Rhinebeck Bancorp, Inc. (RBKB)

Item 2.          Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

Management’s discussion and analysis of financial condition and results of operations at June 30, 2026 and December 31, 2025, and for the three and six months ended June 30, 2026 and 2025, is intended to assist in understanding the financial condition and results of operations of the Company and the Bank. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Cautionary Note Regarding Forward-Looking Statements

This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which can be identified by the use of words such as “estimate,” “approximate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “predict,” “forecast,” “improve,” “continue,” “will,” “would,” “should,” “could,” “may” and words of similar meaning. These forward-looking statements include, but are not limited to:

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Forward-looking statements, by their nature, are subject to risks and uncertainties.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

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Additional factors that may affect our results are discussed in our Annual Report on Form 10-K under the heading “Risk Factors.” Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Accordingly, you should not place undue reliance on such statements.

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Recent Events

On July 21, 2026, the Company completed its second-step conversion, and became a fully public stock holding company. In connection therewith, the Company sold 8,880,210 shares of common stock at a purchase price of $10.00 per share, generating gross offering proceeds of $88.8 million. Because the offering was oversubscribed, the Company subsequently returned approximately $71.5 million to subscribers at closing.

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Concurrent with the offering, existing public shares of common stock were exchanged for new shares of common stock of the Company at an exchange ratio of 1.3978. Cash was paid in lieu of fractional shares at a rate of $10.00 per share. Upon completion of the offering and share exchange, the Company had 15,635,966 shares of common stock outstanding, and the new shares commenced trading on the Nasdaq Capital Market under the symbol “RBKB” on July 22, 2026.

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This significant capital influx substantially increases our net worth and liquidity position. The net proceeds from the offering will provide additional capital to support future loan growth, expand our branch network, enhance products and services, and fund general corporate purposes. Additionally, because the offering was oversubscribed, the Employee Stock Ownership Plan (ESOP) was unable to purchase shares directly in the offering. The ESOP purchased 355,208 shares at an average cost of $12.28 per share in the open market following the transaction.

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Critical Accounting Policies

Our most significant accounting policies are described in Note 1 to the Consolidated Financial Statements in our Annual Report on Form 10-K.  Certain of these accounting policies require management to use significant judgment and estimates, which can have a material impact on the carrying value of certain assets and liabilities. We consider these policies to be our critical accounting estimates.  The judgment and assumptions made are based upon historical experience, future forecasts, and/or other factors that management believes to be reasonable.  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. We consider the allowance for credit losses to be our most critical accounting policy.

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Allowance for Credit Losses

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The Company's allowance for credit losses is its estimate of expected lifetime credit losses currently expected in the loan portfolio, on unfunded lending commitments, and on its available-for-sale securities portfolio over the expected life of those assets. While these estimates are based on substantive methods for determining the required allowance, actual outcomes may differ significantly from estimated results, especially when determining required allowances for larger, complex commercial credits or unfunded lending commitments to commercial borrowers. Consumer loans, including indirect automobile loans and single family residential real estate loans, are smaller and generally behave in a similar manner, and loss estimates for these credits are considered more predictable. Additionally, the allowance for credit losses calculation utilizes a forward-looking forecast of macroeconomic conditions, which may differ significantly from actual results. Further discussion of the methodology used in establishing the allowance is provided in Note 3 to the Notes to the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and in “Item 7. Management’s Discussion and Analysis of Fi

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis reflects information contained in our audited consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the audited consolidated financial statements contained within this Form 10-K.

Overview

Net Interest Income. Our primary source of income is net interest income. 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 on loans. The allowance for credit losses is a valuation allowance for the estimated lifetime credit losses. 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. Our primary sources of non-interest income are service charges on deposit accounts, investment advisory income, net gains in the cash surrender value of bank owned life insurance and other income.

Non-interest Expenses. Our non-interest expenses consist of salaries and employee benefits, net occupancy and equipment, data processing, professional fees, marketing expenses, premium payments we make to the FDIC for insurance of our deposits and other general and administrative expenses.

Income Tax Expense. Our income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between the carrying amounts and the tax basis of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amounts expected to be realized.

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Business Strategy

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In October 2025, Matthew J. Smith was appointed President and Chief Executive Officer of Rhinebeck Bank and its holding companies, Rhinebeck Bancorp and Rhinebeck Bancorp, MHC, to lead Rhinebeck Bank into its next phase of growth and innovation. Mr. Smith’s executive leadership experience includes overseeing community bank operations, spearheading the implementation of digital banking and banking-as-a-service programs and integrating acquired financial institutions. As we realign our strategies for growth, we intend to continue to operate as a well-capitalized and profitable community bank dedicated to providing exceptional personal service to our individual and business customers. We believe that we have a competitive advantage in the markets we serve because of our knowledge of the local marketplace and our long-standing history of providing superior, relationship-based customer service.

Our current business strategy includes the following key components, which are designed to improve earnings by expanding our net interest margin, increasing non-interest income and improving efficiency:

Increasing our commercial real estate loans and commercial business loans involves risk, as described in “Risk Factors—Risks Related to Our Lending Activities—Our emphasis on commercial real estate and commercial business lending involves risks that could adversely affect our financial condition and results of operations” and “—Our non-owner occupied commercial real estate loans may expose us to increased credit risk.”

We are also developing a full suite of treasury management services for business customers to encourage commercial borrowers to maintain deposit accounts with us and to generate recurring fee income. We view treasury management as a core strategic capability that will support both deposit growth and non-interest income diversification. We may also enter into strategic partnerships, including banking-as-a-service partnerships, to facilitate new account openings and provide a low-cost method to attract and retain core deposits.

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Critical Accounting Estimates

Our most significant accounting policies are described in Note 1 to the consolidated financial statements.  Certain of these accounting policies require management to use significant judgment and estimates, which can have a material impact on the carrying value of certain assets and liabilities, and we consider these policies to be our critical accounting estimates.  The judgment and assumptions made are based upon historical experience, future forecasts, or other factors that man

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