Buy Richmond Mutual Bancorporation For Its 5% Yield

seekingalpha2023-11-15

Richmond Mutual Bancorporation offers a dividend yield above 5%, making it an attractive investment option.The bank operates in Indiana and Ohio, primarily focusing on attracting deposits and making ...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nBuy Richmond Mutual Bancorporation For Its 5% Yield\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-11-15 23:25 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4652042-buy-richmond-mutual-bancorporation-for-its-5-percent-yield><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Richmond Mutual Bancorporation offers a dividend yield above 5%, making it an attractive investment option.The bank operates in Indiana and Ohio, primarily focusing on attracting deposits and making ...</p>\n\n<a href=\"https://seekingalpha.com/article/4652042-buy-richmond-mutual-bancorporation-for-its-5-percent-yield\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"SIVBQ","symbol_name":"硅谷银行","start_time":0,"source_url":"https://seekingalpha.com/article/4652042-buy-richmond-mutual-bancorporation-for-its-5-percent-yield","article_id":"2383851715","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/513232938/image_513232938.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2383851715","pubTimestamp":1700061930,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Richmond Mutual Bancorporation offers a dividend yield above 5%, making it an attractive investment option.The bank operates in Indiana and Ohio, primarily focusing on attracting deposits and making l","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"SIVBQ":"硅谷银行","BK4211":"区域性银行","BK4207":"综合性银行","BK4589":"SVB概念","RMBI":"Richmond Mutual Bancorporation, Inc.","BK4585":"ETF&股票定投概念"},"translate_title":"以5%的收益率买入Richmond Mutual Bancorporation","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"RMBI":1,"SIVBQ":1,"US10Y.BOND":1,"US12M.BOND":1,"US2Y.BOND":1,"US30Y.BOND":1,"US3Y.BOND":1,"US5Y.BOND":1,"US6M.BOND":1,"US7Y.BOND":1},"content_text":"Richmond Mutual Bancorporation offers a dividend yield above 5%, making it an attractive investment option.The bank operates in Indiana and Ohio, primarily focusing on attracting deposits and making loans.Richmond's financial performance has been stable, with strong growth in revenues and net interest income.Zerbor Richmond Mutual Bancorporation (NASDAQ:RMBI) offers a dividend yield above 5%, being its most attractive feature of its investment case. Business Overview Richmond Mutual Bancorporation (Richmond) is based in Indiana and was formed in 2019, to serve as the holding company for First Bank Richmond following its restructuring from mutual to a stock holding company form of organization. Its current market value is about $117 million, being therefore a small-cap by this measure. Richmond is a commercial bank operating in the state of Indiana, and was originally established back in 1887, having therefore a long history. The bank provides full banking services in Indiana and Ohio, being regulated by the IDFI and FDIC. Its core business is quite simple and is basically the 'bread and butter' of the banking industry, which is to attract deposits and make loans. Its loan book mainly consist of secured loans backed by commercial and multi-family real estate, first mortgages on owner-occupied properties, consumer loans, finance leases, and other loans. In the asset side, beyond loans, the bank also owns investment securities for liquidity purposes, including mortgage-backed and mortgage-related securities, agency, and municipal bonds. In addition, the bank also provides some trust and wealth management services, having assets under management of about $139 million at the end of 2022. Due to its relatively straightforward business model, the vast majority of its revenues come from net interest income (NII), which is basically the difference between interest earned and paid by the bank, while service charges and fees have a much smaller weight on total revenues. This business profile is not expected to change meaningfully in the foreseeable future, given that Richmond is focused on its banking activities and it's not likely to change its strategy over the long term. Nevertheless, Richmond may pursue other growth sources in the future, diversifying its business across the financial services industry. For instance, last year Richmond formed First Insurance Management, an insurance company based in Nevada, aiming to provide additional property and casualty insurance coverage to its group, when insurance may not be available or economically feasible in the insurance marketplace. In the future, it may decide to also extend its insurance coverage to customers, further diversifying its business beyond banking. At the end of 2022, Richmond had about $1.3 billion in assets, and a loan book of some $961 million, which was funded mainly by deposits ($1 billion) and shareholders' equity ($133 million). Geographically, its presence is mainly in Wayne and Shelby counties in Indiana, Franklin counties in Ohio, having therefore a limited geographic presence in some selected areas. By segment, about 30% of its loans were to commercial mortgage, 15% to residential mortgage, 14% for construction and development, 13% for leases, 12.5% for multi-family, while only about 3% of its total loans were consumer loans. Given that the vast majority of its loan book is collateralized, and assuming that appraisal values are performed in a relatively conservative way, Richmond's risk profile is somewhat low, even though geographically it is quite concentrated. Financial Overview Regarding its financial performance, the bank has a relatively good track record given that it has reported relatively stable earnings over the past three years, not being affected much by Covid due to its high exposure to secured lending and real estate, which did not require increasing provisions in 2020. More recently, the bank has reported strong growth, boosted by its efforts to increase its loan book in the construction and lease segments. While this somewhat increases its risk profile compared to secured loans, it also has higher lending margins which have been positive for the bank's revenue and earnings growth. Indeed, in 2022, Richmond's revenues amounted to $46.5 million, an increase of 6.5% YoY. Its net interest income was $41.6 million, representing 89% of total revenue, and was the bank's major top-line growth source, up by 8.9% over the previous year. While this is a positive development, it also shows that Richmond is not a bank with much exposure to interest rates, given that a good part of if loan book is set at fixed interest rates, thus despite the Fed's hiking pace, its NII growth was not particularly impressive. Regarding other revenue sources, its non-NII income was $4.8 million, a decline of 10.2% YoY, mainly due to lower gains on lease sales. Its total expenses were $30.1 million, up by 5.3% YoY, pressured by the inflationary environment, but its cost growth was slightly lower than revenue growth which led to better efficiency in the year. Its cost-to-income ratio, a key measure of efficiency in the banking sector, was 64.8% in 2022, a ratio that is higher than the most efficient banks in the sector. However, due to its smaller size, it's hard for Richmond to compete with larger banks, as regulatory and technology costs can have more impact on smaller banks, thus I'm not expecting a significant improvement on this metric over the next few years. Its credit quality remained quite resilient despite higher interest rates, leading to just $0.6 million of loan loss provisions (vs. $1.4 million in 2021) during last year, showing that Richmond has good credit quality and a relatively low risk profile. Due to better efficiency and contained loan losses, its net income was nearly $13 million in 2022, up by 16.3% YoY. Its return on equity ratio was 8.8%, which is acceptable within the banking sector, even though it's not above its cost of capital and needs some improvement in the future. During the first nine months of 2023, Richmond has maintained a good operating momentum, boosted by loan growth and higher interest rates. Deposits also increased by some 5% since the end of 2022, to $1.05 billion, which is a very good signal that customers trust Richmond Mutual, despite the issues with regional banks during the first half of the year and strong deposit outflows at other banks, which for instance led to the collapse of SVB Financial Group (OTCPK:SIVBQ). However, the bank had to increase its rates on time deposits to remain competitive in the marketplace, which led to a higher increase in interest expense than interest income. Its NII declined by 7.9% YoY in the first nine months of 2023, to $28.1 million, not a good outcome during a rising interest rate environment. This is explained by a much higher deposit beta compared to other larger banks, which is not surprising considering the turmoil in the regional bank space during the first half of 2023. Regarding costs and loan loss provisions, they remained quite stable compared to the same period of last year, which is a very positive outcome considering inflationary pressures and the ongoing economic slowdown. However, due to lower revenues in the first nine months of the year, Richmond's net income declined by 22% YoY to $7.5 million. Regarding its capital position, Richmond's CET1 ratio was 12.5% at the end of September, way above its capital requirement of 6.5%. This means the bank has a comfortable capital position, enabling it to have an interesting capital return policy to shareholders. Indeed, the bank has performed several share buybacks over recent years, and has a current program ongoing until June 2024. Beyond that, the bank has also delivered a growing dividend over the past three years, which was more than covered by its earnings. Its current quarterly dividend is $0.14 per share, or $0.56 annually, while its earnings per share over the last twelve months were above $1. This means its dividend payout ratio is about 55%, which is an acceptable ratio for a stable bank like Richmond, and leaves some room for further dividend growth in the coming years. At its current share price, Richmond offers a dividend yield of about 5.1%, which is above the sector's average and is quite interesting for income-oriented investors. Conclusion Richmond Mutual Bancorporation is a small bank operating in a specific region, with its local knowledge being its most important competitive advantage. Its business is quite simple, offering basically loans and deposits, and its credit quality is quite good, which is positive for the long-term sustainability of its business model. While its growth prospects may be somewhat muted, its shares are interesting from an income perspective as the bank has an above-average dividend yield, plus its currently trading at 0.95x book value, which seems fair taking into account its business profile and profitability level.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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