Orange County Bancorp, Inc. /DE/

Previous wording

The following discussion and analysis of our financial condition and results of operations at March 31, 2025 and December 31, 2024 and for the three months ended March 31, 2025 and 2024 should be read in conjunction with our audited consolidated financial statements and the accompanying notes in our Annual Report on Form 10-K for the year ended December 31, 2024. This discussion and analysis contains forward-looking statements that are subject to certain risks and uncertainties and are based on certain assumptions that we believe are reasonable but may prove to be inaccurate. Certain risks, uncertainties and other factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements” and elsewhere in this Quarterly Report on Form 10-Q, may cause actual results to differ materially from those projected results discussed in the forward-looking statements appearing in this discussion and analysis. We assume no obligation to update any of these forward-looking statements.

Current wording

The following discussion and analysis of our financial condition and results of operations at June 30, 2025 and December 31, 2024 and for the three and six months ended June 30, 2025 and 2024 should be read in conjunction with our audited consolidated financial statements and the accompanying notes in our Annual Report on Form 10-K for the year ended December 31, 2024. This discussion and analysis contains forward-looking statements that are subject to certain risks and uncertainties and are based on certain assumptions that we believe are reasonable but may prove to be inaccurate. Certain risks, uncertainties and other factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements” and elsewhere in this Quarterly Report on Form 10-Q, may cause actual results to differ materially from those projected results discussed in the forward-looking statements appearing in this discussion and analysis. We assume no obligation to update any of these forward-looking statements.

Previous wording

** ** We are a bank holding company headquartered in Middletown, New York and registered under the Bank Holding Company 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 continue to capitalize on the 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 offices and one loan production office, continue to produce 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 had $1.7 billion in assets under management at March 31, 2025. As of March 31, 2025, our assets, loans, deposits and stockholders’ equity totaled $2.6 billion, $1.9 billion, $2.3 billion and $201.3 million, respectively.

Current wording

** ** We are a bank holding company headquartered in Middletown, New York and registered under the Bank Holding Company 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 continue to capitalize on the 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 offices and one loan production office, continue to produce 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 had $1.8 billion in assets under management at June 30, 2025. As of June 30, 2025, our assets, loans, deposits and stockholders’ equity totaled $2.6 billion, $1.9 billion, $2.3 billion and $252.6 million, respectively.

Previous wording

At March 31, 2025, we operate from our main office and 15 branch offices. We own our main office in Middletown, New York, and four branch offices which are located at Trust Way in Middletown as well as in Chester, in Newburgh and in Montgomery, New York. We lease eleven branch offices located in Middletown, Goshen, Cortlandt Manor, White Plains, Mamaroneck, New City, Mt. Pleasant, Mount Vernon, Bronx, Nanuet, and Yonkers, New York. The branches are leased under agreements that may be renewed for various periods. In addition, HVIA operates from leased offices located in Goshen, New York. At March 31, 2025 and December 31, 2024, the total net book value of our leasehold improvements, furniture, fixtures and equipment was approximately$15.9 million and $15.8 million, respectively, including approximately $1.3 million of long-lived assets held for sale related to the Trust Way location at both dates.

Current wording

At June 30, 2025, we operate from our main office and 14 branch offices. We own our main office in Middletown, New York, and three branch offices which are located in Chester, Newburgh and in Montgomery, New York. We lease eleven branch offices located in Middletown, Goshen, Cortlandt Manor, White Plains, Mamaroneck, New City, Mt. Pleasant, Mount Vernon, Bronx, Nanuet, and Yonkers, New York. The branches are leased under agreements that may be renewed for various periods. In addition, HVIA operates from leased offices located in Goshen, New York. At June 30, 2025 and December 31, 2024, the total net book value of our leasehold improvements, furniture, fixtures and equipment was approximately $14.9 million and $15.8 million, respectively.

Previous wording

Regulatory Trends. We operate in a highly regulated environment and nearly all of our operations are subject to extensive regulation and supervision. Bank or securities regulators, Congress, the State of New York, the FRB and the New York State Department of Financial Services (the “NYSDFS”) may revise the laws and regulations applicable to us, may impose new laws and regulations, increase the level of scrutiny of our business in the supervisory process, and pursue additional enforcement actions against financial institutions. Future legislative and regulatory changes such as these may increase our costs and have an adverse effect on our business, financial condition and results of operations. The legislative and regulatory trends that will affect us in the future are impossible to predict with any certainty.

Current wording

Department of Financial Services (the “NYSDFS”) may revise the laws and regulations applicable to us, may impose new laws and regulations, increase the level of scrutiny of our business in the supervisory process, and pursue additional enforcement actions against financial institutions. Future legislative and regulatory changes such as these may increase our costs and have an adverse effect on our business, financial condition and results of operations. The legislative and regulatory trends that will affect us in the future are impossible to predict with any certainty.

Previous wording

Allowance for Credit Losses. Management believes that the determination of the allowance for credit losses involves a high degree of complexity and requires management to make difficult and subjective judgments, which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could materially impact the results of operations for Orange County Bancorp. The methodology, assumptions, and governance of this CECL model have been codified in a policy document that was most recently reviewed and approved by the Company’s Audit & Risk Committee during the fourth quarter of 2024. While there were no fundamental changes to the CECL model during the quarter, management evaluated certain probability of default assumptions as well as the loss driver analysis. This evaluation resulted in adjustment of certain assumptions but were not considered significant changes to the model. Accordingly, management believes there were no significant changes to the critical accounting estimates during the three months ended March 31, 2025, and as disclosed in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 17, 2025 A summary of our accounting policies, including the Allowance for Credit Losses, is included in the Company’s Annual Report on Form 10-K.

Current wording

Allowance for Credit Losses. Management believes that the determination of the allowance for credit losses involves a high degree of complexity and requires management to make difficult and subjective judgments, which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could materially impact the results of operations for Orange County Bancorp. The methodology, assumptions, and governance of this CECL model have been codified in a policy document that was most recently reviewed and approved by the Company’s Audit & Risk Committee during the fourth quarter of 2024. While there were no fundamental changes to the CECL model during the quarter, management evaluated certain probability of default assumptions as well as the loss driver analysis. This evaluation resulted in adjustment of certain assumptions but were not considered significant changes to the model. Accordingly, management believes there were no significant changes to the critical accounting estimates during the three and six months ended June 30, 2025, and as disclosed in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 17, 2025 A summary of our accounting policies, including the Allowance for Credit Losses, is included in the Company’s Annual Report on Form 10-K.

Previous wording

Assets. Our total assets were $2.6 billion at March 31, 2025, an increase of $50.2 million, or 2.0%, from December 31, 2024. The increase was primarily driven by increases of $38.2 million in loans, net and $13.8 million in cash and due from banks, while investment securities, available for sale, remained relatively level during the period.

Current wording

Assets. Our total assets were $2.6 billion at June 30, 2025, an increase of $96.3 million, or 3.8%, from December 31, 2024. The increase was primarily driven by increases of $99.7 million in loans, net and $25.3 million in cash and due from banks, while investment securities, available for sale, decreased by $33.0 million during the six months ended June 30, 2025.

Previous wording

Cash and due from banks. Cash and due from banks increased $13.8 million, or 9.2%, to $164.2 million at March 31, 2025, from $150.3 million at December 31, 2024. The increase was mainly the result of management’s focus on using deposit growth during the period to maintain a strong liquidity position while paying down borrowings.

Current wording

Cash and due from banks. Cash and due from banks increased $25.3 million, or 16.8%, to $175.6 million at June 30, 2025, from $150.3 million at December 31, 2024. The increase was mainly the result of the completion of a $46.0 million common stock follow-

Previous wording

Net loans increased $38.2 million, or 2.1%, and remained at approximately $1.8 billion at March 31, 2025 and December 31, 2024. The growth was primarily due to an increase of $19.7 million related to commercial real estate loans as well as a $16.7 million increase in commercial real estate construction loans and an increase of $4.9 million in commercial and industrial loans offset by decreases in the residential real estate and consumer categories. Home equity loans also increased by $846 thousand during the period. Construction loans increased $16.7 million, or 20.6%, to $97.7 million at March 31, 2025 from $81.0 million at December 31, 2024. Commercial real estate loans increased by $19.7 million, or 1.4%, to $1.4 billion at March 31, 2025. Commercial and industrial loans experienced an increase of $4.9 million, or 2.0%, to $247.1 million at March 31, 2025 from $242.2 million at December 31, 2024. Consumer loans decreased $1.7 million, or 4.6%, to $36.3 million at March 31, 2025 from $38.0 million at December 31, 2024. Residential real estate loans decreased $1.9 million, or 2.5%, to $73.1 million at March 31, 2025 from $75.0 million at December 31, 2024. The overall diversification within the commercial real estate portfolio continues to provide stability while we remained focused on loan originations to new and existing customers during the three months ended March 31, 2025 as well as our continued commitment to geographic expansion in our market area.

Current wording

Net loans increased $99.7 million, or 5.6%, and reached $1.9 billion at June 30, 2025 as compared to $1.8 billion at December 31, 2024. The growth was primarily due to an increase of $72.4 million related to commercial real estate loans as well as a $30.5 million increase in commercial real estate construction loans and an increase of $6.5 million in commercial and industrial loans offset by decreases in the residential real estate and consumer categories. Home equity loans also increased by $1.8 million during the six months ended June 30, 2025. Commercial real estate loans increased by $72.4 million, or 5.3%, to $1.4 billion at June 30, 2025. Construction loans increased $30.5 million, or 37.6%, to $111.5 million at June 30, 2025 from $81.0 million at December 31, 2024. Commercial and industrial loans experienced an increase of $6.5 million, or 2.7%, to $248.7 million at June 30, 2025 from $242.2 million at December 31, 2024. Consumer loans decreased $5.2 million, or 13.8%, to $32.8 million at June 30, 2025 from $38.0 million at December 31, 2024. Residential real estate loans decreased $3.8 million, or 5.1%, to $71.2 million at June 30, 2025 from $75.0 million at December 31, 2024. The overall diversification within the commercial real estate portfolio continues to provide stability while we remained focused on loan originations to new and existing customers during the three months and six months ended June 30, 2025 as well as our continued commitment to geographic expansion in our market area.

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

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. 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.

Previous wording

The following table sets forth information regarding our non-performing assets. Non-performing loans aggregated approximately $6.2 million at March 31, 2025 as compared to $6.3 million at December 31, 2024.

Current wording

The following table sets forth information regarding our non-performing assets. Non-performing loans aggregated approximately $11.7 million at June 30, 2025 as compared to $6.3 million at December 31, 2024.

Previous wording

Non-performing loans at March 31, 2025 totaled $6.2 million and consisted of $6.0 million related to commercial real estate loans and $200 thousand of commercial and industrial loans. The level of non-performing loans was primarily related to one non-accrual commercial real estate office space loan participation which was classified as non-accrual during second quarter 2024. During the third quarter of 2024, this loan was written down by approximately $8.7 million from its principal balance of $14.7 million and is approximately $6.0 million as of March 31, 2025. We had no other real estate owned at March 31, 2025 and December 31, 2024.

Current wording

Non-performing loans at June 30, 2025 totaled $11.7 million and consisted of $8.4 million related to commercial real estate loans, $2.4 million associated with commercial and industrial loans, $100 thousand of residential real estate loans, and $828 thousand of home equity loans. Although there were increases in other loan segments, the level of non-performing loans was still mainly related to one non-accrual commercial real estate office space loan participation which was classified as non-accrual during the second quarter of 2024. During the third quarter of 2024, this loan was written down by approximately $8.7 million from its principal balance of $14.7 million and remains at $6.0 million as of June 30, 2025. The other loans designated as non-accrual were based upon individual analysis and payment performance. We had no other real estate owned at June 30, 2025 and December 31, 2024.

Previous wording

Non-performing assets decreased $94 thousand, or 1.5%, to $6.2 million, or 0.24% of total assets, at March 31, 2025 from $6.3 million, or 0.25% of total assets, at December 31, 2024. The stability in non-performing assets at March 31, 2025, compared to December 31, 2024 represents management’s continued focus on strong credit quality and attention to assets with potential concerns.

Current wording

Non-performing assets increased $5.4 million, or 86.0%, to $11.7 million, or 0.45% of total assets, at June 30, 2025 from $6.3 million, or 0.25% of total assets, at December 31, 2024 due to the increase in non-performing loans. Although an increase, the overall level of non-performing assets remains relatively stable at June 30, 2025. Management continues to focus on credit quality and attention to assets with potential concerns.

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 three months ended March 31, 2025.

Current 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 three months or six months ended June 30, 2025.

Previous wording

On the basis of management’s review of our assets, we have classified $59.8 million of our assets at March 31, 2025 as substandard compared to $44.0 million at December 31, 2024, with the increase due to a combination of certain trends and delinquencies within those loans. There were no doubtful assets as of March 31, 2025 and December 31, 2024. We designated $28.2 million of our assets at March 31, 2025 as special mention compared to $20.9 million designated as special mention at December 31, 2024.

Current wording

On the basis of management’s review of our assets, we have classified $71.7 million of our assets at June 30, 2025 as substandard compared to $44.0 million at December 31, 2024, with the increase due to a combination of risk ratings resulting from certain trends and delinquencies within those loans. There were no doubtful assets as of June 30, 2025 and December 31, 2024. We designated $26.0 million of our assets at June 30, 2025 as special mention compared to $20.9 million designated as special mention at December 31, 2024.

Previous wording

As presented below, the allowance for credit losses increased by $900 thousand, or 3.5%, to $26.4 million, or 1.42% of total loans at March 31, 2025, from $25.5 million, or 1.47% of total loans at March 31, 2024. The increase in the allowance was primarily due to

Current wording

As presented below, the allowance for credit losses increased by $593 thousand, or 2.1%, to $28.4 million, or 1.48% of total loans at June 30, 2025, from $27.8 million, or 1.60% of total loans at June 30, 2024. The increase in the allowance was primarily due to

Previous wording

reserves associated with loan growth during the period. The three months ended March 31, 2025 also included net-recoveries of approximately $33 thousand.

Current wording

reserves associated with loan growth during the period combined with specific reserves on certain loans. The six months ended June 30, 2025 also included net charge-offs of approximately $148 thousand.

Previous wording

For the three months ended March 31, 2025 and 2024, respectively, no category of loans had a net charge-off ratio which exceeded 0.01% either individually, or in the aggregate.

Current wording

For the six months ended June 30, 2025 and 2024, respectively, no category of loans had a net charge-off ratio which exceeded 0.01% either individually, or in the aggregate.

Previous wording

Available for sale securities increased $22.0 thousand, or less than 0.01%, to $443.8 million at March 31, 2025, due primarily to limited purchases as well as continued declines for all investment categories due to normal amortization and cash flow during the three month period ended March 31, 2025. During the first quarter of 2024, the Company sold and recorded a recovery of $1.9 million related to Signature Bank subordinated debt which was written-off during 2023. As part of the treatment, the Company evaluated the securities portfolio for an allowance and determined it was not necessary. Accordingly, the recovery resulted in a net credit to the ACL.

Current wording

Available for sale securities decreased $33.0 million, or 7.4%, to $410.8 million at June 30, 2025, due primarily to the sale of approximately $15 million of investment securities combined with limited purchases as well as continued declines for all investment categories due to normal amortization and cash flow during the six month period ended June 30, 2025.

Previous wording

Total deposits increased $128.3 million, or 6.0%, to $2.3 billion at March 31, 2025 from $2.2 billion at December 31, 2024 driven by deposit growth which represented a continued focus on maintaining strong liquidity and commercial transaction accounts during the first three months of 2025. Interest bearing demand deposits experienced a $50.8 million, or 15.3%, increase and money market deposits increased $24.3 million, while savings deposits increased by $11.6 million during the first three months of 2025 primarily related to our continued strategic focus on business account activity. Non-interest-bearing demand deposits increased $2.9 million primarily due to normal business activity and continued focus on transactional accounts during the first three months of 2025. At March 31, 2025, our core deposits (which includes all deposits except for certificates of deposit) totaled $2.0 billion, or 88.6% of our total deposits. Certificates of deposit increased by $38.8 million, or 17.6%, mainly from growth in brokered deposits during the three month period ended March 31, 2025. We held approximately $220.0 million of brokered deposits (excluding reciprocal deposits obtained through the Certificate Deposit Account Registry Service (CDARS) and Insured Cash Sweep (ICS) networks) at March 31, 2025 as compared to $180.0 million at December 31, 2024. This increase was the result of a strategic decision to increase short term brokered deposits during the period which could allow for replacement of maturing brokered deposits with transactional customer deposits and reduced interest expense. Our reciprocal deposits obtained through the CDARS and ICS networks totaled $6.9 million and $89.2 million, respectively, at March 31, 2025 and the CDARS and ICS networks totaled $6.9 million and $92.5 million, respectively, at December 31, 2024. Uninsured deposits, net of fully collateralized municipal relationships, remained stable and represent approximately 39% of total deposits as of March 31, 2025 and December 31, 2024.

Current wording

Total deposits increased $123.4 million, or 5.7%, to $2.3 billion at June 30, 2025 from $2.2 billion at December 31, 2024 driven by continued deposit growth focused on maintaining strong liquidity and commercial transaction accounts during the first six months of 2025. Non-interest-bearing demand deposits increased $36.0 million due to normal business activity and continued focus on transactional accounts during the first six months of 2025. Interest bearing demand deposits experienced a $98.2 million, or 29.7%, increase and money market deposits increased $14.1 million, while savings deposits increased by $51.8 million during the first six months of 2025 primarily related to our continued strategic focus on business account activity. At June 30, 2025, our core deposits (which includes all deposits except for certificates of deposit) totaled $2.1 billion, or 93.7% of our total deposits. Certificates of deposit decreased by $76.7 million, or 34.7%, mainly from payoffs of brokered deposits during the six months ended June 30, 2025. We held approximately $106.5 million of brokered deposits (excluding reciprocal deposits obtained through the Certificate Deposit Account Registry Service (CDARS) and Insured Cash Sweep (ICS) networks) at June 30, 2025 as compared to $180.0 million at December 31, 2024. This decrease represents a strategic initiative to reduce short term brokered deposits during the period as a result of increased core deposits and allow for replacement of maturing brokered deposits with transactional customer deposits and lower interest expense. Our reciprocal deposits obtained through the CDARS and ICS networks totaled $6.6 million and $83.8 million, respectively, at June 30, 2025 and the CDARS and ICS networks totaled $6.9 million and $92.5 million, respectively, at December 31, 2024. Uninsured deposits, net of fully collateralized municipal relationships, remained stable and represent approximately 43% of total deposits as of June 30, 2025 and 39% of total deposits as of December 31, 2024.

Previous wording

Total borrowings from the Federal Home Loan Bank of New York were $30.5 million at March 31, 2025 and $123.5 million at December 31, 2024 as we made the strategic decision to pay down Federal Home Loan Bank advances, short term, by approximately $93.0 million. This decrease represents a continued focus by management to reduce borrowings and the related interest expense by using lower-cost deposits for funding. We have the unused capacity to borrow an additional $524.6 million from the Federal Home Loan Bank of New York as of March 31, 2025.

Current wording

Total borrowings from the Federal Home Loan Bank of New York were $31.0 million at June 30, 2025 and $123.5 million at December 31, 2024 as we made the strategic decision to pay down Federal Home Loan Bank advances, short term, by approximately $92.5 million. This decrease represents the continued focus by management to reduce borrowings and the related interest expense by using lower-cost deposits for funding. We have the unused capacity to borrow an additional $541.8 million from the Federal Home Loan Bank of New York as of June 30, 2025.

Previous wording

Stockholders’ equity increased $15.8 million, or 8.5%, to $201.3 million at March 31, 2025 from $185.5 million at December 31, 2024. The increase was due to the combination of $8.7 million in net income and a decrease in unrealized losses of approximately $7.7 million on the market value of investment securities within the Company’s equity as accumulated other comprehensive income (loss) (“AOCI”), net of taxes during the first quarter of 2025 offset by dividends of $1.5 million.

Current wording

Stockholders’ equity increased $67.1 million, or 36.1%, to $252.6 million at June 30, 2025 from $185.5 million at December 31, 2024. The increase was due to the combination of the completion of a follow-on common stock offering during the second quarter of 2025 with net proceeds of $43.0 million coupled with $10.5 million in net income and a decrease in unrealized losses of approximately $6.3 million on the market value of investment securities within the Company’s equity as accumulated other comprehensive income (loss) (“AOCI”), net of taxes during the first six months of 2025 offset by dividends of $3.0 million during the period.

Previous wording

The following table presents average balance sheet information, interest income, interest expense and the corresponding average yields earned and rates paid for the three month periods ended March 31, 2025 and 2024. No tax equivalent yield adjustments have been made, as the effects would be immaterial. The average balances are daily averages for loans, as presented. Interest income on loans includes the effects of discount accretion and net deferred loan origination costs accounted for as yield adjustments. Average deferred loan fees totaled $4.9 million and $4.8 million for the three months ended March 31, 2025 and 2024, respectively.

Current wording

The following tables present average balance sheet information, interest income, interest expense and the corresponding average yields earned and rates paid for the three and six month periods ended June 30, 2025 and 2024. No tax equivalent yield adjustments have been made, as the effects would be immaterial. The average balances are daily averages for loans, as presented. Interest income on loans includes the effects of discount accretion and net deferred loan origination costs accounted for as yield adjustments. Average deferred loan fees totaled $4.9 million and $4.6 million for the three months ended June 30, 2025 and 2024, respectively. Average deferred loan fees totaled $4.9 million and $4.7 million for the six months ended June 30, 2025 and 2024, respectively.

Previous wording

The following table presents the dollar amount of changes in interest income and interest expense for major components of interest earning assets and interest-bearing liabilities for the periods indicated. The table distinguishes between: (1) changes attributable to volume (changes in volume multiplied by the prior period’s rate); (2) changes attributable to rate (change in rate multiplied by the prior year’s volume) and (3) total increase (decrease) (the sum of the previous columns). Changes attributable to both volume and rate are allocated ratably between the volume and rate categories.

Current wording

The following table presents the dollar amount of changes in interest income and interest expense for major components of interest earning assets and interest-bearing liabilities for the periods indicated. The table distinguishes between: (1) changes attributable to volume (changes in volume multiplied by the prior period’s rate); (2) changes attributable to rate (change in rate

Previous wording

Results of Operations for the Three Months Ended March 31, 2025 and 2024

Current wording

Results of Operations for the Three and Six Months Ended June 30, 2025 and 2024

Previous wording

Interest income on loans, net of PPP loans, increased by $1.7 million, or 6.6%, to $27.3 million during the three months ended March 31, 2025 from $25.6 million during the three months ended March 31, 2024. The increase in interest income on loans was primarily due to the increase in the average balance of loans (net of PPP loans) and an increase in the average yield on loans. The average balance of loans increased by $91.7 million, or 5.3%, to $1.8 billion for the three months ended March 31, 2025 compared to $1.7 billion for the three months ended March 31, 2024. The average yield on loans, excluding PPP loans, increased by 14 basis points to 6.05% for the three months ended March 31, 2025 from 5.91% for the three months ended March 31, 2024 as a result of the higher interest rate environment and management’s continued focus on disciplined loan pricing.

Current wording

Interest income on loans, net of PPP loans, increased by $1.3 million, or 4.9%, to $28.1 million during the three months ended June 30, 2025 from $26.8 million during the three months ended June 30, 2024. The increase in interest income on loans was primarily due to the increase in the average balance of loans (net of PPP loans). The average balance of these loans increased by $151.4 million, or 8.8%, to $1.9 billion for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The increase in the average balance of loans was due to growth in commercial real estate loan balances, including commercial real estate construction, as well as growth in our commercial and industrial loan portfolio. The average yield on loans, excluding PPP loans, decreased by 21 basis points to 6.00% for the three months ended June 30, 2025 from 6.21% for the three months ended June 30, 2024 as a result of the lower interest rate environment and competitive rate pressure within the market.

Previous wording

For the three months ended March 31, 2025, interest income on securities decreased by $309 thousand to $3.1 million during the three months ended March 31, 2025 from $3.4 million during the three months ended March 31, 2024. The decrease in interest income on securities was driven primarily by a decrease in the average balance of securities outstanding during the current period due to continued maturities. The average balance of securities decreased by $39.8 million, or 8.3%, to $441.8 million for the three months ended March 31, 2025 compared to $481.5 million for the three months ended March 31, 2024. The average yield on investment securities was relatively flat with a one basis point increase overall from 2.86% for the three months ended March 31, 2024 to 2.87% for the three months ended March 31, 2025. The stability and slight increase in the average yield on securities reflected the continued maturity of lower yielding investments during the current period.

Current wording

Interest income on securities decreased by $281 thousand to $3.1 million during the three months ended June 30, 2025 from $3.4 million during the three months ended June 30, 2024. The decrease in interest income on securities was driven primarily by a decrease in the average balance of securities outstanding during the current period due to certain maturities and securities sales. The average balance of securities decreased by $34.7 million, or 7.4%, to $432.7 million for the three months ended June 30, 2025 compared to $467.3 million for the three months ended June 30, 2024. The average yield on investment securities decreased by three basis points overall from 2.89% for the three months ended June 30, 2024 to 2.86% for the three months ended June 30, 2025. The decrease in the average yield reflected the continued maturity of lower yielding investments as well as the impact of $15.0 million in securities sold at the end of the current period.

Previous wording

Interest Expense. Interest expense decreased $1.2 million, or 12.6%, to $8.3 million for the three months ended March 31, 2025 from $9.5 million for the three months ended March 31, 2024. The decreased interest expense was driven primarily by the effect of lower average balances and costs associated with FHLB borrowings. The average rate paid on interest-bearing liablities decreased 31 basis points to 2.05% during the three months ended March 31, 2025 as compared to 2.36% for the three month period ended March 31, 2024. The average balance of interest-bearing liabilities increased by $26.7 million, or 1.7%, and was approximately $1.6 billion for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.

Current wording

Interest Expense. Interest expense decreased $309 thousand, or 3.7%, to $8.1 million for the three months ended June 30, 2025 from $8.4 million for the three months ended June 30, 2024. The decreased interest expense was primarily the result of the lower interest rate environment and the effect of increased core deposits on overall interest costs. The average rate paid on interest-bearing liablities decreased nine basis points to 1.85% during the three months ended June 30, 2025 as compared to 1.94% for the three month period ended June 30, 2024. The average balance of interest-bearing liabilities increased by $80.8 million, or 5.1%, reaching $1.7 billion for the three months ended June 30, 2025 from $1.6 billion for the three months ended June 30, 2024.

Previous wording

During the three months ended March 31, 2025, interest expense on interest-bearing deposits increased by $127 thousand, or 1.8%, to $7.1 million during the three months ended March 31, 2025 from $7.0 million during the three months ended March 31, 2024. The increase in interest expense on interest-bearing deposits for the three month period ended March 31, 2025 as compared to the same prior year period represents the effect of higher average balances of interest bearing deposits offset by the lower interest rate environment on the average cost of deposits . The average balance of interest-bearing deposits increased by $109.1 million, or 7.7%, to $1.5 billion for the three months ended March 31, 2025 as compared to $1.4 billion for the three months ended March 31, 2024 primarily as a result of the increases in the average balances of money market accounts, savings accounts, and certificates of deposit. The average cost of interest-bearing deposits decreased nine basis points to 1.88% for the three months ended March 31, 2025 as compared to 1.97% for the three months ended March 31, 2024.

Current wording

During the six months ended June 30, 2025, interest expense on interest-bearing deposits increased by $333 thousand, or 2.3%, to $14.6 million during the six months ended June 30, 2025 from $14.3 million during the six months ended June 30, 2024. The increase in interest expense on interest-bearing deposits for the six month period ended June 30, 2025 as compared to the same prior year period represents the effect of higher average balances of interest bearing deposits. The average balance of interest-bearing deposits increased by $116.5 million, or 8.0%, to $1.6 billion for the six months ended June 30, 2025 as compared to $1.5 billion for the six months ended June 30, 2024 primarily as a result of the increases in the average balances of certificates of deposit, money market accounts, and savings accounts. The average cost of interest-bearing deposits decreased 10 basis points to 1.86% for the six months ended June 30, 2025 as compared to 1.96% for the six months ended June 30, 2024.

Previous wording

We also expensed a level amount of approximately $230 thousand in interest expense for both the three months ended March 31, 2025 and 2024 related to the issuance in September 2020 of $20.0 million in outstanding subordinated notes, which carries an interest rate of 4.25%. These flat interest costs represent the debt service required as part of the 2020 subordinated notes.

Current wording

We also expensed a level amount of approximately $231 thousand in interest expense for both the three months ended June 30, 2025 and 2024 related to the issuance in September 2020 of $20.0 million in outstanding subordinated notes, which carries an interest rate of 4.25%. In addition, we expensed $461 thousand in interest expense for both the six months ended June 30, 2025 and June 30, 2024. These flat interest costs represent the debt service required as part of the 2020 subordinated notes.

Previous wording

The interest expense related to borrowings in the first quarter of 2025 decreased to $931 thousand at an average cost of 4.44% as compared to interest expense of $2.3 million at an average cost of 5.39% for the same period in 2024. The first quarter 2025 average FHLB and other borrowings decreased to $85.0 million compared to $167.5 million of average FHLB and other borrowing in the same quarter of 2024. The decrease in average borrowings was the direct result of paydowns driven by increased deposits and less use of cash during the current period. Management was able to replace higher cost FHLB borrowings with lower cost borrowings as rates were adjusted lower and reduced interest expense during the current period. Although borrowings remain a potential source of strategic funding for the Company, the reduction in borrowings during the quarter exemplifies the ability of the Company to increase deposits and strategically reduce associated interest costs.

Current wording

The interest expense related to borrowings in the second quarter of 2025 decreased to $375 thousand at an average cost of 4.38% as compared to interest expense of $890 thousand at an average cost of 4.64% for the same period in 2024. The second quarter 2025 average FHLB and other borrowings decreased to $34.3 million compared to $76.9 million of average FHLB and other borrowings in the same quarter of 2024. The decrease in average borrowings was the direct result of paydowns driven by increased deposits during the current period. Management was able to replace higher cost FHLB borrowings with lower cost deposits and reduce interest expense during the current period. Although borrowings remain a potential source of strategic funding for the Company, the reduction in borrowings during the quarter reflects the ability of the Company to increase deposits and strategically reduce related interest costs.

Previous wording

Net Interest Income. Net interest income increased $2.0 million, or 9.4%, to $23.6 million for the three months ended March 31, 2025 from $21.6 million for the three months ended March 31, 2024 due to the increase in income from interest earning assets outpacing the growth of interest costs associated with interest bearing liabilities. Net interest rate spread increased by 40 basis points to 3.28% for the three months ended March 31, 2025 from 2.88% for the three months ended March 31, 2024, reflecting a nine basis points increase in the average yield on interest-earning assets coupled with a 31 basis points decrease in the average rate paid on interest-bearing liabilities. The net interest margin increased 31 basis points to 3.95% for the three months ended March 31, 2025 from 3.64% for the three months ended March 31, 2024 due to disciplined loan pricing as well as the impact of managed funding and reduced deposit costs during the period.

Current wording

3.43% for the three months ended June 30, 2025 from 3.41% for the three months ended June 30, 2024, reflecting a 16 basis points decrease in the average yield on interest-earning assets offset by an 18 basis points decrease in the average rate paid on interest-bearing liabilities. The net interest margin was reduced by four basis points to 4.06% for the three months ended June 30, 2025 from 4.10% for the three months ended June 30, 2024 due to tightening associated with the lower interest rate environment as well as the impact of managed funding and deposit costs during the period.

Previous wording

Provision for Credit Losses. The Company recognized a provision for credit losses of $202 thousand for the three months ended March 31, 2025 and a net credit of $1.6 million for the three months ended March 31, 2024. The increase in the provision for credit losses during the quarter included the impact of the methodology associated with estimated lifetime losses, the composition of loans closed during the period, and the increase in loans closed as well as the effect of the investment recovery during 2024. The allowance for credit losses to total loans was 1.42% as of March 31, 2025 versus 1.44% as of December 31, 2024. No additional reserves for investment securities were recorded during the first quarter of 2025 or 2024, respectively.

Current wording

Provision for Credit Losses. The Company recognized a provision for credit losses of $2.1 million for the three months ended June 30, 2025, compared to $2.2 million for the three months ended June 30, 2024. The decreased provision for the three months ended June 30, 2025 as compared to the same period in 2024 reflected lower levels of specific reserves associated with certain loans during the second quarter of 2025 as compared to the second quarter of 2024 offset by loan portfolio growth during the current period. The allowance for credit losses to total loans was 1.48% as of June 30, 2025, an increase of four basis points, or 2.8%, versus 1.44% as of December 31, 2024.

Previous wording

Noninterest income increased by $670 thousand, or 18.2%, reaching $4.4 million for the three months ended March 31, 2025 as compared to $3.7 million for the three months ended March 31, 2024. Our Wealth Management division revenues, which include our Trust and Asset Management businesses also experienced growth and represented a 19.2% increase quarter-over-quarter, to $3.4 million for the first quarter of 2025 as compared to $2.9 million for the first quarter of 2024 as a result of increased fees and continued growth in asset values during the current period. During the same period, assets-under-management increased by $66.5 million between March 31, 2025 and March 31, 2024 reaching over $1.7 billion.

Current wording

Noninterest income increased by $3.5 million, or 92.2%, reaching $7.3 million for the three months ended June 30, 2025 as compared to $3.8 million for the three months ended June 30, 2024. Our Wealth Management division revenues, which include our Trust and Asset Management businesses also experienced growth and represented a 14.8% increase quarter-over-quarter, to $3.4 million for the second quarter of 2025 as compared to $3.0 million for the second quarter of 2024 as a result of continued growth in asset values during the current period. During the same period, assets-under-management increased to $1.8 billion at June 30, 2025 from $1.7 billion at June 30, 2024. Additionally, the second quarter of 2025 included the recognition of a $1.2 million gain associated with the sale of a branch location and approximately $2.4 million of income associated with BOLI payments related to death benefit proceeds offset by a loss of $727 thousand recorded on the sale of certain securities to reposition a portion of the investment portfolio and replace with higher yielding securities.

Previous wording

Non-interest expense was $16.5 million for the first quarter of 2025, reflecting an increase of approximately $1.2 million, or 7.7%, as compared to $15.3 million for the same period in 2024. The increase in non-interest expense for the current three month period was due primarily to continued investment in overall Company growth, including increases in salaries and benefits costs, information technology, occupancy expense, and other expenses associated with corporate initiatives. Our efficiency ratio was 58.9% for the three months ended March 31, 2025, from 60.5% for the same period in 2024.

Current wording

Non-interest expense was $16.8 million for the second quarter of 2025, reflecting an increase of approximately $1.3 million, or 8.2%, as compared to $15.5 million for the same period in 2024. The increase in non-interest expense for the current three-month period was due primarily to continued investment in overall Company growth, computer software expense, professional fees, and occupancy expense. Our efficiency ratio was 51.6% for the three months ended June 30, 2025, from 55.5% for the same period in 2024.

Previous wording

Provision for Income Tax. Our provision for income taxes for the three months ended March 31, 2025 was approximately $2.6 million compared to approximately $2.3 million for the same period in 2024. The increase for the current period was directly related to increased income before income taxes during the quarter. Our effective tax rate for the three month period ended March 31, 2025 was 22.9%, as compared to 20.0% for the same period in 2024. The growth of the effective tax rate for the 2025 three month period was due to the increase in proportion of pre-tax income compared with non-taxable revenue and the related accruals during the first quarter of 2025 as compared to the same period in 2024.

Current wording

Provision for Income Tax. Our provision for income taxes for the three months ended June 30, 2025 was $3.1 million, compared to $2.0 million for the same period in 2024. The increase for the current period was due to higher income before income taxes during the quarter. Our effective tax rate for the three-month period ended June 30, 2025 was 23.0%, as compared to 19.7% for the same period in 2024. For the six months ended June 30, 2025, our provision for income taxes was $5.7 million, as compared to $4.3 million for the six months ended June 30, 2024. The increase for the current period was due to the increase in income before income taxes during the current six month period. Our effective tax rate for the six-month period ended June 30, 2025 was 23.0%, as compared to 19.9% for the same period in 2024. The growth of the effective tax rates for the 2025 second quarter and six month periods was due to a reclassification of state tax expense and the increase in proportion of pre-tax income compared with non-taxable revenue (tax-exempt interest income and earnings on bank owned life insurance) during 2025 as compared to 2024.

Previous wording

We conduct our business through two business segments: (1) our banking business segment, which involves the delivery of loan and deposit products to our customers through Orange Bank & Trust Company; and (2) our wealth management business segment, which includes asset management and trust services to individuals and institutions through HVIA and Orange Bank & Trust Company that provides trust and investment management fee income.

Current wording

We conduct our business through two business segments: (1) our banking business segment, which involves the delivery of loan and deposit products to our customers through Orange Bank & Trust Company; and (2) our wealth management business segment,

Previous wording

The market value of assets under management and/or administration at March 31, 2025 and 2024 was approximately $1.7 billion. This includes assets held at both Orange Bank & Trust Company and HVIA at March 31, 2025 and 2024.

Current wording

The market value of assets under management and/or administration at June 30, 2025 was $1.8 billion as compared to $1.7 billion at June 30, 2024. This includes assets held at both Orange Bank & Trust Company and HVIA at June 30, 2025 and 2024.

Previous wording

Our expenses related to our wealth management business segment, which we record as noninterest expense, increased $255 thousand, or 12.1%, to $2.4 million for the three months ended March 31, 2025 compared to $2.1 million for the three months ended March 31, 2024. The increase in expenses was primarily due to continued growth of the business unit, investment in technology, and costs associates with certain managed trust assets during the period.

Current wording

Our expenses related to our wealth management business segment, which we record as noninterest expense, increased $72 thousand, or 3.2%, to $2.3 million for the three months ended June 30, 2025 remaining relatively level with the three months ended June 30, 2024. The increase in expenses was primarily due to continued growth of the business unit and continued investment in technology during the period. For the six months ended June 30, 2025, our expenses related to our wealth management business segment increased $250 thousand, or 5.7%, to $4.6 million for the six months ended June 30, 2025 compared to $4.4 million for the six months ended June 30, 2024. The increase in expenses was primarily due to the growth and investment within the business unit and its related operations as well as costs associated with certain managed trust assets.

Previous wording

Our most liquid assets are cash and due from banks. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At March 31, 2025 and December 31, 2024, cash and due from banks totaled $164.2 million and $150.3 million, respectively. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $443.8 million at March 31, 2025 and at December 31, 2024.

Current wording

Our most liquid assets are cash and due from banks. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At June 30, 2025 and December 31, 2024, cash and due from banks totaled $175.6 million and $150.3 million, respectively. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $410.8 million at June 30, 2025 and $443.8 million at December 31, 2024.

Previous wording

Certificates of deposit due within one year of March 31, 2025 totaled $249.5 million, or 96.0% of total certificates of deposit. The largest concentration of certificates of deposit represented brokered deposits in the amount of $220.0 million for diversified funding purposes.

Current wording

Certificates of deposit due within one year of June 30, 2025 totaled $134.1 million, or 93.0% of total certificates of deposit. The largest concentration of certificates of deposit at June 30, 2025 represented brokered deposits in the amount of $106.5 million for diversified funding purposes.