August 12, 2021 (ACCESSWIRE via COMTEX) -- Orange County Bancorp, Inc. Announces Record Second Quarter 2021 Results
Net Income for Q2 2021 increased $2.3 million, or 80.4%, to a record $5.2 million versus Q2 2020
Return on average assets for Q2 2021 rose 28 basis points year-over-year to 1.05%
Return on common equity for Q2 2021 rose 603 basis points year-over-year to 15.0%
Provision for loan losses of $809 thousand declined 38% versus the same period last year due to stabilizing credit trends
Average Loans (net of PPP) for Q2 2021 increased 22.3% year-over-year, to $1.1 billion
Average Demand Deposits for Q2 2021 grew 37.4% year-over-year to $627.8 million
Total Assets grew $387.3 million, or 23.3%, from year-end 2020 to $2.1 billion at June 30, 2021
Trust and asset advisory business revenue increased 26.3%, to $2.4 million, for Q2 2021
MIDDLETOWN, NY / ACCESSWIRE / August 12, 2021 / Orange County Bancorp, Inc. (the "Company") /zigman2/quotes/200060112/composite OBT -0.02% , parent company of Orange Bank & Trust Co. (the "Bank") and Hudson Valley Investment Advisors, Inc. ("HVIA"), today announced net income of $5.2 million, or $1.16 per basic and diluted share, for the three months ended June 30, 2021. This compares with net income of $2.9 million, or $0.64 per basic and diluted share, for the three months ended June 30, 2020. For the first six months of 2021, net income increased by $4.9 million, or 90.8%, over the prior year period, to $10.2 million, or $2.28 per basic and diluted share. This compares with net income of $5.4 million, or $1.19 per basic and diluted share, for the first six months of 2020.
"I am pleased to announce yet another record quarter of financial performance for the Bank and Company," said Orange County Bancorp President & CEO, Michael Gilfeather. "These results reflect significant growth across all facets of our business, with particularly noteworthy increases in assets and loans as liquidity initiatives took hold and credit uncertainty gave way to an increasingly favorable business outlook."
"The quarter also represents a very important transition period for the organization," Gilfeather added. "As the growth strategy we initiated several years ago continued to yield strong results, the Board and management team elected to leverage our success through a NASDAQ IPO. I am pleased to announce completion of our offering and subsequent NASDAQ Capital Market listing under the stock symbol "OBT" during the first week of August. Our transaction was upsized in the face of strong demand and culminated in the sale of 1.15 million shares to new investors at $33.50 per share, for gross proceeds of approximately $38.5 million. While technically a Q3 event, the groundwork for the transaction began in earnest in Q2 and entailed major contributions from all divisions of the Bank. It was a phenomenal success, particularly in conjunction with the financial results just reported, and positions the Company well for continued growth going forward.
To further highlight our financial accomplishments in Q2, net income of $5.2 million for the quarter pushed our first half net income over $10 million, nearly double the same period last year. Total assets of the Bank also exceeded $2 billion for the first time, increasing $387.3 million, or 23.3%, from year-end 2020.
Total loans were $1.29 billion as of June 30, 2021, representing a $134.1 million, or 11.6%, increase from $1.15 billion at December 31, 2020. This growth was primarily due to increases in commercial real estate and Payroll Protection Program (PPP) loans. Net of PPP, loans grew $94.4 million, reflecting improving economic strength and business opportunities our clients are seeing across the regions we serve. Since the government approved a second round of PPP funding in early 2021, the Bank's PPP loan balance has risen 58%, from nearly $69 million at year-end 2020 to nearly $109 million at the close of Q2 2021. While the program ended on May 31, 2021 we continue to work with our PPP borrowers to assess whether their loans qualify for government forgiveness and, if so, help them through the process.
Deposit growth was also strong for the quarter, with total deposits of $1.87 billion as of June 30, 2021 representing a $382.4 million, or 25.7%, increase from $1.49 billion at December 31, 2020. Over half of these deposits are in low to zero cost NOW and Demand Deposit accounts, resulting in our relatively low average cost of deposits.
Our net interest margin for the three months ended June 30, 2021 was 3.09%, compared to 3.34% for the three months ended June 30, 2020, and 3.18% for the six months ended June 30, 2021, compared to 3.51% for the same period last year.While we did experience margin compression, overall loan growth resulted in an increase in net interest income for the quarter of $2.9 million, or 24.2%, versus the same period last year. For the six months ended June 30, 2021, net interest income increased $5.2 million, or 22.6%, versus the same period last year.
The Company's Wealth Management initiative, which launched earlier this year, also enjoyed strong growth. Orange Wealth Management is a platform that provides a comprehensive suite of wealth management services delivered through the Company's Private Banking and Trust Services Division and HVIA subsidiary. Revenues grew 26.3%, to $2.4 million, for the second quarter 2021 verses the same quarter last year and are up 22.4% for the six months ended June 30, 2021 compared to the same period in 2020. Assets under management (AUM) ended Q2 at $1.24 billion, up $48.4 million for the first half of the year. HVIA, which until recently focused its marketing efforts on our historical operating region, is now actively expanding into Westchester to leverage and support our business relationships there. We remain excited by the growth prospects for this exciting initiative.
While pleased with these results, much remains to be done. We just opened a new branch in the Bronx with a seasoned team that is well respected in the local business community. Senior Vice President and Senior Commercial Loan Officer, Anthony Mormile, is leading this effort and we are very encouraged by the results to date. Additionally, our scheduled Nanuet branch opening later this year will strengthen our presence in Rockland County and, given its proximity to New Jersey, provide a point of entree into Bergen County. In keeping with our broader strategy for the Bank, we intend to remain disciplined and rigorous with branch initiatives.
The success we've enjoyed the past several years doesn't happen without a dedicated staff," Gilfeather concluded. "Last year, the pandemic and need to provide PPP loans to our business clients pushed the Bank beyond what even we thought possible. Our employees responded without hesitation, implementing new systems and processing more than $100 million in loans for clients in a matter of months. This quarter, we sought to raise the public profile of our efforts, improve liquidity, and fund further growth of the Company through an initial public offering. This required enormous effort from the entire organization and, again, our employees responded, assuming important responsibilities in addition to their daily work servicing clients and providing trust and investment assistance. Their efforts resulted in an outstanding transaction, ensuring future growth and viability for the Company. I thank them for a job well done."
Second Quarter and First Half 2021 Financial Review
Net income for the second quarter of 2021 was $5.2 million, compared to net income of $2.9 million for the second quarter of 2020, an increase of $2.3 million, or 80.4%. Net income for the six months ended June 30, 2021 was $10.2 million, compared to net income of $5.4 million for the same period of 2020, an increase of $4.8 million, or 90.8%. The increase for both the three and six month periods in 2021 compared to 2020 was driven primarily by an increase in net interest income and decrease in provision for loan losses, partially offset by increases in non-interest expense and provision for income taxes.
Net Interest Income
For the three months ended June 30, 2021, net interest income increased by $2.9 million, or 24.2%, versus the same period last year. For the six months ended June 30, 2021, net interest income increased by $5.2 million, or 22.6%, versus the same period last year.
Total interest income increased $2.7 million, or 21.1%, and $4.8 million, or 19.0%, for the three and six months ended June 30, 2021, respectiveley, versus the corresponding periods last year. The increase in interest income was primarily due to loan growth and fees associated with PPP loan forgiveness.
Total interest expense decreased $121 thousand in the second quarter of 2021, to $1.0 million, compared to $1.1 million in the second quarter of the prior year, and decreased $388 thousand for the six months ended June 30, 2021, to $2.0 million from $2.4 million, for the six months ended June 30, 2020. The decrease resulted from a reduction in deposit interest expense partially offset by an increase in interest expense due to the subordinated debt issued in September 2020. Lower interest expense on deposits was consistent with the reduction of the Fed Funds rate in the first quarter of 2020 in response to the COVID-19 pandemic.
Provision for Loan Losses
The Company recognized provisions for loan losses of $809 thousand and $875 thousand for the three and six months ended June 30, 2021, respectively, compared to $1.3 million and $2.5 million for the three and six months ended June 30, 2020, respectively. The lower provisions reflect improved credit metrics and declining loan deferrals. The allowance for loan losses to total loans was 1.32% as of June 30, 2021. Excluding PPP loans, the ratio was 1.45%.
Non-interest income was $3.0 million during both the second quarter of 2021 and 2020, while non-interest income was $5.9 million for the six months ended June 30, 2021 compared to $5.5 million for the same period in 2020, an increase of $372 thousand, or 6.7%. The increase was a result of continued growth in the Bank's trust operations and HVIA's asset management activities.
Non-interest expense was $10.4 million and $9.9 million during the second quarters of 2021 and 2020, respectively, an increase of $497 thousand, or 5%, while non-interest expense was $20.7 million for the six months ended June 30, 2021, compared to $19.5 million for the same period in 2020, an increase of $1.2 million, or 6.3%. The increase in non-interest expense for the three and six month periods was due to the Bank's continued investment in growth. This investment was comprised primarily of increases in salaries, information technology, professional fees, and deposit insurance costs resulting from significant growth in deposit balances. The efficiency ratio improved to 58.90% for the three months ended June 30, 2021 from 66.98% for the same period in 2020, and improved to 60.41% for the six months ended June 30, 2021 from 67.97% for the six months ended June 30, 2020.
Income Tax Expense
The provision for income taxes for the three months ended June 30, 2021 was $1.3 million compared to $695 thousand for the same period in 2020. The provision for income taxes for the six months ended June 30, 2021 was $2.5 million compared to $1.3 million for the same period in 2020. The increase for both periods was due to the increase in income before income taxes. The effective tax rate for the three and six month periods ended June 30, 2021 was 19.5%, versus 19.5% and 19.8%, respectively, for the same periods last year.
Total consolidated assets increased $387.3 million, or 23.3%, from $1.7 billion at December 31, 2020 to $2.1 billion at June 30, 2021. The increase reflects increases in cash and due from banks, loans receivable and investments.