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Conversion spotlight: Richmond Mutual Bancorp

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Conversion spotlight: Richmond Mutual Bancorp

Richmond, Ind.-based Richmond Mutual BanCorp. Inc., the proposed stock holding company for First Bank Richmond, is seeking to raise up to $130.3 million in gross proceeds, which would make it the third-largest standard mutual bank conversion in the last five years. First Bank Richmond is experiencing rapid growth in its loan portfolio and holds a high amount of brokered deposits and borrowings relative to the industry.

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Loan growth and shifting composition

Gross loans and leases at the banks have doubled in the last three years to $679.1 million at March 31, and First Bank Richmond has significantly altered the composition of its portfolio during that period. According to regulatory data, commercial real estate and construction and land development loans occupied 43% of the March 31 total, up from 23% three years earlier. On the other hand, the closed-end, first-lien mortgage category has fallen to 19% of the portfolio from 27%, and lease financing receivables have declined 10 percentage points to 16%.

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Largest lending relationships and loans

The bank's largest lending relationship with one borrower at the end of 2018 totaled $10.1 million and comprised four commercial real estate loans secured by four hotels, two of which were in the Dayton, Ohio, area and two in the Cincinnati area, according to the prospectus.

The largest outstanding CRE loan was for $6.6 million and was backed by a first mortgage on a distribution facility in the Columbus, Ohio, area, and the largest construction and land development loan was for $6.4 million with an additional $1.6 million available to complete construction. The loan was secured by a first mortgage on a 96-unit multifamily development in the Columbus area. The bank's largest outstanding loan in the commercial and industrial space was a $4.5 million working-capital loan to a manufacturer secured by a first lien on the borrower's business assets, as well as a second mortgage on a 350,000-square-foot manufacturing plant in Piqua, Ohio.

The largest leasing relationship totaled $13.7 million in receivables, consisting of more than 3,000 leases with Arkansas.

Reliance on brokered deposits and borrowings

At March 31, total brokered deposits and borrowings totaled $261.8 million, representing close to one-third of total liabilities, compared to the aggregate for all U.S. banks and thrifts of 17.4%. Total brokered deposits at First Bank Richmond declined during the first quarter, but those with a remaining maturity of one year or less increased to $82.9 million from $55.3 million at the end of 2018.

Insider purchases

Directors and executive officers plan to buy 225,100 shares, representing 1.7% of the shares offered at the supermax. Director Lindley Mann is planning to purchase 40,000 shares, which is the maximum amount allowed for groups. Another director, M. Lynn Wetzel, anticipates buying 30,000 shares, which is the maximum for individuals.

Jeffrey Jackson, who plans to buy 7,500 shares, is the newest director, having joined in November 2018. He also is a director of regional accounting firm Brady Ware & Co.

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Peer group analysis

S&P Global Market Intelligence created a peer group for Richmond Mutual, consisting of 10 select public thrifts trading on the Nasdaq with total assets between $500 million and $2 billion at March 31. Mutual holding companies and merger targets were excluded from the analysis. Richmond Mutual is priced at 74.5% of pro forma tangible book value at the supermax, which is a 41% discount to the peer median price-to-TBV as of May 21. IF Bancorp Inc. is the only peer trading below TBV.

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