Orange County Bancorp, Inc. Announces Record First Quarter 2026 Earnings and Robust Financial Performance

Key Financial Highlights

• Net Income: Increased by \$2.6 million, or 29.6%, to \$11.3 million for Q1 2026 (vs. \$8.7 million in Q1 2025), marking a record for the company.
• Net Interest Margin: Up 45 basis points, or 11.4%, to 4.40% for Q1 2026 from 3.95% in Q1 2025.
• Total Deposits: Rose \$39.4 million, or 1.7%, to \$2.4 billion at March 31, 2026 (vs. \$2.3 billion at year-end 2025).
• Total Loans: Increased slightly by \$1.7 million to \$2.0 billion, remaining relatively flat.
• Earnings Per Share: Grew \$0.08 per share, or 10.4%, to \$0.85 (vs. \$0.77 per share in Q1 2025).
• Book Value Per Share: Increased \$0.48, or 2.3%, to \$21.75 at March 31, 2026 (vs. \$21.27 at December 31, 2025).
• Tangible Book Value Per Share: Rose \$0.49, or 2.4%, to \$21.32 at March 31, 2026.

Detailed Financial Performance

Net Interest Income and Margin

Net interest income jumped by \$4.3 million, or 18.1%, to \$27.9 million for Q1 2026. This was driven by both an increase in total interest income (up \$2.5 million, or 8.0%) and a decrease in total interest expense (down \$1.8 million, mainly due to reduced borrowing costs). Notably, the average yield on the loan portfolio rose to 6.18%, up 13 basis points from Q1 2025.

The company continues to focus on organically sourced deposits, successfully reducing reliance on higher-cost brokered deposits. The average cost of deposits dropped to 1.03%, down 26 basis points from last year, boosting the bank’s competitive edge.

Net interest margin improved significantly, reaching 4.40%, up from 3.95% in the previous year, a key driver for profitability.

Loans and Deposits

Total loans remained stable at \$2.0 billion, with modest growth in commercial real estate construction, home equity, and consumer sectors offset by a decline in commercial and industrial loans. Deposit growth was robust, with total deposits increasing to \$2.4 billion, mainly reflecting core deposit additions. Certificates of deposit decreased as transaction accounts provided for runoff of maturing brokered deposits.

Deposit composition is healthy, with demand deposit accounts (including NOW accounts) representing 51.1% of total deposits. Uninsured deposits (net of fully collateralized municipal relationships) remain stable at approximately 49%.

Provision for Credit Losses and Asset Quality

The provision for credit losses showed a net recovery of \$436,000 in Q1 2026 (vs. an expense of \$202,000 in Q1 2025). This was due to slower loan growth and lower reserve requirements. The allowance for credit losses to total loans is steady at 1.43%.

Non-performing loans increased to \$26.1 million (1.34% of total loans), primarily due to a commercial real estate participation loan affected by bankruptcy at the parent company. This represents a notable rise from \$11.1 million at year-end 2025 and is a key risk factor for shareholders to monitor.

Asset quality ratios show a rise in non-performing assets to total assets (0.96% vs. 0.24% in Q1 2025), with the allowance for credit losses to non-performing loans declining to 106.74% (from 425.03%).

Non-Interest Income and Expenses

Non-interest income decreased by \$179,000, or 4.1%, to \$4.2 million, mainly due to lower investment advisory income and reduced earnings on bank-owned life insurance. Other fee categories, including trust income and service charges, grew during the quarter.

Non-interest expense increased by \$1.4 million, or 8.7%, to \$17.9 million, largely reflecting investments in compensation, occupancy, professional fees, and technology. The efficiency ratio improved to 55.9% (vs. 58.9% in Q1 2025), indicating better cost control.

Wealth Management Division

The Wealth Management division experienced a setback, with earnings down \$171,000, or 5.0%, year-over-year, and assets under management (AUM) falling 13.0% to \$1.6 billion. This decline, driven by market volatility and restructuring, is notable for shareholders given the division’s strategic importance.

Capital and Liquidity

• Capital Ratios: The bank maintains capital ratios well above regulatory requirements: Tier 1 capital-to-average-assets at 12.80%, common equity and Tier 1 capital-to-risk-weighted-assets at 17.66%, and total capital-to-risk-weighted-assets at 18.91%.
• Liquidity: Cash and due from banks increased by \$53.3 million to \$257.5 million, with robust liquidity resources including \$563.3 million unused borrowing capacity at the FHLBNY and additional capacity with correspondent banks and the Federal Reserve.

Shareholder-Relevant and Price-Sensitive Information

• Record Earnings: The company’s record net income and improved net interest margin are positive signals likely to influence share price.
• Deposit Growth and Cost Control: Continued growth in core deposits and reduced deposit costs enhance profitability and stability.
• Rising Non-Performing Loans: The increase in non-performing loans, particularly due to a commercial real estate loan in bankruptcy, is a material risk and may affect future performance and share valuation.
• Wealth Management Pullback: The decline in AUM and revenue from the Wealth Management division could be a concern for investors looking for growth in diversified business lines.
• Efficiency Improvements: Improved efficiency ratio and cost controls are positive for future earnings potential.
• Strong Capital Position: High capital ratios provide a buffer against market and credit risks, supporting investor confidence.
• Dividend Payout Ratio: Increased to 21.3% (vs. 16.92% a year ago), indicating stronger shareholder returns.

Comprehensive Financial Ratios and Data

• Return on Average Assets: 1.68% (vs. 1.38% in Q1 2025)
• Return on Average Equity: 15.55% (vs. 18.18%)
• Net Interest Margin: 4.40% (vs. 3.95%)
• Dividend Payout Ratio: 21.3%
• Efficiency Ratio: 55.9% (vs. 58.9%)
• Book Value Per Share: \$21.75
• Tangible Book Value Per Share: \$21.32
• Non-Performing Loans to Total Loans: 1.34% (up from 0.33%)
• Allowance for Credit Losses to Total Loans: 1.43%

Outlook and CEO Commentary

“I am pleased to announce record first quarter financial results for the Bank led by growth of our low-cost deposit base and continued strength in our net interest margin. This expansion continued despite today’s challenging macroeconomic and geopolitical environments… The strength of our business model once again enabled us to navigate recent macroeconomic challenges successfully. I am proud of the results and remain optimistic about our opportunities. I also remain confident in our team’s ability to respond quickly to changing circumstances from a foundation of experience to effectively manage risk, serve our clients, and pursue new opportunities in our operating markets.” – Michael Gilfeather, President & CEO

Conclusion

Orange County Bancorp, Inc.’s Q1 2026 report is strongly positive, with record net income, improved margins, robust deposit growth, and enhanced capital and liquidity positions. However, investors should take note of the significant increase in non-performing loans and the pullback in the Wealth Management division, both of which present risks. The company’s continued focus on core deposit growth, cost control, and capital strength positions it well for future challenges and opportunities.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Forward-looking statements are subject to risks and uncertainties, including market volatility, credit risks, regulatory changes, and economic conditions. Investors should conduct their own due diligence or consult a financial advisor before making investment decisions. The information provided is based on unaudited financial statements and may be subject to change.

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