10-K: Rhinebeck Bancorp Swings to Profit, Eyes Full Public Conversion

Rhinebeck Bancorp reported a significant turnaround to net income in 2025, driven by improved net interest income and a strategic shift in its loan portfolio, while planning a full public conversion.

Summary

• Rhinebeck Bancorp, Inc. reported net income of $10.045 million for the year ended December 31, 2025, a substantial improvement from a net loss of $8.620 million in 2024.
• Diluted earnings per share (EPS) rose to $0.92 in 2025 from a diluted loss per share of $0.80 in 2024.
• Net interest income increased by $8.7 million, or 23.1%, to $46.393 million in 2025, up from $37.695 million in 2024.
• The provision for credit losses decreased by $1.1 million, or 40.8%, to $1.659 million in 2025.
• Total assets grew by $46.0 million, or 3.7%, reaching $1.30 billion at December 31, 2025.
• Total deposits increased by $76.6 million, or 7.5%, to $1.10 billion at December 31, 2025.
• Net loans receivable decreased by $18.4 million, or 1.9%, to $953.4 million, primarily due to a strategic reduction in indirect automobile loans.
• Commercial real estate loans increased by $52.1 million, or 10.8%, to $534.7 million, reflecting a strategic emphasis on this segment.
• Indirect automobile loans decreased by $81.9 million, or 27.7%, to $213.8 million, as the company actively reduced exposure.
• Non-performing loans decreased by $434,000, or 10.5%, to $3.7 million, representing 0.39% of total loans.
• The efficiency ratio improved to 73.12% in 2025 from 82.34% in 2024.
• Rhinebeck Bancorp, MHC adopted a Plan of Conversion and Reorganization on February 10, 2026, to convert to a fully public stock holding company structure, subject to regulatory and stockholder approvals.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong positive report, highlighting a significant financial turnaround, improved asset quality, and clear strategic direction. The planned conversion offers potential for future capital and flexibility, though execution risks remain.

Positives

• Achieved a significant turnaround from a net loss of $8.620 million in 2024 to a net income of $10.045 million in 2025.
• Diluted earnings per share improved substantially to $0.92 in 2025 from a loss of $0.80 in 2024.
• Net interest income increased by 23.1% to $46.393 million, driven by higher asset yields and lower interest-bearing liability costs.
• The interest rate spread expanded by 79 basis points to 3.23%, and the net interest margin improved to 3.89% from 3.17%.
• Provision for credit losses decreased by 40.8% to $1.659 million, reflecting fewer delinquencies and decreased charge-offs.
• Asset quality improved, with non-performing loans decreasing by 10.5% to $3.7 million and non-performing assets as a percent of total assets decreasing to 0.28%.
• The allowance for credit losses to non-performing loans ratio increased to 225.76% in 2025 from 206.56% in 2024, indicating stronger coverage.
• Total assets increased by 3.7% to $1.30 billion, and total deposits grew by 7.5% to $1.10 billion.
• Strategic shift towards higher-yielding commercial real estate loans, which increased by 10.8% to $534.7 million.
• Improved efficiency ratio of 73.12% in 2025, down from 82.34% in 2024, indicating better cost management.
• Strong liquidity position with $714.214 million in total available sources of funds at December 31, 2025.

Negatives

• Net loans receivable decreased by 1.9% to $953.4 million, primarily due to a significant reduction in indirect automobile loans.
• Indirect automobile loans decreased by $81.9 million, or 27.7%, reflecting a strategic decision to reduce this portfolio, which may impact overall loan growth.
• Non-interest expense increased by $2.2 million, or 5.9%, to $39.020 million, driven by higher compensation and operating costs.
• The company does not anticipate paying a dividend to its stockholders due to regulatory restrictions on Rhinebeck Bancorp, MHC and the potential inequity to public stockholders.
• The common stock is not heavily traded, and the stock price may fluctuate significantly due to low volume.
• The company currently has one borrower exceeding its internal loans-to-one borrower limit by approximately $600,000, though it expects to reduce this exposure.

Risks

• Emphasis on commercial real estate and commercial business lending involves greater risk due to dependency on successful property operation, sensitivity to economic conditions, larger balances to single borrowers, and less liquid collateral.
• The automobile loan portfolio exposes the company to increased credit risks due to assets that depreciate rapidly, high loan-to-value ratios, difficulty in locating repossessed collateral, and reliance on borrower financial stability.
• The allowance for credit losses may not be sufficient to cover actual loan losses if assumptions about collectability, economic conditions, or collateral values prove incorrect, potentially requiring significant additions to the provision.
• Non-owner occupied commercial real estate loans expose the company to greater risk of non-payment and loss, as repayment depends on tenant ability to pay rent or the property owner's ability to repay without rental income.
• Environmental liability risk is associated with lending activities, as the company could be liable for remediation costs, personal injury, property damage, civil fines, and criminal penalties if hazardous substances are found on foreclosed properties.
• Downturns in the local economy (Hudson Valley region of New York) could adversely affect the company's earnings and capital due to geographic concentration of loans.
• A decline in economic conditions could reduce demand for products and services, increase non-performing loans, and adversely impact business, financial condition, and results of operations.
• Inflation can adversely impact the business and customers by reducing the purchasing power of money, affecting the fair value of investment securities, increasing operating costs, and impairing customers' ability to repay loans.
• Changes to trade policies and tariffs could negatively impact local economic conditions, leading to higher costs for customers, reduced demand, supply chain disruptions, and increased loan delinquencies.
• Interruption of customers' supply chains could negatively impact their business and ability to repay loans, due to factors like third-party provider interruptions, trade restrictions, social unrest, natural disasters, or military conflicts.
• Changes in interest rates may reduce profits if interest rates on deposits increase faster than rates on loans and investments, or if increased prepayments on loans and securities lead to reinvestment in lower-yielding assets.
• Inability to generate core deposits may lead to heavier reliance on more expensive wholesale funding strategies, adversely affecting net interest margin and profitability.
• A lack of liquidity could adversely affect financial condition and operations, potentially resulting in regulatory limits, if the company cannot raise funds through deposits, borrowings, or asset sales.
• Our long-term business strategy involves organic growth, and our financial condition and results of operations may be adversely affected if we fail to grow or fail to manage our growth effectively.
• Our inability to tailor our retail delivery model to respond to consumer preferences in banking may negatively affect earnings.
• We may pursue acquisitions of other financial institutions, branch offices, lines of business, or lift-outs of lending or deposit gathering teams from other financial institutions.
• Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and/or increase our costs of operations.
• Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.
• Changes in accounting standards could affect reported earnings.
• We are subject to stringent capital requirements, which may adversely impact our return on equity, or constrain us from paying dividends or repurchasing shares.
• Strong competition within our market area may reduce our profits and slow growth.
• Our cost of operations is high relative to our assets. Our failure to maintain or reduce our operating expenses may reduce our profits.
• Our success depends on hiring and retaining certain key personnel.
• We may be subject to risks and losses resulting from fraudulent activities that could adversely impact our financial performance and results of operations.
• Our risk management framework may not be effective in mitigating risk and reducing the potential for significant losses.
• We are a community bank and our ability to maintain our reputation is critical to the success of our business.
• Our wealth management business is subject to risks associated with the industry and strong competition for clients.
• Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities.
• Systems failures or breaches of our network security could subject us to increased operating costs as well as litigation and other liabilities.
• Technological changes may adversely impact our business.
• We may not pay any dividends on our common stock.
• Our common stock is not heavily traded, and the stock price may fluctuate significantly.
• The Company's Articles of Incorporation and Bylaws and Maryland law may discourage a corporate takeover.

Future Outlook

The company expects to continue pursuing sustainable organic growth in total assets and deposits, accompanied by an increase in the scale and complexity of operations. It plans to emphasize relationship-based commercial lending, grow and enhance its low-cost deposit base, invest in technology to improve efficiency, and increase household penetration and non-interest income through private banking services. The company will continue to offer consumer loans and residential real estate loans through third-party partnerships as complementary offerings. It also intends to manage credit risk to maintain a low level of non-performing assets and will consider opportunistic acquisitions to expand its market area.

Management Comments

• Matthew J. Smith was appointed President and Chief Executive Officer (CEO) of Rhinebeck Bank in October 2025 to lead Rhinebeck Bank into its next phase of growth and innovation.
• Management believes that the company has a competitive advantage in the markets served due to knowledge of the local marketplace and a long-standing history of providing superior, relationship-based customer service.
• Management believes that commercial real estate and commercial business lending offer opportunities to invest in the community, increase the overall yield earned on the loan portfolio, and manage interest rate risk.
• Management is making a concerted effort to increase lower-cost transaction deposit accounts following a period of relatively higher interest rates.
• Management views treasury management as a core strategic capability that will support both deposit growth and non-interest income diversification.
• Management will monitor efficiency metrics relative to peer institutions and aims to adjust resource allocation to maintain competitiveness while preserving service quality.
• Management believes that credit risk management is foundational to the company's strategy, maintaining a comprehensive enterprise risk management framework.
• Management believes opportunities exist to both increase market share in historical markets and to continue growth in contiguous or other counties with desirable characteristics.
• Management believes, as of December 31, 2025 and 2024, that the Bank met all capital adequacy requirements to which they are subject.

Industry Context

StockSavvy.ai notes that Rhinebeck Bancorp's strategic shift towards commercial real estate lending and away from indirect auto loans aligns with a broader industry trend among community banks seeking higher-yielding assets and reduced exposure to more volatile consumer segments. The focus on digital transformation and treasury management services reflects the competitive pressure from larger institutions and fintech companies, emphasizing the need for enhanced customer experience and operational efficiency. The planned second-step conversion could provide additional capital for growth and flexibility, a common move for mutual holding companies seeking to unlock shareholder value and compete more effectively in a consolidating financial services landscape.

Comparison to Industry Standards

• The U.S. unemployment rate was 4.4% as of December 31, 2025, while New York State's was 4.6%. Rhinebeck Bank's primary market areas (Dutchess, Orange, Ulster, Albany Counties) all had lower unemployment rates (3.2% to 3.6%), suggesting a relatively stronger local economic environment compared to national and state averages.
• Median household income for 2024 in Rhinebeck Bank's primary market areas ($85,333 to $99,478) was generally higher than the U.S. median ($80,734) and New York State median ($85,974), indicating a more affluent customer base.
• At June 30, 2025, Rhinebeck Bank held 10.44% of FDIC-insured deposit market share in Dutchess County (4th among 15 institutions), 1.59% in Ulster County (12th among 18), and 1.28% in Orange County (14th among 22). This indicates a strong local presence in Dutchess County but significant competition from larger regional and money center banks in other areas.
• The efficiency ratio improved to 73.12% in 2025 from 82.34% in 2024. While an improvement, the filing notes that 'our efficiency ratio, comparative to peers, remains high,' suggesting there is still room for improvement to meet industry best practices, which often target ratios below 60% for well-performing banks.

Management Changes

Corporate Governance

Legal Proceedings

• The company was not a party to any pending legal proceedings that are believed to have a material adverse effect on its financial condition, results of operations, or cash flows as of December 31, 2025.

Related Party Transactions

• Deposits from related parties held at the Bank totaled approximately $12.2 million at December 31, 2025.
• Loans to officers, directors, and other related parties were not material during the years presented.

Stakeholder Impact

• **Shareholders**: Potential for increased value and liquidity through the planned second-step conversion to a fully public stock holding company. However, current dividend policy is uncertain due to regulatory restrictions.
• **Depositors**: Continued access to FDIC-insured deposit products, including reciprocal deposit programs, ensuring security of funds. The strategic focus on low-cost deposits aims to maintain competitive offerings.
• **Employees**: Benefits from competitive total rewards programs, including annual bonuses, ESOP, 401(k) plan, healthcare, and career development opportunities. Management changes and strategic growth initiatives may create new roles and development paths.
• **Customers (Borrowers)**: Benefit from a strategic emphasis on commercial lending and local decision-making, potentially leading to tailored financial solutions. Discontinuation of direct residential mortgage originations means customers will be referred to a third-party for origination, though the bank will purchase and service these loans.
• **Local Communities**: The company's focus on community banking and investment in the Hudson Valley region supports local businesses and individuals, contributing to regional economic stability and growth.

Next Steps

• Seek approval from the NYSDFS and the Federal Reserve Board for the Plan of Conversion and Reorganization.
• Obtain approval from the depositors of Rhinebeck Bank and the stockholders of Rhinebeck Bancorp, Inc. for the second-step conversion.
• Offer and sell shares of common stock in a subscription offering and, if necessary, in community and syndicated offerings as part of the second-step conversion.
• Continue pursuing sustainable organic growth in total assets and deposits.
• Emphasize relationship-based commercial lending and consider hiring additional lenders.
• Grow and enhance the low-cost deposit base, including developing a full suite of treasury management services and exploring banking-as-a-service partnerships.
• Invest in updated technology and digital capabilities to improve efficiency and customer experience.
• Explore establishing a private banking offering to increase household penetration and non-interest income.
• Monitor industry and customer concentrations and maintain strong governance and control discipline in credit risk management.
• Evaluate merger and acquisition opportunities of other financial institutions, branch offices, lines of business, or lift-outs of lending and deposit-gathering teams.
• Continue to monitor evolving regulatory requirements related to cybersecurity and ensure full compliance.

Key Dates

Recommendation

The company demonstrated a strong financial turnaround in 2025, moving from a significant loss to a profit, driven by improved net interest income and asset quality. Strategic shifts in the loan portfolio towards commercial real estate and away from indirect auto loans, coupled with enhanced liquidity and an improved efficiency ratio, are positive indicators. However, the planned second-step conversion, while potentially beneficial, introduces a period of uncertainty and requires multiple approvals. The stock's low trading volume also presents liquidity challenges for investors. Given the positive operational improvements balanced against the execution risks of the conversion and market liquidity, a 'hold' recommendation is appropriate for investors to observe the progress of the conversion and its impact on long-term value.

Keywords

Rhinebeck Bancorp, RBKB, Community Bank, Financial Results, SEC Filing, 10-K, Net Income, Earnings Per Share, Net Interest Income, Loan Portfolio, Commercial Real Estate, Indirect Automobile Loans, Deposits, Asset Quality, Non-Performing Loans, Efficiency Ratio, Capital Ratios, Liquidity, Risk Management, Cybersecurity, Mutual Holding Company, Second-Step Conversion, Hudson Valley, New York Banking