Orange County Bancorp, Inc. (OBT) is a bank holding company based in Middletown, New York, with a rich history of serving the financial needs of individuals, small businesses, and local governments in the Lower Hudson Valley region, the New York metropolitan area, and nearby markets in Connecticut and New Jersey. Through its wholly-owned subsidiaries, Orange Bank & Trust Company and Hudson Valley Investment Advisors, Inc. (HVIA), the company offers a comprehensive suite of commercial and consumer banking services, as well as wealth management and trust services.
Company History and Growth
Founded over 125 years ago in 1896 by 14 visionary local business leaders, Orange Bank & Trust Company has grown to become a respected and influential institution in its local markets. The bank's commitment to community development, coupled with a strategic focus on commercial and residential lending, has allowed it to navigate economic cycles and emerge as a resilient financial services provider.
Over the decades, Orange County Bancorp expanded steadily, opening new branch locations and diversifying its product offerings to meet the evolving needs of its customers. The company faced a significant challenge during the 2008 financial crisis, experiencing increased loan defaults and credit quality issues. However, the management team's prudent decisions to strengthen the bank's balance sheet and credit underwriting standards allowed Orange County Bancorp to emerge from the crisis in a position of relative strength compared to many of its peers.
In the aftermath of the financial crisis, the company continued its growth trajectory, expanding its geographic footprint in the Lower Hudson Valley region and enhancing its product capabilities, particularly in commercial and small business banking. The company also made strategic investments in technology to improve customer experience and operating efficiency.
A major milestone was achieved in 2021 when Orange County Bancorp completed a successful initial public offering, listing its shares on the Nasdaq stock exchange under the ticker symbol OBT. This provided the company with additional capital to support future growth initiatives while also raising its public profile.
Financials
As of September 30, 2024, Orange County Bancorp reported total assets of $2.52 billion, an increase of 1.40% from the previous year. The company's loan portfolio stood at $1.80 billion, with a diverse mix of commercial and industrial (13.99%), commercial real estate (74.30%), commercial real estate construction (4.36%), residential real estate (4.15%), home equity (0.89%), and consumer (2.30%) loans. The bank's strong focus on commercial lending has enabled it to build a robust and well-diversified loan book, contributing to its overall financial stability.
For the most recent quarter, Orange County Bancorp reported revenue of $31,436,000 and net income of $3,216,000. The company's operating cash flow (OCF) for the quarter was $10,249,000, while free cash flow (FCF) stood at $9,959,000. Notably, the company experienced year-over-year growth in revenue, net income, OCF, and FCF compared to the same quarter in the prior year, demonstrating its ability to generate consistent financial performance.
Liquidity
One of the key strengths of Orange County Bancorp is its sound liquidity position. As of September 30, 2024, the company's cash and due from banks totaled $160.87 million, providing ample liquidity to meet its funding needs. Additionally, the bank's securities portfolio, primarily comprised of available-for-sale investments, amounted to $469.53 million, further enhancing its liquidity profile.
The company's capital ratios remain well above the regulatory requirements for a "well-capitalized" institution. As of September 30, 2024, Orange County Bancorp's total risk-based capital ratio stood at 14.89%, its Tier 1 risk-based capital ratio was 13.64%, and its Tier 1 leverage ratio was 10.06%. These strong capital levels underscore the company's financial strength and its ability to support future growth and expansion.
Orange County Bancorp maintains a robust liquidity position with a current ratio of 12.80822 and a quick ratio of 12.80822. The company has access to various credit facilities, including a total capacity of $577.60 million at the Federal Home Loan Bank of New York, of which $76.00 million is used to collateralize municipal deposits, and $10.00 million is utilized for long-term advances. Additionally, the company has a $4.50 million collateralized line of credit from the Federal Reserve Bank of New York discount window with no outstanding balance, as well as $20.00 million of discretionary lines of credit with no outstanding balance.
Revenue Streams and Performance
One of the key drivers of Orange County Bancorp's success has been its diversified revenue streams. In addition to its core banking operations, the company's wealth management division, HVIA, has been a significant contributor to its non-interest income. As of September 30, 2024, HVIA had $1.79 billion in assets under management and administration, reflecting a 24.30% increase from the previous year. This growth in the wealth management business has helped to offset the impact of the low-interest-rate environment on the company's net interest income.
During the nine months ended September 30, 2024, Orange County Bancorp reported net interest income of $68.69 million, a 3.70% increase from the same period in the previous year. This growth was driven by a 10.20% increase in interest income, which reached $95.02 million, as the company was able to capitalize on the rising interest rate environment. However, the company also experienced a 31.90% increase in interest expense, which reached $26.33 million, reflecting the higher cost of funding.
The company's noninterest income grew by 20.60% to $11.67 million during the nine-month period, primarily due to a 30.00% increase in investment advisory income and a 25.30% increase in service charges on deposit accounts. These positive trends in the company's revenue streams demonstrate its ability to diversify its business model and adapt to changing market conditions.
Business Segments
Orange County Bancorp operates through two main business segments: Banking and Wealth Management.
The Banking segment, which is the primary driver of OBT's business, involves the delivery of loan and deposit products to customers through Orange Bank Trust Company. This segment contributes the majority of the company's net interest income and assets. The loan portfolio is diverse, with commercial real estate loans representing the largest portion at 74.30% of total loans as of September 30, 2024. The company maintains a prudent approach to credit risk management, with an allowance for credit losses on the loan portfolio of $31.02 million, or 1.73% of total loans.
On the deposit side, OBT offers a range of deposit accounts to businesses and consumers. Total deposits grew to $2.14 billion as of September 30, 2024, up 5.00% from December 31, 2023, driven by organic growth in commercial transaction accounts and interest-bearing deposits. Core deposits, excluding certificates of deposit, represented 93.40% of total deposits, providing a stable funding base.
The Wealth Management segment includes asset management and trust services provided through Hudson Valley Investment Advisors, Inc. (HVIA) and the trust services department of Orange Bank Trust Company. This segment generates fee-based income from trust services and investment advisory activities. As of September 30, 2024, the market value of assets under management and/or administration in the Wealth Management segment was $1.80 billion, up from $1.40 billion as of September 30, 2023. This growth contributed to the increase in noninterest income, which reached $8.97 million for the nine months ended September 30, 2024, up 19.10% from the same period in 2023.
Resilience and Future Outlook
Despite the challenges posed by the COVID-19 pandemic, Orange County Bancorp has remained resilient. The company's proactive risk management practices, coupled with its strong capital and liquidity positions, have allowed it to navigate the economic uncertainties and continue delivering value to its shareholders.
Looking ahead, Orange County Bancorp remains well-positioned for continued growth and expansion. The company's strategic focus on commercial lending, coupled with its robust wealth management offerings, positions it to capitalize on the economic recovery and the growing demand for financial services in its target markets.
However, the company is not without its risks. Like any financial institution, Orange County Bancorp is exposed to interest rate risk, credit risk, and regulatory risks. The company's ability to manage these risks effectively will be crucial to its long-term success.
Overall, Orange County Bancorp's legacy of resilience, its diversified business model, and its commitment to serving its local communities make it a compelling investment opportunity for those seeking exposure to the thriving banking and wealth management sectors in the Northeast United States. The company's consistent financial performance, strong liquidity position, and strategic focus on its core markets provide a solid foundation for future growth and value creation.