10-Q: Rhinebeck Bancorp Q3 2025 Net Income Rebounds, Deposits Grow

Rhinebeck Bancorp reports a significant turnaround in Q3 2025 with net income of $2.7 million, reversing a prior-year loss, driven by strong net interest income growth and strategic shifts.

Summary

• Net income for the third quarter of 2025 was $2.7 million, a substantial improvement from a net loss of $8.1 million in the third quarter of 2024.
• Diluted earnings per share for Q3 2025 was $0.25, compared to a loss per share of $0.75 for the same quarter in 2024.
• For the first nine months of 2025, net income was $7.7 million, reversing a net loss of $6.0 million for the same period in 2024.
• Diluted earnings per share for the first nine months of 2025 was $0.70, compared to a diluted loss per share of $0.55 for the same period in 2024.
• Total assets increased by $60.2 million, or 4.8%, to $1.32 billion as of September 30, 2025, primarily due to a $66.0 million increase in cash and cash equivalents.
• Net loans receivable increased by $5.9 million, or 0.6%, to $977.6 million, driven by growth in commercial real estate and residential real estate loans, partially offset by a strategic reduction in indirect automobile loans.
• Total deposits increased by $95.0 million, or 9.3%, to $1.12 billion, with interest-bearing deposits up $80.5 million and non-interest-bearing deposits up $14.6 million.
• Advances from the Federal Home Loan Bank (FHLB) declined by $43.2 million, or 61.9%, to $26.6 million, reflecting the use of excess liquidity to pay down borrowings.
• Stockholders' equity increased by $11.2 million, or 9.2%, to $133.0 million, with book value per share rising to $11.93 from $10.98.
• Net interest income increased by $2.4 million, or 24.5%, to $12.0 million for Q3 2025, and by $7.0 million, or 25.6%, to $34.6 million for the nine months ended September 30, 2025.
• Net interest margin expanded by 68 basis points to 3.93% in Q3 2025 and by 84 basis points to 3.90% for the nine months, primarily due to higher asset yields and lower funding costs.
• The company has discontinued originating residential mortgages directly, partnering with Homestead Funding Corporation for originations.
• The Middletown branch will close effective January 27, 2026, with customer accounts transferred to the nearest branch by year-end 2025.

Sentiment

Score: 8

Explanation: The company demonstrated a strong financial turnaround, moving from significant losses to solid net income. Key metrics like net interest income, net interest margin, and stockholders' equity showed substantial improvement. Strategic adjustments to mortgage origination and branch network indicate proactive management in a changing industry. While non-interest expenses increased and a commercial real estate charge-off occurred, the overall financial health and strategic direction appear positive.

Positives

• Achieved a significant turnaround from net losses in 2024 to net income of $2.7 million in Q3 2025 and $7.7 million for the first nine months of 2025.
• Diluted EPS improved to $0.25 in Q3 2025 and $0.70 for the nine months, reversing prior-year losses.
• Total assets grew by $60.2 million (4.8%) to $1.32 billion, indicating overall balance sheet expansion.
• Cash and cash equivalents increased substantially by $66.0 million (176.0%) to $103.5 million, enhancing liquidity.
• Total deposits increased by $95.0 million (9.3%) to $1.12 billion, demonstrating strong funding growth.
• FHLB advances were significantly reduced by $43.2 million (61.9%) to $26.6 million, improving the funding mix and reducing interest expense.
• Net interest income increased by $2.4 million (24.5%) in Q3 2025 and $7.0 million (25.6%) for the nine months, reflecting strong core banking performance.
• Net interest margin expanded by 68 basis points to 3.93% in Q3 2025 and 84 basis points to 3.90% for the nine months, driven by higher asset yields and lower funding costs.
• Stockholders' equity increased by $11.2 million (9.2%) to $133.0 million, and book value per share rose to $11.93, indicating improved shareholder value.
• Non-accrual loans decreased by $389,000 (9.4%) to $3.7 million, suggesting improved asset quality.
• The Bank remains 'well capitalized' under regulatory frameworks, indicating strong financial health and compliance.

Negatives

• Available for sale securities declined by $11.0 million (6.9%) to $148.9 million.
• Net charge-offs increased by $619,000 in Q3 2025 compared to Q3 2024, primarily due to a $629,000 charge-off on commercial real estate.
• Total non-interest expense increased by $646,000 (7.1%) in Q3 2025 and $2.0 million (7.6%) year-to-date, driven by higher salaries, employee benefits, and retail banking costs.
• Investment advisory income decreased by $62,000 year-to-date, attributed to reduced staffing levels earlier in the year.
• Unrealized losses on available for sale securities still total $8,909 at September 30, 2025, representing an aggregate depreciation of 5.65% from amortized cost.
• Deferred tax assets decreased by $2.3 million (28.9%).

Risks

• General economic conditions, either nationally or in the market area, including potential recessionary conditions or slowed economic growth.
• Changes in liquidity, including the size and composition of the deposit portfolio and the percentage of uninsured deposits.
• Changes in the level and direction of loan delinquencies and charge-offs and changes in the estimates or methodology used in the calculation of the allowance for credit losses.
• 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 the market area.
• Ability to implement business strategies.
• The effect of the rating under the Community Reinvestment Act.
• Ability to manage or reduce expenses.
• Competition among depository and other financial institutions.
• Inflation and changes in market interest rates that affect margins and yields, the fair value of financial instruments, the volume of loan originations and loan sales, or the level of defaults, losses and prepayments on loans.
• 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 monetary and fiscal policies.
• The imposition of tariffs or other domestic or international governmental policies and retaliatory responses.
• The impact of a continued shutdown of the U.S. government.
• Negative financial impact from potential supervisory action, regulatory penalties and/or settlements.
• Ability to manage interest rate risk, market risk, credit risk and operational risk.
• Ability to enter new markets successfully and capitalize on growth opportunities.
• Ability to successfully integrate into operations any acquired assets, liabilities or systems, as well as new management personnel or customers, and realize related revenue synergies and cost savings.
• Changes in investor sentiment and 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.
• Ability to retain key employees.
• A failure in or breach of operational or security systems or infrastructure, including cyberattacks.
• System failures or cybersecurity threats against informational technology and those of third-party providers and vendors.
• The failure to maintain current technologies and to successfully implement future information technology enhancements.
• Compensation expense associated with equity allocated or awarded to employees.
• Changes in the financial condition, results of operations or prospects of issuers of securities owned.
• Conditions relating to pandemics, or other public health emergencies.

Future Outlook

The company aims to enhance operational efficiency and position itself for long-term growth through strategic initiatives like discontinuing direct residential mortgage originations and partnering with Homestead Funding Corporation, as well as optimizing its branch network. Management believes it is better positioned to react to changes in market interest rates by originating adjustable-rate or shorter-term loans, promoting core deposit products, and adjusting funding source rates and maturities.

Management Comments

• Management believes that resolution of legal matters will not have a material effect on the Company’s financial condition or results of operations.
• Management believes, as of September 30, 2025 and December 31, 2024, that the Bank met all capital adequacy requirements to which it was subject.
• The Company remains committed to adapting to industry changes while maintaining its focus on customer service and community support.
• The Bank is committed to ensuring a seamless transition for both its customers and employees throughout the Middletown branch closure process.
• We manage our interest rate risk to minimize the exposure of our earnings and capital to changes in market interest rates.

Industry Context

The company is adapting to "shifting industry dynamics, including the rise of digital platforms, online loan originations, and competition from non-bank lenders" by discontinuing direct residential mortgage originations and partnering with Homestead Funding Corporation. This reflects a broader trend in the banking industry where traditional banks are either investing heavily in digital capabilities or outsourcing certain specialized functions to remain competitive against fintechs and non-bank entities. The focus on higher-yielding deposit products also indicates a competitive environment for attracting and retaining customer funds.

Comparison to Industry Standards

• The company uses the historical volatility of a peer group of comparable SEC-reporting bank holding companies for estimating expected volatility in its Black-Scholes Option-Pricing Model. No specific comparable companies, projects, or results are detailed for financial performance benchmarks within this filing.

Legal Proceedings

• The company is involved in various legal proceedings which have arisen in the normal course of business, such as employment-related claims, claims to enforce liens, foreclosure or condemnation proceedings, and claims involving loan making and servicing.
• Management believes that no pending legal proceedings would have a material effect on the company's financial condition, results of operations, or cash flows.

Related Party Transactions

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

Stakeholder Impact

• Shareholders: Benefited from increased net income, EPS, book value per share, and stockholders' equity. Stock repurchase plans could further enhance shareholder value.
• Customers: Impacted by the discontinuation of direct residential mortgage originations (now referred to a partner) and the closure of the Middletown branch, with efforts made for a seamless transition and extended hours at the Goshen branch. Depositors benefited from the promotion of higher-yielding deposit products.
• Employees: Experienced increased salaries and employee benefits, including incentive compensation and production commissions. Equity benefits are provided through the ESOP and Share-Based Compensation Plan. Staffing level changes in investment advisory income were noted, and the Middletown branch closure may affect employees in that location.
• Creditors: Improved financial stability indicated by reduced FHLB advances and strong capital ratios.

Next Steps

• Customer accounts from the Middletown branch will be transferred to the nearest branch by year-end 2025.
• The Middletown branch will close effective January 27, 2026.
• The Goshen branch will extend its hours to include Saturday service beginning January 31, 2026.
• The company will continue to evaluate goodwill annually in the fourth quarter or more often if impairment indicators arise.
• The company is evaluating the impact of ASU 2023-06, ASU 2023-09, and ASU 2024-03.

Key Dates

Recommendation

The company has demonstrated a significant financial turnaround, moving from a net loss to substantial net income and positive EPS. Key financial metrics such as net interest income, net interest margin, total assets, and stockholders' equity have shown strong growth. The strategic decision to partner for mortgage originations and optimize the branch network indicates proactive management adapting to industry changes. The reduction in FHLB advances and strong capital ratios further bolster financial health. While non-interest expenses increased, the overall positive trajectory, improved asset quality, and commitment to shareholder value through stock repurchase plans make this an attractive investment.

Keywords

Banking, Financial Services, Community Bank, SEC Filing, 10-Q, Rhinebeck Bancorp, RBKB, Net Income, Deposits, Loans, Net Interest Margin, Asset Quality, Capital Adequacy, Interest Rate Risk, Mortgage Origination, Branch Closure, Stock Repurchase