Table of Contents
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2025
or
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission File No. 001-38779
Rhinebeck Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Maryland
83-2117268
(State or other jurisdiction ofincorporation or organization)
(I.R.S. EmployerIdentification Number)
2 Jefferson Plaza, Poughkeepsie, New York
12601
(Address of Principal Executive Offices)
(Zip Code)
(845) 454-8555
(Registrant’s telephone number)
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
RBKB
The NASDAQ Stock Market, LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 requirements for the past 90 days.
Yes ☒ 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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. (Check one)
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller reporting company ☒
Emerging growth company ☐
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 ☒
As of May 1, 2025, there were 11,098,404 shares of the Registrant’s common stock, par value $0.01 per share, outstanding.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements (Unaudited)
1
Consolidated Statements of Financial Condition at March 31, 2025 and December 31, 2024
Consolidated Statements of Income for the Three Months Ended March 31, 2025 and 2024
2
Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2025 and 2024
3
Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2025 and 2024
4
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2025 and 2024
5
Notes to Consolidated Financial Statements
6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
37
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
46
Item 4.
Controls and Procedures
PART II. OTHER INFORMATION
47
Legal Proceedings
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
48
SIGNATURES
49
PART I — FINANCIAL INFORMATION
ITEM 1.
Rhinebeck Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition (Unaudited)
(In thousands, except share and per share data)
March 31,
December 31,
2025
2024
Assets
Cash and due from banks
$
23,194
18,561
Federal funds sold
26,759
18,309
Interest bearing depository accounts
564
614
Total cash and cash equivalents
50,517
37,484
Available for sale securities (at fair value)
144,872
159,947
Loans receivable (net of allowance for credit losses of $8,406 and $8,539, respectively)
976,502
971,779
Federal Home Loan Bank stock
3,245
3,960
Accrued interest receivable
4,632
4,435
Cash surrender value of life insurance
30,381
30,193
Deferred tax assets (net of valuation allowance of $1,211 and $1,336, respectively)
7,201
8,114
Premises and equipment, net
13,903
14,105
Goodwill
2,235
Intangible assets, net
146
166
Other assets
22,290
23,347
Total assets
1,255,924
1,255,765
Liabilities and Stockholders’ Equity
Liabilities
Deposits
Non-interest bearing
237,952
238,126
Interest bearing
796,289
782,657
Total deposits
1,034,241
1,020,783
Mortgagors’ escrow accounts
7,626
9,425
Advances from the Federal Home Loan Bank
53,873
69,773
Subordinated debt
5,155
Accrued expenses and other liabilities
29,054
28,796
Total liabilities
1,129,949
1,133,932
Stockholders’ Equity
Preferred stock (par value $0.01 per share; 5,000,000 authorized, no shares issued)
—
Common stock (par value $0.01; authorized 25,000,000; issued and outstanding 11,094,828 at March 31, 2025 and December 31, 2024)
111
Additional paid-in capital
45,955
45,946
Unearned common stock held by the employee stock ownership plan
(3,000)
(3,055)
Retained earnings
94,054
91,766
Accumulated other comprehensive loss:
Net unrealized loss on available for sale securities, net of taxes
(8,690)
(10,480)
Defined benefit pension plan, net of taxes
(2,455)
Total accumulated other comprehensive loss
(11,145)
(12,935)
Total stockholders’ equity
125,975
121,833
Total liabilities and stockholders’ equity
See accompanying notes to consolidated financial statements
Consolidated Statements of Income (Unaudited)
Three Months Ended March 31,
Interest and Dividend Income
Interest and fees on loans
15,008
14,297
Interest and dividends on securities
1,351
1,037
Other income
279
217
Total interest and dividend income
16,638
15,551
Interest Expense
Interest expense on deposits
4,762
5,134
Interest expense on borrowings
839
1,605
Total interest expense
5,601
6,739
Net interest income
11,037
8,812
Provision for Credit Losses
353
83
Net interest income after provision for credit losses
10,684
8,729
Non-interest Income
Service charges on deposit accounts
773
743
Net gain on sales of loans
38
Increase in cash surrender value of life insurance
188
184
Net gain from sale of other real estate owned
Net loss on disposal of premises and equipment
(18)
Investment advisory income
336
381
Other
416
250
Total non-interest income
1,751
1,590
Non-interest Expense
Salaries and employee benefits
4,992
Occupancy
1,071
1,053
Data processing
525
495
Professional fees
477
414
Marketing
200
121
FDIC deposit insurance and other insurance
297
253
Amortization of intangible assets
20
21
1,784
1,528
Total non-interest expense
9,508
8,877
Net income before income taxes
2,927
1,442
Net Provision for Income Taxes
639
321
Net income
2,288
1,121
Earnings per common share:
Basic
0.21
0.10
Diluted
Weighted average shares outstanding, basic
10,777,044
10,748,006
Weighted average shares outstanding, diluted
10,923,364
10,844,287
Consolidated Statements of Comprehensive Income (Unaudited)
Net Income
Other Comprehensive Income
Unrealized holding gains (losses) arising during the period
2,266
(734)
Net unrealized gains (losses) on available for sale securities
Tax effect
(476)
154
Unrealized gains (losses) on available for sale securities, net of tax
1,790
(580)
Other comprehensive income (loss):
Total Comprehensive Income
4,078
541
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
Unearned
Accumulated
Additional
Common
Paid-in
Stock Held
Retained
Comprehensive
Stock
Capital
by the ESOP
Earnings
Loss
Total
Balance at December 31, 2023
45,959
(3,273)
100,386
(29,498)
113,685
Other comprehensive loss
ESOP shares committed to be allocated
(8)
54
Balance at March 31, 2024
45,951
(3,219)
101,507
(30,078)
114,272
Balance at December 31, 2024
Other comprehensive income
55
Share-based compensation expense
9
Balance at March 31, 2025
Consolidated Statements of Cash Flows (Unaudited)
Cash Flows from Operating Activities
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and accretion of premiums and discounts on investments, net
(97)
61
Net realized gain on sale of other real estate owned
(4)
Provision for credit losses
Loans originated for sale
(385)
(1,957)
Proceeds from sale of loans
423
2,017
Net gain on sale of loans
(38)
(46)
Depreciation and amortization
318
344
Net loss from disposal of premises and equipment
18
Deferred income tax benefit
437
Increase in cash surrender value of insurance
(188)
(184)
Net (increase) decrease in accrued interest receivable
(197)
Expense of earned ESOP shares
Net decrease (increase) in other assets
1,057
(5,492)
Net increase in accrued expenses and other liabilities
258
447
Net cash provided by (used in) operating activities
4,313
(3,500)
Cash Flows from Investing Activities
Proceeds from maturities and principal repayments of securities
18,069
8,545
Purchases of securities
(631)
Net purchases of FHLB Stock
715
900
Net (increase) decrease in loans
(5,076)
15,408
Purchases of bank premises and equipment
(116)
(244)
Proceeds from disposal of premises and equipment
2,857
Proceeds from sale of other real estate owned
29
Net cash provided by investing activities
12,961
27,495
Cash Flows from Financing Activities
Net increase (decrease) in demand deposits, NOW, money market and savings accounts
21,745
(8,403)
Net (decrease) increase in time deposits
(8,287)
14,924
Net decrease in mortgagors' escrow accounts
(1,799)
(1,973)
Net decrease in short-term debt
(15,900)
(20,000)
Net cash used in financing activities
(4,241)
(15,452)
Net increase in cash and cash equivalents
13,033
8,543
Cash and Cash Equivalents
Beginning balance
22,129
Ending balance
30,672
Supplemental Disclosures of Cash Flow Information
Cash paid for:
Interest
5,743
6,547
Income taxes
105
108
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
1. Nature of Business and Significant Accounting Policies
The financial statements include the accounts of Rhinebeck Bancorp, Inc. (the “Company”), a stock holding company, and its wholly-owned subsidiary, Rhinebeck Bank (the “Bank”), a New York chartered stock savings bank. The primary purpose of the Company is to act as a holding company for the Bank. The Bank provides a full range of banking and financial services to consumer and commercial customers through its thirteen branches and two representative offices located in Dutchess, Ulster, Orange, and Albany counties. Financial services, including investment advisory and financial product sales, are offered through a division of the Bank doing business as Rhinebeck Asset Management.
The unaudited consolidated financial statements reflect all adjustments, which in the opinion of management are necessary for a fair presentation of the results of the interim periods and are of a normal and recurring nature. Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025 or for any other period.
The unaudited financial statements and other financial information contained in this Quarterly Report on Form 10-Q should be read in conjunction with the audited financial statements, and related notes, of the Company at and for the year ended December 31, 2024 contained in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 25, 2025 (the “Annual Report on Form 10-K”).
For more information regarding the Company’s significant accounting policies, see the Notes to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K. As of March 31, 2025, the critical accounting policies of the Company have not changed materially from those disclosed in the Annual Report on Form 10-K. See Note 1 of the Consolidated Financial Statements– Nature of Business and Significant Accounting Policies.
Basis of Financial Statements Presentation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and general practices within the banking industry. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities, as of the date of the consolidated statements of financial condition and reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses (“ACL”), the evaluation of goodwill for impairment and the valuation of deferred tax assets.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.
Reclassifications
Certain amounts in the prior year consolidated financial statements may be reclassified as required to conform to the current year’s presentation. These reclassifications have no effect on our previously reported net income or shareholders’ equity. From and after January 1, 2025, the Company reclassified swap income in its consolidated financial statements. In the consolidated statements of income as of March 31, 2024, $84 previously included in “Interest and Fees on Loans” was reclassified to “Other non-interest income.” These amounts were reclassified to conform to the current year’s presentation.
Impact of Recent Accounting Pronouncements
In October 2023, the FASB issued ASU 2023-06, which amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification. In annual periods, this requires disclosure of an entity’s accounting policy related to the entity’s presentation of cash flows associated with derivative instruments and the related gains and losses in the statement of cash flows. This also requires disclosure of the methods used in the diluted earnings per share computation for each dilutive security and clarifies that certain disclosures should be made during interim periods. The effective dates of ASU 2023-06 will be the date on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company is evaluating the impact of this ASU but does not expect it to have a material impact on the Company’s consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740), Improvements to Income Tax Disclosures.” The amendments in ASU 2023-09 require greater disaggregation of income tax disclosures related to the income tax rate reconciliation and income taxes paid. The ASU indicates that all entities will apply its guidance prospectively with an option for retroactive application to each period in the financial statements. The guidance will be effective for fiscal years beginning after December 15, 2024, and for interim periods for fiscal years beginning after December 15, 2025, with an allowance for early adoption. The Company is evaluating the impact of this ASU but does not expect it to have a material impact on the Company’s consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures”, which requires disaggregated disclosure of income statement expenses for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. The ASU requires new financial statement disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense captions. The guidance will be effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. Upon adoption, ASU 2024-03 may be applied prospectively or retrospectively. The Company is evaluating the impact of this ASU but does not expect it to have a material impact on the Company’s consolidated financial statements.
7
2. Investment Securities
The amortized cost, gross unrealized gains and losses and fair values of available for sale securities are as follows:
March 31, 2025
Gross
Unrealized
Amortized Cost
Gains
Losses
Fair Value
U.S. Treasury securities
14,972
59
(93)
14,938
U.S. government agency mortgage-backed securities–residential
101,481
10
(8,822)
92,669
U.S. government agency securities
22,006
(605)
21,401
Municipal securities(1)
2,716
(194)
2,522
Corporate bonds
14,054
(1,232)
12,822
642
(122)
520
155,871
69
(11,068)
December 31, 2024
29,841
(154)
29,693
103,948
(10,456)
93,492
22,010
(844)
21,166
2,717
(224)
2,493
(1,471)
12,583
173,212
(13,271)
(1)
The issuers of municipal securities are all within New York State.
The following tables present the fair value and unrealized losses of the Company’s available for sale securities with gross unrealized losses aggregated by the length of time the individual securities have been in a continuous unrealized
loss position:
Less Than 12 Months
12 Months or Longer
5,010
(9)
4,914
(84)
9,924
U.S. government agency mortgage-backed securities-residential
39,800
(528)
48,330
(8,294)
88,130
Municipal securities
2,423
497
44,810
(537)
90,387
(10,531)
135,197
8
9,957
(22)
4,866
(132)
14,823
44,577
(1,074)
48,915
(9,382)
54,534
(1,096)
90,520
(12,175)
145,054
At March 31, 2025, the Company had 170 individual available for sale securities in an unrealized loss position with unrealized losses totaling $11,068 with an aggregate depreciation of 7.10% from the Company’s amortized cost.
The Company evaluates securities in an unrealized loss position for impairment related to credit losses on at least a quarterly basis. Securities in unrealized loss positions are first assessed as to whether we intend to sell, or if it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If one of the criteria is met, the security’s amortized cost basis is written down to fair value through current earnings. For securities that do not meet these criteria, the Company evaluates whether the decline in fair value resulted from credit losses or other factors. If this assessment indicates that a credit loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis. Unrealized losses on asset-backed securities, state and municipal securities, and corporate bonds have not been recognized into income because the issuers are of high credit quality, we do not intend to sell and it is likely that we will not be required to sell the securities prior to their anticipated recovery. The decline in fair value is largely due to changes in interest rates and other market conditions. The issuers continue to make timely principal and interest payments on the securities. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes. No allowance for credit losses for available for sale securities was recorded as of March 31, 2025.
Federal agency obligations, residential mortgage-backed pass-through securities and commercial mortgage-backed pass-through securities are issued by U.S. Government agencies and U.S. Government sponsored enterprises. Although a government guarantee exists on these investments, these entities are not legally backed by the full faith and credit of the federal government. Nonetheless, at this time we do not foresee any set of circumstances in which the government would not fund its commitments on these investments.
The amortized cost and fair value of available for sale debt securities at March 31, 2025 and December 31, 2024, by contractual maturities, are presented below. Actual maturities of mortgage-backed securities may differ from contractual maturities because the mortgages underlying the securities may be called or repaid without any penalties. Because mortgage-backed securities are not due at a single maturity date, they are not included in the maturity categories in the following maturity summary:
Maturity:
Within 1 year
20,518
20,282
34,394
34,056
After 1 but within 5 years
19,903
19,392
20,901
20,113
After 5 but within 10 years
13,327
12,009
11,766
After 10 years
Total Maturities
53,748
51,683
68,622
65,935
Mortgage-backed securities
At March 31, 2025 and December 31, 2024, available for sale securities with a carrying value of $91,301 and $101,395, respectively, were pledged to secure Federal Home Loan Bank of New York (“FHLB”) borrowings. In addition, at March 31, 2025 and December 31, 2024, $942 and $937 of available for sale securities were pledged to secure borrowings at the Federal Reserve Bank of New York (“FRB”), respectively.
During the three months ended March 31, 2025, there were no sales of available for sale securities and no realized gains or losses.
The Company elected not to measure an allowance for credit losses for accrued interest receivable, because a timely write-off policy exists. A security is placed on non-accrual status at the time any principal or interest payments become more than 90 days delinquent or if full collection of interest or principal becomes uncertain. Accrued interest for a security placed on non-accrual status is reversed against interest income. There were no securities on non-accrual status and therefore there was no accrued interest related to securities reversed against interest income for the periods ended March 31, 2025 or December 31, 2024. Total accrued interest receivable on available for sale securities totaled $648 and $498 at March 31, 2025 and December 31, 2024, respectively, and was reported in accrued interest receivable on the consolidated statements of financial condition of this Form 10-Q.
3. Loans and Allowance for Credit Losses
A summary of the Company’s loan portfolio is as follows:
Commercial real estate loans:
Construction
24,618
26,611
Non-residential
367,522
350,962
Multi-family
108,373
105,030
Residential real estate loans
90,982
86,651
Commercial and industrial loans
91,957
91,517
Consumer loans:
Indirect automobile
277,922
295,669
Home equity
11,782
11,656
Other consumer
6,746
6,830
Total gross loans
979,902
974,926
Dealer reserves
5,006
5,392
Allowance for credit losses
(8,406)
(8,539)
Total net loans
There were no unpaid principal balances of loans held for sale, which would have been included in the residential real estate category above, at either March 31, 2025 or December 31, 2024.
The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans:
Greater Than
30-59 Days
60-89 Days
90 Days Past
Total Loans
Current
Past Due
Due
Receivable
Non-accrual
Commercial real estate:
365,714
122
1,686
1,687
Multifamily
108,354
19
Residential real estate
89,492
1,438
52
1,004
Commercial and industrial
91,233
475
102
147
Consumer:
268,793
7,338
1,163
628
645
11,627
126
6,518
196
32
966,349
9,695
1,316
2,542
3,512
11
348,220
873
1,869
105,008
22
85,961
604
86
1,182
91,090
57
159
211
319
283,458
10,062
1,593
556
590
11,173
153
156
174
6,689
958,210
11,892
1,928
2,896
4,134
All of our non-accrual loans are individually analyzed for credit loss. The Company has one individually analyzed home equity loan of $98 that was accruing interest at March 31, 2025.
The following table presents the Company’s amortized cost basis of non-accrual loans for which there is no related ACL:
299
131
2,976
3,655
The following table presents the Company’s amortized cost basis of only those non-accrual loans with a related ACL:
Non-accrual loans
Related ACL
514
164
459
139
536
479
12
During the three months ended March 31, 2025, $19 in accrued interest was reversed for non-accrual loans. Total accrued interest receivable associated with loans totaled $3,985 and $3,937 at March 31, 2025 and December 31, 2024, respectively, and was reported in accrued interest receivable on the consolidated statements of financial condition.
The Company has transferred a portion of its originated commercial real estate loans to participating lenders. The amounts transferred have been accounted for as sales and are therefore not included in the Company’s accompanying statements of financial condition. The Company and participating lenders share ratably in any gains or losses that may result from a loan’s performance under its contractual terms. The Company continues to service the loans on behalf of the participating lenders and, as such, collects cash payments from the borrowers, remits payments to participating lenders and disburses required escrow funds to relevant parties. At March 31, 2025 and December 31, 2024, the Company was servicing loans for participants aggregating $50,634 and $54,390, respectively.
Residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $0 and $37 at March 31, 2025 and December 31, 2024, respectively, and are all individually analyzed for credit loss.
The Company services certain loans that it has sold to third parties. The aggregate balances of loans serviced for others were $261,419 and $266,547 as of March 31, 2025 and December 31, 2024, respectively. Included in these are loans serviced for the Federal Home Loan Mortgage Corporation with recourse provisions, whereby the Company is obligated to bear all costs when a default, including foreclosure, occurs. At March 31, 2025 and December 31, 2024, the maximum contingent liability associated with loans sold with recourse was $0 and $805, respectively, which is not recorded in the consolidated financial statements. Losses are borne in priority order by the borrower, private mortgage insurance and the Company. The Company has never repurchased any loans or incurred any losses under these recourse provisions.
The balances of capitalized servicing rights included in other assets at March 31, 2025 and December 31, 2024 were $1,503 and $1,592, respectively. Fair value exceeds carrying value, and thus, no impairment charges related to servicing rights were recognized during the three months ended March 31, 2025 or the year ended December 31, 2024.
Activity in the Company’s ACL for loans for the three months ended March 31, 2025 is summarized in the table below.
Commercial
Real Estate
Residential
and Industrial
Indirect
Consumer
Totals
Three months ended March 31, 2025
Allowance for credit losses:
2,988
575
684
4,133
8,539
Provision for (reversal of) credit losses
161
136
377
Loans charged-off
(175)
(784)
(959)
Recoveries
426
449
3,049
612
673
3,911
8,406
13
Activity in the Company’s ACL for loans for the three months ended March 31, 2024 is summarized in the tables below.
Three months ended March 31, 2024
346
606
4,348
8,124
323
(7)
(238)
99
(34)
(895)
(32)
(961)
699
711
3,039
355
566
3,914
7,973
The Company has also recorded an ACL for unfunded commitments, which was recorded in other liabilities. The provision for unfunded commitments is recorded within the provision for credit losses on the Company’s income statement. Activity in the Company’s ACL for unfunded commitments for the three months ended March 31, 2025 and 2024 is summarized in the tables below.
119
104
244
(Reversal of) provision for credit losses
(27)
(24)
92
103
220
172
72
257
Reversal of credit losses
(14)
(16)
158
71
241
The following table summarizes the provision for credit losses for the three months ended March 31, 2025 and 2024:
Provision for credit losses - loans
Reversal of credit losses - unfunded commitments
14
In the normal course of business, the Company grants loans to officers, directors and other related parties. Balances and activity of such loans during the periods presented were not material.
On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial real estate, multifamily, construction and commercial loans. To assist in the review process, the Company engages an independent third-party to review a significant portion of loans within these segments. Consumer loans are rated as performing or non-performing based on payment status in accordance with regulatory retail credit guidance. Management uses the results of these reviews as part of its annual review process. In addition, management utilizes delinquency reports, the watch list and other loan reports to monitor credit quality of other loan segments.
Credit Quality Indicators. The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on all loans at origination and is updated on a quarterly basis for loans risk rated Watch, Special Mention, Substandard, or Doubtful.
The Company uses the following definitions for risk ratings:
Watch – Loans classified as watch exhibit weaknesses that require more than usual monitoring. Issues may include deteriorating financial condition, payments made after due date but within 30 days, adverse industry conditions or management problems.
Special Mention – Loans classified as special mention exhibit signs of further deterioration but still generally make payments within 30 days. This is a transitional rating and loans should typically not be rated Special Mention for more than 12 months.
Substandard – Loans classified as substandard possess weaknesses that jeopardize the ultimate collection of the principal and interest outstanding. These loans exhibit continued financial losses, ongoing delinquency, overall poor financial condition, and/or insufficient collateral. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful – Loans classified as non-performing have all the weaknesses of substandard loans, and have deteriorated to the level that there is a high probability of substantial loss.
Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered Pass rated loans.
15
The following table presents the credit risk profile of the Company’s loan portfolio (excluding loans in process) based on rating category, as well as gross write-offs for the three months ended March 31, 2025, and by fiscal year of origination as of March 31, 2025.
Revolving
Loans by Origination Year
Loans
2023
2022
2021
2020
Prior
Commercial construction
Pass
-
Watch
9,418
15,000
24,418
Total commercial construction
Commercial non-residential
83,338
45,513
36,718
37,183
26,800
24,789
254,341
41,688
8,485
18,282
19,980
7,298
932
96,665
Special mention
6,017
861
9,866
Substandard
3,838
2,812
6,650
Total commercial non-residential
134,881
53,998
55,000
62,963
34,959
25,721
7,263
745
1,391
18,305
34,383
4,106
66,193
9,696
5,666
10,229
10,960
5,629
42,180
Total multifamily
16,959
6,411
11,620
29,265
40,012
Performing
16,889
15,437
26,565
23,385
2,002
5,700
89,978
Non-performing
Total residential
17,893
1,478
12,116
9,133
16,645
7,172
1,184
18,692
66,420
1,292
2,921
707
5,432
2,638
11,192
24,393
97
496
129
972
95
39
Doubtful
Total commercial and industrial
2,962
15,037
9,840
22,573
7,550
3,822
30,173
Current-period gross write-offs
165
175
15,718
50,478
65,612
92,181
35,933
17,355
277,277
78
106
132
168
Total indirect automobile
15,796
50,584
65,744
92,349
36,094
109
149
260
203
45
784
3,557
339
87
7,770
11,753
Total home equity
3,586
212
2,264
1,529
1,574
315
629
223
Total other consumer
Pass/performing
128,455
126,892
140,948
189,273
106,605
54,050
26,685
772,908
52,676
26,490
44,218
36,372
13,138
3,570
187,656
6,114
0
3,484
990
10,838
3,933
6,822
1,111
1,678
192,289
153,488
185,298
232,109
120,932
57,620
38,166
Total Current-period gross write-offs
183
959
16
The following table presents the credit risk profile of the Company’s loan portfolio (excluding loans in process) based on rating category, as well as gross write-offs for the year ended December 31, 2024, and by fiscal year of origination as of December 31, 2024.
6,509
17,261
2,841
46,429
36,900
47,082
27,329
16,104
69,260
243,104
8,515
14,336
16,201
7,341
10,952
33,799
91,144
3,009
322
5,745
9,949
2,834
3,931
6,765
54,944
51,236
69,126
35,543
27,378
112,735
291
1,398
18,410
28,939
2,034
5,296
56,077
5,673
10,235
11,027
11,863
10,155
48,953
11,633
29,437
40,802
15,451
15,456
26,755
23,922
2,032
14,666
85,469
15,848
13,386
9,810
19,044
7,944
650
957
17,303
69,094
3,269
5,667
191
365
1,081
10,004
21,322
506
98
801
141
16,655
10,555
25,217
8,326
1,113
2,306
27,345
40
561
608
54,048
72,083
104,879
42,286
15,440
6,343
295,079
182
187
62
35
54,094
72,161
105,061
42,473
15,502
6,378
171
812
1,533
665
256
189
3,626
341
3,684
7,457
11,482
3,858
2,581
1,703
1,829
400
89
82
73
24
201
132,241
148,649
215,166
108,930
36,955
100,217
24,977
767,135
23,966
42,577
35,736
19,395
11,317
45,035
188,030
3,515
1,064
420
5,751
10,750
4,034
6,906
1,946
156,253
191,304
257,433
129,576
48,754
156,587
35,019
934
1,606
678
280
1,045
4,726
17
4. Goodwill and Intangible Assets
The Company evaluates goodwill annually in the fourth quarter of the fiscal year or more often if events occur or circumstances change that indicate an impairment may exist. Management has determined that no write-down was required for the first three months of 2025 or 2024.
The changes in the carrying value of the customer list and core deposit intangibles, net of accumulated amortization and impairment, are as follows:
246
Amortization
(20)
(21)
225
Core deposit intangibles represent the estimated fair value of acquired customer deposit relationships on the date of acquisition and are amortized over their estimated useful lives. Purchased customer accounts primarily consist of records and files that contain information about investment holdings. The values assigned to customer lists and core deposit intangibles are based upon the application of the income approach. The Company recognized $20 and $21 of amortization expense related to its intangible assets for the three months ended March 31, 2025 and 2024, respectively.
As of March 31, 2025, the future amortization expense for amortizable intangible assets for the years ended December 31, was as follows:
2026
2027
2028
2029
Thereafter
27
5. Deposits
Deposits balances are summarized as follows:
Non-interest bearing demand deposits
Interest bearing accounts:
NOW(1)
117,616
123,466
Savings
135,303
132,648
Money market
214,018
188,904
Time certificates of deposit
329,352
337,639
Total interest bearing accounts
The Company participates in a reciprocal deposit program with other financial institutions that provides access to Federal Deposit Insurance Corporation (“FDIC”) insurance for deposit products with aggregate amounts exceeding the current limits for depositors. At March 31, 2025 and December 31, 2024, total reciprocal deposits were $33,601 and $38,909, respectively. Included in time certificates of deposit at March 31, 2025 and December 31, 2024 were reciprocal deposits totaling $18,907 and $25,427, respectively, with original maturities of one to three years. Reciprocal deposits included in money market accounts totaled $14,693 and $13,482 at March 31, 2025 and December 31, 2024, respectively.
The Company had no brokered deposits at either March 31, 2025 or December 31, 2024. Time certificates of deposit in denominations of $250 or greater were $93,813 and $95,591 as of March 31, 2025 and December 31, 2024, respectively.
Contractual maturities of time certificates of deposit at March 31, 2025 are summarized below:
263,132
1 – 2 years
62,870
2 – 3 years
559
3 – 4 years
1,203
4 – 5 years
1,588
6. Long-Term Debt and FHLB Stock
FHLB Borrowings and Stock
The Bank is a member of the FHLB. Borrowings under this line require collateralization through the pledge of specific loans and securities. The Bank has access to a preapproved secured line of credit with the FHLB which was not to exceed $627,847 and $627,265 at March 31, 2025 and December 31, 2024, respectively. At March 31, 2025, the Bank had pledged $482,080 of assets to the FHLB, which resulted in a secured line of credit of $331,939. At March 31, 2025 and December 31, 2024, the Company had outstanding overnight line of credit balances with the FHLB of $24,100 and $0, respectively. The overnight interest rate was 4.56% at March 31, 2025. These borrowings mature the following business day. The Company also had structured borrowings of $29,773. The outstanding principal amounts and the related terms and rates at March 31, 2025 were as follows:
Term
Principal
Maturity
Rate
Due in one year
Long term
Fixed medium-term
722
October 31, 2025
4.87
%
5,000
November 3, 2025
728
December 5, 2025
4.34
1,233
September 21, 2026
5.20
November 9, 2026
5.04
969
May 3, 2027
4.99
740
June 21, 2027
4.73
20,000
May 2, 2028
3.88
29,773
Weighted Average Rate
4.21
6,450
23,323
The Bank is required to maintain an investment in FHLB capital stock, as collateral, in an amount equal to a certain percentage of its outstanding debt. FHLB stock is considered restricted stock and is carried at cost. The Bank evaluates FHLB stock for impairment based on the ultimate recovery ability of the cost. No impairment was recognized at either March 31, 2025 or December 31, 2024.
Subordinated Debt
In addition to the Bank, the Company has one other wholly-owned subsidiary, RSB Capital Trust I (the “Trust”). In 2005, the Trust issued $5,000 of pooled trust preferred securities in a private placement and issued 155 shares of common stock at $1 par value per share, to the Company. The Trust, which has no independent assets or operations, was formed in 2005 for the sole purpose of issuing trust preferred securities and investing the proceeds in an equivalent amount of junior subordinated debentures. The proceeds from the issuance of the trust preferred securities were down-streamed to the Bank and are currently considered Tier 1 capital for purposes of determining the Bank’s capital ratios. The duration of the Trust is 30 years.
The subordinated debt securities of $5,155 are unsecured obligations of the Company and are subordinate and junior in right of payment to all present and future senior indebtedness of the Company. The Company has entered into a guarantee, which together with its obligations under the subordinated debt securities and the declaration of trust governing the Trust, including its obligations to pay costs, expenses, debts and liabilities, provides a full and unconditional guarantee of amounts on the capital securities. The rate on the subordinated debentures, which bear interest at the three-month term Secured Overnight Financing Rate (“SOFR”) plus 2% and a relative spread adjustment of 0.26%, was 6.59% and 7.78% at March 31, 2025 and December 31, 2024, respectively. The subordinated debentures mature on May 23, 2035.
Other Borrowings
The Bank has an unsecured, uncommitted $10,000 line of credit with Zions Bank. There were no advances outstanding under this line of credit at either March 31, 2025 or December 31, 2024.
The Bank also has an unsecured, uncommitted $50,000 line of credit with Pacific Coast Bankers Bank. There were no advances outstanding under this line of credit at either March 31, 2025 or December 31, 2024.
7. Employee Benefits
Pension Plan
The Bank maintains a noncontributory defined benefit pension plan covering substantially all of its employees 21 years of age or older who had completed at least one year of service as of June 30, 2012, the effective date on which the Board of Directors of the Bank voted to freeze the defined benefit plan.
The following table sets forth the plan’s funded status and amounts recognized in the Company’s consolidated statements of financial condition:
Projected and accumulated benefit obligation
(16,807)
(16,652)
Plan assets at fair value
18,057
17,916
Funded status included in accrued expenses and other liabilities
1,250
1,264
The net periodic pension cost and amounts recognized in other expense are as follows:
Three months ended March 31,
Interest cost
222
213
Expected return on plan assets
(245)
(249)
Amortization of unrecognized loss
74
Net periodic cost
The expected long-term rate of return on plan assets has been determined by applying historical average investment returns from published indexes relating to the current allocation of assets in the plan. Plan assets are invested in pooled separate accounts consisting of underlying investments in nine diversified investment funds.
As of March 31, 2025, the investment funds included five equity funds and three fixed income bond funds, each with its own investment objectives, investment strategies and risks, as detailed in the Company’s investment policy statement. The Company determines the appropriate strategic asset allocation versus plan liabilities, as governed by the investment policy statement.
The assets of the plan are invested under the supervision of the Company’s investment committee in accordance with the investment policy statement. The investment options of the plan are chosen in a manner consistent with generally accepted standards of fiduciary responsibility. The investment performance of the Company’s individual investment managers, with the assistance of the Company’s investment consultant, is monitored on a quarterly basis and is reviewed at least annually relative to the objectives and guidelines as stated in the Company’s investment policy statement.
The Company did not contribute to the plan in the first three months of 2025 or 2024.
The fair value of the Company’s pension plan assets, by fair value hierarchy, are as follows:
Level 1
Level 2
Level 3
Assets:
Investment in separate accounts
Fixed income
12,662
Equity
5,395
Total assets at fair value
12,489
5,427
The pooled separate accounts are valued at the net asset per unit, based on either the observable net asset value of the underlying investment or the net asset value of the underlying pool of securities. Net asset value is based on the value of the underlying assets owned by the fund, minus its liabilities and then divided by the number of shares outstanding.
For a detailed disclosure on the Bank’s pension and employee benefits plans, please refer to Note 9 of the Company’s Consolidated Financial Statements for the year ended December 31, 2024 included in the Annual Report on Form 10-K.
Defined Contribution Plan
The Bank sponsors a 401(k) defined contribution plan. Participants are permitted, in accordance with the provisions of Section 401(k) of the Internal Revenue Code, to contribute up to 25% of their earnings (as defined) into the plan with the Bank matching up to 6%, subject to Internal Revenue Service limitations. The Bank’s contributions charged to operations amounted to $280 and $269 for the three months ended March 31, 2025 and 2024, respectively.
Deferred Compensation Arrangements
Directors’ Plan, (formerly the “Trustees Plan”)
The Bank’s Deferred Compensation Plan for Fees of Directors, as amended and restated effective January 1, 2005 (the “Directors’ Plan”), covers directors who elect to defer receipt of all or a portion of their fees until separation from service. Upon resignation, retirement, or death, the participant’s total deferred compensation, including earnings thereon, will be paid out. At March 31, 2025 and December 31, 2024, total amounts due to participants of $3,885 and $3,804, respectively, were included in accrued expenses and other liabilities. Total expenses related to the Directors’ Plan were $87 and $63 for the three months ended March 31, 2025 and 2024, respectively, which were included in other non-interest expense in the consolidated statements of income.
Executive Long-Term Incentive and Retention Plan
The Bank maintains an Executive Long-Term Incentive and Retention Plan (the “Executive Plan”). Participation in the Executive Plan is limited to officers of the Company designated as participants by the Board of Directors. Under the Executive Plan, the Board of Directors may grant annual incentive awards equal to a percentage of a participant’s base salary at the rate in effect on the last day of the Executive Plan year, as determined by the Board of Directors based on the attainment of criteria established annually by the Board of Directors. Incentive awards under the Executive Plan are credited to the participant’s incentive benefit account as of the last day of the Executive Plan year to which the award relates and earn interest at a rate determined annually by the Board of Directors. Participants vest in their benefit accounts in accordance with the vesting schedule approved by the Board of Directors, which ranges from one to five years of service. At March 31, 2025 and December 31, 2024, $1,699 and $1,653, respectively, was included in accrued expenses and other liabilities, which represents the cumulative amounts deferred and earnings thereon. The Company recognized expenses of $190 and $60 for the three months ended March 31, 2025 and 2024, respectively, related to this plan, which are included in salaries and employee benefits expense and other non-interest expense in the consolidated statements of income.
Group Term Replacement Plan
Under the terms of the “Group Term Replacement Plan,” the Company provides postretirement life insurance benefits to certain officers. The liability related to these postretirement benefits is accrued over the individual participants’ service period and aggregated $1,723 and $1,711 at March 31, 2025 and December 31, 2024, respectively. The Company recognized expenses of $12 and $13 for the three months ended March 31, 2025 and 2024, respectively, related to this plan, which are included in salaries and employee benefits expense in the consolidated statements of income.
Other Director and Officer Postretirement Benefits
The Company has individual fee continuation agreements with certain directors and a supplemental retirement agreement with an executive officer, each of which provide fixed postretirement benefits to be paid to the directors or the officer, or their beneficiaries, for periods ranging from 15 to 20 years. In addition, the Company has agreements with certain directors which provide certain postretirement life insurance benefits. The liability related to these postretirement benefits is accrued over the individual participants’ service period and aggregated $2,124 and $2,113 at March 31, 2025 and December 31, 2024, respectively. The Company recognized expenses of $28 and $14 for the three months ended March 31, 2025 and 2024, respectively, related to these benefits, which are included in other non-interest expenses in the consolidated statements of income.
23
Employee Stock Ownership Plan
On January 1, 2019, the Bank established an Employee Stock Ownership Plan (“ESOP”) to provide Company stock to eligible employees. The plan is a tax-qualified retirement plan for the benefit of Bank employees. On January 16, 2019, the Company granted a loan to the ESOP to purchase 436,425 shares of the Company’s common stock at a price of $10.00 per share. The loan obtained by the ESOP from the Company is payable annually over 20 years at a rate per annum equal to the Prime Rate, reset annually on January 1st (7.50% at January 1, 2025). Loan payments are funded by cash contributions from the Bank. The loan is secured by the shares purchased, which are held in a suspense account for allocation among participants as the loan is repaid. The balance of the ESOP loan at March 31, 2025 was $3,484. Contributions are allocated to eligible participants on the basis of compensation, subject to federal tax limits. The number of shares committed to be released annually is 21,821 through 2039.
Shares held by the ESOP include the following:
Allocated
130,926
109,105
Committed to be allocated
5,454
21,821
Unallocated
300,045
305,499
Paid out to participants
(23,622)
Total shares
412,803
The fair value of unallocated shares was $2,952 at March 31, 2025.
Total compensation expense recognized in connection with the ESOP for the three months ended March 31, 2025 and 2024 was $55 and $46, respectively.
Share-Based Compensation Plan
On May 26, 2020, stockholders of the Company approved the 2020 Equity Incentive Plan (the “EIP”). The EIP authorizes the issuance to participants of up to 763,743 shares of Rhinebeck Bancorp common stock pursuant to grants of incentive and non-qualified stock options, restricted stock awards and restricted stock units. Of this number, the maximum number of shares of Rhinebeck Bancorp common stock that may be issued under the EIP pursuant to the exercise of stock options is 545,531 shares, and the maximum number of shares of Rhinebeck Bancorp common stock that may be issued as restricted stock awards or restricted stock units is 218,212 shares. These amounts represented 4.90% and 1.96%, respectively, of the number of shares of common stock issued in the stock offering of Rhinebeck Bancorp.
Pursuant to the terms of the EIP, on August 25, 2020, the Board of Directors granted restricted stock and stock options to employees and directors. All of these awards vested annually over a three-year period from the date of the grant and the term of each option is ten years. As of March 31, 2025, there were 105,146 stock options and 34,778 restricted stock awards that remained available for future grants.
The fair value of each option granted under the EIP is estimated on the date of grant using the Black-Scholes Option-Pricing Model. The expected volatility is based on the historical volatility of a peer group of comparable SEC-reporting bank holding companies. The dividend yield assumption is based on the Company’s expectation of dividend payouts. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the date of grant. The Company has elected to recognize forfeitures as they occur.
A summary of options under the 2020 EIP as of March 31, 2025 is presented below:
Weighted -
Weighted-Average
Number of
Average
Remaining Contractual
Shares
Exercise Price
Term (in Years)
Options outstanding at beginning of year
412,930
6.62
5.23
Options outstanding at March 31, 2025
4.80
Options exercisable at March 31, 2025
At March 31, 2025, the aggregate intrinsic value of the stock options outstanding, which fluctuates based on changes in the fair market value of the Company’s stock, was $1,330. The aggregate intrinsic value represents the total pre-tax intrinsic value (i.e., the difference between the Company’s closing stock price on the last trading day of period and the weighted-average exercise price, multiplied by the number of shares) that would have been issued had all option holders exercised their options on March 31, 2025.
The following table summarizes the Company’s restricted stock activity for the three months ended March 31, 2025:
Number
Grant Date
of Shares
Fair Value per Share
Non-vested restricted stock at beginning of year
7.94
Non-vested restricted stock at March 31, 2025
As of March 31, 2025, there was $90 of unrecognized compensation cost related to the nonvested restricted stock awards granted under the 2020 EIP. The cost is expected to be recognized over a remaining period of 2.27 years.
For the three months ended March 31, 2025 and 2024, share-based compensation of options and restricted stock under the plan totaled $9 and $0, respectively.
25
8. Leases
As of March 31, 2025, the Company leased real estate for seven branch offices and two administrative offices under various lease agreements. One lease is classified as a short-term lease, while the remaining leases are classified as operating leases.
The calculated amount of the right-of-use assets and lease liabilities are impacted by the length of the lease term and the discount rate used to present the value of the minimum lease payments. The Company’s leases have maturities which range from 2026 to 2048, some of which include lessee options to extend the lease term. If the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the right-of-use asset and lease liability. The weighted average remaining life of the lease terms for these leases was 15.6 years and 15.7 years as of March 31, 2025 and December 31, 2024, respectively. As most of our leases do not provide an implicit rate, the Company used its incremental borrowing rate, the rate of interest to borrow on a collateralized basis for a similar term, at each lease commencement date. The weighted average discount rate for operating leases as of March 31, 2025 and December 31, 2024 was 3.92% and 3.91%, respectively.
The components of lease cost (included in occupancy expense on the Consolidated Statements of Income) for the three months ended March 31, 2025 and 2024 were as follows:
Lease cost:
Operating lease cost
Short-term lease cost
Total lease cost
205
The right-of-use asset, included in other assets, was $7,179 and $7,307 and the corresponding lease liability, included in accrued expenses and other liabilities, was $7,273 and $7,386 as of March 31, 2025 and December 31, 2024, respectively.
Future minimum payments for operating leases with initial or remaining terms of one year or more as of March 31, 2025 were as follows:
Years ending December 31:
572
705
708
714
6,814
Total future minimum lease payments
10,258
Amounts representing interest
(2,985)
Present Value of Net Future Minimum Lease Payments
7,273
26
9. Commitments and Contingencies and Derivatives
Legal Matters
The Company is involved in various legal proceedings which have arisen in the normal course of business. Management believes that resolution of these matters will not have a material effect on the Company’s financial condition or results of operations.
Employment Agreements
The Company has entered into employment agreements with certain officers. The agreements provide for base salaries and incentive compensation based on performance criteria outlined in the agreements. The agreements also provide for insurance and various other benefits.
Financial Instruments with Off-Balance-Sheet Risk
In the normal course of business, the Company is a party to financial instruments with off-balance-sheet risk to meet the financing needs of its customers. These financial instruments include standby letters of credit and commitments to extend credit, which include new loan commitments, undisbursed portions of construction loans and other lines of credit and loans sold with recourse. We are obligated under a recourse provision associated with certain first mortgage renovation loans sold in the secondary market to bear all costs when a default, including a foreclosure, occurs. These financial instruments involve, to varying degrees, elements of interest rate risk in excess of the amounts recognized in the statements of financial condition. The contractual amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.
Financial instruments whose contract amounts represent off-balance sheet credit risk are as follows:
Commitments to extend credit summarized as follows:
Future loan commitments
4,910
5,556
Undisbursed construction loans
19,426
23,617
Undisbursed home equity lines of credit
10,026
10,357
Undisbursed commercial and other line of credit
77,458
79,107
Standby letters of credit
4,492
3,022
Credit card lines
3,495
2,701
Loans sold with recourse
805
119,807
125,165
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Since these commitments could expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.
The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon an extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include residential and commercial property, deposits and securities.
Interest Rate Swaps
The Company enters into interest rate swaps that allow commercial loan customers to effectively convert a variable-rate loan agreement to a fixed-rate loan agreement. Under these agreements, the Company simultaneously enters into a variable-rate loan and an interest rate swap agreement with a customer. The Company then enters into a corresponding and offsetting swap agreement with a third party to hedge the exposure created by the customer agreements. The interest rate swaps with both the customers and third parties are not designated as hedges under FASB ASC Topic 815, Derivatives and Hedging, and are marked to market through earnings. The fair values of the swaps are recorded as both an asset and a liability, in other assets and other liabilities, respectively, in equal amounts for these transactions. The accrued interest receivable and payable of $129 and $152 related to our swaps is recorded in other assets and other liabilities as of March 31, 2025 and December 31, 2024, respectively.
Summary information regarding these derivatives is presented below:
Notational amount
184,654
151,867
Fair value
6,931
6,458
Weighted average pay rates
5.66
5.48
Weighted average receive rates
6.37
6.67
Weighted average maturity (in years)
6.65
7.45
Number of Contracts
30
In addition, as of March 31, 2025, the Company has one forward rate swap with a notional value of $12,938 and a fair value of $245 with an effective date of September 2, 2025. This forward swap has a fixed weighted average pay rate of 6.49% and the related weighted average adjustable receive rate will be determined at the time the forward swap becomes effective. As of December 31, 2024, there were three forward swaps with a notional value of $19,161, a fair value of $285 and a fixed average pay rate of 6.28%.
28
10. Regulatory Matters
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items, as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the tables below) of total, common equity Tier 1 and additional Tier I capital (as defined in 12 C.F.R. § 324.20) to risk-weighted assets and of Tier I capital to average assets. Management believes, as of March 31, 2025 and December 31, 2024, that the Bank met all capital adequacy requirements to which they are subject.
The most recent notification from the FDIC categorized the Bank as “well capitalized” under the regulatory framework. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, common equity Tier 1, Tier I risk-based and Tier I leverage ratios as set forth in the table below. There are no conditions or events since then which management believes have changed the Bank’s category.
The Bank’s actual capital amounts and ratios were:
To be Well Capitalized under
For Capital Adequacy
Prompt Corrective Action
Actual
Purposes
Provisions
Amount
Ratio
Rhinebeck Bank
Total capital (to risk-weighted assets)
138,522
12.91
85,858
8.00
107,322
10.00
Tier 1 capital (to risk-weighted assets)
129,897
12.10
64,393
6.00
Common equity tier one capital (to risk weighted assets)
48,295
4.50
69,759
6.50
Tier 1 capital (to average assets)
10.17
51,095
4.00
63,868
5.00
135,450
12.63
85,821
107,276
126,668
11.81
64,366
48,274
69,729
10.07
50,292
62,865
11. Fair Value
The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. A description of the valuation methodologies used for assets and liabilities recorded at fair value and for estimating fair value for financial and non-financial instruments not recorded at fair value, is set forth below.
The carrying amount is a reasonable estimate of fair value.
Available for Sale Securities
Where quoted prices are available in an active market for identical securities, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include marketable equity securities and U.S. Treasury obligations. If quoted prices are not available, then fair values are estimated by using pricing models (i.e., matrix pricing) or quoted prices of securities with similar characteristics and are classified within Level 2 of the valuation hierarchy. Examples of such instruments include government agency bonds, mortgage-backed securities and municipal bonds. Level 3 securities include securities for which significant unobservable inputs are utilized. Available for sale securities are recorded at fair value on a recurring basis.
FHLB Stock
The carrying value of FHLB stock approximates fair value based on the redemption provisions of the FHLB.
Loans receivable are carried at cost. For variable rate loans, which reprice frequently, carrying values are a reasonable estimate of fair values adjusted for credit losses inherent in the portfolios. The fair value of fixed rate loans is estimated by discounting the future cash flows using the year end rates, estimated using local market data, at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities, adjusted for credit losses inherent in the portfolios. The Company does not record loans at fair value on a recurring basis. However, from time to time, nonrecurring fair value adjustments to collateral-dependent individually analyzed loans are recorded to reflect partial write-downs based on the observable market price or current appraised value of collateral.
Other Real Estate Owned
Other real estate owned represents real estate acquired through foreclosure and is carried at fair value less estimated selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. These assets are included as Level 3 fair values, based upon the lowest level of input that is utilized in the fair value measurements.
Accrued Interest
The carrying amounts of accrued interest approximate fair value.
Mortgage Servicing Rights
The fair value of mortgage servicing rights is based on a valuation model that calculates the present value of estimated future net servicing income. Mortgage servicing rights are carried at the lower of amortized cost or estimated fair value and are included in other assets on the consolidated statements of financial condition.
Deposit liabilities are carried at cost. The fair value of NOW, savings and money market deposits is the amount payable on demand at the reporting date. The fair value of time certificates of deposit is estimated using a discounted cash flow calculation that applies interest rates currently being offered for deposits of similar remaining maturities estimated using local market data to a schedule of aggregated expected maturities on such deposits.
Mortgagors’ Escrow Accounts
The fair value is estimated using a discounted cash flow calculation that applies interest rates currently being offered on deposited escrow accounts of similarly expected maturities.
Advances from the FHLB
The fair value of the advances is estimated using a discounted cash flow calculation that applies current FHLB interest rates for advances of similar maturity to a schedule of maturities of such advances.
Based on the floating rate characteristic of these instruments, the carrying value is considered to approximate fair value.
Off-Balance-Sheet Instruments
Fair values for off-balance-sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standings. Such amounts are not significant.
Loan Level Interest Rate Swaps
The fair value is based on settlement values adjusted for credit risks associated with the counterparties and the Company and observable market interest rate curves.
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The following tables detail the assets that are carried at fair value on a recurring basis as of the periods shown and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:
Quoted Prices in
Active Markets
Significant
for Identical
Observable
Unobservable
Balance
Assets (Level 1)
Inputs (Level 2)
Inputs (Level 3)
2,422
100
Total available for sale securities
129,834
Loan level interest rate swaps
7,176
152,048
137,010
Liabilities:
U.S. government agency mortgage-backed securities – residential
2,393
130,154
6,743
166,690
136,897
The following tables detail the assets carried at fair value and measured at fair value on a nonrecurring basis as of March 31, 2025 and December 31, 2024, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:
Individually analyzed loans, with specific reserves
352
320
Loans that were individually analyzed using the fair value of the collateral had recorded investments of $536 and $479 with valuation allowances of $184 and $159 and fair values of $352 and $320 at March 31, 2025 and December 31, 2024, respectively. The valuation allowance represents specific allocations to the allowance for credit losses.
The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:
Quantitative Information About Level 3 Fair Value Measurements
Valuation
Range
Estimate
Techniques
Input
(Weighted Average)
Appraisal of collateral
Liquidation expenses
(3)
0% to 8%
Appraisal adjustments
(2)
0% to 20%
Fair value is generally through independent appraisals of the underlying collateral that generally include various level 3 inputs which are not identifiable.
Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percentage of the appraised value.
Estimated costs to sell.
The estimated fair value amounts for 2025 and 2024 have been measured as of their respective reporting dates and have not been reevaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than amounts reported at each year-end.
33
The information presented should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only required for a limited portion of the Company’s assets and liabilities. Due to the wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.
As of the following dates, the carrying value and fair values of the Company’s financial instruments were:
Fair Value Measurements at
March 31, 2025 Using
Carrying Value
Financial Assets:
Cash and cash equivalents
Available for sale securities
FHLB stock
Loans, net
960,797
Mortgage servicing rights
1,503
4,146
Financial Liabilities:
978,854
Mortgagors' escrow accounts
FHLB advances
53,513
Accrued interest payable
802
December 31, 2024 Using
955,123
1,592
4,370
968,878
69,071
943
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12. Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss at March 31, 2025 and December 31, 2024 were as follows:
Securities available for sale:
Net unrealized loss on securities available for sale
(11,000)
(13,266)
Related deferred tax(1)
2,310
2,786
Net accumulated other comprehensive loss
Defined benefit pension plan:
Unrecognized net actuarial loss and prior service cost
(3,108)
653
(1) Related deferred tax is calculated using an income tax rate of 21.0%.
13. Segment Reporting
The Company is a bank holding company, whose principal activity is the ownership and management of its wholly-owned subsidiary, Rhinebeck Bank. As a community-focused financial institution, the Company’s operations primarily involve offering loan and deposit products and providing financial advisory services to customers. Since management evaluates performance and makes strategic decisions based on a single, integrated banking operation, the Company is considered to have one reportable segment for financial reporting purposes.
Management makes operating decisions and assesses performance based on an ongoing review of these banking operations, The accounting policies of the banking operations segment are the same as those described in the summary of significant accounting policies. The Company's reportable segment is determined by the Chief Executive Officer, who serves as the chief operating decision maker (“CODM”). The CODM assesses the Company's products and services, which primarily consist of banking operations, and evaluates performance based on financial data provided.
Interest income from loans and other earning assets, and income from fee-based businesses provide banking operation revenue. Interest expense on deposits and other sources of funding, provisions for credit losses, and operating expenses, primarily salaries and employee benefits, occupancy, furniture and equipment, and data processing and communications, provide the significant expenses of banking operations. The Company currently operates as a single-segment and all operations are domestic.
14. Earnings Per Share
Basic earnings per share represent income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed in a manner similar to that of basic earnings per share except that the weighted-average number of common shares outstanding is increased to include the number of incremental shares (computed using the treasury method) that would have been outstanding if all potentially dilutive common stock equivalents (such as options) were issued during the period. There were no anti-dilutive options for the three months ended March 31, 2025 or 2024. Unearned ESOP shares are not deemed outstanding for earnings per share calculations.
Net (loss) income applicable to common stock
Average number of common shares outstanding
11,079,828
11,072,607
Less: Average unearned ESOP shares
302,784
324,601
Average number of common shares outstanding used to calculate basic earnings per common share
Additional common stock equivalents (nonvested stock) used to calculate diluted earnings per share
5,532
Additional common stock equivalents (stock options) used to calculate diluted earnings per share
140,788
96,281
Weighted-average common shares and common stock equivalents used to calculate diluted earnings per share
Earnings (loss) per Common share:
Diluted (1)
36
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
Management’s discussion and analysis of financial condition and results of operations at March 31, 2025 and December 31, 2024, and for the three months ended March 31, 2025 and 2024, is intended to assist in understanding the financial condition and results of operations of the Company and the Bank. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Cautionary Note Regarding Forward-Looking Statements
This report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “approximate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “intend,” “predict,” “forecast,” “improve,” “continue,” “will,” “would,” “should,” “could,” “may” and words of similar meaning. 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, and financial condition and results of operation;
statements regarding the quality of our loan and investment portfolios; and
estimates of our risks and future costs and benefits.
These forward-looking statements are based on current beliefs and expectations of our management and 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. Forward-looking statements, by their nature, are subject to risks and uncertainties.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
Additional factors that may affect our results are discussed in our Annual Report on Form 10-K under the heading “Risk Factors.” Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Accordingly, you should not place undue reliance on such statements.
Critical Accounting Policies
Our most significant accounting policies are described in Note 1 to the consolidated financial statements. Certain of these accounting policies require management to use significant judgment and estimates, which can have a material impact on the carrying value of certain assets and liabilities. We consider these policies to be our critical accounting estimates. The judgment and assumptions made are based upon historical experience, future forecasts, and/or other factors that management believes to be reasonable. Because of the nature of the judgment and assumptions, actual results could differ from estimates, which could have a material effect on our financial condition and results of operations. We consider the allowance for credit losses to be our most critical accounting policy.
Allowance for Credit Losses
The Company's allowance for credit losses is its estimate of credit losses currently expected in the loan portfolio, on unfunded lending commitments, and on its available-for-sale securities portfolio over the expected life of those assets. While these estimates are based on substantive methods for determining the required allowance, actual outcomes may differ significantly from estimated results, especially when determining required allowances for larger, complex commercial credits or unfunded lending commitments to commercial borrowers. Consumer loans, including indirect automobile loans and single family residential real estate, are smaller and generally behave in a similar manner, and loss estimates for these credits are considered more predictable. Additionally, the Company estimates the allowance for credit losses as a calculation of expected lifetime credit losses utilizing a forward-looking forecast of macroeconomic conditions, which may differ significantly from actual results. Further discussion of the methodology used in establishing the allowance is provided in Note 3 to the Notes to the Consolidated Financial Statements included in this Form 10-Q and in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 25, 2025.
Comparison of Financial Condition at March 31, 2025 and December 31, 2024
Total Assets. Total assets remained relatively stable at $1.26 billion at both March 31, 2025 and December 31, 2024, reflecting a minimal increase of $159,000. While several asset categories fluctuated during the period, the most notable changes included a $13.0 million increase in cash and cash equivalents and a $15.1 million decrease in available-for-sale securities. Net loans receivable increased by $4.7 million, or 0.5%, to $976.5 million and other assets decreased $1.1 million, or 4.5%.
Cash and Cash Equivalents. Cash and cash equivalents increased $13.0 million, or 34.8%, to $50.5 million at March 31, 2025 from $37.5 million at December 31, 2024 primarily due to an $8.5 million, or 46.2%, increase in federal funds sold, as well as increases in deposits held at the FHLB, Federal Reserve Bank of New York and other interest-bearing depository accounts with proceeds resulting from principal payments and maturities of investment securities.
Investment Securities Available for Sale. Available-for-sale securities declined $15.1 million, or 9.4%, to $144.9 million at March 31, 2025 from $159.9 million at December 31, 2024, primarily due to paydowns, calls and maturities of $18.1 million, partially offset by a decrease in the unrealized loss of $2.3 million and purchases of $631,000.
Net Loans. Net loans receivable increased $4.7 million, or 0.5%, to $976.5 million at March 31, 2025, compared to $971.8 million at December 31, 2024. This increase reflects growth in our commercial and residential real estate loan portfolios of $17.9 million and $4.3 million, respectively, partially offset by a $17.7 million decrease in consumer loans. The increase in commercial real estate loans was primarily due to a $16.6 million increase in non-residential real estate loans and a $3.4 million increase in multi-family commercial real estate loans, partially offset by a $2.0 million decrease in commercial construction loans. The decrease in consumer loans is the result of a strategic reduction in indirect automobile loans of $17.7 million. At March 31, 2025, indirect automobile loans were 22.1% of assets, compared to 23.5% at December 31, 2024. Non-accrual loans decreased by $622,000, or 15.0%, between December 31, 2024 and March 31, 2025.
Total Liabilities. Total liabilities decreased $4.0 million, or 0.4%, to $1.13 billion at March 31, 2025. The reduction was primarily driven by a $15.9 million decrease in FHLB advances and a $1.8 million decline in mortgagors' escrow accounts, partially offset by a $13.5 million increase in total deposits.
Deposits. Deposits increased $13.5 million, or 1.3%, to $1.03 billion at March 31, 2025 from $1.02 billion at December 31, 2024. Interest-bearing deposits increased $13.6 million, or 1.7%, while non-interest-bearing deposits decreased by $174,000. The increase in savings of $2.7 million and in money market accounts of $25.1 million reflected the Bank’s promotion of higher-yielding products in response to customer demand for better interest rates. These increases were partially offset by decreases in NOW accounts and certificates of deposit of $5.9 million and $8.3 million, respectively.
We participate in reciprocal deposit programs, obtained through the Certificate Deposit Account Registry Service (CDARS) and IntraFi Cash Service (ICS) networks, that provide access to FDIC-insured deposit products in aggregate amounts exceeding the current limits for depositors. This allows us to maintain deposits that might otherwise be uninsured. Our reciprocal deposits obtained through the CDARS and ICS networks totaled $33.6 million and $38.9 million at March 31, 2025 and December 31, 2024, respectively. We had no brokered deposits at either March 31, 2025 or December 31, 2024.
Mortgagors’ escrow accounts. Mortgagors’ escrow accounts decreased $1.8 million, or 19.1%, to $7.6 million at March 31, 2025 from $9.4 million at December 31, 2024, primarily due to the timing of property tax and insurance disbursements.
Advances from the Federal Home Loan Bank. FHLB advances declined $15.9 million, or 22.8%, to $53.9 million at March 31, 2025 from $69.8 million at December 31, 2024. The reduction reflects the Company’s use of excess liquidity from the maturity of securities, lower loan origination activity and increased deposits to pay down borrowings.
Stockholders’ Equity. Stockholders’ equity increased $4.1 million, or 3.4%, to $126.0 million at March 31, 2025 from $121.8 million at December 31, 2024. The increase was primarily due to $2.3 million in net income and a $1.8 million decrease in accumulated other comprehensive loss reflecting the results of the balance sheet restructuring. The Company’s book value per share was $11.35 at March 31, 2025, compared to $10.98 at December 31, 2024. The ratio of stockholders’ equity to total assets increased to 10.0% from 9.7% over the same period. Unearned common stock held by the Bank’s employee stock ownership plan was $3.0 million and $3.1 million at March 31, 2025 and December 31, 2024, respectively.
Comparison of Operating Results for the Three Months Ended March 31, 2025 and 2024
Net Income. Net income for the first quarter of 2025 was $2.3 million, compared to $1.1 million for the first quarter of 2024. Diluted earnings per share were $0.21 for the first quarter of 2025, up from $0.10 for the same quarter a year ago. Interest and dividend income increased $1.1 million, or 7.0%, while interest expense decreased $1.1 million, or 16.9%. The provision for credit losses increased $270,000, or 325.3%. Non-interest income rose $161,000, or 10.1%, and non-interest expense increased $631,000, or 7.1%. Provision for income taxes increased $318,000, or 99.1%, between the comparable quarters.
Net Interest Income. Net interest income increased $2.2 million, or 25.2%, to $11.0 million for the three months ended March 31, 2025. The ratio of average interest-earning assets to average interest-bearing liabilities rose 2 percentage points to 134.00%, while the net interest margin expanded by 89 basis points to 3.79% compared to the same quarter in 2024. The increase in the net interest margin was primarily due to a higher yield on loans and securities, coupled with a decline in the cost of interest-bearing liabilities. Interest rate spread improved 94 basis points from 2.19% for the three months ended March 31, 2024 to 3.13% for the three months ended March 31, 2025, reflecting better pricing on assets versus liabilities. A balance sheet restructuring in the second half of 2024 significantly increased the yield on our available for sale securities.
Interest Income. Interest income increased $1.1 million, or 7.0%, to $16.6 million for the three months ended March 31, 2025, compared to $15.6 million for the same period in 2024. The increase was primarily due to higher yields on loans and securities, partially offset by a decrease in the average balance of interest-earning assets. The average yield on interest-earning assets increased by 60 basis points to 5.71%, while the average balance of interest-earning assets declined by $42.2 million, or 3.4%, to $1.18 billion. The average yield on loans increased 44 basis points, to 6.14%, and the average yield on available-for-sale securities increased 142 basis points, to 3.25%. The average balance of loans decreased $17.6 million, and the average balance of available-for-sale securities declined $33.7 million, compared to the three months ended March 31, 2024.
Interest Expense. Interest expense decreased $1.1 million, or 16.9%, to $5.6 million for the three months ended March 31, 2025, compared to $6.7 million for the same period in 2024. The average cost of interest-bearing liabilities declined by 34 basis points, to 2.58%, reflecting lower funding costs and a favorable shift in funding mix, despite the ongoing elevated interest rate environment. The average balance of total interest-bearing liabilities decreased $46.2 million, or 5.0%, to $882.1 million, primarily due to a $48.0 million decline in the average balance of Federal Home Loan Bank advances, which fell from $123.0 million to $75.0 million. The average cost of these advances also declined by 86 basis points, from 4.93% to 4.07%.
Provision for Credit Losses. The provision for credit losses on loans increased $270,000, or 325.3%, to $353,000 for the three months ended March 31, 2025, compared to $83,000 for the same period in 2024. The increase was primarily attributable to increased loan production and increased charge-offs during the quarter.
Net charge-offs increased $260,000, or 104.0%, from $250,000 for the first quarter of 2024 to $510,000 for the first quarter of 2025. The increase was primarily due to increased net charge-offs of $162,000 and $139,000 in indirect automobile loans and commercial loans, respectively. The percentage of overdue account balances to total loans decreased to 1.38% as of March 31, 2025 from 1.71% as of December 31, 2024, while non-performing assets decreased $622,000, or 15.0%, to $3.5 million at March 31, 2025.
Non-Interest Income. Non-interest income totaled $1.8 million for the three months ended March 31, 2025, an increase of $161,000, or 10.1%, from the comparable period in 2024, due primarily to an increase of $166,000, or 66.4%, in other non-interest income as swap income increased. Service charges on deposit accounts also increased by $30,000, or 4.0%, as deposits increased. These increases were partially offset by a decrease in investment advisory income of $45,000, or 11.8%, resulting from a decline in assets under management due to unpredictable economic and market conditions. Gains on sales of loans also decreased $8,000 as we sold $385,000 of residential mortgage loans in the first quarter of 2025 as compared to sales of $2.0 million in the first quarter of 2024.
Non-Interest Expense. For the first quarter of 2025, non-interest expense rose to $9.5 million, reflecting a $631,000, or 7.1%, increase compared to the same period in 2024. The increase was broad-based, with almost all major expense categories rising. Other non-interest expense grew by $256,000, or 16.8%, driven by higher retail banking costs. Salaries and benefits rose $142,000, primarily due to increased production commissions. Marketing expense rose by $79,000, or 65.3%, largely due to promotional initiatives associated with the launch of higher-yielding deposit products. Additionally, professional fees, FDIC insurance expense, and data processing fees increased by $63,000, $44,000, and $30,000, respectively.
Income Taxes. The provision for income taxes increased $318,000, or 99.1%, totaling $639,000 for the three months ended March 31, 2025, compared to $321,000 for the same period in 2024. The increased income tax provision corresponds to higher pre-tax income during the quarter. The effective tax rate was 21.83% for the three months ended March 31, 2025 as compared to 22.26% for the three months ended March 31, 2024.
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Average Balance Sheets for the Three Months Ended March 31, 2025 and 2024
The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances, the yields set forth below include the effect of deferred fees and discounts and premiums that are amortized or accreted to interest income (dollars in thousands).
For the Three Months Ended March 31,
Interest and
Dividends
Yield/Cost(3)
Interest bearing depository accounts and federal funds sold
28,428
3.98
17,274
5.05
Loans(1)
992,023
6.14
1,009,612
5.70
157,219
1,261
3.25
190,900
870
1.83
Other interest-earning assets
4,349
90
8.39
6,441
167
10.43
Total interest-earning assets
1,182,019
5.71
1,224,227
5.11
Non-interest-earning assets
87,097
88,866
1,269,116
1,313,093
Liabilities and equity:
NOW accounts
126,085
53
0.17
123,779
42
0.14
Money market accounts
206,019
1,235
2.43
188,896
1,259
2.68
Savings accounts
132,949
124
0.38
147,116
0.36
Certificates of deposit
329,337
3,330
4.10
333,342
3,681
4.44
Total interest-bearing deposits
794,390
4,742
2.42
793,133
5,114
2.59
Escrow accounts
7,575
1.12
7,017
1.15
Federal Home Loan Bank advances
74,963
752
4.07
122,993
1,507
4.93
6.77
7.65
Total other interest-bearing liabilities
87,693
859
3.97
135,165
1,625
4.84
Total interest-bearing liabilities
882,083
2.58
928,298
2.92
Non-interest-bearing deposits
234,295
243,017
Other non-interest-bearing liabilities
28,802
26,620
1,145,180
1,197,935
123,936
115,158
Interest rate spread
3.13
2.19
Net interest margin(2)
3.79
2.90
Average interest-earning assets to average interest-bearing liabilities
134.00
131.88
Non-accruing loans are included in the outstanding loan balance. Deferred loan fees included in interest income totaled $53,000 and $17,000 for the three months ended March 31, 2025 and 2024, respectively.
Represents the difference between interest earned and interest paid, divided by average total interest earning assets.
Annualized.
Rate/Volume Analysis
The following table presents the effects of changing rates and volumes on our net interest income for the period indicated (in thousands). The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the rate and volume columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. The Company did not have any excludable out-of-period items or adjustments.
Three Months Ended March 31, 2025
Compared to Three Months Ended
March 31, 2024
Increase (Decrease)
Due to
Volume
Net
Interest income:
117
(55)
Loans receivable
(254)
965
(176)
567
391
(47)
(30)
(77)
(360)
1,447
1,087
Interest expense:
(381)
(373)
(515)
(239)
(754)
(12)
(505)
(633)
(1,138)
Net increase in net interest income
145
2,080
2,225
Management of Market Risk
General. The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of loans and securities, have longer maturities than our liabilities, consisting primarily of deposits and Federal Home Loan Bank advances. As a result, a principal part of our business strategy is to manage our exposure to changes in market interest rates. Accordingly, the Board of Directors maintains a management-level Asset/Liability Management Committee (the “ALCO”), which takes primary responsibility for reviewing the Company’s asset/liability management process and related procedures, establishing and monitoring reporting systems and ascertaining that established asset/liability strategies are being maintained. On at least a quarterly basis, the ALCO reviews and reports to the Board asset/liability management outcomes from various modeling scenarios. The ALCO also implements any changes in strategies and reviews the performance of any specific asset/liability management actions that have been implemented.
We manage our interest rate risk to minimize the exposure of our earnings and capital to changes in market interest rates. We have implemented the following strategies to manage our interest rate risk: originating loans with adjustable interest rates or with shorter terms, promoting core deposit products, and adjusting the interest rates and maturities of funding sources, as necessary. By following these strategies, we believe that we are better positioned to react to changes in market interest rates.
43
Net Economic Value Simulation. We analyze the Bank’s sensitivity to changes in interest rates through a net economic value of equity (“EVE”) model. EVE represents the present value of the expected cash flows from our assets less the present value of the expected cash flows arising from our liabilities adjusted for the value of off-balance sheet contracts. The EVE ratio represents the dollar amount of our EVE divided by the present value of our total assets for a given interest rate scenario. EVE attempts to quantify our economic value using a discounted cash flow methodology while the EVE ratio reflects that value as a form of capital ratio. We estimate what our EVE would be at a specific date. We then forecast what the EVE might be at the same date throughout a series of interest rate scenarios representing immediate and permanent, parallel shifts in the yield curve. We currently calculate the EVE under scenarios where interest rates increase 100, 200, 300 and 400 basis points from current market rates and where interest rates decrease 100, 200, 300 and 400 basis points from current market rates.
The following table presents the estimated changes in the Bank’s EVE that would result from changes in market interest rates at March 31, 2025 (dollars in thousands).
Net Economic Value as a
Net Economic Value
Percentage of Assets
Dollar
Percent
EVE
Basis Point Change in Interest Rates
Change
(Dollars in thousands)
141,790
(36,568)
(20.5)
12.35
(14.1)
300
150,430
(27,928)
(15.7)
12.87
(10.5)
159,586
(18,772)
13.40
(6.9)
168,993
(9,365)
(5.3)
13.91
(3.3)
178,358
14.38
(100)
176,313
(2,045)
(1.1)
13.95
(3.1)
(200)
168,956
(9,402)
13.12
(8.8)
(300)
152,680
(25,678)
(14.4)
11.64
(19.1)
(400)
129,687
(48,671)
(27.3)
9.67
(32.8)
Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The above table assumes that the composition of our interest-sensitive assets and liabilities existing at the date indicated remains constant uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the table provides an indication of our interest rate risk exposure at a point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our EVE and will likely differ from actual results.
Liquidity Management
We maintain liquid assets at levels we consider adequate to meet both our short-term and long-term liquidity needs. We adjust our liquidity levels to fund deposit outflows, repay our borrowings and to fund loan commitments. We also adjust liquidity as appropriate to meet asset and liability management objectives.
Our primary sources of liquidity are deposits, loan sales, amortization and prepayment of loans and mortgage-backed securities, maturities, sales and calls of investment securities and other short-term investments, earnings, funds provided from operations, as well as access to FHLB advances and other borrowings. While scheduled principal repayments on loans and mortgage-backed securities are a relatively predictable source of funds, deposit flows and loan and security sales and prepayments are greatly influenced by market interest rates, economic conditions, and rates offered by our competition. We set the interest rates on our deposits to maintain a desired level of total deposits.
44
As reflected in the Consolidated Statements of Cash Flows, net cash provided by operating activities was $4.3 million for the three months ended March 31, 2025, compared to net cash used of $3.5 million for the same period in 2024. The increase was primarily attributable to a prior year $5.0 million U.S. Treasury bond that matured on March 31, 2024 and was awaiting settlement. Net cash provided by investing activities totaled $13.0 million in the first quarter of 2025, a decrease from $27.5 million in the prior-year period, driven primarily by net loan growth of $5.1 million in the first three months of 2025 versus a net reduction in loans of $15.4 million in the comparable 2024 period as well as $18.1 million of securities proceeds in the first quarter of 2025 compared to $8.4 million in the first quarter of 2024. Cash flows from financing activities reflected a net use of $4.2 million in the current quarter, compared to $15.5 million used in the prior-year period, with the reduced outflows mainly resulting from changes in deposit balances and short-term debt repayments. As a result of these activities, cash and cash equivalents increased by $13.0 million during the quarter to $50.5 million as of March 31, 2025, from a beginning balance of $37.5 million.
At March 31, 2025, we had the following main sources of availability of liquid funds and borrowings:
(In thousands)
Available liquid funds:
Unencumbered securities
57,987
Availability of borrowings:
Zions Bank line of credit
10,000
Pacific Coast Bankers Bank line of credit
50,000
FHLB secured line of credit
278,066
FRB secured line of credit
202,590
Total available sources of funds
649,160
The Bank has access to a preapproved secured line of credit with the FHLB. At March 31, 2025, the Bank had pledged $482.0 million of assets to the FHLB, which resulted in a secured line of credit of $331.9 million. At March 31, 2025, the Bank had borrowed $53.9 million under this line, with remaining secured borrowing capacity of $278.1 million.
We also have commitments and obligations under our post-retirement plan and other benefit plans and our off-balance sheet financial instruments, as described in Note 7 and Note 9 to the consolidated financial statements.
Impact of Inflation and Changing Prices
The financial statements and related notes of the Company have been prepared in accordance with GAAP. GAAP generally requires the measurement of financial condition and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For information regarding market risk, see “Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operation - Management of Market Risk.”
Item 4. Controls and Procedures
An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of March 31, 2025. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.
There were no changes in the Company’s internal controls over financial reporting during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
We are periodically involved in legal proceedings, such as employment-related claims against us, claims to enforce liens, foreclosure or condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans, and other issues incidental to our business. As of the date of this Quarterly Report on Form 10-Q, we are not a party to any pending legal proceedings that we believe would have a material effect on our financial condition, results of operations or cash flows.
Item 1A. Risk Factors
In addition to the other information contained in this Quarterly Report on Form 10-Q, the following risk factor represents a material update and addition to the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
If we do not successfully manage the transition associated with the retirement of our Chief Executive Officer (“CEO”), it could be viewed negatively by our customers and shareholders and could have an adverse impact on our business.
On March 21, 2025, Michael J. Quinn announced his intention to retire as the Company’s CEO and as a member of the Board effective on the earlier of December 31, 2025 or when a successor is found to ensure an orderly transition. The Board of Directors of the Bank has formed a Search Committee to find a successor to Mr. Quinn. Leadership transitions can be difficult and may present challenges, including potential disruption to our operations and relationships with customers, regulators, vendors, and employees. If the CEO transition is not effectively managed, or if we are unable to identify and secure a qualified successor in a timely manner, our ability to execute our strategic initiatives and meet our financial and operational goals could be negatively impacted. Additionally, uncertainty surrounding the transition may affect employee morale and retention, and could hinder our ability to attract and hire key personnel.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
In September 2022, the Board approved a stock repurchase plan pursuant to which the Company is authorized to repurchase up to 247,506 shares of its common stock, of which 47,506 shares remain available for repurchase. The repurchase plan has no expiration date. No shares were repurchased under the stock repurchase plan during the three months ended March 31, 2025.
There were no sales of unregistered securities during the quarter ended March 31, 2025.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
(c) Director and Section 16 Officer Rule 10b5-1 Trading Arrangements
During the three months ended March 31, 2025, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 6. Exhibits
3.1
Articles of Incorporation of Rhinebeck Bancorp, Inc. (Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 of Rhinebeck Bancorp, Inc. (File no. 333-227266), originally filed with the Securities and Exchange Commission on September 10, 2018.)
3.2
Bylaws of Rhinebeck Bancorp, Inc. (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of Rhinebeck Bancorp, Inc. (File no. 001-38779), filed with the Securities and Exchange Commission on September 27, 2019.)
4.0
Form of Common Stock Certificate of Rhinebeck Bancorp, Inc. (Incorporated by reference to Exhibit 4 to the Registration Statement on Form S-1 of Rhinebeck Bancorp, Inc. (File no. 333-227266), originally filed with the Securities and Exchange Commission on September 10, 2018.)
10.1
Retirement Separation Agreement dated effective as of March 21, 2025, by and among Rhinebeck Bancorp, Inc., Rhinebeck Bank, and Michael J. Quinn, (Incorporated by reference to Rhinebeck Bancorp, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 21, 2025)
31.1
Certification required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.0
The following materials for the period ended March 31, 2025, formatted in inline XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Financial Condition, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements
104.0
The cover page from Rhinebeck Bancorp’s Form 10-Q for the quarterly period ended March 31, 2025, formatted in inline XBRL (contained in Exhibit 101.0)
Pursuant to the requirements of Section 13 or 15(d) 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.
RHINEBECK BANCORP, INC.
Date: May 13, 2025
/s/ Michael J. Quinn
Michael J. QuinnPresident and Chief Executive Officer
/s/ Kevin Nihill
Kevin NihillChief Financial Officer