgage $ 684 $ 10
        Commercial and industrial 858 11
        Residential mortgage 363 6

            Total impaired loans $ 1,905 $ 27

Nine Months Ended September 30, 2019:
    Total impaired loans
        Commercial mortgage $ 706 $ 32
        Commercial and industrial 950 51
        Residential mortgage 375 14

            Total impaired loans $ 2,031 $ 97

Average
Investment in Interest
Impaired Income
Loans Recognized
Three Months Ended September 30, 2018:
    Total impaired loans
        Commercial mortgage $ 397 $ 13
        Commercial and industrial 2,345 26
        Residential mortgage 324 2

            Total impaired loans $ 3,066 $ 41

Nine Months Ended September 30, 2018:
    Total impaired loans
        Commercial mortgage $ 395 $ 25
        Commercial and industrial 2,472 54
        Residential mortgage 329 10

            Total impaired loans $ 3,196 $ 89

	Average
	Investment in		Interest
	Impaired		Income
	Loans		Recognized

Three Months Ended June 30, 2019:
Total impaired loans
Commercial mortgage	$	703	$	7
Commercial and industrial	889		30
Residential mortgage	377		4

Total impaired loans	$	1,969	$	41

	Average
	Investment in		Interest
	Impaired		Income
	Loans		Recognized

Six Months Ended June 30, 2019:
Total impaired loans
Commercial mortgage	$	716	$	22
Commercial and industrial	985		40
Residential mortgage	381		8

Total impaired loans	$	2,082	$	70

The following table presents the Company’s nonaccrual loans and leases at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018:~~

September 30, December 31,
2019 2018

Commercial mortgage $ 674 $ 743
Commercial and industrial 848 1,177
Residential mortgage 324 357
Leases 102 202

$ 1,948 $ 2,479

2019:

	June 30,		December 31,
	2020		2019

Commercial mortgage	$	218	$	342
Commercial and industrial	468		494
Residential mortgage	225		315
Leases	103		74

	$	1,014	$	1,225

During the ~~nine~~three and six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, there were no newly classified troubled debt restructured ~~loans.~~

~~At September~~loans or leases (“TDRs”). For the three and six months ended June 30, 2020 and 2019, the Company recorded no charge-offs related to TDRs. As of both June 30, 2020 and December 31, ~~2018,~~2019, TDRs had a related allowance of $52,000. During the three and six months ended June 30, 2020, there were no TDRs for which there was a payment default within the first 12 months of the modification.

The Coronavirus Aid, Relief, and Economic Security Act of 2020 ("CARES Act") provided guidance around the modification of loans as a result of the COVID-19 pandemic, which outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs. This includes short-term (e.g. six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers are considered current under the CARES Act if they are less than 30 days past due on their contractual payments at the time a modification program is implemented.

In March 2020, the Company began offering short-term loan modifications to assist borrowers during the COVID-19 pandemic. As of June 30, 2020, the Company had approved 752 loan and lease modifications related to the COVID-19 pandemic with an outstanding loan balance totaling $175.1 million in accordance with the CARES Act. Accordingly, the Company does not account for such loan modifications as TDRs. Loan modifications in accordance with the CARES Act and related regulatory guidance are still subject to an evaluation in regard to determining whether or not a loan is deemed to be impaired.

At June 30, 2020 and December 31, 2019, the balance of real estate owned includes ~~$109,000~~$32,000 and ~~$176,000,~~$0, respectively, of foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property. At ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds were in process was ~~$251,000~~$283,000 and ~~$342,000,~~$190,000, respectively.

The following lists the components of the net investment in direct financing leases:

September 30, December 31,
2019 2018

Total minimum lease payments to be received $ 118,269 $ 118,752
Initial direct costs 5,314 5,459
123,583 124,211
Less: Unearned income (16,234 ) (16,476 )

Net investment in direct financing leases $ 107,349 $ 107,735

	June 30,			December 31,
	2020			2019

Total minimum lease payments to be received	$	127,851		$	120,570
Initial direct costs	4,425			5,720
	132,276			126,290
Less: Unearned income	(17,924		)	(16,698		)

Net investment in direct finance leases	$	114,352		$	109,592

The amount of leases serviced by First Bank Richmond for the benefit of others was approximately ~~$1.5 million~~$336,000 and ~~$2.8 million~~$715,000 at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. Additionally, certain leases have been sold with partial recourse. First Bank Richmond estimates and records its obligation based upon historical loss percentages. At ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, First Bank Richmond has recorded a recourse obligation on leases sold with recourse of $0, and has a maximum exposure of ~~$851,000 and $875,000, respectively,~~$411,000 for these leases.

The following table summarizes the future minimum lease payments receivable subsequent to ~~September~~June 30, ~~2019:~~

2020:


2020	$	25,648
2021	43,071
2022	29,713
2023	18,018
2024	9,201
Thereafter	2,200

	$	127,851

2019 $ 12,577
2020 42,946
2021 31,556
2022 19,196
2023 9,361
Thereafter 2,633

$ 118,269

Note 5: Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1Quoted prices in active markets for identical assets or liabilities

~~Level 2~~

Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

~~Level 3~~

~~Unobservable inputs supported by little or no market activity and are significant to the fair value of the assets or liabilities~~

Level 2Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3Unobservable inputs supported by little or no market activity that are significant to the fair value of the assets or liabilities

Recurring Measurements

The following tables present the fair value measurements of assets recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018:~~

2019:

			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	Fair		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)

June 30, 2020
Available-for-sale securities
SBA Pools	$	22,771	$	-	$	22,771	$	-
Federal agencies	7,519		-		7,519		-
State and municipal obligations	62,197		-		62,197		-
Mortgage-backed securities -
GSE residential	128,704		-		128,704		-
Equity securities	13		13		-		-

	$	221,204	$	13	$	221,191	$	-

Fair Value Measurements Using
Quoted Prices
in Active Significant
Markets for Other Significant
Identical Observable Unobservable
Fair Assets Inputs Inputs
Value (Level 1) (Level 2) (Level 3)
September 30, 2019
  Available-for-sale securities
    U.S. Treasury securities $ 4,995 $ - $ 4,995 $ -
    SBA Pools 11,896 - 11,896 -
    Federal agencies 26,129 - 26,129 -
    State and municipal obligations 33,891 - 33,891 -
    Mortgage-backed securities -GSE residential 91,366 - 91,366 -
    Equity securities 13 13 - -

$ 168,290 $ 13 $ 168,277 $ -

Fair Value Measurements Using
Quoted Prices
in Active Significant
Markets for Other Significant
Identical Observable Unobservable
Fair Assets Inputs Inputs
Value (Level 1) (Level 2) (Level 3)
December 31, 2018
  Available-for-sale securities
    Federal agencies $ 38,010 $ - $ 38,010 $ -
    State and municipal obligations 29,789 - 29,789 -
    Mortgage-backed securities -GSE residential 54,670 - 54,670 -
    Equity securities 13 13 - -

$ 122,482 $ 13 $ 122,469 $ -

			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	Fair		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)

December 31, 2019
Available-for-sale securities
U.S. Treasury securities	$	2,991	$	-	$	2,991	$	-
SBA Pools	14,383		-		14,383		-
Federal agencies	21,646		-		21,646		-
State and municipal obligations	45,840		-		45,840		-
Mortgage-backed securities -
GSE residential	116,911		-		116,911		-
Equity securities	13		13		-		-

	$	201,784	$	13	$	201,771	$	-

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the ~~three and nine~~six months ended ~~September~~June 30, ~~2019.~~

2020.

Available-for-Sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy, which includes equity securities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. Level 2 securities include agency securities, obligations of state and political subdivisions, and mortgage-backed securities. Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities without relying exclusively on quoted prices for specific investment securities but rather relying on the investment securities’ relationship to other benchmark quoted investment securities. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Nonrecurring Measurements

The following table presents the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018:~~

2019:

			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	Fair		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)

June 30, 2020
Impaired loans, collateral dependent	$	483	$	-	$	-	$	483
Mortgage-servicing rights	1,405		-		-		1,405

December 31, 2019
Impaired loans, collateral dependent	$	57	$	-	$	-	$	57
Mortgage-servicing rights	1,033		-		-		1,033

Fair Value Measurements Using
Quoted Prices
in Active Significant
Markets for Other Significant
Identical Observable Unobservable
Fair Assets Inputs Inputs
Value (Level 1) (Level 2) (Level 3)
September 30, 2019
  Impaired loans, collateral dependent $ 257 $ - $ - $ 257

December 31, 2018
  Impaired loans, collateral dependent $ 344 $ - $ - $ 344
  Mortgage-servicing rights 1,227 - - 1,227

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Collateral-Dependent Impaired Loans, Net of ALLL

The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell. Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by management. Appraisals are reviewed for accuracy and consistency by management. Appraisers are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by management by comparison to historical results.

Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment. Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral-dependent loans.

Mortgage-Servicing Rights

Mortgage-servicing rights do not trade in an active, open market with readily observable prices. Accordingly, fair value is estimated using discounted cash flow models having significant inputs of discount rate, prepayment speed and default rate. Due to the nature of the valuation inputs, mortgage-servicing rights are classified within Level 3 of the hierarchy.

Mortgage-servicing rights are tested for impairment on a quarterly basis based on an independent valuation. The valuation is reviewed by management for accuracy and for potential impairment.

Unobservable (Level 3) Inputs

The following tables present the fair value measurement of assets recognized in the accompanying consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018:~~

2019:

	Fair Value at
	June 30,		Valuation	Unobservable
	2020		Technique	Inputs	Range

Collateral-dependent	$	483	Appraisal	Marketability	0% - 11%
impaired loans				discount

Mortgage-servicing rights	$	1,405	Discounted	Discount rate	10%
			cash flow

	Fair Value at
	December 31,		Valuation	Unobservable
	2019		Technique	Inputs	Range

Collateral-dependent	$	57	Appraisal	Marketability	0% - 75%
impaired loans				discount

Mortgage-servicing rights	$	1,033	Discounted	Discount rate	10%
			cash flow

Fair Value at
September 30, Valuation Unobservable
2019 Technique Inputs Range

Collateral-dependent $ 257 Appraisal Marketability 0% - 14 %
impaired loans discount

Fair Value at
December 31, Valuation Unobservable
2018 Technique Inputs Range

Collateral-dependent $ 344 Appraisal Marketability 0% - 70 %
impaired loans discount

Mortgage-servicing rights $ 1,227 Discounted Discount rate 10 %
cash flow Prepayment Speed 1% - 56 %

Fair Value of Financial Instruments

The following tables present estimated fair values of the Company’s financial instruments at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~

2019.

			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	Carrying		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
June 30, 2020
Financial assets
Cash and cash equivalents	$	110,606	$	110,606	$	-	$	-
Available-for-sale securities	221,204		13		221,191		-
Held-to-maturity securities	13,320		-		13,664		-
Loans and leases receivable, net	752,923		-		-		762,060
Federal Reserve and FHLB stock	9,080		-		9,080		-
Interest receivable	4,721		-		4,721		-

Financial liabilities
Deposits	739,131		-		742,215		-
FHLB advances	180,000		-		187,403		-
Interest payable	348		-		348		-

			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	Carrying		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
December 31, 2019
Financial assets
Cash and cash equivalents	$	40,597	$	40,597	$	-	$	-
Available-for-sale securities	201,784		13		201,771		-
Held-to-maturity securities	15,917		-		16,156		-
Loans and leases receivable, net	687,258		-		-		687,789
Federal Reserve and FHLB stock	7,600		-		7,600		-
Interest receivable	3,052		-		3,052		-

Financial liabilities
Deposits	617,219		-		619,635		-
FHLB advances	154,000		-		155,304		-
Interest payable	297		-		297		-

Fair Value Measurements Using
Quoted Prices
in Active Significant
Markets for Other Significant
Identical Observable Unobservable
Carrying Assets Inputs Inputs
Value (Level 1) (Level 2) (Level 3)
September 30, 2019
  Financial assets
    Cash and cash equivalents $ 41,377 $ 41,377 $ - $ -
    Available-for-sale securities 168,290 13 168,277 -
    Held-to-maturity securities 16,729 - 16,957 -
    Loans and leases receivable, net 694,745 - - 689,087
    Federal Reserve and FHLB stock 7,600 - 7,600 -
    Interest receivable 2,800 - 2,800 -

  Financial liabilities
    Deposits 607,808 - 609,754 -
    FHLB advances 141,000 - 140,495 -
    Interest payable 554 - 554 -

Fair Value Measurements Using
Quoted Prices
in Active Significant
Markets for Other Significant
Identical Observable Unobservable
Carrying Assets Inputs Inputs
Value (Level 1) (Level 2) (Level 3)
December 31, 2018
  Financial assets
    Cash and cash equivalents $ 14,971 $ 14,971 $ - $ -
    Available-for-sale securities 122,482 13 122,469 -
    Held-to-maturity securities 21,080 - 23,653 -
    Loans and leases receivable, net 654,755 - - 643,572
    Federal Reserve and FHLB stock 6,561 - 6,561 -
    Interest receivable 2,686 - 2,686 -

  Financial liabilities
    Deposits 620,637 - 620,380 -
    FHLB advances 136,100 - 133,141 -
    Interest payable 551 - 551 -

Note 6: Earnings per Share

Basic EPS is computed by dividing net income allocated to common stock by the weighted average number of common shares outstanding during the period which excludes the participating securities. Diluted EPS includes the dilutive effect of additional potential common shares from stock compensation awards, but excludes awards considered participating securities. ESOP shares are not considered outstanding for EPS until they are earned. The following table presents the computation of basic and diluted EPS for the periods ~~indicated (in thousands, except for share and per share data):~~

For the Period
July 2, 2019 to
September 30, 2019

Net income (loss) $ (3,250,335 )
Shares outstanding for Basic EPS:
  Average shares outstanding 13,526,625
  Less: average unearned ESOP Shares 1,052,804
Shares outstanding for Basic EPS 12,473,821

Additional Dilutive Shares -

Shares outstanding for Diluted EPS 12,473,821

  Basic Earnings (Loss) Per Share $ (0.26 )
  Diluted Earnings (Loss) Per Share $ (0.26 )

indicated:

	Three Months Ended		Six Months Ended
	June 30, 2020		June 30, 2020

Net income	$	2,506	$	4,958
Shares outstanding for Basic EPS:
Average shares outstanding	13,526,625		13,526,625
Less: average unearned ESOP Shares	1,045,892		1,052,656
Shares outstanding for Basic EPS	12,480,733		12,473,969

Additional Dilutive Shares	-		-

Shares outstanding for Diluted EPS	12,480,733		12,473,969


Basic Earnings Per Share	$	0.20	$	0.40
Diluted Earnings Per Share	$	0.20	$	0.40

Note 7: Employee Stock Ownership Plan

As part of the corporate reorganization and related stock offering, the Company established an Employee Stock Ownership Plan (ESOP) covering substantially all employees. The ESOP acquired 1,082,130 shares of Company common stock at an average of $13.59 per share on the open market with funds provided by a loan from the Company. Accordingly, $14,706,000 of common stock acquired by the ESOP was shown as a reduction of stockholders’ equity. Shares are released to participants proportionately as the loan is repaid.

ESOP expense for the three and six months ended ~~September~~June 30, ~~2019~~2020 was ~~$121,000.~~

$143,000 and $329,000, respectively.

	June 30, 2020

Earned ESOP shares	49,598
Unearned ESOP shares	1,032,532
Total ESOP shares	1,082,130

Quoted per share price	$	11.24
Fair value of earned shares	$	557
Fair value of unearned shares	$	11,606

Note 8: Subsequent Event

On July 8, 2020, the Company announced that its Board of Directors authorized a stock repurchase program for up to 676,331 shares, or approximately 5% of its currently outstanding shares.

September 30, 2019

Earned ESOP shares 9,018
Unearned ESOP shares 1,073,112
Total ESOP shares 1,082,130

Quoted per share price $ 13.99
Fair value of earned shares $ 126,162
Fair value of unearned shares $ 15,012,837

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

Management’s discussion and analysis of financial condition of the Richmond Mutual Bancorporation, Inc. (the “Company”) at June 30, 2020, and the consolidated results of operations ~~at September 30, 2019 and~~ for the three and ~~nine months~~six month periods ended ~~September~~June 30, 2020, compared to the same periods in 2019 ~~and 2018~~ is intended to assist in understanding ~~our~~the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto appearing in Part I, Item 1, of this Form 10-Q.

The terms “we,” “our,” “us,” or the “Company” refer to Richmond Mutual Bancorporation, Inc. and its consolidated subsidiary, First Bank Richmond, which we sometimes refer to as the “Bank,” unless the context otherwise requires.

Cautionary Note Regarding Forward-Looking Statements

Certain matters in this Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact, are based on certain assumptions and are generally identified by use of words such as “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would,” and “could.” These forward-looking statements include, but are not limited to:

·statements of our goals, intentions and expectations;

·statements regarding our business plans, prospects, growth and operating strategies;

·statements regarding the quality of our loan and investment portfolios; and

·estimates of our risks and future costs and benefits.

You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These forward-looking statements are based on our current beliefs and expectations and, by their nature, are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

Important factors that could cause our actual results to differ materially from the results anticipated or projected, include, but are not limited to, the following:

·the effect of the novel coronavirus disease of 2019 (“COVID-19”), including on the Company’ credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID-19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, and consumer and corporate clients, including economic activity, employment levels and market liquidity;

·general economic conditions, either nationally or in our market areas, that are worse than expected;

·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 loan and lease losses;

·our ability to access cost-effective funding;

·fluctuations in real estate values and both residential and commercial real estate market conditions;

·risks associated with the relatively unseasoned nature of a significant portion of our loan portfolio;

·demand for loans and deposits in our market area;

·our ability to implement and change our business strategies;

·competition among depository and other financial institutions and equipment financing companies;

~~The~~

·the impact of the proposed termination of our defined benefit plan;

·the deductibility of our contribution to the charitable foundation for tax purposes;

·inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans and leases we have made and make;

·adverse changes in the securities or secondary mortgage markets;

·changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements, including as a result of Basel III;

~~the impact of the Dodd–Frank Wall Street Reform and Consumer Protection Act and the implementing regulations;~~

·changes in the quality or composition of our loan, lease or investment portfolios;

·technological changes that may be more difficult or expensive than expected;

·the inability of third-party providers to perform as expected;

·our ability to manage market risk, credit risk and operational risk in the current economic environment;

·our ability to enter new markets successfully and capitalize on growth opportunities;

·our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our 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 the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;

·our ability to retain key employees;

·our compensation expense associated with equity allocated or awarded to our employees;

·changes in the financial condition, results of operations or future prospects of issuers of securities that we ~~own.~~

own;

·other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services including the Coronavirus Aid, Relief, and Economic Security Act of 2020 ("CARES Act") ; and

·the other risks detailed in this report and from time to time in our other filings with the Securities and Exchange Commission ("SEC"), including our Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”).

We undertake no obligation to publicly update or revise any forward-looking statements included in this report or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this report might not occur and you should not put undue reliance on any forward-looking statements.

~~Additional factors that may affect our results are discussed in the Prospectus under the heading “Risk Factors.”~~

Overview

On February 6, 2019, the Board of Directors of First Mutual of Richmond, Inc. (the “MHC”), the parent mutual holding company of Richmond Mutual Bancorporation-Delaware, adopted a Plan of Reorganization and Stock Offering (the “Plan”). The Plan was approved by the Board of Governors of the Federal Reserve System (the “FRB”) and by the Indiana Department of Financial Institutions (the “IDFI”), as well as the voting members of the MHC at a special meeting of members held on June 19, 2019. Pursuant to the Plan, upon completion of the transaction, the MHC would convert from a mutual holding company to the stock holding company corporate structure, the MHC and Richmond Mutual Bancorporation-Delaware would cease to exist, and First Bank Richmond would become a wholly owned subsidiary of ~~Richmond Mutual Bancorporation-Maryland,~~the Company, a newly formed Maryland corporation. The transaction was completed on July 1, 2019. In connection with the related stock offering, which was also completed on July 1, 2019, ~~Richmond Mutual Bancorporation-Maryland~~the Company sold 13,026,625 shares of common stock at $10.00 per share, for gross offering proceeds of approximately $130.3 million in its subscription offering and contributed 500,000 shares and $1.25 million to a newly formed charitable foundation, First Bank Richmond, Inc. Community Foundation (the “Foundation”).

In certain circumstances, where appropriate, the terms “we”, “us”, “our” and the “Company” refer collectively to (i) RMB-Delaware and First Bank Richmond with respect to discussions in this document involving matters occurring prior to completion of the corporate reorganization and (ii) the Company and First Bank Richmond with respect to discussions in this document involving matters occurring post-corporate reorganization, in each case unless the context indicates another meaning.

The Company is regulated by the FRB and the IDFI. Our corporate office is located at 31 North 9th Street, Richmond, Indiana, and our telephone number is (765) ~~962-2581~~.

962-2581.

First Bank Richmond is an Indiana state-chartered commercial bank headquartered in Richmond, Indiana. The ~~bank~~Bank was originally established in 1887 as an Indiana state-chartered mutual savings and loan association and in 1935 converted to a federal mutual savings and loan association, operating under the name First Federal Savings and Loan Association of Richmond. In 1993, the ~~bank~~Bank converted to a state-chartered mutual savings bank and changed its name to First Bank Richmond, S.B. In 1998, the ~~bank,~~Bank, in connection with its non-stock mutual holding company reorganization, converted to a national bank charter operating as First Bank Richmond, National Association. In July 2007, Richmond Mutual Bancorporation-Delaware, the ~~bank’s~~Bank’s then current holding company, acquired Mutual Federal Savings Bank headquartered in Sidney, Ohio. Mutual Federal Savings Bank was operated independently as a separately chartered, wholly owned subsidiary of Richmond Mutual Bancorporation-Delaware until 2016 when it was combined with the bank through an internal merger transaction that consolidated both banks into a single, more efficient commercial bank charter. In 2017, the ~~bank~~Bank converted to an Indiana state-chartered commercial bank and changed its name to First Bank Richmond. Mutual Federal Savings Bank continues to operate in Ohio under the name Mutual Federal, a division of First Bank Richmond.

First Bank Richmond provides full banking services through its seven full- and one limited-service offices located in Cambridge City (1), Centerville (1), Richmond (5) and Shelbyville (1), Indiana, its five full service offices located in Piqua (2), Sidney (2) and Troy (1), Ohio, and its loan production office in Columbus, Ohio. Administrative, trust and wealth management services are conducted through First Bank Richmond’s Corporate Office/Financial Center located in Richmond, Indiana. As an Indiana-chartered commercial bank, First Bank Richmond is subject to regulation by the IDFI and the Federal Deposit Insurance Corporation (“FDIC”).

Our principal business consists of attracting deposits from the general public, as well as brokered deposits, and investing those funds primarily in loans secured by commercial and multi-family real estate, first mortgages on owner-occupied, one- to four-family residences, a variety of consumer loans, direct financing leases and commercial and industrial loans. We also obtain funds by utilizing Federal Home Loan Bank (“FHLB”) advances. Funds not invested in loans generally are invested in investment securities, including mortgage-backed and mortgage-related securities and agency and municipal bonds.

First Bank Richmond generates commercial, mortgage and consumer loans and leases and receives deposits from customers located primarily in Wayne and Shelby Counties, in Indiana and Shelby, Miami and Franklin (no deposits) Counties, in Ohio. We sometimes refer to these counties as our primary market area. First Bank Richmond’s loans are generally secured by specific items of collateral including real property, consumer assets and business assets. Our leasing operation consists of direct investments in equipment that we lease (referred to as direct finance leases) to small businesses located throughout the United States. Our lease portfolio consists of various kinds of equipment, generally technology-related, such as computer systems, medical equipment and general manufacturing, industrial, construction and transportation equipment. We seek leasing transactions where we believe the equipment leased is integral to the lessee's business. We also provide trust and wealth management services, including serving as executor and trustee under wills and deeds and as guardian and custodian of employee benefits, and manage private investment accounts for individuals and institutions. Total wealth management assets under management and administration were ~~$138.2~~$167.0 million at ~~September~~June 30, ~~2019.~~

2020.

Our results of operations are primarily dependent on net interest income. Net interest income is the difference between interest income, which is the income that is earned on loans and investments, and interest expense, which is the interest that is paid on deposits and borrowings. Other significant sources of pre-tax income are service charges (mostly from service charges on deposit accounts and loan servicing fees), and fees from sale of residential mortgage loans originated for sale in the secondary market. We also recognize income from the sale of investment securities.

Changes in market interest rates, the slope of the yield curve, and interest we earn on interest earning assets or pay on interest bearing liabilities, as well as the volume and types of interest earning assets, interest bearing and noninterest bearing liabilities and shareholders’ equity, usually have the largest impact on changes in our net interest spread, net interest margin and net interest income during a reporting period. Because the length of the COVID-19 pandemic and the efficacy of the extraordinary measures being put in place to address its economic consequences are unknown, including the recent 150 basis point reduction in the targeted federal funds rate, until the pandemic subsides, the Company expects its net interest income and net interest margin will be adversely affected in 2020 and possibly longer.

At ~~September~~June 30, ~~2019,~~2020, on a consolidated basis, we had ~~$956.2 million~~$1.1 billion in assets, ~~$694.7~~$752.9 million in loans and leases, net of allowance, ~~$607.8~~$739.1 million in deposits and ~~$200.4~~$196.1 million in stockholders’ equity. At ~~September~~June 30, ~~2019,~~2020, First Bank Richmond’s total risk-based capital ratio was ~~21.5%~~13.4%, exceeding the 10.0% requirement for a well-capitalized institution. For the ~~three and nine~~six months ended ~~September~~June 30, ~~2019, we incurred a~~2020, net ~~loss of $3.3 million and $1.5~~income was $5.0 million, compared with net income of ~~$1.6 million and $4.2~~$1.7 million for the ~~three and nine~~six months ended ~~September~~June 30, 2018, respectively. Our earnings for the three months ended September 31, 2019 were impacted by a one-time $6.25 million contribution to our Foundation created as part of our reorganization to a public company. Our earnings for the nine months ended September 31, 2019 were impacted by the $6.25 million contribution to the Foundation discussed in the previous sentence as well as the adoption of a nonqualified deferred compensation plan in the second quarter of 2019 at a cost of $1.7 million.

As we discussed in the Prospectus relating to our initial public offering, we are evaluating options to terminate participation in our multiemployer defined benefit pension plan, which will require us to pay an amount based on the underfunded status of the plan, referred to as a withdrawal liability, which we previously estimated to be approximately $9.8 million after tax. Our actual termination expense may be higher or lower than our previous estimate depending on a number of factors, including but not limited to the interest rate environment and the valuation of plan assets as of the date of termination.

2019.

Critical Accounting Policies

Certain accounting policies are important to the portrayal of our financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Management believes that its critical accounting policies include determining the allowance for loan and lease losses, the valuation of foreclosed assets, mortgage servicing rights, valuation of intangible assets and securities, deferred tax asset and income tax accounting.

Allowance for Loan and Lease Losses. We maintain an allowance for loan and lease losses to cover probable incurred credit losses at the balance sheet date. Loan and lease losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in our judgment, should be charged-off. A provision for loan and lease losses is charged to operations based on our periodic evaluation of the necessary allowance balance.

We have an established process to determine the adequacy of the allowance for loan and lease losses. The determination of the allowance is inherently subjective, as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans, estimated losses on other classified loans and pools of homogeneous loans, and consideration of past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and other factors, all of which may be susceptible to significant change.

Foreclosed Assets. Foreclosed assets are carried at the lower of cost or fair value less estimated selling costs. Management estimates the fair value of the properties based on current appraisal information. Fair value estimates are particularly susceptible to significant changes in the economic environment, market conditions and real estate market. A worsening or protracted economic decline would increase the likelihood of a decline in property values and could create the need to write down the properties through current operations.

Mortgage Servicing Rights (“MSRs”). MSRs associated with loans originated and sold, where servicing is retained, are capitalized and included in the consolidated balance sheet. The value of the capitalized servicing rights represents the fair value of the right to service loans in the portfolio. Critical accounting policies for MSRs relate to the initial valuation and subsequent impairment tests. The methodology used to determine the valuation of MSRs requires the development and use of a number of estimates, including anticipated principal amortization and prepayments of that principal balance. Events that may significantly affect the estimates used are changes in interest rates, mortgage loan prepayment speeds and the payment performance of the underlying loans. The carrying value of the MSRs is periodically reviewed for impairment based on a determination of fair value. For purposes of measuring impairment, the servicing rights are compared to a valuation prepared based on a discounted cash flow methodology, utilizing current prepayment speeds and discount rates. Impairment, if any, is recognized through a valuation allowance and is recorded as a reduction in loan servicing fee income.

Securities. Under Financial Accounting Standards Board (“FASB”) Codification Topic 320 (ASC 320), Investments-Debt, investment securities must be classified as held to maturity, available for sale or trading. Management determines the appropriate classification at the time of purchase. The classification of securities is significant since it directly impacts the accounting for unrealized gains and losses on securities. Debt securities are classified as held to maturity and carried at amortized cost when management has the positive intent and we have the ability to hold the securities to maturity. Securities not classified as held to maturity are classified as available for sale and are carried at fair value, with the unrealized holding gains and losses, net of tax, reported in other comprehensive income and which do not affect earnings until realized.

The fair values of our securities are generally determined by reference to quoted prices from reliable independent sources utilizing observable inputs. Certain of our fair values of securities are determined using models whose significant value drivers or assumptions are unobservable and are significant to the fair value of the securities. These models are utilized when quoted prices are not available for certain securities or in markets where trading activity has slowed or ceased. When quoted prices are not available and are not provided by third party pricing services, management judgment is necessary to determine fair value. As such, fair value is determined using discounted cash flow analysis models, incorporating default rates, estimation of prepayment characteristics and implied volatilities.

We evaluate all securities on a quarterly basis, and more frequently when economic conditions warrant additional evaluations, for determining if any other-than-temporary-impairments (“OTTI”) exist pursuant to guidelines established in ASC 320. In evaluating the possible impairment of securities, consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and our ability and intent to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, we may consider whether the securities are issued by the federal government or its agencies or government sponsored agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition.

If management determines that an investment experienced an OTTI, we must then determine the amount of the OTTI to be recognized in earnings. If we do not intend to sell the security and it is more likely than not that we will not be required to sell the security before recovery of its amortized cost basis less any current period loss, the OTTI will be separated into the amount representing the credit loss and the amount related to all other factors. The amount of OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the OTTI related to other factors will be recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings will become the new amortized cost basis of the investment. If management intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the OTTI will be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. Any recoveries related to the value of these securities are recorded as an unrealized gain (as accumulated other comprehensive income (loss) in stockholders’ equity) and not recognized in income until the security is ultimately sold.

From time to time we may dispose of an impaired security in response to asset/liability management decisions, future market movements, business plan changes, or if the net proceeds can be reinvested at a rate of return that is expected to recover the loss within a reasonable period of time.

Deferred Tax Asset. We have evaluated our deferred tax asset to determine if it is more likely than not that the asset will be utilized in the future. Our most recent evaluation has determined that we will more likely than not be able to utilize our remaining deferred tax asset.

Income Tax Accounting. We file a consolidated federal income tax return. The provision for income taxes is based upon income in our consolidated financial statements, rather than amounts reported on our income tax return. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on our deferred tax assets and liabilities is recognized as income or expense in the period that includes the enactment date.

COVID 19 Response

In response to the COVID-19 pandemic, the Company is offering a number of options designed to support our customers and the communities that we serve.

Paycheck Protection Program ("PPP"). The Coronavirus Aid, Relief and Economic Security Act, or CARES Act, was signed into law on March 27, 2020, and authorized the Small Business Administration (“SBA”) to temporarily guarantee loans under a new loan program called the Paycheck Protection Program, or PPP. The goal of the PPP is to avoid as many layoffs as possible, and to encourage small businesses to maintain payrolls. As a qualified SBA lender, the Company was automatically authorized to originate PPP loans upon commencement of the program in April 2020. PPP loans have: (a) an interest rate of 1.0%, (b) a two-year loan term to maturity; and (c) principal and interest payments deferred for six months from the date of disbursement. The SBA guarantees 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be forgiven and repaid by the SBA. The deadline for PPP loan applications to the SBA has been extended to August 8, 2020. The Bank continued to accept new PPP applications based on this extended

deadline and is assisting small businesses with other borrowing options as they become available, including SBA and other government sponsored lending programs, as appropriate.

As of June 30, 2020, we have processed 465 PPP loans totaling $64.3 million. There were $72,000 PPP loans approved awaiting funding as of June 30, 2020. Many of the PPP applications have been from our existing clients but we are also serving those who have not had a banking relationship with us in the past. In addition to the 1% interest earned on these loans, the SBA pays us fees for processing PPP loans in the following amounts: (i) five (5) percent for loans of not more than $350,000; (ii) three (3) percent for loans of more than $350,000 and less than $2,000,000; and one (1) percent for loans of at least $2,000,000. We may not collect any fees from the loan applicants.

We may utilize the FRB's Paycheck Protection Program Liquidity Facility (“PPPLF”), pursuant to which the Company would pledge its PPP loans as collateral to obtain FRB non-recourse loans. The PPPLF will take the PPP loans as collateral at face value. As of June 30,2020, we had not utilized the PPPLF.

Loan Modifications.Beginning in March 2020 we started receiving requests from our borrowers for loan and lease deferrals related to the effects of the COVID-19 pandemic. At June 30, 2020, 752 loans aggregating $175.1 million, or 22.9% of total loans and leases, were modified. Modifications include payment deferrals, interest only or principal and interest, of up to primarily 90 days, fee waivers, extensions of repayment terms of up to six months, or other delays in payment that are considered insignificant. These modifications were not classified as TDRs at June 30, 2020 in accordance with the guidance of the CARES Act and related regulatory banking guidance. The CARES Act provides that the short-term modification of loans as a result of the COVID-19 pandemic, made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs. This includes short-term (e.g. six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers are considered current under the CARES Act and related regulatory banking guidance if they are less than 30 days past due on their contractual payments at the time a modification program is implemented. All loans modified due to COVID-19 will be separately monitored and any request for continuation of relief beyond the initial modification will be reassessed at that time to determine if a further modification should be granted and if a downgrade in risk rating is appropriate. We believe the steps we are taking are necessary to effectively manage our portfolio and assist our clients through the ongoing uncertainty surrounding the duration, impact and government response to the COVID-19 pandemic.

The following table summarizes information relating to forbearance requests granted at June 30, 2020 and March 31, 2020:

	June 30, 2020			March 31, 2020
($ in thousands)	Number of Loans	Balance		Number of Loans	Balance
Commercial mortgage	70	$	98,010	21	$	27,050
Commercial and industrial	27	12,692		10	1,730
Construction and development	3	10,098		—	—
Multi-Family	13	21,197		5	4,465
Residential mortgage	88	11,198		8	1,379
Home equity	7	215		—	—
Direct financing leases	507	21,080		176	8,058
Consumer	37	597		—	—
Total Loans	752	$	175,087	220	$	42,682

Branch Operations and Additional Client Support

Many of our employees continue to work remotely or have flexible work schedules, and we have established protective measures within our offices to help ensure the safety of those employees who must work on-site. We have also taken steps to resume more normal branch activities with specific guidelines in place to ensure the safety of our clients and our personnel. This includes the installation of counter shields and hand sanitizing stations, limiting the number of clients in a branch at any one time, requiring social distancing and the wearing of masks within the branch, diligent disinfecting of common area high touchpoints and encouraging the use of our digital and electronic banking channels. We continuously monitor and conform our practices based on updates from the Center for Disease Control, World Health Organization, Financial Regulatory Agencies, and local and state health departments.

In addition, certain late fees are being waived for those customers experiencing a hardship as a result of the COVID 19 pandemic.

Comparison of Financial Condition at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~

2019

General.Total assets increased ~~$106.7~~$154.2 million, or ~~12.6%~~15.6%, to ~~$956.3 million~~$1.1 billion at ~~September~~June 30, ~~2019~~2020 from ~~$849.6~~$986.0 million at December 31, ~~2018, driven by~~2019. The increase was primarily a ~~$40.0~~result of a $65.7 million, or ~~6.1%~~9.6%, increase in ~~the loan~~loans and ~~lease portfolio,~~leases, net of allowance, ~~for loan~~to $752.9 million at June 30, 2020 from $687.3 million at December 31, 2019, and ~~lease losses,~~ a ~~$41.5~~$70.0 million, or ~~28.9%, increase in investment securities and a $26.4 million, or 176.4%~~172.5%, increase in cash and cash ~~equivalents.~~equivalents to $110.6 million at June 30, 2020, compared to $40.6 million at December 31, 2019. The increase in ~~assets~~cash and cash equivalents primarily was ~~funded with~~ the ~~proceeds received by the Company~~result of an increase in ~~connection with the initial public offering. Most~~brokered deposits and FHLB borrowings as part of the ~~growth in the loan portfolio occurred in the commercial real estate and multi-family portfolios.~~

Company’s strategy to increase liquidity.

Loans and Leases.Our loan and lease portfolio, net of allowance for loan and lease losses, increased ~~$40.0~~$65.7 million, ~~or 6.1%,~~ to ~~$694.7~~$752.9 million at ~~September~~June 30, ~~2019~~2020 from ~~$654.8~~$687.3 million at December 31, ~~2018.~~2019. The ~~majority~~increase in loans and leases was attributable to PPP loans, which accounted for $64.3 million of the ~~growth occurred in the~~$65.7 million increase. From December 31, 2019 to June 30, 2020, commercial and industrial loans increased $56.6 million or 67.0%, commercial real estate ~~and multi-family loan portfolios, which in the aggregate~~loans increased ~~$49.2~~$12.6 million or ~~19.3%. We also experienced a $9.3~~5.5%, and construction and development loans increased $8.9 million or ~~12.9%, increase~~16.7%. PPP loans accounted for all of the increases in ~~our~~ commercial and industrial ~~loan portfolio. These~~loans offsetting a decline of $7.7 million of non-PPP loans. Partially offsetting these increases were ~~partially offset by a $17.6~~decreases in multi-family real estate loans of $7.3 million or ~~24.1%~~11.0%, ~~decrease~~non-PPP commercial and industrial loans of $7.7 million, residential real estate loans, including home equity loans, of $5.6 million or 4.1%, and consumer loans of $984,000 or 7.3%. Leases grew $4.8 million, or 4.3%, from December 31, 2019 to June 30, 2020.

Nonperforming loans and leases, consisting of nonaccrual loans and leases and accruing loans and leases more than 90 days past due, totaled $4.3 million or 0.57% of total loans and leases at June 30, 2020, compared to $4.3 million or 0.61% of total loans at March 31, 2020, and $3.8 million or 0.55% of total loans and leases at December 31, 2019. Accruing loans past due more than 90 days at June 30, 2020, totaled $3.3 million, compared to $3.1 million at March 31, 2020, and $2.6 million at December 31, 2019.

At June 30, 2020, TDRs totaled $569,000, compared to $598,000 at December 31, 2019. At June 30, 2020 and December 31, 2019, the Company had TDRs that were accruing and performing in ~~our construction~~accordance with their modified terms of $569,000 and ~~development loan portfolio~~$598,000, respectively. Performing TDRs are not considered nonperforming assets as they continue to accrue interest despite being considered impaired due to ~~customers obtaining long term fixed rate~~the restructured status. The CARES Act amended generally accepted accounting principles with respect to the modification of loans ~~from alternate sources.~~

to borrowers affected by the COVID-19 pandemic. Among other criteria, this guidance provided that short-term loan modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs. As of June 30, 2020, the Company had approved 752 loan modifications qualifying under the CARES Act related to the COVID-19 pandemic with an outstanding loan balance totaling $175.1 million. Loan modifications in accordance with the CARES Act and related regulatory guidance are still subject to an evaluation in regards to determining whether or not a loan is deemed to be impaired.

Allowance for Loan and Lease Losses.The allowance for loan and lease losses increased ~~$1.3~~$1.4 million, or ~~23.1%~~20.2%, to ~~$6.9~~$8.5 million at ~~September~~June 30, ~~2019~~2020 from ~~$5.6~~$7.1 million at December 31, ~~2018, primarily as a result of increased commercial real estate and multi-family loan activity.~~2019. At ~~September~~June 30, ~~2019,~~2020, the allowance for loan and lease losses totaled ~~0.98%~~1.12% of total loans and leases outstanding compared to ~~0.85%~~1.02% at December 31, ~~2018.~~2019. Excluding the $64.3 million of PPP loans from the $763.9 million of total loans and leases at June 30, 2020, the allowance for loan and lease losses to total loans and leases was 1.22% at June 30, 2020. PPP loans are fully guaranteed by the SBA and management expects that the vast majority of PPP borrowers will seek full or partial forgiveness of their loan obligations from the SBA within a short time frame, which in turn will reimburse the Bank for the amount forgiven. Net charge-offs during the first ~~nine~~six months of ~~2019~~2020 were ~~$419,000,~~$98,000 or ~~0.08%~~0.03% of average loans and leases outstanding, compared to ~~$521,000,~~net charge-offs of $329,000, or ~~0.09%~~0.10% of average loans and leases outstanding during the first ~~nine~~six months of ~~2018.~~

2019. The allowance for loan and lease losses to non-performing loans and leases was 197.5% at June 30, 2020, compared to 186.0% at December 31, 2019.

Management regularly analyzes conditions within its geographic markets and evaluates its loan and lease portfolio. The Company evaluated its exposure to potential loan and lease losses as of June 30, 2020, which evaluation included consideration of potential credit losses due to the deteriorating economic conditions driven by the impact of the COVID-19 pandemic. The full impact of the pandemic on the Company’s deposit and loan and lease customers is still unknown. The Company has increased its qualitative factors when determining the adequacy of its allowance for loan and lease losses. Credit metrics are being reviewed and stress testing is being performed on the loan portfolio. Potentially higher risk segments of the portfolio, such as hotels and restaurants, are being closely monitored as are loan payment deferrals.

Deposits. Total deposits ~~decreased $12.8~~increased $121.9 million, or ~~2.1%~~19.8%, to ~~$607.8~~$739.1 million at ~~September~~June 30, ~~2019~~2020, from ~~$620.6~~$617.2 million at December 31, ~~2018.~~2019. This ~~decrease~~increase in deposits was primarily ~~was~~ due to ~~customer’s using their~~an increase in brokered deposits (as the Company sought to increase its liquidity position) and an increase in demand deposit and savings accounts primarily related to disbursements of PPP loan funds onto borrowers’ deposit ~~with First Bank Richmond~~accounts as well as reduced withdrawals reflecting changes in customer spending habits due to ~~purchase stock in~~ the ~~Company’s initial public offering.~~COVID-19 pandemic. Brokered deposits ~~decreased $58.6~~increased $64.0 million ~~during the first nine months of 2019. At September 30, 2019, brokered deposits totaled $65.9~~to $120.7 million, or ~~10.8 %~~16.3% of total deposits, at June 30, 2020, compared to ~~$124.5~~$56.7 million, or ~~15.0%~~9.2% of total deposits, at December 31, ~~2018. This decrease was partially offset by an increase in retail certificates of~~2019. Demand deposit ~~of $39.8~~and savings accounts increased $60.1 million ~~from~~to $395.9 million at June 30, 2020, compared to $335.8 million at December 31, ~~2018~~2019. At June 30, 2020, noninterest bearing deposits totaled $89.9 million, or 12.2% of total deposits, compared to ~~September 30,~~$60.3 million or 9.8% of total deposits at December 31, 2019.

Borrowings.Total borrowings, consisting solely of FHLB advances, increased ~~$4.9~~$26.0 million, or ~~3.6%~~16.9%, to ~~$141.0~~$180.0 million at ~~September~~June 30, ~~2019~~2020 from ~~$136.1~~$154.0 million at December 31, ~~2018. The~~2019 consistent with the Company’s strategy to increase ~~in borrowings, along with deposit growth, primarily was used to fund loan growth during the period.~~

liquidity.

Stockholders’ Equity. Stockholders’ equity totaled ~~$200.4~~$196.1 million at ~~September~~June 30, ~~2019,~~2020, an increase of ~~$114.5~~$8.3 million, or 4.4%, from December 31, ~~2018.~~2019. The increase in stockholders’ equity primarily was the result of net income of $5.0 million in the ~~completion~~first half of ~~the Company’s initial public offering~~2020 and a ~~$4.0~~$3.7 million ~~reduction~~improvement in accumulated other comprehensive ~~loss,~~income, partially offset by ~~a net loss~~$623,000 in dividends paid to shareholders. The Company’s equity to asset ratio was 17.2% at June 30, 2020. At June 30, 2020, the Bank’s Tier 1 capital to total assets ratio was 13.4% and the Bank’s capital was well in excess of ~~$1.5 million. First Bank Richmond’s tangible common equity ratio and its risk-based capital ratios exceeded “well-capitalized” levels as defined by~~ all regulatory ~~standards as of September 30, 2019.~~

requirements.

Comparison of Results of Operations for the Three Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~

2019.

General.Net ~~loss~~income for the three months ended ~~September~~June 30, ~~2019~~2020 was ~~$3.3~~$2.5 million, a ~~$4.9~~$2.2 million, ~~decrease~~or 647.8% increase from net income of ~~$1.6 million~~$335,000 for the three months ended ~~September~~June 30, ~~2018.~~2019. The ~~decrease was driven by a $4.9~~$2.5 million ~~after-tax expense reflecting~~in earnings equaled $0.20 diluted earnings per share for the ~~contribution~~second quarter of 2020. There is no comparison of earnings per share to the ~~Foundation. This resulted in a basic~~second quarter of 2019, as the Company’s reorganization from the mutual to stock form of ownership and ~~diluted loss per share of $0.26~~related stock offering was not completed until July 1, 2019.

Interest Income. Interest income increased $100,000, or 1.0%, to $10.5 million during the quarter ended June 30, 2020, compared to $10.4 million during the quarter ended June 30, 2019. Interest income on loans and leases increased $145,000, or 1.6%, to $9.3 million for the quarter ended ~~September~~June 30, 2020, from $9.2 million for the comparable quarter in 2019, due to higher average loan and lease balances. The average outstanding loan and lease balance was $747.9 million for the quarter ended June 30, 2020, compared to $687.0 million for the quarter ended June 30, 2019. The ~~one-time expenses associated with~~average yield on loans and leases was 4.98% for the ~~Foundation reduced basic~~quarter ended June 30, 2020, compared to 5.33% for the comparable quarter in 2019. The yield on the loan and ~~diluted earnings per share~~lease portfolio was impacted by ~~$0.40 per share.~~

~~Interest Income.~~ ~~Interest income increased $1.8 million, or 20.0%~~the PPP loan activity during the second quarter of 2020 as PPP loans are originated at an interest rate of 1%, although the effective yield is slightly higher as a result of the origination fees paid to ~~$10.8 million~~us by the SBA. The average yield on PPP loans was 3.22%, including the recognition of the net deferred fees, reducing average yield on loans and leases by 12 basis points for the three months ended ~~September~~June 30, ~~2019 compared~~2020.

Interest income on investment securities, including FHLB stock, increased $222,000, or 23.2%, to ~~$9.0~~$1.2 million ~~for~~during the ~~same three month period~~quarter ended June 30, 2020, from $957,000 during the comparable quarter in ~~2018.~~2019. The increase was primarily attributable to a $75.7 million increase in the average balance of loans and leases outstanding and a 15 basis point increase in the yield on loans and leases for the three months ended September 30, 2019, compared to the three months ended September 30, 2018, which resulted in a $1.3 million increase in interest ~~income.~~income on investment securities 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, ~~increased $19.7~~including FHLB stock, was $256.6 million for the ~~three months~~quarter ended ~~September~~June 30, ~~2019~~2020, compared to $157.8 million for the ~~three months~~quarter ended ~~September~~June 30, ~~2018, and the~~2019. The average yield on investment securities, including FHLB stock, was 1.84% for the second quarter of 2020, compared to 2.45% for the second quarter of 2019. Interest income earned on cash and cash equivalents decreased ~~41 basis points, which resulted~~to $11,000 in ~~a $50,000 decrease~~the second quarter of 2020 compared to $278,000 in ~~interest income. The average balance~~the comparable quarter of ~~“Other”, primarily~~2019. This was due to the significantly lower yield earned on funds ~~with~~at the Federal Reserve ~~Bank, increased $84.3~~after the rate reductions experienced in the second half of 2019 and in March 2020.

Interest Expense. Interest expense decreased $441,000, or 15.1%, to $2.5 million for the ~~three months~~quarter ended ~~September~~June 30, 2019 compared to the three months ended September 30, 2018 due to funds received by the Company in its initial public offering, with the average yield on such funds increasing 78 basis points, resulting in a $600,000 increase in interest income.

~~Interest Expense.~~ ~~Interest expense increased $900,000, or 45.0%, to~~2020, from $2.9 million for the ~~three months~~quarter ended ~~September~~June 30, ~~2019 compared~~2019. Interest expense on deposits decreased $403,000, or 19.1%, to ~~$2.0~~$1.7 million ~~during~~for the ~~same period~~quarter ended June 30, 2020, from $2.1 million for the comparable quarter in ~~2018. The increase primarily~~2019. This decrease in interest expense was attributable to the lower weighted average rate paid on interest-bearing deposits, partially offset by higher average ~~balance~~deposit balances. The weighted average rate paid on interest-bearing deposits was 1.13% for the quarter ended June 30, 2020, compared to 1.40% for the quarter ended June 30, 2019. Average balances of ~~FHLB advances~~interest-bearing deposits increased slightly to $602.3 million in the ~~third~~ quarter ~~of 2019~~ended June 30, 2020, compared to $600.1 million in the comparable quarter in 2019. Interest expense on FHLB borrowings decreased $38,000, or 4.7%, to $770,000 in the second quarter of ~~2018, as well as higher overall rates on certificates of deposit and FHLB advances.~~2020 compared to the same quarter in 2019. The average balance of FHLB ~~advances in the third quarter of 2019 increased $32.1~~borrowings totaled $181.8 million ~~over the average balance~~ during the ~~three months~~quarter ended ~~September~~June 30, ~~2018.~~2020, compared to $147.4 million for the quarter ended June 30, 2019. The weighted average ~~rates~~rate paid on ~~certificates of deposit and~~ FHLB ~~advances during~~borrowings was 1.69% for the ~~three months~~quarter ended ~~September~~June 30, ~~2019 increased 50~~2020, a 51 basis ~~points and 42 basis points, respectively, over the rates paid during~~point decline from 2.20% for the comparable ~~period~~quarter in 2018. Higher average balances of and rates paid on savings and money market accounts and interest-bearing checking accounts also contributed to the overall increase in interest expense during the three months ended September 30, 2019, compared to the same period in 2018.

2019.

Net Interest Income. Net interest income before the provision for loan and lease losses increased ~~$969,00,~~$541,000, or ~~14.0%~~7.2%, to ~~$7.9~~$8.0 million ~~during~~in the ~~third~~second quarter of ~~2019~~2020, compared to ~~$6.9~~$7.5 million for the ~~third~~second quarter of ~~2018. The~~2019. This increase was primarily due to an increase in average interest-earning assets during the ~~three months ended September 30, 2019~~second quarter of 2020 compared to the comparable period in ~~2018. We experienced a 28 basis point decline in the~~2019. Our net interest margin was 3.03% for three months ended June 30, 2020, compared to 3.27% for the three months ended June 30, 2019. The decrease in net interest margin was primarily due to yields earned on interest-earning assets declining at a faster rate than interest rates paid on interest-bearing liabilities. The market’s response to lowering deposit pricing to reflect the targeted federal funds rate decrease over the past year typically lags declines in the ~~third quarter~~yield on interest earning assets. The average yield on PPP loans was 3.22% during the three months ended June 30, 2020, including the recognition of ~~2019 to 3.31% compared to 3.59%~~the net deferred fees, resulting in a negative impact on net interest margin of 12 basis points for the ~~third quarter of 2018.~~

three months ended June 30, 2020.

Average Balances, Interest and Average Yields/~~Cost~~. Cost.The following tables set forth for the periods indicated, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities, resultant yields, interest rate spread, net interest margin (otherwise known as net yield on interest-earning assets), and the ratio of average interest-earning assets to average interest-bearing liabilities. Average balances have been calculated using quarterly balances. Non-accruing loans have been included in the table as loans carrying a zero yield. Loan fees are included in interest income on loans and are not material.

Three Months Ended September 30,
2019 2018

Average
Balance
Outstanding

Interest
Earned/
Paid

Yield/
Rate

Average
Balance
Outstanding

Interest
Earned/
Paid

Yield/
Rate

(Dollars in thousands)
Interest-earning assets:
Loans and leases receivable $ 698,924 $ 9,318 5.33 % $ 623,232 $ 8,068 5.18 %
Securities 158,701 750 1.89 % 138,964 800 2.30 %
Federal Reserve and FHLB stock 7,580 112 5.91 % 6,716 77 4.59 %
Other 89,550 627 2.80 % 5,349 27 2.02 %
   Total interest-earning assets 954,755 10,807 4.53 % 774,261 8,972 4.64 %

Interest-bearing liabilities:
Savings and money market accounts 163,660 286 0.70 % 154,720 208 0.54 %
Interest-bearing checking accounts 104,951 115 0.44 % 100,558 51 0.20 %
Certificate accounts 297,848 1,632 2.19 % 287,065 1,216 1.69 %
Borrowings 147,302 865 2.35 % 115,164 557 1.93 %
   Total interest-bearing liabilities 713,761 2,898 1.62 % 657,507 2,032 1.24 %

Net interest income $ 7,909 $ 6,940
Net earning assets $ 240,994 $ 116,754

Net interest rate spread⁽¹⁾
2.91 % 3.40 %

Net interest margin⁽²⁾
3.31 % 3.59 %

Average interest-earning assets to
   average interest-bearing liabilities
133.76 % 117.76 %

~~___________________~~

~~(1)~~

~~Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.~~

~~(2)~~

~~Net interest margin represents net interest income divided by average total interest-earning assets.~~

	Three Months Ended June 30,
	2020							2019
		Average Balance Outstanding			Interest Earned/ Paid	Yield/ Rate			Average Balance Outstanding			Interest Earned/ Paid	Yield/ Rate
		(Dollars in thousands)
Interest-earning assets:
Loans and leases receivable	$	747,865		$	9,308	4.98	%	$	687,023		$	9,163	5.33	%
Securities		247,594			1,120	1.81	%		150,640			867	2.30	%
FHLB stock		9,035			58	2.57	%		7,143			91	5.10	%
Cash and cash equivalents and other		54,806			11	0.08	%		70,744			278	1.57	%
Total interest-earning assets		1,059,300			10,497	3.96	%		915,550			10,399	4.54	%

Interest-bearing liabilities:
Savings and money market accounts		183,415			253	0.55	%		180,514			346	0.77	%
Interest-bearing checking accounts		115,091			66	0.23	%		102,280			98	0.38	%
Certificate accounts		303,805			1,385	1.82	%		317,299			1,663	2.10	%
Borrowings		181,824			770	1.69	%		147,375			809	2.20	%
Total interest-bearing liabilities		784,135			2,474	1.26	%		747,468			2,916	1.56	%

Net interest income				$	8,023						$	7,483
Net earning assets	$	275,165						$	168,082

Net interest rate spread(1)						2.70	%						2.98	%
Net interest margin(2)						3.03	%						3.27	%
Average interest-earning assets to average interest-bearing liabilities		135.09	%						122.49	%
		135.09	%						122.49	%

_____________

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

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

Provision for Loan and Lease Losses. We establish provisions for loan losses, which are charged to earnings, based on our review of the level of the allowance for loan and lease losses required to reflect management’s best estimate of the probable incurred credit losses in the loan and lease portfolio. The amount of the allowance is based on management’s evaluation of the collectability of the loan and lease portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, and economic conditions. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows. Because of uncertainties associated with regional economic conditions, collateral values, and future cash flows on impaired loans, it is reasonably possible that management’s estimate of probable credit losses inherent in the loan and lease portfolio and the related allowance may change materially in the near-term. The allowance is increased by a provision for loan and lease losses, which is charged to expense and reduced by full and partial charge-offs, net of recoveries. Changes in the allowance relating to impaired loans and leases are charged or credited to the provision for loan and lease losses. Management’s periodic evaluation of the adequacy of the allowance is based on various factors, including, but not limited to, management’s ongoing review and grading of loans and leases, facts and issues related to specific loans and leases, historical loan and lease loss and delinquency experience, trends in past due and non-accrual loans and leases, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses.

The provision for loan and lease losses for the three months ended ~~September~~June 30, ~~2019~~2020 totaled ~~$705,000~~$1.3 million compared to ~~$450,000~~$485,000 for the three months ended ~~September~~June 30, ~~2018,~~2019, a ~~$255,000~~$835,000 or ~~56.7%~~172.2% increase. The ~~higher~~increased provision was primarily due to the

~~overall increase in the size~~ continued uncertainty of the ~~loan portfolio, primarily commercial real estate, commercial and industrial and multi-family loans, as well as a reflection~~economic impact of the ~~overall slowing economy.~~COVID-19 pandemic on the Bank’s loan portfolio. Net charge-offs during the ~~third~~second quarter of ~~2019~~2020 were ~~$90,000,~~$106,000, compared to net charge-offs of ~~$454,000~~$40,000 in the second quarter of ~~2018.~~

~~While~~2019. As the COVID-19 pandemic continues, we ~~believe~~expect to see continued pressure on asset quality. As management continues to monitor the estimates and assumptions used in our determination of the adequacy of the allowance are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of futureloan portfolio, additional provisions ~~will not exceed the amount of past provisions or that any increased provisions that~~ may be required will not adversely impact our financial condition and results of operations. In addition, the determination of the amount of our allowance for loan and lease losses is subject to review by bank regulators as part of the routine examination process, which may result in the adjustment of reserves based upon their judgment of information available to them at the time of their examination.

required.

Non-Interest Income. Non-interest income increased ~~$141,000,~~$1.2 million or ~~14.0%~~131.4%, to ~~$1.1~~$2.1 million for the quarter ended June 30, 2020, compared to $900,000 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 $907,000, or 734.1%, to $1.0 million during the second quarter of 2020, compared to $124,000 during the first quarter of 2020 as a result of increased mortgage banking activity during the current quarter due to lower rates. Loan and lease servicing income increased $202,000, or 20.5%, to $301,000 for the second quarter of 2020 compared to $99,000 for the comparable quarter in 2019. In the second quarter of 2020, the Company recorded a recovery to the value of its mortgage servicing rights of $296,000, while no impairment recovery or charge was recorded in the second quarter of 2019. Other loan fees increased $156,000, or 176.8%, to $245,000 due to increased letter of credit fees of $58,000 and loan interest rate modification fees of $76,000. Service fees on deposit accounts decreased $146,000, or 58.1%, to $106,000 for the quarter ended June 20, 2020, compared to $252,000 for the quarter ended June 30, 2019 as a result of the waiving of overdraft fees.

Non-Interest Expense. Non-interest expense decreased $2.0 million, or 25.7%, to $5.6 million for the three months ended ~~September~~June 30, ~~2019, compared to $1.0~~2020, from $7.6 million for the same period in 2018. A gain on sale of securities of $22,000 was recorded for the three months ended September 30, 2019, compared to no gain recognized in the same period in 2018. Gain on sale of loans and leases increased $77,000, or 49.7%, to $232,000 for the three months ended September 30, 2019 compared to $155,000 for the three months ended September 30, 2018 as a result of an increase in mortgage banking activity during the period. Other loan fees increased $108,000 during the third quarter of 2019 compared to the third quarter of 2018. Other income decreased $85,000, or 39.7%, to $129,000 for the three months ended September 30, 2019 compared to $214,000 for the three months ended September 30, 2018.

~~Non-Interest Expense.~~ Noninterest expense increased $7.0 million to $12.5 million during the three months ended September 30, 2019, compared to the same period in 2018. Of the $7.0 million increase, $6.25 million was attributable to the contribution to the Foundation. Excluding the expense associated with the contribution to the Foundation, noninterest expense increased $769,000 in the third quarter of 2019 compared to the same period in 2018.2019. Salaries and employee benefits ~~increased $424,000,~~decreased $2.0 million, or ~~12.4%~~38.5%, into $3.3 million for the ~~third~~quarter ended June 30, 2020 from $5.3 million for the quarter ended June 30, 2019. The $2.0 million decrease from the second quarter of 2019 compared to the third quarter of 2018 due to merit increases and higher related benefits. The higher related benefits included a $135,000 increase in pension expense and a $121,000 increase related to our newly implemented Employee Stock Ownership Plan in the third quarter of 2019 compared to the same period in 2018. The defined benefit plan was frozen effective October 1, 2019 and we are currently evaluating options to terminate the plan which will reduce expenses associated with the pension plan in the future. Data processing fees increased $97,000 during the three months ended September 30, 2019 compared to September 30, 2018, primarily attributable to ~~higher transaction volume and additional services utilized from~~ the Company’s IT provider. FDIC assessment expense decreased $148,000 in the third quarter of 2019 compared to the third quarter of 2018 as the Bank paid no deposit insurance assessment. This was the result of the Deposit Insurance Fund achieving a specified ratio of eligible deposits and banks with less than $10 billion in assets receiving credit for previous assessments paid. The Bank has $36,000 in small bank credits on future assessments remaining as of September 30, 2019, which may be recognized in future periods when allowed for by the FDIC upon insurance fund levels being maintained. Legal and professional fees increased $164,000 in the third quarter of 2019 compared to the same period in 2018 primarily as a result of our corporate reorganization and stock offering. Advertising expenses increased $75,000 for the three months ended September 30, 2019 compared to the three months ended September 30, 2018. Loan tax and insurance expense also increased $75,000 in the third quarter of 2019 compared to the same period in 2018.

~~Income Tax Expense.~~ ~~Income tax expense decreased by $1.3~~$1.7 million to a benefit of $898,000 during the three months ended September 30, 2019, compared to the same period in 2018. This decrease was the result of the net loss recorded for the period due to the $6.25 million expense associated with the contribution to the Foundation.

~~Comparison of Results of Operations for the Nine Months Ended September 30, 2019 and 2018.~~

~~General.~~ Net loss for the nine months ended September 30, 2019, was $1.5 million, compared to net income of $4.2 million for the nine months ended September 30, 2018. The decrease in the first nine months of 2019 compared to the same period of 2018 is due to the $6.25 millionpre-tax expense related to ~~the contribution to the Foundation as well as~~ the adoption of a nonqualified deferred compensation plan during the second quarter of 2019. Excluding this expense, salaries and employee benefits decreased $369,000, or 10.3%, for the three months ended June 30, 2020, compared to the three months ended June 30, 2019. Data processing expenses increased $48,000, or 11.3%, in the second quarter of ~~2019 at a cost of $1.7 million. Excluding these one time expenses associated, net income for the nine months ended September 30, 2019 would have increased by approximately $500,000.~~

~~Interest Income.~~ Interest income increased $5.3 million, or 20.6%, to $31.0 million for the nine months ended September 30, 2019 compared to $25.7 million for the same nine month period in 2018. The increase was primarily attributable to a $79.3 million increase in the average balance of loans and leases outstanding and a 22 basis point increase in the yield on loans and leases for the nine months ended September 30, 2019,2020 compared to the ~~nine months ended September 30, 2018,~~

~~which resulted~~second quarter of 2019, due to normal price increases associated with information technology services and additional digital services and products offered by the Company. Deposit insurance expense decreased $98,000, or 62.0%, to $60,000, in ~~a $4.2 million increase in interest income. The average balance~~the second quarter of ~~securities increased $11.8 million for the nine months ended September 30, 2019~~2020 compared to the ~~nine months ended September 30, 2018, partially offset by a 4 basis point~~second quarter of 2019. The decrease infrom the ~~average yield, which resulted in a $156,000 increase in interest income. The average balance~~second quarter of ~~“Other”, primarily funds with the Federal Reserve Bank, increased $47.5 million for the nine months ended September 30,~~ 2019 ~~compared to the nine months ended September 30, 2018~~was due to the ~~funds received by~~Bank’s higher capital ratios resulting from the ~~Company~~Company’s injection of capital into the Bank in ~~its initial public offering,~~connection with our reorganization to a stock holding company and related stock offering. Legal and professional fees increased $118,000, or 56.4%, to $327,000 for the ~~average yield on such funds increasing 69 basis points, which resulted~~quarter ended June 30, 2020 from $209,000 for the comparable quarter in ~~a $845,000~~2019. The increase in ~~interest income.~~

~~Interest~~legal and professional fees was due to the establishment of an out-of-state subsidiary of First Bank for investment management purposes in the second quarter of 2020.

Income Tax Expense.~~Interest~~ Income tax expense increased ~~$3.0 million, or 55.7 %, to $8.5 million for~~$674,000 during the ~~nine~~three months ended ~~September~~June 30, 2019 compared to $5.4 million during the same period in 2018. The increase primarily was attributable to the higher average balances of certificates of deposit and FHLB advances in the first nine months of 2019 compared to the first nine months of 2018, as well as higher overall rates on certificates of deposits and FHLB advances. The average balances of certificates of deposit and FHLB advances in the first nine months of 2019 increased $35.7 million and $35.3 million, respectively, over the average balances during the nine months ended September 30, 2018. The average rates paid on certificates of deposit and FHLB advances during the nine months ended September 30, 2019 increased 53 basis points and 47 basis points, respectively, over the rates paid during the comparable period in 2018. Higher average rates paid on savings and money market accounts and interest-bearing checking accounts also contributed to the overall increase in interest expense during the nine months ended September 30, 2019,2020, compared to the same period in ~~2018~~

2019, primarily due to a $2.8 million increase in pre-tax income. The effective tax rate for the second quarter of 2020 was 20.2% compared to a 14.3% benefit for the same quarter a year ago.

Comparison of Results of Operations for the Six Months Ended June 30, 2020 and 2019.

General.Net income for the six months ended June 30, 2020 totaled $5.0 million, a $3.3 million or 190.4% increase from net income of $1.7 million for the comparable period in 2019. The $5.0 million in earnings equaled $0.40 diluted earnings per share for the first half of 2020. There is no comparison of earnings per share to the first half of 2019, as the Company’s reorganization from the mutual to stock form of ownership and related stock offering was not completed until July 1, 2019.

Interest Income. Interest income increased $795,000, or 3.9%, to $20.9 million during the six months ended June 30, 2020, compared to $20.2 million for the comparable period in 2019. Interest income on loans and leases increased $443,000, or 2.5%, to $18.4 million for the first six months of 2020, compared to $17.9 million for the comparable period in 2019, due to higher average loan and lease balances and a slightly higher average yield. The average outstanding loan and lease balance was $692.1 million for the first half of the year of 2020, compared to $677.7 million for the first half of 2019. The average yield on loans and leases was 5.31% for the first six months of 2020, compared to 5.29% for the first six months of 2019. The yield on the loan and lease portfolio was impacted by the PPP loan activity which occurred during the second quarter of 2020 as PPP loans are originated at an interest rate of 1%, although the effective yield is slightly higher as a result of the origination fees paid to us by the SBA. The average yield on PPP loans was 3.22% in the first half of 2020, including the recognition of the net deferred fees, reducing average yield on loans and leases by eight basis points during the six months ended June 30, 2020.

Interest income on investment securities, including FHLB stock, increased $543,000, or 28.6%, to $2.4 million during the six months ended June 30, 2020, compared to $1.9 million during the comparable period in 2019. The increase in the interest income on investment securities was due to higher average balances, partially offset by a lower weighted average yield. The average balance of investment securities, including FHLB stock, was $244.4 million for the first six months of 2020, compared to $153.6 million for the first six months of 2019. The average yield on investment securities, including FHLB stock, was 2.00% for the first half of 2020, compared to 2.47% for the first half of 2019. Interest income earned on cash and cash equivalents decreased to $136,000 in the first half of 2020 compared to $328,000 in the first half of 2019. This 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.

Interest Expense. Interest expense decreased $514,000, or 9.3%, to $5.0 million for the six months ended June 30, 2020, compared to $5.6 million for the six months ended June 30, 2019. Interest expense on deposits decreased $465,000, or 11.6%, to $3.5 million for the first half of 2020, compared to $4.0 million in the first half of 2019. This decrease in interest expense on deposits was primarily attributable to the lower weighted average rate paid on interest-bearing deposits, as well as a decline in average balances of interest-bearing deposits. The weighted average rate paid on interest-bearing deposits was 1.23% for the six months ended June 30, 2020, compared to 1.37% for the six months ended June 30, 2019. Average balances of interest-bearing deposits declined $12.5 million, or 2.1%, to $574.4 million in the first six months of 2020 compared to the first six months of 2019. Interest expense on FHLB borrowings decreased $49,000, or 3.2%, to $1.5 million in the first half of 2020 compared to the first half of 2019. The average balance of FHLB borrowings totaled $172.9 million during the first six months of 2020, compared to $141.7 million for the first six months of 2019. The weighted average rate paid on FHLB borrowings was 1.75% for the first half of 2020, a 45 basis point decline from 2.20% for the first half of 2019.

Net Interest Income. Net interest income before the provision for loan and lease losses increased ~~$2.2~~$1.3 million, or ~~10.8%~~9.0%, to ~~$22.5~~$15.9 million in the first ~~nine months~~half of ~~2019~~2020, compared to ~~$20.3~~$14.6 million for the first ~~nine months~~half of ~~2018. The~~2019. This increase was primarily due to an increase in ~~net~~average interest-earning assets during the ~~nine months ended September 30, 2019~~first half of 2020 compared to the ~~comparable~~same period in ~~2018. We experienced a 23 basis point decline in the~~2019. Our net interest margin was 3.25% for six months ended June 30, 2020, compared to 3.35% for the six months ended June 30, 2019. The decrease in net interest margin was primarily due to yields earned on interest-earning assets declining at a faster rate than interest rates paid on interest-bearing liabilities. The market’s response to lowering deposit pricing to reflect the targeted federal funds rate decrease over the past year typically lags declines in the ~~first nine~~yield on interest earning assets. The average yield on PPP loans was 3.22% during the six months ended June 30, 2020, including the recognition of ~~2019 to 3.34% compared to 3.57%~~the net deferred fees, resulting in a negative impact on net interest margin of eight basis points for the ~~first nine~~six months ~~of 2018.~~

ended June 30, 2020.

Average Balances, Interest and Average Yields/Cost.The following tables set forth for the periods indicated, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities, resultant yields, interest rate spread, net interest margin (otherwise known as net yield on interest-earning assets), and the ratio of average interest-earning assets to average interest-bearing liabilities. Average balances have been calculated using quarterly balances. Non-accruing loans have been included in the table as loans carrying a zero yield. Loan fees are included in interest income on loans and are not material.

Nine Months Ended September 30,
2019 2018

Average
Balance
Outstanding

Interest
Earned/
Paid

Yield/
Rate

Average
Balance
Outstanding

Interest
Earned/
Paid

Yield/
Rate

(Dollars in thousands)
Interest-earning assets:
Loans and leases receivable $ 684,844 $ 27,247 5.30 % $ 605,475 $ 23,048 5.08 %
Securities 149,064 2,465 2.20 % 137,323 2,309 2.24 %
Federal Reserve and FHLB stock 7,140 296 5.53 % 6,716 263 5.22 %
Other 56,949 954 2.23 % 9,445 109 1.54 %
   Total interest-earning assets 897,997 30,962 4.60 % 758,959 25,729 4.52 %

Interest-bearing liabilities:
Savings and money market accounts 168,800 914 0.72 % 160,578 631 0.52 %
Interest-bearing checking accounts 102,221 278 0.36 % 101,198 153 0.20 %
Certificate accounts 308,976 4,835 2.09 % 273,310 3,200 1.56 %
Borrowings 143,597 2,424 2.25 % 108,290 1,444 1.78 %
   Total interest-bearing liabilities 723,594 8,451 1.56 % 643,376 5,428 1.12 %

Net interest income $ 22,511 $ 20,301
Net earning assets $ 174,403 $ 115,583

Net interest rate spread⁽¹⁾
3.04 % 3.40 %

Net interest margin⁽²⁾
3.34 % 3.57 %

Average interest-earning assets to
   average interest-bearing liabilities
124.10 % 117.97 %

	Six Months Ended June 30,
	2020							2019
		Average Balance Outstanding			Interest Earned/ Paid	Yield/ Rate			Average Balance Outstanding			Interest Earned/ Paid	Yield/ Rate
		(Dollars in thousands)
Interest-earning assets:
Loans and leases receivable	$	692,055		$	18,372	5.31	%	$	677,688		$	17,929	5.29	%
Securities		235,947			2,302	1.95	%		146,667			1,715	2.34	%
FHLB stock		8,479			139	3.28	%		6,916			183	5.29	%
Cash and cash equivalents and other		43,541			136	0.62	%		40,379			328	1.62	%
Total interest-earning assets		980,022			20,949	4.28	%		871,650			20,155	4.62	%

Interest-bearing liabilities:
Savings and money market accounts		173,352			545	0.63	%		171,736			628	0.73	%
Interest-bearing checking accounts		109,622			148	0.27	%		100,834			163	0.32	%
Certificate accounts		291,449			2,836	1.95	%		314,309			3,203	2.04	%
Borrowings		172,945			1,510	1.75	%		141,713			1,559	2.20	%
Total interest-bearing liabilities		747,368			5,039	1.35	%		728,592			5,553	1.52	%

Net interest income				$	15,910						$	14,602
Net earning assets	$	232,654						$	143,058

Net interest rate spread(1)						2.93	%						3.10	%

Net interest margin(2)						3.25	%						3.35	%

Average interest-earning assets to average interest-bearing liabilities		131.13	%						119.63	%
		131.13	%						119.63	%

___________________

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

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

Provision for Loan and Lease Losses.The provision for loan and lease losses for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 totaled ~~$1.7~~$1.5 million compared to ~~$1.4~~$1.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, a ~~$365,000~~$520,000 or ~~27.0%~~51.5% increase. The ~~higher~~increased provision ~~expense~~ was primarily due to the ~~overall increase in the size~~continued uncertainty of the ~~loan portfolio, primarily commercial real estate, commercial and industrial and multi-family, as well as a reflection~~economic impact of the ~~overall slowing economy.~~COVID-19 pandemic on the Bank’s loan portfolio. Net charge-offs during the first ~~nine months~~half of ~~2019~~2020 were ~~$419,000,~~$98,000, compared to net charge-offs of ~~$521,000~~$329,000 in the first ~~nine months~~half of ~~2018.~~

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.

Non-Interest Income. ~~Noninterest~~ Non-interest income increased ~~$205,000,~~$1.2 million, or ~~7.5%~~68.2%, to $3.0 million for the ~~nine~~first six months ~~ended September 30, 2019,~~of 2020, compared to ~~$2.7~~$1.8 million for the same period in ~~2018. The increase was primarily driven by other loan fees, gains on sale of securities and gain~~2019. Gain on sale of loans and leases ~~increasing $278,000~~increased $1.0 million in the ~~aggregate over~~first half of 2020 to $1.3 million compared to $211,000 in the ~~nine months ended September 2018. These increases were partially offset by~~comparable period of 2019 as a result of increased mortgage banking activity due to lower ~~service~~rates. Service charges on deposit accounts ~~and other income, which decreased $166,000~~declined $123,000, or 25.5%, in the first six months of 2020 compared to the first ~~three quarters of 2018.~~

~~Non-Interest Expense.~~ Noninterest expense increased $9.4 million, or 57.3%, to $25.9 million during the nine months ended September 30, 2019, compared to the same period in 2018, which included the $6.25 million charge attributable to the contribution to the Foundation and the $1.7 million charge related to the adoption of a nonqualified deferred compensation plan during the period. Excluding the expenses associated with these two non-recurring expenses, noninterest expense increased $1.5 million during the nine months ended September 30, 2019 compared to the same period in 2018. Salaries and employee benefits increased $2.4 million, or 23.0%, in the first ninesix months of ~~2019 compared to~~2019. This decrease was the ~~first nine months~~result of ~~2018, primarily due to the adoption of the nonqualified deferred compensation plan~~waiving overdraft charges in the second quarter of ~~2019. Merit increases and higher related benefits accounted for the remainder of the increase. Excluding the nonqualified deferred compensation plan expense, salaries and employee benefits~~2020. Other loan fees increased ~~$662,000,~~$85,000, or ~~6.4%~~34.8%, in the first ~~nine~~half of 2020, primarily due to a $58,000 increase in letter of credit fees and a $27,000 increase in loan processing fees. Trust income increased $46,000, or 21.5%, in the first six months of 2020 compared to the first six months of 2019 due to an increase in assets under management.

Non-Interest Expense. Non-interest expense decreased $2.2 million, or 16.7%, to $11.2 million during the first six months of 2020 compared to $13.4 million during the same period in ~~2018. Data processing fees increased $191,000, while FDIC assessments decreased $117,000,~~2019. Salaries and employee benefits declined $2.2 million, or ~~27.0%~~24.5%, during the nine months ended September 30, 2019 compared to September 30, 2018. The increase in data processing fees was a result of higher transaction volume and services while the decrease in FDIC assessments was attributable to the credit received in the third quarter of 2019. Legal and professional fees also increased $388,000 in the first ~~nine months~~half of 2019 compared to the same period in 2018 for the reasons discussed above. Loan tax and insurance expense increased by $28,000 during the nine months ended September 30, 2019 compared to the same period in 2018 due to a recovery of $84,000 in property taxes in 2018.

~~Income Tax Expense.~~ Income tax expense decreased by $1.6 million during the nine months ended September 30, 2019, compared to the same period in 2018. This decrease was due to pre-tax income decreasing by $7.4 million during the first nine months of 20192020 compared to the first ~~nine months~~half of ~~2018 as a result of the expenses associated with the contribution~~2019. This decrease was primarily due to the ~~Foundation in the third quarter of 2019 and~~$1.7 million pre-tax expense related to the adoption of a nonqualified deferred compensation plan during the second quarter of 2019. Excluding this expense, salaries and employee benefits decreased $456,000, or 6.4%, for the first half of 2020 compared to the first half of 2019. Salary expense increased $49,000, or 1.1%, in the first half of 2020, while benefit expense declined $505,000 in the first half of 2020 compared to the first half of 2019 ~~as discussed above.~~

primarily due to the lower cost of the ESOP compared to the Company’s defined benefit plan which was frozen with the intent to terminate it in December 2019. The freezing of the plan is expected to reduce, but not eliminate, the ongoing expenses associated with the defined benefit plan until the plan is terminated. Data processing expenses increased $111,000, or 13.2%, in the first half of 2020 compared to the first half of 2019, due to normal price increases associated with information technology services and additional digital services offered by the Company. Deposit insurance expense decreased $177,000, or 60.4%, in the first six months of 2020 compared to the first six months of 2019 due to the Bank’s higher capital ratios resulting from the Company’s injection of capital into the Bank in connection with our reorganization to a stock holding company and related stock offering. We also experienced an increase of $62,000, or 12.3%, in legal and professional fees due to the establishment of an out-of-state subsidiary of First Bank for investment management purposes; and a $107,000, or 36.0%, decline in advertising expenses.

Income Tax Expense. Income tax expense increased $1.0 million during the first half of 2020, compared to the first half of 2019, primarily due to a $4.3 million increase in pre-tax income. The effective tax rate for the first half of 2020 was 20.6% compared to 14.1% in the first half of 2019.

Liquidity

We are required to have enough cash and investments that qualify as liquid assets in order to maintain sufficient liquidity to ensure safe and sound operations. Liquidity may increase or decrease depending upon the availability of funds and comparative yields on investments in relation to the return on loans. Historically, liquid assets have been maintained above levels believed to be adequate to meet the requirements of normal operations, including potential deposit outflows. Cash flow projections are regularly reviewed and updated to assure that adequate liquidity is maintained.

Liquidity management involves the matching of cash flow requirements of customers, who may be either depositors desiring to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs and our ability to manage those requirements. We strive to maintain an adequate liquidity position by managing the balances and maturities of interest-earning assets and interest-bearing liabilities so that the balance in short-term investments at any given time will cover adequately any reasonably anticipated immediate need for funds. Additionally, First Bank Richmond maintains a relationship with the FHLB of Indianapolis which could provide funds on short-term notice if needed.

Liquidity management is both a daily and long-term function of the management of our business. It is overseen by the Asset and Liability Management Committee. Excess liquidity is generally invested in short-term investments, such as overnight deposits and holding excess funds at the Federal Reserve Bank. On a ~~long term~~long-term basis, we maintain a strategy of investing in various lending products and investment securities, including mortgage-backed and municipal securities. ~~First Bank Richmond uses its sources of funds primarily to meet its ongoing commitments, pay maturing deposits, fund deposit withdrawals and fund loan commitments.~~

First Bank Richmond can also generate funds from borrowings, primarily FHLB advances. In addition, we have historically sold eligible long-term, fixed-rate residential mortgage loans in the secondary market in order to reduce interest rate risk and to create another source of liquidity.

At June 30, 2020, the Bank had $204.1 million in cash and unpledged available-for-sale investment securities for its cash needs. The Bank had the ability to borrow an additional $41.7 million in FHLB advances based on existing collateral pledged. First Bank Richmond’s liquidity may be supplemented in the second half of 2020 if it participates in the FRB’s PPPLF pursuant to which First Bank Richmond would pledge PPP loans as collateral to obtain FRB non-recourse loans. At June 30, 2020, we had no borrowings from the PPPLF, with the ability to borrow up to $64.3 million based on PPP loans unpledged at that date.

First Bank Richmond uses its sources of funds primarily to meet its ongoing commitments, pay maturing deposits, fund deposit withdrawals and fund loan and lease commitments. At June 30, 2020, outstanding loan and lease commitments, including unused lines and letters of credit, totaled $133.9 million, including $55.6 million of undisbursed construction and land loans. Certificates of deposit scheduled to mature in one year or less at June 30, 2020, totaled $265.2 million. It is management’s policy to offer deposit rates that are competitive with other local financial institutions. Based on this management strategy, we believe that a majority of maturing deposits will remain with the Bank.

Liquidity, represented by cash, cash equivalents, and investment securities, is a product of our operating, investing and financing activities. Primary sources of funds are deposits, amortization, prepayments and maturities of outstanding loans and mortgage-backed securities, maturities of investment securities and other short-term investments and funds provided from operations. While scheduled payments from the amortization of loans and mortgage-backed securities and maturing investment securities and short-term investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. In addition, excess funds are invested in short-term interest-earning assets, which provide liquidity to meet lending requirements. Cash is also generated through borrowings. FHLB advances are utilized to leverage our capital base and provide funds for lending and investment activities, as well as to enhance interest rate risk management.

~~Funds~~

Cash and cash equivalents increased $70.0 million to $110.6 million as of June 30, 2020, from $40.6 million as of December 31, 2019. Net cash provided by operating activities was $7.2 million for the six months ended June 30, 2020. Net cash used in investing activities totaled $84.5 million during the six months ended June 30, 2020 and consisted primarily of increases in net loans and available-for-sale securities. The $147.2 million of net cash provided by financing activities during the six months ended June 30, 2020 was primarily the result of a $121.9 million net increase in deposits and $26.0 million net increase in FHLB advances.

As a separate legal entity from the Bank, the Company must provide for its own liquidity. At June 30, 2020, the Company, on an unconsolidated basis, had $42.5 million in cash, noninterest-bearing deposits and liquid investments generally available for its cash needs. The Company’s principal source of liquidity is dividends and ESOP loan repayments from the Bank.

Management believes that its primary liquidity sources of loan repayments, maturing investment securities, available FHLB borrowing, possible utilization of the PPPLF facility, and access to the brokered CD market are used primarily to meet ongoing commitments, pay maturing deposits, fund withdrawals, and to fund loan commitments. It is management’s policy to offer deposit rates that are competitive with other local financial institutions. Based on this management strategy, we believe that a majority of maturing deposits will remain with us.

sufficient in the economic environment created by the COVID-19 pandemic.

Except as set forth above, management is not aware of any trends, events, or uncertainties that will have, or that are reasonably likely to have a material impact on liquidity, capital resources or operations. Further, management is not aware of any current recommendations by regulatory agencies, which, if they were to be implemented, would have this effect.

Off-Balance Sheet Activities

In the normal course of operations, we engage in a variety of financial transactions that are not recorded in our financial statements, including commitments to extend credit and unused lines of credit. These transactions involve varying degrees of off-balance sheet risks. While these commitments are contractual obligations and represent our potential future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At ~~September~~June 30, ~~2019,~~2020, we had ~~$96.9~~$133.9 million in loan and lease commitments and unused lines of credit.

Capital Resources

First Bank Richmond is subject to minimum capital requirements imposed by the FDIC. The FDIC may require us to have additional capital above the specific regulatory levels if it believes we are subject to increased risk due to asset problems, high interest rate risk and other risks. At ~~September~~June 30, ~~2019,~~2020 First Bank Richmond’s regulatory capital exceeded the FDIC regulatory requirements, and First Bank Richmond was well-capitalized under regulatory prompt corrective action standards. Consistent with our goals to operate a sound and profitable organization, our policy is for First Bank Richmond to maintain well-capitalized status.

Required for To Be Well
Actual Adequate Capital Capitalized
Amount Ratio Amount Ratio Amount Ratio

At September 30, 2019

(Dollars in thousands)

Total risk-based capital (to risk weighted assets) $ 161,392 21.5 % $ 59,972 8.0 % $ 74,964 10.0 %
Tier 1 risk-based capital (to risk weighted assets) 154,496 20.6 44,979 6.0 59,972 8.0
Common equity tier 1 capital (to risk weighted assets) 154,496 20.6 33,734 4.5 48,727 6.5
Tier 1 leverage (core) capital (to adjusted tangible assets) 154,496 15.7 39,335 4.0 49,168 5.0

As of December 31, 2018

Total risk-based capital (to risk weighted assets) $ 89,850 12.3 % $ 58,640 8.0 % $ 73,300 10.0 %
Tier 1 risk-based capital (to risk weighted assets) 84,250 11.5 43,980 6.0 58,640 8.0
Common equity tier 1 capital (to risk weighted assets) 84,250 11.5 32,985 4.5 47,645 6.5
Tier 1 leverage (core) capital (to adjusted tangible assets) 84,250 10.1 33,511 4.0 41,888 5.0

						Required for					To Be Well
	Actual					Adequate Capital					Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio

As of June 30, 2020	(Dollars in thousands)

Total risk-based capital (to risk weighted assets)	$	115,769		20.1	%	$	62,079		8.0	%	$	77,599		10.0	%
Tier 1 risk-based capital (to risk weighted assets)		147,248		19.0			46,559		6.0			62,079		8.0
Common equity tier 1 capital (to risk weighted assets)		147,248		19.0			34,920		4.5			50,439		6.5
Tier 1 leverage (core) capital (to adjusted tangible assets)		147,248		13.4			43,860		4.0			54,824		5.0

As of December 31, 2019

Total risk-based capital (to risk weighted assets)	$	149,137		19.5	%	$	61,304		8.0	%	$	76,629		10.0	%
Tier 1 risk-based capital (to risk weighted assets)		142,048		18.5			45,978		6.0			61,304		8.0
Common equity tier 1 capital (to risk weighted assets)		142,048		18.5			34,483		4.5			49,809		6.5
Tier 1 leverage (core) capital (to adjusted tangible assets)		142,048		14.6			39,027		4.0			48,784		5.0

Pursuant to the capital regulations of the FDIC and the other federal banking agencies, First Bank Richmond must maintain a capital conservation buffer consisting of additional common equity tier 1 (“CET1”) capital greater than 2.5% of risk-weighted assets above the required minimum levels of risk-based CET1 capital, tier 1 capital and total capital in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses. At ~~September~~June 30, ~~2019,~~2020 the Bank’s CET1 capital exceeded the required capital conservation buffer.

For a bank holding company with less than $3.0 billion in assets, the capital guidelines apply on a bank only basis and the FRB expects the holding company’s subsidiary banks to be well capitalized under the prompt corrective action regulations. If Richmond Mutual ~~Bancorporation-Delaware~~Bancorporation was subject to regulatory guidelines for bank holding companies with $3.0 billion or more in assets, at ~~September~~June 30, ~~2019,~~2020, it would have exceeded all regulatory capital requirements.

Impact of Inflation

The effects of price changes and inflation can vary substantially for most financial institutions. While management believes that inflation affects the economic value of total assets, it believes that it is difficult to assess the overall impact. Management believes this to be the case due to the fact that generally neither the timing nor the magnitude of inflationary changes in the economy coincides with changes in interest rates. Since virtually all of our assets and liabilities are monetary in nature, interest rates generally have a more significant impact on our performance than does inflation.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

There has not been any material change in the market risk disclosures contained in our ~~Prospectus.~~

2019 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

An evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Act”)) as of ~~September~~June 30, ~~2019,~~2020, was carried out under the supervision and with the

participation of our Chief Executive Officer, Chief Financial Officerand several other members of ~~our~~ senior management. Our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures in effect as of ~~September~~June 30, ~~2019,~~2020, were effective.In addition, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Act) that occurred during the quarter ended ~~September~~June 30, ~~2019,~~2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We do not expect that our disclosure controls and procedures and internal control over financial reporting will prevent all errors and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls may be circumvented by the individual acts of some persons, by collusion of two or more people, or by override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not involved in any pending legal proceedings as a plaintiff or defendant other than routine legal proceedings occurring in the ordinary course of business, and at ~~September~~June 30, ~~2019,~~2020, we were not involved in any legal proceedings the outcome of which would be material to our financial condition or results of operations.

ITEM 1A. RISK FACTORS

In light of recent developments relating to COVID-19, the Company is supplementing its risk factors contained in Item 1A of its 2019 Form 10-K. The following risk factor should be read in conjunction with the risk factors described in the 2019 Form 10-K.

The COVID-19 pandemic has impacted the way we conduct business which may adversely impact our financial results and those of our customers. The ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.

The COVID-19 pandemic has significantly affected the way we provide banking services to businesses which may adversely affect our operations. As an essential business, we continue to provide banking and financial services to our customers through our drive-up facilities and in-person services available by appointment. In addition, we continue to provide access to banking and financial services through online banking, ATMs and by telephone. If the COVID-19 pandemic worsens it could limit or disrupt our ability to provide banking and financial services to our customers.

Although the stay-at-home orders in Indiana and Oho have terminated and phased re-opening of businesses has commenced, the majority of our employees with the ability to work remotely have been encouraged to continue doing so while continuing to provide banking services to our customers. Heightened cybersecurity, information security and operational risks may result from these remote work-from-home arrangements. We also could be adversely affected if key personnel or a significant number of employees were to become unavailable due to the effects and restrictions of the COVID-19 pandemic. We also rely upon our third-party vendors to conduct business and to process, record and monitor transactions. If any of these vendors are unable to continue to provide us with these services, it could negatively impact our ability to serve our customers. Although we have business continuity plans and other ~~information set forth~~safeguards in ~~this Quarterly Report on Form 10-Q, you should carefully consider~~place, there is no assurance that such plans and safeguards will be effective.

There is pervasive uncertainty surrounding the ~~factors discussed under the heading “Risk Factors” contained~~future economic conditions that will emerge in the ~~Prospectus. Our~~months and years following the start of the pandemic. As a result, management is confronted with a significant and unfamiliar degree of uncertainty in estimating the impact of the pandemic on credit quality, revenues and asset values. To date, the COVID-19 pandemic has resulted in declines in loan demand and loan originations, other than through government sponsored programs such as the Payroll Protection Program, deposit availability, market interest rates and negatively impacted many of our business and consumer borrower’s ability to make their loan payments. Because the length of the pandemic and the efficacy of the extraordinary measures being put in place to address its economic consequences are unknown, including a continued low targeted federal funds rate, until the pandemic subsides, we expect our net interest income and net interest margin will be adversely affected in the near term, if not longer. Many of our borrowers have become unemployed or may face unemployment, and certain businesses are at risk of insolvency as their revenues decline precipitously, especially in businesses related to travel, hospitality, leisure and physical personal services. Businesses may ultimately not reopen as there is a significant level of uncertainty regarding the level of economic activity that will return to our markets over time, the impact of governmental assistance, the speed of economic recovery, the resurgence of COVID-19 in subsequent seasons and changes to demographic and social norms that will take place.

The impact of the pandemic is expected to continue to adversely affect us during 2020 and possibly longer as the ability of many of our customers to make loan payments has been significantly affected. Although the Company makes estimates of loan losses related to the pandemic as part of its evaluation of the ~~risk factors applicable to us has not changed materially from those disclosed~~allowance for loan losses, such estimates involve significant judgment and are made in the ~~Prospectus.~~

context of significant uncertainty as to the impact the pandemic will have on the credit quality of our loan portfolio. It is likely that increased loan delinquencies, adversely classified loans and loan charge-offs will increase in the future as a result of the pandemic. Consistent with guidance provided by banking regulators, we have modified loans by providing various loan payment deferral options to our borrowers affected by the COVID-19 pandemic. Notwithstanding these modifications, these borrowers may not be able to resume making full payments on their loans once the COVID-19 pandemic is resolved. Any increases in the allowance for credit losses will result in a decrease in net income and, most likely, capital, and may have a material negative effect on our financial condition and results of operations.

As of June 30, 2020, we hold and service a portfolio of approximately 752 PPP loans with a balance of $75.1 million. The PPP loans are subject to the provisions of the CARES Act and to complex and evolving rules and guidance issued by the SBA and other government agencies. We expect that the vast majority of our PPP borrowers will seek full or partial forgiveness of their loan obligations. We could face additional risks in our administrative capabilities to service our PPP loans and risk with respect to the determination of loan forgiveness depending on the final procedures for determining loan forgiveness. Further, since the commencement of the PPP, several larger banks have been subject to litigation regarding their processing of PPP loan applications. The Bank may be exposed to the risk of similar litigation, from both customers and non-customers that approached the Bank seeking PPP loans. PPP lenders, including the Bank, may also be subject to the risk of litigation in connection with other aspects of the PPP, including but not limited to borrowers seeking forgiveness of their loans and PPP agents seeking fees from PPP lenders for assisting borrowers in securing PPP loans. If any such litigation is filed against the Bank, it may result in significant financial or reputational harm to us.

Even after the COVID-19 pandemic subsides, the U.S. economy will likely require some time to recover from its effects, the length of which is unknown. and during which we may experience a recession. As a result, we anticipate our business may be materially and adversely affected during this recovery. To the extent the effects of the COVID-19 pandemic adversely impact our business, financial condition, liquidity or results of operations, it may also have the effect of heightening many of the other risks described in the section entitled "Risk Factors" in our 2019 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)Not applicable

(b)Not applicable

(c)The Company ~~completed its initial public offering on July 1, 2019 through~~did not make any stock repurchases during the ~~sale~~quarter ended June 30, 2020, and as of ~~shares of its common~~that date did not have any publicly announced stock par value $0.01 per share, pursuant to a Registration Statement on Form S-1, as amended (Commission File No. 333- 230184), as declared effective on May 6, 2019. A total of 13,526,625 shares of common stock for an aggregate price of $135,266,250 were registered with the SEC. The Company sold 13,026,625 shares of common stock at $10.00 per share in its subscription offering for gross proceeds of approximately $130.3 million and issued 500,000 shares of common stock to First Bank Richmond, Inc. Community Foundation. Keefe, Bruyette & Wood, Inc. (“KBW”) acted as marketing agent for the offering. The net proceeds resulting from the offering after deducting all expenses related to the offering, including $1.5 million paid to KBW, were $127.7 million. Consistent with the disclosure in the Company’s prospectus dated May 6, 2019, we invested approximately $63.9 million of the net proceeds in First Bank Richmond, our wholly owned operating subsidiary, contributed $1.25 million to First Bank Richmond, Inc. Community Foundation and used approximately $5.2 million to redeem our outstanding subordinated debentures and related trust preferred securities. Our Employee Stock Ownership Plan (“ESOP”) was unable to purchase any shares in the offering as a result of an oversubscription in the offering. As a result, approximately $14.7 million of the net proceeds of the offering were used to fund a loan to our ESOP to purchase 1,082,130 shares of Company common stock in the aftermarket. The remaining net proceeds were invested in securities and cash and cash equivalents.

repurchase programs.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Nothing to report.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Nothing to report.

ITEM 6. EXHIBITS

Exhibit

2.0	Plan of Reorganization and Stock Offering of First Mutual of Richmond, Inc. ~~(incorporated~~(incorporated by reference to Exhibit 2.0 of the Company’s Registration Statement on Form S-1 (Commission File No. 333-230184))

3.1	Charter of Richmond Mutual Bancorporation, Inc. ~~(incorporated~~(incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1 (Commission File No. 333-230184))

3.2	Bylaws of Richmond Mutual Bancorporation, Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-1 (Commission File No. 333-230184))

4	Form of Common Stock Certificate of Richmond Mutual Bancorporation, Inc. (incorporated by reference to Exhibit 4.0 of the Company’s Registration Statement on Form S-1 (Commission File No. 333-230184))

~~10.1~~	~~Form of Non-Qualified Deferred Compensation Plan for Garry Kleer (incorporated by reference to Exhibit 10.1 of the Company’s Registration Statement on Form S-1 (Commission File No. 333-230184))~~
31.1
~~31.1~~	Rule 13a-14(a) Certifications (Chief Executive Officer)

31.2	Rule 13a-14(a) Certifications (Chief Financial Officer)

32.0	Section 1350 Certifications

101.0	The following materials for the quarter ended ~~September~~June 30, ~~2019,~~2020, formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Changes in Shareholders’ Equity (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	RICHMOND MUTUAL BANCORPORATION, INC.


Date: ~~November 14, 2019~~August 13, 2020	By:	/s/ Garry D. Kleer
		Garry D. Kleer
		Chairman, President and CEO
		(Duly Authorized Officer)

Date: ~~November 14, 2019~~August 13, 2020	By:	/s/ Donald A. Benziger
		Donald A. Benziger
		Executive Vice President and CFO
		(Principal Financial and Accounting Officer)

	September 30,			December 31,
Assets	2019			2018
	(Unaudited)

Cash and due from banks	$	10,513,957		$	10,112,422
Interest-bearing demand deposits		30,863,289			4,858,748
Cash and cash equivalents		41,377,246			14,971,170
Investment securities - available for sale		168,289,560			122,482,487
Investment securities - held to maturity		16,729,471			21,079,974
Loans and leases, net of allowance for losses of $6,896,000 and $5,600,000, respectively		694,744,985			654,755,066
Premises and equipment, net		14,014,239			14,025,476
Federal Home Loan Bank stock		7,600,400			6,560,600
Interest receivable		2,800,042			2,686,010
Mortgage-servicing rights		1,214,660			1,227,356
Cash surrender value of life insurance		3,809,526			3,718,219
Other assets		5,639,888			8,112,005

Total assets	$	956,220,017		$	849,618,363

Liabilities
Non-interest bearing deposits	$	54,810,363		$	58,044,369
Interest bearing deposits		552,997,714			562,592,451
Total deposits		607,808,077			620,636,820
Federal Home Loan Bank advances		141,000,000			136,100,000
Advances by borrowers for taxes and insurance		626,358			543,527
Interest payable		554,278			550,749
Other liabilities		5,877,399			5,934,235
Total liabilities		755,866,112			763,765,331

Commitments and Contingent Liabilities

Stockholders' Equity
Common stock, $.01 par value Authorized - 90,000,000 shares and 500 shares, respectively Issued and outstanding - 13,526,625 shares and 100 shares, respectively		135,266			1
Additional paid-in capital		132,590,923			12,750,999
Retained earnings		82,652,959			77,480,318
Unearned employee stock ownership plan (ESOP)		(14,584,215	)		-
Accumulated other comprehensive loss		(441,028	)		(4,378,286	)
Total stockholders' equity		200,353,905			85,853,032

Total liabilities and stockholders' equity	$	956,220,017		$	849,618,363

	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019			2018
Interest Income
Loans and leases	$	9,318,054		$	8,067,685	$	27,247,406		$	23,047,744
Investment securities		862,331			876,642		2,760,808			2,572,381
Other		626,705			27,120		954,274			109,412
Total interest income		10,807,090			8,971,447		30,962,488			25,729,537

Interest Expense
Deposits		2,033,000			1,474,865		6,027,160			3,984,264
Borrowings		864,957			556,553		2,423,784			1,443,803
Total interest expense		2,897,957			2,031,418		8,450,944			5,428,067

Net Interest Income		7,909,133			6,940,029		22,511,544			20,301,470
Provision for losses on loans and leases		705,000			450,000		1,715,000			1,350,000

Net Interest Income After Provision for Losses on Loans and Leases
		7,204,133			6,490,029		20,796,544			18,951,470

Other Income
Service charges on deposit accounts		295,703			284,501		779,147			810,475
Card fee income		189,583			168,769		542,072			504,811
Loan and lease servicing fees		68,079			81,203		280,282			225,369
Net gains on securities (includes $21,827 and $0, $83,059 and $11,952, related to accumulated other comprehensive loss reclassifications)		21,827			-		83,059			11,952
Net gains on loan and lease sales		231,534			154,686		442,332			355,102
Other loan fees		211,249			103,302		454,283			333,597
Other income		129,121			213,806		370,281			505,420
Total other income		1,147,096			1,006,267		2,951,456			2,746,726

Other Expenses
Salaries and employee benefits		3,840,806			3,417,559		12,632,760			10,269,584
Net occupancy expenses		275,535			256,422		825,480			812,066
Equipment expenses		250,173			224,790		725,818			681,412
Data processing fees		442,082			344,741		1,280,248			1,089,534
Deposit insurance expense		23,983			172,000		316,983			434,000
Printing and office supplies		45,099			28,265		114,119			106,744
Legal and professional fees		310,561			146,800		816,315			428,617
Advertising expense		197,799			122,807		494,475			358,375
Bank service charges		29,383			28,569		93,652			80,504
Real estate owned expense		7,481			10,297		44,874			29,015
Loss on sale of real estate owned		5,287			3,650		11,780			3,650
Donation to establish First Bank Richmond Charitable Foundation		6,250,000			-		6,250,000			-
Loan tax and insurance expense		81,061			5,980		130,788			103,010
Other expenses		740,514			719,627		2,171,469			2,072,981
Total other expenses		12,499,764			5,481,507		25,908,761			16,469,492

Income Before Income Tax Expense (Benefit)		(4,148,535	)		2,014,789		(2,160,761	)		5,228,704
Provision (benefit) for income taxes (includes $5,661 and $0, $21,543 and $3,124, related to income tax expense from reclassification of items)		(898,200	)		394,700		(617,800	)		1,021,300

Net Income (Loss)	$	(3,250,335	)	$	1,620,089	$	(1,542,961	)	$	4,207,404

Earnings (Loss) Per Share
Basic (for period July 2, 2019 to September 30, 2019)	$	(0.26	)		N/A	$	(0.26	)		N/A
Diluted (for period July 2, 2019 to September 30, 2019)	$	(0.26	)		N/A	$	(0.26	)		N/A

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018

Net Income (Loss)	$	(3,250,335	)	$	1,620,089		$	(1,542,961	)	$	4,207,404

Other Comprehensive Income (Loss)
Unrealized gain (loss) on available-for-sale securities, net of tax expense (benefit) of $175,173 and ($187,520), $1,400,357 and ($1,039,305).		500,236			(529,985	)		3,998,774			(2,937,374	)
Less: reclassification adjustment for realized gains included in net income, net of tax expense of $5,661 and $0, $21,544 and $3,124.		16,166			-			61,516			8,828
		484,070			(529,985	)		3,937,258			(2,946,202	)

Comprehensive Income (Loss)	$	(2,766,265	)	$	1,090,104		$	2,394,297		$	1,261,202

																				Accumulated
	Preferred Stock				Common Stock						Additional						Unearned			Other
	Shares				Shares						Paid-in			Retained			ESOP			Comprehensive
	Outstanding		Amount		Outstanding			Amount			Capital			Earnings			Shares			Loss			Total

Balances, June 30, 2019		-	$	-		100		$	1		$	12,750,999		$	79,187,692		$	-		$	(925,098	)	$	91,013,594
Net loss		-		-		-			-			-			(3,250,335	)		-			-			(3,250,335	)
Other comprehensive income		-		-		-			-			-			-			-			484,070			484,070
ESOP shares earned		-		-		-			-			(751	)		-			122,100			-			121,349
Issuance of common stock, net of offering costs		-		-		13,026,625			130,266			127,596,674			-			(14,706,315	)		-			113,020,625
Stock contributed to charitble foundation		-		-		500,000			5,000			4,995,000			-			-			-			5,000,000
Reorganization of Richmond Mutual Bancorporation		-		-		(100	)		(1	)		(12,750,999	)		6,715,602			-			-			(6,035,398	)

Balances, September 30, 2019		-	$	-		13,526,625		$	135,266		$	132,590,923		$	82,652,959		$	(14,584,215	)	$	(441,028	)	$	200,353,905

	September 30, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Available for sale
U.S. treasury securities	$	5,000	$	3	$	8	$	4,995
SBA Pools		11,975		-		79		11,896
Federal agencies		26,193		-		64		26,129
State and municipal obligations		33,654		339		102		33,891
Mortgage-backed securities - government- sponsored enterprises (GSE) residential		92,050		141		825		91,366
Equity securities		13		-		-		13
		168,885		483		1,078		168,290
Held to maturity
State and municipal obligations		16,729		236		8		16,957
		16,729		236		8		16,957

Total investment securities	$	185,614	$	719	$	1,086	$	185,247

	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Available for sale
Federal agencies	$	40,812	$	-	$	2,802	$	38,010
State and municipal obligations		30,531		34		776		29,789
Mortgage-backed securities - government- sponsored enterprises GSE residential		56,945		11		2,286		54,670
Equity securities		13		-		-		13
		128,301		45		5,864		122,482
Held to maturity
State and municipal obligations		18,580		70		107		18,543
Corporate obligations		2,500		2,610		-		5,110
		21,080		2,680		107		23,653

Total investment securities	$	149,381	$	2,725	$	5,971	$	146,135

2019	$	12,577
2020		42,946
2021		31,556
2022		19,196
2023		9,361
Thereafter		2,633

	$	118,269

	For the Period
	July 2, 2019 to
	September 30, 2019


Net income (loss)	$	(3,250,335	)
Shares outstanding for Basic EPS:
Average shares outstanding		13,526,625
Less: average unearned ESOP Shares		1,052,804
Shares outstanding for Basic EPS		12,473,821

Additional Dilutive Shares		-

Shares outstanding for Diluted EPS		12,473,821


Basic Earnings (Loss) Per Share	$	(0.26	)
Diluted Earnings (Loss) Per Share	$	(0.26	)

	September 30, 2019

Earned ESOP shares		9,018
Unearned ESOP shares		1,073,112
Total ESOP shares		1,082,130

Quoted per share price	$	13.99
Fair value of earned shares	$	126,162
Fair value of unearned shares	$	15,012,837