United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2024

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File No. 001-38779

Rhinebeck Bancorp, Inc.

(Exact name of registrant as specified in its charter)


Maryland		83-2117268
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

2 Jefferson Plaza, Poughkeepsie, New York		12601
(Address of Principal Executive Offices)		(Zip Code)

(845) 454-8555

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	RBKB	The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

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 ☒

As of May 1, 2024, there were 11,072,607 shares of the Registrant’s common stock, par value $0.01 per share, outstanding.

Table of Contents

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	1

	Consolidated Statements of Financial Condition at March 31, 2024 and December 31, 2023	1

	Consolidated Statements of Income for the Three Months Ended March 31, 2024 and 2023	2

	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2024 and 2023	3

	Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023	4

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023	5

	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47

Item 4.	Controls and Procedures	47

PART II. OTHER INFORMATION		48

Item 1.	Legal Proceedings	48

Item 1A.	Risk Factors	48

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	48

Item 3.	Defaults Upon Senior Securities	48

Item 4.	Mine Safety Disclosures	48

Item 5.	Other Information	48

Item 6.	Exhibits	49

	SIGNATURES	50

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1.

Rhinebeck Bancorp, Inc. and Subsidiary

Consolidated Statements of Financial Condition (Unaudited)

(In thousands, except share and per share data)


	March 31,		December 31,
	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 consolidated financial statements

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Rhinebeck Bancorp, Inc. and Subsidiary

Consolidated Statements of Income (Unaudited)

(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

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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

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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

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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

See accompanying notes to consolidated financial statements

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Rhinebeck Bancorp, 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”), a stock holding company, and its wholly-owned subsidiary, Rhinebeck Bank (the “Bank”), a New York chartered stock savings bank. The primary purpose of the Company is to act as a holding company for the Bank. The Bank provides a full range of banking and financial services to consumer and commercial customers through its thirteen branches and two representative offices located in Dutchess, Ulster, Orange, and Albany counties. Financial services, including investment advisory and financial product sales, are offered through a division of the Bank doing business as Rhinebeck Asset Management.

The unaudited consolidated financial statements reflect all adjustments, which in the opinion of management are necessary for a fair presentation of the results of the interim periods and are of a normal and recurring nature. Operating results for the three months ended March 31, 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”).

For more information regarding the Company’s significant accounting policies, see the Notes to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K. As of March 31, 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 credit losses (“ACL”), the evaluation of goodwill for impairment and the valuation of deferred tax assets.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications

Certain amounts in the prior year consolidated financial statements may be reclassified as required to conform to the current year’s presentation. These reclassifications have no effect on our previously reported net income or shareholders’ equity.

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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

In October 2023, the FASB issued ASU 2023-06, which amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification. In annual periods, this requires disclosure of an entity’s accounting policy related to the entity’s presentation of cash flows associated with derivative instruments and the related gains and losses in the statement of cash flows. This also requires disclosure of the methods used in the diluted earnings-per-share computation for each dilutive security and clarifies that certain disclosures should be made during interim periods. The effective dates of ASU 2023-06 will be the date on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company is evaluating the impact of this ASU but does not expect it to have a material impact on the Company’s consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable 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 amount of other segment items and a description of its 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 ASU 2023-09 require greater disaggregation of income tax disclosures related to the income tax rate reconciliation and income taxes paid. The ASU indicates that all entities will apply its guidance prospectively with an option for retroactive application to each period in the financial statements. The guidance will be effective for fiscal years beginning after December 15, 2024, and for interim periods for fiscal years beginning after December 15, 2025, with an allowance for early adoption. The Company is evaluating the impact of this ASU but does not expect it to have a material impact on the Company’s consolidated financial statements.

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 is taking advantage of the benefits of the extended transition periods allowed under the Jumpstart Our Business Startups Act.

Accordingly, the Company’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 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.

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Rhinebeck Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except share and per share data)

2. Investment Securities

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


	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 tables present the fair value and unrealized losses of the Company’s available for sale securities with gross unrealized losses aggregated by the length of time the individual securities have been in a continuous unrealized loss position:


	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)

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Rhinebeck Bancorp, Inc. and Subsidiary

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 March 31, 2024, the Company had 231 individual available-for-sale securities in an unrealized loss position with unrealized losses totaling $33,744 with an aggregate depreciation of 15.61% from the Company’s amortized cost.

The Company evaluates securities in an unrealized loss position for impairment related to credit losses on at least a quarterly basis. Securities in unrealized loss positions are first assessed as to whether we intend to sell, or if it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If one of the criteria is met, the security’s amortized cost basis is written down to fair value through current earnings. For securities that do not meet these criteria, the Company evaluates whether the decline in fair value resulted from credit losses or other factors. If this assessment indicates that a credit loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis. Unrealized losses on asset backed securities, state and municipal securities, and corporate bonds have not been recognized into income because the issuers are of high credit quality, we do not intend to sell and it is likely that we will not be required to sell the securities prior to their anticipated recovery. The decline in fair value is largely due to changes in interest rates and other market conditions. The issuers continue to make timely principal and interest payments on the securities. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes. No allowance for credit losses for available-for-sale securities was recorded as of March 31, 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 this time we do not foresee any set of circumstances in which the government would not fund its commitments on these investments.

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Rhinebeck Bancorp, Inc. and 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 March 31, 2024 and December 31, 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:


	March 31, 2024				December 31, 2023
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity:
Within 1 year	$	11,442	$	11,285	$	15,449	$	15,170
After 1 but within 5 years		31,839		29,553		32,860		30,569
After 5 but within 10 years		19,400		17,017		19,400		16,968
After 10 years		—		—		—		—
Total Maturities		62,681		57,855		67,709		62,707
Mortgage-backed securities		152,958		124,134		156,523		128,580
Other		750		656		763		698
Total	$	216,389	$	182,645	$	224,995	$	191,985

At March 31, 2024 and December 31, 2023, available for sale securities with a carrying value of $12,634 and $13,130, respectively, were pledged to secure Federal Home Loan Bank of New York (“FHLB”) borrowings. In addition, at March 31, 2024 and 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 (“FRB”), respectively.

During the three months ended March 31, 2024, there were no sales of available for sale securities and no realized gains or losses.

The Company elected not to measure an allowance for credit losses for accrued interest receivable, because a timely write-off policy exists. A security is placed on non-accrual status at the time any principal or interest payments become more than 90 days delinquent or if full collection of interest or principal becomes uncertain. Accrued interest for a security placed on non-accrual is reversed against interest income. There were no securities on non-accrual status and therefore there was no accrued interest related to securities reversed against interest income for the periods ended March 31, 2024 and December 31, 2023. Total accrued interest receivable on available for sale securities totaled $578 and $602 at March 31, 2024 and December 31, 2023, respectively, and was reported in accrued interest receivable on the consolidated statements of financial condition.

Table of Contents

Rhinebeck Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except share and per share data)

3. Loans and Allowance for Credit Losses

A summary of the Company’s loan portfolio is as follows:


	March 31,		December 31,
	2024		2023
Commercial real estate loans:
Construction	$	20,438	$	20,208
Non-residential		329,241		324,493
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		367,011		394,245
Home equity		11,494		11,990
Other consumer		7,641		8,095
Total gross loans		993,843		1,008,593
Dealer reserves		7,476		8,382
Allowance for credit losses		(7,973)		(8,124)
Total net loans	$	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 March 31, 2024 and December 31, 2023, the unpaid principal balances of loans held for sale included in the residential real estate category above were $893 and $908, respectively.

The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans:


	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	$	20,438	$	—	$	—	$	—	$	20,438	$	—
Non-residential		324,593		2,035		—		2,613		329,241		2,613
Multifamily		87,881		—		—		—		87,881		—
Residential real estate		76,577		1,039		1,154		76		78,846		1,143
Commercial and industrial		90,658		318		128		187		91,291		187
Consumer:
Indirect automobile		356,740		8,265		1,570		436		367,011		476
Home equity		11,295		14		46		139		11,494		139
Other consumer		7,366		233		40		2		7,641		2
Total	$	975,548	$	11,904	$	2,938	$	3,453	$	993,843	$	4,560

Table of Contents

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 table 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

Table of Contents

Rhinebeck Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, 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 totaled $4,033 and $4,014, at March 31, 2024 and December 31, 2023, respectively, and was reported in accrued interest receivable on the consolidated statements of financial condition.

The Company has transferred a portion of its originated commercial real estate loans to participating lenders. The amounts transferred have been accounted for as sales and are therefore not included in the Company’s accompanying statements of financial condition. The Company and participating lenders share ratably in any gains or losses that may result from a loan’s performance under its contractual terms. The Company continues to service the loans on behalf of the participating lenders and, as such, collects cash payments from the borrowers, remits payments to participating lenders and disburses required escrow funds to relevant parties. At March 31, 2024 and December 31, 2023, the Company was servicing loans for 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 process totaled $99 and $152 at March 31, 2024 and December 31, 2023, respectively, and are all individually analyzed for credit loss.

The Company services certain loans that it has sold to third parties. The aggregate balances of loans serviced for others were $279,235 and $282,269 as of March 31, 2024 and December 31, 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 and the Company. The Company has never repurchased any loans or incurred any losses under these recourse provisions.

The balances of capitalized servicing rights, included in other assets at March 31, 2024 and December 31, 2023 were $1,880 and $1,977, respectively. Fair value exceeds carrying value, and thus, no impairment charges related to servicing rights were recognized during the three-month period ended March 31, 2024 or the year ended December 31, 2023.

Table of Contents

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 March 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 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

Table of Contents

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 table summarizes the provision for credit losses for the 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

In the normal course of business, the Company grants loans to officers, directors and other related parties. Balances and activity of such loans during the periods presented were not material.

Table of Contents

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 accordance with regulatory retail credit guidance. Management uses the results of these reviews as part of its annual review process. In addition, management utilizes delinquency reports, the watch list and other loan reports to monitor credit quality of other loan segments.

Credit Quality Indicators. The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on all loans at origination and is updated on a quarterly basis for loans risk rated Watch, Special Mention, Substandard, or Doubtful.

The Company uses the following definitions for risk ratings:

Watch – Loans classified as watch exhibit weaknesses that require more than usual monitoring. Issues may include deteriorating financial condition, payments made after due date but within 30 days, adverse industry conditions or management problems.

Special Mention – Loans classified as special mention exhibit signs of further deterioration but still generally make payments within 30 days. This is a transitional rating and loans should typically not be rated Special Mention for more than 12 months.

Substandard – Loans classified as substandard possess weaknesses that jeopardize the ultimate collection of the principal and interest outstanding. These loans exhibit continued financial losses, ongoing delinquency, overall poor financial condition, and/or insufficient collateral. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as non-performing have all the weaknesses of substandard loans, and have deteriorated to the level that there is a high probability of substantial loss.

Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered Pass rated loans.

Table of Contents

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

Table of Contents

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

Table of Contents

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 the customer list and core deposit intangibles are as follows:


	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

Core deposit intangibles represent the estimated fair value of acquired customer deposit relationships on the date of acquisition and are amortized over their estimated useful lives. Purchased customer accounts primarily consist of records and files that contain information about investment holdings. The values assigned to customer lists and core deposit intangibles are based upon the application of the income approach. The intangibles are expected to have useful lives of approximately 13 years. The Company recognized $21 and $24 of amortization expense related to its intangible assets for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, the future amortization expense for amortizable intangible assets for the years ended December 31, was as follows:


2024	$	58
2025		60
2026		29
2027		21
2028		16
Thereafter		41
Total	$	225

Table of Contents

Rhinebeck Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except share and per share data)

5. Deposits

Deposits balances are summarized as follows:


	March 31,		December 31,
	2024		2023
Non-interest bearing demand deposits	$	236,957	$	249,793
Interest bearing accounts:
NOW⁽¹⁾		126,058		125,628
Savings		144,932		146,172
Money market		196,107		190,864
Time certificates of deposit		332,970		318,046
Total interest bearing accounts		800,067		780,710
Total deposits	$	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 March 31, 2024 and December 31, 2023 were reciprocal deposits totaling $27,580 and $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 $100,385 and $100,063 as of March 31, 2024 and December 31, 2023, respectively.

Contractual maturities of time certificates of deposit at March 31, 2024 are summarized below:


	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

Table of Contents

Rhinebeck 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 Bank is a member of the FHLB. At March 31, 2024 and December 31, 2023, the Bank had access to a preapproved secured line of credit with the FHLB of $649,283 and $656,516, respectively. Borrowings under this line require collateralization through the pledge of specific loans and securities. At March 31, 2024 and December 31, 2023, the Bank had pledged assets of $227,899 and $228,172, respectively. The Company had no outstanding overnight line of credit balances with the FHLB at either March 31, 2024 or December 31, 2023. These borrowings would mature the following business day.

The outstanding principal amounts and the related terms and rates at March 31, 2024 were as follows:


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

The Bank is required to maintain an investment in FHLB capital stock, as collateral, in an amount equal to a certain percentage of its outstanding debt. FHLB stock is considered restricted stock and is carried at cost. The Bank evaluates FHLB stock for impairment based on the ultimate recovery ability of the cost. No impairment was recognized at either March 31, 2024 or December 31, 2023.

Subordinated Debt

In addition to the Bank, the Company has one other wholly-owned subsidiary, RSB Capital Trust I (the “Trust”). In 2005, the Trust issued $5,000 of pooled trust preferred securities in a private placement and issued 155 shares of common stock at $1 par value per share, to the Company. The Trust, which has no independent assets or operations, was formed in 2005 for the sole purpose of issuing trust preferred securities and investing the proceeds thereof in an equivalent amount of junior subordinated debentures. The proceeds from the issuance of the trust preferred securities were down-streamed to the Bank and are currently considered Tier 1 capital for purposes of determining the Bank’s capital ratios. The duration of the Trust is 30 years.

The subordinated debt securities of $5,155 are unsecured obligations of the Company and are subordinate and junior in right of payment to all present and future senior indebtedness of the Company. The Company has entered into a guarantee, which together with its obligations under the subordinated debt securities and the declaration of trust governing the Trust, including its obligations to pay costs, expenses, debts and liabilities, provides a full and unconditional guarantee of amounts on the capital securities. The subordinated debentures, which bear interest at the three month term Secured Overnight Financing Rate (“SOFR”) plus 2% and a relative spread adjustment of

Table of Contents

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 March 31, 2024 and December 31, 2023, respectively. The subordinated debentures mature on May 23, 2035.

Other Borrowings

The Bank has an unsecured, uncommitted $10,000 line of credit with Zions Bank. There were no advances outstanding under this line of credit at either March 31, 2024 or December 31, 2023.

The Bank also has an unsecured, uncommitted $50,000 line of credit with Pacific Coast Bankers Bank. There were no advances outstanding under this line of credit at either March 31, 2024 or December 31, 2023.

7. Employee Benefits

Pension Plan

The Bank maintains a noncontributory defined benefit pension plan covering substantially all of its employees 21 years of age or older who had completed at least one year of service as of June 30, 2012, the effective date on which the Board of Directors of the Bank voted to freeze the defined benefit plan.

The following table sets forth the plan’s funded status and amounts recognized in the Company’s consolidated statements of financial condition:


	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

The net periodic pension cost and amounts recognized in other expense are as follows:


	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

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 eight diversified investment funds.

As of March 31, 2024, the investment funds included six equity funds and two fixed income bond funds, each with its own investment objectives, investment strategies and risks, as detailed in the Company’s investment policy statement. The Company determines the appropriate strategic asset allocation versus plan liabilities, as governed by the investment policy statement.

Table of Contents

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:


	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.

For a detailed disclosure on the Bank’s pension and employee benefits plans, please refer to Note 9 of the Company’s Consolidated Financial Statements for the year ended December 31, 2023 included in the Annual Report on Form 10-K.

Defined Contribution Plan

The Bank sponsors a 401(k) defined contribution plan. Participants are permitted, in accordance with the provisions of Section 401(k) of the Internal Revenue Code, to contribute up to 25% of their earnings (as defined) into the plan with the Bank matching up to 6%, subject to Internal Revenue Service limitations. The Bank’s contributions charged to operations amounted to $269 and $286 for the three months ended March 31, 2024 and 2023, respectively.

Table of Contents

Rhinebeck Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except share and per share data)

Deferred Compensation Arrangements

Directors’ Plan, (formerly the “Trustees Plan”)

The Bank’s Deferred Compensation Plan for Fees of Directors, as amended and restated effective January 1, 2005 (the “Directors’ Plan”), covers directors who elect to defer receipt of all or a portion of their fees until separation from service. Upon resignation, retirement, or death, the participant’s total deferred compensation, including earnings thereon, will be paid out. At March 31, 2024 and December 31, 2023, total amounts due to participants of $3,483 and $3,278, respectively, were included in accrued expenses and other liabilities. Total expenses related to the Directors’ Plan were $63 and $51 for the three months ended March 31, 2024 and 2023, respectively, which were included in other non-interest expense in the consolidated statements of income.

Executive Long-Term Incentive and Retention Plan

The Bank maintains an Executive Long-Term Incentive and Retention Plan (the “Executive Plan”). Participation in the Executive Plan is limited to officers of the Company designated as participants by the Board of Directors. Under the Executive Plan, the Board of Directors may grant annual incentive awards equal to a percentage of a participant’s base salary at the rate in effect on the last day of the Executive Plan year, as determined by the Board of Directors based on the attainment of criteria established annually by the Board of Directors. Incentive awards under the Executive Plan are credited to the participant’s incentive benefit account as of the last day of the Executive Plan year to which the award relates and earn interest at a rate determined annually by the Board of Directors. Participants vest in their benefit accounts in accordance with the vesting schedule approved by the Board of Directors, which ranges from one to five years of service. At March 31, 2024 and December 31, 2023, $1,980 and $1,962, respectively, was included in accrued expenses and other liabilities, which represents the cumulative amounts deferred and earnings thereon. The Company recognized expenses of $45 and $131 for the three months ended March 31, 2024 and 2023, respectively, related to this plan, which are included in salaries and employee benefits expense and other non-interest expense in the consolidated statements of income.

Group Term Replacement Plan

Under the terms of the “Group Term Replacement Plan”, the Company provides postretirement life insurance benefits to certain officers. The liability related to these postretirement benefits is accrued over the individual participants’ service period and aggregated $1,655 and $1,642 at March 31, 2024 and December 31, 2023, respectively. The Company recognized expenses of $13 for both of the three-month periods ended March 31, 2024 and March 31, 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 fixed postretirement benefits to be paid to the directors or the officer, or their beneficiaries, for periods ranging from 15 to 20 years. In addition, the Company has agreements with certain directors which provide certain postretirement life insurance benefits. The liability related to these postretirement benefits is accrued over the individual participants’ service period and aggregated $2,072 and $2,068 at March 31, 2024 and December 31, 2023, respectively. The Company recognized expenses of $14 and $16 for the three months ended March 31, 2024 and 2023, respectively, related to these benefits, which are included in other non-interest expenses in the consolidated statements of income.

Table of Contents

Rhinebeck Bancorp, Inc. and Subsidiary

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 fair value of unallocated shares was $2,720 at March 31, 2024.

Total compensation expense recognized in connection with the ESOP for the three months ended March 31, 2024 and 2023 was $46 and $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 EIP is estimated on the date of grant using the Black-Scholes Option-Pricing Model. The expected volatility is based on the historical volatility of a peer group of comparable SEC-reporting bank holding companies. The dividend yield assumption is based on the Company’s expectation of dividend payouts. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the date of grant. The Company has elected to recognize forfeitures as they occur.

Table of Contents

Rhinebeck Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except share and per share data)

A summary of options under the 2020 EIP as of March 31, 2024 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 the 2020 EIP had vested, therefore there were no compensation costs for the three months ended March 31, 2024.

For the three months ended March 31, 2023, share-based compensation of options and restricted stock under the plan totaled $150.

Table of Contents

Rhinebeck Bancorp, Inc. and Subsidiary

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 right-of-use assets and lease liabilities are impacted by the length of the lease term and the discount rate used to present the value of the minimum lease payments. The Company’s leases have maturities which range from 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, 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

Table of Contents

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’s financial condition or results of operations.

Employment Agreements

The Company has entered into employment agreements with certain officers. The agreements provide for base salaries and incentive compensation based on performance criteria outlined in the agreements. The agreements also provide for insurance and various other benefits.

Financial Instruments with Off-Balance-Sheet Risk

In the normal course of business, the Company is a party to financial instruments with off-balance-sheet risk to meet the financing needs of its customers. These financial instruments include standby letters of credit and commitments to extend credit, which include new loan commitments, undisbursed portions of construction loans and other lines of credit and loans sold with recourse. We are obligated under a recourse provision associated with certain first mortgage renovation loans sold in the secondary market to bear all costs when a default, including a foreclosure, occurs. These financial instruments involve, to varying degrees, elements of interest rate risk in excess of the amounts recognized in the statements of financial condition. The contractual amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

Financial instruments whose contract amounts represent off-balance sheet credit risk are as follows:


	March 31,		December 31,
	2024		2023
Commitments to extend credit summarized as follows:
Future loan commitments	$	3,401	$	5,318
Undisbursed construction loans		40,747		42,482
Undisbursed home equity lines of credit		10,788		10,727
Undisbursed commercial and other line of credit		70,957		69,258
Standby letters of credit		3,115		4,965
Loans sold with recourse		1,155		1,873
Total	$	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’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon an extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include residential and commercial property, deposits and securities.

Table of Contents

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%.

Table of Contents

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 is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items, as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the tables below) of total, common equity Tier 1 and additional Tier I capital (as defined in 12 C.F.R. § 324.20) to risk-weighted assets and of Tier I capital to average assets. Management believes, as of March 31, 2024 and December 31, 2023, that the Bank met all capital adequacy requirements to which they are subject.

The most recent notification from the FDIC categorized the Bank as “well capitalized” under the regulatory framework. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, common equity Tier 1, Tier I risk-based and Tier I leverage ratios as set forth in the table below. There are no conditions or events since then which management believes have changed the Bank’s category.

The Bank’s actual capital amounts and ratios were:


									To be Well Capitalized under
					For Capital Adequacy				Prompt Corrective Action
	Actual				Purposes				Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio

	March 31, 2024
Rhinebeck Bank
Total capital (to risk-weighted assets)	$	145,962	12.99	%	$	89,892	8.00	%	$	112,366	10.00	%
Tier 1 capital (to risk-weighted assets)		137,749	12.26	%		67,419	6.00	%		89,892	8.00	%
Common equity tier one capital (to risk weighted assets)		137,749	12.26	%		50,564	4.50	%		73,038	6.50	%
Tier 1 capital (to average assets)		137,749	10.28	%		53,582	4.00	%		66,977	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	%

Table of Contents

Rhinebeck Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, 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 Cash Equivalents

The carrying amount is a reasonable estimate of fair value.

Available for Sale Securities

Where quoted prices are available in an active market for identical securities, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include marketable equity securities and U.S. Treasury obligations. If quoted prices are not available, then fair values are estimated by using pricing models (i.e., matrix pricing) or quoted prices of securities with similar characteristics and are classified within Level 2 of the valuation hierarchy. Examples of such instruments include government agency bonds, mortgage-backed securities and municipal bonds. Level 3 securities include securities for which significant unobservable inputs are utilized. Available for sale securities are recorded at fair value on a recurring basis.

FHLB Stock

The carrying value of FHLB stock approximates fair value based on the redemption provisions of the FHLB.

Loans

Loans receivable are carried at cost. For variable rate loans, which reprice frequently, carrying values are a reasonable estimate of fair values adjusted for credit losses inherent in the portfolios. The fair value of fixed rate loans is estimated by discounting the future cash flows using the year end rates, estimated using local market data, at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities, adjusted for credit losses inherent in the portfolios. The Company does not record loans at fair value on a recurring basis. However, from time to time, nonrecurring fair value adjustments to collateral-dependent individually analyzed loans are recorded to reflect partial write-downs based on the observable market price or current appraised value of collateral.

Other Real Estate Owned

Other real estate owned represents real estate acquired through foreclosure and is carried at fair value less estimated selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. These assets are included as Level 3 fair values, based upon the lowest level of input that is utilized in the fair value measurements.

Accrued Interest

The carrying amounts of accrued interest approximate fair value.

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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 FHLB

The fair value of the advances is estimated using a discounted cash flow calculation that applies current FHLB interest rates for advances of similar maturity to a schedule of maturities of such advances.

Subordinated Debt

Based on the floating rate characteristic of these instruments, the carrying value is considered to approximate fair value.

Off-Balance-Sheet Instruments

Fair values for off-balance-sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standings. Such amounts are not significant.

Loan Level Interest Rate Swaps

The fair value is based on settlement values adjusted for credit risks associated with the counterparties and the Company and observable market interest rate curves.

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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	$	—

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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 carried at fair value and measured at fair value on a nonrecurring basis as of March 31, 2024 and December 31, 2023, 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
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:


	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 estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percentage of the appraised value.

(3)	Estimated costs to sell.

The estimated fair value amounts for 2024 and 2023 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.

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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’s assets and liabilities. Due to the wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.

As of the following dates, the carrying value and fair values of the Company’s financial instruments were:


	March 31,				December 31,
	2024				2023
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Assets:
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)		163,387		163,387		167,864		167,864
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)		993,346		972,258		1,008,851		979,037
Accrued interest receivable (Level 2)		4,611		4,611		4,616		4,616
Mortgage servicing rights (Level 3)		1,880		4,520		1,977		4,720
Financial Liabilities:
Deposits (Level 2)		1,037,024		962,985		1,030,503		948,140
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
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 components of other comprehensive loss at March 31, 2024 and December 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)

(1) Related deferred tax is calculated using an income tax rate of 21.0%.

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Rhinebeck Bancorp, Inc. and 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 outstanding if all potentially dilutive common stock equivalents (such as options) were issued during the period. There were no anti-dilutive options for the three months ended March 31, 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 Analysis of Financial Condition and Results of Operations

General

Management’s discussion and analysis of financial condition and results of operations at March 31, 2024 and December 31, 2023, and for the three months ended March 31, 2024 and 2023, is intended to assist in understanding the financial condition and results of operations of the Company and the Bank. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “intend,” “predict,” “forecast,” “improve,” “continue,” “will,” “would,” “should,” “could,” “may” and words of similar meaning. These forward-looking statements include, but are not limited to:

statements of our goals, intentions and expectations;

statements regarding our business plans, prospects, growth and operating strategies;

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 Annual Report on Form 10-K under the heading “Risk Factors.” Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Accordingly, you should not place undue reliance on such statements.

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Critical Accounting Policies

Our most significant accounting policies are described in Note 1 to the consolidated financial statements. Certain of these accounting policies require management to use significant judgment and estimates, which can have a material impact on the carrying value of certain assets and liabilities. We consider these policies to be our critical accounting estimates. The judgment and assumptions made are based upon historical experience, future forecasts, and/or other factors that management believes to be reasonable. Because of the nature of the judgment and assumptions, actual results could differ from estimates, which could have a material effect on our financial condition and results of operations. We consider the allowance for credit losses to be our most critical accounting policy.

Allowance for Credit Losses

The Company's allowance for credit losses is its estimate of credit losses currently expected in the loan portfolio, on unfunded lending commitments, and in its available-for-sale securities portfolio over the expected life of those assets. While these estimates are based on substantive methods for determining the required allowance, actual outcomes may differ significantly from estimated results, especially when determining required allowances for larger, complex commercial credits or unfunded lending commitments to commercial borrowers. Consumer loans, including indirect automobile loans and single family residential real estate, are smaller and generally behave in a similar manner, and loss estimates for these credits are considered more predictable. Additionally, the Company estimates the allowance for credit losses as a calculation of expected lifetime credit losses utilizing a forward-looking forecast of macroeconomic conditions, which may differ significantly from actual results. Further discussion of the methodology used in establishing the allowance is provided in Note 3 to the Notes to the Consolidated Financial Statements included in this Form 10-Q and in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—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.

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Comparison of Financial Condition at March 31, 2024 and December 31, 2023

Total Assets. Total assets were $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 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 $30.7 million at March 31, 2024 from $22.1 million at December 31, 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 net income of $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 $0.10 per diluted share, compared to net income 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 7.1%, interest expense increased $2.0 million, or 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 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 decrease of $139.9 million, or 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 was primarily attributable to decreased loan production during the quarter, changes to qualitative factors in response to improving economic conditions and decreased charge-offs.

Net charge-offs decreased $164,000 from $414,000 for the first quarter of 2023 to $250,000 for the first quarter of 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 three months ended March 31, 2024, an increase of $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 net gain on sales of mortgage loans as we sold $2.0 million of residential mortgage loans in the first quarter of 2024 as compared to $1.1 million in the 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, a decrease of $326,000, or 3.5%, over the comparable period in 2023. The decrease 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 first quarter of 2023. Other non-interest expense decreased $108,000, or 6.6%, primarily due to decreased retail banking expenses. FDIC deposit insurance and other insurance decreased $29,000, or 10.3%, primarily due a decreased assessment rate while occupancy expense decreased $26,000, or 2.4%, due to 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.

Income Taxes. Income taxes increased by $96,000, or 42.7%, for the three months ended March 31, 2024 as compared to the same three month period in 2023 as our income before income taxes increased. Our effective tax rate for the three months ended March 31, 2024 was 22.26% compared to 21.99% for the three months ended March 31, 2023.

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Average Balance Sheets for the Three Months Ended March 31, 2024 and 2023

The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances, the yields set forth below include the effect of deferred fees and discounts and premiums that are amortized or accreted to interest income (dollars in thousands).


	For the Three Months Ended March 31,
	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.

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Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our net interest income for the period indicated (in thousands). The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the rate and volume columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. The Company does not have any excludable out-of-period items or 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)

Management of Market Risk

General. The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of loans and securities, have longer maturities than our liabilities, consisting primarily of deposits and Federal Home Loan Bank advances. As a result, a principal part of our business strategy is to manage our exposure to changes in market interest rates. Accordingly, the Board of Directors maintains a management-level Asset/Liability Management Committee (the “ALCO”), which takes primary responsibility for reviewing the Company’s asset/liability management process and related procedures, establishing and monitoring reporting systems and ascertaining that established asset/liability strategies are being maintained. On at least a quarterly basis, the ALCO reviews and reports to the Board asset/liability management outcomes from various modeling scenarios. The ALCO also implements any changes in strategies and reviews the performance of any specific asset/liability management actions that have been implemented.

We manage our interest rate risk to minimize the exposure of our earnings and capital to changes in market interest rates. We have implemented the following strategies to manage our interest rate risk: originating loans with adjustable interest rates or with shorter terms, promoting core deposit products, and adjusting the interest rates and maturities of funding sources, as necessary. By following these strategies, we believe that we are better positioned to react to changes in market interest rates.

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Net Economic Value Simulation. We analyze the Bank’s sensitivity to changes in interest rates through a net economic value of equity (“EVE”) model. EVE represents the present value of the expected cash flows from our assets less the present value of the expected cash flows arising from our liabilities adjusted for the value of off-balance sheet contracts. The EVE ratio represents the dollar amount of our EVE divided by the present value of our total assets for a given interest rate scenario. EVE attempts to quantify our economic value using a discounted cash flow methodology while the EVE ratio reflects that value as a form of capital ratio. We estimate what our EVE would be at a specific date. We then forecast what the EVE might be at the same date throughout a series of interest rate scenarios representing immediate and permanent, parallel shifts in the yield curve. We currently calculate the EVE under scenarios where interest rates increase 100, 200, 300 and 400 basis points from current market rates and where interest rates decrease 100, 200, 300 and 400 basis points from current market rates.

The following table presents the estimated changes in the Bank’s EVE that would result from changes in market interest rates at March 31, 2024 (dollars in 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)	%

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The above table assumes that the composition of our interest-sensitive assets and liabilities existing at the date indicated remains constant uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the table provides an indication of our interest rate risk exposure at a point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our EVE and will likely differ from actual results.

Liquidity Management

We maintain liquid assets at levels we consider adequate to meet both our short-term and long-term liquidity needs. We adjust our liquidity levels to fund deposit outflows, repay our borrowings and to fund loan commitments. We also adjust liquidity as appropriate to meet asset and liability management objectives.

Our primary sources of liquidity are deposits, loan sales, amortization and prepayment of loans and mortgage-backed securities, maturities, sales and calls of investment securities and other short-term investments, earnings, funds provided from operations, as well as access to FHLB advances and other borrowings. While scheduled principal repayments on loans and mortgage-backed securities are a relatively predictable source of funds, deposit flows and loan and security sales and prepayments are greatly influenced by market interest rates, economic conditions, and rates offered by our competition. We set the interest rates on our deposits to maintain a desired level of total deposits.

As reported in the Consolidated 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 net cash provided by operating activities of $3.1 million for the three months ended March 31, 2023. These amounts differ from our net income because of a variety of cash receipts and disbursements that did not affect net income for the respective periods. The cash outflow in operating activities was

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primarily due to an increase in other assets of $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 investment security and loan activities 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 have traditionally comprised most of our financing activities, which resulted in a net cash outflow of $15.5 million in the three months ended March 31, 2024, as opposed to a net cash inflow of $11.3 million in the comparable 2023 period.

At March 31, 2024, we had the following 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 a preapproved secured line of credit with the FHLB which totaled $649,283 at March 31, 2024. Additional funds available under this line 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 commitments and obligations under our off-balance sheet financial instruments, post-retirement plan and other benefit plans as described in Note 7 and Note 9 to the consolidated financial statements.

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Impact of Inflation and Changing Prices

The financial statements and related notes of the Company have been prepared in accordance with GAAP. GAAP generally requires the measurement of financial condition and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For information regarding market risk, see “Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operation - Management of Market Risk.”

Item 4. Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of March 31, 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.

There 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 periodically involved in legal proceedings, such as employment-related claims against us, claims to enforce liens, foreclosure or condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans, and other issues incidental to our business. As of the date of this Quarterly Report on Form 10-Q, we are not a party to any pending legal proceedings that we believe would have a material effect on our financial condition, results of operations or cash flows.

Item 1A. Risk Factors

There have been no material changes to the risk factors applicable to the Company from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

In September 2022, the Board approved a stock repurchase plan pursuant to which the Company is authorized to repurchase up to 247,506 shares of its common stock. No shares were repurchased under the stock repurchase plan for the three months ended March 31, 2024.

There were no sales of unregistered securities during the quarter ended March 31, 2024.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(c) Director and Section 16 Officer Rule 10b5-1 Trading Arrangements

During the three months ended March 31, 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


3.1	Articles of Incorporation of Rhinebeck Bancorp, Inc. (Incorporated by reference to the Registration Statement on Form S-1 of Rhinebeck Bancorp, Inc. (File no. 333-227266), originally filed with the Securities and Exchange Commission on September 10, 2018.)

3.2	Bylaws of Rhinebeck Bancorp, Inc. (Incorporated by reference to the Current Report on Form 8-K of Rhinebeck Bancorp, Inc. (File no. 333-227266), filed with the Securities and Exchange Commission on September 27, 2019.)

4.0	Form of Common Stock Certificate of Rhinebeck Bancorp, Inc. (Incorporated by reference to the Registration Statement on Form S-1 of Rhinebeck Bancorp, Inc. (File no. 333-227266), originally filed with the Securities and Exchange Commission on September 10, 2018.)

31.1	Certification required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.0	The following materials for the period ended March 31, 2024, formatted in inline XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Financial Condition, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements

104.0	The cover page from Rhinebeck Bancorp’s Form 10-Q for the quarterly period ended March 31, 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.


	RHINEBECK BANCORP, INC.

Date: May 9, 2024		/s/ Michael J. Quinn
		Michael J. Quinn President and Chief Executive Officer

Date: May 9, 2024		/s/ Michael J. McDermott
		Michael J. McDermott Chief Financial Officer