Orange County Bancorp (OBT) risk factors, FY2025 10-K

Risks Related to Economic Conditions

1. 01A substantial portion of our business is in the New York City Metropolitan area and in Orange, Westchester, Bronx, and Rockland Counties in New York and, therefore, our business is particularly vulnerable to an economic downturn in our primary market area
2. 02We have a significant number of loans secured by real estate, and a downturn in the local real estate market could negatively impact our profitability22% rewritten
3. 03Inflation can have an adverse impact on our business and on our customers49% rewritten

Risks Related to Lending Activities

1. 04Our emphasis on commercial real estate loans involves risks that could adversely affect our financial condition and results of operations
2. 05Imposition of limits by bank regulators on commercial real estate lending activities could curtail our growth and adversely affect our earnings
3. 06A large portion of our loan portfolio is comprised of commercial and industrial loans secured by receivables, inventory, equipment or other commercial collateral, the deterioration in value of which could increase the potential for future losses
4. 07If our allowance for credit losses is not sufficient to cover actual loan losses, our earnings could decrease
5. 08If our non-performing assets increase, our earnings will be adversely affected
6. 09A portion of our loan portfolio consists of loan participations. Loan participations may have a higher risk of loss than loans we originate because we are not the lead lender and we have limited control over credit monitoring71% rewritten
7. 10A portion of our loan portfolio consists of loan purchases we do not service which may have a higher risk of loss than loans we originate because these loans are secured by assets outside our primary market area27% rewritten

Risks Related to Wealth Management

1. 11Involvement in wealth management creates risks associated with the industry
2. 12We may not be able to attract and retain wealth management clients
3. 13The wealth management industry is subject to extensive regulation, supervision and examination by regulators, and any enforcement action or adverse changes in the laws or regulations governing our business could decrease our revenues and profitability

Risks Related to Deposits

1. 14We accept deposits that do not have a fixed term and which may be withdrawn by the customer at any time for any reason
2. 15At December 31, 2025, we had $2.2 billion of deposit liabilities that have no maturity and, therefore, may be withdrawn by the depositor at any time. These deposit liabilities include our checking, savings, and money market deposit accounts
3. 16Municipal deposits are an important source of funds for us and a reduced level of those deposits may hurt our profits

Risks Related to Our Growth Strategy

1. 17We may not be able to grow, and if we do we may have difficulty managing that growth
2. 18that we will be successful in expanding our operations organically or through strategic acquisitions while managing the costs and implementation risks associated with this growth strategy
3. 19Future acquisitions could disrupt our business and adversely affect our results of operations, financial condition and cash flows

Risks Related to Market Interest Rates

1. 20We are subject to interest rate risk, and fluctuations in market interest rates may affect our interest margins and income, demand for our products, defaults on loans, loan prepayments and the fair value of our financial instruments
2. 21Changes in the valuation of our securities portfolio may reduce our profits and our capital levels

Risks Related to Operations and Security

1. 22We face significant operational risks because the nature of the financial services business involves a high volume of transactions
2. 23Cyber-attacks or other security breaches could adversely affect our operations, net income or reputation
3. 24If this confidential or proprietary information were to be mishandled, misused or lost, we could be exposed to significant regulatory consequences, reputational damage, civil litigation and financial loss
4. 25We rely on third party vendors, which could expose us to additional cybersecurity risks
5. 26The development and use of artificial intelligence (“AI”) presents risks and challenges that may adversely impact our businessNew
6. 27We rely heavily on our executive management team and other key employees for our successful operation, and we could be adversely affected by the unexpected loss of their services
7. 28Our ability to maintain our reputation is critical to the success of our business, and the failure to do so may materially adversely affect our performance
8. 29Our risk management framework may not be effective in mitigating risk and reducing the potential for significant losses

Risks Related to Competitive Matters

1. 30We may be unable to successfully compete with others for business

Risk Related to Laws and Regulations

1. 31We operate in a highly regulated environment and may be adversely affected by changes in federal, state and local laws and regulations
2. 32We are subject to stringent capital requirements, which may adversely impact our return on equity, require us to raise additional capital, or restrict us from paying dividends or repurchasing shares
3. 33Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions
4. 34We are subject to the Community Reinvestment Act (“CRA”) and fair lending laws, and failure to comply with these laws could lead to material penalties
5. 35The Federal Reserve Board may require us to commit capital resources to support Orange Bank & Trust Company, and we may not have sufficient access to such capital resources
6. 36Our earnings are significantly affected by the fiscal and monetary policies of the federal government and its agencies
7. 37Liquidity is essential to our businesses
8. 38Legal and regulatory proceedings and related matters could adversely affect us
9. 39We are subject to environmental liability risk associated with lending activities or properties we own
10. 40Societal responses to climate change could adversely affect our business and performance, including indirectly through impacts on our customers
11. 41We cannot predict how changes in technology will affect our business; increased use of technology may expose us to service interruptions or breaches in security

Risks Related to an Investment in Our Common Stock

1. 42The price of our common stock could be volatile
2. 43The reduced disclosures and relief from certain other significant disclosure requirements that are available to emerging growth companies may make our common stock less attractive to investors
3. 44Our dividend policy may change without notice and any payment of dividends in the future is subject to the discretion of our Board of Directors
4. 45Our directors and executive officers and members of the Morrison family beneficially own a significant portion of our common stock and have substantial influence over us31% rewritten
5. 46Our common stock is subordinate to our existing and future indebtedness
6. 47Our Certificate of Incorporation and Bylaws, and certain banking laws applicable to us, could have an anti- takeover effect that decreases our chances of being acquired, even if our acquisition is in our shareholders’ best interests
7. 48An investment in our common stock is not an insured deposit and is not guaranteed by the FDIC, so you could lose some or all of your investment