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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024

or
oTRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission file number: 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, Indiana 47374
(Address of principal executive offices; Zip Code)
(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. o 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No [X]
There were 10,908,590 shares of Registrant’s common stock, par value of $0.01 per share, issued and outstanding as of November 13, 2024.



RICHMOND MUTUAL BANCORPORATION, INC. AND SUBSIDIARY
10-Q
TABLE OF CONTENTS
Page
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Controls and Procedures
Legal Proceedings
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Other Information
Exhibits



PART I. FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS

Richmond Mutual Bancorporation, Inc.
Condensed Consolidated Balance Sheets
September 30,
2024		December 31,
2023
(Unaudited)
Assets
Cash and due from banks$8,520,922 $8,578,489 
Interest-earning demand deposits11,049,535 11,661,636 
Cash and cash equivalents19,570,457 20,240,125 
Interest-earning time deposits300,000 — 
Investment securities - available for sale267,251,153 282,688,326 
Investment securities - held to maturity4,052,456 4,949,530 
Loans held for sale220,000 793,500 
Loans and leases, net of allowance for credit losses of $15,772,747 and $15,663,153, respectively
1,140,969,151 1,090,073,198 
Premises and equipment, net13,018,031 13,311,892 
Federal Home Loan Bank stock13,907,100 12,647,100 
Interest receivable5,873,966 5,843,705 
Mortgage-servicing rights1,953,693 1,945,367 
Cash surrender value of life insurance3,833,530 3,764,929 
Other assets21,600,420 24,766,129 
Total assets$1,492,549,957 $1,461,023,801 
Liabilities
Noninterest-bearing deposits$98,521,848 $114,376,777 
Interest-bearing deposits990,572,616 926,763,134 
Total deposits1,089,094,464 1,041,139,911 
Federal Home Loan Bank advances252,000,000 271,000,000 
Advances by borrowers for taxes and insurance699,816 588,371 
Interest payable3,434,001 4,396,952 
Other liabilities7,295,079 9,038,991 
Total liabilities1,352,523,360 1,326,164,225 
Commitments and Contingent Liabilities— — 
Stockholders' Equity
Common stock, $0.01 par value
Authorized - 90,000,000 shares
Issued and outstanding - 10,948,818 shares and 11,208,500 shares at September 30, 2024 and December 31, 2023, respectively
109,488 112,085 
Additional paid-in capital99,282,509 101,347,566 
Retained earnings90,511,043 87,902,747 
Unearned employee stock ownership plan (ESOP)(10,906,239)(11,457,726)
Accumulated other comprehensive loss(38,970,204)(43,045,096)
Total stockholders' equity140,026,597 134,859,576 
Total liabilities and stockholders' equity$1,492,549,957 $1,461,023,801 
See Notes to Condensed Consolidated Statements.

1

Richmond Mutual Bancorporation, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Interest Income
Loans and leases$18,070,712 $15,270,405 $53,132,574 $42,561,814 
Investment securities2,002,123 2,040,973 6,178,777 5,965,374 
Other188,197 102,152 545,183 301,728 
Total interest income20,261,032 17,413,530 59,856,534 48,828,916 
Interest Expense
Deposits8,331,483 6,317,915 23,398,461 15,888,485 
Borrowings2,496,750 1,968,247 7,616,600 4,609,001 
Total interest expense10,828,233 8,286,162 31,015,061 20,497,486 
Net Interest Income9,432,799 9,127,368 28,841,473 28,331,430 
(Reversal of)/provision for credit losses(98,848)49,700 354,758 228,016 
Net Interest Income After (Reversal of)/Provision for Credit Losses9,531,647 9,077,668 28,486,715 28,103,414 
Noninterest Income
Service charges on deposit accounts325,470 274,653 908,121 831,431 
Card fee income301,384 303,815 893,031 904,539 
Loan and lease servicing fees, including mortgage servicing right impairment122,106 111,480 381,060 341,195 
Net gains (loss) on sales of securities available for sale (includes $11,331, $0, $(50,698), and $0, respectively, related to accumulated other comprehensive income reclassifications) 
11,331 — (50,698)— 
Net gains on loan and lease sales211,102 89,510 420,740 399,111 
Other income353,787 377,660 1,013,953 955,688 
Total noninterest income1,325,180 1,157,118 3,566,207 3,431,964 
Noninterest Expenses
Salaries and employee benefits4,580,929 4,377,159 13,826,856 12,891,376 
Net occupancy expenses332,479 337,348 1,005,702 1,005,142 
Equipment expenses233,619 275,318 699,175 872,852 
Data processing fees894,080 853,791 2,680,029 2,512,242 
Deposit insurance expense380,000 280,000 1,163,000 640,000 
Printing and office supplies31,816 49,825 124,225 122,404 
Legal and professional fees463,108 528,045 1,376,585 1,195,520 
Advertising expense111,183 94,707 281,999 261,179 
Bank service charges66,191 50,268 183,427 153,683 
Real estate owned expense3,883 12,112 16,370 35,935 
Other expenses918,246 1,153,819 2,767,545 3,019,254 
Total noninterest expenses8,015,534 8,012,392 24,124,913 22,709,587 
Income Before Income Tax Expense2,841,293 2,222,394 7,928,009 8,825,791 
Provision for income taxes (includes $2,380, $0, $(10,647), and $0, respectively, related to income tax benefit from reclassification of items)
369,415 273,637 1,026,636 1,280,861 
Net Income$2,471,878 $1,948,757 $6,901,373 $7,544,930 
Earnings Per Share
Basic$0.25 $0.19 $0.68 $0.72 
Diluted$0.24 $0.19 $0.68 $0.72 
See Notes to Condensed Consolidated Statements.

2

Richmond Mutual Bancorporation, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Net Income$2,471,878 $1,948,757 $6,901,373 $7,544,930 
Other Comprehensive Income (Loss)
Unrealized gain (loss) on available for sale securities, net of tax expense (benefit) of $2,184,979, $(3,063,330), $1,072,553, and $(2,651,043), respectively
8,219,682 (11,523,955)4,034,841 (9,972,970)
Less: reclassification adjustment for realized gains (losses) included in net income, net of tax benefit of $2,380, $0, $(10,647), and $0, respectively
8,951 — (40,051)— 
8,210,731 (11,523,955)4,074,892 (9,972,970)
Comprehensive Income (Loss)$10,682,609 $(9,575,198)$10,976,265 $(2,428,040)
See Notes to Condensed Consolidated Statements.

3

Richmond Mutual Bancorporation, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)

Three Months Ended September 30, 2024
Common StockAdditional
Paid-in
Capital		Retained
Earnings		Unearned
ESOP
Shares		Accumulated
Other
Comprehensive
Loss		Total
Shares
Outstanding		Amount
Balances, June 30, 202411,018,824 $110,188 $99,813,232 $89,457,837 $(11,090,068)$(47,180,935)$131,110,254 
Net income— — — 2,471,878 — — 2,471,878 
Other comprehensive income— — — — — 8,210,731 8,210,731 
ESOP shares earned— — (17,074)— 183,829 — 166,755 
Stock based compensation— — 371,537 — — — 371,537 
Exercise of stock options1,300 13 (24)— — — (11)
Common stock dividends ($0.14 per share)
— — — (1,418,672)— — (1,418,672)
Repurchase of common stock(71,306)(713)(885,162)— — — (885,875)
Balances, September 30, 202410,948,818 $109,488 $99,282,509 $90,511,043 $(10,906,239)$(38,970,204)$140,026,597 


Nine Months Ended September 30, 2024
Common StockAdditional
Paid-in
Capital		Retained
Earnings		Unearned
ESOP
Shares		Accumulated
Other
Comprehensive
Loss		Total
Shares
Outstanding		Amount
Balances, December 31, 202311,208,500 $112,085 $101,347,566 $87,902,747 $(11,457,726)$(43,045,096)$134,859,576 
Net income— — — 6,901,373 — — 6,901,373 
Other comprehensive income— — — — — 4,074,892 4,074,892 
ESOP shares earned— — (75,005)— 551,487 — 476,482 
Forfeiture of restricted stock awards(400)(4)4 — — — — 
Stock based compensation— — 1,102,526 — — — 1,102,526 
Exercise of stock options1,952 19 (32)— — — (13)
Common stock dividends ($0.42 per share)
— — — (4,293,077)— — (4,293,077)
Repurchase of common stock(261,234)(2,612)(3,092,550)— — — (3,095,162)
Balances, September 30, 202410,948,818 $109,488 $99,282,509 $90,511,043 $(10,906,239)$(38,970,204)$140,026,597 

See Notes to Condensed Consolidated Statements.


4

Richmond Mutual Bancorporation, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)

Three Months Ended September 30, 2023
Common StockAdditional
Paid-in
Capital		Retained
Earnings		Unearned
ESOP
Shares		Accumulated
Other
Comprehensive
Loss		Total
Shares
Outstanding		Amount
Balances, June 30, 202311,448,621 $114,486 $103,216,869 $86,929,536 $(11,825,384)$(48,200,190)$130,235,317 
Net income— — — 1,948,757 — — 1,948,757 
Other comprehensive loss— — — — — (11,523,955)(11,523,955)
ESOP shares earned— — (29,955)— 183,829 — 153,874 
Stock based compensation— — 386,768 — — — 386,768 
Common stock dividends ($0.14 per share)
— — — (1,470,633)— — (1,470,633)
Repurchase of common stock(148,546)(1,485)(1,690,478)— — — (1,691,963)
Balances, September 30, 202311,300,075 $113,001 $101,883,204 $87,407,660 $(11,641,555)$(59,724,145)$118,038,165 



Nine Months Ended September 30, 2023
Common StockAdditional
Paid-in
Capital		Retained
Earnings		Unearned
ESOP
Shares		Accumulated
Other
Comprehensive
Loss		Total
Shares
Outstanding		Amount
Balances, December 31, 202211,784,246 $117,842 $106,088,897 $88,122,052 $(12,193,043)$(49,751,175)$132,384,573 
Impact of ASU 2016-13 adoption— — — (3,785,168)— — (3,785,168)
Balances, January 1, 202311,784,246 117,842 106,088,897 84,336,884 (12,193,043)(49,751,175)128,599,405 
Net income— — — 7,544,930 — — 7,544,930 
Other comprehensive loss— — — — — (9,972,970)(9,972,970)
ESOP shares earned— — (86,153)— 551,488 — 465,335 
Stock based compensation— — 1,149,789 — — — 1,149,789 
Common stock dividends ($0.42 per share)
— — — (4,474,154)— — (4,474,154)
Repurchase of common stock(484,171)(4,841)(5,269,329)— — — (5,274,170)
Balances, September 30, 202311,300,075 $113,001 $101,883,204 $87,407,660 $(11,641,555)$(59,724,145)$118,038,165 

See Notes to Condensed Consolidated Statements.

5

Richmond Mutual Bancorporation, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,
20242023
Operating Activities
Net income$6,901,373 $7,544,930 
Adjustments to reconcile net income to net cash provided by operating activities
Provision for credit losses354,758 228,016 
Depreciation and amortization638,183 752,056 
Deferred income tax(25,729)(26,656)
Stock based compensation1,102,526 1,149,789 
Investment securities amortization, net726,168 854,478 
Net loss on sale of investment securities - available for sale
50,698 — 
Net gains on loan and lease sales(420,740)(399,111)
Loss (gain) on sale of real estate owned7,050 (698)
Gain on sale of premises and equipment(6,000)(1,800)
Accretion of loan origination fees(581,788)(771,833)
Amortization of mortgage-servicing rights141,242 161,024 
ESOP shares expense476,482 465,335 
Increase in cash surrender value of life insurance(68,601)(67,746)
Loans originated for sale(20,561,099)(15,524,749)
Proceeds on loans sold19,987,599 15,619,299 
Net change in
Interest receivable(30,261)(605,206)
Other assets1,976,081 (560,748)
Other liabilities(1,743,912)(2,794,381)
Interest payable(962,951)2,303,546 
Net cash provided by operating activities7,961,079 8,325,545 
Investing Activities
Net change in interest-bearing time deposits(300,000)245,000 
Purchases of securities available for sale(3,502,331)(9,555,258)
Proceeds from maturities and paydowns of securities available for sale16,414,642 16,751,355 
Proceeds from sales of securities available for sale6,907,932 — 
Proceeds from maturities and paydowns of securities held to maturity895,228 1,534,358 
Net change in loans(49,250,751)(108,229,672)
Proceeds from sales of real estate owned125,109 424,671 
Purchases of premises and equipment(344,322)(425,488)
Proceeds from sale of premises and equipment6,000 1,800 
Purchase of FHLB stock (1,260,000)(1,349,800)
Net cash used in investing activities(30,308,493)(100,603,034)
Financing Activities
Net change in
Demand and savings deposits(4,363,372)(33,185,130)
Certificates of deposit52,317,925 81,833,169 
Advances by borrowers for taxes and insurance111,445 108,122 
Proceeds from FHLB advances230,500,000 481,500,000 
Repayment of FHLB advances(249,500,000)(423,500,000)
Repurchase of common stock(3,095,162)(5,274,170)
Proceeds from stock option exercises(13)— 
Dividends paid(4,293,077)(4,474,154)
Net cash provided by financing activities21,677,746 97,007,837 
Net Change in Cash and Cash Equivalents(669,668)4,730,348 
Cash and Cash Equivalents, Beginning of Period20,240,125 15,922,093 
Cash and Cash Equivalents, End of Period$19,570,457 $20,652,441 
Additional Cash Flows and Supplementary Information
Interest paid$31,978,012 $18,193,940 
Transfers from loans to other real estate owned— 1,002,981 
See Notes to Condensed Consolidated Statements.

6

Richmond Mutual Bancorporation, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Table Dollar Amounts in Thousands, Except Per Share Amounts)
Note 1: Basis of Presentation
The accompanying financial information is unaudited and has been prepared from the consolidated financial statements of Richmond Mutual Bancorporation, Inc., and its wholly owned direct and indirect subsidiaries, First Bank Richmond, First Insurance Management, Inc., FB Richmond Holdings, Inc. and FB Richmond Properties, Inc. References in this document to Richmond Mutual Bancorporation refer to Richmond Mutual Bancorporation, Inc. References to “we,” “us,” and “our” or the “Company” refers to Richmond Mutual Bancorporation and its wholly-owned direct and indirect subsidiaries, First Bank Richmond, First Insurance Management, Inc., FB Richmond Holdings, Inc., and FB Richmond Properties, Inc. unless the context otherwise requires.
First Bank Richmond is an Indiana state-chartered commercial bank headquartered in Richmond, Indiana and the wholly owned banking subsidiary of Richmond Mutual Bancorporation. 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 Indiana Department of Financial Institutions ("IDFI") and the Federal Deposit Insurance Corporation ("FDIC").
First Insurance Management, Inc., a wholly-owned subsidiary of the Company which was formed and began operations in June 2022, is a Nevada-based captive insurance company that insures against certain risks unique to the operations of the Company and its subsidiaries and for which insurance may not be currently available or economically feasible in today's insurance marketplace. First Insurance Management, Inc. is subject to the regulations of the State of Nevada and undergoes periodic examinations by the Nevada Division of Insurance.
FB Richmond Holdings, Inc., a wholly-owned subsidiary of First Bank Richmond which was formed and began operations in April 2020, is a Nevada corporation that holds and manages substantially all of First Bank Richmond's investment portfolio. FB Richmond Holdings, Inc. has one active subsidiary, FB Richmond Properties, Inc., a Delaware corporation which holds loans on behalf of the Bank.
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 the year ended December 31, 2023 ("2023 Form 10-K") filed with the Securities and Exchange Commission (“SEC”) on March 29, 2024 (SEC File No. 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 results of operations for the periods are not necessarily indicative of the results to be expected for the full year.
Use of Estimates in Preparation of Financial Statements
Financial statements prepared in accordance with generally accepted accounting principles in the United States ("GAAP") require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates.
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

7

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.
On occasion, the Company will provide modifications to loans and leases to borrowers experiencing financial difficulty, by providing payment delays, term extensions, or interest-rate reductions. In some cases, combinations of modifications may be made to the same loan or lease. If determined that the value of the modified loan or lease is less than the recorded investment in the loan, a charge-off is recognized to the allowance for credit losses on loans and leases.
Note 2: Accounting Pronouncements
The Jumpstart Our Business Startups Act (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. This status will expire on December 31, 2024. 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. The Company has elected to comply with new or amended accounting pronouncements in the same manner as a private company.

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures, requiring public entities to disclose information about significant expenses for their reportable segments on both an interim and annual basis. Public entities must disclose significant expense categories and amounts for each reportable segment, which are derived from expenses regularly reported to the entity’s chief operating decision-maker (CODM) and included in the segment's reported measures of profit or loss. Additionally, public entities must disclose the title and position of the CODM and explain how the CODM uses these measures to assess segment performance. The ASU also mandates certain segment-related interim disclosures that were previously required only on an annual basis. The ASU is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted, and the ASU should be applied prospectively. Adoption of the ASU is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

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 the London Interbank Offer Rate ("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. In December of 2022, the FASB issued ASU No. 2022-06 which extended the period of time preparers can utilize the reference rate reform relief guidance in Topic 848. The guidance ensures the relief in Topic 848 covers the period of time during which a significant number of modifications may take place and the ASU defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The Company does not expect the adoption of ASU No. 2020-04 to have a material impact on its consolidated financial statements.


8

In March 2023, the FASB issued ASU No. 2023-02, Investments Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. This ASU allows reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. ASU No. 2023-02 is effective for all public business entities for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023. The Company adopted this guidance on January 1, 2024. Adoption of ASU 2023-02 did not have a material impact on the Company's consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU established new income tax disclosure requirements and modified existing requirements. The ASU requires additional information be disclosed for specified categories, and reconciling items that meet a certain threshold, within the rate reconciliation on an annual basis. Additionally, this ASU requires information be disclosed on the amount of income taxes paid (net of refunds), disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds) disaggregated by jurisdiction based on a quantitative threshold. ASU No. 2023-09 is effective for all public business entities for annual periods beginning after December 15, 2024. The ASU is effective for the Company beginning January 1, 2025. The Company does not expect the adoption of ASU No. 2023-09 to have a material impact on its consolidated financial statements.


Note 3: Investment Securities
The amortized cost and approximate fair values, together with gross unrealized gains and losses, of investment securities are as follows:
September 30, 2024
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Available for sale
U.S. treasury securities$2,206 $— $7 $2,199 
SBA Pools4,409 — 447 3,962 
Federal agencies15,000 — 1,427 13,573 
State and municipal obligations162,709 11 26,797 135,923 
Mortgage-backed securities - GSE residential120,757 — 18,399 102,358 
Corporate obligations11,500 — 2,264 9,236 
316,581 11 49,341 267,251 
Held to maturity
State and municipal obligations4,052 11 35 4,028 
4,052 11 35 4,028 
Total investment securities$320,633 $22 $49,376 $271,279 


9

December 31, 2023
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Available for sale
U.S. treasury securities$2,996 $— $20 $2,976 
SBA Pools5,337 — 565 4,772 
Federal agencies15,000 — 1,847 13,153 
State and municipal obligations169,118 16 27,688 141,446 
Mortgage-backed securities - government-sponsored enterprises (GSE) residential133,223 62 21,804 111,481 
Corporate obligations11,500 — 2,640 8,860 
337,174 78 54,564 282,688 
Held to maturity
State and municipal obligations4,950 13 42 4,921 
4,950 13 42 4,921 
Total investment securities$342,124 $91 $54,606 $287,609 
The amortized cost and fair value of investment securities at September 30, 2024, 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 SaleHeld to Maturity
Amortized
Cost		Fair
Value		Amortized
Cost		Fair
Value
Within one year$4,081 $4,054 $1,000 $997 
One to five years24,287 22,908 1,728 1,715 
Five to ten years39,371 35,455 714 725 
After ten years128,085 102,477 610 591 
195,824 164,894 4,052 4,028 
Mortgage-backed securities –GSE residential120,757 102,357 — — 
Totals$316,581 $267,251 $4,052 $4,028 
Investment securities with a carrying value of $115,500,000 and $162,430,000 were pledged at September 30, 2024 and December 31, 2023, respectively, to secure certain deposits and for other purposes as permitted or required by law.
Proceeds from the sale of securities available for sale for the three and nine months ended September 30, 2024 were $3,119,000 and $6,908,000, respectively. Gross losses recognized on the sale of securities available for sale for the three and nine months ended September 30, 2024 were $9,000 and $71,000, respectively. Gross gains on the sale of securities available for sale were $21,000 for both the three and nine months ended September 30, 2024. There were no sales of securities available for sale for the three and nine months ended September 30, 2023.
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 30, 2024 and December 31, 2023 was $267,216,000 and $279,852,000, respectively, which is approximately 98% and 97% of the Company’s aggregated available for sale and held to maturity investment portfolio at those dates, respectively.  These declines primarily resulted from changes in market interest rates since their purchase.
The Company does not consider available for sale securities with unrealized losses to be experiencing credit losses at September 30, 2024. Management considers it more likely than not that the Company will not be required to sell these investments before recovery of the amortized cost basis, which may be the maturity dates of the securities.

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Held to maturity securities are financial assets measured at amortized cost. Held to maturity securities are required to have an established allowance for credit losses that represents the portion of the amortized cost basis of a financial asset that is not expected to be collectable. The Company estimates expected credit losses on a collective basis by security type, with consideration given to historical information, credit ratings, and the statistical probability of future losses.
The Company monitors the credit quality of investment securities held to maturity through the use of credit ratings quarterly. As of September 30, 2024, there was no allowance for credit losses recognized on the Company's securities held to maturity portfolio.
The following table summarizes the amortized cost of held to maturity securities by credit quality indicator as of September 30, 2024:
State and municipal obligations
AA+$1,014 
AA-295 
A+605 
Not rated2,138 
$4,052 
The Company has elected to exclude accrued interest receivable from the calculation of the allowance for credit losses.
The following tables show the Company’s investment securities 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 30, 2024 and December 31, 2023:
Description of
Securities		September 30, 2024
Less Than 12 Months12 Months or MoreTotal
Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
Available for sale
U.S. Treasury Securities$2,199 $7 $— $— $2,199 $7 
SBA Pools253 — 3,203 447 3,456 447 
Federal agencies— — 13,573 1,427 13,573 1,427 
State and municipal obligations816 4 133,242 26,793 134,058 26,797 
Mortgage-backed securities - GSE residential— — 102,357 18,399 102,357 18,399 
Corporate obligations— — 9,236 2,264 9,236 2,264 
Total available for sale3,268 11 261,611 49,330 264,879 49,341 
Held to maturity
State and municipal obligations100 2,237 35 2,337 35 
Total$3,368 $11 $263,848 $49,365 $267,216 $49,376 


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Description of
Securities		December 31, 2023
Less Than 12 Months12 Months or MoreTotal
Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
Available for sale
U.S. Treasury securities$489 $4 $2,487 $16 $2,976 $20 
SBA Pools329 — 4,410 565 4,739 565 
Federal agencies— — 13,153 1,847 13,153 1,847 
State and municipal obligations1,565 21 137,119 27,667 138,684 27,688 
Mortgage-backed securities - GSE residential3,458 139 104,581 21,665 108,039 21,804 
Corporate obligations— — 8,860 2,640 8,860 2,640 
Total available for sale5,841 164 270,610 54,400 276,451 54,564 
Held to maturity
State and municipal obligations849 3 2,552 39 3,401 42 
Total$6,690 $167 $273,162 $54,439 $279,852 $54,606 
Federal Agency Obligations.  The unrealized losses on the Company’s investments in direct obligations of U.S. federal agencies 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.  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.
SBA Pools and Mortgage-Backed Securities - GSE Residential.  The unrealized losses on the Company’s investment in mortgage-backed securities and SBA pools were caused by interest rate changes and illiquidity.  The Company expects to recover the amortized cost basis over the term of the securities. The decline in fair value is attributable to changes in interest rates and not credit quality. The Company does not intend to sell the securities and it is not more likely than not the Company will be required to sell the securities before recovery of their amortized cost basis, which may be maturity.
State, Municipal, and Corporate Obligations.  The unrealized losses on the Company’s investments in securities of state, municipal, and corporate obligations were caused by interest rate changes.  The contractual terms of those securities do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments.  The Company does not intend to sell the securities and it is not more likely than not the Company will be required to sell the securities before recovery of their amortized cost basis, which may be maturity.
The Company expects the fair value of the securities as described above to recover as the securities approach their maturity or reset date.

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Note 4: Loans, Leases and Allowance
The following table shows the composition of the loan and lease portfolio at September 30, 2024 and December 31, 2023:
September 30,
2024		December 31,
2023
Commercial mortgage$348,473 $341,633 
Commercial and industrial126,591 115,428 
Construction and development140,761 157,805 
Multi-family183,778 138,757 
Residential mortgage172,873 162,123 
Home equity lines of credit15,236 10,904 
Direct financing leases147,057 156,598 
Consumer22,608 23,264 
1,157,377 1,106,512 
Less
Allowance for credit losses on loans and leases15,773 15,663 
Deferred loan fees635 776 
$1,140,969 $1,090,073 

The Company rates all loans and leases by credit quality using the following designations:
Grade 1 – Exceptional
Exceptional loans and leases are top-quality loans to individuals whose financial credentials are well known to the Company. These loans and leases have excellent sources of repayment, are well documented and/or virtually free of risk (i.e., CD secured loans).
Grade 2 – Quality Loans and Leases
These loans and leases have excellent sources of repayment with no identifiable risk of collection, and they conform in all respects to Company policy and IDFI and 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 and leases.  These loans and leases 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 and leases 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 and leases 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 and leases 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 lease or in the Company’s credit position at some future date.  Special Mention loans and leases 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 or lease has a higher probability of default than a pass rated loan or lease, its default is not imminent.

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Grade 6 – Substandard
Loans and leases 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 and leases 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 and leases have a high probability of payment default, or they have other well-defined weaknesses.  Such loans and leases have a distinct potential for loss; however, an individual loan’s or lease’s potential for loss does not have to be distinct for the loan or lease to be rated substandard.
The following are examples of situations that might cause a loan or lease to be graded a “6”:
•Cash flow deficiencies (losses) jeopardize future loan or lease payments.
•Sale of non-collateral assets has become a primary source of loan or lease 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 or lease repayment.
•The borrower is bankrupt or for any other reason future repayment is dependent on court action.
Grade 7 – Doubtful
A loan or lease 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 or lease 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 and leases.
Grade 8 – Loss
Loans and leases 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 or lease has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan or lease even though partial recovery may be effected in the future.
No material changes have been made to the risk characteristics discussed above contained in the Company's 2023 Form 10-K.

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The following tables present the credit risk profile of the Company’s loan and lease portfolio based on rating category, payment activity, and origination year as of September 30, 2024 and rating category as of December 31, 2023:
20242023202220212020PriorRevolving loans amortized cost basisTotal
As of September 30, 2024:
Commercial mortgage
Pass$14,473 $40,885 $82,201 $63,925 $31,744 $92,255 $17,494 $342,977 
Substandard— — — 238 4,754 504 — 5,496 
Total Commercial mortgage14,473 40,885 82,201 64,163 36,498 92,759 17,494 348,473 
Current period gross charge-offs— — — — — — — — 
Commercial and industrial
Pass16,374 34,752 10,445 11,720 3,506 10,626 34,656 122,079 
Substandard