SEC Filing | Orange County Bancorp, Inc

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40711

Orange County Bancorp, Inc.

(Exact name of registrant as specified in its charter)


Delaware	26-1135778
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

212 Dolson Avenue

Middletown, New York 10940

(Address of Principal Executive Offices)

(845) 341-5000

(Registrant’s telephone number)

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


Title of Each Class	Trading symbol	Name of Exchange on which registered
Common Stock, par value $0.50 per share	OBT	The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒	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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 8, 2023, there were 5,642,789 shares of the registrant’s common stock outstanding.

Table of Contents

TABLE OF CONTENTS


		Page

Part I	Financial Information

Item 1.	Financial Statements	3

	Condensed Consolidated Statements of Condition as of March 31, 2023 and December 31, 2022 (Unaudited)	3

	Condensed Consolidated Statements of Income for the three months ended March 31, 2023 and 2022 (Unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income/(Loss) for the three ended March 31, 2023 and 2022 (Unaudited)	5

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three ended March 31, 2023 and 2022 (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the threee months ended March 31, 2023 and 2022 (Unaudited)	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	47

Item 4.	Controls and Procedures	47

Part II	Other Information

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48

Item 3.	Defaults Upon Senior Securities	48

Item 4.	Mine Safety Disclosures	48

Item 5.	Other Information	48

Item 6.	Exhibits	48

Exhibit Index		49

Signatures		49

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PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

ORANGE COUNTY BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONDITION

(UNAUDITED)

(Dollar amounts in thousands except per share data)


	March 31, 2023		December 31, 2022
ASSETS
Cash and due from banks	$	165,297	$	86,081
Investment securities – available-for-sale (amortized cost $595,628, net of allowance for credit losses of $5,000 at March 31, 2023 and $609,954, net of allowance for credit losses of $0 at December 31, 2022)		526,325		533,461
Restricted investment in bank stocks		14,401		9,562
Loans		1,663,368		1,569,430
Allowance for credit losses ⁽¹⁾		(24,726)		(21,832)
Loans, net		1,638,642		1,547,598
Premises and equipment, net		16,579		14,739
Accrued interest receivable		5,961		6,320
Bank owned life insurance		40,701		40,463
Goodwill		5,359		5,359
Intangible assets		1,321		1,392
Other assets		40,412		42,359
TOTAL ASSETS	$	2,454,998	$	2,287,334
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest bearing	$	694,283	$	723,228
Interest bearing		1,331,559		1,251,159
Total deposits		2,025,842		1,974,387
FHLB advances, short term		229,000		131,500
FHLB advances, long term		10,000		—
Subordinated notes, net of issuance costs		19,466		19,447
Accrued expenses and other liabilities		22,110		23,862
TOTAL LIABILITIES		2,306,418		2,149,196
STOCKHOLDERS’ EQUITY
Common stock, $0.50 par value; 15,000,000 shares authorized; 5,683,304 issued; 5,642,789 and 5,642,621 outstanding, at March 31, 2023 and December 31, 2022, respectively		2,842		2,842
Surplus		120,268		120,107
Retained Earnings		85,007		84,635
Accumulated other comprehensive income (loss), net of taxes		(58,174)		(68,196)
Treasury stock, at cost; 40,515 and 40,683 shares at March 31, 2023 and December 31, 2022, respectively		(1,363)		(1,250)
TOTAL STOCKHOLDERS’ EQUITY		148,580		138,138
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,454,998	$	2,287,334

See accompanying notes to unaudited condensed consolidated financial statements.

(1)

Commencing on January 1, 2023 the allowance calculation is based on the current expected credit loss methodology. Prior to January 1, 2023 the calculation was based on the incurred loss methodology.

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ORANGE COUNTY BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(Dollar amounts in thousands except per share data)


	Three Months Ended
	March 31,
	2023		2022
INTEREST INCOME
Interest and fees on loans	$	21,836	$	15,005
Interest on investment securities:
Taxable		3,073		1,638
Tax exempt		597		482
Interest on Federal funds sold and other		858		145
TOTAL INTEREST INCOME		26,364		17,270
INTEREST EXPENSE
Savings and NOW accounts		2,430		570
Time deposits		459		88
FHLB advances		2,105		—
Note payable		—		42
Subordinated notes		231		231
TOTAL INTEREST EXPENSE		5,225		931
NET INTEREST INCOME		21,139		16,339
Provision for credit losses- investments		5,000		—
Provision for credit losses ⁽¹⁾		1,355		923
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		14,784		15,416
NONINTEREST INCOME
Service charges on deposit accounts		174		168
Trust income		1,176		1,170
Investment advisory income		1,198		1,201
Investment securities gains		107		—
Earnings on bank owned life insurance		238		233
Other		277		233
TOTAL NONINTEREST INCOME		3,170		3,005
NONINTEREST EXPENSE
Salaries		6,254		5,269
Employee benefits		1,867		1,401
Occupancy expense		1,254		1,223
Professional fees		1,048		879
Directors’ fees and expenses		230		345
Computer software expense		1,223		1,116
FDIC assessment		330		309
Advertising expenses		276		190
Advisor expenses related to trust income		29		138
Telephone expenses		169		175
Intangible amortization		71		71
Other		1,277		705
TOTAL NONINTEREST EXPENSE		14,028		11,821
Income before income taxes		3,926		6,600
Provision for income taxes		696		1,270
NET INCOME	$	3,230	$	5,330

Basic and diluted earnings per share	$	0.57	$	0.95
Weighted average shares outstanding		5,625,660		5,634,667

See accompanying notes to unaudited condensed consolidated financial statements.

(1)

Commencing on January 1, 2023 the allowance calculation is based on the current expected credit loss methodology. Prior to January 1, 2023 the calculation was based on the incurred loss methodology.

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ORANGE COUNTY BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(UNAUDITED)

(Dollar amounts in thousands except per share data)


	Three Months Ended
	March 31,
	2023		2022
Net Income	$	3,230	$	5,330
Other comprehensive income/(loss):
Unrealized gains/(losses) on securities:
Unrealized holding gains/(losses) arising during the period		7,190		(28,600)
Credit loss expense		5,000		—
Reclassification adjustment for (gains) included in net income		(107)		—
Tax effect		2,453		(6,006)
Net of tax		9,630		(22,594)
Defined benefit pension plans:
Net gain/(loss) arising during the period		500		240
Reclassification adjustment for amortization of prior service cost and net gains included in net periodic pension cost		—		(7)
Tax effect		105		49
Net of tax		395		198
Deferred compensation liability:
Unrealized loss		(4)		(4)
Tax effect		(1)		(1)
Net of tax		(3)		(3)
Total other comprehensive loss		10,022		(22,399)
Total comprehensive income/(loss)	$	13,252	$	(17,069)

See accompanying notes to unaudited condensed consolidated financial statements.

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ORANGE COUNTY BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)

(Dollar amounts in thousands except per share data)


							Accumulated Other
	Common				Retained		Comprehensive		Treasury
	Stock		Surplus		Earnings		Income (Loss)		Stock		Total
Balance, January 1, 2022	$	2,842	$	119,825	$	64,941	$	(3,443)	$	(1,329)	$	182,836
Net income		—		—		5,330		—		—		5,330
Other comprehensive loss, net of taxes		—		—		—		(22,399)		—		(22,399)
Cash dividends declared ($0.20 per share)		—		—		(1,125)		—		—		(1,125)
Treasury stock purchased (4,617 shares)		—		—		—		—		(189)		(189)
Restricted stock expense		—		67		—		—		—		67
Stock-based compensation (700 shares)		—		8		—		—		21		29
Balance, March 31, 2022	$	2,842	$	119,900	$	69,146	$	(25,842)	$	(1,497)	$	164,549

Balance, January 1, 2023	$	2,842	$	120,107	$	84,635	$	(68,196)	$	(1,250)	$	138,138
Cumulative effect adjustment for adoption of ASU 2016-13						(1,561)						(1,561)
Balance, January 1, 2023 (as adjusted for change in accounting principle)	$	2,842	$	120,107	$	83,074	$	(68,196)	$	(1,250)	$	136,577
Net income		—		—		3,230		—		—		3,230
Other comprehensive income, net of taxes		—		—		—		10,022		—		10,022
Cash dividends declared ($0.23 per share)		—		—		(1,297)		—		—		(1,297)
Treasury stock purchased (5,685 shares)		—		—		—		—		(293)		(293)
Restricted stock expense		—		28		—		—		—		28
Stock-based compensation (5,853 shares)		—		133		—		—		180		313
Balance, March 31, 2023	$	2,842	$	120,268	$	85,007	$	(58,174)	$	(1,363)	$	148,580

See accompanying notes to unaudited condensed consolidated financial statements.

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ORANGE COUNTY BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(Dollar amounts in thousands except per share data)


	Three Months Ended
	March 31,
	2023		2022
Cash flows from operating activities
Net income	$	3,230	$	5,330
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses (1)		6,355		923
Depreciation		498		376
Accretion on loans		(748)		(1,232)
Amortization of intangibles		71		71
Amortization of subordinated notes issuance costs		19		18
Investment securities (gains) losses		(107)		—
Restricted stock expense		28		67
Stock-based compensation		313		29
Net amortization of investment premiums		321		447
Earnings on bank owned life insurance		(238)		(233)
Net change in:
Accrued interest receivable		359		(69)
Other assets		145		(50)
Other liabilities		(2,074)		(2,557)
Net cash from operating activities		8,172		3,120
Cash flows from investing activities
Purchases of investment securities available-for-sale		(3,112)		(85,270)
Proceeds from sales of investment securities available-for-sale		7,296
Proceeds from paydowns of investment securities available-for-sale		11,587		16,461
Proceeds from maturities and calls of investment securities available-for-sale		1,416		418
Purchase of restricted investment in bank stocks		(18,326)		—
Proceeds from redemptions of restricted investment in bank stocks		13,487		(558)
Net increase in loans		(96,331)		(41,932)
Purchase of premises and equipment		(2,338)		(81)
Net cash used by investing activities		(86,321)		(110,962)
Cash flows from financing activities
Net increase in deposits		51,455		159,303
Net change in FHLB advances, short term		97,500		—
Proceeds from FHLB advances, long term		10,000		—
Cash dividends paid		(1,297)		(1,125)
Purchases of treasury stock		(293)		(189)
Net cash from financing activities		157,365		157,989
Net change in cash and cash equivalents		79,216		50,147
Beginning cash and cash equivalents		86,081		306,179
Ending cash and cash equivalents	$	165,297	$	356,326
Supplemental cash flow information:
Interest paid		5,442		1,132
Income taxes paid		102		9
Supplemental noncash disclosures:
Lease liabilities arising from obtaining right-of-use assets		858		—

See accompanying notes to unaudited condensed consolidated financial statements.

(1)

Commencing on January 1, 2023 the allowance calculation is based on the current expected credit loss methodology. Prior to January 1, 2023 the calculation was based on the incurred loss methodology.

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ORANGE COUNTY BANCORP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands except per share data)

Note 1 — Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations and Principles of Consolidation: The unaudited consolidated financial statements include Orange County Bancorp, Inc., a Delaware bank holding company (“Orange County Bancorp”) and its wholly owned subsidiaries: Orange Bank & Trust Company, a New York trust company (the “Bank”) and Hudson Valley Investment Advisors (“HVIA”), a Registered Investment Advisor, together referred to as the “Company.” Intercompany transactions and balances are eliminated in consolidation.

The Company provides commercial and consumer banking services to individuals, small businesses and local municipal governments as well as trust and investment services through the Bank and HVIA. The Company is headquartered in Middletown, New York, with eight locations in Orange County, New York, seven in Westchester County, New York, two in Rockland County, New York, and one in Bronx County, New York. Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are commercial real estate, commercial and residential mortgage loans. Substantially all loans are secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate. Commercial loans are expected to be repaid from cash flow from operations of businesses. There are no significant concentrations of loans to any one industry or customer. However, the customers’ ability to repay their loans is dependent on the real estate and general economic conditions in the areas in which they operate.

Assets held by the Company in an agency or fiduciary capacity for its customers are excluded from the consolidated financial statements since they do not constitute assets of the Company. Assets held by the Company in an agency or fiduciary capacity for its customers amounted to $1.4 million and $1.3 million at March 31, 2023 and December 31, 2022, respectively.

Certain information and footnote disclosures normally included in the audited consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes for the year ended December 31, 2022 for Orange County Bancorp, Inc. contained in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 24, 2023. In the opinion of the management of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting solely of normal and recurring accruals) necessary to present fairly the financial position as of March 31, 2023, the results of operations, comprehensive income/(loss), changes in stockholders’ equity for the three months ended March 31, 2023 and 2022 and cash flow statements for the three months ended March 31, 2023 and 2022. The results of operations for any interim period are not necessarily indicative of the results that may be expected for the full year or for any future period. Certain reclassifications have been made to the financial statements to conform with prior period presentations.

Use of Estimates: To prepare financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

Recent Accounting Pronouncements: In December 2022, the financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. The amendments in this ASU defer the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. The ASU is effective upon issuance. The FASB had previously issued 2020-04 - Facilitation of the Effects of Reference Rate Reform on Financial Reporting and related amendments in 2020 to ease the potential burden in accounting for reference rate reform. The amendments in ASU 2020-04 were elective and applied to all entities that have contracts, hedging relationships, and other transactions that reference the London Inter-bank Offer Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. The Company does not expect such adoption of the new ASU to have an impact on the Company’s consolidated financial instruments.

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ORANGE COUNTY BANCORP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands except per share data)

The Company adopted ASU 2016-13 on January 1, 2023 for all financial assets measured at amortized cost and off-balance sheet credit exposures using the modified retrospective method. Results for the three months ended March 31, 2023 are presented under Accounting Standards Codification 326, Financial Instruments – Credit Losses, while prior period amounts continue to be reported with previously applicable GAAP and have not been restated. Effective January 1,2023, the Company recorded a $1.9 million increase in allowance for credit losses on loans that is referred to as the current expected credit loss (“CECL”) methodology (previously allowance for loan losses), an adjustment of $1.4 million recording reserves related to acquired loans, and a $520 thousand increase related to allowance for off balance sheet credit exposures included in other liabilities section of the consolidated statements of financial condition, which resulted in a total cumulative effect adjustment of $1.5 million, net of tax, and a decrease to retained earnings a component of the stockholders’ equity. Further information regarding the impact of CECL can be found in Note 3 – Loans and Allowance for Credit Losses.

The Company adopted ASU 2022-02, Financial Instruments – Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) prospectively effective January 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measurement of troubled debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty. The Company did not have any loans that were both experiencing financial difficulties and modified during the three months ended March 31, 2023.

Allowance for Credit Losses

On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”), which replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan and lease receivables and held-to-maturity securities. It also applies to off-balance sheet credit exposures (loan commitments, standby letters of credit, financial guarantees, and other similar instruments). In addition, Accounting Standards Codification (“ASC”) 326 made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities which management does not intend to sell or believes that it is more likely than not they will be required to sell.

The allowance for credit losses represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The measurement of expected credit losses is applicable to loans receivable and securities measured at amortized cost. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The allowance is established through a provision for credit losses that is charged against income. 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. The allowance for credit losses is reported separately as a contra-asset on the consolidated statement of financial condition. The expected credit loss for unfunded lending commitments and unfunded loan commitments is reported on the Consolidated Statement of Financial Condition in other liabilities and is recorded within the provision for credit losses.

Allowance for Credit Losses on Loans Receivable

The allowance for credit losses on loans is deducted from the amortized cost basis of the loan to present the net amount expected to be collected. Expected losses are evaluated and calculated on a collective, or pooled, basis for those loans which share similar risk characteristics. If the loan does not share risk characteristics with other loans, the Company will evaluate the loan on an individual basis. Individually evaluated loans are primarily non-accrual and collateral dependent loans. Furthermore, the Company evaluates the pooling methodology at least annually to ensure that loans with similar risk characteristics are pooled appropriately. Loans are charged off against the allowance for credit losses when the Company believes the balances to be uncollectible. Expected recoveries do not

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ORANGE COUNTY BANCORP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands except per share data)

exceed the aggregate of amounts previously charged off or expected to be charged off. The Company does not estimate expected losses on accrued interest receivable on loans, as accrued interest receivable is reversed or written off when the full collection of the accrued interest receivable related to a loan becomes doubtful.

The Company has chosen to segment its portfolio consistent with the manner in which it manages credit risk. The Company calculates estimated credit losses for these loan segments using quantitative models and qualitative factors. Further information on loan segmentation and the credit loss estimation is included in Note 3 – Loans and Allowance for Credit Losses.

Individually Evaluated Loans

On a case-by-case basis, the Company may conclude that a loan should be evaluated on an individual basis based on its disparate risk characteristics. When the Company determines that a loan no longer shares similar risk characteristics with other loans in the portfolio, the allowance will be determined on an individual basis using the present value of expected cash flows or, for collateral-dependent loans, the fair value of the collateral as of the reporting date, less estimated selling costs, as applicable. If the fair value of the collateral is less than the amortized cost basis of the loan, the Company will charge off the difference between the fair value of the collateral, less costs to sell at the reporting date and the amortized cost basis of the loan.

Allowance for Credit Losses on Off-Balance Sheet Commitments

The Company is required to include unfunded commitments that are expected to be funded in the future within the allowance calculation, other than those that are unconditionally cancelable. To arrive at that reserve, the reserve percentage for each applicable segment is applied to the unused portion of the expected commitment balance and is multiplied by the expected funding rate. As noted above, the allowance for credit losses on unfunded loan commitments is included in other liabilities on the consolidated statement of financial condition and the related credit expense is recorded as provisions for credit losses in the consolidated statements of income.

Allowance for Credit Losses on Available for Sale Securities

For available for sale securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more than likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities available for sale that do not meet the above criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of tax.

Changes in the allowance for credit losses are recorded as provision for, or reversal of, credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available for sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. The Company does not estimate expected losses on accrued interest receivable on investments, as accrued interest receivable is reversed or written off when the full collection of the accrued interest receivable related to an investment becomes doubtful.

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ORANGE COUNTY BANCORP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands except per share data)

Note 2 — Investment Securities

The amortized cost and fair value of investment securities at March 31, 2023 and December 31, 2022:


			Gross		Gross
	Amortized		Unrealized		Unrealized		ACL		Fair
	Cost		Gains		Losses		Adjustment		Value
Available-for-sale March 31, 2023
U.S. government agencies and treasuries	$	102,194	$	27	$	(8,538)	$	—	$	93,683
Mortgage-backed securities		360,748		89		(40,293)		—		320,544
Corporate Securities		28,553		—		(2,765)		(5,000)		20,788
Obligations of states and political subdivisions		104,133		65		(12,888)		—		91,310
Total debt securities	$	595,628	$	181	$	(64,484)	$	(5,000)	$	526,325


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Available-for-sale December 31, 2022
U.S. government agencies and treasuries	$	104,734	$	25	$	(11,009)	$	93,750
Mortgage-backed securities		364,690		17		(47,792)		316,915
Corporate Securities		28,559		—		(2,901)		25,658
Obligations of states and political subdivisions		111,971		48		(14,881)		97,138
Total debt securities	$	609,954	$	90	$	(76,583)	$	533,461

Proceeds from sales of securities and associated gains and losses for the three months ended March 31, 2023 and 2022.


	Three Months Ended March 31,
	2023		2022
Proceeds	$	7,296	$	—

Gross realized gains	$	130	$	—
Gross realized losses		23		—
Net gain on sales of securities		107		—
Tax provision on realized net gains and loss		22		—
Net gain on sales of securities, after tax	$	85	$	—

Table of Contents

ORANGE COUNTY BANCORP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands except per share data)

The amortized cost and fair value of debt securities as of March 31, 2023 are shown below by contractual maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Available-for-sale
	Amortized		Fair
	Cost		Value
Due in one year or less	$	2,744	$	2,759
Due after one through five years		27,703		26,590
Due after five through ten years		66,060		54,448
Due after ten years		138,373		121,984
		234,880		205,781
Mortgage-backed securities		360,748		320,544
Total debt securities	$	595,628	$	526,325

Securities pledged at March 31, 2023 and December 31, 2022 had a carrying amount of $353,659 and $323,674 and were pledged to secure public deposits.

At March 31, 2023 and December 31, 2022, there were no holdings of securities of any one issuer, other than the US Government and its agencies, in an amount greater than 10% of stockholders’ equity.

The following tables summarize securities with unrealized losses for which an allowance for credit losses has not been recorded at March 31, 2023 and December 31, 2022, aggregated by major security types and length of time in a continuous unrealized loss position:


	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Available-for-sale March 31, 2023
U.S. government agencies and treasuries	$	32,615	$	(448)	$	56,508	$	(8,090)	$	89,123	$	(8,538)
Mortgage-backed securities		58,650		(1,597)		253,124		(38,696)		311,774		(40,293)
Corporate Securities		7,679		(821)		8,347		(1,944)		16,026		(2,765)
Obligations of states and political subdivisions		11,291		(460)		73,455		(12,428)		84,746		(12,888)
Total debt securities	$	110,235	$	(3,326)	$	391,434	$	(61,158)	$	501,669	$	(64,484)

Less than 12 Months

12 Months or More

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

Value

Losses

Value

Losses

Value

Losses

Available-for-sale December 31, 2022

U.S. government agencies

47,064

(2,414)

41,718

(