Rhinebeck Bancorp, Inc. Reports Results for the Three and Six Months Ended June 30, 2023

POUGHKEEPSIE, NY / ACCESSWIRE / July 27, 2023 / Rhinebeck Bancorp, Inc. (the "Company") (NASDAQ:RBKB), the holding company of Rhinebeck Bank (the "Bank"), reported net income for the three months ended June 30, 2023 of $1.4 million ($0.13 per basic and diluted share), which was $598,000, or 29.5%, less than the comparable prior year period. Net income for the six months ended June 30, 2023 of $2.2 million ($0.21 per basic and $0.20 per diluted share), was $1.9 million, or 45.4%, less than the same period last year.

The decrease in net income was primarily due to a decrease in net interest income accompanied by a reduction in non-interest income. The Company's return on average assets and return on average equity were 0.43% and 5.17% for the second quarter of 2023, respectively, as compared to 0.63% and 7.06% for the second quarter of 2022, respectively. The Company's return on average assets and return on average equity were 0.34% and 4.08% for the first six months of 2023, respectively, as compared to 0.64% and 6.86% for the first six months of 2022, respectively.

President and Chief Executive Officer Michael J. Quinn said, "While our second quarter 2023 results of net income of $1.4 million and a return on average assets of 0.43% compare negatively to our second quarter 2022 results, they are an enhancement compared to the first quarter of 2023, with results showing improvement in net income, return on average assets, and return on average equity as we progress in the year. We continue to focus on improving results through the beneficial pricing of assets and liabilities, as well as reducing operational costs. Additionally, our loan portfolios continue to perform at satisfactory levels."

Income Statement Analysis

Net interest income decreased $1.6 million, or 14.4%, to $9.3 million for the three months ended June 30, 2023, from $10.9 million for the three months ended June 30, 2022. Year to date net interest income decreased $1.8 million, or 8.7%, to $19.2 million compared to $21.0 million for the prior year six-month period. The decreases on both a quarterly and year-to-date basis were primarily due to higher costs for deposits and borrowings and higher average balances of interest-bearing liabilities, partially offset by higher interest-earning asset balances and higher yields on those interest earning assets. The increased yields on interest-earning assets and the increased costs on our interest-bearing liabilities were mostly due to the rising interest rate environment over the past year.

For the three months ended June 30, 2023, the average balance of interest-bearing liabilities increased by $101.2 million, or 12.0%, and the cost of interest-bearing liabilities increased by 198 basis points to 2.40%. The average balance of interest-earning assets grew by $54.7 million, or 4.6%, to $1.26 billion and the average yields improved by 85 basis points to 4.77%, when compared to the three months ended June 30, 2022.

For the six months ended June 30, 2023, the average balance of interest-bearing liabilities increased by $95.7 million, or 11.5%, and the cost of interest-bearing liabilities increased by 183 basis points to 2.25%. The average balance of interest-earning assets grew by $51.3 million, or 4.3%, to $1.25 billion and the average yields improved by 94 basis points to 4.76%, when compared to the six months ended June 30, 2022.

The provision for credit losses on loans decreased by $798,000, from an expense of $346,000 for the quarter ended June 30, 2022 to a credit of $452,000 for the current quarter. The decrease to the provision for the three months ended June 30, 2023 was primarily attributable to a decrease in loan balances, primarily indirect automobile loans, and a $710,000 loss on a commercial loan that was reserved for in the first quarter and written off in the second quarter.

Net charge-offs increased $745,000 from net recoveries of $123,000 for the second quarter of 2022 to net charge-offs of $622,000 for the second quarter of 2023. The increase was primarily due to a $710,000 charge-off of one commercial loan in the second quarter of 2023. Year-to-date, net charge-offs increased $1.1 million from net recoveries of $43,000 for the first six months of 2022 to net charge-offs of $1.0 million for the first six months of 2023. The increase was primarily due to the aforementioned commercial loan charge-off and increased charge-offs in indirect automobile loans of $354,000. The percentage of overdue account balances to total loans decreased to 1.76% as of June 30, 2023 from 2.29% as of December 31, 2022, while non-performing assets increased $73,000, or 1.7%, to $4.5 million at June 30, 2023.

Non-interest income totaled $1.4 million for the three months ended June 30, 2023, a decrease of $145,000, or 9.6%, from the comparable period in the prior year, due primarily to a decrease in the net gain on sales of mortgage loans of $241,000 as activity decreased due to fewer originations in the increasing interest rate environment and a strategic decision to hold new production in our portfolio instead of selling these loans. The decrease was also due to a decrease in investment advisory income of $129,000, primarily the result of a challenging investment market and economic conditions. These decreases were partially offset by $162,000 as the prior year period included a net realized loss on the sale of securities.

Year-to-date non-interest income totaled $2.7 million for the six months ended June 30, 2023, a decrease of $480,000, or 14.9%, from the comparable period in the prior year, due primarily to a decrease in the net gain on sales of mortgage loans as activity decreased due to fewer originations in the increasing interest rate environment and a strategic decision to hold new production in our portfolio instead of selling these loans. Gain on sales of mortgage loans decreased $631,000, or 91.1%, compared to the prior year period as we sold $2.6 million of residential mortgage loans in the first half of 2023 as compared to $18.1 million in the first half of 2022. Investment advisory income decreased $160,000, or 22.8%, primarily the result of a challenging investment market and economic conditions. These decreases were partially offset by the prior year period net realized loss on the sale of securities of $162,000.

For the second quarter of 2023, non-interest expense totaled $9.3 million, a decrease of $196,000, or 2.1%, over the comparable 2022 period. The decrease was primarily due to a decrease in salaries and benefits of $565,000, or 10.2%, as the number of employees decreased. Occupancy decreased $112,000, or 9.3%, due to a branch closure at the end of 2022. Marketing fees also decreased by $58,000. These decreases were partially offset by the increase in other non-interest expense of $195,000, or 13.8%, as well as an increase in FDIC deposit insurance assessments of $160,000, or 82.5%.

For the first six months of 2023, non-interest expense totaled $18.5 million, a decrease of $98,000, or 0.5%, over the comparable 2022 period. The decrease was primarily due to a decrease in salaries and benefits of $844,000 as the number of employees decreased when the Company made the difficult decision to layoff approximately 5% of its workforce in the first quarter of 2023. Occupancy decreased $131,000 due to the closure of our Monroe branch at the end of 2022. Marketing fees also decreased by $71,000. These decreases were partially offset due to the growth in other non-interest expense of $549,000, or 20.4%, primarily due to a decrease in deferred loan commitments and inflationary pressures on our service contracts, as well as an increases in FDIC deposit insurance assessments of $260,000, or 69.1%, and an increase in professional fees of $71,000.

Balance Sheet Analysis

Total assets increased $1.2 million, or 0.09%, to $1.337 billion at June 30, 2023 from $1.336 billion at December 31, 2022. Cash and cash equivalents increased $22.6 million, or 71.9%, primarily due to an increase in deposits held at the Federal Home Loan Bank of New York. Federal Home Loan Bank stock increased $2.3 million and other assets increased by $1.4 million. These increases were partially offset by a decrease in available for sale securities of $16.8 million, or 7.5%, due to principal payments and maturities, a decrease in net loans of $7.3 million, or 0.7%, and a decrease in accrued interest receivable of $1.2 million, or 29.0%.

While net loans decreased $7.3 million, or 0.7%, commercial real estate loans increased $34.8 million, or 9.4%, while indirect automobile loans decreased $39.3 million, or 8.6%. The increase in commercial real estate was primarily due to the closing of two large loans, secured by an auto dealership and a retail shopping center. The decrease in our indirect automobile portfolio was due to a strategic decision to reduce loan growth and decrease that loan portfolio as a percentage of our balance sheet.

Past due loans decreased $5.3 million, or 23.5%, between December 31, 2022 and June 30, 2023, finishing at $17.4 million, or 1.76%, of total loans, down from $22.7 million, or 2.29%, of total loans at year-end 2022. Our allowance for credit losses was 0.81% of total loans and 177.96% of non-performing loans at June 30, 2023 as compared to 0.80% of total loans and 179.54% of non-performing loans at December 31, 2022.

Total liabilities increased $1.8 million, or 0.2%, to $1.230 billion at June 30, 2023 from $1.228 billion at December 31, 2022 as borrowings increased to fund deposit outflows. Advances from the Federal Home Loan Bank increased $48.7 million, or 84.4%, while deposits decreased $52.5 million, or 4.6%. Interest bearing deposits decreased $25.2 million, or 3.0%, while non-interest bearing deposits decreased $27.3 million, or 9.6%, as some depositors withdrew funds in reaction to the highly publicized bank failures in the first quarter of 2023 and as competition for deposits increased. At June 30, 2023, uninsured deposits represented approximately 29% of the Bank's total deposits.

Stockholders' equity decreased $669,000, or 0.6%, to $107.5 million at June 30, 2023, primarily due to the repurchase of 200,000 shares of the Company's stock, totaling $1.4 million, a $1.3 million increase in accumulated other comprehensive loss primarily reflecting valuation changes in our available-for-sale securities portfolio due to current financial market conditions, and a reduction in retained earnings of $633,000 due to the adoption of the current expected credit loss standard on January 1, 2023. These decreases were partially offset by our net income for first six months of the year of $2.2 million. The Company's ratio of average equity to average assets was 8.23% for the six months ended June 30, 2023 and 8.91% for the year ended December 31, 2022.

About Rhinebeck Bancorp

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

Forward Looking Statements

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

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

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

Rhinebeck Bancorp, Inc. and Subsidiary
Consolidated Statements of Income (Unaudited)
(In thousands, except share and per share data)

Rhinebeck Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition (Unaudited)
(In thousands, except share and per share data)

Rhinebeck Bancorp, Inc. and Subsidiary
Selected Ratios (Unaudited)

1. Performance ratios for the three and six month periods ended June 30, 2023 and 2022 are annualized.
2. Represents net income divided by average total assets.
3. Represents net income divided by average equity.
4. Represents net interest income as a percent of average interest-earning assets.
5. Represents non-interest expense divided by the sum of net interest income and non-interest income.
6. Represents average equity divided by average total assets.
7. Capital ratios are for Rhinebeck Bank only. Rhinebeck Bancorp, Inc. is not subject to the minimum consolidated capital requirements as a small bank holding company with assets of less than $3.0 billion.
8. Represents a non-GAAP financial measure, see table below for a reconciliation of the non-GAAP financial measures.

NON-GAAP FINANCIAL INFORMATION

This release contains financial information determined by methods other than in accordance with generally accepted accounting principles ("GAAP"). Such non-GAAP financial information includes the following measure: "tangible book value per common share." Management uses this non-GAAP measure because we believe that it may provide useful supplemental information for evaluating our operations and performance, as well as in managing and evaluating our business and in discussions about our operations and performance. Management believes this non-GAAP measure may also provide users of our financial information with a meaningful measure for assessing our financial results, as well as a comparison to financial results for prior periods. This non-GAAP measure should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP and are not necessarily comparable to other similarly titled measures used by other companies. To the extent applicable, reconciliations of these non-GAAP measures to the most directly comparable measures as reported in accordance with GAAP are included below.

Related Links

http://www.Rhinebeckbank.com

CONTACT:

Rhineback Bancorp, Inc.
Michael Quinn
845-454-8555

SOURCE: Rhinebeck Bancorp, Inc.