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What changed in Rhinebeck Bancorp, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Rhinebeck Bancorp, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+397 added−398 removedSource: 10-K (2024-03-26) vs 10-K (2023-03-23)

Top changes in Rhinebeck Bancorp, Inc.'s 2023 10-K

397 paragraphs added · 398 removed · 307 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

160 edited+23 added−35 removed209 unchanged
Biggest changeFor a discussion regarding that accounting standard and its implementation, see “Management’s Discussion and Analysis if Financial Condition and Results of Operation – Terms of Critical Accounting Policies.” The following table sets forth activity in our allowance for loan losses for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 ​ ​ (Dollars in thousands) Allowance for loan losses at beginning of period ​ $ 7,559 ​ $ 11,633 ​ Provision for (credit to) loan losses ​ 1,414 ​ (3,667) ​ Charge-offs: ​ ​ ​ Residential real estate loans ​ (44) ​ — ​ Commercial loans ​ (456) ​ (12) ​ Consumer loans ​ ​ ​ ​ ​ ​ ​ Indirect automobile ​ ​ (2,660) ​ ​ (2,048) ​ Other consumer ​ ​ (107) ​ ​ (24) ​ Total charge-offs ​ (3,267) ​ (2,084) ​ Recoveries: ​ ​ ​ Residential real estate loans ​ 156 ​ 6 ​ Commercial loans ​ 119 ​ 101 ​ Consumer loans ​ ​ ​ ​ ​ ​ Indirect automobile ​ ​ 1,907 ​ ​ 1,525 ​ Other consumer ​ ​ 55 ​ ​ 45 ​ Total recoveries ​ 2,237 ​ 1,677 ​ Net charge-offs ​ (1,030) ​ (407) ​ Allowance for loan losses at end of period ​ $ 7,943 ​ $ 7,559 ​ Allowance for loan losses to non-performing loans at end of period ​ 179.54 % 113.01 % Allowance for loan losses to total loans outstanding at end of period ​ 0.80 % 0.89 % Non-performing loans to total loans ​ ​ 0.45 % ​ 0.78 % Net charge-offs to average loans outstanding during period ​ (0.11) % (0.05) % ​ During the year, our allowance for loan losses increased $384,000, or 5.1%, reflecting an increase in our loan portfolio partially offset by a reduction in the overall risk rating of our indirect loan portfolio.
Biggest changeThe following table sets forth activity in our allowance for credit losses on loans for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 ​ ​ (Dollars in thousands) Allowance for credit losses at beginning of period ​ $ 7,943 ​ $ 7,559 ​ Adoption of CECL standard ​ ​ 580 ​ ​ ​ ​ Provision for loan losses ​ 1,666 ​ 1,414 ​ Charge-offs: ​ ​ ​ Residential real estate loans ​ — ​ (44) ​ Commercial loans ​ (836) ​ (456) ​ Consumer loans ​ ​ ​ ​ ​ ​ ​ Indirect automobile ​ ​ (3,577) ​ ​ (2,660) ​ Other consumer ​ ​ (62) ​ ​ (107) ​ Total charge-offs ​ (4,475) ​ (3,267) ​ Recoveries: ​ ​ ​ Residential real estate loans ​ 52 ​ 156 ​ Commercial loans ​ 111 ​ 119 ​ Consumer loans ​ ​ ​ ​ ​ ​ Indirect automobile ​ ​ 2,182 ​ ​ 1,907 ​ Other consumer ​ ​ 65 ​ ​ 55 ​ Total recoveries ​ 2,410 ​ 2,237 ​ Net charge-offs ​ (2,065) ​ (1,030) ​ Allowance for credit losses at end of period ​ $ 8,124 ​ $ 7,943 ​ Allowance for credit losses to non-performing loans at end of period ​ 194.31 % 179.54 % Allowance for credit losses to total loans outstanding at end of period ​ 0.81 % 0.80 % Non-performing loans to total loans ​ ​ 0.41 % ​ 0.45 % Net charge-offs to average loans outstanding during period ​ (0.21) % (0.11) % 14 Table of Contents ​ During the year, our allowance for credit losses on loans increased $181,000, or 2.3%, primarily reflecting the adoption of CECL and an increase in our loan portfolio, offset by improved asset quality metrics.
In addition, we have the right to “force place” insurance coverage (supplemental insurance taken out by Rhinebeck Bank) if the required physical damage insurance on an automobile is not maintained by the borrower. Nevertheless, there can be no assurance that each borrower will maintain physical damage insurance for a financed vehicle during the entire term of an automobile loan.
In addition, we have the right to “force place” insurance coverage (supplemental insurance taken out by the Bank) if the required physical damage insurance on an automobile is not maintained by the borrower. Nevertheless, there can be no assurance that each borrower will maintain physical damage insurance for a financed vehicle during the entire term of an automobile loan.
However, if a substantial portion of these deposits is not retained, we may utilize FHLB advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense. ​ Borrowings. We primarily borrow from the Federal Home Loan Bank of New York to supplement our supply of investable funds.
However, if a substantial portion of these deposits is not retained, we may utilize FHLB advances, brokered deposits or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense. ​ Borrowings. We primarily borrow from the Federal Home Loan Bank of New York to supplement our supply of investable funds.
The SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers such as Rhinebeck Bancorp, Inc. that file electronically with the SEC. All filed SEC reports and interim filings can also be obtained from the Bank’s website (www.Rhinebeckbank.com), on the “Investor Relations” page, without charge from Rhinebeck Bancorp, Inc.
The SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers such as the Company that file electronically with the SEC. All filed SEC reports and interim filings can also be obtained from the Bank’s website (www.Rhinebeckbank.com), on the “Investor Relations” page, without charge from Rhinebeck Bancorp, Inc.
We basically follow the same underwriting guidelines in originating direct (non-dealer) automobile loans. We generally finance up to the full sales price of the vehicle plus sales tax, dealer preparation fees, license fees and title fees, plus the cost of service and warranty contracts (amounts in addition to the sales price are collectively referred to as the “additional vehicle costs”).
We generally follow the same underwriting guidelines in originating direct (non-dealer) automobile loans. We generally finance up to the full sales price of the vehicle plus sales tax, dealer preparation fees, license fees and title fees, plus the cost of service and warranty contracts (amounts in addition to the sales price are collectively referred to as the “additional vehicle costs”).
Our multi-family real estate loans are generally secured by properties consisting of five to 100 rental units in our market area. 7 Table of Contents We will originate multi-family real estate loans with terms and amortization periods of up to 30 years.
Our multi-family real estate loans are generally secured by multi-unit rental properties, consisting of five to 100 rental units, in our market area. 7 Table of Contents We will originate multi-family real estate loans with terms and amortization periods of up to 30 years.
Deposits have traditionally been our primary source of funds for our lending and investment activities. We also use borrowings, primarily FHLB advances, and brokered certificates of deposit, depending on market conditions, to supplement cash flows, as needed.
Deposits have traditionally been our primary source of funds for our lending and investment activities. We also use borrowings, primarily FHLB advances, and may use brokered certificates of deposit, depending on market conditions, to supplement cash flows, as needed.
We will originate one- to four-family residential mortgage loans with loan-to-value ratios of up to 80% of the appraised value, depending on the size of the loan. Our conforming mortgage loans may be for up to 97% of the appraised value of the property provided the borrower obtains private mortgage insurance.
We originate one- to four-family residential mortgage loans with loan-to-value ratios of up to 80% of the appraised value, depending on the size of the loan. Our conforming mortgage loans may be for up to 97% of the appraised value of the property provided the borrower obtains private mortgage insurance.
McCardle III joined the Bank in 2001 and is currently the Chief Credit Officer of Rhinebeck Bank, a position he was appointed to in 2018. Prior to being named CCO, Mr. McCardle was the Chief Lending Officer for seven years.
McCardle III joined the Bank in 2001 and is currently the Chief Credit Officer (“CCO”) of Rhinebeck Bank, a position he was appointed to in 2018. Prior to being named CCO, Mr. McCardle was the Chief Lending Officer for seven years.
He previously served in senior positions in healthcare, utilities, government and higher education, where he was also an adjunct professor. Age 64. ​ Emerging Growth Company Status As an emerging growth company, Rhinebeck Bancorp, Inc. may delay adoption of new or revised financial accounting standards until such date that the standards are required to be adopted by non-public companies.
He previously served in senior positions in healthcare, utilities, government and higher education, where he was also an adjunct professor. Age 65. ​ Emerging Growth Company Status As an emerging growth company, Rhinebeck Bancorp, Inc. may delay adoption of new or revised financial accounting standards until such date that the standards are required to be adopted by non-public companies.
The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies regarding the classifying of assets and establishing an adequate allowance for loan losses for regulatory purposes. ​ As a New York-chartered mutual holding company, Rhinebeck Bancorp, MHC is regulated and subject to examination by the NYSDFS and the Federal Reserve Board.
The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies regarding the classifying of assets and establishing an adequate Allowance for credit losses for regulatory purposes. ​ As a New York-chartered mutual holding company, Rhinebeck Bancorp, MHC is regulated and subject to examination by the NYSDFS and the Federal Reserve Board.
To a lesser extent, we also originate loans above the conforming limits, which are referred to as “jumbo loans.” We usually underwrite jumbo loans, whether originated or purchased, in a manner similar to conforming loans. 6 Table of Contents Historically we have sold all of the fixed-rate residential mortgage loans that we originated to reduce our interest rate risk exposure and generate fee income.
To a lesser extent, we also originate loans above the conforming limits, which are referred to as “jumbo loans.” We usually underwrite jumbo loans, whether originated or purchased, in a manner similar to conforming loans. 6 Table of Contents Historically we have sold most of the fixed-rate residential mortgage loans that we originated to reduce our interest rate risk exposure and generate fee income.
Morgan-D’Amelio worked in both private practice and held managing attorney roles and leadership roles in financial institutions such as The Dime Savings Bank of NY, FSB, Washington Mutual and J.P. Morgan Chase, and was a Deputy County Attorney for Nassau County, New York. Age 52. ​ Francis X. Dwyer is the President of Rhinebeck Asset Management.
Morgan-D’Amelio worked in both private practice and held managing attorney roles and leadership roles in financial institutions such as The Dime Savings Bank of NY, FSB, Washington Mutual and J.P. Morgan Chase, and was a Deputy County Attorney for Nassau County, New York. Age 53. ​ Francis X. Dwyer is the President of Rhinebeck Asset Management.
Our retail banking offices are located in these four counties and serve the surrounding areas. The Hudson Valley region has a diversified economy and representative industries include education, health, government, leisure and hospitality and professional business services. We also maintain a representative office in Albany County to originate indirect automobile and commercial loans.
Our retail banking offices (and the representative offices noted below) are located in these four counties and serve the surrounding areas. The Hudson Valley region has a diversified economy and representative industries include education, health, government, leisure and hospitality and professional business services. We also maintain a representative office in Albany County to originate indirect automobile and commercial loans.
At December 31, 2022, this loan was performing according to its original terms. 5 Table of Contents Commercial Business Loans. We originate commercial business loans and lines of credit to a variety of small- and medium-sized businesses in our market area. Our commercial business borrowers include professional organizations, family-owned businesses, and not-for-profit organizations.
At December 31, 2023, this loan was performing according to its original terms. 5 Table of Contents Commercial Business Loans. We originate commercial business loans and lines of credit to a variety of small- and medium-sized businesses in our market area. Our commercial business borrowers include professional organizations, family-owned businesses, and not-for-profit organizations.
The following table sets forth the allowance for loan losses allocated by loan category, the allocation of the allowance for loan losses by loan segment and the percent of loan balances by category at the dates indicated.
The following table sets forth the allowance for credit losses allocated by loan category, the allocation of the allowance for credit losses by loan segment and the percent of loan balances by category at the dates indicated.
Generally, Section 23A of the Federal Reserve Act and the Federal Reserve Board’s Regulation W limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10.0% of the bank’s capital stock and surplus, and with all transactions with all affiliates to an amount equal to 20.0% of the bank’s capital stock and surplus.
Generally, Section 23A of the Federal Reserve Act and the Federal Reserve Board’s Regulation W limits the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10.0% of the bank’s capital stock and surplus, and with all transactions with all affiliates to an amount equal to 20.0% of the bank’s capital stock and surplus.
At December 31, 2022, this loan was performing according to its original terms. Commercial Construction and Land Development Loans. We originate loans to finance the construction of commercial properties, multi-family projects (including one- to four-family non-owner occupied residential properties) and professional complexes, or to acquire land for development for these purposes.
At December 31, 2023, this loan was performing according to its original terms. Commercial Construction and Land Development Loans. We originate loans to finance the construction of commercial properties, multi-family projects (including one- to four-family non-owner occupied residential properties) and professional complexes, or to acquire land for development for these purposes.
Effective March 1, 2017, the NYSDFS made effective regulations that require financial institutions regulated by the NYSDFS, including Rhinebeck Bank, to, among other things, (i) establish and maintain a cyber security program designed to ensure the confidentiality, integrity and availability of their information systems; (ii) implement and maintain a written cyber security policy setting forth policies and procedures for the protection of their information systems and nonpublic information; and (iii) designate a Chief Information Security Officer. ​ Community Reinvestment Act.
Effective March 1, 2017, the NYSDFS made effective regulations that require financial institutions regulated by the NYSDFS, including Rhinebeck Bank, to, among other things, (i) establish and maintain a cyber security program designed to ensure the confidentiality, integrity and availability of their information systems; (ii) implement and maintain a written cyber security policy setting forth policies and procedures for the protection of their information systems and nonpublic information; and (iii) designate a Chief Information Security Officer. ​ 26 Table of Contents Community Reinvestment Act.
Generally, a financial institution may carry forward net operating losses indefinitely and are subject to a limitation of 80% of taxable income. See Note 9 to the Consolidated Financial Statements for additional information. Capital Loss Carryovers. Generally, a financial institution may carry back capital losses to the preceding three taxable years and forward to the succeeding five taxable years.
Generally, a financial institution may carry forward net operating losses indefinitely and are subject to a limitation of 80% of taxable income. See Note 8 to the Consolidated Financial Statements for additional information. Capital Loss Carryovers. Generally, a financial institution may carry back capital losses to the preceding three taxable years and forward to the succeeding five taxable years.
At December 31, 2022, Rhinebeck Bank had no capital loss carryovers. Corporate Dividends. We may generally exclude from our income 100% of dividends received from Rhinebeck Bank as a member of the same affiliated group of corporations. As of December 31, 2022, no dividends had been paid by Rhinebeck Bank. Audit of Tax Returns.
At December 31, 2023, Rhinebeck Bank had no capital loss carryovers. Corporate Dividends. We may generally exclude from our income 100% of dividends received from Rhinebeck Bank as a member of the same affiliated group of corporations. As of December 31, 2023, no dividends had been paid by Rhinebeck Bank. Audit of Tax Returns.
At December 31, 2022, each loan in this relationship was performing according to its original repayment terms. Non-Performing Loans and Problem Assets Performance of the loan portfolio is reviewed on a regular basis by Bank management.
At December 31, 2023, each loan in this relationship was performing according to its original repayment terms. Non-Performing Loans and Problem Assets Performance of the loan portfolio is reviewed on a regular basis by Bank management.
Our employees must adhere to our Code of Business Conduct and Ethics that sets standards for appropriate behavior and includes periodic training on preventing, identifying, reporting, and stopping discrimination of any kind. ​ 20 Table of Contents Continual learning and career development is advanced through ongoing performance and development conversations with employees, internally developed training programs, customized corporate training engagements and educational reimbursement programs.
Our employees must adhere to our Code of Business Conduct and Ethics that sets standards for appropriate behavior and includes periodic training on preventing, identifying, reporting, and stopping discrimination of any kind. ​ Continual learning and career development is advanced through ongoing performance and development conversations with employees, internally developed training programs, customized corporate training engagements and educational reimbursement programs.
The regulatory structure also gives the FDIC extensive discretion in connection with its supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of an adequate allowance for loan losses for regulatory purposes.
The regulatory structure also gives the FDIC extensive discretion in connection with its supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of an adequate Allowance for credit losses for regulatory purposes.
Commercial loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and ultimate collectability of total contractual principal and interest no longer is in doubt. In our collection efforts, we will first attempt to cure any delinquent loan.
Commercial loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and ultimate collectability of total contractual principal and interest no longer is in doubt. 15 Table of Contents In our collection efforts, we will first attempt to cure any delinquent loan.
We seek to meet this competition by the convenience of our branch locations, emphasizing personalized banking and the advantage of local decision-making in our banking businesses. Specifically, we promote and maintain relationships and build customer loyalty within local communities by focusing our marketing and community involvement on the specific needs of individual neighborhoods.
We seek to meet this competition with convenient branch locations, emphasizing personalized banking and the advantage of local decision-making in our banking businesses. Specifically, we promote and maintain relationships and build customer loyalty within local communities by focusing our marketing and community involvement on the specific needs of individual neighborhoods.
We will continue to assess the impact of the CARES Act, CAA, and other statues, regulations and supervisory guidance related to the COVID-19 pandemic. ​ FEDERAL AND STATE TAXATION Federal Taxation General. The Company and the Bank are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below.
We will continue to assess the impact of the CARES Act, CAA, and other statues, regulations and supervisory guidance related to the COVID-19 pandemic. ​ 30 Table of Contents FEDERAL AND STATE TAXATION Federal Taxation General. The Company and the Bank are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below.
A number of factors regarding the borrower and loan, such as overall financial strength, collateral values and repayment ability, are considered in deciding what actions should be taken when determining the collectability of interest for accrual purposes. When a loan, including a loan that is impaired, is classified as non-accrual, the accrual of interest on such a loan is discontinued.
A number of factors regarding the borrower and loan, such as overall financial strength, collateral values and repayment ability, are considered in deciding what actions should be taken when determining the collectability of interest for accrual purposes. When a loan is classified as non-accrual, the accrual of interest on such a loan is discontinued.
The description is limited to certain material aspects of certain statutes and regulations that are addressed, and is not intended to be a complete list or description of such statutes and regulations and their effects on Rhinebeck Bancorp, Inc., Rhinebeck Bancorp, MHC and Rhinebeck Bank. 22 Table of Contents New York Banking Laws and Supervision Supervision and Enforcement Authority.
The description is limited to certain material aspects of certain statutes and regulations that are addressed, and is not intended to be a complete list or description of such statutes and regulations and their effects on Rhinebeck Bancorp, Inc., Rhinebeck Bancorp, MHC and Rhinebeck Bank. New York Banking Laws and Supervision Supervision and Enforcement Authority.
Depending on the size of the loan or other extension of credit, prior approval of the Bank’s Board of Directors (with the interested party, if a director, abstaining from participating directly or indirectly in the voting) may be required. Federal Bank Regulation Supervision and Enforcement Authority.
Depending on the size of the loan or other extension of credit, prior approval of the Bank’s Board of Directors (with the interested party, if a director, abstaining from participating directly or indirectly in the voting) may be required. 22 Table of Contents Federal Bank Regulation Supervision and Enforcement Authority.
Rhinebeck Bank’s most recent rating under New York law was “Satisfactory.” 27 Table of Contents Consumer Protection and Fair Lending Regulations. Rhinebeck Bank is subject to a variety of federal and New York statutes and regulations that are intended to protect consumers and prohibit discrimination in the granting of credit.
Rhinebeck Bank’s most recent rating under New York law was “Satisfactory.” Consumer Protection and Fair Lending Regulations. Rhinebeck Bank is subject to a variety of federal and New York statutes and regulations that are intended to protect consumers and prohibit discrimination in the granting of credit.
The Bank is subject to regulation and examination by the NYSDFS and by the Federal Deposit Insurance Corporation (the “FDIC”). Market Area Our primary market area encompasses Albany, Dutchess, Orange, and Ulster Counties (and their contiguous counties), which are located in the Hudson Valley region of New York.
The Bank is subject to regulation and examination by the NYSDFS and by the Federal Deposit Insurance Corporation (the “FDIC”). 1 Table of Contents Market Area Our primary market area encompasses Albany, Dutchess, Orange, and Ulster Counties (and their contiguous counties), which are located in the Hudson Valley region of New York.
“Critically undercapitalized” institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after it obtains such status. 25 Table of Contents Transactions with Affiliates Transactions between banks and their affiliates are governed by federal law.
“Critically undercapitalized” institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after it obtains such status. Transactions with Affiliates Transactions between banks and their affiliates are governed by federal law.
Where appropriate, we also require corporate guarantees or personal guarantees. We monitor borrowers’ and guarantors’ financial information on an ongoing basis by requiring periodic financial statement updates. At December 31, 2022, our largest multi-family real estate loan had an outstanding balance of $14.8 million and was secured by an apartment complex located in Poughkeepsie, New York.
Where appropriate, we also require corporate guarantees or personal guarantees. We monitor borrowers’ and guarantors’ financial information on an ongoing basis by requiring periodic financial statement updates. At December 31, 2023, our largest multi-family real estate loan had an outstanding balance of $14.5 million and was secured by an apartment complex located in Poughkeepsie, New York.
In the future, Rhinebeck Bancorp, MHC may convert from the mutual to capital stock form of ownership, in a transaction commonly referred to as a “second-step conversion.” Any second-step conversion of Rhinebeck Bancorp, MHC would require the approval of the NYSDFS and the Federal Reserve Board. Acquisition.
In the future, Rhinebeck Bancorp, MHC may convert from the mutual to capital stock form of ownership, in a transaction commonly referred to as a “second-step conversion.” Any second-step conversion of Rhinebeck Bancorp, MHC would require the approval of the NYSDFS and the Federal Reserve Board. 28 Table of Contents Acquisition.
These programs, include annual bonus opportunities, an Employee Stock Ownership Plan, a stock compensation plan, a matched 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, flexible work schedules, adoption assistance, education reimbursement program, and employee assistance programs. ​ We encourage and support the growth and development of our associates and, wherever possible, seek to fill positions by promotion and transfer from within the organization.
These programs include annual bonus opportunities, an Employee Stock Ownership Plan, a stock compensation plan, a matched 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, flexible work schedules, adoption assistance, education reimbursement program, and employee assistance programs. ​ 19 Table of Contents We encourage and support the growth and development of our employees and, wherever possible, seek to fill positions by promotion and transfer from within the organization.
A bank holding company that meets certain specified criteria may elect to be regulated as a “financial holding company” and thereby engage in a broader array of nonbank financial activities than those generally permitted for bank holding companies. Capital.
A bank holding company that meets certain specified criteria may elect to be regulated as a “financial holding company” and thereby engage in a broader array of nonbank financial activities than those generally permitted for bank holding companies. 27 Table of Contents Capital.
He has been with Rhinebeck Bank in this position since 2015. His career expands over 34 years in the financial services industry. Prior to joining the Bank, he held other senior executive roles with various other financial institutions. Age 61. ​ Timmian C. Massie joined Rhinebeck Bank in October 2020 as Chief Marketing/Public Affairs Officer.
He has been with Rhinebeck Bank in this position since 2015. His career expands over 35 years in the financial services industry. Prior to joining the Bank, he held other senior executive roles with various other financial institutions. Age 62. ​ Timmian C. Massie joined Rhinebeck Bank in October 2020 as Chief Marketing/Public Affairs Officer.
Rhinebeck Bancorp, Inc. also is subject to the rules and regulations of the SEC under the federal securities laws. Set forth below is a brief description of material regulatory requirements that are applicable to Rhinebeck Bancorp, Inc., Rhinebeck Bancorp, MHC and Rhinebeck Bank.
Rhinebeck Bancorp, Inc. also is subject to the rules and regulations of the SEC under the federal securities laws. 21 Table of Contents Set forth below is a brief description of material regulatory requirements that are applicable to Rhinebeck Bancorp, Inc., Rhinebeck Bancorp, MHC and Rhinebeck Bank.
We promote the health and wellness of our employees by strongly encouraging work-life balance, offering flexible work schedules, keeping the employee portion of health care premiums to a minimum and sponsoring various wellness programs.
We promote the health and wellness of our employees by strongly encouraging work-life balance, offering flexible work schedules, allowing remote work options, keeping the employee portion of health care premiums to a minimum and sponsoring various wellness programs.
His career expands over 20 years in commercial lending with various banks in the Hudson Valley. Age 47. ​ 21 Table of Contents Karen Morgan-D’Amelio, Esq . is the Chief Risk Officer and General Counsel for Rhinebeck Bank and a member of its executive leadership team. She was appointed to these positions in 2014. Prior to joining the Bank, Ms.
His career expands over 20 years in commercial lending with various banks in the Hudson Valley. Age 48. ​ Karen Morgan-D’Amelio, Esq . is the Chief Risk Officer and General Counsel for Rhinebeck Bank and a member of its executive leadership team. She was appointed to these positions in 2014. Prior to joining the Bank, Ms.
We originate loans to finance the construction of one- to four-family residential properties. We also originate rehabilitation loans, enabling the borrower to partially or totally refurbish an existing structure, which are structured as construction loans and monitored in the same manner. At December 31, 2022, residential construction loans totaled $2.3 million, or 4.2% of our residential mortgage loan portfolio.
We originate loans to finance the construction of one- to four-family residential properties. We also originate rehabilitation loans, enabling the borrower to partially or totally refurbish an existing structure, which are structured as construction loans and monitored in the same manner. At December 31, 2023, residential construction loans totaled $1.8 million, or 2.4% of our residential mortgage loan portfolio.
Commercial real estate loans are generally originated in amounts up to 75% of the appraised value or the purchase price of the property securing the loan, whichever is lower. The Bank does selectively offer interest rate swaps for both commercial and multi-family real estate loans. See Note 13 to the Consolidated Financial Statements for additional information.
Commercial real estate loans are generally originated in amounts up to 75% of the appraised value or the purchase price of the property securing the loan, whichever is lower. The Bank selectively offers interest rate swaps for both commercial and multi-family real estate loans. See Note 12 to the Consolidated Financial Statements for additional information.
We also originate rehabilitation loans, enabling the borrower to partially or totally refurbish an existing structure, which are structured as a construction loan and monitored in the same manner. At December 31, 2022, commercial construction and land development loans totaled $20.3 million, or 2.1% of our total loan portfolio.
We also originate rehabilitation loans, enabling the borrower to partially or totally refurbish an existing structure, which are structured as a construction loan and monitored in the same manner. At December 31, 2023, commercial construction and land development loans totaled $20.2 million, or 2.0% of our total loan portfolio.
The FDIC also has authority to establish individual minimum capital requirements in appropriate cases upon determination that an institution’s capital level is, or is likely to become, inadequate in light of the particular circumstances. At December 31, 2022, Rhinebeck Bank exceeded all of its capital requirements. Standards for Safety and Soundness.
The FDIC also has authority to establish individual minimum capital requirements in appropriate cases upon determination that an institution’s capital level is, or is likely to become, inadequate in light of the particular circumstances. At December 31, 2023, Rhinebeck Bank exceeded all of its capital requirements. 23 Table of Contents Standards for Safety and Soundness.
Rhinebeck Bank’s federal income tax returns have not been audited in the most recent three-year period. 31 Table of Contents State Taxation Rhinebeck Bancorp, MHC, Rhinebeck Bancorp, Inc. and Rhinebeck Bank report income on a combined fiscal year basis to New York State.
Rhinebeck Bank’s federal income tax returns have not been audited in the most recent three-year period. State Taxation Rhinebeck Bancorp, MHC, Rhinebeck Bancorp, Inc. and Rhinebeck Bank report income on a combined fiscal year basis to New York State.
These loans are generally secured by business assets and we may require support of this collateral with liens on real property. At December 31, 2022, commercial business loans were $88.0 million, or 8.9% of our total loan portfolio. At December 31, 2022, commercial business loans included $537,000 of SBA PPP loans.
These loans are generally secured by business assets and we may require support of this collateral with liens on real property. At December 31, 2023, commercial business loans were $88.9 million, or 8.8% of our total loan portfolio. At December 31, 2023, commercial business loans included $272,000 of SBA PPP loans.
Information about our Executive Officers ​ The following listing sets forth the name, principal position, recent business experience and age (as of December 31, 2022) of each executive officer: ​ Michael J. Quinn is President and Chief Executive Officer of Rhinebeck Bank.
Information about our Executive Officers ​ The following listing sets forth the name, principal position, recent business experience and age (as of December 31, 2023) of each executive officer: ​ Michael J. Quinn is President and CEO of Rhinebeck Bank.
Rhinebeck Bancorp, Inc. has policies, procedures and systems designed to comply with these regulations, and we review and document such policies, procedures and systems to ensure continued compliance with these regulations. 30 Table of Contents Regulatory Enforcement Authority Federal law provides federal banking regulators with substantial enforcement powers.
Rhinebeck Bancorp, Inc. has policies, procedures and systems designed to comply with these regulations, and we review and document such policies, procedures and systems to ensure continued compliance with these regulations. Regulatory Enforcement Authority Federal law provides federal banking regulators with substantial enforcement powers.
At December 31, 2022, our automobile loans to borrowers with credit scores of 639 or less at origination totaled $42.6 million, or 9.3% of our total indirect automobile loan portfolio. We typically will not originate these types of loans with loan-to-value ratios greater than 100% of the sales price of the automobile or debt-to-income ratios greater than 40%.
At December 31, 2023, our automobile loans to borrowers with credit scores of 639 or less at origination totaled $36.3 million, or 9.2% of our total indirect automobile loan portfolio. We typically will not originate these types of loans with loan-to-value ratios greater than 100% of the sales price of the automobile or debt-to-income ratios greater than 40%.
If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. 24 Table of Contents Investment Activities.
If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. Investment Activities.
Rhinebeck Bancorp, MHC Rhinebeck Bancorp, MHC, a New York-chartered non-stock corporation, is a mutual holding company that owns 56.24% of the outstanding common stock of Rhinebeck Bancorp, Inc. Rhinebeck Bank Rhinebeck Bank is a New York-chartered stock savings bank that was organized in 1860.
Rhinebeck Bancorp, MHC Rhinebeck Bancorp, MHC, a New York-chartered non-stock corporation, is a mutual holding company that owns 57.31% of the outstanding common stock of Rhinebeck Bancorp, Inc. Rhinebeck Bank Rhinebeck Bank is a New York-chartered stock savings bank that was organized in 1860.
The four counties in our primary market area each had a lower unemployment rate than New York State as a whole (Dutchess County, 2.5%, Orange County, 2.6%, Ulster County, 2.6% and Albany County, 2.5%).
The four counties in our primary market area each had a lower unemployment rate than New York State as a whole (Dutchess County, 3.6%, Orange County, 3.9%, Ulster County, 3.9% and Albany County, 3.6%).
He has held various titles since joining the Bank including VP, Commercial Lending, SVP Commercial Lending and SVP and Senior Lending Officer. Age 57. ​ Philip Bronzi joined the Bank in 2012 as the Vice President of Lending. He became the Senior Vice President of Lending in 2018 and was named Chief Lending Officer in 2021.
He has held various titles since joining the Bank including VP, Commercial Lending, SVP Commercial Lending and SVP and Senior Lending Officer. Age 58. ​ 20 Table of Contents Philip Bronzi joined the Bank in 2012 as the Vice President of Lending. He became the Senior Vice President of Lending in 2018 and was named Chief Lending Officer in 2021.
All of these loans are secured by properties located in our primary market area. We also had undrawn amounts on the commercial construction loans totaling $29.5 million at December 31, 2022. Our construction and land development loans are generally structured as two-year interest-only balloon loans.
All of these loans are secured by properties located in our primary market area. We also had undrawn amounts on the commercial construction loans totaling $35.4 million at December 31, 2023. Our construction and land development loans are generally structured as two-year interest-only balloon loans.
We view Orange and Albany Counties, which have larger populations than Dutchess and Ulster Counties, as primary areas for growth. 1 Table of Contents Based on published statistics, the U.S. unemployment rate was 3.5%, while the New York State unemployment rate was 4.3% as of December 31, 2022.
We view Orange and Albany Counties, which have larger populations than Dutchess and Ulster Counties, as primary areas for growth. Based on published statistics, the U.S. unemployment rate was 3.7%, while the New York State unemployment rate was 4.5% as of December 31, 2023.
Information on this website is not and should not be considered a part of this report. Rhinebeck Bancorp, Inc. files interim, quarterly and annual reports with the Securities and Exchange Commission (the “SEC”).
Information on this website is not and should not be considered a part of this report. The Company files interim, quarterly and annual reports with the Securities and Exchange Commission (the “SEC”).
We owned shares of FHLB common stock at December 31, 2022 equal to what we were required to own to maintain our membership in the Federal Home Loan Bank System and was necessary to support the balance of our advances. We are required to purchase stock as our outstanding advances increase.
We owned shares of FHLB common stock at December 31, 2023 equal to what we were required to own to maintain our membership in the Federal Home Loan Bank System and was necessary to support the balance of our advances. We are required to purchase stock as our outstanding advances increase and sell stock as the size of borrowings decrease.
Approximately 44% of our employees are employed at our banking center and loan production offices, and another 56% are employed at our corporate headquarters. We believe our relationship with our employees to be generally good.
Approximately 45% of our employees are employed at our banking center and loan production offices, and another 55% are employed at our corporate headquarters. We believe our relationship with our employees to be generally good.
At December 31, 2022, our investment portfolio had a fair value of $223.7 million and consisted primarily of U.S. Government securities, U.S. Government agency securities, including residential and collateralized mortgage-backed securities, municipal securities and corporate bonds in the form of subordinated bank debt.
At December 31, 2023, our investment portfolio had a fair value of $192.0 million and consisted primarily of U.S. Government securities, U.S. Government agency securities, including residential and collateralized mortgage-backed securities, municipal securities and corporate bonds in the form of subordinated bank debt.
A company loses emerging growth company status on the earlier of: (1) the last day of the fiscal year of the company during which it had total annual gross revenues of $1.07 billion or more; (2) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the company pursuant to an effective registration statement under the Securities Act of 1933; (3) the date on which such company has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (4) the date on which such company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, a “large accelerated filer” is defined as a corporation with at least $700 million of voting and non-voting equity held by non-affiliates).
Rhinebeck Bancorp, Inc. has elected to comply with new or amended accounting pronouncements in the same manner as a private company. 29 Table of Contents A company loses emerging growth company status on the earlier of: (1) the last day of the fiscal year of the company during which it had total annual gross revenues of $1.07 billion or more; (2) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the company pursuant to an effective registration statement under the Securities Act of 1933; (3) the date on which such company has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (4) the date on which such company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, a “large accelerated filer” is defined as a corporation with at least $700 million of voting and non-voting equity held by non-affiliates).
Fair values for determining the value of collateral are estimated from various sources, such as real estate appraisals, financial statements and from any other reliable sources of available verifiable information. For those loans deemed to be impaired, collateral value is reduced for the estimated costs to sell.
Fair values for determining the value of collateral are estimated from various sources, such as real estate appraisals, financial statements and from any other reliable sources of available verifiable information. For loans individually evaluated, collateral value is reduced for the estimated costs to sell.
The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements. ​ As of December 31, 2022, the aggregate amount of certificates of deposits in denominations greater than $250,000 was $38.9 million.
The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements. ​ As of December 31, 2023, the aggregate amount of certificates of deposits in denominations greater than $250,000 was $100.1 million.
At December 31, 2022, the Company had consolidated total assets of $1.34 billion, total deposits of $1.13 billion and stockholders’ equity of $108.1 million. The Company’s executive offices are located at 2 Jefferson Plaza, Poughkeepsie, New York 12601. The telephone number at this address is (845) 454-8555. Our website address is www.Rhinebeckbank.com.
At December 31, 2023, the Company had consolidated total assets of $1.31 billion, total deposits of $1.03 billion and stockholders’ equity of $113.7 million. The Company’s executive offices are located at 2 Jefferson Plaza, Poughkeepsie, New York 12601. The telephone number at this address is (845) 454-8555. Our website address is www.Rhinebeckbank.com.
However, occasionally we will originate commercial real estate loans on properties located outside this area based on an established relationship with a strong borrower. As of December 31, 2022, we had three loans located outside of the state of New York totaling $11.4 million.
However, occasionally we will originate commercial real estate loans on properties located outside our market area based on an established relationship with a strong borrower. As of December 31, 2023, we had three loans located outside of the state of New York totaling $11.0 million.
At December 31, 2022, $11.5 million of our consumer loans were home equity loans and lines of credit, and $8.3 million of our consumer loans were direct automobile loans. 8 Table of Contents Home equity loans and lines of credit are multi-purpose loans used to finance various home or personal needs, where a one- to four-family primary or secondary residence serves as collateral.
At December 31, 2023, $12.0 million of our consumer loans were home equity loans and lines of credit, and $7.0 million of our consumer loans were direct automobile loans. 8 Table of Contents Home equity loans and lines of credit are multi-purpose loans used to finance various home or personal needs, where a one- to four-family primary or secondary residence serves as collateral.
The Investment Committee also reviews and discusses policy changes prior to their presentation to the full board. Our management has the overall responsibility for implementing the investment policy and supervising our investment activities and performance.
The Investment Committee also reviews and discusses policy changes prior to their presentation to the full board. Our management has the overall responsibility for implementing the investment policy and supervising our investment activities and performance. Management is also responsible for providing regular reports to the Investment Committee.
We believe our commitment to living our core values, actively prioritizing concern for our employees’ well-being, supporting our employees’ career goals, offering competitive wages and providing valuable fringe benefits aids in retention of our top-performing employees. ​ As of December 31, 2022, we had 182 full-time employees and 10 part-time employees.
We believe our commitment to demonstrating our core values, actively prioritizing concern for our employees’ well-being, supporting our employees’ career goals, offering competitive wages and providing valuable fringe benefits aids in retention of our top-performing employees. ​ As of December 31, 2023, we had 164 full-time employees and nine part-time employees.
At December 31, 2022, our leverage loans totaled $6.2 million, all of which were performing in accordance with their contractual terms. At December 31, 2022, our largest commercial business loan had an outstanding balance of $4.8 million and was secured by all business assets. At December 31, 2022, this loan was performing according to its original terms.
At December 31, 2023, our leverage loans totaled $5.0 million, all of which were performing in accordance with their contractual terms. At December 31, 2023, our largest commercial business loan had an outstanding balance of $6.3 million and was secured by all business assets. At December 31, 2023, this loan was performing according to its original terms.
In addition, as of December 31, 2022, the portion of certificates of deposit in excess of the FDIC insurance limit of $250,000 was $14.1 million.
In addition, as of December 31, 2023, the portion of certificates of deposit in excess of the FDIC insurance limit of $250,000 was $58.1 million.
We will consider originating one- to four-family residential real estate loans secured by properties located outside our normal lending area on a case by case basis, preferably to preexisting customers with a relationship of one year or longer, and provided the property is located in New York.
We will consider originating one- to four-family residential real estate loans secured by properties located outside our normal lending area on a case-by-case basis, preferably to preexisting customers with a relationship of one year or longer, and provided the property is located in New York. We offer fixed-rate and adjustable-rate residential mortgage loans with maturities up to 30 years.
Loan proceeds are disbursed periodically in increments as construction progresses and as inspections by our approved inspectors warrant. Multi-Family Real Estate Loans. At December 31, 2022, multi-family real estate loans totaled $67.8 million, or 6.8%, of our total loan portfolio.
Loan proceeds are disbursed periodically in increments as construction progresses and as inspections by our approved inspectors warrant. Multi-Family Real Estate Loans. At December 31, 2023, multi-family real estate loans totaled $83.4 million, or 8.3%, of our total loan portfolio.
Our Board of Directors may make exceptions to the 10% limit for unsecured credit for borrowers with strong credit profiles. At December 31, 2022, our regulatory limit on loans-to-one borrower and our internal loans-to-one borrower limit were $32.8 million and $30.0 million, respectively.
Our Board of Directors may make exceptions to the 10% limit for unsecured credit for borrowers with strong credit profiles. At December 31, 2023, our regulatory limit on loans-to-one borrower and our internal loans-to-one borrower limit were $34.0 million and $31.7 million, respectively.
As of December 31, 2022, we had no loans that equaled or exceeded our internal loans-to-one borrower limit or our individual regulatory loan limit. At December 31, 2022, our largest lending relationship consisted of 33 loans aggregating $24.0 million, which consisted of $21.0 million secured by multiple commercial properties and $3.0 million secured by equipment, inventory and receivables.
As of December 31, 2023, we had no loans that equaled or exceeded our internal loans-to-one borrower limit or our individual regulatory loan limit. At December 31, 2023, our largest lending relationship consisted of 44 loans aggregating $25.9 million, which consisted of $22.9 million secured by multiple commercial properties and $3.0 million secured by equipment, inventory and receivables.
Non-Residential Commercial Real Estate Loans. At December 31, 2022, non-residential commercial real estate loans were $282.4 million, or 28.5%, of our total loan portfolio. Our commercial real estate loans are generally secured by properties used for business purposes, such as office buildings, industrial facilities and retail facilities.
Non-Residential Commercial Real Estate Loans. At December 31, 2023, non-residential commercial real estate loans were $324.5 million, or 32.2%, of our total loan portfolio. Our commercial real estate loans are generally secured by properties used for business purposes, such as office buildings, industrial facilities and retail facilities.
We acquire our indirect automobile loans from 63 automobile dealerships located in the Hudson Valley region and 32 dealers located in the Albany area, either under an arrangement where the dealer receives a flat fee for referring the loan to us or receives a portion of the finance charge, which is known as dealer participation or dealer reserve.
We acquire our indirect automobile loans from 85 automobile dealerships located in the Hudson Valley region and 35 dealers located in the Albany area, under an arrangement where the dealer receives a flat fee for referring the loan to us, which is known as dealer participation or dealer reserve.
Where appropriate, we also require corporate guarantees and/or personal guarantees. We monitor borrowers’ and guarantors’ financial information on an ongoing basis by requiring periodic financial statement updates. At December 31, 2022, our largest commercial real estate loan had an outstanding balance of $9.9 million and was secured by a hotel located in Wallkill, New York.
Where appropriate, we also require corporate guarantees and/or personal guarantees. We monitor borrowers’ and guarantors’ financial information on an ongoing basis by requiring periodic financial statement updates. At December 31, 2023, our largest commercial real estate loan had an outstanding balance of $16.8 million and was secured by a shopping center located in Clifton Park, New York.
We do not rely on any individual, group, or entity for a material portion of our deposits. 2 Table of Contents Lending Activities General. Loans are our primary interest-earning asset. At December 31, 2022, net loans represented 74.4% of our total assets. Loan Portfolio Composition.
We do not rely on any individual, group, or entity for a material portion of our deposits. 2 Table of Contents Lending Activities General. Loans are our primary interest-earning asset. At December 31, 2023, net loans represented 76.8% of our total assets.
Loans are usually restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt. Non-performing Loans. At December 31, 2022, $4.4 million, or 0.4% of our total loans, were non-performing loans.
Loans are usually restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt. Non-performing Loans.
Loan officers are not allowed to approve loans they have originated. Loans in excess of individual officers’ lending limits require approval of our Credit Committee, which is comprised of our President and Chief Executive Officer, Chief Credit Officer, Chief Lending Officer, Senior Vice President-Commercial Lending Team Leader, Vice President-Credit Administration, and other lending officers appointed from time to time.
Loans in excess of individual officers’ lending limits require approval of our Credit Committee, which is comprised of our President and Chief Executive Officer (“CEO”), Chief Credit Officer, Chief Lending Officer, Senior Vice President-Commercial Lending Team Leader, Vice President-Credit Administration, and other lending officers appointed from time to time.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA deterioration in economic conditions in the United States and our markets could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our products and services, all of which, in turn, would adversely affect our business, financial condition and results of operations. ​ Risks Related to Interest Rates ​ The reversal of the historically low interest rate environment may adversely affect our net interest income and profitability. ​ Since March 2022, in response to inflation, the Federal Open Market Committee ("FOMC") of the Federal Reserve has increased the target range for the federal funds rate by 425 basis points, to a range of 4.25% to 4.50% as of December 31, 2022.
Biggest changeA deterioration in economic conditions in the United States and our markets could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our products and services, all of which, in turn, would adversely affect our business, financial condition and results of operations. ​ Risks Related to Interest Rates ​ Changes in interest rates may reduce our profits.
Changes in interest rates also may negatively affect our ability to originate real estate loans, the value of our assets and our ability to realize gains from the sale of our assets, all of which may ultimately affect our earnings. For further discussion of how changes in interest rates could impact us, see “Item 7.
Changes in interest rates also may negatively impact our ability to originate real estate loans, the value of our assets and our ability to realize gains from the sale of our assets, all of which may ultimately affect our earnings. For further discussion of how changes in interest rates could impact us, see “Item 7.
Risks Related to Privacy, Security and Technology 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. ​ We are subject to various privacy, information security and data protection laws, such as the Gramm-Leach-Bliley Act, which, among other things, requires privacy disclosures, and maintenance of a robust security program that are increasingly subject to change which could have a significant impact on our current and planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding of consumer or employee information, and some of our current or planned business activities.
Risks Related to Privacy, Security and Technology 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. ​ We are subject to various privacy, information security and data protection laws, such as the Gramm-Leach-Bliley Act, which, among other things, requires privacy disclosures, and maintenance of a robust security program which are increasingly subject to change and that could have a significant impact on our current and planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding of consumer or employee information, and some of our current or planned business activities.
While we use broad and diversified risk monitoring and mitigation techniques, these techniques are inherently limited because they cannot anticipate the existence or future development of currently unanticipated or unknown risks. Recent economic conditions and heightened legislative and regulatory scrutiny of the financial services industry, among other developments, have increased our level of risk.
While we use broad and diversified risk monitoring and mitigation techniques, these techniques are inherently limited because they cannot anticipate the existence or future development of unanticipated or unknown risks. Recent economic conditions and heightened legislative and regulatory scrutiny of the financial services industry, among other developments, have increased our level of risk.
In determining the adequacy of the allowance for loan losses, we rely on our experience and our evaluation of economic conditions and other qualitative factors. If our assumptions prove to be incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, and adjustments may be necessary.
In determining the adequacy of the allowance for credit losses, we rely on our experience and our evaluation of economic conditions and other qualitative factors. If our assumptions prove to be incorrect, our allowance for credit losses may not be sufficient to cover losses inherent in our loan portfolio, and adjustments may be necessary.
Risks Related to Economic Conditions Our business may be adversely affected by downturns in the national economy and in the economies in our market areas. ​ Substantially all of our loans are to businesses and individuals in the Hudson Valley in New York.
Risks Related to Economic Conditions Our business may be adversely affected by downturns in the national economy and in the economies in our market areas. ​ Substantially all of our loans are to businesses and individuals in the Hudson Valley region of New York.
Although we, with the help of third-party service providers, intend to continue to implement security technology and establish operational procedures designed to prevent such damage, our security measures may not be successful.
Although we, with the help of third-party service providers, continue to implement security technology and establish operational procedures designed to prevent such damage, our security measures may not be successful.
Weakness in the global economy and global supply chain issues may adversely affect businesses operating in our market. ​ A deterioration in economic conditions in the market areas we serve as a result of inflation, a recession, the effects of COVID-19 variants or other factors could result in the following consequences, any of which could have a materially adverse impact on our business, financial condition and results of operations: ​ ● loan delinquencies, problem assets and foreclosures may increase; ● we may increase our allowance for loan losses; ● demand for our products and services may decline possibly resulting in a decrease in our total loans, total deposits, or assets; ● collateral for loans may decline in value, thereby reducing customers’ borrowing power, and reducing the value of assets and collateral associated with existing loans; ● the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; and ● the amount of our low-cost or non-interest bearing deposits may decrease and the composition of our deposits may be adversely affected. ​ A decline in local economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of larger financial institutions whose real estate loans are geographically diverse.
Weaknesses in the global economy and global supply chain issues may adversely affect businesses operating in our market. ​ A deterioration in economic conditions in the market areas we serve as a result of inflation, a recession, the effects of COVID-19 or other factors could result in the following consequences, any of which could have a materially adverse impact on our business, financial condition and results of operations: ​ ● loan delinquencies, problem assets and foreclosures may increase; ● we may increase our allowance for credit losses; ● demand for our products and services may decline possibly resulting in a decrease in our total loans, total deposits, or assets; ● collateral for loans may decline in value, thereby reducing customers’ borrowing power, and reducing the value of assets and collateral associated with existing loans; ● the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; and ● the amount of our low-cost or non-interest bearing deposits may decrease and the composition of our deposits may be adversely affected. ​ A decline in local economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of larger financial institutions whose operations and real estate loans are geographically diverse.
The Company’s Articles of Incorporation and Bylaws contain certain provisions designed to enhance the ability of the Company’s board of directors to deal with attempts to acquire control of the Company, including a classified board, the ability to classify and reclassify unissued shares of stock of any class or series of stock by setting, fixing, eliminating, or altering in any one or more respects the preferences, rights, voting powers, restrictions and qualifications of, dividends on, and redemption, conversion, exchange, and other rights of, such securities and a requirement for any stockholder who desires to nominate a director to abide by strict notice requirements. ​ 41 Table of Contents Maryland law also contains anti-takeover provisions that apply to the Company.
The Company’s Articles of Incorporation and Bylaws contain certain provisions designed to enhance the ability of the Company’s board of directors to deal with attempts to acquire control of the Company, including a classified board, the ability to classify and reclassify unissued shares of stock of any class or series of stock by setting, fixing, eliminating, or altering in any one or more respects the preferences, rights, voting powers, restrictions and qualifications of, dividends on, and redemption, conversion, exchange, and other rights of, such securities and a requirement for any stockholder who desires to nominate a director to abide by strict notice requirements. ​ Maryland law also contains anti-takeover provisions that apply to the Company.
Our risk management framework is designed to minimize risk and loss to us. We seek to identify, measure, monitor, report and control our exposure to risk, including strategic, market, liquidity, compliance and operational risks.
Our risk management framework is designed to minimize risk and loss. We seek to identify, measure, monitor, report and control our exposure to risk, including strategic, market, liquidity, compliance and operational risks.
Factors such as inflation, recession and instability in financial markets, among other factors beyond our control, may affect interest rates. 33 Table of Contents If interest rates rise, and the interest rates on our deposits increased faster than the interest rates we receive on our loans and investments, our interest rate spread would decrease, which would have a negative effect on our net interest income and profitability.
Factors such as inflation, recession and instability in financial markets, among other factors beyond our control, may affect interest rates. 33 Table of Contents If interest rates rise, and the interest rates on our deposits increase faster than the interest rates we receive on our loans and investments, our interest rate spread would decrease, which would have a negative effect on our net interest income and profitability.
In preparing the periodic reports we are required to file under the Securities Exchange Act of 1934, including our consolidated financial statements, our management is and will be required under applicable rules and regulations to make estimates and assumptions as of specified dates.
In preparing the periodic reports we are required to file under the Securities Exchange Act of 1934, including our consolidated financial statements, our management is required under applicable rules and regulations to make estimates and assumptions as of specified dates.
Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the ability to impose restrictions on our operations, classify our assets and determine the level of our allowance for loan losses.
Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the ability to impose restrictions on our operations, classify our assets and determine the level of our allowance for credit losses.
Business — Waivers of Dividends by Rhinebeck Bancorp, MHC.” Our common stock is not heavily traded, and the stock price may fluctuate significantly. Our common stock is traded on The NASDAQ Capital Market (ticker symbol “RBKB”), but the volume of shares traded is relatively low.
Business — Waivers of Dividends by Rhinebeck Bancorp, MHC.” 41 Table of Contents Our common stock is not heavily traded, and the stock price may fluctuate significantly. Our common stock is traded on The NASDAQ Capital Market (ticker symbol “RBKB”), but the volume of shares traded is relatively low.
Real estate values are affected by various other factors, including changes in general or regional economic conditions, government rules or policies and natural disasters.
Real estate values are affected by various other factors, including changes in general or regional economic conditions, government regulations or policies and natural disasters.
Business — Loan Underwriting Risks.” ​ 34 Table of Contents Our emphasis on commercial real estate and commercial business lending involves risks that could adversely affect our financial condition and results of operations. We intend to continue to emphasize the originations of commercial real estate and commercial business loans.
Business — Loan Underwriting Risks.” ​ 34 Table of Contents Our emphasis on commercial real estate and commercial business lending involves risks that could adversely affect our financial condition and results of operations. We emphasize the originations of commercial real estate and commercial business loans.
Depending on the capitalization and regulatory treatment of depository institutions, including whether an institution is subject to a supervisory prompt corrective action directive, certain additional regulatory restrictions and prohibitions may apply, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on payment of dividends and restrictions on the acceptance of brokered deposits.
Depending on the capitalization and regulatory treatment of depository institutions, including whether an institution is subject to a supervisory prompt corrective action directive, certain additional regulatory restrictions and prohibitions may apply, including restrictions on interest rates paid on deposits and on the acceptance of brokered deposits.
Rhinebeck Bancorp, MHC owns a majority of Rhinebeck Bancorp, Inc.’s common stock and, through its board of directors, are able to exercise voting control over most matters put to a vote of stockholders. Generally, the same directors and officers who manage Rhinebeck Bank also manage Rhinebeck Bancorp, Inc. and Rhinebeck Bancorp, MHC.
Rhinebeck Bancorp, MHC owns a majority of the Company’s common stock and, through its board of directors, are able to exercise voting control over most matters put to a vote of stockholders. Generally, the same directors and officers who manage Rhinebeck Bank also manage the Company and Rhinebeck Bancorp, MHC.
Areas requiring significant estimates and assumptions by management include our evaluation of the adequacy of our allowance for loan losses, the determination of our deferred income taxes, our fair value measurements and our determination of goodwill impairment. 40 Table of Contents Our risk management framework may not be effective in mitigating risk and reducing the potential for significant losses.
Areas requiring significant estimates and assumptions by management include our evaluation of the adequacy of our Allowance for credit losses, the determination of our deferred income taxes, our fair value measurements and our determination of goodwill impairment. Our risk management framework may not be effective in mitigating risk and reducing the potential for significant losses.
Accordingly, we could suffer losses if we fail to properly anticipate and manage these risks. Risks Relating to Ownership of Our Common Stock We may not pay any dividends on our common stock. Rhinebeck Bancorp, Inc.’s board of directors has the authority to declare dividends on our common stock subject to statutory and regulatory requirements.
Accordingly, we could suffer losses if we fail to properly anticipate and manage these risks. Risks Relating to Ownership of Our Common Stock We may not pay any dividends on our common stock. The Company’s board of directors has the authority to declare dividends on our common stock subject to statutory and regulatory requirements.
Significant deposit withdrawals could materially reduce our liquidity, and, in such an event, we may be required to replace such deposits with higher-costing borrowings. Other primary sources of funds consist of cash flows from operations and sales of investment securities.
Significant deposit withdrawals could materially reduce our liquidity, and, in such an event, we may be required to replace such deposits with higher-costing borrowings. Other primary sources of funds consist of cash flows from operations and sales of investment securities and borrowings from the FHLB of New York and the Federal Reserve.
Investors may find our common stock less attractive if we choose to rely on these exemptions. Item 1B. Unresolved Staff Comments Not applicable.
Investors may find our common stock less attractive if we choose to rely on these exemptions. 42 Table of Contents ​ Item 1B. Unresolved Staff Comments Not applicable.
If hazardous conditions or toxic substances are found on these properties, we may be liable for remediation costs, as well as for personal injury and property damage, civil fines and criminal penalties regardless of when the hazardous conditions or toxic substances first affected any particular property.
If so, we may be liable for remediation costs, as well as for personal injury and property damage, civil fines and criminal penalties regardless of when the hazardous conditions or toxic substances first affected any particular property.
New laws or changes to existing laws may increase our costs of compliance and business operations and could reduce income from certain business initiatives, including increased privacy-related enforcement activity, and higher compliance and technology costs and could restrict our ability to provide certain products and services, which could have a material adverse effect on our business, financial conditions or results of operations.
New laws or changes to existing laws may increase our costs of compliance, could reduce income from certain business initiatives and could restrict our ability to provide certain products and services, which could have a material adverse effect on our business, financial conditions or results of operations.
Persons who have purchased stock will own a minority of Rhinebeck Bancorp, Inc.’s common stock and will not be able to exercise voting control over most matters put to a vote of stockholders.
Persons who have purchased stock will own a minority of the Company’s common stock and will not be able to exercise voting control over most matters put to a vote of stockholders.
Achieving our growth targets requires us to attract customers that currently bank at other financial institutions in our market. Our ability to grow successfully will depend on a variety of factors, including our ability to attract and retain experienced bankers, the availability of attractive business opportunities and competition from other financial institutions in our market area.
Our ability to grow successfully will depend on a variety of factors, including our ability to attract and retain experienced bankers, the availability of attractive business opportunities and competition from other financial institutions in our market area.
Our access to funding sources could also be affected by a decrease in the ability to sell mortgage portfolios as a result of higher market interest rates negatively impacting originations, a downturn in our markets or by one or more adverse regulatory actions against us.
Our liquidity is also affected by a decrease in the ability to sell mortgage portfolios as a result of our decision to retain more mortgage loans in the portfolio, higher market interest rates negatively impacting originations, a downturn in our markets or by one or more adverse regulatory actions against us.
Any decline in available funding could adversely impact our ability to originate loans, invest in securities, meet our expenses or fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity, business, financial condition and results of operations. Our success depends on retaining certain key personnel.
Any decline in available funding could adversely impact our ability to originate loans, invest in securities, meet our expenses or fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity, business, financial condition and results of operations. 40 Table of Contents The value of our goodwill may decline in the future.
These loans also generally have relatively large balances to single borrowers or related groups of borrowers. Accordingly, any charge-offs may be larger on a per loan basis than those incurred with our residential or consumer loans. See “Item 1. Business — Loan Underwriting Risks.” Our allowance for loan losses may not be sufficient to cover actual loan losses.
Accordingly, any charge-offs may be larger on a per loan basis than those incurred with our residential or consumer loans. See “Item 1. Business — Loan Underwriting Risks.” Our allowance for credit losses may not be sufficient to cover actual loan losses.
At December 31, 2022, our commercial real estate (which includes multi-family real estate loans and commercial construction loans) and commercial business loans totaled $458.5 million, or 46.3% of our loan portfolio.
At December 31, 2023, our commercial real estate (which includes multi-family real estate loans and commercial construction loans) and commercial business loans totaled $517.0 million, or 51.3% of our loan portfolio.
Stockholders' equity, specifically accumulated other comprehensive income (loss) ("AOCI"), is increased or decreased by the amount of change in the estimated fair value of our securities available for sale, net of deferred income taxes. Increases in interest rates generally decrease the fair value of securities available for sale, which adversely impacts stockholders' equity.
Generally, the fair value of fixed-rate securities fluctuates inversely with changes in interest rates. Stockholders' equity, specifically accumulated other comprehensive income (loss), is increased or decreased by the amount of change in the estimated fair value of our securities available for sale, net of deferred income taxes.
Changes in interest rates may also have an adverse effect on our financial condition, as our available-for-sale securities are reported at their estimated fair value, and therefore are affected by fluctuations in interest rates. We increase or decrease our stockholders’ equity by the amount of change in the estimated fair value of the available-for-sale securities, net of taxes.
Changes in interest rates may also have an adverse effect on our financial condition, as our available-for-sale securities are reported at their estimated fair value, and therefore are affected by fluctuations in interest rates.
The Maryland Control Share Acquisition Act applies to acquisitions of “control shares,” which, subject to certain exceptions, are shares the acquisition of which entitle the holder, directly or indirectly, to exercise or direct the exercise of the voting power of shares of stock of a corporation in the election of directors within any of the following ranges of voting power: one-tenth or more, but less than one-third of all voting power; one-third or more, but less than a majority of all voting power or a majority or more of all voting power.
The Maryland Control Share Acquisition Act applies to acquisitions of “control shares,” which, subject to certain exceptions, are shares the acquisition of which entitle the holder, directly or indirectly, to exercise or direct the exercise of the voting power of shares of stock of a corporation in the election of directors.
In addition, inflation increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our non-interest expenses.
As inflation increased, the value of our investment securities, particularly those with longer maturities, decreased. In addition, inflation increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our non-interest expenses.
For more information about our market area and the competition we face, see “Item 1. Business — Market Area” and “— Competition.” 39 Table of Contents A lack of liquidity could adversely affect our financial condition and results of operations and result in regulatory limits being placed on the Company. Liquidity is essential to our business.
Business — Market Area” and “— Competition.” A lack of liquidity could adversely affect our financial condition and results of operations and result in regulatory limits being placed on the Company. Liquidity is essential to our business.
If this evaluation shows impairment to the actual or projected cash flows associated with one or more securities, we may take a charge to earnings to reflect such impairment.
Management evaluates securities for impairment related to credit losses on at least a quarterly basis. If this evaluation shows impairment to the actual or projected cash flows associated with one or more securities, we may take a charge to earnings to reflect such impairment.
At December 31, 2022, $457.2 million, or 46.2% of our total loan portfolio and 34.2% of our total assets, consisted of indirect automobile loans, which represents loans originated through automobile dealers for the purchase of new or used automobiles. At that date, $8.3 million, or 0.8% of our total loan portfolio, consisted of automobile loans that we also originated directly.
At December 31, 2023, $394.2 million, or 39.1% of our total loan portfolio and 30.0% of our total assets, consisted of indirect automobile loans, which represented loans originated through automobile dealers for the purchase of new or used automobiles. At that date, $7.0 million, or 6.9% of our total loan portfolio, consisted of automobile loans that we also originated directly.
We maintain an allowance for loan losses, which is established through a provision for loan losses that represents management’s best estimate of probable incurred losses within the existing portfolio of loans.
We maintain an allowance for credit losses, which is established through a provision for credit losses that represents management’s best estimate of the lifetime expected losses on loans.
Finally, depending on the type of incident, banking regulators can impose restrictions on our business and consumer laws may require reimbursement of customer losses. 38 Table of Contents Our inability to successfully implement technological change may adversely impact our business. ​ The financial services industry is continually undergoing rapid technological change with frequent introductions of new, technology-driven products and services which increases efficiency and enables financial institutions to better serve customers and reduce costs.
Our inability to successfully implement technological change may adversely impact our business. ​ The financial services industry is continually undergoing rapid technological change with frequent introductions of new, technology-driven products and services which increases efficiency and enables financial institutions to better serve customers and reduce costs.
If we are unable to effectively compete in our market area, our profitability would be negatively affected. The greater resources and broader offering of deposit and loan products of some of our competitors may also limit our ability to increase our interest-earning assets. Competition also makes it more difficult and costly to attract and retain qualified employees.
The greater resources and broader offering of deposit and loan products of some of our competitors may also limit our ability to increase our interest-earning assets. Competition also makes it more difficult and costly to attract and retain qualified employees. For more information about our market area and the competition we face, see “Item 1.
In some cases, repossessed collateral for a defaulted automobile loan may not provide an adequate source of repayment for the outstanding loan and the remaining deficiency may not warrant further collection efforts against the borrower.
Automobile loans are inherently risky as they are secured by assets that may be difficult to locate and can depreciate rapidly. In some cases, repossessed collateral for a defaulted automobile loan may not provide an adequate source of repayment for the outstanding loan and the remaining deficiency may not warrant further collection efforts against the borrower.
A problem with one or more loans could require us to significantly increase our provision for loan losses. In addition, federal and state regulators periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs. Significant additions to the allowance could materially decrease our net income.
There can be no assurance that the Company’s allowance for credit losses will be adequate to cover actual losses. In addition, federal and state regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or recognize further loan charge-offs. Significant additions to the allowance could materially decrease our net income.
Our failure to maintain or reduce our operating expenses may reduce our profits. Our non-interest expenses totaled $37.4 million and $35.5 million for the years ended December 31, 2022 and 2021, respectively.
Our failure to maintain or reduce our operating expenses may reduce our profits. Our non-interest expenses totaled $36.4 million and $37.4 million for the years ended December 31, 2023 and 2022, respectively. Although we have decreased our expenses and have achieved certain efficiencies, our efficiency ratio, comparative to peers, remains high.
Declines in market value may result in other-than-temporary impairments of these assets, which may lead to accounting charges that could have a material adverse effect on our net income and stockholders’ equity. Management evaluates securities for other-than-temporary impairment on a quarterly basis, with more frequent evaluation for selected issues.
Fluctuations in market value may be caused by changes in market interest rates, lower market prices for securities and limited investor demand. Declines in market value may result in impairments of these assets, which may lead to accounting charges that could have a material adverse effect on our net income and stockholders’ equity.
If we do not manage our growth effectively, we may not be able to execute our business plan, which would have an adverse effect on our financial condition and results of operations. Building market share through de novo branching may cause our expenses to increase faster than revenues.
If we do not manage our growth effectively, we may not be able to execute our business plan, which would have an adverse effect on our financial condition and results of operations. 36 Table of Contents Risks Related to Laws and Regulations 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.
Some of these impacts might occur even in the absence of an actual default but as a consequence of extended political negotiations around the threat of such a default and a government shutdown. ​ Inflation can have an adverse impact on our business and on our customers. ​ Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money.
Further, unless and until U.S. political, credit and financial market conditions have been sufficiently resolved or stabilized, we may face increases in our future borrowing costs. ​ Inflation can have an adverse impact on our business and on our customers. ​ Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money.
During the year ended December 31, 2022, we incurred other comprehensive losses, net of tax, of $25.5 million related to net changes in unrealized holding losses in the available-for-sale investment securities portfolio. Any substantial, unexpected or prolonged change in market interest rates could have a material adverse effect on our financial condition, liquidity and results of operations.
Any substantial or unexpected change in market interest rates could have a material adverse effect on our financial condition, liquidity and results of operations.
The annual inflation rate in the United States hit a high in June of 2022 at 9.1%, and while currently declining, was still at 6.5% as of December 31, 2022.
The annual inflation rate in the United States hit a high in June of 2022 at 9.1% and has been substantially reduced to 3.4% as of December 31, 2023. The Federal Reserve increased the target federal funds rate, up 425 basis points in 2022 to combat inflation.
Changes in the valuation of our securities portfolio may reduce our profits and our capital levels. The market value of our securities portfolio may fluctuate, potentially increasing accumulated other comprehensive loss or reducing earnings.
The market value of our securities portfolio may fluctuate, potentially increasing accumulated other comprehensive loss or reducing earnings. At December 31, 2023, our other comprehensive losses, net of tax, of $26.1 million was related to net changes in unrealized holding losses in the available-for-sale investment securities portfolio.
Strong competition within our market area may reduce our profits and slow growth. We face strong competition in making loans and attracting deposits. Price competition for loans and deposits sometimes requires us to charge lower interest rates on our loans and pay higher interest rates on our deposits, which may reduce our net interest income.
Price competition for loans and deposits sometimes requires us to charge lower interest rates on our loans and pay higher interest rates on our deposits, which may reduce our net interest income. Many of the institutions with which we compete have substantially greater resources and lending limits than we have and may offer services that we do not provide.
Additional liquidity is provided by our ability to borrow from the FHLB of New York or our ability to sell portions of our loan portfolio. We also may borrow funds from third-party lenders, such as other financial institutions.
We also may borrow funds from third-party lenders, such as other financial institutions.
During the year ended December 31, 2022, we incurred other comprehensive losses, net of tax, of $25.5 million related to net changes in unrealized holding losses in the available-for-sale investment securities portfolio. Fluctuations in market value may be caused by changes in market interest rates, lower market prices for securities and limited investor demand.
Increases in interest rates generally decrease the fair value of securities available for sale, which adversely impacts stockholders' equity. On December 31, 2023, we recorded other comprehensive losses, net of tax, of $26.1 million related to net changes in unrealized holding losses in our available-for-sale investment securities portfolio.
Moreover, our efficiency ratio, comparative to peers, remains high as a result of our higher operating expenses, even though we have increased our net interest income. Our efficiency ratio totaled 78.40% and 75.82% for the years ended December 31, 2022 and 2021, respectively. Failure to control or maintain our expenses may reduce future profits.
Our efficiency ratio totaled 83.28% and 78.4% for the years ended December 31, 2023 and 2022, respectively. Failure to control or maintain our expenses may reduce future profits. Changes in the valuation of our securities portfolio may reduce our profits and our capital levels.
Many of the institutions with which we compete have substantially greater resources and lending limits than we have and may offer services that we do not provide. Our competitors often aggressively price loan and deposit products when they enter into new lines of business or new market areas.
Our competitors often aggressively price loan and deposit products when they enter into new lines of business or new market areas. If we are unable to effectively compete in our market area, our profitability would be negatively affected.
If we are required to liquidate a significant amount of collateral during a period of reduced real estate values, our financial condition and profitability could be adversely affected. ​ 32 Table of Contents Further, a U.S. government debt default would have a material adverse impact on our business and financial performance, including a decrease in the value of Treasury bonds and other government securities held by us, which could negatively impact the Bank’s capital position and its ability to meet regulatory requirements.
If we are required to liquidate a significant amount of collateral during a period of reduced real estate values, our financial condition and profitability could be adversely affected. ​ ​ 32 Table of Contents Lawmakers’ failure to address the federal debt ceiling in a timely manner, downgrades of the U.S. credit rating and uncertain credit and financial market conditions may affect the stability of securities issued or guaranteed by the federal government, which may affect the valuation or liquidity of our investment securities portfolio and increase future borrowing costs.
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on us. ​ Risk Related to our Business Strategy Our business strategy involves moderate 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.
This has resulted in an increase from $57.7 million in FHLB advances at December 31, 2022 to $128.1 million at December 31, 2023 and a corresponding increase in borrowing expense to $5.1 million for the year ended December 31, 2023 as compared to $1.1 million for the year ended December 31, 2022. ​ Risk Related to our Business Strategy Our long-term business strategy involves moderate 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.
Although we expect that we will continue to meet all capital adequacy requirements to which we are subject following recording of the impact of adoption to stockholders’ equity, future provisioning for expected credit losses under CECL may have a material adverse effect on our financial condition and results of operations. ​ Our non-owner occupied commercial real estate loans may expose us to increased credit risk. ​ At December 31, 2022, $112.4 million, or 11.3% of our total loan portfolio and 39.8% of our commercial real estate loan portfolio, consisted of loans secured by non-owner occupied commercial real estate loans.
Our non-owner occupied commercial real estate loans may expose us to increased credit risk. ​ At December 31, 2023, $304.8 million, or 30.2% of our total loan portfolio and 71.2% of our commercial real estate loan portfolio, consisted of loans secured by non-owner occupied commercial real estate loans.
Removed
Other negative impacts could be volatile capital markets, an adverse impact on the U.S. economy and the U.S. dollar, as well as increased default rates among borrowers in light of increased economic uncertainty.
Added
As a result of uncertain political, credit and financial market conditions, including the potential consequences of the federal government defaulting on its obligations for a period of time due to federal debt ceiling limitations or other unresolved political issues, investments in financial instruments issued or guaranteed by the federal government pose credit default and liquidity risks.
Removed
As a result, the Federal Reserve has continued to increase the target federal funds rate, up 425 basis points in 2022, and has indicated its intention to continue to increase interest rates in an effort to combat inflation. As inflation increases, the value of our investment securities, particularly those with longer maturities, would decrease.
Added
Given that future deterioration in the U.S. credit and financial markets is a possibility, no assurance can be made that losses or significant deterioration in the fair value of our U.S. government issued or guaranteed investments will not occur.
Removed
As it seeks to control inflation without creating a recession, the FOMC has indicated further increases are to be expected.
Added
At December 31, 2023, we had approximately $23.2 million and $128.6 million in U.S. government agency securities and residential mortgage-backed securities issued or guaranteed by government-sponsored enterprises, respectively, and $24.0 million in U.S. treasury securities.
Removed
If the FOMC further increased the targeted federal funds rates, overall interest rates will likely continue to rise, which may positively impact our interest income but may negatively impact both the housing market by reducing refinancing activity and new home purchases and the U.S. economy.
Added
Downgrades to the U.S. credit rating could affect the stability of securities issued or guaranteed by the federal government and the valuation or liquidity of our portfolio of such investment securities, and could result in our counterparties requiring additional collateral for our borrowings.
Removed
Further, as discussed below, the increase in market interest rates is expected to have an adverse effect on our net interest income and profitability. ​ Changes in interest rates may reduce our profits.
Added
These loans also generally have relatively large balances to single borrowers or related groups of borrowers. In addition, changes in consumer preferences about where they work, live, shop and eat can also impact commercial real estate, which could result in declines in occupancy and declines in property values.
Removed
Generally, the fair value of fixed-rate securities fluctuates inversely with changes in interest rates. Unrealized gains and losses on investment securities available for sale are reported as a separate component of equity, net of tax. Decreases in the fair value of investment securities available for sale resulting from increases in interest rates have an adverse effect on stockholders' equity.
Added
The Company adopted the current expected credit loss model (“CECL”), effective January 1, 2023, which replaced the previous “incurred loss” model for measuring credit losses with an “expected life of loan loss” model referred to as the CECL model.
Removed
We serve customers that cover a range of creditworthiness and the required terms and rates are reflective of those risk profiles. Automobile loans are inherently risky as they are secured by assets that may be difficult to locate and can depreciate rapidly.
Added
The CECL methodology substantially changed how the Company calculates its allowance for credit losses, and the ongoing impact of the adoption is dependent on various factors, including credit quality, macroeconomic forecasts and conditions, composition of our loans and securities portfolios, and other management judgements.
Removed
We expect that the implementation of Current Expected Credit Loss (“CECL”), which will require us to record an allowance for credit losses in excess of our existing allowance for loan losses, could cause increased volatility in our financial condition and results of operation. ​ The Financial Accounting Standards Board (“FASB”) has adopted a new accounting standard, CECL.
Added
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on us. ​ Risks Related to Our Funding ​ Our inability to generate core deposits may cause us to rely more heavily on wholesale funding strategies for funding and liquidity needs, which could have an adverse effect on our net interest margin and profitability.
Removed
CECL will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans, other financial instruments and other commitments to extend credit and provide for the expected credit losses as allowances for credit losses. The Company adopted CECL as of January 1, 2023.
Added
We must maintain sufficient funds to respond to the needs of depositors and borrowers. Deposits have traditionally been our primary source of funds for use in lending and investment activities. We also receive funds from loan repayments, investment maturities and income on other interest-earning assets. While we emphasize generating transaction accounts, we cannot guarantee if and when this will occur.
Removed
This will change the current method of providing allowances for loan losses that are probable, which will require us to record an allowance for credit losses as of January 1, 2023 in excess of our existing allowance for loan losses, and will greatly increase the analysis we will need to undertake to determine the appropriate level of the allowance for credit losses.
Added
Further, the considerable competition for deposits in our market area also has made, and may continue to make, it difficult for us to obtain reasonably priced deposits. Moreover, deposit balances can decrease if customers perceive alternative investments as providing a better risk/return tradeoff.
Removed
Our assets increased $54.8 million, or 4.3%, from $1.28 billion at December 31, 2021 to $1.33 billion at December 31, 2022, primarily due to increases in loans. Over the next several years, we expect to experience moderate growth in our total assets and deposits, and the scale of our operations.
Added
If we are not able to increase our lower-cost transactional deposits at a level necessary to fund our asset growth or deposit outflows, we may be forced seek other sources of funds, including other certificates of deposit, FHLB advances, brokered deposits and lines of credit to meet the borrowing and deposit withdrawal requirements of our customers, which may be more expensive and have an adverse effect on our net interest margin and profitability.
Removed
In 2021, we continued to build market share by opening two newly acquired and two de novo branches in Orange County, New York. There are considerable costs involved in establishing new branches as they require time to generate sufficient revenues to offset their initial start-up costs.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAt December 31, 2022, the net book value of our land, buildings, furniture, fixtures and equipment was $18.7 million.
Biggest changeWe own seven and lease nine properties, and own three other buildings situated on land controlled under long-term leases. At December 31, 2023, the net book value of our land, buildings, furniture, fixtures and equipment was $17.6 million.
Item 2. Properties At December 31, 2022, we conducted business through our corporate office in Poughkeepsie and 14 other retail banking offices located in Rhinebeck, Fishkill, Goshen, Hopewell Junction, Hyde Park, Kingston, Middletown, Newburgh, Poughkeepsie (three branch offices), Red Hook, Wappingers Falls and Warwick, as well as two representative offices in Montgomery and Albany.
Item 2. Properties At December 31, 2023, we conducted business through our corporate office in Poughkeepsie and 14 other retail banking offices located in Rhinebeck, Fishkill, Goshen, Hopewell Junction, Hyde Park, Kingston, Middletown, Newburgh, Poughkeepsie (three branch offices), Red Hook, Wappingers Falls and Warwick, as well as two representative offices in Montgomery and Albany.
Removed
A stand-alone ATM located in Tivoli, New York was removed in January 2022 and our branch office located in Monroe, New York was permanently closed as of December 30, 2022. We own seven and lease nine properties, and own three other buildings situated on land controlled under long-term leases.
Added
On November 16, 2023, the Bank entered into an agreement with Heritage Financial Credit Union, a New York State chartered credit union, to sell the Bank’s Beacon branch office in Wappingers Falls, New York, for $2.9 million subject to the receipt of applicable regulatory approvals and other customary closing conditions.
Added
The sale includes the land and building as well of all branch premises and equipment. All of the branch accounts have been redomiciled to the customer’s nearest branch and all employees will be placed in open positions. An impairment expense of $375,000 was taken on the property in December 2023. The closing date of the branch was February 23, 2024.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAt December 31, 2022, we were not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows. Item 4. Mine Safety Disclosures Not applicable. 42 Table of Contents PART II
Biggest changeAt December 31, 2023, we were not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows. Item 4. Mine Safety Disclosures Not applicable. 45 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 42 PART II ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 43 Item 6. [ Reserved] 43 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 44 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 59
Biggest changeItem 4. Mine Safety Disclosures 45 PART II ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 46 Item 6. [ Reserved] 46 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 47 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 63

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn September 2022, the Board approved a stock repurchase plan pursuant to which the Company was authorized to repurchase up to 247,506 shares of its common stock.
Biggest changeSee “Item1. Business — Waivers of Dividends by Rhinebeck Bancorp, MHC.” In September 2022, the Board approved a stock repurchase plan pursuant to which the Company was authorized to repurchase up to 247,506 shares of its common stock.
Certain shares of the Company are held in “nominee” or “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number. Rhinebeck Bancorp, Inc. currently does not anticipate paying a dividend to its stockholders.
Certain shares of the Company are held in “nominee” or “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number. The Company currently does not anticipate paying a dividend to its stockholders.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The common stock of Rhinebeck Bancorp, Inc. is listed on The NASDAQ Capital Market under the symbol “RBKB”. At February 28, 2023, Rhinebeck Bancorp, Inc. had 364 stockholders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The common stock of the Company is listed on The NASDAQ Capital Market under the symbol “RBKB”. At February 28, 2023, the Company had 346 stockholders of record.
No shares were repurchased under the stock repurchase plan during the three months ended December 31, 2022. ​ There were no sales of unregistered securities or repurchases of shares of common stock during the quarter ended December 31, 2022. ​
No shares were repurchased under the stock repurchase plan during the three months ended December 31, 2023. ​ There were no sales of unregistered securities during the quarter ended December 31, 2023. ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

82 edited+43 added−38 removed39 unchanged
Biggest changeDeferred loan fees included in interest income totaled $1.2 million and $2.7 million for the years ended December 31, 2022 and 2021, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2022 ​ 2021 ​ ​ Average Interest and ​ Average Interest and ​ ​ ​ Balance ​ Dividends ​ Yield/Cost ​ Balance ​ Dividends ​ Yield/Cost ​ ​ ​ (Dollars in thousands) Assets: ​ ​ ​ ​ Interest bearing depository accounts ​ $ 29,368 ​ $ 325 1.11 % $ 83,169 ​ $ 105 0.13 % Loans (1) ​ 924,581 ​ 44,419 4.80 % 861,207 ​ 41,363 4.80 % Available for sale securities ​ 257,740 ​ 3,848 1.49 % 198,795 ​ 2,232 1.12 % Total interest-earning assets ​ ​ 1,211,689 ​ ​ 48,592 4.01 % ​ 1,143,171 ​ ​ 43,700 3.82 % Non-interest-earning assets ​ 84,310 ​ ​ 72,091 ​ ​ Total assets ​ $ 1,295,999 ​ ​ $ 1,215,262 ​ ​ Liabilities and equity: ​ ​ ​ ​ ​ NOW accounts ​ $ 160,172 ​ $ 228 0.14 % $ 148,851 ​ $ 241 0.16 % Money market accounts ​ 315,231 ​ 3,395 1.08 % 244,412 ​ 1,395 0.57 % Savings accounts ​ 188,188 ​ 443 0.24 % 174,369 ​ 283 0.16 % Certificates of deposit ​ 143,449 ​ 1,435 1.00 % 178,360 ​ 1,577 0.88 % Total interest-bearing deposits ​ 807,040 ​ 5,501 0.68 % 745,992 ​ 3,496 0.47 % Escrow accounts ​ 9,931 ​ 110 1.11 % 9,045 ​ 105 1.16 % FHLB and FRB advances ​ 30,074 ​ 948 3.15 % 28,792 ​ 573 1.99 % Subordinated debt ​ 5,155 ​ 197 3.82 % 5,155 ​ 113 2.19 % Other interest-bearing liabilities ​ 45,160 ​ 1,255 2.78 % 42,992 ​ 791 1.84 % Total interest-bearing liabilities ​ ​ 852,200 ​ ​ 6,756 0.79 % ​ 788,984 ​ ​ 4,287 0.54 % Non-interest-bearing deposits ​ 304,488 ​ ​ 284,279 ​ ​ Other non-interest-bearing liabilities ​ 23,865 ​ ​ 20,250 ​ ​ Total liabilities ​ ​ 1,180,553 ​ ​ ​ 1,093,513 ​ ​ Total stockholders’ equity ​ 115,446 ​ ​ 121,749 ​ ​ Total liabilities and stockholders’ equity ​ $ 1,295,999 ​ ​ $ 1,215,262 ​ ​ Net interest income ​ ​ $ 41,836 ​ ​ $ 39,413 ​ Interest rate spread ​ ​ 3.22 % ​ 3.28 % Net interest margin (2) ​ ​ 3.45 % ​ 3.45 % Average interest-earning assets to average interest-bearing liabilities ​ ​ 142.18 % ​ 144.89 % (1) Non-accruing loans are included in the outstanding loan balance.
Biggest changeDeferred loan fees included in interest income totaled $67,000 and $1.2 million for the years ended December 31, 2023 and 2022, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2023 ​ 2022 ​ ​ Average Interest and ​ Average Interest and ​ ​ ​ Balance ​ Dividends ​ Yield/Cost ​ Balance ​ Dividends ​ Yield/Cost ​ ​ ​ (Dollars in thousands) Assets: ​ ​ ​ ​ Interest bearing depository accounts ​ $ 22,612 ​ $ 1,173 5.19 % $ 29,368 ​ $ 325 1.11 % Loans (1) ​ 1,006,506 ​ 55,077 5.47 % 924,581 ​ 44,419 4.80 % Available for sale securities ​ 208,058 ​ 3,964 1.91 % 255,762 ​ 3,733 1.46 % Other interest-earning assets ​ 5,223 ​ 445 8.52 % 1,978 ​ ​ 115 ​ 5.81 % Total interest-earning assets ​ ​ 1,242,399 ​ ​ 60,659 4.88 % ​ 1,211,689 ​ ​ 48,592 4.01 % Non-interest-earning assets ​ 90,389 ​ ​ 84,310 ​ ​ Total assets ​ $ 1,332,788 ​ ​ $ 1,295,999 ​ ​ Liabilities and equity: ​ ​ ​ ​ ​ NOW accounts ​ $ 138,515 ​ $ 192 0.14 % $ 160,172 ​ $ 228 0.14 % Money market accounts ​ 232,666 ​ 6,154 2.64 % 315,231 ​ 3,395 1.08 % Savings accounts ​ 161,812 ​ 586 0.36 % 188,188 ​ 443 0.24 % Certificates of deposit ​ 282,838 ​ 10,574 3.74 % 143,449 ​ 1,435 1.00 % Total interest-bearing deposits ​ 815,831 ​ 17,506 2.15 % 807,040 ​ 5,501 0.68 % Escrow accounts ​ 10,032 ​ 111 1.11 % 9,931 ​ 110 1.11 % Federal Home Loan Bank advances ​ 96,409 ​ 4,634 4.81 % 30,074 ​ 948 3.15 % Subordinated debt ​ 5,155 ​ 381 7.39 % 5,155 ​ 197 3.82 % Other interest-bearing liabilities ​ ​ 1,146 ​ ​ 62 ​ 5.41 % ​ — ​ ​ — ​ ​ ​ Total other interest-bearing liabilities ​ 112,742 ​ 5,188 4.60 % 45,160 ​ 1,255 2.78 % Total interest-bearing liabilities ​ ​ 928,573 ​ ​ 22,694 2.44 % ​ 852,200 ​ ​ 6,756 0.79 % Non-interest-bearing deposits ​ 268,103 ​ ​ 304,488 ​ ​ Other non-interest-bearing liabilities ​ 26,972 ​ ​ 23,865 ​ ​ Total liabilities ​ ​ 1,223,648 ​ ​ ​ 1,180,553 ​ ​ Total stockholders’ equity ​ 109,140 ​ ​ 115,446 ​ ​ Total liabilities and stockholders’ equity ​ $ 1,332,788 ​ ​ $ 1,295,999 ​ ​ Net interest income ​ ​ $ 37,965 ​ ​ $ 41,836 ​ Interest rate spread ​ ​ 2.44 % ​ 3.22 % Net interest margin (2) ​ ​ 3.06 % ​ 3.45 % Average interest-earning assets to average interest-bearing liabilities ​ ​ 133.80 % ​ 142.18 % (1) Non-accruing loans are included in the outstanding loan balance.
The allowance for loan losses is increased through charges to the provision for loan losses. Loans are charged against the allowance when management believes that the collectability of the principal loan amount is not probable. Recoveries on loans previously charged-off, if any, are credited to the allowance for loan losses when realized. Non-interest Income.
The allowance for credit losses is increased through charges to the provision for credit losses. Loans are charged against the allowance when management believes that the collectability of the principal loan amount is not probable. Recoveries on loans previously charged-off, if any, are credited to the allowance for credit losses when realized. Non-Interest Income.
See Note 9 to the Consolidated Financial Statements for a further description of our provision and related income tax assets and liabilities. ​ In establishing a provision for income tax expense, we must make judgments and interpretations about the application of these inherently complex tax laws.
See Note 8 to the Consolidated Financial Statements for a further description of our provision and related income tax assets and liabilities. ​ In establishing a provision for income tax expense, we must make judgments and interpretations about the application of these inherently complex tax laws.
(2) Represents the difference between interest earned and interest paid, divided by average total interest earning assets. ​ ​ 55 Table of Contents Rate/Volume Analysis ​ The following table presents the effects of changing rates and volumes on our net interest income for the years indicated.
(2) Represents the difference between interest earned and interest paid, divided by average total interest earning assets. ​ ​ 59 Table of Contents Rate/Volume Analysis ​ The following table presents the effects of changing rates and volumes on our net interest income for the years indicated.
We have implemented the following strategies to manage our interest rate risk: originating loans with adjustable interest rates, holding more residential mortgage loans, promoting core deposit products and managing the interest rates and maturities of funding sources, as favorably as possible.
We have implemented the following strategies to manage our interest rate risk: originating loans with adjustable interest rates, holding more residential mortgage loans in our portfolio, promoting core deposit products and managing the interest rates and maturities of funding sources, as favorably as possible.
By following these strategies, we believe that we can be better positioned to react to changes in market interest rates. 56 Table of Contents Net Economic Value Simulation. We analyze our sensitivity to changes in interest rates through a net economic value of equity (“EVE”) model.
By following these strategies, we believe that we can be better positioned to react to changes in market interest rates. 60 Table of Contents Net Economic Value Simulation. We analyze our sensitivity to changes in interest rates through a net economic value of equity (“EVE”) model.
Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit. For information about our loan commitments, letters of credit and unused lines of credit, see Note 12 to the Consolidated Financial Statements.
Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit. For information about our loan commitments, letters of credit and unused lines of credit, see Note 11 to the Consolidated Financial Statements.
Our primary sources of non-interest income are mortgage banking income, service charges on deposit accounts, investment advisory income and net gains in the cash surrender value of bank owned life insurance and other income. Non-Interest Expenses.
Our primary sources of non-interest income are service charges on deposit accounts, investment advisory income and net gains in the cash surrender value of bank owned life insurance and other income. Non-Interest Expenses.
Net cash provided by operating activities was $14.8 million and $7.7 million for the years ended December 31, 2022 and 2021, respectively. 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 operating activities was $7.0 million and $14.8 million for the years ended December 31, 2023 and 2022, respectively. 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.
The statutory tax rate is impacted by the benefits derived mainly from tax-exempt bond income and income received on the bank owned life insurance to arrive at the effective tax rate. ​ 54 Table of Contents Average Balance Sheets for the Years Ended December 31, 2022 and 2021 The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated.
The statutory tax rate is impacted by the benefits derived mainly from tax-exempt bond income and income received on the bank owned life insurance to arrive at the effective tax rate. ​ 58 Table of Contents Average Balance Sheets for the Years Ended December 31, 2023 and 2022 The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated.
Our strategy for credit risk management focuses on an experienced team of credit professionals, well-defined and implemented credit policies and procedures, conservative loan underwriting criteria and active credit monitoring. Our ratio of non-performing loans to total assets was 0.33% at December 31, 2022, which decreased from 0.52% at December 31, 2021. ● Grow the balance sheet.
Our strategy for credit risk management focuses on an experienced team of credit professionals, well-defined and implemented credit policies and procedures, conservative loan underwriting criteria and active credit monitoring. Our ratio of non-performing loans to total assets was 0.32% at December 31, 2023, which decreased from 0.33% at December 31, 2022. ● Grow the balance sheet.
A valuation allowance, if needed, reduces deferred tax assets to the amounts expected to be realized. ​ 44 Table of Contents Business Strategy Based on an extensive review of the current opportunities in our primary market area as well as our resources and capabilities, we are pursuing the following business strategies: ● Maintain our indirect automobile loan portfolio.
A valuation allowance, if needed, reduces deferred tax assets to the amounts expected to be realized. ​ 47 Table of Contents Business Strategy Based on an extensive review of the current opportunities in our primary market area as well as our resources and capabilities, we are pursuing the following business strategies: ● Maintain our indirect automobile loan portfolio while limiting growth.
We set the interest rates on our deposits to maintain a desired level of total deposits. 57 Table of Contents As reported in the Consolidated Statements of Cash Flows, our cash flows are classified for financial reporting purposes as operating, investing, or financing cash flows.
We set the interest rates on our deposits in an attempt to maintain a desired level of total deposits. 61 Table of Contents As reported in the Consolidated Statements of Cash Flows, our cash flows are classified for financial reporting purposes as operating, investing, or financing cash flows.
Our non-interest expense was $37.4 million and $35.5 million for the years ended December 31, 2022 and 2021, respectively. ● Manage credit risk to maintain a low level of non-performing assets. We believe that strong asset quality is a key to long-term financial success.
Our non-interest expense was $36.4 million and $37.4 million for the years ended December 31, 2023 and 2022, respectively. ● Manage credit risk to maintain a low level of non-performing assets. We believe that strong asset quality is a key to long-term financial success.
We currently calculate EVE under the assumptions that interest rates increase 100, 200, 300 and 400 basis points from current market rates and that interest rates decrease 100 and 200 basis points from current market rates. The following table presents the estimated changes in our EVE that would result from changes in market interest rates at December 31, 2022.
We currently calculate EVE under the assumptions that interest rates increase 100 to 400 basis points from current market rates and that interest rates decrease from 100 to 400 basis points from current market rates. The following table presents the estimated changes in our EVE that would result from changes in market interest rates at December 31, 2023.
In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk.
In the normal course of operations, we engage in a variety of financial transactions that, in accordance with GAAP are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk.
Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of loans, have longer maturities than our liabilities, consisting primarily of deposits. As a result, a principal part of our business strategy is to manage our exposure to changes in market interest rates.
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, have longer maturities than our liabilities, consisting primarily of deposits. As a result, a principal part of our business strategy is to manage our exposure to changes in market interest rates.
Net interest income is the difference between interest income, which is the income we earn on our loans and investments, and interest expense, which is the interest we pay on our deposits and borrowings. Provision for Loan Losses. The allowance for loan losses is a valuation allowance for probable incurred credit losses.
Net interest income is the difference between interest income, which is the income we earn on our loans and investments, and interest expense, which is the interest we pay on our deposits and borrowings. Provision for Credit Losses. The allowance for credit losses is a valuation allowance for the estimated lifetime credit losses.
Based on our model, if all segments of the portfolio grew by an additional 5% on a year-over-year basis, our allowance for loan losses as of December 31, 2022, would have increased by $408,000 to $8.2 million, holding all other variables constant.
Based on our model, if all segments of the portfolio grew by an additional 5% on a year-over-year basis, our allowance for credit losses as of December 31, 2023, would have increased by $394,000 to $8.5 million, holding all other variables constant.
We believe that commercial real estate, multi-family real estate and general commercial business lending offer opportunities to invest in our community, while helping to increase the overall yield earned on our loan portfolio and assisting in managing interest rate risk.
We believe that commercial real estate, multi-family real estate and commercial business lending offer opportunities to invest in our community, increase the overall yield earned on our loan portfolio and manage interest rate risk.
For fiscal year 2022, we did not engage in any off-balance-sheet transactions other than loan origination commitments and standby letters of credit in the normal course of our lending activities. 58 Table of Contents Impact of Inflation and Changing Prices The financial statements and related notes of Rhinebeck Bancorp, Inc. have been prepared in accordance with United States GAAP.
For 2023, we did not engage in any off-balance-sheet transactions other than loan origination commitments and standby letters of credit in the normal course of our lending activities. 62 Table of Contents Impact of Inflation and Changing Prices The financial statements and related notes of the Company have been prepared in accordance with United States GAAP.
(8) Represents a non-GAAP financial measure, see table below for a reconciliation of the non-GAAP financial measures. ​ 50 Table of Contents NON-GAAP FINANCIAL INFORMATION This Report contains financial information determined by methods other than in accordance with GAAP.
(8) Represents a non-Generally Accepted Accounting Principles (“GAAP”) financial measure, see table below for a reconciliation of the non-GAAP financial measures. ​ 54 Table of Contents NON-GAAP FINANCIAL INFORMATION This Report contains financial information determined by methods other than in accordance with GAAP.
We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
One of the most significant variables being portfolio growth, evaluated for the changing historical loss trends within the specific business segments. As of December 31, 2022, $1.2 million of our allowance for loan losses reflected the specific risk relative to portfolio growth trends.
One of the most significant variables being portfolio growth, evaluated for the changing historical loss trends within the specific business segments. As of December 31, 2023, $150,000 of our allowance for credit losses reflected the specific risk relative to portfolio growth trends.
Credit losses for loans that do not share similar risk characteristics are estimated on an individual basis. The lifetime losses for individually measured loans are estimated based on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows; and g.
The lifetime losses for individually measured loans are estimated based on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows; and g.
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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (In thousands, except per share amounts) ​ 2022 ​ 2021 Book value per common share reconciliation ​ ​ ​ ​ ​ ​ Total shareholders' equity (book value) (GAAP) ​ $ 108,132 ​ $ 125,969 Total shares outstanding ​ ​ 11,285 ​ ​ 11,296 Book value per common share ​ $ 9.58 ​ $ 11.15 Total common equity ​ ​ ​ ​ ​ ​ Total shareholders' equity (book value) (GAAP) ​ $ 108,132 ​ $ 125,969 Goodwill ​ ​ (2,235) ​ ​ (2,235) Intangible assets, net ​ ​ (334) ​ ​ (433) Tangible common equity (non-GAAP) ​ $ 105,563 ​ $ 123,301 Tangible book value per common share ​ ​ ​ ​ ​ ​ Tangible common equity (non-GAAP) ​ $ 105,563 ​ $ 123,301 Total shares outstanding ​ ​ 11,285 ​ ​ 11,296 Tangible book value per common share (non-GAAP) ​ $ 9.35 ​ $ 10.92 ​ 51 Table of Contents Comparison of Financial Condition at December 31, 2022 and December 31, 2021 Total Assets.
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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (In thousands, except per share amounts) ​ 2023 ​ 2022 Book value per common share reconciliation ​ ​ ​ ​ ​ ​ Total shareholders' equity (book value) (GAAP) ​ $ 113,685 ​ $ 108,132 Total shares outstanding ​ ​ 11,073 ​ ​ 11,285 Book value per common share ​ $ 10.27 ​ $ 9.58 Total common equity ​ ​ ​ ​ ​ ​ Total shareholders' equity (book value) (GAAP) ​ $ 113,685 ​ $ 108,132 Goodwill ​ ​ (2,235) ​ ​ (2,235) Intangible assets, net ​ ​ (246) ​ ​ (334) Tangible common equity (non-GAAP) ​ $ 111,204 ​ $ 105,563 Tangible book value per common share ​ ​ ​ ​ ​ ​ Tangible common equity (non-GAAP) ​ $ 111,204 ​ $ 105,563 Total shares outstanding ​ ​ 11,073 ​ ​ 11,285 Tangible book value per common share (non-GAAP) ​ $ 10.04 ​ $ 9.35 ​ ​ Comparison of Financial Condition at December 31, 2023 and December 31, 2022 Total Assets.
Net income for the year ended December 31, 2022 was $7.0 million ($0.65 per basic and $0.64 per diluted share), compared with $11.6 million ($1.07 per basic and $1.06 per diluted share) for the year ended December 31, 2021, a decrease of $4.6 million, or 39.5%.
Net income for the year ended December 31, 2023 was $4.4 million ($0.41 per basic and $0.40 per diluted share), compared with $7.0 million ($0.65 per basic and $0.64 per diluted share) for the year ended December 31, 2022, a decrease of $2.6 million, or 37.2%.
A favorable tax settlement would result in a reduction in our effective income tax rate in the period of resolution. ​ 48 Table of Contents Selected Financial Data The following selected consolidated financial data sets forth certain financial highlights of the Company and should be read in conjunction with the audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K for 2022 and 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ 2022 2021 ​ ​ (In thousands) Selected Financial Condition Data: ​ ​ ​ ​ ​ ​ Total assets ​ $ 1,335,977 ​ $ 1,281,166 Cash and cash equivalents ​ 31,384 ​ 72,091 Securities available-for-sale ​ 223,659 ​ 280,283 Loans receivable, net ​ 994,368 ​ 854,967 Bank owned life insurance ​ 29,794 ​ 29,131 Goodwill and other intangibles ​ 2,569 ​ 2,668 ​ ​ ​ ​ ​ ​ ​ Total liabilities ​ 1,227,845 ​ 1,155,197 Deposits ​ 1,129,933 ​ 1,101,999 Federal Home Loan Bank advances ​ 57,723 ​ 18,041 Subordinated debt ​ 5,155 ​ 5,155 ​ ​ ​ ​ ​ ​ ​ Total stockholders’ equity ​ $ 108,132 ​ $ 125,969 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ 2022 2021 ​ ​ (In thousands, except per share data) Selected Operating Data: ​ ​ ​ ​ ​ ​ Interest and dividend income ​ $ 48,592 ​ $ 43,700 Interest expense ​ 6,756 ​ 4,287 Net interest income ​ 41,836 ​ 39,413 Provision for (credit to) loan losses ​ 1,414 ​ (3,667) Net interest income after provision for (credit to) loan losses ​ 40,422 ​ 43,080 Non-interest income ​ 5,896 ​ 7,423 Non-interest expense ​ 37,422 ​ 35,512 Income before income tax expense ​ 8,896 ​ 14,991 Income tax expense ​ 1,899 ​ 3,433 Net income ​ $ 6,997 ​ $ 11,558 Earnings per share (diluted) ​ $ 0.64 ​ $ 1.06 ​ 49 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ At or For the Year Ended December 31, ​ 2022 2021 Performance Ratios: Return on average assets (1) 0.54 % 0.95 % Return on average equity (2) 6.06 % 9.49 % Interest rate spread (3) 3.22 % 3.28 % Net interest margin (4) 3.45 % 3.45 % Efficiency ratio (5) 78.40 % 75.82 % Average interest-earning assets to average interest-bearing liabilities 142.18 % 144.89 % Total loans to total assets 74.14 % 66.62 % Equity to assets (6) 8.91 % 10.02 % ​ ​ ​ ​ ​ ​ Capital Ratios (7) : Tier 1 capital (to adjusted total assets) 9.75 % 9.65 % Tier I capital (to risk-weighted assets) 11.55 % 12.76 % Total capital (to risk-weighted assets) 12.25 % 13.54 % Common equity Tier 1 capital (to risk-weighted assets) 11.55 % 12.76 % ​ ​ ​ ​ ​ ​ Asset Quality Ratios: Allowance for loan losses as a percent of total loans 0.80 % 0.89 % Allowance for loan losses as a percent of non-performing loans 179.54 % 113.01 % Net charge-offs to average outstanding loans (0.11) % (0.05) % Non-performing loans as a percent of total loans 0.45 % 0.78 % Non-performing assets as a percent of total assets 0.33 % 0.52 % ​ ​ ​ ​ ​ ​ Other Data: Book value per common share ​ $ 9.58 ​ $ 11.15 ​ Tangible book value per common share (8) ​ $ 9.35 ​ $ 10.92 ​ Number of offices 17 18 Number of full-time equivalent employees 190 192 (1) Represents net income divided by average total assets.
A favorable tax settlement would result in a reduction in our effective income tax rate in the period of resolution. ​ 52 Table of Contents Selected Financial Data The following selected consolidated financial data sets forth certain financial highlights of the Company and should be read in conjunction with the audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K for 2023 and 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ 2023 2022 ​ ​ (In thousands) Selected Financial Condition Data: ​ ​ ​ ​ ​ ​ Total assets ​ $ 1,313,202 ​ $ 1,335,977 Cash and cash equivalents ​ 22,129 ​ 31,384 Securities available-for-sale ​ 191,985 ​ 223,659 Loans receivable, net ​ 1,008,851 ​ 994,368 Bank owned life insurance ​ 30,031 ​ 29,794 Goodwill and other intangibles ​ 2,481 ​ 2,569 ​ ​ ​ ​ ​ ​ ​ Total liabilities ​ 1,199,517 ​ 1,227,845 Deposits ​ 1,030,503 ​ 1,129,933 Federal Home Loan Bank advances ​ 128,064 ​ 57,723 Subordinated debt ​ 5,155 ​ 5,155 ​ ​ ​ ​ ​ ​ ​ Total stockholders’ equity ​ $ 113,685 ​ $ 108,132 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ 2023 2022 ​ ​ (In thousands, except per share data) Selected Operating Data: ​ ​ ​ ​ ​ ​ Interest and dividend income ​ $ 60,659 ​ $ 48,592 Interest expense ​ 22,694 ​ 6,756 Net interest income ​ 37,965 ​ 41,836 Provision for credit losses ​ 1,702 ​ 1,414 Net interest income after provision for credit losses ​ 36,263 ​ 40,422 Non-interest income ​ 5,780 ​ 5,896 Non-interest expense ​ 36,429 ​ 37,422 Income before income tax expense ​ 5,614 ​ 8,896 Income tax expense ​ 1,219 ​ 1,899 Net income ​ $ 4,395 ​ $ 6,997 Earnings per share (diluted) ​ $ 0.40 ​ $ 0.64 ​ 53 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ At or For the Year Ended December 31, ​ 2023 2022 Performance Ratios: Return on average assets (1) 0.33 % 0.54 % Return on average equity (2) 4.03 % 6.06 % Interest rate spread (3) 2.44 % 3.22 % Net interest margin (4) 3.06 % 3.45 % Efficiency ratio (5) 83.28 % 78.40 % Average interest-earning assets to average interest-bearing liabilities 133.80 % 142.18 % Total gross loans to total assets 76.80 % 74.14 % Equity to assets (6) 8.19 % 8.91 % ​ ​ ​ ​ ​ ​ Capital Ratios (7) : Tier 1 capital (to adjusted total assets) 10.10 % 9.75 % Tier I capital (to risk-weighted assets) 11.96 % 11.55 % Total capital (to risk-weighted assets) 12.70 % 12.25 % Common equity Tier 1 capital (to risk-weighted assets) 11.96 % 11.55 % ​ ​ ​ ​ ​ ​ Asset Quality Ratios: Allowance for credit losses as a percent of total loans 0.81 % 0.80 % Allowance for credit losses as a percent of non-performing loans 194.31 % 179.54 % Net charge-offs to average outstanding loans (0.21) % (0.11) % Non-performing loans as a percent of total loans 0.41 % 0.45 % Non-performing assets as a percent of total assets 0.32 % 0.33 % ​ ​ ​ ​ ​ ​ Other Data: Book value per common share ​ $ 10.27 ​ $ 9.58 ​ Tangible book value per common share (8) ​ $ 10.04 ​ $ 9.35 ​ Number of offices 16 17 Number of full-time equivalent employees 171 190 (1) Represents net income divided by average total assets.
Our indirect automobile loan portfolio totaled $457.2 million, or 46.2% of our total loan portfolio and 34.2% of total assets, at December 31, 2022 as compared to $382.1 million, or 44.8% of our total loan portfolio and 29.8% of total assets, at December 31, 2021. In addition, our direct automobile portfolio totaled $8.3 million at December 31, 2022.
Our indirect automobile loan portfolio totaled $394.2 million, or 39.1% of our total loan portfolio and 30.0% of total assets, at December 31, 2023 as compared to $457.2 million, or 46.2% of our total loan portfolio and 34.2% of total assets, at December 31, 2022. In addition, our direct automobile portfolio totaled $7.0 million at December 31, 2023.
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. ​ The following accounting policies materially affect our reported earnings and financial condition and require significant judgments and estimates. ​ Allowance for loan losses ​ The allowance for loan losses is the estimated amount considered necessary to cover credit losses inherent in the loan portfolio at the balance sheet date.
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. ​ The following accounting policies materially affect our reported earnings and financial condition and require significant judgments and estimates. ​ Allowance for Credit Losses ​ The allowance for credit losses is an estimate of current expected credit losses considering available information relevant to assessing collectability of cash flows over the contractual term of the financial assets necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date.
The increase was primarily due to a $449,000 charge-off of one commercial loan in the fourth quarter and $230,000 in increased charge-offs in our indirect automobile portfolio.
The increase was primarily due to a $710,000 charge-off of one commercial loan in the second quarter of 2023, a $126,000 charge-off of a commercial loan in the fourth quarter of 2023 and increased net charge-offs in indirect automobile loans of $642,000.
Net interest income increased $2.4 million, or 6.1%, to $41.8 million for the year ended December 31, 2022, as compared to $39.4 million for the year ended December 31, 2021. The increase was primarily driven by higher yields on higher interest-earning asset balances, which were partially offset by higher costs on interest-bearing liabilities.
Net interest income decreased $3.9 million, or 9.3%, to $38.0 million for the year ended December 31, 2023, as compared to $41.8 million for the year ended December 31, 2022. The decrease was primarily driven by higher costs on higher interest-bearing liability balances, which were partially offset by higher yields on higher interest-earning asset balances.
The increase in average interest earning assets during 2022 compared to 2021 included increases of $63.4 million in average loan balances and $58.9 million in available for sale securities partially offset by a decrease of $53.8 million in average interest bearing depository accounts. Interest Expense.
The increase in average interest earning assets during 2023 compared to 2022 included increases of $81.9 million in average loan balances and $3.2 million in other interest earning assets partially offset by decreases of $47.7 million in available for sale securities and $6.8 million in average interest bearing depository accounts. Interest Expense.
The increase resulted primarily from increased yields and higher average earning asset balances. The average yield on interest-bearing depository accounts increased to 1.11% for fiscal year 2022 from 0.13% for fiscal year 2021. The average yield on loans remained unchanged at 4.80% for the fiscal year 2022 and fiscal year 2021.
The increase resulted primarily from increased yields and higher average earning asset balances. The average yield on interest-bearing depository accounts increased to 5.19% for 2023 from 1.11% for 2022. The average yield on loans increased to 5.47% for 2023 from 4.80% in 2022. The average yields on investment securities increased to 1.91% for 2023 from 1.46% for 2022.
This was primarily due to a 25 basis point increase in the overall cost of interest bearing liabilities to 0.79% for fiscal 2022 from 0.54% for fiscal 2021, supplemented by an increase in average interest bearing liability balances of $63.2 million, or 8.0%, year over year.
This was primarily due to a 165 basis point increase in the overall cost of interest bearing liabilities to 2.44% for 2023 from 0.79% for 2022, supplemented by an increase in average interest bearing liability balances of $76.4 million, or 9.0%, year over year. The average balance of FHLB advances increased $66.3 million, while the cost increased 166 basis points.
The Company is adopting Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments effective January 1, 2023. The new accounting rule requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.
The new accounting rule required the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.
Cash and Cash Equivalents. Cash and cash equivalents decreased $40.7 million, or 56.5%, to $31.4 million at December 31, 2022 from $72.1 million at December 31, 2021, primarily due to a decrease in deposits held at the Federal Reserve Bank of New York, as excess cash was used to fund loan growth. Investment Securities Available for Sale.
Cash and cash equivalents decreased $9.3 million, or 29.5%, to $22.1 million at December 31, 2023 from $31.4 million at December 31, 2022, primarily due to a decrease in deposits held at the Federal Reserve Bank of New York and the Federal Home Loan Bank of New York, as cash was used to help cover deposit outflows.
While we still plan to originate such loans, we plan to slow the growth of our indirect automobile loan portfolio by decreasing loan originations through increased pricing and limiting risk selections. Current management’s risk appetite limits our total indirect automobile loan portfolio to 45% of total assets. ● Focus on commercial real estate, multi-family real estate and commercial business lending.
Current management’s risk appetite limits our total indirect automobile loan portfolio to 45% of total assets. ● Focus on commercial real estate, multi-family real estate and commercial business lending.
Investment securities available for sale decreased $56.6 million, or 20.2%, to $223.7 million at December 31, 2022 from $280.3 million at December 31, 2021. The decrease was primarily due to $39.4 million of paydowns and maturities and $14.8 million of sales and calls, the proceeds of which were used to fund loan growth.
Investment Securities Available for Sale. Investment securities available for sale decreased $31.7 million, or 14.2%, to $192.0 million at December 31, 2023 from $223.7 million at December 31, 2022. The decrease was primarily due to $34.1 million of paydowns and maturities, the proceeds of which were used to help offset deposit outflows.
Interest and dividend income increased $4.9 million, or 11.2%, interest expense increased $2.5 million, or 57.6%, and the provision for loan losses increased $5.1 million, or 138.6%. Non-interest income decreased $1.5 million, or 20.6%, while non-interest expenses increased $1.9 million, or 5.4%, as compared to 2021. Taxes decreased $1.5 million or 44.7% on lower net income.
Interest and dividend income increased $12.1 million, or 24.8%, interest expense increased $15.9 million, or 235.9%, and the provision for credit losses increased $288,000, or 20.4%. Non-interest income decreased $116,000, or 2.0%, while non-interest expenses decreased $993,000, or 2.7%, as compared to 2022. Taxes decreased $680,000 or 35.8% on lower net income. ​ Net Interest Income.
Non-accrual loans and non-performing assets decreased $2.3 million, or 33.9%, to $4.4 million at December 31, 2022 from $6.7 million at December 31, 2021. The Company had no other real estate owned at the end of either period. Deferred Tax Assets.
Non-accrual loans decreased $243,000, or 5.5%, to $4.2 million at December 31, 2023 from $4.4 million at December 31, 2022. Non-performing assets decreased $218,000, or 4.9%. Non-performing assets included $25,000 in other real estate owned as of December 31, 2023. The Company had no other real estate owned as of December 31, 2022.
Net interest rate spread decreased 6 basis points to 3.22% for the year ended December 31, 2022 as compared to 3.28% for the year ended December 31, 2021. Net interest margin was stable at 3.45% at both December 31, 2022 and 2021. ​ Management of Market Risk General. The majority of our assets and liabilities are monetary in nature.
The net interest rate spread decreased 78 basis points to 2.44% for the year ended December 31, 2023 as compared to 3.22% for the year ended December 31, 2022. Net interest margin decreased 39 basis points to 3.06% at December 31, 2023 from 3.45% at December 31, 2022. ​ Management of Market Risk General.
The increase was primarily related to an increase in net loans receivable of $139.4 million, or 16.3%, and an increase in deferred tax assets of $6.8 million, or 202.2%, partially offset by a decrease in available for sale securities of $56.6 million, or 20.2% and a decrease in cash and cash equivalents of $40.7 million, or 56.5%.
The decrease was primarily due to a decrease in available for sale securities of $31.7 million, or 14.2%, a decrease in cash and cash equivalents of $9.3 million, or 29.5%, and a decrease in premises and equipment of $1.2 million, or 6.2%, partially offset by an increase in net loans receivable of $14.5 million, or 1.5%, and an increase in Federal Home Loan Bank stock of $3.3 million, or 99.9%.
Deposit and borrowing cash flows have traditionally comprised most of our financing activities which, together with other funding cash flows, resulted in net cash provided of $68.1 million in fiscal year 2022, and $106.7 million in fiscal year 2021.
Deposit and borrowing cash flows have traditionally comprised most of our financing activities, which resulted in a net cash outflow $31.0 million in the year ended December 31, 2023, as opposed to a net cash inflow of $68.1 million in fiscal year 2022.
An increase in indirect automobile loan balances, an increase in specific allocations to the allowance for loan losses and declining economic conditions, primarily due to high inflation, were the primary factors leading to the increase in the provision in 2022. ​ Net charge-offs for the year ended December 31, 2022 totaled $1.0 million, compared to $407,000 for the year ended December 31, 2021.
The increase to the provision was primarily attributable to an increase in loan balances and changes to qualitative factors in response to changing economic conditions. ​ Net charge-offs for the year ended December 31, 2023 totaled $2.1 million, compared to $1.0 for the year ended December 31, 2022.
These excluded items are reflected in our consolidated balance sheet and include deposits with no stated maturity, trade payables, and accrued interest payable. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 (In thousands) Total One Year or Less After One but within Five Years After 5 Years Payments Due: ​ ​ ​ ​ ​ ​ ​ ​ Federal Home Loan Bank advances ​ $ 57,723 ​ $ 51,273 ​ $ 6,450 ​ $ — Operating lease agreements ​ ​ 8,054 ​ ​ 761 ​ ​ 2,899 ​ ​ 4,394 Subordinated debt ​ ​ 5,155 ​ ​ — ​ ​ — ​ ​ 5,155 Time deposits with stated maturity dates ​ ​ 216,382 ​ ​ 151,591 ​ ​ 64,791 ​ ​ — Total contractual obligations ​ $ 287,314 ​ $ 203,625 ​ $ 74,140 ​ $ 9,549 ​ Off-Balance Sheet Arrangements.
These excluded items are reflected in our consolidated balance sheet and include deposits with no stated maturity, trade payables, and accrued interest payable. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 (In thousands) Total One Year or Less After One but within Five Years After 5 Years Payments Due: ​ ​ ​ ​ ​ ​ ​ ​ Federal Home Loan Bank advances ​ $ 128,064 ​ $ 80,000 ​ $ 48,064 ​ $ — Operating lease agreements ​ ​ 7,293 ​ ​ 764 ​ ​ 2,812 ​ ​ 3,717 Subordinated debt ​ ​ 5,155 ​ ​ — ​ ​ — ​ ​ 5,155 Time deposits with stated maturity dates ​ ​ 318,046 ​ ​ 291,212 ​ ​ 26,834 ​ ​ — Total contractual obligations ​ $ 458,558 ​ $ 371,976 ​ $ 77,710 ​ $ 8,872 ​ Off-Balance Sheet Arrangements.
The increase was primarily due to increases of $75.1 million, or 19.7%, in indirect automobile loans and $58.9 million, or 18.9%, in commercial real estate loans, while commercial and industrial loans decreased $16.3 million, or 15.7%.
The increase was primarily due to increases of $57.5 million, or 15.5%, in commercial real estate loans and $23.5 million, or 43.8%, in residential real estate loans, while indirect automobile loans decreased $63.0 million, or 13.8%.
In addition, the FDIC and NYSDFS, as an integral part of their examination process, will periodically review our allowance for loan losses. These agencies may require us to recognize adjustments to the allowance, based on their judgments about information available to them at the time of their examination.
In addition, the FDIC and NYSDFS, as an integral part of their examination process, will periodically review our allowance for credit losses.
The methodology for determining the allowance for loan losses is considered a critical accounting policy by management due to the high degree of judgment involved, the subjectivity of the assumptions utilized and the potential for unanticipated changes in the economic environment that could result in changes to the amount of the recorded allowance for loan losses. ​ As a substantial amount of our loan portfolio is collateralized by real estate, appraisals of the underlying value of property securing loans and discounted cash flow valuations of properties are critical in determining the amount of the allowance required for specific impaired loans.
The methodology for determining the allowance for credit losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded allowance for credit losses.
Total assets were $1.34 billion at December 31, 2022, representing an increase of $54.8 million, or 4.3%, compared to $1.28 billion at December 31, 2021.
Total assets were $1.313 billion at December 31, 2023, representing a decrease of $22.8 million, or 1.7%, compared to $1.336 billion at December 31, 2022.
For the year ended December 31, 2022, non-interest expense totaled $37.4 million, an increase of $1.9 million, or 5.4%, over 2021.
For the year ended December 31, 2023, non-interest expense totaled $36.4 million, a decrease of $993,000, or 2.7%, over 2022.
Based on the Company’s portfolio balances and forecasted economic conditions as of December 31, 2022, management believes the adoption of the CECL standard will result in an increase in the current reserves of approximately $800,000, or 10%, bringing the reserve to $8.7 million at January 1, 2023, as compared to the Company’s current reserve levels of $7.9 million.
Based on the Company’s portfolio balances and forecasted economic conditions as of December 31, 2022, the adoption of the CECL standard resulted in an increase in the reserves for loans of $580,000, and brought the allowance for credit losses on loans to $8.5 million at January 1, 2023, as compared to the Company’s December 31, 2022 reserve of $7.9 million. ​ Our methodology for estimating lifetime expected credit losses for our loan portfolios include the following key components: ​ a.
The Company does not have any excludable out-of-period items or adjustments. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2022 ​ ​ ​ Compared to Year Ended ​ ​ ​ December 31, 2021 ​ ​ ​ Increase (Decrease) ​ ​ ​ Due to ​ ​ Volume Rate Net ​ ​ (In thousands) Interest income: ​ ​ ​ Interest bearing depository accounts ​ $ (108) ​ $ 328 ​ $ 220 ​ Loans receivable ​ 3,045 ​ 11 ​ 3,056 ​ Available for sale securities ​ 764 ​ 852 ​ 1,616 ​ Total interest-earning assets ​ 3,701 ​ 1,191 ​ 4,892 ​ Interest expense: ​ ​ ​ ​ Deposits ​ 202 ​ 1,804 ​ 2,006 ​ Escrow accounts ​ 9 ​ (5) ​ 4 ​ Federal Home Loan Bank advances ​ 27 ​ 348 ​ 375 ​ Subordinated debt ​ — ​ 84 ​ 84 ​ Total interest-bearing liabilities ​ 238 ​ 2,231 ​ 2,469 ​ Net increase in net interest income ​ $ 3,463 ​ $ (1,040) ​ $ 2,423 ​ ​ As the table above shows, net interest income for the year ended December 31, 2022 has been affected most significantly by the increase in volume of loans and securities, partially offset by the increase in interest-bearing liability balances and rates on interest-bearing liabilities.
The Company does not have any excludable out-of-period items or adjustments. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2023 ​ ​ ​ Compared to Year Ended ​ ​ ​ December 31, 2022 ​ ​ ​ Increase (Decrease) ​ ​ ​ Due to ​ ​ Volume Rate Net ​ ​ (In thousands) Interest income: ​ ​ ​ Interest bearing depository accounts ​ $ (91) ​ $ 939 ​ $ 848 ​ Loans receivable ​ 4,149 ​ 6,509 ​ 10,658 ​ Available for sale securities ​ (777) ​ 1,008 ​ 231 ​ Other interest-earning assets ​ 257 ​ 73 ​ 330 ​ Total interest-earning assets ​ 3,538 ​ 8,529 ​ 12,067 ​ Interest expense: ​ ​ ​ ​ Deposits ​ 1,207 ​ 10,798 ​ 12,005 ​ Escrow accounts ​ 1 ​ — ​ 1 ​ Federal Home Loan Bank advances ​ 2,977 ​ 709 ​ 3,686 ​ Subordinated debt ​ — ​ 184 ​ 184 ​ Other interest-bearing liabilities ​ 62 ​ — ​ 62 ​ Total interest-bearing liabilities ​ 4,247 ​ 11,691 ​ 15,938 ​ Net decrease in net interest income ​ $ (709) ​ $ (3,162) ​ $ (3,871) ​ ​ As the table above shows, net interest income for the year ended December 31, 2023 has been affected most by the increase in the rates on deposits and additional FHLB advances, which was partially offset by increases in both the rate and volume of loans.
We believe that the remaining offices, and the Bank overall, will continue to benefit from a large customer base that prefers doing business with a local institution and may be reluctant to do business with larger institutions. By providing our customers with quality service, coupled with a home-town ambience, we expect to continue our strong organic growth.
The branch location and sheer number of financial institutions in the market made it difficult to gain any meaningful traction. We believe that the remaining offices, and the Bank overall, will continue to benefit from a large customer base that prefers doing business with a local institution and may be reluctant to do business with larger institutions.
An economic forecast period based on the relation of losses with key economic variables for each portfolio segment; c. Reversion period to historical loss experience using a straight-line method; d. Inclusion of qualitative adjustments to consider factors that have not been accounted for; e. Discounted cash flow method to measure credit impairment on each of our loan portfolio segments; f.
Segmentation of loans into pools that share common risk characteristics; b. An economic forecast based on the relation of losses with key economic variables for each portfolio segment; c. Reversion period to historical loss experience using a straight-line method; d.
At December 31, 2022, we had the following main sources of availability of liquid funds and borrowings: ​ ​ ​ ​ (In thousands) Total Available liquid funds: ​ ​ Cash and cash equivalents ​ $ 31,384 Unencumbered securities ​ ​ 207,294 Amount available from the Paycheck Protection Plan Loan Facility ​ ​ 537 Availability of borrowings: ​ ​ ​ Zions Bank line of credit ​ ​ 10,000 Pacific Coast Bankers Bank line of credit ​ ​ 50,000 Other secured FHLB credit facility ​ ​ 142,729 Total available sources of funds ​ $ 441,944 ​ The following table summarizes our main contractual obligations and other commitments to make future payments as of December 31, 2022.
At December 31, 2023, we had the following main sources of availability of liquid funds and borrowings: ​ ​ ​ ​ (In thousands) Total Available liquid funds: ​ ​ Cash and cash equivalents ​ $ 22,129 Unencumbered securities ​ ​ 117,719 Amount available from the Paycheck Protection Plan Loan Facility ​ ​ 276 Availability of borrowings: ​ ​ ​ Zions Bank line of credit ​ ​ 10,000 Pacific Coast Bankers Bank line of credit ​ ​ 50,000 FHLB secured line of credit ​ ​ 100,118 FRB secured line of credit ​ ​ 379,151 Total available sources of funds ​ $ 679,393 ​ The Bank has access to a preapproved secured line of credit with the FHLB which totaled $656,516 at December 31, 2023.
Income tax provision decreased by $1.5 million, or 44.7%, to $1.9 million for the year ended December 31, 2022 as compared to $3.4 million in 2021, primarily due to the decline in pre-tax income. Our effective tax rate for the year ended December 31, 2022 was 21.35% compared to 22.90% in 2021.
The sale closed in the first quarter of 2024. ​ Income Taxes. Income tax provision decreased by $680,000, or 35.8%, to $1.2 million for the year ended December 31, 2023 as compared to $1.9 million for the year ended December 31, 2022, primarily due to the decline in pre-tax income.
Going forward, we will focus on increasing our core deposits by increasing our commercial lending activities and enhancing our relationships with our retail customers. We are also working to continue to increase our market share in Orange County, New York, having opened four new branches in the county in 2021. ● Continue expense control.
We will focus on increasing our core deposits by increasing operating accounts related to commercial lending activities and enhancing our relationships with our retail customers through the introduction of new deposit products. ● Continue expense control.
All estimated changes presented in the table are within the policy limits approved by our Board of Directors. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ $ 158,218 ​ $ (30,594) (16.2) % ​ 13.27 % (9.0) % 300 ​ 165,896 ​ (22,916) (12.1) % ​ 13.64 % (6.5) % 200 ​ 172,773 ​ (16,039) (8.5) % ​ 13.93 % (4.5) % 100 ​ 181,239 ​ (7,573) (4.0) % ​ 14.31 % (1.9) % 0 ​ 188,812 ​ — — % ​ 14.58 % — % (100) ​ ​ 188,594 ​ ​ (218) (0.1) % ​ 14.25 % (2.3) % (200) ​ ​ 180,056 ​ ​ (8,756) (4.6) % ​ 13.30 % (8.8) % ​ Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements.
All estimated changes presented in the table are within the policy limits approved by our Board of Directors. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ $ 116,530 ​ $ (46,056) (28.3) % ​ 9.90 % (21.9) % 300 ​ 127,355 ​ (35,231) (21.7) % ​ 10.60 % (16.3) % 200 ​ 138,410 ​ (24,176) (14.9) % ​ 11.28 % (10.9) % 100 ​ 150,465 ​ (12,121) (7.5) % ​ 12.00 % (5.3) % 0 ​ 162,586 ​ — — % ​ 12.67 % — % (100) ​ ​ 160,827 ​ ​ (1,759) (1.1) % ​ 12.25 % (3.3) % (200) ​ ​ 153,256 ​ ​ (9,330) ​ (5.7) % ​ 11.42 % (9.9) % (300) ​ ​ 138,425 ​ ​ (24,161) ​ (14.9) % ​ 10.09 % (20.4) % (400) ​ ​ 119,160 ​ ​ (43,426) (26.7) % ​ 8.48 % (33.1) % ​ Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements.
Net cash used for investing activities was $123.6 million and $135.7 million in fiscal years 2022 and 2021, respectively, principally reflecting our investment security and loan activities in the respective periods. Cash outlays for the purchase of securities decreased from $244.6 million for the year ended December 31, 2021 to $30.2 million for the year ended December 31, 2022.
Net cash provided by investing activities was $14.7 million in 2023 as compared to net cash used for investing activities of $123.6 million in 2022. Net cash provided by or used in investing activities principally reflects our investment security and loan activities in the respective periods.
The average yields on investment securities increased to 1.49% for the fiscal year 2022 from 1.12% for 2021. Average interest earning assets increased $68.5 million from $1.14 billion at December 31, 2021 to $1.21 billion at December 31, 2022.
Average interest earning assets increased $30.7 million from $1.212 billion for the year ended December 31, 2022 to $1.242 billion for the year ended December 31, 2023.
The percentage of overdue account balances to total loans increased to 2.29% as of December 31, 2022 from 1.58% as of December 31, 2021 while our non-performing assets decreased $2.3 million, or 33.9%, to $4.4 million. ​ Although we believe that we use the best information available to establish the allowance for loan losses, future additions to the allowance may be necessary, based on estimates that are susceptible to change as a result of changes in economic conditions and other factors.
Although we believe that we use the best information available to establish the allowance for credit losses, based on industry standards and historical experience, future additions to the allowance may be necessary, as a result of changes in economic conditions and other factors.
While our focus on developing Orange County remains a strategic priority for the Bank, we made the business decision to permanently close the Monroe branch at year-end 2022. The branch location and sheer number of financial institutions in the market made it difficult to gain any meaningful traction.
We expect the balance sheet to decrease next year through the rebalancing of our portfolio and then stabilize in 2025. We then intend to again focus on growing the balance sheet. While our focus on developing Orange County remains a strategic priority for the Bank, we decided to close the Monroe branch at year-end 2022.
At December 31, 2021, the Company’s book value per share was $11.15 and the Company’s ratio of stockholders’ equity-to-total assets was 9.83%. Unearned common stock held by the Bank’s employee stock ownership plan was $3.5 million and $3.7 million at December 31, 2022 and 2021, respectively.
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 8.7%.
Comparison of Operating Results for the Years Ended December 31, 2022 and December 31, 2021 Net Income.
Unearned common stock held by the Bank’s employee stock ownership plan was $3.3 million and $3.5 million at December 31, 2023 and 2022, respectively. ​ Comparison of Operating Results for the Years Ended December 31, 2023 and December 31, 2022 Net Income.
Interest bearing accounts grew 7.5%, or $59.2 million, to $846.4 million. The increase resulted from an increase in certificates of deposit of $59.5 million, or 37.9% and an increase in money market accounts of $7.7 million, or 2.7%. This was partially offset by decreases in savings accounts of $5.6 million, or 3.1% and NOW accounts of $2.3 million, or 1.5%.
Of the interest bearing accounts, transaction accounts including NOW, savings and money market accounts decreased $167.3 million, or 26.6%, which was partially offset by an increase in time deposits of $101.7 million, or 47.0%.
Conversely, if all segment balances of our loan portfolio had fallen by 5% during the year ended December 31, 2022, our allowance for loan losses would have decreased by $377,000 to $7.5 million, holding all other variables constant. ​ ​ 47 Table of Contents Goodwill and Intangible Assets ​ The assets (including identifiable intangible assets) and liabilities acquired in a business combination are recorded at fair value at the date of acquisition.
Conversely, if all segment balances of our loan portfolio had fallen by 5% during the year ended December 31, 2023, our allowance for credit losses would have decreased by $394,000 to $7.7 million, holding all other variables constant. ​ Another variable in our evaluation of the allowance for credit losses is the forecasted unemployment rate sourced from the FOMC Summary of Economic Projections for the Civilian Unemployment Rate, Median (Percent) .
Based on our impairment tests, no impairment was recorded in 2022 or 2021. ​ Income Taxes ​ We are subject to the income tax laws of the United States, New York State, and the municipalities in which we operate. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant government taxing authorities.
These tax laws are complex and subject to different interpretations by the taxpayer and the relevant government taxing authorities. We use the asset and liability method of accounting for income taxes.
We originate automobile loans through a network of 95 automobile dealerships (63 in the Hudson Valley region and 32 in Albany, New York). In 2022, we exceeded our goals to grow this portfolio.
We originate automobile loans through a network of 120 automobile dealerships (85 in the Hudson Valley region and 35 in Albany, New York). In 2023, we slowed the growth of our indirect automobile loan portfolio by decreasing loan originations through increased pricing and limiting risk selections.
The decrease was primarily due to decreased activity as there were fewer loan originations in the increasing interest rate environment as well as a strategic decision that was made to hold most of our new production in our portfolio instead of selling these loans.
Non-interest income totaled $5.8 million for the year ended December 31, 2023, a decrease of $116,000, or 2.0%, 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.
Interest expense increased $2.5 million, or 57.6%, to $6.8 million for fiscal year 2022 from $4.3 million for fiscal year 2021.
Interest expense increased $15.9 million, or 235.9%, to $22.7 million for 2023 from $6.8 million for 2022.
Also, as the pandemic retreats, we expect that the pent- up demand of commercial activity will return to a more normal pace providing renewed growth opportunities for our loan portfolio. 45 Table of Contents Terms of Critical Accounting Policies Our most significant accounting policies are described in Note 1 to the consolidated financial statements.
By providing our customers with quality service, coupled with a home-town ambience, we expect to return to a period of strong organic growth. 48 Table of Contents Critical Accounting Policies Our most significant accounting policies are described in Note 1 to the consolidated financial statements.
In addition, our banking regulators, as an integral part of their examination process, periodically review our allowance for loan losses. Our banking regulators may require us to recognize adjustments to the allowance based on judgments about information available to them at the time of its examination.
These agencies may require us to recognize adjustments to the allowance, based on their judgments about information available to them at the time of their examination. ​ The Company recorded a provision for credit losses of $1.7 million for the year ended December 31, 2023, an increase of $288,000, or 20.4%, as compared to $1.4 million for the year ended December 31, 2022.
The decrease in commercial and industrial loans was due to a decrease in PPP loans of $28.9 million, primarily as a result of SBA loan forgiveness. Excluding PPP loans, commercial and industrial loans increased $12.6 million, or 16.8%. During the year, the allowance for loan losses increased $384,000, or 5.1%, reflecting an increase in our loan portfolio.
The decrease in our indirect automobile portfolio was also due to a strategic decision to decrease that loan portfolio as a percentage of our balance sheet. Allowance for Credit Losses. During the year, the allowance for credit losses increased $181,000, or 2.3%, reflecting an increase of expected losses in our loan portfolio.
Total liabilities increased $72.6 million, or 6.3%, in 2022 primarily due to an increase in FHLB advances of $39.7 million, or 220.0%, an increase in deposits of $27.9 million, or 2.5%, and an increase in accrued expenses and other liabilities of $4.4 million, or 21.2%. Deposits. Deposits increased $27.9 million, or 2.5%, to $1.13 billion at December 31, 2022.
Total liabilities decreased $28.3 million, or 2.3%, to $1.200 billion at December 31, 2023 from $1.228 billion at December 31, 2022 due to a decrease in deposits of $99.4 million, or 8.8%, partially offset by an increase in advances from the FHLB of $70.3 million, or 121.9%, to help offset deposit outflows. Deposits.
The net interest margin was 3.45% at both December 31, 2022 and 2021. T he ratio of average interest-earning assets to average interest-bearing liabilities decreased 1.9% to 142.18%. The yield on interest earning assets increased 19 basis points to 4.01% in 2022 from 3.82%, primarily due to the rising interest rate environment in 2022.
The net interest margin was 3.06% for the year ended December 31, 2023 and 3.45% for the year ended December 31, 2022. The ratio of average interest-earning assets to average interest-bearing liabilities decreased 5.9% to 133.80%.
The unrealized loss on available for sale securities was $35.7 million at December 31, 2022 as compared to $3.5 million at December 31, 2021. ​ Total Liabilities.
The decrease was partially offset by a decrease in unrealized loss on available for sale securities of $2.7 million. 55 Table of Contents Net Loans. Net loans receivable were $1.009 billion at December 31, 2023, an increase of $14.5 million, or 1.5%, as compared to $994.4 million at December 31, 2022.
We intend to focus on expanding our core deposits (which we define as all deposits except for certificates of deposit), particularly non-interest-bearing demand deposits, because they have no cost and are less sensitive to withdrawal when interest rates fluctuate. Core deposits represented 80.9% of our total deposits at December 31, 2022 compared to 85.8% at December 31, 2021.
Core deposits, which we define as all non time deposits, represented 69.1% of our total deposits at December 31, 2023 compared to 80.9% at December 31, 2022.
Deposit and borrowing costs increased 25 basis points to 0.79% in 2022 from 0.54% in 2021 driven by increases in general market rates and competitive forces. Interest Income. Interest income increased $4.9 million, or 11.2%, to $48.6 million for fiscal year 2022 from $43.7 million for fiscal year 2021.
The costs of interest bearing liabilities increased 165 basis points to 2.44% in 2023 from 0.79% in 2022 driven by increases in general market rates, competitive forces and a greater percentage of higher-yielding certificates of deposits and FHLB advances.
The 2021 one-time gain from the collection of a life insurance claim of $195,000 and a net realized loss in 2022 from the sale of securities of $170,000 also contributed to the decrease in total non-interest income.
These decreases were partially offset by a $221,000 gain on life insurance, the prior year period net realized loss on the sale of securities of $170,000 and a $148,000 increase in other non-interest income as the income from mortgage servicing rights increased. ​ Non-Interest Expense.

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