Orange County Bancorp, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021, compared with FY2020. This is an annual filing; it does not provide a clear standalone fourth-quarter income statement or results.
Business context
Orange County Bancorp is a New York bank holding company operating Orange Bank & Trust Company and Hudson Valley Investment Advisors. It provides commercial and consumer banking, trust, and wealth management services across the Lower Hudson Valley and nearby markets. At year-end, it operated 14 branches and one loan production office. The company completed its IPO in August 2021, raising $38.5 million gross and listing on Nasdaq.
Financial results and condition
| Metric | FY2021 / Dec. 31, 2021 | FY2020 / Dec. 31, 2020 | Change |
|---|---|---|---|
| Total assets | $2.143 billion | $1.665 billion | +28.7% |
| Loans, net | $1.274 billion | $1.137 billion | +12.1% |
| Deposits | $1.914 billion | $1.489 billion | +28.5% |
| Net interest income | $60.5 million | $48.7 million | +24.1% |
| Net interest margin | 3.15% | 3.36% | Down 21 basis points |
| Provision for loan losses | $2.4 million | $5.4 million | Down 55.1% |
| Noninterest income | $12.1 million | $11.4 million | +5.9% |
| Noninterest expense | $43.5 million | $40.2 million | +8.0% |
| Net income | $21.3 million | $11.7 million | +82.3% |
| Basic and diluted EPS | $4.28 | $2.59 | — |
- Growth in net interest income and a lower loan-loss provision drove higher earnings; higher noninterest expenses and income taxes partly offset the improvement. FY2021 effective tax rate was 20.2%, versus 19.6%.
- Average earning assets rose 32.0%, while their average yield fell to 3.36% from 3.68%. The average rate paid on interest-bearing liabilities declined to 0.33% from 0.51%.
- Commercial real estate loans were $852.7 million, or 66.0% of total loans. The allowance for loan losses was $17.7 million, 1.37% of loans and 296.7% of nonperforming loans. Net charge-offs were 0.08% of average loans.
- Nonperforming assets were $6.0 million, or 0.28% of assets, versus $2.5 million and 0.15% a year earlier. Management attributed much of the increase to a roughly $2.9 million commercial real estate loan under contract for sale and said no loss was expected.
- Cash and due from banks reached $306.2 million; available-for-sale securities were $464.8 million. Core deposits were 95.7% of deposits, with a 0.12% annual cost. Municipal deposits totaled $272.6 million; uninsured deposits were $1.1 billion.
- Operating cash flow was $20.3 million; investing activities used $291.3 million and financing activities provided $455.9 million. The increase in financing cash was primarily associated with $425.1 million of deposit growth and $35.3 million in net IPO proceeds.
- Year-end stockholders’ equity was $182.8 million, up 35.0%, reflecting IPO proceeds and net income, partly offset by dividends and a $5.3 million decline in accumulated other comprehensive income. The Bank was well capitalized: total risk-based capital was 14.12%, Tier 1 risk-based capital 12.87%, and Tier 1 leverage 8.15%.
- Borrowings included $19.4 million of subordinated notes, carrying a 4.25% fixed rate through September 2025 before resetting to three-month SOFR plus 413 basis points, and a $3.0 million note payable maturing in November 2022. No FHLB advances were outstanding; available FHLB capacity was $358.8 million.
Material changes and notable items
- Deposits grew 28.5%, driven in part by stimulus-related funds and reduced customer spending; noninterest-bearing demand deposits rose to 36.7% of deposits. Certificates of deposit declined 9.6%.
- Commercial real estate loans increased 22.1%; PPP loan balances fell 44.7% to $38.1 million as loans were forgiven. The company originated $87.2 million of PPP loans in 2021.
- Trust and advisory income increased with higher assets under management and market performance. Combined AUM and assets under administration were $1.326 billion, up 11.5%.
- Expenses rose notably for salaries, software, and professional fees. Management cited hiring, technology and core-processing conversion, and additional public-company audit and reporting costs.
- The company recorded no investment securities gains in 2021, compared with $804,000 in 2020. Unrealized securities losses contributed to the decline in accumulated other comprehensive income; no securities impairment charges were recorded.
- The company paid $0.80 per share in dividends during 2021 and stated an intention to continue quarterly dividends of $0.20 per share, subject to board discretion and regulatory limitations.
Outlook, risks, and contingencies
- Management’s strategy emphasizes organic growth, relationship banking, core deposits, expanded fee-based wealth services, and growth in Westchester and Rockland Counties. It reported no current acquisition plans or arrangements.
- Management described the company as asset sensitive: a steeper yield curve and higher rates could benefit net interest income, while a continued low-rate, flat-curve environment could pressure it. The filing gives no quantified earnings guidance.
- Key risks include the concentration of lending in commercial real estate and the local New York market, potential deterioration in borrower and collateral quality, interest-rate and funding pressures, and reliance on significant municipal and uninsured deposits. Commercial real estate exposure met the filing’s cited supervisory concentration thresholds.
- COVID-19 effects remained uncertain. The company reported no COVID-19-modified loans at year-end, but noted potential effects on credit quality, wealth fees, operations, and cybersecurity. Adoption of CECL was planned for January 1, 2023, with impact still under evaluation.
- Loan commitments were $373.6 million and standby letters of credit were $11.5 million. Management did not anticipate material losses from these commitments. The company said pending legal proceedings were not expected to have a material adverse effect.
- The 2021 audit received an unqualified opinion. Management concluded disclosure controls were effective; the filing did not include management’s internal-control assessment or auditor attestation because of the company’s newly public and emerging-growth-company status.
Important facts for investors to verify
- Whether deposit growth—particularly uninsured, municipal, and stimulus-related balances—persists and at what funding cost.
- Trends in CRE concentrations, classified assets, nonperforming loans, and the allowance as the loan book grows and economic conditions change.
- How interest-rate changes affect asset yields, deposit pricing, net interest margin, and the fair value of the available-for-sale securities portfolio.
- Execution costs and potential efficiency benefits from the core-processing conversion, public-company compliance, and branch expansion.
- The actual timing and terms for repayment of the $3.0 million note due in November 2022, and the effect of the subordinated notes’ 2025 rate reset.
- Future quarterly results separately from these full-year figures; the filing text does not provide a clear standalone Q4 2021 result.