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 March 31, 2021

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)

(Former name, former address and former fiscal year, if changed since last report)


Securities registered pursuant to Section 12(b) of the Act: None

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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  .

2,551,940 shares of the Registrant common stock, par value $0.01 per share, were issued and outstanding as of May 12, 2021.


Index

Page

PART I. FINANCIAL INFORMATION

1

Item 1. Condensed Consolidated Financial Statements

1

Condensed Consolidated Statements of Financial Condition March 31, 2021 (Unaudited) and December 31, 2020

1

Condensed Consolidated Statements of Income Three-month Periods Ended March 31, 2021 and 2020 (Unaudited)

2

Condensed Consolidated Statements of Comprehensive Income Three-month Periods Ended March 31, 2021 and 2020 (Unaudited)

3

Condensed Consolidated Statements of Changes in Shareholders Equity Three-month Periods Ended March 31, 2021 and 2020 (Unaudited)

4

Condensed Consolidated Statements of Cash Flows Three-month Periods Ended March 31, 2021 and 2020 (Unaudited)

5

Notes to Condensed Consolidated Financial Statements (Unaudited)

6

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

43

Item 4. Controls and Procedures

50

PART II. OTHER INFORMATION

51

Item 1. Legal Proceedings

51

Item 1A. Risk Factors

51

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

51

Item 3. Defaults Upon Senior Securities

51

Item 4. Mine Safety Disclosures

51

Item 5. Other Information

51

Item 6. Exhibits

52

Signatures

53


PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Generations Bancorp NY, Inc.

Condensed Consolidated Statements of Financial Condition

March 31, 

December 31, 

(In thousands, except share data)

    

2021

    

2020

(Unaudited)

ASSETS:

 

  

 

  

Cash and due from banks

$

3,517

$

4,168

Interest earning deposits

 

21,455

 

22,662

Total cash and cash equivalents

 

24,972

 

26,830

Investment securities available-for-sale, at fair value

 

32,774

 

17,926

Investment securities held-to-maturity (fair value 2021-$1,424, 2020-$1,510)

 

1,390

 

1,480

Equity investment securities, at fair value

 

309

 

661

Federal Home Loan Bank stock, at cost

 

1,868

 

1,992

Loans

 

284,248

 

287,461

Less: Allowance for loan losses

 

1,881

 

1,821

Loans receivable, net

 

282,367

 

285,640

Premises and equipment, net

 

16,640

 

16,743

Bank-owned life insurance

 

7,809

 

7,777

Pension plan asset

 

9,329

 

8,720

Foreclosed real estate & repossessed assets

 

45

 

45

Goodwill

 

792

 

792

Intangible assets, net

 

832

 

848

Accrued interest receivable

 

1,299

 

1,179

Other assets

 

1,514

 

2,381

Total assets

$

381,940

$

373,014

LIABILITIES AND SHAREHOLDERS' EQUITY:

 

  

 

  

Deposits:

 

  

 

  

Noninterest-bearing

$

56,876

$

65,673

Interest-bearing

 

254,068

 

243,873

Total deposits

 

310,944

 

309,546

Long-term borrowings

 

25,307

 

27,628

Subordinated debt

 

 

1,235

Advances from borrowers for taxes and insurance

 

1,773

 

2,595

Other liabilities

 

1,969

 

2,124

Total liabilities

 

339,993

 

343,128

Shareholders' equity:

 

  

 

  

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

 

 

Common stock, par value $0.01; 14,000,000 and 9,000,000 shares authorized in 2021 and 2020, respectively; 2,458,401 and 2,546,836 shares issued in 2021 and 2020, respectively; and 2,458,401 and 2,458,580 shares outstanding in 2021 and 2020 respectively (1)

 

26

 

26

Additional paid in capital

 

24,468

 

11,954

Retained earnings

 

20,609

 

20,256

Accumulated other comprehensive loss

 

(1,405)

 

(1,415)

Treasury stock, at cost; 88,256 shares in 2020(1)

 

 

(614)

Stock held in rabbi trust

 

(627)

 

(290)

Unearned ESOP shares, at cost

 

(1,124)

 

(31)

Total shareholders' equity

 

41,947

 

29,886

Total liabilities and shareholders' equity

$

381,940

$

373,014

(1)    Shares amounts related to the periods prior to the January 13, 2021 closing of the conversion offering have been restated to give retroactive recognition to the .9980 exchange ratio applied in the conversion offering (see Note 1).

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

1


Generations Bancorp NY, Inc.

Condensed Consolidated Statements of Income (Unaudited)

Three Months Ended March 31, 

(In thousands, except per share data)

    

2021

    

2020

Interest and dividend income:

 

  

 

  

Loans, including fees

$

3,109

$

2,972

Debt and equity securities:

 

  

 

Taxable

 

84

 

25

Tax-exempt

 

101

 

247

Interest-earning deposits

 

4

 

10

Other

 

23

 

38

Total interest income

 

3,321

 

3,292

Interest expense:

 

  

 

  

Deposits

 

347

 

655

Short-term borrowings

 

 

2

Long-term borrowings

 

122

 

154

Subordinated debt

 

9

 

14

Total interest expense

 

478

 

825

Net interest income

 

2,843

 

2,467

Provision for loan losses

 

135

 

90

Net interest income after provision for loan losses

 

2,708

 

2,377

Noninterest income:

 

  

 

  

Banking fees and service charges

 

374

 

390

Mortgage banking income, net

 

13

 

12

Insurance commissions

 

174

 

216

Investment services commissions

 

 

57

Earnings on bank-owned life insurance

 

32

 

33

Unrealized losses on equity securities

 

(15)

 

(248)

Other charges, commissions & fees

 

34

 

25

Total noninterest income

 

612

 

485

Noninterest expense:

 

  

 

  

Compensation and benefits

 

1,259

 

1,504

Occupancy and equipment

 

520

 

528

Service charges

 

503

 

481

Regulatory assessments

 

95

 

65

Professional and other services

 

139

 

142

Advertising

 

108

 

108

Other expenses

 

264

 

300

Total noninterest expenses

 

2,888

 

3,128

Income before income tax benefit

 

432

 

(266)

Expense (benefit) for income taxes

 

79

 

(276)

Net income

 

353

 

10

Net income available to common shareholders

$

353

$

10

Basic and diluted earnings per common share

$

0.15

$

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

2


Generations Bancorp NY, Inc.

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Three Months Ended March 31, 

(In thousands)

    

2021

    

2020

Net income

$

353

$

10

Other comprehensive  income, before tax:

 

  

 

  

Unrealized gains on securities available-for-sale:

 

  

 

  

Unrealized holding (losses) gains arising during the period

 

(16)

 

426

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

 

(16)

 

426

Defined benefit pension plan:

 

  

 

  

Reclassification of amortization of net losses recognized in net pension expense

 

29

 

34

Net change in defined benefit pension plan asset

 

29

 

34

Other comprehensive income before tax

 

13

 

460

Tax effect

 

(3)

 

(97)

Other comprehensive income net of tax

 

10

 

363

Total comprehensive income

$

363

$

373

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

3


Generations Bancorp NY, Inc.

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

  

  

  

Accumulated

  

  

Stock

  

Additional

Other

Unearned

Held by

Common

Paid in

Retained

Comprehensive

Treasury

ESOP

Rabbi

(In thousands, except share data)

    

Stock

    

Capital

    

Earnings

    

Loss

    

Stock

    

Shares

    

Trust

    

Total

Balance, January 1, 2021

$

26

$

11,954

$

20,256

$

(1,415)

(614)

$

(31)

$

(290)

$

29,886

Net income

 

 

353

 

 

 

 

 

353

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

13,128

(1,104)

12,024

Treasury Stock retired

(614)

614

Other comprehensive income

 

 

 

10

 

 

 

 

10

Purchase of common stock for SERPs

 

 

 

 

 

 

(337)

 

(337)

ESOP shares committed to be released (1,126 shares)

 

 

 

 

 

11

 

 

11

Balance, March 31, 2021

$

26

$

24,468

$

20,609

$

(1,405)

$

$

(1,124)

$

(627)

$

41,947

Balance, January 1, 2020

$

26

$

11,962

$

18,571

$

(1,662)

$

(573)

$

(93)

$

$

28,231

Net income

 

 

 

10

 

 

 

 

 

10

Other comprehensive income

 

 

 

 

363

 

 

 

 

363

Repurchase of common stock

 

 

 

 

 

(42)

 

 

 

(42)

ESOP shares committed to be released (6,221 shares)

 

 

5

 

 

 

 

15

 

 

20

Balance, March 31, 2020

$

26

$

11,967

$

18,581

$

(1,299)

$

(615)

$

(78)

$

$

28,582


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

4


Generations Bancorp NY, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

Three Months Ended March 31, 

(In thousands)

    

2021

    

2020

OPERATING ACTIVITIES

 

  

 

  

Net income (loss)

$

353

$

10

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

  

 

  

Provision for loan losses

 

135

 

90

Deferred income tax (benefit)

 

79

 

(276)

Unrealized losses (gains) on sales of:

 

  

 

  

Equity securities

 

15

 

248

Write-down of other real estate owned to fair value

 

 

5

Depreciation

 

259

 

266

Amortization of intangible asset

 

16

 

16

Amortization of fair value adjustment to purchased loan portfolio

 

(17)

 

(17)

ESOP expense

 

11

 

20

Amortization of deferred loan costs

 

26

 

29

Earnings on bank-owned life insurance

 

(32)

 

(33)

Change in pension plan assets

 

(580)

 

(432)

Net amortization of premiums and discounts on investment securities

 

21

 

(8)

Net change in accrued interest receivable

 

(120)

 

(194)

Net change in other assets and liabilities

 

(192)

 

387

Net cash provided by (used in) operating activities

 

(26)

 

111

INVESTING ACTIVITIES

 

  

 

  

Purchase of equity investment securities

 

 

(1)

Purchase of investment securities available-for-sale

 

(15,734)

 

(848)

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

 

124

 

(134)

Proceeds from maturities and principal reductions of:

 

  

 

  

Available-for-sale investment securities

 

851

 

850

Held-to-maturity investment securities

 

88

 

175

Proceeds from sale of:

 

  

 

  

Real estate and repossessed assets acquired

 

10

 

42

Net change in loans

 

3,119

 

(4,325)

Purchase of premises and equipment

 

(156)

 

(80)

Net cash used in investing activities

 

(11,698)

 

(4,321)

FINANCING ACTIVITIES

 

  

 

  

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

 

1,809

 

2,043

Net change in time deposits

 

(411)

 

(3,710)

Net change in brokered time deposits

 

 

53

Payments on long-term borrowings

 

(2,321)

 

(2,350)

Repayment from subordinated debt offering

(1,235)

(735)

Proceeds from long-term borrowings

 

 

6,000

Net proceeds from stock offering and conversion

13,128

Purchase of common stock for ESOP

(1,104)

Repurchase of common stock

 

 

(42)

Net cash provided by financing activities

 

9,866

 

1,259

Increase in cash and cash equivalents

 

(1,858)

 

(2,951)

Cash and cash equivalents at beginning of period

 

26,830

 

13,448

Cash and cash equivalents at end of period

$

24,972

$

10,497

Supplemental Cash Flows Information

 

  

 

  

Cash paid during the period for:

 

  

 

  

Interest

$

550

$

895

Transfer of loans to foreclosed real estate

 

10

 

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-owned subsidiary of Seneca-Cayuga, and The Seneca Falls Savings Bank, MHC (“MHC”) 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 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 federal 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, with retail offices in Waterloo, Geneva, Auburn, Union Springs, Phelps, Farmington, Medina and Albion, 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.  The Bank also offers financial and investments services to its customers through licensed third parties.

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-owned subsidiary.

Interim Financial Statements

The interim condensed consolidated financial statements as of March 31, 2021, and for the three months ended March 31, 2021 and 2020, 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 months ended March 31, 2021 and 2020, are not necessarily indicative of the results to be achieved for the remainder of the year ending December 31, 2021, or any other period.

Certain prior period data presented in the consolidated financial statements have been reclassified to conform with 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, 2020 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.  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, 2020.

6


Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

2. Accumulated Other Comprehensive Income (Loss)

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

Unrealized

  

Accumulated

(Losses) Gains

Defined

Other

on Securities

Benefit

Comprehensive

(In thousands)

    

Available-for-Sale

    

Pension Plan

    

Income (Loss)

Balance, January 1, 2021

$

723

$

(2,138)

$

(1,415)

Other comprehensive loss before reclassifications

 

(13)

 

 

(13)

Amounts reclassified from AOCI to the income statement

 

 

23

 

23

Net current-period other comprehensive income (loss)

 

(13)

 

23

 

10

Balance, March 31, 2021

$

710

$

(2,115)

$

(1,405)

Balance, January 1, 2019

$

658

$

(2,320)

$

(1,662)

Other comprehensive gain before reclassifications

 

336

 

 

336

Amounts reclassified from AOCI to the income statement

 

 

27

 

27

Net current-period other comprehensive income

 

336

 

27

 

363

Balance, March 31, 2020

$

994

$

(2,293)

$

(1,299)

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

  

For years Ended

March 31, 

Affected Line Item in the

(In thousands)

    

2021

    

2020

    

Statement of Income

Defined benefit pension plan:

 

  

 

  

 

  

Retirement plan net losses recognized in net periodic pension cost

$

29

$

34

 

Compensation and benefits

Tax effect(2)

 

(6)

 

(7)

 

Benefit for income taxes

$

23

$

27

 

Net income


(2)     Amounts in parentheses indicate reductions of net income.

7


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. The weighted-average number of common shares outstanding was 2,360,000 and 2,451,0001, for the three months ended March 31, 2021 and 2020. The Company has not granted any restricted stock awards or stock options and had no potentially dilutive common stock equivalents. 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.

4.Securities

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

March 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

$

37

$

1

$

(1)

$

37

Corporate bonds

14,894

238

(109)

15,023

State and political subdivisions

 

16,943

 

877

 

(106)

 

17,714

Total securities available-for-sale

$

31,874

$

1,116

$

(216)

$

32,774

Securities held-to-maturity:

 

  

 

  

 

  

 

  

Residential mortgage-backed - US agency and GSEs

$

1,390

$

37

$

(3)

$

1,424

Total securities held-to-maturity

$

1,390

$

37

$

(3)

$

1,424

Equity securities:

 

  

 

  

 

  

 

  

Large cap equity mutual fund

$

38

 

  

 

  

$

38

Other mutual funds

 

271

 

  

 

  

 

271

Total of equity securities

$

309

 

  

 

  

$

309

1 Shares amounts related to the periods prior to the January 13, 2021 closing of the conversion offering have been restated to give retroactive recognition to the 0.9980 exchange ration applied in the conversion offering (see Note 1)

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Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

December 31, 2020

    

Gross

Gross

    

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

(in thousands)

    

Cost

    

Gains

    

Losses

    

Value

Securities available-for-sale:

 

  

 

  

 

  

 

  

Residential mortgage-backed - US agency and GSEs

$

39

$

1

$

(1)

$

39

State and political subdivisions

 

16,971

 

917

 

(1)

 

17,887

Total securities available-for-sale

$

17,010

$

918

$

(2)

$

17,926

Securities held-to-maturity:

 

  

 

  

 

  

 

  

Residential mortgage-backed - US agency and GSEs

 

1,480

 

33

 

(3)

 

1,510

Total securities held-to-maturity

$

1,480

$

33

$

(3)

$

1,510

Equity securities:

 

  

 

  

 

  

 

  

Large cap equity mutual fund

$

35

 

  

 

  

$

35

Other mutual funds

 

626

 

  

 

  

 

626

Total of equity securities

$

661

 

  

 

  

$

661

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:

March 31, 2021

12 Months or Less

More than 12 Months

Total

Gross

Gross

Gross

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

(in thousands)

    

Value

    

Losses

    

Value

    

Losses

    

Value

    

Losses

Securities available-for-sale:

 

  

 

  

 

  

 

  

 

  

 

  

Residential mortgage-backed - US agency and GSEs

$

23

$

(1)

$

2

$

$

25

$

(1)

Corporate bonds

8,665

(109)

8,665

(109)

State and political subdivisions

 

4,755

 

(106)

 

 

 

4,755

 

(106)

Total securities available-for-sale

$

13,443

$

(216)

$

2

$

$

13,445

$

(216)

Securities held-to-maturity:

 

  

 

  

 

  

 

  

 

  

 

  

Residential mortgage-backed - US agency and GSEs

$

134

$

(2)

$

85

$

(1)

$

219

$

(3)

Total securities held-to-maturity

$

134

$

(2)

$

85

$

(1)

$

219

$

(3)

9


Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

December 31, 2020

12 Months or Less

More than 12 Months

Total

 

Gross

 

Gross

 

Gross

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

(in thousands)

 

Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

Securities available-for-sale:

    

  

    

  

    

  

    

  

    

  

    

  

Residential mortgage-backed - US agency and GSEs

$

24

$

(1)

$

2

$

$

26

 

$

(1)

State and political subdivisions

 

1,066

 

(1)

 

 

 

1,066

 

(1)

Total securities available-for-sale

$

1,090

$

(2)

$

2

$

$

1,092

$

(2)

Securities held-to-maturity:

 

  

 

  

 

  

 

  

 

  

 

  

Residential mortgage-backed - US agency and GSEs

$

150

$

(1)

$

97

$

(1)

$

247

$

(2)

Total securities held-to-maturity

$

150

$

(1)

$

97

$

(1)

$

247

$

(2)

 

  

 

  

 

  

 

  

 

  

 

  

The Company conducts a formal review of investment securities on a quarterly basis for the presence of other-than-temporary impairment (“OTTI”). Management assesses whether OTTI 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 to have occurred (1) if we intend to sell the security; (2) if it is “more likely than not” we will be required to sell the security before recovery of its amortized cost basis; or (3) the present value of 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 operations on a gross basis, including both the portion recognized in earnings as well as the portion recorded in other comprehensive income.  Normally, the gross OTTI would then be offset by the amount of non-credit-related OTTI, showing the net as the impact on earnings.  All OTTI charges have been credit-related to date, and therefore no offset has been presented on the consolidated statements of income.

Eleven government agency and government sponsored enterprise (GSE) residential mortgage-backed security holdings have an unrealized loss as of March 31, 2021.  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 $700 or less.  

There are eighteen bond issues held by the Bank that have an unrealized loss as of March 31, 2021.  The bonds are issued by well-established 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.  We anticipate full recovery of our investment over time and have no plans to sell the securities in the near term.  

None of the securities demonstrate a steadily increasing loss ratio and values 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 is deemed present on these securities.

10


Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following is a summary of the amortized cost and estimated fair values of debt securities at March 31, 2021, 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.

March 31, 2021

Securities

Securities

 

Available-for-Sale

 

Held-to-Maturity

 

Amortized

 

Estimated

 

Amortized

 

Estimated

(in thousands)

    

Cost

    

Fair Value

    

Cost

    

Fair Value

Due in one year or less

$

124

$

125

$

$

Due over one year through five years

 

3,374

 

3,386

 

 

Due over five through ten years

 

6,348

 

6,509

 

 

Due after ten years

 

21,991

 

22,717

 

 

 

31,837

 

32,737

 

 

Residential mortgage-backed securities

 

37

 

37

 

1,390

 

1,424

Total

$

31,874

$

32,774

$

1,390

$

1,424

There were no gross realized gains (losses) on sales and redemptions of available-for sale securities for the three months March 31, 2021 and 2020.

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 $6,966,965 and $6,969,058 were pledged to collateralize certain deposit arrangements at March 31, 2021 and December 31, 2020 respectively.

11


Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

5.Loans Receivable

Major classifications of loans are as follows:

March 31, 

December 31, 

(In thousands)

    

2021

    

2020

 

Originated Loans

 

  

 

  

Residential mortgages:

 

  

 

  

One-to-four family

$

110,040

$

113,254

 

110,040

 

113,254

Commercial loans:

 

  

 

  

Real estate - nonresidential

 

22,520

 

22,812

Multi-family

 

2,331

 

5,125

Commercial business

 

19,266

 

20,178

 

44,117

 

48,115

Consumer:

 

  

 

  

Home equity and junior liens

 

9,202

 

9,981

Manufactured homes

 

46,608

 

44,347

Automobile

 

22,421

 

21,469

Student

 

2,304

 

2,259

Recreational vehicle

17,043

14,557

Other consumer

 

4,245

 

4,081

 

101,823

 

96,694

Total originated loans

 

255,980

 

258,063

Net deferred loan costs

 

12,658

 

11,854

Less allowance for loan losses

 

(1,881)

 

(1,821)

Net originated loans

$

266,757

$

268,096

12


Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

March 31, 

December 31, 

(In thousands)

    

2021

    

2020

Acquired Loans

  

  

Residential mortgages:

 

  

 

  

One-to-four family

$

12,493

$

14,102

 

12,493

 

14,102

Commercial loans:

 

  

 

  

Real estate - nonresidential

 

1,885

 

1,942

Commercial business

 

310

 

327

 

2,195

 

2,269

Consumer:

 

  

 

  

Home equity and junior liens

 

1,163

 

1,406

Other consumer

 

163

 

190

 

1,326

 

1,596

Total acquired loans

 

16,014

 

17,967

Net deferred loan costs

 

(65)

 

(67)

Fair value credit and yield adjustment

 

(339)

 

(356)

Net acquired loans

$

15,610

$

17,544

March 31, 

December 31, 

(In thousands)

    

2021

    

2020

Total Loans

  

Residential mortgages:

  

  

One-to-four family

$

122,533

$

127,356

 

122,533

 

127,356

Commercial loans:

 

  

 

  

Real estate - nonresidential

 

24,405

 

24,754

Multi-family

 

2,331

 

5,125

Commercial business

 

19,576

 

20,505

 

46,312

 

50,384

Consumer:

 

  

 

  

Home equity and junior liens

 

10,365

 

11,387

Manufactured homes

 

46,608

 

44,347

Automobile

 

22,421

 

21,469

Student

 

2,304

 

2,259

Recreational vehicle

17,043

14,557

Other consumer

 

4,408

 

4,271

 

103,149

 

98,290

Total Loans

 

271,994

 

276,030

Net deferred loan costs

 

12,593

 

11,787

Fair value credit and yield adjustment

 

(339)

 

(356)

Less allowance for loan losses

 

(1,881)

 

(1,821)

Loans receivable, net

$

282,367

$

285,640

13


Table of Contents

Generations Bancorp NY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company grants residential mortgage, commercial and consumer loans to customers throughout the Finger Lakes region of New York State, which includes parts of Cayuga, Seneca, Wayne, Yates, Ontario and Orleans Counties.  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 Northeastern United States, are purchased regularly from BCI Financial Corporation, a Connecticut Company. In 2019, the Company also began to purchase modular home loans originated throughout the United States from Triad Financial Services, Inc., who then services the loans for the Company. In 2020, the Company began to purchase automobile and recreational vehicle loans originated in New York State from OneSource Financial.

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 unless 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 pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system:

March 31, 2021

Special

(In thousands)

    

Pass

    

Mention

    

Substandard

    

Doubtful

    

Total

Originated Loans

 

  

 

  

 

  

 

  

 

  

Residential mortgages:

 

  

 

  

 

  

 

  

 

  

One-to-four family

$

106,706

$

943

$

2,391

$

$

110,040

 

106,706

 

943

 

2,391

 

 

110,040

Commercial loans:

 

  

 

  

 

 

  

 

  

Real estate - nonresidential

 

15,419

 

4,568

 

2,533

 

 

22,520

Multi-family

 

2,331

 

 

 

 

2,331

Commercial business

 

16,360

 

825

 

2,081

 

 

19,266

 

34,110

 

5,393

 

4,614