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
FORM 10-Q
For the quarterly period ended September 30, 2018Quarterly Period Ended March 31, 2024
or
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. 333-227266001-38779
Rhinebeck Bancorp, Inc.
(Exact Namename of Registrantregistrant as Specifiedspecified in Its Charter)its charter)
Maryland | 83-2117268 | |
(State or | (I.R.S. Employer | |
2 Jefferson Plaza, Poughkeepsie, New York | 12601 | |
| ||
| (Address of Principal Executive Offices) | (Zip Code) |
(845) (845) 454-8555
(Registrant’s Telephone Number, Including Area Code)
N/Atelephone number)
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)Securities registered pursuant to Section 12(b) of the Act:
| | |||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $0.01 per share | | 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 x
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).
YES x NO ¨
Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (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 xYes ☐ No ☒
100As of May 1, 2024, there were 11,072,607 shares of the Registrant’s common stock, par value $0.01 per share, were issued and outstanding as of December 21, 2018.outstanding.
Rhinebeck Bancorp, Inc.
Form 10-Q
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 37 | |
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EXPLANATORY NOTEPART I — FINANCIAL INFORMATION
ITEM 1.
Rhinebeck Bancorp, Inc. (the “Company,” “we” or “our”) was formedand Subsidiary
Consolidated Statements of Financial Condition (Unaudited)
(In thousands, except share and per share data)
| | | | | | | |
| | March 31, | | December 31, | | ||
|
| 2024 |
| 2023 | | ||
Assets | | | | | | | |
Cash and due from banks | | $ | 13,825 | | $ | 14,178 | |
Federal funds sold | | | 15,298 | | | 7,524 | |
Interest bearing depository accounts | | | 1,549 | | | 427 | |
Total cash and cash equivalents | | | 30,672 | | | 22,129 | |
| | | | | | | |
Available for sale securities (at fair value) | |
| 182,645 | |
| 191,985 | |
Loans receivable (net of allowance for credit losses of $7,973 and $8,124, respectively) | |
| 993,346 | |
| 1,008,851 | |
Federal Home Loan Bank stock | |
| 5,614 | |
| 6,514 | |
Accrued interest receivable | |
| 4,611 | |
| 4,616 | |
Cash surrender value of life insurance | |
| 30,215 | |
| 30,031 | |
Deferred tax assets (net of valuation allowance of $593 and $598, respectively) | |
| 10,070 | |
| 9,936 | |
Premises and equipment, net | |
| 14,592 | |
| 17,567 | |
Other real estate owned | |
| — | |
| 25 | |
Goodwill | |
| 2,235 | |
| 2,235 | |
Intangible assets, net | |
| 225 | |
| 246 | |
Other assets | |
| 24,559 | |
| 19,067 | |
Total assets | | $ | 1,298,784 | | $ | 1,313,202 | |
Liabilities and Stockholders’ Equity | |
|
| |
|
| |
Liabilities | |
|
| |
|
| |
Deposits | |
|
| |
|
| |
Non-interest bearing | | $ | 236,957 | | $ | 249,793 | |
Interest bearing | |
| 800,067 | |
| 780,710 | |
Total deposits | |
| 1,037,024 | |
| 1,030,503 | |
| | | | | | | |
Mortgagors’ escrow accounts | |
| 7,301 | |
| 9,274 | |
Advances from the Federal Home Loan Bank | |
| 108,064 | |
| 128,064 | |
Subordinated debt | |
| 5,155 | |
| 5,155 | |
Accrued expenses and other liabilities | |
| 26,968 | |
| 26,521 | |
Total liabilities | |
| 1,184,512 | |
| 1,199,517 | |
| | | | | | | |
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 11,072,607) | |
| 111 | |
| 111 | |
Additional paid-in capital | |
| 45,951 | |
| 45,959 | |
Unearned common stock held by the employee stock ownership plan | | | (3,219) | | | (3,273) | |
Retained earnings | |
| 101,507 | |
| 100,386 | |
Accumulated other comprehensive loss: | |
| | |
| | |
Net unrealized loss on available for sale securities, net of taxes | |
| (26,657) | |
| (26,077) | |
Defined benefit pension plan, net of taxes | |
| (3,421) | |
| (3,421) | |
Total accumulated other comprehensive loss | |
| (30,078) | |
| (29,498) | |
Total stockholders’ equity | |
| 114,272 | |
| 113,685 | |
Total liabilities and stockholders’ equity | | $ | 1,298,784 | | $ | 1,313,202 | |
See accompanying notes to serve as the mid-tier stock holding company for Rhinebeck Bank in connection with the reorganization of Rhinebeck Bank and its mutual holding company, Rhinebeck Bancorp, MHC, into the two-tier mutual holding company structure. As of September 30, 2018, the reorganization had not been completed and the Company had no assets or liabilities and had not conducted any business activities other than organizational activities. Accordingly, the unaudited financial statements and other financial information contained in this Quarterly Report on Form 10-Q relate solely to the consolidated financial results and financial position of Rhinebeck Bancorp, MHC and Rhinebeck Bank.statements
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 Rhinebeck Bank at and for the year ended December 31, 2017 contained in the Company’s definitive prospectus dated November 9, 2018 (the “Prospectus”), as filed with the Securities and Exchange Commission pursuant to Securities Act Rule 424(b)(3) on November 21, 2018.
1
Rhinebeck Bancorp, Inc. and Subsidiary
Consolidated Statements of Income (Unaudited)
| September 30, | December 31, | |||||||
| 2018 | 2017 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Cash and due from banks | $ | 12,596 | $ | 10,460 | ||||
| Available for sale securities (at fair value) | 102,387 | 113,302 | ||||||
| Held to maturity securities (fair value of $0 and $1,928, respectively) | - | 1,914 | ||||||
| Loans receivable (net of allowance for loan losses of $6,310 and $5,457, respectively) | 652,053 | 566,178 | ||||||
| Federal Home Loan Bank stock | 2,874 | 1,108 | ||||||
| Accrued interest receivable | 2,418 | 2,149 | ||||||
| Cash surrender value of life insurance | 17,918 | 17,577 | ||||||
| Deferred tax assets (net of valuation allowance of $985 and $982, respectively) | 3,332 | 3,021 | ||||||
| Premises and equipment, net | 16,593 | 17,025 | ||||||
| Other real estate owned | 1,739 | 2,233 | ||||||
| Goodwill | 1,410 | 1,505 | ||||||
| Intangible assets, net | 294 | 326 | ||||||
| Other assets | 6,093 | 5,305 | ||||||
| Total assets | $ | 819,707 | $ | 742,103 | ||||
| Liabilities and Capital | ||||||||
| Liabilities | ||||||||
| Deposits | ||||||||
| Noninterest bearing | $ | 185,222 | $ | 157,828 | ||||
| Interest bearing | 506,496 | 492,277 | ||||||
| Total deposits | 691,718 | 650,105 | ||||||
| Mortgagors’ escrow accounts | 3,521 | 7,284 | ||||||
| Advances from the Federal Home Loan Bank | 53,621 | 14,900 | ||||||
| Subordinated debt | 5,155 | 5,155 | ||||||
| Accrued expenses and other liabilities | 8,679 | 9,682 | ||||||
| Total liabilities | 762,694 | 687,126 | ||||||
| Stockholders’ Equity | ||||||||
| Common stock (par value $0.01 per share, 100 shares outstanding) | - | - | ||||||
| Additional paid-in capital | 100 | 100 | ||||||
| Retained earnings | 64,991 | 61,832 | ||||||
| Accumulated other comprehensive loss: | ||||||||
| Net unrealized loss on available for sale securities, net of taxes | (4,244 | ) | (2,322 | ) | ||||
| Defined benefit pension plan, net of taxes | (3,834 | ) | (4,633 | ) | ||||
| Total accumulated other comprehensive loss | (8,078 | ) | (6,955 | ) | ||||
| Total stockholders’ equity | 57,013 | 54,977 | ||||||
| Total liabilities and stockholders’ equity | $ | 819,707 | $ | 742,103 | ||||
(In thousands, except share and per share data)
| | | | | | | |
| | Three Months Ended March 31, | | ||||
|
| 2024 |
| 2023 | | ||
Interest and Dividend Income | | | | | | | |
Interest and fees on loans | | $ | 14,381 | | $ | 13,395 | |
Interest and dividends on securities | |
| 1,037 | |
| 1,018 | |
Other income | |
| 217 | |
| 189 | |
Total interest and dividend income | |
| 15,635 | |
| 14,602 | |
Interest Expense | |
|
| |
|
| |
Interest expense on deposits | |
| 5,134 | |
| 3,970 | |
Interest expense on borrowings | |
| 1,605 | |
| 768 | |
Total interest expense | |
| 6,739 | |
| 4,738 | |
Net interest income | |
| 8,896 | |
| 9,864 | |
Provision for credit losses | |
| 83 | |
| 1,014 | |
Net interest income after provision for credit losses | |
| 8,813 | |
| 8,850 | |
Non-interest Income | |
|
| |
|
| |
Service charges on deposit accounts | |
| 743 | |
| 708 | |
Net gain on sales of loans | |
| 46 | |
| 10 | |
Increase in cash surrender value of life insurance | |
| 184 | |
| 160 | |
Net gain from sale of other real estate owned | |
| 4 | |
| — | |
(Loss) gain on disposal of premises and equipment | |
| (18) | |
| 17 | |
Investment advisory income | |
| 381 | |
| 309 | |
Other | |
| 166 | |
| 172 | |
Total non-interest income | |
| 1,506 | |
| 1,376 | |
Non-interest Expense | |
|
| |
|
| |
Salaries and employee benefits | |
| 4,992 | |
| 5,240 | |
Occupancy | |
| 1,053 | |
| 1,079 | |
Data processing | |
| 495 | |
| 472 | |
Professional fees | |
| 414 | |
| 366 | |
Marketing | |
| 121 | |
| 104 | |
FDIC deposit insurance and other insurance | |
| 253 | |
| 282 | |
Amortization of intangible assets | |
| 21 | |
| 24 | |
Other | |
| 1,528 | |
| 1,636 | |
Total non-interest expense | |
| 8,877 | |
| 9,203 | |
Income before income taxes | |
| 1,442 | |
| 1,023 | |
Provision for income taxes | |
| 321 | |
| 225 | |
Net income | | $ | 1,121 | | $ | 798 | |
| | | | | | | |
Earnings per common share: | | | | | | | |
Basic | | $ | 0.10 | | $ | 0.07 | |
Diluted | | $ | 0.10 | | $ | 0.07 | |
| | | | | | | |
Weighted average shares outstanding, basic | | | 10,748,006 | | | 10,881,885 | |
Weighted average shares outstanding, diluted | | | 10,844,287 | | | 11,021,395 | |
See accompanying notes to consolidated financial statements.
2
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Interest and Dividend Income | ||||||||||||||||
| Interest and fees on loans | $ | 8,570 | $ | 6,477 | $ | 22,713 | $ | 18,738 | ||||||||
| Interest and dividends on securities | 578 | 590 | 1,762 | 1,859 | ||||||||||||
| Other income | 5 | 25 | 14 | 48 | ||||||||||||
| Total interest and dividend income | 9,153 | 7,092 | 24,489 | 20,645 | ||||||||||||
| Interest expense on deposits | 1,112 | 784 | 2,927 | 2,287 | ||||||||||||
| Interest expense on borrowings | 311 | 45 | 673 | 153 | ||||||||||||
| Total interest expense | 1,423 | 829 | 3,600 | 2,440 | ||||||||||||
| Net interest income | 7,730 | 6,263 | 20,889 | 18,205 | ||||||||||||
| Provision for loan losses | 525 | 225 | 1,575 | 675 | ||||||||||||
| Net interest income after provision for loan losses | 7,205 | 6,038 | 19,314 | 17,530 | ||||||||||||
| Noninterest Income | ||||||||||||||||
| Service charges on deposit accounts | 785 | 613 | 2,030 | 1,799 | ||||||||||||
| Net realized loss on sales and calls of securities | (21 | ) | (2 | ) | (22 | ) | (14 | ) | ||||||||
| Net gain on sales of loans | 167 | 163 | 435 | 432 | ||||||||||||
| Increase in cash surrender value of insurance | 101 | 116 | 300 | 345 | ||||||||||||
| Net gain from sale of other real estate owned | - | 1 | - | - | ||||||||||||
| Write-downs of other real estate owned | - | - | (387 | ) | - | |||||||||||
| Other real estate owned income | 11 | 10 | 32 | 32 | ||||||||||||
| Gain on sale of subsidiary | - | 1,834 | - | 1,834 | ||||||||||||
| Loss on disposal of premises and equipment | - | (106 | ) | - | (106 | ) | ||||||||||
| Insurance related income | - | 283 | - | 1,403 | ||||||||||||
| Investment advisory income | 225 | 183 | 557 | 565 | ||||||||||||
| Other | 230 | 253 | 685 | 735 | ||||||||||||
| Total noninterest income | 1,498 | 3,348 | 3,630 | 7,025 | ||||||||||||
| Noninterest Expenses | ||||||||||||||||
| Salaries and employee benefits | 3,601 | 3,287 | 10,520 | 10,267 | ||||||||||||
| Sales commissions | - | 30 | - | 217 | ||||||||||||
| Occupancy | 818 | 787 | 2,572 | 2,532 | ||||||||||||
| Data processing | 283 | 272 | 851 | 879 | ||||||||||||
| Professional fees | 217 | 186 | 635 | 588 | ||||||||||||
| Advertising | 148 | 166 | 532 | 460 | ||||||||||||
| FDIC deposit insurance and other insurance | 229 | 182 | 608 | 612 | ||||||||||||
| Other real estate owned expense | 101 | 76 | 184 | 139 | ||||||||||||
| Amortization of intangible assets | 11 | 14 | 32 | 57 | ||||||||||||
| Impairment loss on goodwill | - | - | 95 | - | ||||||||||||
| Other | 1,065 | 1,010 | 3,211 | 3,099 | ||||||||||||
| Total noninterest expenses | 6,473 | 6,010 | 19,240 | 18,850 | ||||||||||||
| Income before income taxes | 2,230 | 3,376 | 3,704 | 5,705 | ||||||||||||
| Provision for income taxes | 266 | 754 | 545 | 1,471 | ||||||||||||
| Net income | $ | 1,964 | $ | 2,622 | $ | 3,159 | $ | 4,234 | ||||||||
Rhinebeck Bancorp, Inc. and Subsidiary
Consolidated Statements of Comprehensive Income (Unaudited)
(In thousands, except share and per share data)
| | | | | | | |
| | Three Months Ended March 31, | | ||||
|
| 2024 |
| 2023 | | ||
Net Income | | $ | 1,121 | | $ | 798 | |
Other Comprehensive Income | |
| | |
| | |
Net unrealized (losses) gains on available for sale securities | |
| (734) | |
| 2,811 | |
Tax effect | |
| 154 | |
| (590) | |
Unrealized (losses) gains on available for sale securities, net of tax | |
| (580) | |
| 2,221 | |
Other comprehensive (loss) income: | |
| (580) | |
| 2,221 | |
Total Comprehensive Income | | $ | 541 | | $ | 3,019 | |
See accompanying notes to consolidated financial statements.
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Net Income | $ | 1,964 | $ | 2,622 | $ | 3,159 | $ | 4,234 | ||||||||
| Other Comprehensive Loss | ||||||||||||||||
| Unrealized (losses) gains on available for sale securities: | ||||||||||||||||
| Unrealized holding (losses) gains arising during the period | (670 | ) | 1 | (2,455 | ) | 645 | ||||||||||
| Reclassification adjustment for losses realized in net realized gain on sales and calls of securities on the consolidated statements of income | 21 | 2 | 22 | 14 | ||||||||||||
| Net unrealized (losses) gains on available for sale securities | (649 | ) | 3 | (2,433 | ) | 659 | ||||||||||
| Tax effect | 137 | (1 | ) | 511 | (224 | ) | ||||||||||
| Unrealized (losses) gains on available for sale securities, net of tax | (512 | ) | 2 | (1,922 | ) | 435 | ||||||||||
| Defined benefit pension plan: | ||||||||||||||||
| Actuarial gain arising during the period | - | - | 823 | - | ||||||||||||
| Reclassification adjustment for amortization of net actuarial loss | - | - | 187 | - | ||||||||||||
| Total | - | - | 1,010 | - | ||||||||||||
| Tax effect | - | - | (211 | ) | - | |||||||||||
| Defined pension benefit plan gain, net of tax | - | - | 799 | - | ||||||||||||
| Other comprehensive (loss) income | (512 | ) | 2 | (1,123 | ) | 435 | ||||||||||
| Total Comprehensive Income | $ | 1,452 | $ | 2,624 | $ | 2,036 | $ | 4,669 | ||||||||
3
Rhinebeck Bancorp, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
(In thousands, except share and per share data)
| | | | | | | | | | | | | | | | | | | |
| | | | | | Unearned | | | | Accumulated | | |
| ||||||
| | | | Additional | | Common | | | | Other | | | | ||||||
| | Common | | Paid-in | | Stock Held | | Retained | | Comprehensive | | | | ||||||
|
| Stock |
| Capital | | by the ESOP |
| Earnings |
| Loss |
| Total | | ||||||
Balance at December 31, 2022 | | $ | 113 | | $ | 47,075 | | $ | (3,491) | | $ | 96,624 | | $ | (32,189) | | $ | 108,132 | |
| | | | | | | | | | | | | | | | | | | |
Cumulative effect of change in accounting principle (See Note 1 of the Consolidated Financial Statements– Impact of Recent Accounting Pronouncements), net of tax | | $ | — | | $ | — | | $ | — | | $ | (633) | | $ | — | | $ | (633) | |
Balance at January 1, 2023 as adjusted for change in accounting principle | | $ | 113 | | $ | 47,075 | | $ | (3,491) | | $ | 95,991 | | $ | (32,189) | | $ | 107,499 | |
Net income | |
| — | |
| — | |
| — | |
| 798 | |
| — | |
| 798 | |
Other comprehensive income | | | — | |
| — | |
| — | |
| — | |
| 2,221 | |
| 2,221 | |
ESOP shares committed to be allocated | |
| — | | | (5) | | | 54 | | | — | | | — | | | 49 | |
Share-based compensation expense | | | — | | | 150 | |
| — | | | — | | | — | | | 150 | |
Balance at March 31, 2023 | | $ | 113 | | $ | 47,220 | | $ | (3,437) | | $ | 96,789 | | $ | (29,968) | | $ | 110,717 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2023 | | $ | 111 | | $ | 45,959 | | $ | (3,273) | | $ | 100,386 | | $ | (29,498) | | $ | 113,685 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| | |
Net income | |
| — | |
| — | |
| — | |
| 1,121 | |
| — | |
| 1,121 | |
Other comprehensive loss | |
| — | |
| — | |
| — | |
| — | |
| (580) | |
| (580) | |
ESOP shares committed to be allocated | | | — | | | (8) | | | 54 | | | — | | | — | | | 46 | |
Balance at March 31, 2024 | | $ | 111 | | $ | 45,951 | | $ | (3,219) | | $ | 101,507 | | $ | (30,078) | | $ | 114,272 | |
See accompanying notes to consolidated financial statements.
4
Rhinebeck Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
(In thousands, except share and per share data)
| | | | | | |
| | Three Months Ended March 31, | ||||
|
| 2024 |
| 2023 | ||
Cash Flows from Operating Activities | | | | | | |
Net income | | $ | 1,121 | | $ | 798 |
Adjustments to reconcile net income to net cash provided by operating activities: | |
|
| |
|
|
Amortization and accretion of premiums and discounts on investments, net | |
| 61 | |
| 72 |
Net realized gain on sale of other real estate owned | | | (4) | | | — |
Provision for credit losses | |
| 83 | |
| 1,014 |
Loans originated for sale | |
| (1,957) | |
| (1,510) |
Proceeds from sale of loans | |
| 2,017 | |
| 1,079 |
Net gain on sale of loans | |
| (46) | |
| (10) |
Amortization of intangible assets | |
| 21 | |
| 24 |
Depreciation and amortization | |
| 344 | |
| 358 |
Net loss (gain) from disposal of premises and equipment | |
| 18 | |
| (17) |
Deferred income tax expense (benefit) | |
| 20 | |
| (338) |
Increase in cash surrender value of insurance | |
| (184) | |
| (160) |
Net increase in accrued interest receivable | |
| 5 | |
| 1,256 |
Expense of earned ESOP shares | |
| 46 | |
| 49 |
Share-based compensation expense | | | — | | | 150 |
Net increase in other assets | |
| (5,492) | |
| (1,227) |
Net increase in accrued expenses and other liabilities | |
| 447 | |
| 1,568 |
Net cash (used in) provided by operating activities | |
| (3,500) | |
| 3,106 |
Cash Flows from Investing Activities | |
|
| |
|
|
Proceeds from maturities and principal repayments of securities | |
| 8,545 | |
| 4,226 |
Net purchases of FHLB Stock | |
| 900 | |
| (2,192) |
Net decrease (increase) in loans | |
| 15,408 | |
| (11,601) |
Purchases of bank premises and equipment | |
| (244) | |
| (63) |
Proceeds from disposal of premises and equipment | |
| 2,857 | |
| 27 |
Net increase of other real estate owned | |
| 29 | |
| — |
Net cash provided by (used in) investing activities | |
| 27,495 | |
| (9,603) |
Cash Flows from Financing Activities | |
|
| |
|
|
Net decrease in demand deposits, NOW, money market and savings accounts | |
| (8,403) | |
| (104,127) |
Net increase in time deposits | |
| 14,924 | |
| 67,718 |
Net decrease in mortgagors' escrow accounts | |
| (1,973) | |
| (1,062) |
Net (decrease) increase in short-term debt | |
| (20,000) | |
| 28,727 |
Net increase in long-term debt | |
| — | |
| 20,000 |
Net cash (used in) provided by financing activities | |
| (15,452) | |
| 11,256 |
Net increase in cash and cash equivalents | |
| 8,543 | |
| 4,759 |
Cash and Cash Equivalents | |
|
| |
|
|
Beginning balance | |
| 22,129 | |
| 31,384 |
Ending balance | | $ | 30,672 | | $ | 36,143 |
Supplemental Disclosures of Cash Flow Information | |
|
| |
|
|
Cash paid for: | |
|
| |
|
|
Interest | | $ | 6,547 | | $ | 4,465 |
Income taxes | | $ | 108 | | $ | 106 |
| Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||
| Balance at December 31, 2017 | $ | - | $ | 100 | $ | 61,832 | $ | (6,955 | ) | $ | 54,977 | |||||||||
| Net income | - | - | 3,159 | - | 3,159 | |||||||||||||||
| Other comprehensive loss | - | - | - | (1,123 | ) | (1,123 | ) | |||||||||||||
| Balance at September 30, 2018 (unaudited) | $ | - | $ | 100 | $ | 64,991 | $ | (8,078 | ) | $ | 57,013 | |||||||||
| Balance at December 31, 2016 | $ | - | $ | 100 | $ | 57,686 | $ | (5,269 | ) | $ | 52,517 | |||||||||
| Net income | - | - | 4,234 | - | 4,234 | |||||||||||||||
| Other comprehensive loss | - | - | - | 435 | 435 | |||||||||||||||
| Balance at September 30, 2017 (unaudited) | $ | - | $ | 100 | $ | 61,920 | $ | (4,834 | ) | $ | 57,186 | |||||||||
See accompanyingnotes to consolidated financial statements.statements
5
| For the nine months ended | ||||||||
| September 30, | ||||||||
| 2018 | 2017 | |||||||
| (unaudited) | ||||||||
| Cash Flows from Operating Activities | ||||||||
| Net income | $ | 3,159 | $ | 4,234 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Amortization and accretion of premiums and discounts on investments, net | 265 | 286 | ||||||
| Net realized loss on sales and calls of securities | 22 | 14 | ||||||
| Provision for loan losses | 1,575 | 675 | ||||||
| Loans originated for sale | (26,937 | ) | (29,615 | ) | ||||
| Proceeds from sale of loans | 29,146 | 29,567 | ||||||
| Net gain on sale of mortgage loans | (435 | ) | (432 | ) | ||||
| Net gain on sale of other real estate owned | - | - | ||||||
| Amortization of intangible assets | 32 | 57 | ||||||
| Gain on sale of subsidiary | - | (1,834 | ) | |||||
| Impairment loss on goodwill | 95 | - | ||||||
| Depreciation and amortization | 866 | 856 | ||||||
| Write-down of other real estate owned | 387 | - | ||||||
| Loss from disposal of premises and equipment | - | 106 | ||||||
| Deferred income tax (benefit) expense | (12 | ) | 134 | |||||
| Increase in cash surrender value of insurance | (300 | ) | (345 | ) | ||||
| Decrease (increase) in accrued interest receivable | (269 | ) | 325 | |||||
| Decrease (increase) in other assets | (788 | ) | 697 | |||||
| Increase in accrued expenses and other liabilities | 7 | 217 | ||||||
| Net cash provided by operating activities | 6,813 | 4,942 | ||||||
| Cash Flows from Investing Activities | ||||||||
| Proceeds from sales and calls of available for sale securities | 2,113 | 26,519 | ||||||
| Proceeds from maturities and principal repayments of securities | 11,881 | 14,542 | ||||||
| Purchases of securities | (3,885 | ) | (19,568 | ) | ||||
| Net (purchases) sales of FHLB stock | (1,766 | ) | 1 | |||||
| Net increase in loans | (89,224 | ) | (34,489 | ) | ||||
| Purchases of bank owned life insurance policies | (41 | ) | (41 | ) | ||||
| Purchases of bank premises and equipment | (434 | ) | (408 | ) | ||||
| Proceeds from disposal of premises and equipment | - | 525 | ||||||
| Net decrease of other real estate owned | - | 2 | ||||||
| Proceeds from sale of other real estate owned | 108 | 281 | ||||||
| Proceeds from sale of subsidiary | - | 3,443 | ||||||
| Net cash used in investing activities | (81,248 | ) | (9,193 | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Net increase in demand deposits, NOW, money market and savings accounts | 30,911 | 17,035 | ||||||
| Net increase (decrease) in time deposits | 10,702 | (10,902 | ) | |||||
| Decrease in mortgagors’ escrow accounts | (3,763 | ) | (3,317 | ) | ||||
| Net increase in short-term debt | 20,537 | 700 | ||||||
| Net increase in long-term debt | 18,184 | - | ||||||
| Net cash provided by financing activities | 76,571 | 3,516 | ||||||
| Net increase (decrease) in cash and due from banks | 2,136 | (735 | ) | |||||
| Cash and Due from Banks | ||||||||
| Beginning balance | 10,460 | 12,976 | ||||||
| Ending balance | $ | 12,596 | $ | 12,241 | ||||
| Supplemental Disclosures of Cash Flow Information | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | 2,081 | $ | 1,610 | ||||
| Income taxes | $ | 368 | $ | 1,009 | ||||
| Noncash Investing and Financing Activities | ||||||||
| Unrealized holding (loss) gain on available for sale securities arising during the period | $ | (2,433 | ) | $ | 659 | |||
| Transfer of loans to other real estate owned | $ | - | $ | 139 | ||||
| Decrease in defined benefit plan liability included in other comprehensive loss | $ | 1,010 | $ | - | ||||
See accompanying notes to consolidated financial statements.
Table of ContentsRHINEBECK BANCORP, MHC AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
Rhinebeck Bancorp, MHC (“Company”Inc. and Subsidiary
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”) is, a mutualstock holding company, whoseand its wholly-owned subsidiary, is Rhinebeck Bank (“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 eleventhirteen 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 (“RAM”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, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 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, 2023 contained in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 26, 2024 (the “Annual Report on form 10-K”).
A description ofFor more information regarding the Company'sCompany’s significant accounting policies, are presented below.see the Notes to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K. As of March 31, 2024, 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– Impact of Recent Accounting Pronouncements.
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 loancredit losses the valuation of securities and other real estate owned, the evaluation of investment securities for other-than-temporary impairment,(“ACL”), the evaluation of goodwill for impairment and the valuation of deferred tax assets and the determination of pension obligations.
The interim financial statements at September 30, 2018 and for the three and nine months ended September 30, 2018 and 2017, respectively, are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. The results of operations for the nine months ended September 30, 2018 are not necessarily indicative of the results to be achieved for the remainder of 2018 or any other period.
assets.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary.the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.
Significant Group Concentrations of Credit Risk
Most of the Company’s activities are with customers located in the New York State counties of Dutchess, Ulster, Orange, Columbia, Putnam, and Albany. Although the Company has a diversified loan portfolio, a substantial portion of its customers’ abilities to repay their loans is dependent on the economic conditions in the territories in which the Company operates.
Cash and Cash Equivalents
Cash and due from banks and federal funds sold are recognized as cash equivalents in the consolidated statements of financial condition and cash flows. Federal funds sold generally mature in one day. The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.
Investment in Debt and Marketable Equity Securities
Debt securities that management has the positive intent and ability to hold to maturity are classified as “held to maturity” and are recorded at amortized cost. “Trading” securities, if any, are carried at fair value, with unrealized gains and losses recognized in earnings. Securities not classified as held to maturity or trading, including equity securities with readily determinable fair values, are classified as “available for sale” and are recorded at fair value, with unrealized gains and losses excluded from earnings and reported in accumulated other comprehensive income (loss), net of taxes. Purchase premiums and discounts are recognized in interest income using the interest method over the maturity terms of the securities. Realized gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.
The Company evaluates securities for other-than temporary impairment on a regular basis. The evaluation considers several factors including the amount of the unrealized loss, the period of time the security has been in a loss position and the credit standing of the issuer. When the Company does not intend to sell the security and it is likely that the Company will not be required to sell the security before recovery of its cost basis, the credit loss determined due to a permanent impairment will be recognized in earnings. The credit loss component recognized is identified as the amount of future principal cash flows not expected to be received over the remaining term of the security as projected based on cash flow estimates discounted at the applicable original yield of the security.
Loans Receivable
Loans that the Company has the intent and ability to hold for the foreseeable future or until maturity or payoff generally are reported at their outstanding unpaid principal balances adjusted for unearned income, including any allowance for loan losses and any unamortized deferred fees or costs.
Interest income is accrued based on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and amortized as a level yield adjustment over the respective term of the loan.
The accrual of interest on loans is discontinued at the time the loan is 90 days past due. Consumer automobile and installment loans are typically charged off no later than 180 days past due. Past due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful.
All interest accrued, but not collected, for loans that are placed on nonaccrual status or charged off, is reversed against interest income. The interest on these loans is accounted for on the cash-basis method until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management determines all or part of the loan balance is uncollectible. Subsequent recoveries, if any, are credited to the allowance.
The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the size and composition of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
The allowance calculation methodology involves segregation of the total loan portfolio into segments. The Company’s loans receivable portfolio is comprised of the following segments: commercial real estate, residential real estate, commercial and industrial and consumer. The segments of the Company’s loans receivable portfolio are further disaggregated into classes based on identified associated risks within those segments. This allows management to better monitor risk and performance.
Commercial real estate loans are separated into the two classes: non-residential and multi-family. Non-residential and multi-family loans include long-term loans financing commercial properties and includeboth owner and non-owner occupied properties. Construction loans, which includeland loans,arecomprised mostly of non-owner occupied projects, whereby the property is generally under development and tends to have more risk than the owner occupied loans.The Company grants loans for the construction of residential homes, residential developments and land development projects. Repayment of these loans is mostly dependent upon either the ongoing cash flow of the borrowing entity or the resale or lease of the subject property.
Residential real estate loans are secured by the borrower’s residential real estate generally in a first lien position. Residential mortgages have varying loan interest rates depending on the financial condition of the borrower, the loan to value ratio and the term of the loan.
The commercial and industrial loan segment consists of loans made for purposes of financing the activities of commercial customers. The assets financed through commercial and industrial loans are used within the business for its ongoing operations. Repayment of commercial and industrial loans predominately comes from the cash flow of the business or the ongoing operations of assets.
Consumer loans are classified into the following three classes: indirect automobile loans, home equity loans and other consumer loans. Indirect automobile loans are secured by the borrowers’ automobiles and originated through the Company’s relationships with the automobile dealers in the various counties in the Company’s service area. Home equity loans are secured by the borrower’s residential real estate in a first or second lien position. Other direct consumer loans may be unsecured.
The Company has established credit policies applicable to each type of lending activity in which it engages. The Company evaluates the creditworthiness of each customer and, in most cases, extends credit of up to 80% of the market value of the collateral at the date of the credit extension, depending on the borrowers' creditworthiness and the type of collateral. The Company’s credit policies determine advance rates against the different forms of collateral that can be pledged against commercial and industrial and commercial real estate loans. Typically, the majority of loans will be limited to a percentage of their underlying collateral values such as real estate values, automobiles, equipment, eligible accounts receivable and inventory. Individual loan advance rates may be higher or lower depending upon the financial strength of the borrower, past experience with the borrower, the nature of the collateral, competitive offerings and/or term of the loan.
The market value of collateral is monitored on an ongoing basis and additional collateral may be obtained when warranted. While collateral provides some assurance as a secondary source of repayment, the Company ordinarily requires the primary source of repayment to be based on the borrower's ability to generate continuing sufficient cash flows. The Company's policy for collateral requires that, generally, the amount of the loan may not exceed 90% of the original appraised value of the property. Private mortgage insurance is usually required for that portion of the loan in excess of 80% of the appraised value of the property.
The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated at least quarterly or when credit deficiencies arise, such as when loan payments are delinquent. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans classified as special mention have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass.
The allowance consists of specific and general components. The specific component relates to loans that are considered impaired. For such impaired loans, an allowance is established when the discounted cash flows (or observable market price or collateral value if the loan is collateral dependent) of the impaired loan is lower than the carrying value of that loan. The general component covers all other loans, segregated generally by loan type and is based on historical loss experience with adjustments for qualitative factors which are made after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss data.
These qualitative risk factors generally include:
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls are not necessarily classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and real estate loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. The estimated fair values of substantially all of the Company’s impaired loans are measured based on the estimated fair value of the loans’ collateral.
For loans secured by real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the size of the loan, age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values are discounted for expected sales costs to arrive at the estimated recognizable value of the collateral, which is considered to be the estimated fair value. The recorded investment in consumer mortgages and loans secured by residential real estate properties for which formal foreclosure proceedings are in process was $593 and $97 on September 30, 2018 and December 31, 2017, respectively.
For loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower’s financial statements, inventory reports, accounts receivable aging or equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets.
The evaluation of the need and amount of the allowance for impaired loans and whether a loan can be removed from impairment status is made on a quarterly basis. The Company’s policy for recognizing interest income on impaired loans does not differ from its overall policy for interest recognition.
The Company may grant a concession or modification for economic or legal reasons related to a borrower's financial condition that it would not otherwise consider resulting in a modified loan which is then identified as a troubled debt restructuring (“TDR”). These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. TDRs are considered impaired loans for purposes of calculating the Company's allowance for loan losses.
The Company identifies loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower's financial statements, revenue projections, tax returns and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, negative trends, or specific conditions that may result in a payment default in the near future.
Regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate.
Loans Held for Sale
Loans held for sale are those mortgage loans the Company has the intent to sell in the foreseeable future and are carried at the lower of aggregate cost or market value, with valuation changes recorded in noninterest income. Gains and losses on sales of loans are recognized at the trade dates and are determined by the difference between the sales proceeds and the carrying value of the loans.
Mortgage loans held for sale are generally sold with the mortgage servicing rights retained by the Company. Gains or losses on sales of mortgage loans are recognized based on the difference between the selling price and the carrying value of the related mortgage loans sold. Mortgage service rights are recorded and amortized over the life of the loan.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company – put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the transferor does not maintain effective control over the transferred assets through either (a) an agreement that both entitles and obligates the transferor to repurchase or redeem the assets before maturity or (b) the ability to unilaterally cause the holder to return specific assets, other than through a cleanup call.
Servicing
Servicing assets are recognized as separate assets developed through the sale of residential mortgages. Servicing rights are initially recorded at fair value with the income statement effect recorded in gain or loss on sales of loans. Fair value is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to and over the period of the estimated future net servicing income of the underlying financial assets.
Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is recognized through a valuation allowance and charged to noninterest income, to the extent that fair value is less than the capitalized amount. If the Company later determines that all or a portion of the impairment no longer exists, a reduction of the allowance may be recorded as an increase to income.
Other Real Estate Owned
Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in operations. Costs relating to the development and improvement of the property are capitalized, subject to the resulting limit of fair value of the collateral. Gains or losses are included in operations upon disposal. Other real estate owned included $935 and $1,322 of residential real estate and $804 and $911 of commercial property on September 30, 2018 and December 31, 2017, respectively.
Premises and Equipment
Premises and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation is charged to operations using the straight-line method over the estimated useful lives of the related assets. Rent expense is charged to operations over the expected lease term using the straight-line method. Leasehold improvements are amortized over the shorter of the improvements' estimated economic lives or the related lease terms. Gains and losses on dispositions are recognized upon realization. Maintenance and repairs are expensed as incurred and improvements are capitalized.
Bank-Owned Life Insurance
The Company purchased bank owned life insurance (“BOLI”) on a chosen group of employees and trustees. The Company is the owner and sole beneficiary of the policies. Earnings from BOLI are recognized as part of noninterest income. BOLI is carried at cash surrender value. Death benefit proceeds received in excess of the policies cash surrender values are recognized in income upon receipt. The Company does not intend to surrender these policies and, accordingly, no deferred taxes have been provided.
Significant One-Time Business Transactions
At the close of business on August 15, 2017, the Bank sold all of its interest in its subsidiary Brinckerhoff and Neuville, Inc. (“B&N”) in a stock transaction for net proceeds of $3,443. As a result, the Company realized a $1,834 net gain on the sale, which is separately reported on the consolidated statements of income. B&N had pre-tax profit of $437 in 2017.
Goodwill and Amortizable Intangible Assets
The excess of the purchase price of an acquisition over the net fair value of the identifiable tangible and intangible assets and liabilities is assigned to goodwill. Goodwill is not amortizable, but is subject to at least an annual assessment, or more frequently in the presence of certain circumstances, for impairment.
Other intangible assets are stated at cost, less accumulated amortization and consist of purchased customer accounts. Purchased customer accounts primarily consist of records and files that contain information about investment holdings. These assets are amortized on a straight-line basis over the related estimated lives of approximately 13 years. In the presence of certain circumstances, intangible assets may be assessed for impairment as well. Impairment exists when carrying value exceeds its fair value. In such circumstances a charge for the relevant impairment is recognized and the net book value is reduced to the appropriate value.
Income Taxes
The Company recognizes income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that all or some portion of the deferred tax assets will not be realized.
When tax returns are filed, it is highly expected that most positions taken would be sustained upon examination by the taxing authorities, while others may be subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the consolidated financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company has no liabilities for uncertain tax positions at September 30, 2018 and December 31, 2017.
Interest and penalties associated with unrecognized tax benefits, if any, would be classified as an additional provision for income taxes in the consolidated statements of income.
Comprehensive Income (Loss)
GAAP requires that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities and the net actuarial loss of the defined benefit pension plan, are reported as a separate component of the stockholders’ equity section of the consolidated statements of financial condition, such items, along with net income, are components of comprehensive income (loss).
Fair Value
The Company uses fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in certain instances, there are no quoted market prices for certain assets or liabilities. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the asset or liability.
Fair value measurements focus on exit prices in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment.
The Company's fair value measurements are classified into a fair value hierarchy based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. The three categories within the hierarchy are as follows:
Reclassifications
Certain amounts in the prior year consolidated financial statements have beenmay 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.
6
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
Impact of Recent Accounting Pronouncements
Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. ASU No. 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The Company used the modified retrospective method for transition with the cumulative effect recognized as of the date of initial application with no restatement of prior periods. The adoption did not have a significant effect on the Company’s financial statements as the recognition of interest income has been scoped out of the guidance and noninterest income recognition is similar to current revenue recognition practices. See Note 16 for additional information related to the adoption of ASU No. 2014-09.
In February 2016,October 2023, the FASB issued ASU No. 2016-02 “Leases (Topic 842)”. This ASU requires lessees2023-06, which amends the disclosure or presentation requirements related to recognize the assets and liabilities that arise from leases with a lease term of more than 12 months on the balance sheet. A lessee should recognizevarious subtopics in the statementsFASB Accounting Standards Codification. In annual periods, this requires disclosure of financial position a right-of-use asset representing its rightan entity’s accounting policy related to use the underlying assetentity’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 lease term and a liability to make lease payments. This ASU isdate on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, for the Company in 2019. Earlywith early adoption is permitted.prohibited. The Company is currently assessingevaluating the effect that ASU No. 2016-02 will have on its results of operations, financial position and cash flows.
In June 2016, the FASB issued ASU No. 2016-13 on “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This ASU requires credit losses on most financial assets be measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (“CECL”) model). Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument. The measurement of expected credit losses is based upon relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. This ASU is effective for the Company in 2021. Early adoption is permitted in 2019. The Company does not believe that the adoption of these updates will have a material effect on its results of operations, financial position and cash flows.
Effective January 1, 2018, the Company adopted ASU 2016-01 “Financial Instruments (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities”. This makes significant changes in U.S. GAAP related to certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The changes provided for in this Update that are applicable to the Company are as follows: (1) require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; however, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer; (2) for equity investments without readily determinable fair values, require a qualitative assessment to identify impairment and if a qualitative assessment indicates that impairment exists, requiring an entity to measure the investment at fair value; (3) eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (4) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (5) require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (6) require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (7) clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. For the Company, the adoption of ASU 2016-01 resulted in the use of an exit price to determine the fair value of financial instruments not measured at fair value in the consolidated statements of financial condition. Accordingly, we refined the calculation used to determine the disclosed fair value of the Company’s loans held for investment as part of adopting this standard. The refined calculation did not have a significant impact on the Company’s fair value disclosures.
In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other” to simplify the accounting for goodwill impairment. This guidance, among other things, removes step 2 of the goodwill impairment test thus eliminating the need to determine the fair value of individual assets and liabilities of the reporting unit. Upon adoption of this ASU goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This may result in more or less impairment being recognized than under current guidance. This will become effective for the Company’s annual goodwill impairment test in 2020. The Company does not believe that the adoption of this Update will have a material effect on its results of operations, financial position and cash flows.
In February 2018, the FASB issued ASU 2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220).” ASU 2018-02 permits a reclassification from accumulated other comprehensive loss to retained earnings for stranded tax effects resulting from the reduction in the corporate income tax rate to 21% with the newly enacted Tax Cuts and Jobs Act. As required by GAAP, the Company had re-measured all deferred tax amounts at 21% at December 31, 2017 with the change included in provision for income taxes in 2017, the period of enactment. This left deferred tax items in accumulated other comprehensive loss at the old rate of 34% used by the Company. The reclassification allows the Company to transfer an amount equal to the change in the rate related to those deferred tax items included in accumulated other comprehensive loss to retained earnings. ASU 2018-02 is effective for the Company in 2019 but early adoption is permitted. The Company elected to adopt this guidance at December 31, 2017.
In May 2018, the FASB issued ASU No. 2018-06, “Codification Improvements to Topic 942, Financial Services - Depository and Lending”. This update superseded outdated guidance related to the Office of the Comptroller of the Currency's Banking Circular 202, Accounting for Net Deferred Tax Charges. The Company does not expect the new guidanceit to have a material impact on the Company’s consolidated financial statements.
In June 2018,November 2023, the FASB issued ASU No. 2018-07, “Compensation- Stock Compensation2023-07, "Segment Reporting (Topic 718)280): Improvements to Nonemployee Share-Based Payment Accounting”. This update expandsReportable Segment Disclosures,” which requires public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis. Under ASU 2023-07, public entities must disclose significant expense categories and amounts for each reportable segment, where significant expense categories are defined as those that are regularly reported to an entity’s chief operating decision-maker and included in a segment’s reported measures of profit or loss. Additionally, public entities must disclose the scopeamount of Topic 718 to include share based payment transactions for acquiring goodsother segment items and services from nonemployees. As a result, nonemployee share based payment awards will be measured at the grant-date fair valuedescription of the equity instruments that an entity is obligated to issue when the service has been rendered, subject to the probability of satisfying performance conditions when applicable. This updateits composition. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023. As the Company has only one reportable segment, ASU 2023-07 does not have an 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 2019.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 the new guidanceit to have a material impact on the Company’s consolidated financial statements.
In July 2018, the FASB issued ASU No. 2018-09, “Codification Improvements” to address stakeholder suggestions for minor corrections and clarifications within the codification. The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments in this update do not require transition guidance and will be effective upon issuance of this update. However, many of the amendments in this update do have transition guidance with effective dates for annual periods beginning after December 15, 2018, for public business entities. The Company does not expect the new guidance to have a material impact on the consolidated financial statements.
In July 2018, the FASB issued ASU No. 2018-10, “Codification Improvements to Topic 842, Leases” to address certain narrow aspects of the guidance issued in ASU No. 2016-02. This guidance did not change the Company's assessment of the impact of ASU No. 2016-02 on the consolidated financial statements as described above.
In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements”, which amends Topic 842, Leases, to (1) add an optional transition method that would permit entities to apply the new requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption, and (2) provide a practical expedient for lessors regarding the separation of the lease and non-lease components of a contract. This guidance did not change the Company's assessment of the impact of ASU No. 2016-02 on the consolidated financial statements as described above.
In August 2018, the FASB issued ASU No. 2018-14, “Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20)”. The amendments in this ASU remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. Although narrow in scope, the amendments are considered an important part of FASB's efforts to improve the effectiveness of disclosures in the notes to financial statements. ASU 2018-14 is effective for the Company in 2021. Early adoption is permitted. The Company has not evaluated the new guidance for its effect on the consolidated financial statements.
Emerging Growth Company Status
As an emerging growth company, the Company may delay adoption of new or revised financial accounting standards until such date that the standards are required to be adopted by non-issuer companies. If such standards would not apply to non-issuer companies, no deferral would be applicable. The Company intends to takeis taking advantage of the benefits of the extended transition periods allowed under the Jumpstart Our Business Startups Act.
Accordingly, the Company'sCompany’s consolidated financial statements may not be comparable to those of public companies that adopt new or revised financial accounting standards as of an earlier date. The effective dates of the following recent accounting standards reflect those that relate to non-issuer companies. The Company expects to lose its emerging growth company status on December 31, 2024.
18
7
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data) |
The amortized cost, gross unrealized gains and losses and fair values of available for sale securities are as follows:
| | | | | | | | | | | | |
| | March 31, 2024 | ||||||||||
| | | | Gross | | Gross | | | ||||
| | | | Unrealized | | Unrealized | | | ||||
|
| Amortized Cost |
| Gains |
| Losses |
| Fair Value | ||||
U.S. Treasury securities | | $ | 20,048 | | $ | — | | $ | (905) | | $ | 19,143 |
U.S. government agency mortgage-backed securities–residential | | | 152,958 | | | — | | | (28,824) | | | 124,134 |
U.S. government agency securities |
| | 24,772 |
| | — |
| | (1,676) |
| | 23,096 |
Municipal securities(1) |
| | 3,161 |
| | — |
| | (279) |
| | 2,882 |
Corporate bonds |
| | 14,700 |
| | — |
| | (1,966) |
| | 12,734 |
Other |
| | 750 |
| | — |
| | (94) |
| | 656 |
Total | | $ | 216,389 | | $ | — | | $ | (33,744) | | $ | 182,645 |
| September 30, 2018 | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Losses | Fair Value | |||||||||||||
| U.S. Treasury securities | $ | 3,039 | $ | - | $ | (111 | ) | $ | 2,928 | |||||||
| U.S. government agency mortgage-backed securities-residential | 86,568 | - | (4,555 | ) | 82,013 | |||||||||||
| U.S. government agency securities | 16,923 | - | (706 | ) | 16,217 | |||||||||||
| Municipal securities ¹ | 1,229 | 1 | (1 | ) | 1,229 | |||||||||||
| Total | $ | 107,759 | $ | 1 | $ | (5,373 | ) | $ | 102,387 | |||||||
| December 31, 2017 | ||||||||||||||||
| U.S. Treasury securities | $ | 3,048 | $ | - | $ | (47 | ) | $ | 3,001 | |||||||
| U.S. government agency mortgage-backed securities-residential | 93,858 | 1 | (2,470 | ) | 91,389 | |||||||||||
| U.S. government agency securities | 16,935 | - | (409 | ) | 16,526 | |||||||||||
| Municipal securities ¹ | 2,401 | 1 | (16 | ) | 2,386 | |||||||||||
| Total | $ | 116,242 | $ | 2 | $ | (2,942 | ) | $ | 113,302 | |||||||
¹ The issuers of municipal securities are all within New York State.
| | | | | | | | | | | | |
|
| December 31, 2023 | ||||||||||
| | | | Gross | | Gross | | | ||||
| | | | Unrealized | | Unrealized | | | ||||
|
| Amortized Cost |
| Gains |
| Losses |
| Fair Value | ||||
U.S. Treasury securities | | $ | 25,072 | | $ | — | | $ | (1,066) | | $ | 24,006 |
U.S. government agency mortgage-backed securities–residential | | | 156,523 | | | — | | | (27,943) | | | 128,580 |
U.S. government agency securities | | | 24,774 |
| | — |
| | (1,616) |
| | 23,158 |
Municipal securities(1) |
| | 3,163 |
| | — |
| | (260) |
| | 2,903 |
Corporate bonds | | | 14,700 |
| | — |
| | (2,060) |
| | 12,640 |
Other | | | 763 |
| | — |
| | (65) |
| | 698 |
Total | | $ | 224,995 | | $ | — | | $ | (33,010) | | $ | 191,985 |
(1) |
The issuers of municipal securities are all within New York State. |
The following table presentstables 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:
| | | | | | | | | | | | | | | | | | |
| | March 31, 2024 | ||||||||||||||||
| | Less Than 12 Months | | 12 Months or Longer | | Total | ||||||||||||
| | | | Unrealized | | | | Unrealized | | | | Unrealized | ||||||
|
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses | ||||||
U.S. Treasury securities | | $ | — | | $ | — | | $ | 19,143 | | $ | (905) | | $ | 19,143 | | $ | (905) |
U.S. government agency mortgage-backed securities-residential | | | — | | | — | | | 124,101 | | | (28,824) | | | 124,101 | | | (28,824) |
U.S. government agency securities | | | — | | | — | | | 23,095 | | | (1,676) | | | 23,095 | | | (1,676) |
Municipal securities | | | — | | | — | | | 2,766 | | | (279) | | | 2,766 | | | (279) |
Corporate bonds | | | — | | | — | | | 12,734 | | | (1,966) | | | 12,734 | | | (1,966) |
Other | | | 629 | | | (94) | | | — | | | — | | | 629 | | | (94) |
Total | | $ | 629 | | $ | (94) | | $ | 181,839 | | $ | (33,650) | | $ | 182,468 | | $ | (33,744) |
8
Rhinebeck Bancorp, Inc. and Subsidiary
| Less Than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
| Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
| September 30, 2018 | ||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||
| U.S. Treasury securities | $ | - | $ | - | $ | 2,928 | $ | (111 | ) | $ | 2,928 | $ | (111 | ) | ||||||||||
| U.S. government agency mortgage-backed securities-residential | 6,908 | (168 | ) | 74,676 | (4,387 | ) | 81,584 | (4,555 | ) | |||||||||||||||
| U.S. government agency securities | - | - | 16,217 | (706 | ) | 16,217 | (706 | ) | ||||||||||||||||
| Municipal Securities | 533 | (1 | ) | - | - | 533 | (1 | ) | ||||||||||||||||
| Total | $ | 7,441 | $ | (169 | ) | $ | 93,821 | $ | (5,204 | ) | $ | 101,262 | $ | (5,373 | ) | |||||||||
| December 31, 2017 | ||||||||||||||||||||||||
| U.S. Treasury securities | $ | 3,001 | $ | (47 | ) | $ | - | $ | - | $ | 3,001 | $ | (47 | ) | ||||||||||
| U.S. government agency mortgage-backed securities-residential | 34,601 | (542 | ) | 56,170 | (1,928 | ) | 90,771 | (2,470 | ) | |||||||||||||||
| U.S. government agency securities | 3,923 | (50 | ) | 12,603 | (359 | ) | 16,526 | (409 | ) | |||||||||||||||
| Municipal Securities | 593 | (3 | ) | 977 | (13 | ) | 1,570 | (16 | ) | |||||||||||||||
| Total | $ | 42,118 | $ | (642 | ) | $ | 69,750 | $ | (2,300 | ) | $ | 111,868 | $ | (2,942 | ) | |||||||||
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
| | | | | | | | | | | | | | | | | | |
|
| December 31, 2023 | ||||||||||||||||
| | Less Than 12 Months | | 12 Months or Longer | | Total | ||||||||||||
| | | | Unrealized | | | | Unrealized | | | | Unrealized | ||||||
|
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses | ||||||
U.S. Treasury securities | | $ | — | | $ | — | | $ | 24,006 | | $ | (1,066) | | $ | 24,006 | | $ | (1,066) |
U.S. government agency mortgage-backed securities-residential | | | — | | | — | | | 128,580 | | | (27,943) | | | 128,580 | | | (27,943) |
U.S. government agency securities | | | — | | | — | | | 23,158 | | | (1,616) | | | 23,158 | | | (1,616) |
Municipal securities | | | 512 | | | (18) | | | 2,276 | | | (242) | | | 2,788 | | | (260) |
Corporate bonds | | | — | | | — | | | 12,640 | | | (2,060) | | | 12,640 | | | (2,060) |
Other | | | 672 | | | (65) | | | — | | | — | | | 672 | | | (65) |
Total | | $ | 1,184 | | $ | (83) | | $ | 190,660 | | $ | (32,927) | | $ | 191,844 | | $ | (33,010) |
At September 30, 2018 and DecemberMarch 31, 2017,2024, the Company had 98 and 100231 individual available-for-sale securities in an unrealized loss position with unrealized losses totaling $5,373 and $2,942, respectively,$33,744 with an aggregate depreciation of 5.31% and 2.63%, respectively,15.61% from the Company’s amortized cost.
Management believes that none of theThe Company evaluates securities in an unrealized loss position for impairment related to credit losses on available for sale securitiesat least a quarterly basis. Securities in unrealized loss positions are other-than-temporary because substantially all of the unrealized losses in the Company’s investment portfolio relatefirst assessed as to market interest rate changes on debt and mortgage-backed securities issued either directly by the government or from government sponsored enterprises. Because the Company does notwhether we intend to sell, the securities andor if it is more likely than not likely that the Companywe will be required to sell the securitiessecurity before recovery of theirits amortized cost basis. If one of the criteria is met, the security’s amortized cost basis which may be maturity,is written down to fair value through current earnings. For securities that do not meet these criteria, the Company does not consider those investmentsevaluates 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 other-than-temporarily impairedcollected 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, 2024.
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 September 30, 2018this time we do not foresee any set of circumstances in which the government would not fund its commitments on these investments.
9
Rhinebeck Bancorp, Inc. and December 31, 2017.Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
The amortized cost and fair value of available for sale debt securities at September 30, 2018March 31, 2024 and December 31, 2017,2023, 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 as follows:summary:
| September 30, 2018 | December 31, 2017 | |||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||
| Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
| | March 31, 2024 | | December 31, 2023 | ||||||||||||||||||||||||
|
| Amortized Cost |
| Fair Value |
| Amortized Cost |
| Fair Value | ||||||||||||||||||||
| Maturity: | | | | | | | | | | | | | ||||||||||||||||
| Within 1 year | $ | 320 | $ | 321 | $ | 335 | $ | 335 | | $ | 11,442 | | $ | 11,285 | | $ | 15,449 | | $ | 15,170 | ||||||||
| After 1 but within 5 years | 18,162 | 17,418 | 20,074 | 19,623 |
| | 31,839 |
| | 29,553 |
| | 32,860 |
| | 30,569 | ||||||||||||
| After 5 but within 10 years | 1,975 | 1,902 | 1,975 | 1,954 |
| | 19,400 |
| | 17,017 |
| | 19,400 |
| | 16,968 | ||||||||||||
| After 10 years | 734 | 733 | - | - |
| | — |
| | — |
| | — |
| | — | ||||||||||||
Total Maturities |
| | 62,681 |
| | 57,855 |
| | 67,709 |
| | 62,707 | ||||||||||||||||
| Mortgage-backed securities | 86,568 | 82,013 | 93,858 | 91,390 |
| | 152,958 |
| | 124,134 |
| | 156,523 |
| | 128,580 | ||||||||||||
Other |
| | 750 |
| | 656 |
| | 763 |
| | 698 | ||||||||||||||||
| Total | $ | 107,759 | $ | 102,387 | $ | 116,242 | $ | 113,302 | | $ | 216,389 | | $ | 182,645 | | $ | 224,995 | | $ | 191,985 | ||||||||
At September 30, 2018March 31, 2024 and December 31, 2017,2023, available for sale securities with a carrying value of $27,769$12,634 and $1,285,$13,130, respectively, were pledged to secure Federal Home Loan Bank of New York (“FHLBNY”FHLB”) borrowings. In addition, $1,029at March 31, 2024 and $2,350, respectively,December 31, 2023, $69,180 and $75,769 of available for sale securities were pledged to secure borrowings at the Federal Reserve Bank of New York (“FRBNY”FRB”)., respectively.
ForDuring the first ninethree months of 2018,ended March 31, 2024, there were $2,113 of securities sold as compared to sale proceeds of $30,786 for the year ended December 31, 2017. During the period ended September 30, 2018, there were no gross gains recorded while for the year ended December 31, 2017 there were gross gains of $45. During these two reported periods there were gross losses of $22 and $72 realized on the sales of available for sale securities respectively.
and no realized gains or losses.
The amortized cost, gross unrealized gainsCompany 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 is reversed against interest income. There were no securities on non-accrual status and losses and fair values of heldtherefore there was no accrued interest related to maturity securities are as follows:
| September 30, 2018 | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
| Other | $ | - | $ | - | $ | - | $ | - | ||||||||
| Municipal securities ¹ | - | - | - | - | ||||||||||||
| Total | $ | - | $ | - | $ | - | $ | - | ||||||||
| December 31, 2017 | ||||||||||||||||
| Other | $ | 332 | $ | - | $ | - | $ | 332 | ||||||||
| Municipal securities ¹ | 1,582 | 15 | (1 | ) | 1,596 | |||||||||||
| Total | $ | 1,914 | $ | 15 | $ | (1 | ) | $ | 1,928 | |||||||
¹ The issuers of municipal securities are all within New York State.
The amortized cost and fair value of held to maturity debt securities at September 30, 2018reversed against interest income for the periods ended March 31, 2024 and December 31, 2017, by contractual maturities, are presented below. Actual maturities of mortgage-backed2023. Total accrued interest receivable on available for sale securities may differ from contractual maturities because the mortgages underlying the securities may be called or repaid without any penalties:
| September 30, 2018 | December 31, 2017 | |||||||||||||||
| (unaudited) | ||||||||||||||||
| Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||
| Maturity: | ||||||||||||||||
| Within 1 year | $ | - | $ | - | $ | 252 | $ | 252 | ||||||||
| After 1 but within 5 years | - | - | 576 | 575 | ||||||||||||
| After 5 but within 10 years | - | - | - | - | ||||||||||||
| After 10 years | - | - | 754 | 769 | ||||||||||||
| Other | - | - | 332 | 332 | ||||||||||||
| Total | $ | - | $ | - | $ | 1,914 | $ | 1,928 | ||||||||
At September 30, 2018totaled $578 and $602 at March 31, 2024 and December 31, 2017, held2023, respectively, and was reported in accrued interest receivable on the consolidated statements of financial condition.
10
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to maturity securities with an amortized cost of $0Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and $1,362, respectively, were pledged at the FRBNYper share data)
3. Loans and Allowance for borrowings.
During the third quarter, as part of an effort to increase the performance of our investment portfolio, seven underperforming bonds were swapped for better yielding instruments. It was later discovered that in the group sold were two bonds, totaling $575 in book value, which were designated as held to maturity (“HTM”). As part of that transaction a loss on disposition of $4 was recognized. As a further consequence of this action, in accordance with ASC 320-10-35, the four remaining HTM securities that totaled $1,163 were reclassified as available for sale (“AFS”) and the unrealized holding loss of $1 was recognized in AOCI, net of the applicable taxes for the period ended September 30, 2018. As a result of the sale and subsequent reclassification, the whole of our investment portfolio is now AFS. Securities purchased in the future will be designated as AFS.
A summary of the Company’s loan portfolio is as follows:
| September 30, | December 31, | ||||||||||||||
| 2018 | 2017 | ||||||||||||||
| (unaudited) | |||||||||||||||
| Commercial real estate: | |||||||||||||||
| | | | | | | | ||||||||
| | March 31, | | December 31, | | ||||||||||
|
| 2024 |
| 2023 | | ||||||||||
Commercial real estate loans: |
| |
|
| | ||||||||||
| Construction | $ | 10,407 | $ | 5,621 | | $ | 20,438 | | $ | 20,208 | | ||||
| Non-residential | 201,913 | 192,469 | |
| 329,241 | |
| 324,493 | | ||||||
| Multifamily | 12,379 | 13,103 | |||||||||||||
| Residential real estate | 44,388 | 43,300 | |||||||||||||
| Commercial and industrial | 79,055 | 67,650 | |||||||||||||
| Consumer: | |||||||||||||||
Multi-family | |
| 87,881 | |
| 83,376 | | ||||||||
Residential real estate loans | |
| 78,846 | |
| 77,259 | | ||||||||
Commercial and industrial loans(1) | |
| 91,291 | |
| 88,927 | | ||||||||
Consumer loans: | |
|
| |
|
| | ||||||||
| Indirect automobile | 272,892 | 214,823 | |
| 367,011 | |
| 394,245 | | ||||||
| Home equity | 19,559 | 19,452 | |
| 11,494 | |
| 11,990 | | ||||||
| Other consumer | 10,453 | 9,929 | |
| 7,641 | |
| 8,095 | | ||||||
| Total gross loans | 651,046 | 566,347 | |
| 993,843 | |
| 1,008,593 | | ||||||
| Net deferred loan costs | 7,317 | 5,288 | |||||||||||||
| Allowance for loan losses | (6,310 | ) | (5,457 | ) | |||||||||||
Dealer reserves | |
| 7,476 | |
| 8,382 | | ||||||||
Allowance for credit losses | |
| (7,973) | |
| (8,124) | | ||||||||
| Total net loans | $ | 652,053 | $ | 566,178 | | $ | 993,346 | | $ | 1,008,851 | | ||||
(1) | Includes $226 and $272 in U.S. Small Business Administration (“SBA”), paycheck protection program (“PPP”) loans at March 31, 2024 and December 31, 2023, respectively. |
At September 30, 2018March 31, 2024 and December 31, 2017,2023, the unpaid principal balances of loans held for sale included in the residential real estate category above were $286$893 and $2,059.
$908, respectively.
The following tables present the classes of the loan portfolio summarized by the pass category and the criticized categories of special mention, substandard and doubtful within the internal risk system:
| September 30, 2018 | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Special | ||||||||||||||||||||
| Pass | Mention | Substandard | Doubtful | Total | ||||||||||||||||
| Commercial real estate: | ||||||||||||||||||||
| Construction | $ | 10,407 | $ | - | $ | - | $ | - | $ | 10,407 | ||||||||||
| Non-residential | 189,009 | 7,276 | 1,414 | 4,214 | 201,913 | |||||||||||||||
| Multifamily | 11,926 | - | - | 453 | 12,379 | |||||||||||||||
| Residential | 41,943 | - | - | 2,445 | 44,388 | |||||||||||||||
| Commercial and industrial | 77,768 | - | 657 | 630 | 79,055 | |||||||||||||||
| Consumer: | ||||||||||||||||||||
| Indirect automobile | 272,350 | - | - | 542 | 272,892 | |||||||||||||||
| Home equity | 19,287 | - | - | 272 | 19,559 | |||||||||||||||
| Other consumer | 10,430 | - | - | 23 | 10,453 | |||||||||||||||
| Total | $ | 633,120 | $ | 7,276 | $ | 2,071 | $ | 8,579 | $ | 651,046 | ||||||||||
| December 31, 2017 | ||||||||||||||||||||
| Special | ||||||||||||||||||||
| Pass | Mention | Substandard | Doubtful | Total | ||||||||||||||||
| Commercial real estate: | ||||||||||||||||||||
| Construction | $ | 4,495 | $ | - | $ | 1,126 | $ | - | $ | 5,621 | ||||||||||
| Non-residential | 181,720 | 3,485 | 7,264 | - | 192,469 | |||||||||||||||
| Multifamily | 13,103 | - | - | - | 13,103 | |||||||||||||||
| Residential | 41,115 | - | - | 2,185 | 43,300 | |||||||||||||||
| Commercial and industrial | 65,351 | 125 | 2,156 | 18 | 67,650 | |||||||||||||||
| Consumer: | ||||||||||||||||||||
| Indirect automobile | 214,381 | - | - | 442 | 214,823 | |||||||||||||||
| Home equity | 19,334 | - | - | 118 | 19,452 | |||||||||||||||
| Other consumer | 9,925 | - | - | 4 | 9,929 | |||||||||||||||
| Total | $ | 549,424 | $ | 3,610 | $ | 10,546 | $ | 2,767 | $ | 566,347 | ||||||||||
Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The past due status of all classes of loans is determined based on contractual due dates for loan payments.
The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrualnon-accrual loans:
| September 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||||||||||||
| Greater Than | ||||||||||||||||||||||||||||||||||||||||||
| 30-59 Days | 60-89 Days | 90 Days Past | Total Loans | |||||||||||||||||||||||||||||||||||||||
| Current | Past Due | Past Due | Due | Receivable | Nonaccrual | |||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||
| | March 31, 2024 | ||||||||||||||||||||||||||||||||||||||||
| | | | | | | | Greater Than | | | | | ||||||||||||||||||||||||||||||
| | | | 30-59 Days | | 60-89 Days | | 90 Days Past | | Total Loans | | | ||||||||||||||||||||||||||||||
|
| Current |
| Past Due |
| Past Due |
| Due |
| Receivable |
| Non-accrual | ||||||||||||||||||||||||||||||
| Commercial real estate: | | |
| | |
| | |
| | |
| | |
| | |
| ||||||||||||||||||||||||
| Construction | $ | 10,407 | $ | - | $ | - | $ | - | $ | 10,407 | $ | - | | $ | 20,438 | | $ | — | | $ | — | | $ | — | | $ | 20,438 | | $ | — | ||||||||||||
| Non-residential | 197,367 | - | 332 | 4,214 | 201,913 | 4,214 | | | 324,593 | | | 2,035 | | | — | | | 2,613 | | | 329,241 | | | 2,613 | ||||||||||||||||||
| Multifamily | 11,745 | 181 | - | 453 | 12,379 | 453 | | | 87,881 | | | — | | | — | | | — | | | 87,881 | | | — | ||||||||||||||||||
| Residential | 42,823 | 849 | 56 | 660 | 44,388 | 2,366 | ||||||||||||||||||||||||||||||||||||
Residential real estate |
| | 76,577 |
| | 1,039 |
| | 1,154 |
| | 76 |
| | 78,846 |
| | 1,143 | ||||||||||||||||||||||||
| Commercial and industrial | 78,710 | 16 | 6 | 323 | 79,055 | 630 |
| | 90,658 |
| | 318 |
| | 128 |
| | 187 |
| | 91,291 |
| | 187 | ||||||||||||||||||
| Consumer: |
| |
|
| |
|
| | |
| |
|
| |
|
| | | ||||||||||||||||||||||||
| Indirect automobile | 268,108 | 3,627 | 640 | 517 | 272,892 | 542 |
| | 356,740 |
| | 8,265 | | | 1,570 |
| | 436 |
| | 367,011 |
| | 476 | ||||||||||||||||||
| Home equity | 19,255 | 137 | - | 167 | 19,559 | 265 |
| | 11,295 |
| | 14 | | | 46 |
| | 139 |
| | 11,494 |
| | 139 | ||||||||||||||||||
| Other consumer | 10,281 | 112 | 38 | 22 | 10,453 | 23 |
| | 7,366 |
| | 233 |
| | 40 |
| | 2 |
| | 7,641 |
| | 2 | ||||||||||||||||||
| Total | $ | 638,696 | $ | 4,922 | $ | 1,072 | $ | 6,356 | $ | 651,046 | $ | 8,493 | | $ | 975,548 | | $ | 11,904 | | $ | 2,938 | | $ | 3,453 | | $ | 993,843 | | $ | 4,560 | ||||||||||||
| December 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||
| Greater Than | ||||||||||||||||||||||||||||||||||||||||||
| 30-59 Days | 60-89 Days | 90 Days Past | Total Loans | |||||||||||||||||||||||||||||||||||||||
| Current | Past Due | Past Due | Due | Receivable | Nonaccrual | |||||||||||||||||||||||||||||||||||||
| Commercial real estate: | ||||||||||||||||||||||||||||||||||||||||||
| Construction | $ | 4,494 | $ | - | $ | - | $ | 1,127 | $ | 5,621 | $ | 1,127 | ||||||||||||||||||||||||||||||
| Non-residential | 184,877 | 2,229 | 921 | 4,442 | 192,469 | 4,442 | ||||||||||||||||||||||||||||||||||||
| Multifamily | 12,637 | - | 466 | - | 13,103 | - | ||||||||||||||||||||||||||||||||||||
| Residential | 41,989 | 450 | 422 | 439 | 43,300 | 2,100 | ||||||||||||||||||||||||||||||||||||
| Commercial and industrial | 66,542 | 69 | 19 | 1,020 | 67,650 | 1,237 | ||||||||||||||||||||||||||||||||||||
| Consumer: | ||||||||||||||||||||||||||||||||||||||||||
| Indirect automobile | 209,574 | 4,022 | 808 | 419 | 214,823 | 442 | ||||||||||||||||||||||||||||||||||||
| Home equity | 18,637 | 676 | 127 | 12 | 19,452 | 12 | ||||||||||||||||||||||||||||||||||||
| Other consumer | 9,742 | 176 | 7 | 4 | 9,929 | 4 | ||||||||||||||||||||||||||||||||||||
| Total | $ | 548,492 | $ | 7,622 | $ | 2,770 | $ | 7,463 | $ | 566,347 | $ | 9,364 | ||||||||||||||||||||||||||||||
11
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
| | | | | | | | | | | | | | | | | | |
| | December 31, 2023 | ||||||||||||||||
| | | | | | | | Greater Than | | | | | ||||||
| | | | 30-59 Days | | 60-89 Days | | 90 Days Past | | Total Loans | | | ||||||
|
| Current |
| Past Due |
| Past Due |
| Due |
| Receivable |
| Non-accrual | ||||||
Commercial real estate: | | |
| | |
| | |
| | |
| | |
| | |
|
Construction | | $ | 20,208 | | $ | — | | $ | — | | $ | — | | $ | 20,208 | | $ | — |
Non-residential | | | 319,467 | | | 1,276 | | | 2,129 | | | 1,621 | | | 324,493 | | | 1,621 |
Multifamily | | | 83,376 | | | — | | | — | | | — | | | 83,376 | | | — |
Residential real estate |
| | 75,998 |
| | 888 |
| | 37 |
| | 336 |
| | 77,259 |
| | 1,624 |
Commercial and industrial |
| | 88,646 |
| | 17 |
| | 83 |
| | 181 |
| | 88,927 |
| | 181 |
Consumer: |
| |
|
| |
|
| | |
| |
|
| |
|
| | |
Indirect automobile |
| | 382,042 |
| | 10,155 | | | 1,478 |
| | 570 |
| | 394,245 |
| | 631 |
Home equity |
| | 11,843 |
| | — | | | 48 |
| | 99 |
| | 11,990 |
| | 99 |
Other consumer |
| | 7,844 |
| | 202 |
| | 24 |
| | 25 |
| | 8,095 |
| | 25 |
Total | | $ | 989,424 | | $ | 12,538 | | $ | 3,799 | | $ | 2,832 | | $ | 1,008,593 | | $ | 4,181 |
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, 2024.
The following tables summarize informationtable presents the Company’s amortized cost basis of non-accrual loans for which there is no related ACL:
| | | | | | | |
| March 31, 2024 | | December 31, 2023 | ||||
Commercial real estate: |
| |
| |
| |
|
Non-residential | $ | | 1,375 | | $ | | 1,152 |
Residential real estate | | | 1,143 | | | | 1,624 |
Commercial and industrial | | | 172 | | | | 150 |
Consumer: | | |
| | | |
|
Indirect automobile | | | 150 | | | | 160 |
Home equity | | | 139 | | | | 99 |
Other consumer | | | 2 | | | | 25 |
Total | $ | | 2,981 | | $ | | 3,210 |
The following table presents the Company’s amortized cost basis of only those non-accrual loans with a related ACL:
| | | | | | | | | | | | |
| | March 31, 2024 | | December 31, 2023 | ||||||||
| | Non-accrual loans |
| Related ACL |
| Non-accrual loans |
| Related ACL | ||||
Commercial real estate: | |
|
| |
|
| |
|
| |
|
|
Non-residential | | $ | 1,238 | | $ | 290 | | $ | 469 | | $ | 16 |
Commercial and industrial | | | 15 | | | 1 | | | 31 | | | 32 |
Consumer: | |
|
| |
| | |
|
| |
| |
Indirect automobile | | | 326 | | | 99 | | | 471 | | | 167 |
Total | | $ | 1,579 | | $ | 390 | | $ | 971 | | $ | 215 |
12
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in regards to impairedthousands, except share and per share data)
For the three months ended March 31, 2024, $56 in accrued interest was reversed during the period for non-accrual loans. Total accrued interest receivable associated with loans by loan portfolio class:
| September 30, 2018 | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | |||||||||||||
| With no related allowance recorded: | ||||||||||||||||
| Commercial real estate: | ||||||||||||||||
| Construction | $ | - | $ | - | $ | - | $ | 563 | ||||||||
| Non-residential | 4,214 | 4,616 | - | 3,877 | ||||||||||||
| Multifamily | 453 | 458 | - | 227 | ||||||||||||
| Residential | 2,445 | 3,070 | - | 2,315 | ||||||||||||
| Commercial and industrial | 625 | 749 | - | 922 | ||||||||||||
| Consumer: | ||||||||||||||||
| Indirect automobile | 211 | 247 | - | 210 | ||||||||||||
| Home equity | 272 | 282 | - | 195 | ||||||||||||
| Other consumer | 2 | 2 | - | 1 | ||||||||||||
| Total | $ | 8,222 | $ | 9,424 | $ | - | $ | 8,310 | ||||||||
| With an allowance recorded: | ||||||||||||||||
| Commercial real estate: | ||||||||||||||||
| Construction | $ | - | $ | - | $ | - | $ | - | ||||||||
| Non-residential | - | - | - | 451 | ||||||||||||
| Multifamily | - | - | - | - | ||||||||||||
| Residential | - | - | - | - | ||||||||||||
| Commercial and industrial | 5 | 5 | 5 | 12 | ||||||||||||
| Consumer: | ||||||||||||||||
| Indirect automobile | 331 | 338 | 83 | 282 | ||||||||||||
| Home equity | - | - | - | - | ||||||||||||
| Other consumer | 20 | 20 | 11 | 12 | ||||||||||||
| Total | $ | 356 | $ | 363 | $ | 99 | $ | 757 | ||||||||
| Total: | ||||||||||||||||
| Commercial real estate: | ||||||||||||||||
| Construction | $ | - | $ | - | $ | - | $ | 563 | ||||||||
| Non-residential | 4,214 | 4,616 | - | 4,328 | ||||||||||||
| Multifamily | 453 | 458 | - | 227 | ||||||||||||
| Residential | 2,445 | 3,070 | - | 2,315 | ||||||||||||
| Commercial and industrial | 630 | 754 | 5 | 934 | ||||||||||||
| Consumer: | ||||||||||||||||
| Indirect automobile | 542 | 585 | 83 | 492 | ||||||||||||
| Home equity | 272 | 282 | - | 195 | ||||||||||||
| Other consumer | 22 | 22 | 11 | 13 | ||||||||||||
| Total | $ | 8,578 | $ | 9,787 | $ | 99 | $ | 9,067 | ||||||||
| December 31, 2017 | ||||||||||||||||
| Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | |||||||||||||
| With no related allowance recorded: | ||||||||||||||||
| Commercial real estate: | ||||||||||||||||
| Construction | $ | 1,127 | $ | 1,137 | $ | - | $ | 1,127 | ||||||||
| Non-residential | 3,539 | 3,584 | - | 2,878 | ||||||||||||
| Multifamily | - | - | - | - | ||||||||||||
| Residential | 2,184 | 2,741 | - | 2,114 | ||||||||||||
| Commercial and industrial | 1,219 | 1,700 | - | 1,325 | ||||||||||||
| Consumer: | ||||||||||||||||
| Indirect automobile | 210 | 237 | - | 179 | ||||||||||||
| Home equity | 118 | 119 | - | 182 | ||||||||||||
| Other consumer | - | 1 | - | 2 | ||||||||||||
| Total | $ | 8,397 | $ | 9,519 | $ | - | $ | 7,807 | ||||||||
| With an allowance recorded: | ||||||||||||||||
| Commercial real estate: | ||||||||||||||||
| Construction | $ | - | $ | - | $ | - | $ | - | ||||||||
| Non-residential | 903 | 903 | 300 | 451 | ||||||||||||
| Multifamily | - | - | - | - | ||||||||||||
| Residential | - | - | - | - | ||||||||||||
| Commercial and industrial | 19 | 447 | 19 | 221 | ||||||||||||
| Consumer: | ||||||||||||||||
| Indirect automobile | 232 | 247 | 75 | 292 | ||||||||||||
| Home equity | - | - | - | - | ||||||||||||
| Other consumer | 3 | 3 | 3 | 18 | ||||||||||||
| Total | $ | 1,157 | $ | 1,600 | $ | 397 | $ | 982 | ||||||||
| Total: | ||||||||||||||||
| Commercial real estate: | ||||||||||||||||
| Construction | $ | 1,127 | $ | 1,137 | $ | - | $ | 1,127 | ||||||||
| Non-residential | 4,442 | 4,487 | 300 | 3,330 | ||||||||||||
| Multifamily | - | - | - | - | ||||||||||||
| Residential | 2,184 | 2,741 | - | 2,114 | ||||||||||||
| Commercial and industrial | 1,238 | 2,147 | 19 | 1,546 | ||||||||||||
| Consumer: | ||||||||||||||||
| Indirect automobile | 442 | 484 | 75 | 471 | ||||||||||||
| Home equity | 118 | 119 | - | 182 | ||||||||||||
| Other consumer | 3 | 4 | 3 | 19 | ||||||||||||
| Total | $ | 9,554 | $ | 11,119 | $ | 397 | $ | 8,789 | ||||||||
A loan is considered impaired when based on current informationtotaled $4,033 and events it is probable that the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming loans and loans modified as troubled debt restructurings (“TDRs”). Loan modifications, which resulted in these loans being considered TDRs, are primarily in the form of rate concessions and extensions of maturity dates. The Company does not generally recognize interest income on a loan in an impaired status. At September 30, 2018$4,014, at March 31, 2024 and December 31, 2017, three2023, 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 totaling $1,803to participating lenders. The amounts transferred have been accounted for as sales and four loans totaling $1,815, respectively, which wereare therefore not included in impairedthe 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 were identified as TDRs. In 2018, the Company restructured two loans, a residential mortgage and home equity loan, into a single residential mortgage, with a carrying value of $117, which included both rate and term modifications. In 2017, the Company modified a residential loan and a commercial loan with carrying amounts of $1,661 and $19, respectively, through rate and term modifications. Interest income on impaired loans was immaterial during eachbehalf of the periods presented.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 September 30, 2018March 31, 2024 and December 31, 2017, all2023, the Company was servicing loans were performingfor participants aggregating $48,318 and $44,418, respectively.
Residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in accordance with their restructured terms. During the nine months ended September 30, 2018, one loan for $19 had defaulted in its modified termsprocess totaled $99 and was charged off. At September 30, 2018$152 at March 31, 2024 and December 31, 2017, the Company had no commitments to advance additional funds to borrowers under TDR loans.
2023, respectively, and are all individually analyzed for credit loss.
The Company services certain loans that it has sold without recourse to third parties. The aggregate balances of loans serviced for others were $253,856$279,235 and $244,765$282,269 as of September 30, 2018March 31, 2024 and December 31, 2017,2023, respectively.
Included in these loans serviced for others are loans serviced for the Federal Home Loan Mortgage Corporation with a recourse provision whereby the Company is obligated to bear all costs when a default, including foreclosure, occurs. At March 31, 2024 and December 31, 2023, the maximum contingent liability associated with loans sold with recourse was $1,155 and $1,873, respectively, which is not recorded in the consolidated financial statements. Losses are borne in priority order by the borrower, private mortgage insurance andthe Company. The Company has never repurchased any loans or incurred any losses under these recourse provisions.
The balancebalances of capitalized servicing rights, included in other assets at September 30, 2018March 31, 2024 and December 31, 2017,2023 were $2,278$1,880 and $2,260,$1,977, respectively. Fair value exceeds carrying value. Novalue, and thus, no impairment charges related to servicing rights were recognized during the ninethree-month period ended March 31, 2024 or the year ended December 31, 2023.
13
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
Activity in the Company’s ACL for loans for the three months ended September 30, 2018March 31, 2024 is summarized in the table below.
| | | | | | | | | | | | | | | | | | |
| | Commercial | | Residential | | Commercial | | | | | | | ||||||
|
| Real Estate |
| Real Estate |
| and Industrial |
| Indirect |
| Consumer |
| Totals | ||||||
| | Three months ended March 31, 2024 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | |
Allowance for credit losses: | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 2,716 | | $ | 346 | | $ | 606 | | $ | 4,348 | | $ | 108 | | $ | 8,124 |
Provision for (reversal of) credit losses | | | 323 | | | 9 | | | (7) | | | (238) | | | 12 | | | 99 |
Loans charged-off | | | — | | | — | | | (34) | | | (895) | | | (32) | | | (961) |
Recoveries |
| | — |
| | — |
| | 1 |
| | 699 |
| | 11 |
| | 711 |
Ending balance | | $ | 3,039 | | $ | 355 | | $ | 566 | | $ | 3,914 | | $ | 99 | | $ | 7,973 |
Ending balance: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Loans individually analyzed | | $ | 291 | | $ | — | | $ | — | | $ | 99 | | $ | — | | $ | 390 |
Loans collectively analyzed | | $ | 2,748 | | $ | 355 | | $ | 566 | | $ | 3,815 | | $ | 99 | | $ | 7,583 |
Loan receivables: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Ending balance | | $ | 437,560 | | $ | 78,846 | | $ | 91,291 | | $ | 367,011 | | $ | 19,135 | | $ | 993,843 |
Ending balance: | |
|
| |
| | |
|
| |
|
| |
|
| |
|
|
Loans individually analyzed | | $ | 2,613 | | $ | 1,143 | | $ | 187 | | $ | 476 | | $ | 239 | | $ | 4,658 |
Loans collectively analyzed | | $ | 434,947 | | $ | 77,703 | | $ | 91,104 | | $ | 366,535 | | $ | 18,896 | | $ | 989,185 |
Activity in the Company’s allowance for credit losses for the three months ended March 31, 2023 and 2017.December 31, 2023 is summarized in the tables below. The adoption of ASC 326 row presents adjustments recorded on January 1, 2023 through retained earnings.
| | | | | | | | | | | | | | | | | | |
| | Commercial | | Residential | | Commercial | | | | | | | ||||||
|
| Real Estate |
| Real Estate |
| and Industrial |
| | Indirect | | Consumer |
| Totals | |||||
| | Three months ended March 31, 2023 | ||||||||||||||||
Allowance for credit losses: | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 3,031 | | $ | 103 | | $ | 881 | | $ | 3,868 | | $ | 60 | | $ | 7,943 |
Adoption of ASC 326 | | | (860) | | | 54 | | | (383) | | | 1,710 | | | 59 | | | 580 |
Provision for credit losses | | | 170 | | | 13 | | | 703 | | | 104 | | | 4 | | | 994 |
Loans charged-off | | | — | | | — | | | — | | | (989) | | | (22) | | | (1,011) |
Recoveries |
| | — |
| | — |
| | — |
| | 585 |
| | 12 |
| | 597 |
Ending balance | | $ | 2,341 | | $ | 170 | | $ | 1,201 | | $ | 5,278 | | $ | 113 | | $ | 9,103 |
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, 2024 is summarized in the tables below. The adoption of ASC 326 row presents adjustments recorded on January 1, 2023 through retained earnings.
| | | | | | | | | | | | | | | | | | |
|
| Commercial |
| |
| Commercial |
| |
| |
| | ||||||
|
| Real Estate |
| Residential |
| and Industrial |
| Indirect |
| Consumer |
| Totals | ||||||
|
| Three months ended March 31, 2024 | ||||||||||||||||
Allowance for credit losses: | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 172 | | $ | — | | $ | 72 | | $ | — | | $ | 13 | | $ | 257 |
Reversal of credit losses | | | (14) | | | — | | | (1) | | | — | | | (1) | | | (16) |
Ending balance | | $ | 158 | | $ | — | | $ | 71 | | $ | — | | $ | 12 | | $ | 241 |
14
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
| | | | | | | | | | | | | | | | | | |
|
| Commercial |
| |
| Commercial |
| |
| |
| | ||||||
|
| Real Estate |
| Residential |
| and Industrial |
| Indirect |
| Consumer |
| Totals | ||||||
|
| Three months ended March 31, 2023 | ||||||||||||||||
Allowance for credit losses: | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — |
Adoption of ASC 326 | | | 149 | | | — | | | 65 | | | — | | | 7 | | | 221 |
Provision for credit losses | | | 19 | | | — | | | 1 | | | — | | | — | | | 20 |
Ending balance | | $ | 158 | | $ | — | | $ | 71 | | $ | — | | $ | 12 | | $ | 241 |
The following tables summarizetable summarizes the segments of the loan portfolio and the allowanceprovision for loan losses, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment and the activity in the allowance for loancredit losses for the periods then ended:three months ended March 31, 2024 and 2023:
| | | | | | |
| | Three months ended March 31, | ||||
|
| 2024 |
| 2023 | ||
Provision for credit losses - loans | | $ | 99 | | $ | 994 |
(Reversal of) provision for credit losses - unfunded commitments | | | (16) | | | 20 |
Provision for credit losses | | $ | 83 | | $ | 1,014 |
| Commercial Real Estate | Residential | Commercial and Industrial | Consumer | Totals | ||||||||||||||||
| Three months ended September 30, 2018 | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Allowance for loan losses: | ||||||||||||||||||||
| Beginning balance | $ | 947 | $ | 513 | $ | 1,082 | $ | 3,397 | $ | 5,939 | ||||||||||
| Provision for loan losses | (77 | ) | (40 | ) | (27 | ) | 669 | 525 | ||||||||||||
| Loans charged-off | - | - | - | (372 | ) | (372 | ) | |||||||||||||
| Recoveries | - | 1 | - | 217 | 218 | |||||||||||||||
| Ending balance | $ | 870 | $ | 474 | $ | 1,055 | $ | 3,911 | $ | 6,310 | ||||||||||
| Ending balance: | ||||||||||||||||||||
| Individually evaluated for impairment | $ | - | $ | - | $ | 5 | $ | 94 | $ | 99 | ||||||||||
| Collectively evaluated for impairment | $ | 870 | $ | 474 | $ | 1,050 | $ | 3,817 | $ | 6,211 | ||||||||||
| Loan receivables: | ||||||||||||||||||||
| Ending balance | $ | 224,699 | $ | 44,387 | $ | 79,055 | $ | 302,905 | $ | 651,046 | ||||||||||
| Ending balance: | ||||||||||||||||||||
| Individually evaluated for impairment | $ | 4,668 | $ | 2,445 | $ | 630 | $ | 836 | $ | 8,579 | ||||||||||
| Collectively evaluated for impairment | $ | 220,031 | $ | 41,942 | $ | 78,425 | $ | 302,069 | $ | 642,467 | ||||||||||
| Three months ended September 30, 2017 | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Allowance for loan losses: | ||||||||||||||||||||
| Beginning balance | $ | 936 | $ | 585 | $ | 574 | $ | 3,383 | $ | 5,478 | ||||||||||
| Provision for loan losses | 46 | 3 | (60 | ) | 236 | 225 | ||||||||||||||
| Loans charged-off | (16 | ) | - | (181 | ) | (378 | ) | (575 | ) | |||||||||||
| Recoveries | - | 3 | - | 272 | 275 | |||||||||||||||
| Ending balance | $ | 966 | $ | 591 | $ | 333 | $ | 3,513 | $ | 5,403 | ||||||||||
| Ending balance: | ||||||||||||||||||||
| Individually evaluated for impairment | $ | - | $ | - | $ | 2 | $ | 74 | $ | 76 | ||||||||||
| Collectively evaluated for impairment | $ | 966 | $ | 591 | $ | 331 | $ | 3,439 | $ | 5,327 | ||||||||||
| Loan receivables: | ||||||||||||||||||||
| Ending balance | $ | 204,793 | $ | 41,417 | $ | 60,706 | $ | 240,124 | $ | 547,040 | ||||||||||
| Ending balance: | ||||||||||||||||||||
| Individually evaluated for impairment | $ | 3,011 | $ | 1,988 | $ | 2,325 | $ | 652 | $ | 7,976 | ||||||||||
| Collectively evaluated for impairment | $ | 201,782 | $ | 39,429 | $ | 58,381 | $ | 239,472 | $ | 539,064 | ||||||||||
| Commercial Real Estate | Residential | Commercial and Industrial | Consumer | Totals | ||||||||||||||||
| Nine months ended September 30, 2018 | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Allowance for loan losses: | ||||||||||||||||||||
| Beginning balance | $ | 1,305 | $ | 455 | $ | 879 | $ | 2,818 | $ | 5,457 | ||||||||||
| Provision for loan losses | (132 | ) | 15 | 91 | 1,601 | 1,575 | ||||||||||||||
| Loans charged-off | (303 | ) | - | (28 | ) | (1,125 | ) | (1,456 | ) | |||||||||||
| Recoveries | - | 4 | 113 | 617 | 734 | |||||||||||||||
| Ending balance | $ | 870 | $ | 474 | $ | 1,055 | $ | 3,911 | $ | 6,310 | ||||||||||
| Ending balance: | ||||||||||||||||||||
| Individually evaluated for impairment | $ | - | $ | - | $ | 5 | $ | 94 | $ | 99 | ||||||||||
| Collectively evaluated for impairment | $ | 870 | $ | 474 | $ | 1,050 | $ | 3,817 | $ | 6,211 | ||||||||||
| Loan receivables: | ||||||||||||||||||||
| Ending balance | $ | 224,699 | $ | 44,387 | $ | 79,055 | $ | 302,905 | $ | 651,046 | ||||||||||
| Ending balance: | ||||||||||||||||||||
| Individually evaluated for impairment | $ | 4,668 | $ | 2,445 | $ | 630 | $ | 836 | $ | 8,579 | ||||||||||
| Collectively evaluated for impairment | $ | 220,031 | $ | 41,942 | $ | 78,425 | $ | 302,069 | $ | 642,467 | ||||||||||
| Nine months ended September 30, 2017 | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Allowance for loan losses: | ||||||||||||||||||||
| Beginning balance | $ | 1,092 | $ | 1,231 | $ | 775 | $ | 2,778 | $ | 5,876 | ||||||||||
| Provision for loan losses | (202 | ) | (567 | ) | 152 | 1,292 | 675 | |||||||||||||
| Loans charged-off | (16 | ) | (79 | ) | (596 | ) | (1,313 | ) | (2,004 | ) | ||||||||||
| Recoveries | 92 | 6 | 2 | 756 | 856 | |||||||||||||||
| Ending balance | $ | 966 | $ | 591 | $ | 333 | $ | 3,513 | $ | 5,403 | ||||||||||
| Ending balance: | ||||||||||||||||||||
| Individually evaluated for impairment | $ | - | $ | - | $ | 2 | $ | 74 | $ | 76 | ||||||||||
| Collectively evaluated for impairment | $ | 966 | $ | 591 | $ | 331 | $ | 3,439 | $ | 5,327 | ||||||||||
| Loan receivables: | ||||||||||||||||||||
| Ending balance | $ | 204,793 | $ | 41,417 | $ | 60,706 | $ | 240,124 | $ | 547,040 | ||||||||||
| Ending balance: | ||||||||||||||||||||
| Individually evaluated for impairment | $ | 3,011 | $ | 1,988 | $ | 2,325 | $ | 652 | $ | 7,976 | ||||||||||
| Collectively evaluated for impairment | $ | 201,782 | $ | 39,429 | $ | 58,381 | $ | 239,472 | $ | 539,064 | ||||||||||
| Commercial Real Estate | Residential | Commercial and Industrial | Consumer | Totals | ||||||||||||||||
| December 31, 2017 | ||||||||||||||||||||
| Allowance for loan losses: | ||||||||||||||||||||
| Beginning balance | $ | 1,092 | $ | 1,231 | $ | 775 | $ | 2,778 | $ | 5,876 | ||||||||||
| Provision for loan losses | 137 | (707 | ) | 698 | 772 | 900 | ||||||||||||||
| Loans charged-off | (16 | ) | (78 | ) | (596 | ) | (1,724 | ) | (2,414 | ) | ||||||||||
| Recoveries | 92 | 9 | 2 | 992 | 1,095 | |||||||||||||||
| Ending balance | $ | 1,305 | $ | 455 | $ | 879 | $ | 2,818 | $ | 5,457 | ||||||||||
| Ending balance: | ||||||||||||||||||||
| Individually evaluated for impairment | $ | 300 | $ | - | $ | 19 | $ | 78 | $ | 397 | ||||||||||
| Collectively evaluated for impairment | $ | 1,005 | $ | 455 | $ | 860 | $ | 2,740 | $ | 5,060 | ||||||||||
| Loan receivables: | ||||||||||||||||||||
| Ending balance | $ | 211,193 | $ | 43,300 | $ | 67,650 | $ | 244,204 | $ | 566,347 | ||||||||||
| Ending balance: | ||||||||||||||||||||
| Individually evaluated for impairment | $ | 5,569 | $ | 2,184 | $ | 1,238 | $ | 563 | $ | 9,554 | ||||||||||
| Collectively evaluated for impairment | $ | 205,624 | $ | 41,116 | $ | 66,412 | $ | 243,641 | $ | 556,793 | ||||||||||
In the normal course of business, the Company grants loans to officers, trusteesdirectors and other related parties. SuchBalances and activity of such loans during the periods presented were not material.
15
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
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 presented periods.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.
PremisesThe 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 equipmentloans 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 summarizedcharacterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful – Loans classified as follows: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.
| September 30, | December 31, | |||||||
| 2018 | 2017 | |||||||
| (unaudited) | ||||||||
| Land | $ | 3,536 | $ | 3,536 | ||||
| Buildings and improvements | 23,504 | 23,409 | ||||||
| Furniture, fixtures and equipment | 11,036 | 10,725 | ||||||
| Construction in progress | 40 | 43 | ||||||
| Total | 38,116 | 37,713 | ||||||
| Less accumulated depreciation | (21,523 | ) | (20,688 | ) | ||||
| Net | $ | 16,593 | $ | 17,025 | ||||
16
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
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, 2024, and by fiscal year of origination as of March 31, 2024.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | Revolving | | | | |
| | Loans by Origination Year | | Loans | | | | |||||||||||||||||
| | 2024 | | 2023 | | 2022 | | 2021 | | 2020 | | Prior | | Amortized Cost | | Total | ||||||||
Commercial construction | | | | | | | | | | | | | | | | | | | | | | | | |
Watch | | | 641 | | | 15,399 | | | 4,398 | | | - | | | - | | | - | | | - | | | 20,438 |
Total commercial construction | | | 641 | | | 15,399 | | | 4,398 | | | - | | | - | | | - | | | - | | | 20,438 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Commercial non-residential | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 2,021 | | $ | 34,387 | | $ | 52,760 | | $ | 26,360 | | $ | 16,493 | | $ | 87,069 | | $ | - | | $ | 219,090 |
Watch | | | 2,776 | | | 16,542 | | | 16,259 | | | 7,470 | | | 11,645 | | | 37,747 | | | - | | | 92,439 |
Special mention | | | - | | | - | | | - | | | 896 | | | 360 | | | 6,084 | | | - | | | 7,340 |
Substandard | | | - | | | - | | | 2,895 | | | 1,386 | | | 460 | | | 5,631 | | | - | | | 10,372 |
Total commercial non-residential | | | 4,797 | | | 50,929 | | | 71,914 | | | 36,112 | | | 28,958 | | | 136,531 | | | - | | | 329,241 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Multifamily | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | - | | $ | 804 | | $ | 18,681 | | $ | 30,175 | | $ | 2,084 | | $ | 5,832 | | $ | - | | $ | 57,576 |
Watch | | | - | | | 1,000 | | | 6,732 | | | 11,895 | | | - | | | 10,331 | | | - | | | 29,958 |
Substandard | | | - | | | - | | | - | | | - | | | - | | | 347 | | | | | | 347 |
Total multifamily | | | - | | | 1,804 | | | 25,413 | | | 42,070 | | | 2,084 | | | 16,510 | | | - | | | 87,881 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | | | | | | | | | | | | | | | | | | | | | | | |
Performing | | $ | 3,034 | | $ | 28,170 | | $ | 25,068 | | $ | 2,122 | | $ | 2,708 | | $ | 16,601 | | $ | - | | $ | 77,703 |
Non-performing | | | - | | | - | | | - | | | - | | | - | | | 1,143 | | | - | | | 1,143 |
Total residential | | | 3,034 | | | 28,170 | | | 25,068 | | | 2,122 | | | 2,708 | | | 17,744 | | | - | | | 78,846 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 2,382 | | $ | 12,044 | | $ | 25,244 | | $ | 10,193 | | $ | 1,241 | | $ | 1,940 | | $ | 10,446 | | $ | 63,490 |
Watch | | | 676 | | | 2,005 | | | 3,129 | | | 296 | | | 470 | | | 1,591 | | | 16,483 | | | 24,650 |
Special mention | | | - | | | 224 | | | - | | | 275 | | | 108 | | | 24 | | | - | | | 631 |
Substandard | | | - | | | - | | | - | | | - | | | - | | | 869 | | | 1,651 | | | 2,520 |
Total commercial and industrial | | | 3,058 | | | 14,273 | | | 28,373 | | | 10,764 | | | 1,819 | | | 4,424 | | | 28,580 | | | 91,291 |
Current-period gross write-offs | | | - | | | - | | | - | | | - | | | - | | | 32 | | | 2 | | | 34 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Indirect automobile | | | | | | | | | | | | | | | | | | | | | | | | |
Performing | | $ | 15,025 | | $ | 93,746 | | $ | 145,617 | | $ | 64,530 | | $ | 28,830 | | $ | 18,787 | | $ | - | | $ | 366,535 |
Non-performing | | | - | | | 50 | | | 161 | | | 182 | | | 53 | | | 30 | | | - | | | 476 |
Total indirect automobile | | | 15,025 | | | 93,796 | | | 145,778 | | | 64,712 | | | 28,883 | | | 18,817 | | | - | | | 367,011 |
Current-period gross write-offs | | | - | | | 153 | | | 414 | | | 210 | | | 61 | | | 57 | | | - | | | 895 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Home equity | | | | | | | | | | | | | | | | | | | | | | | | |
Performing | | $ | - | | $ | - | | $ | - | | $ | - | | $ | - | | $ | 4,155 | | $ | 7,200 | | $ | 11,355 |
Non-performing | | | - | | | - | | | - | | | - | | | - | | | 99 | | | 40 | | | 139 |
Total home equity | | | - | | | - | | | - | | | - | | | - | | | 4,254 | | | 7,240 | | | 11,494 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | | | | | | | | | | | | | | | | | | | | | | |
Performing | | $ | 694 | | $ | 2,507 | | $ | 3,057 | | $ | 729 | | $ | 308 | | $ | 116 | | $ | 228 | | $ | 7,639 |
Non-performing | | | - | | | - | | | - | | | 2 | | | - | | | - | | | - | | | 2 |
Total other consumer | | | 694 | | | 2,507 | | | 3,057 | | | 731 | | | 308 | | | 116 | | | 228 | | | 7,641 |
Current-period gross write-offs | | | - | | | 4 | | | - | | | 3 | | | 24 | | | - | | | 1 | | | 32 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Loans | | | | | | | | | | | | | | | | | | | | | | | | |
Pass/performing | | $ | 23,156 | | $ | 171,658 | | $ | 270,427 | | $ | 134,109 | | $ | 51,664 | | $ | 134,500 | | $ | 17,874 | | $ | 803,388 |
Watch | | | 4,093 | | | 34,946 | | | 30,518 | | | 19,661 | | | 12,115 | | | 49,669 | | | 16,483 | | | 167,485 |
Special mention | | | 0 | | | 224 | | | 0 | | | 1,171 | | | 468 | | | 6,108 | | | - | | | 7,971 |
Substandard | | | - | | | - | | | 2,895 | | | 1,386 | | | 460 | | | 6,500 | | | 1,651 | | | 12,892 |
Non-performing | | | - | | | 50 | | | 161 | | | 184 | | | 53 | | | 1,272 | | | 40 | | | 1,760 |
Total Loans | | $ | 27,249 | | $ | 206,878 | | $ | 304,001 | | $ | 156,511 | | $ | 64,760 | | $ | 198,396 | | $ | 36,048 | | $ | 993,843 |
Total Current-period gross write-offs | | $ | 0 | | $ | 157 | | $ | 414 | | $ | 213 | | $ | 85 | | $ | 89 | | $ | 3 | | $ | 961 |
17
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
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, 2023, and by fiscal year of origination as of December 31, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | Revolving | | | | |
| | Loans by Origination Year | | Loans | | | | |||||||||||||||||
| | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Amortized Cost | | Total | ||||||||
Commercial construction | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | - | | $ | 8,227 | | $ | - | | $ | - | | $ | - | | $ | - | | $ | - | | $ | 8,227 |
Watch | | | 9,328 | | | 2,653 | | | - | | | - | | | - | | | - | | | - | | | 11,981 |
Total commercial construction | | | 9,328 | | | 10,880 | | | - | | | - | | | - | | | - | | | - | | | 20,208 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Commercial non-residential | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 34,508 | | $ | 43,534 | | $ | 26,600 | | $ | 16,673 | | $ | 39,943 | | $ | 44,412 | | $ | - | | $ | 205,670 |
Watch | | | 16,575 | | | 19,235 | | | 14,854 | | | 12,747 | | | 7,573 | | | 38,004 | | | - | | | 108,988 |
Special mention | | | - | | | - | | | - | | | - | | | 5,884 | | | 963 | | | - | | | 6,847 |
Substandard | | | - | | | - | | | - | | | - | | | 465 | | | 2,523 | | | - | | | 2,988 |
Total commercial non-residential | | | 51,083 | | | 62,769 | | | 41,454 | | | 29,420 | | | 53,865 | | | 85,902 | | | - | | | 324,493 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Multifamily | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 807 | | $ | 18,765 | | $ | 30,374 | | $ | 2,100 | | $ | 1,540 | | $ | 4,348 | | $ | - | | $ | 57,934 |
Watch | | | 1,000 | | | 6,754 | | | 6,925 | | | - | | | 1,265 | | | 9,498 | | | - | | | 25,442 |
Total multifamily | | | 1,807 | | | 25,519 | | | 37,299 | | | 2,100 | | | 2,805 | | | 13,846 | | | - | | | 83,376 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Residential | | | | | | | | | | | | | | | | | | | | | | | | |
Performing | | $ | 28,670 | | $ | 25,260 | | $ | 2,150 | | $ | 2,732 | | $ | 2,626 | | $ | 14,197 | | $ | - | | $ | 75,635 |
Non-performing | | | - | | | 257 | | | - | | | - | | | - | | | 1,367 | | | - | | | 1,624 |
Total residential | | | 28,670 | | | 25,517 | | | 2,150 | | | 2,732 | | | 2,626 | | | 15,564 | | | - | | | 77,259 |
Current-period gross write-offs | | | - | | | - | | | - | | | - | | | - | | | - | | | - | | | - |
| | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 12,637 | | $ | 26,070 | | $ | 10,804 | | $ | 1,474 | | $ | 962 | | $ | 1,254 | | $ | 11,662 | | $ | 64,863 |
Watch | | | 2,082 | | | 3,227 | | | 321 | | | 620 | | | 482 | | | 1,603 | | | 14,204 | | | 22,539 |
Special mention | | | 224 | | | - | | | 301 | | | - | | | 33 | | | - | | | - | | | 558 |
Substandard | | | - | | | - | | | - | | | - | | | 83 | | | 841 | | | 43 | | | 967 |
Total commercial and industrial | | | 14,943 | | | 29,297 | | | 11,426 | | | 2,094 | | | 1,560 | | | 3,698 | | | 25,909 | | | 88,927 |
Current-period gross write-offs | | | - | | | - | | | 710 | | | - | | | - | | | 126 | | | - | | | 836 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Indirect automobile | | | | | | | | | | | | | | | | | | | | | | | | |
Performing | | $ | 101,230 | | $ | 160,439 | | $ | 72,941 | | $ | 34,196 | | $ | 19,035 | | $ | 5,773 | | $ | - | | $ | 393,614 |
Non-performing | | | 31 | | | 259 | | | 196 | | | 69 | | | 63 | | | 13 | | | - | | | 631 |
Total indirect automobile | | | 101,261 | | | 160,698 | | | 73,137 | | | 34,265 | | | 19,098 | | | 5,786 | | | - | | | 394,245 |
Current-period gross write-offs | | | 198 | | | 1,492 | | | 1,034 | | | 418 | | | 309 | | | 126 | | | - | | | 3,577 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Home equity | | | | | | | | | | | | | | | | | | | | | | | | |
Performing | | $ | - | | $ | - | | $ | - | | $ | - | | $ | 34 | | $ | 4,064 | | $ | 7,793 | | $ | 11,891 |
Non-performing | | | - | | | - | | | - | | | - | | | - | | | 99 | | | - | | | 99 |
Total home equity | | | - | | | - | | | - | | | - | | | 34 | | | 4,163 | | | 7,793 | | | 11,990 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | | | | | | | | | | | | | | | | | | | | | | |
Performing | | $ | 2,928 | | $ | 3,477 | | $ | 856 | | $ | 411 | | $ | 138 | | $ | 22 | | $ | 238 | | $ | 8,070 |
Non-performing | | | - | | | - | | | - | | | 24 | | | - | | | - | | | 1 | | | 25 |
Total other consumer | | | 2,928 | | | 3,477 | | | 856 | | | 435 | | | 138 | | | 22 | | | 239 | | | 8,095 |
Current-period gross write-offs | | | 8 | | | 30 | | | 10 | | | 11 | | | - | | | 3 | | | - | | | 62 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Loans | | | | | | | | | | | | | | | | | | | | | | | | |
Pass/performing | | $ | 180,780 | | $ | 285,772 | | $ | 143,725 | | $ | 57,586 | | $ | 64,278 | | $ | 74,070 | | $ | 19,693 | | $ | 825,904 |
Watch | | | 28,985 | | | 31,869 | | | 22,100 | | | 13,367 | | | 9,320 | | | 49,105 | | | 14,204 | | | 168,950 |
Special mention | | | 224 | | | - | | | 301 | | | 0 | | | 5,917 | | | 963 | | | - | | | 7,405 |
Substandard | | | - | | | - | | | - | | | - | | | 548 | | | 3,364 | | | 43 | | | 3,955 |
Non-performing | | | 31 | | | 516 | | | 196 | | | 93 | | | 63 | | | 1,479 | | | 1 | | | 2,379 |
Total Loans | | $ | 210,020 | | $ | 318,157 | | $ | 166,322 | | $ | 71,046 | | $ | 80,126 | | $ | 128,981 | | $ | 33,941 | | $ | 1,008,593 |
Total Current-period gross write-offs | | $ | 206 | | $ | 1,522 | | $ | 1,754 | | $ | 429 | | $ | 309 | | $ | 255 | | $ | - | | $ | 4,475 |
18
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
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 2024 or 2023.
The changes in the carrying value of goodwillthe customer list and core deposit intangibles are as follows:
| Three Months Ended September 30, 2018 | Three Months Ended September 30, 2017 | |||||||||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||||||
| B&N | RAM | Total | B&N | RAM | Total | |||||||||||||||||||
| Beginning balance | $ | - | $ | 1,410 | $ | 1,410 | $ | 1,276 | $ | 1,505 | $ | 2,781 | ||||||||||||
| Relief due to asset sale | - | - | - | (1,276 | ) | - | (1,276 | ) | ||||||||||||||||
| Ended balance | $ | - | $ | 1,410 | $ | 1,410 | $ | - | $ | 1,505 | $ | 1,505 | ||||||||||||
| Accumulated impairment | $ | - | $ | 1,116 | $ | 1,116 | $ | - | $ | 1,021 | $ | 1,021 | ||||||||||||
Nine Months Ended | Nine Months Ended September 30, 2017 | |||||||||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||||||
| B&N | RAM | Total | B&N | RAM | Total | |||||||||||||||||||
| Beginning balance | $ | - | $ | 1,505 | $ | 1,505 | $ | 1,276 | $ | 1,505 | $ | 2,781 | ||||||||||||
| Impairment | - | (95 | ) | (95 | ) | - | - | - | ||||||||||||||||
| Relief due to asset sale | - | - | - | (1,276 | ) | - | (1,276 | ) | ||||||||||||||||
| Ended balance | $ | - | $ | 1,410 | $ | 1,410 | $ | - | $ | 1,505 | $ | 1,505 | ||||||||||||
| Accumulated impairment | $ | - | $ | 1,116 | $ | 1,116 | $ | - | $ | 1,021 | $ | 1,021 | ||||||||||||
| December 31, 2017 | ||||||||||||||||||||||||
| B&N | RAM | Total | ||||||||||||||||||||||
| Beginning balance | $ | 1,276 | $ | 1,505 | $ | 2,781 | ||||||||||||||||||
| Relief due to asset sale | (1,276 | ) | - | (1,276 | ) | |||||||||||||||||||
| Ended balance | $ | - | $ | 1,505 | $ | 1,505 | ||||||||||||||||||
| Accumulated impairment | $ | - | $ | 1,021 | $ | 1,021 | ||||||||||||||||||
| | | | | | |
| | Three Months Ended March 31, | ||||
|
| 2024 |
| 2023 | ||
Beginning balance | | $ | 246 | | $ | 334 |
Amortization | |
| (21) | |
| (24) |
| |
|
| |
|
|
Ending balance | | $ | 225 | | $ | 310 |
Accumulated amortization and impairment | | $ | 1,052 | | $ | 967 |
ForCore deposit intangibles represent the nine months ended September 30, 2017, the Company had no amortization or impairment expenses related to goodwill.
As discussed in Note 1, in 2017 the Bank sold its entire interest in B&N resulting in the removal of the remaining goodwill. At June 30, 2018 the Company tested the goodwill recorded for RAM and determined that a write-down of $95 was required to reflect impairment due to the loss of expected revenue. The similar test done at September 30, 2018 determined that no additional write-down was necessary. At year end 2017 the Company tested the goodwill recorded for RAM and determined that no impairment charge was required.
The changes in the carryingestimated fair value of acquired customer list intangibledeposit relationships on the date of acquisition and are as follows:
| Three Months Ended September 30, 2018 | Three Months Ended September 30, 2017 | |||||||||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||||||
| B&N | RAM | Total | B&N | RAM | Total | |||||||||||||||||||
| Beginning balance | $ | - | $ | 305 | $ | 305 | $ | 336 | $ | 347 | $ | 683 | ||||||||||||
| Amortization | - | (11 | ) | (11 | ) | (3 | ) | (11 | ) | (14 | ) | |||||||||||||
| Relief due to asset sale | - | - | - | (333 | ) | - | (333 | ) | ||||||||||||||||
| Ended balance | $ | - | $ | 294 | $ | 294 | $ | - | $ | 336 | $ | 336 | ||||||||||||
| Accumulated amortization and impairment | $ | - | $ | 653 | $ | 653 | $ | - | $ | 611 | $ | 611 | ||||||||||||
| Nine Months Ended September 30, 2018 | Nine Months Ended September 30, 2017 | |||||||||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||||||
| B&N | RAM | Total | B&N | RAM | Total | |||||||||||||||||||
| Beginning balance | $ | - | $ | 326 | $ | 326 | $ | 358 | $ | 368 | $ | 726 | ||||||||||||
| Amortization | - | (32 | ) | (32 | ) | (25 | ) | (32 | ) | (57 | ) | |||||||||||||
| Relief due to asset sale | - | - | - | (333 | ) | - | (333 | ) | ||||||||||||||||
| Ended balance | $ | - | $ | 294 | $ | 294 | $ | - | $ | 336 | $ | 336 | ||||||||||||
| Accumulated amortization and impairment | $ | - | $ | 653 | $ | 653 | $ | - | $ | 611 | $ | 611 | ||||||||||||
| December 31, 2017 | ||||||||||||||||||||||||
| B&N | RAM | Total | ||||||||||||||||||||||
| Beginning balance | $ | 358 | $ | 368 | $ | 726 | ||||||||||||||||||
| Amortization | (25 | ) | (42 | ) | (67 | ) | ||||||||||||||||||
| Relief due to asset sale | (333 | ) | - | (333 | ) | |||||||||||||||||||
| Ended balance | $ | - | $ | 326 | $ | 326 | ||||||||||||||||||
| Accumulated amortization and impairment | $ | - | $ | 621 | $ | 621 | ||||||||||||||||||
amortized over their estimated useful lives. Purchased customer accounts primarily consist of records and files that contain information about investment holdings. The valuevalues assigned to customer listlists and core deposit intangibles isare based upon a multiplethe application of the amount of commission revenue generated from the identified premiums.income approach. The customer listsintangibles are expected to have useful lives of approximately 13 years and 4 months.years. The Company recognized $32$21 and $24 of amortization expense related to its intangible assets for the ninethree months ended September 30, 2017.
As discussed in Note 1, in 2017 the Bank sold its entire interest in B&N resulting in the removal of the remaining related intangibles. At September 30, 2018, based upon the amount of future commission revenue available from the then existing RAM customer premiums on hand, the Company determined that the fair value of the amortizable intangible assets exceeded their carrying values recorded at year end.
March 31, 2024 and 2023, respectively.
As of September 30, 2018March 31, 2024, the future amortization expense for amortizable intangible assets for the respective years isended December 31, was as follows:
| 2018 | $ | 10 | ||
| 2019 | 42 | |||
| 2020 | 42 | |||
| 2021 | 42 | |||
| 2022 | 42 | |||
| Thereafter | 116 |
| | | |
2024 |
| $ | 58 |
2025 | |
| 60 |
2026 | |
| 29 |
2027 | |
| 21 |
2028 | |
| 16 |
Thereafter | | | 41 |
Total | | $ | 225 |
19
Rhinebeck Bancorp, Inc. and Subsidiary Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data) |
Deposits werebalances are summarized as follows:
| September 30, | December 31, | |||||||||||||
| 2018 | 2017 | |||||||||||||
| (unaudited) | ||||||||||||||
| Noninterest bearing demand deposits | $ | 185,222 | $ | 157,828 | ||||||||||
| | | | | | | ||||||||
| | March 31, | | December 31, | ||||||||||
|
| 2024 |
| 2023 | ||||||||||
Non-interest bearing demand deposits | | $ | 236,957 | | $ | 249,793 | ||||||||
| Interest bearing accounts: | |
|
| |
|
| ||||||||
| NOW | 95,857 | 101,167 | ||||||||||||
NOW(1) | |
| 126,058 | |
| 125,628 | ||||||||
| Savings | 128,733 | 125,244 | |
| 144,932 | |
| 146,172 | ||||||
| Money market | 128,982 | 123,643 | |
| 196,107 | |
| 190,864 | ||||||
| Time certificates of deposit | 152,924 | 142,223 | |
| 332,970 | |
| 318,046 | ||||||
| Total interest bearing accounts | 506,496 | 492,277 | |
| 800,067 | |
| 780,710 | ||||||
| Total deposits | $ | 691,718 | $ | 650,105 | | $ | 1,037,024 | | $ | 1,030,503 | ||||
| (1) | Negotiable order of withdrawal |
The Company has established a relationship to participate in a reciprocal deposit program with other financial institutions. The reciprocal deposit program provides access to Federal Deposit Insurance Corporation (“FDIC”) insurance deposit products in aggregate amounts exceeding the current limits for depositors. At March 31, 2024 and December 31, 2023, total reciprocal deposits were $43,488 and $40,009. Included in time certificates of deposit at September 30, 2018March 31, 2024 and December 31, 20172023 were reciprocal deposits totaling $21,311$27,580 and $20,673,$23,357, respectively, with original maturities of one to three years. Reciprocal deposits included in money market accounts totaled $15,908 and $16,652 at March 31, 2024 and December 31, 2023, respectively.
The Company had no brokered deposits at either March 31, 2024 or December 31, 2023. Time certificates of deposit in denominations of $250 or greater were $15,138$100,385 and $13,920$100,063 as of September 30, 2018March 31, 2024 and December 31, 2017,2023, respectively.
Contractual maturities of time certificates of deposit at March 31, 2024 are summarized below:
| September 30, | December 31, | |||||||
| 2018 | 2017 | |||||||
| (unaudited) | ||||||||
| within 1 year | $ | 107,625 | $ | 69,634 | ||||
| 1 - 2 years | 23,000 | 47,603 | ||||||
| 2 - 3 years | 4,299 | 10,988 | ||||||
| 3 - 4 years | 14,991 | 7,521 | ||||||
| 4 - 5 years | 3,009 | 6,477 | ||||||
| over 5 years | - | - | ||||||
| Total | $ | 152,924 | $ | 142,223 | ||||
| | | |
| | March 31, | |
|
| 2024 | |
Within 1 year | | $ | 324,632 |
1 – 2 years | |
| 5,115 |
2 – 3 years | |
| 1,561 |
3 – 4 years | |
| 428 |
4 – 5 years | |
| 1,234 |
Total | | $ | 332,970 |
20
FHLBNYRhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
6. Long-Term Debt and FHLB Stock
FHLB Borrowings and Stock
The CompanyBank is a member of the FHLBNY.FHLB. At September 30, 2018March 31, 2024 and December 31, 2017,2023, the CompanyBank had access to a preapproved secured line of credit with the FHLBNYFHLB of $409,776$649,283 and $370,974,$656,516, respectively. Borrowings under this line require collateralization through the pledge of specific loans and securities. At September 30, 2018March 31, 2024 and December 31, 2017,2023, the CompanyBank had pledged assets of $148,006$227,899 and $25,608,$228,172, respectively. At September 30, 2018 and December 31, 2017, theThe Company had no outstanding overnight line of credit balances with the FHLBNY of $17,500 and $14,500, respectively.FHLB at either March 31, 2024 or December 31, 2023. These borrowings would mature the following business day. The interest rate was 2.38% at September 30, 2018 and 1.53% at December 31, 2017. At September 30, 2018, the Company also had structured borrowings in the amount of $36,121.
The outstanding principal amounts and the related terms and rates at September 30, 2018March 31, 2024 were as follows (unaudited):follows:
| Term | Principal | Maturity | Rate | Due in one year | Long term | |||||||||||||
| 5 month bullet | $ | 10,000 | February 26, 2019 | 2.64 | % | $ | 10,000 | $ | - | |||||||||
| 1 year amortizing | 3,762 | May 15, 2019 | 2.50 | % | 3,762 | - | ||||||||||||
| 1 year amortizing | 4,175 | June 7, 2019 | 2.53 | % | 4,175 | - | ||||||||||||
| 2 year amortizing | 4,390 | May 15, 2020 | 2.78 | % | 2,482 | 1,908 | ||||||||||||
| 2 year amortizing | 4,594 | June 8, 2020 | 2.76 | % | 2,687 | 1,907 | ||||||||||||
| 3 year amortizing | 9,200 | May 17, 2021 | 2.92 | % | 3,813 | 5,387 | ||||||||||||
| Total | $ | 36,121 | Weighted Average Rate | 2.72 | % | $ | 26,919 | $ | 9,202 | |||||||||
| | | | | | | | | | | | | | |
Term |
| Principal |
| Maturity |
| Rate |
| | Due in one year |
| Long term | |||
Fixed short-term | | $ | 10,000 | | April 23, 2024 | | 5.70 | % | | $ | 10,000 | | $ | — |
Fixed short-term | | | 10,000 | | May 17, 2024 | | 5.59 | % | | | 10,000 | | | — |
Fixed short-term | | | 10,000 | | June 17, 2024 | | 5.60 | % | | | 10,000 | | | — |
Fixed short-term | | | 10,000 | | July 17, 2024 | | 5.59 | % | | | 10,000 | | | — |
Fixed short-term | | | 10,000 | | August 6, 2024 | | 5.42 | % | | | 10,000 | | | — |
Fixed short-term | | | 10,000 | | September 6, 2024 | | 5.39 | % | | | 10,000 | | | — |
Fixed medium-term | | | 20,000 | | March 20, 2025 | | 4.47 | % | | | — | | | 20,000 |
Fixed medium-term | | | 722 | | October 31, 2025 | | 4.87 | % | | | — | | | 722 |
Fixed medium-term | | | 5,000 | | November 3, 2025 | | 4.87 | % | | | — | | | 5,000 |
Fixed medium-term | | | 728 | | December 5, 2025 | | 4.34 | % | | | — | | | 728 |
Fixed medium-term | | | 1,233 | | September 21, 2026 | | 5.20 | % | | | — | | | 1,233 |
Fixed medium-term | | | 381 | | November 9, 2026 | | 5.04 | % | | | — | | | 381 |
Fixed medium-term | | | 20,000 | | May 2, 2028 | | 3.88 | % | | | — | | | 20,000 |
Total | | $ | 108,064 | | Weighted Average Rate |
| 4.99 | % | | $ | 60,000 | | $ | 48,064 |
At December 31, 2017, the Company did not have any structured advances with the FHLBNY.
The CompanyBank is required to maintain an investment in FHLB capital stock, of the FHLBNY, as collateral, in an amount equal to a certain percentage of its outstanding debt. FHLBNYFHLB stock is considered restricted stock and is carried at cost. The CompanyBank evaluates FHLB stock for impairment based on the ultimate recovery ability of the cost. No impairment was recognized at September 30, 2018either March 31, 2024 or December 31, 2017.
2023.
Subordinated Debt
During 2005,In addition to the Bank, the Company formedhas one other wholly-owned subsidiary, RSB Capital Trust I (“Trust”(the “Trust”). In 2005, the Trust issued $5,000 of pooled trust preferred securities in a private placement and owns allissued 155 shares of common stock at $1 par value per share, to the Trust’s common securities.Company. The Trust, which has no independent assets or operations, and was createdformed in 2005 for the sole purpose of issuing trust preferred securities and investing the proceeds thereof in an equivalent amount of junior subordinated debentures issued bydebentures. The proceeds from the Company. Trustissuance 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 trust securities also bear interest at 3-month LIBOR plus 2.00%. 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, other than trust securities, provides a full and unconditional guarantee of amounts on the capital securities. The subordinated debentures, which bear interest at 3-month LIBORthe three month term Secured Overnight Financing Rate (“SOFR”) plus 2.00% (4.310%2% and a relative spread adjustment of
21
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
0.26% was 7.58% and 7.64% at September 30, 2018March 31, 2024 and 3.454% at December 31, 2017)2023, respectively. The subordinated debentures mature on May 23, 2035.
AvailableOther Borrowings
The CompanyBank has an unsecured, uncommitted $10,000 line of credit with Zions Bank. There were no advances outstanding under this line of credit at September 30, 2018 andeither March 31, 2024 or December 31, 2017.2023.
The componentsBank also has an unsecured, uncommitted $50,000 line of the provision for income taxes are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||
| (unaudited) | (unaudited) | |||||||||||||
| Current expense (benefit): | ||||||||||||||
| Federal | $ | 89 | $ | 831 | $ | 550 | $ | 1,408 | ||||||
| State | (6 | ) | (89 | ) | 7 | (71 | ) | |||||||
| Total | 83 | 742 | 557 | 1,337 | ||||||||||
| Deferred (benefit) expense: | ||||||||||||||
| Federal | 183 | 12 | (12 | ) | 134 | |||||||||
| State | - | - | - | - | ||||||||||
| Total | 183 | 12 | (12 | ) | 134 | |||||||||
| Total provision for income taxes | $ | 266 | $ | 754 | $ | 545 | $ | 1,471 | ||||||
The following is a reconciliation between the expected federal statutory income tax ratecredit with Pacific Coast Bankers Bank. There were no advances outstanding under this line of 21% (2018) and 34% (2017) and the Company’s actual income tax expense and rate:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||||||||||||||
| Provision at statutory rate | $ | 468 | 21 | % | $ | 1,148 | 34 | % | $ | 778 | 21 | % | $ | 1,940 | 34 | % | ||||||||||||||||
| Tax exempt income | (22 | ) | -1 | % | (41 | ) | -1 | % | (70 | ) | -2 | % | (129 | ) | -2 | % | ||||||||||||||||
| State income taxes, net of federal income tax benefit | 24 | 1 | % | 6 | 0 | % | 14 | 0 | % | 17 | 0 | % | ||||||||||||||||||||
| Tax basis difference on sale of B&N | - | 0 | % | (296 | ) | -9 | % | - | 0 | % | (296 | ) | -5 | % | ||||||||||||||||||
| Other, net | (204 | ) | -5 | % | (63 | ) | -1 | % | (177 | ) | -4 | % | (61 | ) | -1 | % | ||||||||||||||||
| Effective income tax and rate | $ | 266 | 16 | % | $ | 754 | 23 | % | $ | 545 | 15 | % | $ | 1,471 | 26 | % | ||||||||||||||||
The tax effects of temporary differences that give rise to significant components of the deferred tax assets and deferred tax liabilitiescredit at September 30, 2018 andeither March 31, 2024 or December 31, 2017:2023.
| September 30, | December 31, | |||||||
| 2018 | 2017 | |||||||
| (unaudited) | ||||||||
| Deferred tax assets: | ||||||||
| Allowance for loan losses | $ | 1,704 | $ | 1,473 | ||||
| Deferred expenses | 767 | 717 | ||||||
| Depreciation and amortization | 79 | 105 | ||||||
| Unrecognized pension liability | 1,019 | 1,232 | ||||||
| Postretirement liability | 919 | 901 | ||||||
| Deferred loss on OREO | 187 | 83 | ||||||
| Unrealized loss on securities | 1,128 | 617 | ||||||
| State tax NOLs | 647 | 647 | ||||||
| Other | 198 | 232 | ||||||
| Gross deferred tax assets | 6,648 | 6,007 | ||||||
| Deferred tax liabilities: | ||||||||
| Prepaid expenses | (277 | ) | (181 | ) | ||||
| Prepaid pension | (1,304 | ) | (1,148 | ) | ||||
| Deferred loan fees | (135 | ) | (65 | ) | ||||
| Mortgage servicing rights | (615 | ) | (610 | ) | ||||
| Gross deferred tax liabilities | (2,331 | ) | (2,004 | ) | ||||
| Net deferred tax asset | 4,317 | 4,003 | ||||||
| Deferred tax valuation allowance | (985 | ) | (982 | ) | ||||
| Deferred tax assets, net of allowance | $ | 3,332 | $ | 3,021 | ||||
The 2015-16 New York Tax State (“NYS”) Budget enacted on March 31, 2015 contained a significant reform of NYS’s corporate tax system (Part A of Chapter 59 of the Laws of 2015). The budget enacted on April 13, 2016 presented technical and clarifying amendments to the previously enacted tax reform statutes (Part T of Chapter 59 of the Laws of 2016) which were effective for tax years effective on or after January 1, 2016.
Among the many changes related to the Company, the separate tax article 32 that used to apply to financial institutions became no longer applicable and the Company was required to file as a general business corporation (Article 9-A) starting in 2015. The new tax law provided for a permanent deduction of income from “qualified” loans from taxable income for community banks. As such, management determined that the Company would most likely not pay any income tax but rather generate New York net operating losses (“NOLs”) for the foreseeable future. The Company would likely pay the NYS capital based tax until the phase out of that tax which is scheduled for the year ended December 31, 2020. While the change was positive for the Company (it would likely pay less cash taxes in future years due to the permanent deduction afforded), one immediate negative impact was the reduced value of the Company’s NYS deferred tax assets (“DTAs”).
In management’s opinion, it is expected that in future years there will be no opportunity to reverse the NYS DTAs to provide for a reduction in NYS income taxes. Therefore, at year end 2015 management established a full valuation allowance to recognize the fully diminished value of these DTAs.
Retained earnings at September 30, 2018 and December 31, 2017 and 2016 include a contingency reserve for loan losses of approximately $1,534 which represents the tax reserve balance existing at December 31, 1987 and is maintained in accordance with provisions of the Internal Revenue Code applicable to mutual savings banks. Amounts transferred to the reserve have been claimed as deductions from taxable income and, if the reserve is used for purposes other than to absorb losses on loans, a federal income tax liability could be incurred. It is not anticipated that the Company will incur a federal income tax liability relating to this reserve balance and accordingly, deferred income taxes of approximately $414 at September 30, 2018 and $614 at December 31, 2017 and 2016 have not been recognized.
| 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 havehad completed at least one year of service. On April 24,service as of June 30, 2012, the effective date on which the Board of Directors of Rhinebeckthe Bank voted to freeze the Bank’s defined benefit plan as of June 30, 2012.
plan.
The following table sets forth the plan’s funded status and amounts recognized in the Company’s consolidated statements of financial condition:
| Nine months ended September 30, | Year ended December 31, | |||||||||||
| 2018 | 2017 | |||||||||||
| (unaudited) | ||||||||||||
| Projected and accumulated benefit obligation | $ | (18,304 | ) | $ | (19,777 | ) | ||||||
| Plan assets at fair value | 18,281 | 18,166 | ||||||||||
| Funded status included in other liabilities | $ | (23 | ) | $ | (1,611 | ) | ||||||
| | | | | | | |
| | March 31, | | December 31, | | ||
|
| 2024 |
| 2023 | | ||
Projected and accumulated benefit obligation | | $ | (17,986) | | $ | (17,868) | |
Plan assets at fair value | |
| 18,139 | |
| 18,062 | |
Funded status included in accrued expenses and other liabilities | | $ | 153 | | $ | 194 | |
Amounts recognized in accumulated other comprehensive loss consisted of the following:
| Nine months ended September 30, | Year ended December 31, | |||||||
| 2018 | 2017 | |||||||
| (unaudited) | ||||||||
| Net actuarial loss | $ | 4,855 | $ | 5,865 | ||||
The net periodic pension (benefit) cost and amounts recognized in other comprehensive income (loss)expense are as follows:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||
| (unaudited) | (unaudited) | |||||||||||||
| Net periodic pension (income) cost | $ | - | $ | 19 | $ | (2 | ) | $ | 57 | |||||
| Net actuarial pension (gain) loss | - | - | (1,010 | ) | - | |||||||||
| Total | $ | - | $ | 19 | $ | (1,012 | ) | $ | 57 | |||||
| | | | | | |
| | Three months ended March 31, | ||||
|
| 2024 |
| 2023 | ||
Interest cost | | $ | 213 | | $ | 215 |
Expected return on plan assets | |
| (249) | |
| (232) |
Amortization of unrecognized loss | |
| 74 | |
| 93 |
Net periodic cost | | $ | 38 | | $ | 76 |
In 2018 and 2017, net actuarial (gain) loss resulted primarily from changes in the discount rate.
Estimated net actuarial loss of $374 will be amortized from accumulated other comprehensive loss into net periodic pension cost in 2018. Weighted-average assumptions used by the Company to determine the pension benefit obligation consisted of the following:
| September 30, | December 31, | |||||||
| 2018 | 2017 | |||||||
| (unaudited) | ||||||||
| Discount rate | 4.11 | % | 3.53 | % | ||||
Weighted-average assumptions used by the Company to determine the net periodic pension cost consisted of the following:
| September 30, | December 31, | |||||||
| 2018 | 2017 | |||||||
| (unaudited) | ||||||||
| Discount rate | 4.11 | % | 4.06 | % | ||||
| Rate of increase in compensation | - | - | ||||||
| Expected long-term rate of retun on assets | 6.00 | % | 6.00 | % | ||||
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 nineeight diversified investment funds.
As of September 30, 2018, the investment funds include six equity funds, three bond funds and a real estate fund, each with its own investment objectives, investment strategies and risks, as detailed in the Company’s investment policy statement. At DecemberMarch 31, 2017 and 20162024, the investment funds included fivesix equity funds threeand two fixed income bond funds, and a taxable money market fund, 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.
22
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
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 2024 or 2023.
The fair value of the Company’s pension plan assets, by fair value hierarchy, are as follows:
| Balance | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Observable Inputs (Level 3) | |||||||||||||
| September 30, 2018 | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Pooled separate accounts | $ | 18,281 | $ | - | $ | 18,281 | $ | - | ||||||||
| December 31, 2017 | ||||||||||||||||
| Pooled separate accounts | $ | 18,166 | $ | - | $ | 18,166 | $ | - | ||||||||
| | | | | | | | | | | | |
| | March 31, 2024 | ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Assets: | | | | | | | | | | | | |
Investment in separate accounts | | | | | | | | | | | | |
Fixed income | | $ | 12,686 | | $ | — | | $ | — | | $ | 12,686 |
Equity | |
| 5,453 | |
| — | |
| — | |
| 5,453 |
Total assets at fair value | | $ | 18,139 | | $ | — | | $ | — | | $ | 18,139 |
| | | | | | | | | | | | |
| | December 31, 2023 | ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Assets: | | | | | | | | | | | | |
Investment in separate accounts | | | | | | | | | | | | |
Fixed income | | $ | 12,293 | | $ | — | | $ | — | | $ | 12,293 |
Equity | |
| 5,769 | |
| — | |
| — | |
| 5,769 |
Total assets at fair value | | $ | 18,062 | | $ | — | | $ | — | | $ | 18,062 |
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. Pooled separate accounts are classified within level 2
For a detailed disclosure on the Bank’s pension and employee benefits plans, please refer to Note 9 of the valuation hierarchy described in Note 1.
Employer contributions and benefit payments are as follows:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Employer contribution | $ | 570 | $ | - | $ | 570 | $ | - | ||||||||
| Benefits paid | $ | (110 | ) | $ | (100 | ) | $ | (331 | ) | $ | (300 | ) | ||||
As ofCompany’s Consolidated Financial Statements for the year ended December 31, 2018 and 2017, the following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
| Years ended December 31, | 2018 | 2017 | ||||||
| 2018 | $ | 540 | $ | 538 | ||||
| 2019 | 567 | 564 | ||||||
| 2020 | 636 | 633 | ||||||
| 2021 | 667 | 666 | ||||||
| 2022 | 711 | 708 | ||||||
| 2023 - 2027 | 4,206 | 4,284 | ||||||
On August 14, 2018, the Company made a contribution to the plan2023 included in the amount of $570. The contribution was made to reduce the underfunded status of the plan and realize a higher tax deduction due to the decrease of the federal tax rate in 2018.
Defined Contribution Plan
The CompanyBank 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 CompanyBank matching up to 6%, subject to Internal Revenue Service limitations. The Company’sBank’s contributions charged to operations amounted to $577, $508$269 and $686$286 for the ninethree months ended September 30, 2018March 31, 2024 and 20172023, respectively.
23
Rhinebeck Bancorp, Inc. and year ended December 31, 2017, respectively.Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
Bank Owned Life Insurance(Dollars in thousands, except share and per share data)
The Company has an investment in and is the beneficiary of, life insurance policies on the lives of certain officers and trustees. The purpose of these life insurance policies is to provide income through the appreciation in cash surrender value of the policies, which is expected to offset the cost of the deferred compensation plans. These policies have aggregate cash surrender values of $17,736 and $17,577 at September 30, 2018 and December 31, 2017, respectively. Net earnings on these policies aggregated $345 and $345 for the nine months ended September 30, 2018 and 2017 and $460 for the year ended December 31, 2017, respectively, which are included in noninterest income in the consolidated statements of income.
Deferred Compensation Arrangements
Trustees’Directors’ Plan,
(formerly the “Trustees Plan”)
The Company’s 1991Bank’s Deferred Compensation Plan for Fees of Directors, as amended and restated effective January 1, 2005 (the “Trustees’“Directors’ Plan”), covers Trusteesdirectors who elect to defer fees earned. Under the termsreceipt of the Trustees’ Plan, each participant may elect to defer all or parta portion of their annual director’s fees.fees until separation from service. Upon resignation, retirement, or death, the participants’participant’s total deferred compensation, including earnings thereon, will be paid out. At September 30, 2018March 31, 2024 and December 31, 2017, $1,7602023, total amounts due to participants of $3,483 and $1,648,$3,278, respectively, iswere included in accrued expenses and other liabilities, which represents cumulative amounts deferred and earnings thereon.liabilities. Total expenseexpenses related to the Trustees’Directors’ Plan were $63 and $51 for the ninethree months ended September 30, 2018March 31, 2024 and 2017 were $61 and $44 and year ended December 31, 2017 was $62,2023, respectively, which arewere included in noninterestother non-interest expense in the consolidated statements of income.
Executive Long-Term Incentive and Retention Plan
The CompanyBank 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 Trustees and who filed a properly completed and executed participation agreement in accordance with the terms of the Executive Plan.Directors. Under the Executive Plan, the Board of TrusteesDirectors 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 TrusteesDirectors based on the attainment of criteria established annually by the Board of Trustees.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 Trustees.Directors. Participants vest in their benefit accounts in accordance with the vesting schedule approved by the Board of Trustees,Directors, which ranges from one to five years of service. At September 30, 2018March 31, 2024 and December 31, 2017, $8402023, $1,980 and $813,$1,962, respectively, iswas included in accrued expenses and other liabilities, which represents the cumulative amounts deferred and earnings thereon. The Company recognized expenses of $27$45 and $23$131 for the ninethree months ended September 30, 2018March 31, 2024 and 2017, and $76 for the year ended December 31, 2017,2023, respectively, related to this plan, and 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 being accrued over the individual participants’ service period and aggregated $1,300$1,655 and $1,260, respectively,$1,642 at September 30, 2018March 31, 2024 and December 31, 2017.2023, respectively. The Company recognized expenses of $40$13 for both of the three-month periods ended March 31, 2024 and $41 for the nine months ended September 30, 2018 and 2017 and $71 for the year ended DecemberMarch 31, 2017, respectively,2023, 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 for fixed postretirement benefits to be paid to the directors andor the officer, or their beneficiaries, for periods ranging from 15 to 20 years. In addition, the Company has agreements with certain directors which provide for certain postretirement life insurance benefits. The liability related to these postretirement benefits is being accrued over the individual participants’ service period and aggregated $2,105$2,072 and $2,078, respectively,$2,068 at September 30, 2018March 31, 2024 and December 31, 2017.2023, respectively. The Company recognized expenses of $75$14 and $178$16 for the ninethree months ended September 30, 2018March 31, 2024 and 2017 and $292 for the year ended December 31, 2017,2023, respectively, related to these benefits, which are included in other noninterestnon-interest expenses in the consolidated statements of income.
24
LeasesRhinebeck Bancorp, Inc. and SubleasesSubsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
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 (8.50% at January 1, 2024). 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, 2024 was $3,612. 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:
| | | | |
| | March 31, | | December 31, |
| | 2024 |
| 2023 |
Allocated | | 109,107 |
| 87,286 |
Committed to be allocated | | 5,454 |
| 21,821 |
Unallocated | | 321,864 |
| 327,318 |
Paid out to participants | | (10,988) | | (10,988) |
Total shares | | 425,437 |
| 425,437 |
The Company leases certain branch offices and equipment under operating lease agreements which expirefair value of unallocated shares was $2,720 at various dates through 2025. The Company has the option to renew the leases for its branch offices at fair rental values. In addition to rental payments, the branch leases require payments for property taxes in excess of base year taxes.
As of September 30, 2018, future minimum rental commitments under the terms of these leases, by year and in the aggregate, are as follows:
| Years ending December 31, | ||||
| 2018 | $ | 168 | ||
| 2019 | 673 | |||
| 2020 | 641 | |||
| 2021 | 564 | |||
| 2022 | 509 | |||
| 2023 and thereafter | 963 | |||
| Total | $ | 3,518 | ||
March 31, 2024.
Total rentalcompensation expense charged to operations for cancelable and non-cancelable operating leases were $155 and $162recognized in connection with the ESOP for the three months ended March 31, 2024 and $4792023 was $46 and $469$49, 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 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, 2024, there were 105,146 stock options and 49,778 restricted stock awards that remained available for future grants.
The fair value of each option granted under the nine months ended September 30, 2018EIP 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.
25
Rhinebeck Bancorp, Inc. and 2017Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and $626 forper share data)
A summary of options under the year ended December2020 EIP as of March 31, 2017, respectively. Rental income2024 is presented below:
| | | | | | | |
| | | | Weighted - | | Weighted-Average | |
| | Number of | | Average | | Remaining Contractual | |
| | Shares | | Exercise Price | | Term (in Years) | |
Options outstanding at beginning of year | | 436,263 | | $ | 6.62 | | 6.64 |
Expired | | (1,333) | | | 6.57 | | - |
Options outstanding at March 31, 2024 | | 434,930 | | $ | 6.62 | | 6.50 |
Options exercisable at March 31, 2024 | | 434,930 | | $ | 6.62 | | 6.50 |
At March 31, 2024, 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 $806. 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, 2024.
As of March 31, 2024, all of the outstanding stock options and restricted stock awards granted under subleases was $81 and $67the 2020 EIP had vested, therefore there were no compensation costs for the three months and $230 and $239 forended March 31, 2024.
For the ninethree months ended September 30, 2018March 31, 2023, share-based compensation of options and 2017,restricted stock under the plan totaled $150.
.
26
Rhinebeck Bancorp, Inc. and $319Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
8. Leases
As of March 31, 2024, the Company leased real estate for seven branch offices and two administrative offices under various lease agreements. All of our leases are classified as operating leases.
The calculated amount of the year endedright-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 2024 to 2041, 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 10.6 years and 10.8 years as of March 31, 2024 and December 31, 2017,2023, 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 Company utilized a weighted average discount rate of 2.60% in determining the lease liability as of both March 31, 2024 and December 31, 2023.
For the three months ended March 31, 2024 and 2023, total operating lease costs were $182 and $178, respectively, and were included in occupancy and other expense. The right-of-use asset, included in other assets, was $6,157 and $6,307 and the corresponding lease liability, included in accrued expenses and other liabilities, was $6,218 and $6,375 as of March 31, 2024 and December 31, 2023, respectively.
Future minimum payments for operating leases with initial or remaining terms of one year or more as of March 31, 2024 were as follows:
| | | |
Years ending December 31: |
| | |
2024 | | $ | 573 |
2025 | |
| 739 |
2026 | |
| 720 |
2027 | |
| 676 |
2028 | |
| 677 |
Thereafter | |
| 3,778 |
Total future minimum lease payments | | | 7,163 |
Amounts representing interest | | | (945) |
Present Value of Net Future Minimum Lease Payments | | $ | 6,218 |
27
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
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'sCompany’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, and undisbursed portions of construction loans and other lines of credit.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 credit and 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.
The contractual amounts of commitments to extend credit represent the amounts of potential accounting loss should the contract be fully drawn upon, the customer defaults and the value of any existing collateral become worthless. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
Financial instruments whose contract amounts represent off-balance sheet credit risk are as follows:
| September 30, | December 31, | ||||||||||||||
| 2018 | 2017 | ||||||||||||||
| (unaudited) | |||||||||||||||
| Commitments to extend credit summarized as follows | |||||||||||||||
| | | | | | | | ||||||||
| | March 31, | | December 31, | | ||||||||||
|
| 2024 |
| 2023 | | ||||||||||
Commitments to extend credit summarized as follows: | | | | | | | | ||||||||
| Future loan commitments | $ | 4,998 | $ | 3,805 | | $ | 3,401 | | $ | 5,318 | | ||||
| Undisbursed construction loans | 12,413 | 7,175 | |
| 40,747 | |
| 42,482 | | ||||||
| Undisbursed home equity lines of credit | 10,955 | 11,185 | |
| 10,788 | |
| 10,727 | | ||||||
| Undisbursed commercial and other line of credit | 59,969 | 60,897 | |
| 70,957 | |
| 69,258 | | ||||||
| Standby letters of credit | 2,324 | 3,429 | |
| 3,115 | |
| 4,965 | | ||||||
Loans sold with recourse | |
| 1,155 | |
| 1,873 | | ||||||||
| Total | $ | 90,659 | $ | 86,491 | | $ | 130,163 | | $ | 134,623 | | ||||
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'scustomer’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'smanagement’s credit evaluation of the counterparty. Collateral held varies but may include residential and commercial property, deposits and securities.
28
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
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 $166 and $132 related to our swaps is recorded in other assets and other liabilities as of March 31, 2024 and December 31, 2023, respectively.
Summary information regarding these derivatives is presented below:
| | | | | | | | |
| | March 31, | | December 31, | ||||
| | 2024 | | 2023 | | |||
Notational amount | | $ | 88,780 | | | $ | 65,420 | |
Fair value | | $ | 5,735 | | | $ | 5,343 | |
Weighted average pay rates | | | 5.03 | % | | | 5.064 | % |
Weighted average receive rates | | | 7.44 | % | | | 7.49 | % |
Weighted average maturity (in years) | | | 9.04 | | | | 8.88 | |
| | | | | | | | |
Number of Contracts | | | 16 | | | | 14 | |
In addition, as of March 31, 2024, the Company has four forward rate swaps with a notional value of $30,560 and a fair value of $856 with effective dates at various points in 2024 and 2025. These forward swaps have a fixed weighted average pay rate of 5.75% and the related weighted average adjustable receive rates will be determined at the time the forward swaps become effective. As of December 31, 2023, there were five forward swaps with a notional value of $30,211, a fair value of $970 and a fixed average pay rate of 4.95%.
29
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
10. Regulatory Matters
The Bank areis subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company'sCompany’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company's and the Bank’s assets, liabilities and certain off-balance-sheet items, as calculated under regulatory accounting practices. The Company's and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
The final rules implementing the BASEL Committee on Banking Supervisor’s Capital Guidance for U.S. Banks (BASEL III) became effective for the Company and Bank on January 1, 2016. Compliance with the requirements is being phased in over a four year period with full compliance as of January 1, 2019. All presented capital ratios are calculated using BASEL III rules.
Quantitative measures established by regulation to ensure capital adequacy require the Company and 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 the regulations)12 C.F.R. § 324.20) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined).assets. Management believes, as of September 30, 2018March 31, 2024 and December 31, 2017,2023, that the Company and 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'sBank’s category.
The Company’s and Bank'sBank’s actual capital amounts and ratios were:
| | | | | | | | | | | | | | | | | ||||||||||||||||||||||||
| | | | | | | | | | | | To be Well Capitalized under |
| |||||||||||||||||||||||||||
| | | | | | | For Capital Adequacy | | Prompt Corrective Action |
| ||||||||||||||||||||||||||||||
| | Actual | | Purposes | | Provisions |
| |||||||||||||||||||||||||||||||||
|
| Amount |
| Ratio |
| Amount |
| Ratio |
| Amount |
| Ratio |
| |||||||||||||||||||||||||||
| Actual | For Capital Adequacy Purposes | To be Well Capitalized under Prompt Corrective Action Provisions | ||||||||||||||||||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||||||||||||||||||
| September 30, 2018 | ||||||||||||||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||||||||||
| Rhinebeck Bancorp, MHC | ||||||||||||||||||||||||||||||||||||||||
| Total capital (to risk-weighted assets) | $ | 69,698 | 9.86 | % | $ | 56,538 | 8.00 | % | $ | 70,672 | 10.00 | % | ||||||||||||||||||||||||||||
| Tier 1 capital (to risk-weighted assets) | 63,388 | 8.97 | % | 42,403 | 6.00 | % | 56,538 | 8.00 | % | |||||||||||||||||||||||||||||||
| Common equity tier one capital (to risk weighted assets) | 63,388 | 8.97 | % | 31,803 | 4.50 | % | 45,937 | 6.50 | % | |||||||||||||||||||||||||||||||
| Tier 1 capital (to average assets) | 63,388 | 7.85 | % | 32,319 | 4.00 | % | 40,399 | 5.00 | % | |||||||||||||||||||||||||||||||
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| | March 31, 2024 |
| |||||||||||||||||||||||||||||||||||||
| Rhinebeck Bank | |
|
|
| | | | | | | | | | | | | ||||||||||||||||||||||||
| Total capital (to risk-weighted assets) | $ | 72,858 | 10.31 | % | $ | 56,526 | 8.00 | % | $ | 70,657 | 10.00 | % | | $ | 145,962 |
| 12.99 | % | $ | 89,892 |
| 8.00 | % | $ | 112,366 |
| 10.00 | % | ||||||||||||
| Tier 1 capital (to risk-weighted assets) | 66,548 | 9.42 | % | 42,394 | 6.00 | % | 56,526 | 8.00 | % | |
| 137,749 |
| 12.26 | % |
| 67,419 |
| 6.00 | % |
| 89,892 |
| 8.00 | % | |||||||||||||||
| Common equity tier one capital (to risk weighted assets) | 66,548 | 9.42 | % | 31,796 | 4.50 | % | 45,927 | 6.50 | % | |
| 137,749 |
| 12.26 | % |
| 50,564 |
| 4.50 | % |
| 73,038 |
| 6.50 | % | |||||||||||||||
| Tier 1 capital (to average assets) | 66,548 | 8.24 | % | 32,313 | 4.00 | % | 40,391 | 5.00 | % | |
| 137,749 |
| 10.28 | % |
| 53,582 |
| 4.00 | % |
| 66,977 |
| 5.00 | % | |||||||||||||||
| December 31, 2017 | ||||||||||||||||||||||||||||||||||||||||
| Rhinebeck Bancorp, MHC | ||||||||||||||||||||||||||||||||||||||||
| Total capital (to risk-weighted assets) | $ | 65,623 | 10.94 | % | $ | 47,977 | 8.00 | % | $ | 59,971 | 10.00 | % | ||||||||||||||||||||||||||||
| Tier 1 capital (to risk-weighted assets) | 60,166 | 10.03 | % | 35,983 | 6.00 | % | 47,977 | 8.00 | % | |||||||||||||||||||||||||||||||
| Common equity tier one capital (to risk weighted assets) | 60,166 | 10.03 | % | 26,987 | 4.50 | % | 38,891 | 6.50 | % | |||||||||||||||||||||||||||||||
| Tier 1 capital (to average assets) | 60,166 | 8.16 | % | 29,488 | 4.00 | % | 36,860 | 5.00 | % | |||||||||||||||||||||||||||||||
| Rhinebeck Bank | ||||||||||||||||||||||||||||||||||||||||
| Total capital (to risk-weighted assets) | $ | 68,631 | 11.45 | % | $ | 47,964 | 8.00 | % | $ | 59,955 | 10.00 | % | ||||||||||||||||||||||||||||
| Tier 1 capital (to risk-weighted assets) | 63,174 | 10.54 | % | 35,973 | 6.00 | % | 47,964 | 8.00 | % | |||||||||||||||||||||||||||||||
| Common equity tier one capital (to risk weighted assets) | 63,174 | 10.54 | % | 26,980 | 4.50 | % | 38,971 | 6.50 | % | |||||||||||||||||||||||||||||||
| Tier 1 capital (to average assets) | 63,174 | 8.57 | % | 29,488 | 4.00 | % | 36,860 | 5.00 | % | |||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | |
| | December 31, 2023 |
| |||||||||||||
Rhinebeck Bank | |
|
|
|
| |
|
|
|
| |
|
|
|
| |
Total capital (to risk-weighted assets) | | $ | 144,675 |
| 12.70 | % | $ | 91,154 |
| 8.00 | % | $ | 113,942 |
| 10.00 | % |
Tier 1 capital (to risk-weighted assets) | |
| 136,295 |
| 11.96 | % |
| 68,365 |
| 6.00 | % |
| 91,154 |
| 8.00 | % |
Common equity tier one capital (to risk weighted assets) | |
| 136,295 |
| 11.96 | % |
| 51,274 |
| 4.50 | % |
| 74,062 |
| 6.50 | % |
Tier 1 capital (to average assets) | |
| 136,295 |
| 10.10 | % |
| 53,990 |
| 4.00 | % |
| 67,488 |
| 5.00 | % |
As described
30
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in Note 1, thethousands, except share and per share data)
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.
Cash and Due from Banks, Accrued Interest Receivable and Mortgagors' Escrow Accounts
Cash Equivalents
The carrying amount is a reasonable estimate of fair value.
Available for Sale and Held to Maturity 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. The Company does not have any 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 and held to maturity securities are only disclosed at fair value.
basis.
FHLBNYFHLB Stock
The carrying value of FHLBNYFHLB stock approximates fair value based on the redemption provisions of the FHLBNY.FHLB.
Loans
Loans receivable are carried at cost. For variable rate loans, which reprice frequently, and have no significant change in credit risk, 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 impairedindividually analyzed loans are recorded to reflect partial write-downs based on the observable market price or current appraised value of collateral. The fair value of loans held for sale is estimated using quoted market prices.
Other Real Estate Owned
Other real estate owned represents real estate acquired through foreclosure and is carried at the lower of cost or 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.
31
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
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.
Deposits
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 FHLBNY
FHLB
The fair value of the advances is estimated using a discounted cash flow calculation that applies current FHLBNYFHLB interest rates for advances of similar maturity to a schedule of maturities of such advances.
Subordinated Debt
Based on the floating rate characteristic of these instruments, the carrying value is considered to approximate fair value.
Off-Balance-SheetOff-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'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.
32
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
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 | | Significant | |||
| | | | | for Identical | | Observable | | Unobservable | |||
|
| Balance |
| Assets (Level 1) |
| Inputs (Level 2) |
| Inputs (Level 3) | ||||
| | March 31, 2024 | ||||||||||
Assets: | | | | | | | | | | | | |
U.S. Treasury securities | | $ | 19,143 | | $ | 19,143 | | $ | — | | $ | — |
U.S. government agency mortgage-backed securities-residential | | | 124,134 | | | — | | | 124,134 | | | — |
U.S. government agency securities | |
| 23,096 | |
| — | |
| 23,096 | |
| — |
Municipal securities | |
| 2,882 | |
| — | |
| 2,767 | |
| 115 |
Corporate Bonds | | | 12,734 | | | — | | | 12,734 | | | — |
Other | |
| 656 | |
| — | |
| 656 | |
| — |
Total available for sale securities | | | 182,645 | | | 19,143 | | | 163,387 | | | 115 |
Loan level interest rate swaps | | | 6,591 | | | — | | | 6,591 | | | — |
Total assets | | $ | 189,236 | | $ | 19,143 | | $ | 169,978 | | $ | 115 |
Liabilities: | | | | | | | | | | | | |
Loan level interest rate swaps | | $ | 6,591 | | $ | — | | $ | 6,591 | | $ | — |
Total liabilities | | $ | 6,591 | | $ | — | | $ | 6,591 | | $ | — |
| | | | | | | | | | | | |
|
| December 31, 2023 | ||||||||||
Assets: | | | | | | | | | | | | |
U.S. Treasury securities | | $ | 24,006 | | $ | 24,006 | | $ | — | | $ | — |
U.S. government agency mortgage-backed securities – residential | | | 128,580 | | | — | | | 128,580 | | | — |
U.S. government agency securities | |
| 23,158 | |
| — | |
| 23,158 | |
| — |
Municipal securities | |
| 2,903 | |
| — | |
| 2,788 | |
| 115 |
Corporate Bonds | | | 12,640 | | | — | | | 12,640 | | | — |
Other | |
| 698 | |
| — | |
| 698 | |
| — |
Total available for sale securities | | | 191,985 | | | 24,006 | | | 167,864 | | | 115 |
Loan level interest rate swaps | | | 6,278 | | | — | | | 6,278 | | | — |
Total assets | | $ | 198,263 | | $ | 24,006 | | $ | 174,142 | | $ | 115 |
Liabilities: | | | | | | | | | | | | |
Loan level interest rate swaps | | $ | 6,278 | | $ | — | | $ | 6,278 | | $ | — |
Total liabilities | | $ | 6,278 | | $ | — | | $ | 6,278 | | $ | — |
33
Rhinebeck Bancorp, Inc. and Subsidiary
| Identical Assets | Inputs | Inputs | ||||||||||||||
| Balance | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| September 30, 2018 | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| U.S. Treasury securities | $ | 2,928 | $ | 2,928 | $ | - | $ | - | ||||||||
| U.S. government agency mortgage-backed securities-residential | 82,013 | - | 81,584 | 429 | ||||||||||||
| U.S. government agency securities | 16,217 | - | 16,217 | - | ||||||||||||
| Municipal securities | 1,229 | - | 1,229 | - | ||||||||||||
| Total | $ | 102,387 | $ | 2,928 | $ | 99,030 | $ | 429 | ||||||||
| December 31, 2017 | ||||||||||||||||
| U.S. Treasury securities | $ | 3,001 | $ | 3,001 | $ | - | $ | - | ||||||||
| U.S. government agency mortgage-backed securities-residential | 91,390 | - | 91,390 | - | ||||||||||||
| U.S. government agency securities | 16,526 | - | 16,526 | - | ||||||||||||
| Municipal securities | 2,385 | - | 2,385 | - | ||||||||||||
| Total | $ | 113,302 | $ | 3,001 | $ | 110,301 | $ | - | ||||||||
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
The following tables detail the assets carried at fair value and measured at fair value on a nonrecurring basis as of September 30, 2018March 31, 2024 and December 31, 2017 and 20162023, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:
| Balance | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Observable Inputs (Level 3) | |||||||||||||
| September 30, 2018 | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Assets held at fair value | ||||||||||||||||
| Impaired loans | $ | 258 | $ | - | $ | - | $ | 258 | ||||||||
| Other real estate owned | $ | 1,074 | $ | - | $ | - | $ | 1,074 | ||||||||
| December 31, 2017 | ||||||||||||||||
| Assets held at fair value | ||||||||||||||||
| Impaired loans | $ | 760 | $ | - | $ | - | $ | 760 | ||||||||
| Other real estate owned | $ | 773 | $ | - | $ | - | $ | 773 | ||||||||
| | | | | | | | | | | | |
| | | | | Quoted Prices in | | | | | | | |
| | | | | Active Markets | | Significant | | Significant | |||
| | | | | for Identical | | Observable | | Unobservable | |||
|
| Balance |
| Assets (Level 1) |
| Inputs (Level 2) |
| Inputs (Level 3) | ||||
| | March 31, 2024 | ||||||||||
Individually analyzed loans, with specific reserves | | $ | 1,189 | | $ | — | | $ | — | | $ | 1,189 |
Total | | $ | 1,189 | | $ | — | | $ | — | | $ | 1,189 |
| | | | | | | | | | | | |
|
| December 31, 2023 | ||||||||||
Individually analyzed loans, with specific reserves | | $ | 758 | | $ | — | | $ | — | | $ | 758 |
Other real estate owned | |
| 25 | |
| — | |
| — | |
| 25 |
Total | | $ | 783 | | $ | — | | $ | — | | $ | 783 |
Loans that were individually analyzed using the fair value of the collateral had recorded investments of $1,579 and $973 with valuation allowances of $390 and $215 and fair values of $1,189 and $758 at March 31, 2024 and December 31, 2023, 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:
| Fair Value Estimate | Valuation Technique | Unobservable Input | Range | |||||||
| September 30, 2018 | ||||||||||
| (unaudited) | ||||||||||
| Assets held at fair value | ||||||||||
| Impaired loans | $ | 258 | Appraisal of collateral(1) | Appraisal adjustments(2) | 0% - 20% | |||||
| Liquidation expenses(3) | 0% - 6% | |||||||||
| Other real estate owned | 1,074 | Appraisal of collateral(1) | Appraisal adjustments(2) | 0% - 20% | ||||||
| December 31, 2017 | ||||||||||
| Impaired loans | $ | 760 | Appraisal of collateral(1) | Appraisal adjustments(2) | 0% - 20% | |||||
| Liquidation expenses(3) | 0% - 6% | |||||||||
| Other real estate owned | 773 | Appraisal of collateral(1) | Appraisal adjustments(2) | 0% - 20% | ||||||
(1) Fair value is generally determined through independent appraisals of the underlying collateral that generally include various level 3 inputs which are not identifiable.
(2) 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 percent of the appraised value.
(3) Estimated costs to sell.
The Company discloses fair value information about financial instruments, whether or not recognized in the statements of financial condition, for which it is practicable to estimate that value. Certain financial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.
| | | | | | | | | |
| | Quantitative Information About Level 3 Fair Value Measurements | |||||||
| | Fair Value | | Valuation | | Unobservable | | Range | |
|
| Estimate |
| Techniques |
| Input |
| (Weighted Average) | |
| | March 31, 2024 | |||||||
Individually analyzed loans, with specific reserves | | $ | 1,189 |
| Appraisal of collateral | (1) | Liquidation expenses | (3) | 0% to 8% |
| | | | | | | Appraisal adjustments | (2) | 0% to 20% |
| | | | | | | | | |
| | December 31, 2023 | |||||||
Individually analyzed loans, with specific reserves | | $ | 758 |
| Appraisal of collateral | (1) | Liquidation expenses | (3) | 0% to 8% |
| | | | | | | Appraisal adjustments | (2) | 0% to 20% |
Other real estate owned | |
| 25 |
| Appraisal of collateral | (1) | Liquidation expenses | (3) | 0% to 6% |
| |
|
|
|
|
| Appraisal adjustments | (2) | 0% to 20% |
(1) | Fair value is generally through independent appraisals of the underlying collateral that generally include various level 3 inputs which are not identifiable. |
(2) | Appraisals may be adjusted by management for qualitative factors such as economic conditions and |
(3) | Estimated costs to sell. |
The estimated fair value amounts for 2018, 20172024 and 20162023 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.
34
Rhinebeck Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
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'sCompany’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'sCompany’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'sCompany’s financial instruments were:
| September 30, | December 31, | |||||||||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
| | March 31, | | December 31, | ||||||||||||||||||||||||
| | 2024 | | 2023 | ||||||||||||||||||||||||
|
| Carrying Value |
| Fair Value |
| Carrying Value |
| Fair Value | ||||||||||||||||||||
| Financial Assets: | | |
| | |
| | |
| | |
| ||||||||||||||||
| Cash and due from banks (Level 2) | $ | 12,596 | $ | 12,596 | $ | 10,460 | $ | 10,460 | ||||||||||||||||||||
Cash and cash equivalents (Level 1) | | $ | 30,672 | | $ | 30,672 | | $ | 22,129 | | $ | 22,129 | ||||||||||||||||
Available for sale securities (Level 1) | |
| 19,143 | |
| 19,143 | |
| 24,006 | |
| 24,006 | ||||||||||||||||
| Available for sale securities (Level 2) | 102,387 | 102,387 | 113,302 | 113,302 | |
| 163,387 | |
| 163,387 | |
| 167,864 | |
| 167,864 | ||||||||||||
| Held to maturity securities (Level 2) | - | - | 1,914 | 1,928 | ||||||||||||||||||||||||
| FHLBNY stock (Level 2) | 2,874 | 2,874 | 1,108 | 1,108 | ||||||||||||||||||||||||
Available for sale securities (Level 3) | |
| 115 | |
| 115 | |
| 115 | |
| 115 | ||||||||||||||||
Loan level interest rate swaps (Level 2) | | | 6,591 | | | 6,591 | | | 6,278 | | | 6,278 | ||||||||||||||||
FHLB stock (Level 2) | |
| 5,614 | |
| 5,614 | |
| 6,514 | |
| 6,514 | ||||||||||||||||
| Loans, net (Level 3) | 652,053 | 643,286 | 566,178 | 565,765 | |
| 993,346 | |
| 972,258 | |
| 1,008,851 | |
| 979,037 | ||||||||||||
| Accrued interest receivable (Level 2) | 2,418 | 2,418 | 2,149 | 2,149 | |
| 4,611 | |
| 4,611 | |
| 4,616 | |
| 4,616 | ||||||||||||
| Mortgage servicing rights (Level 3) | 2,278 | 4,628 | 2,260 | 4,122 | |
| 1,880 | |
| 4,520 | |
| 1,977 | |
| 4,720 | ||||||||||||
| Financial Liabilities: | |
|
| |
|
| |
|
| |
|
| ||||||||||||||||
| Deposits (Level 2) | 691,718 | 690,260 | 650,105 | 649,517 | |
| 1,037,024 | |
| 962,985 | |
| 1,030,503 | |
| 948,140 | ||||||||||||
| Mortgagors escrow accounts (Level 2) | 3,521 | 3,521 | 7,284 | 7,284 | ||||||||||||||||||||||||
| FHLBNY advances (Level 2) | 53,621 | 53,621 | 14,900 | 14,900 | ||||||||||||||||||||||||
Mortgagors' escrow accounts (Level 2) | |
| 7,301 | |
| 7,301 | |
| 9,274 | |
| 9,274 | ||||||||||||||||
FHLB advances (Level 2) | |
| 108,064 | |
| 107,057 | |
| 128,064 | |
| 127,592 | ||||||||||||||||
| Subordinated debt (Level 2) | 5,155 | 5,155 | 5,155 | 5,155 | |
| 5,155 | |
| 5,155 | |
| 5,155 | |
| 5,155 | ||||||||||||
Loan level interest rate swaps (Level 2) | | | 6,591 | | | 6,591 | | | 6,278 | | | 6,278 | ||||||||||||||||
Accrued interest payable (Level 2) | | | 1,681 | | | 1,681 | | | 1,488 | | | 1,488 | ||||||||||||||||
12. Accumulated Other Comprehensive Loss
The Company generally fully satisfies its performance obligations on its contracts with customers as services are renderedcomponents of other comprehensive loss at March 31, 2024 and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers. The main types of revenue contracts included in non-interest income within the consolidated statements of income areDecember 31, 2023 were as follows:
| | | | | | | |
| | March 31, | | December 31, | | ||
|
| 2024 |
| 2023 |
| ||
Securities available for sale: | | | | | | |
|
Net unrealized loss on securities available for sale | | $ | (33,744) | | $ | (33,009) |
|
Related deferred tax | |
| 7,087 | |
| 6,932 |
|
Net accumulated other comprehensive loss | |
| (26,657) | |
| (26,077) |
|
Defined benefit pension plan: | |
|
| |
|
|
|
Unrecognized net actuarial loss and prior service cost | |
| (4,330) | |
| (4,330) |
|
Related deferred tax | |
| 909 | |
| 909 |
|
Net accumulated other comprehensive loss | |
| (3,421) | |
| (3,421) |
|
Total accumulated other comprehensive loss | | $ | (30,078) | | $ | (29,498) |
|
On June 12, 2018, the Board
35
Rhinebeck Bancorp, Inc. hasand Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)
13. 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 organized and will becomeoutstanding if all potentially dilutive common stock equivalents (such as options) were issued during the bank holding companyperiod. There were no anti-dilutive options for the Bank. As partthree months ended March 31, 2024 or 2023. Unearned ESOP shares are not deemed outstanding for earnings per share calculations.
| | | | | | |
| | Three Months Ended March 31, | ||||
| | 2024 | | 2023 | ||
Net income applicable to common stock | | $ | 1,121 | | $ | 798 |
| |
|
| |
|
|
Average number of common shares outstanding | |
| 11,072,607 | |
| 11,228,299 |
Less: Average unearned ESOP shares | |
| 324,601 | |
| 346,414 |
Average number of common shares outstanding used to calculate basic earnings per common share | |
| 10,748,006 | |
| 10,881,885 |
Additional common stock equivalents (nonvested stock) used to calculate diluted earnings per share | | | — | | | 34,822 |
Additional common stock equivalents (stock options) used to calculate diluted earnings per share | | | 96,281 | | | 104,688 |
Weighted-average common shares and common stock equivalents used to calculate diluted earnings per share | | | 10,844,287 | | | 11,021,395 |
| |
|
| |
|
|
Earnings per Common share: | |
|
| |
|
|
Basic | | $ | 0.10 | | $ | 0.07 |
Diluted | | $ | 0.10 | | $ | 0.07 |
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Item 2. Management’s Discussion and numberAnalysis of sharesFinancial Condition and Results of common stock based upon an independent appraiser’s valuation. The stock will be priced at $10.00 per share. In addition, the Bank’s Board of Directors will adopt an employee stock ownership plan (“ESOP”), which is permitted to subscribe for up to 3.92% of the common stock to be outstanding following the completion of the reorganization and the offering. Rhinebeck Bancorp, Inc. is organized as a Maryland corporation and will offer 43% of its common stock to be outstanding to the Bank’s eligible members, the ESOP and certain other persons. The Bank also intends to form a charitable foundation, Rhinebeck Bank Community Foundation, Inc., and fund it with 2% of the shares to be outstanding following completion of the reorganization and the offering and up to $200 in cash. The Company will own 55% of the common stock of Rhinebeck Bancorp, Inc. outstanding upon completion of the reorganization and stock offering.
The costs of the reorganization and the issuing of the common stock will be deferred and deducted from the sales proceeds of the offering. If the reorganization and offering is unsuccessful, all deferred costs will be charged to operations. As of September 30, 2018, $471 of reorganization costs had been incurred.
As of November 7, 2018 Rhinebeck Bancorp, MHC contributed $1,750 of additional capital to Rhinebeck Bank.
General
Management’s discussion and analysis of financial condition and results of operations at September 30, 2018March 31, 2024 and December 31, 2023, and for the three and nine months ended September 30, 2018March 31, 2024 and 20172023, is intended to assist in understanding the financial condition and results of operations of Rhinebeck Bancorp, MHCthe Company and Rhinebeckthe 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,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect”“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; |
· | 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:
| ● | general economic conditions, either nationally or in our market area, including potential recessionary conditions; |
| ● | changes in liquidity, including the size and composition of our deposit portfolio and the percentage of uninsured deposits in the portfolio; |
| ● | changes in the level and direction of loan delinquencies and charge-offs and changes in estimates or methodology in the calculation of the allowance for credit losses; |
| ● | our ability to access cost-effective funding; |
| ● | fluctuations in real estate values and both residential and commercial real estate market conditions; |
| ● | demand for loans and deposits in our market area; |
| ● | our ability to continue to implement our business strategies; |
| ● | our ability to manage or reduce expenses; |
| ● | changes in the determination of goodwill impairment; |
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| ● | competition among depository and other financial institutions; |
| ● | inflation and changes in market interest rates that affect our margins and yields, the fair value of financial instruments, our volume of loan originations and loan sales, or the level of defaults, losses and prepayments on loans, whether held in portfolio or sold in the secondary market; |
| ● | adverse changes in the securities markets; |
| ● | changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, Federal Deposit Insurance Corporation premiums and capital requirements, and changes in the monetary and fiscal policies of the Board of Governors of the Federal Reserve System; |
| ● | negative financial impact from potential supervisory action, regulatory penalties and/or settlements; |
| ● | our ability to manage interest rate risk, market risk, credit risk and operational risk; |
| ● | our ability to enter new markets successfully and capitalize on growth opportunities; |
| ● | our ability to successfully integrate into our operations any assets, liabilities or systems we may acquire, as well as new management personnel or customers, and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; |
| ● | changes in consumer spending, borrowing and savings habits; |
| ● | the current or anticipated impact of military conflict, terrorism or other geopolitical events; |
| ● | changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board; |
| ● | our ability to retain key employees; |
| ● | a failure in or breach of our operational or security systems or infrastructure, including cyberattacks; |
| ● | system failures or cybersecurity threats against our informational technology and those of our third-party providers and vendors; |
| ● | the failure to maintain current technologies and to successfully implement future information technology enhancements; |
| ● | our compensation expense associated with equity allocated or awarded to our employees; |
| ● | changes in the financial condition, results of operations or prospects of issuers of securities that we own; and |
| ● | conditions relating to the Coronavirus (“COVID-19”) pandemic, or other public health emergencies. |
Additional factors that may affect our results are discussed in our market area, that are worse than expected;
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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. Additional factors that may affect our results are discussed in the Prospectus under the heading “Risk Factors.”Accordingly, you should not place undue reliance on such statements.
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Critical Accounting Policies
A summary of ourOur most significant accounting policies isare described in Note 1 to the unaudited consolidated financial statements included Item 1statements. Certain of this report. Critical accounting estimates are necessary in the application of certainthese accounting policies require management to use significant judgment and procedures and are particularly susceptible to significant change. Critical accounting policies are defined as those involving significant judgments and assumptions by management that couldestimates, 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 on income under differentother factors that management believes to be reasonable. Because of the nature of the judgment and assumptions, or conditions. Actualactual results could differ from these judgments and estimates, under different conditions, resulting in a change thatwhich could have a material impacteffect on the carrying values of our assetsfinancial condition and liabilities and our results of operations. Management believes thatWe consider the allowance for credit losses to be our most critical accounting policies, which involve the most complex or subjective decisions or assessments, are as follows:policy.
Allowance for Loan Losses.Credit Losses
The methodology for determining theCompany's allowance for loancredit losses is considered a critical accounting policy by management becauseits estimate of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the economic environment that could result in changes to the amount of the recorded allowance for loan losses. The allowance for loancredit losses is determined by management based upon portfolio segment, past experience, evaluation of estimated loss and impairmentcurrently expected in the loan portfolio, current economic conditionson unfunded lending commitments, and other pertinent factors. Management also considers risk characteristics byin its available-for-sale securities portfolio segments. The allowance for loan losses is maintained at a level that management considers adequate to provide for estimated losses and impairment based upon an evaluationover the expected life of known and inherent risk in the loan portfolio. Loan impairment is evaluatedthose assets. While these estimates are based on substantive methods for determining the fair value of collateralrequired allowance, actual outcomes may differ significantly from estimated results, especially when determining required allowances for larger, complex commercial credits or cash flows. While management usesunfunded 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 best information available to make such evaluations, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluations.
The allowance for loan losses is established through a provision for loan losses charged to expense, which is based upon past loan loss experience and an evaluation of estimated losses in the current loan portfolio, including the evaluation of impaired loans. Determining the amount ofCompany estimates the allowance for loancredit losses necessarily involvesas a high degreecalculation of judgment. Amongexpected lifetime credit losses utilizing a forward-looking forecast of macroeconomic conditions, which may differ significantly from actual results. Further discussion of the material estimates required to establishmethodology used in establishing the allowance are: overall economic conditions; value of collateral; strength of guarantors; loss exposure at default; the amount and timing of future cash flows on impaired loans; and determination of loss factors to be appliedis provided in Note 3 to the various elements of the portfolio. All of these estimates are susceptible to significant change. Management regularly reviews the level of loss experience, current economic conditions and other factors relatedNotes to the collectability of the loan portfolio. Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. In addition, our banking regulators, as an integral part of their examination process, periodically review our allowance for loan losses. Our banking regulators may require us to recognize adjustments to the allowance based on judgments about information available to them at the time of its examination.
Our financial results are affected by the changes in and the level of the allowance for loan losses. This process involves our analysis of internal and external variables, and it requires that we exercise judgment to estimate an appropriate allowance for loan losses. As a result of the uncertainty associated with this subjectivity, we cannot assure you that our allowance will be adequate if we experience sizeable loan losses in any particular period.
Deferred Income Taxes. At September 30, 2018, we had net deferred tax assets totaling $3,332 million. In accordance with Accounting Standards Codification (“ASC”) Topic 740 “Income Taxes,” we use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If currently available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax assets and liabilities. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets are inherently subjective and are reviewed on a regular basis as regulatory or business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. A valuation allowance that results in additional income tax expense in the period in which it is recognized would negatively affect earnings. Management believes, based upon current facts, that it is more likely than not that there will be sufficient taxable income in future years to realize the federal portion of its deferred tax assets. However, due to changes in New York state tax law, we do not believe we can realize our state deferred tax assets. Accordingly, we established a 100% valuation allowance against such assets.
Fair Value Measurements. The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. We estimate the fair value of a financial instrument and any related asset impairment using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. When observable market prices do not exist, we estimate fair value. These estimates are subjective in nature and imprecision in estimating these factors can impact the amount of revenue or loss recorded. A more detailed description of the fair values measured at each level of the fair value hierarchy and the methodology we utilize can be found in Note 15 to the unaudited consolidated financial statementsConsolidated Financial Statements included in Item 1this Form 10-Q and in “Item 7. Management’s Discussion and Analysis of this report.Financial Condition and Results of Operations—Terms of Critical Accounting Policies” in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 26, 2024.
Investment Securities. Available for sale and held to maturity securities are reviewed regularly for possible other-than-temporary impairment. The review includes an analysis of the facts and circumstances of each individual investment such as the severity of loss, the length of time the fair value has been below cost, the expectation for that security’s performance, the creditworthiness of the issuer and our intent and ability to hold the security to recovery. A decline in value that is considered to be other-than-temporary is recorded as a loss within non-interest income in the statements of income. At September 30, 2018, we believe the unrealized losses are primarily a result of increases in market interest rates from the time of purchase. In general, as market interest rates rise, the fair value of securities will decrease; as market interest rates fall, the fair value of securities will increase. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, these securities have not been classified as other-than-temporarily impaired. Management has also concluded that based on current information we expect to continue to receive scheduled interest payments as well as the entire principal balance. Furthermore, management does not intend to sell these securities and does not believe it will be required to sell these securities before they recover in value.
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39
Pension Obligations. We maintain a non-contributory defined benefit pension plan, which was frozen in 2012. We account for benefits under the plan in accordance with ASC Topic 715 “Pension and Other Postretirement Benefits.” The guidance requires an employer to: (1) recognize in its statement of financial position the over funded or underfunded status of a defined benefit postretirement plan measured as the difference between the fair value of plan assets and the benefit obligation; (2) measure a plan’s assets and its obligations that determine its funded status as of the end of the employer’s fiscal year (with limited exceptions); and (3) recognize as a component of other comprehensive income, net of tax, the actuarial gains and losses and the prior service costs and credits that arise during the period.
Comparison of Financial Condition at September 30, 2018March 31, 2024 and December 31, 20172023
Total Assets. Total assets increased $77.6were $1.30 billion at March 31, 2024 as compared to $1.31 billion at December 31, 2023, reflecting a decrease of $14.4 million, or 10.5%1.1%. Loans receivable decreased by $15.5 million, or 1.5%, available for sale securities decreased $9.3 million, or 4.9%, premises and equipment decreased $3.0 million, or 16.9%, and Federal Home Loan Bank stock decreased $900,000. The decreases were partially offset by an increase in cash of $8.5 million, or 38.6%, and an increase in other assets of $5.5 million, or 28.8%.
Cash and Cash Equivalents. Cash and cash equivalents increased $8.5 million, or 38.6%, to $819.7$30.7 million at September 30, 2018March 31, 2024 from $742.1$22.1 million at December 31, 2017.2023, primarily due to an increase in deposits held at the Federal Reserve Bank of New York as customer deposits increased, specifically time certificates and money market accounts.
Investment Securities Available for Sale. Investment securities available for sale decreased 9.3 million, or 4.9%, to $182.6 million at March 31, 2024 from $192.0 million at December 31, 2023, primarily due to paydowns, calls and maturities of $8.5 million and an increase in the unrealized loss of $734,000. The proceeds from the maturity of securities were primarily used to paydown the advances from the Federal Home Loan Bank.
Net Loans. Total net loans receivable were $993.3 million at March 31, 2024, a decrease of $15.5 million, or 1.5%, as compared to $1.01 billion at December 31, 2023. The decrease was primarily due to a decrease in indirect automobile loans of $27.2 million, or 6.9%, reflecting a strategic decision to decrease that loan portfolio as a percentage of our balance sheet. Partially offsetting the decreases in automobile loans were increases in commercial real estate loans of $9.5 million, or 2.2%, residential real estate loans of $1.6 million, or 2.1%, and commercial and industrial loans of $2.4 million, or 2.7%. Non-accrual loans increased $379,000, or 9.1%, to $4.6 million at March 31, 2024 from $4.2 million at December 31, 2023.
Federal Home Loan Bank Stock. FHLB stock decreased $900,000, or 13.8%, to $5.6 million at March 31, 2024, primarily due to a reduction in mandatory FHLB stock in connection with the pay-off of $20.0 million in advances during the quarter ended March 31, 2024.
Premises and Equipment. Premises and equipment decreased $3.0 million, or 16.9%, to $14.6 million at March 31, 2024 from $17.6 million at March 31, 2023 as the Beacon branch office was sold in February of 2024 for $2.9 million. The sale included the land and building as well of all branch furniture and equipment. All of the branch accounts were redomiciled to the customer’s nearest branch and all employees were placed in open positions.
Other Assets. Other assets increased $5.5 million, or 28.8%, primarily due to a $5.0 million U.S. Treasury bond that matured on March 31, 2024 and was awaiting settlement.
Total Liabilities. Total liabilities decreased $15.0 million, or 1.3%, to $1.18 billion at March 31, 2024 from $1.20 billion at December 31, 2023, primarily due to a decrease in borrowings of $20.0 million and a decrease in mortgagors’ escrow accounts of $2.0 million, partially offset by an increase in deposits of $6.5 million.
Deposits. Deposits increased $6.5 million, or 0.6%, to $1.04 billion at March 31, 2024 from $1.03 billion at December 31, 2023. For the quarter ended March 31, 2024, interest-bearing accounts increased $19.4 million, or 2.5%, to $800.1 million, while non-interest bearing balances decreased $12.8 million, or 5.1%, to $237.0 million. Of the interest bearing accounts, transaction accounts (including NOW, savings and money market accounts) increased $4.4 million, or 1.0%, while time deposits increased $14.9 million, or 4.7%, at March 31, 2024. The continued growth in interest-bearing deposits was primarily due a shift in deposits from non-interest bearing and lower-yielding transaction accounts to higher-yielding time deposits and money market accounts as customers sought higher interest rates, contributing to the decrease in non-interest bearing and lower interest-bearing deposits.
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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 $43.5 million and $40.0 million, respectively, at March 31, 2024. We had no brokered deposits at either March 31, 2024 or December 31, 2023.
Mortgagors’ escrow accounts.Mortgagors’ escrow accounts decreased $2.0 million, or 21.3%, from $9.3 million at December 31, 2023 to $7.3 million at March 31, 2024, primarily due to the timing of tax disbursements.
Advances from the Federal Home Loan Bank. Advances from the Federal Home Loan Bank decreased $20.0 million, or 15.6%, from $128.1 million at December 31, 2023 to $108.1 million at March 31, 2024, primarily as the proceeds from the maturity of securities and a reduction in the origination of indirect automobile loans was used to pay down the debt.
Stockholders’ Equity. Stockholders' equity increased $587,000, or 0.5%, to $114.3 million at March 31, 2024 from $113.7 million at December 31, 2023. The increase was primarily due to increasesnet income of $85.9$1.1 million, partially offset by a $580,000 increase in accumulated other comprehensive loss primarily reflecting valuation changes in our available-for-sale securities portfolio due to current financial market conditions. At March 31, 2024, the Company’s book value per share was $10.32 and the Company’s ratio of stockholders’ equity-to-total assets was 8.80%. At December 31, 2023, the Company’s book value per share was $10.27 and the Company’s ratio of stockholders’ equity-to-total assets was 8.66%. Unearned common stock held by the Bank’s employee stock ownership plan was $3.2 million and $3.3 million at March 31, 2024 and December 31, 2023, respectively.
Comparison of Operating Results for the Three Months Ended March 31, 2024 and 2023
Net Income. Net income for the three months ended March 31, 2024 increased $323,000, or 40.5%, to $1.1 million, or 15.2%, in$0.10 per diluted share, compared to net loans, $2.1income of $798,000, or $0.07 per diluted share, for the three months ended March 31, 2023. Interest and dividend income increased $1.0 million, or 20.4%7.1%, in cash and cash equivalents and $1.8interest expense increased $2.0 million, or 159.4%42.2%, the provision for credit losses decreased $931,000, or 91.8%, non-interest income increased $130,000, or 9.4%, non-interest expense decreased $326,000, or 3.5%, and taxes increased $96,000, or 42.7%, between comparable quarters.
Net Interest Income. Net interest income decreased $968,000, or 9.8%, to $8.9 million for the three months ended March 31, 2024, compared to $9.9 million for the quarter ended March 31, 2023. The ratio of average interest-earning assets to average interest-bearing liabilities decreased 3.1% to 131.88% while our net interest margin decreased by 29 basis points to 2.92% when comparing the first quarter of 2024 to the same quarter in 2023.
Interest Income. Interest income increased $1.0 million, or 7.1%, to $15.6 million for the three months ended March 31, 2024 from $14.6 million for the comparable 2023 period primarily due to the rising interest rate environment and an increase in the average balance of loans, offset by a decrease in the average balance of available for sale securities. The overall average yield of interest-earning assets increased by 39 basis points to 5.14% and the overall average balance of interest-earning assets decreased $23.0 million, or 1.8%. The average yield on loans increased 31 basis points, while the average yield on available for sale securities increased 13 basis points.. For the three months ended March 31, 2024, the average balance of loans increased $6.7 million, while the average balance of available for sale securities decreased $32.2 million when compared to the three months ended March 31, 2023.
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Interest Expense. Interest expense increased $2.0 million, or 42.2%, from $4.7 million for the quarter ended March 31, 2023, to $6.7 million for the quarter ended March 31, 2024. The average cost of interest-bearing liabilities increased 82 basis points to 2.92% for the quarter ended March 31, 2024, due to the current interest rate environment, a greater proportion of deposits consisting of higher-yielding certificates of deposit, and the higher average balance of borrowings. The average balance of total interest-bearing liabilities also increased $12.0 million, or 1.3%, to $928.3 million. Between the three months ended March 31, 2023 and 2024, the average cost of Federal Home Loan Bank stock,advances increased by 33 basis points and the average balance increased by $63.0 million. An increase of $89.7 million, or 36.8%, in the average balance of certificates of deposit was offset by a $10.9decrease of $139.9 million, or 9.6%23.3%, in the average balance of our core interest-bearing deposits (consisting of savings, NOW and money market accounts) as depositors sought higher yields in the increasing interest rate environment.
Provision for Credit Losses. The provision for credit losses on loans decreased by $931,000, or 91.8%, from $1.0 million for the quarter ended March 31, 2023 to $83,000 for the current quarter. The decrease in available for sale securities combined with a $1.9 million decrease in heldwas primarily attributable to maturity securities due to the reclassification of these securities to available for saledecreased loan production during the period.quarter, changes to qualitative factors in response to improving economic conditions and decreased charge-offs.
Cash and Cash Equivalents. Total cash and cash equivalents increased $2.1 million, or 20.4%,Net charge-offs decreased $164,000 from $414,000 for the first quarter of 2023 to $12.6 million at September 30, 2018 from $10.5 million at December 31, 2017. This increase primarily reflected proceeds from maturing securities and an increase in deposits and Federal Home Loan Bank advances.
Securities Available$250,000 for Sale. Total securities available-for-sale decreased $10.9 million, or 9.6%, to $102.4 million at September 30, 2018 from $113.3 million at December 31, 2017. The decrease reflected the strategyfirst quarter of increasing Rhinebeck Bank’s loans-to-assets ratio to increase the overall yield on interest-earning assets and improve profitability.
Net Loans. Net loans increased $85.9 million, or 15.2%, to $652.1 million at September 30, 2018 from $566.2 million at December 31, 2017. The increase was primarily due to increases of $58.1 million, or 27.0%, in indirect automobile loans, $11.4 million, or 16.9%, in commercial business loans, $8.7 million, or 4.2%, in commercial real estate loans and $4.8 million, or 85.1%, in commercial construction loans. The increase in indirect automobile loans reflected the hiring in March 2018 of a team of lenders operating in Albany, as well as increased market share in the Hudson Valley market. Commercial real estate loans and commercial business loans increased, reflecting Rhinebeck Bank’s focus on increasing these portfolios. The increase in commercial construction loans reflected $3.5 million in additional extensions on previously originated loans and $4.6 million in loans originated in 2018.
Non-Performing Assets. Non-performing loans decreased from $9.4 million, or 1.65% of total loans at December 31, 2017, to $8.5 million, or 1.30% of total loans, at September 30, 2018.2024. The decrease was primarily due to decreased net charge-offs of indirect automobile loans of $208,000. The percentage of overdue account balances to total loans decreased to 1.84% as of March 31, 2024 from 1.90% as of December 31, 2023, while non-performing assets increased $354,000, or 8.4%, to $4.6 million at March 31, 2024.
Non-Interest Income. Non-interest income totaled $1.5 million for the salethree months ended March 31, 2024, an increase of development property at foreclosure$130,000, or 9.4%, from the comparable period in 2023, due primarily to an increase of $72,000, or 23.3%, in investment advisory income resulting from the improved investment market and economic conditions, an increase of $36,000 in the recapturenet gain on sales of $1.6mortgage loans as we sold $2.0 million of residential mortgage loans in the first quarter of 2024 as compared to $1.1 million in principal balances. Real estate owned decreased from $2.2the first quarter of 2023, and an increase of $35,000 in service charges on deposit accounts.
Non-Interest Expense. For the first quarter of 2024, non-interest expense totaled $8.9 million, at December 31, 2017 to $1.7 million at September 30, 2018 due to a $387,000 write down on a residential property and the sale of two lots.
Deposits. Total deposits increased $41.6 million, or 6.4%, to $691.7 million at September 30, 2018 from $650.1 million at December 31, 2017. The increase in interest-bearing deposits reflected increases of $10.7 million, or 7.5%, in certificates of deposit, $5.3 million, or 4.3%, in money market accounts and $3.5 million, or 2.8%, in savings accounts, offset by a decrease of $5.3 million,$326,000, or 5.2%3.5%, over the comparable period in NOW accounts.2023. The increase in certificates of deposit reflected the effects of promotional offers. The decrease in NOW accounts was primarily due to a $248,000, or 4.7%, decrease in salaries and benefits due to a Company-wide reduction in force of approximately 5% in the discontinuancefirst quarter of a higher-tiered product. Noninterest-bearing deposits increased $27.4 million,2023. Other non-interest expense decreased $108,000, or 17.4%6.6%, to $185.2 million at September 30, 2018 from $157.8 million at December 31, 2017, primarily due to the typical seasonal increase in tax payments received by Rhinebeck Bank.
Federal Home Loan Bank Advances.Federal Home Loan Bank advances increased $38.7 million,decreased retail banking expenses. FDIC deposit insurance and other insurance decreased $29,000, or 259.9%10.3%, to $53.6 million at September 30, 2018 from $14.9 million at December 31, 2017. The increase wasprimarily due a decreased assessment rate while occupancy expense decreased $26,000, or 2.4%, due to additional advances taken to fund loan growth.a branch closure in the first quarter of 2024. Professional fees, data processing fees and marketing expense increased by $48,000, $23,000 and $17,000, respectively, partially offsetting the other decreases in non-interest expense.
Total Equity.Total equityIncome Taxes. Income taxes increased $2.0 million,by $96,000, or 3.7%42.7%, to $57.0 million at September 30, 2018 from $55.0 million at December 31, 2017. The increase was due to $3.2 million of net income for the ninethree months ended September 30, 2018, offset by an aggregate increase of $1.2 millionMarch 31, 2024 as compared to the same three month period in accumulated other comprehensive loss on2023 as our availableincome before income taxes increased. Our effective tax rate for sale securities and defined benefit pension plan.the three months ended March 31, 2024 was 22.26% compared to 21.99% for the three months ended March 31, 2023.
56
42
Average Balance Sheets for the Three Months Ended March 31, 2024 and Related Yields and Rates
2023
The following tables present information regardingset forth average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualizedbalance sheets, average yields and costs. The yieldscosts, and costscertain other information for the periods indicated are derived by dividing income or expense by theindicated. All average balances of assets or liabilities, respectively, for the periods presented. Average balances have been calculated usingare daily balances. Nonaccrual loans are included in average balances, only. Loanthe yields set forth below include the effect of deferred fees and discounts and premiums that are included inamortized or accreted to interest income on loans and are not material. Tax exempt income on loans and on investment securities has been calculated on a tax equivalent basis using a combined federal and state marginal tax rate(dollars in thousands).
| | | | | | | | | | | | | | | | | |
| | For the Three Months Ended March 31, | | ||||||||||||||
| | 2024 | | 2023 | | ||||||||||||
|
| Average |
| Interest and |
| |
| Average |
| Interest and |
| |
| ||||
| | Balance | | Dividends | | Yield/Cost(3) | | Balance | | Dividends | | Yield/Cost(3) | | ||||
Assets: |
| |
|
| |
|
|
|
| |
|
| |
|
|
|
|
Interest bearing depository accounts and federal funds sold | | $ | 17,274 | | $ | 217 |
| 5.05 | % | $ | 17,691 | | $ | 189 |
| 4.33 | % |
Loans(1) | |
| 1,009,612 | |
| 14,381 |
| 5.73 | % |
| 1,002,908 | |
| 13,395 |
| 5.42 | % |
Available for sale securities | |
| 190,900 | |
| 870 |
| 1.83 | % |
| 223,067 | |
| 936 |
| 1.70 | % |
Other interest-earning assets | |
| 6,441 | |
| 167 |
| 10.43 | % |
| 3,523 | | | 82 | | 9.44 | % |
Total interest-earning assets | | | 1,224,227 | | | 15,635 |
| 5.14 | % | | 1,247,189 | | | 14,602 |
| 4.75 | % |
Non-interest-earning assets | |
| 88,866 | |
|
|
|
| |
| 87,547 | |
|
|
|
| |
Total assets | | $ | 1,313,093 | |
|
|
|
| | $ | 1,334,736 | |
|
|
|
| |
Liabilities and equity: | |
|
| |
|
|
|
| |
|
| |
|
|
|
| |
NOW accounts | | $ | 123,779 | | $ | 42 |
| 0.14 | % | $ | 144,128 | | $ | 49 |
| 0.14 | % |
Money market accounts | |
| 188,896 | |
| 1,259 |
| 2.68 | % |
| 281,198 | |
| 1,835 |
| 2.65 | % |
Savings accounts | |
| 147,116 | |
| 132 |
| 0.36 | % |
| 174,370 | |
| 157 |
| 0.37 | % |
Certificates of deposit | |
| 333,342 | |
| 3,681 |
| 4.44 | % |
| 243,675 | |
| 1,909 |
| 3.18 | % |
Total interest-bearing deposits | |
| 793,133 | |
| 5,114 |
| 2.59 | % |
| 843,371 | |
| 3,950 |
| 1.90 | % |
Escrow accounts | |
| 7,017 | |
| 20 |
| 1.15 | % |
| 7,761 | |
| 20 |
| 1.05 | % |
Federal Home Loan Bank advances | |
| 122,993 | |
| 1,507 |
| 4.93 | % |
| 60,007 | |
| 681 |
| 4.60 | % |
Subordinated debt | | | 5,155 | |
| 98 |
| 7.65 | % |
| 5,155 | |
| 87 |
| 6.84 | % |
Total other interest-bearing liabilities | |
| 135,165 | |
| 1,625 |
| 4.84 | % |
| 72,923 | |
| 788 |
| 4.38 | % |
Total interest-bearing liabilities | | | 928,298 | | | 6,739 |
| 2.92 | % | | 916,294 | | | 4,738 |
| 2.10 | % |
Non-interest-bearing deposits | |
| 243,017 | |
|
|
|
| |
| 283,887 | |
|
|
|
| |
Other non-interest-bearing liabilities | |
| 26,620 | |
|
|
|
| |
| 24,979 | |
|
|
|
| |
Total liabilities | | | 1,197,935 | |
|
|
|
| | | 1,225,160 | |
|
|
|
| |
Total stockholders’ equity | |
| 115,158 | |
|
|
|
| |
| 109,576 | |
|
|
|
| |
Total liabilities and stockholders’ equity | | $ | 1,313,093 | |
|
|
|
| | $ | 1,334,736 | |
|
|
|
| |
Net interest income | |
|
| | $ | 8,896 |
|
| |
|
| | $ | 9,864 |
|
| |
Interest rate spread | |
|
| |
|
|
| 2.22 | % |
|
| |
|
|
| 2.65 | % |
Net interest margin(2) | |
|
| |
|
|
| 2.92 | % |
|
| |
|
|
| 3.21 | % |
Average interest-earning assets to average interest-bearing liabilities | |
|
| |
|
|
| 131.88 | % |
|
| |
|
|
| 136.11 | % |
(1) | Non-accruing loans are included in the outstanding loan balance. Deferred loan fees included in interest income totaled $17,000 and $16,000 for the three months ended March 31, 2024 and 2023, respectively. |
(2) | Represents the difference between interest earned and interest paid, divided by average total interest earning assets. |
(3) | Annualized. |
43
Table of 27% for 2018 and 40% for the previous periods.Contents
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||||||
| Average | Interest and | Average | Interest and | |||||||||||||||||||||
| Balance | Dividends | Yield/Cost | Balance | Dividends | Yield/Cost | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||
| Cash and due from banks | $ | 1,353 | $ | 5 | 1.47 | % | $ | 8,252 | $ | 25 | 1.20 | % | ||||||||||||
| Loans | 640,534 | 8,570 | 5.31 | 546,554 | 6,477 | 4.70 | ||||||||||||||||||
| Marketable securities | 106,322 | 578 | 2.16 | 120,344 | 590 | 1.95 | ||||||||||||||||||
| Total interest-earning assets | 748,209 | 9,153 | 4.85 | 675,150 | 7,092 | 4.17 | ||||||||||||||||||
| Non-interest-earning assets | 53,819 | 55,755 | ||||||||||||||||||||||
| Total assets | $ | 802,028 | $ | 730,905 | ||||||||||||||||||||
| Interest-earning liabilities: | ||||||||||||||||||||||||
| NOW accounts | $ | 97,770 | $ | 63 | 0.26 | $ | 92,281 | $ | 41 | 0.18 | ||||||||||||||
| Money market accounts | 129,582 | 313 | 0.96 | 128,212 | 208 | 0.64 | ||||||||||||||||||
| Savings accounts | 127,398 | 82 | 0.26 | 128,855 | 60 | 0.18 | ||||||||||||||||||
| Certificates of deposit | 152,440 | 621 | 1.62 | 142,485 | 443 | 1.23 | ||||||||||||||||||
| Total interest-bearing deposits | 507,190 | 1,079 | 0.84 | 491,833 | 752 | 0.61 | ||||||||||||||||||
| Escrow accounts | 10,719 | 33 | 1.22 | 10,394 | 32 | 1.22 | ||||||||||||||||||
| Federal Home Loan Bank advances | 39,140 | 254 | 2.57 | 761 | 2 | 1.04 | ||||||||||||||||||
| Subordinated debt | 5,155 | 57 | 4.39 | 5,155 | 43 | 3.31 | ||||||||||||||||||
| Total interest-bearing liabilities | 562,204 | 1,423 | 1.00 | 508,143 | 829 | 0.65 | ||||||||||||||||||
| Non-interest-bearing deposits | 174,450 | 157,620 | ||||||||||||||||||||||
| Other non-interest-bearing liabilities | 8,906 | 9,080 | ||||||||||||||||||||||
| Total liabilities | 745,560 | 674,843 | ||||||||||||||||||||||
| Total stockholders’ equity | 56,468 | 56,062 | ||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 802,028 | $ | 730,905 | ||||||||||||||||||||
| Net interest income | $ | 7,730 | $ | 6,263 | ||||||||||||||||||||
| Net interest-earning assets | $ | 186,005 | $ | 167,007 | ||||||||||||||||||||
| Interest rate spread | 3.85 | % | 3.52 | % | ||||||||||||||||||||
| Net interest margin | 4.10 | % | 3.68 | % | ||||||||||||||||||||
| Average interest-earning assets to average interest-bearing liabilities | 133.08 | % | 132.87 | % | ||||||||||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||||||
| Average | Interest and | Average | Interest and | |||||||||||||||||||||
| Balance | Dividends | Yield/Cost | Balance | Dividends | Yield/Cost | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||
| Cash and due from banks | $ | 1,269 | $ | 14 | 1.48 | % | $ | 6,249 | $ | 48 | 1.03 | % | ||||||||||||
| Loans | 606,566 | 22,713 | 5.01 | 534,765 | 18,738 | 4.68 | ||||||||||||||||||
| Marketable securities | 109,827 | 1,762 | 2.14 | 123,976 | 1,859 | 2.00 | ||||||||||||||||||
| Total interest-earning assets | 717,662 | 24,489 | 4.56 | 664,990 | 20,645 | 4.15 | ||||||||||||||||||
| Non-interest-earning assets | 53,825 | 56,874 | ||||||||||||||||||||||
| Total assets | $ | 771,487 | $ | 721,864 | ||||||||||||||||||||
| Interest-earning liabilities: | ||||||||||||||||||||||||
| NOW accounts | $ | 100,643 | $ | 172 | 0.23 | $ | 89,923 | $ | 118 | 0.18 | ||||||||||||||
| Money market accounts | 127,385 | 763 | 0.80 | 128,373 | 620 | 0.65 | ||||||||||||||||||
| Savings accounts | 125,827 | 219 | 0.23 | 125,773 | 140 | 0.15 | ||||||||||||||||||
| Certificates of deposit | 148,482 | 1,696 | 1.53 | 146,059 | 1,335 | 1.22 | ||||||||||||||||||
| Total interest-bearing deposits | 502,337 | 2,850 | 0.76 | 490,128 | 2,213 | 0.60 | ||||||||||||||||||
| Escrow accounts | 8,312 | 77 | 1.24 | 8,011 | 74 | 1.24 | ||||||||||||||||||
| Federal Home Loan Bank advances | 29,853 | 516 | 2.31 | 4,750 | 31 | 0.87 | ||||||||||||||||||
| Subordinated debt | 5,155 | 157 | 4.07 | 5,155 | 122 | 3.16 | ||||||||||||||||||
| Total interest-bearing liabilities | 545,657 | 3,600 | 0.88 | 508,044 | 2,440 | 0.64 | ||||||||||||||||||
| Non-interest-bearing deposits | 161,142 | 150,410 | ||||||||||||||||||||||
| Other non-interest-bearing liabilities | 9,431 | 9,029 | ||||||||||||||||||||||
| Total liabilities | 716,230 | 667,483 | ||||||||||||||||||||||
| Total stockholders’ equity | 55,257 | 54,381 | ||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 771,487 | $ | 721,864 | ||||||||||||||||||||
| Net interest income | $ | 20,889 | $ | 18,205 | ||||||||||||||||||||
| Net interest-earning assets | $ | 172,005 | $ | 156,946 | ||||||||||||||||||||
| Interest rate spread | 3.68 | % | 3.51 | % | ||||||||||||||||||||
| Net interest margin | 3.89 | % | 3.66 | % | ||||||||||||||||||||
| Average interest-earning assets to average interest-bearing liabilities | 131.52 | % | 130.89 | % | ||||||||||||||||||||
Rate/Volume Analysis
The following table sets forthpresents the effects of changing rates and volumes on our net interest income.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 priorrate and volume columns. ChangesFor purposes of this table, changes attributable to changes in both rate and volume, thatwhich cannot be segregated, have been allocated proportionallyproportionately based on the changes due to rate and the changes due to volume.
| Three Months Ended September 30, 2018 Compared to Three Months Ended | Nine Months Ended September 30, 2018 Compared to Nine Months Ended | |||||||||||||||||||||||
| September 30, 3017 | September 30, 3017 | |||||||||||||||||||||||
| Increase (Decrease) Due to | Increase (Decrease) Due to | |||||||||||||||||||||||
| Volume | Rate | Net | Volume | Rate | Net | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Interest income: | ||||||||||||||||||||||||
| Cash and due from banks | $ | (25 | ) | $ | 5 | $ | (20 | ) | $ | (53 | ) | $ | 19 | $ | (34 | ) | ||||||||
| Loans | 1,184 | 909 | 2,093 | 2,601 | 1,374 | 3,975 | ||||||||||||||||||
| Marketable securities | (73 | ) | 61 | (12 | ) | (220 | ) | 123 | (97 | ) | ||||||||||||||
| Total interest-earning assets | 1,086 | 975 | 2,061 | 2,328 | 1,516 | 3,844 | ||||||||||||||||||
| Interest expense: | ||||||||||||||||||||||||
| Deposits | 41 | 286 | 327 | 36 | 601 | 637 | ||||||||||||||||||
| Escrow accounts | 1 | - | 1 | 3 | - | 3 | ||||||||||||||||||
| Federal Home Loan Bank advances | 105 | 147 | 252 | 245 | 240 | 485 | ||||||||||||||||||
| Subordinated debt | - | 14 | 14 | - | 35 | 35 | ||||||||||||||||||
| Total interest-bearing liabilities | 147 | 447 | 594 | 284 | 876 | 1,160 | ||||||||||||||||||
| Net increase (decrease) in net interest income | $ | 939 | $ | 528 | $ | 1,467 | $ | 2,044 | $ | 640 | $ | 2,684 | ||||||||||||
Comparison of Operating Results for the Three Months Ended September 30, 2018 and September 30, 2017
General. Net income decreased by $658,000, The Company does not have any excludable out-of-period items or 25.1%, to $2.0 million for the three months ended September 30, 2018 from $2.6 million for the three months ended September 30, 2017. The decrease was primarily due to a $1.9 million decrease in non-interest income, a $463,000 increase in non-interest expense, and a $300,000 increase in the provision for loan losses, offset by a $1.5 million increase in net interest income and a $488,000 decrease in income tax expense.adjustments.
| | | | | | | | | |
| | Three Months Ended March 31, 2024 | |||||||
| | Compared to Three Months Ended | |||||||
| | March 31, 2023 | |||||||
| | Increase (Decrease) | |||||||
| | Due to | |||||||
|
| Volume |
| Rate |
| Net | |||
| | (unaudited) | |||||||
Interest income: |
| |
|
| |
|
| |
|
Interest bearing depository accounts | | $ | (5) | | $ | 33 | | $ | 28 |
Loans receivable | |
| 90 | |
| 896 | |
| 986 |
Available for sale securities | |
| (142) | |
| 76 | |
| (66) |
Other interest-earning assets | |
| 75 | |
| 10 | |
| 85 |
Total interest-earning assets | |
| 18 | |
| 1,015 | |
| 1,033 |
Interest expense: | |
|
| |
|
| |
|
|
Deposits | |
| 193 | |
| 971 | |
| 1,164 |
Escrow accounts | |
| (2) | |
| 2 | |
| — |
Federal Home Loan Bank advances | |
| 768 | |
| 58 | |
| 826 |
Subordinated debt | |
| — | |
| 11 | |
| 11 |
Total interest-bearing liabilities | |
| 959 | |
| 1,042 | |
| 2,001 |
Net decrease in net interest income | | $ | (941) | | $ | (27) | | $ | (968) |
Net Interest Income. Net interest income increased $1.4 million, or 23.4%, to $7.7 million for the three months ended September 30, 2018 compared to $6.3 million for the three months ended September 30, 2017. The increase reflected a $19.0 million increase in the average balance of net interest-earning assets to $186.0 million for the three months ended September 30, 2018 from $167.0 million for the three months ended September 30, 2017, combined with a 33 basis point increase in the interest rate spread to 3.85% for the three months ended September 30, 2018 from 3.52% for the three months ended September 30, 2017. The net interest margin increased 42 basis points to 4.10% for the three months ended September 30, 2018 from 3.68% for the three months ended September 30, 2017.
Interest and Dividend Income. Interest and dividend income increased $2.1 million, or 29.1%, to $9.2 million for the three months ended September 30, 2018, from $7.1 million for the three months ended September 30, 2017. The increase primarily reflected a $73.0 million increase in the average balance of interest-earning assets and a 68 basis point increase in the average yield to 4.85% for the three months ended September 30, 2018 from 4.17% for the three months ended September 30, 2017. The increased yield reflected an increase in market interest rates.
Interest income on loans increased $2.1 million primarily due to a $93.9 million increase in the average balance of loans to $640.5 million for the three months ended September 30, 2018 from $546.6 million for the three months ended September 30, 2017, and a 61 basis point increase in the average yield to 5.31% for the three months ended September 30, 2018 from 4.70% for the three months ended September 30, 2017. Interest income on loans also increased due to the payoff in the third quarter of 2018 of three commercial loans totaling $2.2 million, which were on non-accrual status, resulting in recognized interest of $603,000.
Interest income on securities decreased $12,000, or 2.0%, to $578,000 primarily due to a $14.0 million decrease in the average balance of securities to $106.3 million for the three months ended September 30, 2018 from $120.3 million for the three months ended September 30, 2017, offset in part by a 21 basis point increase in the average yield to 2.16% for the three months ended September 30, 2018 from 1.95% for the three months ended September 30, 2017. The decrease in the average balance of securities reflects Rhinebeck Bank’s strategy to improve the overall yield on interest-earning assets by decreasing the level of its securities portfolio while simultaneously increasing its loans-to-assets ratio.
Interest Expense. Interest expense increased $594,000, or 71.7%, to $1.4 million for the three months ended September 30, 2018 from $829,000 for the three months ended September 30, 2017. The increase primarily reflects a $54.1 million increase in the average balance of interest-bearing liabilities and a 35 basis point increase in the average cost to 1.00% for the three months ended September 30, 2018 from 0.65% for the three months ended September 30, 2017. The increase in the cost of funds reflects an increase in market interest rates.
Interest expense on non-escrow interest-bearing deposits increased $328,000, or 41.8%, primarily due to a $15.4 million increase in the average balance of deposits to $507.2 million for the three months ended September 30, 2018 from $491.8 million for the three months ended September 30, 2017, combined with a 23 basis point increase in the average rate paid on interest-bearing deposits to 0.84% for the three months ended September 30, 2018 from 0.61% for the same period in the prior year.
Interest expense on Federal Home Loan Bank advances increased $251,000, primarily due to a $38.1 million increase in the average balance of Federal Home Loan Bank advances to $39.1 million for the three months ended September 30, 2018 from $1.0 million for the three months ended September 30, 2017, and a 101 basis point increase in the average cost of Federal Home Loan Bank advances to 2.57% for the three months ended September 30, 2018 from 1.56% for the three months ended September 30, 2017. Rhinebeck Bank added higher cost borrowings to fund loan growth that exceeded deposit growth.
Provision for Loan Losses. We recorded a provision for loan losses of $525,000 for the three months ended September 30, 2018 compared to $225,000 for the three months ended September 30, 2017. The increase in the provision reflected management’s assessment of the loss inherent in our loan portfolio due in part to the growth of the indirect automobile, commercial real estate and commercial business loan portfolios, offset by decreases in charge-offs and non-performing loans. Net charge-offs decreased $146,000 from $300,000 for the three months ended September 30, 2017 to $154,000 for the three months ended September 30, 2018.
Non-Interest Income. Non-interest income decreased $1.8 million, or 55.3%, to $1.5 million for the three months ended September 30, 2018 from $3.3 million for the three months ended September 30, 2017. The decrease was primarily due to the recognition of a $1.7 million net gain on the sale of our insurance subsidiary in August 2017 and a $283,000 decrease in insurance-related income resulting from the sale of the insurance subsidiary. These decreases were offset in part by a $171,000 increase in service charges on deposit accounts and a $43,000 increase in investment advisory income. The increase in service charges on deposit accounts reflected a new deposit fee structure that was implemented in May 2018. The increase in investment advisory income reflected more income from annuities and mutual funds.
Non-Interest Expense. Non-interest expense increased $463,000, or 7.7%, to $6.5 million for the three months ended September 30, 2018. The increase was due primarily to an increase of $314,000 in salaries and employee benefits, which reflected the increased number of employees necessary to support Rhinebeck Bank’s growth, a $47,000 increase in insurance mostly due to a higher FDIC assessment rate, a $30,000 increase in accounting and auditing services, a $25,000 increase in OREO expenses due to efforts to sell our properties, and a general increase in net expenses of $79,000 mainly due to growth-related IT and office supply increases. These expense increases were offset by a $90,000 reduction in consolidated expenses resulting from the sale of our insurance subsidiary in August 2017.
Income Tax Expense. Income tax expense decreased $488,000, or 64.7%, to $266,000 for the three months ended September 30, 2018 from $754,000 for the three months ended September 30, 2017. The decrease resulted primarily from lower pre-tax income combined with the lower effective federal corporate tax rate under the Tax Cuts and Jobs Act, which reduced the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. Additionally, the decrease in income tax expense for the three months ended September 30, 2018 reflected the benefit of tax planning implemented in 2018. Such strategies, which included additional pension payments made in 2018 and a repairs and maintenance study that allowed Rhinebeck Bancorp, MHC to take tax deductions at a 34% rate for 2017 compared to a 21% rate in 2018 and thereafter. The benefit of such strategies was reflected in the quarter.
Comparison of Operating Results for the Nine Months Ended September 30, 2018 and September 30, 2017
General. Net income decreased by $1.0 million, or 25.4%, to $3.2 million for the nine months ended September 30, 2018 from $4.2 million for the nine months ended September 30, 2017. The decrease was primarily due to a $3.4 million decrease in non-interest income, a $390,000 increase in non-interest expense and a $900,000 increase in the provision for loan losses, offset by a $2.7 million increase in net interest income and a $926,000 decrease in income tax expense.
Net Interest Income. Net interest income increased $2.7 million, or 14.7%, to $20.9 million for the nine months ended September 30, 2018 compared to $18.2 million for the nine months ended September 30, 2017. The increase reflected a $15.1 million increase in the average balance of net interest-earning assets to $172.0 million for the nine months ended September 30, 2018 from $156.9 million for the nine months ended September 30, 2017, and a 17 basis point increase in the interest rate spread to 3.68% for the nine months ended September 30, 2018 from 3.51% for the nine months ended September 30, 2017. The net interest margin increased 23 basis points to 3.89% for the nine months ended September 30, 2018 from 3.66% for the nine months ended September 30, 2017.
Interest and Dividend Income. Interest and dividend income increased $3.9 million, or 18.6%, to $24.5 million for the nine months ended September 30, 2018, from $20.6 million for the nine months ended September 30, 2017. The increase primarily reflected a $52.7 million increase in the average balance of interest-earning assets, and a 41 basis point increase in the average yield to 4.56% for the nine months ended September 30, 2018 from 4.15% for the nine months ended September 30, 2017. The increased yield reflected an increase in market interest rates.
Interest income on loans increased $4.0 million primarily due to a $71.8 million increase in the average balance of loans to $606.6 million for the nine months ended September 30, 2018 from $534.8 million for the nine months ended September 30, 2017 and a 33 basis point increase in the average yield to 5.01% for the nine months ended September 30, 2018 from 4.68% for the nine months ended September 30, 2017. Interest income on loans also increased due to the payoff in the third quarter of 2018 of three commercial loans totaling $2.2 million, which were on non-accrual status, resulting in recognized interest of $603,000.
Interest income on securities decreased $97,000 primarily due to a $14.2 million decrease in the average balance of securities to $109.8 million for the nine months ended September 30, 2018 from $124.0 million for the nine months ended September 30, 2017, offset in part by a 14 basis point increase in the average yield to 2.14% for the nine months ended September 30, 2018 from 2.00% for the nine months ended September 30, 2017. The decrease in the average balance of securities reflects Rhinebeck Bank’s strategy to improve the overall yield on interest-earning assets by decreasing the level of its securities portfolio while simultaneously increasing its loans-to-assets ratio.
Interest Expense. Interest expense increased $1.2 million, or 47.5%, to $3.6 million for the nine months ended September 30, 2018 from $2.4 million for the nine months ended September 30, 2017. The increase primarily reflected a $37.6 million increase in the average balance of interest-bearing liabilities and a 24 basis point increase in the average cost to 0.88% for the nine months ended September 30, 2018 from 0.64% for the nine months ended September 30, 2017. The increase in the cost of funds reflects an increase in market interest rates.
Interest expense on non-escrow interest-bearing deposits increased $637,000, or 28.8%, primarily due to a $12.2 million increase in the average balance of deposits to $502.3 million for the nine months ended September 30, 2018 from $490.1 million for the nine months ended September 30, 2017, and a 16 basis point increase in the average rate paid on interest-bearing deposits to 0.76% for the nine months ended September 30, 2018 from 0.60% for the same period in the prior year.
Interest expense on Federal Home Loan Bank advances increased $485,000, primarily due to a $25.1 million increase in the average balance of Federal Home Loan Bank advances to $29.9 million for the nine months ended September 30, 2018 from $4.8 million for the nine months ended September 30, 2017, and a 144 basis point increase in the average cost of Federal Home Loan Bank advances to 2.31% for the nine months ended September 30, 2018 from 0.87% for the nine months ended September 30, 2017. Rhinebeck Bank added higher cost borrowings to fund loan growth that exceeded deposit growth.
Provision for Loan Losses. We recorded a provision for loan losses of $1.6 million for the nine months ended September 30, 2018 compared to $675,000 for the nine months ended September 30, 2017. The increase in the provision reflected management’s assessment of the loss inherent in our loan portfolio combined with the growth of the indirect automobile, commercial real estate and commercial business loan portfolios, offset by decreases in charge-offs and non-performing assets. Net charge-offs decreased $427,000 to $722,000 for the nine months ended September 30, 2018 from $1.1 million for the nine months ended September 30, 2017.
Non-Interest Income. Non-interest income decreased $3.4 million, or 48.3%, to $3.6 million for the nine months ended September 30, 2018 from $7.0 million for the nine months ended September 30, 2017. The decrease was due primarily to the recognition of a $1.7 million gain on the sale of our insurance subsidiary in August 2017, a $1.4 million decrease in insurance-related income resulting from the sale of the insurance subsidiary, and to a $387,000 write down of a foreclosed residential real estate property. These decreases were offset in part by a $231,000 increase in service charges on deposit accounts. The increase in service charges on deposit accounts reflected a new deposit fee structure that was implemented in May 2018.
Non-Interest Expense. Non-interest expense increased $390,000, or 2.1%, to $19.2 million for the nine months ended September 30, 2018. The increase was due primarily to a $253,000 increase in salaries and employee benefits due to the increased number of employees necessary to support Rhinebeck Bank’s growth, a $95,000 impairment charge for goodwill related to the valuation of Rhinebeck Asset Management and a $72,000 increase in advertising expense associated with a greater focus on marketing. These increases were offset by the sale of our insurance subsidiary in August 2017, which resulted in no insurance sales commissions being paid during the nine months ended September 30, 2018 compared to $217,000 in sales commissions paid during the nine months ended September 30, 2017.
Income Tax Expense. Income tax expense decreased $926,000, or 63.0%, to $545,000 for the nine months ended September 30, 2018 from $1.5 million for the nine months ended September 30, 2017. The decrease resulted from lower pre-tax income combined with the lower effective federal corporate tax rate under the Tax Cuts and Jobs Act. Additionally, the decrease in income tax expense for the nine months ended September 30, 2018 reflected the benefit of tax planning strategies implemented in 2018 as previously described. The benefit of such strategies was reflected in the nine-month period.
Management of Market Risk
General.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.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 boardBoard of directors establishedDirectors maintains a management-level Asset/Liability Management Committee (the “ALCO”), which takes initialprimary 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 with the ALCO. This committeefrom 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 try to 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;rates or with shorter terms, promoting core deposit products;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.
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Net PortfolioEconomic Value Simulation.We analyze ourthe Bank’s sensitivity to changes in interest rates through a net portfolioeconomic value of equity (“NPV”EVE”) model. NPVEVE 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 NPVEVE ratio represents the dollar amount of our NPVEVE divided by the present value of our total assets for a given interest rate scenario. NPVEVE attempts to quantify our economic value using a discounted cash flow methodology while the NPVEVE ratio reflects that value as a form of capital ratio. We estimate what our NPVEVE would be at a specific date. We then calculateforecast what the NPV wouldEVE 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 NPVthe EVE under the assumptions thatscenarios where interest rates increase 100, 200, 300 and 400 basis points from current market rates and thatwhere interest rates decrease 100, 200, 300 and 400 basis points from current market rates.
The following table presents the estimated changes in our NPVthe Bank’s EVE that would result from changes in market interest rates at September 30, 2018. All estimated changes presentedMarch 31, 2024 (dollars in the table are within the policy limits approved by our board of directors.thousands).
| | | | | | | | | | | | | | |
| | | | | | | | | | | Net Economic Value as a | |||
| | Net Economic Value | | | Percentage of Assets | |||||||||
|
| Dollar |
| Dollar |
| Percent |
| | EVE |
| Percent |
| ||
Basis Point Change in Interest Rates | | Amount | | Change | | Change | | | Ratio | | Change |
| ||
| | (Dollars in thousands) | | | | | |
| ||||||
400 | | $ | 113,537 | | $ | (51,313) |
| (31.1) | % | | 9.67 | % | (25.0) | % |
300 | |
| 125,161 | |
| (39,689) |
| (24.1) | % | | 10.46 | % | (19.0) | % |
200 | |
| 138,208 | |
| (26,642) |
| (16.2) | % | | 11.30 | % | (12.4) | % |
100 | |
| 151,212 | |
| (13,638) |
| (8.3) | % | | 12.10 | % | (6.2) | % |
0 | |
| 164,850 | |
| — |
| — | % | | 12.90 | % | — | % |
(100) | | | 168,508 | | | 3,658 |
| 2.2 | % | | 12.91 | % | 0.0 | % |
(200) | | | 168,645 | | | 3,795 | | 2.3 | % | | 12.63 | % | (2.1) | % |
(300) | | | 162,663 | | | (2,187) | | (1.3) | % | | 11.92 | % | (7.6) | % |
(400) | | | 147,475 | | | (17,375) |
| (10.5) | % | | 10.57 | % | (18.1) | % |
| NPV | Net Portfolio Value As Percent of Portfolio Value of Assets | |||||||||||||||||||
| Basis Point (“bp”) Change in Interest Rates | Dollar Amount | Dollar Change | Percent Change | NPV Ratio | Change | |||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| 400 | $ | 88,071 | (15,721 | ) | -18 | % | 11.85 | % | -7 | % | ||||||||||
| 300 | 92,239 | (11,553 | ) | -13 | % | 12.15 | % | -5 | % | |||||||||||
| 200 | 96,311 | (7,481 | ) | -8 | % | 12.42 | % | -3 | % | |||||||||||
| 100 | 100,711 | (3,081 | ) | -3 | % | 12.69 | % | -1 | % | |||||||||||
| 0 | 103,792 | - | 0 | % | 12.79 | % | 0 | % | ||||||||||||
| -100 | 98,129 | (5,663 | ) | -6 | % | 11.84 | % | -7 | % | |||||||||||
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 particular 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 NPVEVE and will likely differ from actual results.
Liquidity Management
Liquidity and Capital Resources
Liquidity. Liquidity is the abilityWe maintain liquid assets at levels we consider adequate to meet currentboth our short-term and future financial obligations of a short-term nature. 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 funds consist of deposit inflows,liquidity are deposits, loan repaymentssales, amortization and sales and maturities of securities. While maturities and scheduled amortizationprepayment 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 sourcessource of funds, deposit flows and mortgageloan and security sales and prepayments and loan sales are greatly influenced by generalmarket 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.
We regularly reviewAs reported in the needConsolidated Statements of Cash Flows, our cash flows are classified for financial reporting purposes as operating, investing, or financing cash flows. Net cash used in operating activities was $3.5 million for the three months ended March 31, 2024 as compared to adjustnet cash provided by operating activities of $3.1 million for the three months ended March 31, 2023. These amounts differ from our investmentsnet income because of a variety of cash receipts and disbursements that did not affect net income for the respective periods. The cash outflow in liquidoperating activities was
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primarily due to an increase in other assets based uponof $5.5 million, which was mostly caused by $5.0 million U.S. Treasury bond that matured on March 31, 2024 and was awaiting settlement. Net cash provided by investing activities was $27.5 million for the three months ended March 31, 2024, while net cash used in investing activities was $9.6 million for the three months ended March 31, 2023, principally reflecting our assessment of: (1) expectedinvestment security and loan demand, (2) expected depositactivities in the respective periods. A cash inflow of $15.4 million for a decrease in loans was the primary contributor to the cash used in investing activities for the three months ended March 31, 2024 as opposed to a cash outlay of $11.6 million for an increase in loans for the three months ended March 31, 2023. Proceeds from the maturities of securities was also a main contributor to the cash provided by investing activities. Deposit and borrowing cash flows (3) yields available on interest-earning deposits and securities, and (4) the objectiveshave traditionally comprised most of our asset/liability management program. Excess liquid assets are invested generallyfinancing activities, which resulted in interest-earning deposits and short- and intermediate-term securities.
Our most liquid assets area net cash andoutflow of $15.5 million in the three months ended March 31, 2024, as opposed to a net cash equivalents. The levelsinflow of these assets are dependent on our operating, financing, lending and investing activities during any given$11.3 million in the comparable 2023 period. At September 30, 2018, cash and cash equivalents totaled $12.6 million. Securities classified as available-for-sale, which provide an additional source of liquidity, totaled $102.4 million at September 30, 2018.
At September 30, 2018,March 31, 2024, we had the abilityfollowing main sources of availability of liquid funds and borrowings:
| | | |
(In thousands) |
| Total | |
Available liquid funds: | | |
|
Cash and cash equivalents | | $ | 30,672 |
Unencumbered securities | | | 115,747 |
Availability of borrowings: | | | |
Zions Bank line of credit | | | 10,000 |
Pacific Coast Bankers Bank line of credit | | | 50,000 |
FHLB secured line of credit | | | 119,834 |
FRB secured line of credit | | | 353,081 |
Total available sources of funds | | $ | 679,334 |
The Bank has access to borrow up to $146,006 from the Federal Home Loan Bank of New York, $53.6 million of which was outstanding. At September 30, 2018, we also had an availablea preapproved secured line of credit with the Federal Reserve Bank of New York’s discount window program of $1 million, none ofFHLB which was outstandingtotaled $649,283 at that date. Rhinebeck Bank, MHC has a $10 millionMarch 31, 2024. Additional funds available under this line of credit with an unaffiliated bank, none of which was outstanding at September 30, 2018.
are not included in the table above as we do not consider it to be as readily accessible as the funds above.
We also have no material commitments or demands that are likelyand obligations under our off-balance sheet financial instruments, post-retirement plan and other benefit plans as described in Note 7 and Note 9 to affect our liquidity other than as set forth below. If loan demand increases faster than expected, or any unforeseen demand or commitment occurs, we could access borrowings from the Federal Home Loan Bankconsolidated financial statements.
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Impact of Inflation and Changing Prices
The financial statements and related notes of the Federal Reserve BankCompany have been prepared in accordance with GAAP. GAAP generally requires the measurement of New York.
At September 30, 2018, we had $5 millionfinancial condition and operating results in terms of loan commitments outstanding and $83.4 millionhistorical dollars without consideration for changes in the relative purchasing power of approved, but un-advanced, fundsmoney over time due to borrowers. We also had $2.3 millioninflation. The impact of inflation is reflected in outstanding letters of credit at September 30, 2018.
Certificates of deposit due within one year of September 30, 2018 totaled $107.6 million. If these deposits do not remain with us, we will be required to access other sources of funds, including other certificates of deposit and Federal Home Loan Bank of New York advances. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit. We believe, however, based on past experience that a significant portionincreased cost of our certificates of deposit will remain with us. We have the ability to attractoperations. Unlike industrial companies, our assets and retain deposits by adjusting theliabilities are primarily monetary in nature. As a result, changes in market interest rates offered.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.”
Not applicable.
| 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 September 30, 2018.March 31, 2024. 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.
During the quarter ended September 30, 2018, there have beenThere were no changes in the Company’s internal controls over financial reporting during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II –— OTHER INFORMATION
| Item 1. Legal Proceedings |
We are notperiodically 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 asthat we believe would have a plaintiff or defendant other than routine legal proceedings occurring in the ordinary course of business, and at September 30, 2018, we were not involved in any legal proceedings the outcome of which would be material toeffect on our financial condition, or results of operations.operations or cash flows.
In additionThere have been no material changes to the other information set forth in this report, you should carefully consider the factors discussed under the heading “Risk Factors” contained in the Prospectus. The Company’s evaluation of the risk factors applicable to it has not changed materiallythe Company from those disclosed in our Annual Report on Form 10-K for the Prospectus.fiscal year ended December 31, 2023.
None.
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, 2024, 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.
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Item 6. Exhibits
None.
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3.1 | |||
| Articles of Incorporation of Rhinebeck Bancorp, Inc. | |||
| | ||
3.2 | |||
| | ||
4.0 | |||
| | ||
31.1 | |||
| | ||
31.2 | |||
| | ||
32.1 | |||
| | ||
101.0 | The following materials for the | ||
| | ||
104.0 | The cover page from Rhinebeck Bancorp’s Form 10-Q for the quarterly period ended March 31, 2024, formatted in inline XBRL (contained in Exhibit 101.0) | ||
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SIGNATURES
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.
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