United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


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

For the Quarterly Period Ended March 31, 2020

or

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

For the transition period from               to               

Commission File No. 001‑38779


Rhinebeck Bancorp, Inc.

(Exact name of registrant as specified in its charter)


 

 

 

 

Maryland

    

83‑2117268

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification Number)

 

 

 

2 Jefferson Plaza, Poughkeepsie, New York

 

12601

(Address of Principal Executive Offices)

 

(Zip Code)

 

(845) 454‑8555

(Registrant’s telephone number)

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

 

 

 

 

 

 

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

RBKB

 

The NASDAQ Stock Market, LLC

 

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

YES         NO  

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

YES         NO  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b‑2 of the Exchange Act. (Check one)

 

 

 

 

Large accelerated filer  

    

Accelerated filer  

Non-accelerated filer   

 

Smaller reporting company   

 

 

Emerging growth company   

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act).

YES         NO   

 

As of May 1, 2020, there were 11,133,290 shares of the Registrant’s common stock, par value $0.01 per share, outstanding.

 

 

 

 

TABLE OF CONTENTS

 

 

 

PART I. FINANCIAL INFORMATION 

 

 

 

 

Item 1. 

Financial Statements (Unaudited)

2

 

 

 

 

Consolidated Statements of Financial Condition at March 31, 2020 and December 31, 2019

2

 

 

 

 

Consolidated Statements of Income for the Three Months Ended March 31, 2020 and 2019 

3

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2020 and 2019 

4

 

 

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2020 and 2019

5

 

 

 

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 

6

 

 

 

 

Notes to Consolidated Financial Statements

7

 

 

 

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

34

 

 

 

Item 3. 

Quantitative and Qualitative Disclosures About Market Risk

44

 

 

 

Item 4. 

Controls and Procedures

44

 

 

 

PART II. OTHER INFORMATION 

44

 

 

 

Item 1. 

Legal Proceedings

44

 

 

 

Item 1A. 

Risk Factors

45

 

 

 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

47

 

 

 

Item 3. 

Defaults Upon Senior Securities

47

 

 

 

Item 4. 

Mine Safety Disclosures

47

 

 

 

Item 5. 

Other Information

47

 

 

 

Item 6. 

Exhibits

47

 

 

 

 

SIGNATURES

48

 

 

 

 

 

EXPLANATORY NOTE

Rhinebeck Bancorp, Inc. (the “Company,” “we” or “our”) was formed to serve as the mid-tier stock holding company for Rhinebeck Bank in connection with the reorganization of Rhinebeck Bank and its mutual holding company, Rhinebeck Bancorp, MHC, into the two-tier mutual holding company structure. The reorganization was completed on January 16, 2019. Prior to January 16, 2019, the Company had no assets or liabilities and had not conducted any business activities other than organizational activities. Accordingly, the unaudited financial statements and other financial information contained in this Quarterly Report on Form 10‑Q relate solely to the consolidated financial results and financial position of Rhinebeck Bancorp, MHC and Rhinebeck Bank for any period prior to January 16, 2019.

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 Rhinebeck Bancorp, Inc. and Rhinebeck Bank at and for the year ended December 31, 2019 contained in the Company’s Annual Report on Form 10‑K, as filed with the Securities and Exchange Commission on March 26, 2020.

1

PART 1 — FINANCIAL INFORMATION

ITEM 1.

Rhinebeck Bancorp, Inc. and Subsidiary

Consolidated Statements of Financial Condition (Unaudited)

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

 

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

 

    

2020

    

2019

 

Assets

 

 

 

 

 

 

 

Cash and due from banks

 

$

21,796

 

$

11,978

 

Available for sale securities (at fair value)

 

 

115,134

 

 

114,832

 

Loans receivable (net of allowance for loan losses of $6,620 and $5,954, respectively)

 

 

810,361

 

 

793,471

 

Federal Home Loan Bank stock

 

 

4,035

 

 

3,435

 

Accrued interest receivable

 

 

3,102

 

 

2,903

 

Cash surrender value of life insurance

 

 

18,554

 

 

18,457

 

Deferred tax assets (net of valuation allowance of $1,247 and $1,202, respectively)

 

 

1,541

 

 

2,255

 

Premises and equipment, net

 

 

18,504

 

 

18,338

 

Other real estate owned

 

 

1,382

 

 

1,417

 

Goodwill

 

 

1,410

 

 

1,410

 

Intangible assets, net

 

 

230

 

 

241

 

Other assets

 

 

11,217

 

 

5,209

 

Total assets

 

$

1,007,266

 

$

973,946

 

Liabilities and Stockholders’ Equity

 

 

  

 

 

  

 

Liabilities

 

 

  

 

 

  

 

Deposits

 

 

  

 

 

  

 

Noninterest bearing

 

$

174,958

 

$

179,236

 

Interest bearing

 

 

609,697

 

 

594,107

 

Total deposits

 

 

784,655

 

 

773,343

 

 

 

 

 

 

 

 

 

Mortgagors’ escrow accounts

 

 

7,063

 

 

8,106

 

Advances from the Federal Home Loan Bank

 

 

79,645

 

 

66,304

 

Subordinated debt

 

 

5,155

 

 

5,155

 

Accrued expenses and other liabilities

 

 

16,851

 

 

11,156

 

Total liabilities

 

 

893,369

 

 

864,064

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

  

 

 

  

 

Preferred stock (par value $0.01 per share; 5,000,000 authorized, no shares issued)

 

 

 —

 

 

 —

 

Common stock (par value $0.01 per share; 25,000,000 authorized, 11,133,290 issued and outstanding)

 

 

111

 

 

111

 

Additional paid-in capital

 

 

45,869

 

 

45,869

 

Unearned common stock held by the employee stock ownership plan ("ESOP")

 

 

(4,091)

 

 

(4,146)

 

Retained earnings

 

 

73,227

 

 

72,152

 

Accumulated other comprehensive loss:

 

 

 

 

 

 

 

Net unrealized gain (loss) on available for sale securities, net of taxes

 

 

2,412

 

 

(195)

 

Defined benefit pension plan, net of taxes

 

 

(3,631)

 

 

(3,909)

 

Total accumulated other comprehensive loss

 

 

(1,219)

 

 

(4,104)

 

Total stockholders’ equity

 

 

113,897

 

 

109,882

 

Total liabilities and stockholders’ equity

 

$

1,007,266

 

$

973,946

 

 

See accompanying notes to consolidated financial statements

2

Rhinebeck Bancorp, Inc. and Subsidiary

Consolidated Statements of Income (Unaudited)

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

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

    

2020

    

2019

 

Interest and Dividend Income

 

 

 

 

 

 

 

Interest and fees on loans

 

$

10,046

 

$

8,715

 

Interest and dividends on securities

 

 

683

 

 

608

 

Other income

 

 

11

 

 

35

 

Total interest and dividend income

 

 

10,740

 

 

9,358

 

Interest Expense

 

 

  

 

 

  

 

Interest expense on deposits

 

 

2,017

 

 

1,382

 

Interest expense on borrowings

 

 

402

 

 

406

 

Total interest expense

 

 

2,419

 

 

1,788

 

Net interest income

 

 

8,321

 

 

7,570

 

Provision for loan losses

 

 

1,200

 

 

780

 

Net interest income after provision for loan losses

 

 

7,121

 

 

6,790

 

Noninterest Income

 

 

  

 

 

  

 

Service charges on deposit accounts

 

 

652

 

 

698

 

Net realized loss on sales and calls of securities

 

 

(29)

 

 

 —

 

Net gain on sales of loans

 

 

465

 

 

166

 

Increase in cash surrender value of life insurance

 

 

97

 

 

100

 

Other real estate owned income

 

 

 —

 

 

10

 

Investment advisory income

 

 

312

 

 

213

 

Other

 

 

63

 

 

77

 

Total noninterest income

 

 

1,560

 

 

1,264

 

Noninterest Expense

 

 

  

 

 

  

 

Salaries and employee benefits

 

 

4,152

 

 

3,888

 

Occupancy

 

 

850

 

 

895

 

Data processing

 

 

354

 

 

307

 

Professional fees

 

 

322

 

 

266

 

Marketing

 

 

143

 

 

155

 

FDIC deposit insurance and other insurance

 

 

168

 

 

141

 

Other real estate owned expense

 

 

17

 

 

39

 

Amortization of intangible assets

 

 

11

 

 

11

 

Other

 

 

1,282

 

 

1,216

 

Total noninterest expense

 

 

7,299

 

 

6,918

 

Income before income taxes

 

 

1,382

 

 

1,136

 

Provision for income taxes

 

 

307

 

 

225

 

Net income

 

$

1,075

 

$

911

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

Basic

 

$

0.10

 

$

0.09

 

Diluted

 

$

0.10

 

$

0.09

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding, basic

 

 

10,721,413

 

 

10,699,592

 

Weighted average shares outstanding, diluted

 

 

10,721,413

 

 

10,699,592

 

 

See accompanying notes to consolidated financial statements

3

Rhinebeck Bancorp, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income (Unaudited)

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

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

    

2020

    

2019

 

Net Income

 

$

1,075

 

$

911

 

Other Comprehensive Income:

 

 

 

 

 

 

 

Unrealized holding gains arising during the period

 

 

3,272

 

 

1,317

 

Reclassification adjustment for losses included in net realized loss on sales and calls of securities on the consolidated statements of income

 

 

29

 

 

-

 

Net unrealized gains on available for sale securities

 

 

3,301

 

 

1,317

 

Tax effect (a)

 

 

(694)

 

 

(276)

 

Unrealized gains on available for sale securities, net of tax

 

 

2,607

 

 

1,041

 

Defined benefit pension plan:

 

 

  

 

 

  

 

Actuarial gain (loss) arising during the period

 

 

280

 

 

(20)

 

Reclassification adjustment for amortization of net actuarial loss (b)

 

 

71

 

 

90

 

Total

 

 

351

 

 

70

 

Tax effect (c)

 

 

(73)

 

 

(15)

 

Defined benefit pension plan gain, net of tax

 

 

278

 

 

55

 

Other comprehensive income

 

 

2,885

 

 

1,096

 

Total Comprehensive Income

 

$

3,960

 

$

2,007

 


(a) - Includes $6 and $0 for the three months March 31, 2020 and 2019, respectively, for tax effect of realized losses which are included in the provision for income taxes on the consolidated statements of income.

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

(c) - Includes $15 and $19 for the three months ended March 31, 2020 and 2019, respectively, for tax effect of amortization of net actuarial loss included in the provision for income taxes on the consolidated statements of income.

See accompanying notes to consolidated financial statements

4

Rhinebeck Bancorp, Inc. and Subsidiary

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

(Dollars 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, 2018

 

$

 —

 

$

100

 

$

 —

 

$

66,189

 

$

(7,012)

 

$

59,277

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

Net income

 

 

 —

 

 

 —

 

 

 —

 

 

911

 

 

 —

 

 

911

 

Other comprehensive income

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,096

 

 

1,096

 

Common Stock and proceeds of offering

 

 

111

 

 

45,754

 

 

 —

 

 

 —

 

 

 —

 

 

45,865

 

Unallocated common stock held by ESOP

 

 

 —

 

 

 —

 

 

(4,364)

 

 

 —

 

 

 —

 

 

(4,364)

 

ESOP shares committed to be allocated

 

 

 —

 

 

 9

 

 

55

 

 

 —

 

 

 —

 

 

64

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

Balance at March 31, 2019 

 

$

111

 

$

45,863

 

$

(4,309)

 

$

67,100

 

$

(5,916)

 

$

102,849

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

Balance at December 31, 2019

 

$

111

 

$

45,869

 

$

(4,146)

 

$

72,152

 

$

(4,104)

 

$

109,882

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

Net income

 

 

 —

 

 

 —

 

 

 —

 

 

1,075

 

 

 —

 

 

1,075

 

Other comprehensive income

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

2,885

 

 

2,885

 

ESOP shares committed to be allocated

 

 

 —

 

 

 —

 

 

55

 

 

 —

 

 

 —

 

 

55

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

Balance at March 31, 2020

 

$

111

 

$

45,869

 

$

(4,091)

 

$

73,227

 

$

(1,219)

 

$

113,897

 

 

See accompanying notes to consolidated financial statements

5

Rhinebeck Bancorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows (Unaudited)

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

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

    

2020

    

2019

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

Net income

 

$

1,075

 

$

911

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

  

 

 

 

 

Amortization and accretion of premiums and discounts on investments, net

 

 

110

 

 

66

 

Net realized loss on sales and calls of securities

 

 

29

 

 

 —

 

Provision for loan losses

 

 

1,200

 

 

780

 

Loans originated for sale

 

 

(15,335)

 

 

(8,318)

 

Proceeds from sale of loans

 

 

16,850

 

 

7,303

 

Net gain on sale of loans

 

 

(254)

 

 

(56)

 

Amortization of intangible assets

 

 

11

 

 

11

 

Depreciation and amortization

 

 

328

 

 

321

 

Deferred income tax benefit

 

 

(53)

 

 

(133)

 

Increase in cash surrender value of insurance

 

 

(97)

 

 

(100)

 

Increase in accrued interest receivable

 

 

(199)

 

 

(259)

 

Expense of released ESOP shares

 

 

55

 

 

 —

 

(Increase) decrease  in other assets

 

 

(6,008)

 

 

1,161

 

Increase (decrease) in accrued expenses and other liabilities

 

 

6,047

 

 

(395)

 

Net cash provided by operating activities

 

 

3,759

 

 

1,292

 

Cash Flows from Investing Activities

 

 

  

 

 

  

 

Proceeds from sales and calls of securities

 

 

6,996

 

 

 —

 

Proceeds from maturities and principal repayments of securities

 

 

6,009

 

 

2,877

 

Purchases of securities

 

 

(10,146)

 

 

(9,709)

 

Net purchases of FHLB Stock

 

 

(600)

 

 

(2,036)

 

Net increase in loans

 

 

(19,351)

 

 

(28,189)

 

Purchases of bank premises and equipment

 

 

(493)

 

 

(235)

 

Net increase of other real estate owned

 

 

(16)

 

 

 —

 

Proceeds from sale of other real estate owned

 

 

51

 

 

51

 

Net cash used in investing activities

 

 

(17,550)

 

 

(37,241)

 

Cash Flows from Financing Activities

 

 

  

 

 

  

 

Net increase in demand deposits, NOW, money market and savings accounts

 

 

(629)

 

 

(18,931)

 

Net increase in time deposits

 

 

11,941

 

 

18,537

 

Decrease in mortgagors' escrow accounts

 

 

(1,043)

 

 

(1,414)

 

Net increase in short-term debt

 

 

2,861

 

 

43,683

 

Net increase (decrease) in long-term debt

 

 

10,479

 

 

(3,436)

 

Proceeds of stock subscriptions

 

 

 —

 

 

9,814

 

Return of unfulfilled stock subscriptions

 

 

 —

 

 

(41,083)

 

Offering expenses

 

 

 —

 

 

(1,887)

 

Loan to ESOP

 

 

 —

 

 

(4,364)

 

Return of capital to Rhinebeck Bancorp, MHC

 

 

 —

 

 

(121)

 

Net cash provided by financing activities

 

 

23,609

 

 

798

 

Net increase (decrease) in cash and due from banks

 

 

9,818

 

 

(35,151)

 

Cash and Due from Banks

 

 

  

 

 

  

 

Beginning balance

 

 

11,978

 

 

50,590

 

Ending balance

 

$

21,796

 

$

15,439

 

Supplemental Disclosures of Cash Flow Information

 

 

  

 

 

  

 

Cash paid for:

 

 

  

 

 

  

 

Interest

 

$

2,445

 

$

1,758

 

Income taxes

 

$

 3

 

$

 6

 

 

See accompanying notes to consolidated financial statements

 

 

6

Table of Contents

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 consolidated financial statements include 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 eleven 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 (“RAM”).

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 month period ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or for any other period.

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 for the year ended December 31, 2019, filed with the Securities and Exchange Commission. As of March 31, 2020, the significant accounting policies of the Company have not changed materially from those disclosed in the Annual Report on Form 10‑K for the year ended December 31, 2019.

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 loan losses, the valuation of securities and other real estate owned, the evaluation of investment securities for other-than-temporary impairment, the evaluation of goodwill for impairment, the valuation of deferred tax assets and the determination of pension obligations.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications

Certain amounts in the prior year consolidated financial statements have been reclassified to conform to the current year’s presentation. 

COVID-19

The Company has evaluated subsequent events for potential recognition and/or disclosure through the date the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q were issued. On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a global pandemic, which continues to spread throughout the United States and around the world. The declaration

7

Table of Contents

Rhinebeck Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

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

of a global pandemic indicates that almost all public commerce and related business activities must be, to varying degrees, curtailed with the goal of decreasing the rate of new infections. The outbreak of COVID-19 could adversely impact a broad range of industries in which the Company’s customers operate and impair their ability to fulfill their financial obligations to the Company. On March 3, 2020, the Federal Open Market Committee reduced the target federal funds rate by 50 basis points to 1.00% to 1.25%. This rate was further reduced to a target range of 0.00% to 0.25% on March 16, 2020. These reductions in interest rates and other effects of the COVID-19 outbreak will likely adversely affect the Company’s financial condition and results of operations. As a result of the spread of COVID-19, economic uncertainties have arisen which are likely to negatively impact net interest income and noninterest income. Other financial impact could occur though such potential impact is unknown at this time.

Impact of Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (“Topic 842”), which created FASB Accounting Standards Codification (“ASC”) Topic 842 (“ASC 842”) and is intended to increase transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. The principal change required by ASC 842 related to lessee accounting, and is that for operating leases, a lessee is required to (1) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position, (2) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term generally on a straight-line basis, and (3) classify all cash payments within operating activities in the statement of cash flows. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. ASC 842 also changes disclosure requirements related to leasing activities and requires certain qualitative disclosures along with specific quantitative disclosures. ASC 842 also provides an optional transition method for adoption, under which an entity initially applies ASC 842 at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity's reporting for the comparative periods presented in the financial statements in which it adopts ASC 842 will continue to be in accordance with current GAAP. The Company adopted the provisions of ASC 842 effective January 1, 2020 utilizing the optional transition method and did not restate comparative periods. The Company elected the package of practical expedients permitted under ASC 842's transition guidance, which allows the Company to carryforward its historical lease classifications and its assessment as to whether a contract is or contains a lease. The Company elected to not recognize lease assets and lease liabilities for leases with an initial term of 12 months or less. Upon adoption, the Company recorded an increase in other assets and an increase in other liabilities of approximately $6.7 million, respectively. See Note 10 of the footnotes to the consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016‑13 on “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This ASU requires credit losses on most financial assets be measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (“CECL”) model). Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument. The measurement of expected credit losses is based upon relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. On October 16, 2019, the FASB approved a delay for conversion to the CECL methodology to January 2023 for smaller reporting companies, other public business entities, private companies and non-profits; although early adoption is permitted in 2019. While the Company is

8

Table of Contents

Rhinebeck Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

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

currently assessing the effect of ASU No. 2016‑13 and has engaged with a software vendor to assist in its efforts; it is unlikely that the Company will early adopt this ASU.

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 intends to take 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.

 

2.    Investment Securities

The amortized cost, gross unrealized gains and losses and fair values of available for sale securities are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

 

 

Gross

 

Gross

 

 

 

 

 

 

Unrealized

 

Unrealized

 

 

 

    

Amortized Cost

    

Gains

    

Losses

    

Fair Value

U.S. government agency mortgage-backed securities–residential

 

$

102,887

 

$

2,819

 

$

(7)

 

$

105,699

U.S. government agency securities

 

 

5,021

 

 

176

 

 

 —

 

 

5,197

Municipal securities(1)

 

 

1,383

 

 

17

 

 

(25)

 

 

1,375

Corporate bonds

 

 

2,250

 

 

34

 

 

(15)

 

 

2,269

Other

 

 

540

 

 

54

 

 

 —

 

 

594

Total

 

$

112,081

 

$

3,100

 

$

(47)

 

$

115,134

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

December 31, 2019

U.S. government agency mortgage-backed securities–residential

 

$

98,842

 

$

464

 

$

(828)

 

$

98,478

U.S. government agency securities

 

 

12,049

 

 

53

 

 

(26)

 

 

12,076

Municipal securities(1)

 

 

1,384

 

 

17

 

 

(5)

 

 

1,396

Corporate bonds

 

 

2,250

 

 

25

 

 

(2)

 

 

2,273

Other

 

 

555

 

 

54

 

 

 —

 

 

609

Total

 

$

115,080

 

$

613

 

$

(861)

 

$

114,832

 


1The issuers of municipal securities are all within New York State.

9

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

Less Than 12 Months

 

12 Months or Longer

 

Total

 

 

 

 

Unrealized

 

 

 

Unrealized

 

 

 

Unrealized

 

    

Fair Value

    

Losses

    

Fair Value

    

Losses

    

Fair Value

    

Losses

U.S. government agency mortgage-backed securities-residential

 

$

 —

 

$

 —

 

$

1,009

 

$

(7)

 

$

1,009

 

$

(7)

Municipal Securities

 

 

471

 

 

(25)

 

 

 —

 

 

 —

 

 

471

 

 

(25)

Corporate Bonds

 

 

985

 

 

(15)

 

 

 —

 

 

 —

 

 

985

 

 

(15)

Total

 

$

1,456

 

$

(40)

 

$

1,009

 

$

(7)

 

$

2,465

 

$

(47)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

December 31, 2019

U.S. government agency mortgage-backed securities-residential

 

$

35,612

 

$

(302)

 

$

27,252

 

$

(526)

 

$

62,864

 

$

(828)

U.S. government agency securities

 

 

 —

 

 

 —

 

 

7,001

 

 

(26)

 

 

7,001

 

 

(26)

Municipal Securities

 

 

490

 

 

(5)

 

 

 —

 

 

 —

 

 

490

 

 

(5)

Corporate Bonds

 

 

749

 

 

(2)

 

 

 —

 

 

 —

 

 

749

 

 

(2)

Total

 

$

36,851

 

$

(309)

 

$

34,253

 

$

(552)

 

$

71,104

 

$

(861)

 

At March 31, 2020, the Company had 11 individual available-for-sale securities in an unrealized loss position with unrealized losses totaling $47, with an aggregate depreciation of 1.91%, from the Company’s amortized cost.

Management believes that none of the unrealized losses on available for sale securities are other-than-temporary because substantially all of the unrealized losses in the Company’s investment portfolio relate to market interest rate changes on debt and mortgage-backed securities issued either directly by the government or from government sponsored enterprises. The Company does not intend to sell the securities and it is not likely that the Company will be required to sell the securities before recovery of their amortized cost basis, which may be maturity, therefore, the Company did not consider those investments to be other-than-temporarily impaired at March 31, 2020.

The amortized cost and fair value of available for sale debt securities at March 31, 2020 and December 31, 2019, 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.

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Table of Contents

Rhinebeck Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

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

Because mortgage-backed securities are not due at a single maturity date, they are not included in the maturity categories in the following maturity summary:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

December 31, 2019

 

    

Amortized Cost

    

Fair Value

    

Amortized Cost

    

Fair Value

Maturity:

 

 

 

 

 

 

 

 

 

 

 

 

Within 1 year

 

$

175

 

$

175

 

$

175

 

$

175

After 1 but within 5 years

 

 

 —

 

 

 —

 

 

7,027

 

 

7,001

After 5 but within 10 years

 

 

7,804

 

 

8,016

 

 

7,806

 

 

7,899

After 10 years

 

 

675

 

 

650

 

 

675

 

 

670

Total Maturities

 

 

8,654

 

 

8,841

 

 

15,683

 

 

15,745

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

102,887

 

 

105,699

 

 

98,842

 

 

98,478

Other

 

 

540

 

 

594

 

 

555

 

 

609

Total

 

$

112,081

 

$

115,134

 

$

115,080

 

$

114,832

 

At March 31, 2020 and December 31, 2019, available for sale securities with a carrying value of $23,116 and $23,782, respectively, were pledged to secure Federal Home Loan Bank of New York (“FHLB”) borrowings. In addition, at March 31, 2020 and December 31, 2019, $725 and $726 of available for sale securities were pledged to secure borrowings at the Federal Reserve Bank of New York (“FRB”), respectively.

During the three months ended March 31, 2020, there was $6,996 in proceeds from the sales of available for sale securities with $29 in gross losses realized.  

3.    Loans and Allowance for Loan Losses

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

 

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

 

    

2020

    

2019

 

Commercial real estate loans:

 

 

 

  

 

Construction

 

$

8,801

 

$

20,354

 

Non-residential

 

 

242,078

 

 

228,157

 

Multi-family

 

 

30,334

 

 

20,129

 

Residential real estate loans

 

 

43,629

 

 

43,726

 

Commercial and industrial loans

 

 

90,242

 

 

90,554

 

Consumer loans:

 

 

  

 

 

  

 

Indirect automobile

 

 

367,293

 

 

360,569

 

Home equity

 

 

15,165

 

 

16,276

 

Other consumer

 

 

9,410

 

 

9,752

 

Total gross loans

 

 

806,952

 

 

789,517

 

Net deferred loan costs

 

 

10,029

 

 

9,908

 

Allowance for loan losses

 

 

(6,620)

 

 

(5,954)

 

Total net loans

 

$

810,361

 

$

793,471

 

 

At March 31, 2020 and December 31, 2019, the unpaid principal balances of loans held for sale, included in the residential real estate category above, were $1,169 and $2,684, respectively.

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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 tables present the classes of the loan portfolio summarized by the pass category and the criticized and classified categories of special mention and substandard within the internal risk system:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

    

Pass

    

Special Mention

    

Substandard

    

Total

Commercial real estate:

 

 

  

 

 

  

 

 

  

 

 

  

Construction

 

$

8,801

 

$

 —

 

$

 —