0001823365us-gaap:ResidentialPortfolioSegmentMembergbny:OneToFourFamilyResidentialMemberus-gaap:SpecialMentionMember2021-12-31CommercialPortfolioSegmentMemberus-gaap:CommercialRealEstateMemberus-gaap:FinancialAssetNotPastDueMember2022-12-31

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SeptemberJune 30, 20222023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to

Commission file number 001-39883

Generations Bancorp NY, Inc.

(Exact name of registrant as specified in its charter)

Maryland

85-3659943

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

20 East Bayard Street

Seneca Falls, New York 13148

(Address of principal executive offices)

(Zip Code)

(315) 568-5855

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Ticker Symbol

    

Name of each exchange on which registered

Common Stock, $0.01 par value

GBNY

The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No  .

2,364,9792,235,889 shares of the Registrant’s common stock, par value $0.01 per share, were issued and outstanding as of November 3, 2022.August 2, 2023.

Table of Contents

Index

Page

PART I. FINANCIAL INFORMATION

1

Item 1. Condensed Consolidated Financial Statements

1

Condensed Consolidated Statements of Financial Condition September June 30, 20222023 (Unaudited) and December 31, 20212022

1

Condensed Consolidated Statements of Income Three-month and Nine-monthSix-month Periods Ended SeptemberJune 30, 20222023 and 20212022 (Unaudited)

2

Condensed Consolidated Statements of Comprehensive Income (Loss) Three-month and Nine-monthSix-month Periods Ended SeptemberJune 30, 20222023 and 20212022 (Unaudited)

3

Condensed Consolidated Statements of Changes in Shareholders Equity Three-month and Nine-monthSix-month Periods Ended SeptemberJune 30, 20222023 and 20212022 (Unaudited)

4

Condensed Consolidated Statements of Cash Flows Nine-monthSix-month Periods Ended SeptemberJune 30, 20222023 and 20212022 (Unaudited)

5

Notes to Condensed Consolidated Financial Statements (Unaudited)

6

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

4852

Item 3. Quantitative and Qualitative Disclosures About Market Risk

63

Item 4. Controls and Procedures

5963

PART II. OTHER INFORMATION

5963

Item 1. Legal Proceedings

5963

Item 1A. Risk Factors

5963

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

6064

Item 3. Defaults Upon Senior Securities

6064

Item 4. Mine Safety Disclosures

6064

Item 5. Other Information

6064

Item 6. Exhibits

6165

Signatures

6266

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Generations Bancorp NY, Inc.

Condensed Consolidated Statements of Financial Condition

At September 30, 

At December 31, 

(In thousands, except share data)

    

2022

    

2021

(Unaudited)

ASSETS:

 

  

 

  

Cash and due from banks

$

3,426

$

4,051

Interest earning deposits

 

3,972

 

16,946

Total cash and cash equivalents

 

7,398

 

20,997

Interest earning time deposits in banks

650

650

Investment securities available-for-sale, at fair value

 

31,628

 

36,975

Investment securities held-to-maturity (fair value 2022-$945, 2021-$1,150)

 

971

 

1,128

Equity investment securities, at fair value

 

283

 

350

Federal Home Loan Bank stock, at cost

 

1,646

 

1,450

Loans

 

293,977

 

279,961

Less: Allowance for loan losses

 

(2,326)

 

(1,841)

Loans receivable, net

 

291,651

 

278,120

Premises and equipment, net

 

14,860

 

15,345

Bank-owned life insurance

 

7,438

 

7,890

Pension plan asset

 

12,193

 

11,107

Foreclosed real estate & repossessed assets

 

69

 

27

Goodwill

 

792

 

792

Intangible assets, net

 

735

 

783

Accrued interest receivable

 

1,216

 

1,249

Other assets

 

2,082

 

2,086

Total assets

$

373,612

$

378,949

LIABILITIES AND SHAREHOLDERS' EQUITY:

 

  

 

  

Deposits:

 

  

 

  

Noninterest-bearing

$

57,680

$

57,540

Interest-bearing

 

250,628

 

254,509

Total deposits

 

308,308

 

312,049

Short-term borrowings

 

13,600

 

Long-term borrowings

 

10,496

 

17,760

Advances from borrowers for taxes and insurance

 

1,600

 

2,443

Other liabilities

 

1,955

 

3,218

Total liabilities

 

335,959

 

335,470

Shareholders' equity:

 

  

 

  

Preferred stock, par value $0.01; 1,000,000 shares authorized; none issued

 

 

Common stock, par value $0.01; 14,000,000 shares authorized in 2022 and 2021; 2,369,918 shares issued and outstanding in 2022; and 2,458,261 shares issued and outstanding in 2021

 

24

 

26

Additional paid in capital

 

23,160

 

24,494

Retained earnings

 

22,488

 

21,669

Accumulated other comprehensive loss

 

(6,265)

 

(966)

Stock held in rabbi trust

 

(698)

 

(654)

Unearned ESOP shares, at cost

 

(1,056)

 

(1,090)

Total shareholders' equity

 

37,653

 

43,479

Total liabilities and shareholders' equity

$

373,612

$

378,949

At June 30, 

At December 31, 

(In thousands, except share data)

    

2023

    

2022

(Unaudited)

ASSETS:

 

  

 

  

Cash and due from banks

$

3,385

$

3,955

Interest earning deposits

 

1,884

 

4,049

Total cash and cash equivalents

 

5,269

 

8,004

Interest-earning time deposits in banks

2,260

Investment securities available-for-sale, at fair value

 

31,080

 

33,050

Investment securities held-to-maturity (fair value 2023-$1,258, 2022-$1,301)

 

1,516

 

1,587

Equity investment securities, at fair value

 

341

 

307

Federal Home Loan Bank stock, at cost

 

1,439

 

1,740

Loans

 

318,235

 

306,377

Less: Allowance for credit losses

 

(2,771)

 

(2,497)

Loans receivable, net

 

315,464

 

303,880

Premises and equipment, net

 

14,542

 

14,863

Bank-owned life insurance

 

7,407

 

7,351

Pension plan asset

 

11,421

 

10,697

Foreclosed real estate & repossessed assets

 

271

 

12

Goodwill

 

 

792

Intangible assets, net

 

686

 

718

Accrued interest receivable

 

1,331

 

1,304

Other assets

 

1,915

 

1,988

Total assets

$

394,942

$

386,293

LIABILITIES AND SHAREHOLDERS' EQUITY:

 

  

 

  

Deposits:

 

  

 

  

Noninterest-bearing

$

50,510

$

54,609

Interest-bearing

 

282,137

 

263,069

Total deposits

 

332,647

 

317,678

Short-term borrowings

 

9,244

 

16,200

Long-term borrowings

 

10,445

 

10,334

Advances from borrowers for taxes and insurance

 

3,161

 

2,653

Other liabilities

 

2,519

 

2,100

Total liabilities

 

358,016

 

348,965

Shareholders' equity:

 

  

 

  

Preferred stock, par value $0.01; 1,000,000 shares authorized; none issued

 

 

Common stock, par value $0.01; 14,000,000 shares authorized in 2023 and 2022; 2,303,839 and 2,348,748 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

 

23

 

24

Additional paid in capital

 

22,662

 

23,002

Retained earnings

 

22,214

 

22,512

Accumulated other comprehensive loss

 

(6,212)

 

(6,467)

Stock held in rabbi trust

 

(739)

 

(698)

Unearned ESOP shares, at cost

 

(1,022)

 

(1,045)

Total shareholders' equity

 

36,926

 

37,328

Total liabilities and shareholders' equity

$

394,942

$

386,293

The accompanying notes are an integral part of the condensed consolidated financial statements.

1

Table of Contents

Generations Bancorp NY, Inc.

Condensed Consolidated Statements of (Loss) Income (Unaudited)

Three Months Ended September 30, 

Nine Months Ended September 30, 

(In thousands, except per share data)

    

2022

    

2021

    

2022

    

2021

Interest and dividend income:

 

  

 

  

 

 

  

Loans, including fees

$

3,009

$

3,247

$

8,827

$

9,463

Debt and equity securities:

 

  

 

 

  

 

Taxable

 

157

 

156

 

458

 

369

Tax-exempt

 

113

 

99

 

336

 

300

Interest-earning deposits

 

19

 

8

 

73

 

15

Other

 

16

 

21

 

38

 

67

Total interest income

 

3,314

 

3,531

 

9,732

 

10,214

Interest expense:

 

  

 

  

 

  

 

  

Deposits

 

304

 

300

 

860

 

969

Short-term borrowings

 

24

 

 

24

 

Long-term borrowings

 

55

 

96

 

200

 

329

Subordinated debt

 

 

 

 

9

Total interest expense

 

383

 

396

 

1,084

 

1,307

Net interest income

 

2,931

 

3,135

 

8,648

 

8,907

Provision for loan losses

 

181

 

135

 

481

 

405

Net interest income after provision for loan losses

 

2,750

 

3,000

 

8,167

 

8,502

Noninterest income:

 

  

 

  

 

  

 

  

Banking fees and service charges

 

386

 

400

 

1,188

 

1,172

Mortgage banking income, net

 

13

 

16

 

37

 

39

Insurance commissions

 

77

 

172

 

375

 

547

Earnings on bank-owned life insurance

 

6

 

27

 

59

 

86

Change in fair value on equity securities

 

(16)

 

(1)

 

(67)

 

2

Net gain on sale of securities

 

 

13

 

 

11

Other charges, commissions & fees

 

24

 

44

 

81

 

146

Total noninterest income

 

490

 

671

 

1,673

 

2,003

Noninterest expense:

 

  

 

  

 

  

 

  

Compensation and benefits

 

1,245

 

1,341

 

3,643

 

3,942

Occupancy and equipment

 

510

 

513

 

1,494

 

1,564

Impairment of long-lived assets

��

300

300

Service charges

 

526

 

537

 

1,563

 

1,547

Regulatory assessments

 

30

 

106

 

156

 

317

Professional and other services

 

162

 

171

 

544

 

454

Advertising

 

107

 

108

 

321

 

325

Other expenses

 

294

 

389

 

870

 

970

Total noninterest expenses

 

2,874

 

3,465

 

8,591

 

9,419

Income before income tax expense

 

366

 

206

 

1,249

 

1,086

Income tax expense

 

66

 

33

 

208

 

191

Net income

 

300

 

173

 

1,041

 

895

Net income available to common shareholders

$

300

$

173

$

1,041

$

895

Basic and diluted earnings per common share

$

0.13

$

0.07

$

0.45

$

0.38

Three Months Ended June 30, 

Six Months Ended June 30, 

(In thousands, except per share data)

    

2023

    

2022

    

2023

    

2022

Interest and dividend income:

 

  

 

  

 

 

  

Loans, including fees

$

3,455

$

2,868

$

6,803

$

5,818

Debt and equity securities:

 

  

 

 

  

 

Taxable

 

240

 

139

 

479

 

301

Tax-exempt

 

99

 

111

 

200

 

223

Interest-earning deposits

 

36

 

38

 

81

 

54

Other

 

26

 

13

 

65

 

22

Total interest income

 

3,856

 

3,169

 

7,628

 

6,418

Interest expense:

 

  

 

  

 

  

 

  

Deposits

 

1,405

 

279

 

2,527

 

556

Short-term borrowings

 

180

 

 

268

 

Long-term borrowings

 

32

 

68

 

70

 

145

Total interest expense

 

1,617

 

347

 

2,865

 

701

Net interest income

 

2,239

 

2,822

 

4,763

 

5,717

Provision for loan losses

165

150

330

300

Provision for unfunded commitments

Provision for available-for-sale securities

 

 

 

 

Total provision for credit losses

 

165

 

150

 

330

 

300

Net interest income after provision for credit losses

 

2,074

 

2,672

 

4,433

 

5,417

Noninterest income:

 

  

 

  

 

  

 

  

Banking fees and service charges

 

364

 

427

 

728

 

802

Mortgage banking income, net

 

7

 

15

 

15

 

24

Insurance commissions

 

24

 

101

 

153

 

298

Earnings on bank-owned life insurance

 

28

 

26

 

56

 

53

Change in fair value on equity securities

 

26

 

(39)

 

34

 

(51)

Net gain on sale of Generations Agency

 

312

 

 

312

 

Other charges, commissions & fees

 

27

 

37

 

66

 

57

Total noninterest income

 

788

 

567

 

1,364

 

1,183

Noninterest expense:

 

  

 

  

 

  

 

  

Compensation and benefits

 

1,338

 

1,163

 

2,746

 

2,398

Occupancy and equipment

 

502

 

499

 

1,015

 

984

Service charges

 

416

 

531

 

923

 

1,037

Regulatory assessments

 

103

 

63

 

167

 

126

Professional and other services

 

232

 

192

 

423

 

382

Advertising

 

107

 

106

 

214

 

214

Other expenses

 

376

 

273

 

713

 

576

Total noninterest expenses

 

3,074

 

2,827

 

6,201

 

5,717

(Loss) Income before income tax (benefit) expense

 

(212)

 

412

 

(404)

 

883

Income tax (benefit) expense

 

(46)

 

67

 

(86)

 

142

Net (loss) income

$

(166)

$

345

$

(318)

$

741

Net (loss) income available to common shareholders

$

(166)

$

345

$

(318)

$

741

Basic and diluted (losses) earnings per common share

$

(0.07)

$

0.15

$

(0.14)

$

0.32

The accompanying notes are an integral part of the condensed consolidated financial statements.

2

Table of Contents

Generations Bancorp NY, Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income (Loss) (Unaudited)

Three Months Ended September 30, 

Nine Months Ended September 30, 

Three Months Ended June 30, 

Six Months Ended June 30, 

(In thousands)

    

2022

    

2021

    

2022

    

2021

    

2023

    

2022

    

2023

    

2022

Net income

$

300

$

173

$

1,041

$

895

Other comprehensive loss, before tax:

 

  

 

  

 

  

 

  

Unrealized losses on securities available-for-sale:

 

 

  

 

  

 

  

Unrealized holding losses arising during the period

 

(1,317)

 

(349)

 

(6,707)

 

(150)

Reclassification adjustment for net gains included in net income

 

 

(13)

 

 

(11)

Net unrealized losses on securities available-for-sale

 

(1,317)

 

(362)

 

(6,707)

 

(161)

Net (loss) income

$

(166)

$

345

$

(318)

$

741

Other comprehensive (loss) income, before tax:

 

  

 

  

 

  

 

  

Unrealized (losses) gains on securities available-for-sale:

 

 

  

 

  

 

  

Unrealized holding (losses) gains arising during the period

 

(173)

 

(3,145)

 

242

 

(5,390)

Net unrealized (losses) gains on securities available-for-sale

 

(173)

 

(3,145)

 

242

 

(5,390)

Defined benefit pension plan:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Reclassification of amortization of net losses recognized in net pension expense

 

 

28

 

 

85

 

41

 

 

81

 

Net change in defined benefit pension plan asset

 

 

28

 

 

85

 

41

 

 

81

 

Other comprehensive loss, before tax

 

(1,317)

 

(334)

 

(6,707)

 

(76)

Other comprehensive (loss) income, before tax

 

(132)

 

(3,145)

 

323

 

(5,390)

Tax effect

 

276

 

70

 

1,408

 

16

 

27

 

661

 

(68)

 

1,132

Other comprehensive loss, net of tax

 

(1,041)

 

(264)

 

(5,299)

 

(60)

Other comprehensive (loss) income, net of tax

 

(105)

 

(2,484)

 

255

 

(4,258)

Total comprehensive (loss) income

$

(741)

$

(91)

$

(4,258)

$

835

$

(271)

$

(2,139)

$

(63)

$

(3,517)

The accompanying notes are an integral part of the condensed consolidated financial statements.

3

Table of Contents

Generations Bancorp NY, Inc.

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

  

  

  

Accumulated

  

Stock

  

  

  

  

  

Accumulated

Stock

  

  

Additional

Other

Held by

Unearned

Additional

Other

Held by

Unearned

Common

Paid in

Retained

Comprehensive

Treasury

Rabbi

ESOP

Common

Paid in

Retained

Comprehensive

Rabbi

ESOP

(In thousands, except share data)

    

Stock

    

Capital

    

Earnings

    

Loss

    

Stock

    

Trust

    

Shares

    

Total

    

Stock

    

Capital

    

Earnings

    

Loss

    

Trust

    

Shares

    

Total

Balance, June 30, 2022

$

25

$

23,716

$

22,276

$

(5,224)

$

$

(698)

$

(1,067)

$

39,028

Balance, March 31, 2023

$

23

$

22,983

$

22,353

$

(6,107)

$

(698)

$

(1,033)

$

37,521

Net loss

 

 

 

(166)

 

 

 

 

(166)

Other comprehensive loss

(105)

(105)

Effect of stock repurchase plan

 

 

(373)

 

27

 

 

 

 

(346)

Stock-based compensation

54

54

Purchase of common stock for Directors Retirement Plan

(10)

(10)

Purchase of common stock for SERPs

 

 

 

 

 

(31)

 

 

(31)

ESOP shares committed to be released

 

 

(2)

 

 

 

 

11

 

9

Balance, June 30, 2023

$

23

$

22,662

$

22,214

$

(6,212)

$

(739)

$

(1,022)

$

36,926

Balance, March 31, 2022

$

26

$

24,496

$

22,065

$

(2,740)

$

(654)

$

(1,078)

$

42,115

Net income

 

 

 

300

 

 

 

 

 

300

 

 

 

345

 

 

 

 

345

Other comprehensive loss

(1,041)

(1,041)

(2,484)

(2,484)

Effect of stock repurchase plan

 

(1)

 

(609)

 

(88)

 

 

 

 

 

(698)

 

(1)

 

(805)

 

(134)

 

 

 

 

(940)

Stock-based compensation

52

52

23

23

Purchase of common stock for Directors Retirement Plan

(13)

(13)

Purchase of common stock for SERPs

 

 

 

 

 

(31)

 

 

(31)

ESOP shares committed to be released

 

 

1

 

 

 

 

 

11

 

12

 

 

2

 

 

 

 

11

 

13

Balance, September 30, 2022

$

24

$

23,160

$

22,488

$

(6,265)

$

$

(698)

$

(1,056)

$

37,653

Balance, June 30, 2021

$

26

$

24,491

$

20,978

$

(1,211)

$

$

(627)

$

(1,112)

$

42,545

Net income

 

 

 

173

 

 

 

 

 

173

Other comprehensive loss

 

 

 

 

(264)

 

 

 

 

(264)

ESOP shares committed to be released

 

 

1

 

 

 

 

 

11

 

12

Balance, September 30, 2021

$

26

$

24,492

$

21,151

$

(1,475)

$

$

(627)

$

(1,101)

$

42,466

Balance, June 30, 2022

$

25

$

23,716

$

22,276

$

(5,224)

$

(698)

$

(1,067)

$

39,028

  

  

  

Accumulated

  

Stock

  

  

  

  

  

Accumulated

Stock

  

  

Additional

Other

Held by

Unearned

Additional

Other

Held by

Unearned

Common

Paid in

Retained

Comprehensive

Treasury

Rabbi

ESOP

Common

Paid in

Retained

Comprehensive

Rabbi

ESOP

(In thousands, except share data)

    

Stock

    

Capital

    

Earnings

    

Loss

    

Stock

    

Trust

    

Shares

    

Total

    

Stock

    

Capital

    

Earnings

    

Loss

    

Trust

    

Shares

    

Total

Balance, December 31, 2022

$

24

$

23,002

$

22,512

$

(6,467)

$

(698)

$

(1,045)

$

37,328

Net loss

 

 

(318)

 

 

 

 

(318)

Other comprehensive income

 

 

 

255

 

 

 

255

Effect of stock repurchase plan

(1)

(446)

20

(427)

Stock-based compensation

107

107

Purchase of common stock for Directors Retirement Plan

 

 

 

 

(10)

 

 

(10)

Purchase of common stock for SERPs

 

 

 

 

(31)

 

 

(31)

ESOP shares committed to be released

 

(1)

 

 

 

 

23

 

22

Balance, June 30, 2023

$

23

$

22,662

$

22,214

$

(6,212)

$

(739)

$

(1,022)

$

36,926

Balance, December 31, 2021

$

26

$

24,494

$

21,669

$

(966)

$

$

(654)

$

(1,090)

$

43,479

$

26

$

24,494

$

21,669

$

(966)

$

(654)

$

(1,090)

$

43,479

Net income

 

 

1,041

 

 

 

 

 

1,041

 

 

 

741

 

 

 

 

741

Other comprehensive loss

 

 

 

(5,299)

 

 

 

 

(5,299)

(4,258)

(4,258)

Effect of stock repurchase plan

(2)

(1,414)

(222)

(1,638)

(1)

(805)

(134)

(940)

Stock-based compensation

75

75

 

 

23

 

 

 

 

 

23

Purchase of common stock for Directors Retirement Plan

 

 

 

 

 

(13)

 

 

(13)

(13)

(13)

Purchase of common stock for SERPs

 

 

 

 

 

(31)

 

 

(31)

 

 

 

 

 

(31)

 

 

(31)

ESOP shares committed to be released

 

5

 

 

 

 

 

34

 

39

 

 

4

 

 

 

 

23

 

27

Balance, September 30, 2022

$

24

$

23,160

$

22,488

$

(6,265)

$

$

(698)

$

(1,056)

$

37,653

Balance, December 31, 2020

$

26

$

11,954

$

20,256

$

(1,415)

$

(614)

$

(290)

$

(31)

$

29,886

Net income

 

 

 

895

 

 

 

 

 

895

Proceeds from issuance of 1,477,575 shares of common stock (which included 109,450 shares related to the ESOP), net of the offering cost of $1.65 million

13,151

(1,104)

12,047

Treasury stock retired

(614)

614

Other comprehensive loss

 

���

 

 

 

(60)

 

 

 

 

(60)

Purchase of common stock for Directors Retirement Plan

(337)

(337)

ESOP shares committed to be released

 

 

1

 

 

 

 

 

34

 

35

Balance, September 30, 2021

$

26

$

24,492

$

21,151

$

(1,475)

$

$

(627)

$

(1,101)

$

42,466

Balance, June 30, 2022

$

25

$

23,716

$

22,276

$

(5,224)

$

(698)

$

(1,067)

$

39,028

The accompanying notes are an integral part of the condensed consolidated financial statements.

4

Table of Contents

Generations Bancorp NY, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine Months Ended September 30, 

Six Months Ended June 30, 

(In thousands)

    

2022

    

2021

    

2023

    

2022

OPERATING ACTIVITIES

 

  

 

  

 

  

 

  

Net income

$

1,041

$

895

Net (loss) income

$

(318)

$

741

Adjustments to reconcile net income to net cash provided by operating activities:

 

  

 

  

 

  

 

  

Provision for loan losses

 

481

 

405

Deferred income tax expense (benefit)

 

(1,011)

 

239

Realized gains on sales of:

 

  

 

  

Available-for-sale investment securities

 

 

(11)

Provision for credit losses

 

330

 

300

Deferred income tax benefit

 

(127)

 

(1,003)

Change in fair value on equity securities

 

67

 

(2)

 

(34)

 

51

Impairment of long-lived asset

300

Depreciation

 

704

 

784

 

474

 

469

Amortization of intangible asset

 

48

 

48

 

32

 

32

Amortization of fair value adjustment to purchased loan portfolio

 

(52)

 

(52)

 

(34)

 

(34)

ESOP expense

 

39

 

35

 

22

 

27

Stock-based compensation

75

107

23

Amortization of deferred loan costs

 

79

 

69

 

1,039

 

52

Earnings on bank-owned life insurance

 

(59)

 

(86)

 

(56)

 

(53)

Decrease in bank-owned life insurance premium

511

Change in pension plan assets

 

(1,086)

 

(976)

 

(643)

 

(834)

Extinguishment of goodwill

 

792

 

Net amortization of premiums and discounts on investment securities

 

209

 

226

 

39

 

143

Net change in accrued interest receivable

 

33

 

(126)

 

(27)

 

87

Net change in other assets and liabilities

 

317

 

(317)

 

1,058

 

1,472

Net cash provided by operating activities

 

1,396

 

1,431

 

2,654

 

1,473

INVESTING ACTIVITIES

 

  

 

 

  

 

Purchase of equity investment securities

 

 

(1)

Purchase of investment securities available-for-sale

 

(2,767)

 

(25,293)

 

(879)

 

(2,577)

Net proceeds from the (purchase of) redemption of Federal Home Loan Bank stock

 

(196)

 

430

Net change in interest-earning time deposits in banks

(2,260)

Net proceeds from the redemption of Federal Home Loan Bank stock

 

301

 

233

Proceeds from maturities and principal reductions of:

 

 

  

 

 

  

Available-for-sale investment securities

 

1,202

 

2,961

 

3,055

 

1,112

Held-to-maturity investment securities

 

153

 

290

 

69

 

109

Proceeds from sale of:

 

 

  

 

 

  

Available-for-sale investment securities

 

 

3,041

Real estate and repossessed assets acquired

 

27

 

56

 

112

 

27

Premises and equipment

 

 

79

 

15

 

Net change in loans

 

(14,108)

 

(2,268)

 

(13,290)

 

(3,206)

Purchase of premises and equipment

 

(219)

 

(375)

 

(168)

 

(202)

Net cash used in investing activities

 

(15,908)

 

(21,080)

 

(13,045)

 

(4,504)

FINANCING ACTIVITIES

 

  

 

  

 

  

 

  

Net change in demand deposits, savings accounts, and money market accounts

 

(2,531)

 

4,843

 

(20,619)

 

2,120

Net change in time deposits

 

(1,210)

 

(2,881)

 

35,588

 

(2,615)

Net change in short-term borrowings

 

13,600

 

 

(6,956)

 

Payments on long-term borrowings

 

(7,264)

 

(7,770)

 

(2,889)

 

(3,532)

Repayment from subordinated debt offering

(1,235)

Proceeds from long-term borrowings

3,000

Purchase of common stock for directors retirement plan

(13)

(10)

(13)

Purchase of common stock of SERP

(31)

(31)

(31)

Net proceeds from stock offering and conversion

13,151

Effect of stock repurchase plan

(1,638)

(427)

(940)

Purchase of common stock for ESOP

(1,104)

Net cash provided by financing activities

 

913

 

5,004

Net cash provided by (used in) financing activities

 

7,656

 

(5,011)

Net change in cash and cash equivalents

 

(13,599)

 

(14,645)

 

(2,735)

 

(8,042)

Cash and cash equivalents at beginning of period

 

20,997

 

26,830

 

8,004

 

20,997

Cash and cash equivalents at end of period

$

7,398

$

12,185

$

5,269

$

12,955

Supplemental Cash Flows Information

 

  

 

  

 

  

 

  

Cash paid during the period for:

 

  

 

  

 

  

 

  

Interest

$

972

$

1,302

$

2,701

$

699

Transfer of loans to foreclosed real estate and repossessed assets

 

69

 

67

 

371

 

69

The accompanying notes are an integral part of the condensed consolidated financial statements.

5

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Nature of Operations

Generations Bancorp NY, Inc. (“Generations Bancorp”) is a Maryland corporation that was organized in August 2020 as part of the Seneca-Cayuga Bancorp, Inc. (“Seneca-Cayuga”) conversion from the mutual holding company structure to a fully public stock holding company structure.  Prior to the conversion, Generations Bank was the wholly-ownedwholly owned subsidiary of Seneca-Cayuga and The Seneca Falls Savings Bank, MHC (“MHC”), which owned 60.1% of Seneca-Cayuga’s common stock.  On January 13, 2021, Generations Bancorp sold 1,477,575 of its common stock in a stock offering, (which included 109,450 shares issued to the ESOP) representing the ownership interest of the MHC for gross proceeds of $14.8 million and net proceeds of $13.2 million.  The exchange ratio of previously held shares by public shareholders (i.e., shareholders other than the MHC) of Seneca-Cayuga was 0.9980 as applied in the conversion offering.  References herein to the “Company” include Generations Bancorp subsequent to the completion of the conversion and Seneca-Cayuga prior to the completion of the conversion.  

Generations Bank (the “Bank”) is a federally chartered savings bank headquartered in Seneca Falls, New York.  We were organized in 1870 and have operated continuously since that time in the northern Finger Lakes Region of New York State which is located in the central to northwestern portion of New York State.

Generations Commercial Bank (the “Commercial Bank”) is a New York State chartered limited-purpose commercial bank formed expressly to enable local municipalities to deposit public funds with the Bank in accordance with existing NYS municipal law and is a wholly owned subsidiary of the Bank.

The Bank maintains its executive offices and main retail location in Seneca Falls, New York, in addition to seven full-service offices and one drive-through facility located Auburn, Farmington, Geneva, Medina, Phelps, Union Springs, and Waterloo, New York. The Bank is a community-oriented savings institution whose business primarily consists of accepting deposits from customers within its market area and investing those funds in loans secured by one- to four-family residential real estate, commercial real estate, business or personal assets, and in investment securities.

In addition, Generations Agency, Inc. (the “Agency”) offers personal and commercial insurance products through licensed employees in the same market area.  The Agency is the Bank’s wholly-ownedwholly owned subsidiary.  The Agency’s book of business was purchased by The Northwoods Corporation on June 1, 2023.  Further detail regarding the treatment of goodwill is included in Note 15.

Interim Financial Statements

The interim condensed consolidated financial statements as of SeptemberJune 30, 2022,2023, and for the three and ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Such adjustments are the only adjustments contained in these unaudited consolidated financial statements.  These unaudited condensed consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission, and therefore certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been omitted.  The results of operations for the three and ninesix months ended SeptemberJune 30, 20222023 are not necessarily indicative of the results to be achieved for the remainder of the year ending December 31, 2022,2023, or any other period.

Certain prior period data presented in the consolidated financial statements has been reclassified to conform to current year presentation.  The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto of the Company for the year ended December 31, 20212022 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022. Reference is made to the accounting policies of the Company described in the Notes to Financial Statements contained in the Annual Report on Form 10-K for the year ended December 31, 2021.

2022.

6

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company's significant accounting policies followed in the preparation of the unaudited consolidated financial statements are disclosed in Note 2 of the audited financial statements and notes for the year ended December 31, 2022 and are contained in the Company's Annual Report on Form 10-K. There have been no significant changes to the application of significant accounting policies since December 31, 2022, except for the following:

Accounting Standards Adopted in 2023

On January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASC 326). This standard replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, and some off-balance sheet credit exposures such as unfunded commitments to extend credit. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. In addition, CECL made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities if management does not intend to sell and does not believe that it is more likely than not, they will be required to sell. The Company adopted ASC 326 and all related subsequent amendments thereto effective January 1, 2023 using the modified retrospective approach for all financial assets measured at amortized cost and off-balance sheet credit exposures. The Company adopted ASC 326 using the prospective transition approach for debt securities for which other-than-temporary impairment had been recognized prior to January 1, 2023. As of December 31, 2022, the Company did not have any other-than-temporarily impaired investment securities. Therefore, upon adoption of ASC 326, the Company determined that an allowance for credit losses on available-for-sale securities was not deemed material.

Allowance for Credit Losses – Held-to-Maturity Securities

Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type. Accrued interest receivable on held-to-maturity debt securities totaled $2,000 at June 30, 2023 and was excluded from the estimate of credit losses. Management classifies the held-to-maturity portfolio into the following major security types: mortgage-backed securities or structured certificates of deposit. All the mortgage-backed securities held by the Company are issued by government-sponsored corporations. These securities are either explicitly or implicitly guaranteed by the U.S. government and have a long history of no credit losses. The structured certificates of deposit are all fully insured by the Federal Deposit Insurance Corporation as no one security exceeds the $250,000 insurance limit. As a result, no allowance for credit losses was recorded on held-to-maturity at June 30, 2023.

Allowance for Credit Losses – Available-for-Sale Securities

For available-for-sale securities, management evaluates all investments in an unrealized loss position on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security, the security is written down to fair value and the entire loss is recorded in earnings. If either of the above criteria is not met, the Company evaluates whether the decline in fair value is the result of credit losses or other factors. In making the assessment, the Company may consider various factors including the extent to which fair value is less than amortized cost, performance on any underlying collateral, downgrades in the ratings of the security by a rating agency, the failure of the issuer to make scheduled interest or principal payments, and adverse conditions specifically related to the security. If the assessment indicates that a credit loss exists, the present value of cash flows expected to be collected are compared to the amortized cost basis of the security and any excess is recorded as an allowance for credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any amount of unrealized loss that has

7

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

not been recorded through an allowance for credit loss is recognized in other comprehensive income. Changes in the allowance for credit loss are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance for credit loss when management believes an available for sale security is confirmed to be uncollectible or when either of the criteria regarding intent or requirement to sell is met. At June 30, 2023, there was no allowance for credit loss related to the available for sale portfolio. Accrued interest receivable on available for sale debt securities totaled $244,000 at June 30, 2023 and was excluded from the estimate of credit losses.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts and deferred fees and costs. Accrued interest receivable related to loans totaled $1.1 million at June 30, 2023 and was reported in accrued interest receivable on the consolidated balance sheets. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using methods that approximate a level yield without anticipating prepayments. The accrual of interest is generally discontinued when a loan becomes 90 days past due and is not well collateralized and in the process of collection, or when management believes, after considering economic and business conditions and collection efforts, that the principal or interest will not be collectible in the normal course of business. Past due status is based on contractual terms of the loan. A loan is considered to be past due when a scheduled payment has not been received 30 days after the contractual due date. All accrued interest is reversed against interest income when a loan is placed on nonaccrual status. Interest received on such loans is accounted for using the cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, there is a sustained period of repayment performance, and future payments are reasonably assured.

Allowance for Credit Losses - Loans

The allowance for credit losses is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Accrued interest receivable is included in the estimate of credit losses. The allowance for credit losses represents management’s estimate of lifetime credit losses inherent in loans as of the balance sheet date. The allowance for credit losses is estimated by management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. The Company has identified the following portfolio segments: multi-family, commercial business, nonresidential real estate, manufactured homes, home equity loans, and residential real estate, commercial lines of credit, direct automobile, indirect automobile, manufactured homes, other consumer, other consumer lines of credit, recreational vehicles, student loans, and residential construction loans. The Company utilizes the advanced vintage, probability of default, and weighted average remaining maturity methods considering relevant information about past events, current conditions, and reasonable and supportable forecasts. The Company utilizes a reasonable and supportable forecast period of 3 – 10 years depending upon the portfolio segment. Subsequent to this forecast period the Company reverts, on a straight-line basis over the applicable segment period, to historical loss experience to inform its estimate of losses for the remaining contractual life of each portfolio.

Additionally, the allowance for credit losses calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience. These qualitative adjustments may increase or reduce reserve levels and include adjustments for volume and loan mix, economics, and delinquency and loan quality. Loans that do not share risk characteristics are evaluated on an individual basis. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date adjusted for selling costs as appropriate.

8

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Allowance for Credit Losses – Unfunded Commitments

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded. The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for unfunded commitments in the Company’s income statements. The allowance for credit losses on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur as well as any third-party guarantees. The allowance for unfunded commitments is included in other liabilities on the Company’s consolidated balance sheets.

9

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

2. Accumulated Other Comprehensive Loss

The balances and changes in the components of accumulated other comprehensive loss, net of tax, are as follows:

Unrealized

  

Accumulated

Unrealized

  

Accumulated

Gains (Losses)

Defined

Other

Gains (Losses)

Defined

Other

Three Months Ended September 30,

on Securities

Benefit

Comprehensive

Three Months Ended June 30,

on Securities

Benefit

Comprehensive

(In thousands)

    

Available-for-Sale

    

Pension Plan

    

Loss

    

Available-for-Sale

    

Pension Plan

    

Loss

Balance, June 30, 2022

$

(4,043)

$

(1,181)

$

(5,224)

Balance, March 31, 2023

$

(3,577)

$

(2,530)

$

(6,107)

Other comprehensive loss before reclassifications

 

(137)

 

 

(137)

Amounts reclassified from AOCI to the statements of (loss) income

 

 

32

 

32

Net current-period other comprehensive loss

 

(137)

 

32

 

(105)

Balance, June 30, 2023

$

(3,714)

$

(2,498)

$

(6,212)

Balance, March 31, 2022

$

(1,559)

$

(1,181)

$

(2,740)

Other comprehensive loss before reclassifications

 

(1,041)

 

 

(1,041)

 

(2,484)

 

 

(2,484)

Net current-period other comprehensive loss

 

(1,041)

 

 

(1,041)

 

(2,484)

 

 

(2,484)

Balance, September 30, 2022

$

(5,084)

$

(1,181)

$

(6,265)

Balance, June 30, 2021

$

882

$

(2,093)

$

(1,211)

Other comprehensive loss before reclassifications

 

(276)

 

 

(276)

Amounts reclassified from AOCI to the income statement

 

(11)

 

23

 

12

Net current-period other comprehensive income (loss)

 

(287)

 

23

 

(264)

Balance, September 30, 2021

$

595

$

(2,070)

$

(1,475)

Balance, June 30, 2022

$

(4,043)

$

(1,181)

$

(5,224)

Unrealized

  

Accumulated

Unrealized

  

Accumulated

(Losses) Gains

Defined

Other

(Losses) Gains

Defined

Other

Nine Months Ended September 30,

on Securities

Benefit

Comprehensive

Six Months Ended June 30,

on Securities

Benefit

Comprehensive

(In thousands)

    

Available-for-Sale

    

Pension Plan

    

Loss

    

Available-for-Sale

    

Pension Plan

    

Loss

Balance, December 31, 2022

$

(3,905)

$

(2,562)

$

(6,467)

Other comprehensive gain before reclassifications

 

191

 

 

191

Amounts reclassified from AOCI to the statements of (loss) income

 

 

64

 

64

Net current-period other comprehensive income

 

191

 

64

 

255

Balance, June 30, 2023

$

(3,714)

$

(2,498)

$

(6,212)

Balance, December 31, 2021

$

215

$

(1,181)

$

(966)

$

215

$

(1,181)

$

(966)

Other comprehensive loss before reclassifications

 

(5,299)

 

 

(5,299)

 

(4,258)

 

 

(4,258)

Net current-period other comprehensive loss

 

(5,299)

 

 

(5,299)

 

(4,258)

 

 

(4,258)

Balance, September 30, 2022

$

(5,084)

$

(1,181)

$

(6,265)

Balance, December 31, 2020

$

723

$

(2,138)

$

(1,415)

Other comprehensive loss before reclassifications

 

(119)

 

 

(119)

Amounts reclassified from AOCI to the income statement

 

(9)

 

68

 

59

Net current-period other comprehensive income (loss)

 

(128)

 

68

 

(60)

Balance, September 30, 2021

$

595

$

(2,070)

$

(1,475)

Balance, June 30, 2022

$

(4,043)

$

(1,181)

$

(5,224)

710

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss:

  

  

Three months ended September 30, 

Nine months ended September 30, 

Affected Line Item in the

Three months ended June 30, 

Six months ended June 30, 

Affected Line Item in the

(In thousands)

    

2022

    

2021

    

2022

    

2021

    

Statement of Income

    

2023

    

2022

    

2023

    

2022

    

Statement of Income

Available-for-sale securities:

 

  

 

  

 

  

 

  

 

  

Realized gain on sale of securities

$

$

(13)

$

$

(11)

 

Net gain on sale of securities

Tax effect

 

 

2

 

 

2

 

Income tax expense

$

$

(11)

$

$

(9)

 

Net income

Defined benefit pension plan:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Retirement plan net losses recognized in net periodic pension cost

$

$

28

$

$

85

 

Compensation and benefits

$

41

$

$

81

$

 

Compensation and benefits

Tax effect

 

 

(5)

 

 

(17)

 

Income tax expense

 

(9)

 

 

(17)

 

 

Income tax (benefit) expense

$

$

23

$

$

68

 

Net income

$

32

$

$

64

$

 

Net (loss) income

811

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

3. Earnings Per Common Share

Basic earnings per common share is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is calculated in a manner similar to that of basic earnings per share except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares that would have been outstanding under the treasury stock method if all potentially dilutive common shares (such as stock options) issued became vested during the period. Based on the calculation, there was no impact on earnings per share as the stock options were considered anti-dilutive for the three and ninesix months ended SeptemberJune 30, 2022.2023. On March 28, 2022, the Board of Directors authorized a stock repurchase program to repurchase approximately 83,300 shares, or approximately 3.4%, of the Company’s outstanding common stock. On May 19, 2022, the 2022 Equity Incentive Plan (the “Plan”) which includes initial grants of restricted stock and stock options to outside directors, was approved by the Company’s stockholders.  On June 14, 2022, the Board of Directors of the Company approved restricted stock and stock option grants to senior management. An aggregate of 132,977 stock options and 53,191 shares of restricted stock were granted to directors and senior management during the period ended June 30, 2022.  The grants to directors and senior management vest over a five-year period in equal annual installments, with the first installment vesting on the first anniversary date of the grant and succeeding installments on each anniversary thereafter, through 2027. On July 25, 2022, the Board of Directors authorized a second stock repurchase program to acquire up to 87,000 shares, or approximately 3.6%, of the Company’s outstanding common stock at the conclusion of the first stock repurchase program. On May 31, 2023, the Board of Directors authorized a third stock repurchase program to acquire up to $1.0 million, or approximately 91,000 shares, or approximately 4.0%, of the Company’s outstanding common stock, based on the current trading price of the common stock. Unallocated common shares held by the ESOP are not included in the weighted-average number of common shares outstanding for purposes of calculating basic earnings per common share until they are committed to be released.

The following tables set forth the calculation of basic and diluted earnings per share.

Three Months Ended September 30, 

Three Months Ended June 30, 

(In thousands, except per share data)

2022

2021

2023

2022

Net income available to common stockholders

$

300

$

173

Net (loss) income available to common stockholders

$

(166)

$

345

Weighted-average common shares outstanding

2,299

2,348

2,238

2,333

Earnings per common share - basic and diluted

$

0.13

$

0.07

(Losses) Earnings per common share - basic and diluted

$

(0.07)

$

0.15

Nine Months Ended September 30, 

Six Months Ended June 30, 

(In thousands, except per share data)

2022

2021

2023

2022

Net income available to common stockholders

$

1,041

$

895

Net (loss) income available to common stockholders

$

(318)

$

741

Weighted-average common shares outstanding

2,327

2,352

2,239

2,342

Earnings per common share - basic and diluted

$

0.45

$

0.38

(Losses) Earnings per common share - basic and diluted

$

(0.14)

$

0.32

912

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

4.Securities

Investments in securities available-for-sale, held-to-maturity, and equity are summarized as follows:

At September 30, 2022

At June 30, 2023

Gross

Gross

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

Amortized

Unrealized

Unrealized

Fair

(in thousands)

    

Cost

    

Gains

    

Losses

    

Value

    

Cost

    

Gains

    

Losses

    

Value

Securities available-for-sale:

Residential mortgage-backed - US agency and Government Sponsored Enterprise ("GSE")

$

27

$

$

(1)

$

26

$

23

$

$

(1)

$

22

Corporate bonds

21,085

1

(3,441)

17,645

19,431

34

(2,930)

16,535

State and political subdivisions

 

16,951

 

 

(2,994)

 

13,957

 

16,326

 

 

(1,803)

 

14,523

Total securities available-for-sale

$

38,063

$

1

$

(6,436)

$

31,628

$

35,780

$

34

$

(4,734)

$

31,080

Securities held-to-maturity:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Structured certificates of deposit

$

650

$

$

(221)

$

429

Residential mortgage-backed - US agency and GSEs

$

971

$

1

$

(27)

$

945

866

(37)

829

Total securities held-to-maturity

$

971

$

1

$

(27)

$

945

$

1,516

$

$

(258)

$

1,258

Equity securities:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Large cap equity mutual fund

$

35

 

  

 

  

$

35

$

42

 

  

 

  

$

42

Other mutual funds

 

248

 

  

 

  

 

248

 

299

 

  

 

  

 

299

Total of equity securities

$

283

 

  

 

  

$

283

$

341

 

  

 

  

$

341

1013

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

At December 31, 2021

    

Gross

Gross

    

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

(in thousands)

    

Cost

    

Gains

    

Losses

    

Value

Securities available-for-sale:

 

  

 

  

 

  

 

  

Residential mortgage-backed - US agency and GSEs

$

33

$

1

$

(1)

$

33

Corporate bonds

18,589

266

(812)

18,043

State and political subdivisions

 

18,081

 

887

 

(69)

 

18,899

Total securities available-for-sale

$

36,703

$

1,154

$

(882)

$

36,975

Securities held-to-maturity:

 

  

 

  

 

  

 

  

Residential mortgage-backed - US agency and GSEs

$

1,128

$

25

$

(3)

$

1,150

Total securities held-to-maturity

$

1,128

$

25

$

(3)

$

1,150

Equity securities:

 

  

 

  

 

  

 

  

Large cap equity mutual fund

$

45

 

  

 

  

$

45

Other mutual funds

 

305

 

  

 

  

 

305

Total of equity securities

$

350

 

  

 

  

$

350

At December 31, 2022

    

Gross

Gross

    

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

(in thousands)

    

Cost

    

Gains

    

Losses

    

Value

Securities available-for-sale:

 

  

 

  

 

  

 

  

Residential mortgage-backed - US agency and GSEs

$

25

$

$

(1)

$

24

Corporate bonds

21,032

58

(2,896)

18,194

State and political subdivisions

 

16,935

 

2

 

(2,105)

 

14,832

Total securities available-for-sale

$

37,992

$

60

$

(5,002)

$

33,050

Securities held-to-maturity:

 

  

 

  

 

  

 

  

Structured certificates of deposit

$

650

$

$

(252)

$

398

Residential mortgage-backed - US agency and GSEs

937

1

(35)

903

Total securities held-to-maturity

$

1,587

$

1

$

(287)

$

1,301

Equity securities:

 

  

 

  

 

  

 

  

Large cap equity mutual fund

$

37

 

  

 

  

$

37

Other mutual funds

 

270

 

  

 

  

 

270

Total of equity securities

$

307

 

  

 

  

$

307

Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, is as follows:

At September 30, 2022

At June 30, 2023

12 Months or Less

More than 12 Months

Total

12 Months or Less

More than 12 Months

Total

Gross

Gross

Gross

Gross

Gross

Gross

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

(in thousands)

    

Value

    

Losses

    

Value

    

Losses

    

Value

    

Losses

    

Value

    

Losses

    

Value

    

Losses

    

Value

    

Losses

Securities available-for-sale:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Residential mortgage-backed - US agency and GSEs

$

$

$

20

$

(1)

$

20

$

(1)

$

$

$

18

$

(1)

$

18

$

(1)

Corporate bonds

13,136

(1,441)

3,422

(2,000)

16,558

(3,441)

4,134

(67)

11,319

(2,863)

15,453

(2,930)

State and political subdivisions

 

10,267

 

(2,114)

 

3,690

 

(880)

 

13,957

 

(2,994)

 

5,523

 

(282)

 

8,999

 

(1,521)

 

14,522

 

(1,803)

Total securities available-for-sale

$

23,403

$

(3,555)

$

7,132

$

(2,881)

$

30,535

$

(6,436)

$

9,657

$

(349)

$

20,336

$

(4,385)

$

29,993

$

(4,734)

Securities held-to-maturity:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Structured certificates of deposit

$

$

$

428

$

(221)

$

428

$

(221)

Residential mortgage-backed - US agency and GSEs

$

652

$

(19)

$

217

$

(8)

$

869

$

(27)

349

(12)

474

(25)

823

(37)

Total securities held-to-maturity

$

652

$

(19)

$

217

$

(8)

$

869

$

(27)

$

349

$

(12)

$

902

$

(246)

$

1,251

$

(258)

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Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

At December 31, 2021

At December 31, 2022

12 Months or Less

More than 12 Months

Total

12 Months or Less

More than 12 Months

Total

 

Gross

 

Gross

 

Gross

 

Gross

 

Gross

 

Gross

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

(in thousands)

 

Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

Securities available-for-sale:

    

  

    

  

    

  

    

  

    

  

    

  

    

  

    

  

    

  

    

  

    

  

    

  

Residential mortgage-backed - US agency and GSEs

$

$

$

23

$

(1)

$

23

$

(1)

$

$

$

19

$

(1)

$

19

$

(1)

Corporate bonds

9,925

(812)

9,925

(812)

7,028

(725)

8,105

(2,171)

15,133

(2,896)

State and political subdivisions

 

4,774

 

(69)

 

 

 

4,774

 

(69)

 

10,330

 

(1,421)

 

4,133

 

(684)

 

14,463

 

(2,105)

Total securities available-for-sale

$

14,699

$

(881)

$

23

$

(1)

$

14,722

$

(882)

$

17,358

$

(2,146)

$

12,257

$

(2,856)

$

29,615

$

(5,002)

Securities held-to-maturity:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Structured certificates of deposit

$

$

$

398

$

(252)

$

398

$

(252)

Residential mortgage-backed - US agency and GSEs

$

$

$

156

$

(3)

$

156

$

(3)

691

(26)

206

(9)

897

(35)

Total securities held-to-maturity

$

$

$

156

$

(3)

$

156

$

(3)

$

691

$

(26)

$

604

$

(261)

$

1,295

$

(287)

The Company conducts a formal review of investment securities on a quarterly basis for the presence of other-than-temporary impairment (“OTTI”).credit-related and non-credit-related losses. Management assesses whether OTTIa loss is present when the fair value of a debt security is less than its amortized cost basis at the statement of financial condition date. Under these circumstances, OTTI is considered toUnrealized losses on corporate bonds have occurred (1) if wenot been recognized into income because the issuer(s) bonds are of high credit quality (rated AA or higher), management does not intend to sell the security; (2) ifand it is “more likely than not” wethat management will not be required to sell the security beforesecurities prior to their anticipated recovery, of its amortized cost basis; or (3)and the presentdecline in fair value ofis largely due to changes in interest rates and other market conditions. The issuer(s) continue to make timely principal and interest payments on the bonds. The fair value is expected cash flows is not sufficient to recover the entire amortized cost basis.  Credit-related OTTI is recognized in earnings while non-credit-related OTTI on securities not expected to be sold is recognized in other comprehensive income.  Non-credit-related OTTI is based on other factors, including illiquidity. Presentation of OTTI is made in the consolidated statement of income on a gross basis, including both the portion recognized in earnings as well as the portion recorded in other comprehensive income.bond(s) approach maturity.

EighteenSeventeen government agency and government sponsored enterprise (“GSE”) residential mortgage-backed security holdings have an unrealized loss as of SeptemberJune 30, 2022.2023.  The securities were issued by the Federal National Mortgage Association (“FNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”), and the Government National Mortgage Association (“GNMA”).  The government-backed securities that have unrealized losses are immaterial, with each of these securities having value deficiencies of $5,600$8,500 or less.  

There are 116110 bond issues held by the BankCompany that have an unrealized loss as of SeptemberJune 30, 2022.2023.  The bonds are issued by well-established municipalities and corporate entities with semi-annual interest payments.  All interest payments have historically been made timely.  The value of the bonds held is closely correlated with long-term interest rates, and as interest rates increase, the bond values decrease.  Within this portfolio are seven bonds issued by corporate entities that have an aggregate loss of $2.4$2.2 million.  These bonds have variable rates and reprice based upon the spread between intermediate Treasury bond yields and long-term Treasury bond yields and will respond positively with the steepening of the Treasury yield curve. We anticipate full recovery of our investment over time and have no plans to sell the securities in the near term.  

Market values of the securities fluctuate in reaction to the uncertainty of the economy.  Principal and interest continue to be received on all securities as anticipated.  The Company has the ability and intent to hold the securities through maturity or recovery of its amortized cost basis.  With the government guarantees in place, management does not expect losses on these securities. No OTTI iscredit-related or non-credit-related losses are deemed present on these securities.

The Company monitors the credit quality of the debt securities held-to-maturity on a quarterly basis.  At June 30, 2023 the amortized cost of debt securities held-to-maturity totaled $1.5 million. Structured certificates of deposit totaled $650,000 and are fully insured by the Federal Deposit Insurance Corporation as no one security exceeds the $250,000

1215

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

insurance limit. Residential mortgage-backed securities totaled $866,000 and are backed by the full faith of the U.S. government. As a result, no credit-related or non-credit related losses are deemed present on these securities.

The following is a summary of the amortized cost and estimated fair values of debt securities at SeptemberJune 30, 2022,2023, by remaining term to contractual maturity other than mortgage-backed securities. Actual maturities may differ from these amounts because certain issuers have the right to call or redeem their obligations prior to contractual maturity. The contractual maturities of mortgage-backed securities generally exceed 20 years; however, the effective average life is expected to be substantially shorter due to anticipated repayments and prepayments.

At September 30, 2022

At June 30, 2023

Securities

Securities

Securities

Securities

 

Available-for-Sale

 

Held-to-Maturity

 

Available-for-Sale

 

Held-to-Maturity

 

Amortized

 

Estimated

 

Amortized

 

Estimated

 

Amortized

 

Estimated

 

Amortized

 

Estimated

(in thousands)

    

Cost

    

Fair Value

    

Cost

    

Fair Value

    

Cost

    

Fair Value

    

Cost

    

Fair Value

Due in one year or less

$

432

$

424

$

$

$

1,222

$

1,204

$

$

Due over one year through five years

 

3,156

 

2,940

 

 

 

3,239

 

3,045

 

 

Due over five through ten years

 

4,355

 

3,437

 

 

 

5,299

 

4,208

 

 

Due after ten years

 

30,093

 

24,801

 

 

 

25,997

 

22,601

 

 

 

38,036

 

31,602

 

 

 

35,757

 

31,058

 

 

Structured certificates of deposit

650

429

Residential mortgage-backed securities

 

27

 

26

 

971

 

945

 

23

 

22

 

866

 

829

Total

$

38,063

$

31,628

$

971

$

945

$

35,780

$

31,080

$

1,516

$

1,258

There were no gross realized gains or losses on sales and redemptions of available-for-sale securities for the three and ninesix months ended SeptemberJune 30, 2022. There were $13,000 in gross realized gains2023 and no losses on sales and redemptions of available-for-sale securities for the three months ended September 30, 2021. There were $13,000 in gross realized gains and $2,000 in gross realized losses on sales and redemptions of available-for-sale securities for the nine months ended September 30, 2021.2022. Gains and losses on the sales of securities are recognized in income when sold, using the specific identification method, on a trade date basis.

Securities with a fair value of $9,804,734$12,431,000 and $8,775,255$10,045,000 were pledged to collateralize certain deposit arrangements at SeptemberJune 30, 20222023 and December 31, 20212022, respectively.

1316

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

5.Loans Receivable

Major classifications of loans are as follows:

At September 30, 

At December 31,

At June 30, 

At December 31, 

(In thousands)

    

2022

    

2021

    

2023

    

2022

 

 

Originated Loans:

 

  

 

  

 

  

 

  

Residential mortgages:

 

  

 

  

 

  

 

  

One- to four-family

$

120,195

$

102,766

$

141,372

$

129,448

Construction

 

184

 

 

 

387

 

120,379

 

102,766

 

141,372

 

129,835

Commercial loans:

 

  

 

  

 

  

 

  

Real estate - nonresidential

 

15,542

 

19,734

 

13,642

 

15,262

Multi-family

 

446

 

456

 

844

 

854

Commercial business

 

9,709

 

12,366

 

15,279

 

11,594

 

25,697

 

32,556

 

29,765

 

27,710

Consumer:

 

  

 

  

 

  

 

  

Home equity and junior liens

 

10,653

 

8,840

 

11,474

 

11,027

Manufactured homes

 

49,887

 

47,717

 

51,684

 

50,989

Automobile

 

23,843

 

22,666

 

23,748

 

24,339

Student

 

1,921

 

2,096

 

1,694

 

1,803

Recreational vehicle

27,013

29,463

25,010

26,909

Other consumer

 

7,419

 

5,408

 

7,885

 

7,125

 

120,736

 

116,190

 

121,495

 

122,192

Total originated loans

 

266,812

 

251,512

 

292,632

 

279,737

Net deferred loan costs

 

16,052

 

15,650

 

15,891

 

16,274

Less allowance for loan losses

 

(2,326)

 

(1,841)

 

(2,771)

 

(2,497)

Net originated loans

$

280,538

$

265,321

$

305,752

$

293,514

1417

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

At September 30, 

At December 31,

At June 30, 

At December 31, 

(In thousands)

    

2022

    

2021

    

2023

    

2022

Acquired Loans:

  

  

  

  

Residential mortgages:

 

  

 

  

 

  

 

  

One- to four-family

$

9,038

$

10,295

$

8,084

$

8,553

 

9,038

 

10,295

 

8,084

 

8,553

Commercial loans:

 

  

 

  

 

  

 

  

Real estate - nonresidential

 

1,621

 

1,744

 

1,355

 

1,419

Commercial business

 

111

 

162

 

61

 

83

 

1,732

 

1,906

 

1,416

 

1,502

Consumer:

 

  

 

  

 

  

 

  

Home equity and junior liens

 

581

 

861

 

408

 

535

Other consumer

 

52

 

84

 

39

 

47

 

633

 

945

 

447

 

582

Total acquired loans

 

11,403

 

13,146

 

9,947

 

10,637

Net deferred loan costs

 

(55)

 

(60)

 

(51)

 

(53)

Fair value credit and yield adjustment

 

(235)

 

(287)

 

(184)

 

(218)

Net acquired loans

$

11,113

$

12,799

$

9,712

$

10,366

At September 30, 

At December 31,

At June 30, 

At December 31, 

(In thousands)

    

2022

    

2021

    

2023

    

2022

Total Loans:

  

  

Residential mortgages:

  

  

  

  

One- to four-family

$

129,233

$

113,061

$

149,456

$

138,001

Construction

 

184

 

 

 

387

 

129,417

 

113,061

 

149,456

 

138,388

Commercial loans:

 

  

 

  

 

  

 

  

Real estate - nonresidential

 

17,163

 

21,478

 

14,997

 

16,681

Multi-family

 

446

 

456

 

844

 

854

Commercial business

 

9,820

 

12,528

 

15,340

 

11,677

 

27,429

 

34,462

 

31,181

 

29,212

Consumer:

 

  

 

  

 

  

 

  

Home equity and junior liens

 

11,234

 

9,701

 

11,882

 

11,562

Manufactured homes

 

49,887

 

47,717

 

51,684

 

50,989

Automobile

 

23,843

 

22,666

 

23,748

 

24,339

Student

 

1,921

 

2,096

 

1,694

 

1,803

Recreational vehicle

27,013

29,463

25,010

26,909

Other consumer

 

7,471

 

5,492

 

7,924

 

7,172

 

121,369

 

117,135

 

121,942

 

122,774

Total Loans

 

278,215

 

264,658

 

302,579

 

290,374

Net deferred loan costs

 

15,997

 

15,590

 

15,840

 

16,221

Fair value credit and yield adjustment

 

(235)

 

(287)

 

(184)

 

(218)

Less allowance for loan losses

 

(2,326)

 

(1,841)

 

(2,771)

 

(2,497)

Loans receivable, net

$

291,651

$

278,120

$

315,464

$

303,880

1518

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company grantsoriginates residential mortgage, commercial, and consumer loans to customers, principally located in the Finger Lakes Region of New York State and extending north to Orleans County. Although the Company has a diversified loan portfolio, a substantial portion of its debtors’ abilities to honor their contracts is dependent upon the counties’ employment and economic conditions. To further diversify the loan portfolio, the Company also purchases loans that have been originated outside of the region. High quality automobile loans, originated in the Northeastern United States, are purchased regularly from a Connecticut based company. In 2019, the Company also began to purchase modular home loans originated throughout the United States, the seller of which then services the loans for the Company. In 2020, the Company began to purchase automobile and recreational vehicle loans originated in New York State. In 2022, the Company began to purchase one- to four-family, owner occupiedowner-occupied residential real estate loans from a third-party originator. These loans are serviced by the Company and primarily located in Cayuga, Ontario, Orleans, and Seneca counties.

Loan Origination / Risk Management

The Company has lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by frequently providing management with reports related to loan production, loan quality, loan delinquencies, non-performing, and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions.

The loan portfolio is segregated into risk rating categories based on the borrower’s overall financial condition, repayment sources, guarantors, and value of collateral, if appropriate. The risk ratings are evaluated at least annually for commercial loans. Risk ratings are also reviewed when credit deficiencies arise, such as delinquent loan payments, for commercial, residential mortgage, or consumer loans. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful, and loss. Loans classified as loss are considered uncollectible and are charged to the allowance for loan loss. Loans not classified are rated as pass.

The following table presents the classes of the loan portfolio summarized by the credit quality indicator:

At June 30, 2023

Special

(In thousands)

    

Pass

    

Mention

    

Substandard

    

Doubtful

    

Total

Originated Loans:

 

  

 

  

 

  

 

  

 

  

Residential mortgages:

 

  

 

  

 

  

 

  

 

  

One- to four-family

$

138,466

$

1,077

$

1,829

$

$

141,372

 

138,466

 

1,077

 

1,829

 

 

141,372

Commercial loans:

 

  

 

  

 

 

  

 

  

Real estate - nonresidential

 

11,672

 

1,663

 

307

 

 

13,642

Multi-family

 

844

 

 

 

 

844

Commercial business

 

12,351

 

2,389

 

539

 

 

15,279

 

24,867

 

4,052

 

846

 

 

29,765

Consumer:

 

  

 

  

 

  

 

  

 

  

Home equity and junior liens

 

11,321

 

49

 

104

 

 

11,474

Manufactured homes

 

50,828

 

452

 

404

 

 

51,684

Automobile

 

23,659

 

31

 

58

 

 

23,748

Student

 

1,636

 

 

58

 

 

1,694

Recreational vehicle

24,379

432

199

25,010

Other consumer

 

7,855

 

30

 

 

 

7,885

 

119,678

 

994

 

823

 

 

121,495

Total originated loans

$

283,011

$

6,123

$

3,498

$

$

292,632

1619

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table presents the classes of the loan portfolio summarized by the pass rating and the classified ratings of special mention, substandard, and doubtful within the Company’s internal risk rating system:

At June 30, 2023

Special

(In thousands)

    

Pass

    

Mention

    

Substandard

    

Doubtful

    

Total

Acquired Loans:

 

  

 

  

 

  

 

  

 

  

Residential mortgages:

 

  

 

 

  

 

  

 

  

One- to four-family

$

7,872

$

10

$

202

$

$

8,084

 

7,872

 

10

 

202

 

 

8,084

Commercial loans:

 

  

 

  

 

  

 

  

 

  

Real estate - nonresidential

 

1,355

 

 

 

 

1,355

Commercial business

 

61

 

 

 

 

61

 

1,416

 

 

 

 

1,416

Consumer:

 

  

 

  

 

  

 

  

 

  

Home equity and junior liens

 

374

 

 

34

 

 

408

Other consumer

 

31

 

8

 

 

 

39

 

405

 

8

 

34

 

 

447

Total acquired loans

$

9,693

$

18

$

236

$

$

9,947

At September 30, 2022

At June 30, 2023

Special

Special

(In thousands)

    

Pass

    

Mention

    

Substandard

    

Doubtful

    

Total

    

Pass

    

Mention

    

Substandard

    

Doubtful

    

Total

Originated Loans:

 

  

 

  

 

  

 

  

 

  

Total Loans:

 

  

 

  

 

  

 

  

 

  

Residential mortgages:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

One- to four-family

$

116,608

$

1,263

$

2,324

$

$

120,195

$

146,338

$

1,087

$

2,031

$

$

149,456

Construction

 

184

 

 

 

 

184

 

116,792

 

1,263

 

2,324

 

 

120,379

 

146,338

 

1,087

 

2,031

 

 

149,456

Commercial loans:

 

  

 

  

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Real estate - nonresidential

 

13,131

 

1,995

 

416

 

 

15,542

 

13,027

 

1,663

 

307

 

 

14,997

Multi-family

 

446

 

 

 

 

446

 

844

 

 

 

 

844

Commercial business

 

6,441

 

3,106

 

162

 

 

9,709

 

12,412

 

2,389

 

539

 

 

15,340

 

20,018

 

5,101

 

578

 

 

25,697

 

26,283

 

4,052

 

846

 

 

31,181

Consumer:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Home equity and junior liens

 

10,464

 

19

 

170

 

 

10,653

 

11,695

 

49

 

138

 

 

11,882

Manufactured homes

 

49,574

 

168

 

145

 

 

49,887

 

50,828

 

452

 

404

 

 

51,684

Automobile

 

23,704

 

107

 

32

 

 

23,843

 

23,659

 

31

 

58

 

 

23,748

Student

 

1,857

 

2

 

62

 

 

1,921

 

1,636

 

 

58

 

 

1,694

Recreational vehicle

26,844

169

27,013

24,379

432

199

25,010

Other consumer

 

7,342

 

77

 

 

 

7,419

 

7,886

 

38

 

 

 

7,924

 

119,785

 

542

 

409

 

 

120,736

 

120,083

 

1,002

 

857

 

 

121,942

Total originated loans

$

256,595

$

6,906

$

3,311

$

$

266,812

Total loans

$

292,704

$

6,141

$

3,734

$

$

302,579

1720

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

At September 30, 2022

At December 31, 2022

Special

Special

(In thousands)

    

Pass

    

Mention

    

Substandard

    

Doubtful

    

Total

    

Pass

    

Mention

    

Substandard

    

Doubtful

    

Total

Acquired Loans:

 

  

 

  

 

  

 

  

 

  

Originated Loans:

 

  

 

  

 

  

 

  

 

  

Residential mortgages:

 

  

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

One- to four-family

$

8,715

$

82

$

241

$

$

9,038

$

125,949

$

1,066

$

2,433

$

$

129,448

Construction

 

387

 

 

 

 

387

 

8,715

 

82

 

241

 

 

9,038

 

126,336

 

1,066

 

2,433

 

 

129,835

Commercial loans:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

  

 

  

Real estate - nonresidential

 

1,621

 

 

 

 

1,621

 

12,870

 

1,691

 

701

 

 

15,262

Multi-family

 

854

 

 

 

 

854

Commercial business

 

111

 

 

 

 

111

 

8,349

 

2,529

 

716

 

 

11,594

 

1,732

 

 

 

 

1,732

 

22,073

 

4,220

 

1,417

 

 

27,710

Consumer:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Home equity and junior liens

 

546

 

 

35

 

 

581

 

10,891

 

14

 

122

 

 

11,027

Manufactured homes

 

50,297

 

324

 

368

 

 

50,989

Automobile

 

24,188

 

130

 

21

 

 

24,339

Student

 

1,735

 

 

68

 

 

1,803

Recreational vehicle

26,445

329

135

26,909

Other consumer

 

52

 

 

 

 

52

 

7,004

 

121

 

 

 

7,125

 

598

 

 

35

 

 

633

 

120,560

 

918

 

714

 

 

122,192

Total acquired loans

$

11,045

$

82

$

276

$

$

11,403

Total originated loans

$

268,969

$

6,204

$

4,564

$

$

279,737

At September 30, 2022

At December 31, 2022

Special

Special

(In thousands)

    

Pass

    

Mention

    

Substandard

    

Doubtful

    

Total

    

Pass

    

Mention

    

Substandard

    

Doubtful

    

Total

Total Loans:

 

  

 

  

 

  

 

  

 

  

Acquired Loans:

 

  

 

  

 

  

 

  

 

  

Residential mortgages:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

One- to four-family

$

125,323

$

1,345

$

2,565

$

$

129,233

$

8,335

$

45

$

173

$

$

8,553

Construction

 

184

 

 

 

 

184

 

125,507

 

1,345

 

2,565

 

 

129,417

 

8,335

 

45

 

173

 

 

8,553

Commercial loans:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Real estate - nonresidential

 

14,752

 

1,995

 

416

 

 

17,163

 

1,419

 

 

 

 

1,419

Multi-family

 

446

 

 

 

 

446

Commercial business

 

6,552

 

3,106

 

162

 

 

9,820

 

83

 

 

 

 

83

 

21,750

 

5,101

 

578

 

 

27,429

 

1,502

 

 

 

 

1,502

Consumer:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Home equity and junior liens

 

11,010

 

19

 

205

 

 

11,234

 

485

 

 

50

 

 

535

Manufactured homes

 

49,574

 

168

 

145

 

 

49,887

Automobile

 

23,704

 

107

 

32

 

 

23,843

Student

 

1,857

 

2

 

62

 

 

1,921

Recreational vehicle

26,844

169

27,013

Other consumer

 

7,394

 

77

 

 

 

7,471

 

47

 

 

 

 

47

 

120,383

 

542

 

444

 

 

121,369

 

532

 

 

50

 

 

582

Total loans

$

267,640

$

6,988

$

3,587

$

$

278,215

Total acquired loans

$

10,369

$

45

$

223

$

$

10,637

1821

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

At December 31, 2021

Special

(In thousands)

    

Pass

    

Mention

    

Substandard

    

Doubtful

    

Total

Originated Loans:

 

  

 

  

 

  

 

  

 

  

Residential mortgages:

 

  

 

  

 

  

 

  

 

  

One- to four-family

$

99,294

$

1,110

$

2,362

$

$

102,766

 

99,294

 

1,110

 

2,362

 

 

102,766

Commercial loans:

 

  

 

  

 

 

  

 

  

Real estate - nonresidential

 

14,464

 

3,045

 

2,225

 

 

19,734

Multi-family

 

456

 

 

 

 

456

Commercial business

 

10,256

 

1,112

 

998

 

 

12,366

 

25,176

 

4,157

 

3,223

 

 

32,556

Consumer:

 

  

 

  

 

  

 

  

 

  

Home equity and junior liens

 

8,753

 

41

 

46

 

 

8,840

Manufactured homes

 

47,717

 

 

 

 

47,717

Automobile

 

22,558

 

64

 

44

 

 

22,666

Student

 

2,096

 

 

 

 

2,096

Recreational vehicle

29,424

39

29,463

Other consumer

 

5,376

 

32

 

 

 

5,408

 

115,924

 

176

 

90

 

 

116,190

Total originated loans

$

240,394

$

5,443

$

5,675

$

$

251,512

At December 31, 2021

Special

(In thousands)

    

Pass

    

Mention

    

Substandard

    

Doubtful

    

Total

Acquired Loans:

 

  

 

  

 

  

 

  

 

  

Residential mortgages:

 

  

 

  

 

  

 

  

 

  

One- to four-family

$

10,038

$

42

$

215

$

$

10,295

 

10,038

 

42

 

215

 

 

10,295

Commercial loans:

 

  

 

  

 

  

 

  

 

  

Real estate - nonresidential

 

1,744

 

 

 

 

1,744

Commercial business

 

162

 

 

 

 

162

 

1,906

 

 

 

 

1,906

Consumer:

 

  

 

  

 

  

 

  

 

  

Home equity and junior liens

 

841

 

 

20

 

 

861

Other consumer

 

84

 

 

 

 

84

 

925

 

 

20

 

 

945

Total acquired loans

$

12,869

$

42

$

235

$

$

13,146

19

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

At December 31, 2021

At December 31, 2022

Special

Special

(In thousands)

    

Pass

    

Mention

    

Substandard

    

Doubtful

    

Total

    

Pass

    

Mention

    

Substandard

    

Doubtful

    

Total

Total Loans:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Residential mortgages:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

One- to four-family

$

109,332

$

1,152

$

2,577

$

$

113,061

$

134,284

$

1,111

$

2,606

$

$

138,001

Construction

 

387

 

 

 

 

387

 

109,332

 

1,152

 

2,577

 

 

113,061

 

134,671

 

1,111

 

2,606

 

 

138,388

Commercial loans:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Real estate - nonresidential

 

16,208

 

3,045

 

2,225

 

 

21,478

 

14,289

 

1,691

 

701

 

 

16,681

Multi-family

 

456

 

 

 

 

456

 

854

 

 

 

 

854

Commercial business

 

10,418

 

1,112

 

998

 

 

12,528

 

8,432

 

2,529

 

716

 

 

11,677

 

27,082

 

4,157

 

3,223

 

 

34,462

 

23,575

 

4,220

 

1,417

 

 

29,212

Consumer:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Home equity and junior liens

 

9,594

 

41

 

66

 

 

9,701

 

11,376

 

14

 

172

 

 

11,562

Manufactured homes

 

47,717

 

 

 

 

47,717

 

50,297

 

324

 

368

 

 

50,989

Automobile

 

22,558

 

64

 

44

 

 

22,666

 

24,188

 

130

 

21

 

 

24,339

Student

 

2,096

 

 

 

 

2,096

 

1,735

 

 

68

 

 

1,803

Recreational vehicle

29,424

39

29,463

26,445

329

135

26,909

Other consumer

 

5,460

 

32

 

 

 

5,492

 

7,051

 

121

 

 

 

7,172

 

116,849

 

176

 

110

 

 

117,135

 

121,092

 

918

 

764

 

 

122,774

Total loans

$

253,263

$

5,485

$

5,910

$

$

264,658

$

279,338

$

6,249

$

4,787

$

$

290,374

Management has reviewed its loan portfolio and determined that, to the best of its knowledge, little or no exposure exists to sub-prime or other high-risk residential mortgages. The Company is not in the practice of originating these types of loans.

Non-accrual and Past Due Loans

Loans are considered past due if the required principal and interest payments have not been received within thirty days of the payment due date.

For all classes of loans receivable, the accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan may be currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured.  When a loan is placed on non-accrual status, unpaid interest is reversed and charged to interest income.  Interest received on non-accrual loans, including impaired loans, generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal.  Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt.  Non-accrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after modification.

When future collectability of the recorded loan balance is expected, interest income may be recognized on a cash basis.  In the case where a non-accrual loan had been partially charged off, recognition of interest on a cash basis is limited to that which would have been recognized on the recorded loan balance at the contractual interest rate.  Cash interest receipts in excess of that amount are recorded as recoveries to allowance for loan losses until prior charge-offs have been fully recovered.    

2022

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

An age analysis of past due loans, segregated by class of loans, as are as follows:

At June 30, 2023

90 Days

 

30-59 Days

 

60-89 Days

 

or More

 

Total

 

Total Loans

Total Loans

(In thousands)

    

Past Due

    

Past Due

    

Past Due

    

Past Due

    

Current

    

Receivable

Originated Loans:

 

  

 

  

 

  

 

  

 

  

 

  

Residential mortgage loans:

 

  

 

  

 

  

 

  

 

  

 

  

One- to four-family

$

3,597

$

1,420

$

1,829

$

6,846

$

134,526

$

141,372

 

3,597

 

1,420

 

1,829

 

6,846

 

134,526

 

141,372

Commercial loans:

 

  

 

  

 

  

 

  

 

  

 

  

Real estate - nonresidential

 

84

 

 

29

 

113

 

13,529

 

13,642

Multi-family

 

437

 

 

 

437

 

407

 

844

Commercial business

 

536

 

 

41

 

577

 

14,702

 

15,279

 

1,057

 

 

70

 

1,127

 

28,638

 

29,765

Consumer loans:

 

  

 

  

 

  

 

  

 

  

 

  

Home equity and junior liens

 

102

 

14

 

104

 

220

 

11,254

 

11,474

Manufactured homes

 

819

 

452

 

404

 

1,675

 

50,009

 

51,684

Automobile

 

343

 

31

 

58

 

432

 

23,316

 

23,748

Student

 

 

��

 

58

 

58

 

1,636

 

1,694

Recreational vehicle

780

432

199

1,411

23,599

25,010

Other consumer

 

98

 

29

 

 

127

 

7,758

 

7,885

 

2,142

 

958

 

823

 

3,923

 

117,572

 

121,495

Total originated loans

$

6,796

$

2,378

$

2,722

$

11,896

$

280,736

$

292,632

23

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

An age analysis of past due loans, segregated by class of loans, as are as follows:

At June 30, 2023

90 Days

30-59 Days

60-89 Days

or More

Total

Total Loans

Total Loans

(In thousands)

    

Past Due

    

Past Due

    

Past Due

    

Past Due

    

Current

    

Receivable

Acquired Loans:

 

  

 

  

 

  

 

  

 

  

 

  

Residential mortgage loans:

 

  

 

  

 

  

 

  

 

 

  

One- to four-family

$

215

$

16

$

202

$

433

$

7,651

$

8,084

 

215

 

16

 

202

 

433

 

7,651

 

8,084

Commercial loans:

 

  

 

  

 

  

 

  

 

  

 

  

Real estate - nonresidential

 

 

 

 

 

1,355

 

1,355

Commercial business

 

 

 

 

 

61

 

61

 

 

 

 

 

1,416

 

1,416

Consumer loans:

 

  

 

  

 

  

 

  

 

  

 

  

Home equity and junior liens

 

 

 

34

 

34

 

374

 

408

Other consumer

 

 

8

 

 

8

 

31

 

39

 

 

8

 

34

 

42

 

405

 

447

Total acquired loans

$

215

$

24

$

236

$

475

$

9,472

$

9,947

At September 30, 2022

At June 30, 2023

90 Days

90 Days

 

30-59 Days

 

60-89 Days

 

or More

 

Total

 

Total Loans

Total Loans

30-59 Days

60-89 Days

or More

Total

Total Loans

Total Loans

(In thousands)

    

Past Due

    

Past Due

    

Past Due

    

Past Due

    

Current

    

Receivable

    

Past Due

    

Past Due

    

Past Due

    

Past Due

    

Current

    

Receivable

Originated Loans:

 

  

 

  

 

  

 

  

 

  

 

  

Total Loans:

 

  

 

  

 

  

 

  

 

  

 

  

Residential mortgage loans:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

One- to four-family

$

3,238

$

692

$

2,324

$

6,254

$

113,941

$

120,195

$

3,812

$

1,436

$

2,031

$

7,279

$

142,177

$

149,456

Construction

 

 

 

 

 

184

 

184

 

3,238

 

692

 

2,324

 

6,254

 

114,125

 

120,379

 

3,812

 

1,436

 

2,031

 

7,279

 

142,177

 

149,456

Commercial loans:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Real estate - nonresidential

 

 

 

416

 

416

 

15,126

 

15,542

 

84

 

 

29

 

113

 

14,884

 

14,997

Multi-family

 

 

 

 

 

446

 

446

 

437

 

 

 

437

 

407

 

844

Commercial business

 

143

 

 

163

 

306

 

9,403

 

9,709

 

536

 

 

41

 

577

 

14,763

 

15,340

 

143

 

 

579

 

722

 

24,975

 

25,697

 

1,057

 

 

70

 

1,127

 

30,054

 

31,181

Consumer loans:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Home equity and junior liens

 

85

 

35

 

170

 

290

 

10,363

 

10,653

 

102

 

14

 

138

 

254

 

11,628

 

11,882

Manufactured homes

 

783

 

168

 

145

 

1,096

 

48,791

 

49,887

 

819

 

452

 

404

 

1,675

 

50,009

 

51,684

Automobile

 

267

 

107

 

32

 

406

 

23,437

 

23,843

 

343

 

31

 

58

 

432

 

23,316

 

23,748

Student

 

7

 

2

 

62

 

71

 

1,850

 

1,921

 

 

 

58

 

58

 

1,636

 

1,694

Recreational vehicle

916

169

1,085

25,928

27,013

780

432

199

1,411

23,599

25,010

Other consumer

 

103

 

77

 

 

180

 

7,239

 

7,419

 

98

 

37

 

 

135

 

7,789

 

7,924

 

2,161

 

558

 

409

 

3,128

 

117,608

 

120,736

 

2,142

 

966

 

857

 

3,965

 

117,977

 

121,942

Total originated loans

$

5,542

$

1,250

$

3,312

$

10,104

$

256,708

$

266,812

Total loans

$

7,011

$

2,402

$

2,958

$

12,371

$

290,208

$

302,579

2124

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

At September 30, 2022

At December 31, 2022

90 Days

90 Days

30-59 Days

60-89 Days

or More

Total

Total Loans

Total Loans

 

30-59 Days

 

60-89 Days

 

or More

 

Total

 

Total Loans

Total Loans

(In thousands)

    

Past Due

    

Past Due

    

Past Due

    

Past Due

    

Current

    

Receivable

 

Past Due

 

Past Due

 

Past Due

 

Past Due

 

Current

 

Receivable

Acquired Loans:

 

  

 

  

 

  

 

  

 

  

 

  

Originated Loans:

    

  

    

  

    

  

    

  

    

  

    

  

Residential mortgage loans:

 

  

 

  

 

  

 

  

 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

One- to four-family

$

177

$

46

$

241

$

464

$

8,574

$

9,038

$

2,967

$

1,158

$

2,432

$

6,557

$

122,891

$

129,448

Construction

 

 

 

 

 

387

 

387

 

177

 

46

 

241

 

464

 

8,574

 

9,038

 

2,967

 

1,158

 

2,432

 

6,557

 

123,278

 

129,835

Commercial loans:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Real estate - nonresidential

 

 

 

 

 

1,621

 

1,621

 

254

 

 

416

 

670

 

14,592

 

15,262

Multi-family

 

 

 

 

 

854

 

854

Commercial business

 

 

 

 

 

111

 

111

 

129

 

 

158

 

287

 

11,307

 

11,594

 

 

 

 

 

1,732

 

1,732

 

383

 

 

574

 

957

 

26,753

 

27,710

Consumer loans:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Home equity and junior liens

 

15

 

 

35

 

50

 

531

 

581

 

193

 

85

 

122

 

400

 

10,627

 

11,027

Manufactured homes

 

696

 

324

 

368

 

1,388

 

49,601

 

50,989

Automobile

 

402

 

130

 

21

 

553

 

23,786

 

24,339

Student

 

 

 

68

 

68

 

1,735

 

1,803

Recreational vehicle

1,005

329

135

1,469

25,440

26,909

Other consumer

 

 

 

 

 

52

 

52

 

95

 

122

 

 

217

 

6,908

 

7,125

 

15

 

 

35

 

50

 

583

 

633

 

2,391

 

990

 

714

 

4,095

 

118,097

 

122,192

Total acquired loans

$

192

$

46

$

276

$

514

$

10,889

$

11,403

Total originated loans

$

5,741

$

2,148

$

3,720

$

11,609

$

268,128

$

279,737

At September 30, 2022

At December 31, 2022

90 Days

90 Days

30-59 Days

60-89 Days

or More

Total

Total Loans

Total Loans

30-59 Days

60-89 Days

or More

Total

Total Loans

Total Loans

(In thousands)

    

Past Due

    

Past Due

    

Past Due

    

Past Due

    

Current

    

Receivable

    

Past Due

    

Past Due

    

Past Due

    

Past Due

    

Current

    

Receivable

Total Loans:

 

  

 

  

 

  

 

  

 

  

 

  

Acquired Loans:

Residential mortgage loans:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

One- to four-family

$

3,415

$

738

$

2,565

$

6,718

$

122,515

$

129,233

$

268

$

103

$

173

$

544

$

8,009

$

8,553

Construction

 

 

 

 

 

184

 

184

 

3,415

 

738

 

2,565

 

6,718

 

122,699

 

129,417

 

268

 

103

 

173

 

544

 

8,009

 

8,553

Commercial loans:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Real estate - nonresidential

 

 

 

416

 

416

 

16,747

 

17,163

 

 

 

 

 

1,419

 

1,419

Multi-family

 

 

 

 

 

446

 

446

Commercial business

 

143

 

 

163

 

306

 

9,514

 

9,820

 

 

 

 

 

83

 

83

 

 

 

 

 

1,502

 

1,502

 

143

 

 

579

 

722

 

26,707

 

27,429

 

  

 

  

 

  

 

  

 

  

 

  

Consumer loans:

 

  

 

  

 

  

 

  

 

  

 

  

 

 

 

 

 

 

Home equity and junior liens

 

100

 

35

 

205

 

340

 

10,894

 

11,234

 

 

 

50

 

50

 

485

 

535

Manufactured homes

 

783

 

168

 

145

 

1,096

 

48,791

 

49,887

Automobile

 

267

 

107

 

32

 

406

 

23,437

 

23,843

Student

 

7

 

2

 

62

 

71

 

1,850

 

1,921

Recreational vehicle

916

169

1,085

25,928

27,013

Other consumer

 

103

 

77

 

 

180

 

7,291

 

7,471

 

8

 

 

 

8

 

39

 

47

 

2,176

 

558

 

444

 

3,178

 

118,191

 

121,369

8

50

58

524

582

Total loans

$

5,734

$

1,296

$

3,588

$

10,618

$

267,597

$

278,215

Total acquired loans

$

276

$

103

$

223

$

602

$

10,035

$

10,637

2225

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

At December 31, 2021

At December 31, 2022

90 Days

90 Days

 

30-59 Days

 

60-89 Days

 

or More

 

Total

 

Total Loans

Total Loans

30-59 Days

60-89 Days

or More

Total

Total Loans

Total Loans

(In thousands)

 

Past Due

 

Past Due

 

Past Due

 

Past Due

 

Current

 

Receivable

    

Past Due

    

Past Due

    

Past Due

    

Past Due

    

Current

    

Receivable

Originated Loans:

    

  

    

  

    

  

    

  

    

  

    

  

Total Loans:

 

  

 

  

 

  

 

  

 

  

 

  

Residential mortgage loans:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

One- to four-family

$

3,137

$

757

$

2,362

$

6,256

$

96,510

$

102,766

$

3,235

$

1,261

$

2,605

$

7,101

$

130,900

$

138,001

Construction

 

 

 

 

 

387

 

387

 

3,137

 

757

 

2,362

 

6,256

 

96,510

 

102,766

 

3,235

 

1,261

 

2,605

 

7,101

 

131,287

 

138,388

Commercial loans:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Real estate - nonresidential

 

389

 

 

416

 

805

 

18,929

 

19,734

 

254

 

 

416

 

670

 

16,011

 

16,681

Multi-family

 

 

 

 

 

456

 

456

 

 

 

 

 

854

 

854

Commercial business

 

 

8

 

161

 

169

 

12,197

 

12,366

 

129

 

 

158

 

287

 

11,390

 

11,677

 

389

 

8

 

577

 

974

 

31,582

 

32,556

 

383

 

 

574

 

957

 

28,255

 

29,212

Consumer loans:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Home equity and junior liens

 

149

 

31

 

46

 

226

 

8,614

 

8,840

 

193

 

85

 

172

 

450

 

11,112

 

11,562

Manufactured homes

 

922

 

615

 

 

1,537

 

46,180

 

47,717

 

696

 

324

 

368

 

1,388

 

49,601

 

50,989

Automobile

 

168

 

64

 

44

 

276

 

22,390

 

22,666

 

402

 

130

 

21

 

553

 

23,786

 

24,339

Student

 

95

 

 

 

95

 

2,001

 

2,096

 

 

 

68

 

68

 

1,735

 

1,803

Recreational vehicle

605

39

644

28,819

29,463

1,005

329

135

1,469

25,440

26,909

Other consumer

 

75

 

32

 

 

107

 

5,301

 

5,408

 

103

 

122

 

 

225

 

6,947

 

7,172

 

2,014

 

781

 

90

 

2,885

 

113,305

 

116,190

 

2,399

 

990

 

764

 

4,153

 

118,621

 

122,774

Total originated loans

$

5,540

$

1,546

$

3,029

$

10,115

$

241,397

$

251,512

Total loans

$

6,017

$

2,251

$

3,943

$

12,211

$

278,163

$

290,374

At December 31, 2021

90 Days

30-59 Days

60-89 Days

or More

Total

Total Loans

Total Loans

(In thousands)

    

Past Due

    

Past Due

    

Past Due

    

Past Due

    

Current

    

Receivable

Acquired Loans:

Residential mortgage loans:

 

  

 

  

 

  

 

  

 

  

 

  

One- to four-family

$

318

$

68

$

215

$

601

$

9,694

$

10,295

 

318

 

68

 

215

 

601

 

9,694

 

10,295

Commercial loans:

 

  

 

  

 

  

 

  

 

  

 

  

Real estate - nonresidential

 

 

 

 

 

1,744

 

1,744

Commercial business

 

27

 

 

 

27

 

135

 

162

 

27

 

 

 

27

 

1,879

 

1,906

 

  

 

  

 

  

 

  

 

  

 

  

Consumer loans:

 

 

 

 

 

 

Home equity and junior liens

 

 

 

20

 

20

 

841

 

861

Other consumer

 

 

 

 

 

84

 

84

20

20

925

945

Total acquired loans

$

345

$

68

$

235

$

648

$

12,498

$

13,146

Non-accrual loans, segregated by class of loan, were as follows:

At June 30, 

At December 31, 

(In thousands)

    

2023

    

2022

Residential mortgage loans:

  

  

One- to four-family

$

2,031

$

2,605

 

2,031

 

2,605

Commercial loans:

 

  

 

  

Real estate - nonresidential

 

29

 

416

Commercial business

 

439

 

587

 

468

 

1,003

Consumer loans:

 

  

 

  

Home equity and junior liens

 

138

 

172

Manufactured homes

 

404

 

368

Automobile

 

58

 

21

Student

 

58

 

68

Recreational vehicle

199

135

 

857

 

764

Total non-accrual loans

$

3,356

$

4,372

There were no loans past due more than ninety days and still accruing interest at June 30, 2023 and December 31, 2022.

2326

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

At December 31, 2021

90 Days

30-59 Days

60-89 Days

or More

Total

Total Loans

Total Loans

(In thousands)

    

Past Due

    

Past Due

    

Past Due

    

Past Due

    

Current

    

Receivable

Total Loans:

 

  

 

  

 

  

 

  

 

  

 

  

Residential mortgage loans:

 

  

 

  

 

  

 

  

 

  

 

  

One- to four-family

$

3,455

$

825

$

2,577

$

6,857

$

106,204

$

113,061

 

3,455

 

825

 

2,577

 

6,857

 

106,204

 

113,061

Commercial loans:

 

  

 

  

 

  

 

  

 

  

 

  

Real estate - nonresidential

 

389

 

 

416

 

805

 

20,673

 

21,478

Multi-family

 

 

 

 

 

456

 

456

Commercial business

 

27

 

8

 

161

 

196

 

12,332

 

12,528

 

416

 

8

 

577

 

1,001

 

33,461

 

34,462

Consumer loans:

 

  

 

  

 

  

 

  

 

  

 

  

Home equity and junior liens

 

149

 

31

 

66

 

246

 

9,455

 

9,701

Manufactured homes

 

922

 

615

 

 

1,537

 

46,180

 

47,717

Automobile

 

168

 

64

 

44

 

276

 

22,390

 

22,666

Student

 

95

 

 

 

95

 

2,001

 

2,096

Recreational vehicle

605

39

644

28,819

29,463

Other consumer

 

75

 

32

 

 

107

 

5,385

 

5,492

 

2,014

 

781

 

110

 

2,905

 

114,230

 

117,135

Total loans

$

5,885

$

1,614

$

3,264

$

10,763

$

253,895

$

264,658

Loan Modifications

Non-accrual loans, segregated by class of loan, were as follows:

At September 30, 

At December 31,

(In thousands)

    

2022

    

2021

    

Residential mortgage loans:

  

  

One- to four-family

$

2,565

$

2,577

 

2,565

 

2,577

Commercial loans:

 

  

 

  

Real estate - nonresidential

 

416

 

416

Commercial business

 

163

 

161

 

579

 

577

Consumer loans:

 

  

 

  

Home equity and junior liens

 

205

 

66

Manufactured homes

 

145

 

Automobile

 

32

 

44

Student

 

62

 

 

444

 

110

Total non-accrual loans

$

3,588

$

3,264

There were no loans past due more than ninety days and still accruing interest at September 30, 2022 and December 31, 2021.

24

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Generations Bancorp NY, Inc.

NotesPrior to Condensed Consolidated Financial Statements

(Unaudited)

Troubled Debt Restructuring

TheJanuary 1, 2023, the Company iswas required to disclose certain activities related to Troubled Debt Restructuring (“TDR”) in accordance with accounting guidance. Certain loans have beenwere modified in a TDR where economic concessions have been granted to a borrower who is experiencing, or is expected to experience, financial difficulties. These economic concessions could include a reduction in the loan interest rate, extension of payment terms, reduction of principal amortization, or other actions that the Company would not otherwise consider for a new loan with similar risk characteristics. The recorded investment for each TDR loan is determined by the outstanding balance less the allowance associated with the loan.

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a probability of default/loss given default model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, the Company modifies loans by providing principal forgiveness on certain of its real estate loans. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses. In some cases, the Company will modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.

There were no loans that had been modified as a TDR during the three and nine monthsyear ended September 30, 2022 and for the three months ended September 30, 2021.  There were seven loans that had been modified as a TDR during the nine months ended September 30, 2021.  During the nine months ended September 30, 2022 and 2021, there were no defaults on TDRs that were modified within the twelve months prior to the default date.  A default for these purposes is defined as a loan that reaches 90 days past due.

The table below details loans that have been modified as a troubled debt restructuring for the nine months ended September 30, 2021.

Nine Months Ended September 30, 2021

Post-

Pre-Modification

Modification

Current

Outstanding

Outstanding

Outstanding

Number of

Recorded

Recorded

Recorded

Contracts

Investment

Investment

Investment

One- to four-family residential mortgages

4

$

336

$

336

$

Commercial business

3

46

46

The TDR loans that were modified during the nine months ended September 30, 2021 were paid off during the three months ended June 30,December 31, 2022.

At September 30December 31, 2022, there werethe Company had seven TDR loans, with an outstanding balance of $2.5 million, in the portfolio that had been modified by making concessions to maturity dates and, in some cases, lowering the interest rate from the original contract.  Each modification was doneAt January 1, 2023, as part of the adoption of the CECL standard, two of these loans totaling $270,000 were returned to alleviate the borrowers’general pool to be collectively reviewed as a result of making regularly scheduled payments as agreed.  The remaining five loans totaling $2.2 million will continue to be individually reviewed although regularly scheduled payments have been made as agreed. There were no loans modified to borrowers experiencing financial difficulties during the three and keep the collateral from repossession when the borrower met the eligibility criteria. There was one TDR totaling $8,000 in non-accrual status due to delinquency greater than 90 days. All other TDR loans continue to accrue interest.six months ended June 30, 2023.

At December 31, 2021, the Company had 15 TDR loans with an outstanding balance of $3.0 million in the portfolio.Impaired Loans

Impaired Loans

APrior to January 1, 2023, a loan is considered impaired when based on current information and events it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  Impairment is measured on a

25

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

loan-by-loan basis for commercial loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent.collateral-dependent.  

The following table summarizes impaired loans information by portfolio class:

At September 30, 2022

Unpaid

Recorded

Principal

Related

(In thousands)

    

Investment

    

Balance

    

Allowance

With no related allowance recorded:

 

  

 

  

 

  

One- to four-family residential mortgages

$

2,565

$

2,525

$

Commercial real estate - nonresidential

 

416

 

516

 

Commercial business

 

162

 

126

 

Home equity and junior liens

 

205

 

205

 

Total:

 

  

 

  

 

  

One- to four-family residential mortgages

 

2,565

 

2,525

 

Commercial real estate - nonresidential

 

416

 

516

 

Commercial business

 

162

 

126

 

Home equity and junior liens

 

205

 

205

 

$

3,348

$

3,372

$

At December 31, 2021

Unpaid

  

Recorded

Principal

Related

(In thousands)

    

Investment

    

Balance

    

Allowance

With no related allowance recorded:

  

  

  

One- to four-family residential mortgages

$

2,352

$

2,423

$

Commercial real estate - nonresidential

 

416

 

516

 

Commercial business

 

73

 

73

 

Home equity and junior liens

 

67

 

67

 

With an allowance recorded:

 

  

 

  

 

  

One- to four-family residential mortgages

 

224

 

224

 

7

Commercial business

 

55

 

55

 

12

Total:

 

  

 

  

 

  

One- to four-family residential mortgages

 

2,576

 

2,647

 

7

Commercial real estate - nonresidential

 

416

 

516

 

Commercial business

 

128

 

128

 

12

Home equity and junior liens

 

67

 

67

 

$

3,187

$

3,358

$

19

26

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table presents the average recorded investment in impaired loans:

Three Months Ended September 30, 

Nine Months Ended September 30, 

(In thousands)

    

2022

2021

2022

2021

 

 

One- to four-family residential mortgages

$

2,567

$

2,397

$

2,579

$

2,412

Commercial real estate - nonresidential

 

416

 

954

 

416

 

954

Commercial business

 

163

 

469

 

169

 

471

Home equity and junior liens

 

212

 

81

 

214

 

81

$

3,358

$

3,901

$

3,378

$

3,918

The following table presents interest income recognized on impaired loans:

Three Months Ended September 30, 

Nine Months Ended September 30, 

(In thousands)

2022

    

2021

    

2022

    

2021

One- to four-family residential mortgages

$

8

$

13

$

46

$

56

Commercial real estate - nonresidential

 

 

 

 

1

Commercial business

 

1

1

Home equity and junior liens

3

2

$

8

$

13

$

50

$

60

Income recognized on a cash basis was not materially different than interest income recognized on an accrual basis for the periods.

6.Allowance for Loan Loss

Changes in the allowance for loan losses and information pertaining to the allocation of the allowance for loan losses and balances of the allowance for loan losses and loans receivable based on individual and collective impairment evaluation by loan portfolio class are summarized as follows:

Three Months Ended September 30, 2022

One- to four-

Construction

Commercial

Commercial

family

residential

real estate

real estate

Construction

Commercial

(In thousands)

    

residential

    

mortgage

    

nonresidential

    

multi-family

    

commercial

    

business

Allowance for loan losses:

  

  

  

  

  

  

Beginning Balance

$

690

$

$

516

 

$

2

$

$

240

Charge-offs

 

(1)

 

 

 

 

 

(2)

Recoveries

 

2

 

 

 

 

 

1

Provision (credit) for loan losses

 

37

 

1

 

(48)

 

 

 

(9)

Ending balance

$

728

$

1

$

468

 

$

2

$

$

230

27

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Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company designates individually evaluated loans on nonaccrual status as collateral-dependent loans, as well as other loans that management of the Company designates as having higher risk. Collateral-dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses. Under CECL, for collateral-dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan's collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required.

The following table presents an analysis of collateral-dependent loans of the Company as of June 30, 2023:

Three Months Ended September 30, 2022 (cont'd) 

Home equity

Manufactured

Recreational

Other

(In thousands)

    

and junior liens

    

homes

    

Automobile

    

Student

    

vehicle

    

consumer

    

Unallocated

    

Total

Allowance for loan losses:

Beginning Balance

$

49

$

104

$

126

$

62

$

347

$

52

$

$

2,188

Charge-offs

 

(10)

 

 

(18)

 

(29)

 

 

(1)

 

 

(61)

Recoveries

 

 

 

12

 

1

 

 

2

 

 

18

Provision for loan losses

 

19

 

1

 

7

 

25

 

13

 

135

 

 

181

Ending balance

$

58

$

105

$

127

$

59

$

360

$

188

$

$

2,326

Residential

Business

Commercial

Total

(In thousands)

properties

assets

Land

property

Other

Loans

One- to four-family

$

2,031

$

$

$

$

$

2,031

Real estate - nonresidential

29

29

Commercial business

439

439

Home equity and junior liens

138

138

Total loans

$

2,198

$

439

$

$

$

$

2,637

Three Months Ended September 30, 2021

One- to four-

Construction

Commercial

Commercial

family

residential

real estate

real estate

Construction

Commercial

(In thousands)

    

residential

    

mortgage

    

nonresidential

    

multi-family

    

commercial

    

business

Allowance for loan losses:

  

  

  

  

  

  

Beginning Balance

$

611

$

$

376

 

$

2

$

$

563

Charge-offs

 

(40)

 

 

(2)

 

 

 

Recoveries

 

1

 

 

 

 

 

Provision (credit) for loan losses

 

180

 

 

51

 

1

 

 

(94)

Ending balance

$

752

$

$

425

 

$

3

$

$

469

The following table summarizes collateral-dependent loan information by portfolio class:

Three Months Ended June 30, 2023

Average

Interest

recorded

income

(In thousands)

    

investment

    

recognized

One- to four-family residential mortgages

$

2,033

$

4

Commercial real estate - nonresidential

 

29

 

Commercial business

 

493

 

Home equity and junior liens

 

140

 

1

$

2,695

$

5

Six Months Ended June 30, 2023

Average

Interest

recorded

income

(In thousands)

investment

    

recognized

One- to four-family residential mortgages

$

2,051

$

31

Commercial real estate - nonresidential

 

30

 

Commercial business

 

469

 

1

Home equity and junior liens

 

140

 

2

$

2,690

$

34

28

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Three Months Ended September 30, 2021 (cont'd) 

Home equity

Manufactured

Recreational

Other

(In thousands)

    

and junior liens

    

homes

    

Automobile

    

Student

    

vehicle

    

consumer

    

Unallocated

    

Total

Allowance for loan losses:

Beginning Balance

$

46

$

82

$

143

$

69

$

$

84

$

$

1,976

Charge-offs

 

 

 

(1)

 

 

 

(9)

 

 

(52)

Recoveries

 

 

 

9

 

1

 

 

1

 

 

12

Provision (credit) for loan losses

 

(17)

 

11

 

(6)

 

(2)

 

 

11

 

 

135

Ending balance

$

29

$

93

$

145

$

68

$

$

87

$

$

2,071

Nine Months Ended September 30, 2022

One- to four-

Construction

family

residential

Real estate

Construction

Commercial

(In thousands)

    

residential

    

mortgage

    

nonresidential

    

Multi-family

    

commercial

    

business

Allowance for loan losses:

  

  

  

  

  

  

Beginning balance

$

688

$

$

630

 

$

2

$

$

161

Charge-offs

 

(37)

 

 

 

 

 

(14)

Recoveries

 

18

 

 

 

 

 

1

Provision (credit) for loan losses

 

59

 

1

 

(162)

 

 

 

82

Ending balance

$

728

$

1

$

468

 

$

2

$

$

230

Ending balance:  related to loans individually evaluated for impairment

$

$

$

 

$

$

$

Ending balance:  related to loans collectively evaluated for impairment

$

728

$

1

$

468

 

$

2

$

$

230

Loans receivable:

 

  

 

  

 

  

 

  

 

  

 

  

Ending balance

$

129,233

$

184

$

17,163

 

$

446

$

$

9,820

Ending balance: individually evaluated for impairment

$

2,565

$

$

416

 

$

$

$

162

Ending balance: collectively evaluated for impairment

$

126,668

$

184

$

16,747

 

$

446

$

$

9,658

The following table summarizes impaired loan information by portfolio class:

At December 31, 2022

Unpaid

  

Recorded

principal

Related

(In thousands)

    

investment

    

balance

    

allowance

With no related allowance recorded:

  

  

  

One- to four-family residential mortgages

$

2,560

$

2,641

$

Commercial real estate - nonresidential

 

701

 

801

 

Commercial business

 

717

 

729

 

Home equity and junior liens

 

181

 

191

 

Total:

 

  

 

  

 

  

One- to four-family residential mortgages

 

2,560

 

2,641

 

Commercial real estate - nonresidential

 

701

 

801

 

Commercial business

 

717

 

729

 

Home equity and junior liens

 

181

 

191

 

$

4,159

$

4,362

$

The following table presents the amortized cost information of loans on non-accrual status:

Interest income

Non-accrual loans

recognized on

with no allowance

Amortized cost of loans on

non-accrual loans

for credit losses

non-accrual status

as of

as of

(In thousands)

    

January 1, 2023

June 30, 2023

June 30, 2023

June 30, 2023

 

 

Residential mortgage loans:

One- to four-family

$

2,605

$

2,080

$

31

$

1,777

 

 

 

 

Commercial loans:

 

 

 

 

Real estate - nonresidential

 

416

 

29

 

 

29

Commercial business

 

587

 

439

 

1

 

439

 

 

 

 

Consumer loans:

 

 

 

 

Home equity and junior liens

 

172

 

136

 

2

 

138

Manufactured homes

368

404

404

Automobile

 

21

 

55

 

 

58

Student

 

68

 

58

 

 

58

Recreational vehicle

 

135

 

150

 

6

 

199

$

4,372

$

3,351

$

40

$

3,102

Income recognized on a cash basis was not materially different than interest income recognized on an accrual basis for the periods.

29

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Nine Months Ended September 30, 2022 (cont'd) 

Home equity

Manufactured

Recreational

Other

(In thousands)

    

and junior liens

    

homes

    

Automobile

    

Student

    

vehicle

    

consumer

    

Unallocated

    

Total

Allowance for loan losses:

Beginning balance

$

39

$

102

$

107

$

64

$

$

48

$

$

1,841

Charge-offs

 

(10)

 

 

(58)

 

(29)

 

 

(1)

 

 

(149)

Recoveries

 

 

 

128

 

2

 

 

4

 

 

153

Provision (credit) for loan losses

 

29

 

3

 

(50)

 

22

 

360

 

137

 

 

481

Ending balance

$

58

$

105

$

127

$

59

$

360

$

188

$

$

2,326

Ending balance: related to loans individually evaluated for impairment

$

$

$

$

$

$

$

$

Ending balance: related to loans collectively evaluated for impairment

$

58

$

105

$

127

$

59

$

360

$

188

$

$

2,326

Loans receivable:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Ending balance

$

11,234

$

49,887

$

23,843

$

1,921

$

27,013

$

7,471

$

$

278,215

Ending balance: individually evaluated for impairment

$

205

$

$

$

$

$

$

$

3,348

Ending balance: collectively evaluated for impairment

$

11,029

$

49,887

$

23,843

$

1,921

$

27,013

$

7,471

$

$

274,867

The following tables present the loans to customers as of June 30, 2023 based on year of origination within each credit quality indicator:

Nine Months Ended September 30, 2021

One- to four-

Construction

family

residential

Real estate

Construction

Commercial

(In thousands)

    

residential

    

mortgage

    

nonresidential

    

Multi-family

    

commercial

    

business

Allowance for loan losses:

  

  

  

  

  

  

Beginning balance

$

457

$

$

319

 

$

26

$

$

617

Charge-offs

 

(117)

 

 

(53)

 

 

 

(17)

Recoveries

 

3

 

 

16

 

12

 

 

7

Provision (credit) for loan losses

 

409

 

 

143

 

(35)

 

 

(138)

Ending balance

$

752

$

$

425

 

$

3

$

$

469

Ending balance:  related to loans individually evaluated for impairment

$

14

$

$

 

$

$

$

183

Ending balance:  related to loans collectively evaluated for impairment

$

738

$

$

425

 

$

3

$

$

286

Loans receivable:

 

  

 

  

 

  

 

  

 

  

 

  

Ending balance

$

116,182

$

193

$

22,226

 

$

403

$

$

15,158

Ending balance: individually evaluated for impairment

$

2,325

$

$

604

 

$

$

$

469

Ending balance: collectively evaluated for impairment

$

113,857

$

193

$

21,622

 

$

403

$

$

14,689

At June 30, 2023

2023

2022

2021

2020

2019

Prior

Total

Originated Loans:

Residential mortgage loans:

4 Internal grade

$

15,325

$

42,193

$

10,284

$

11,575

$

11,931

$

47,158

$

138,466

5 Internal grade

28

106

943

1,077

6 Internal grade

133

113

41

81

1,461

1,829

$

15,325

$

42,326

$

10,425

$

11,616

$

12,118

$

49,562

$

141,372

Current period gross writeoffs

$

$

$

$

$

$

(100)

$

(100)

Current period recoveries

Current period net writeoffs

$

$

$

$

$

$

(100)

$

(100)

Commercial loans:

2 Internal grade

$

$

$

$

$

$

379

$

379

3 Internal grade

169

610

279

906

6,283

8,247

4 Internal grade

3,868

3,169

721

201

124

8,158

16,241

5 Internal grade

2,092

1,960

4,052

6 Internal grade

41

805

846

$

3,868

$

3,338

$

1,331

$

480

$

3,163

$

17,585

$

29,765

Current period gross writeoffs

$

$

$

$

$

$

$

Current period recoveries

51

51

Current period net writeoffs

$

$

$

$

$

$

51

$

51

Consumer loans:

4 Internal grade

$

9,477

$

25,948

$

28,827

$

34,467

$

9,558

$

11,401

$

119,678

5 Internal grade

113

425

122

211

123

994

6 Internal grade

45

428

187

67

96

823

$

9,477

$

26,106

$

29,680

$

34,776

$

9,836

$

11,620

$

121,495

Current period gross writeoffs

$

$

$

(1)

$

(1)

$

$

(20)

$

(22)

Current period recoveries

12

12

Current period net writeoffs

$

$

$

(1)

$

(1)

$

$

(8)

$

(10)

30

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Nine Months Ended September 30, 2021 (cont'd) 

Home equity

Manufactured

Recreational

Other

(In thousands)

    

and junior liens

    

homes

    

Automobile

    

Student

    

vehicle

    

consumer

    

Unallocated

    

Total

Allowance for loan losses:

Beginning balance

$

46

$

76

$

127

$

69

$

$

84

$

$

1,821

Charge-offs

 

(2)

 

 

(7)

 

 

 

(45)

 

 

(241)

Recoveries

 

 

 

34

 

2

 

7

 

5

 

 

86

Provision (credit) for loan losses

 

(15)

 

17

 

(9)

 

(3)

 

(7)

 

43

 

 

405

Ending balance

$

29

$

93

$

145

$

68

$

$

87

$

$

2,071

Ending balance: related to loans individually evaluated for impairment

$

$

$

$

$

$

$

$

197

Ending balance: related to loans collectively evaluated for impairment

$

29

$

93

$

145

$

68

$

$

87

$

$

1,874

Loans receivable:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Ending balance

$

10,092

$

48,234

$

22,940

$

2,216

$

30,185

$

5,829

$

$

273,658

Ending balance: individually evaluated for impairment

$

80

$

$

$

$

$

$

$

3,478

Ending balance: collectively evaluated for impairment

$

10,012

$

48,234

$

22,940

$

2,216

$

30,185

$

5,829

$

$

270,180

Year Ended December 31, 2021

One- to four-

Construction

 

family

 

residential

 

Real estate

 

 

Construction

 

Commercial

(In thousands)

    

residential

    

mortgage

    

nonresidential

    

Multi-family

    

commercial

    

business

Allowance for loan losses:

Beginning balance

$

457

$

$

319

 

$

26

$

$

617

Charge-offs

 

(117)

 

 

(386)

 

 

 

(84)

Recoveries

 

28

 

 

16

 

12

 

 

7

Provision (credit) for loan losses

 

320

 

 

681

 

(36)

 

 

(379)

Ending balance

$

688

$

$

630

 

$

2

$

$

161

Ending balance: related to loans individually evaluated for impairment

$

7

$

$

 

$

$

$

12

Ending balance: related to loans collectively evaluated for impairment

$

681

$

$

630

 

$

2

$

$

149

Loans receivable:

 

  

 

  

 

  

 

  

 

  

 

  

Ending balance

$

113,061

$

$

21,478

 

$

456

$

$

12,528

Ending balance: individually evaluated for impairment

$

2,576

$

$

416

 

$

$

$

128

Ending balance: collectively evaluated for impairment

$

110,485

$

$

21,062

 

$

456

$

$

12,400

At June 30, 2023

2023

2022

2021

2020

2019

Prior

Total

Acquired Loans:

Residential mortgage loans:

4 Internal grade

$

$

$

$

$

$

7,872

$

7,872

5 Internal grade

10

10

6 Internal grade

202

202

$

$

$

$

$

$

8,084

$

8,084

Current period gross writeoffs

$

$

$

$

$

$

$

Current period recoveries

3

3

Current period net writeoffs

$

$

$

$

$

$

3

$

3

Commercial loans:

4 Internal grade

$

$

$

$

$

$

1,416

$

1,416

5 Internal grade

6 Internal grade

$

$

$

$

$

$

1,416

$

1,416

Current period gross writeoffs

$

$

$

$

$

$

$

Current period recoveries

Current period net writeoffs

$

$

$

$

$

$

$

Consumer loans:

4 Internal grade

$

$

$

$

$

$

405

$

405

5 Internal grade

8

8

6 Internal grade

34

34

$

$

$

$

$

$

447

$

447

Current period gross writeoffs

$

$

$

$

$

$

$

Current period recoveries

Current period net writeoffs

$

$

$

$

$

$

$

31

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Year Ended December 31, 2021 (cont'd)

Home equity

Manufactured

Recreational

Other

(In thousands)

    

and junior liens

    

homes

    

Automobile

    

Student

    

vehicle

    

consumer

    

Unallocated

    

Total

Allowance for loan losses:

Beginning balance

$

46

$

76

$

127

$

69

$

$

84

$

$

1,821

Charge-offs

 

(2)

 

 

(12)

 

 

(1)

 

(45)

 

 

(647)

Recoveries

 

 

 

48

 

3

 

8

 

5

 

 

127

Provision (credit) for loan losses

 

(5)

 

26

 

(56)

 

(8)

 

(7)

 

4

 

 

540

Ending balance

$

39

$

102

$

107

$

64

$

$

48

$

$

1,841

Ending balance: related to loans individually evaluated for impairment

$

$

$

$

$

$

$

$

19

Ending balance: related to loans collectively evaluated for impairment

$

39

$

102

$

107

$

64

$

$

48

$

$

1,822

Loans receivable:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Ending balance

$

9,701

$

47,717

$

22,666

$

2,096

$

29,463

$

5,492

$

$

264,658

Ending balance: individually evaluated for impairment

$

67

$

$

$

$

$

$

$

3,187

Ending balance: collectively evaluated for impairment

$

9,634

$

47,717

$

22,666

$

2,096

$

29,463

$

5,492

$

$

261,471

At June 30, 2023

2023

2022

2021

2020

2019

Prior

Total

Total Loans:

Residential mortgage loans:

4 Internal grade

$

15,325

$

42,193

$

10,284

$

11,575

$

11,931

$

55,030

$

146,338

5 Internal grade

28

106

953

1,087

6 Internal grade

133

113

41

81

1,663

2,031

$

15,325

$

42,326

$

10,425

$

11,616

$

12,118

$

57,646

$

149,456

Current period gross writeoffs

$

$

$

$

$

$

(100)

$

(100)

Current period recoveries

3

3

Current period net writeoffs

$

$

$

$

$

$

(97)

$

(97)

Commercial loans:

2 Internal grade

$

$

$

$

$

$

379

$

379

3 Internal grade

169

610

279

906

6,283

8,247

4 Internal grade

3,868

3,169

721

201

124

9,574

17,657

5 Internal grade

2,092

1,960

4,052

6 Internal grade

41

805

846

$

3,868

$

3,338

$

1,331

$

480

$

3,163

$

19,001

$

31,181

Current period gross writeoffs

$

$

$

$

$

$

$

Current period recoveries

51

51

Current period net writeoffs

$

$

$

$

$

$

51

$

51

Consumer loans:

4 Internal grade

$

9,477

$

25,948

$

28,827

$

34,467

$

9,558

$

11,806

$

120,083

5 Internal grade

113

425

122

211

131

1,002

6 Internal grade

45

428

187

67

130

857

$

9,477

$

26,106

$

29,680

$

34,776

$

9,836

$

12,067

$

121,942

Current period gross writeoffs

$

$

$

(1)

$

(1)

$

$

(20)

$

(22)

Current period recoveries

12

12

Current period net writeoffs

$

$

$

(1)

$

(1)

$

$

(8)

$

(10)

The allowance for loan losses represents management's estimate of losses inherent in the loan portfolio as of the consolidated statement of financial condition date and is recorded as a reduction of loans. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable is charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. Consumer loans not secured by residential real estate are generally charged off no later than 90 days past due on a contractual basis, earlier in the event of bankruptcy, or if there is an amount deemed uncollectible. Because all identified losses are immediately charged off, no portion of the allowance for loan losses is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all loan losses.

The allowance consists of specific, general, and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying amount of that loan. The general component covers pools of loans by loan class including commercial loans not considered impaired, automobile loans identified in pools by product and underwriting standards, as well as smaller balance homogeneous consumer loans. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative risk factors. These qualitative risk factors include:

Asset quality trends
The trend in loan growth and portfolio mix
Regional and local economic conditions
Historical loan loss experience
Underlying credit quality

32

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Each factor is assigned a value6.Allowance for Credit Loss

The following tables summarize the activity related to reflect improving, stable, or declining conditions basedthe allowance for credit losses for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30, 2023

Additional

Allowance

Recognized

Credit

Due to

Loss

Writeoffs

Adoption

Expense

During

Recoveries

Beginning

of

for the

the

During

Ending

(In thousands)

    

Balance

    

Topic 326

    

Period

    

Period

    

the Period

    

Balance

Residential mortgage loans:

One- to four-family

$

943

$

$

220

$

(100)

$

2

$

1,065

Construction

1

(1)

Commercial loans:

Real estate - nonresidential

600

(63)

537

Multi-family

Commercial business

279

(30)

49

298

Consumer loans:

Home equity and junior liens

70

8

(2)

76

Manufactured homes

Automobile

259

(9)

4

254

Student

15

(1)

1

15

Recreational vehicle

134

16

150

Other consumer

352

25

(1)

376

$

2,653

$

$

165

$

(103)

$

56

$

2,771

At June 30, 2023 there was no liability recorded for unfunded loan commitments.

Prior to the adoption of ASC 326 on management's best judgment using relevant information available atJanuary 1, 2023, the timeCompany calculated the allowance for loan losses under the incurred loss methodology. The following tables are disclosures related to the allowance for loan losses in prior periods.

Three Months Ended June 30, 2022

One- to four-

Construction

Commercial

Commercial

family

residential

real estate

real estate

Construction

Commercial

(In thousands)

    

residential

    

mortgage

    

nonresidential

    

multi-family

    

commercial

    

business

Allowance for loan losses:

  

  

  

  

  

  

Beginning Balance

$

739

$

$

644

 

$

3

$

$

209

Charge-offs

 

(26)

 

 

 

 

 

(12)

Recoveries

 

1

 

 

 

 

 

Provision for loan losses

 

(24)

 

 

(128)

 

(1)

 

 

43

Ending balance

$

690

$

$

516

 

$

2

$

$

240

33

Table of the evaluation.Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Three Months Ended June 30, 2022 (cont'd) 

Home equity

Manufactured

Recreational

Other

(In thousands)

    

and junior liens

    

homes

    

Automobile

    

Student

    

vehicle

    

consumer

    

Unallocated

    

Total

Allowance for loan losses:

Beginning Balance

$

43

$

116

$

107

$

64

$

$

49

$

$

1,974

Charge-offs

 

 

 

 

 

 

 

 

(38)

Recoveries

 

 

 

99

 

 

 

2

 

 

102

Provision (credit) for loan losses

 

6

 

(12)

 

(80)

 

(2)

 

347

 

1

 

 

150

Ending balance

$

49

$

104

$

126

$

62

$

347

$

52

$

$

2,188

Six Months Ended June 30, 2023

Additional

Allowance

Recognized

Credit

Due to

Loss

Writeoffs

Adoption

Expense

During

Recoveries

Beginning

of

for the

the

During

Ending

(In thousands)

    

Balance

    

Topic 326

    

Period

    

Period

    

the Period

    

Balance

Residential mortgage loans:

One- to four-family

$

787

$

$

375

$

(100)

$

3

$

1,065

Construction

2

(2)

Commercial loans:

Real estate - nonresidential

319

218

537

Multi-family

4

(4)

Commercial business

248

(1)

51

298

Consumer loans:

Home equity and junior liens

65

24

(13)

76

Manufactured homes

110

(110)

Automobile

135

110

9

254

Student

55

(35)

(7)

2

15

Recreational vehicle

646

(496)

150

Other consumer

126

251

(2)

1

376

$

2,497

$

$

330

$

(122)

$

66

$

2,771

34

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Six Months Ended June 30, 2022

One- to four-

Construction

family

residential

Real estate

Construction

Commercial

(In thousands)

    

residential

    

mortgage

    

nonresidential

    

Multi-family

    

commercial

    

business

Allowance for loan losses:

  

  

  

  

  

  

Beginning balance

$

688

$

$

630

 

$

2

$

$

161

Charge-offs

 

(36)

 

 

 

 

 

(12)

Recoveries

 

16

 

 

 

 

 

Provision for loan losses

 

22

 

 

(114)

 

 

 

91

Ending balance

$

690

$

$

516

 

$

2

$

$

240

Ending balance:  related to loans individually evaluated for impairment

$

1

$

$

 

$

$

$

Ending balance:  related to loans collectively evaluated for impairment

$

689

$

$

516

 

$

2

$

$

240

Loans receivable:

 

  

 

  

 

  

 

  

 

  

 

  

Ending balance

$

118,454

$

$

17,829

 

$

449

$

$

11,405

Ending balance: individually evaluated for impairment

$

2,517

$

$

416

 

$

$

$

113

Ending balance: collectively evaluated for impairment

$

115,937

$

$

17,413

 

$

449

$

$

11,292

Six Months Ended June 30, 2022 (cont'd) 

Home equity

Manufactured

Recreational

Other

(In thousands)

    

and junior liens

    

homes

    

Automobile

    

Student

    

vehicle

    

consumer

    

Unallocated

    

Total

Allowance for loan losses:

Beginning balance

$

39

$

102

$

107

$

64

$

$

48

$

$

1,841

Charge-offs

 

 

 

(40)

 

 

 

 

 

(88)

Recoveries

 

 

 

116

 

1

 

 

2

 

 

135

Provision (credit) for loan losses

 

10

 

2

 

(57)

 

(3)

 

347

 

2

 

 

300

Ending balance

$

49

$

104

$

126

$

62

$

347

$

52

$

$

2,188

Ending balance: related to loans individually evaluated for impairment

$

$

$

$

$

$

$

$

1

Ending balance: related to loans collectively evaluated for impairment

$

49

$

104

$

126

$

62

$

347

$

52

$

$

2,187

Loans receivable:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Ending balance

$

10,829

$

49,247

$

22,569

$

2,042

$

28,059

$

6,811

$

$

267,694

Ending balance: individually evaluated for impairment

$

82

$

$

$

$

$

$

$

3,128

Ending balance: collectively evaluated for impairment

$

10,747

$

49,247

$

22,569

$

2,042

$

28,059

$

6,811

$

$

264,566

35

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Year Ended December 31, 2022

One- to four-

Construction

 

family

 

residential

 

Real estate

 

 

Construction

 

Commercial

(In thousands)

    

residential

    

mortgage

    

nonresidential

    

Multi-family

    

commercial

    

business

Allowance for loan losses:

Beginning balance

$

688

$

$

630

 

$

2

$

$

161

Charge-offs

 

(37)

 

 

 

 

 

(14)

Recoveries

 

18

 

 

 

 

 

2

Provision (credit) for loan losses

 

118

 

2

 

(311)

 

2

 

 

99

Ending balance

$

787

$

2

$

319

 

$

4

$

$

248

Ending balance: related to loans individually evaluated for impairment

$

$

$

 

$

$

$

Ending balance: related to loans collectively evaluated for impairment

$

787

$

2

$

319

 

$

4

$

$

248

Loans receivable:

 

  

 

  

 

  

 

  

 

  

 

  

Ending balance

$

138,001

$

387

$

16,681

 

$

854

$

$

11,677

Ending balance: individually evaluated for impairment

$

2,560

$

$

701

 

$

$

$

717

Ending balance: collectively evaluated for impairment

$

135,441

$

387

$

15,980

 

$

854

$

$

10,960

Year Ended December 31, 2022 (cont'd)

Home equity

Manufactured

Recreational

Other

(In thousands)

    

and junior liens

    

homes

    

Automobile

    

Student

    

vehicle

    

consumer

    

Unallocated

    

Total

Allowance for loan losses:

���

Beginning balance

$

39

$

102

$

107

$

64

$

$

48

$

$

1,841

Charge-offs

 

(10)

 

 

(59)

 

(29)

 

(1)

 

(2)

 

 

(152)

Recoveries

 

 

 

149

 

3

 

1

 

4

 

 

177

Provision (credit) for loan losses

 

36

 

8

 

(62)

 

17

 

646

 

76

 

 

631

Ending balance

$

65

$

110

$

135

$

55

$

646

$

126

$

$

2,497

Ending balance: related to loans individually evaluated for impairment

$

$

$

$

$

$

$

$

Ending balance: related to loans collectively evaluated for impairment

$

65

$

110

$

135

$

55

$

646

$

126

$

$

2,497

Loans receivable:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Ending balance

$

11,562

$

50,989

$

24,339

$

1,803

$

26,909

$

7,172

$

$

290,374

Ending balance: individually evaluated for impairment

$

181

$

$

$

$

$

$

$

4,159

Ending balance: collectively evaluated for impairment

$

11,381

$

50,989

$

24,339

$

1,803

$

26,909

$

7,172

$

$

286,215

The risk characteristics within the loan portfolio vary depending on the loan segment. Consumer loans generally are repaid from personal sources of income. Risks associated with consumer loans primarily include general economic

36

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

risks such as declines in the local economy creating higher rates of unemployment. Those conditions may also lead to a decline in collateral values should the Company be required to repossess the collateral securing consumer loans. These economic risks also impact the commercial loan segment, however, commercial loans are considered to have greater risk than consumer loans as the primary source of repayment is from the cash flow of the business customer. Loans secured by real estate provide the best collateral protection and thus significantly reduce the inherent risk in the portfolio.

7.Employee Benefit Plans

The Company provides pension benefits for eligible employees through two defined benefit pension plans (the “Plans”).  The following tables set forth the changes in the Plans’ net periodic pension benefit:

Generations Bank Plan:

Three Months Ended September 30, 

Nine Months Ended September 30, 

Three Months Ended June 30, 

Six Months Ended June 30, 

(In thousands)

2022

2021

2022

2021

2023

2022

2023

2022

Net periodic expenses recognized in income:

Service cost

$

108

$

115

$

324

$

344

$

60

$

108

$

120

$

216

Interest cost

102

105

307

315

117

103

235

205

Expected return on plan assets

(383)

(370)

(1,151)

(1,110)

(306)

(384)

(613)

(768)

Amortization of net losses

28

85

41

81

Net periodic pension benefit

$

(173)

$

(122)

$

(520)

$

(366)

$

(88)

$

(173)

$

(177)

$

(347)

Medina Savings and Loan Plan:

Three Months Ended September 30, 

Nine Months Ended September 30, 

Three Months Ended June 30, 

Six Months Ended June 30, 

(In thousands)

2022

2021

2022

2021

2023

2022

2023

2022

Net periodic expenses recognized in income:

Service cost

$

9

$

8

$

25

$

23

$

3

$

8

$

6

$

16

Interest cost

28

33

83

98

33

27

67

55

Expected return on plan assets

(116)

(116)

(346)

(348)

(89)

(115)

(179)

(230)

Net periodic pension benefit

$

(79)

$

(75)

$

(238)

$

(227)

$

(53)

$

(80)

$

(106)

$

(159)

33

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

8. Stock-Based Compensation

A summary of the Company’s stock option activity andrelated information for its option plans for the three and nine months ended September 30, 2022 is as follows:

Three Months Ended September 30, 2022

Weighted Average

Exercise Price Per

Options

Share

Outstanding at beginning of quarter

132,977

$

11.61

Grants

Exercised

Outstanding at quarter end

132,977

$

11.61

Exercisable at quarter end

$

Nine Months Ended September 30, 2022

Weighted Average

Exercise Price Per

Options

Share

Outstanding at beginning of year

$

Grants

132,977

11.61

Exercised

Outstanding at quarter end

132,977

$

11.61

Exercisable at quarter end

$

There were no stock options granted for the three- and nine-month periods ended September 30, 2021.

The grants to senior management and directors vest over a five-year period in equal annual installments, with the first installment vesting on the first anniversary date of the grant and succeeding installments on each anniversary thereafter, through 2027.

The compensation expense of the awards is based on the fair value of the instruments on the date of grant.  The Company recorded compensation expense in the amount of $21,000 and $32,000 for the three and nine months ended September 30, 2022.

An aggregate of 53,191 shares of restricted stock were granted to directors and senior management during the period ended September 30, 2022. These shares of restricted stock vest in the same manner as the stock options described above. The Company recorded compensation expense in the amount of $31,000 and $43,000 for the three and nine months ended September 30, 2022.

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Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

8. Stock-Based Compensation

A summary of the Company’s stock option activity andrelated information for its option plans for the three and six months ended June 30, 2023 and 2022 is as follows:

Three Months Ended June 30, 2023

Weighted Average

Exercise Price Per

Options

Share

Outstanding at beginning of quarter

132,977

$

11.61

Grants

Exercised

Outstanding at quarter end

132,977

$

11.61

Exercisable at quarter end

26,595

$

11.61

Three Months Ended June 30, 2022

Weighted Average

Exercise Price Per

Options

Share

Outstanding at beginning of year

$

Grants

132,977

11.61

Exercised

Outstanding at quarter end

132,977

$

11.61

Exercisable at quarter end

$

Six Months Ended June 30, 2023

Weighted Average

Exercise Price Per

Options

Share

Outstanding at beginning of quarter

132,977

$

11.61

Grants

Exercised

Outstanding at quarter end

132,977

$

11.61

Exercisable at quarter end

26,595

$

11.61

Six Months Ended June 30, 2022

Weighted Average

Exercise Price Per

Options

Share

Outstanding at beginning of year

$

Grants

132,977

11.61

Exercised

Outstanding at quarter end

132,977

$

11.61

Exercisable at quarter end

$

38

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The grants to senior management and directors vest over a five-year period in equal annual installments, with the first installment vesting on the first anniversary date of the grant and succeeding installments on each anniversary thereafter, through 2027.

The compensation expense of the awards is based on the fair value of the instruments on the date of grant.  The Company recorded compensation expense in the amount of $23,000 and $45,000 for the three and six months ended June 30, 2023. The Company recorded compensation expense in the amount of $11,000 for the three and six months ended June 30, 2022.

An aggregate of 53,191 shares of restricted stock were granted to directors and senior management during the year ended December 31, 2022. These shares of restricted stock vest in the same manner as the stock options described above. The Company recorded compensation expense in the amount of $31,000 and $62,000 for the three and six months ended June 30, 2023. The Company recorded compensation expense in the amount of $12,000 for the three and six months ended June 30, 2022.

9.Regulatory Capital

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheetoff-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain amounts and ratios (set forth in the table below) of total core and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to total adjusted assets (as defined).

Under applicable regulation, the Bank must hold a 2.50% capital conservation buffer above the adequately capitalized risk-based capital ratios.  The net unrealized gain or loss on available-for-sale securities is not included in computing regulatory capital. Management believes as of SeptemberJune 30, 20222023 and December 31, 2021,2022, the Bank meets all capital adequacy requirements to which it is subject.

39

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Bank’s actual capital amounts and ratios are as follows:

Minimum

Minimum

To Be "Well-

To Be "Well-

Minimum

Capitalized"

Minimum

Capitalized"

For Capital

Under Prompt

For Capital

Under Prompt

Actual

Adequacy Purposes

Corrective Provisions

Actual

Adequacy Purposes

Corrective Provisions

(in thousands)

    

Amount

    

Ratio

    

Amount

    

Ratio

    

Amount

    

Ratio

    

    

Amount

    

Ratio

    

Amount

    

Ratio

    

Amount

    

Ratio

    

As of September 30, 2022

    

  

    

  

    

  

    

  

    

    

  

    

As of June 30, 2023:

    

  

    

  

    

  

    

  

    

    

  

    

Common Equity Tier 1 Capital

$

41,078

14.25

%  

$

12,970

4.50

%  

$

18,734

6.50

%  

$

40,541

13.51

%  

$

13,506

4.50

%  

$

19,509

6.50

%  

Total Capital (to Risk-Weighted Assets)

$

43,404

15.06

%  

$

23,058

8.00

%  

$

28,822

10.00

%  

$

43,312

14.43

%  

$

24,011

8.00

%  

$

30,014

10.00

%  

Tier 1 Capital (to Risk-Weighted Assets)

$

41,078

14.25

%  

$

17,293

6.00

%  

$

23,058

8.00

%  

$

40,541

13.51

%  

$

18,008

6.00

%  

$

24,011

8.00

%  

Tier 1 Capital (to Total Adjusted Assets)

$

41,078

11.21

%  

$

14,652

4.00

%  

$

18,315

5.00

%  

$

40,541

10.38

%  

$

15,618

4.00

%  

$

19,523

5.00

%  

As of December 31, 2021:

 

  

  

 

  

 

  

  

As of December 31, 2022:

 

  

  

 

  

 

  

  

Common Equity Tier 1 Capital

$

41,287

14.82

%  

$

12,534

4.50

%  

$

18,104

6.50

%  

$

41,127

13.87

%  

$

13,347

4.50

%  

$

19,278

6.50

%  

Total Capital (to Risk-Weighted Assets)

$

43,128

15.48

%  

$

22,282

8.00

%  

$

27,853

10.00

%  

$

43,624

14.71

%  

$

23,727

8.00

%  

$

29,659

10.00

%  

Tier 1 Capital (to Risk-Weighted Assets)

$

41,287

14.82

%  

$

16,712

6.00

%  

$

22,282

8.00

%  

$

41,127

13.87

%  

$

17,795

6.00

%  

$

23,727

8.00

%  

Tier 1 Capital (to Total Adjusted Assets)

$

41,287

10.99

%  

$

15,034

4.00

%  

$

18,792

5.00

%  

$

41,127

10.98

%  

$

14,989

4.00

%  

$

18,736

5.00

%  

The Company’s goal is to maintain a strong capital position, consistent with the risk profile of its subsidiary bank that supports growth and expansion activities while at the same time exceeding regulatory standards. At SeptemberJune 30, 20222023 and December 31, 2021,2022, Generations Bank exceeded all regulatory required minimum capital ratios and met the regulatory definition of a “well-capitalized” institution, i.e. Tier 1 Capital (to Total Adjusted Asset) exceeding 5.00%, a common equity Tier 1 capital ratio exceeding 6.50%, a Tier 1 risk-based capital ratio exceeding 8.00%, and a total risk-based capital ratio exceeding 10.00%.

By letter dated September 10, 2020, based on its supervisory profile, the Office of the Comptroller of the Currency (“OCC”) established higher individual minimum capital ratios for Generations Bank. Specifically, effective September 10, 2020, Generations Bank is required to maintain a leverage ratio of 8.00% and a total capital ratio of 12.00%. The individual minimum capital ratios will remain in effect until terminated, modified, or suspended in writing by the OCC.

35

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

10.Commitments and Contingencies

Credit Commitments

The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business in order to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit, which involve, to varying degrees, elements of credit, interest rate, or liquidity risk in excess of the amount recognized in the consolidated statements of financial condition. The Bank’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amounts of those instruments. The Bank has experienced minimal credit losses to date on its financial instruments with off-balance sheet risk and management does not anticipate any significant losses on its commitments to extend credit outstanding at SeptemberJune 30, 2022.2023.

Financial instruments whose contract amounts represent credit risk consist of the following:

At September 30, 

At December 31,

At June 30, 

At December 31, 

(In thousands)

    

2022

    

2021

    

2023

    

2022

 

 

Commitments to grant loans

$

8,498

$

3,524

$

2,126

$

6,400

Unfunded commitments under lines of credit

 

16,124

 

15,568

 

13,999

 

14,789

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Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitment amounts are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the counter party. Collateral held varies but may include residential real estate and income-producing commercial properties. Loan commitments, including unused lines of credit and standby letters of credit, outstanding at SeptemberJune 30, 20222023 with fixed interest rates amounted to approximately $11.7$6.4 million. Loan commitments, including unused lines of credit and standby letters of credit, outstanding at SeptemberJune 30, 20222023 with variable interest rates amounted to approximately $12.9$9.7 million. Loan commitments, including unused lines of credit and standby letters of credit, outstanding at December 31, 20212022 with fixed interest rates amounted to approximately $3.8$9.6 million. Loan commitments, including unused lines of credit and standby letters of credit, outstanding at December 31, 20212022 with variable interest rates amounted to approximately $15.3$11.6 million.

Unfunded commitments under revolving credit lines and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed.

Letters of credit written are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Generally, all letters of credit, when issued have expiration dates. The credit risk involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers. The Company generally holds collateral and/or personal guarantees supporting these commitments. Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payments required under the corresponding guarantees.

36

TableThe Company maintains a separate reserve for credit losses on off-balance sheet credit exposures, including unfunded loan commitments, which is included in other liabilities on the consolidated balance sheet. The reserve for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit losses in the income statement. The estimate includes consideration of Contents

Generations Bancorp NY, Inc.

Notesthe likelihood that funding will occur and an estimate of expected credit losses on commitments expected to Condensed Consolidated Financial Statementsbe funded over its estimated life, utilizing the same models and approaches for the Company’s other loan portfolio segments described above, as these unfunded commitments share similar risk characteristics as its loan portfolio segments. The Company has identified the unfunded portion of certain lines of credit as unconditionally cancellable credit exposures, meaning the Company can cancel the unfunded commitment at any time. No credit loss estimate is reported for off-balance sheet credit exposures that are unconditionally cancellable by the Company or for undrawn amounts under such arrangements that may be drawn prior to the cancellation of the arrangement. On January 1, 2023, the Company did not record an adjustment for unfunded commitments for the adoption of ASC Topic 326. For the three and six months ended June 30, 2023, the Company recorded a provision for credit losses for unfunded commitments of $0. At June 30, 2023, the liability for credit losses on off-balance sheet credit exposures included in other liabilities was $0.

(Unaudited)

Commitments to Originate and Sell One- to four-family Residential Mortgages

The Bank has sold and funded $68.6 million of loans to the Federal Home Loan Bank of New York as part of its mortgage partnership finance program (“MPF Program”), inclusive of USDA loans, to date. The principal outstanding balance on loans sold under the MPF Program is $8.9$7.7 million at SeptemberJune 30, 2022.2023. The Bank continues to service loans sold under the MPF Program.

41

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Under the terms of the MPF Program, there is limited recourse to the Bank for loans that do not perform in accordance with the terms of the loan agreement. Each loan that is sold under the program is “credit enhanced” such that the individual loan’s rating is raised to “AA,” as determined by the Federal Home Loan Bank of New York. The sum of each individual loan’s credit enhancement represents the total recourse back to the Bank. The total recourse back to the Bank for loans sold was $707,000 at SeptemberJune 30, 2022.2023. A portion of the recourse is offset by a “first loss account” to which funds are allocated by the Federal Home Loan Bank of New York annually in January. The balance of the “first loss account” allocated to the Bank was $91,000$93,000 at SeptemberJune 30, 2022.2023. In addition, many of the loans sold under the MPF Program have primary mortgage insurance, which reduces the Bank’s overall exposure. The potential liability for the recourse is considered when the Bank determines its allowance for loan losses.

Lease Commitments

As part of the Medina Savings and Loan Association merger, the Bank took on the assignment of a non-cancelable operating lease with Wal-Mart East for the space occupied by the Albion retail office. This lease expired on May 31, 2021 and was not renewed and the office was closed on May 7, 2021.  Lease expense, since the merger, is included in occupancy expense and was $0 and $19,000 for the nine-month periods ended September 30, 2022 and 2021, respectively, and $19,000 for the year ending December 31, 2021.

There are no future minimum lease commitments at September 30, 2022.

11.Revenue from Contracts with Customers

The majority of the Company’s revenue-generating transactions are not subject to ASC Topic 606, including revenue generated from financial instruments, such as loans and investment securities, which are presented in our consolidated statements of operations as components of net interest income. All of the Company’s revenue from contracts with customers in the scope of Topic 606 is recognized within non-interest income.

The following table presents revenues subject to Topic 606:

Three Months Ended September 30, 

Nine Months Ended September 30, 

Three Months Ended June 30, 

Six Months Ended June 30, 

(In thousands)

    

2022

    

2021

    

2022

    

2021

    

2023

    

2022

    

2023

    

2022

Service charges on deposit accounts

$

162

$

149

$

470

$

415

$

141

$

158

$

275

$

308

Debit card interchange and surcharge income

 

186

 

208

 

568

 

651

 

188

 

194

 

371

 

382

Insurance commissions

 

77

 

172

 

375

 

547

 

24

 

101

 

153

 

298

Net gain on sale of Generations Agency

312

312

Loan servicing fees

 

34

 

40

 

141

 

99

 

29

 

72

 

74

 

107

$

459

$

569

$

1,554

$

1,712

$

694

$

525

$

1,185

$

1,095

37

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Service charges on deposit accounts: The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as stop payment charges, wire transfers, and official check charges, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance and inactivity fees, which relate primarily to monthly maintenance and servicing, are recognized at the end of the month in which maintenance occurs. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposit accounts are withdrawn from the customer’s account balance.

Debit card interchange and surcharge income: The Company earns interchange income from debit cardholder transactions conducted through the MasterCard International Inc. payment network. Additionally, ATM surcharges are also assessed on foreign (non-customer) users who use the Company’s ATM network of machines. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and foreign surcharges are a fixed fee per transaction. Both are recognized daily, concurrently with the transaction processing services provided to the cardholder.

Insurance commissions: Regular commissions are earned upon the effective date of bound insurance coverage. They are paid by the insurance carrier and recorded by the Company through a monthly remittance which are subject to the Management Agreement with the Northwoods Corporation (“Northwoods”) which became effective on April 1, 2022. Contingent commissions are based on a contract but are dependent, not only on the level of policies bound with the carrier, but also on loss claim levels experienced through the last day of the year, volume growth, or shrinkage. The Agency’s business is not considered to be significant to the carriers, and many of our insurance carriers are combined under an umbrella with other independent agents, making the contingent commission earned dependent on a

42

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

calculation that includes the experience of others. As such, the level of contingent commissions is not readily determinable until it is paid, but does not have a significant impact on the Company’s financial results.  The Agency’s book of business was purchased by Northwoods on June 1, 2023.

Gain on sale of Generations Agency’s book of business:  Pursuant to the sale of Generations Agency’s book of business to Northwoods on June 1, 2023, a net gain of $312,000 was recognized.  Although the Company financed the transaction there are no performance obligations owed to Northwoods.

Loan servicing fees: The majority of income derived from loans is excluded from the scope of the amended guidance on accounting for revenue from contracts with customers. However, servicing fee revenue is generated in the form of late charges on customer loans. Late fees are transaction-based and are recognized at the point in time that the customer has exceeded the loan payment grace-period and the Company has earned the fee based on loan note. Fees are assessed as a percentage of the past-due loan payment amount.

12.Fair Value Disclosures

Management uses its best judgment in estimating the fair value of the Company’s financial assets and liabilities; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial assets and liabilities, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sale transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective reporting dates and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial assets and liabilities subsequent to the respective reporting dates may be different from the amounts reported at each reporting date.

The Company uses fair value measurements to record fair value adjustments to certain financial assets and liabilities and to determine fair value disclosures. The fair value of a financial asset or liability is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in some instances, there may be no quoted market prices for the Company’s various financial assets and liabilities. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the financial asset or liability.

38

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Fair value measurement guidance established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date of identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported with little or no market activity).

An asset or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. There have been no changes in valuation techniques during the periods ended SeptemberJune 30, 20222023 and December 31, 2021.2022.

43

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparison between the Company’s disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of the Company’s assets and liabilities at SeptemberJune 30, 20222023 and December 31, 2021.2022.

Cash and due from banks: The carrying amounts of cash and due from banks approximate fair values.

Interest-earning deposits: The carrying amounts of interest-earning term deposits held in banks approximate fair values.

Investment securities: The fair values of trading, available-for-sale, held-to-maturity, and equity securities are obtained from an independent third party and are based on quoted prices on a nationally recognized exchange (Level 1), where available. At this time, only the equity securities qualify as a Level 1 valuation. If quoted prices are not available, fair values are measured by utilizing matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2). Management made no adjustment to the fair value quotes that were received from the independent third party pricing service.

Sensitivity of significant unobservable inputs: The following is a description of the sensitivity of significant unobservable inputs, the interrelationships between those inputs and other unobservable inputs used in recurring fair value measurement and how those inputs might magnify or mitigate the effect of changes in the unobservable inputs on the fair value measurement.

Municipal bonds: The significant unobservable inputs used in the fair value measurement of the Company’s municipal bonds are premiums for unrated securities and marketability discounts. Significant increases (decreases) in either of those inputs in isolation would result in a significantly lower (higher) fair value measurement. In general, changes in either of those inputs will not affect the other input. The Company receives scheduled principal and interest payments from the municipalities based on the terms of the bonds.  Management receives valuations on these investments on a quarterly basis from an outside party.  As such, the carrying value is deemed to approximate fair value (Level 3).

Federal Home Loan Bank (“FHLB”) stock: The carrying value of FHLB stock approximates fair value based on the redemption provisions of the FHLB, resulting in a Level 2 classification. There have been no identified events or changes in circumstances that may have a significant adverse effect on the FHLB stock.

39

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Loans receivable: The fair values of loans, excluding impaired loans, are estimated using discounted cash flow analyses, using market rates at the statement of financial condition date that reflect the credit and interest rate risk inherent in the loans, resulting in a Level 3 classification. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. Future cash flows are then discounted using the Bank’s weighted average rate on new loans and thus the resulting fair value represents exit pricing. Generally, for variable rate loans that reprice frequently and with no significant changes in credit risk, fair values are based on carrying values.

ImpairedCollateral-dependent and impaired loans: Impaired loans are those loans in which the Company has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties or discounted cash flows based upon expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value consists of loan balances less their valuation allowances.

Deposits: The fair values disclosed for demand deposits (e.g., interest and non-interest checking) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts), and are therefore classified

44

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

as Level 1. Savings and money market account fair values are based on estimated decay rates and current costs. Fair values for fixed rate certificates of deposit, including brokered deposits, are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits. Due to the inputs necessary to calculate the fair value, savings and time deposits are considered Level 3 valuations that estimate exit pricing.

Accrued interest: The carrying amounts of accrued interest receivable and payable approximate fair value, and due to the short-term (30 days or less) nature of the balances, are considered Level 1.

Long-term borrowingsBorrowings: Fair values of FHLB advances are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar credit risk characteristics, terms and remaining maturity, resulting in a Level 2 classification. These prices obtained from this active market represent a fair value that is deemed to represent the transfer price if the liability were assumed by a third party.

The following table presents a comparison of the carrying amount and estimated fair value of the Company’s financial instruments:

At September 30, 2022

At June 30, 2023

Carrying

Fair

Carrying

Fair

(In thousands)

    

Amount

    

Level 1

    

Level 2

    

Level 3

    

Value

    

Amount

    

Level 1

    

Level 2

    

Level 3

    

Value

Financial assets:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Cash and cash equivalents

$

7,398

$

7,398

$

$

$

7,398

$

5,269

$

5,269

$

$

$

5,269

Interest-bearing time deposits in banks

650

650

650

Interest-earning time deposits in banks

2,260

2,260

2,260

Securities available-for-sale

 

31,628

 

 

29,937

 

1,691

 

31,628

 

31,080

 

 

29,533

 

1,547

 

31,080

Securities held-to-maturity

 

971

 

 

945

 

 

945

 

1,516

 

 

1,258

 

 

1,258

Equity securities

 

283

 

283

 

 

 

283

 

341

 

341

 

 

 

341

Loans receivable, net

 

291,651

 

 

 

284,220

 

284,220

 

315,464

 

 

 

288,716

 

288,716

FHLB stock

 

1,646

 

 

1,646

 

 

1,646

 

1,439

 

 

1,439

 

 

1,439

Accrued interest receivable

 

1,216

 

1,216

 

 

 

1,216

 

1,331

 

1,331

 

 

 

1,331

Financial liabilities:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Deposits

$

308,308

$

96,818

$

$

203,730

$

300,548

$

332,647

$

84,853

$

$

237,098

$

321,951

Short-term borrowings

9,244

9,289

9,289

Long-term borrowings

 

10,496

 

 

14,953

 

 

14,953

 

10,445

 

 

10,403

 

 

10,403

Accrued interest payable

 

55

 

55

 

 

 

55

 

326

 

326

 

 

 

326

4045

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Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

At December 31, 2021

At December 31, 2022

Carrying

Fair

Carrying

Fair

(In thousands)

    

Amount

    

Level 1

    

Level 2

    

Level 3

    

Value

    

Amount

    

Level 1

    

Level 2

    

Level 3

    

Value

Financial assets:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Cash and cash equivalents

$

20,997

$

20,997

$

$

$

20,997

$

8,004

$

8,004

$

$

$

8,004

Interest-bearing time deposits in banks

650

650

650

Securities available-for-sale

 

36,975

 

 

33,965

 

3,010

 

36,975

 

33,050

 

 

31,335

 

1,715

 

33,050

Securities held-to-maturity

 

1,128

 

 

1,150

 

 

1,150

 

1,587

 

 

1,301

 

 

1,301

Equity securities

 

350

 

350

 

 

 

350

 

307

 

307

 

 

 

307

Loans receivable, net

 

278,120

 

 

 

281,502

 

281,502

 

303,880

 

 

 

294,897

 

294,897

FHLB stock

 

1,450

 

 

1,450

 

 

1,450

 

1,740

 

 

1,740

 

 

1,740

Accrued interest receivable

 

1,249

 

1,249

 

 

 

1,249

 

1,304

 

1,304

 

 

 

1,304

Financial liabilities:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Deposits

$

312,049

$

94,709

$

$

219,261

$

313,970

$

317,678

$

92,745

$

$

211,598

$

304,343

Short-term borrowings

 

16,200

 

 

16,311

 

 

16,311

Long-term borrowings

 

17,760

 

 

21,985

 

 

21,985

 

10,334

 

 

15,081

 

 

15,081

Accrued interest payable

 

35

 

35

 

 

 

35

 

162

 

162

 

 

 

162

The following tables summarize assets measured at fair value on a recurring basis, segregated by the level of valuation inputs within the hierarchy utilized to measure fair value:

At September 30, 2022

At June 30, 2023

Total Fair

Total Fair

(In thousands)

    

Level 1

    

Level 2

    

Level 3

    

Value

    

Level 1

    

Level 2

    

Level 3

    

Value

Securities available-for-sale:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Debt investment securities:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Residential mortgage-backed - US agency and GSEs

$

$

26

$

$

26

$

$

22

$

$

22

Corporate bonds

17,645

17,645

16,535

16,535

Municipal bonds

 

 

12,266

 

1,691

 

13,957

 

 

12,976

 

1,547

 

14,523

Equity investment securities:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Large cap equity mutual fund

 

35

 

 

 

35

 

42

 

 

 

42

Other mutual funds

 

248

 

 

 

248

 

299

 

 

 

299

Total investment securities

$

283

$

29,937

$

1,691

$

31,911

$

341

$

29,533

$

1,547

$

31,421

At December 31, 2021

At December 31, 2022

Total Fair

Total Fair

(In thousands)

    

Level 1

    

Level 2

    

Level 3

    

Value

    

Level 1

    

Level 2

    

Level 3

    

Value

Securities available-for-sale:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Debt investment securities:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Residential mortgage-backed - US agency and GSEs

$

$

33

$

$

33

$

$

24

$

$

24

Corporate bonds

18,043

18,043

18,194

18,194

Municipal bonds

 

 

15,889

 

3,010

 

18,899

 

 

13,117

 

1,715

 

14,832

Equity investment securities:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Large cap equity mutual fund

 

45

 

 

 

45

 

37

 

 

 

37

Other mutual funds

 

305

 

 

 

305

 

270

 

 

 

270

Total investment securities

$

350

$

33,965

$

3,010

$

37,325

$

307

$

31,335

$

1,715

$

33,357

4146

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Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The changes in Level 3 assets measured at estimated fair value on a recurring basis during the periods noted:

    

Investment

    

Investment

(In thousands)

Securities

Securities

Balance - December 31, 2021

$

3,010

Total losses realized/unrealized:

 

  

Included in other comprehensive loss

 

(207)

Purchases

 

85

Balance - December 31, 2022

$

1,715

Total gains realized/unrealized:

 

  

Included in other comprehensive income

 

130

Principal payments/maturities

 

(1,197)

 

(298)

Balance - September 30, 2022

$

1,691

Balance - March 31, 2023

$

1,547

    

Investment

    

Investment

(In thousands)

Securities

Securities

Balance - December 31, 2020

$

3,174

Balance - December 31, 2021

$

3,010

Total gains realized/unrealized:

 

  

 

  

Included in other comprehensive income

 

170

 

(236)

Purchases

 

826

 

85

Principal payments/maturities

 

(1,141)

 

(1,007)

Balance - September 30, 2021

$

3,029

Balance - June 30, 2022

$

1,852

Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

The following tables summarize assets measured at fair value on a nonrecurring basis segregated by the level of valuation inputs within the hierarchy utilized to measure fair value:

At September 30, 2022

At June 30, 2023

Total Fair

Total Fair

(In thousands)

    

Level 1

    

Level 2

    

Level 3

    

Value

    

Level 1

    

Level 2

    

Level 3

    

Value

Impaired loans

$

$

$

$

Collateral-dependent loans

$

$

$

231

$

231

Foreclosed real estate & repossessed assets

 

 

 

69

 

69

 

 

 

271

 

271

At December 31, 2021

At December 31, 2022

Total Fair

Total Fair

(In thousands)

    

Level 1

    

Level 2

    

Level 3

    

Value

    

Level 1

    

Level 2

    

Level 3

    

Value

Impaired loans

$

$

$

260

$

260

$

$

$

$

Foreclosed real estate & repossessed assets

 

 

 

27

 

27

 

 

 

12

 

12

There have been no transfers of assets in or out of any fair value measurement level.

4247

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Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table presents additional quantitative information about assets measured at fair value on a recurring  basis and for which Level 3 inputs were used to determine fair value:  

Quantitative Information about Level 3 Fair Value Measurements

    

Valuation

    

Unobservable

    

Range

Techniques

Input

(Weighted Avg.)

Investment type-

Other Investments

Scheduled principal

Cost to Sell

0%

and interest payments

Carrying value

100%

The following table presents quantitative information about Level 3 fair value measurements for assets measured at fair value on a nonrecurring basis at SeptemberJune 30, 20222023 and December 31, 2021:2022:

Quantitative Information about Level 3 Fair Value Measurements

Valuation

Unobservable

Range

    

Techniques

    

Input

    

(Weighted Avg.)

ImpairedCollateral-dependent and impaired loans -

    

Appraisal of collateral

    

Appraisal Adjustments

    

  5%  - 35%  (20)%

One-to four-family residential

 

  

 

Costs to Sell

 

  5%  - 15% (10)%

 

  

 

  

 

  

ImpairedCollateral-dependent and impaired loans -

 

Appraisal of collateral

 

Appraisal Adjustments

 

  5%  - 35%  (25)%

Commercial business

 

  

 

Changes in property condition

 

10%  - 20% (15)%

  

 

Costs to Sell

 

  5%  - 15% (10)%

 

  

 

  

 

  

Foreclosed real estate and repossessed assets

 

Appraisal of collateral

 

Appraisal Adjustments

 

  5%  - 35%  (25)%

 

  

 

Changes in property condition

 

10%  - 20% (15)%

 

  

 

Costs to Sell

 

  5%  - 15% (10)%

ImpairedCollateral-dependent loans: At the time a loan is considered impaired, it is valued at the lower of cost or fair value. ImpairedCollateral-dependent loans carried at fair value generallyhave been partially charged-off or receive a specific valuationallocations of the allowance for credit losses. The Company evaluates and values collateral-dependent impaired loans at the time the loan losses. Foris identified as impaired, and the fair values of such loans are estimated using Level 3 inputs in the fair value hierarchy. Each loan’s collateral dependent loans,value has a unique appraisal and management’s discount of the value is based on the factors unique to each impaired loan. The significant unobservable input in determining the fair value is commonly basedmanagement’s subjective discount on recent real estate appraisals.appraisals of the collateral securing the loan. In addition, a discount is typically applied to account for estimated costs to sell. These real estate appraisals may include up to three approaches to value: the sales comparison approach, the income approach (for income-producing property) and the cost approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available, if applicable. Although the fair value of the property normally will be based on an appraisal, the valuation should be consistent with the price that a market participant will pay to purchase the property at the measurement date. Circumstances may exist that indicate that the appraised value is not an accurate measurement of the property’s current fair value. Examples of such circumstances include changed economic conditions since the last appraisal, stale appraisals, or imprecision and subjectivity in the appraisal process. Appraisal adjustments may be made by management to reflect these conditions resulting in a discount of the appraised value. In addition, a discount is typically applied to account for estimated costs to sell. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuations, and management’s expertise and knowledge of the client and client’s business. The methods used to determine the fair values of impaired loans typically result in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

48

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Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Foreclosed real estate & repossessed assets: Assets acquired through foreclosure, transfers in lieu of foreclosure or repossession are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Similar to the impaired

43

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

loan disclosures above, fair value is commonly based on recent real estate appraisals, or estimated value from auction house or qualified dealer, and adjusted as deemed necessary by independent appraisers and management and estimated costs to sell resulting in a level 3 fair value classification. Foreclosed and repossessed assets are evaluated on a monthly basis to determine whether an additional reduction in the fair value less estimated costs to sell should be recorded.

13.Segment Information

The Company has three primary business segments, its community banking franchise, its insurance agency, and a limited-purpose commercial bank.

The community banking segment provides financial services to consumers and businesses principally in the Finger Lakes Region and Orleans County of New York State. These services include providing various types of loans to customers, accepting deposits, mortgage banking, and other traditional banking services. Parent company and treasury function income is included in the community-banking segment, as the majority of effort for these functions is related to this segment. Major revenue sources include net interest income and service fees on deposit accounts. Expenses include personnel and branch-network support charges.

The insurance agency segment offers insurance coverage to businesses and individuals in the Finger Lakes Region. The insurance activities consist of those conducted through the Bank’s wholly owned subsidiary, Generations Agency. The primary revenue source is commissions. Pursuant to a Management Agreement, which became effective on April 1, 2022, personnel and office support charges were assumed by Northwoods. The Agency’s book of business was purchased by Northwoods on June 1, 2023.

The municipal banking segment is a New York State chartered limited-purpose commercial bank formed expressly to enable local municipalities, primarily within the Finger Lakes Region and Northwest New York State, to deposit public funds with the Commercial Bank in accordance with existing NYS municipal law. The Commercial Bank is a wholly owned subsidiary of the Bank. The major revenue source is net interest income. Expenses include rent and support charges for using the assets and technology of the Bank.

Information about the segments is presented in the following tables as of and for the periods as noted:

Three Months Ended September 30, 

2022

2021

Community

Municipal

Community

Municipal

Banking

Insurance

Banking

Banking

Insurance

Banking

(In thousands)

    

Activities

    

Activities

    

Activities

    

Total

    

Activities

    

Activities

    

Activities

    

Total

Net interest income

$

2,865

$

$

66

$

2,931

$

3,074

$

$

61

$

3,135

Provision for loan losses

 

181

 

 

 

181

 

135

 

 

 

135

Net interest income after provision for loan losses

 

2,684

 

 

66

 

2,750

 

2,939

 

 

61

 

3,000

Total noninterest income

 

414

 

76

 

 

490

 

500

 

171

 

 

671

Compensation and benefits

 

(1,245)

 

 

 

(1,245)

 

(1,251)

 

(90)

 

 

(1,341)

Other noninterest expense

 

(1,606)

 

(2)

 

(21)

 

(1,629)

 

(2,048)

 

(44)

 

(32)

 

(2,124)

Income before income tax expense

 

247

 

74

 

45

 

366

 

140

 

37

 

29

 

206

Income tax expense

 

58

 

 

8

 

66

 

28

 

 

5

 

33

Net income

$

189

$

74

$

37

$

300

$

112

$

37

$

24

$

173

4449

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Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Nine Months Ended September 30, 

2022

2021

Community

Municipal

Community

Municipal

Banking

Insurance

Banking

Banking

Insurance

Banking

(In thousands)

    

Activities

    

Activities

    

Activities

    

Total

    

Activities

    

Activities

    

Activities

    

Total

    

Net interest income

$

8,457

$

$

191

$

8,648

$

8,719

$

$

188

$

8,907

Provision for loan losses

 

481

 

 

 

481

 

405

 

 

 

405

Net interest income after provision for loan losses

 

7,976

 

 

191

 

8,167

 

8,314

 

 

188

 

8,502

Total noninterest income

 

1,304

 

369

 

 

1,673

 

1,448

 

555

 

 

2,003

Compensation and benefits

 

(3,538)

 

(105)

 

 

(3,643)

 

(3,661)

 

(281)

 

 

(3,942)

Other noninterest expense

 

(4,852)

 

(35)

 

(61)

 

(4,948)

 

(5,273)

 

(110)

 

(94)

 

(5,477)

Income before income tax expense (benefit)

 

890

 

229

 

130

 

1,249

 

828

 

164

 

94

 

1,086

Income tax expense (benefit)

 

186

 

 

22

 

208

 

173

 

 

18

 

191

Net income

$

704

$

229

$

108

$

1,041

$

655

$

164

$

76

$

895

Information about the segments is presented in the following tables as of and for the periods as noted:

Three Months Ended June 30, 

2023

2022

Community

Municipal

Community

Municipal

Banking

Insurance

Banking

Banking

Insurance

Banking

(In thousands)

    

Activities

    

Activities

    

Activities

    

Total

    

Activities

    

Activities

    

Activities

    

Total

Net interest income

$

2,220

$

$

19

$

2,239

$

2,757

$

$

65

$

2,822

Provision for loan losses

 

165

 

 

 

165

 

150

 

 

 

150

Net interest income after provision for loan losses

 

2,055

 

 

19

 

2,074

 

2,607

 

 

65

 

2,672

Total noninterest income

 

766

 

22

 

 

788

 

469

 

98

 

 

567

Compensation and benefits

 

(1,338)

 

 

 

(1,338)

 

(1,144)

 

(19)

 

 

(1,163)

Other noninterest expense

 

(1,714)

 

(1)

 

(21)

 

(1,736)

 

(1,642)

 

(3)

 

(19)

 

(1,664)

(Loss) Income before income tax (benefit) expense

 

(231)

 

21

 

(2)

 

(212)

 

290

 

76

 

46

 

412

Income tax (benefit) expense

 

(46)

 

 

 

(46)

 

60

 

 

7

 

67

Net (loss) income

$

(185)

$

21

$

(2)

$

(166)

$

230

$

76

$

39

$

345

Six Months Ended June 30, 

2023

2022

Community

Municipal

Community

Municipal

Banking

Insurance

Banking

Banking

Insurance

Banking

(In thousands)

    

Activities

    

Activities

    

Activities

    

Total

    

Activities

    

Activities

    

Activities

    

Total

    

Net interest income

$

4,685

$

$

78

$

4,763

$

5,592

$

$

125

$

5,717

Provision for loan losses

 

330

 

 

 

330

 

300

 

 

 

300

Net interest income after provision for loan losses

 

4,355

 

 

78

 

4,433

 

5,292

 

 

125

 

5,417

Total noninterest income

 

1,215

 

149

 

 

1,364

 

890

 

293

 

 

1,183

Compensation and benefits

 

(2,746)

 

 

 

(2,746)

 

(2,293)

 

(105)

 

 

(2,398)

Other noninterest expense

 

(3,413)

 

(1)

 

(41)

 

(3,455)

 

(3,246)

 

(33)

 

(40)

 

(3,319)

(Loss) Income before income tax (benefit) expense

 

(589)

 

148

 

37

 

(404)

 

643

 

155

 

85

 

883

Income tax (benefit) expense

 

(94)

 

 

8

 

(86)

 

128

 

 

14

 

142

Net (loss) income

$

(495)

$

148

$

29

$

(318)

$

515

$

155

$

71

$

741

50

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following represents a reconciliation of the Company’s reported segment assets:

    

    

At September 30, 

At December 31,

At June 30, 

At December 31, 

(In thousands)

    

2022

    

2021

    

2023

    

2022

 

 

Total assets for reportable segments

$

389,785

$

395,225

$

411,373

$

402,776

Elimination of intercompany balances

 

(16,173)

 

(16,276)

 

(16,431)

 

(16,483)

Consolidated total assets

$

373,612

$

378,949

$

394,942

$

386,293

The accounting policies of each segment are the same as those described in the summary of significant accounting policies.

14. Recently Issued Accounting Pronouncements

ASU No. 2016-13

In September 2016, theThe FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments.” This2023-03, which amends or supersedes various SEC paragraphs within the Codification to conform to past SEC announcements and guidance issued by the SEC. The ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

In issuing the standard, the FASB is responding to criticism that today’s guidance delays recognition of credit losses. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held-to-maturity securities, loan commitments, and financial guarantees.

The CECL model does not applyprovide any new guidance so there is no transition or effective date associated with it and it was not expected to available-for-sale (“AFS”) debt securities. For AFS debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. As a result, entities will

45

Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

recognize improvements to estimated credit losses immediately in earnings rather than as interest income over time, as they do today.

The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. In addition, entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination.

ASU No. 2016-13 is effective for public business entities that are U.S. Securities and Exchange Commission (“SEC”) filers for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For SEC filers that are Smaller Reporting Companies, such as the Company, all other public business entities, and other non-public entities, the amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., modified retrospective approach). The Company is currently evaluating thehave any significant impact of these amendments toon the Company’s consolidated financial positionstatements for the three and results of operations and will hire a vendorsix months ended June 30, 2023, or subsequent to assist with expected credit loss projections. these consolidated financial statements.

15. Goodwill

The Allowance for Loan Losses (“ALL”) estimate is material to the Company and given the change from an incurred loss model to a methodology that considers the credit loss over the life of the loan, there is the potential for an increase in the ALL at adoption date. The Company is anticipating a significant change in the processes and procedures to calculate the ALL, including changes in assumptions and estimates to consider expected credit losses over the lifecarrying amount of the loan versus the current accounting practice that utilizes the incurred loss model. In addition, the current accounting policy and proceduresgoodwill for the other-than-temporary impairment on available-for-sale securities will be replaced with an allowance approach. The Company continues to collect and retain historical loan and credit data. The Companysix months ended June 30, 2023 is in the process of identifying data gaps. The Board of Directors is informed of ongoing CECL developments. For additional information on the allowance for loan losses, see Notes 5 and 6 to these condensed consolidated financial statements.

ASU No. 2022-02

In March 2022, the FASB issued ASU No. 2022-02, amendments related to Troubled Debt Restructurings (TDRs) for all entities after they adopt 2016-13 and amendments related to vintage disclosures that affect public business entities with investments in financing receivables, under Financial Instruments-Credit Losses (Topic 326).  The amendments in the accounting guidance for TDRs by credits eliminates the recognition and measurement guidance for TDRs in Subtopic 310-40. The effective dates for the amendments in this Update are the same as the effective dates in Update 2016-13.  The amendments in this update should be applied prospectively, except for the transition method related to the recognition and measurement of TDRs, an entity as the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption.

ASU No. 2022-03

In June 2022, the FASB issued ASU No. 2022-03, to update guidance intended to increase the comparability of financial information across reporting entities that have investments in equity securities measured at fair value that are subject to contractual restrictions preventing the sale of those securities.  The updated guidance clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, as a result, should not be considered in measuring fair value.  In addition, new disclosures are required about the nature of the restrictions and their remaining duration.  The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2023, with early adoption permitted.  The Company does not expect the adoption of this guidance to impact its condensed consolidated financial statements.

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Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statementsfollows:

(Unaudited)

Generations

(In thousands)

Agency, Inc

Balance as of December 31, 2022

Goodwill

$

792

792

Goodwill written off related to sale of business unit

(792)

Balance as of June 30, 2023

$

15.16. Subsequent Events

The Company has evaluated subsequent events through November 4, 2022,August 3, 2023, which is the date the consolidated financial statements were issued.

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ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

Management’s discussion and analysis of the financial condition and results of operations at and for the three and ninesix months ended SeptemberJune 30, 20222023 and 20212022 is intended to assist in understanding the financial condition and results of operations of the Company.  The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto, appearing on Part I, Item 1 of this quarterly report on Form 10-Q.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and words of similar meaning. These forward-looking statements include, but are not limited to:

statements of our goals, intentions and expectations;
statements regarding our business plans, prospects, growth and operating strategies;
statements regarding the asset quality of our loan and investment portfolios; and
estimates of our risks and future costs and benefits.

These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

conditions relating to the Covid-19 pandemic, including the severity and duration of the associated economic slowdown either nationally or in our market area, that are worse than expected;
general economic conditions, either nationally or in our market areas, that are worse than expected;
changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses;
government-imposed limitations on our ability to foreclose on or repossess collateral for our loans;
government-mandated forbearance programs;
the success of our consumer loan portfolio, much of which is purchased from third-party originators, and is secured by collateral outside of our market area, including in particular, automobile, recreational vehicle and manufactured home loans,
our ability to access cost-effective funding, including by increasing core deposits and reducing reliance on wholesale funds;
fluctuations in real estate values in both residential and commercial real estate market conditions;

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demand for loans and deposits in our market area;

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our ability to implement and change our business strategies;
the performance and availability of purchased loans;
competition among depository and other financial institutions;
inflation and changes in the interest rate environment that reduce our margins and yields, the fair value of financial instruments, or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make;
adverse changes in the securities or secondary mortgage markets;
changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements, including as a result of Basel III;
the impact of the Dodd-Frank Act and the implementing regulations;
changes in the quality or composition of our loan or investment portfolios;
technological changes that may be more difficult or expensive than expected;
the inability of third-party providers to perform as expected, including third-party loan originators;
our ability to manage market risk, credit risk, and operational risk in the current economic environment;
our ability to enter new markets successfully and capitalize on growth opportunities;
our ability to successfully integrate into our operations any assets, liabilities, customers, systems, and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto;
changes in consumer spending, borrowing, and savings habits;
changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission, or the Public Company Accounting Oversight Board;
our ability to retain key employees;
our compensation expense associated with equity allocated or awarded to our employees; and
changes in the financial condition, results of operations, or future prospects of issuers of securities that we own.

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.  

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Critical Accounting Policies

There are no material changes to the critical accounting policies disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021.  2022 except as noted in Note 1 to this Form 10-Q for the adoption of the CECL accounting standard.

The information for the three and ninesix months ended SeptemberJune 30, 20222023 and 20212022 is unaudited, but reflects all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. The results of operations for the three and ninesix months ended SeptemberJune 30, 20222023 are not necessarily indicative of the results to be achieved for the remainder of the year ending December 31, 20222023 or any other period.

Emerging Growth Company Status

The Company qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as the Company is an emerging growth company, it may choose to take advantage of exemptions from various reporting requirements applicable to other public companies. An emerging growth company may elect to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies, but must make such election when the company is first required to file a registration statement. The Company has elected to use the extended transition period described above and intends to maintain its emerging growth company status as allowed under the JOBS Act.

Comparison of Financial Condition at SeptemberJune 30, 20222023 and December 31, 20212022

Total Assets. Total assets decreased $5.3increased $8.6 million, or 1.4%2.2%, to $373.6$394.9 million at SeptemberJune 30, 20222023 from $378.9$386.3 million at December 31, 2021.2022.  The decreaseincrease resulted primarily from increases in net loans of $11.6 million, interest earning time deposits in banks of $2.3 million, and pension plan assets of $724,000, partially offset by decreases in cash and cash equivalents of $13.6$2.7 million, and investment securities available-for-sale of $5.3 million, partially offset by increases in net loans of $13.5$2.0 million, and pension plan assetsgoodwill of $1.1 million.  

Cash and Cash Equivalents.  Cash and cash equivalents decreased $13.6 million, or 64.8%, to $7.4 million at September 30, 2022 from $21.0 million at December 31, 2021 as a result of increased loan originations along with a decrease in total deposits and repayments of our long-term FHLB advances.

Investment Securities Available-for-sale. Investment securities available-for-sale decreased $5.3 million, or 14.5%, to $31.6 million at September 30, 2022 from $37.0 million at December 31, 2021.  The decrease in investment securities available-for-sale was primarily attributable to a $6.7 million decrease in the fair market value and bond maturities and principal repayments of $1.2 million, partially offset by the purchase of $2.8 million of bonds.$792,000.  

Net Loans. Net loans increased $13.5$11.6 million, or 4.9%3.8%, to $291.7$315.5 million at SeptemberJune 30, 20222023 from $278.1$303.9 million at December 31, 2021.2022. The increase resulted from increases in one- to four-family residential real estate loans of $16.2$11.5 million, or 14.3%8.3%, commercial business loans of $3.7 million, or 31.4%, other consumer loans of $752,000, or 10.5%, manufactured home loans of $2.2 million,$695,000, or 4.6%1.4%, other consumer loans of $2.0 million, or 36.0%,and home equity loans and junior lienslines of $1.5 million,credit of $320,000, or 15.8%, and automobile loans of $1.2 million, or 5.2%2.8%, partially offset by decreases in nonresidential loans of $4.3 million, or 20.1%, commercial business loans of $2.7 million, or 21.6%, and recreational vehicle loans of $2.5$1.9 million, or 8.3%7.1%, nonresidential loans of $1.7 million, or 10.1%, automobile loans of $591,000, or 2.4%, construction loans of $387,000, or 100.0%, student loans of $109,000, or 6.1%, and multi-family loans of $10,000, or 1.2%.  

Net deferred fees increased $407,000,decreased $381,000, or 2.6%2.4%, during the ninesix months ended SeptemberJune 30, 2022,2023, representing primarily fees paid for purchased loans net of amortization, which is over the estimated loan lives.

Consistent with our business strategy, we intend to continue the purchase and origination of residential mortgage, automobile, and manufactured home and recreational vehicle loans. During the ninesix months ended SeptemberJune 30, 2022,2023, we purchased $22.1$16.3 million of residential mortgage loans, $9.2$4.7 million of automobile loans, $6.5and $3.7 million of manufactured home loans,loans.

Interest Earning Time Deposits in Banks.  Interest earning time deposits in banks increased to $2.3 million at June 30, 2023 from $0 at December 31, 2022. Excess cash was invested in short-term certificates of deposit at other financial institutions in order to maximize the yield on interest earning deposits.

Pension Plan Assets.  Pension plan assets increased $724,000, or 6.8%, to $11.4 million at June 30, 2023 from $10.7 million at December 31, 2022. The increase resulted from estimated returns on pension assets of $792,000 and $1.8 millionemployer contributions of recreational vehicle loans.$361,000, partially offset by estimated benefits paid of $126,000 and interest costs of $302,000.

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Pension Plan Assets.Cash and Cash Equivalents.  Pension plan assets increased $1.1Cash and cash equivalents decreased $2.7 million, or 9.8%34.2%, to $12.2$5.3 million at SeptemberJune 30, 20222023 from $11.1$8.0 million at December 31, 2021.2022 as a result of increased loan originations along with repayments of FHLB advances.

Investment Securities Available-for-Sale.  Investment securities available-for-sale decreased $2.0 million, or 6.0%, to $31.1 million at June 30, 2023 from $33.1 million at December 31, 2022. The increase resulted from estimated returns on pension assetsdecrease in investment securities available-for-sale was primarily attributable to calls and principal repayments of $1.5$3.1 million, and employer contributions of $328,000, partially offset by estimated benefits paidpurchases of $349,000$879,000 and interest costsa $243,000 increase in fair market value.

Goodwill.  Goodwill decreased $792,000 to $0 at June 30, 2023 from $792,000 at December 31, 2022 as a result of $390,000.the sale of Generations Agency’s book of business to Northwoods on June 1, 2023. Further detail regarding the treatment of goodwill is included in Note 15 of the interim condensed consolidated financial statements.

Deposits.  Deposits decreased $3.7increased $15.0 million, or 1.2%4.7%, to $308.3$332.6 million at SeptemberJune 30, 20222023 from $312.0$317.7 million at December 31, 2021.2022. Interest-bearing accounts decreased $3.9increased $19.1 million, or 1.5%7.2%, to $250.6$282.1 million at SeptemberJune 30, 20222023 from $254.5$263.1 million at December 31, 2021.2022.  The largest decreaseincrease in interest-bearing deposits was in savings accountscertificates of deposit which decreased $5.7increased $35.6 million, or 5.2%33.6%, to $104.6$141.4 million at SeptemberJune 30, 20222023 from $110.3$105.8 million at December 31, 2021. Certificates2022 as customers shifted funds from lower yielding core deposit accounts into higher yielding certificate of deposit specials. Savings accounts decreased $1.2$7.2 million, or 1.6%7.7%, to $74.5$85.5 million at SeptemberJune 30, 20222023 from $75.7$92.6 million at December 31, 2021 due to an increase in non-renewal of2022. Money market accounts at maturity. Conversely, interest-bearing checking accounts increased $3.0decreased $5.6 million, or 8.0%21.0%, to $40.1$20.9 million at SeptemberJune 30, 20222023 from $37.2$26.5 million at December 31, 2021. Money market2022. Interest-bearing checking accounts increased $51,000,decreased $3.8 million, or 0.2%9.9%, to $31.4$34.3 million at SeptemberJune 30, 20222023 from $31.3$38.1 million at December 31, 2021.2022. Noninterest-bearing deposits increased $140,000,decreased $4.1 million, or 0.2%7.5%, to $57.7$50.5 million at SeptemberJune 30, 20222023 from $57.5$54.6 million at December 31, 2021.2022.    

Municipal deposits held at Generations Commercial Bank increased $1.7 million, or 26.3%21.8%, to $8.0$9.3 million at SeptemberJune 30, 20222023 from $6.3$7.6 million at December 31, 2021.2022.

Federal Home Loan Bank Advances. Short-term Federal Home Loan Bank advances increaseddecreased $7.0 million, or 42.9%, to $13.6$9.2 million at SeptemberJune 30, 2023 from $16.2 million at December 31, 2022 as a result of increased loan originations during the first nine months of 2022 along with a decrease in total deposits.repayments. Long-term Federal Home Loan Bank advances decreased $7.3 million,increased $111,000, or 40.9%1.1%, to $10.5$10.4 million at SeptemberJune 30, 20222023 from $17.8$10.3 million at December 31, 20212022 as a result of repayments.$3.0 million in new advances partially offset by repayments of $2.9 million.

Total Equity. Total equity decreased $5.8 million,$402,000, or 13.4%1.1%, to $37.7$36.9 million at SeptemberJune 30, 20222023 from $43.5$37.3 million at December 31, 2021.2022.  The decrease was primarily due to an increasea $427,000 decrease as a result of stock repurchases in addition to a net loss of $318,000, partially offset by a decrease in accumulated other comprehensive loss of $5.3 million$255,000 as a result of a decreasean increase in the fair market value of our investment securities available-for-sale and a decrease of $1.6 million due to stock repurchases, offset in part by net income of $1.0 million during the ninesix months ended SeptemberJune 30, 2022.2023.

Comparison of Operating Results for the Three Months Ended SeptemberJune 30, 20222023 and 20212022

General.  Net incomeloss for the three months ended SeptemberJune 30, 20222023 was $300,000$166,000 as compared to $173,000net income of $345,000 for the three months ended SeptemberJune 30, 2021, an increase2022, a decrease of $127,000,$511,000, or 73.4%148.1%.  The increasedecrease was due to a $591,000 decrease in noninterest expense, partially offset by a $204,000$583,000 decrease in net interest income, a $181,000 decrease$247,000 increase in noninterest income,expense, and a $46,000$15,000 increase in provision for loancredit losses, partially offset by a $221,000 increase in noninterest income and a $33,000 increase$113,000 decrease in income tax expense.

Interest and Dividend Income.  Interest and dividend income decreased $217,000,increased $687,000, or 6.2%21.7%, to $3.3$3.9 million for the three months ended SeptemberJune 30, 20222023 from $3.5$3.2 million for the three months ended SeptemberJune 30, 2021.2022.  This decreaseincrease was primarily attributable to a $238,000 decrease$587,000 increase in interest on loans receivable partially offset by an increase in interest on interest-earning deposits of $11,000 and a net increase of $15,000$89,000 in interest on investment securities.  The average balance of loans decreased $3.2increased $36.8 million, or 1.1%13.4%, to $286.1$311.5 million for the three months ended SeptemberJune 30, 20222023 from $289.2$274.7 million for the three months ended SeptemberJune 30, 2021.2022.  The average yield on loans decreased 28increased 26 basis points to 4.21% for the 2022 period from 4.49% for the 2021 period, reflecting a decrease in higher-yielding loans in addition to an increase in amortization of deferred loan costs period over period.  The average balance of investment securities decreased $3.4 million, or 9.0%, to $34.6 million4.44% for the three months ended SeptemberJune 30, 20222023 from $38.0 million4.18% for the three months ended SeptemberJune 30, 2021. The average yield on investment securities increased 44 basis points to 3.12% for the 2022, period from 2.68% for the 2021 period due to purchases of $23.6 millionreflecting an increase in higher-yielding corporate bonds throughout 2021.

Interest Expense.  Total interest expense decreased $13,000, or 3.3%, to $383,000 for the three months ended September 30, 2022 from $396,000 for the three months ended September 30, 2021.  Interest expense on total interest-bearing deposits increased $4,000, or 1.3%, to $304,000 for the three months ended September 30, 2022 from $300,000 for the three months ended September 30, 2021.  The increase was primarily attributable to an increase ofloans quarter over quarter as well as higher market

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$314,000,interest rates.  The average balance of investment securities decreased $3.1 million, or 0.3%8.6%, to $33.4 million for the three months ended June 30, 2023 from $36.6 million for the three months ended June 30, 2022. The average yield on investment securities increased 132 basis points to 4.05% for the 2023 period from 2.73% for the 2022 period due to rising interest rates and lower premium amortization expense during the three months ended June 30, 2023.

Interest Expense.  Total interest expense increased $1.3 million, or 366.0%, to $1.6 million for the three months ended June 30, 2023 from $347,000 for the three months ended June 30, 2022.  Interest expense on total interest-bearing deposits increased $1.1 million, or 403.6%, to $1.4 million for the three months ended June 30, 2023 from $279,000 for the three months ended June 30, 2022.  The increase was attributable to an increase of $57.9 million, or 76.8%, in the average balance of savingscertificate of deposit accounts to $110.6$133.4 million for the three months ended SeptemberJune 30, 20222023 from $110.3$75.5 million for the three months ended SeptemberJune 30, 2021,2022, in addition to an increase in the average cost of one298 basis pointpoints to 0.42%3.61% for the three months ended SeptemberJune 30, 20222023 from 0.41%0.63% for the same period in 2021.  Furthermore,2022.  Interest expense on borrowings increased $144,000, or 211.8%, to $212,000 for the three months ended June 30, 2023 from $68,000 for the three months ended June 30, 2022, as a result of an increase in the average borrowing costs of 213 basis points to 3.96% for the three months ended June 30, 2023 from 1.83% for the three months ended June 30, 2022 due to rising interest rates. The average balance of money market accountsborrowings increased $2.4$6.6 million, or 8.0%44.2%, to $32.1$21.4 million for the three months ended SeptemberJune 30, 20222023 from $29.7$14.8 million for the three months ended SeptemberJune 30, 2021. Interest expense on borrowings decreased $17,000, or 17.7%, to $79,000 for the three months ended September 30, 2022 from $96,000 for the three months ended September 30, 2021, as a result of a decrease in the average balance of borrowings of $5.4 million, or 26.4%, to $15.2 million for the three months ended September 30, 2022 from $20.6 million for the three months ended September 30, 2021. Average borrowing costs increased 22 basis points to 2.08% for the three months ended September 30, 2022 from 1.86% for the three months ended September 30, 2021 due to rising interest rates.2022.

Net Interest Income.  Net interest income decreased $204,000,$583,000, or 6.5%20.7%, to $2.9$2.2 million for the three months ended SeptemberJune 30, 20222023 from $3.1$2.8 million for the three months ended SeptemberJune 30, 2021.2022.  Our net interest rate spread decreased 13108 basis points to 3.51%2.23% for the three months ended SeptemberJune 30, 20222023 from 3.64%3.31% for the three months ended SeptemberJune 30, 2021.2022.  Our net interest margin decreased 1385 basis points to 3.59%2.56% for the three months ended SeptemberJune 30, 20222023 from 3.72%3.41% for the same period in 2021.2022.  Net interest rate spread and net interest margin were affected primarily by the decreaseincrease in yield on interest-earning assetsthe cost of our interest-bearing liabilities between the comparable periods.periods as these liabilities repriced faster than our interest-earning assets.

Provision for LoanCredit Losses.  Based on management’s analysis of the allowance for loancredit losses described in Note 6 of our interim consolidated financial statements “Allowance for LoanCredit Losses,” we recorded a provision for loancredit losses of $181,000$165,000 for the three months ended SeptemberJune 30, 20222023 as compared to a provision for loan losses of $135,000$150,000 for the three months ended SeptemberJune 30, 2021.2022.  The allowance for loancredit losses was $2.3$2.8 million, or 0.84%0.92%, of total loans at SeptemberJune 30, 20222023 as compared to $1.8$2.5 million, or 0.70%0.86%, of total loans at December 31, 2021.2022. The increase in provision for loancredit losses for the 20222023 period was primarily due to increases in reserves allocated to other consumer loans as a result ofoverall growth in the portfolio in addition to recreational vehicle and student loans as a result of higher economic reserve factors applied due to the current economic outlook and resultant increases in delinquent and substandard loans.loan portfolio.

Noninterest Income.  Noninterest income decreased $181,000,increased $221,000, or 27.0%39.0%, to $490,000$788,000 for the three months ended SeptemberJune 30, 20222023 from $671,000$567,000 for the three months ended SeptemberJune 30, 2021.2022.  The increase was primarily due a net gain of $312,000 recognized from the sale of Generations Agency’s book of business and an increase in fair value on equity securities, partially offset by decreases in insurance commissions and banking fees and service charges.  Change in fair value on equity securities increased $65,000, or 166.7%, to $26,000 for the three months ended June 30, 2023 from a loss of $39,000 for the three months ended June 30, 2022 due to an increase in the fair market value of our equity securities. Insurance commissions decreased $77,000, or 76.2%, to $24,000 for the three months ended June 30, 2023 from $101,000 for the three months ended June 30, 2022 due to the sale of Generations Agency’s book of business to Northwoods on June 1, 2023. Banking fees and service charges decreased $63,000, or 14.8%, to $364,000 for the three months ended June 30, 2023 from $427,000 for the three months ended June 30, 2022 due to fewer loan recapture fees and loan prepayment penalties as well as fewer non-sufficient funds fees for the three months ended June 30, 2023 as compared to the same period in 2022.

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Noninterest Expense.  Noninterest expense increased $247,000, or 8.7%, to $3.1 million for the three months ended June 30, 2023 from $2.8 million for the three months ended June 30, 2022 primarily due to increases in compensation and benefits and other expenses partially offset by a decrease in service charges. Compensation and benefits increased $175,000, or 15.1%, to $2.7 million for the three months ended June 30, 2023 from $2.4 million for the three months ended June 30, 2022 as a result of a decrease in pension expense benefit as well as an increase in equity incentive plan expenses related to stock awards and stock options granted to senior management in June 2022. Other expenses increased $103,000, or 37.7%, to $376,000 for the three months ended June 30, 2023 from $273,000 for the three months ended June 30, 2022 as a result of an increase in other real estate owned expense along with an increase in directors’ fees as a result of changes in the fair market value of the directors retirement plans. Service charges decreased $115,000, or 21.7%, to $416,000 for the three months ended June 30, 2023 from $531,000 for the three months ended June 30, 2022 as a result of discounts recognized from the renewal of our core processing contract.

Income Taxes.  Income tax expense decreased $113,000, or 168.7%, to an income tax benefit of $46,000 for the three months ended June 30, 2023 as compared to income tax expense of $67,000 for the three months ended June 30, 2022. The effective tax rate was 21.7% for the three months ended June 30, 2023 as compared to 16.3% for the three months ended June 30, 2022. The statutory tax rate was impacted by the benefits derived from tax-exempt bond income, as well as income received on bank-owned life insurance. The increase in the current quarter’s effective tax rate was a result of an increase in permanent tax differences and state tax expense proportional to total income, which was a loss for the three months ended June 30, 2023.

Comparison of Operating Results for the Six Months Ended June 30, 2023 and 2022

General.  Net loss for the six months ended June 30, 2023 was $318,000 as compared to net income of $741,000 for the six months ended June 30, 2022, a decrease of $1.1 million, or 142.9%.  The decrease was due to a $954,000 decrease in net interest income, a $484,000 increase in noninterest expense, and a $30,000 increase in provision for credit losses, partially offset by a $181,000 increase in noninterest income and a $228,000 decrease in income tax expense.

Interest and Dividend Income.  Interest and dividend income increased $1.2 million, or 18.9%, to $7.6 million for the six months ended June 30, 2023 from $6.4 million for the six months ended June 30, 2022.  This increase was primarily attributable to a $985,000 increase in interest on loans receivable and a net increase of $155,000 in interest on investment securities.  The average balance of loans increased $33.6 million, or 12.2%, to $309.3 million for the six months ended June 30, 2023 from $275.7 million for the six months ended June 30, 2022.  The average yield on loans increased 18 basis points to 4.40% for the six months ended June 30, 2023 from 4.22% for the six months ended June 30, 2022, reflecting an increase in higher-yielding loans period over period.  The average balance of investment securities decreased $3.8 million, or 9.9%, to $34.1 million for the six months ended June 30, 2023 from $37.9 million for the six months ended June 30, 2022. The average yield on investment securities increased 121 basis points to 3.98% for the 2023 period from 2.77% for the 2022 period due to rising interest rates and lower premium amortization expense during the six months ended June 30, 2023.

Interest Expense.  Total interest expense increased $2.2 million, or 308.7%, to $2.9 million for the six months ended June 30, 2023 from $701,000 for the six months ended June 30, 2022.  Interest expense on total interest-bearing deposits increased $2.0 million, or 354.5%, to $2.5 million for the six months ended June 30, 2023 from $556,000 for the six months ended June 30, 2022.  The increase was attributable to an increase of $53.9 million, or 70.7%, in the average balance of certificate of deposit accounts to $130.2 million for the six months ended June 30, 2023 from $76.3 million for the six months ended June 30, 2022, in addition to an increase in the average cost of 274 basis points to 3.37% for the six months ended June 30, 2023 from 0.63% for the same period in 2022.  Interest expense on borrowings increased $193,000, or 133.1%, to $338,000 for the six months ended June 30, 2023 from $145,000 for the six months ended June 30, 2022, as a result of an increase in the average borrowing costs of 169 basis points to 3.54% for the six months ended June 30, 2023 from 1.85% for the six months ended June 30, 2022 due to rising interest rates. The average balance of borrowings increased $3.4 million, or 21.5%, to $19.1 million for the six months ended June 30, 2023 from $15.7 million for the six months ended June 30, 2022.

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Net Interest Income.  Net interest income decreased $954,000, or 16.7%, to $4.8 million for the six months ended June 30, 2023 from $5.7 million for the six months ended June 30, 2022.  Our net interest rate spread decreased 90 basis points to 2.43% for the six months ended June 30, 2023 from 3.33% for the six months ended June 30, 2022.  Our net interest margin decreased 70 basis points to 2.73% for the six months ended June 30, 2023 from 3.43% for the same period in 2022.  Net interest rate spread and net interest margin were affected primarily by the increase in the cost of our interest-bearing liabilities between the comparable periods.

Provision for Credit Losses.  Based on management’s analysis of the allowance for credit losses described in Note 6 of our interim consolidated financial statements “Allowance for Credit Losses,” we recorded a provision for credit losses of $330,000 for the six months ended June 30, 2023 as compared to a provision for loan losses of $300,000 for the six months ended June 30, 2022.  The allowance for credit losses was $2.8 million, or 0.92%, of total loans at June 30, 2023 as compared to $2.5 million, or 0.86%, of total loans at December 31, 2022. The increase in provision for credit losses for the 2023 period was primarily due to decreasesoverall growth in insurance commissions, earnings on bank-owned life insurance, other charges, commissions,the loan portfolio.

Noninterest Income.Noninterest income increased $181,000, or 15.3%, to $1.4 million for the six months ended June 30, 2023 from $1.2 million for the six months ended June 30, 2022.  The increase was primarily due to a net gain of $312,000 recognized from the sale of Generations Agency’s book of business and fees, andan increase in change in fair value on equity securities, partially offset by decreases in insurance commissions and banking fees and service charges.  Change in fair value on equity securities increased $85,000, or 166.7%, to $34,000 for the six months ended June 30, 2023 from a loss of $51,000 for the six months ended June 30, 2022 due to an increase in the fair market value of our equity securities. Insurance commissions decreased $95,000,$145,000, or 55.2%48.7%, to $77,000$153,000 for the threesix months ended SeptemberJune 30, 20222023 from $172,000$298,000 for the threesix months ended SeptemberJune 30, 20212022 as a result of the Management Agreement with Northwoods whereby Northwoods assumed customer service responsibilities for Generations Insurance Agency Inc. effective April 1, 2022. Earnings on bank-owned life insurance decreased $21,000, or 77.8%, to $6,000 for the three months ended September 30, 2022 from $27,000 for the three months ended September 30, 2021 due to the recognition of a $14,000 loss associated with the death of a participant and the subsequent surrendersale of the insurance policy. Otherbook of business to Northwoods on June 1, 2023. Banking fees and service charges commissions, and fees decreased $20,000,$74,000, or 45.5%9.2%, to $24,000$728,000 for the threesix months ended SeptemberJune 30, 2023 from $802,000 for the six months ended June 30, 2022 from $44,000due to fewer loan recapture fees and loan prepayment penalties as well as fewer non-sufficient funds fees for the threesix months ended SeptemberJune 30, 2021 primarily due to a gain recognized on the sale of a fixed asset in 2021 in addition to a decrease in rental income received in 2022 as a result of the sale of a non-banking retail building in December 2021. Change in fair value on equity securities decreased $15,000, or 1,500.0%, to a loss of $16,000 for the three months ended September 30, 2022 from a loss of $1,000 for the three months ended September 30, 2021 due to a decrease in the fair market value of our equity securities.

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Noninterest Expense.  Noninterest expense decreased $591,000, or 17.1%, to $2.9 million for the three months ended September 30, 2022 from $3.5 million for the three months ended September 30, 2021 due to decreases in impairment of long-lived assets, compensation and benefits, other expenses, and regulatory assessments. Impairment of long-lived assets decreased $300,000 due to the write down of a building in 2021. Compensation and benefits decreased $96,000, or 7.2%, to $1.2 million for the three months ended September 30, 2022 from $1.3 million for the three months ended September 30, 2021 primarily due to the Management Agreement with Northwoods and an increase in pension expense benefit. Other expenses decreased $95,000, or 24.4%, to $294,000 for the three months ended September 30, 2022 from $389,000 for the three months ended September 30, 2021 primarily due to a $74,000 decrease in directors’ fees related to changes in the market price of Generations Bancorp’s stock held in the directors retirement plan for the three months ended September 30, 20222023 as compared to the same period in 2021. Regulatory assessments decreased $76,000,2022.

Noninterest Expense.  Noninterest expense increased $484,000, or 71.7%8.5%, to $30,000$6.2 million for the threesix months ended SeptemberJune 30, 2023 from $5.7 million for the six months ended June 30, 2022 from $106,000primarily due to increases in compensation and benefits and other expenses, partially offset by a decrease in service charges. Compensation and benefits increased $348,000, or 14.5%, to $2.7 million for the threesix months ended SeptemberJune 30, 2021 due2023 from $2.4 million for the six months ended June 30, 2022 as a result of a decrease in pension expense benefit as well as an increase in equity incentive plan expenses related to lower deposit insurance costs.stock awards and stock options granted to senior management in June 2022. Other expenses increased $137,000, or 23.8%, to $713,000 for the six months ended June 30, 2023 from $576,000 for the six months ended June 30, 2022 as a result of an increase in other real estate owned expense along with an increase in directors’ fees as a result of changes in the fair market value of the directors retirement plans in addition to equity incentive plan expenses related to stock awards and stock options granted to directors in May 2022. Service charges decreased $114,000, or 11.0%, to $923,000 for the six months ended June 30, 2023 from $1.0 million for the six months ended June 30, 2022 as a result of discounts recognized from the renewal of our core processing contract.

Income Taxes.  Income tax expense increased $33,000,decreased $228,000, or 100.0%160.6%, to $66,000an income tax benefit of $86,000 for the threesix months ended SeptemberJune 30, 20222023 as compared to income tax expense of $33,000$142,000 for the threesix months ended SeptemberJune 30, 2021.2022. The effective tax rate was 18.0%21.3% for the threesix months ended SeptemberJune 30, 20222023 as compared to 16.0%16.1% for the threesix months ended SeptemberJune 30, 2021.  

Comparison of Operating Results for the Nine Months Ended September 30, 2022 and 2021

General.  Net income for the nine months ended September 30, 20222022. The statutory tax rate was $1.0 million as compared to $895,000 for the nine months ended September 30, 2021, an increase of $146,000, or 16.3%.  The increase was due to an $828,000 decrease in noninterest expense, partially offset by a $259,000 decrease in net interest income, a $330,000 decrease in noninterest income, a $76,000 increase in provision for loan losses, and a $17,000 increase in income tax expense.

Interest and Dividend Income.  Interest and dividend income decreased $482,000, or 4.7%, to $9.7 million for the nine months ended September 30, 2022 from $10.2 million for the nine months ended September 30, 2021.  This decrease was primarily attributable to a $636,000 decrease in interest on loans receivable, partially offset by a net increase of $125,000 in interest on investment securities and an increase of $58,000 in interest-earning deposits.  The average balance of loans decreased $6.2 million, or 2.2%, to $279.2 million for the nine months ended September 30, 2022 from $285.4 million for the nine months ended September 30, 2021.  The average yield on loans decreased 20 basis points to 4.22% for the 2022 period from 4.42% for the 2021 period, reflecting a decrease in higher-yielding loans in addition to an increase in amortization of deferred loan costs period over period.  The average balance of investment securities increased $2.7 million, or 7.9%, to $36.8 million for the nine months ended September 30, 2022 from $34.1 million for the nine months ended September 30, 2021. The average yield on investment securities increased 26 basis points to 2.88% for the 2022 period from 2.62% for the 2021 period due to purchases of $23.6 million in higher-yielding corporate bonds throughout 2021.

Interest Expense.  Total interest expense decreased $223,000, or 17.1%, to $1.1 million for the nine months ended September 30, 2022 from $1.3 million for the nine months ended September 30, 2021.  Interest expense on total interest-bearing deposits decreased $109,000, or 11.3%, to $860,000 for the nine months ended September 30, 2022 from $969,000 for the nine months ended September 30, 2021.  The decrease was primarily attributable to a decrease of $5.9 million, or 7.3%, in the average balance of certificates of deposit to $75.3 million for the nine months ended September 30, 2022 from $81.3 million for the nine months ended September 30, 2021, in addition to a decrease in the average cost of 18 basis points to 0.67% for the nine months ended September 30, 2022 from 0.85% for the same period in 2021.  Interest expense on borrowings decreased $114,000, or 33.7%, to $224,000 for the nine months ended September 30, 2022 from $338,000 for the nine months ended September 30, 2021 as a result of a decrease in the average balance of borrowings of $8.0 million, or 33.9%, to $15.5 million for the nine months ended September 30, 2022 from $23.5 million for the nine months ended September 30, 2021. Average borrowing costs remained unchanged at 1.92% for the nine months ended September 30, 2022 and 2021.

Net Interest Income.  Net interest income decreased $259,000, or 2.9%, to $8.6 million for the nine months ended September 30, 2022 from $8.9 million for the nine months ended September 30, 2021.  Our net interest rate spread decreased four basis points to 3.41% for the nine months ended September 30, 2022 as compared to 3.45% for the

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nine months ended September 30, 2021. Our net interest margin decreased five basis points to 3.48% for the nine months ended September 30, 2022 as compared to 3.53% for the nine months ended September 30, 2021. Net interest rate spread and net interest margin were affected primarilyimpacted by the decrease in yieldbenefits derived from tax-exempt bond income, as well as income received on interest-earning assets between the comparable periods.

Provision for Loan Losses.  Based on management’s analysis of the allowance for loan losses described in Note 6 of our interim consolidated financial statements “Allowance for Loan Losses,” we recorded a provision for loan losses of $481,000 for the nine months ended September 30, 2022 as compared to a provision for loan losses of $405,000 for the nine months ended September 30, 2021.  The allowance for loan losses was $2.3 million, or 0.84%, of total loans at September 30, 2022 as compared to $1.8 million, or 0.70%, of total loans at December 31, 2021.bank-owned life insurance. The increase in provision for loan losses for the 2022 period was primarily due to increases in reserves allocated to other consumer loans as a result of growth in the portfolio in addition to recreational vehicle loans as a result of higher economic reserve factors applied due to the current economic outlook and resultant increases in delinquent and substandard loans.

Noninterest Income.Noninterest income decreased $330,000, or 16.5%, to $1.7 million for the nine months ended September 30, 2022 from $2.0 million for the nine months ended September 30, 2021.  The decrease was primarily due to decreases in insurance commissions, change in fair value on equity securities, and other charges, commissions, and fees.  Insurance commissions decreased $172,000, or 31.4%, to $375,000 for the nine months ended September 30, 2022 from $547,000 for the nine months ended September 30, 2021 as a result of the Management Agreement with Northwoods whereby Northwoods assumed customer service responsibilities for Generations Insurance Agency, Inc. effective April 1, 2022. Change in fair value on equity securities decreased $69,000, or 3,450.0%, to a loss of $67,000 for the nine months ended September 30, 2022 from a gain of $2,000 for the nine months ended September 30, 2021 due to a decrease in the fair market value of our equity securities. Other charges, commissions, and fees decreased $65,000, or 44.5%, to $81,000 for the nine months ended September 30, 2022 from $146,000 for the nine months ended September 30, 2021 primarily due to a gain recognized on the sale of a fixed asset in 2021 in addition a decrease in rental income received in 2022 as a result of the sale of a non-banking retail building in December 2021.

Noninterest Expense.  Noninterest expense decreased $828,000, or 8.8%, to $8.6 million for the nine months ended September 30, 2022 from $9.4 million for the nine months ended September 30, 2021 due to decreases in impairment of long-lived assets, compensation and benefits, regulatory assessments, and other expenses, partially offset by an increase in professional and other services. Impairment of long-lived assets decreased $300,000 due to the write down of a building in 2021. Compensation and benefits decreased $299,000, or 7.6%, to $3.6 million for the nine months ended September 30, 2022 from $3.9 million for the nine months ended September 30, 2021 primarily due to the Management Agreement with Northwoods and an increase in pension expense benefit. Regulatory assessments decreased $161,000, or 50.8%, to $156,000 for the nine months ended September 30, 2022 from $317,000 for the nine months ended September 30, 2021 due to lower deposit insurance costs. Other expenses decreased $100,000, or 10.3%, to $870,000 for the nine months ended September 30, 2022 from $970,000 for the nine months ended September 30, 2021 primarily due to a decrease in directors’ fees related to changes in the market price of Generations Bancorp’s stock held in the directors retirement plan for the nine months ended September 30, 2022 as compared to the same period in 2021. Professional and other services increased $90,000, or 19.8%, to $544,000 for the nine months ended September 30, 2022 from $454,000 for the nine months ended September 30, 2021 due to increases in legal and consulting fees.  

Income Taxes. Income tax expense increased $17,000, or 8.9%, to $208,000 for the nine months ended September 30, 2022 as compared to income tax expense of $191,000 for the nine months ended September 30, 2021. Theperiod’s effective tax rate was 16.7%a result of an increase in permanent tax differences and state tax expense proportional to total income, which was a loss for the ninesix months ended SeptemberJune 30, 2022 as compared to 17.6% for the nine months ended September 30, 2021.  

2023.

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Average Balances and Yields. The following tables set forth average balance sheets, average yield and costs, and certain other information at the dates and for the periods indicated.  No tax-equivalent yield adjustments have been made. Any adjustments necessary to present yields on a tax-equivalent basis are insignificant.  All average balances are daily average balances.  Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield.  The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or interest expense. Net deferred loan costs amortized totaled approximately $494,000$556,000 and $388,000$485,000 for the three months ended SeptemberJune 30, 20222023 and 2021,2022, respectively.  Net deferred loan costs amortized totaled approximately $1.5$1.0 million and $1.2 million$969,000 for the ninesix months ended SeptemberJune 30, 2023 and 2022, and 2021, respectively.

Three Months Ended September 30, 

2022

2021

Average

Average

Balance

Balance

Outstanding

Interest

Yield/ Rate

Outstanding

Interest

Yield/ Rate

Interest-earning assets:

Loans

$

286,057

$

3,009

4.21

%

$

289,244

$

3,247

4.49

%

Securities

34,605

270

3.12

38,019

255

2.68

Interest-earning deposits

4,664

19

1.63

8,215

8

0.39

Other

1,251

16

5.12

1,605

21

5.23

Total interest-earning assets

326,577

3,314

4.06

337,083

3,531

4.19

Non-interest-earning assets

41,869

41,919

Total assets

$

368,446

$

379,002

Interest-bearing liabilities:

Demand deposits

$

47,368

$

17

0.14

%

$

46,512

$

16

0.14

%

Money market accounts

32,119

29

0.36

29,739

27

0.36

Savings accounts

110,610

117

0.42

110,296

114

0.41

Certificates of deposit

73,500

141

0.77

79,128

143

0.72

Total interest-bearing deposits

263,597

304

0.46

265,675

300

0.45

Borrowings

15,161

79

2.08

20,601

96

1.86

Total interest-bearing liabilities

278,758

383

0.55

286,276

396

0.55

Other non-interest bearing liabilities

50,374

49,932

Total liabilities

329,132

336,208

Equity

39,314

42,794

Total liabilities and equity

$

368,446

$

379,002

Net interest income

$

2,931

$

3,135

Interest rate spread

3.51

%

3.64

%

Net interest-earning assets

$

47,819

$

50,807

Net interest margin

3.59

%

3.72

%

Average interest-earning assets to average

interest-bearing liabilities

117.15

%

117.75

%

Three Months Ended June 30, 

2023

2022

Average

Average

Balance

Balance

Outstanding

Interest

Yield/ Rate

Outstanding

Interest

Yield/ Rate

Interest-earning assets:

Loans

$

311,457

$

3,455

4.44

%

$

274,699

$

2,868

4.18

%

Securities

33,445

339

4.05

36,580

250

2.73

Interest-earning deposits

3,456

36

4.17

18,845

38

0.81

Other

1,517

26

6.86

1,250

13

4.16

Total interest-earning assets

349,875

3,856

4.41

331,374

3,169

3.83

Non-interest-earning assets

41,293

41,905

Total assets

$

391,168

$

373,279

Interest-bearing liabilities:

Demand deposits

$

30,751

$

46

0.60

%

$

33,304

$

15

0.18

%

Money market accounts

22,189

53

0.95

32,128

28

0.35

Savings accounts

89,113

103

0.46

112,863

117

0.41

Certificates of deposit

133,376

1,203

3.61

75,459

119

0.63

Total interest-bearing deposits

275,429

1,405

2.04

253,754

279

0.44

Borrowings

21,401

212

3.96

14,846

68

1.83

Total interest-bearing liabilities

296,830

1,617

2.18

268,600

347

0.52

Other non-interest bearing liabilities

56,940

63,443

Total liabilities

353,770

332,043

Equity

37,398

41,236

Total liabilities and equity

$

391,168

$

373,279

Net interest income

$

2,239

$

2,822

Interest rate spread

2.23

%

3.31

%

Net interest-earning assets

$

53,045

$

62,774

Net interest margin

2.56

%

3.41

%

Average interest-earning assets to average

interest-bearing liabilities

117.87

%

123.37

%

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Nine Months Ended September 30, 

Six Months Ended June 30, 

2022

2021

2023

2022

Average

Average

Average

Average

Balance

Balance

Balance

Balance

(In thousands)

  

Outstanding

  

Interest

  

Yield/ Rate

  

Outstanding

  

Interest

  

Yield/ Rate

  

  

Outstanding

  

Interest

  

Yield/ Rate

  

Outstanding

  

Interest

  

Yield/ Rate

  

Assets

Interest-earning assets:

Loans

$

279,185

$

8,827

4.22

%

$

285,409

$

9,463

4.42

%

$

309,340

$

6,803

4.40

%

$

275,749

$

5,818

4.22

%

Securities

36,795

794

2.88

%

34,108

669

2.62

%

34,124

679

3.98

37,890

524

2.77

Interest-earning deposits

13,634

73

0.71

%

15,204

15

0.13

%

4,406

81

3.68

18,119

54

0.60

Other

1,295

38

3.91

%

1,762

67

5.07

%

1,402

65

9.27

1,317

22

3.34

Total interest-earning assets

330,909

9,732

3.92

%

336,483

10,214

4.05

%

349,272

7,628

4.37

333,075

6,418

3.85

Non-interest-earning assets

41,775

41,901

40,102

41,728

Total assets

$

372,684

$

378,384

$

389,374

$

374,803

Liabilities and equity

Interest-bearing liabilities:

Demand deposits

$

46,602

46

0.13

%

$

46,545

43

0.12

%

$

31,875

$

71

0.45

%

$

33,482

$

29

0.17

%

Money market accounts

32,085

85

0.35

%

29,100

77

0.35

%

23,795

75

0.63

32,067

56

0.35

Savings accounts

111,881

349

0.42

%

108,817

332

0.41

%

90,424

189

0.42

112,517

232

0.41

Certificates of deposit

75,344

380

0.67

%

81,285

517

0.85

%

130,193

2,192

3.37

76,268

239

0.63

Total interest-bearing deposits

265,912

860

0.43

%

265,747

969

0.49

%

276,287

2,527

1.83

254,334

556

0.44

Borrowings

15,525

224

1.92

%

23,476

338

1.92

%

19,085

338

3.54

15,707

145

1.85

Total interest-bearing liabilities

281,437

1,084

0.51

%

289,223

1,307

0.60

%

295,372

2,865

1.94

270,041

701

0.52

Other non-interest bearing liabilities

50,064

48,285

56,669

62,645

Total liabilities

331,501

337,508

352,041

332,686

Equity

41,183

40,876

37,333

42,117

Total liabilities and equity

$

372,684

$

378,384

$

389,374

$

374,803

Net interest income

$

8,648

$

8,907

$

4,763

$

5,717

Interest rate spread

3.41

%

3.45

%

2.43

%

3.33

%

Net interest-earning assets

$

49,472

$

47,260

$

53,900

$

63,034

Net interest margin

3.48

%

3.53

%

2.73

%

3.43

%

Average interest-earning assets to average

interest-bearing liabilities

117.58

%

116.34

%

118.25

%

123.34

%

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Loan and Asset Quality and Allowance for LoanCredit Losses. The following table represents information concerning the aggregate amount of non-performing assets at the indicated dates:

At September 30, 

At December 31,

At June 30, 

At December 31, 

(In thousands)

2022

    

2021

2023

    

2022

Non-accrual loans:

Residential:

One- to four-family

$

2,565

$

2,577

$

2,031

$

2,605

Commercial:

Real estate - nonresidential

416

416

29

416

Commercial business

163

161

439

587

Consumer:

  

  

  

  

Home equity and junior liens

205

66

138

172

Manufactured homes

145

404

368

Automobile

32

44

58

21

Student

62

58

68

Recreational vehicle

199

135

Total non-accrual loans

$

3,588

$

3,264

$

3,356

$

4,372

Real estate owned:

Residential:

One- to four-family

$

69

$

27

$

271

$

12

Total real estate owned

$

69

$

27

$

271

$

12

Total non-performing assets

$

3,657

$

3,291

$

3,627

$

4,384

Ratios:

Total non-performing loans to total loans

1.29%

1.23%

1.11%

1.51%

Total non-performing loans to total assets

0.96%

0.86%

0.85%

1.13%

Total non-performing assets to total assets

0.98%

0.87%

0.92%

1.13%

Non-performing assets include non-accrual loans, non-accruing TDRs (prior to January 1, 2023), and foreclosed real estate. The Company generally places a loan on non-accrual status and ceases accruing interest when loan payment performance is deemed unsatisfactory and the loan is past due 90 days or more. At SeptemberJune 30, 20222023 there were no loans that were past due 90 days or more and still accruing interest.

As indicated in the table above, non-performing assets were $3.7$3.6 million at SeptemberJune 30, 20222023 and $3.3$4.4 million at December 31, 2021.2022. At SeptemberJune 30, 2023, the Bank had 31 non-performing one- to four-family residential mortgage loans for $2.0 million, two non-performing commercial business loans for $439,000, three non-performing manufactured home loans for $404,000, five non-performing recreational vehicle loans for $199,000, five home equity loans and lines of credit for $138,000, three non-performing automobile loans for $58,000, five non-performing student loans for $58,000, and one non-performing nonresidential loan for $29,000. At December 31, 2022, the Bank had 37 non-performing one- to four-family residential mortgage loans for $2.6 million, two non-performing nonresidential loans for $416,000, threefour non-performing commercial business loans for $163,000, nine$587,000, eight home equity loans and lines of credit for $205,000, two$172,000, three non-performing manufactured home loans for $145,000, three$368,000, two non-performing automobile loans for $32,000, and five$21,000, six non-performing student loans for $62,000. At December 31, 2021, the Bank had 38$68,000, and two non-performing one- to four-family residential mortgagerecreational vehicle loans for $2.6 million, two non-performing nonresidential loans for $416,000, three non-performing commercial business loans for $161,000, six home equity loans and lines of credit for $66,000, and three non-performing automobile loans for $44,000.$135,000. The Bank had $69,000 infour real estate owned properties for $271,000 at SeptemberJune 30, 20222023 and $27,000 inone real estate owned property for $12,000 at December 31, 2021.2022.

The allowance for loancredit losses represents management’s estimate of losses inherent in the loan portfolio as of the date of the consolidated statement of financial condition. The allowance for loancredit losses was $2.3$2.8 million at SeptemberJune 30, 20222023 and $1.8$2.5 million at December 31, 2021.2022. The Company reported an increase in the ratio of the allowance for loancredit losses to gross loans to 0.84%0.92% at SeptemberJune 30, 20222023 as compared to 0.70%0.86% at December 31, 2021.2022. Management performs

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a quarterly evaluation of the allowance for loancredit losses based on quantitative and qualitative factors and has determined that the current level of the allowance for loancredit losses is adequate to absorb the losses in the loan portfolio as of SeptemberJune 30, 2022.2023.

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At September 30, 2022, theThe Company had no loans which were deemed to be impaired and had one commercial business loan for $55,000 and one one- to four-family residential loan for $224,000 which were deemed to be impaired at December 31, 2021.2022.

Management has identified potential credit problems which may result in the borrowers not being able to comply with the current loan repayment terms and which may result in it being included in future impaired loan reporting. Management has identified potential problem loans totaling $10.6$9.9 million as of SeptemberJune 30, 20222023 as compared to $11.1$11.0 million at December 31, 2021.2022. These loans have been internally classified as special mention or substandard, yet are not currently considered impaired. The decrease of $541,000$1.1 million was primarily driven by the payoff of a commercial loan relationshipdecrease in the second quarter of 2022 that wasresidential mortgage loans classified as special mention.substandard as a result of loan upgrades and loan payoffs. Based on current information available at SeptemberJune 30, 2022,2023, these loans were re-evaluated for their range of potential losses and reclassified accordingly.

Liquidity and Capital Resources. Liquidity is the ability to meet financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. The Bank’s primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from the sale or maturities of securities. In addition, the Bank may borrow from the FHLB. At SeptemberJune 30, 2022,2023, the Bank had $24.1$19.7 million outstanding in advances from the FHLB and had the ability to borrow approximately $29.2$45.4 million based on our collateral capacity. At SeptemberJune 30, 2022,2023, the Bank had an additional $15.5 million in lines of credit available with other financial institutions and as such no advances received can exceed 50% of the Bank’s capital. At SeptemberJune 30, 20222023 and December 31, 2021,2022, there were no outstanding advances on these lines.

On March 12, 2023, in response to liquidity concerns in the banking system, the Federal Deposit Insurance Corporation, Federal Reserve Board, and U.S. Department of Treasury, collaboratively approved certain actions with a stated intention to reduce stress across the financial system, support financial stability, and minimize any impact on businesses, households, taxpayers, and the broader economy. Among other actions, the Federal Reserve Board has created a new Bank Term Funding Program (“BTFP”) to make additional funding available to eligible depository institutions to help ensure institutions can meet the needs of their depositors. Eligible institutions may obtain liquidity against a wide range of collateral. BTFP advances can be requested through at least March 11, 2024. The Company has not requested funding through the BTFP as of June 30, 2023, but has an established relationship with the Federal Reserve to take advantage of this program.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and equity and available-for-sale investments. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $1.4$2.7 million for the ninesix months ended SeptemberJune 30, 20222023 and 2021.$1.5 million for the six months ended June 30, 2022. Net cash used in investing activities, which consists primarily of disbursements for loan originations and the purchase of securities, offset by principal collections on loans and proceeds from the sale of and maturing securities, was $15.9$13.0 million for the ninesix months ended SeptemberJune 30, 20222023 and $21.1$4.5 million for the ninesix months ended SeptemberJune 30, 2021.2022. Net cash provided by financing activities, consisting primarily of the activity in deposit accounts and FHLB advances, was $913,000$7.7 million for the ninesix months ended SeptemberJune 30, 20222023 and net cash used in financing activities was $5.0 million for the ninesix months ended SeptemberJune 30, 2021.2022.

We are committed to maintaining a satisfactory liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments.

Generations Bancorp is a separate corporate entity from Generations Bank and it must provide for its own liquidity to pay any dividends to its stockholders, to repurchase any shares of its common stock, and for other corporate purposes.

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Generations Bancorp’s primary source of liquidity is any dividend payments it may receive from Generations Bank. Generations Bank paid a dividend of $1.3$1.0 million to Generations Bancorp during the ninesix months ended SeptemberJune 30, 2022. There was no2023. Generations Bank paid a dividend paidof $1.3 million to Generations Bancorp for the year ended December 31, 2021.2022.  At SeptemberJune 30, 2022,2023, Generations Bancorp (on an unconsolidated, stand-alone basis) had cash and investment securities totaling $1.9$2.5 million.

At SeptemberJune 30, 20222023 and December 31, 2021,2022, Generations Bank exceeded all its regulatory capital requirements and was categorized as well capitalized.  See Note 9 to the interim condensed consolidated financial statements.  Management is unaware of any conditions or events since the most recent notification that would change our category.

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable, as the Registrant is a smaller reporting company.

ITEM 4. Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of SeptemberJune 30, 2022.2023. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Registrant’s disclosure controls and procedures were effective.

During the quarter ended SeptemberJune 30, 2022,2023, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.Legal Proceedings

We are subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on our financial condition or results of operations.

ITEM 1A.Risk Factor

Not applicable, as the Registrant is a smaller reporting company.

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ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides certain information with regard to shares repurchased by the Company in the thirdsecond quarter of 20222023.

(c) Total

Number of

(d)

Shares

Maximum

Purchased as

Number of

Part of

Shares that

(a) Total

Publicly

May Yet Be

Number of

(b) Average

Announced

Purchased under the

Shares

Price Paid

Plans or

Plans or

Period

Purchased

per Share

Programs (1)

Programs (1)

July 1 - July 31, 2022

1,782

$

11.34

1,782

1,038

August 1 - August 31, 2022

41,338

$

11.40

41,338

46,700

September 1 - September 30, 2022

17,934

$

11.35

17,934

28,766

Total

61,054

$

11.38

61,054

(1)The Company’s Board of Directors authorized its first stock repurchase program on March 28, 2022 to acquire up to 83,300 shares, or 3.4 %, of the Company’s then outstanding common stock.  On July 25, 2022, the Board of Directors authorized a second stock repurchase program to acquire up to 87,000 shares, or approximately 3.6%, of the Company’s outstanding common stock at the conclusion of the first stock repurchase program. As of August 11, 2022, all 83,300 shares from the Company’s first repurchase program had been repurchased. Repurchases will be made from time to time depending on market conditions and other factors, and will be conducted through open market or private transactions, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission.  There is no guarantee as to the exact number of shares to be repurchased by the Company.  

Total

Maximum

Number of

Number of

Shares

Shares (or

Purchased as

Approximate Dollar

Part of

Value) that

Total

Publicly

May Yet Be

Number of

Average

Announced

Purchased under the

Shares

Price Paid

Plans or

Plans or

Period

Purchased

per Share

Programs

Programs ($)

April 1 - April 30, 2023

$

May 1 - May 31, 2023

$

1,000,000

June 1 - June 30, 2023

37,313

$

9.22

37,313

655,975

Total

37,313

$

9.22

37,313

The Company’s Board of Directors authorized its first stock repurchase program on March 28, 2022 to acquire up to 83,300 shares, or 3.4 %, of the Company’s then outstanding common stock.  On July 25, 2022, the Board of Directors authorized a second stock repurchase program to acquire up to 87,000 shares, or approximately 3.6%, of the Company’s outstanding common stock at the conclusion of the first stock repurchase program. As of August 11, 2022, all 83,300 shares from the Company’s first repurchase program had been repurchased. As of March 31, 2023, all 87,000 shares from the Company’s second repurchase program had been repurchased. On May 31, 2023, the Board of Directors authorized a third stock repurchase program to acquire up to $1.0 million, or approximately 91,000 shares, or approximately 4.0%, of the Company’s outstanding common stock, based on the current trading price of the common stock. All of the repurchases were made pursuant to a publicly announced plan and were made from time to time depending on market conditions and other factors, and were conducted through open market or private transactions, through block trades, and pursuant to any trading plan that may have been adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission.

ITEM 3.Defaults Upon Senior Securities

None.

ITEM 4.Mine Safety Disclosures

None.

ITEM 5.Other Information

None.

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ITEM 6.Exhibits

Exhibit Index

Exhibit Number

    

Description

31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL document (included in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GENERATIONS BANCORP NY, INC.

Date:  November 4, 2022August 3, 2023

/s/ Menzo D. Case

Menzo D. Case

Chief Executive Officer

Date:  November 4, 2022August 3, 2023

/s/ Angela M. Krezmer

Angela M. Krezmer

Chief Financial Officer

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