Rhinebeck Bancorp(RBKB) - 2020 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) This section provides the unaudited consolidated financial statements, including statements of financial condition, income, comprehensive income, equity, and cash flows, along with explanatory notes - Total assets increased to $1.11 billion at September 30, 2020, from $973.9 million at December 31, 2019[12] - Net income for the nine months ended September 30, 2020, was $3.57 million, a decrease from $4.22 million in the same period of 2019, with basic and diluted EPS at $0.33 compared to $0.39 for the prior year period[14] Consolidated Statements of Financial Condition Total assets increased to $1.11 billion, driven by growth in net loans and cash, with a corresponding rise in deposits and liabilities Comparison of Financial Condition | Metric | Sep 30, 2020 ($ in thousands) | Dec 31, 2019 ($ in thousands) | | :--- | :--- | :--- | | Total Assets | $1,112,578 | $973,946 | | Loans Receivable, net | $890,495 | $793,471 | | Total Deposits | $916,195 | $773,343 | | Total Liabilities | $997,388 | $864,064 | | Total Stockholders' Equity | $115,190 | $109,882 | Consolidated Statements of Income Net income decreased for both the three and nine months ended September 30, 2020, primarily due to a significant increase in the provision for loan losses Income Statement Highlights (Nine Months Ended Sep 30) | Metric | 2020 ($ in thousands) | 2019 ($ in thousands) | | :--- | :--- | :--- | | Net Interest Income | $26,326 | $23,955 | | Provision for Loan Losses | $5,705 | $2,010 | | Noninterest Income | $5,406 | $4,156 | | Noninterest Expense | $21,496 | $20,798 | | Net Income | $3,573 | $4,223 | | Basic EPS | $0.33 | $0.39 | Notes to Consolidated Financial Statements The notes detail accounting policies, financial data, and significant events, including COVID-19 impacts, loan portfolio specifics, and a new equity incentive plan - The company's loan portfolio is primarily composed of indirect automobile loans ($372.9 million), non-residential commercial real estate ($245.4 million), and commercial and industrial loans ($170.7 million), which includes $91.7 million in PPP loans[45] - The allowance for loan losses increased significantly to $10.56 million at Sep 30, 2020, from $5.95 million at Dec 31, 2019, with a provision of $5.71 million for the first nine months of 2020[54] - On May 26, 2020, stockholders approved the 2020 Equity Incentive Plan (EIP), authorizing the issuance of up to 763,743 shares, with 433,385 stock options and 169,769 restricted stock awards granted as of Sep 30, 2020[88][93] - On October 26, 2020, the Bank entered an agreement to acquire two branch offices from ConnectOne Bank, a transaction expected to close in late Q4 2020 or early Q1 2021[139] Management's Discussion and Analysis (MD&A) This section provides management's analysis of financial condition and operating results, highlighting the impact of COVID-19, balance sheet changes, income fluctuations, liquidity, and capital resources Impact of COVID-19 The COVID-19 pandemic significantly impacted operations, leading to participation in the PPP loan program and implementation of loan forbearance for affected borrowers - The company funded 674 PPP loans totaling $92.0 million as of September 30, 2020[167] - As of September 30, 2020, the Bank had approved 2,042 CARES Act loan deferrals totaling $118.0 million, with 192 loans totaling $27.2 million remaining outstanding[172][173] Comparison of Financial Condition Total assets increased by 14.2% to $1.11 billion, driven by growth in net loans and cash, while deposits rose by 18.5% and non-accrual loans decreased - Total assets increased by $138.6 million (14.2%) to $1.11 billion[174] - Net loans increased by $97.0 million (12.2%), largely due to $89.6 million in net outstanding SBA PPP loans[177] - Deposits increased by $142.9 million (18.5%), with non-interest bearing deposits growing by 40.4%[182] - Non-accrual loans decreased by $3.1 million (34.3%) to $5.9 million[180] Comparison of Operating Results Net income decreased for the nine months ended September 30, 2020, primarily due to a significant increase in the provision for loan losses, despite growth in net interest and non-interest income Operating Results Comparison (Nine Months Ended Sep 30) | Metric | 2020 ($ in thousands) | 2019 ($ in thousands) | Change | | :--- | :--- | :--- | :--- | | Net Income | $3,573 | $4,223 | -15.4% | | Net Interest Income | $26,326 | $23,955 | +9.9% | | Provision for Loan Losses | $5,705 | $2,010 | +183.8% | | Non-Interest Income | $5,406 | $4,156 | +30.1% | | Non-Interest Expense | $21,496 | $20,798 | +3.4% | - The increase in the provision for loan losses was mainly attributable to the significant negative impact of the change in both qualitative and quantitative factors reflecting the diminished economic environment due to COVID-19[198] - Net interest margin declined by 33 basis points to 3.47% for the nine-month period, primarily due to lower yielding PPP loans and the lower interest rate environment[188][190] Liquidity and Capital Resources The company maintains adequate liquidity through deposits, loan amortization, and FHLB advances, and is categorized as 'well capitalized' under regulatory frameworks - Primary liquidity sources include deposits, loan sales, amortization and prepayment of loans and securities, and FHLB advances[221] - At September 30, 2020, the company had access to FHLB advances of up to $556.2 million[222] - The Bank was categorized as "well capitalized" by the FDIC, with all capital ratios exceeding the required minimums[107][108] Quantitative and Qualitative Disclosures About Market Risk The company's most significant market risk is interest rate risk, managed by the Asset/Liability Management Committee (ALCO), showing higher sensitivity to falling rates Net Economic Value (EVE) Sensitivity Analysis (as of Sep 30, 2020) | Basis Point Change in Interest Rates | EVE Percent Change | | :--- | :--- | | +400 | (19.5)% | | +200 | (6.7)% | | 0 | 0.0% | | (100) | (23.3)% | Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2020, with no material changes to internal controls over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of September 30, 2020[228] - No material changes were made to internal controls over financial reporting during the third quarter of 2020[229] PART II. OTHER INFORMATION Legal Proceedings The company is involved in various routine legal proceedings incidental to its business, none of which are expected to have a material adverse effect - As of September 30, 2020, the company was not a party to any legal proceedings expected to have a material adverse effect[230] Risk Factors No material changes to the risk factors have been reported since the company's previous filings for the year ended December 31, 2019, and the quarter ended March 31, 2020 - No material changes to risk factors were reported since the previous filings for the year ended December 31, 2019 and quarter ended March 31, 2020[232]