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Orange County Bancorp, Inc. Announces Third Quarter and Year-to-Date Results through September 30, 2020

Thursday, 22 October 2020 10:10 PM

Orange County Bancorp, Inc.

Topic:
Earnings

MIDDLETOWN, NY / ACCESSWIRE / October 22, 2020 / Orange County Bancorp, Inc. (the "Company")(OTCQX:OCBI), parent of Orange Bank & Trust Co. (the "Bank") and Hudson Valley Investment Advisors, Inc. (HVIA), today announced net income of $2.9 million, or $0.64 per share, and $8.0 million, or $1.78 per share, for the three and nine months ended September 30, 2020, respectively. This compares with net income of $3.2 million, or $0.70 per share, and $8.2 million, or $1.82 per share, for the three and nine months ended September 30, 2019, respectively.

  • Net Interest Income for the first nine months of 2020 was $35.9 million, up 11.5% over last year and for the third quarter of 2020 was $12.6 million, up 9.9% over the same period last year
  • Average Loans for the third quarter of 2020 was $1.05 billion, up 25.1% over same quarter last year, including PPP loans
  • Average Non-Interest-Bearing Deposits for the first nine months of 2020 were $429.4 million, up 51.2%, including undrawn PPP loan related deposits compared to last year.
  • Provisions for Loan Losses for the first nine months of 2020 were $3.7 million, up $2.0 million, or 117.6%, from $1.7 million last year
  • Net Income for the first nine months of 2020 was $8.0 million or $200 thousand less than the same period last year. A $2 million increase in Provision for loan losses for the first nine months of 2020 was a material factor in the net income decline.
  • Total Assets increased $496 million or 40.4% from December 31, 2019 to $1.72 billion
  • Tangible Book Value per Share of $27.34 increased 8.7% from December 31, 2019

"This was a dynamic and challenging quarter for the Bank and I am proud of how our team responded," said President and Chief Executive Officer Michael Gilfeather. "We continue to be impacted by economic and operational issues related to COVID-19, but managed to produce another strong quarter, with earnings of $2.9 million, or $.64 per share, bringing our 9 month total to $8.0 million, or $1.78 per share.

New York State's ongoing efforts to curb the spread of the virus recently allowed for the partial re-opening of business in the economies we serve. Though economic activity remains well short of pre-COVID levels, we saw sufficient economic momentum to reduce deferred loan balances more than two-thirds from their second quarter peak and are seeing this trend continue. We will, as always, continue to monitor and work closely with clients, especially those still on deferral, and are cautiously optimistic loans brought current will remain so and that we will continue to reduce deferrals as business in the markets we serve improves further.

The unprecedented federal response to the economic shutdown has left the entire banking community dealing with the challenge of historically low rates and high levels of liquidity. Despite significant interest rate margin pressure this created across our industry, we managed to grow net interest income 6.1% quarter over quarter, and 11.5% through the first 9 months of the year. This was accomplished despite an average of $87 million in Payroll Protection Program loans during the quarter, which carry an interest rate of just 1%. The Bank was very active in the PPP program, originating over $100 million in loans for more than 800 clients, and stands ready to assist clients as the forgiveness process evolves.

Loans and deposits also showed strong growth in the quarter, with the latter outpacing the former due to a decision to temper loan growth, despite significant demand, as we continue to monitor economic conditions and maintain conservative lending standards in today's low rate environment. Of particular note is the growth in our average non-interest bearing deposits, which were up over 50% to nearly $430 million, as compared to the same period last year. While some of this increase represents clients yet unused PPP loans, the majority of this growth was the result of our concerted efforts to expand business client outreach and earn a greater share of their banking business.

Though the low interest rate environment has presented challenges, it did provide us an opportunity to raise $20 million in cost effective debt through the issuance of 10-year Subordinated Notes with a 5-year fixed interest rate of 4.25%. This debt, combined with our low cost deposit base, further strengthens our economic foundation which should support continued growth for the forseeable future. As of September 30, 2020, none of these proceeds were down-streamed to the Bank as capital. The Company will contribute proceeds of this offering as additional capital to the Bank as needed to support future growth.

We remain on track to open branches in the Bronx and Nanuet by early next year. Additionally, we are ready to launch the Bank's new service called Orange Wealth Solutions which is financial planning along with a new tool called Orange Wealth Navigator which aggregates all of your financial accounts and important documents in one place.

Despite the challenging operating environment, the bank and our employees have remained steadfast in their dedication and commitment to our customers, the maintenance of conservative lending standards, and improving and expanding the services and experience we provide. This has enabled us to continue to deliver outstanding results and provides the framework for future growth our clients and shareholders have come to expect."

Income Statement Summary
Net interest income for the three months ended September 30, 2020 increased $1.1 million, or 9.9%, to $12.6 million, compared with the three months ended September 30, 2019. The increase is primarily due to a $384.7 million, or 33.5%, increase in average interest earning assets. The growth in average earning assets includes $87.0 million in low rate PPP loans and $172.2 million in low rate deposits with banks, contributing to an 82 basis point decline in average earning rates. Despite the decline in earning rates, interest revenue increased during the period. Net interest income for the nine months ended September 30, 2020 increased $3.7 million, or 11.5%, to $35.8 million, compared with the nine months ended September 30, 2019. Average earning assets grew $298.3 million, or 27.3%, for the period. The increase in average interest earning assets was driven primarily by a $191.3 million, or 23.9%, increase in average loans outstanding.

Net interest margin of 3.26% for the three months ended September 30, 2020 represents a 69 basis point, or 17.5%, decline versus 3.95% for the same period last year. The average cost of interest-bearing deposits for the three months ended September 30, 2020 dropped 22 basis points to 0.47%, from 0.69% for the three months ended September 30, 2019, a 31.9% decrease. This drop in funding costs was insufficient to offset the impact of the decline in earnings rates. As explained above, the average asset earning rate was materially impacted by $87.0 million of 1% loans through the PPP program, as well as a precautionary increase in liquid funds on deposit at the federal reserve during this uncertain period. The interest rate picture has changed dramatically over the past 7 months following the Federal Reserve's move to significantly reduce overnight rates and, through direct bond purchases, reduce market rates to unprecedented levels. The feds funds rate is currently between 0% and 0.25% and the 10-year treasury yield is close to 0.70%. The Bank responded by reducing its interest bearing deposit costs. The cost of funds also benefited from continued strong growth in non-interest-bearing demand accounts, with a $177.3 million, or 57.5%, increase to an average of $485.5 million versus the three months ended September 30, 2019. Accordingly, the total cost of deposits dropped 17 basis points, or 36.2%, from 47 basis points to 30 basis points.

The margin outlook includes the benefit of unamortized fees to be recognized at the time PPP loans are forgiven. The unamortized portion of such fees totaled $2.6 million at September 30, 2020. In addition, as opportunities arise, the Bank plans to prudently increase loan balances by redeploying excess liquidity to increase average earning rates.

The Bank's provision for loan losses was $1.2 million for the three months ended September 30, 2020, an increase of $575 thousand, or 89.8%, versus $640 thousand for the three months ended September 30, 2019. For the nine months ended September 30, the provision was $3.7 million compared to $1.7 million for the same period last year. The increases were made in response to uncertainty surrounding loan performance due to the COVID-19 related shutdown of various business sectors. While the asset quality of the Bank's loan portfolio remains high, non-performance statistics do not reflect the potential stresses facing loans on deferred status. Details of deferred loans are shown in the table below. Management believes it is prudent to increase reserves due to this uncertainty. Non-accrual loans, as a percent of total loans, was 0.10% as of September 30, 2020, a 0.13% decrease from the period ended September 30, 2019. See the asset quality section below for additional information.

Non-interest income increased $253 thousand to $3.0 million for the three months ended September 30, 2020, compared to the three months ended September 30, 2019. Non-interest income increased $1.1 million, to $8.8 million, for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The improvement in the current quarter's results is primarily driven by $218 thousand in securities gains and by improved trust asset management revenue, as detailed in the income statement comparison below.

Non-interest expense increased $1.2 million, to $10.8 million, for the three months ended September 30, 2020, compared to the three months ended September 30, 2019. Non-interest expense increased $3.0 million, to $30.9 million, for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019. The increase versus last year was due primarily to an FDIC deposit insurance increase of $243 thousand (due to a credit realized during 2019), and a one-time charge of $400 thousand related to trading error losses in asset management operations during the most recent quarter. Year-to-date increases include $606 thousand of FDIC insurance expense and a $1.3 million increase in growth-related salaries and benefits.

The Company's effective income tax rate for the three and nine months ended September 30, 2020 were 19.6% and 19.7%, respectively. For the same periods last year, the effective tax rates were 20.4% and 20.2%, respectively.

Balance Sheet Summary
Total assets increased $496.3 million, or 40.4%, to $1.72 billion at September 30, 2020, from $1.23 billion at December 31, 2019. This was primarily comprised of increases of $186.5 million in loans, $234.6 million in cash and cash equivalents, and $72.7 million in investment securities, including a $6.6 million increase in unrealized gains. The increases in cash and cash equivalents and investment securities was primarily due to increases in deposits, while the increase in loans was the result of $232.2 million of new loan originations and $45.6 million in purchases, partially offset by $91.3 million of net amortization and repayments on our existing portfolio. Draws on credit lines were immaterial during the period.

Total liabilities increased $486.6 million, to $1.59 billion, at September 30, 2020, from $1.11 billion at December 31, 2019. This was due to a $470.1 million, or 43.4%, increase in deposits and a $20 million increase in borrowed funds raised in a subordinated debt offering in late September, partially offset by a $5 million reduction in FHLB advances.

Deposit growth continues to be fueled by non-interest-bearing commercial demand deposits ("DDA") and NOW accounts. Growth in these deposits was $274.1 million, or 83.3%, from December 31, 2019, consistent with the Bank's strategy to grow value added business deposits with the support of advanced cash management services. It also includes remaining PPP loan balances. Commercial deposits represented 52.3% of total deposits at September 30, 2020, compared to 46.7% at December 31, 2019. This increase reflects strong response to our company-wide focus on business relationships. Total DDA and NOW balances were 50.0% of total deposits at September 30, 2020.

Total shareholders' equity increased $9.7 million, or 8.0%, to $130.6 million at September 30, 2020, from $120.9 million at December 31, 2019. This increase was due to a $5.3 million increase in retained earnings and a $4.4 million improvement in the market value of securities available for sale.

At September 30, 2020, the Company's book value per common share and tangible book value per common share were $28.98 and $27.34, respectively, compared to $26.85 and $25.16, respectively, at December 31, 2019. This represents increases of 7.9% and 8.7%, respectively. At September 30, 2020, the Bank exceeded the "well capitalized" thresholds under applicable regulatory guidelines.

Asset Quality Summary

Non-performing loans decreased $186 thousand, or 15.2%, to $1.0 million at September 30, 2020 from $1.2 million at June 30, 2020, and decreased $508 thousand from $1.5 million at December 31, 2019. Non- performing loans to total loans was 0.10%, 0.12% and 0.17% at September 30, 2020, June 30, 2020 and December 31, 2019, respectively.

Loans classified as substandard or doubtful increased $491 thousand, or 4.2%, to $12.1 million at September 30, 2020 from $11.6 million at June 30, 2020, and decreased $1.9 million, or 13.6%, from $14.0 million at December 31, 2019. Watch rated loans increased $5.4 million, or 28.0%, to $24.8 million at September 30, 2020 from $19.3 million at June 30, 2020. Delinquencies (inclusive of loans on non-accrual) increased to $3.8 million, or 0.35%, of total loans at September 30, 2020, from $3.2 million, or 0.31%, of total loans at June 30, 2020, and decreased $4.4 million from $8.2 million, or 0.27%, of total loans at December 31, 2019. Higher deferred loan balances will tend to understate delinquency statistics. The Bank's asset quality metrics have remained stable or improved even as the deferred loans have declined to $118.5 million at September 30, 2020 from $310 million at June 30, 2020. The Bank continues to work proactively with customers to manage COVID-19 related forbearance requests, where necessary, with a renewed focus on current and prospective business performance and available liquidity for the resumption of loan payments over the near-term. Particular emphasis is given to loans approaching or recently past their deferral dates.

Management continues to actively evaluate performance trends and industry dynamics across asset classes to assess underlying business and liquidity risks stemming from the economic impact of COVID-19. While the Bank is taking active steps to provide payment relief from debt service through forbearance agreements, the focus has shifted toward the resumption of loan payments, as management believes borrowers in need of payment deferrals have largely been accommodated at this time. This relief has been structured as 90-day deferments of principal and interest and effected broadly across the portfolio based on our analysis and direct feedback from customers. Most borrowers that requested payment deferrals early in the cycle have commenced scheduled repayments of their loan obligations after the end of their initial 90 day deferral. During the third quarter of 2020, there were 411 loans with a total principal balance of $310.3 million that reached the end of their 90-day deferment period. About 88 of those loans with a principal balance of $104.9 million (representing 21.4% of loans by number and 33.8% of balances), requested and received approval for an additional 90-day deferment during the most recent quarter. There were 11 loans totaling $6.4 million that requested and received intial deferrals during the quarter. The other 66% of previously deferred loans are with borrowers that have the financial wherewithal and business continuity to resume required debt service obligations at this time. Management believes the deferral program has been successful in helping customers bridge a difficult economic environment. Current estimates for year end 2020 deferrals is less than $20 million. Deferred loans at September 30, 2020 are shown in the table below:

Summary of Loan Portfolio Segments and Deferments at September 30, 2020
(dollar amounts in thousands)

 
                    Total Deferments        
Industry Classification
  Balance     Loan Count     % of Total Loans     Outstanding Balance     Loan Count     Deferred %  
Real Estate and Rental Leasing
  $ 388,069       464       35.9 %   $ 50,561       24       13.0 %
Healthcare and Social Assistance
    119,250       686       11.0 %     16,362       49       13.7 %
Construction
    66,446       96       6.1 %     -       1       0.0 %
Retail Trade
    45,146       80       4.2 %     19,322       4       42.8 %
Management of Companies/Enterprise
    37,216       18       3.4 %     3,353       1       9.0 %
Wholesale Trade
    27,677       76       2.6 %     43       1       0.2 %
Manufacturing
    26,517       97       2.5 %     -       0       0.0 %
Hotel / Motel
    24,843       13       2.3 %     912       1       3.7 %
Professional, Scientific, and Technical Services
    21,362       206       2.0 %     145       1       0.7 %
Finance and Insurance
    17,657       67       1.6 %     -       0       0.0 %
Contractors
    16,588       106       1.5 %     -       0       0.0 %
Educational Services & Child Care
    17,026       33       1.6 %     -       0       0.0 %
Administrative and Management
    15,949       85       1.5 %     7,764       2       48.7 %
Food Services
    17,408       37       1.6 %     6,495       1       37.3 %
Art, Entertainment, and Recreation
    3,168       10       0.3 %     2,931       2       92.5 %
Transportation and Warehousing
    2,875       35       0.3 %     1,307       3       45.5 %
Residential Real Estate & Other
    149,290       1,349       13.8 %     2,149       9       1.4 %
PPP Loans
    85,473       686       7.9 %     -       0       0.0 %
TOTAL
  $ 1,081,960       4,144       100.0 %   $ 111,344       99       10.3 %
 
                                               
 
                    Total Deferments        
 
                                   
Loan Portfolio Category
  Balance     Loan Count     % of Total Loans     Outstanding Balance     Loan Count     Deferred %  
CRE:
                                   
Multifamily
  $ 160,945       93       14.9 %   $ 12,642       6       7.9 %
Non-owner occupied
    310,700       341       28.7 %     69,388       22       22.3 %
Owner occupied
    154,739       182       14.3 %     14,332       15       9.3 %
Construction, development, land
    61,523       25       5.7 %     1,351       1       2.2 %
 
                                               
C&I
    220,562       1,911       20.4 %     12,619       50       5.7 %
PPP Loans
    85,473       686       7.9 %     -       0       0.0 %
 
                                               
Consumer:
                                               
Residential
    66,347       549       6.1 %     1,012       5       1.5 %
Non-residential
    21,671       357       2.0 %     -       0       0.0 %
TOTAL
  $ 1,081,960       4,144       100.0 %   $ 111,344       99       10.3 %

The Company's allowance for loan losses increased $2.7 million, or 21.8%, to $14.9 million, at September 30, 2020, from $12.2 million at December 31, 2019. At September 30, 2020, the allowance was 1.38% of total loans outstanding, an increase from 1.37% at December 31, 2019. Excluding the $87 million in PPP loans, which are characterized as a zero risk-weighted asset class, the allowance to loans ratio is 1.50% at September 30, 2020. Continued uncertainties about the current credit environment prompted the increase in allowance for unimpaired credits in 2020.

After charge-offs taken for impaired credits, the allowance for impaired loans in the aggregate declined to $1.2 million in the most recent quarter versus $1.4 million for the quarter ended June 30, 2020. The Bank has historically maintained a high ratio of loan loss allowances relative to its peers, and will continue to prudently manage reserves through close monitoring of business conditions and higher risk loans, as well as thorough analysis of the profitability and cash flow of loan customers.

Trust and Advisory Summary

Trust and Asset Management performed well during the quarter, increasing fee related revenue by $142 thousand, or 6.8%, compared to the same period last year. Year-to-date, these businesses showed a $340 thousand, or 5.7%, increase in fee revenue compared to the first nine months of 2019, despite volatile market performance since the beginning of the year. The combination of new account growth and the recovery in stock and bond prices increased assets under management ("AUM") materially during the most recent quarter. AUM is the basis on which revenues are earned in these businesses. Future AUM growth will depend on market performance and the quality of service we provide our customers. The introduction of additional wealth management tools, combined with continuous outreach to our Trust and Asset Management customers, provides valued support during this uncertain time and serves as the foundation for growth of this business.

About Orange County Bancorp, Inc.

Orange County Bancorp, Inc. is the parent company of Orange Bank & Trust Company and Hudson Valley Investment Advisors, Inc. Orange Bank & Trust Company is an independent bank that began with the vision of 14 founders over 125 years ago. It has grown through conservative banking practices, ongoing innovation, and an unwavering commitment to its community and business clientele to more than $1.5 billion in Total Assets. In recent years, Orange Bank & Trust Company has added branches in Rockland and Westchester Counties, and is in the process of opening a new branch in Nanuet and the Bronx. Hudson Valley Investment Advisors, Inc. is a Registered Investment Advisor in Goshen, NY. It was founded in 1996 and was acquired by the Company in 2012. For more information, visit orangebanktrust.com or hviaonline.com

For further information:

Robert L. Peacock
EVP Chief Financial Officer
[email protected]
Phone: (845) 341-5005

Orange County Bancorp, Inc.
Consolidated Statements of Condition (unaudited)

(dollar amounts in thousands except per share data)

 
                 
 
  September 30,     December 31,     September 30,  
 
  2020     2019     2019  
ASSETS
                 
 
                 
Cash and due from banks
  $ 259,707     $ 25,112     $ 65,667  
Investment securities - available-for-sale
    327,623       254,915       257,624  
Restricted investment in bank stocks
    1,449       1,474       1,477  
Loans, net of deferrals
    1,077,244       890,704       868,244  
Allowance for loan losses
    (14,956)       (12,275 )     (12,345 )
Loans, net
    1,062,288       878,429       855,899  
 
                       
Premises and equipment
    14,234       14,599       14,503  
Accrued interest receivable
    8,296       3,202       4,327  
Cash surrender value of bank-owned life insurance
    28,337       27,818       27,644  
Goodwill
    5,359       5,359       5,359  
Intangible assets
    2,035       2,249       2,321  
Other assets
    15,367       15,273       9,516  
 
                       
TOTAL ASSETS
  $ 1,724,695     $ 1,228,430     $ 1,244,337  
 
                       
LIABILITIES AND STOCKHOLDERS' EQUITY
                       
 
                       
Deposits:
                       
Noninterest bearing
  $ 507,349     $ 335,469     $ 332,681  
Interest bearing
    1,045,851       747,663       771,896  
Total deposits
    1,553,200       1,083,132       1,104,577  
 
                       
FHLB advances
    -       5,000       5,000  
Subordinated notes
    20,000       -       -  
Note payable
    3,000       3,000       3,013  
Accrued expenses and other liabilities
    17,872       16,357       13,251  
 
                       
TOTAL LIABILITIES
    1,594,072       1,107,489       1,125,841  
 
                       
STOCKHOLDERS' EQUITY
                       
 
                       
 
                       
at September 30, 2020, December 31, 2019 and September 30, 2019, respectively
    2,253       2,266       2,255  
Surplus
    84,739       85,178       84,849  
Undivided profits
    44,090       38,467       36,728  
Accumulated other comprehensive loss, net of taxes
    345       (4,044 )     (4,390 )
Treasury stock, at cost
    (804)       (926 )     (946 )
TOTAL STOCKHOLDERS' EQUITY
    130,623       120,941       118,496  
 
                       
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  $ 1,724,695     $ 1,228,430     $ 1,244,337  
 
                       
Book value per share
  $ 28.98     $ 26.85     $ 26.31  
Tangible book value per share
  $ 27.34     $ 25.16     $ 24.61  
 
                       

Orange County Bancorp, Inc.
Consolidated Statements of Income (unaudited)

(dollar amounts in thousands except per share data)

 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
  2020     2019     2020     2019  
INTEREST INCOME
                       
Interest and fees on loans
  $ 12,271     $ 10,680     $ 34,868     $ 30,116  
Interest on investment securities:
                               
Taxable
    1,102       1,695       3,661       4,345  
Tax exempt
    297       131       656       516  
Interest on Federal funds sold and other
    46       282       254       636  
 
                               
TOTAL INTEREST INCOME
    13,716       12,788       39,439       35,613  
 
                               
INTEREST EXPENSE
                               
Interest on demand, savings and money market accounts
    868       977       2,674       2,267  
Interest on time deposits
    227       309       762       919  
Interest on FHLB advances
    -       21       10       136  
Interest on notes payable
    59       46       143       137  
TOTAL INTEREST EXPENSE
    1,154       1,353       3,589       3,459  
 
                               
NET INTEREST INCOME
    12,562       11,435       35,850       32,154  
 
                               
Provision for loan losses
    1,215       640       3,725       1,660  
 
                               
NET INTEREST INCOME AFTER PROVISION
    11,347       10,795       32,125       30,494  
 
                               
OTHER OPERATING INCOME
                               
Service charges on deposit accounts
    155       254       480       695  
Trust income
    1,001       949       2,958       2,636  
Investment advisory income
    1,215       1,125       3,399       3,381  
Investment securities gains (losses)
    218       -       804       (219 )
Earnings on bank-owned life insurance
    173       176       520       516  
Other
    237       242       671       725  
TOTAL OTHER OPERATING INCOME
    2,999       2,746       8,832       7,734  
 
                               
OTHER OPERATING EXPENSES
                               
Salaries
    3,911       3,658       11,930       10,661  
Employee benefits and taxes
    1,711       1,816       5,149       5,164  
Occupancy expense
    938       879       2,810       2,653  
Professional fees
    894       672       2,495       1,975  
Directors' fees and expenses
    268       282       837       823  
Computer software expense
    986       821       2,700       2,218  
FDIC assessment
    243       -       609       245  
Advertising expenses
    277       324       929       965  
Advisor expenses related to trust income
    248       213       777       631  
Telephone expenses
    144       115       413       339  
Intangible amortization
    71       71       214       214  
Other
    1,077       719       2,070       2,068  
TOTAL OTHER OPERATING EXPENSES
    10,768       9,570       30,933       27,956  
 
                               
Income before income taxes
    3,578       3,971       10,024       10,272  
 
                               
Provision for income taxes
    700       810       1,975       2,073  
NET INCOME
  $ 2,878     $ 3,161     $ 8,049     $ 8,199  
 
                               
Weighted average earnings per share
  $ 0.64     $ 0.70     $ 1.78     $ 1.82  
 
                               
Cash dividends declared per share
  $ 0.20     $ 0.20     $ 0.60     $ 0.60  
 
                               
Weighted average shares outstanding
    4,507,315       4,505,966       4,511,425       4,507,316  
 
                               

Orange County Bancorp, Inc.
Net Interest Margin Analysis (unaudited)

(dollar amounts in thousands)

 
  Three Months Ended September, 30
 
  2020     2019
 
  Average Balance     Interest     Average Rate     Average Balance     Interest     Average Rate  
Assets:
                                   
Loans Receivable (net of PPP)
  $ 966,369     $ 11,645       4.79 %   $ 841,944     $ 10,680       5.03 %
PPP Loans
    87,006       626       2.86 %     -       -       0.00 %
Investment securities
    308,062       1,399       1.81 %     262,659       1,826       2.76 %
Federal funds sold and other
    172,160       46       0.11 %     44,352       282       2.52 %
Total interest earning assets
    1,533,597       13,716       3.56 %     1,148,955       12,788       4.42 %
Non-interest earning assets
    82,883                       70,111                  
Total assets
  $ 1,616,480                     $ 1,219,066                  
 
                                               
Liabilities and equity:
                                               
Demand accounts
  $ 214,793     $ 111       0.21 %   $ 186,627     $ 117       0.25 %
Savings and money market accounts
    675,282       757       0.45 %     494,038       860       0.69 %
Time deposits
    91,071       227       0.99 %     91,241       309       1.34 %
Total interest-bearing deposits
    981,146       1,095       0.44 %     771,906       1,286       0.66 %
FHLB Advances and notes
    4,740       59       4.95 %     8,020       67       3.31 %
Total interest bearing liabilities
    985,886       1,154       0.47 %     779,926       1,353       0.69 %
Non-interest bearing deposits
    485,481                       308,194                  
Other non-interest bearing liabilities
    14,624                       13,530                  
Total liabilities
    1,485,991                       1,101,650                  
Total shareholders' equity
    130,489                       117,416                  
Total liabilities and shareholders' equity
  $ 1,616,480                     $ 1,219,066                  
 
                                               
Net interest income
          $ 12,562                     $ 11,435          
Interest rate spread 1
                    3.09 %                     3.73 %
Net interest margin 2
                    3.26 %                     3.95 %
Average interest earning assets to interest-bearing liabilities
    155.6 %                     147.3 %                
 
                                               

Notes:

1 The Interest rate spread is the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities
2 Net interest margin is the annualized net interest income divided by average interest-earning assets.

Orange County Bancorp, Inc.
Net Interest Margin Analysis (unaudited)

(dollar amounts in thousands)

 
  Nine Months Ended September, 30  
 
  2020     2019  
 
  Average Balance     Interest     Average Rate     Average Balance     Interest     Average Rate  
Assets:
                                   
Loans Receivable (net of PPP)
  $ 939,719     $ 33,801       4.80 %   $ 800,153     $ 30,116       5.03 %
PPP Loans
    51,757       1,067       2.75 %     -       -       0.00 %
Investment securities
    279,717       4,317       2.06 %     257,668       4,861       2.52 %
Federal funds sold and other
    121,299       254       0.28 %     36,364       636       2.34 %
Total interest earning assets
    1,392,492       39,439       3.78 %     1,094,185       35,613       4.35 %
Non-interest earning assets
    79,223                       66,454                  
Total assets
  $ 1,471,715                     $ 1,160,639                  
 
                                               
Liabilities and equity:
                                               
Demand accounts
  $ 206,594     $ 316       0.20 %   $ 183,613     $ 205       0.15 %
Savings and money market accounts
    598,869       2,358       0.53 %     459,673       2,062       0.60 %
Time deposits
    89,638       762       1.14 %     93,743       919       1.31 %
Total interest-bearing deposits
    895,101       3,436       0.51 %     737,029       3,186       0.58 %
FHLB Advances and notes
    4,357       153       4.69 %     13,510       273       2.70 %
Total interest bearing liabilities
    899,458       3,589       0.53 %     750,539       3,459       0.62 %
Non-interest bearing deposits
    429,391                       283,977                  
Other non-interest bearing liabilities
    15,897                       13,237                  
Total liabilities
    1,344,746                       1,047,753                  
Total shareholders' equity
    126,969                       112,887                  
Total liabilities and shareholders' equity
  $ 1,471,715                     $ 1,160,639                  
 
                                               
Net interest income
          $ 35,850                     $ 32,154          
Interest rate spread 1
                    3.25 %                     3.74 %
Net interest margin 2
                    3.44 %                     3.93 %
Average interest earning assets to interest-bearing liabilities
    154.8 %                     145.8 %                

Notes:

1 The Interest rate spread is the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities
2 Net interest margin is the annualized net interest income divided by average interest-earning assets.

Orange County Bancorp, Inc.
Selected Financial Data (unaudited)

(dollar amounts in thousands except per share data)

 
  For the Quarter Ended  
 
 
September 30,
2020
   
June 30,
2020
   
March 31,
2020
   
December 31,
2019
   
September 30,
2019
 
Performance Ratios 1
                             
Return on average assets
    0.71 %     0.74 %     0.74 %     0.98 %     1.03 %
Return on average equity
    8.77 %     8.67 %     7.93 %     10.17 %     10.67 %
Interest rate spread
    3.09 %     3.18 %     3.53 %     3.60 %     3.76 %
Net interest margin
    3.26 %     3.38 %     3.74 %     3.83 %     3.98 %
Efficiency Ratio
    69.20 %     68.53 %     70.02 %     70.09 %     67.29 %
 
                                       
Noninterest income to average assets
    0.74 %     0.85 %     0.83 %     0.86 %     0.90 %
Noninterest expense to average assets
    2.65 %     2.77 %     3.04 %     3.14 %     3.14 %
Average interest-earning assets to average interest-bearing liabilities
    155.56 %     158.78 %     149.63 %     150.63 %     147.32 %
Average equity to average assets
    8.07 %     8.56 %     9.39 %     9.56 %     9.63 %
Dividend payout ratio
    31.13 %     32.60 %     36.99 %     30.97 %     28.36 %
 
  As of the Quarter Ended  
 
 
September 30,
2020
   
June 30,
2020
   
March 31,
2020
   
December 31,
2019
   
September 30,
2019
 
 
                             
Loans to Deposits
    69.36 %     73.00 %     77.53 %     82.23 %     78.61 %
Noninterest bearing deposits to total deposits
    32.66 %     34.85 %     30.00 %     30.97 %     30.12 %
 
                                       
Share Data:
                                       
Shares outstanding
    4,507,315       4,506,653       4,518,128       4,504,389       4,503,779  
Book value per common share
  $ 28.98     $ 28.69     $ 28.13     $ 26.85     $ 26.31  
Tangible book value per common share 2
  $ 27.34     $ 27.02     $ 26.45     $ 25.16     $ 24.61  
 
                                       
Capital Ratios 3
                                       
Tier 1 capital (to adjusted total assets)
    7.62 %     8.16 %     9.13 %     9.39 %     8.95 %
Common equity Tier 1 capital (to risk weighted assets)
    12.06 %     12.55 %     12.29 %     12.52 %     12.16 %
Tier 1 capital (to risk-weighted assets)
    12.06 %     12.55 %     12.29 %     12.52 %     12.16 %
Total capital (to risk-weighted assets)
    13.31 %     13.80 %     13.53 %     13.77 %     13.41 %
 
                                       
 
                                       

Notes:

1 Performance ratios are annualized.
2 Tangible book value per share is a non-GAAP measure and equals total shareholders' equity, less goodwill and other intangible assets, divided by shares outstanding.
3 Represents Orange Bank & Trust Company's ratios.

Orange County Bancorp, Inc.
Condensed Financial Information (unaudited)

(dollar amounts in thousands except per share data)

 
  As of                          
Condensed Balance Sheets
 
September 30,
2020
   
June 30,
2020
   
March 31,
2020
   
December 31,
2019
   
September 30,
2019
 
 
                             
Cash and Cash Equivalents
  $ 259,707     $ 187,892     $ 84,347     $ 25,112     $ 65,667  
Total Investment Securities
    329,072       288,749       276,242       256,389       259,101  
Loans, net
    1,062,288       1,033,309       925,092       878,429       855,899  
Other Assets
    73,628       72,104       69,561       68,500       63,670  
Total Assets
  $ 1,724,695     $ 1,582,054     $ 1,355,242     $ 1,228,430     $ 1,244,337  
 
                                       
Total Deposits
  $ 1,553,200     $ 1,434,843     $ 1,210,620     $ 1,083,132     $ 1,104,577  
FHLB Advances & Note Payable
    3,000       3,000       3,000       8,000       8,013  
Subordinated Notes
    20,000       -       -       -       -  
Other Liabilities
    17,872       15,721       15,310       16,357       13,251  
Total Liabilities
    1,594,072       1,453,564       1,228,930       1,107,489       1,125,841  
Total Shareholders' Equity
    130,623       128,490       126,312       120,941       118,496  
Total Liabilities and Shareholders' Equity
  $ 1,724,695     $ 1,582,054     $ 1,355,242     $ 1,228,430     $ 1,244,337  

Orange County Bancorp, Inc.
Selected Financial Data (unaudited)

(Dollar Amounts in thousands except per share data)

 
  Three Months Ended  
Condensed Income Statements
 
September 30,
2020
   
June 30,
2020
   
March 31,
2020
   
December 31,
2019
   
September 30,
2019
 
 
                             
Interest Income
  $ 13,716     $ 12,991     $ 12,731     $ 12,682     $ 12,788  
Interest Expense
    1,154       1,147       1,289       1,381       1,353  
Net Interest Income
    12,562       11,844       11,442       11,301       11,435  
Provision for Loan Loss
    1,215       1,310       1,200       535       640  
Noninterest Income
    2,999       3,150       2,683       2,698       2,746  
Noninterest Expense
    10,768       10,275       9,890       9,812       9,570  
Income before income tax expense
    3,578       3,409       3,035       3,652       3,971  
Income Tax Expense
    700       661       613       753       810  
Net income
  $ 2,878     $ 2,748     $ 2,422     $ 2,899     $ 3,161  
 
                                       
 
                                       
Weighted average earnings per Share
  $ 0.64     $ 0.61     $ 0.54     $ 0.65     $ 0.70  

Orange County Bancorp, Inc.
Loan Portfolio (unaudited)

(dollar amounts in thousands)

LOANS
  September 30,     June 30,     March 31,     December 31,     September 30,  
 
  2020     2020     2020     2019     2019  
Commercial:
                             
 
                             
Commercial & industrial
  $ 220,364     $ 213,862     $ 240,155     $ 222,229     $ 220,157  
PPP Loans
    85,473       101,245       -       -       -  
CRE* owner occupied
    154,739       163,368       143,063       133,355       121,707  
CRE non-owner occupied
    310,700       289,103       280,595       256,639       251,765  
CRE multifamily
    160,945       140,476       136,862       144,328       143,308  
CRE construction
    58,324       59,147       53,396       55,808       56,939  
Total commercial
    990,545       967,201       854,071       812,359       793,875  
 
                                       
Consumer:
                                       
Residential real estate
    52,721       52,239       50,923       52,478       49,519  
Home equity loans and lines
    13,626       13,397       13,574       11,668       11,840  
Residential construction
    3,199       3,991       5,217       13,937       13,276  
Other
    21,869       15,898       16,873       2,436       1,846  
Total consumer
    91,415       85,525       86,587       80,519       76,480  
Total loans
    1,081,960       1,052,726       940,658       892,878       870,355  
 
                                       
Deferrals
    (4,716 )     (5,345 )     (2,085 )     (2,174 )     (2,111 )
Loans, net of deferrals
    1,077,244       1,047,381       938,573       890,704       868,244  
Allowance for loan losses
    (14,956 )     (14,072 )     (13,481 )     (12,275 )     (12,345 )
Loans, net
  $ 1,062,288     $ 1,033,309     $ 925,092     $ 878,429     $ 855,899  
 
                                       
* CRE = Commercial Real Estate loans
                                       

Orange County Bancorp, Inc.
Deposit Portfolio (unaudited)

(dollar amounts in thousands)

DEPOSIT TREND
 
September 30,
2020
   
June 30,
2020
   
March 31,
2020
   
December 31,
2019
   
September 30,
2019
 
Demand Deposits
  $ 507,349     $ 500,002     $ 363,214     $ 335,469     $ 332,681  
NOW
    269,103       197,003       200,930       166,907       183,883  
Money market accounts
    528,908       514,546       433,081       369,507       364,767  
Savings
    152,638       133,501       124,085       122,592       132,844  
Time
    95,202       89,791       89,310       88,657       90,403  
 
                                       
Total deposits
  $ 1,553,200     $ 1,434,843     $ 1,210,620     $ 1,083,132     $ 1,104,577  
 
                                       
                                      Growth  
DEPOSIT COMPOSITION and GROWTH ANALYSIS     September 30, 2020       % of Total Deposits       September 30,
2019
      % of Total Deposits       $       %  
Demand Deposits
  $ 507,349       32.7 %   $ 332,681       30.1 %   $ 174,668       52.5 %
NOW
    269,103       17.3 %     183,883       16.6 %     85,220       46.3 %
Money market accounts
    528,908       34.1 %     364,767       33.0 %     164,141       45.0 %
Savings
    152,638       9.8 %     132,844       12.0 %     19,794       14.9 %
Time
    95,202       6.1 %     90,403       8.2 %     4,799       5.3 %
Total deposits
  $ 1,553,200       100.0 %   $ 1,104,577       100.0 %   $ 448,623       40.6 %
 
                                               
Commercial
  $ 812,534       52.3 %   $ 530,004       48.0 %   $ 282,530       53.3 %
Consumer
    464,674       29.9 %     353,115       32.0 %     111,559       31.6 %
Municipal
    275,992       17.8 %     221,458       20.0 %     54,534       24.6 %
Total Deposits
  $ 1,553,200       100.0 %   $ 1,104,577       100.0 %   $ 448,623       40.6 %

Orange County Bancorp, Inc.
Asset Quality Trends (unaudited)

(dollar amounts in thousands)

ASSET QUALITY
  September 30,     June 30,     March 31,     December 31,     September 30,  
 
  2020     2020     2020     2019     2019  
 
                             
Total Loans
    1,081,960       1,052,726       940,658       892,878       870,355  
 
                                       
Non-performing loans:
                                       
Commercial & industrial
  -     148     495     502     603  
Commercial real estate
    959       959       959       959       1,348  
Consumer - residential real estate
    82       84       86       88       91  
Consumer - home equity loans and lines
    -       36       51       -       -  
TOTAL NON-PERFORMING LOANS ("NPLs")
  1,041     1,227     1,591     1,549     2,042  
 
                                       
Delinquencies:
                                       
 
                                       
30-59 days past due
  735     632     10,038     5,674     1,050  
60-89 days past due
    296       979       60       360       352  
90+ days past due
    1,776       460       1,766       683       576  
On non-accrual
    959       1,143       1,505       1,461       1,951  
TOTAL PAST DUE LOANS
  3,766     3,214     13,369     8,178     3,929  
 
                                       
Troubled debt restructurings:
                                       
On non-accrual (included in total NPLs above)
  959     959     959     959     1,348  
On accrual
    12,146       10,801       10,842       11,436       11,713  
TOTAL TROUBLED DEBT RESTRUCTURINGS
  13,105     11,760     11,801     12,395     13,061  
 
                                       
ALLOWANCE FOR LOAN LOSSES
  14,956     14,072     13,481     12,275     12,345  
 
                                       
Allowance for loan losses as a % of total loans
    1.38 %     1.34 %     1.43 %     1.37 %     1.42 %
Allowance for loan losses as a % of total NPLs
    1436.70 %     1146.86 %     847.33 %     792.45 %     604.55 %
Allowance for loan losses as a % of delinquent loans
    397.13 %     437.83 %     100.84 %     150.10 %     314.20 %
NPLs as a % of total loans
    0.10 %     0.12 %     0.17 %     0.17 %     0.23 %
 
                                       
Net charge-offs (recoveries)
  331     719     (6 )   605     142  
Net charge-offs (recoveries) to average outstanding loans during the period
    0.03 %     0.07 %     0.00 %     0.07 %     0.02 %
 
                                       

SOURCE: Orange County Bancorp, Inc.

Topic:
Earnings
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