Orange County Bancorp, Inc. /DE/

Previous wording

We are a bank holding company headquartered in Middletown, New York and registered under the BHC Act. Through our wholly owned subsidiaries, Orange Bank & Trust Company and Hudson Valley Investment Advisors, Inc., we offer full-service commercial and consumer banking products and services and trust and wealth management services to small businesses, middle-market enterprises, local municipal governments and affluent individuals in the Lower Hudson Valley region, the New York metropolitan area and nearby markets in Connecticut and New Jersey. By combining the high-touch service and relationship- based focus of a community bank with the extensive suite of financial products and services offered by our larger competitors, we believe we can capitalize on the substantial growth opportunities available in our market areas. We also offer a variety of deposit accounts to businesses and consumers, including checking accounts and a full line of municipal banking accounts through our business banking platform. These activities, together with our 15 branches 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 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. 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.

Current wording

We are a bank holding company headquartered in Middletown, New York and registered under the BHC Act. Through our wholly owned subsidiaries, Orange Bank & Trust Company and Hudson Valley Investment Advisors, Inc., we offer full-service commercial and consumer banking products and services and trust and wealth management services to small businesses, middle-market enterprises, local municipal governments and affluent individuals in the Lower Hudson Valley region, the New York metropolitan area and nearby markets in Connecticut and New Jersey. By combining the high-touch service and relationship- based focus of a community bank with the extensive suite of financial products and services offered by our larger competitors, we believe we can capitalize on the substantial growth opportunities available in our market areas. We also offer a variety of deposit accounts to businesses and consumers, including checking accounts and a full line of municipal banking accounts through our business banking platform. These activities, together with our 16 branches 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 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 $1.8 billion in assets under management at December 31, 2024. As of December 31, 2024, our assets, loans, deposits and stockholders’ equity totaled $2.5 billion, $1.8 billion, $2.2 billion and $185.5 million, respectively.

Previous wording

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.

Current wording

Interest rates experienced some volatility during 2024. 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.

Previous wording

Noninterest Expense*.*Noninterest expense includes salaries, employee benefits, occupancy, furniture and equipment expense, professional fees, directors’ fees and expenses, computer software expense, Federal deposit insurance assessment, advertising expenses, advisor expenses related to trust income and other expenses. In evaluating our level of noninterest expense we closely monitor our efficiency ratio. The efficiency ratio is calculated by dividing noninterest expense to net interest income plus noninterest income. We continue to seek to identify ways to streamline our business and operate more efficiently.

Current wording

Noninterest Expense*.*Noninterest expense includes salaries, employee benefits, occupancy, furniture and equipment expenses, professional fees, directors’ fees and expenses, computer software expense, Federal deposit insurance assessment, advertising expenses, advisor expenses related to trust income and other expenses. In evaluating our level of noninterest expense, we closely monitor our efficiency ratio. The efficiency ratio is calculated by dividing noninterest expense to net interest income plus noninterest income. We continue to seek to identify ways to streamline our business and operate more efficiently.

Previous wording

Concentration of Credit Risk. Most of the Company’s business activity is with customers located within the New York counties of Orange, Westchester, Bronx and Rockland. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy in these counties. The Company’s largest loan segment is non-owner occupied commercial real estate. Property types within this segment include: multi- family properties, retail properties, and general construction loans. Regionally, commercial real estate loans are concentrated within the Company’s primary operating footprint, including Orange, Westchester, Rockland and Bronx counties. Commercial and industrial loans are concentrated in Orange County, New York and outside of the Company’s core market, primarily as a result of purchased loans. While industry exposure is widely dispersed, the Company does have a significant concentration of commercial and industrial loans within the healthcare and social assistance industry.

Current wording

Concentration of Credit Risk. Most of the Company’s business activity is with customers located within the New York counties of Orange, Westchester, Bronx and Rockland. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy in these counties. The Company’s largest loan segment remains non-owner occupied commercial real estate. Property types within this segment include: multi-family properties, retail properties, and general construction loans. Regionally, commercial real estate loans are concentrated within the Company’s primary operating footprint, including Orange, Westchester, Rockland and Bronx counties. Commercial and industrial loans are concentrated in Orange County, New York and outside of the Company’s core market. While industry exposure is widely dispersed, the Company does have a significant concentration of commercial and industrial loans within the healthcare and social assistance industry.

Previous wording

Credit Quality**.**We have well established loan policies and underwriting practices that have resulted in very low levels of charge-offs and nonperforming assets. We strive to originate quality loans that will maintain the credit quality of our loan portfolio. However, credit trends in the markets in which we operate are largely impacted by economic conditions beyond our control and can adversely impact our financial condition.

Current wording

Credit Quality**.**We have well established loan policies and underwriting practices that have resulted in low historical levels of charge-offs and nonperforming assets. We strive to generate quality loans that will maintain the credit quality of our loan portfolio. However, credit trends in the markets in which we operate are largely impacted by economic conditions beyond our control and can adversely impact our financial condition.

Previous wording

Assets. Our total assets were $2.5 billion at December 31, 2023, an increase of $198.1 million from $2.3 billion at December 31, 2022. The increase was primarily due to increased net loan growth of approximately $174.3 million, or 11.3%, during the year. The increase in assets also included an increase in cash and due from banks of $61.3 million, or 71.2%. During the 2023 fiscal year, investment securities decreased by $43.5 million, or 8.2%. This decrease represents management’s continued focus on liquidity and the maturities were primarily used to increase the Bank’s cash position.

Current wording

Assets. Our total assets were $2.5 billion at December 31, 2024, an increase of $24.5 million from December 31, 2023. The increase was primarily due to increased net loan growth of approximately $67.8 million, or 3.9%, during the year. The increase in assets also included an increase in cash and due from banks of $3.0 million, or 2.0%. During 2024, investment securities decreased by $46.2 million, or 9.4%. This decrease represents management’s continued focus on increased liquidity as the maturities of securities were primarily used to enhance the Bank’s cash position and pay down borrowings.

Previous wording

Cash and due from banks. Cash and due from banks increased $61.3 million, or 71.2%, to $147.4 million at December 31, 2023 from $86.1 million at December 31, 2022. The increase was driven by a strategic focus to increase cash balances, even through borrowings in order to maintain greater on-hand cash levels during a period of industry liquidity concerns.

Current wording

Cash and due from banks. Cash and due from banks increased $3.0 million, or 2.0%, to $150.3 million at December 31, 2024 from $147.4 million at December 31, 2023. The increase was primarily driven by a strategic focus to increase cash balances, while paying down borrowings in order to maintain continued strong cash levels while ensuring that contingent liquidity sources are available.

Previous wording

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. 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. Consumer loans increased $20.3 million, or 124.3%, to $36.6 million at December 31, 2023 from $16.3 million at December 31, 2022.

Current wording

Net loans increased $67.8 million, or 3.9%, to $1.8 billion at December 31, 2024 from $1.7 billion at December 31, 2023 primarily due to increases in commercial real estate loans as well as increases in home equity loans and consumer loans. Commercial real estate loans increased $102.7 million, or 8.2%, to $1.4 billion at December 31, 2024 from $1.3 billion at December 31, 2023 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. Consumer loans increased $1.4 million, or 3.9%, to $38.0 million at December 31, 2024 from $36.6 million at December 31, 2023. Home

Previous wording

At December 31, 2023, $491.1 million, or 51.6% of our adjustable interest rate loans were at their interest rate floor.

Current wording

At December 31, 2024, $523.3 million, or 51.3% of our adjustable interest rate loans were at their interest rate floor.

Previous wording

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. When a loan is determined to be non-performing, the measurement of the loan in the allowance for credit losses is based on the fair value of the collateral for all collateral-dependent loans. Non-accrual loans are loans for which collectability is questionable and, therefore, interest on such loans will no longer be recognized on an accrual basis. All loans that become 90 days or more delinquent are placed on non-accrual status unless the loan is well secured and in the process of collection. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received on a cash basis or cost recovery method.

Current wording

Management reviews a loan for 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. When a loan is determined to be non-performing, the measurement of the loan in the allowance for credit losses is based on the fair value of the collateral for all collateral-dependent loans. Non-accrual loans are loans for which collectability is questionable and, therefore, interest on such loans will no longer be recognized on an accrual basis. All loans that become 90 days or more delinquent are placed on non-accrual status unless the loan is well secured and in the process of collection. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received on a cash basis or cost recovery method.

Previous wording

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. 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. Costs relating to the development and improvement of the property, however, are capitalized to the extent of estimated fair value less estimated costs to sell. 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. 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.

Current wording

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. 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. Costs relating to the development and improvement of the property, however, are capitalized to the extent of estimated fair value less estimated costs to sell.

Previous wording

The following table sets forth information regarding our non-performing assets. Non-performing loans aggregated approximately $4.4 million at December 31, 2023 as compared to $8.5 million at December 31, 2022. No PPP loans were considered non-performing at December 31, 2023 or December 31, 2022.

Current wording

The following table sets forth information regarding our non-performing assets. Non-performing loans aggregated approximately $6.3 million at December 31, 2024 as compared to $4.4 million at December 31, 2023.

Previous wording

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. We had no other real estate owned at December 31, 2023.

Current wording

Non-performing loans at December 31, 2024 totaled $6.3 million and consisted mainly of $6.0 million related to commercial real estate loans and $293 thousand of commercial and industrial loans as well as $6 thousand of residential real estate loans. We had no other real estate owned at December 31, 2024 or 2023, respectively.

Previous wording

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. The decrease in non- performing assets at December 31, 2023 compared to December 31, 2022 was primarily due to management’s focus on resolution and payoff of certain loan relationships with limited charge-offs required.

Current wording

Non-performing assets increased $1.9 million, or 42.3%, to $6.3 million, or 0.25% of total assets, at December 31, 2024 from $4.4 million, or 0.18% of total assets, at December 31, 2023. The increase in non- performing assets at December 31, 2024 compared to December 31, 2023 was primarily due to one commercial real estate loan participation which defaulted during 2024 and is currently recorded at $6.0 million.

Previous wording

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.

Current wording

From time to time, as part of our loss mitigation strategy, we may renegotiate loan terms based on certain economic and legal reasons related to the borrower’s financial situation. There were no loans modified due to financial difficulties during the year ended December 31, 2024 and during the year ended December 31, 2023.

Previous wording

Classified Assets. Federal regulations provide that loans and other assets of lesser quality should be classified as “substandard”, “doubtful” or “loss” assets. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that we will sustain “some loss” if the deficiencies are not corrected. 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

Current wording

Classified Assets. Federal regulations provide that loans and other assets of lesser quality should be classified as “substandard”, “doubtful” or “loss” assets. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that we will sustain “some loss” if the deficiencies are not corrected. 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. We designate an asset as “special mention” if the asset has a potential weakness that warrants management’s close attention.

Previous wording

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. We designated $32.8 million of our assets at December 31, 2023 as special mention compared to $8.0 million designated as special mention at December 31, 2022.

Current wording

On the basis of management’s review of our assets, we classified $44.0 million of our assets at December 31, 2024 as substandard compared to $19.6 million at December 31, 2023. We designated $20.9 million of our assets at December 31, 2024 as special mention compared to $32.8 million designated as special mention at December 31, 2023.

Previous wording

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. The increase in the allowance for credit losses for 2023 was driven by growth in our commercial real estate and commercial real estate construction

Current wording

The allowance for credit losses increased by $895 thousand, or 3.6%, to $26.1 million, or 1.44% of total loans at December 31, 2024 from $25.2 million, or 1.44% of total loans, at December 31, 2023. The increase in the allowance for credit losses for 2024 was driven mainly by a provision of $8.7 million for one nonaccrual loan participation of a

Previous wording

Available for sale securities decreased $43.5 million, or 14.8%, to $489.9 million at December 31, 2023 from $533.5 million at December 31, 2022, as mortgage-backed securities decreased $26.7 million, municipal securities decreased $3.8 million, U.S. Government agency securities decreased $6.7 million, and corporate securities decreased $6.4 million. The overall decrease was primarily the result of management’s intent to increase its liquidity position and maintain the maturing investments within the cash accounts. During the first quarter of 2023, the Company recorded a credit loss associated with a corporate bond issued by Signature Bank resulting in a provision for credit losses totaling $5.0 million during 2023. This loss was the direct result of the failure of that bank during the first quarter of 2023. The investment was written-off during the second quarter of 2023.

Current wording

Available for sale securities decreased $46.2 million, or 9.4%, to $443.8 million at December 31, 2024 from $489.9 million at December 31, 2023, as mortgage-backed securities decreased $32.9 million, municipal securities decreased $3.1 million, and U.S. Government agency securities decreased $10.9 million, while corporate securities increased $758 thousand. The overall decrease was primarily the result of management’s intent to increase our liquidity position and maintain the maturing investments within the cash accounts. During the first quarter of 2024, the Company recognized a net credit related to the provision for credit losses of $1.9 million. The recovery was received for proceeds from the sale of subordinated debt securities which were previously charged off during 2023. Management determined that an ACL was not required for the portfolio and the amount was reversed from the provision which reduced the ACL on investment securities to zero. The 2023 provision included the effect of a $5 million reserve associated with the write-off of an investment in Signature Bank subordinated debt.

Previous wording

Available for sale securities are evaluated to determine if a decline in fair value below the amortized cost basis has resulted from a credit loss or other factors. An impairment related to credit factors would be recorded through an allowance for credit losses. The allowance is limited to the amount by which the security’s amortized cost basis exceeds the fair value. An impairment that has not been recorded through an allowance for credit losses shall be recorded through other comprehensive income, net of applicable taxes. Investment securities will be written down to fair value through the Consolidated Statements of Income when management intends to sell, or may be required to sell, the securities before they recover in value. Primarily all of the investment securities are backed by loans guaranteed by either U.S. government agencies or U.S government-sponsored entities, and management believes that default is highly unlikely given the lack of historical credit losses and governmental backing. Management believes that the unrealized losses on these securities are a function of changes in market interest rates and credit spreads, not changes in credit quality.

Current wording

Available for sale securities are evaluated to determine if a decline in fair value below the amortized cost basis has resulted from a credit loss or other factors. An impairment related to credit factors would be recorded through an allowance for credit losses. The allowance is limited to the amount by which the security’s amortized cost basis exceeds the fair value. An impairment that has not been recorded through an allowance for credit losses shall be recorded through other comprehensive income, net of applicable taxes. Investment securities will be written down to fair value through the Consolidated Statements of Income when management intends to sell, or may be required to sell, the securities before they recover in value. Primarily all of the investment securities are backed by loans guaranteed by either U.S. government agencies or U.S government-sponsored entities, and management believes that default is highly unlikely

Previous wording

Based on a comparison of the present value of expected cash flows to the amortized cost as well as a potential market for sale, the Company determined that there was no value to its corporate bond issued by Signature Bank due to its failure. Accordingly, the Company wrote off the amount of the corporate bond totaling $5.0 million during the quarter ended June 30, 2023. The amount of the write-down was previously recorded through an allowance for credit losses. The Company also evaluated available for sale debt securities that are in an unrealized loss position as of December 31, 2023 and has determined that the declines in fair value are mainly attributable to interest rates, credit spreads, market volatility and liquidity conditions, not credit quality or other factors. No impairment charges were recorded for the years ended December 31, 2023 and 2022, respectively.

Current wording

The Company also evaluated available for sale debt securities that are in an unrealized loss position as of December 31, 2024 and determined that the declines in fair value are mainly attributable to interest rates, credit spreads, market volatility and liquidity conditions, not credit quality or other factors. No provision was recorded for the year ended December 31, 2024. During 2023, the Company wrote off approximately $5.0 million associated with Signature Bank subordinated notes.

Previous wording

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. Certificates of deposit increased $128.5 million, or 138.1% to $221.5 million at December 31, 2023 from $93.0 million at December 31, 2022, primarily by increased broker deposits to support loan growth. The increase represented a continued strategic focus on maintaining increased liquidity during 2023 as a result of the liquidity volatility within the industry. 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. Our reciprocal deposits obtained through the CDARS and ICS networks totaled $11.1 million and $99.5 million, respectively, at December 31, 2023. Interest bearing demand deposits increased $20.2 million due to certain seasonality of municipal deposit relationships, as well as the impact of the overall interest rate environment. 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. Money market deposits decreased $30.2 million, savings deposits decreased $30.0 million and noninterest-bearing demand deposits decreased $24.0 million during 2023 as a result of industry concerns during the first quarter of 2023 associated with certain bank failures as well as the effect of rate pressure driven by the current interest rate environment. 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.

Current wording

Total deposits increased $114.6 million, or 5.6%, to $2.2 billion at December 31, 2024 from $2.0 billion at December 31, 2023. 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. Money market deposits increased $94.1 million and savings deposits increased $42.9 million while noninterest-bearing demand deposits decreased $48.1 million during 2024. Interest bearing demand deposits increased $26.2 million in 2024 due to certain seasonality of municipal deposit relationships, as well as the impact of attorney trust account growth during the year. At December 31, 2024, our core deposits (which includes all deposits except for certificates of deposit) totaled $1.9 billion, or 89.7% of our total deposits. The overall increase in deposits represented a continued strategic focus on maintaining increased liquidity during 2024. Certificates of deposit decreased $504 thousand, or 0.2% to $221.0 million at December 31, 2024 from $221.5 million at December 31, 2023, primarily due to relatively level balances of broker deposits to support loan growth. We held approximately $180.0 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, 2024 and $172.4 million in brokered deposits at December 31, 2023. Our reciprocal deposits obtained through the CDARS and ICS networks totaled $6.9 million and $92.5 million, respectively, at December 31, 2024.

Previous wording

billion, respectively. In addition, as of December 31, 2023, the aggregate amount of all our uninsured certificates of deposit was $11.3 million. The following table sets forth the maturity of these uninsured certificates of deposit as of December 31, 2023.

Current wording

As of December 31, 2024, and December 31, 2023, 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 $1.1 billion and $1.0 billion, respectively. In addition, as of December 31, 2024, the aggregate amount of all our uninsured certificates of deposit was $11.6 million. The following table sets forth the maturity of these uninsured certificates of deposit as of December 31, 2024.

Previous wording

Our borrowings consist of both short-term and long-term borrowings and provide us with one of our sources of funding. Maintaining available borrowing capacity provides us with a contingent source of liquidity.

Current wording

Our borrowings consist of both short-term and long-term borrowings and provide us with one of our sources of funding. Maintaining the available borrowing capacity provides us with a contingent source of liquidity.

Previous wording

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.

Current wording

Total borrowings from the Federal Home Loan Bank of New York were $123.5 million at December 31, 2024 and $234.5 million at December 31, 2023. The decrease in borrowings was related to management’s focus on reducing borrowings with increased deposit levels. We have the capacity to borrow up to $512.2 million from the Federal Home Loan Bank of New York at December 31, 2024.

Previous wording

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. From September 30, 2025 to the maturity date or early redemption date, the interest rate will reset quarterly to a level equal to the then current three-month SOFR plus 413 basis points, payable quarterly in arrears.

Current wording

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. From September 30, 2025 to the maturity date or early redemption date, the interest rate will reset quarterly to a level equal to the current three-month SOFR plus 413 basis points, payable quarterly in arrears.

Previous wording

Total stockholders’ equity increased $27.2 million, or 19.7%, to $165.4 million at December 31, 2023, from $138.1 million at December 31, 2022. The increase was primarily the result of the increase of $22.7 million in retained earnings during the current year and a $4.1 million decrease in accumulated other comprehensive loss due to an increase in the fair market value of our securities available-for-sale during 2023.

Current wording

Total stockholders’ equity increased $20.2 million, or 12.2%, to $185.5 million at December 31, 2024, from $165.4 million at December 31, 2023. The increase was primarily the result of the increase of $22.6 million in retained earnings during the current year, offset in part by a $3.6 million increase in accumulated other comprehensive loss due to a decrease in the fair market value of our securities available-for-sale during 2024.

Previous wording

accretion and net deferred loan origination costs accounted for as yield adjustments. Deferred loan fees totaled $4.9 million and $5.2 million for the years ended December 31, 2023 and 2022, respectively.

Current wording

accretion and net deferred loan origination costs accounted for as yield adjustments. Deferred loan fees totaled $4.9 million for each of the years ended December 31, 2024 and 2023, respectively.

Previous wording

Summary Income Statements. The following table sets forth the income summary for the year indicated:

Current wording

Summary Income Statements. The following table sets forth the income summary for the years indicated:

Previous wording

General. 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 increase was mainly driven by a $10.3 million increase in net

Current wording

General. Net income decreased $1.6 million, or 5.4%, to $27.9 million for the year ended December 31, 2024 from $29.5 million for the year ended December 31, 2023. The decrease was mainly driven by an $8.4 million increase in

Previous wording

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.

Current wording

noninterest expense and partially offset by an increase in net interest income of $3.4 million and an increase of $2.6 million in noninterest income.

Previous wording

Interest Income. 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. 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. 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.

Current wording

Interest Income. Interest income increased $9.5 million, or 8.0%, to $127.2 million for the year ended December 31, 2024 from $117.8 million for the year ended December 31, 2023. This increase was the result of an increase in our average interest-earning assets which increased by $47.9 million, or 2.1%, to $2.4 billion for the year ended December 31, 2024 compared to $2.3 billion for the year ended December 31, 2023. Supporting the increase in interest income was an increase in the average yield on interest earning assets of 28 basis points to 5.31% during the year ended December 31, 2024 from 5.03% for the year ended December 31, 2023.

Previous wording

Interest income on loans increased by $26.9 million, or 38.9%, to $96.3 million during the year ended December 31, 2023 from $69.3 million during the year ended December 31, 2022. The increase in interest income on loans was primarily due to the increase in the average balance of loans (excluding PPP loans), combined with the effect of an increase in the average yield on loans. 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. 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. 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.

Current wording

Interest income on loans increased by $9.8 million, or 10.2%, to $106.0 million during the year ended December 31, 2024 from $96.2 million during the year ended December 31, 2023. The increase in interest income on loans was primarily due to the increase in the average balance of loans (excluding PPP loans), combined with the effect of an increase in the average yield on loans. The average balance of loans (excluding PPP loans) increased by $76.8 million, or 4.6%, to $1.8 billion for the year ended December 31, 2024 compared to $1.7 billion for the year ended December 31, 2023. The average yield on loans increased by 29 basis points from 5.72% for the year ended December 31, 2023 to 6.01% for the year ended December 31, 2024. 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 was driven by a disciplined pricing approach within the market for new loan originations.

Previous wording

Interest income on securities increased by $2.1 million, or 17.4%, to $14.0 million during the year ended December 31, 2023 from $12.0 million during the year ended December 31, 2022. The increase in interest income on securities was due to an increase in the average yield on securities, partially offset by a decrease in the average balance of securities. 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. The average balance of securities decreased by $19.5 million, or 3.7%, to $503.4 million for the year ended December 31, 2023 compared to $522.9 million for the year ended December 31, 2022. The decrease in the average balance of securities was due to maturity and amortization of lower yielding securities during 2023 as compared to 2022.

Current wording

Interest income on investment securities decreased by $800 thousand, or 5.7%, to $13.3 million during the year ended December 31, 2024 from $14.1 million during the year ended December 31, 2023. The decrease in interest income on securities was due to a decrease in the average balance of securities, partially offset by an increase in the average yield on securities. The average balance of securities decreased by $36.3 million, or 7.2%, to $467.1 million for the year ended December 31, 2024 compared to $503.4 million for the year ended December 31, 2023. The decrease in the average balance of securities was due to maturity and amortization of lower yielding securities during 2024 as compared to 2023. The average yield on securities increased by four basis points from 2.79% for the year ended December 31, 2023 to 2.83% for the year ended December 31, 2024. 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 2024.

Previous wording

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 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. 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%.

Current wording

Interest income on cash and due from banks and other increased $723 thousand, or 11.1%, to $7.2 million for the year ended December 31, 2024 from $6.5 million for the year ended December 31, 2023. The increase in interest income from cash and due from banks and other was attributable to an increase in the average yield earned on cash and due from banks combined with increased average balances during the year. The average yield increased 11 basis points to 4.69% in 2024 from 4.58% in 2023 as a result of increased short-term market interest rates during the first half of 2024. Average balances for cash and due from banks increased to $153.6 million for the year ended December 31, 2024 from $142.0 million for the year ended December 31, 2023, representing an increase of $11.6 million, or 8.2%.

Previous wording

Interest Expense. 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. 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. 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.

Current wording

Interest Expense. Interest expense increased $6.1 million, or 20.7%, to $35.5 million for the year ended December 31, 2024 from $29.4 million for the year ended December 31, 2023. The increase in interest expense was a result of the higher interest rate environment associated with interest-bearing liabilities, primarily deposits, coupled with an increase in the average balance of interest-bearing liabilities. The average rate paid on interest-bearing liabilities increased 30 basis points to 2.20% during the year ended December 31, 2024 from 1.90% for the year ended December 31, 2023. The average balance of interest-bearing liabilities increased by $55.2 million, or 3.6%, to $1.6 billion for the year ended December 31, 2024 compared to $1.5 billion for the year ended December 31, 2023.

Previous wording

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 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. The average balance of interest-bearing deposits increased by $20.9 million, or 1.6%, to $1.4 billion for the year ended December 31, 2023 compared to the year ended December 31, 2022.

Current wording

Interest expense on interest-bearing deposits increased by $8.4 million, or 42.8%, to $27.9 million during the year ended December 31, 2024 from $19.5 million during the year ended 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 47 basis points to 1.91% during the year ended December 31, 2024. The average balance of interest-bearing deposits increased by $99.3 million, or 7.3%, to $1.5 billion for the year ended December 31, 2024 compared to the year ended December 31, 2023 due to increases in the average balances of all deposit categories. The average cost of interest-bearing deposits increased due to the higher interest rate environment as we continued to experience rate pressure on all interest-bearing deposit categories, demand deposit accounts, savings, money market, and certificates of deposit accounts.

Previous wording

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. The increase in interest expense on borrowed funds was primarily due to increased Federal Home Loan Bank advances to support loan growth from an average balance of $12.8 million for the year ended December 31, 2022 compared to an average balance of $170.4 million for the year ended December 31, 2023. In addition, the average rate of Federal Home Loan Bank advances increased 57 basis points from 4.68% for the year ended December 31, 2022 to 5.25% for the year ended December 31, 2023 as a result of the rising interest rate environment. 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%.

Current wording

Interest expense on Federal Home Loan Bank borrowings decreased to $6.7 million for the year ended December 31, 2024 as compared to $8.9 million for the year ended December 31, 2023. The decrease in interest expense on borrowed funds was primarily due to reduced Federal Home Loan Bank advances as a result of increased deposit levels during the year which supported loan growth. The average balance of Federal Home Loan Bank advances decreased from $170.4 million for the year ended December 31, 2023 to an average balance of $126.1 million for the year ended December 31, 2024. In addition, the average rate of Federal Home Loan Bank advances remained relatively stable and only increased two basis points from 5.25% for the year ended December 31, 2023 to 5.27% for the year ended December 31, 2024. We also incurred $921 thousand in interest expense for the year ended December 31, 2024 as compared to $922 thousand for the year ended December 31, 2023 due to the issuance in September 2020 of $20.0 million in outstanding subordinated notes which carries an interest rate of 4.25%.

Previous wording

Net Interest Income. Net interest income increased $10.3 million, or 13.2%, to $88.4 million for the year ended December 31, 2023 from $78.1 million for the year ended December 31, 2022 due primarily to an increase in net interest margin. The net interest margin increased 26 basis points to 3.78% for the year ended December 31, 2023 from 3.52% for the year ended December 31, 2022 due to the continued effect of interest rate increases as a result of Federal Reserve policy during a rising interest rate environment coupled with a focus on managing interest costs associated with deposits and borrowings. Net interest-earning assets decreased by $54.1 million to $792.2 million for the year ended December 31, 2023 from $846.3 million for the year ended December 31, 2022. 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.

Current wording

Net Interest Income. Net interest income increased $3.4 million, or 3.8%, to $91.8 million for the year ended December 31, 2024 from $88.4 million for the year ended December 31, 2023 due primarily to an increase in net interest margin. The net interest margin increased five basis points to 3.83% for the year ended December 31, 2024 from 3.78% for the year ended December 31, 2023 due to stability within the interest rate policy by the FRB which did not decrease rates until September 2024 coupled with a focus on managing interest costs associated with deposits and borrowings. Net interest-earning assets decreased by $7.3 million to $784.9 million for the year ended December 31, 2024 from $792.2 million for the year ended December 31, 2023. Net interest rate spread decreased by two basis points to 3.11% for the year ended December 31, 2024 from 3.13% for the year ended December 31, 2023, reflecting a 30 basis points increase in the average rate paid on interest-bearing liabilities, partially offset by a 28 basis points increase in the average yield on interest-earning assets.

Previous wording

Provision for Credit Losses. Our provision for credit losses was $7.9 million for the year ended December 31, 2023 compared to $9.5 million for the year ended December 31, 2022. The decrease in the provision for credit losses primarily reflected the impact of charge-offs during 2022 representing two syndicated loan relationships affected by pandemic related effects. The provision for the year ended December 31, 2023 also reflected the recognition of credit losses associated with the write off of the Signature Bank subordinated debt in the amount of $5.0 million as well as the additional provision related to the growth of the Company’s loan portfolio. 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.

Current wording

Provision for Credit Losses. Our provision for credit losses was $7.7 million for the year ended December 31, 2024 compared to $7.9 million for the year ended December 31, 2023. The decrease in the provision for credit losses primarily reflected the impact of a net recovery during 2024 associated with the previously charged-off Signature Bank subordinated debt and offset by provisions related to one nonaccrual loan participation of a commercial real estate transaction. The provision for the year ended December 31, 2024 included the recognition of credit losses associated with the participation as well as the additional provision related to the growth of the Company’s loan portfolio. The allowance for credit losses was $26.1 million, or 1.44%, of loans outstanding at December 31, 2024 compared to $25.2 million, or 1.44%, of loans outstanding at December 31, 2023.