Orange County Bancorp, Inc. /DE/ (OBT) stock intrinsic value fair value estimate & owner earnings analysis

Orange County Bancorp is the holding company for Orange Bank & Trust Company, a community bank that serves Orange, Rockland and Westchester Counties in New York and the Bronx through 16 branches and one loan production office. Earnings come mainly from the spread between what it earns on loans and securities and what it pays on deposits: net interest income was $104.1 million in 2025 against $91.8 million in 2024 and $88.4 million in 2023. How we measured earnings. We start from cash generated by operations and subtract stock-based pay, routine equipment spending and swings in working capital such as accrued interest and other assets and liabilities. On that basis earnings power per diluted share was about $1.74 in 2020, $1.91 in 2021, $2.72 in 2022, $2.99 in 2023, $3.03 in 2024 and $3.43 in 2025 (adjusted for the 2-for-1 stock split). We used a window of 2023 through 2025, the period of higher interest rates, and took the median, about $34 million a year in total. 2025 was helped by a $3.6 million gain on bank-owned life insurance proceeds and a $1.2 million gain on sale of an asset, both one-time items that are excluded from operating cash flow and therefore from our figures. One judgement matters for a bank. Cash from operations adds back the provision for credit losses ($7.7 million in 2025), yet loans that go bad are a genuine loss of principal that never appears in operating cash. In 2025 the allowance for credit losses rose $2.3 million to $28.3 million after $6.1 million of charge-offs, with commercial and industrial loans, including two deteriorated relationships, the largest factor. We therefore deduct about $5 million a year of expected loan losses from the anchor, giving a base earnings level of about $29 million a year, or roughly $2.18 per share on about 13.4 million diluted shares. The June 2025 follow-on offering ($46.0 million gross) raised the share count and we use the current count; we give no credit for the extra earnings that capital could produce. Growth in earnings, 2025 versus 2024, was about 26% on this measure, well above what we assume. The base case starts from the lower normalized level, so its first-year growth of 3% sits below that trailing figure, and we do not extrapolate the rate-driven jump. The first half of 2026 net interest income of $56.3 million versus $48.8 million a year earlier shows the earnings level is holding, which is why the bull case starts from the 2025 level. Base case, about $44 per share. Earnings of about $29 million grow 3% a year for five years and 1.5% a year for the next five, then stay flat. The credit is limited to the ordinary process of retaining part of earnings and lending it out: total loans grew roughly 8% in 2025, to about $1.95 billion from about $1.81 billion, and the assumed growth is well below that. We do not credit new branches, new markets, margin gains or acquisitions. After year ten we assume the earnings simply persist without growth. Bear case, about $27 per share. Credit losses run at roughly double the recent level, in line with the $9.5 million provision the bank booked in 2022 and the deterioration seen in two commercial relationships in 2025, and earnings power falls to about $22 million a year with no growth. That level continues indefinitely. Bull case, about $60 per share. Earnings hold at the normal 2025 level less expected loan losses, about $37.6 million, and grow 4% a year for five years and 2% for the next five, on the same retained-earnings lending mechanism, then stay flat. What could make this wrong. The 2025 provision was driven mainly by growth of the commercial real estate portfolio, so a real estate downturn would hit the bear case first. Lower rates would compress the spread. On the other hand, the first half of 2026 shows net income of $24.9 million versus $19.2 million a year earlier, so if that pace proves durable after loan losses the shares are worth more than our base case. We could not reconcile 2026 second-quarter noninterest income, which was slightly negative, from the summary data alone. The margin-of-safety price of $30 sits just above the bear case value and about a third below the base case, reflecting a stable but credit-exposed community bank.