Orange County Bancorp net income rises 30.6% on margin expansion
The bank reported net income of $13.7 million for the second quarter, aided by a $5.3 million tax asset reversal
Orange County Bancorp (OBT) reported net income of $13.7 million for the second quarter ended June 30, 2026, an increase of 30.6% from the $10.5 million recorded in the same period last year. The bank holding company saw its bottom line supported by expanded interest margins and a one-time tax benefit, despite a significant drop in non-interest income.
Net interest income rose 13.1% year-over-year to $28.4 million. This growth was driven by a $1.5 million increase in total interest income and a $2.0 million decrease in total interest expense. The company's net interest margin expanded 38 basis points to 4.44%, up from 4.06% in the prior year.
The expansion in margin was supported by a decline in funding costs. The average cost of deposits fell 35 basis points year-over-year and 9 basis points sequentially to 0.96%. Total deposits grew 5.2% to $2.4 billion as of June 30, 2026, compared to $2.3 billion at the end of 2025.
Loan growth remained stagnant as the company faced significant payoffs. Total loans were relatively flat at $2.0 billion at the end of the quarter. While loans increased by $23.6 million during the quarter, the company recorded $81.1 million in unanticipated payoffs during the first half of 2026, compared to $28.5 million in the prior year period. The average loan portfolio yield rose 3 basis points to 6.03%.
Non-interest income fell 108.3% to a loss of $607 thousand, compared to $7.3 million in the second quarter of 2025. This decline was primarily due to a $4.8 million valuation loss on loans held-for-sale. Consequently, the efficiency ratio increased to 62.1% from 51.6% a year earlier, though the ratio would have been 53.0% if adjusted for the valuation loss.
Other contributors to the quarter's result included a shift in credit provisions and a tax adjustment. The company recognized a net recovery of $1.0 million for credit losses, compared to a $2.1 million expense in the prior year. Additionally, the company recognized a one-time $5.3 million valuation allowance reversal related to its deferred tax asset.
Performance in the wealth management segment declined. Earnings for the division fell 5.2% year-over-year to $3.2 million and decreased 1.56% from the previous quarter. Assets under management in the segment dropped 11.4% to $1.7 billion at June 30, 2026, from $1.9 billion at the end of 2025.
Asset quality showed signs of pressure as non-accrual loans rose to $18.8 million at June 30, 2026, up from $11.1 million at December 31, 2025. Despite these headwinds, book value per share grew 7.5% to $22.87 from $21.27 at the end of the prior year.