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 September 30, 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 November 1, 2024, there were 11,087,607 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 September 30, 2024 and December 31, 2023	1

	Consolidated Statements of (Loss) Income for the Three and Nine Months Ended September 30, 2024 and 2023	2

	Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2024 and 2023	3

	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2024 and 2023	4

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023	5

	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50

Item 4.	Controls and Procedures	50

PART II. OTHER INFORMATION		51

Item 1.	Legal Proceedings	51

Item 1A.	Risk Factors	51

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	51

Item 3.	Defaults Upon Senior Securities	51

Item 4.	Mine Safety Disclosures	51

Item 5.	Other Information	51

Item 6.	Exhibits	52

	SIGNATURES	53

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)


	September 30,		December 31,
	2024		2023
Assets
Cash and due from banks	$	21,670	$	14,178
Federal funds sold		10,429		7,524
Interest bearing depository accounts		14,281		427
Total cash and cash equivalents		46,380		22,129

Available for sale securities (at fair value)		169,134		191,985
Loans receivable (net of allowance for credit losses of $8,153 and $8,124, respectively)		964,875		1,008,851
Federal Home Loan Bank stock		3,510		6,514
Accrued interest receivable		4,375		4,616
Cash surrender value of life insurance		30,005		30,031
Deferred tax assets (net of valuation allowance of $1,124 and $598, respectively)		7,839		9,936
Premises and equipment, net		14,062		17,567
Other real estate owned		—		25
Goodwill		2,235		2,235
Intangible assets, net		186		246
Other assets		23,544		19,067
Total assets	$	1,266,145	$	1,313,202
Liabilities and Stockholders’ Equity
Liabilities
Deposits
Non-interest bearing	$	256,864	$	249,793
Interest bearing		789,309		780,710
Total deposits		1,046,173		1,030,503

Mortgagors’ escrow accounts		3,552		9,274
Advances from the Federal Home Loan Bank		59,773		128,064
Subordinated debt		5,155		5,155
Accrued expenses and other liabilities		28,825		26,521
Total liabilities		1,143,478		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 11,087,607 and 11,072,607 at September 30, 2024 and December 31, 2023, respectively)		111		111
Additional paid-in capital		45,939		45,959
Unearned common stock held by the employee stock ownership plan		(3,109)		(3,273)
Retained earnings		94,420		100,386
Accumulated other comprehensive loss:
Net unrealized loss on available for sale securities, net of taxes		(11,540)		(26,077)
Defined benefit pension plan, net of taxes		(3,154)		(3,421)
Total accumulated other comprehensive loss		(14,694)		(29,498)
Total stockholders’ equity		122,667		113,685
Total liabilities and stockholders’ equity	$	1,266,145	$	1,313,202

See accompanying notes to consolidated financial statements

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Rhinebeck Bancorp, Inc. and Subsidiary

Consolidated Statements of (Loss) Income (Unaudited)

(In thousands, except share and per share data)


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

Earnings (loss) per common share:
Basic	$	(0.75)	$	0.12	$	(0.55)	$	0.32
Diluted	$	(0.75)	$	0.11	$	(0.55)	$	0.32

Weighted average shares outstanding, basic		10,758,914		10,710,607		10,753,460		10,804,699
Weighted average shares outstanding, diluted		10,758,914		10,760,118		10,753,460		10,891,730

See accompanying notes to consolidated financial statements

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Rhinebeck Bancorp, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(In thousands, except share and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net (Loss) Income	$	(8,062)	$	1,236	$	(5,966)	$	3,465
Other Comprehensive Income
Unrealized holding gains (losses) arising during the period		6,027		(2,829)		6,406		(3,865)
Reclassification adjustment for gains or losses included in net realized gains or losses on sales and calls of securities on the consolidated statements of income		11,996		—		11,996		—
Net unrealized gains (losses) on available for sale securities		18,023		(2,829)		18,402		(3,865)
Tax effect (a)		(3,784)		594		(3,864)		812
Unrealized gains (losses) on available for sale securities, net of tax		14,239		(2,235)		14,538		(3,053)
Defined benefit pension plan:
Actuarial gains (losses) arising during the period		378		288		562		(101)
Reclassification adjustment for amortization of net actuarial gain (b)		(75)		(93)		(224)		(280)
Total		303		195		338		(381)
Tax effect (c)		(64)		(41)		(71)		80
Defined benefit pension plan gains (losses), net of tax		239		154		267		(301)
Other comprehensive income (loss):		14,478		(2,081)		14,805		(3,354)
Total Comprehensive Income (Loss)	$	6,416	$	(845)	$	8,839	$	111

(a)	Includes ($2,519) for both the three and nine months ended September 30, 2024 and $0 for both the three and nine months ended September 30, 2023, respectively, for tax effect of realized gains or losses which are included in the provision for income taxes on the consolidated statements of income.

(b)	Included in other non-interest expense on the consolidated statements of income.

(c)

Includes ($16) and ($47) for both the three and nine months ended September 30, 2024, respectively and ($20) and ($59) for the three and nine months ended September 30, 2023, respectively, for tax effect of amortization of net actuarial loss, which are included in the provision for income taxes on the consolidated statements of income.

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

Net income		—		—		—		1,431		—		1,431
Other comprehensive income		—		—		—		—		(3,494)		(3,494)
ESOP shares committed to be allocated		—		(16)		55		—		—		39
Share-based compensation expense		—		150		—		—		—		150
Repurchase of common stock		(2)		(1,378)		—		—		—		(1,380)
Balance at June 30, 2023	$	111	$	45,976	$	(3,382)	$	98,220	$	(33,462)	$	107,463

Net income		—		—		—		1,236		—		1,236
Other comprehensive income		—		—		—		—		(2,081)		(2,081)
ESOP shares committed to be allocated		—		(17)		54		—		—		37
Share-based compensation expense		—		95		—		—		—		95
Restricted stock awards, net of taxes withheld		—		(78)		—		—		—		(78)
Balance at September 30, 2023	$	111	$	45,976	$	(3,328)	$	99,456	$	(35,543)	$	106,672


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

Net income		—		—		—		975		—		975
Other comprehensive income		—		—		—		—		906		906
ESOP shares committed to be allocated		—		(12)		55		—		—		43
Balance at June 30, 2024	$	111	$	45,939	$	(3,164)	$	102,482	$	(29,172)	$	116,196

Net loss		—		—		—		(8,062)		—		(8,062)
Other comprehensive income		—		—		—		—		14,478		14,478
ESOP shares committed to be allocated		—		(9)		55		—		—		46
Share-based compensation expense		—		9		—		—		—		9
Balance at September 30, 2024	$	111	$	45,939	$	(3,109)	$	94,420	$	(14,694)	$	122,667

See accompanying notes to consolidated financial statements

Table of Contents

Rhinebeck Bancorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows (Unaudited)

(In thousands, except share and per share data)


	Nine Months Ended September 30,
	2024		2023
Cash Flows from Operating Activities
Net (loss) income	$	(5,966)	$	3,465
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Amortization and accretion of premiums and discounts on investments, net		148		214
Net realized loss on sales and calls of securities		11,996		—
Net realized gain on sale of other real estate owned		(4)		—
Provision for credit losses		1,419		1,472
Loans originated for sale		(4,919)		(3,568)
Proceeds from sale of loans		5,519		3,800
Net gain on sale of loans		(131)		(92)
Amortization of intangible assets		60		67
Depreciation and amortization		1,017		1,075
Net loss (gain) from disposal of premises and equipment		18		(36)
Deferred income tax benefit		(1,838)		(369)
Increase in cash surrender value of insurance		(564)		(494)
Gain on life insurance		(412)		(218)
Net decrease in accrued interest receivable		241		792
Expense of earned ESOP shares		135		125
Share-based compensation expense		9		395
Net increase in other assets		(4,477)		(2,889)
Net increase in accrued expenses and other liabilities		2,640		3,149
Net cash provided by operating activities		4,891		6,888
Cash Flows from Investing Activities
Proceeds from sales of securities		58,564		—
Proceeds from maturities and principal repayments of securities		27,294		25,328
Purchases of securities		(56,749)		—
Net purchases of FHLB Stock		3,004		(1,439)
Net decrease (increase) in loans		42,089		(11,643)
Purchases of bank owned life insurance		(23)		(23)
Purchases of bank premises and equipment		(422)		(338)
Proceeds from disposal of premises and equipment		2,892		—
Net proceeds from life insurance		1,025		669
Proceeds from sale of other real estate owned		29		—
Net cash provided by investing activities		77,703		12,554
Cash Flows from Financing Activities
Net decrease in demand deposits, NOW, money market and savings accounts		(9,766)		(134,129)
Net increase in time deposits		25,436		86,496
Net decrease in mortgagors' escrow accounts		(5,722)		(4,935)
Net decrease in short-term debt		(50,000)		(11,273)
Net (decrease) increase in long-term debt		(18,291)		41,233
Stock repurchase		—		(1,458)
Net cash used in financing activities		(58,343)		(24,066)
Net increase (decrease) in cash and cash equivalents		24,251		(4,624)
Cash and Cash Equivalents
Beginning balance		22,129		31,384
Ending balance	$	46,380	$	26,760
Supplemental Disclosures of Cash Flow Information
Cash paid for:
Interest	$	20,194	$	16,064
Income taxes	$	768	$	1,106

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 or nine months ended September 30, 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 September 30, 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:


	September 30, 2024
			Gross		Gross
			Unrealized		Unrealized
	Amortized Cost		Gains		Losses		Fair Value
U.S. Treasury securities	$	20,834	$	6	$	(184)	$	20,656
U.S. government agency mortgage-backed securities–residential		122,971		—		(11,745)		111,226
U.S. government agency securities		22,014		—		(771)		21,243
Municipal securities⁽¹⁾		2,718		—		(190)		2,528
Corporate bonds		14,429		—		(1,631)		12,798
Other		776		—		(93)		683
Total	$	183,742	$	6	$	(14,614)	$	169,134


	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:


	September 30, 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	$	5,032	$	(6)	$	5,822	$	(178)	$	10,854	$	(184)
U.S. government agency mortgage-backed securities-residential		41,687		(245)		69,539		(11,500)		111,226		(11,745)
U.S. government agency securities		—		—		21,243		(771)		21,243		(771)
Municipal securities		—		—		2,529		(190)		2,529		(190)
Corporate bonds		—		—		12,798		(1,631)		12,798		(1,631)
Other		—		—		658		(93)		658		(93)
Total	$	46,719	$	(251)	$	112,589	$	(14,363)	$	159,308	$	(14,614)

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
	Less Than 12 Months				12 Months or Longer				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
U.S. Treasury securities	$	—	$	—	$	24,006	$	(1,066)	$	24,006	$	(1,066)
U.S. government agency mortgage-backed securities-residential		—		—		128,580		(27,943)		128,580		(27,943)
U.S. government agency securities		—		—		23,158		(1,616)		23,158		(1,616)
Municipal securities		512		(18)		2,276		(242)		2,788		(260)
Corporate bonds		—		—		12,640		(2,060)		12,640		(2,060)
Other		672		(65)		—		—		672		(65)
Total	$	1,184	$	(83)	$	190,660	$	(32,927)	$	191,844	$	(33,010)

At September 30, 2024, the Company had 188 individual available-for-sale securities in an unrealized loss position with unrealized losses totaling $14,614 with an aggregate depreciation of 8.40% 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 September 30, 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.

Table of Contents

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 September 30, 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:


	September 30, 2024				December 31, 2023
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity:
Within 1 year	$	23,306	$	22,960	$	15,449	$	15,170
After 1 but within 5 years		22,383		21,669		32,860		30,569
After 5 but within 10 years		14,306		12,596		19,400		16,968
After 10 years		—		—		—		—
Total Maturities		59,995		57,225		67,709		62,707
Mortgage-backed securities		122,971		111,226		156,523		128,580
Other		776		683		763		698
Total	$	183,742	$	169,134	$	224,995	$	191,985

At September 30, 2024 and December 31, 2023, available for sale securities with a carrying value of $86,452 and $13,130, respectively, were pledged to secure Federal Home Loan Bank of New York (“FHLB”) borrowings. In addition, at September 30, 2024 and December 31, 2023, $954 and $75,769 of available for sale securities were pledged to secure borrowings at the Federal Reserve Bank of New York (“FRB”), respectively.

Proceeds from the sale of available for sale securities totaled $58,564 during the nine months ended September 30, 2024. Gross losses of $11,996 were realized on the sales of securities. There were no gross gains realized during the nine months ended September 30, 2024.

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 September 30, 2024 or December 31, 2023. Total accrued interest receivable on available for sale securities totaled $652 and $602 at September 30, 2024 and December 31, 2023, respectively, and was reported in accrued interest receivable on the consolidated statements of financial condition of this Form 10-Q.

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:


	September 30,		December 31,
	2024		2023
Commercial real estate loans:
Construction	$	28,902	$	20,208
Non-residential		334,795		324,493
Multi-family		91,378		83,376
Residential real estate loans		85,592		77,259
Commercial and industrial loans		88,406		88,927
Consumer loans:
Indirect automobile		318,919		394,245
Home equity		11,728		11,990
Other consumer		7,326		8,095
Total gross loans		967,046		1,008,593
Dealer reserves		5,982		8,382
Allowance for credit losses		(8,153)		(8,124)
Total net loans	$	964,875	$	1,008,851

At September 30, 2024 and December 31, 2023, the unpaid principal balances of loans held for sale included in the residential real estate category above were $439 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:


	September 30, 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	$	28,902	$	—	$	—	$	—	$	28,902	$	—
Non-residential		332,434		4		—		2,357		334,795		2,357
Multifamily		91,378		—		—		—		91,378		—
Residential real estate		84,235		1,105		34		218		85,592		1,227
Commercial and industrial		88,126		72		57		151		88,406		151
Consumer:
Indirect automobile		308,062		8,725		1,463		669		318,919		692
Home equity		11,180		269		38		241		11,728		241
Other consumer		7,060		222		20		24		7,326		24
Total	$	951,377	$	10,397	$	1,612	$	3,660	$	967,046	$	4,692

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 September 30, 2024.

The following table presents the Company’s amortized cost basis of non-accrual loans for which there is no related ACL:


	September 30, 2024		December 31, 2023
Commercial real estate:
Non-residential	$	2,357	$	1,152
Residential real estate		1,227		1,624
Commercial and industrial		120		150
Consumer:
Indirect automobile		235		160
Home equity		241		99
Other consumer		12		25
Total	$	4,192	$	3,210

The following table presents the Company’s amortized cost basis of only those non-accrual loans with a related ACL:


	September 30, 2024				December 31, 2023
	Non-accrual loans		Related ACL		Non-accrual loans		Related ACL
Commercial real estate:
Non-residential	$	—	$	—	$	469	$	16
Commercial and industrial		31		31		31		32
Consumer:
Indirect automobile		457		110		471		167
Other consumer		12		5		—		—
Total	$	500	$	146	$	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)

During the nine months ended September 30, 2024, $117 in accrued interest was reversed for non-accrual loans. Total accrued interest receivable associated with loans totaled $3,723 and $4,014 at September 30, 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 September 30, 2024 and December 31, 2023, the Company was servicing loans for participants aggregating $52,906 and $44,418, respectively.

Residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $37 and $152 at September 30, 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 $270,124 and $282,269 as of September 30, 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 September 30, 2024 and December 31, 2023, the maximum contingent liability associated with loans sold with recourse was $807 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 September 30, 2024 and December 31, 2023 were $1,680 and $1,977, respectively. Fair value exceeds carrying value, and thus, no impairment charges related to servicing rights were recognized during the nine months ended September 30, 2024 or the year ended December 31, 2023.

Activity in the Company’s ACL for loans for the three and nine months ended September 30, 2024 is summarized in the table below.


	Commercial				Commercial
	Real Estate		Residential		and Industrial		Indirect		Consumer		Totals

	Three months ended September 30, 2024
Allowance for credit losses:
Beginning balance	$	2,806	$	377	$	576	$	3,698	$	117	$	7,574
Provision for (reversal of) credit losses		80		11		(20)		784		68		923
Loans charged-off		—		—		(1)		(863)		(55)		(919)
Recoveries		—		—		1		568		6		575
Ending balance	$	2,886	$	388	$	556	$	4,187	$	136	$	8,153

Table of Contents

Rhinebeck Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

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


	Commercial		Residential		Commercial
	Real Estate		Real Estate		and Industrial		Indirect		Consumer		Totals

	Nine months ended September 30, 2024

Allowance for credit losses:
Beginning balance	$	2,716	$	346	$	606	$	4,348	$	108	$	8,124
Provision for credit losses		461		42		31		795		127		1,456
Loans charged-off		(291)		—		(83)		(2,676)		(136)		(3,186)
Recoveries		—		—		2		1,720		37		1,759
Ending balance	$	2,886	$	388	$	556	$	4,187	$	136	$	8,153

Activity in the Company’s ACL for loans for the three and nine months ended September 30, 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 September 30, 2023
Allowance for credit losses:
Beginning balance	$	2,294	$	179	$	454	$	4,968	$	108	$	8,003
Provision for (reversal of) credit losses		517		13		13		341		(5)		879
Loans charged-off		—		—		—		(1,098)		—		(1,098)
Recoveries		—	$	49	$	69	$	588	$	7		713
Ending balance	$	2,811	$	241	$	536	$	4,799	$	110	$	8,497


	Commercial		Residential		Commercial
	Real Estate		Real Estate		and Industrial			Indirect	Consumer		Totals

	Nine months ended September 30, 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 (reversal of) credit losses		640		32		639		118		(35)		1,394
Loans charged-off		—		—		(710)		(2,584)		(25)		(3,319)
Recoveries		—		52		109		1,687		51		1,899
Ending balance	$	2,811	$	241	$	536	$	4,799	$	110	$	8,497

Table of Contents

Rhinebeck Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

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

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 and nine months ended September 30, 2024 and 2023 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 September 30, 2024
Allowance for credit losses:
Beginning balance	$	160	$	3	$	80	$	—	$	11	$	254
(Reversal of) provision for credit losses		(42)		(2)		6		—		4		(34)
Ending balance	$	118	$	1	$	86	$	—	$	15	$	220


	Commercial				Commercial
	Real Estate		Residential		and Industrial		Indirect		Consumer		Totals

	Nine months ended September 30, 2024
Allowance for credit losses:
Beginning balance	$	172	$	—	$	72	$	—	$	13	$	257
(Reversal of) provision for credit losses		(54)		1		14		—		2		(37)
Ending balance	$	118	$	1	$	86	$	—	$	15	$	220


	Commercial				Commercial
	Real Estate		Residential		and Industrial		Indirect		Consumer		Totals

	Three months ended September 30, 2023
Allowance for credit losses:
Beginning balance	$	200	$	—	$	61	$	—	$	7	$	268
Provision for credit losses		26		—		4		—		1		31
Ending balance	$	226	$	—	$	65	$	—	$	8	$	299


	Commercial				Commercial
	Real Estate		Residential		and Industrial		Indirect		Consumer		Totals

	Nine months ended September 30, 2023
Allowance for credit losses:
Beginning balance	$	—	$	—	$	—	$	—	$	—	$	—
Adoption of CECL standard		149		—		65		—		7		221
Provision for credit losses		77		—		—		—		1		78
Ending balance	$	226	$	—	$	65	$	—	$	8	$	299

The following table summarizes the provision for credit losses for the three and nine months ended September 30, 2024 and 2023:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Provision for credit losses - loans	$	923	$	879	$	1,456	$	1,394
(Reversal of) provision for credit losses - unfunded commitments		(34)		31		(37)		78
Provision for credit losses	$	889	$	910	$	1,419	$	1,472

Table of Contents

Rhinebeck Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

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

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.

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 nine months ended September 30, 2024, and by fiscal year of origination as of September 30, 2024.


													Revolving
	Loans by Origination Year												Loans
	2024		2023		2022		2021		2020		Prior		Amortized Cost		Total
Commercial construction
Watch		2,565		24,025		2,312		-		-		-		-		28,902
Total commercial construction		2,565		24,025		2,312		-		-		-		-		28,902

Commercial non-residential
Pass	$	14,438	$	37,069	$	50,198	$	27,236	$	16,294	$	80,420	$	-	$	225,655
Watch		8,529		14,347		15,307		7,386		11,409		36,715		-		93,693
Special mention		-		-		1,368		879		335		5,984		-		8,566
Substandard		-		-		2,855		-		-		4,026		-		6,881
Total commercial non-residential		22,967		51,416		69,728		35,501		28,038		127,145		-		334,795
Current-period gross write-offs		-		-		-		-		-		291		-		291

Multifamily
Pass	$	-	$	1,405	$	18,511	$	29,779	$	2,051	$	5,355	$	-	$	57,101
Watch		-		987		11,079		11,675		-		10,536		-		34,277
Total multifamily		-		2,392		29,590		41,454		2,051		15,891		-		91,378

Residential
Performing	$	12,137	$	27,948	$	24,128	$	2,062	$	2,663	$	15,427	$	-	$	84,365
Non-performing		-		-		-		-		-		1,227		-		1,227
Total residential		12,137		27,948		24,128		2,062		2,663		16,654		-		85,592

Commercial and industrial
Pass	$	7,383	$	9,945	$	23,300	$	8,496	$	846	$	1,133	$	13,676	$	64,779
Watch		3,179		1,134		2,359		219		403		1,218		11,707		20,219
Special mention		-		224		521		222		100		10		-		1,077
Substandard		-		-		-		-		-		795		1,536		2,331
Total commercial and industrial		10,562		11,303		26,180		8,937		1,349		3,156		26,919		88,406
Current-period gross write-offs		-		40		-		7		-		36				83

Indirect automobile
Performing	$	42,612	$	79,430	$	118,013	$	49,122	$	19,501	$	9,549	$	-	$	318,227
Non-performing		17		29		383		148		47		68		-		692
Total indirect automobile		42,629		79,459		118,396		49,270		19,548		9,617		-		318,919
Current-period gross write-offs		83		608		1,153		488		207		137		-		2,676

Home equity
Performing	$	-	$	-	$	-	$	-	$	-	$	3,796	$	7,691	$	11,487
Non-performing		-		-		-		-		-		226		15		241
Total home equity		-		-		-		-		-		4,022		7,706		11,728

Other consumer
Performing	$	2,261	$	1,877	$	2,263	$	500	$	142	$	35	$	224	$	7,302
Non-performing		-		23		1		-		-		-		-		24
Total other consumer		2,261		1,900		2,264		500		142		35		224		7,326
Current-period gross write-offs		8		58		35		6		24		5		-		136

Total Loans
Pass/performing	$	78,831	$	157,674	$	236,413	$	117,195	$	41,497	$	115,715	$	21,591	$	768,916
Watch		14,273		40,493		31,057		19,280		11,812		48,469		11,707		177,091
Special mention		0		224		1,889		1,101		435		5,994		-		9,643
Substandard		-		-		2,855		-		0		4,821		1,536		9,212
Non-performing		17		52		384		148		47		1,521		15		2,184
Total Loans	$	93,121	$	198,443	$	272,598	$	137,724	$	53,791	$	176,520	$	34,849	$	967,046
Total Current-period gross write-offs	$	91	$	706	$	1,188	$	501	$	231	$	469	$	-	$	3,186

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 nine months of 2024 or 2023.

The changes in the carrying value of the customer list and core deposit intangibles, net of accumulated amortization and impairment, are as follows:


	Nine months ended September 30, 2024
	2024		2023
Beginning balance	$	246	$	334
Amortization		(60)		(67)

Ending balance	$	186	$	267

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 Company recognized $19 and $22 of amortization expense related to its intangible assets for the three months ended September 30, 2024 and 2023, respectively. The Company recognized $60 and $67 of amortization expense related to its intangible assets for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, the future amortization expense for amortizable intangible assets for the years ended December 31, was as follows:


2024	$	19
2025		60
2026		29
2027		21
2028		16
Thereafter		41
Total	$	186

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:


	September 30,		December 31,
	2024		2023
Non-interest bearing demand deposits	$	256,864	$	249,793
Interest bearing accounts:
NOW⁽¹⁾		122,985		125,628
Savings		137,031		146,172
Money market		185,811		190,864
Time certificates of deposit		343,482		318,046
Total interest bearing accounts		789,309		780,710
Total deposits	$	1,046,173	$	1,030,503

(1)

Negotiable order of withdrawal

The Company participates in a reciprocal deposit program with other financial institutions that provides access to Federal Deposit Insurance Corporation (“FDIC”) insurance deposit products in aggregate amounts exceeding the current limits for depositors. At September 30, 2024 and December 31, 2023, total reciprocal deposits were $42,918 and $40,009, respectively. Included in time certificates of deposit at September 30, 2024 and December 31, 2023 were reciprocal deposits totaling $27,383 and $23,357, respectively, with original maturities of one to three years. Reciprocal deposits included in money market accounts totaled $15,535 and $16,652 at September 30, 2024 and December 31, 2023, respectively.

The Company had no brokered deposits at either September 30, 2024 or December 31, 2023. Time certificates of deposit in denominations of $250 or greater were $95,882 and $100,063 as of September 30, 2024 and December 31, 2023, respectively.

Contractual maturities of time certificates of deposit at September 30, 2024 are summarized below:


	September 30,
	2024
Within 1 year	$	324,739
1 – 2 years		15,230
2 – 3 years		591
3 – 4 years		1,000
4 – 5 years		1,922
Total	$	343,482

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 September 30, 2024 and December 31, 2023, the Bank had access to a preapproved secured line of credit with the FHLB of $633,017 and $656,516, respectively. Borrowings under this line require collateralization through the pledge of specific loans and securities. At September 30, 2024 and December 31, 2023, the Bank had pledged assets of $275,857 and $228,172, respectively. At September 30, 2024 and December 31, 2023, the Company had outstanding overnight line of credit balances with the FHLB of $10,000 and $0, respectively. The interest rate was 5.06% at September 30, 2024. These borrowings mature the following business day. The Company also had structured borrowings of $49,773. The outstanding principal amounts and the related terms and rates at September 30, 2024 were as follows:


Term	Principal		Maturity	Rate		Due in one year		Long term
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		969	May 3, 2027	4.99	%		—		969
Fixed medium-term		740	June 21, 2027	4.73	%		—		740
Fixed medium-term		20,000	May 2, 2028	3.88	%		—		20,000
Total	$	49,773	Weighted Average Rate	4.31	%	$	20,000	$	29,773

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 September 30, 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 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 rate on the subordinated debentures, which bear interest at the three-month term Secured Overnight Financing Rate (“SOFR”) plus 2% and a relative spread adjustment of 0.26%, was 7.36% and 7.64% at September 30, 2024 and December 31, 2023, respectively. The subordinated debentures mature on May 23, 2035.

Table of Contents

Rhinebeck Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

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

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 September 30, 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 September 30, 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:


	September 30,		December 31,
	2024		2023
Projected and accumulated benefit obligation	$	(18,615)	$	(17,868)
Plan assets at fair value		19,033		18,062
Funded status included in accrued expenses and other liabilities	$	418	$	194

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


	Nine months ended September 30,
	2024		2023
Interest cost	$	640	$	646
Expected return on plan assets		(748)		(698)
Amortization of unrecognized loss		223		280
Net periodic cost	$	115	$	228

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 nine diversified investment funds.

As of September 30, 2024, the investment funds included six equity funds and three 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.

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 nine months of 2024 or 2023.

Table of Contents

Rhinebeck Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

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

The fair value of the Company’s pension plan assets, by fair value hierarchy, are as follows:


	September 30, 2024
	Level 1		Level 2		Level 3		Total
Assets:
Investment in separate accounts
Fixed income	$	13,085	$	—	$	—	$	13,085
Equity		5,948		—		—		5,948
Total assets at fair value	$	19,033	$	—	$	—	$	19,033


	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 $803 and $823 for the nine months ended September 30, 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 September 30, 2024 and December 31, 2023, total amounts due to participants of $3,762 and $3,278, respectively, were included in accrued expenses and other liabilities. Total expenses related to the Directors’ Plan were $191 and $155 for the nine months ended September 30, 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 September 30, 2024 and December 31, 2023, $2,020 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 $195 and $259 for the nine months ended September 30, 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 $1,681 and $1,642 at September 30, 2024 and December 31, 2023, respectively. The Company recognized expenses of $39 for both the nine months ended September 30, 2024 and 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 $2,099 and $2,068 at September 30, 2024 and December 31, 2023, respectively. The Company recognized expenses of $62 and $45 for the nine months ended September 30, 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 September 30, 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:


	September 30,	December 31,
	2024	2023
Allocated	109,107	87,286
Committed to be allocated	16,362	21,821
Unallocated	310,956	327,318
Paid out to participants	(10,988)	(10,988)
Total shares	425,437	425,437

The fair value of unallocated shares was $2,876 at September 30, 2024.

Total compensation expense recognized in connection with the ESOP for the nine months ended September 30, 2024 and 2023 was $134 and $126, 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 the 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 September 30, 2024, there were 105,146 stock options and 34,778 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 September 30, 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 September 30, 2024	434,930	$	6.62	5.58
Options exercisable at September 30, 2024	434,930	$	6.62	5.58

At September 30, 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 $1,146. 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 September 30, 2024.

The following table summarizes the Company’s restricted stock activity for the nine months ended September 30, 2024:


			Weighted-Average
	Number		Grant Date
	of Shares		Fair Value per Share
Non-vested restricted stock at beginning of year	-	$	-
Granted	15,000		7.94
Non-vested restricted stock at September 30, 2024	15,000	$	7.94

As of September 31, 2024, there was $110 of unrecognized compensation cost related to the nonvested restricted stock awards granted under the 2020 EIP. The cost is expected to be recognized over a remaining period of 2.77 years.

For the nine months ended September 30, 2024 and 2023, share-based compensation of options and restricted stock under the plan totaled $9 and $395, respectively.

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 September 30, 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 2048, 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 15.9 years and 10.8 years as of September 30, 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 3.89% and 2.60% in calculating the value of the lease liability as of September 30, 2024 and December 31, 2023, respectively.

For the nine months ended September 30, 2024 and 2023, total operating lease costs were $573 and $537, respectively, and were included in occupancy and other expense. The right-of-use asset, included in other assets, was $7,444 and $6,239 and the corresponding lease liability, included in accrued expenses and other liabilities, was $7,509 and $6,307 as of September 30, 2024 and December 31, 2023, respectively.

Future minimum payments for operating leases with initial or remaining terms of one year or more as of September 30, 2024 were as follows:


Years ending December 31:
2024	$	195
2025		757
2026		745
2027		705
2028		708
Thereafter		7,528
Total future minimum lease payments		10,638
Amounts representing interest		(3,129)
Present Value of Net Future Minimum Lease Payments	$	7,509

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:


	September 30,		December 31,
	2024		2023
Commitments to extend credit summarized as follows:
Future loan commitments	$	4,477	$	5,318
Undisbursed construction loans		21,449		42,482
Undisbursed home equity lines of credit		10,363		10,727
Undisbursed commercial and other line of credit		77,780		69,258
Standby letters of credit		2,941		4,965
Loans sold with recourse		807		1,873
Total	$	117,817	$	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.

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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 $177 and $132 related to our swaps is recorded in other assets and other liabilities as of September 30, 2024 and December 31, 2023, respectively.

Summary information regarding these derivatives is presented below:


	September 30,			December 31,
	2024			2023
Notational amount	$	113,385		$	65,420
Fair value	$	6,043		$	5,343
Weighted average pay rates		5.24	%		5.064	%
Weighted average receive rates		7.29	%		7.49	%
Weighted average maturity (in years)		8.45			8.88

Number of Contracts		19			14

In addition, as of September 30, 2024, the Company has three forward rate swaps with a notional value of $26,110 and a fair value of $583 with effective dates at various points in 2024 and 2025. These forward swaps have a fixed weighted average pay rate of 5.79% 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%.

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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 September 30, 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

	September 30, 2024
Rhinebeck Bank
Total capital (to risk-weighted assets)	$	138,116	12.81	%	$	86,234	8.00	%	$	107,793	10.00	%
Tier 1 capital (to risk-weighted assets)		129,743	12.04	%		64,676	6.00	%		86,234	8.00	%
Common equity tier one capital (to risk weighted assets)		129,743	12.04	%		48,507	4.50	%		70,065	6.50	%
Tier 1 capital (to average assets)		129,743	10.04	%		51,694	4.00	%		64,618	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	%

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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)

	September 30, 2024
Assets:
U.S. Treasury securities	$	20,656	$	20,656	$	—	$	—
U.S. government agency mortgage-backed securities-residential		111,226		—		111,226		—
U.S. government agency securities		21,243		—		21,243		—
Municipal securities		2,528		—		2,428		100
Corporate bonds		12,798		—		12,798		—
Other		683		—		683		—
Total available for sale securities		169,134		20,656		148,378		100
Loan level interest rate swaps		6,626		—		6,626		—
Total assets	$	175,760	$	20,656	$	155,004	$	100
Liabilities:
Loan level interest rate swaps	$	6,626	$	—	$	6,626	$	—
Total liabilities	$	6,626	$	—	$	6,626	$	—


	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 September 30, 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)

	September 30, 2024
Individually analyzed loans, with specific reserves	$	354	$	—	$	—	$	354
Total	$	354	$	—	$	—	$	354


	December 31, 2023
Individually analyzed loans, with specific reserves	$	756	$	—	$	—	$	756
Other real estate owned		25		—		—		25
Total	$	781	$	—	$	—	$	781

Loans that were individually analyzed using the fair value of the collateral had recorded investments of $500 and $971 with valuation allowances of $146 and $215 and fair values of $354 and $756 at September 30, 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)

	September 30, 2024
Individually analyzed loans, with specific reserves	$	354	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	$	756	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:


			Fair Value Measurements at
			September 30, 2024 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and cash equivalents	$	46,380	$	46,380	$	—	$	—	$	46,380
Available for sale securities		169,134		20,656		148,378		100		169,134
Loan level interest rate swaps		6,626		—		6,626		—		6,626
FHLB stock		3,510		—		3,510		—		3,510
Loans, net		964,875		—		—		949,452		949,452
Accrued interest receivable		4,375		—		4,375		—		4,375
Mortgage servicing rights		1,680		—		—		4,299		4,299
Financial Liabilities:
Deposits	$	1,046,173	$	—	$	1,002,426	$	—	$	1,002,426
Mortgagors' escrow accounts		3,552		—		3,552		—		3,552
FHLB advances		59,773		—		59,567		—		59,567
Subordinated debt		5,155		—		5,155		—		5,155
Loan level interest rate swaps		6,626		—		6,626		—		6,626
Accrued interest payable		1,014		—		1,014		—		1,014


			Fair Value Measurements at
			December 31, 2023 Using
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and cash equivalents	$	22,129	$	22,129	$	—	$	—	$	22,129
Available for sale securities		191,985		24,006		167,864		115		191,985
Loan level interest rate swaps		6,278		—		6,278		—		6,278
FHLB stock		6,514		—		6,514		—		6,514
Loans, net		1,008,851		—		—		979,037		979,037
Accrued interest receivable		4,616		—		4,616		—		4,616
Mortgage servicing rights		1,977		—		—		4,720		4,720
Financial Liabilities:
Deposits	$	1,030,503	$	—	$	948,140	$	—	$	948,140
Mortgagors' escrow accounts		9,274		—		9,274		—		9,274
FHLB advances		128,064		—		127,592		—		127,592
Subordinated debt		5,155		—		5,155		—		5,155
Loan level interest rate swaps		6,278		—		6,278		—		6,278
Accrued interest payable		1,488		—		1,488		—		1,488

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Rhinebeck Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

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

12. Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss at September 30, 2024 and December 31, 2023 were as follows:


	September 30,		December 31,
	2024		2023
Securities available for sale:
Net unrealized loss on securities available for sale	$	(14,608)	$	(33,010)
Related deferred tax⁽¹⁾		3,068		6,933
Net accumulated other comprehensive loss		(11,540)		(26,077)
Defined benefit pension plan:
Unrecognized net actuarial loss and prior service cost		(3,992)		(4,330)
Related deferred tax⁽¹⁾		838		909
Net accumulated other comprehensive loss		(3,154)		(3,421)
Total accumulated other comprehensive loss	$	(14,694)	$	(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. Unearned ESOP shares are not deemed outstanding for earnings per share calculations.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net income applicable to common stock	$	(8,062)	$	1,236	$	(5,966)	$	3,465

Average number of common shares outstanding		11,072,607		11,046,118		11,072,607		11,145,659
Less: Average unearned ESOP shares		313,693		335,511		319,147		340,960
Average number of common shares outstanding used to calculate basic earnings per common share		10,758,914		10,710,607		10,753,460		10,804,699
Additional common stock equivalents (nonvested stock) used to calculate diluted earnings per share		—		30,770		—		34,791
Additional common stock equivalents (stock options) used to calculate diluted earnings per share		—		18,741		—		52,240
Weighted-average common shares and common stock equivalents used to calculate diluted earnings per share		10,758,914		10,760,118		10,753,460		10,891,730

Earnings (loss) per Common share:
Basic	$	(0.75)	$	0.12	$	(0.55)	$	0.32
Diluted ⁽¹⁾	$	(0.75)	$	0.11	$	(0.55)	$	0.32

(1) Because the Company was in a net loss position for the three and nine months ended September 30, 2024, diluted net loss per share is the same as basic net loss per share, as the inclusion of potentially dilutive common shares would have been anti-dilutive. The weighted average anti-dilutive common shares not included in the calculation of diluted earnings per share were 89,133 and 84,117 for the three and nine months ended September 30, 2024.

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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 September 30, 2024 and December 31, 2023, and for the three and nine months ended September 30, 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;

●

the effect of our rating under the Community Reinvestment Act;

●

our ability to achieve the expected results of the balance sheet restructuring;

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●

our ability to manage or reduce expenses;

●

changes in the determination of goodwill impairment;

●

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 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—Critical Accounting Policies” in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 26, 2024.

Comparison of Financial Condition at September 30, 2024 and December 31, 2023

Total Assets. Total assets were $1.27 billion at September 30, 2024 as compared to $1.31 billion at December 31, 2023, a decrease of $47.1 million, or 3.6%. Loans receivable decreased by $44.0 million, or 4.4%, available for sale securities decreased $22.9 million, or 11.9%, premises and equipment decreased $3.5 million, or 20.0%, Federal Home Loan Bank stock decreased $3.0 million, or 46.1%, and deferred tax assets decreased $2.1 million, or 21.1%. The decreases were partially offset by an increase in cash of $24.3 million, or 109.6%.

Cash and Cash Equivalents. Cash and cash equivalents increased $24.3 million, or 109.6%, to $46.4 million at September 30, 2024 from $22.1 million at December 31, 2023, primarily due to an increase in deposits held at the FHLB, Federal Reserve Bank of New York and other interest-bearing depository accounts with proceeds resulting from principal payments from loans and security sales.

Investment Securities Available for Sale. Available for sale securities decreased $22.9 million, or 11.9%, due to the balance sheet restructuring, which resulted in sales of $70.6 million of lower-yielding securities, and paydowns, calls and maturities of $27.3 million, partially offset by purchases in higher-yielding securities of $56.7 million and a decrease in unrealized loss on available for sale securities of $18.4 million. The restructuring decreased the average life of the securities portfolio, and improved the Company’s earnings stream going forward, beginning in the fourth quarter of 2024. The securities sold had a yield of 1.11% and a weighted average life of approximately 5.8 years. The proceeds were reinvested into assets yielding 4.22% with an approximate weighted average life of 2.7 years.

Net Loans. Total net loans receivable were $964.9 million at September 30, 2024, a decrease of $44.0 million, or 4.4%, as compared to $1.01 billion at December 31, 2023. The decrease was primarily due to a decrease in indirect automobile loans of $75.3 million, or 19.1%, reflecting a strategic decision to decrease that loan portfolio as a percentage of our balance sheet. At September 30, 2024, indirect automobile loans were 25.2% of assets, compared to 30.0% at December 31, 2023. Partially offsetting the decreases in automobile loans were increases in commercial real estate loans of $27.0 million, or 6.3%, and residential real estate loans of $8.3 million, or 10.8%. Non-accrual loans increased by $511,000, or 12.2%, between December 31, 2023 and September 30, 2024.

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Federal Home Loan Bank Stock. FHLB stock decreased $3.0 million, or 46.1%, to $3.5 million at September 30, 2024 from $6.5 million at December 31, 2023, primarily due to a reduction in mandatory ownership of FHLB stock in connection with the pay-off of $68.3 million in advances during the nine months ended September 30, 2024.

Premises and Equipment. Premises and equipment decreased $3.5 million, or 20.0%, to $14.1 million at September 30, 2024 from $17.6 million at December 31, 2023 as the Bank’s Beacon branch office was sold in February of 2024 for $2.9 million. The sale included the land and building as well as all branch furniture and equipment. All of the branch accounts were redomiciled to the customer’s next nearest Bank branch and all employees were placed in open positions.

Total Liabilities. Total liabilities decreased $56.0 million, or 4.7%, to $1.14 billion at September 30, 2024 from $1.20 billion at December 31, 2023, primarily due to a decreases in Federal Home Loan Bank advances of $68.3 million and mortgagors’ escrow accounts of $5.7 million. These decreases were partly offset by an increase in deposits of $15.7 million and an increase of $2.3 million in accrued expenses and other liabilities.

Deposits. Deposits increased $15.7 million, or 1.5%, to $1.05 billion at September 30, 2024 from $1.03 billion at December 31, 2023. For the nine months ended September 30, 2024, interest-bearing accounts increased $8.6 million, or 1.1%, to $789.3 million, while non-interest bearing balances increased $7.1 million, or 2.8%, to $256.9 million. Of the interest bearing accounts, time deposits increased $25.4 million, or 8.0%, at September 30, 2024, while transaction accounts (including NOW, savings and money market accounts) decreased $16.8 million, or 3.6%. The continued growth in interest-bearing time deposits was primarily due a shift in deposits from lower-yielding transaction accounts to higher-yielding time deposits and money market accounts as customers sought higher interest rates.

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 $42.9 million and $40.0 million at September 30, 2024 and December 31, 2023, respectively. We had no brokered deposits at either September 30, 2024 or December 31, 2023.

Mortgagors’ escrow accounts. Mortgagors’ escrow accounts decreased $5.7 million, or 61.7%, from $9.3 million at December 31, 2023 to $3.6 million at September 30, 2024, primarily due to the timing of tax disbursements.

Advances from the Federal Home Loan Bank. Advances from the Federal Home Loan Bank decreased $68.3 million, or 53.3%, from $128.1 million at December 31, 2023 to $59.8 million at September 30, 2024, primarily due the use of proceeds from the sales of securities and a reduction in the origination of indirect automobile loans to pay down the debt.

Stockholders’ Equity. Stockholders' equity increased $9.0 million, or 7.9%, to $122.7 million at September 30, 2024. The increase was primarily due to a $14.8 million decrease in accumulated other comprehensive loss primarily reflecting efforts of the balance sheet restructuring as well as the 50 basis point decrease in market interest rates, which was partially offset by a net loss of $5.6 million. At September 30, 2024, the Company’s book value per share was $11.06 and the Company’s ratio of stockholders’ equity-to-total assets was 9.69%. 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 $3.1 million and $3.3 million at September 30, 2024 and December 31, 2023, respectively.

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Comparison of Operating Results for the Three and Nine Months Ended September 30, 2024 and 2023

Net Income. Net loss for the third quarter of 2024 was $8.1 million, compared to net income of $1.2 million for the third quarter of 2023. Diluted loss per share was $0.75 for the third quarter of 2024, compared to earnings per share of $0.11 for the same quarter a year ago. Interest and dividend income increased $506,000, or 3.3%, interest expense increased $465,000, or 7.9%, the provision for credit losses decreased $21,000, or 2.3%, non-interest income decreased $11.7 million, or 709.2%, non-interest expense increased $266,000, or 3.0%, and taxes decreased $2.6 million, or 752.2%, between comparable quarters.

Net loss for the nine months ended September 30, 2024 totaled $6.0 million, compared to net income of $3.5 million for the same period in 2023. Diluted loss per share was $0.55 for the first nine months of 2024 compared to earnings per share of $0.32 for the first nine months of 2023. Interest and dividend income increased $2.4 million, or 5.3%, interest expense increased $3.5 million, or 21.3%, the provision for credit losses decreased $53,000, non-interest income decreased $11.4 million, or 260.0%, non-interest expense decreased $402,000, or 1.5%, and taxes decreased $2.6 million, or 270.6%, between comparable periods.

Both the third quarter and nine months of 2024 results reflected a $12.0 million pre-tax loss from the previously announced balance sheet restructuring.

Net Interest Income. Net interest income increased $41,000, or 0.4%, to $9.7 million for the three months ended September 30, 2024. The ratio of average interest-earning assets to average interest-bearing liabilities increased 1.5% to 135.00% while the net interest margin increased by 17 basis points to 3.26% when comparing the third quarter of 2024 to the same quarter in 2023.

Net interest income decreased $1.1 million, or 3.8%, to $27.7 million for the nine months ended September 30, 2024, compared to $28.8 million for the nine months ended September 30, 2023. The ratio of average interest-earning assets to average interest-bearing liabilities decreased 0.9% to 132.92% while our net interest margin decreased by 1 basis point to 3.08% when comparing the first nine months of 2024 to the same period in 2023.

Interest Income. Interest income increased $506,000, or 3.3%, to $16.0 million for the three months ended September 30, 2024, from $15.5 million for the comparable 2023 period primarily due to the rising interest rate environment, offset by a decrease in the average balance of loans and available for sale securities. The average yield of interest-earning assets increased by 43 basis points to 5.39% and the average balance of interest-earning assets decreased $58.1 million, or 4.7%. The average yield on loans increased 39 basis points, while the average yield on available for sale securities increased 31 basis points. For the three months ended September 30, 2024, the average balance of loans decreased $25.6 million, while the average balance of available for sale securities decreased $29.5 million when compared to the three months ended September 30, 2023.

Interest income increased $2.4 million, or 5.3%, to $47.5 million for the nine months ended September 30, 2024 from $45.1 million for the comparable 2023 period. Interest and fees on loans increased due to the rising interest rate environment while interest and dividends on securities decreased as the average balance decreased. For the nine months ended September 30, 2024, the average balance of loans decreased $11.0 million, while the average balance of available for sale securities decreased $33.0 million when compared to the nine months ended September 30, 2023. The average yield on loans increased 42 basis points, while the average yield on available for sale securities increased 6 basis points. The average yield of interest-earning assets increased by 45 basis points to 5.28% and the average balance of interest-earning assets decreased $47.6 million, or 3.8%.

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Interest Expense. Interest expense increased $465,000, or 7.9%, from $5.9 million for the quarter ended September 30, 2023, to $6.3 million for the quarter ended September 30, 2024. The average cost of interest-bearing liabilities increased 38 basis points to 2.88% for the quarter ended September 30, 2024, due to the current interest rate environment and a greater proportion of deposits consisting of higher-yielding certificates of deposit. The average balance of total interest-bearing liabilities decreased $57.2 million, or 6.1%, to $876.9 million primarily due to a decrease of $73.2 million, or 13.9%, 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, partially offset by an increase of $53.0 million, or 18.2%, in the average balance of certificates of deposit. Between the three months ended September 30, 2023 and 2024, the average cost of Federal Home Loan Bank advances decreased by 55 basis points and the average balance also decreased by $36.1 million.

Interest expense increased $3.5 million, or 21.3%, from $16.3 million for the nine months ended September 30, 2023, to $19.7 million for the nine months ended September 30, 2024. The average cost of interest-bearing liabilities increased 59 basis points to 2.92% for the nine-month period ended September 30, 2024, due to the current interest rate environment and a greater proportion of deposits consisting of higher-rate certificates of deposit, while the average balance of total interest-bearing liabilities decreased $27.7 million, or 3.0%, to $903.5 million. Between the nine months ended September 30, 2023 and 2024, the average cost of Federal Home Loan Bank advances decreased by 9 basis points, while the average balance increased by $5.6 million. A decrease of $98.1 million, or 17.8%, in the average balance of core interest-bearing deposits (consisting of savings, NOW and money market accounts) was partially offset by an increase of $64.5 million, or 23.5%, in the average balance of certificates of deposit as depositors sought higher yields in the increasing interest rate environment.

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

Net charge-offs decreased $41,000 from $385,000 for the third quarter of 2023 to $344,000 for the third quarter of 2024. The decrease was primarily due to decreased net charge-offs in indirect automobile loans of $216,000 and recoveries in residential real estate and commercial loans in the third quarter of 2023. Net charge-offs increased $8,000, or 0.6%, to $1.4 million for the first nine months of 2024. The percentage of overdue account balances to total loans decreased to 1.62% as of September 30, 2024, from 1.90% as of December 31, 2023, while non-performing assets increased $486,000, or 11.6%, to $4.7 million at September 30, 2024.

Non-Interest (Loss) Income. Non-interest loss totaled $10.0 million for the three months ended September 30, 2024, a decrease of $11.7 million, from non-interest income of $1.6 million for the comparable period in 2023, due primarily to the $12.0 million loss on sale of investment securities resulting from the previously mentioned balance sheet restructuring. Excluding the securities loss, non-interest income for the third fiscal quarter of 2024 would have been $2.0 million compared to $1.6 million for the three months ended September 30, 2023. The Company recorded an increase of $54,000, or 16.8%, in investment advisory income resulting from the improved market and economic conditions, an increase of $194,000 related to gains on life insurance, an increase of $35,000 in service charges on deposit accounts, an increase of $22,000 in the cash surrender value of life insurance, and an increase in the gain on sales of loans of $20,000.

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

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

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

Income Taxes. The income tax benefit for the third quarter of 2024 totaled $2.2 million at a negative effective tax rate of 21.72%, compared to a provision of $343,000 at an effective tax rate of 21.72% in the prior year’s comparable quarter. The decrease in the provision for income taxes in the third quarter of 2024 reflected a lower pre-tax income when compared to the prior year’s comparable quarter and a tax benefit resulting from a $12.0 million pre-tax loss on the sale of available-for-sale investment securities.

The income tax benefit for the first nine months of 2024 totaled $1.6 million at a negative effective tax rate of 21.50%, compared to a provision of $958,000 at an effective tax rate of 21.66% for the first nine months of 2023. The decrease in the effective tax rate in the first half of 2024, as compared to the same period a year ago, was primarily due to the pre-tax loss on the sale of investment securities as previously mentioned.

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Average Balance Sheets for the Three and Nine Months Ended September 30, 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 September 30,
	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	$	26,810	$	366	5.43	%	$	28,282	$	384	5.39	%
Loans⁽¹⁾		978,806		14,679	5.97	%		1,004,420		14,139	5.58	%
Available for sale securities		174,265		895	2.04	%		203,769		889	1.73	%
Other interest-earning assets		3,832		100	10.38	%		5,386		122	8.99	%
Total interest-earning assets		1,183,713		16,040	5.39	%		1,241,857		15,534	4.96	%
Non-interest-earning assets		86,673						91,118
Total assets	$	1,270,386					$	1,332,975
Liabilities and equity:
NOW accounts	$	124,099	$	44	0.14	%	$	139,318	$	49	0.14	%
Money market accounts		188,449		1,294	2.73	%		227,116		1,552	2.71	%
Savings accounts		139,067		126	0.36	%		158,352		144	0.36	%
Certificates of deposit		343,597		4,066	4.71	%		290,634		2,804	3.83	%
Total interest-bearing deposits		795,212		5,530	2.77	%		815,420		4,549	2.21	%
Escrow accounts		12,481		37	1.18	%		13,946		39	1.11	%
Federal Home Loan Bank advances		63,469		668	4.19	%		99,541		1,189	4.74	%
Subordinated debt		5,155		99	7.64	%		5,155		99	7.62	%
Other interest-bearing liabilities		534		7	5.21	%		—		—	—	%
Total other interest-bearing liabilities		81,639		811	3.95	%		118,642		1,327	4.44	%
Total interest-bearing liabilities		876,851		6,341	2.88	%		934,062		5,876	2.50	%
Non-interest-bearing deposits		247,180						263,021
Other non-interest-bearing liabilities		26,992						27,565
Total liabilities		1,151,023						1,224,648
Total stockholders’ equity		119,363						108,327
Total liabilities and stockholders’ equity	$	1,270,386					$	1,332,975
Net interest income			$	9,699					$	9,658
Interest rate spread					2.51	%					2.46	%
Net interest margin⁽²⁾					3.26	%					3.09	%
Average interest-earning assets to average interest-bearing liabilities					135.00	%					132.95	%

⁽¹⁾	Non-accruing loans are included in the outstanding loan balance. Deferred loan fees included in interest income totaled $10,000 and $17,000 for the three months ended September 30, 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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	For the Nine Months Ended September 30,
	2024						2023
	Average		Interest and				Average		Interest and
	Balance		Dividends		Yield/Cost⁽³⁾		Balance		Dividends		Yield/Cost⁽³⁾

	(Dollars in thousands)
Assets:
Interest bearing depository accounts	$	21,659	$	878	5.41	%	$	25,601	$	971	5.07	%
Loans⁽¹⁾		993,297		43,584	5.86	%		1,004,270		40,847	5.44	%
Available for sale securities		180,808		2,588	1.91	%		213,773		2,958	1.85	%
Other interest-earning assets		5,172		401	10.36	%		4,847		299	8.25	%
Total interest-earning assets		1,200,936		47,451	5.28	%		1,248,491		45,075	4.83	%
Non-interest-earning assets		88,215						89,619
Total assets	$	1,289,151					$	1,338,110
Liabilities and equity:
NOW accounts	$	124,305	$	128	0.14	%	$	142,056	$	148	0.14	%
Money market accounts		187,182		3,777	2.70	%		244,662		4,826	2.64	%
Savings accounts		142,896		386	0.36	%		165,774		450	0.36	%
Certificates of deposit		338,864		11,692	4.61	%		274,375		7,308	3.56	%
Total interest-bearing deposits		793,247		15,983	2.69	%		826,867		12,732	2.06	%
Escrow accounts		9,906		88	1.19	%		10,931		90	1.10	%
Federal Home Loan Bank advances		93,806		3,295	4.69	%		88,225		3,152	4.78	%
Subordinated debt		5,155		296	7.67	%		5,155		279	7.24	%
Other interest-bearing liabilities		1,393		57	5.47	%		—			—	%
Total other interest-bearing liabilities		110,260		3,736	4.53	%		104,311		3,521	4.51	%
Total interest-bearing liabilities		903,507		19,719	2.92	%		931,178		16,253	2.33	%
Non-interest-bearing deposits		242,255						270,992
Other non-interest-bearing liabilities		27,072						26,322
Total liabilities		1,172,834						1,228,492
Total stockholders’ equity		116,317						109,618
Total liabilities and stockholders’ equity	$	1,289,151					$	1,338,110
Net interest income			$	27,732					$	28,822
Interest rate spread					2.36	%					2.49	%
Net interest margin⁽²⁾					3.08	%					3.09	%
Average interest-earning assets to average interest-bearing liabilities					132.92	%					134.08	%

⁽¹⁾	Non-accruing loans are included in the outstanding loan balance. Deferred loan fees included in interest income totaled $44,000 and $53,000 for the nine months ended September 30, 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 did not have any excludable out-of-period items or adjustments.


	Three Months Ended September 30, 2024						Nine Months Ended September 30, 2024
	Compared to Three Months Ended						Compared to Nine Months Ended
	September 30, 2023						September 30, 2023
	Increase (Decrease)						Increase (Decrease)
	Due to						Due to
	Volume		Rate		Net		Volume		Rate		Net
Interest income:
Interest bearing depository accounts	$	(20)	$	2	$	(18)	$	(156)	$	63	$	(93)
Loans receivable		(367)		907		540		(451)		3,188		2,737
Available for sale securities		(139)		144		5		(469)		99		(370)
Other interest-earning assets		(38)		17		(21)		21		81		102
Total interest-earning assets		(564)		1,070		506		(1,055)		3,431		2,376
Interest expense:
Deposits		(115)		1,095		980		(536)		3,786		3,250
Escrow accounts		(4)		3		(1)		(8)		7		(1)
Federal Home Loan Bank advances		(392)		(129)		(521)		197		(53)		144
Subordinated debt		—		—		—		—		17		17
Other interest-bearing liabilities		7		—		7		56		—		56
Total interest-bearing liabilities		(504)		969		465		(291)		3,757		3,466
Net (decrease) increase in net interest income	$	(60)	$	101	$	41	$	(764)	$	(326)	$	(1,090)

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 September 30, 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	$	120,686	$	(34,375)	(22.2)	%	10.44	%	(15.8)	%
300		128,815		(26,246)	(16.9)	%	10.94	%	(11.8)	%
200		137,531		(17,530)	(11.3)	%	11.45	%	(7.6)	%
100		146,274		(8,787)	(5.7)	%	11.94	%	(3.7)	%
0		155,061		—	—	%	12.40	%	—	%
(100)		153,144		(1,917)	(1.2)	%	12.00	%	(3.2)	%
(200)		145,555		(9,506)	(6.1)	%	11.19	%	(9.7)	%
(300)		129,955		(25,106)	(16.2)	%	9.81	%	(20.9)	%
(400)		113,223		(41,838)	(27.0)	%	8.36	%	(32.6)	%

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.

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As reported in the Consolidated Statements of Cash Flows, cash flows are classified for financial reporting purposes as operating, investing, or financing cash flows. Net cash provided by operating activities was $4.9 million for the nine months ended September 30, 2024 as compared to $6.9 million for the nine months ended September 30, 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. Net cash provided by investing activities was $77.7 million for the nine months ended September 30, 2024, and $12.6 million for the nine months ended September 30, 2023, principally reflecting our investment security and loan activities in the respective periods. A cash inflow of $42.1 million for a decrease in loans was the primary contributor to the cash provided by investing activities for the nine months ended September 30, 2024 as opposed to a cash outflow of $11.6 million for an increase in loans for the nine months ended September 30, 2023. Deposit and borrowing cash flows have traditionally comprised most of our financing activities, which resulted in a net cash outflow of $58.3 million in the nine months ended September 30, 2024, due primarily to a paydown of debt, compared to a net cash outflow of $24.1 million in the comparable 2023 period caused by an increase in debt offset by a decrease in deposits.

At September 30, 2024, we had the following main sources of availability of liquid funds and borrowings:


(In thousands)	Total
Available liquid funds:
Cash and cash equivalents	$	46,380
Unencumbered securities		90,614
Availability of borrowings:
Zions Bank line of credit		10,000
Pacific Coast Bankers Bank line of credit		50,000
FHLB secured line of credit		215,167
FRB secured line of credit		234,647
Total available sources of funds	$	646,808

The Bank has access to a preapproved secured line of credit with the FHLB which totaled $633,017 at September 30, 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.

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.

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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 September 30, 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 September 30, 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, of which 47,506 shares remain available for repurchase. The repurchase plan has no expiration date. No shares were repurchased under the stock repurchase plan during the three months ended September 30, 2024.

There were no sales of unregistered securities during the quarter ended September 30, 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 September 30, 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 Exhibit 3.1 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 Exhibit 3.1 to the Current Report on Form 8-K of Rhinebeck Bancorp, Inc. (File no. 001-38779), 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 Exhibit 4 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.)

10.1	Change in Control Agreement, effective July 8, 2024, by and between Kevin Nihill and Rhinebeck Bank (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Rhinebeck Bancorp, Inc. (File no. 001-38779), originally filed with the Securities and Exchange Commission on June 25, 2024.)

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 September 30, 2024, formatted in inline XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Financial Condition, (ii) Consolidated Statements of (Loss) Income, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Changes in 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 September 30, 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: November 12, 2024		/s/ Michael J. Quinn
		Michael J. Quinn President and Chief Executive Officer

Date: November 12, 2024		/s/ Kevin Nihill
		Kevin Nihill Chief Financial Officer