Rhinebeck Bancorp, Inc. Reports Results for the Quarter Ended September 30, 2024

POUGHKEEPSIE, NY / ACCESSWIRE / October 24, 2024 / Rhinebeck Bancorp, Inc. (the "Company") (NASDAQ:RBKB), the holding company of Rhinebeck Bank (the "Bank"), reported a net loss for the third quarter of 2024 of $8.1 million, compared to net income of $1.2 million for the third quarter of 2023. Loss per share was $0.75 for the third quarter of 2024, compared to diluted earnings per share of $0.11 for the same quarter of 2023. Net loss for the first nine months of 2024 totaled $6.0 million, compared to net income of $3.5 million for the same period last year. Diluted (loss) earnings per share was $(0.55) and $0.32 for the first nine months of 2024 and 2023, respectively. Both the results for the three and nine months ended September 30, 2024, reflected the sale of securities from the previously announced balance sheet restructuring. The restructuring, which was announced late last month, resulted in a pre-tax loss of $12.0 million as lower-yielding securities were sold and proceeds were reinvested in higher-yielding securities. The restructuring decreased the average life of the securities portfolio, and improved the Company's earnings stream going forward, beginning in the fourth quarter of 2024. The securities sold had a yield of 1.11% and a weighted average life of approximately 5.8 years. The proceeds were reinvested into securities yielding 4.22% with an approximate weighted average life of 2.7 years.

President and Chief Executive Officer Michael J. Quinn said, "In this challenging interest rate environment, we took the opportunity to sell a significant portion of our available for sale securities as part of a strategic balance sheet restructuring as we look toward the future. The proceeds from the sales were reinvested into higher-yielding securities. We believe these transactions will improve our future profitability, provide long-term benefits to the Company, our shareholders and the Bank's customers and allow us greater flexibility in managing balance sheet growth going forward."

Income Statement Analysis

For the three months ended September 30, 2024, net interest income was relatively stable, increasing $41,000, or 0.4%, to $9.7 million when compared to the three months ended September 30, 2023. Year-to-date net interest income decreased $1.1 million, or 3.8%, to $27.7 million, compared to $28.8 million for the prior year nine-month period. The decrease on a year-to-date basis was primarily due to higher costs for deposits partially offset by higher yields on interest earning assets.

For the three months ended September 30, 2024, the average balance of interest-earning assets decreased by $58.1 million, or 4.7%, to $1.18 billion while the average yields improved by 43 basis points to 5.39%, when compared to the three months ended September 30, 2023. The average balance of interest-bearing liabilities decreased by $57.2 million, or 6.1%, and the cost of interest-bearing liabilities increased by 38 basis points to 2.88%, reflecting the higher interest rate environment and a greater proportion of deposits in higher yielding certificates of deposit. The net interest margin increased by 17 basis points to 3.26% while the interest rate spread increased by 6 basis points to 2.51% for the three months ended September 30, 2024 as compared to the same period in 2023.

For the nine months ended September 30, 2024, the average balance of interest-earning assets decreased by $47.6 million, or 3.8%, to $1.20 billion while the average yield improved by 45 basis points to 5.28%, when compared to the nine months ended September 30, 2023. The average balance of interest-bearing liabilities decreased by $27.7 million, or 3.0%, primarily due to a decrease in deposits, partially offset by the increase in the average balance of FHLB advances, while the cost of interest-bearing liabilities increased by 59 basis points to 2.92%. The net interest margin decreased by 1 basis point to 3.08% and the interest rate spread decreased by 13 basis points to 2.36% for the nine months ended September 30, 2024 from the same period in 2023.

The provision for credit losses decreased by $21,000, or 2.3%, from $910,000 for the quarter ended September 30, 2023 to $889,000 for the quarter ended September 30, 2024. The provision for credit losses decreased by $53,000, or 3.6%, from $1.47 million for the nine months ended September 30, 2023 to $1.42 million for the nine months ended September 30, 2024. These decreases to the provision for the three months and the nine months ended September 30, 2024 were primarily attributable to a decrease in loan balances, primarily indirect automobile loans.

Net charge-offs decreased $41,000 from $385,000 for the third quarter of 2023 to $344,000 for the third quarter of 2024. The decrease was primarily due to decreased net charge-offs in indirect automobile loans of $216,000 and recoveries in residential real estate and commercial loans in the third quarter of 2023. Net charge-offs increased $8,000, or 0.6%, to $1.4 million for the first nine months of 2024. The percentage of overdue account balances to total loans decreased to 1.62% as of September 30, 2024, from 1.90% as of December 31, 2023, while non-performing assets increased $584,000, or 13.9%, to $4.8 million at September 30, 2024.

Non-interest (loss) income totaled $(10.0) million for the three months ended September 30, 2024, a decrease of $11.7 million, from $1.6 million for the comparable period in 2023, due primarily to the $12.0 million loss on sale of investment securities resulting from the previously mentioned balance sheet restructuring. Excluding the securities loss, non-interest income for the third fiscal quarter of 2024 would have been $2.0 million compared to $1.6 million for the three months ended September 30, 2023. The Company also recorded an increase of $54,000, or 16.8%, in investment advisory income resulting from the improved market and economic conditions, an increase of $35,000 in service charges on deposit accounts, an increase of $22,000 in the cash surrender value of life insurance, and an increase in the gain on sales of loans of $20,000.

Non-interest (loss) income totaled $(7.0) million for the nine months ended September 30, 2024, a decrease of $11.4 million, from $4.4 million for the comparable period in 2023, due primarily to the $12.0 million loss on sale of investment securities resulting from the previously mentioned balance sheet restructuring. Excluding the securities loss, non-interest income for the nine months ended September 30, 2024 would have been $5.0 million compared to $4.4 million for the nine months ended September 30, 2023. The Company recorded an increase of $270,000, or 31.3%, in investment advisory income resulting from the improved market and economic conditions, an increase of $194,000 related to gains on life insurance, an increase of $88,000 in service charges on deposit accounts, an increase of $70,000, or 14.2%, in the cash surrender value of life insurance, and an increase in the gain on sales of loans of $39,000, partially offset by a decrease of $54,000 on the disposal of premises and equipment.

Non-interest expense totaled $9.1 million for the third quarter of 2024, an increase of $266,000, or 3.0%, over the comparable period in 2023. The increase was primarily due to a $370,000 increase in salaries and benefits related primarily due to higher production commissions and higher medical insurance costs. This increase was partially offset by a $109,000 decrease in other non-interest expense primarily due to a decrease in lending operations expense.

Non-interest expense totaled $26.9 million for the first nine months of 2024, a decrease of $402,000, or 1.5%, over the comparable period in 2023. The decrease was primarily due to a $229,000, or 4.7%, decrease in other non-interest expense, primarily due to decreased retail banking and lending expenses. FDIC deposit insurance and other insurance decreased $121,000, or 13.1%, primarily due to a decreased assessment rate while professional fees decreased $90,000, or 6.1%. Occupancy expense decreased $66,000, or 2.1%, due to a branch closure in the first quarter of 2024. These decreases were partially offset by an $82,000 increase in salaries and benefits and a $42,000 increase in data processing costs.

Balance Sheet Analysis

Total assets decreased $47.1 million, or 3.6%, to $1.27 billion at September 30, 2024 from $1.31 billion at December 31, 2023. Loans receivable decreased $44.0 million, or 4.4%, to $964.9 million, as compared to $1.01 billion at December 31, 2023, primarily due to a decrease in indirect automobile loans of $75.3 million, or 19.1%, reflecting a strategic decision to decrease that loan portfolio as a percentage of the balance sheet. At September 30, 2024, indirect automobile loans were 25.2% of assets, compared to 30.0% at December 31, 2023. Partially offsetting the decrease in automobile loans were increases in commercial real estate loans of $27.0 million, or 6.3%, and residential real estate loans of $8.3 million, or 10.8%. Available for sale securities decreased $22.9 million, or 11.9%, due to the aforementioned balance sheet restructuring which resulted in sales of $70.6 million, and paydowns, calls and maturities of $27.3 million, partially offset by purchases of $56.7 million and a decrease in unrealized loss on available for sale securities of $18.4 million. Cash and cash equivalents increased $24.3 million, or 109.6%, primarily due to an increase in deposits held at the FHLB, Federal Reserve Bank of New York and other interest bearing depository accounts with proceeds resulting from maturing loans and securities sales. Property and equipment decreased $3.5 million, or 20.0%, as our former Beacon, New York branch office was closed and the property sold during the first quarter of 2024 for $2.9 million and Federal Home Loan Bank stock decreased $3.0 million as borrowings decreased. Deferred tax assets decreased $2.1 million, or 21.1%, primarily due to a decrease in the net unrealized loss resulting from the balance sheet restructuring.

Past due loans decreased $3.5 million or 18.3%, between December 31, 2023 and September 30, 2024, finishing at $15.7 million, or 1.62%, of total loans, down from $19.2 million, or 1.90%, of total loans at year-end 2023. The decrease was most notable in non-residential commercial real-estate, as a few large loans were brought current and one loan was paid off. The allowance for credit losses was 0.84% of total loans and 170.21% of non-performing loans at September 30, 2024 as compared to 0.81% of total loans and 194.31% of non-performing loans at December 31, 2023. Non-performing assets totaled $4.8 million, an increase of $584,000, and included no other real estate owned at September 30, 2024. At December 31, 2023, non-performing assets totaled $4.2 million and included $25,000 in other real estate owned.

Total liabilities decreased $56.0 million, or 4.7%, to $1.14 billion at September 30, 2024 from $1.20 billion at December 31, 2023 due to a decrease in borrowings and mortgagors' escrow accounts, partially offset by increases in deposits and accrued expenses and other liabilities. Advances from the Federal Home Loan Bank decreased $68.3 million, or 53.3%. Deposits increased $15.7 million, or 1.5%. Interest bearing deposits increased $8.6 million, or 1.1%, while non-interest-bearing deposits increased $7.1 million, or 2.8%. The continued growth in interest-bearing time deposits was primarily due a shift in deposits from lower-yielding transaction accounts to higher-yielding time deposits and money market accounts as customers sought higher interest rates. At September 30, 2024, uninsured deposits were approximately 27.6% of the Bank's total deposits.

Stockholders' equity increased $9.0 million, or 7.9%, to $122.7 million at September 30, 2024. The increase was primarily due to a $14.8 million decrease in accumulated other comprehensive loss reflecting the results of the balance sheet restructuring and the decrease in market rates, which was partially offset by a net loss of $6.0 million. The Company's ratio of average equity to average assets was 9.02% for the nine months ended September 30, 2024 and 8.19% for the year ended December 31, 2023.

About Rhinebeck Bancorp

Rhinebeck Bancorp, Inc. is a Maryland corporation organized as the mid-tier holding company of Rhinebeck Bank and is the majority-owned subsidiary of Rhinebeck Bancorp, MHC. The Bank is a New York chartered stock savings bank, which 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 in New York State. Financial services including comprehensive brokerage, investment advisory services, financial product sales and employee benefits are offered through Rhinebeck Asset Management, a division of the Bank.

Forward Looking Statements

This press release contains certain forward-looking statements about the Company and the Bank. Forward-looking statements include statements regarding anticipated future events or results and can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as "believe", "expect", "anticipate", "estimate", "intend", "predict", "forecast", "improve", "continue", "will", "would", "should", "could", or "may". Forward-looking statements, by their nature, are subject to risks and uncertainties. Certain factors that could cause actual results to differ materially from expected results include increased competitive pressures, inflation, changes in the interest rate environment, fluctuations in real estate values, general economic conditions or conditions within the securities markets, potential recessionary conditions, changes in liquidity, including the size and composition of our deposit portfolio and the percentage of uninsured deposits in the portfolio, our ability to access cost-effective funding, changes in asset quality, loan sale volumes, charge-offs and credit loss provisions, changes in economic assumptions that may impact our allowance for credit losses calculation, changes in demand for our products and services, legislative, accounting, tax and regulatory changes, including changes in the monetary and fiscal policies of the Board of Governors of the Federal Reserve System, the effect of our rating under the Community Reinvestment Act, our ability to achieve the expected results of the balance sheet restructuring, political developments, uncertainties or instability, catastrophic events, acts of war or terrorism, natural disasters, such as earthquakes, drought, pandemic diseases, extreme weather events, or breach of our operational or security systems or infrastructure, including cyberattacks that could adversely affect the Company's or the Bank's financial condition and results of operations and the business in which the Company and the Bank are engaged.

Accordingly, you should not place undue reliance on forward-looking statements. Rhinebeck Bancorp, Inc. undertakes no obligation to revise these forward-looking statements or to reflect events or circumstances after the date of this press release.

The Company's summary consolidated statements of income and financial condition and other selected financial data follow:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2024				2023				2024				2023
Interest and Dividend Income
Interest and fees on loans		$	14,679			$	14,139			$	43,584			$	40,847
Interest and dividends on securities			995				1,011				2,989				3,257
Other income			366				384				878				971
Total interest and dividend income			16,040				15,534				47,451				45,075
Interest Expense
Interest expense on deposits			5,567				4,588				16,071				12,822
Interest expense on borrowings			774				1,288				3,648				3,431
Total interest expense			6,341				5,876				19,719				16,253
Net interest income			9,699				9,658				27,732				28,822
Provision for credit losses			889				910				1,419				1,472
Net interest income after provision for credit losses			8,810				8,748				26,313				27,350
Non-interest (Loss) Income
Service charges on deposit accounts			773				738				2,252				2,164
Net realized loss on sales and calls of securities			(11,996	)			-				(11,996	)			-
Net gain on sales of loans			50				30				131				92
Increase in cash surrender value of life insurance			192				170				564				494
Net gain from sale of other real estate owned			-				-				4				-
Net (loss) gain on disposal of premises and equipment			-				-				(18	)			36
Gain on life insurance			412				218				412				218
Investment advisory income			375				321				1,134				864
Other			166				169				509				512
Total non-interest (loss) income			(10,028	)			1,646				(7,008	)			4,380
Non-interest Expense
Salaries and employee benefits			5,043				4,673				14,947				14,865
Occupancy			1,034				1,049				3,149				3,215
Data processing			505				501				1,521				1,479
Professional fees			510				490				1,382				1,472
Marketing			129				131				365				378
FDIC deposit insurance and other insurance			289				288				803				924
Amortization of intangible assets			19				22				60				67
Other			1,552				1,661				4,678				4,907
Total non-interest expense			9,081				8,815				26,905				27,307
Net (loss) income before income taxes			(10,299	)			1,579				(7,600	)			4,423
Net (Benefit) Provision for income taxes			(2,237	)			343				(1,634	)			958
Net (loss) income		$	(8,062	)		$	1,236			$	(5,966	)		$	3,465
Earnings (loss) per common share:
Basic		$	(0.75	)		$	0.12			$	(0.55	)		$	0.32
Diluted		$	(0.75	)		$	0.11			$	(0.55	)		$	0.32
Weighted average shares outstanding, basic			10,758,914				10,710,607				10,753,460				10,804,699
Weighted average shares outstanding, diluted			10,758,914				10,760,118				10,753,460				10,891,730

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