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 June 30, 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 August 7, 2023, there were 5,645,304 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 June 30, 2023 (Unaudited) and December 31, 2022	3

	Condensed Consolidated Statements of Income for the three and six months ended June 30, 2023 and 2022 (Unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income/(Loss) for the three and six months ended June 30, 2023 and 2022 (Unaudited)	5

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022 (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 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	34

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	53

Item 4.	Controls and Procedures	53

Part II	Other Information

Item 1.	Legal Proceedings	53

Item 1A.	Risk Factors	53

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54

Item 3.	Defaults Upon Senior Securities	54

Item 4.	Mine Safety Disclosures	54

Item 5.	Other Information	54

Item 6.	Exhibits	54

Exhibit Index		55

Signatures		55

Table of Contents

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)


	June 30, 2023		December 31, 2022
ASSETS
Cash and due from banks	$	178,619	$	86,081
Investment securities – available-for-sale (amortized cost $578,530, net of allowance for credit losses of $0 at June 30, 2023 and $609,954, net of allowance for credit losses of $0 at December 31, 2022)		503,243		533,461
Restricted investment in bank stocks		11,494		9,562
Loans		1,713,113		1,569,430
Allowance for credit losses ⁽¹⁾		(24,848)		(21,832)
Loans, net		1,688,265		1,547,598
Premises and equipment, net		16,360		14,739
Accrued interest receivable		5,808		6,320
Bank owned life insurance		40,945		40,463
Goodwill		5,359		5,359
Intangible assets		1,249		1,392
Other assets		42,567		42,359
TOTAL ASSETS	$	2,493,909	$	2,287,334
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest bearing	$	715,630	$	723,228
Interest bearing		1,422,608		1,251,159
Total deposits		2,138,238		1,974,387
FHLB advances, short term		156,500		131,500
FHLB advances, long term		10,000		—
Subordinated notes, net of issuance costs		19,484		19,447
Accrued expenses and other liabilities		21,516		23,862
TOTAL LIABILITIES		2,345,738		2,149,196
STOCKHOLDERS’ EQUITY
Common stock, $0.50 par value; 15,000,000 shares authorized; 5,683,304 issued; 5,645,304 and 5,642,621 outstanding, at June 30, 2023 and December 31, 2022, respectively		2,842		2,842
Surplus		120,272		120,107
Retained Earnings		92,795		84,635
Accumulated other comprehensive income (loss), net of taxes		(66,459)		(68,196)
Treasury stock, at cost; 38,000 and 40,683 shares at June 30, 2023 and December 31, 2022, respectively		(1,279)		(1,250)
TOTAL STOCKHOLDERS’ EQUITY		148,171		138,138
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,493,909	$	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				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
INTEREST INCOME
Interest and fees on loans	$	23,879	$	15,200	$	45,716	$	30,206
Interest on investment securities:
Taxable		3,348		2,249		6,420		3,887
Tax exempt		560		553		1,157		1,034
Interest on Federal funds sold and other		1,953		482		2,811		627
TOTAL INTEREST INCOME		29,740		18,484		56,104		35,754
INTEREST EXPENSE
Savings and NOW accounts		3,145		651		5,575		1,221
Time deposits		1,479		51		1,939		139
FHLB advances		2,283		—		4,388		—
Note payable		—		42		—		84
Subordinated notes		231		231		461		462
TOTAL INTEREST EXPENSE		7,138		975		12,363		1,906
NET INTEREST INCOME		22,602		17,509		43,741		33,848
Provision for credit losses- investments		—		—		5,000		—
Provision for credit losses ⁽¹⁾		214		5,510		1,569		6,433
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		22,388		11,999		37,172		27,415
NONINTEREST INCOME
Service charges on deposit accounts		205		161		378		329
Trust income		1,265		1,223		2,441		2,393
Investment advisory income		1,289		1,099		2,486		2,300
Investment securities gains, net		—		—		107		—
Earnings on bank owned life insurance		244		236		482		469
Other		283		258		562		491
TOTAL NONINTEREST INCOME		3,286		2,977		6,456		5,982
NONINTEREST EXPENSE
Salaries		6,217		5,499		12,471		10,768
Employee benefits		1,740		1,374		3,607		2,775
Occupancy expense		1,180		1,105		2,434		2,328
Professional fees		1,666		1,240		2,713		2,119
Directors’ fees and expenses		157		160		387		505
Computer software expense		1,258		1,238		2,481		2,353
FDIC assessment		230		313		560		622
Advertising expenses		434		564		710		755
Advisor expenses related to trust income		30		20		59		158
Telephone expenses		182		138		350		313
Intangible amortization		71		71		143		143
Other		1,282		744		2,560		1,448
TOTAL NONINTEREST EXPENSE		14,447		12,466		28,475		24,287
Income before income taxes		11,227		2,510		15,153		9,110
Provision for income taxes		2,141		400		2,837		1,670
NET INCOME	$	9,086	$	2,110	$	12,316	$	7,440

Basic and diluted earnings per share	$	1.61	$	0.38	$	2.19	$	1.32
Weighted average shares outstanding		5,629,030		5,618,296		5,627,354		5,618,232

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				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Net Income	$	9,086	$	2,110	$	12,316	$	7,440
Other comprehensive income/(loss):
Unrealized gains/(losses) on securities:
Unrealized holding gains/(losses) arising during the period		(10,984)		(25,460)		(3,794)		(54,060)
Credit loss expense		—		—		5,000		—
Reclassification adjustment for (gains) included in net income		—		—		(107)		—
Tax effect		(2,307)		(5,346)		146		(11,352)
Net of tax		(8,677)		(20,114)		953		(42,708)
Defined benefit pension plans:
Net gain/(loss) arising during the period		500		240		1,000		480
Reclassification adjustment for amortization of prior service cost and net gains included in net periodic pension cost		—		(7)		—		(14)
Tax effect		105		49		210		98
Net of tax		395		198		790		396
Deferred compensation liability:
Unrealized loss		(4)		(4)		(8)		(7)
Tax effect		(1)		(1)		(2)		(1)
Net of tax		(3)		(3)		(6)		(6)
Total other comprehensive loss		(8,285)		(19,919)		1,737		(42,318)
Total comprehensive income/(loss)	$	801	$	(17,809)	$	14,053	$	(34,878)

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

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, April 1, 2023	$	2,842	$	120,268	$	85,007	$	(58,174)	$	(1,363)	$	148,580
Net income		—		—		9,086		—		—		9,086
Other comprehensive loss, net of taxes		—		—		—		(8,285)		—		(8,285)
Cash dividends declared ($0.23 per share)		—		—		(1,298)		—		—		(1,298)
Treasury stock purchased (118 shares)		—		—		—		—		(4)		(4)
Restricted stock expense		—		8		—		—		—		8
Stock-based compensation (2,633 shares)		—		(4)		—		—		88		84
Balance, June 30, 2023	$	2,842	$	120,272	$	92,795	$	(66,459)	$	(1,279)	$	148,171

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		—		—		12,316		—		—		12,316
Other comprehensive income, net of taxes		—		—		—		1,737		—		1,737
Cash dividends declared ($0.46 per share)		—		—		(2,595)		—		—		(2,595)
Treasury stock purchased (5,803 shares)		—		—		—		—		(297)		(297)
Restricted stock expense		—		36		—		—		—		36
Stock-based compensation (8,486 shares)		—		129		—		—		268		397
Balance, June 30, 2023	$	2,842	$	120,272	$	92,795	$	(66,459)	$	(1,279)	$	148,171


							Accumulated Other
	Common				Retained		Comprehensive		Treasury
	Stock		Surplus		Earnings		Income (Loss)		Stock		Total
Balance, April 1, 2022	$	2,842	$	119,900	$	69,146	$	(25,842)	$	(1,497)	$	164,549
Net income		—		—		2,110		—		—		2,110
Other comprehensive loss, net of taxes		—		—		—		(19,919)		—		(19,919)
Cash dividends declared ($0.20 per share)		—		—		(1,125)		—		—		(1,125)
Restricted stock expense		—		33		—		—		—		33
Stock-based compensation (2,060 shares)		—		13		—		—		62		75
Balance, June 30, 2022	$	2,842	$	119,946	$	70,131	$	(45,761)	$	(1,435)	$	145,723

Balance, January 1, 2022	$	2,842	$	119,825	$	64,941	$	(3,443)	$	(1,329)	$	182,836
Net income		—		—		7,440		—		—		7,440
Other comprehensive loss, net of taxes		—		—		—		(42,318)		—		(42,318)
Cash dividends declared ($0.40 per share)		—		—		(2,250)		—		—		(2,250)
Treasury stock purchased (4,617 shares)		—		—		—		—		(189)		(189)
Restricted stock expense		—		100		—		—		—		100
Stock-based compensation (2,760 shares)		—		21		—		—		83		104
Balance, June 30, 2022	$	2,842	$	119,946	$	70,131	$	(45,761)	$	(1,435)	$	145,723

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)


	Six Months Ended
	June 30,
	2023		2022
Cash flows from operating activities
Net income	$	12,316	$	7,440
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses (1)		6,569		6,433
Depreciation		884		738
Accretion on loans		(1,409)		(1,998)
Amortization of intangibles		143		143
Amortization of subordinated notes issuance costs		36		37
Investment securities (gains) losses		(107)		—
Restricted stock expense		36		100
Stock-based compensation		397		104
Net amortization of investment premiums		630		898
Earnings on bank owned life insurance		(482)		(469)
Net change in:
Accrued interest receivable		512		(304)
Other assets		434		(115)
Other liabilities		(2,352)		(2,529)
Net cash from operating activities		17,607		10,478
Cash flows from investing activities
Purchases of investment securities available-for-sale		(3,806)		(189,934)
Proceeds from sales of investment securities available-for-sale		7,296		—
Proceeds from paydowns of investment securities available-for-sale		22,492		33,622
Proceeds from maturities and calls of investment securities available-for-sale		3,254		4,490
Purchase of restricted investment in bank stocks		(30,978)		(870)
Proceeds from redemptions of restricted investment in bank stocks		29,046		24
Net increase in loans		(145,827)		(178,753)
Purchase of premises and equipment		(2,940)		(416)
Disposal of premises and equipment		435		—
Net cash used by investing activities		(121,028)		(331,837)
Cash flows from financing activities
Net increase in deposits		163,851		289,064
Net change in FHLB advances, short term		25,000		—
Proceeds from FHLB advances, long term		10,000		—
Cash dividends paid		(2,595)