# Orange County Bancorp, Inc.: Form 10-Q for the period ended Mar 31, 2025

- Company: [Orange County Bancorp, Inc.](/companies/obt.md) (CIK 1754226)
- Form: 10-Q
- Filed: 2025-05-12
- Accepted by EDGAR: May 12, 2025, 16:19 ET
- Period: 2025-03-31
- Accession: 0001558370-25-007391
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1754226/000155837025007391/tmb-20250331x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1754226/000155837025007391/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Income tax | 3 months, 2025-01-01 to 2025-03-31 | $2.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | $8.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | $0.77 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | $0.77 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 11,331,884 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | $4.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $494.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2025-01-01 to 2025-03-31 | $1.5m | us-gaap:PaymentsOfDividends |
| Total assets | at 2025-03-31 | $2.56bn | us-gaap:Assets |
| Total liabilities | at 2025-03-31 | $2.36bn | us-gaap:Liabilities |
| Shareholders' equity | at 2025-03-31 | $201.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 67,945 characters.

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.

### Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of section 21E of the Securities Exchange Act of 1934. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “attribute,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “goal,” “target,” “outlook,” “aim,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements include, but are not limited to:

- statements of our goals, intentions and expectations;
- statements regarding our business plans, prospects, growth and operating strategies;
- statements regarding the quality of our loan and investment portfolios; and
- estimates of our risks and future costs and benefits.

These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

- inflation, tariffs and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments;
- general economic conditions, either nationally or in our market areas, that are worse than expected;
- changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses;
- our ability to access cost-effective funding;
- events involving the failure of financial institutions may adversely affect our business, and the market price of our common stock;
- fluctuations in real estate values and both residential and commercial real estate market conditions;
- demand for loans and deposits in our market area;
- risks associated with loan participations;
- our ability to implement and change our business strategies;
- competition among depository and other financial institutions;
- the amounts of non-performing loans and loans that are charged-off;
- adverse changes in the securities markets;
- fluctuations in the stock market may have a significant adverse effect on transaction fees, client activity and client investment portfolio gains and losses related to our trust and wealth management business;
- changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;
- our ability to enter new markets successfully and capitalize on growth opportunities;
- our ability to capitalize on strategic opportunities;
- our ability to successfully introduce new products and services;
- our ability to prevent or mitigate fraudulent activity;
- our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto;
- our ability to retain our existing customers;
- changes in consumer spending, borrowing and savings habits;
- changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;
- changes in our organization, compensation and benefit plans;
- changes in the quality or composition of our loan or investment portfolios;
- a breach in security of our information systems, including the occurrence of a cyber incident or a deficiency in cyber security;
- political instability or civil unrest;
- acts of war or terrorism;
- competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional providers, including retail businesses and technology companies;
- the failure to attract and retain skilled people;
- any future FDIC insurance premium increases, or special assessment may adversely affect our earnings;
- the fiscal and monetary policies of the federal government and its agencies; and
- other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services described elsewhere in this Quarterly Report on Form 10-Q.

The foregoing factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included in this Quarterly Report on Form 10-Q. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New risks and uncertainties arise from time to time, and it is not possible for us to predict those events or how they may affect us. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

### Overview

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.

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.

### Key Factors Affecting Our Business

***Net Interest Income.*** Net interest income is the most significant contributor to our net income and is the difference between the interest and fees earned on interest-earning assets and the interest expense incurred in connection with interest-bearing liabilities. Net interest income is primarily a function of the average balances and yields/rates of these interest-earning assets and interest-bearing liabilities. These factors are influenced by internal considerations such as product mix and risk appetite as well as external influences such as economic conditions, competition for loans and deposits and market interest rates.

The cost of our deposits and short-term borrowings is primarily based on short-term interest rates, which are largely driven by the Board of Governors of the Federal Reserve System’s (the “FRB”) actions and market competition. The yields generated by our loans and securities are typically affected by short-term and long-term interest rates, which are driven by market competition and market rates often impacted by the FRB’s actions. The level of net interest income is influenced by movements in such interest rates and the pace at which such movements occur.

Considering the impact of the FRB’s rate reduction during the second half of 2024 and 2025 economic conditions, it is possible that interest rates may be reduced during 2025. Although our asset sensitivity is relatively neutral, this movement could have a beneficial impact on our net interest income.

***Noninterest Income***. Noninterest income is also a contributor to our net income. Noninterest income consists primarily of our investment advisory income, trust income generated by HVIA and our trust department, as well as income generated by our BOLI investment earnings. In addition, noninterest income is also impacted by net gains (losses) on the sale of investment securities, service charges on deposit accounts, and other fee income consisting primarily of debit card fee income, checkbook fees and rebates and safe deposit box rental income.

***Noninterest Expense.*** Noninterest expense includes salaries, employee benefits, occupancy, 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.

***Credit Quality.*** We have well established loan policies and underwriting practices that have resulted in relatively low levels of loan charge-offs and nonperforming assets in recent periods. 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.

***Competition.*** The industry and businesses in which we operate are highly competitive. We may see increased competition in different areas including interest rates, underwriting standards and product offerings and structure. While we seek to maintain an appropriate return on our investments, we anticipate that we will experience continued pressure on our net interest margins as we operate in this competitive environment.

***Economic Conditions.*** Our business and financial performance are affected by economic conditions generally in the United States and more directly in the market of the Lower Hudson Valley region, the New York metropolitan area and nearby markets in Connecticut and New Jersey where we primarily operate. The significant economic factors that are most relevant to our business and our financial performance include, but are not limited to, real estate values, interest rates and unemployment rates.

***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.

### Critical Accounting Estimates

Critical accounting estimates are necessary in the application of certain accounting policies and procedures and are particularly susceptible to significant change. Critical accounting policies are defined as those involving significant judgments and assumptions by management that could have a material impact on the carrying value of certain assets or on income under different assumptions or conditions. These critical estimates, policies and their application are periodically reviewed with the Audit Committee and the board of directors. Management believes that the most critical accounting estimates, which involve the most complex or subjective decisions or assessments, are as follows:

***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.

### Discussion and Analysis of Financial Condition

***Summary Financial Condition.*** The following table sets forth a summary of the material categories of our balance sheet at the dates indicated:

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ As of March 31, 2025 | ​ ​ ​ ​ ​ | ​ ​ ​ ​ As of December 31, 2024 | ​ ​ ​ ​ ​ | ​ Change March 31, 2025 vs. December 31, 2024 Amount ($) | ​ | ​ ​ Percentage (%) |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Assets |  | 2,560,128 |  | 2,509,927 |  | 50,201 |  | 2.0% |
| Cash and due from banks |  | 164,173 |  | 150,334 |  | 13,839 |  | 9.2% |
| Loans, net |  | 1,827,881 |  | 1,789,674 |  | 38,207 |  | 2.1% |
| Investment securities, available for sale |  | 443,797 |  | 443,775 |  | 22 |  | 0.0% |
| Deposits |  | 2,281,698 |  | 2,153,359 |  | 128,339 |  | 6.0% |
| FHLB advances, short term | ​ | 20,500 | ​ | 113,500 | ​ | (93,000) | ​ | (81.9)% |
| FHLB advances, long term |  | 10,000 |  | 10,000 |  | — |  | —% |
| Subordinated notes, net of issuance costs | ​ | 19,609 | ​ | 19,591 | ​ | 18 | ​ | 0.1% |
| Stockholders’ Equity |  | 201,324 |  | 185,531 |  | 15,793 |  | 8.5% |

***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.

***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.

***Loans.*** The following table sets forth the composition of our loan portfolio by type of loan at the dates indicated.

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ At March 31, 2025 Amount | ​ ​ ​ ​ ​ Percent | ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ At December 31, 2024 Amount | ​ | ​ ​ ​ ​ Percent |
| --- | --- | ---: | ---: | --- | --- | ---: | --- | ---: |
| Commercial and industrial | ​ | $247,125 | 13.33% | ​ | ​ | $242,220 |  | 13.34% |
| Commercial real estate | ​ | 1,381,719 | 74.52% | ​ | ​ | 1,362,054 |  | 75.01% |
| Commercial real estate construction | ​ | 97,703 | 5.27% | ​ | ​ | 80,993 |  | 4.46% |
| Residential real estate | ​ | 73,090 | 3.94% | ​ | ​ | 74,973 |  | 4.13% |
| Home equity | ​ | 18,211 | 0.98% | ​ | ​ | 17,365 |  | 0.96% |
| Consumer | ​ | 36,247 | 1.95% | ​ | ​ | 37,976 |  | 2.09% |
| PPP loans | ​ | 159 | 0.01% | ​ | ​ | 170 |  | 0.01% |
| Total loans | ​ | 1,854,254 | 100.00% | ​ | ​ | 1,815,751 |  | 100.00% |
| Allowance for credit losses | ​ | 26,373 | ​ | ​ | ​ | 26,077 |  | ​ ​ |
| Total loans, net | ​ | $1,827,881 | ​ ​ | ​ | ​ | $1,789,674 | ​ | ​ ​ |

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.

### Non-performing Assets

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.

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.

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.

*(Dollars in thousands)*

| ​ ​ ​ ​ Non-accrual loans: | ​ ​ ​ ​ | ​ ​ ​ At March 31, ​ 2025 ​ ​ ​ | ​ ​ ​ At December 31, ​ 2024 ​ ​ ​ |
| --- | --- | ---: | ---: |
| Commercial and industrial | ​ | $200 ​ | $293 ​ |
| Commercial real estate | ​ | 6,000 ​ | 6,000 ​ |
| Commercial real estate construction | ​ | — ​ | — ​ |
| Residential real estate | ​ | 5 ​ | 6 ​ |
| Home equity | ​ | — ​ | — ​ |
| Consumer | ​ | — ​ | — ​ |
| Total non-accrual loans | ​ | 6,205 ​ | 6,299 ​ |
| Accruing loans 90 days or more past due: | ​ | ​ | ​ |
| Commercial and industrial | ​ | — ​ | — ​ |
| Commercial real estate | ​ | — ​ | — ​ |
| Commercial real estate construction | ​ | — ​ | — ​ |
| Residential real estate | ​ | — ​ | — ​ |
| Home equity | ​ | — ​ | — ​ |
| Consumer | ​ | — ​ | — ​ |
| Total accruing loans 90 days or more past due | ​ | — ​ | — ​ |
| Total non-performing loans | ​ | 6,205 ​ | 6,299 ​ |
| Other real estate owned | ​ | — ​ | — ​ |
| Other non-performing assets | ​ | — ​ | — ​ |
| Total non-performing assets | ​ | $6,205 ​ | $6,299 ​ |
| Ratios: | ​ | ​ | ​ |
| Total non-performing loans to total loans | ​ | 0.33% | 0.35% |
| Total non-performing loans to total assets | ​ | 0.24% | 0.25% |
| Total non-performing assets to total assets | ​ | 0.24% | 0.25% |

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.

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.

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.

***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.

The following table summarizes classified assets of all portfolio types at the dates indicated:

*(Dollars in thousands)*

| ​ ​ ​ ​ Classification of Assets: | ​ ​ ​ ​ | ​ ​ At March 31, 2025 ​ ​ | ​ ​ ​ ​ | ​ ​ At December 31, 2024 ​ ​ |
| --- | --- | ---: | --- | ---: |
| Substandard | ​ | $59,769 | ​ | $43,981 |
| Doubtful | ​ | — | ​ | — |
| Loss | ​ | — | ​ | — |
| Total Classified Assets | ​ | $59,769 | ​ | $43,981 |
| Special Mention | ​ | $28,182 | ​ | $20,851 |

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.

### Allowance for Credit Losses

On January 1, 2023, the Company adopted ASU 2016-13 (Topic 326), which replaced the incurred loss methodology with CECL for financial instruments measured at amortized cost and other commitments to extend credit. The allowance for credit losses is a valuation allowance for management’s estimate of expected credit losses in the loan portfolio. The process to determine expected credit losses utilizes analytic tools and judgement and is reviewed on a quarterly basis. When management is reasonably certain that a loan balance is not fully collectable, an analysis is completed and a specific reserve may be established or a full or partial charge off could be recorded against the allowance. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance via a quantitative analysis which considers available information from internal and external sources related to past loan loss and prepayment experience and current conditions, as well as the incorporation of reasonable and supportable forecasts. Management evaluates a variety of factors including available published economic information in arriving at its forecast. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. Also included in the allowance for credit losses are qualitative reserves that are expected, but, in management’s assessment, may not be adequately represented in the quantitative analysis or the forecasts described above. Factors may include changes in lending policies and procedures, size and composition of the portfolio, experience and depth of management and the effect of external factors such as competition, legal and regulatory requirements, among others. The allowance is available for any loan that, in management’s judgment, should be charged off. Although management uses the best information available, the level of the allowance for credit losses remains an estimate, which is subject to significant judgment and short-term change. Various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for credit losses. Such agencies may require the Company to make additional provisions for credit losses based upon information available to them at the time of their examination. Furthermore, the majority of the Bank’s loans are secured by real estate in the State of New York. Accordingly, the collectability of a substantial portion of the carrying value of the Bank’s loan portfolio is susceptible to changes in local market conditions and any adverse economic conditions. Future adjustments to the provision for credit losses and allowance for credit losses may be necessary due to economic, operating, regulatory and other conditions beyond the Company’s control.

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

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ ​ At or for the Three Months Ended March 31, 2025 | ​ ​ ​ ​ ​ 2024 |
| --- | --- | --- | --- |
| Balance at beginning of year | ​ | $26,077 ​ | $25,182 ​ |
| Charge-offs: | ​ | ​ ​ ​ | ​ ​ ​ |
| Commercial and industrial |  | ​ 6 | ​ 3 |
| Commercial real estate |  | ​ — | ​ — |
| Commercial real estate construction |  | ​ — | ​ — |
| Residential real estate |  | ​ — | ​ 94 |
| Home equity |  | ​ — | ​ — |
| Consumer |  | ​ — | ​ — |
| PPP loans |  | ​ — | ​ — |
| Total charge-offs |  | ​ 6 | ​ 97 |
| Recoveries: | ​ | ​ ​ ​ | ​ ​ ​ |
| Commercial and industrial |  | ​ 16 | ​ 7 |
| Commercial real estate |  | ​ — | ​ — |
| Commercial real estate construction |  | ​ — | ​ — |
| Residential real estate |  | ​ — | ​ — |
| Home equity |  | ​ — | ​ — |
| Consumer |  | ​ 23 | ​ 19 |
| Total recoveries |  | ​ 39 | ​ 26 |
| Net charge-offs (recoveries) |  | ​ (33) | ​ 71 |
| Provision for credit losses |  | ​ 263 | ​ 362 |
| Balance at end of period | ​ | $26,373 ​ | $25,473 ​ |
| Ratios: | ​ | ​ ​ ​ | ​ ​ ​ |
| Net charge-offs to average loans outstanding | ​ | —% | —% |
| Allowance for credit losses to non-performing loans at end of period | ​ | 425.03% | 440.86% |
| Allowance for credit losses to total loans at end of period | ​ | 1.42% | 1.47% |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ |

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.

### Investment Securities

The following table sets forth the estimated fair value of our available-for-sale securities portfolio at the dates indicated.

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ ​ Available for sale securities: | ​ ​ ​ ​ | ​ ​ ​ ​ At March 31, 2025 Amortized Cost ​ | ​ ​ ​ | ​ ​ ​ ​ Estimated Fair Value ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ At December 31, 2024 Amortized Cost ​ | ​ ​ | ​ ​ Estimated Fair Value ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| U.S. government agencies and treasuries | ​ | $84,207 | ​ | $76,419 | ​ | $85,464 | ​ | $76,154 |
| Mortgage-backed securities | ​ | 299,826 | ​ | 257,252 | ​ | 307,463 | ​ | 257,339 |
| Corporate securities | ​ | 23,503 | ​ | 20,673 | ​ | 23,508 | ​ | 20,034 |
| Obligations of states and political subdivisions | ​ | 102,370 | ​ | 89,453 | ​ | 103,132 | ​ | 90,248 |
| Total | ​ | $509,906 | ​ | $443,797 | ​ | $519,567 | ​ | $443,775 |

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.

We did not have held-to-maturity securities at March 31, 2025 and December 31, 2024.

### Deposits

The following table sets forth our total deposit account balances, by account type, at the dates indicated:

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ | ​ ​ ​ | ​ ​ At March 31, 2025 ​ ​ Amount | ​ ​ ​ ​ ​ Percent ​ | ​ ​ ​ Average Rate ​ | ​ ​ ​ ​ | ​ ​ At December 31, 2024 ​ Amount | ​ ​ ​ ​ Percent ​ | ​ ​ ​ Average Rate ​ |
| --- | --- | ---: | ---: | ---: | --- | ---: | ---: | ---: |
| Noninterest-bearing demand deposits | ​ | $654,061 | 28.66% | — ​ | ​ | $651,135 | 30.24% | — ​ |
| Interest bearing demand deposits | ​ | 381,878 | 16.74% | 0.48% | ​ | 331,115 | 15.38% | 0.42% |
| Money market deposits | ​ | 703,384 | 30.83% | 2.14% | ​ | 679,082 | 31.54% | 2.15% |
| Savings deposits | ​ | 282,563 | 12.38% | 1.23% | ​ | 271,014 | 12.59% | 1.25% |
| Certificates of deposit | ​ | 259,812 | 11.39% | 3.93% | ​ | 221,013 | 10.26% | 3.97% |
| Total | ​ | $2,281,698 | 100.00% | 1.34% | ​ | $2,153,359 | 100.00% | 1.31% |

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.

### Borrowings

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.

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.

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.

### Stockholders’ Equity

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.

### Average Balance Sheets and Related Yields and Rates

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.

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ ​ ​ Interest-earning assets: | ​ ​ ​ ​ ​ | ​ ​ For the Three Months Ended March 31, 2025 Average Outstanding Balance ​ | ​ ​ ​ | ​ ​ ​ ​ ​ ​ Interest ​ | ​ ​ ​ ​ ​ ​ ​ ​ Average ​ Yield/Rate(1) | ​ ​ 2024 Average Outstanding Balance ​ | ​ ​ ​ | ​ ​ ​ ​ ​ ​ Interest ​ | ​ ​ ​ ​ ​ ​ Average Yield/Rate(1) ​ ​ ​ |
| --- | --- | ---: | --- | ---: | ---: | ---: | --- | ---: | ---: |
| Loans (excluding PPP loans) | ​ | $1,829,917 | ​ | $27,311 | 6.05% | $1,738,199 | ​ | $25,611 | 5.91% |
| PPP loans | ​ | 163 | ​ | 3 | 7.46% | 209 | ​ | 3 | 5.76% |
| Investment securities available for sale | ​ | 441,776 | ​ | 3,123 | 2.87% | 481,530 | ​ | 3,432 | 2.86% |
| Cash and due from banks and other | ​ | 146,657 | ​ | 1,353 | 3.74% | 149,596 | ​ | 1,665 | 4.46% |
| Restricted stock | ​ | 7,979 | ​ | 117 | 5.95% | 10,894 | ​ | 362 | 13.33% |
| Total interest-earning assets | ​ | 2,426,492 | ​ | 31,907 | 5.33% | 2,380,428 | ​ | 31,073 | 5.24% |
| Noninterest-earning assets | ​ | 101,960 | ​ | ​ ​ | ​ | 94,647 | ​ |  | ​ |
| Total assets | ​ | $2,528,452 | ​ | ​ ​ | ​ | $2,475,075 | ​ |  | ​ |
| **Interest-bearing liabilities:** | ​ |  | ​ |  | ​ |  | ​ |  | ​ |
| Interest-bearing demand deposits | ​ | $357,057 | ​ | $403 | 0.46% | $360,287 | ​ | $437 | 0.49% |
| Money market deposits | ​ | 685,827 | ​ | 3,634 | 2.15% | 620,028 | ​ | 3,355 | 2.17% |
| Savings deposits | ​ | 269,019 | ​ | 857 | 1.29% | 235,829 | ​ | 785 | 1.34% |
| Certificates of deposit | ​ | 222,992 | ​ | 2,224 | 4.04% | 209,642 | ​ | 2,414 | 4.62% |
| Total interest-bearing deposits | ​ | 1,534,895 | ​ | 7,118 | 1.88% | 1,425,786 | ​ | 6,991 | 1.97% |
| FHLB Advances and other borrowings | ​ | 85,011 | ​ | 931 | 4.44% | 167,484 | ​ | 2,251 | 5.39% |
| Subordinated notes | ​ | 19,597 | ​ | 230 | 4.76% | 19,526 | ​ | 230 | 4.72% |
| Total interest-bearing liabilities | ​ | 1,639,503 | ​ | 8,279 | 2.05% | 1,612,796 | ​ | 9,472 | 2.36% |
| Noninterest-bearing demand deposits | ​ | 667,564 | ​ | ​ ​ | ​ | 668,439 | ​ |  | ​ |
| Other noninterest-bearing liabilities | ​ | 29,907 | ​ | ​ ​ | ​ | 28,446 | ​ |  | ​ |
| Total liabilities | ​ | 2,336,974 | ​ | ​ ​ | ​ | 2,309,681 | ​ |  | ​ |
| Total stockholders’ equity | ​ | 191,478 | ​ | ​ ​ | ​ | 165,394 | ​ |  | ​ |
| Total liabilities and stockholders’ equity | ​ | $2,528,452 | ​ | ​ ​ | ​ | $2,475,075 | ​ |  | ​ |
| Net interest income | ​ | ​ ​ | ​ | $23,628 | ​ |  | ​ | $21,601 | ​ |
| Net interest rate spread(2) | ​ | ​ ​ | ​ | ​ ​ | 3.28% |  | ​ |  | 2.88% |
| Net interest-earning assets(3) | ​ | $786,989 | ​ |  | ​ ​ | $767,632 | ​ |  | ​ |
| Net interest margin(4) | ​ | ​ ​ | ​ | ​ ​ | 3.95% |  | ​ |  | 3.64% |
| Average interest-earning assets to interest-bearing liabilities | ​ |  | ​ |  | 148.0% | ​ ​ | ​ | ​ ​ | 147.6% |

(1) Annualized.

(2) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(3) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(4) Net interest margin represents net interest income divided by average total interest-earning assets.

### Rate/Volume Analysis

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.

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ ​ ​ Interest-earning assets: | ​ ​ ​ ​ ​ | ​ ​ Three Months Ended March 31, 2025 vs. 2024 ​ Increase (Decrease) Due to Volume ​ | ​ | ​ ​ Rate ​ | ​ ​ ​ | ​ ​ Total Increase (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Loans (excluding PPP loans) | ​ | $1,088 | ​ | $612 | ​ | $1,700 |
| PPP loans | ​ | (1) | ​ | 1 | ​ | — |
| Investment securities available for sale | ​ | (319) | ​ | 10 | ​ | (309) |
| Cash and due from banks | ​ | (45) | ​ | (267) | ​ | (312) |
| Other | ​ | (47) | ​ | (198) | ​ | (245) |
| Total interest-earning assets | ​ | 676 | ​ | 158 | ​ | 834 |
| **Interest-bearing liabilities:** | ​ |  | ​ |  | ​ |  |
| Interest-bearing demand deposits | ​ | (9) | ​ | (25) | ​ | (34) |
| Money market deposits | ​ | 312 | ​ | (33) | ​ | 279 |
| Savings deposits | ​ | 97 | ​ | (25) | ​ | 72 |
| Certificates of deposit | ​ | 106 | ​ | (296) | ​ | (190) |
| Total interest-bearing deposits | ​ | 506 | ​ | (379) | ​ | 127 |
| ​ | ​ |  | ​ |  | ​ |  |
| Federal Home Loan Bank advances | ​ | (928) | ​ | (392) | ​ | (1,320) |
| Subordinated notes | ​ | — | ​ | — | ​ | — |
| Total interest-bearing liabilities | ​ | (422) | ​ | (771) | ​ | (1,193) |
| Change in net interest income | ​ | $1,098 | ​ | $929 | ​ | $2,027 |

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

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

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Three Months Ended March 31, ​ ​ 2025 | ​ ​ | ​ ​ ​ ​ 2024 | ​ ​ | ​ ​ Change Amount ($) | ​ | ​ ​ ​ Percentage % ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Interest income | ​ | $31,907 | ​ | $31,073 | ​ | $834 |  | 2.7% |
| Interest expense | ​ | 8,279 | ​ | 9,472 | ​ | (1,193) |  | (12.6)% |
| Net interest income | ​ | 23,628 | ​ | 21,601 | ​ | 2,027 |  | 9.4% |
| Provision for credit losses - investments | ​ | ​ — | ​ | ​ (1,900) | ​ | ​ 1,900 | ​ | (100.0)% |
| Provision for credit losses | ​ | 202 | ​ | 260 | ​ | (58) |  | (22.3)% |
| Noninterest income | ​ | 4,356 | ​ | 3,686 | ​ | 670 |  | 18.2% |
| Noninterest expense | ​ | 16,494 | ​ | 15,310 | ​ | 1,184 |  | 7.7% |
| Provision for income taxes | ​ | 2,584 | ​ | 2,327 | ​ | 257 |  | 11.0% |
| Net income | ​ | 8,704 | ​ | 9,290 | ​ | (586) |  | (6.3)% |

***General.*** Net income decreased $586 thousand, or 6.3%, to $8.7 million for the three months ended March 31, 2025 from $9.3 million for the three months ended March 31, 2024. This decrease was the result of a one-time recovery of $1.9 million from the sale of Signature Bank subordinated debt in the first quarter of 2024 offset by higher net interest income and noninterest income as well as a reduced provision for credit losses on loans during the first quarter of 2025 as compared to the first quarter of 2024.

***Interest Income.*** Interest income increased $834 thousand, or 2.7%, to $31.9 million for the three months ended March 31, 2025 from $31.1 million for the three months ended March 31, 2024. This increase was primarily driven by a nine basis points increase in the average yield of interest-earning assets which grew from 5.24% during the three months ended March 31, 2024 to 5.33% for the three months ended March 31, 2025 as a result of disciplined pricing on loan production during the first quarter of 2025. Over the same comparative period, the average balance of interest-earning assets increased by $46.1 million, or 1.9%, to $2.4 billion for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.

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.

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.

***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.

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.

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.

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.

***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.

***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.

***Noninterest Income.*** Noninterest income information is as follows:

*(Dollars in thousands)*

| ​ ​ ​ ​ | ​ ​ | ​ ​ Three Months Ended March 31, 2025 | ​ | ​ ​ 2024 | ​ ​ | ​ ​ Change Amount | ​ ​ ​ Percent ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | ---: |
| Service charges on deposit accounts | ​ | $290 | ​ | $235 | ​ | $55 | 23.4% |
| Trust income | ​ | 1,674 | ​ | 1,312 | ​ | 362 | 27.6% |
| Investment advisory income | ​ | 1,766 | ​ | 1,575 | ​ | 191 | 12.1% |
| Earnings on bank owned life insurance | ​ | 259 | ​ | 242 | ​ | 17 | 7.0% |
| Other | ​ | 367 | ​ | 322 | ​ | 45 | 14.0% |
| Total noninterest income | ​ | $4,356 | ​ | $3,686 | ​ | $670 | 18.2% |

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.

***Noninterest Expense.*** Noninterest expense information is as follows:

*(Dollars in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Three Months Ended March 31, 2025 | ​ | ​ ​ 2024 | ​ ​ | ​ ​ Change Amount | ​ ​ ​ Percent |
| --- | --- | ---: | --- | ---: | --- | ---: | ---: |
| Salaries | ​ | $6,905 | ​ | $6,738 | ​ | $167 | 2.5% |
| Employee benefits | ​ | 2,450 | ​ | 2,122 | ​ | 328 | 15.5% |
| Occupancy expense | ​ | 1,277 | ​ | 1,161 | ​ | 116 | 10.0% |
| Professional fees | ​ | 1,347 | ​ | 1,436 | ​ | (89) | (6.2)% |
| Directors’ fees and expenses | ​ | 306 | ​ | 322 | ​ | (16) | (5.0)% |
| Computer software expense | ​ | 1,982 | ​ | 1,235 | ​ | 747 | 60.5% |
| FDIC assessment | ​ | 330 | ​ | 418 | ​ | (88) | (21.1)% |
| Advertising expenses | ​ | 389 | ​ | 364 | ​ | 25 | 6.9% |
| Advisor expenses related to trust income | ​ | 22 | ​ | 33 | ​ | (11) | (33.3)% |
| Telephone expenses | ​ | 207 | ​ | 187 | ​ | 20 | 10.7% |
| Intangible amortization | ​ | 71 | ​ | 72 | ​ | (1) | (1.4) ​ |
| Other | ​ | 1,208 | ​ | 1,222 | ​ | (14) | (1.1)% |
| Total noninterest expense | ​ | $16,494 | ​ | $15,310 | ​ | $1,184 | 7.7% |

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.

***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.

### Financial Position and Results of Operations of our Wealth Management Business Segment

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.

The following table presents the statements of income and total assets for our reportable business segments for the periods indicated:

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ ​ | ​ ​ ​ | ​ ​ For the Three Months Ended March 31, 2025 ​ ​ Banking | ​ ​ | ​ ​ Wealth Management | ​ ​ | ​ ​ Total Segments | ​ ​ ​ | ​ ​ 2024 ​ ​ Banking | ​ ​ | ​ ​ Wealth Management | ​ ​ | ​ ​ Total Segments |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Net Interest Income | ​ | $23,628 | ​ | $— | ​ | $23,628 | ​ | $21,601 | ​ | $— | ​ | $21,601 |
| Noninterest income | ​ | 916 | ​ | 3,440 | ​ | 4,356 | ​ | 799 | ​ | 2,887 | ​ | 3,686 |
| Provision for credit loss- investments | ​ | — | ​ | — | ​ | — | ​ | 1,900 | ​ | — | ​ | 1,900 |
| Provision for credit loss | ​ | ​ (202) | ​ | ​ — | ​ | ​ (202) | ​ | ​ (260) | ​ | ​ — | ​ | ​ (260) |
| Noninterest expenses | ​ | (14,132) | ​ | (2,362) | ​ | (16,494) | ​ | (13,203) | ​ | (2,107) | ​ | (15,310) |
| Income tax expense | ​ | (2,358) | ​ | (226) | ​ | (2,584) | ​ | (2,163) | ​ | (164) | ​ | (2,327) |
| Net income | ​ | $7,852 | ​ | $852 | ​ | $8,704 | ​ | $8,674 | ​ | $616 | ​ | $9,290 |
| ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |

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.

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.

### Liquidity and Capital Resources

***Liquidity.*** Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments and maturities and sales of securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

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.

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.

We participate in IntraFi Network, allowing us to provide access to multi-million-dollar FDIC deposit insurance protection on deposits for customers, businesses and public entities. We can elect to sell or repurchase this funding as reciprocal deposits from other IntraFi Network banks depending on our funding needs. At March 31, 2025, we had a total of $96.1 million of IntraFi Network deposits, all of which were repurchased as reciprocal deposits from the IntraFi Network.

Although customer deposits remain our preferred source of funds, maintaining back up sources of liquidity is part of our prudent liquidity risk management practices. We have the ability to borrow from the Federal Home Loan Bank of New York and the Federal Reserve Bank of New York as well as other correspondent banks. At March 31, 2025, we had a total capacity of $631.0 million at the Federal Home Loan Bank of New York, of which $96.4 million was used to collateralize municipal deposits, and $10.0 million was utilized for long-term advances. At March 31, 2025, we also held $91.0 million of collateral at the Federal Reserve Bank of New York which could be utilized to provide additional funding through the discount window. We also maintain additional borrowing capacity of $20.0 million of discretionary lines of credit with correspondent banks at March 31, 2025 with no outstanding balance. We have a borrowing agreement with Atlantic Community Bankers Bank (“ACBB”) to provide short-term borrowings of $5.0 million at March 31, 2025. There were no outstanding borrowings with ACBB at March 31, 2025.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $4.8 million and $2.3 million for the three months ended March 31, 2025 and 2024, respectively. Net cash used by investing activities, which consists primarily of disbursements for loan originations and the purchase of securities, offset by principal collections on loans, proceeds from the sale of securities and proceeds from maturing securities and pay downs on securities, was $24.7 million for the three months ended March 31, 2025 and net cash from investing activities was $32.5 million for the three months ended March 31, 2024. Net cash provided by financing activities, consisting of activity in deposit accounts and borrowings, was $33.7 million for the three months ended March 31, 2025 and net cash used by financing activities was $37.4 million for the three months ended March 31, 2024.

We remain committed to maintaining a strong liquidity position. We monitor and evaluate our liquidity position daily. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit growth and retention, current pricing strategy and regulatory restrictions, we have the ability to retain and increase a substantial portion of maturing time deposits, and we can supplement our funding with borrowings in the event that we allow these deposits to run off at maturity.

***Capital Resources.*** We are subject to various regulatory capital requirements administered by the FRB and the NYSDFS. At March 31, 2025 and December 31, 2024, we exceeded all applicable regulatory capital requirements, and were considered “well capitalized” under regulatory guidelines. See Note 10 to the Notes to the Unaudited Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q for actual and required capital amounts and ratios at March 31, 2025 and December 31, 2024.

### Off-Balance Sheet Arrangements

***Off-Balance Sheet Arrangements.*** We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit, which involve elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. Our exposure to credit loss is represented by the contractual amount of the instruments. We use the same credit policies in making commitments as we do for on-balance sheet instruments.

At March 31, 2025, we had $440.6 million in loan commitments outstanding. We also had $15.6 million in standby letters of credit at March 31, 2025.

### Effect of Inflation and Changing Prices

The consolidated financial statements and related financial data included in this Quarterly Report on Form 10-Q have been prepared in accordance with generally accepted accounting principles in the United States of America, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on a financial institution’s performance than do general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

## Market risk

As filed, 6,841 characters.

### Management of Market Risk

**General.** The principal objective of our asset and liability management function is to evaluate the interest rate risk within the balance sheet and pursue a controlled assumption of interest rate risk while maximizing net income and preserving adequate levels of liquidity and capital. The board of directors of our Bank has oversight of our asset and liability management function, which is managed by our Asset/Liability Management Committee and our Finance Committee. Our Asset/Liability Management Committee meets regularly to review, among other things, the sensitivity of our assets and liabilities to market interest rate changes, local and national market conditions and market interest rates. That group also reviews our liquidity, capital, deposit mix, loan mix and investment positions. As a financial institution, our primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the fair value of all interest-earning assets and interest-bearing liabilities, other than those that have a short term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income.

We manage our exposure to interest rates primarily by structuring our balance sheet in the ordinary course of business. We do not typically enter into derivative contracts for the purpose of managing interest rate risk, but we may do so in the future. Based upon the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets.

**Net Interest Income Simulation.** We use an interest rate risk simulation model to test the interest rate sensitivity of net interest income and the balance sheet. Instantaneous parallel rate shift scenarios are modeled and utilized to evaluate risk and establish exposure limits for acceptable changes in net interest margin. These scenarios, known as rate shocks, simulate an instantaneous change in interest rates and use various assumptions, including, but not limited to, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment and replacement of asset and liability cash flows.

The following table presents the estimated changes in our net interest income, calculated on a bank-only basis, which would result from changes in market interest rates over a twelve month period as of March 31, 2025.

*At March 31, 2025*

*(Dollars in thousands)*

| ​ ​ Change in Interest Rates (basis points) (1) ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ Net Interest Income Change Year 1 Forecast ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Year 1 Change from Level ​ | ​ ​ ​ ​ ​ ​ ​ |
| ---: | --- | ---: | --- | --- | ---: |
| +200 | ​ | $1,196 | ​ | ​ | 1.20% |
| +100 | ​ | $724 | ​ |  | 0.73% |
| — | ​ | $— | ​ | ​ | —% |
| -100 | ​ | $(1,058) | ​ |  | (1.06)% |
| -200 | ​ | $(2,328) | ​ |  | (2.33)% |

This analysis assumes an instantaneous and parallel rate shock across the entire yield curve for the scenarios indicated.

***Economic Value of Equity Simulation.*** We also analyze our sensitivity to changes in interest rates through an economic value of equity ("EVE") model. EVE represents the present value of the expected cash flows from our assets less the present value of the expected cash flows arising from our liabilities adjusted for the value of off-balance sheet contracts. EVE attempts to quantify our economic value using a discounted cash flow methodology. We estimate what our EVE would be as of a specific date. We then calculate what EVE would be as of the same date throughout a series of interest rate scenarios representing immediate and permanent, parallel shifts in the yield curve. We currently calculate EVE under the assumptions that interest rates increase 100, 200, 300 and 400 basis points from current market rates, and under the assumption that interest rates decrease 100 basis points from current market rates.

The following table presents the estimated changes in our EVE, calculated on a bank-only basis, that would result from changes in market interest rates as of March 31, 2025.

*At March 31, 2025*

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ Change in Interest Rates (basis points) | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ Estimated EVE | ​ ​ ​ ​ ​ | ​ ​ Estimated Increase (Decrease) in EVE ​ ​ ​ Amount | ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percent |
| --- | --- | ---: | --- | ---: | ---: |
| +400 | ​ | $564,545 | ​ | $23,211 | 4.29% |
| +300 | ​ | 561,372 | ​ | 20,038 | 3.70% |
| +200 | ​ | 555,888 | ​ | 14,554 | 2.69% |
| +100 | ​ | 553,155 | ​ | 11,821 | 2.18% |
| — | ​ | 541,334 | ​ | — | —% |
| -100 | ​ | 519,758 | ​ | (21,576) | (3.99)% |

Note: This analysis assumes an instantaneous and parallel rate shock across the entire yield curve for the scenarios indicated.

Many assumptions are used to calculate the impact of interest rate fluctuations. Actual results may be significantly different than our projections due to several factors, including the timing and frequency of rate changes, market conditions and the shape of the yield curve. The computations of interest rate risk shown above do not include actions that our management may undertake to manage the risks in response to anticipated changes in interest rates, and actual results may also differ due to any actions taken in response to the changing rates.

### Credit Risk

The Company manages credit risk consistent with state and federal laws governing the making of loans through written policies and procedures; loan review to identify loan problems at the earliest possible time; collection procedures (including subsequent to a loan being charged off); an adequate allowance for credit losses; and continuing education and training to ensure lending expertise. Diversification by loan product is maintained through offering commercial loans, 1-4 family mortgages, and a full range of consumer loans.

The Company monitors its loan portfolio prudently. The Director’s Loan Committee of the Company’s Board of Directors is designated to receive required loan reports, oversee loan policy, and approve loans above authorized individual and Management Loan Committee lending limits. The Management Loan Committee, consisting of the President and Chief Executive Officer, Chief Financial Officer, Chief Credit Officer, Chief Risk Officer, Chief Loan Officer, EVP-Strategic Lending, and the SVP-Commercial Lending, implements the Board-approved loan policy.

## Controls and procedures

As filed, 1,798 characters.

***An Evaluation of disclosure controls and procedures***. As of the end of the period covered by this Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply judgment in evaluating its controls and procedures. Based on their evaluation of the Company’s disclosure controls and procedures as of March 31, 2025 the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and regulations are operating in an effective manner.

***Internal control over financial reporting***. There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 183 characters.

There has been no material change to Risk Factors as disclosed in the Company’s 2024 Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 17, 2025.

Filed May 12, 2025.
Source: SEC EDGAR, the filing index for accession 0001558370-25-007391. Last ingested by Listed: Nov 5, 2026, 21:20 ET. No prices; not investment advice.