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What changed in Orange County Bancorp, Inc. /DE/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Orange County Bancorp, Inc. /DE/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+362 added−349 removedSource: 10-K (2024-03-29) vs 10-K (2023-03-24)

Top changes in Orange County Bancorp, Inc. /DE/'s 2023 10-K

362 paragraphs added · 349 removed · 289 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

102 edited+19 added−11 removed178 unchanged
Biggest changeAn emerging growth company also is not subject to the requirement that its auditors attest to the effectiveness of the company’s internal control over financial reporting, and can provide scaled disclosure regarding executive compensation; however, Orange County Bancorp, Inc. will also not be subject to the auditor attestation requirement or additional executive compensation disclosure so long as it remains a “non-accelerated filer” and a “smaller reporting company,” respectively, under Securities and Exchange Commission regulations (generally less than $75 million and $250 million, respectively, of voting and non-voting equity held by non-affiliates or less than $100.0 million in annual revenue).
Biggest changeAn emerging growth company also is not subject to the requirement that its auditors attest to the effectiveness of the company’s internal control over financial reporting, and can provide scaled disclosure regarding executive compensation.
Orange County, located 60 miles from New York City, is an attractive and stable market. Our 130-year-operating history in the region provides us a strong foundation for growth and low- cost deposit funding. Economic activity in the region stems from local business activity and increasing support services to the New York metropolitan area.
Orange County, located 60 miles from New York City, is an attractive and stable market. Our over 130-year-operating history in the region provides us a strong foundation for growth and low- cost deposit funding. Economic activity in the region stems from local business activity and increasing support services to the New York metropolitan area.
Among other things, Title III of the USA PATRIOT Act and the related regulations require: • Establishment of anti-money laundering compliance programs that includes policies, procedures, and internal controls; the designation of a BSA officer; a training program; and independent testing; 22 Table of Contents • Filing of certain reports to Financial Crimes Enforcement Network and law enforcement that are designated to assist in the detection and prevention of money laundering and terrorist financing activities; • Establishment of a program specifying procedures for obtaining and maintaining certain records from customers seeking to open new accounts, including verifying the identity of customers; • In certain circumstances, compliance with enhanced due diligence policies, procedures and controls designed to detect and report money-laundering, terrorist financing and other suspicious activity; • Monitoring account activity for suspicious transactions; and • A heightened level of review for certain high-risk customers or accounts.
Among other things, Title III of the USA PATRIOT Act and the related regulations require: • Establishment of anti-money laundering compliance programs that includes policies, procedures, and internal controls; the designation of a BSA officer; a training program; and independent testing; • Filing of certain reports to Financial Crimes Enforcement Network and law enforcement that are designated to assist in the detection and prevention of money laundering and terrorist financing activities; • Establishment of a program specifying procedures for obtaining and maintaining certain records from customers seeking to open new accounts, including verifying the identity of customers; 23 Table of Contents • In certain circumstances, compliance with enhanced due diligence policies, procedures and controls designed to detect and report money-laundering, terrorist financing and other suspicious activity; • Monitoring account activity for suspicious transactions; and • A heightened level of review for certain high-risk customers or accounts.
Our lending activities follow written, non-discriminatory, underwriting standards and loan origination procedures established by our Board of Directors and management. The approval of two out of three of the Chief Executive Officer, the Chief Lending Officer or the Executive Vice President-Rockland Regional President is generally required for lending relationships up to $1.0 million.
Loan Approval Authority . Our lending activities follow written, non-discriminatory, underwriting standards and loan origination procedures established by our Board of Directors and management. The approval of two out of three of the Chief Executive Officer, the Chief Lending Officer or the Executive Vice President-Rockland Regional President is generally required for lending relationships up to $1.0 million.
A company loses emerging growth company status on the earlier of: (i) the last day of the fiscal year of the company during which it had total annual gross revenues of $1.07 billion or more; (ii) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the company pursuant to an effective registration statement under the Securities Act of 1933; (iii) the date on which such company has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which such company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, at least $700 million of voting and non- voting equity held by non-affiliates).
A company loses emerging growth company status on the earlier of: (i) the last day of the fiscal year of the company during which it had total annual gross revenues of $1.235 billion or more; (ii) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the company pursuant to an effective registration statement under the Securities Act of 1933; (iii) the date on which such company has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which such company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, at least $700 million of voting and non- voting equity held by non-affiliates).
Orange County Bancorp, Inc. is a reporting company subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934. 26 Table of Contents Emerging Growth Company Status The Jumpstart Our Business Startups Act (the “JOBS Act”), which was enacted in April 2012, has made numerous changes to the federal securities laws to facilitate access to capital markets.
Orange County Bancorp, Inc. is a reporting company subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934. 27 Table of Contents Emerging Growth Company Status The Jumpstart Our Business Startups Act (the “JOBS Act”), which was enacted in April 2012, has made numerous changes to the federal securities laws to facilitate access to capital markets.
Other Regulations The Bank’s operations are also subject to federal laws applicable to credit transactions, such as: • The Truth-In-Lending Act, and Regulation Z promulgated thereunder, governing disclosures of credit terms to consumer borrowers; • The Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one-to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services; • The Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; • The Equal Credit Opportunity Act and other fair lending laws, prohibiting discrimination on the basis of race, religion, sex and other prohibited factors in extending credit; • The Fair Credit Reporting Act, governing the use of credit reports on consumers and the provision of information to credit reporting agencies; • Unfair or Deceptive Acts or Practices laws and regulations; • The Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and • The Coronavirus Aid, Relief and Economic Security Act; and • The rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
Other Regulations The Bank’s operations are also subject to federal laws applicable to credit transactions, such as: • The Truth-In-Lending Act, and Regulation Z promulgated thereunder, governing disclosures of credit terms to consumer borrowers; • The Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one-to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services; • The Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; • The Equal Credit Opportunity Act and other fair lending laws, prohibiting discrimination on the basis of race, religion, sex and other prohibited factors in extending credit; • The Fair Credit Reporting Act, governing the use of credit reports on consumers and the provision of information to credit reporting agencies; • Unfair or Deceptive Acts or Practices laws and regulations; • The Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and • The rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
Our profitability depends in large part based upon our continued ability to successfully compete with these institutions for lending opportunities, deposit funds, financial products, bankers and potential acquisition targets. We conduct business through 14 banking offices and one loan production office in Orange, Westchester, Rockland and Bronx Counties in New York.
Our profitability depends in large part based upon our continued ability to successfully compete with these institutions for lending opportunities, deposit funds, financial products, bankers and potential acquisition targets. We conduct business through 15 banking offices and one loan production office in Orange, Westchester, Rockland and Bronx Counties in New York.
We also offer a variety of deposit accounts to businesses and consumers, including checking accounts and a full line of municipal banking accounts. These activities, together with our 14 branch offices and one loan production office, generate a stable source of low-cost core deposits and a diverse loan portfolio with attractive risk-adjusted yields.
We also offer a variety of deposit accounts to businesses and consumers, including checking accounts and a full line of municipal banking accounts. These activities, together with our 15 branch offices and one loan production office, generate a stable source of low-cost core deposits and a diverse loan portfolio with attractive risk-adjusted yields.
We follow our customary loan underwriting and approval policies specific to these purchased loans. We purchase such loans under two programs. The first is a direct purchase with no guarantee (the “Direct Purchase Loans”), in which the loans are purchased at par with a put-back provision to the originator in the event of nonperformance.
We follow our customary loan underwriting and approval policies specific to these purchased loans. Historically, we had purchased such loans under two programs. The first is a direct purchase with no guarantee (the “Direct Purchase Loans”), in which the loans are purchased at par with a put-back provision to the originator in the event of nonperformance.
We also purchase whole loans from other lenders. Beginning in 2018, we have purchased commercial and industrial loans made to medical professionals throughout the U.S. such as to doctors and dentists secured by a blanket lien on their business assets from a national provider of such loans.
We also purchase whole loans from other lenders. Beginning in 2018, we have purchased commercial and industrial loans made to medical professionals throughout the U.S. such as to doctors, dentists, accountants, and attorneys secured by a blanket lien on their business assets from a national provider of such loans.
Specifically, the CRE Guidance provides that a bank has a concentration in CRE lending if (1) total reported loans for construction, land development, and other land represent 100% or more of total risk-based capital; or (2) total reported loans secured by multi-family properties, non-farm non-residential properties (excluding those that are owner-occupied), and loans for construction, land development, and other land represent 300% or more of total risk-based capital and the bank’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months.
Specifically, the CRE Guidance provides that a bank has a concentration in CRE lending if (1) total reported loans for construction, land development, and other land represent 100% or more of total risk-based capital; or (2) total reported loans secured by multi-family properties, non-farm non-residential properties (excluding those that are owner-occupied), and loans for construction, land development, and other 18 Table of Contents land represent 300% or more of total risk-based capital and the bank’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months.
In general, whenever a particular loan or overall borrower relationship is downgraded to pass-watch or special mention based on one or more standard loan grading factors, our credit officers engage in active evaluation of the asset to determine the appropriate resolution strategy.
Additionally, whenever a particular loan or overall borrower relationship is downgraded to pass-watch or special mention based on one or more standard loan grading factors, our credit officers engage in active evaluation of the asset to determine the appropriate resolution strategy.
Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations. ​ In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, a bank’s assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests), are multiplied by a risk weight factor assigned by the regulations based on perceived risks inherent in the type of asset.
Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations. 19 Table of Contents ​ In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, a bank’s assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests), are multiplied by a risk weight factor assigned by the regulations based on perceived risks inherent in the type of asset.
A Qualifying Community Bank that meets the CBLR is considered to be well capitalized and to have met generally applicable leverage capital requirements, generally applicable risk-based capital requirements, and any other capital or leverage requirements to which such financial institution or holding company is subject.
A Qualifying Community Bank that meets and elects to follow the CBLR is considered to be well capitalized and to have met generally applicable leverage capital requirements, generally applicable risk-based capital requirements, and any other capital or leverage requirements to which such financial institution or holding company is subject.
Under the JOBS Act, a company with total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year qualifies as an “emerging growth company.” Orange County Bancorp, Inc. qualifies as an emerging growth company under the JOBS Act.
Under the JOBS Act, a company with total annual gross revenues of less than $1.235 billion during its most recently completed fiscal year qualifies as an “emerging growth company.” Orange County Bancorp, Inc. qualifies as an emerging growth company under the JOBS Act.
Our active banking operations are located mainly in Orange, Westchester, Rockland and Bronx Counties in New York, which we refer to as our geographic footprint. We operate 14 full-service branches and one loan production office throughout our network.
Our active banking operations are located mainly in Orange, Westchester, Rockland and Bronx Counties in New York, which we refer to as our geographic footprint. We operate 15 full-service branches and one loan production office throughout our network.
Separate regulatory guidance provides for prior consultation with FRB staff concerning dividends in certain circumstances such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate or earnings retention is inconsistent with the company’s capital needs and overall financial condition.
Separate regulatory guidance provides for prior consultation with FRB staff concerning dividends in certain circumstances such as where the company’s net income for the past four quarters, net of dividends 26 Table of Contents previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate or earnings retention is inconsistent with the company’s capital needs and overall financial condition.
That vision continues to drive the Company today, as we serve customers in Orange, Rockland, and Westchester Counties and the Bronx through a network of 14 branches, one loan production office and approximately 200 employees.
That vision continues to drive the Company today, as we serve customers in Orange, Rockland, and Westchester Counties and the Bronx through a network of 15 branches, one loan production office and approximately 200 employees.
As a member, we are required to own capital stock in the FHLB and are authorized to apply for advances on the security of such stock and certain of our whole first mortgage loans and other assets (principally securities which are obligations of, or guaranteed by, the United States), provided certain standards related to creditworthiness have been met.
As a member, we are required to own capital stock in the FHLB and are authorized to apply for advances on the security of such stock and certain of our whole first mortgage loans and 16 Table of Contents other assets (principally securities which are obligations of, or guaranteed by, the United States), provided certain standards related to creditworthiness have been met.
We do not know of any practice, condition or violation that might lead to termination of deposit insurance at the Bank. ​ 18 Table of Contents Capitalization The FRB regulations require state member banks, such as the Bank, to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio, a Tier 1 capital to risk-based assets ratio, a total capital to risk-based assets and a Tier 1 capital to total assets leverage ratio.
We do not know of any practice, condition or violation that might lead to termination of deposit insurance at the Bank. ​ Capitalization The FRB regulations require state member banks, such as the Bank, to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio, a Tier 1 capital to risk-based assets ratio, a total capital to risk-based assets and a Tier 1 capital to total assets leverage ratio.
In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans. 12 Table of Contents Loan Purchases, Participations and Sales .
In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans. Loan Purchases, Participations and Sales .
Investment Advisory Regulations We offer wealth management services through HVIA, a wholly owned subsidiary of Orange Bank & Trust Company. HVIA is registered investment advisor under the Investment Advisors Act of 1940, as amended, and as such, is supervised by the SEC. HVIA is also subject to various other federal laws and state licensing and/or registration requirements.
Investment Advisory Regulations We offer wealth management services through HVIA, a wholly owned subsidiary of the Company. HVIA is a registered investment advisor under the Investment Advisors Act of 1940, as amended, and as such, is supervised by the SEC. HVIA is also subject to various other federal laws and state licensing and/or registration requirements.
In underwriting commercial real estate construction loans, we perform a thorough analysis of the financial condition of the borrower, the borrower’s credit history, the reliability and predictability of the cash flow generated by the project using feasibility studies and market data. 11 Table of Contents Appraisals on properties securing commercial real estate construction loans we originated are performed by independent appraisers.
In underwriting commercial real estate construction loans, we perform a thorough analysis of the financial condition of the borrower, the borrower’s credit history, the reliability and predictability of the cash flow generated by the project using feasibility studies and market data. Appraisals on properties securing commercial real estate construction loans we originated are performed by independent appraisers.
Under the prompt corrective action requirements, insured depository institutions are required to meet the following in order to qualify as “well capitalized:” (1) a common equity Tier 1 risk-based capital ratio of 6.5%; (2) a Tier 1 risk-based capital ratio of 8%; (3) a total risk-based capital ratio of 10% and (4) a Tier 1 leverage ratio of 5%.
Under the prompt corrective action requirements, insured depository institutions are required to meet the following in order to qualify as “well capitalized:” (1) a common equity Tier 1 risk-based capital ratio of 6.5%; (2) a Tier 1 risk- 20 Table of Contents based capital ratio of 8%; (3) a total risk-based capital ratio of 10% and (4) a Tier 1 leverage ratio of 5%.
The second program carries a 50% guarantee from the seller (the “Partial Guaranteed Loans”) in which the loans are purchased at par. Because these loans are generally secured by business assets, they may be subject to a greater extent to the financial condition of the borrower than loans secured by real estate collateral.
The second program carried a 50% guarantee from the seller (the “Partial Guaranteed Loans”) in which the loans were purchased at par. Because these loans are generally secured by business assets, they may be subject to a greater extent to the financial condition of the borrower than loans secured by real estate collateral.
The Bank was classified as well capitalized at December 31, 2022. ​ State member banks that have insufficient capital are subject to certain mandatory and discretionary supervisory measures.
The Bank was classified as well capitalized at December 31, 2023. ​ State member banks that have insufficient capital are subject to certain mandatory and discretionary supervisory measures.
In evaluating each potential loan relationship, we adhere to a disciplined underwriting evaluation process including but not limited to the following: • understanding the borrower’s financial condition and ability to repay the loan; • determining whether the borrower is a capable manager; • understanding the specific purpose of the loan; • verifying that the primary, secondary and tertiary sources of repayment are adequate in relation to the amount and structure of the loan; • assessing the economic environment in which the loan would be granted; and • ensuring that each loan is properly documented with perfected liens on collateral. 13 Table of Contents Loan Approval Authority .
In evaluating each potential loan relationship, we adhere to a disciplined underwriting evaluation process including but not limited to the following: • understanding the borrower’s financial condition and ability to repay the loan; • determining whether the borrower is a capable manager; • understanding the specific purpose of the loan; • verifying that the primary, secondary and tertiary sources of repayment are adequate in relation to the amount and structure of the loan; • assessing the economic environment in which the loan would be granted; and • ensuring that each loan is properly documented with perfected liens on collateral.
In this regard, the CFPB has several rules that implement various provisions of the Dodd-Frank Act that were specifically identified as 23 Table of Contents being enforced by the CFPB.
In this regard, 24 Table of Contents the CFPB has several rules that implement various provisions of the Dodd-Frank Act that were specifically identified as being enforced by the CFPB.
Acquisition of more than 10% of any class of a bank holding company’s voting stock constitutes a rebuttable presumption of control under the regulations under certain circumstances including where, as will be the case with the Company, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.
Acquisition of more than 10% of any class of a bank holding company’s voting stock constitutes a rebuttable presumption of control under the regulations under certain circumstances including where, as is the case with the Company, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.
In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall 25 Table of Contents supervisory financial condition.
In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall supervisory financial condition.
The NYSDFS classifies investment securities into five different types and, depending on its type, a state commercial bank or trust company may have the authority to deal in and underwrite the security. The NYSDFS has 17 Table of Contents also permitted New York state member banks to purchase certain non-investment securities that can be reclassified and underwritten as loans.
The NYSDFS classifies investment securities into five different types and, depending on its type, a state commercial bank or trust company may have the authority to deal in and underwrite the security. The NYSDFS has also permitted New York state member banks to purchase certain non-investment securities that can be reclassified and underwritten as loans.
Currently, assessments for institutions of less than $10 billion of total assets are based on financial measures and supervisory ratings derived from statistical models estimating the probability of failure within three years. Assessment rates (inclusive of possible adjustments) currently range from 1.5 to 30 basis points of each institution’s total assets less tangible capital.
Currently, assessments for institutions of less than $10 billion of total assets are based on financial measures and supervisory ratings derived from statistical models estimating the probability of failure within three years. Assessment rates (inclusive of possible adjustments) currently range from 3.5 to 32 basis points of each institution’s total assets less tangible capital.
Certain covered transactions, such as loans to or guarantees on behalf of an affiliate, must be secured by collateral in amounts ranging from 100 to 130 percent of the loan amount, depending upon the type of collateral.
Certain covered transactions, such as loans to or guarantees on behalf of an affiliate, must be secured by collateral in amounts ranging from 100 to 130 percent of the loan amount, depending 21 Table of Contents upon the type of collateral.
We have policies, procedures and systems designed to comply with these regulations, and we review and document such policies, procedures and systems to ensure continued compliance with these regulations. ​ ​ ​ 27 Table of Contents
We have policies, procedures and systems designed to comply with these regulations, and we review and document such policies, procedures and systems to ensure continued compliance with these regulations. ​ ​ ​ 28 Table of Contents
At December 31, 2022, we had $1.3 billion of assets under management in a fiduciary, custodial or agency capacity for customers. These assets are not assets of Orange Bank & Trust Company or HVIA and therefore are not included in the consolidated balance sheets included in the Annual Report on Form 10-K.
At December 31, 2023, we had $1.6 billion of assets under management in a fiduciary, custodial or agency capacity for customers. These assets are not assets of Orange Bank & Trust Company or HVIA and therefore are not included in the consolidated balance sheets included in the Annual Report on Form 10-K.
Safety and Soundness Standards Each federal banking agency, including the FRB, has adopted guidelines establishing general standards relating to, among other things, internal controls, information and internal audit systems, loan documentation, credit underwriting, 19 Table of Contents interest rate exposure, asset growth, asset quality, earnings, compensation, fees and benefits and information security standards.
Safety and Soundness Standards Each federal banking agency, including the FRB, has adopted guidelines establishing general standards relating to, among other things, internal controls, information and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, asset quality, earnings, compensation, fees and benefits and information security standards.
The FDIC may increase or decrease the range of assessments uniformly, except that no adjustment can deviate more than two basis points from the base assessment rate without notice and comment rulemaking.
The FDIC may increase or decrease the range of assessments uniformly, except that no adjustment can deviate more than two basis points from the base assessment rate without notice and comment rulemaking. The FDIC may also issue special assessments.
The Company continues to enjoy particularly strong growth in its newer markets of Rockland and Westchester Counties, which offer significant growth potential as a function of market size and demographics, while Orange County continues to represent approximately 47% of the Bank’s deposits as of December 31, 2022. Private Banking .
The Company continues to enjoy particularly strong growth in its newer markets of Rockland and Westchester Counties, which offer significant growth potential as a function of market size and demographics, while Orange County continues to represent approximately 43% of the Bank’s deposits as of December 31, 2023. Private Banking .
The operations of the Bank are further subject to the: • The Truth in Savings Act, which specifies disclosure requirements with respect to deposit accounts; • The Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; • The Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; • The Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; and • State unclaimed property or escheatment laws; and • Cybersecurity regulations, including but not limited to those implemented by NYSDFS. 24 Table of Contents ​ Holding Company Regulation General The Company, as a bank holding company controlling the Bank, is subject to regulation and supervision by the FRB under the BHCA.
The operations of the Bank are further subject to the: • The Truth in Savings Act, which specifies disclosure requirements with respect to deposit accounts; • The Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; • The Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; • The Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; and • State unclaimed property or escheatment laws; ​ 25 Table of Contents Holding Company Regulation General The Company, as a bank holding company controlling the Bank, is subject to regulation and supervision by the FRB under the BHCA.
We view all of our recent openings and locations as natural and logical extensions for the Bank and consistent with our geographic footprint. Our operating markets have demographic, economic and competitive dynamics that we believe are favorable to continued execution of our growth strategy: Orange County.
We view all of our recent openings and locations as natural and logical extensions for the Bank and consistent with our geographic footprint. Our operating markets have demographic, economic and competitive dynamics that we believe are favorable to continued execution of our strategic plan: Orange County.
Like our core banking business, our trust and advisory services have also achieved significant recent milestones, with combined assets under management (AUM) in the two groups aggregating $1.3 billion at December 31, 2022, in spite of difficult market conditions.
Like our core banking business, our trust and advisory services have also achieved significant recent milestones, with combined assets under management (AUM) in the two groups aggregating $1.6 billion at December 31, 2023, in spite of difficult market conditions.
Personnel As of December 31, 2022, we had 204 full-time equivalent employees at Orange County Bancorp, Orange Bank & Trust Company and HVIA, none of whom are represented by a collective bargaining unit. We believe we have a good working relationship with our employees.
Personnel As of December 31, 2023, we had 197 full-time equivalent employees at Orange County Bancorp, Orange Bank & Trust Company and HVIA, none of whom are represented by a collective bargaining unit. We believe we have a good working relationship with our employees.
The Bank did not elect into the CBLR framework and at December 31, 2022, the Bank’s capital exceeded all applicable requirements.
The Bank did not elect into the CBLR framework and at December 31, 2023, the Bank’s capital exceeded all applicable requirements.
Subsidiaries Orange Bank & Trust Company and HVIA are the only subsidiaries of Orange County Bancorp and there are no subsidiaries of Orange Bank & Trust Company and HVIA. 16 Table of Contents SUPERVISION AND REGULATION General The Bank is a trust company organized under the laws of the state of New York.
Subsidiaries Orange Bank & Trust Company and HVIA are the only subsidiaries of Orange County Bancorp and there are no subsidiaries of Orange Bank & Trust Company and HVIA. SUPERVISION AND REGULATION General The Bank is a trust company organized under the laws of the state of New York.
The Bank’s capital conservation buffer was greater than 2.5% of risk-weighted assets at December 31, 2022.
The Bank’s capital conservation buffer was greater than 2.5% of risk-weighted assets at December 31, 2023.
In May 2018, we joined a community bank lending network operated by BancAlliance which provides the opportunity to participate in commercial and industrial loans and lines of credit that are broadly syndicated to member banks and outside institutions. As of December 31, 2022, the outstanding balances of loans sourced through this program totaled $30.8 million, across seven distinct borrower relationships.
In May 2018, we joined a community bank lending network operated by BancAlliance which provides the opportunity to participate in commercial and industrial loans and lines of credit that are broadly syndicated to member banks and outside institutions. As of December 31, 2023, the outstanding balances of loans sourced through this program totaled $24.8 million, across six distinct borrower relationships.
The regulatory structure establishes a comprehensive framework of activities in which a state member bank may engage and is primarily intended for the protection of depositors, customers and the DIF.
The regulatory structure establishes a comprehensive framework of activities in which a 17 Table of Contents state member bank may engage and is primarily intended for the protection of depositors, customers and the DIF.
We generally do not sell loans and did not sell any loans during the years ended December 31, 2022 or 2021. Credit Risk Management We control credit risk both through disciplined underwriting of each transaction, as well as active credit management processes and procedures to manage risk and minimize loss throughout the life of a transaction.
We generally do not sell loans and did not sell any loans during the years ended December 31, 2023 or 2022. ​ 13 Table of Contents Credit Risk Management We control credit risk both through disciplined underwriting of each transaction, as well as active credit management processes and procedures to manage risk and minimize loss throughout the life of a transaction.
As a result of the Economic Growth Act, banking regulatory agencies adopted a revised definition of “well capitalized” for financial institutions and holding companies with assets of less than $10 billion and that are not determined to be ineligible by their primary federal regulator due to their risk profile (a “Qualifying Community Bank”).
As a result of an amendment to the Dodd-Frank Act, banking regulatory agencies adopted a revised definition of “well capitalized” for financial institutions and holding companies with assets of less than $10 billion and that are not determined to be ineligible by their primary federal regulator due to their risk profile (a “Qualifying Community Bank”).
An unbalanced market of bigger banks, with only a few community banks, has created an attractive competitive landscape that has strengthened our reputation as a leading local bank for small businesses within this market area. We believe our market share relative to our size also provides the opportunity for long-term growth. Bronx County.
An unbalanced market of bigger banks, with few smaller banks, continues to provide an attractive competitive landscape that has strengthened our reputation as a leading local bank for small businesses within this market area. We believe our market share relative to our size also provides the opportunity for long-term growth. Bronx County.
To qualify for this additional 10% the Bank must perfect a security interest in the collateral and the collateral must have a market value at all times of at least 100% of the loan amount that exceeds the 15% general limit. At December 31, 2022, our regulatory limit on loans-to-one borrower was $34.2 million. Ongoing Credit Risk Management.
To qualify for this additional 10% the Bank must perfect a security interest in the collateral and the collateral must have a market value at all times of at least 100% of the loan amount that exceeds the 15% general limit. At December 31, 2023, our regulatory limit on loans-to-one borrower was approximately $35.9 million. Ongoing Credit Risk Management.
Commercial real estate construction loans generally present a higher level of risk than other types of loans due primarily to the effect of general economic conditions and uncertainties of construction costs. Residential Real Estate Lending . As of December 31, 2022, we had $74.3 million in total residential real estate loans, representing 4.7% of total loans.
Commercial real estate construction loans generally present a higher level of risk than other types of loans due primarily to the effect of general economic conditions and uncertainties of construction costs. Residential Real Estate Lending . As of December 31, 2023, we had $78.3 million in total residential real estate loans, representing 4.5% of total loans.
As of December 31, 2022, we had $12.4 million in total home equity loans, representing less than 1% of total loans. We originate home equity lines of credit and closed-end loans. These loans are generally secured by properties located in, or made to customers who reside in, our primary market area.
As of December 31, 2023, we had $13.5 million in total home equity loans, representing less than 1% of total loans. We originate home equity lines of credit and closed-end loans. These loans are generally secured by properties located in, or made to customers who reside in, our primary market area.
As of December 31, 2022, we had $1.1 billion in total commercial real estate loans, representing approximately 70.0% of total loans. We originate loans to finance commercial real estate, primarily secured by commercial retail space, multifamily properties, office buildings and warehouses in our primary lending market.
As of December 31, 2023, we had $1.3 billion in total commercial real estate loans, representing approximately 72.1% of total loans. We originate loans to finance commercial real estate, primarily secured by commercial retail space, multifamily properties, office buildings and warehouses in our primary lending market.
As we have successfully done with our banking business, we intend to continue expansion of HVIA’s services into Westchester and Rockland Counties. Additionally, our newest service, private banking, continued to grow in 2022 and now enables approximately 440 clients to fully leverage the resources and capabilities of our platform.
As we have successfully done with our banking business, we intend to continue expansion of HVIA’s services into Westchester and Rockland Counties. Additionally, our newest service, private banking, continued to grow in 2023 and now supports approximately 625 clients (an increase from 440 clients in 2022) to fully leverage the resources and capabilities of our platform.
Terms of construction loans depend on the specifics of the project such as the estimated time for completion, the planned construction costs and the prospective appraised value of those projects. At December 31, 2022, we have made commitments of $198.4 million of which $109.6 million has been drawn by our commercial real estate construction borrowers.
Terms of construction loans depend on the specifics of the project such as the estimated time for completion, the planned construction costs and the prospective appraised value of those projects. At December 31, 2023, we have made commitments of $244.4 million of which $85.7 million has been drawn by our commercial real estate construction borrowers.
Based on experience, we believe that our deposits are relatively stable. However, the ability to attract and maintain deposits and the rates paid on these deposits has been and will continue to be significantly affected by market conditions. Borrowings We maintain diverse funding sources including borrowing lines at the FHLB, two commercial banks and the Federal Reserve Bank discount window.
However, the ability to attract and maintain deposits and the rates paid on these deposits has been and will continue to be significantly affected by market conditions. Borrowings We maintain diverse funding sources including borrowing lines at the FHLB, two commercial banks and the Federal Reserve Bank discount window.
We generally require a debt service coverage ratio of at least 1.20x. All commercial real estate loans of $500,000 or more are appraised by outside independent appraisers. Personal guarantees are generally obtained from the principals of commercial real estate loans.
We generally require a debt service coverage ratio of at least 1.20x. All commercial real estate loans of $500,000 or more are appraised by outside independent appraisers. Personal guarantees are generally obtained from the principals of commercial real estate loans. All commercial real estate loans of more than $500,000 must have an environmental assessment completed.
As of December 31, 2022, we had $441.5 million of available borrowing capacity with the FHLB. On that date, we had $131.5 million in advances outstanding from the FHLB. The other borrowing lines are maintained primarily for contingency funding sources and had no amounts outstanding at December 31, 2022.
As of December 31, 2023, we had $495.6 million of available borrowing capacity with the FHLB. On that date, we had $234.5 million in advances outstanding from the FHLB. The other borrowing lines are maintained primarily for contingency funding sources and had no amounts outstanding at December 31, 2023.
Additionally, by continuing to broaden our suite of business services, from sophisticated cash management to enhanced commercial lending, loans and deposits grew to $1.6 billion and $2.0 billion at year end 2022, up 21.5% and 3.1%, respectively, over year end 2021.
Additionally, by continuing to broaden our suite of business services, from sophisticated cash management to enhanced commercial lending, loans and deposits grew to $1.7 billion and $2.0 billion at year end 2023, up 11.3% and 3.3%, respectively, over year end 2022.
HVIA and Orange Bank & Trust Company’s trust department collectively had 40 full-time equivalent employees as of December 31, 2022 and revenue of $9.3 million or approximately 9.7% of our total revenues in 2022. Investments Our board of directors is responsible for approving and overseeing our investment policy.
HVIA and Orange Bank & Trust Company’s trust department collectively had 42 full-time equivalent employees as of December 31, 2023 and revenue of $10.3 million or approximately 8.8% of our total revenues in 2023. Investments Our board of directors is responsible for approving and overseeing our investment policy.
The Bronx market is densely populated with 1,439,809 residents estimated as of January 1, 2022 and has a diversified economy typical of most urban population centers. The majority of employment provided is by services, wholesale/retail trade and finance/ insurance/real estate with services accounting for the largest employment sector in the county.
The Bronx market is densely populated with 1,356,476 residents estimated as of July 1, 2023 and has maintained a diversified economy typical of most urban population centers. The majority of employment provided is by services, wholesale/retail trade and finance/ insurance/real estate with services accounting for the largest employment sector in the county.
As of December 31, 2022, the Company’s assets, loans, deposits and stockholders’ equity totaled $2.3 billion, $1.6 billion, $2.0 billion and $138.1 million, respectively. Orange Bank & Trust Company’s trust department and HVIA had a combined $1.3 billion in assets under management at December 31, 2022.
As of December 31, 2023, the Company’s assets, loans, deposits and stockholders’ equity totaled $2.5 billion, $1.7 billion, $2.0 billion and $165.4 million, respectively. Orange Bank & Trust Company’s trust department and HVIA had a combined $1.6 billion in assets under management at December 31, 2023.
With a median household income of $38,588 estimated as of January 1, 2022, the Bronx is home to a significant number of health care & social assistance businesses and non-profit organizations. A persistent need for housing in the region generates constant growth through demand for construction lending and refinancing activity.
With a median household income of $47,036 estimated as of July 1, 2023, the Bronx remains home to a significant number of health care & social assistance businesses and non-profit organizations. A persistent need for housing in the region generates constant growth through demand for construction lending and refinancing activity.
Changes in economic conditions that are not in the control of the borrower or lender could affect the value of the collateral for the loan or the future cash flow of the property. Commercial and Industrial Lending. As of December 31, 2022, we had $258.9 million in commercial and industrial loans (including PPP loans), representing 16.5% of total loans.
Changes in economic conditions that are not in the control of the borrower or lender could affect the value of the collateral for the loan or the future cash flow of the property. Commercial and Industrial Lending. As of December 31, 2023, we had $273.6 million in commercial and industrial loans (including PPP loans), representing 15.7% of total loans.
In underwriting home equity lines and loans, a thorough analysis of the borrower’s financial ability to repay the loan as agreed is performed. The ability to repay is determined by the borrower’s employment history, current financial conditions, and credit background. The analysis is based primarily on the customer’s ability to repay and secondarily on the collateral or security.
In underwriting home equity lines and loans, a thorough analysis of the borrower’s financial ability to repay the loan as agreed is performed. The ability to repay is determined by the borrower’s employment history, current financial conditions, and credit background.
Strategic Expansion . While Orange County remains our home, ongoing investments in Rockland, Westchester and Bronx Counties continue to be significant drivers of our growth and profitability. Most recently, we entered the Nanuet market with a Rockland County branch location during third quarter 2021.
Strategic Expansion . While Orange County remains our home, ongoing investments in Rockland, Westchester and Bronx Counties continue to be significant drivers of our growth and profitability. Most recently, we entered the Nanuet market with a Rockland County branch location during third quarter 2021. The exploration of new opportunities for expansion will remain a key initiative within the Company’s strategy.
Any change in the applicable laws and regulations could have a material adverse impact on the Company and the Bank and their operations and the Company’s stockholders.
Any change in the applicable laws and regulations could have a material adverse impact on the Company and the Bank and their operations and the Company’s stockholders. The following is a summary of some of the laws and regulations applicable to the Bank and the Company.
As of December 31, 2022, we had $109.6 million in commercial real estate construction loans, representing 7.0% of total loans. We engage in commercial real estate construction lending, primarily for projects located within our primary lending market.
As of December 31, 2023, we had $85.7 million in commercial real estate construction loans, representing 4.9% of total loans. We engage in commercial real estate construction lending, primarily for projects located within our primary lending market.
The exploration of new opportunities for expansion will remain a key initiative within the Company’s strategy. 9 Table of Contents Engage in Opportunistic M&A. We are currently focused on organic growth in our geographic markets and have no current plans or arrangements for acquisitions. We may, however, evaluate acquisitions that we believe could produce attractive returns for our stockholders.
Engage in Opportunistic M&A. We are currently focused on organic growth in our geographic markets and have no current plans or arrangements for acquisitions. We may, however, evaluate acquisitions that we believe could produce 9 Table of Contents attractive returns for our stockholders.
During the year ended December 31, 2022, we did not purchase any Direct Purchase Loans. During the years ended December 31, 2022 and 2021, we did not purchase any Partial Guaranteed Loans. As of December 31, 2022 and 2021, the aggregate balance of the purchased loans under these programs were $32.5 million and $44.5 million, respectively.
As of December 31, 2023 and 2022, the aggregate balance of the purchased loans under these programs were $53.5 million and $32.5 million, respectively. During the year ended December 31, 2023, we did not purchase any partially guaranteed consumer loans.
Separately, the Superintendent of the NYSDFS also has the authority to appoint a receiver or liquidator of any state-chartered bank or trust company under specified circumstances, including where (i) the bank is conducting its business in an unauthorized or unsafe manner, (ii) the bank has suspended payment of its obligations, or (iii) the bank cannot with safety and expediency continue to do business. 21 Table of Contents Federal Reserve Under federal law and regulations, the Bank is required to maintain sufficient liquidity to ensure safe and sound banking practices.
Separately, the Superintendent of the NYSDFS also has the authority to appoint a receiver or liquidator of any state-chartered bank or trust company under specified circumstances, including where (i) the bank is conducting its business in an unauthorized or unsafe manner, (ii) the bank has suspended payment of its obligations, or (iii) the bank cannot with safety and expediency continue to do business.
At December 31, 2022, our core deposits (which includes all deposits except for certificates of deposit) totaled $1.9 billion, or 95.3% of our total deposits, and our cost of funds on this stable funding source was 0.35% anchored by our noninterest bearing demand deposits which represented 36.6% of total deposits at December 31, 2022.
At December 31, 2023, our core deposits (which includes all deposits except for certificates of deposit) totaled $1.8 billion, or 89.1% of our total deposits, and our cost of funds on this stable funding source was 1.26% anchored by our noninterest bearing demand deposits which represented 34.3% of total deposits at December 31, 2023.
The rule was effective April 1, 2022, with compliance required by May 1, 2022. Consumer Finance Regulations The CFPB has broad rulemaking authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit “unfair, deceptive or abusive” acts and practices.
Consumer Finance Regulations The CFPB has broad rulemaking authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit “unfair, deceptive or abusive” acts and practices.
With a population estimated as of January 1, 2022 at 406,009 and a median household income of $89,135 as of the same date, the local economy is distinct and somewhat insulated from economic activity in New York City and Westchester County, and includes a growing number of service, warehousing, and logistical businesses.
With a population estimated as of July 1, 2023 at 407,370 and a median household income of $91,806 as of the same date, the local economy is distinct and remains somewhat insulated from economic activity in New York City and Westchester County, and includes a growing number of service, warehousing, and logistical businesses.
These deposits are from local government entities such as county, village and town governments, school districts, fire departments and other municipalities. We solicit their operating and savings deposits.
These deposits are from local government entities such as county, village and town governments, school districts, fire departments and other municipalities. We solicit their operating and savings deposits. Municipal deposit accounts are generally collateralized by eligible government and government agency securities.
Community Reinvestment Act and Fair Lending Laws Federal Regulation Under the CRA, the Bank has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods.
The Bank is required to pay an annual assessment to the NYSDFS and FRB to fund the agencies’ operations. ​ 22 Table of Contents Community Reinvestment Act and Fair Lending Laws Federal Regulation Under the CRA, the Bank has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods.
The ability to repay is determined by the borrower’s employment history, current financial condition, and credit background. Consumer loans may entail greater credit risk than do residential real estate loans particularly in the case of consumer loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles or recreational equipment.
Consumer loans may entail greater credit risk than do residential real estate loans particularly in the case of consumer loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles or recreational equipment.
We have approximately $33 million of brokered deposits at December 31, 2022. Our CDARS and ICS deposits totaled $53.4 million at December 31, 2022. We actively seek to obtain municipal deposits. At December 31, 2022, municipal deposits totaled $300.1 million or 15.2% of our total deposits. We have developed a program for the retention and management of municipal deposits.
We have approximately $172.4 million of brokered deposits at December 31, 2023. Our CDARS and ICS deposits totaled $110.6 million at December 31, 2023. We actively seek to obtain municipal deposits. At December 31, 2023, municipal deposits totaled $270.1 million or 13.3% of our total deposits. We have developed a program for the retention and management of municipal deposits.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf such activities are detected, financial 37 Table of Contents institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts.
Biggest changeThe USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network.
Adverse developments affecting commerce or real estate values in the local economies in our primary market areas could increase the credit risk associated with our loan portfolio and have an adverse impact on our revenues and financial condition. In particular, we may experience increased loan delinquencies, which could result in a higher provision for loan losses and increased charge-offs.
Adverse developments affecting commerce or real estate values in the local economies in our primary market areas could increase the credit risk associated with our loan portfolio and have an adverse impact on our revenues and financial condition. In particular, we may experience increased loan delinquencies, which could result in a higher provision for credit losses and increased charge-offs.
As a result of a public health emergency, including the COVID-19 pandemic, and the related adverse local and national consequences, and as a result of governmental, consumer and business responses to any outbreak, we may be subject to the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, or results of operations: demand for our products and services may decline; if consumer and business activities are restricted, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could increase loan losses; our allowance for loan losses may have to be increased if borrowers experience financial difficulties; a material decrease in net income or a net loss over several quarters could affect our ability to pay cash dividends; cyber security risks may be increased as the result of an increase in the number of employees working remotely; critical services provided by third-party vendors may become unavailable; government actions and vaccine mandates in response to a pandemic may affect our workforce, human capital resources and infrastructure; and the Company may experience staffing shortages and unanticipated unavailability or loss of key employees, harming our ability to execute our business strategy.
As a result of a public health emergency, including the COVID-19 pandemic, and the related adverse local and national consequences, and as a result of governmental, consumer and business responses to any outbreak, we may be subject to the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, or results of operations: demand for our products and services may decline; if consumer and business activities are restricted, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could increase loan losses; our allowance for credit losses may have to be increased if borrowers experience financial difficulties; a material decrease in net income or a net loss over several quarters could affect our ability to pay cash dividends; cyber security risks may be increased as the result of an increase in the number of employees working remotely; critical services provided by third-party vendors may become unavailable; government actions and vaccine mandates in response to a pandemic may affect our workforce, human capital resources and infrastructure; and the Company may experience staffing shortages and unanticipated unavailability or loss of key employees, harming our ability to execute our business strategy.
Our non-performing assets adversely affect our net income in various ways: • we record interest income only on the cash basis or cost-recovery method for non-accrual loans and we do not record interest income for other real estate owned; • we must provide for probable loan losses through a current period charge to the provision for loan losses; • non-interest expense increases when we write down the value of properties in our other real estate owned portfolio to reflect changing market values; • there are legal fees associated with the resolution of problem assets, as well as carrying costs, such as taxes, insurance, and maintenance fees; and • the resolution of non-performing assets requires the active involvement of management, which can distract them from more profitable activity.
Our non-performing assets adversely affect our net income in various ways: • we record interest income only on the cash basis or cost-recovery method for non-accrual loans and we do not record interest income for other real estate owned; • we must provide for probable loan losses through a current period charge to the provision for credit losses; • non-interest expense increases when we write down the value of properties in our other real estate owned portfolio to reflect changing market values; • there are legal fees associated with the resolution of problem assets, as well as carrying costs, such as taxes, insurance, and maintenance fees; and • the resolution of non-performing assets requires the active involvement of management, which can distract them from more profitable activity.
These provisions, and the corporate and banking laws and regulations applicable to us: • enable our board of directors to increase the size of the board and fill the vacancies created by the increase; • provide for the division of the board of directors into three staggered classes so that it would require replacing more than one class of directors to gain control of the board of directors; • provide that directors may only be removed for cause and by a majority of the votes entitled to be cast; • enable our board of directors to amend our Bylaws without shareholder approval, subject, however, to the general right of shareholders to change such action in accordance with pertinent sections of the Bylaws and Delaware General Corporation Law; • require advance notice and certain ownership requirements for director nominations; • require advance notice for shareholder proposals; • require the request of record holders of at least 25% of the outstanding shares of our capital stock entitled to vote at a meeting to call a special shareholders’ meeting; • require a supermajority vote of the shareholders to approve a merger with a person owning 10% or more of the Company’s common stock, unless such merger is approved by a supermajority of unaffiliated members of the board of directors; and • require prior regulatory application and approval of any transaction involving control of our organization.
These provisions, and the corporate and banking laws and regulations applicable to us: • enable our board of directors to increase the size of the board and fill the vacancies created by the increase; • provide for the division of the board of directors into three staggered classes so that it would require replacing more than one class of directors to gain control of the board of directors; • provide that directors may only be removed for cause and by a majority of the votes entitled to be cast; • enable our board of directors to amend our Bylaws without shareholder approval, subject, however, to the general right of shareholders to change such action in accordance with pertinent sections of the Bylaws and Delaware General Corporation Law; • require advance notice and certain ownership requirements for director nominations; • require advance notice for shareholder proposals; • require the request of record holders of at least 25% of the outstanding shares of our capital stock entitled to vote at a meeting to call a special shareholders’ meeting; 43 Table of Contents • require a supermajority vote of the shareholders to approve a merger with a person owning 10% or more of the Company’s common stock, unless such merger is approved by a supermajority of unaffiliated members of the board of directors; and • require prior regulatory application and approval of any transaction involving control of our organization.
Any increase in our allowance for loan losses or loan charge-offs as a result of such review or otherwise may have a material adverse effect on our financial condition and results of operations. If our non-performing assets increase, our earnings will be adversely affected.
Any increase in our allowance for credit losses or loan charge-offs as a result of such review or otherwise may have a material adverse effect on our financial condition and results of operations. If our non-performing assets increase, our earnings will be adversely affected.
In determining the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience, and we evaluate economic conditions. If our assumptions or the results of our analyses are incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to our allowance.
In determining the amount of the allowance for credit losses, we review our loans and our loss and delinquency experience, and we evaluate economic conditions. If our assumptions or the results of our analyses are incorrect, our allowance for credit losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to our allowance.
Material additions to our allowance would materially decrease our net income. In addition, bank regulators periodically review our allowance for loan losses and, as a result of such reviews, we may be required to increase our provision for loan losses or recognize further loan charge-offs.
Material additions to our allowance would materially decrease our net income. In addition, bank regulators periodically review our allowance for credit losses and, as a result of such reviews, we may be required to increase our provision for credit losses or recognize further loan charge-offs.
Significant adverse changes in the economy or local market conditions in which our commercial lending customers operate could cause rapid declines in loan collectability and the values associated with general business assets, resulting in inadequate collateral coverage that may expose us to credit losses and could adversely affect our business, financial condition and results of operations. 29 Table of Contents If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings could decrease.
Significant adverse changes in the economy or local market conditions in which our commercial lending customers operate could cause rapid declines in loan collectability and the values associated with general business assets, resulting in inadequate collateral coverage that may expose us to credit losses and could adversely affect our business, financial condition and results of operations. 30 Table of Contents If our allowance for credit losses is not sufficient to cover actual loan losses, our earnings could decrease.
These factors include, among other things: • general economic conditions and overall market fluctuations; • actual or anticipated fluctuations in our quarterly or annual operating results; • changes in accounting standards, policies, guidance, interpretations or principles; • the public reaction to our press releases, our other public announcements and our filings with the SEC; • changes in financial estimates and recommendations by securities analysts following our stock; • changes in earnings estimates by securities analysts or our ability to meet those estimates; • the operating and stock price performance of other comparable companies; • the trading volume of our common stock; • new technology used, or services offered, by competitors; and • changes in business, legal or regulatory conditions, or other developments affecting the financial services industry, participants in our industry, and publicity regarding our business or any of our significant customers or competitors.
These factors include, among other things: • general economic conditions and overall market fluctuations; • actual or anticipated fluctuations in our quarterly or annual operating results; • changes in accounting standards, policies, guidance, interpretations or principles; • the public reaction to our press releases, our other public announcements and our filings with the SEC; • changes in financial estimates and recommendations by securities analysts following our stock; • changes in earnings estimates by securities analysts or our ability to meet those estimates; • the operating and stock price performance of other comparable companies; 41 Table of Contents • the trading volume of our common stock; • new technology used, or services offered, by competitors; and • changes in business, legal or regulatory conditions, or other developments affecting the financial services industry, participants in our industry, and publicity regarding our business or any of our significant customers or competitors.
If we are not successful, our results of operations and financial condition may be negatively impacted. 31 Table of Contents The wealth management industry is subject to extensive regulation, supervision and examination by regulators, and any enforcement action or adverse changes in the laws or regulations governing our business could decrease our revenues and profitability.
If we are not successful, our results of operations and financial condition may be negatively impacted. 32 Table of Contents The wealth management industry is subject to extensive regulation, supervision and examination by regulators, and any enforcement action or adverse changes in the laws or regulations governing our business could decrease our revenues and profitability.
We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that apply to other public companies that are not “emerging growth companies.” These exemptions include the following: 40 Table of Contents • not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes- Oxley Act; • less extensive disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and • exemptions from the requirements to hold nonbinding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that apply to other public companies that are not “emerging growth companies.” These exemptions include the following: • not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes- Oxley Act; • less extensive disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and • exemptions from the requirements to hold nonbinding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Our directors and executive officers, as a group, beneficially owned approximately 10.9% of our outstanding shares of common stock as of December 31, 2022. To our knowledge, although there is no written agreement between members of the Morrison family to act in concert, relatives of director William D. Morrison and William D.
Our directors and executive officers, as a group, beneficially owned approximately 10.9% of our outstanding shares of common stock as of December 31, 2023. To our knowledge, although there is no written agreement between members of the Morrison family to act in concert, relatives of director William D. Morrison and William D.
This could require increasing our allowance for loan losses to address the decrease in the value of the real estate securing our loans, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Inflation can have an adverse impact on our business and on our customers.
This could require increasing our allowance for credit losses to address the decrease in the value of the real estate securing our loans, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Inflation can have an adverse impact on our business and on our customers.
The impact on our customers will likely vary depending on their 39 Table of Contents specific attributes, including reliance on or role in carbon intensive activities. Among the impacts to us could be a drop in demand for our products and services, particularly in certain sectors.
The impact on our customers will likely vary depending on their 40 Table of Contents specific attributes, including reliance on or role in carbon intensive activities. Among the impacts to us could be a drop in demand for our products and services, particularly in certain sectors.
We primarily serve individuals, businesses and municipalities located in the New York City metropolitan area and in Orange, Westchester and Rockland Counties, New York. As of December 31, 2022, most of our loan portfolio was secured by real estate and other assets located in these areas in New York.
We primarily serve individuals, businesses and municipalities located in the New York City metropolitan area and in Orange, Westchester and Rockland Counties, New York. As of December 31, 2023, most of our loan portfolio was secured by real estate and other assets located in these areas in New York.
We also can provide no assurance 32 Table of Contents that we will be successful in expanding our operations organically or through strategic acquisitions while managing the costs and implementation risks associated with this growth strategy.
We also can provide no assurance 33 Table of Contents that we will be successful in expanding our operations organically or through strategic acquisitions while managing the costs and implementation risks associated with this growth strategy.
Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact their ability to repay their loans with us. 28 Table of Contents Risks Related to Lending Activities Our emphasis on commercial real estate loans involves risks that could adversely affect our financial condition and results of operations.
Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses could have a negative impact on their ability to repay their loans with us. 29 Table of Contents Risks Related to Lending Activities Our emphasis on commercial real estate loans involves risks that could adversely affect our financial condition and results of operations.
At December 31, 2022, commercial real estate loan participations, including construction, for which we were not the lead lender totaled $112.2 million, or 10.2% of our commercial real estate loan portfolio, including commercial real estate construction, and commercial and industrial loan participations for which we were not the lead lender totaled $1.5 million, or 0.57% of our commercial and industrial loan portfolio. 30 Table of Contents We underwrite each commercial real estate loan and commercial and industrial loan that we participate in and establish the loan classification and loan provision using the same criteria we use for loans we originate.
At December 31, 2023, commercial real estate loan participations, including construction, for which we were not the lead lender totaled $112.2 million, or 10.2% of our commercial real estate loan portfolio, including commercial real estate construction, and commercial and industrial loan participations for which we were not the lead lender totaled $1.5 million, or 0.57% of our commercial and industrial loan portfolio. 31 Table of Contents We underwrite each commercial real estate loan and commercial and industrial loan that we participate in and establish the loan classification and loan provision using the same criteria we use for loans we originate.
We may not be successful in retaining our 35 Table of Contents key employees, and the unexpected loss of services of one or more of our key personnel at Orange Bank & Trust Company or HVIA could have a material adverse effect on our business because of their skills, knowledge of our primary markets, years of industry experience and the difficulty of promptly finding qualified replacement personnel.
We may not be successful in retaining our key employees, and the unexpected loss of services of one or more of our key personnel at Orange Bank & Trust Company or HVIA could have a material adverse effect on our business because of their skills, knowledge of our primary markets, years of industry experience and the difficulty of promptly finding qualified replacement personnel.
At December 31, 2022, no loan participations were delinquent 60 days or more. If our underwriting of these participation loans is not sufficient, our non-performing loans may increase, and our earnings may decrease.
At December 31, 2023, no loan participations were delinquent 60 days or more. If our underwriting of these participation loans is not sufficient, our non-performing loans may increase, and our earnings may decrease.
As a result, if you acquire our common stock, you could lose some or all of your investment. ​ ​ Item 1B. Unresolved Staff Comments Not applicable. 42 Table of Contents ​
As a result, if you acquire our common stock, you could lose some or all of your investment. ​ ​ Item 1B. Unresolved Staff Comments Not applicable. ​ 44 Table of Contents
This influence may also have the effect of delaying or preventing changes of control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in the best interests of our Company. 41 Table of Contents Our common stock is subordinate to our existing and future indebtedness.
This influence may also have the effect of delaying or preventing changes of control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in the best interests of our Company. Our common stock is subordinate to our existing and future indebtedness.
In the event of a breakdown in our internal control systems, 34 Table of Contents improper operation of systems or improper employee actions, we could suffer financial loss, face regulatory action, and/or suffer damage to our reputation. Cyber-attacks or other security breaches could adversely affect our operations, net income or reputation.
In the event of a breakdown in our internal control systems, improper operation of systems or improper employee actions, we could suffer financial loss, face regulatory action, and/or suffer damage to our reputation. Cyber-attacks or other security breaches could adversely affect our operations, net income or reputation.
Risks Related to Deposits We accept deposits that do not have a fixed term and which may be withdrawn by the customer at any time for any reason. At December 31, 2022, we had $1.9 billion of deposit liabilities that have no maturity and, therefore, may be withdrawn by the depositor at any time.
Risks Related to Deposits We accept deposits that do not have a fixed term and which may be withdrawn by the customer at any time for any reason. At December 31, 2023, we had $1.8 billion of deposit liabilities that have no maturity and, therefore, may be withdrawn by the depositor at any time.
Accordingly, we could suffer losses if we fail to properly anticipate and manage these risks. Risks Related to Competitive Matters We may be unable to successfully compete with others for business. The area in which we operate is a highly competitive banking market.
Accordingly, we could suffer losses if we fail to properly anticipate and manage these risks. Risks Related to Competitive Matters 37 Table of Contents We may be unable to successfully compete with others for business. The area in which we operate is a highly competitive banking market.
Although we have paid a cash dividend for at least 38 consecutive years, we have no obligation to continue paying dividends.
Although we have paid a cash dividend for at least 39 consecutive years, we have no obligation to continue paying dividends.
As information security risks and cyber threats continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures and/or to investigate and remediate any information security vulnerabilities. We rely on third party vendors, which could expose us to additional cybersecurity risks.
As information security risks and cyber threats continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures and/or to investigate and remediate any information security vulnerabilities. 36 Table of Contents We rely on third party vendors, which could expose us to additional cybersecurity risks.
Such changes could also affect (i) demand for our products and services and price competition, in turn affecting our ability to originate loans and obtain deposits; (ii) the fair value of our financial assets and liabilities; (iii) the average duration of our mortgage-backed securities portfolio and other interest-earning assets; (iv) levels of defaults on loans; and (v) loan prepayments. 33 Table of Contents During 2022, in response to accelerated inflation, the Federal Reserve implemented monetary tightening policies, resulting in significantly increased interest rates.
Such changes could also affect (i) demand for our products and services and price competition, in turn affecting our ability to originate loans and obtain deposits; (ii) the fair value of our financial assets and liabilities; (iii) the average duration of our mortgage-backed securities portfolio and other interest-earning assets; (iv) levels of defaults on loans; and (v) loan prepayments. 34 Table of Contents During 2023, in response to accelerated inflation, the Federal Reserve continued to implement monetary tightening policies, resulting in increased interest rates.
We will remain an emerging growth company for up to five years, though we may cease to be an emerging growth company earlier under certain circumstances, including if, before the end of such five years, we are deemed to be a large accelerated filer under the rules of the SEC (which depends on, among other things, having a market value of common stock held by non-affiliates in excess of $700 million).
We will remain an emerging growth company for up to five years from the end of the year in which we completed our initial public offering, though we may cease to be an emerging growth company earlier under certain circumstances, including if, before the end of such five years, we are deemed to be a large accelerated filer under the rules of the SEC (which depends on, among other things, having a market value of common stock held by non-affiliates in excess of $700 million).
Commercial real estate loans represent 399% of our risk-based capital at December 31, 2022 and the outstanding balance of our commercial real estate loan portfolio has increased by 92% during the 36 months preceding December 31, 2022. In December 2015, the Agencies released a new statement on prudent risk management for commercial real estate lending (the “2015 Statement”).
Commercial real estate loans represent 417% of our risk-based capital at December 31, 2023 and the outstanding balance of our commercial real estate loan portfolio has increased by 102% during the 36 months preceding December 31, 2023. In December 2015, the Agencies released a new statement on prudent risk management for commercial real estate lending (the “2015 Statement”).
Risks Related to an Investment in Our Common Stock The price of our common stock could be volatile. The market price of our common stock may be volatile and could be subject to wide fluctuations in price in response to various factors, some of which are beyond our control.
The market price of our common stock may be volatile and could be subject to wide fluctuations in price in response to various factors, some of which are beyond our control.
Municipal deposits are a significant source of funds for our lending and investment activities. At December 31, 2022, $300.1 million, or 15.2% of our total deposits, consisted of municipal deposits from local government entities such as county, village and town governments, school districts, fire departments and other municipalities, which are collateralized by investment securities.
Municipal deposits are a significant source of funds for our lending and investment activities. At December 31, 2023, $270.1 million, or 13.3% of our total deposits, consisted of municipal deposits from local government entities such as county, village and town governments, school districts, fire departments and other municipalities, which are collateralized by investment securities.
We have a significant number of loans secured by real estate, and a downturn in the local real estate market could negatively impact our profitability. At December 31, 2022, approximately $1.2 billion, or 76.9%, of our total loan portfolio was secured by commercial real estate, almost all of which is located in our primary lending market.
We have a significant number of loans secured by real estate, and a downturn in the local real estate market could negatively impact our profitability. At December 31, 2023, approximately $1.4 billion, or 77.0%, of our total loan portfolio was secured by commercial real estate, almost all of which is located in our primary lending market.
In addition, our emphasis on loan growth and on increasing our portfolios of commercial real estate and commercial and industrial loans, as well as any future credit deterioration, could require us to increase our allowance for loan losses in the future. At December 31, 2022, our allowance for loan losses was 1.39% of total loans and 258.3% of nonperforming loans.
In addition, our emphasis on loan growth and on increasing our portfolios of commercial real estate and commercial and industrial loans, as well as any future credit deterioration, could require us to increase our allowance for credit losses in the future. At December 31, 2023, our allowance for credit losses was 1.44% of total loans and 568.8% of nonperforming loans.
Morrison beneficially owned collectively approximately 24.6% of our outstanding shares of common stock as of December 31, 2022. William D. Morrison beneficially owned approximately 1.0% of our outstanding shares of common stock as of December 31, 2022.
Morrison beneficially owned collectively approximately 24.5% of our outstanding shares of common stock as of December 31, 2023. William D. Morrison beneficially owned approximately 1.0% of our outstanding shares of common stock as of December 31, 2023.
The Federal Reserve has signaled that further tightening is anticipated. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected.
The Federal Reserve has signaled that interest rates may remain elevated. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected.
Our loan portfolio includes commercial real estate loans, primarily loans secured by commercial retail space, office buildings and multifamily properties. At December 31, 2022, our commercial real estate loans totaled $1.1 billion, or 70.0%, of our total loan portfolio.
Our loan portfolio includes commercial real estate loans, primarily loans secured by commercial retail space, office buildings and multifamily properties. At December 31, 2023, our commercial real estate loans totaled $1.3 billion, or 72.1%, of our total loan portfolio.
We compete for loans and deposits with numerous regional and national banks and other community banking institutions, as well as other kinds of financial institutions and enterprises, such as securities firms, insurance companies, savings associations, credit unions, mortgage brokers and private lenders.
We compete for loans and deposits with numerous regional and national banks and other community banking institutions, as well as other kinds of financial institutions and enterprises, such as securities firms, insurance companies, savings associations, credit unions, mortgage brokers and private lenders. The trust department of the Bank competes with national trust companies and local attorneys for fiduciary appointments.
At December 31, 2022, our purchased commercial and industrial loans totaled $32.5 million, or 2.0% of our loan portfolio and 12.6% of our commercial and industrial loan portfolio, none of which were delinquent 60 days or more. During the year ended December 31, 2022, we did not purchased any loans from a partially guaranteed consumer loan program.
At December 31, 2023, our purchased commercial and industrial loans totaled $53.5 million, or 3.1% of our loan portfolio and 19.6% of our commercial and industrial loan portfolio, none of which were delinquent 60 days or more. During the year ended December 31, 2023, we did not purchase any loans from the partially guaranteed consumer loan program.
As a result, the FRB has increased the federal funds rate by a cumulative 475 basis points in 2022 and to date in 2023 and has indicated its intention to continue to increase interest rates in an effort to combat inflation.
As a result, the FRB has continued to increase the federal funds rate by an additional 100 basis points in 2023 and has indicated its intention to maintain the increased interest rates in an effort to combat inflation.
At December 31, 2022, $258.9 million, or 16.5% of our total loan portfolio, consisted of commercial and industrial loans (including $1.7 million of PPP loans). Our commercial and industrial loans are collateralized by general business assets, including accounts receivable, inventory and equipment and generally backed by a personal guaranty of the borrower or principal.
At December 31, 2023, $274.6 million, or 15.7% of our total loan portfolio, consisted of commercial and industrial loans (including $215 thousand of PPP loans). Our commercial and industrial loans are collateralized by general business assets, including accounts receivable, inventory and equipment and generally backed by a personal guaranty of the borrower or principal.
At December 31, 2022, our non-performing assets, which consist of non-performing loans and other real estate owned, were $8.5 million, or 0.37% of total assets.
At December 31, 2023, our non-performing assets, which consist of non-performing loans and other real estate owned, were $4.4 million, or 0.18% of total assets.
Our principal business operations are conducted through our subsidiary, Orange Bank & Trust Company. Cash available to pay dividends to our stockholders is derived primarily, if not entirely, from dividends paid by Orange Bank & Trust Company to us.
Cash available to pay dividends to our stockholders is derived primarily, if not entirely, from dividends paid by Orange Bank & Trust Company to us.
The application of such stringent capital requirements could, among other things, result in lower returns on equity, requiring the raising of additional capital, and resulting in regulatory actions constraining us from paying dividends or repurchasing shares if we are unable to comply with such requirements.
The application of such stringent capital requirements could, among other things, result in lower returns on equity, requiring the raising of additional capital, and resulting in regulatory actions constraining us from paying dividends or repurchasing shares if we are unable to comply with such requirements. 38 Table of Contents Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.
Operational risk is the risk of loss resulting from our operations, including but not limited to, the risk of fraud by employees or persons outside our company, the execution of unauthorized transactions by employees, errors relating to transaction processing and technology, breaches of our internal control systems and compliance requirements.
Operational risk is the risk of loss resulting from our operations, including but not limited to, the risk of fraud by employees or persons outside our company, the execution of unauthorized transactions by employees, errors relating to transaction processing and technology, breaches of our internal control systems and compliance requirements. 35 Table of Contents Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits.
Any future determination relating to our dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including our future earnings, capital requirements, financial condition, future prospects, regulatory restrictions, and other factors that our board of directors may deem relevant.
Any future determination relating to our dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including our future earnings, capital requirements, financial condition, future prospects, regulatory restrictions, and other factors that our board of directors may deem relevant. 42 Table of Contents Our principal business operations are conducted through our subsidiary, Orange Bank & Trust Company.
Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. During 2022, inflation in the United States increased to levels not seen since the 1980s.
Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. During 2023, inflation in the United States remained elevated.
Certain industries were particularly hard-hit, including the travel and hospitality industry, the restaurant industry, the retail industry, the healthcare industry, restaurants and food services, and entertainment and recreation.
The COVID-19 pandemic caused significant economic dislocation in the United States. Certain industries were particularly hard-hit, including the travel and hospitality industry, the restaurant industry, the retail industry, the healthcare industry, restaurants and food services, and entertainment and recreation.
The trust department of the Bank competes with national trust companies and local attorneys 36 Table of Contents for fiduciary appointments. In addition, HVIA competes with a multitude of investment companies, from online providers to similarly structured investment advisors. Many competitors have substantially greater resources than we do.
In addition, HVIA competes with a multitude of investment companies, from online providers to similarly structured investment advisors. Many competitors have substantially greater resources than we do.
The Consumer Financial Protection Bureau (“CFPB”), the United States Department of Justice, the NYSDFS and other federal agencies are responsible for enforcing these laws and regulations.
The CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other federal and state fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions. The Consumer Financial Protection Bureau (“CFPB”), the United States Department of Justice, the NYSDFS and other federal agencies are responsible for enforcing these laws and regulations.
The occurrence of an economic downturn in these areas, or adverse changes in laws or regulations in New York due to the adverse effects of the COVID-19 pandemic or otherwise, could impact the credit quality of our assets, the businesses of our customers and ability to expand our business.
As a result, we are exposed to risks associated with lack of geographic diversification. The occurrence of an economic downturn in these areas, or adverse changes in laws or regulations in New York could impact the credit quality of our assets, the businesses of our customers and ability to expand our business.
We also increase or decrease our stockholders’ equity by the amount of change in the fair value of equity securities through net income in the consolidated statement of operations. Risks Related to Operations and Security We face significant operational risks because the nature of the financial services business involves a high volume of transactions.
We also increase or decrease our stockholders’ equity by the amount of change in the fair value of equity securities through net income in the consolidated statement of operations.
Failure to comply with these regulations could result in fines or sanctions, including restrictions on conducting acquisitions or establishing new branches. The policies and procedures we have adopted that are designed to assist in compliance with these laws and regulations may not be effective in preventing violations of these laws and regulations.
The policies and procedures we have adopted that are designed to assist in compliance with these laws and regulations may not be effective in preventing violations of these laws and regulations. We are subject to the Community Reinvestment Act (“CRA”) and fair lending laws, and failure to comply with these laws could lead to material penalties.
Risks Related to Wealth Management Involvement in wealth management creates risks associated with the industry. At December 31, 2022, we had approximately $1.3 billion in assets under management.
If our underwriting of these purchased loans is not sufficient, our non-performing loans may increase and our earnings may decrease. Risks Related to Wealth Management Involvement in wealth management creates risks associated with the industry. At December 31, 2023, we had approximately $1.6 billion in assets under management.
Removed
As a result, we are exposed to risks associated with lack of geographic diversification.
Added
On January 1, 2023, the Company adopted ASU 2016-13, Topic 326, which replaced the incurred loss methodology with CECL for financial instruments measured at amortized cost and other commitments to extend credit. CECL requires the immediate recognition of estimated credit losses expected to occur over the estimated remaining life of the asset.
Removed
As of December 31, 2022, the aggregate balance of the purchased loans under this program was $10.1 million or less than 1% of our loan portfolio. If our underwriting of these purchased loans is not sufficient, our non-performing loans may increase and our earnings may decrease.
Added
The forward-looking concept of CECL requires loss estimates to consider historical experience, current conditions and reasonable and supportable economic forecasts of future events and circumstances. Risks Related to Operations and Security We face significant operational risks because the nature of the financial services business involves a high volume of transactions.
Removed
If this evaluation shows impairment to the actual or projected cash flows associated with one or more securities, we may take a charge to earnings to reflect such impairment.
Added
These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions, including restrictions on conducting acquisitions or establishing new branches.
Removed
Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits.
Added
Other Risks Related to Our Business Liquidity is essential to our businesses. Liquidity is essential to our business as we must be able to meet the cash needs of borrowers and depositors. Our liquidity could be impaired by an inability to access the capital markets or unforeseen outflows of cash.
Removed
The implementation of the Current Expected Credit Loss accounting standard could require us to increase our allowance for loan losses and may have a material adverse effect on our financial condition and results of operations.
Added
Reduced liquidity may arise due to circumstances that we may be unable to control, such as a general market disruption or an operational problem that affects third parties or us. Our efforts to monitor and manage liquidity risk may not be successful or sufficient to deal with dramatic or unanticipated reductions in our liquidity.
Removed
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016 13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016 13 replaces the incurred loss model with a lifetime loss model, which is referred to as the current expected credit loss model, or CECL.
Added
In such events, our cost of funds may increase, thereby reducing our net interest income, or we may need to sell a portion of our investment and/or loan portfolio, which, depending upon market conditions, could result in us realizing a loss. 39 Table of Contents Public health emergencies, like the COVID-19 outbreak, may have an adverse impact on our business and results of operations.
Removed
CECL will become effective for us beginning January 1, 2023. This standard requires earlier recognition of expected credit losses on loans and certain other instruments, compared to the incurred loss model. The change to the CECL framework requires us to greatly increase the data we must collect and review to determine the appropriate level of the allowance for credit losses.
Added
We cannot predict how changes in technology will impact our business; increased use of technology may expose us to service interruptions or breaches in security.
Removed
The adoption of CECL may result in greater volatility in the level of the allowance for credit losses, depending on various factors and assumptions applied in the model, such as the reasonable and supportable forecasted economic conditions and loan payment behaviors.
Added
The financial services market, including banking services, is increasingly affected by advances in technology, including developments in: • Telecommunications; • Data processing; • Automation; • Internet-based banking, including personal computers, mobile phones and tablets; • Debit cards and so-called “smart cards”; • Remote deposit capture; • Artificial Intelligence; • Cryptocurrency; and • Use of Blockchain.
Removed
Any increase in the allowance for credit losses, or expenses incurred to determine the appropriate level of the allowance for credit losses, may have an adverse effect on our financial condition and results of operations.
Added
Our ability to compete successfully in the future will depend, to a certain extent, on whether we can anticipate and respond to technological changes. We offer electronic banking services for our consumer and business clients via our website, www.orangebanktrust.com, including Internet banking and electronic bill payment, as well as mobile banking by phone.
Removed
Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions. The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities.
Added
We also offer check cards, ATM cards, credit cards, and automatic and ACH transfers. The successful operation and further development of these and other new technologies will likely require additional capital investments in the future.
Removed
We are subject to the Community Reinvestment Act (“CRA”) and fair lending laws, and failure to comply with these laws could lead to material penalties. The CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other federal and state fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions.
Added
In addition, increased use of electronic banking creates opportunities for interruptions in service or security breaches, which could expose us to claims by clients or other third parties and damage our reputation.
Removed
Other Risks Related to Our Business Adverse developments affecting the financial services industry, such as recent bank failures or concerns involving liquidity, may have a material effect on the Company’s operations. Recent events relating to the failures of certain banking entities in March 2023, i.e.
Added
We cannot assure you that we will have sufficient resources or access to the necessary proprietary technology to remain competitive in the future, or that we will be able to maintain a secure electronic environment. Risks Related to an Investment in Our Common Stock The price of our common stock could be volatile.
Removed
Silicon Valley Bank and Signature Bank, has caused general uncertainty and concern regarding the liquidity adequacy of the banking sector as a whole.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties We operate from our main office and 14 branch offices. We own our main office in Middletown, New York, and four branch offices located at North Street in Middletown, at Trust Way in Middletown, in Chester and in Montgomery, New York.
Biggest changeItem 2. Properties We operate from our main office and 15 branch offices. We own our main office in Middletown, New York, and five branch offices located at North Street in Middletown, at Trust Way in Middletown, in Chester, in Newburgh and in Montgomery, New York.
We lease ten branch offices located in Goshen, Newburgh, Cortlandt Manor, White Plains, Mamaroneck, New City, Mt. Pleasant, Mount Vernon, Bronx, and Nanuet, New York. The branches are leased under agreements that may be renewed for varying periods. In addition, HVIA operates from leased offices located in Goshen, New York.
We lease nine branch offices located in Goshen, Cortlandt Manor, White Plains, Mamaroneck, New City, Mt. Pleasant, Mount Vernon, Bronx, and Nanuet, and New York. The branches are leased under agreements that may be renewed for varying periods. In addition, HVIA operates from leased offices located in Goshen, New York.
At December 31, 2022, the total net book value of our leasehold improvements, furniture, fixtures and equipment was approximately $14.7 million. ​
At December 31, 2023, the total net book value of our leasehold improvements, furniture, fixtures and equipment was approximately $16.2 million. ​

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings From time to time, we are a party to various litigation matters incidental to the conduct of our business. As of December 31, 2022, we do not believe that any currently pending legal proceedings will have a material adverse effect on our business, financial condition or results of operations. ​ Item 4.
Biggest changeItem 3. Legal Proceedings From time to time, we are a party to various litigation matters incidental to the conduct of our business. As of December 31, 2023, we do not believe that any currently pending legal proceedings will have a material adverse effect on our business, financial condition or results of operations. ​ Item 4.
Mine Safety Disclosures Not applicable. ​ 43 Table of Contents PART II
Mine Safety Disclosures Not applicable. ​ 46 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The common stock of Orange County Bancorp, Inc. has been listed on The Nasdaq Capital Market under the symbol “OBT” since August 5, 2021. At March 23, 2023, Orange County Bancorp, Inc. had approximately 224 stockholders of record.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The common stock of Orange County Bancorp, Inc. has been listed on The Nasdaq Capital Market under the symbol “OBT” since August 5, 2021. At March 20, 2024, Orange County Bancorp, Inc. had approximately 209 stockholders of record.
See “Item 1 Business — Supervision and Regulation — Bank Regulation — Dividends.” To pay a cash dividend, a state member bank must also maintain an adequate capital conservation buffer under the capital rules described in “Item 1 Business — Supervision and Regulation — Bank Regulation — Capitalization.” There were no sales of unregistered securities or repurchases of shares of common stock during the quarter ended December 31, 2022. ​ Item 6.
See “Item 1 Business — Supervision and Regulation — Bank Regulation — Dividends.” To pay a cash dividend, a state member bank must also maintain an adequate capital conservation buffer under the capital rules described in “Item 1 Business — Supervision and Regulation — Bank Regulation — Capitalization.” There were no sales of unregistered securities or repurchases of shares of common stock during the quarter ended December 31, 2023. ​ Item 6.
In addition, as a 44 Table of Contents depository institution the deposits of which are insured by the FDIC, Orange Bank & Trust Company may not pay dividends or distribute any of its capital assets while it remains in default on any assessment due to the FDIC or if in the FDIC’s opinion, the payment of dividends would constitute an unsafe or unsound practice.
In addition, as a 47 Table of Contents depository institution the deposits of which are insured by the FDIC, Orange Bank & Trust Company may not pay dividends or distribute any of its capital assets while it remains in default on any assessment due to the FDIC or if in the FDIC’s opinion, the payment of dividends would constitute an unsafe or unsound practice.
Rese rved ​ ​ 45 Table of Contents
Rese rved ​ ​ 48 Table of Contents

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. Reserved ​ 45 ​ ​ ​ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 46 ​ ​ ​ Item 7A. Quantitative and Qualitative Disclosures About Market Risk ​ 65 ​ ​ ​ Item 8. Financial Statements and Supplementary Data ​ 67 ​ ​ ​
Biggest changeItem 6. Reserved ​ 48 ​ ​ ​ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 49 ​ ​ ​ Item 7A. Quantitative and Qualitative Disclosures About Market Risk ​ 68 ​ ​ ​ Item 8. Financial Statements and Supplementary Data ​ 70 ​ ​ ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeDeferred loan fees totaled $5.2 million and $4.8 million for the years ended December 31, 2022 and 2021, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2022 ​ 2021 ​ Average ​ ​ ​ Average ​ ​ ​ ​ ​ Outstanding ​ ​ ​ ​ Average ​ Outstanding ​ ​ ​ ​ Average ​ ​ Balance ​ Interest ​ Yield/Rate ​ Balance ​ Interest ​ Yield/Rate ​ (Dollars in thousands) ​ Interest-earning assets: ​ ​ ​ ​ ​ Loans (excluding PPP loans) ​ $ 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 available for sale ​ 522,902 ​ 11,969 2.29 % 382,391 ​ 6,444 1.69 % Cash and due from banks and other ​ 257,218 ​ 2,739 1.06 % 282,804 ​ 372 0.13 % Restricted stock ​ 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 % Noninterest-earning assets ​ 91,830 ​ ​ ​ 84,465 ​ ​ Total assets ​ $ 2,311,351 ​ ​ ​ ​ $ 2,001,612 ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ Interest-bearing demand deposits ​ $ 345,550 ​ 524 0.15 % $ 286,112 ​ 333 0.12 % Money market deposits ​ 689,610 ​ 2,931 0.43 % 613,865 ​ 1,805 0.29 % Savings deposits ​ 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 % — ​ — — % 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 % Noninterest-bearing demand deposits ​ 761,393 ​ ​ ​ ​ 639,791 ​ ​ Other noninterest-bearing liabilities ​ 20,744 ​ ​ ​ ​ 18,829 ​ ​ Total liabilities ​ 2,155,395 ​ ​ ​ ​ 1,846,181 ​ ​ Total stockholders’ equity ​ 155,956 ​ ​ ​ ​ 155,431 ​ ​ Total liabilities and stockholders’ equity ​ $ 2,311,351 ​ ​ ​ ​ $ 2,001,612 ​ ​ Net interest income ​ ​ ​ ​ $ 78,088 ​ ​ $ 60,461 ​ Net interest rate spread (1) ​ ​ ​ 3.34 % ​ ​ 3.03 % Net interest-earning assets (2) ​ $ 846,263 ​ ​ $ 729,586 ​ ​ Net interest margin (3) ​ ​ ​ 3.52 % ​ 3.15 % Average interest-earning assets to interest-bearing liabilities ​ ​ ​ ​ ​ ​ 161.6 % ​ ​ ​ ​ 161.4 % (1) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.
Biggest changeDeferred loan fees totaled $4.9 million and $5.2 million for the years ended December 31, 2023 and 2022, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2023 ​ 2022 ​ Average ​ ​ ​ Average ​ ​ ​ ​ ​ Outstanding ​ ​ ​ ​ Average ​ Outstanding ​ ​ ​ ​ Average ​ ​ Balance ​ Interest ​ Yield/Rate ​ Balance ​ Interest ​ Yield/Rate ​ (Dollars in thousands) ​ Interest-earning assets: ​ ​ ​ ​ ​ ​ Loans (excluding PPP loans) ​ $ 1,683,232 ​ $ 96,236 5.72 % $ 1,426,478 ​ $ 68,405 4.80 % PPP loans ​ 1,133 ​ 28 2.47 % 9,280 ​ 922 9.94 % Investment securities available for sale ​ 503,410 ​ 14,055 2.79 % 522,902 ​ 11,969 2.29 % Cash and due from banks and other ​ 142,003 ​ 6,498 4.58 % 257,218 ​ 2,739 1.06 % Restricted stock ​ 11,561 ​ 953 8.24 % 3,643 ​ 188 5.16 % Total interest-earning assets ​ 2,341,339 ​ 117,770 5.03 % 2,219,521 ​ 84,223 3.79 % Noninterest-earning assets ​ 96,259 ​ ​ ​ 91,830 ​ ​ Total assets ​ $ 2,437,598 ​ ​ ​ ​ $ 2,311,351 ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ Interest-bearing demand deposits ​ $ 331,056 ​ $ 1,284 0.39 % $ 345,550 ​ $ 524 0.15 % Money market deposits ​ 617,345 ​ 9,429 1.53 % 689,610 ​ 2,931 0.43 % Savings deposits ​ 245,663 ​ 2,413 0.98 % 227,938 ​ 658 0.29 % Certificates of deposit ​ 165,239 ​ 6,393 3.87 % 75,354 ​ 346 0.46 % Total interest-bearing deposits ​ 1,359,303 ​ 19,519 1.44 % 1,338,452 ​ 4,459 0.33 % FHLB Advances and other borrowings ​ 170,371 ​ 8,938 5.25 % 12,791 ​ 599 4.68 % Note payable ​ - ​ - — % 2,605 ​ 154 5.91 % Subordinated notes ​ 19,481 ​ 922 4.73 % 19,410 ​ 923 4.76 % Total interest-bearing liabilities ​ 1,549,155 ​ 29,379 1.90 % 1,373,258 ​ 6,135 0.45 % Noninterest-bearing demand deposits ​ 717,689 ​ ​ ​ ​ 761,393 ​ ​ ​ Other noninterest-bearing liabilities ​ 23,338 ​ ​ ​ ​ 20,744 ​ ​ Total liabilities ​ 2,290,182 ​ ​ ​ ​ 2,155,395 ​ ​ Total stockholders’ equity ​ 147,416 ​ ​ ​ ​ 155,956 ​ ​ Total liabilities and stockholders’ equity ​ $ 2,437,598 ​ ​ ​ ​ $ 2,311,351 ​ ​ Net interest income ​ ​ ​ ​ $ 88,391 ​ ​ $ 78,088 ​ Net interest rate spread (1) ​ ​ ​ 3.13 % ​ ​ 3.34 % Net interest-earning assets (2) ​ $ 792,184 ​ ​ $ 846,263 ​ ​ Net interest margin (3) ​ ​ ​ 3.78 % ​ 3.52 % Average interest-earning assets to interest-bearing liabilities ​ ​ ​ ​ ​ ​ 151.1 % ​ ​ ​ ​ 161.6 % (1) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.
Any excess of the recorded value of the loan satisfied over the market value of the property is charged against the allowance for loan losses, or, if the existing allowance is inadequate, charged to expense of the current period. After acquisition, all costs incurred in maintaining the property are expensed.
Any excess of the recorded value of the loan satisfied over the market value of the property is charged against the allowance for credit losses, or, if the existing allowance is inadequate, charged to expense of the current period. After acquisition, all costs incurred in maintaining the property are expensed.
Financial Position and Results of Operations of our Wealth Management Business Segment We conduct our business through two business segments: (1) our banking business segment, which involves the delivery of loan and deposit products to our customers through Orange Bank & Trust Company that provides revenues in our banking business segment; and (2) our wealth management business segment, which includes asset management and trust services to individuals and institutions through HVIA and Orange Bank & Trust Company that provides trust and 62 Table of Contents investment management fee income in our wealth management business segment.
Financial Position and Results of Operations of our Wealth Management Business Segment We conduct our business through two business segments: (1) our banking business segment, which involves the delivery of loan and deposit products to our customers through Orange Bank & Trust Company that provides revenues in 65 Table of Contents our banking business segment; and (2) our wealth management business segment, which includes asset management and trust services to individuals and institutions through HVIA and Orange Bank & Trust Company that provides trust and investment management fee income in our wealth management business segment.
We also have a borrowing agreement with Atlantic Community Bankers Bank (“ACBB”) to provide short-term borrowings of $2.5 million at December 31, 2022. There were no outstanding borrowings with ACBB at December 31, 2022. Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities.
We also have a borrowing agreement with Atlantic Community Bankers Bank (“ACBB”) to provide short-term borrowings of $2.5 million at December 31, 2023. There were no outstanding borrowings with ACBB at December 31, 2023. Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities.
Interest income on restructured loans is accrued after the borrower demonstrates the ability to pay under the restructured terms through a sustained period of repayment performance, which is generally six consecutive months. The following table sets forth information regarding our non-performing assets.
Interest income on restructured loans is accrued after the borrower demonstrates the ability to pay under the restructured terms through a sustained period of repayment performance, which is generally six consecutive months. 54 Table of Contents The following table sets forth information regarding our non-performing assets.
Average Balance Sheet and Related Yields and Rates The following table presents average balance sheet information, interest income, interest expense and the corresponding average yields earned and rates paid for the years ended December 31, 2022 and 2021. No tax equivalent yield adjustments have been made as the effects would be immaterial.
Average Balance Sheet and Related Yields and Rates The following table presents average balance sheet information, interest income, interest expense and the corresponding average yields earned and rates paid for the years ended December 31, 2023 and 2022. No tax equivalent yield adjustments have been made as the effects would be immaterial.
Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.
Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss 55 Table of Contents reserve is not warranted.
See Note 13 to the Notes to the Consolidated Audited Financial Statements appearing elsewhere in this Annual Report on Form 10-K for actual and required capital amounts and ratios at December 31, 2022 and December 31, 2021. Off-Balance Sheet Arrangements Off-Balance Sheet Arrangements .
See Note 13 to the Notes to the Consolidated Audited Financial Statements appearing elsewhere in this Annual Report on Form 10-K for actual and required capital amounts and ratios at December 31, 2023 and December 31, 2022. Off-Balance Sheet Arrangements Off-Balance Sheet Arrangements .
We are subject to various regulatory capital requirements administered by the Federal Reserve and New York State Department of Financial Services. At December 31, 2022 and December 31, 2021, we exceeded all applicable regulatory capital requirements, and were considered “well capitalized” under regulatory guidelines.
We are subject to various regulatory capital requirements administered by the Federal Reserve and New York State Department of Financial Services. At December 31, 2023 and December 31, 2022, we exceeded all applicable regulatory capital requirements, and were considered “well capitalized” under regulatory guidelines.
(3) Net interest margin represents net interest income divided by average total interest-earning assets. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Rate/Volume Analysis The following table presents the dollar amount of changes in interest income and interest expense for major components of interest earning assets and interest-bearing liabilities for the years indicated.
(3) Net interest margin represents net interest income divided by average total interest-earning assets. ​ 61 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Rate/Volume Analysis The following table presents the dollar amount of changes in interest income and interest expense for major components of interest earning assets and interest-bearing liabilities for the years indicated.
The average balances are daily averages and, for loans, include both performing and nonperforming balances. Interest income on loans includes the effects of discount 57 Table of Contents accretion and net deferred loan origination costs accounted for as yield adjustments.
The average balances are daily averages and, for loans, include both performing and nonperforming balances. Interest income on loans includes the effects of discount 60 Table of Contents accretion and net deferred loan origination costs accounted for as yield adjustments.
Management believes that the determination of the allowance for loan losses involves a high degree of complexity and requires management to make difficult and subjective judgments, which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could materially impact Orange County Bancorp’s results of operations.
Management believes that the determination of the allowance for credit losses (“ACL”) involves a high degree of complexity and requires management to make difficult and subjective judgments, which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could materially impact Orange County Bancorp’s results of operations.
In addition, noninterest income is also impacted by net gains (losses) on the sale of investment securities, service charges on deposit accounts, earnings on bank owned life insurance and other fee income consisting primarily of debit card fee income, checkbook fees and rebates and safe deposit box rental income. 46 Table of Contents Noninterest Expense .
In addition, noninterest income is also impacted by net gains on the sale of investment securities, service charges on deposit accounts, earnings on bank owned life insurance and other fee income consisting primarily of debit card fee income, checkbook fees and rebates and safe deposit box rental income. 49 Table of Contents Noninterest Expense .
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations for the years ended December 31, 2022 and 2021 should be read in conjunction with our consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations for the years ended December 31, 2023 and 2022 should be read in conjunction with our audited consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K.
The table distinguishes between: (1) changes attributable to volume (changes in volume multiplied by the prior year’s rate); (2) changes attributable to rate (change in rate multiplied by the prior year’s volume) and (3) total increase (decrease) (the sum of the 58 Table of Contents previous columns).
The table distinguishes between: (1) changes attributable to volume (changes in volume multiplied by the prior year’s rate); (2) changes attributable to rate (change in rate multiplied by the prior year’s volume) and (3) total increase (decrease) (the sum of the previous columns).
For further information, see Note 20 of the Notes to the Audited Consolidated Financial.
For further information, see Note 20 of the Notes to the Audited Consolidated Financial Statements.
Furthermore, the majority of the Bank’s loans are secured by real estate in the State of New York. Accordingly, the collectability of a substantial portion of the carrying value of the Bank’s loan portfolio is susceptible to changes in local market conditions and may experience adverse economic conditions.
Furthermore, the majority of the Bank’s loans are secured by real estate in the State of New York. Accordingly, the collectability of a substantial portion of the carrying value of the Bank’s loan portfolio is susceptible to changes in local market conditions and any adverse economic conditions.
The increased tax expense was reflective of the growth of pre-tax net income.
The increased tax expense was reflective of the growth of pre-tax income.
We also offer private banking services through Orange Bank & Trust Private Banking, a division of Orange Bank & Trust Company, and provide trust and wealth management services through Orange Bank & Trust Company’s trust services department and HVIA, which combined has $1.3 billion in assets under management at December 31, 2022.
We also offer private banking services through Orange Bank & Trust Private Banking, a division of Orange Bank & Trust Company, and provide trust and wealth management services through Orange Bank & Trust Company’s trust services department and HVIA, which combined has $1.6 billion in assets under management at December 31, 2023.
At December 31, 2022, we had a $2.9 million collateralized line of credit from the Federal Reserve Bank of New York with no outstanding balance. Additionally, we had a total of $25.0 million of discretionary lines of credit at December 31, 2022.
At December 31, 2023, we had a $2.3 million collateralized line of credit from the Federal Reserve Bank of New York with no outstanding balance. Additionally, we had a total of $25.0 million of discretionary lines of credit at December 31, 2023.
Net cash used in investing activities, which consists primarily of disbursements for loan originations and the purchase of securities, offset by principal collections on loans, proceeds from the sale of securities and proceeds from maturing securities and pay downs on securities, was $434.1 million and $291.3 million for the year ended December 31, 2022 and the year ended December 31, 2021, respectively.
Net cash used in investing activities, which consists primarily of disbursements for loan originations and the purchase of securities, offset by principal collections on loans, proceeds from the sale of securities and proceeds from maturing securities and pay downs on securities, was $144.9 million and $434.1 million for the year ended December 31, 2023 and the year ended December 31, 2022, respectively.
Net cash provided by financing activities, consisting of activity in deposit accounts and borrowings, was $183.5 million and $456.0 million for the year ended December 31, 2022 and the year ended December 31, 2021, respectively. We are committed to maintaining a strong liquidity position. We monitor our liquidity position daily.
Net cash provided by financing activities, consisting of activity in deposit accounts and borrowings, was $161.7 million and $183.5 million for the year ended December 31, 2023 and the year ended December 31, 2022, respectively. We are committed to maintaining a strong liquidity position. We monitor our liquidity position daily.
The market value of assets under management and/or administration at December 31, 2022 and 2021 was approximately $1.3 billion, respectively, at each date. This includes assets held at both Orange Bank & Trust Company and HVIA at December 31, 2022 and 2021, respectively.
The market value of assets under management and/or administration at December 31, 2023 and 2022 was approximately $1.6 billion at December 31, 2023, and $1.3 billion at December 31, 2022. This includes assets held at both Orange Bank & Trust Company and HVIA at December 31, 2023 and 2022, respectively.
The decrease was mainly due to the economic conditions within the marketplace and the impact of equity markets and the interest rate environment.
The increase was mainly due to the improving economic conditions within the marketplace and the impact of equity markets and the interest rate environment.
We also incurred an additional $923,000 in 60 Table of Contents interest expense for the year ended December 31, 2022 as compared to $919,000 for the year ended December 31, 2021 due to the issuance in September 2020 of $20.0 million in outstanding subordinated notes which carries an interest rate of 4.25%. Net Interest Income.
We also incurred an additional $922,000 in interest expense for the year ended December 31, 2023 as compared to $923,000 for the year ended December 31, 2022 due to the issuance in September 2020 of $20.0 million in outstanding subordinated notes which carries an interest rate of 4.25%. Net Interest Income.
We regularly review the need to adjust our investments in liquid assets based upon our assessment of: (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest earning deposits and securities, and (4) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest earning deposits and short- and intermediate-term securities.
We regularly review the need to adjust our investments in liquid assets based upon our assessment of: (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest earning deposits and securities, and (4) the objectives of our asset/liability management program.
Various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses. Such agencies may require the Bank to record additional provisions for loan losses based upon information available to them at the time of their examination.
Various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for credit losses. Such agencies may require the Company to make additional provisions for credit losses based upon information available to them at the time of their examination.
The real estate owned is recorded at the lower of carrying amount or fair value, less estimated costs to sell. Soon after acquisition, we order a new appraisal to determine the current market value of the property.
When we acquire real estate as a result of foreclosure, the real estate is classified as real estate owned. The real estate owned is recorded at the lower of carrying amount or fair value, less estimated costs to sell. Soon after acquisition, we order a new appraisal to determine the current market value of the property.
The following table summarizes classified assets of all portfolio types at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ At December 31, ​ 2022 ​ 2021 ​ ​ (Dollars in thousands) Classification of Assets: ​ ​ ​ ​ ​ ​ Substandard ​ $ 18,433 ​ $ 29,593 Doubtful ​ — ​ — Loss ​ — ​ — Total Classified Assets ​ $ 18,433 ​ $ 29,593 Special Mention ​ $ 7,974 ​ $ 4,885 ​ On the basis of management’s review of our assets, we classified $18.4 million of our assets at December 31, 2022 as substandard compared to $29.6 million at December 31, 2021.
The following table summarizes classified assets of all portfolio types at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ At December 31, ​ 2023 ​ 2022 ​ ​ (Dollars in thousands) Classification of Assets: ​ ​ ​ ​ ​ ​ Substandard ​ $ 19,615 ​ $ 18,433 Doubtful ​ — ​ — Loss ​ — ​ — Total Classified Assets ​ $ 19,615 ​ $ 18,433 Special Mention ​ $ 32,804 ​ $ 7,974 ​ On the basis of management’s review of our assets, we classified $19.6 million of our assets at December 31, 2023 as substandard compared to $18.4 million at December 31, 2022.
The increase in interest income from cash and due from banks and other was mainly attributable to an increase in the average yield earned on cash and due from banks. The average yield increased 93 basis points to 1.06% in 2022 from 0.13% in 2021 as a result of increases in short-term market interest rates during 2022.
The increase in interest income from cash and due from banks and other was mainly attributable to an increase in the average yield earned on cash and due from banks. The average yield increased 352 basis points to 4.58% in 2023 from 1.06% in 2022 as a result of increases in short-term market interest rates during 2023.
Interest expense increased $2.2 million, or 54.6%, to $6.1 million for the year ended December 31, 2022 from $4.0 million for the year ended December 31, 2021. The increase in interest expense was a result of the increase in rates on interest-bearing liabilities, primarily deposits, coupled with an increase in the average balance of interest-bearing liabilities.
Interest expense increased $23.2 million, or 378.9%, to $29.4 million for the year ended December 31, 2023 from $6.1 million for the year ended December 31, 2022. The increase in interest expense was a result of the increase in rates on interest-bearing liabilities, primarily deposits, coupled with an increase in the average balance of interest-bearing liabilities.
Commercial real estate loans increased $245.3 million, or 28.8%, to $1.10 billion at December 31, 2022 from $852.7 million at December 31, 2021 primarily as a result of continued loan demand by our commercial real estate customers and developers, along with our strategy to expand commercial real estate lending in our market area.
Commercial real estate loans increased $161.3 million, or 14.7%, to $1.26 billion at December 31, 2023 from $1.10 billion at December 31, 2022 primarily as a result of continued loan demand by our commercial real estate customers and developers, along with our strategy to expand commercial real estate lending in our market area.
From time to time, as part of our loss mitigation strategy, we may renegotiate loan terms based on the economic and legal reasons related to the borrower’s financial difficulties. There were no new troubled debt restructurings during the years ended December 31, 2022 or December 31, 2021.
From time to time, as part of our loss mitigation strategy, we may renegotiate loan terms based on the economic and legal reasons related to the borrower’s financial difficulties. There were no loans modified due to financial difficulties during the year ended December 31, 2023 or new troubled debt restructurings during the year ended December 31, 2022. Classified Assets.
The increase in overall deposits was primarily driven by strategic focus to increase commercial deposit relationships through our suite of cash management products and continued attention to low cost deposits. Our strategy remains centered on increasing business demand deposit accounts through our customer centric business development approach.
Our strategic focus is to increase commercial deposit relationships through our suite of cash management products and continued attention to low cost deposits. Our strategy remains centered on increasing business demand deposit accounts through our customer centric business development approach.
Future adjustments to the provision for loan losses and allowance for loan losses may be necessary due to economic, operating, regulatory and other conditions beyond the Bank’s control. Discussion and Analysis of Financial Condition Summary Financial Condition .
Future adjustments to the provision for credit losses and allowance for credit losses may be necessary due to economic, operating, regulatory and other conditions beyond the Company’s control. 51 Table of Contents Discussion and Analysis of Financial Condition Summary Financial Condition .
We anticipate that interest rates will continue to rise in 2023. Based on our asset sensitivity, a steepened yield curve and higher interest rates generally could have a beneficial impact on our net interest income. Conversely, a flat yield curve at lower rates would be expected to have an adverse impact on our net interest income. Noninterest Income .
Interest rates continued to remain elevated in 2023. Based on our asset sensitivity, a steepened yield curve and higher interest rates generally could have a beneficial impact on our net interest income. Conversely, a flat yield curve at lower rates would be expected to have an adverse impact on our net interest income. Noninterest Income .
Income Tax Expense. We recorded an income tax expense of $5.9 million for the year ended December 31, 2022, reflecting an effective tax rate of 19.5%. For the year ended December 31, 2021, we recorded an income tax expense of $5.4 million, reflecting an effective tax rate of 20.2%.
Income Tax Expense. We recorded an income tax expense of $7.7 million for the year ended December 31, 2023, reflecting an effective tax rate of 20.6%. For the year ended December 31, 2022, we recorded an income tax expense of $5.9 million, reflecting an effective tax rate of 19.5%.
While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.
Our primary sources of funds consist of deposit inflows, loan repayments and maturities and sales of securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.
Management believes that the most critical accounting estimate, which involves the most complex or subjective decisions or assessments, is as follows: Allowance for Loan Losses.
Management believes that the most critical accounting estimate, which involves the most complex or subjective decisions or assessments, is as follows: 50 Table of Contents Allowance for Credit Losses.
Interest expense on Federal Home Loan Bank borrowings increased to $599 thousand for the year ended December 31, 2022 as compared to $0 for the year ended December 31, 2021.
Interest expense on Federal Home Loan Bank borrowings increased to $8.9 million for the year ended December 31, 2023 as compared to $599 thousand for the year ended December 31, 2022.
PPP loans decreased $36.4 million, or 95.5%, to $1.7 million at December 31, 2022 from $38.1 million at December 31, 2021 due to loan forgiveness by the SBA throughout 2022. ​ Loan Portfolio Maturities. The following table sets forth the contractual maturities of our total loan portfolio at December 31, 2022.
PPP loans decreased $1.5 million, or 87.5%, to $215 thousand at December 31, 2023 from $1.7 million at December 31, 2022 due to loan forgiveness by the SBA throughout 2023. ​ Loan Portfolio Maturities. The following table sets forth the contractual maturities of our total loan portfolio at December 31, 2023.
Our exposure to credit loss is represented by the contractual amount of the instruments. We use the same credit policies in making commitments as we do for on-balance sheet instruments. At December 31, 2022, we had $389.1 million in loan commitments outstanding. We also had $13.5 million in standby letters of credit at December 31, 2022.
Our exposure to credit loss is represented by the contractual amount of the instruments. We use the same credit policies in making commitments as we do for on-balance sheet instruments. 67 Table of Contents At December 31, 2023, we had $409.5 million in loan commitments outstanding. We also had $17.3 million in standby letters of credit at December 31, 2023.
The increase in interest expense on interest-bearing deposits was due to an increase in the average cost of deposits combined with an increase in the average balance of interest-bearing deposits. The average cost of interest-bearing deposits increased eight basis points to 0.33% during the year ended December 31, 2022.
The increase in interest expense on interest-bearing deposits was due to an increase in the average cost of deposits combined with an increase in the average balance of interest-bearing deposits. The average cost of interest-bearing deposits increased 111 basis points to 1.44% during the year ended December 31, 2023.
Net income increased $3.1 million, or 14.5%, to $24.4 million for the year ended December 31, 2022 from $21.3 million for the year ended December 31, 2021.
Net income increased $5.1 million, or 21.0%, to $29.5 million for the year ended December 31, 2023 from $24.4 million for the year ended December 31, 2022.
The average rate paid on interest-bearing liabilities increased 12 basis points to 0.45% during the year ended December 31, 2022 from 0.33% for the year ended December 31, 2021.
The average rate paid on interest-bearing liabilities increased 145 basis points to 1.90% during the year ended December 31, 2023 from 0.45% for the year ended December 31, 2022.
Average balances for cash and due from banks decreased to $257.2 million for the year ended December 31, 2022 from $282.8 million for the year ended December 31, 2021, representing a decrease of $25.6 million, or 9.0%. Interest Expense.
Average balances for cash and due from banks decreased to $142.0 million for the year ended December 31, 2023 from $257.2 million for the year ended December 31, 2022, representing a decrease of $115.2 million, or 44.8%. Interest Expense.
As of December 31, 2022 and December 31, 2021, the aggregate amount of uninsured deposits (deposits in amounts greater than or equal to $250,000, which is the maximum amount for federal deposit insurance) was $1.2 billion and $1.1 billion, respectively. In addition, as of December 31, 2022, the aggregate amount of all our uninsured certificates of deposit was $17.0 million.
As of December 31, 2023 and December 31, 2022, the aggregate amount of uninsured deposits (deposits in amounts greater than or equal to $250,000, which is the maximum amount for federal deposit insurance) was $1.0 billion and $1.2 59 Table of Contents billion, respectively.
This increase was the result of an increase in our average interest-earning assets which increased by $302.4 million, or 15.8%, to $2.2 billion for the year ended December 31, 2022 compared to $1.9 billion for the year ended December 31, 2021.
This increase was the result of an increase in our average interest-earning assets which increased by $121.8 million, or 5.5%, to $2.3 billion for the year ended December 31, 2023 compared to $2.2 billion for the year ended December 31, 2022.
At December 31, 2021, we had $373.3 million in loan commitments outstanding. We also had $11.5 million in standby letters of credit at December 31, 2021. 64 Table of Contents For further information, see Note 16 to the Notes to the Consolidated Audited Financial Statements appearing elsewhere in this Annual Report on Form 10-K.
At December 31, 2022, we had $389.1 million in loan commitments outstanding. We also had $13.6 million in standby letters of credit at December 31, 2022. For further information, see Note 16 to the Notes to the Consolidated Audited Financial Statements appearing elsewhere in this Annual Report on Form 10-K.
This slight decrease was due to successful acquisition of new assets under management combined with a decrease in the market value of assets under management.
This slight increase was due to continued acquisition of new assets under management combined with an increase in the market value of assets under management.
As of December 31, 2022, our assets, loans, deposits and stockholders’ equity totaled $2.3 billion, $1.6 billion, $2.0 billion and $138.1 million, respectively. Key Factors Affecting Our Business Net Interest Income .
As of December 31, 2023, our assets, loans, deposits and stockholders’ equity totaled $2.5 billion, $1.7 billion, $2.0 billion and $165.4 million, respectively. Key Factors Affecting Our Business Net Interest Income .
The average yield on securities increased by 60 basis points from 1.69% for the year ended December 31, 2021 to 2.29% for the year ended December 31, 2022. The increase in the average yield on securities resulted from higher-yielding securities purchased during a period of increasing market interest rates.
The average yield on securities increased by 50 basis points from 2.29% for the year ended December 31, 2022 to 2.79% for the year ended December 31, 2023. The increase in the average yield on securities resulted from higher-yielding securities purchased during a period of increasing market interest rates combined with the maturity of lower-yielding investment securities during 2023.
At December 31, 2022, our core deposits (which includes all deposits except for certificates of deposit) totaled $1.9 billion, or 95.3% of our total deposits.
At December 31, 2023, our core deposits (which includes all deposits except for certificates of deposit) totaled $1.8 billion, or 89.1% of our total deposits.
The average yield on loans increased by 29 basis points from 4.51% for the year ended December 31, 2021 to 4.80% for the year ended December 31, 2022.
The average yield on loans increased by 92 basis points from 4.80% for the year ended December 31, 2022 to 5.72% for the year ended December 31, 2023.
Supporting the increase in interest income 59 Table of Contents was an increase in the average yield on interest earning assets of 43 basis points to 3.79% during the year ended December 31, 2022 from 3.36% for the year ended December 31, 2021.
Supporting the increase in interest income was an increase in the average yield on interest earning assets of 124 basis points to 5.03% during the year ended December 31, 2023 from 3.79% for the year ended December 31, 2022.
The increase in the average balance of loans was primarily due to our continued success in growing our commercial real estate, construction, and commercial and industrial loans, whereas the average yield on loans increased due to rising interest rates within the market for new loan originations as a result of the overall interest rate environment.
The increase in the average balance of loans was primarily due to our continued investment in commercial real estate, construction, and commercial and industrial loans, whereas the increase in average yield on loans continued to be driven by the rising interest rate environment within the market for new loan originations.
No PPP loans were considered non-performing at December 31, 2022 or December 31, 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ At December 31, ​ ​ 2022 2021 ​ ​ (Dollars in thousands) 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 ​ 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 accruing 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 % ​ Non-performing loans at December 31, 2022 totaled $8.5 million and consisted of $3.9 million of commercial real estate loans, $2.9 million of commercial and industrial loans and $1.2 million of residential real estate loans.
No PPP loans were considered non-performing at December 31, 2023 or December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ At December 31, ​ ​ 2023 2022 ​ ​ (Dollars in thousands) Non-accrual loans: ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 556 ​ $ 1,003 ​ Commercial real estate ​ 2,692 ​ 3,882 ​ Commercial real estate construction ​ — ​ — ​ Residential real estate ​ 1,179 ​ 1,188 ​ Home equity ​ — ​ 51 ​ Consumer ​ — ​ — ​ Total non-accrual loans ​ 4,427 ​ 6,124 ​ Accruing loans 90 days or more past due: ​ ​ ​ Commercial and industrial ​ — ​ 1,850 ​ Commercial real estate ​ — ​ — ​ Commercial real estate construction ​ — ​ — ​ Residential real estate ​ — ​ — ​ Home equity ​ — ​ — ​ Consumer ​ — ​ 477 ​ Total accruing loans 90 days or more past due ​ — ​ 2,327 ​ Total non-performing loans ​ 4,427 ​ 8,451 ​ Other real estate owned ​ — ​ — ​ Other non-performing assets ​ — ​ — ​ Total non-performing assets ​ $ 4,427 ​ $ 8,451 ​ Ratios: ​ ​ ​ Total non-performing loans to total loans ​ 0.25 % 0.54 % Total non-performing loans to total assets ​ 0.18 % 0.37 % Total non-performing assets to total assets ​ 0.18 % 0.37 % ​ Non-performing loans at December 31, 2023 totaled $4.4 million and consisted of $2.7 million of commercial real estate loans, $556 thousand of commercial and industrial loans and $1.2 million of residential real estate loans.
Maintaining available borrowing capacity provides us with a contingent source of liquidity. Total borrowings from the Federal Home Loan Bank of New York were $131.5 million at December 31, 2022 and no borrowings outstanding at December 31, 2021.
Maintaining available borrowing capacity provides us with a contingent source of liquidity. Total borrowings from the Federal Home Loan Bank of New York were $234.5 million at December 31, 2023 and $131.5 million at December 31, 2022. We have the capacity to borrow up to $495.6 million from the Federal Home Loan Bank of New York at December 31, 2023.
The increase in noninterest expense for the year ended December 31, 2022 as compared to the prior year was mainly due to a $2.8 million increase in salaries, a $2.3 million increase in employee benefits, a $417 thousand increase in professional fees, a $409,000 increase in occupancy expense and a $381,000 increase in advertising expenses.
The increase in noninterest expense for the year ended December 31, 2023 as compared to the prior year was mainly due to a $2.3 million increase in salaries, a $1.9 million increase in employee benefits, a $687 thousand increase in professional fees, a $294 thousand increase in occupancy expense and a $56 thousand increase in advertising expenses.
Net cash provided by operating activities was $30.6 million and $20.3 million for the year ended December 31, 2022 and the year ended December 31, 2021, respectively.
Net cash provided by operating activities was $44.5 million and $30.5 million for the year ended December 31, 2023 and the year ended December 31, 2022, respectively.
We held approximately $33.0 million in brokered deposits (excluding reciprocal deposits obtained through the Certificate Deposit Account Registry Service (CDARS) and Insured Cash Sweep (ICS) networks) at December 31, 2022 and no brokered deposits at December 31, 2021. Our reciprocal deposits obtained through the CDARS and ICS networks totaled $12.5 million and $40.9 million, respectively, at December 31, 2022.
We held approximately $172.4 million in brokered deposits (excluding reciprocal deposits obtained through the Certificate Deposit Account Registry Service (CDARS) and Insured Cash Sweep (ICS) networks) at December 31, 2023 and $33.0 million in brokered deposits at December 31, 2022.
The following table sets forth the maturity of these uninsured certificates of deposit as of December 31, 2022. ​ ​ ​ ​ ​ ​ ​ At December 31, 2022 ​ (In thousands) Maturing period: ​ ​ ​ Three months or less ​ $ 2,099 Over three months through six months ​ 4,349 Over six months through twelve months ​ 4,267 Over twelve months ​ 6,300 Total ​ $ 17,015 ​ ​ 56 Table of Contents Borrowings Our borrowings consist of both short-term and long-term borrowings and provide us with one of our sources of funding.
The following table sets forth the maturity of these uninsured certificates of deposit as of December 31, 2023. ​ ​ ​ ​ ​ ​ ​ At December 31, 2023 ​ (In thousands) Maturing period: ​ ​ ​ Three months or less ​ $ 1,437 Over three months through six months ​ 873 Over six months through twelve months ​ 2,828 Over twelve months ​ 6,185 Total ​ $ 11,323 ​ ​ Borrowings Our borrowings consist of both short-term and long-term borrowings and provide us with one of our sources of funding.
The average balance of loans (excluding PPP loans) increased by $263.9 million, or 22.7%, to $1.4 billion for the year ended December 31, 2022 compared to $1.2 billion for the year ended December 31, 2021.
The average balance of loans (excluding PPP loans) increased by $256.8 million, or 18.0%, to $1.7 billion for the year ended December 31, 2023 compared to $1.4 billion for the year ended December 31, 2022.
Interest income on cash and due from banks and other increased $2.4 million, or 636.3%, to $2.7 million for the year ended December 31, 2022 from $372,000 for the year ended December 31, 2021.
Interest income on cash and due from banks and other increased $3.8 million, or 137.2%, to $6.5 million for the year ended December 31, 2023 from $2.7 million for the year ended December 31, 2022.
The following table sets forth our loan delinquencies, including non-accrual loans, by type and amount at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ 2022 ​ 2021 ​ ​ 30 – 59 ​ 60 – 89 ​ 90 Days ​ 30 – 59 ​ 60 – 89 ​ 90 Days ​ ​ Days ​ Days ​ or More ​ Days ​ Days ​ or More ​ Past Due Past Due Past Due Past Due Past Due Past Due ​ (In thousands) Commercial and industrial ​ $ 1,497 ​ $ 1,583 ​ $ 2,854 ​ $ 541 ​ $ 1,519 ​ $ 720 Commercial real estate ​ 563 ​ — ​ 952 ​ — ​ 2,873 ​ 1,161 Commercial real estate construction ​ — ​ — ​ — ​ — ​ — ​ — Residential real estate ​ 2 ​ — ​ 1,188 ​ 26 ​ — ​ 578 Home equity ​ — ​ — ​ — ​ — ​ 58 ​ 50 Consumer ​ 584 ​ 634 ​ 476 ​ 1,134 ​ 292 ​ 212 Total ​ $ 2,646 ​ $ 2,217 ​ $ 5,470 ​ $ 1,701 ​ $ 4,742 ​ $ 2,721 ​ The following table sets forth our loan delinquencies, including non-accrual loans, at the dates indicated as a percentage of loans for the corresponding types. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ ​ 2022 ​ ​ 2021 ​ ​ ​ 30 – 59 ​ 60 – 89 ​ 90 Days ​ ​ 30 – 59 ​ 60 – 89 ​ 90 Days ​ ​ ​ Days ​ Days ​ or More ​ ​ Days ​ Days ​ or More ​ ​ Past Due Past Due Past Due ​ Past Due Past Due Past Due Commercial and industrial 0.58 % 0.62 % 1.11 % ​ 0.23 % 0.66 % 0.31 % Commercial real estate 0.05 % — % 0.09 % ​ — 0.34 % 0.14 % Commercial real estate construction — — — ​ — — — Residential real estate 0.00 % — 1.60 % ​ 0.04 % — 0.89 % Home equity — — — ​ — 0.43 % 0.37 % Consumer 3.58 % 3.89 % 2.92 % ​ 5.94 % 1.53 % 1.11 % Total 0.17 % 0.14 % 0.35 % ​ 0.13 % 0.37 % 0.21 % ​ Non-performing Assets Management determines that a loan is impaired or non-performing when it is probable at least a portion of the loan will not be collected in accordance with the original terms due to a deterioration in the financial condition of the borrower or the value of the underlying collateral if the loan is collateral dependent.
The following table sets forth our loan delinquencies, including non-accrual loans, by type and amount at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ 2023 ​ 2022 ​ ​ 30 – 59 ​ 60 – 89 ​ 90 Days ​ 30 – 59 ​ 60 – 89 ​ 90 Days ​ ​ Days ​ Days ​ or More ​ Days ​ Days ​ or More ​ Past Due Past Due Past Due Past Due Past Due Past Due ​ (In thousands) Commercial and industrial ​ $ 229 ​ $ — ​ $ 327 ​ $ 1,497 ​ $ 1,583 ​ $ 2,854 Commercial real estate ​ 20 ​ — ​ 300 ​ 563 ​ — ​ 952 Commercial real estate construction ​ — ​ — ​ — ​ — ​ — ​ — Residential real estate ​ — ​ — ​ 1,167 ​ 2 ​ — ​ 1,188 Home equity ​ — ​ — ​ — ​ — ​ — ​ — Consumer ​ — ​ — ​ — ​ 584 ​ 634 ​ 476 Total ​ $ 249 ​ $ — ​ $ 1,794 ​ $ 2,646 ​ $ 2,217 ​ $ 5,470 ​ 53 Table of Contents The following table sets forth our loan delinquencies, including non-accrual loans, at the dates indicated as a percentage of loans for the corresponding types. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ ​ 2023 ​ ​ 2022 ​ ​ ​ 30 – 59 ​ 60 – 89 ​ 90 Days ​ ​ 30 – 59 ​ 60 – 89 ​ 90 Days ​ ​ ​ Days ​ Days ​ or More ​ ​ Days ​ Days ​ or More ​ ​ Past Due Past Due Past Due ​ Past Due Past Due Past Due Commercial and industrial 0.08 % — % 0.12 % ​ 0.58 % 0.62 % 1.11 % Commercial real estate 0.00 % — % 0.02 % ​ 0 — % 0.09 % Commercial real estate construction — — — ​ — — — Residential real estate — % — 1.49 % ​ 0.00 % — 1.60 % Home equity — — — ​ — — % — % Consumer — % — % — % ​ 3.58 % 3.89 % 2.92 % Total 0.01 % — % 0.10 % ​ 0.17 % 0.14 % 0.35 % ​ Non-performing Assets Management reviews a loan for impairment or individual evaluation when it is non-performing or when it is probable at least a portion of the loan will not be collected in accordance with the original terms due to a deterioration in the financial condition of the borrower or the value of the underlying collateral if the loan is collateral dependent.
For the year ended December 31, 2022 compared to the year ended December 31, 2021: ● Salaries increased primarily as a result of hiring additional employees in support of the growth, along with increased salaries in the normal course of business and increased competition. ● Employee benefits increased mainly due to escalating insurance costs as well as the full effect of staff additions in the prior year associated with expansion of the Bank branch network ● Professional fees continued to increase primarily due to continuing information technology support costs relating to our core processing conversion that occurred in November 2021, costs associated with a third-party manager of our investment portfolio and audit and accounting expenses due to enhancing audit procedures for audited financial statements associated with the Company’s public reporting status. ● Occupancy expense increased as a result of the full year effect of branch offices opened during 2021. ● Advertising and other noninterest expense increased mainly as a result of increased operating costs associated with our growth and development of brand awareness.
For the year ended December 31, 2023 compared to the year ended December 31, 2022: • Salaries increased primarily as a result of employee hiring costs necessary to support the growth of the Company, along with increased salaries in the normal course of business and increased competition. • Employee benefits increased mainly due to continued escalations of insurance costs as well as the full effect of staff additions in the prior year associated with branch expansion. • Professional fees increased mainly due to continued costs associated with a third-party manager of our investment portfolio as well as legal, audit and accounting expenses due to enhanced requirements associated with the Company’s public reporting status. • Occupancy expense increased due to normal costs associated with branches and bank facilities. • Advertising and other noninterest expense increased mainly as a result of increased operating costs associated with continued growth and development of brand awareness.
The average balance of interest-bearing deposits increased by $173.4 million, or 14.9%, to $1.3 billion for the year ended December 31, 2022 compared to the year ended December 31, 2021.
The average balance of interest-bearing liabilities increased by $175.9 million, or 12.8%, to $1.5 billion for the year ended December 31, 2023 compared to $1.4 billion for the year ended December 31, 2022.
Net interest rate spread increased by 31 basis points to 3.34% for the year ended December 31, 2022 from 3.03% for the year ended December 31, 2021, reflecting a 44 basis points increase in the average yield on interest-earnings assets, partially offset by a 12 basis points increase in the average rate paid on interest-bearing liabilities.
Net interest rate spread decreased by 21 basis points to 3.13% for the year ended December 31, 2023 from 3.34% for the year ended December 31, 2022, reflecting a 145 basis points increase in the average rate paid on interest-bearing liabilities, partially offset by a 124 basis points increase in the average yield on interest-earning assets. Provision for Credit Losses.
We had no other real estate owned at December 31, 2022. 51 Table of Contents Non-performing assets increased $2.5 million, or 42.0%, to $8.5 million, or 0.37% of total assets, at December 31, 2022 from $6.0 million, or 0.28% of total assets, at December 31, 2021.
We had no other real estate owned at December 31, 2023. Non-performing assets decreased $4.0 million, or 47.6%, to $4.4 million, or 0.18% of total assets, at December 31, 2023 from $8.5 million, or 0.37% of total assets, at December 31, 2022.
Our income related to our wealth management business segment, which we record as noninterest income, decreased $340 thousand, or 3.5%, to $9.3 million for the year ended December 31, 2022 compared to $9.6 million for the year ended December 31, 2021.
Our income related to our wealth management business segment, which we record as noninterest income, increased $1.0 million, or 11.2%, to $10.3 million for the year ended December 31, 2023 compared to $9.3 million for the year ended December 31, 2022.
Interest expense on interest-bearing deposits increased by $1.6 million, or 54.8%, to $4.5 million during the year ended December 31, 2022 from $2.9 million during the year ended December 31, 2021.
Interest expense on interest-bearing deposits increased by $15.1 million, or 337.7%, to $19.5 million during the year ended December 31, 2023 from $4.5 million during the year ended December 31, 2022.
The allowance for loan losses was $21.8 million, or 1.39%, of loans outstanding at December 31, 2022 compared to $17.7 million, or 1.37%, of loans outstanding at December 31, 2021. Noninterest Income.
The allowance for credit losses was $25.2 million, or 1.44%, of loans outstanding at December 31, 2023 compared to $21.9 million, or 1.39%, of loans outstanding at December 31, 2022. Noninterest Income.
The following table sets forth the composition of our loan portfolio by type of loan at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ ​ At December 31, ​ ​ ​ 2022 ​ ​ ​ 2021 ​ ​ Amount Percent ​ ​ Amount Percent ​ ​ (Dollars in thousands) Commercial and industrial ​ $ 257,184 16.39 % ​ ​ $ 230,394 17.84 % 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 % PPP loans ​ 1,717 0.11 % ​ ​ 38,114 2.95 % 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 ​ ​ ​ ​ Net loans increased $273.8 million, or 21.5%, to $1.6 billion at December 31, 2022 from $1.3 billion at December 31, 2021 primarily due to increases in commercial real estate loans and commercial real estate construction loans.
The following table sets forth the composition of our loan portfolio by type of loan at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ ​ At December 31, ​ ​ ​ 2023 ​ ​ ​ 2022 ​ ​ Amount Percent ​ ​ Amount Percent ​ ​ (Dollars in thousands) Commercial and industrial ​ $ 273,347 15.65 % ​ ​ $ 257,184 16.39 % Commercial real estate ​ 1,259,356 72.08 % ​ ​ 1,098,054 69.97 % Commercial real estate construction ​ 85,725 4.91 % ​ ​ 109,570 6.98 % Residential real estate ​ 78,321 4.48 % ​ ​ 74,277 4.73 % Home equity ​ 13,546 0.78 % ​ ​ 12,329 0.79 % Consumer ​ 36,552 2.09 % ​ ​ 16,299 1.04 % PPP loans ​ 215 0.01 % ​ ​ 1,717 0.11 % Total loans ​ 1,747,062 100.00 % ​ ​ 1,569,430 100.00 % Allowance for credit losses ​ 25,182 ​ ​ ​ 21,832 ​ ​ Total loans, net ​ $ 1,721,880 ​ ​ ​ ​ $ 1,547,598 ​ ​ ​ ​ Net loans increased $174.3 million, or 11.3%, to $1.7 billion at December 31, 2023 from $1.6 billion at December 31, 2022 primarily due to increases in commercial real estate loans, consumer loans and commercial and industrial loans.
The 2020 Notes are non-callable for five years, have a stated maturity of September 30, 2030, and bear interest at a fixed rate of 4.25% per year until September 30, 2025.
In September 2020, we issued $20.0 million in aggregate principal amount of fixed to floating subordinated notes (the “2020 Notes”) to certain institutional investors. The 2020 Notes are non-callable for five years, have a stated maturity of September 30, 2030, and bear interest at a fixed rate of 4.25% per year until September 30, 2025.
This usually includes a modification of loan terms, such as a reduction of the interest rate to below market terms, capitalizing past due interest or extending the maturity date and possibly a partial forgiveness of the principal amount due.
Management will consider a modification of loan terms, such as a reduction of the interest rate to below market terms, capitalizing past due interest or extending the maturity date and possibly a partial forgiveness of the principal amount due, when it is deemed appropriate based on individual borrower conditions.
The increase was mainly driven by an $17.6 million increase in net interest income, partially offset by an increase in the provision for loan losses of $7.1 million and an increase in noninterest expense of $6.8 million. Interest Income.
The increase was mainly driven by a $10.3 million increase in net 62 Table of Contents interest income, a $1.4 million increase in noninterest income and a decrease in the provision for credit losses of $1.6 million, partially offset by an increase in noninterest expense of $6.5 million. Interest Income.
Deposits The following table sets forth our total deposit account balances, by account type, at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, 2022 ​ ​ At December 31, 2021 ​ ​ ​ ​ ​ Average ​ ​ Average ​ ​ Amount ​ Percent ​ Rate ​ ​ Amount ​ Percent ​ Rate ​ ​ (Dollars in thousands) Noninterest-bearing demand deposits ​ $ 723,228 36.63 % — ​ ​ $ 701,645 36.65 % — ​ Interest bearing demand deposits ​ 284,747 14.42 % 0.31 % ​ 301,596 15.75 % 0.11 % Money market deposits ​ 615,149 31.16 % 0.97 % ​ 615,111 32.13 % 0.26 % Savings deposits ​ 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 % ​ Total deposits increased $60.0 million, or 3.1%, to $2.0 billion at December 31, 2022 from $1.9 billion at December 31, 2021.
Deposits The following table sets forth our total deposit account balances, by account type, at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, 2023 ​ ​ At December 31, 2022 ​ ​ ​ ​ ​ Average ​ ​ Average ​ ​ Amount ​ Percent ​ Rate ​ ​ Amount ​ Percent ​ Rate ​ ​ (Dollars in thousands) Noninterest-bearing demand deposits ​ $ 699,203 34.30 % — ​ ​ $ 723,228 36.63 % — ​ Interest bearing demand deposits ​ 304,892 14.95 % 0.49 % ​ 284,747 14.42 % 0.31 % Money market deposits ​ 584,976 28.69 % 2.04 % ​ 615,149 31.16 % 0.97 % Savings deposits ​ 228,161 11.19 % 1.19 % ​ 258,230 13.08 % 0.72 % Certificates of deposit ​ 221,517 10.87 % 4.57 % ​ 93,033 4.71 % 1.74 % Total ​ $ 2,038,749 100.00 % 1.29 % ​ $ 1,974,387 100.00 % 0.52 % ​ Total deposits increased $64.4 million, or 3.3%, to $2.04 billion at December 31, 2023 from $1.97 billion at December 31, 2022.
Interest income increased $19.8 million, or 30.7%, to $84.2 million for the year ended December 31, 2022 from $64.4 million for the year ended December 31, 2021.
Interest income increased $33.5 million, or 39.8%, to $117.8 million for the year ended December 31, 2023 from $84.2 million for the year ended December 31, 2022.
Although we believe that we have established the allowance at a level to absorb probable and estimable losses, additions may be necessary if economic or other conditions in the future differ from the current environment. 53 Table of Contents The following table sets forth activity in our allowance for loan losses for the years indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or for the Year Ended ​ ​ ​ December 31, ​ ​ 2022 2021 ​ ​ (Dollars in thousands) Balance at beginning of year ​ $ 17,661 ​ $ 16,172 ​ Charge-offs: ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ 4,962 ​ 942 Commercial real estate ​ — ​ — Commercial real estate construction ​ — ​ — Residential real estate ​ 65 ​ 11 Home equity ​ — ​ — Consumer ​ 479 ​ 314 PPP loans ​ — ​ — Total charge-offs ​ 5,506 ​ 1,267 Recoveries: ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ 66 ​ 220 Commercial real estate ​ 52 ​ 75 Commercial real estate construction ​ — ​ — Residential real estate ​ — ​ — Home equity ​ — ​ — Consumer ​ 42 ​ 33 Total recoveries ​ 160 ​ 328 Net charge-offs (recoveries) ​ 5,346 ​ 939 Provision for loan losses ​ 9,517 ​ 2,428 Balance at end of period ​ $ 21,832 ​ $ 17,661 ​ Ratios: ​ ​ ​ ​ ​ ​ ​ Net charge-offs to average loans outstanding ​ 0.37 % 0.08 % Allowance for loan losses to non-performing loans at end of year ​ 258.34 % 296.67 % Allowance for loan losses to total loans at end of year ​ 1.39 % 1.37 % Allowance for loan losses to total loans (excluding PPP Loans) at end of year ​ 1.39 % 1.41 % ​ The following table presents the summary of net charge-offs (recovery) to average loans outstanding by loan type for the years presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ Net charge-offs to average loans outstanding ​ ​ 0.37% ​ ​ 0.08% Broken down by loan type as follows, excluding PPP: ​ ​ ​ ​ ​ ​ Commercial and Industrial ​ 0.34% ​ 0.06% Commercial real estate ​ 0.00% ​ (0.01)% Commercial real estate construction ​ 0.00% ​ 0.00% Residential real estate ​ 0.00% ​ 0.00% Home equity ​ 0.00% ​ 0.00% Consumer ​ 0.03% ​ 0.02% ​ The allowance for loan losses increased by $4.2 million, or 23.6%, to $21.8 million, or 1.39% of total loans at December 31, 2022 from $17.7 million, or 1.37% of total loans (or 1.41% of total loans, excluding PPP loans), at December 31, 2021.
Future adjustments to the provision for credit losses and allowance for credit losses may be necessary due to economic, operating, regulatory and other conditions beyond the Company’s control. 56 Table of Contents The following table sets forth activity in our allowance for credit losses for the years indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or for the Year Ended ​ ​ ​ December 31, ​ ​ 2023 2022 ​ ​ (Dollars in thousands) Balance at beginning of year ​ $ 21,832 ​ $ 17,661 ​ Adoption of ASC 326 ​ ​ 1,483 ​ ​ — ​ Charge-offs: ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ 1,569 ​ 4,962 Commercial real estate ​ — ​ — Commercial real estate construction ​ — ​ — Residential real estate ​ — ​ 65 Home equity ​ — ​ — Consumer ​ 37 ​ 479 PPP loans ​ — ​ — Total charge-offs ​ 1,606 ​ 5,506 Recoveries: ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ 75 ​ 66 Commercial real estate ​ 173 ​ 52 Commercial real estate construction ​ — ​ — Residential real estate ​ — ​ — Home equity ​ — ​ — Consumer ​ 211 ​ 42 Total recoveries ​ 459 ​ 160 Net charge-offs (recoveries) ​ 1,147 ​ 5,346 Provision for credit losses ​ 3,014 ​ 9,517 Balance at end of period ​ $ 25,182 ​ $ 21,832 ​ Ratios: ​ ​ ​ ​ ​ ​ ​ Net charge-offs to average loans outstanding ​ 0.18 % 0.37 % Allowance for credit losses to non-performing loans at end of period ​ 568.83 % 258.34 % Allowance for credit losses to total loans at end of period ​ 1.44 % 1.39 % Allowance for credit losses to total loans (excluding PPP Loans) at end of period ​ 1.44 % 1.39 % ​ ​ The following table presents the summary of net charge-offs (recovery) to average loans outstanding by loan type for the years presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ​ Net charge-offs to average loans outstanding ​ ​ 0.07% ​ ​ 0.37% Broken down by loan type as follows, excluding PPP: ​ ​ ​ ​ ​ ​ Commercial and Industrial ​ 0.09% ​ 0.34% Commercial real estate ​ 0.00% ​ 0.00% Commercial real estate construction ​ 0.00% ​ 0.00% Residential real estate ​ 0.00% ​ 0.00% Home equity ​ 0.00% ​ 0.00% Consumer ​ -0.01% ​ 0.03% ​ The allowance for credit losses increased by $3.4 million, or 15.3%, to $25.2 million, or 1.44% of total loans at December 31, 2023 from $21.8 million, or 1.39% of total loans, at December 31, 2022.
Noninterest income information is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Change ​ 2022 2021 Amount Percent ​ ​ (Dollars in thousands) Service charges on deposit accounts ​ $ 693 ​ $ 638 ​ $ 55 8.6 % Trust income ​ 4,764 ​ 4,788 ​ (24) (0.5) % Investment advisory income ​ 4,537 ​ 4,853 ​ (316) (6.5) % Investment securities gains (losses) ​ — ​ — ​ — — % Earnings on BOLI ​ 950 ​ 793 ​ 157 19.8 % Other ​ 1,052 ​ 1,030 ​ 22 2.1 % Total noninterest income ​ $ 11,996 ​ $ 12,102 ​ $ (106) (0.9) % ​ Noninterest income decreased by $106 thousand, or 0.9%, to $12.0 million for the year ended December 31, 2022 from $12.1 million for the year ended December 31, 2021.
Noninterest income information is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Change ​ 2023 2022 Amount Percent ​ ​ (Dollars in thousands) Service charges on deposit accounts ​ $ 809 ​ $ 693 ​ $ 116 16.7 % Trust income ​ 5,098 ​ 4,764 ​ 334 7.0 % Investment advisory income ​ 5,241 ​ 4,537 ​ 704 15.5 % Investment securities gains (losses) ​ 107 ​ — ​ 107 — % Earnings on BOLI ​ 984 ​ 950 ​ 34 3.6 % Other ​ 1,180 ​ 1,052 ​ 128 12.2 % Total noninterest income ​ $ 13,419 ​ $ 11,996 ​ $ 1,423 11.9 % ​ Noninterest income increased by $1.4 million, or 11.9 %, to $13.4 million for the year ended December 31, 2023 from $12.0 million for the year ended December 31, 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIn our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. ​ Basis for Opinion ​ These financial statements are the responsibility of the Company's management.
Biggest changeIn our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. ​ Explanatory Paragraph - Change in Accounting Principle ​ As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for credit losses effective January 1, 2023 due to the adoption of ASC 326, Financial Instruments – Credit Losses. ​ Basis for Opinion ​ These financial statements are the responsibility of the Company's management.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk A smaller reporting company is not required to provide the information related to this item. ​ ​ 65 Table of Contents ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ Stockholders and Board of Directors of Orange County Bancorp, Inc.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk A smaller reporting company is not required to provide the information related to this item. ​ ​ 68 Table of Contents ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ Stockholders and Board of Directors of Orange County Bancorp, Inc.
(the "Company") as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements").
(the "Company") as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements").
We believe that our audits provide a reasonable basis for our opinion. ​ ​ ​ ​ /s/ Crowe LLP ​ We have served as the Company's auditor since 2018. ​ Grand Rapids, Michigan March 24, 2023 ​ 66 Table of Contents ​
We believe that our audits provide a reasonable basis for our opinion. ​ ​ /s/ Crowe LLP ​ ​ We have served as the Company's auditor since 2018. ​ Livingston, New Jersey March 29, 2024 ​ 69 Table of Contents ​

Other OBT 10-K year-over-year comparisons