Rhinebeck Bancorp, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; balance-sheet comparisons are with December 31, 2023. The company is a bank holding company whose subsidiary operates 13 branches and two representative offices in New York. Financial amounts below are in millions unless stated otherwise.
Financial performance and condition
- Profitability: Net income rose 40.5% to $1.12 million from $0.80 million; diluted earnings per share were $0.10 versus $0.07. Income before taxes was $1.44 million.
- Interest income and margin: Interest and dividend income increased 7.1% to $15.64 million, while interest expense rose 42.2% to $6.74 million. Net interest income fell 9.8% to $8.90 million. Net interest margin declined 29 basis points to 2.92%.
- Other income and expenses: Non-interest income increased 9.4% to $1.51 million; non-interest expense decreased 3.5% to $8.88 million. The effective tax rate was 22.26% versus 21.99%.
- Assets and loans: Total assets decreased 1.1% to $1.299 billion. Net loans were $993.3 million, down 1.5%; indirect automobile loans fell $27.2 million as the company pursued a strategic reduction in that portfolio. Commercial real estate loans increased $9.5 million.
- Credit: The provision for credit losses was $83,000, compared with $1.01 million a year earlier. Net charge-offs decreased to $250,000 from $414,000. Non-accrual loans increased to $4.6 million from $4.2 million at year-end; past-due loan balances as a share of loans declined to 1.84% from 1.90%. The loan allowance was $8.0 million.
- Deposits and borrowings: Deposits increased 0.6% to $1.037 billion. Interest-bearing deposits rose while non-interest-bearing deposits declined, reflecting customer movement toward higher-yielding accounts. FHLB advances decreased $20.0 million to $108.1 million; subordinated debt remained $5.2 million.
- Cash flow and liquidity: Cash and cash equivalents rose $8.5 million to $30.7 million. Operating cash flow was negative $3.5 million, investing cash flow was positive $27.5 million, and financing cash flow was negative $15.5 million. Management reported $679.3 million of available funding sources, including cash, unencumbered securities and borrowing availability.
- Capital and equity: Stockholders’ equity was $114.3 million; the equity-to-assets ratio was 8.80%, and book value per share was $10.32. The Bank was categorized as well capitalized; its total risk-based capital ratio was 12.99% and common equity Tier 1 ratio was 12.26%.
Material changes versus comparable periods
- Compared with Q1 2023, higher asset yields increased interest income, but faster growth in funding costs drove lower net interest income and margin. Average cost of interest-bearing liabilities rose to 2.92% from 2.10%.
- Year-over-year earnings improved despite lower net interest income, primarily alongside a substantially lower credit-loss provision and reduced non-interest expense.
- Compared with December 31, 2023, available-for-sale securities declined $9.3 million to $182.6 million. The portfolio had $33.7 million of gross unrealized losses, principally attributed by management to interest rates and market conditions; no securities allowance for credit losses was recorded.
- The Beacon branch was sold in February 2024 for approximately $2.9 million. Its accounts were transferred to nearby branches and employees were placed in open positions.
Outlook, commentary and risks
- The filing provides no specific earnings, margin, loan-growth or other numerical guidance. Management cautions that interim results are not necessarily indicative of full-year results.
- Management identifies interest-rate, funding and deposit-mix sensitivity, credit quality, real-estate conditions, competition, economic conditions, cybersecurity and operational risks as factors that could affect results. The filing’s rate-sensitivity model estimates that a 400-basis-point increase in rates would reduce economic value of equity by 31.1%; management cautions that the model relies on assumptions and is not a precise forecast.
- Key estimation uncertainty centers on the allowance for credit losses, including forward-looking economic assumptions and larger commercial exposures. The filing also reports $130.2 million of off-balance-sheet credit commitments and standby letters of credit; amounts drawn may differ from contractual totals.
- Management reported effective disclosure controls and no material change in internal controls during the quarter. It reported no material pending legal proceedings and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether deposit pricing and the shift toward time deposits and money-market accounts continue to pressure funding costs and net interest margin.
- Trends in indirect auto lending, charge-offs, non-accrual loans and commercial real-estate credit ratings; particularly monitor the $167.5 million of loans classified as Watch.
- Liquidity and funding capacity, including upcoming maturities of $60 million of FHLB advances due within one year and continued reliance on secured borrowing availability.
- Changes in the securities portfolio’s unrealized losses and their effects on accumulated other comprehensive loss and reported equity.
- Execution and financial effects of the branch sale and the strategic reduction in indirect automobile loans.