UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):  January 25, 2023

Orange County Bancorp, Inc.
(Exact Name of Registrant as Specified in Charter)

Delaware
001-40711
26-1135778
(State or Other Jurisdiction)
(Commission File No.)
(I.R.S. Employer
of Incorporation)
 
Identification No.)
     
212 Dolson Avenue, Middletown, New York
10940
(Address of Principal Executive Offices)
(Zip Code)

Registrant's telephone number, including area code: (845) 341-5000

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):


Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
 
Trading
Symbol(s)
 
Name of each exchange on which registered
Common Stock, par value $0.50
 
OBT
 
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


 
Item 2.02 Results of Operations and Financial Condition

On January 25, 2023, Orange County Bancorp, Inc. (the “Company”) issued a press release reporting its financial results at and for the three months and twelve months ended December 31, 2022.

A copy of the press release is attached as Exhibit 99.1 to this report and is being furnished to the Securities and Exchange Commission and shall not be deemed filed for any purpose.

Item 9.01    Financial Statements and Exhibits

(a)
 
Financial statements of businesses acquired.  None.
     
(b)
 
Pro forma financial information.  None.
     
(c)
 
Shell company transactions: None.
     
(d)
 
Exhibits.

     
   
104.1
 
Cover Page for this Current Report on Form 8-K, formatted in Inline XBRL


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.


   
ORANGE COUNTY BANCORP, INC.
     
     
     
DATE: January 25, 2023
By:  
 /s/ Michael Lesler
   
Michael Lesler
   
Senior Vice President, Chief Accounting Officer and Controller
     

EXHIBIT 99.1


FOR IMMEDIATE RELEASE

Orange County Bancorp, Inc. Announces Record Quarterly and Annual Earnings :
Net income for Q4 2022 reached a quarterly record $9.1 million, a $3.6 million, or 65.0% increase, over net income of $5.5 million in Q4 2021, due primarily to increased interest income
Net income for fiscal year 2022 reached a record $24.4 million, a $3.1 million, or 14.4% increase, over net income of $21.3 million in fiscal year 2021, also due primarily to increased interest income
Total assets increased $144.8 million, or 6.8%, to $2.3 billion at December 31, 2022 from $2.1 billion at December 31, 2021
Total loans grew $278.0 million, or 21.5%, to $1.6 billion at December 31, 2022 from $1.3 billion at December 31, 2021
Total deposits were $2.0 billion at December 31, 2022, as compared to $1.9 billion at December 31, 2021, an increase of $60.0 million, or 3.1%
Net interest margin for Q4 2022 rose 102 basis points, or 32.9%, to 4.12% from 3.10% for Q4 2021
Annualized return on average assets of 1.58% for the three months ended December 31, 2022 increased 56 basis points, or 54.9%, versus the same period in 2021
Annualized return on average equity of 19.41% for the three months ended December 31, 2022 increased 733 basis points, or 60.7%, versus the same period in 2021

MIDDLETOWN, N.Y., January 25, 2023 – Orange County Bancorp, Inc. (the “Company” - Nasdaq: OBT), parent company of Orange Bank & Trust Company, (the “Bank”) and Hudson Valley Investment Advisors, Inc. (“HVIA”), today announced net income of $9.1 million, or $1.61 per basic and diluted share, for the three months ended December 31, 2022.  This compares with net income of $5.5 million, or $0.97 per basic and diluted share, for the three months ended December 31, 2021.  The increase in net income was primarily driven by a $6.6 million increase in net interest income during the quarter resulting from further increases in interest rates and strong loan growth.
Book value per share declined $7.95, or 24.5%, from $32.43 at December 31, 2021 to $24.48 at December 31, 2022. Tangible book value per share decreased $7.89, or 25.3%, from $31.18 to $23.29 at December 31, 2021 and 2022, respectively (see “Non-GAAP Financial Measure Reconciliation” below for additional detail).  These decreases reflect the impact of changes in market value in the available-for-sale investment portfolio, which continue to be affected by rising interest rates. The Bank maintains its entire investment portfolio within the available-for-sale category.
“I am pleased to announce Orange Bank ended the year with the strongest quarter in our history,” commented Company President and CEO Michael Gilfeather.  “We earned $9.1 million, or $1.61 per share, for the quarter, compared to $5.5 million, or $.97 per share, during the same period last year, a 65% increase. These earnings were the result of rising interest rates impacting our entire industry, as well as strong organic loan and deposit growth throughout the year. Our loan portfolio finished the year at $1.6 billion, up 21% over year end 2021, while total deposits rose 3.1% to close out the year at $2 billion.
1


Though enthusiastic about loan growth trends we see from quality borrowers, we recognize local economies aren’t immune to the widespread impact of current interest rate policy at the Federal Reserve.  It’s also worth noting that the Fed’s efforts to slow economic growth also involve the reduction of liquidity in the financial system, negatively impacting the industry’s deposit base. While deposits at the Bank rose on a year-over-year basis, there was some contraction in the fourth quarter deposit base.  This was attributable largely to seasonal withdrawals associated with municipalities which we expect will be replaced early in 2023.  Though the Fed’s efforts to further reduce liquidity will remain a challenge for the entire industry, the Bank remains focused on its deposit gathering and meeting our goals to expand market share and support our funding plans.  Based on our strategic loan objectives, the Bank is well positioned to continue originating high quality loans further into the year and gather a larger share of our business clients’ funds on deposit.  While higher interest rates may slow the economy and impact loan and deposit growth, they have also provided an opportunity for the bank to increase its margins during 2022 and create a strong foundation for the coming year.  The Bank’s net interest margins for Q4 2022 grew 102 basis points, or 32.9%, to 4.12% versus 3.10% the prior year.
Wealth management revenues for the quarter, including our Trust and Advisory businesses, were $2.35 million, down slightly from $2.51 million the same quarter last year.  Assets under management (“AUM”) are the principal driver of fee income for this division and subject to fluctuations in market valuation.  With major bond market indices down more than 10% and the S&P 500 equity index down nearly 20% in 2022, the fluctuation realized  – from $1.3 billion at year end 2021 to $1.2 billion at year end 2022 – reflects impact of these market adjustments and the capable oversight of our Wealth Management team.
This quarter represents further validation of our strategic positioning as the region’s premier business bank.  I couldn’t be more pleased by our team’s performance navigating the past year’s challenges, particularly the Federal Reserve’s aggressive efforts to control inflation through interest rate policy and liquidity tightening measures. While these actions are having their intended effect, regional economic activity remains relatively strong and Orange is well positioned to manage current headwinds.  We are a high-performing business bank in a large market with significant upside opportunity focused on execution of our strategic initiatives.  I want to once again thank our dedicated employees for their commitment to our clients.  The record results we experienced this quarter, and this year, reflect the combined efforts of our entire team at Orange Bank.”

2


Fourth Quarter and Full Year 2022 Financial Review
Net Income
Net income for the fourth quarter of 2022 was a record $9.1 million, an increase of approximately $3.6 million, or 65.0%, versus net income of $5.5 million for the fourth quarter of 2021.  Net income for the twelve months ended December 31, 2022 was a record $24.4 million, as compared to $21.3 million for the same period in 2021. The increase in both periods was driven primarily by increased net interest income driven by interest rate increases and strong loan growth, which outpaced deposit growth during the year.
Net Interest Income
For the three months ended December 31, 2022, net interest income increased $6.6 million, or 40.8%, to $22.8 million, versus $16.2 million during the same period in 2021.  For the twelve months ended December 31, 2022, net interest income increased $17.6 million, or 29.2%, over the twelve months ended December 31, 2021. These increases include the rising cost of deposits resulting from the rising interest rate environment.
Total interest income rose $8.5 million, or 49.4%, to $25.6 million for the three months ended December 31, 2022, compared to $17.2 million for the three months ended December 31, 2021. The growth in interest income continues to be associated with increased interest and fees driven by loan growth, as well as an approximately 104.0% increase in interest income associated with higher levels of investment securities.  The securities-related increase reflects the deployment of excess liquidity in 2022 to capture incremental interest income in the rising rate environment. For the year ended December 31, 2022, total interest income rose $19.8 million, or 30.7%, to $84.2 million, as compared to $64.4 million for the year ended December 31, 2021.
Total interest expense increased $1.9 million in the fourth quarter of 2022, to $2.8 million, as compared to $940 thousand in the fourth quarter of 2021. The increase reflects the ongoing impact of rising interest rates on deposit products during the quarter as well as costs associated with FHLB borrowings during the quarter.  The control of interest expense has been a focus area for management in 2022, as we anticipate further increases in short-term rates based on Federal Reserve guidance.  During the twelve months ended December 31, 2022, total interest expense rose $2.2 million, or 54.6%, to $6.1 million, as compared to $3.9 million for the twelve months ended December 31, 2021.
Provision for Loan Losses
The Company recognized a provision for loan losses of $1.0 million for the three months ended December 31, 2022, compared to $545 thousand for the three months ended December 31, 2021. The increased provision primarily reflects reserve increases required by continued growth of the loan portfolio. The allowance for loan losses to total loans was 1.39% as of December 31, 2022, an increase of 2 basis points, or 1.5%, versus 1.37% as of December 31, 2021.  For the year ended December 31, 2022, the provision for loan losses totaled $9.5 million, as compared to $2.4 million for the year ended December 31, 2021 due to the continued growth of the loan portfolio as well as additional reserves associated with charge-offs of certain syndicated loans during 2022.  Syndicated loans represented less than 3.5% of total loans at December 31, 2022.
3

Non-Interest Income
Non-interest income remained relatively stable at $3.1 million for the fourth quarter of 2022 as compared to $3.2 million for the fourth quarter of 2021. With assets-under-management of approximately $1.2 billion at December 31, 2022, non-interest income continues to be supported by the success of the Bank’s trust operations and HVIA asset management activities.  For the twelve months ended December 31, 2022, non-interest income remained level with the twelve months ended December 31, 2021, generating approximately $12.0 million and $12.1 million, respectively.
Non-Interest Expense
Non-interest expense was $13.4 million for the fourth quarter of 2022, reflecting an increase of approximately $1.6 million, or 13.6%, as compared to $11.8 million for the same period in 2021. The increase in non-interest expense for the current three-month period was due to continued investment in Company growth, including increases in compensation and benefit costs, occupancy costs, information technology, and deposit insurance.  Our efficiency ratio was 51.7% for the three months ended December 31, 2022, down from 61.0% for the same period in 2021.  For the year ended December 31, 2022, our efficiency ratio was 55.8% as compared to 59.9% for 2021.
Income Tax Expense
Our provision for income taxes for the three months ended December 31, 2022 was $2.5 million, compared to $1.5 million for the same period in 2021. The increase for the current period was due to the increase in income before income taxes during the quarter.  Our effective tax rate for the three-month period ended December 31, 2022 was 21.3%, as compared to 21.7% for the same period in 2021. For the twelve months ended December 31, 2022, our provision for income taxes was $5.9 million, as compared to $5.4 million for the twelve months ended December 31, 2021.  Our effective tax rate for the twelve month period ended December 31, 2022 was 19.5%, as compared to 20.2% for the same period in 2021.  The reduction in effective tax rates for the 2022 three and twelve month periods, respectively, is due mainly to the increase in proportion of non-taxable revenue (tax-exempt interest income and earnings on bank-owned life insurance) compared with total pre-tax income.
4

Financial Condition
Total consolidated assets increased $144.8 million, or 6.8%, from $2.1 billion at December 31, 2021 to $2.3 billion at December 31, 2022. The increase during the year was driven primarily by growth in loans, deposits, and investment securities.
Total cash and due from banks decreased from $306.2 million at December 31, 2021, to $86.1 million at December 31, 2022, a decrease of approximately $220.1 million, or 71.9%. The decline is due to increased loan growth, as well as management’s deployment of excess cash into investments during the year.
Total investment securities rose $76.0 million, or 16.3%, from $467.0 million at December 31, 2021 to $543.0 million at December 31, 2022. The increase represents the effect of purchases of investment securities, offset by an increase in unrealized losses on investment securities since December 31, 2021, as well as paydowns and maturities during the period.
Total loans increased $278.0 million, or 21.5%, from $1.3 billion at December 31, 2021 to approximately $1.6 billion at December 31, 2022.  The increase was driven by $245.3 million of commercial real estate loan growth and $37.3 million of commercial real estate construction loan growth.  PPP loans declined $36.4 million, to $1.7 million at December 31, 2022, from $38.1 million at December 31, 2021. Most of the remaining PPP loan balance is subject to SBA loan forgiveness.
Total deposits grew $60.0 million, to $2.0 billion at December 31, 2022, from $1.9 billion at December 31, 2021.  This increase was driven by success during 2022 in business account development, attorney trust deposit growth and increased deposit levels for local municipal accounts. At December 31, 2022, 51.1% of total deposits were demand deposit accounts (including NOW accounts).  FHLB advances supplemented customer deposits to fund a portion of the loan growth and totaled $131.5 million at December 31, 2022.  There were no borrowings outstanding at December 31, 2021.
Stockholders’ equity experienced a decrease of approximately $44.7 million, to $138.1 million at December 31, 2022, from $182.8 million at December 31, 2021. The decrease was primarily due to $68.2 million of unrealized losses on the market value of investment securities recognized within the Company’s equity as accumulated other comprehensive income (loss) (“AOCI”), net of taxes, as a result of the increase in market interest rates. Offsetting the AOCI fluctuation, the Bank recognized an approximately $19.7 million increase in retained earnings during the twelve months ended December 31, 2022, net of dividends paid.
At December 31, 2022, the Bank maintained capital ratios in excess of regulatory standards for well capitalized institutions.  The Bank’s Tier 1 capital to average assets ratio was 9.09%, both common equity and Tier 1 capital to risk weighted assets were 12.70%, and total capital to risk weighted assets was 13.95% at December 31, 2022.
Asset Quality
At December 31, 2022, the Bank had total non-performing loans of $8.5 million, or 0.54% of total loans, which included $3.3 million of Troubled Debt Restructured Loans (“TDRs”).  Total TDRs at December 31, 2022, was $3.3 million, or 0.21% of total loans, and experienced a decrease of approximately $300 thousand compared with $3.6 million at December 31, 2021. Accruing loans delinquent greater than 90 days experienced an increase during 2022 and totaled $2.3 million as of December 31, 2022, as compared to $1.4 million at December 31, 2021.
5

Non-GAAP Financial Measure Reconciliation
     
The following table reconciles, as of the dates set forth below, stockholders’ equity (on a GAAP basis) to tangible equity and total assets (on a GAAP basis) to tangible assets and calculates our tangible book value per share.
               
         
December 31, 2022
 
December 31, 2021
         
(Dollars in thousands except for share data)
Tangible Common Equity:
           
Total stockholders’ equity
   
 $                   138,138
 
 $                 182,836
Adjustments:
           
Goodwill
       
                         (5,359)
 
                      (5,359)
Other intangible assets
     
                         (1,392)
 
                      (1,678)
Tangible common equity
     
 $                   131,387
 
 $                 175,799
Common shares outstanding
   
                   5,642,121
 
                 5,637,376
Book value per common share
   
 $                       24.48
 
 $                     32.43
Tangible book value per common share
   
 $                       23.29
 
 $                     31.18
               
Tangible Assets
           
Total assets
       
 $                2,287,334
 
 $              2,142,583
Adjustments:
           
Goodwill
       
                         (5,359)
 
                      (5,359)
Other intangible assets
     
                         (1,392)
 
                      (1,678)
Tangible assets
     
 $                2,280,583
 
 $              2,135,546
Tangible common equity to tangible assets
 
5.76%
 
8.23%
               

About Orange County Bancorp, Inc.
Orange County Bancorp, Inc. is the parent company of Orange Bank & Trust Company and Hudson Valley Investment Advisors, Inc. Orange Bank & Trust Company is an independent bank that began with the vision of 14 founders over 125 years ago. It has grown through innovation and an unwavering commitment to its community and business clientele to approximately $2.3 billion in total assets at December 31, 2022.  Hudson Valley Investment Advisors, Inc. is a Registered Investment Advisor in Goshen, NY. It was founded in 1996 and acquired by the Company in 2012.

6


Forward Looking Statements
Certain statements contained herein are “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. Such forward looking statements may be identified by reference to a future period or periods, or by the use of forward looking terminology, such as “may,” “will,” “believe,” “expect,” “estimate,” “anticipate,” “continue,” or similar terms or variations on those terms, or the negative of those terms. Forward looking statements are subject to numerous risks and uncertainties, including, but not limited to, those related to the real estate and economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, inflation, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, credit risk management, asset-liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity. Further, given its ongoing and dynamic nature, it is difficult to predict what the continuing effects of the COVID-19 pandemic will have on our business and results of operations. The pandemic and related local and national economic disruption may, among other effects, continue to result in a material adverse change for the demand for our products and services; increased levels of loan delinquencies, problem assets and foreclosures; branch disruptions, unavailability of personnel and increased cybersecurity risks as employees work remotely.
The Company wishes to caution readers not to place undue reliance on any such forward looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake and specifically declines any obligation to publicly release the results of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

For further information:
Robert L. Peacock
SEVP Chief Financial Officer
rpeacock@orangebanktrust.com
Phone: (845) 341-5005

7

ORANGE COUNTY BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
(UNAUDITED)
(Dollar Amounts in thousands except per share data)
                       
                 
December 31, 2022
 
December 31, 2021
                       
   
ASSETS
               
                       
Cash and due from banks
       
 $                   86,081
 
 $                 306,179
Investment securities - available-for-sale
     
                    533,461
 
                    464,797
Restricted investment in bank stocks
     
                       9,562
 
                       2,217
Loans
           
                 1,569,430
 
                 1,291,428
Allowance for loan losses
       
                    (21,832)
 
                    (17,661)
 
Loans, net
         
                 1,547,598
 
                 1,273,767
                       
Premises and equipment, net
       
                      14,739
 
                      14,601
Accrued interest receivable
       
                       6,320
 
                       6,643
Bank owned life insurance
       
                      40,463
 
                      39,513
Goodwill
         
                       5,359
 
                       5,359
Intangible assets
         
                       1,392
 
                       1,678
Other assets
         
                      42,359
 
                      27,829
                       
   
TOTAL ASSETS
       
 $              2,287,334
 
 $              2,142,583
                       
   
LIABILITIES AND STOCKHOLDERS' EQUITY
       
                       
Deposits:
               
 
Noninterest bearing
       
 $                 723,228
 
                    701,645
 
Interest bearing
         
                 1,251,159
 
                 1,212,739
   
Total deposits
       
                 1,974,387
 
                 1,914,384
                       
FHLB advances
         
                    131,500
 
                            — 
Note payable
         
                            — 
 
                       3,000
Subordinated notes, net of issuance costs
   
                      19,447
 
                      19,376
Accrued expenses and other liabilities
     
                      23,862
 
                      22,987
                       
   
TOTAL LIABILITIES
       
                 2,149,196
 
                 1,959,747
                       
   
STOCKHOLDERS' EQUITY
           
                       
Common stock, $0.50 par value; 15,000,000 shares authorized;
     
 
5,683,304 issued; 5,642,621 and 5,637,376 outstanding,
       
 
at December 31, 2022 and December 31, 2021, respectively
                       2,842
 
                       2,842
Surplus
         
                    120,107
 
                    119,825
Retained Earnings
       
                      84,635
 
                      64,941
Accumulated other comprehensive income (loss), net of taxes
                    (68,196)
 
                      (3,443)
Treasury stock, at cost; 40,683 and 45,928 shares at December 31,
   
 
2022 and December 31, 2021, respectively
   
                      (1,250)
 
                      (1,329)
   
TOTAL STOCKHOLDERS' EQUITY
   
                    138,138
 
                    182,836
                       
   
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 $              2,287,334
 
 $              2,142,583
                       


8

ORANGE COUNTY BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollar Amounts in thousands except per share data)
               
For Three Months Ended December 31,
Twelve Months Ended December 31,
               
2022
 
2021
 
2022
 
2021
INTEREST INCOME
                 
 
Interest and fees on loans
 $                   21,008
 
 $                   15,160
 
 $                   69,327
 
 $                   57,524
 
Interest on investment securities:
           
   
Taxable
     
                       3,136
 
                       1,404
 
                       9,871
 
                       4,901
   
Tax exempt
     
                          631
 
                          443
 
                       2,286
 
                       1,632
 
Interest on Federal funds sold and other
                          853
 
                          142
 
                       2,739
 
                          372
                             
   
TOTAL INTEREST INCOME
                      25,628
 
                      17,149
 
                      84,223
 
                      64,429
                             
INTEREST EXPENSE
               
 
Savings and NOW accounts
                       1,793
 
                          569
 
                       4,113
 
                       2,370
 
Time deposits
     
                          152
 
                            99
 
                          346
 
                          511
 
FHLB advances
   
                          599
 
                            — 
 
                          599
 
                            — 
 
Note payable
     
                            28
 
                            42
 
                          154
 
                          168
 
Subordinated notes
   
                          231
 
                          230
 
                          923
 
                          919
   
TOTAL INTEREST EXPENSE
                       2,803
 
                          940
 
                       6,135
 
                       3,968
                             
   
NET INTEREST INCOME
                      22,825
 
                      16,209
 
                      78,088
 
                      60,461
                             
Provision for loan losses
                       1,000
 
                          545
 
                       9,517
 
                       2,428
   
NET INTEREST INCOME AFTER
       
     
PROVISION FOR LOAN LOSSES
                      21,825
 
                      15,664
 
                      68,571
 
                      58,033
                             
NONINTEREST INCOME
           
 
Service charges on deposit accounts
                          182
 
                          139
 
                          693
 
                          638
 
Trust income
     
                       1,195
 
                       1,251
 
                       4,764
 
                       4,788
 
Investment advisory income
                       1,152
 
                       1,266
 
                       4,537
 
                       4,853
 
Investment securities gains(losses)
                            -
     
                            — 
 
                            — 
 
Earnings on bank owned life insurance
                          241
 
                          240
 
                          950
 
                          793
 
Gain on the sale of other real estate owned
                            — 
 
                            — 
       
 
Other
       
                          311
 
                          258
 
                       1,052
 
                       1,030
   
TOTAL NONINTEREST INCOME
                       3,081
 
                       3,154
 
                      11,996
 
                      12,102
                             
NONINTEREST EXPENSE
           
 
Salaries
       
                       5,830
 
                       5,026
 
                      22,461
 
                      19,710
 
Employee benefits
   
                       1,321
 
                          767
 
                       5,579
 
                       3,257
 
Occupancy expense
   
                       1,076
 
                       1,102
 
                       4,467
 
                       4,058
 
Professional fees
   
                       1,181
 
                          839
 
                       4,066
 
                       3,649
 
Directors' fees and expenses
                          403
 
                          296
 
                       1,157
 
                       1,041
 
Computer software expense
                       1,174
 
                       1,959
 
                       4,803
 
                       5,168
 
FDIC assessment
   
                          405
 
                          309
 
                       1,411
 
                       1,198
 
Advertising expenses
 
                          474
 
                          355
 
                       1,601
 
                       1,220
 
Advisor expenses related to trust income
                            29
 
                          138
 
                          215
 
                          533
 
Telephone expenses
   
                          174
 
                          136
 
                          679
 
                          556
 
Intangible amortization
                            72
 
                            71
 
                          286
 
                          285
 
Other
       
                       1,243
 
                          803
 
                       3,565
 
                       2,783
   
TOTAL NONINTEREST EXPENSE
                      13,382
 
                      11,801
 
                      50,290
 
                      43,458
                             
 
Income before income taxes
                      11,524
 
                       7,017
 
                      30,277
 
                      26,677
                             
Provision for income taxes
                       2,454
 
                       1,524
 
                       5,914
 
                       5,390
   
NET INCOME
   
 $                     9,070
 
 $                     5,493
 
 $                   24,363
 
 $                   21,287
                             
Basic and diluted earnings per share
 $                      1.61
 
 $                      0.97
 
 $                      4.33
 
 $                      4.28
                             
Weighted average shares outstanding
                 5,626,771
 
                 5,637,376
 
                 5,621,630
 
                 4,968,692
                             

9


ORANGE COUNTY BANCORP, INC.
NET INTEREST MARGIN ANALYSIS
(UNAUDITED)
(Dollar Amounts in thousands)
                       
 
Three Months Ended December 31,
 
2022
 
2021
 
Average Balance
Interest
 
Average Rate
Average Balance
Interest
 
Average Rate
Assets:
                     
Loans Receivable (net of PPP)
 $    1,554,960
 
 $  20,999
 
5.36%
 
 $ 1,229,054
 
 $  14,226
 
4.59%
PPP Loans
              1,738
 
              8
 
1.83%
 
         48,280
 
          934
 
7.68%
Investment securities
          534,649
 
       3,706
 
2.75%
 
       432,361
 
       1,823
 
1.67%
Due from banks
            99,077
 
          853
 
3.42%
 
       360,444
 
          142
 
0.16%
Other
              5,808
 
            62
 
4.24%
 
           2,217
 
            24
 
4.29%
Total interest earning assets
       2,196,232
 
     25,628
 
4.63%
 
    2,072,356
 
     17,149
 
3.28%
Non-interest earning assets
            99,111
         
         86,618
       
  Total assets
 $    2,295,343
         
 $ 2,158,974
       
                       
Liabilities and equity:
                     
Interest-bearing demand accounts
 $       306,173
 
 $       214
 
0.28%
 
 $    308,195
 
 $         86
 
0.11%
Money market accounts
          664,331
 
       1,240
 
0.74%
 
       641,140
 
          417
 
0.26%
Savings accounts
          236,328
 
          338
 
0.57%
 
       189,597
 
            67
 
0.14%
Certificates of deposit
            75,228
 
          153
 
0.81%
 
         82,265
 
            99
 
0.48%
  Total interest-bearing deposits
       1,282,060
 
       1,945
 
0.60%
 
    1,221,197
 
          669
 
0.22%
FHLB Advances and other borrowings
            50,745
 
          599
 
4.68%
 
                -
 
            -
 
0.00%
Note payable
              1,435
 
            28
 
7.74%
 
           3,000
 
            42
 
5.55%
Subordinated notes
            19,437
 
          231
 
4.72%
 
         19,370
 
          230
 
4.71%
  Total interest bearing liabilities
       1,353,677
 
       2,803
 
0.82%
 
    1,243,567
 
          941
 
0.30%
Non-interest bearing demand accounts
          783,605
         
       713,090
       
Other non-interest bearing liabilities
            22,013
         
         20,413
       
  Total liabilities
       2,159,295
         
    1,977,070
       
  Total shareholders' equity
          136,048
         
       181,904
       
  Total liabilities and shareholders' equity
 $    2,295,343
         
 $ 2,158,974
       
                       
Net interest income
   
 $  22,825
         
 $  16,208
   
Interest rate spread 1
       
3.81%
         
2.98%
Net interest margin 2
       
4.12%
         
3.10%
Average interest earning assets to interest-bearing liabilities
162.2%
         
166.6%
       
                       
Notes:
                     
1 The Interest rate spread is the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities
2 Net interest margin is the annualized net interest income divided by average interest-earning assets
   
10

ORANGE COUNTY BANCORP, INC.
NET INTEREST MARGIN ANALYSIS
(UNAUDITED)
(Dollar Amounts in thousands)
                       
 
Twelve Months Ended December 31,
 
2022
    
 
2021
       
 
Average Balance
Interest
 
Average Rate
Average Balance
Interest
 
Average Rate
Assets:
                     
Loans Receivable (net of PPP)
 $      1,426,478
 
 $   68,405
 
4.80%
 
 $ 1,162,536
 
 $   52,418
 
4.51%
PPP Loans
                9,280
 
           922
 
9.94%
 
         87,438
 
        5,106
 
5.84%
Investment securities
            522,902
 
      11,969
 
2.29%
 
       382,391
 
        6,444
 
1.69%
Due from banks
            257,218
 
        2,739
 
1.06%
 
       282,804
 
           372
 
0.13%
Other
                3,643
 
           188
 
5.16%
 
           1,978
 
             89
 
4.50%
Total interest earning assets
         2,219,521
 
      84,223
 
3.79%
 
    1,917,147
 
      64,429
 
3.36%
Non-interest earning assets
              91,830
         
         84,465
       
  Total assets
 $      2,311,351
         
 $ 2,001,612
       
                       
Liabilities and equity:
                     
Interest-bearing demand accounts
 $         345,550
 
 $        524
 
0.15%
 
 $    286,112
 
 $        333
 
0.12%
Money market accounts
            689,610
 
        2,931
 
0.43%
 
       613,865
 
        1,805
 
0.29%
Savings accounts
            227,938
 
           658
 
0.29%
 
       178,551
 
           231
 
0.13%
Certificates of deposit
              75,354
 
           346
 
0.46%
 
         86,516
 
           511
 
0.59%
  Total interest-bearing deposits
         1,338,452
 
        4,459
 
0.33%
 
    1,165,044
 
        2,881
 
0.25%
FHLB Advances and other borrowings
              12,791
 
           599
 
4.68%
 
                 -
 
              -
 
0.00%
Note payable
                2,605
 
           154
 
5.91%
 
           3,000
 
           168
 
5.60%
Subordinated notes
              19,410
 
           923
 
4.76%
 
         19,517
 
           919
 
4.71%
  Total interest bearing liabilities
         1,373,258
 
        6,135
 
0.45%
 
    1,187,561
 
        3,968
 
0.33%
Non-interest bearing demand accounts
            761,393
         
       639,791
       
Other non-interest bearing liabilities
              20,744
         
         18,829
       
  Total liabilities
         2,155,395
         
    1,846,181
       
  Total shareholders' equity
            155,956
         
       155,431
       
  Total liabilities and shareholders' equity
 $      2,311,351
         
 $ 2,001,612
       
                       
Net interest income
   
 $   78,088
         
 $   60,461
   
Interest rate spread 1
       
3.35%
         
3.03%
Net interest margin 2
       
3.52%
         
3.15%
Average interest earning assets to interest-bearing liabilities
161.6%
         
161.4%
       
                       
Notes:
                     
1 The Interest rate spread is the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities
2 Net interest margin is the annualized net interest income divided by average interest-earning assets
       

11

ORANGE COUNTY BANCORP, INC.
SELECTED RATIOS AND OTHER DATA
(UNAUDITED)
                               
               
Three Months Ended
December 31, (1)
Twelve Months Ended
December 31,
               
2022
 
2021
 
2022
 
2021
 
Performance Ratios:
                     
Return on average assets (1)
     
1.58%
 
1.02%
 
1.05%
 
1.06%
 
Return on average equity (1)
     
26.67%
 
12.08%
 
15.62%
 
13.70%
 
Interest rate spread (2)
     
3.81%
 
2.98%
 
3.35%
 
3.03%
 
Net interest margin (3)
     
4.12%
 
3.10%
 
3.52%
 
3.15%
 
Dividend payout ratio (4)
     
14.27%
 
20.53%
 
19.15%
 
18.67%
 
Non-interest income to average total assets
 
0.54%
 
0.58%
 
0.52%
 
0.60%
 
Non-interest expenses to average total assets
2.33%
 
2.19%
 
2.18%
 
2.17%
 
Average interest-earning assets to average interest-bearing liabilities
162.24%
 
166.65%
 
161.62%
 
161.44%
 
                               
               
 At
 
 At
         
               
December 31, 2022
December 31, 2021
     
Asset Quality Ratios:
                     
Non-performing assets to total assets
   
0.37%
 
0.28%
         
Non-performing loans to total loans
   
0.54%
 
0.46%
         
Allowance for loan losses to non-performing loans
258.34%
 
296.67%
         
Allowance for loan losses to total loans
   
1.39%
 
1.37%
         
                               
Capital Ratios (5):
                       
Total capital (to risk-weighted assets)
   
13.95%
 
14.12%
         
Tier 1 capital (to risk-weighted assets)
   
12.70%
 
12.87%
         
Common equity tier 1 capital (to risk-weighted assets)
12.70%
 
12.87%
         
Tier 1 capital (to average assets)
   
9.09%
 
8.15%
         
                               
Notes:
                         
(1) 
 
Annualized for the three month periods ended December 31, 2022 and 2021, respectively.
     
(2) 
 
Represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the periods.
(3) 
 
The net interest margin represents net interest income as a percent of average interest-earning assets for the periods.
(4) 
 
The dividend payout ratio represents dividends paid per share divided by net income per share.
   
(5) 
 
Ratios are for the Bank only.
                   

12

ORANGE COUNTY BANCORP, INC.
SELECTED OPERATING DATA
(UNAUDITED)
(Dollar Amounts in thousands except per share data)
               
Three Months Ended December 31,
 
Twelve Months Ended December 31,
               
2022
 
2021
 
2022
 
2021
Interest income
       
 $                     25,628
 
 $                     17,149
 
 $                     84,223
 
 $                     64,429
Interest expense
       
                          2,803
 
                             940
 
                          6,135
 
                          3,968
Net interest income
     
                        22,825
 
                        16,209
 
                        78,088
 
                        60,461
Provision for loan losses
     
                          1,000
 
                             545
 
                          9,517
 
                          2,428
Net interest income after provision for loan losses
                        21,825
 
                        15,664
 
                        68,571
 
                        58,033
Noninterest income
     
                          3,081
 
                          3,154
 
                        11,996
 
                        12,102
Noninterest expenses
     
                        13,382
 
                        11,801
 
                        50,290
 
                        43,458
Income before income taxes
     
                        11,524
 
                          7,017
 
                        30,277
 
                        26,677
Provision for income taxes
     
                          2,454
 
                          1,524
 
                          5,914
 
                          5,390
Net income
       
 $                       9,070
 
 $                       5,493
 
 $                     24,363
 
 $                     21,287
                             
Basic and diluted earnings per share
   
 $                         1.61
 
 $                         0.97
 
 $                         4.33
 
 $                         4.28
Weighted average common shares outstanding
                   5,626,771
 
                   5,637,376
 
                   5,621,630
 
                   4,968,692
                             
               
 At
 
 At
       
               
December 31, 2022
 
December 31, 2021
       
Book value per share
     
 $                       24.48
 
 $                       32.43
       
Net tangible book value per share (1)
   
 $                       23.28
 
 $                       31.18
       
Outstanding common shares
     
                   5,642,621
 
                   5,637,376
       
                             
Notes:
                       
(1)      Net tangible book value represents the amount of total tangible assets reduced by our total liabilities. Tangible assets are calculated by reducing total assets, as defined by GAAP, by $5,359 in goodwill and $1,392, and $1,678 in other intangible assets for December 31, 2022 and December 31, 2021, respectively.

13


ORANGE COUNTY BANCORP, INC.
LOAN COMPOSITION
(UNAUDITED)
(Dollar Amounts in thousands)
               
At December 31, 2022
 
At December 31, 2021
               
Amount
 
Percent
 
Amount
 
Percent
 Commercial and industrial (a)
     
 $                   258,901
 
16.50%
 
 $                   268,508
 
20.79%
 Commercial real estate
     
                   1,098,054
 
69.97%
 
                      852,707
 
66.03%
 Commercial real estate construction
 
                      109,570
 
6.98%
 
                        72,250
 
5.59%
 Residential real estate
     
                        74,277
 
4.73%
 
                        65,248
 
5.05%
 Home equity
       
                        12,329
 
0.79%
 
                        13,638
 
1.06%
 Consumer
       
                        16,299
 
1.04%
 
                        19,077
 
1.48%
 Total loans
       
                   1,569,430
 
100.00%
 
                   1,291,428
 
100.00%
 Allowance for loan losses
     
                        21,832
     
                        17,661
   
 Total loans, net
       
 $                1,547,598
     
 $                1,273,767
   
                             
 (a) - Includes PPP loans of:
     
 $                       1,717
     
 $                     38,114
   
                             

ORANGE COUNTY BANCORP, INC.
DEPOSITS BY ACCOUNT TYPE
(UNAUDITED)
(Dollar Amounts in thousands)
               
At December 31, 2022
 
At December 31, 2021
               
Amount
 
Percent
 
Average Rate
Amount
 
Percent
 
Average Rate
 Noninterest-bearing demand accounts
 
 $        723,228
 
36.63%
 
0.00%
 
 $     701,645
 
36.65%
 
0.00%
 Interest bearing demand accounts
   
           284,747
 
14.42%
 
0.31%
 
        301,596
 
15.75%
 
0.11%
 Money market accounts
     
           615,149
 
31.16%
 
0.97%
 
        615,111
 
32.14%
 
0.26%
 Savings accounts
       
           258,230
 
13.08%
 
0.72%
 
        213,592
 
11.16%
 
0.14%
 Certificates of Deposit
     
             93,033
 
4.71%
 
1.74%
 
          82,440
 
4.31%
 
0.46%
 Total
       
 $     1,974,387
 
100.00%
 
0.52%
 
 $  1,914,384
 
100.00%
 
0.14%
                                     
14


ORANGE COUNTY BANCORP, INC.
NON-PERFORMING ASSETS
(UNAUDITED)
(Dollar Amounts in thousands)
                       
                 
December 31, 2022
 
December 31, 2021
                       
Non-accrual loans:
               
Commercial and industrial
       
 $                       1,003
 
 $                            — 
Commercial real estate
       
                          3,882
 
                          3,928
Commercial real estate construction
     
                               — 
 
                               — 
Residential real estate
       
                          1,188
 
                             578
Home equity
         
                               51
 
                               50
Consumer
         
                               — 
 
                                 4
  Total non-accrual loans 1
       
                          6,124
 
                          4,560
Accruing loans 90 days or more past due:
           
Commercial and industrial
       
                          1,850
 
                             720
Commercial real estate
       
                               — 
 
                             465
Commercial real estate construction
     
                               — 
 
                               — 
Residential real estate
       
                               — 
 
                               — 
Home equity
         
                               — 
 
                               — 
Consumer
         
                             477
 
                             208
  Total loans 90 days or more past due
     
                          2,327
 
                          1,393
Total non-performing loans
       
                          8,451
 
                          5,953
Other real estate owned
       
                               — 
 
                               — 
Other non-performing assets
       
                               — 
 
                               — 
Total non-performing assets
       
 $                       8,451
 
 $                       5,953
                       
Ratios:
                 
Total non-performing loans to total loans
     
0.54%
 
0.46%
Total non-performing loans to total assets
     
0.37%
 
0.28%
Total non-performing assets to total assets
     
0.37%
 
0.28%
                       
Notes:
               
1 - Includes non-accruing TDRs:
       
 $                       3,278
 
 $                       3,570
                       
15