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 September 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 November 6, 2023, there were 5,650,458 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 September 30, 2023 (Unaudited) and December 31, 2022	3

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

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

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

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 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	33

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	52

Item 4.	Controls and Procedures	52

Part II	Other Information

Item 1.	Legal Proceedings	52

Item 1A.	Risk Factors	53

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53

Item 3.	Defaults Upon Senior Securities	53

Item 4.	Mine Safety Disclosures	53

Item 5.	Other Information	53

Item 6.	Exhibits	53

Exhibit Index		54

Signatures		54

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)


	September 30, 2023		December 31, 2022
ASSETS
Cash and due from banks	$	158,708	$	86,081
Investment securities – available-for-sale (amortized cost $569,978, net of allowance for credit losses of $0 at September 30, 2023 and $609,954, net of allowance for credit losses of $0 at December 31, 2022)		478,708		533,461
Restricted investment in bank stocks		10,992		9,562
Loans		1,707,729		1,569,430
Allowance for credit losses ⁽¹⁾		(25,775)		(21,832)
Loans, net		1,681,954		1,547,598
Premises and equipment, net		16,073		14,739
Accrued interest receivable		6,332		6,320
Bank owned life insurance		41,188		40,463
Goodwill		5,359		5,359
Intangible assets		1,178		1,392
Other assets		46,779		42,359
TOTAL ASSETS	$	2,447,271	$	2,287,334
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest bearing	$	726,627	$	723,228
Interest bearing		1,378,404		1,251,159
Total deposits		2,105,031		1,974,387
FHLB advances, short term		146,000		131,500
FHLB advances, long term		10,000		—
Subordinated notes, net of issuance costs		19,502		19,447
Accrued expenses and other liabilities		22,820		23,862
TOTAL LIABILITIES		2,303,353		2,149,196
STOCKHOLDERS’ EQUITY
Common stock, $0.50 par value; 15,000,000 shares authorized; 5,683,304 issued; 5,650,458 and 5,642,621 outstanding, at September 30, 2023 and December 31, 2022, respectively		2,842		2,842
Surplus		120,367		120,107
Retained Earnings		100,536		84,635
Accumulated other comprehensive income (loss), net of taxes		(78,693)		(68,196)
Treasury stock, at cost; 32,846 and 40,683 shares at September 30, 2023 and December 31, 2022, respectively		(1,134)		(1,250)
TOTAL STOCKHOLDERS’ EQUITY		143,918		138,138
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,447,271	$	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				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
INTEREST INCOME
Interest and fees on loans	$	24,682	$	18,113	$	70,398	$	48,319
Interest on investment securities:
Taxable		3,150		2,848		9,570		6,735
Tax exempt		564		621		1,721		1,655
Interest on Federal funds sold and other		1,703		1,259		4,514		1,886
TOTAL INTEREST INCOME		30,099		22,841		86,203		58,595
INTEREST EXPENSE
Savings and NOW accounts		3,506		1,099		9,081		2,320
Time deposits		1,954		55		3,893		194
FHLB advances		1,907		—		6,295		—
Note payable		—		42		—		126
Subordinated notes		231		230		692		692
TOTAL INTEREST EXPENSE		7,598		1,426		19,961		3,332
NET INTEREST INCOME		22,501		21,415		66,242		55,263
Provision for credit losses- investments		—		—		5,000		—
Provision for credit losses ⁽¹⁾		837		2,084		2,406		8,517
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		21,664		19,331		58,836		46,746
NONINTEREST INCOME
Service charges on deposit accounts		210		182		588		511
Trust income		1,266		1,176		3,707		3,569
Investment advisory income		1,333		1,085		3,819		3,385
Investment securities gains, net		—		—		107		—
Earnings on bank owned life insurance		243		240		725		709
Other		168		250		730		741
TOTAL NONINTEREST INCOME		3,220		2,933		9,676		8,915
NONINTEREST EXPENSE
Salaries		6,135		5,863		18,606		16,631
Employee benefits		1,752		1,483		5,359		4,258
Occupancy expense		1,180		1,063		3,614		3,391
Professional fees		799		766		3,512		2,885
Directors’ fees and expenses		295		249		682		754
Computer software expense		1,233		1,276		3,714		3,629
FDIC assessment		463		384		1,023		1,006
Advertising expenses		364		372		1,074		1,127
Advisor expenses related to trust income		30		28		89		186
Telephone expenses		184		192		534		505
Intangible amortization		71		71		214		214
Other		1,084		808		3,644		2,322
TOTAL NONINTEREST EXPENSE		13,590		12,555		42,065		36,908
Income before income taxes		11,294		9,709		26,447		18,753
Provision for income taxes		2,256		1,856		5,093		3,460
NET INCOME	$	9,038	$	7,853	$	21,354	$	15,293

Basic and diluted earnings per share	$	1.61	$	1.40	$	3.79	$	2.72
Weighted average shares outstanding		5,629,642		5,623,172		5,628,036		5,619,897

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				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Net Income	$	9,038	$	7,853	$	21,354	$	15,293
Other comprehensive income/(loss):
Unrealized gains/(losses) on securities:
Unrealized holding gains/(losses) arising during the period		(15,982)		(21,201)		(19,670)		(75,262)
Credit loss expense		—		—		5,000		—
Reclassification adjustment for (gains) included in net income		—		—		(107)		—
Tax effect		(3,356)		(4,452)		(3,104)		(15,805)
Net of tax		(12,626)		(16,749)		(11,673)		(59,457)
Defined benefit pension plans:
Net gain/(loss) arising during the period		500		240		1,500		720
Reclassification adjustment for amortization of prior service cost and net gains included in net periodic pension cost		—		(7)		—		(21)
Tax effect		105		49		315		147
Net of tax		395		198		1,185		594
Deferred compensation liability:
Unrealized loss		(4)		(4)		(11)		(11)
Tax effect		(1)		(1)		(2)		(2)
Net of tax		(3)		(3)		(9)		(9)
Total other comprehensive loss		(12,234)		(16,554)		(10,497)		(58,872)
Total comprehensive income/(loss)	$	(3,196)	$	(8,701)	$	10,857	$	(43,579)

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, July 1, 2023	$	2,842	$	120,272	$	92,795	$	(66,459)	$	(1,279)	$	148,171
Net income		—		—		9,038		—		—		9,038
Other comprehensive loss, net of taxes		—		—		—		(12,234)		—		(12,234)
Cash dividends declared ($0.23 per share)		—		—		(1,297)		—		—		(1,297)
Treasury stock purchased (2,922 shares)		—		—		—		—		(127)		(127)
Restricted stock expense		—		9		—		—		—		9
Stock-based compensation (8,076 shares)		—		86		—		—		272		358
Balance, September 30, 2023	$	2,842	$	120,367	$	100,536	$	(78,693)	$	(1,134)	$	143,918

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		—		—		21,354		—		—		21,354
Other comprehensive income, net of taxes		—		—		—		(10,497)		—		(10,497)
Cash dividends declared ($0.69 per share)		—		—		(3,892)		—		—		(3,892)
Treasury stock purchased (8,725 shares)		—		—		—		—		(424)		(424)
Restricted stock expense		—		45		—		—		—		45
Stock-based compensation (16,562 shares)		—		215		—		—		540		755
Balance, September 30, 2023	$	2,842	$	120,367	$	100,536	$	(78,693)	$	(1,134)	$	143,918


							Accumulated Other
	Common				Retained		Comprehensive		Treasury
	Stock		Surplus		Earnings		Income (Loss)		Stock		Total
Balance, July 1, 2022	$	2,842	$	119,946	$	70,131	$	(45,761)	$	(1,435)	$	145,723
Net income		—		—		7,853		—		—		7,853
Other comprehensive loss, net of taxes		—		—		—		(16,554)		—		(16,554)
Cash dividends declared ($0.20 per share)		—		—		(1,124)		—		—		(1,124)
Treasury stock purchased (3,035 shares)		—		—		—		—		(119)		(119)
Restricted stock expense		—		33		—		—		—		33
Stock-based compensation (9,637 shares)		—		89		—		—		289		378
Balance, September 30, 2022	$	2,842	$	120,068	$	76,860	$	(62,315)	$	(1,265)	$	136,190

Balance, January 1, 2022	$	2,842	$	119,825	$	64,941	$	(3,443)	$	(1,329)	$	182,836
Net income		—		—		15,293		—		—		15,293
Other comprehensive loss, net of taxes		—		—		—		(58,872)		—		(58,872)
Cash dividends declared ($0.60 per share)		—		—		(3,374)		—		—		(3,374)
Treasury stock purchased (7,652 shares)		—		—		—		—		(308)		(308)
Restricted stock expense		—		133		—		—		—		133
Stock-based compensation (12,397 shares)		—		110		—		—		372		482
Balance, September 30, 2022	$	2,842	$	120,068	$	76,860	$	(62,315)	$	(1,265)	$	136,190

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

ORANGE COUNTY BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(Dollar amounts in thousands except per share data)


	Nine Months Ended
	September 30,
	2023		2022
Cash flows from operating activities
Net income	$	21,354	$	15,293
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses (1)		7,406		8,517
Depreciation		1,286		1,150
Accretion on loans		(2,127)		(2,298)
Amortization of intangibles		214		214
Amortization of subordinated notes issuance costs		55		55
Investment securities (gains) losses		(107)		—
Restricted stock expense		45		133
Stock-based compensation		755		482
Net amortization of investment premiums		960		1,339
Earnings on bank owned life insurance		(725)		(709)
Net change in:
Accrued interest receivable		(12)		1,089
Other assets		433		(1,230)
Other liabilities		(1,049)		(799)
Net cash from operating activities		28,488		23,236
Cash flows from investing activities
Purchases of investment securities available-for-sale		(6,327)		(210,589)
Proceeds from sales of investment securities available-for-sale		7,296		—
Proceeds from paydowns of investment securities available-for-sale		32,254		46,360
Proceeds from maturities and calls of investment securities available-for-sale		3,774		5,154
Purchase of restricted investment in bank stocks		(41,418)		(1,189)
Proceeds from redemptions of restricted investment in bank stocks		39,988		24
Net increase in loans		(139,636)		(257,268)
Purchase of premises and equipment		(3,055)		(1,145)