POUGHKEEPSIE, NY / ACCESSWIRE / July 25, 2024 / Rhinebeck Bancorp, Inc. (the "Company") (NASDAQ:RBKB), the holding company of Rhinebeck Bank (the "Bank"), reported net income for the three months ended June 30, 2024 of $975,000 ($0.09 per basic and diluted share), which was $456,000, or 31.9% less than the comparable prior year period of $1.4 million ($0.13 per basic and diluted share). Net income for the six months ended June 30, 2024 of $2.1 million ($0.19 per basic and diluted share) was $133,000, or 6.0%, less than the same period last year.

The decrease in net income for the quarter ended June 30, 2024 was primarily due to an increase in the provision for credit losses and a decrease in net interest income, partially offset by an increase in non-interest income and a decrease in non-interest expense, when compared to the quarter ended June 30, 2023. The Company's return on average assets and return on average equity were 0.31% and 3.43% for the second quarter of 2024, respectively, as compared to 0.43% and 5.17% for the second quarter of 2023, respectively. The decrease in net income for the six months ended June 30, 2024 was primarily due to a decrease in net interest income, partially offset by an increase in non-interest income, and a decrease in non-interest expense, when compared to the six months ended June 30, 2023. The Company's return on average assets and return on average equity were 0.32% and 3.67% for the first six months of 2024, respectively, as compared to 0.34% and 4.08% for the first six months of 2023, respectively.

President and Chief Executive Officer Michael J. Quinn said, "While second quarter net income decreased to $1.0 million from $1.1 million in the first quarter, we are pleased that our efforts to focus on pricing and sources of revenue and to prudently manage expenses have resulted in improvements to net interest margin, non-interest income and the efficiency ratio quarter over quarter. Tangible book value per share increased to $10.27, an increase of 8.5% from June 30, 2023. We continue to focus on improving results through the beneficial pricing of assets and liabilities, as well as focusing on expense management." (Tangible book value per share is a non-GAAP financial measure; see page 10 for a reconciliation to GAAP measures.)

Income Statement Analysis

Net interest income decreased $163,000, or 1.8%, to $9.1 million for the three months ended June 30, 2024, from $9.3 million for the three months ended June 30, 2023. Year-to-date net interest income decreased $1.1 million, or 5.9%, to $18.0 million compared to $19.2 million for the prior year six-month period. The decreases on both a quarterly and year-to-date basis were primarily due to higher costs for deposits and borrowings, partially offset by higher yields on interest earning assets.

For the three months ended June 30, 2024, the average balance of interest-earning assets decreased by $61.4 million, or 4.9%, to $1.20 billion and the average yields improved by 54 basis points to 5.31%, when compared to the three months ended June 30, 2023. The average balance of interest-bearing liabilities decreased by $37.3 million, or 4.0%, and the cost of interest-bearing liabilities increased by 55 basis points to 2.95%, reflecting the higher interest rate environment and a greater proportion of deposits in higher yielding certificates of deposit. The net interest margin increased by 11 basis points to 3.08% while the interest rate spread decreased by one basis point to 2.36% for the three months ended June 30, 2024.

For the six months ended June 30, 2024, the average balance of interest-earning assets decreased by $42.2 million, or 3.4%, to $1.21 billion while the average yield improved by 46 basis points to 5.22%, when compared to the six months ended June 30, 2023. The average balance of interest-bearing liabilities decreased by $12.7 million, or 1.4%, primarily due to a decrease in deposits, partially offset by the increase in the average balance of FHLB advances, while the cost of interest-bearing liabilities increased by 68 basis points to 2.93%. The net interest margin decreased by 9 basis points to 3.00% and the interest rate spread decreased by 22 basis points to 2.29% for the six months ended June 30, 2024.

The provision for credit losses on loans increased by $899,000, or 198.9%, from a credit of $452,000 for the quarter ended June 30, 2023 to an expense of $447,000 for the quarter ended June 30, 2024. The credit to the provision for the three months ended June 30, 2023 was primarily attributable to a decrease in loan balances, primarily indirect automobile loans, and a $710,000 charge-off on a leveraged loan, which reduced the credit that would have been taken.

Net charge-offs increased $211,000 from $622,000 for the second quarter of 2023 to $833,000 for the second quarter of 2024. The increase was primarily due to increased net charge-offs in indirect automobile loans of $465,000 and a $275,000 charge-off on a commercial real estate property. Net charge-offs increased $48,000, or 4.6% to $1.1 million for the first six months of 2024. The percentage of overdue account balances to total loans decreased to 1.58% as of June 30, 2024, from 1.90% as of December 31, 2023, while non-performing assets decreased $29,000, or 0.7%, to $4.2 million at June 30, 2024.

Non-interest income totaled $1.5 million for the three months ended June 30, 2024, an increase of $156,000, or 11.5%, from the comparable period in 2023, due primarily to an increase of $144,000, or 61.5%, in investment advisory income resulting from the improved market and economic conditions, an increase of $24,000 in the cash surrender value of life insurance and an increase of $18,000 in service charges on deposit accounts, partially offset by decreases in the gain on sales of loans of $17,000 and a $19,000 gain on disposal of premises and equipment in 2023.

Non-interest income totaled $3.0 million for the six months ended June 30, 2024, an increase of $286,000, or 10.5%, from the comparable period in 2023, due primarily to an increase of $216,000, or 39.8%, in investment advisory income resulting from the improved market and economic conditions, an increase of $48,000 in the cash surrender value of life insurance, an increase of $53,000 in service charges on deposit accounts, and an increase in the gain on sales of loans of $19,000, partially offset by a decrease of $54,000 on the disposal of premises and equipment.

Non-interest expense totaled $8.9 million for the second quarter of 2024, a decrease of $342,000, or 3.7%, over the comparable period in 2023. The decrease was primarily due to a $158,000, or 25.6%, decrease in professional fees as consulting fees on our indirect business were higher in 2023. FDIC deposit insurance and other insurance decreased $93,000, or 26.3%, primarily due a decreased assessment rate while salaries and occupancy expenses decreased $40,000 and $25,000, respectively, due to a reduction in force in our indirect lending business and a branch closure in the first quarter of 2024. Marketing expense and other non-interest expense decreased $28,000 and $12,000, respectively, while data processing fees increased $15,000 during the second quarter of 2024 as compared to 2023.

Non-interest expense totaled $17.8 million for the first six months of 2024, a decrease of $668,000, or 3.6%, over the comparable period in 2023. The decrease was primarily due to a $288,000, or 2.8%, decrease in salaries and benefits due to a Company-wide reduction in force of approximately 5% in the first quarter of 2023 and a further reduction in force in the first quarter of 2024 with the Company's strategic decision to reduce its indirect automobile business. FDIC deposit insurance and other insurance decreased $122,000, or 19.2%, primarily due a decreased assessment rate while professional fees decreased $110,000, or 11.2%. Occupancy expense decreased $51,000, or 2.4%, due to a branch closure in the first quarter of 2024 and other non-interest expense decreased $120,000, or 3.7%, primarily due to decreased retail banking expenses.

Balance Sheet Analysis

Total assets decreased $37.2 million, or 2.8%, to $1.28 billion at June 30, 2024 from $1.31 billion at December 31, 2023. Loans receivable decreased $26.5 million to $982.4 million, as compared to December 31, 2023, primarily due to a decrease in indirect automobile loans of $50.7 million, or 12.9%, reflecting a strategic decision to decrease that loan portfolio as a percentage of the balance sheet. At June 30, 2024, indirect automobile loans was 26.9% of assets, compared to 30.0% at December 31, 2023. Partially offsetting the decrease in automobile loans were increases in commercial real estate loans of $19.5 million, or 4.6%, residential real estate loans of $5.3 million, or 6.9%, and commercial and industrial loans of $1.8 million, or 2.0%, as production increased on these lines of business. Available for sale securities decreased $17.7 million, or 9.2%, primarily due to paydowns, calls and maturities of $18.0 million, partially offset by a decrease in unrealized loss on available for sale securities of $299,000, net of taxes. Cash and cash equivalents increased $12.3 million, or 55.6%, primarily due to an increase in deposits held at the Federal Reserve Bank of New York with proceeds from maturing loans and securities. Property and equipment decreased $3.2 million, or 18.3%, as the Beacon branch office was closed and the property sold during the first quarter of 2024 for $2.9 million and Federal Home Loan Bank stock decreased $2.1 million as borrowings decreased.

Past due loans decreased $3.6 million, or 18.8%, between December 31, 2023 and June 30, 2024, finishing at $15.6 million, or 1.58%, of total loans, down from $19.2 million, or 1.90%, of total loans at year-end 2023. The allowance for credit losses was 0.77% of total loans and 181.33% of non-performing loans at June 30, 2024 as compared to 0.81% of total loans and 194.31% of non-performing loans at December 31, 2023. Non-performing assets totaled $4.2 million, a decrease of $29,000, and included no other real estate owned at June 30, 2024. At December 31, 2023, non-performing assets totaled $4.2 million and included $25,000 in other real estate owned.

Total liabilities decreased $39.7 million, or 3.3%, to $1.16 billion at June 30, 2024 from $1.20 billion at December 31, 2023 due to a decrease in borrowings partially offset by increases in mortgagors' escrow accounts and accrued expenses and other liabilities. Advances from the Federal Home Loan Bank decreased $48.3 million, or 37.7%. Deposits increased $1.4 million, or 0.1%. Interest bearing deposits increased $10.5 million, or 1.3%, reflecting a shift in deposits from transaction accounts to higher-yielding time deposits and money market accounts as customers sought increasing yields on their deposits while non-interest bearing deposits decreased $9.0 million, or 3.6%, due to increased competition for deposits. At June 30, 2024, uninsured deposits were approximately 27% of the Bank's total deposits.

Stockholders' equity increased $2.5 million, or 2.2%, to $116.2 million at June 30, 2024. The increase was primarily due to net income of $2.1 million and a $326,000 decrease in accumulated other comprehensive loss primarily reflecting valuation changes in our available-for-sale securities portfolio due to current financial market conditions. The Company's ratio of average equity to average assets was 8.84% for the six months ended June 30, 2024 and 8.19% for the year ended December 31, 2023.

About Rhinebeck Bancorp

Rhinebeck Bancorp, Inc. is a Maryland corporation organized as the mid-tier holding company of Rhinebeck Bank and is the majority-owned subsidiary of Rhinebeck Bancorp, MHC. The Bank is a New York chartered stock savings bank, which provides a full range of banking and financial services to consumer and commercial customers through its thirteen branches and two representative offices located in Dutchess, Ulster, Orange, and Albany counties in New York State. Financial services including comprehensive brokerage, investment advisory services, financial product sales and employee benefits are offered through Rhinebeck Asset Management, a division of the Bank.

Forward Looking Statements

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

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

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