S-1 1 tm2030321d1_s1.htm FORM S-1

 

As filed with the Securities and Exchange Commission on September 11, 2020

Registration No. 333-________

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM S-1 

REGISTRATION STATEMENT UNDER THE

SECURITIES ACT OF 1933

 

Generations Bancorp NY, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

Maryland 6036 Being applied for
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)

 

20 East Bayard Street

Seneca Falls, New York 13148

(315) 568-5855
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

Menzo D. Case

President and Chief Executive Officer

20 East Bayard Street

Seneca Falls, New York 13148

(315) 568-5855
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

 

Copies to:

Kip A. Weissman, Esq.

Steven Lanter, Esq.

Luse Gorman, PC

5335 Wisconsin Avenue, N.W., Suite 780

Washington, D.C. 20015

(202) 274-2000 

John F. Breyer, Jr.

Breyer & Associates PC

8180 Greensboro Drive, Suite 785

McLean, VA 22102

(703) 883-1100 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: x

 

If this Form is filed to register additional shares for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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  xSmaller reporting company  x
Emerging growth company  x   

 

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 to Section 7(a)(2)(B) of the Securities Act. ¨

 

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be
registered
Amount to be
registered
Proposed maximum
offering price per share(1)
Proposed maximum
aggregate offering
price(1)
Amount of
registration fee
Common Stock, $0.01 par value per share 2,875,000 shares $10.00 $28,750,000 $3,732
Participation Interests 224,815     (2)

 

(1)Estimated solely for purposes of calculating the amount of the registration fee in accordance with Rule 457(o) of the Securities Act of 1933, as amended.
(2)The securities to be purchased by the Generations Bank 401(k) Plan are included in the amount shown for the common stock. Accordingly, no separate fee is required for the participation interests

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 

Prospectus Supplement

 

GENERATIONS BANK 401(K) PLAN

 

Offering of Participation Interests in up to 224,815 Shares

of

GENERATIONS BANCORP NY, INC.

Common Stock

 

Generations Bancorp NY, Inc., a new Maryland corporation, is offering shares of common stock for sale at $10.00 per share in connection with the conversion of The Seneca Fall Savings Bank, MHC from the mutual holding company to the stock holding company form of organization. The shares being offered represent the ownership interest in Seneca-Cayuga Bancorp, Inc., an existing federal corporation, currently owned by The Seneca Fall Savings Bank, MHC. Seneca-Cayuga Bancorp, Inc.’s common stock currently trades on the OTC Pink Marketplace under the trading symbol “SCAY.” We expect that Generations Bancorp NY, Inc.’s common stock will be quoted on the Nasdaq Capital Market (NASDAQ) upon conclusion of the stock offering and we have applied to list the shares of Generations Bancorp NY, Inc. common stock on the NASDAQ under the symbol “GBNY.”

 

In connection with the offering, Generations Bank is allowing participants in the Generations Bank 401(k) Plan (the “401(k) Plan”) to invest all or a portion of their account balances (other than the existing Seneca-Cayuga Bancorp, Inc. Stock Fund) in Generations Bancorp NY, Inc. common stock. Based upon the value of the 401(k) Plan assets at June 30, 2020, the trustee of the 401(k) Plan could purchase up to 224,815 shares of Generations Bancorp NY, Inc. common stock, at the purchase price of $10.00 per share. This prospectus supplement relates to the election of 401(k) Plan participants to direct the trustee of the 401(k) Plan to invest all or a portion of their 401(k) Plan account balances in Generations Bancorp NY, Inc. common stock at the time of the stock offering.

 

Before you consider investing, you should read the prospectus of Generations Bancorp NY, Inc., dated [________ __, 2020], which is attached to this prospectus supplement. It contains detailed information regarding the conversion, the stock offering of Generations Bancorp NY, Inc., and the financial condition, results of operations and business of Generations Bank. This prospectus supplement provides information regarding the 401(k) Plan. You should read this prospectus supplement together with the prospectus and keep both for future reference.

 

For a discussion of risks that you should consider, see “Risk Factors” in this prospectus supplement, “Risk Factors” beginning on page [1] of the attached prospectus, and “Notice of Your Rights Concerning Employer Securities” in this prospectus supplement.

 

The interests in the 401(k) Plan and the offering of the shares of Generations Bancorp NY, Inc. common stock have not been approved or disapproved by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Securities and Exchange Commission or any other federal or state agency. Any representation to the contrary is a criminal offense.

 

The securities offered by this prospectus supplement are not deposits or savings accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.

 

This prospectus supplement may be used only in connection with offers and sales, by Generations Bancorp NY, Inc., in the offering of Generations Bancorp NY, Inc. common stock that may be acquired within the 401(k) Plan. No one may use this prospectus supplement to reoffer or resell interests in shares of Generations Bancorp NY, Inc. common stock acquired through the 401(k) Plan.

 

You should rely only on the information contained in this prospectus supplement and the attached prospectus. Generations Bancorp NY, Inc., Generations Bank and the 401(k) Plan have not authorized anyone to provide you with different information.

 

This prospectus supplement does not constitute an offer to sell or solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make an offer or solicitation in that jurisdiction. Neither the delivery of this prospectus supplement and the attached prospectus nor any sale of Generations Bancorp NY, Inc. common stock shall under any circumstances imply that there has been no change in the affairs of Seneca-Cayuga Bancorp, Inc., Generations Bank or the 401(k) Plan since the date of this prospectus supplement, or that the information contained in this prospectus supplement or incorporated by reference is correct as of any time after the date of this prospectus supplement.

 

The date of this prospectus supplement is [________ __, 2020].

 

   

 

 

TABLE OF CONTENTS

 

RISK FACTORS 1
   
THE OFFERING 1
   
Securities Offered 1
Election to Purchase Generations Bancorp NY, Inc. Common Stock 2
Purchase Priorities 2
Purchases in the Stock Offering and Oversubscriptions 3
Composition of the Generations Bancorp NY, Inc. Stock Fund 4
Minimum and Maximum Investment 5
Value of 401(k) Plan Assets 6
How to Order Common Stock Through the 401(k) Plan During the Offering 6
Special Investment Election Form Delivery Deadline 7
Irrevocability of Transfer Direction 7
Future Direction to Purchase and Sell Common Stock 8
Voting Rights of Common Stock 8
   
DESCRIPTION OF THE 401(k) PLAN 8
   
Introduction 8
Eligibility and Participation 9
Contributions under the 401(k) Plan 9
Limitations on Contributions 10
Benefits Under the 401(k) Plan 10
Investment of Contributions and Account Balances 11
Performance History 12
Description of the Investment Funds 13
Generations Bancorp NY, Inc. Stock Fund 19
Administration of the 401(k) Plan 20
Amendment and Termination 20
Merger, Consolidation or Transfer 20
Federal Income Tax Consequences 21
Notice of Your Rights Concerning Employer Securities 22
Additional Employee Retirement Income Security Act Considerations 22
Securities and Exchange Commission Reporting and Short-Swing Profit Liability 23
Financial Information Regarding Plan Assets 24
   
LEGAL OPINION 24

 

   

 

 

 

RISK FACTORS

 

In addition to considering the material risks disclosed under “Risk Factors” beginning on page [1] of the attached prospectus, you should also consider the following:

 

If you elect to purchase Generations Bancorp NY, Inc. common stock using your 401(k) Plan account balance and the stock offering is oversubscribed, you will bear the risk of price changes in the investment funds of the 401(k) Plan.

 

If you elect to purchase Generations Bancorp NY, Inc. common stock using your 401(k) Plan account balance, the 401(k) Plan trustee will sell the designated percentage of your designated investment funds (other than the existing Seneca-Cayuga Bancorp, Inc. Stock Fund) within your 401(k) Plan account based on your investment election. If the stock offering is oversubscribed (i.e., there are more orders for Generations Bancorp NY, Inc. common stock than shares available for sale in the stock offering) and the 401(k) Plan trustee cannot use any or all of the funds you allocate to purchase Generations Bancorp NY, Inc. common stock, the funds that cannot be invested in Generations Bancorp NY, Inc. common stock, and any interest earned on such funds, will be reinvested in your existing investment funds of the 401(k) Plan (other than the existing Seneca-Cayuga Bancorp, Inc. Stock Fund), according to your then existing investment election (i.e., in proportion to your investment direction for future contributions). During the period from when the 401(k) Plan trustee sells a percentage of each of your investment funds until reinvestment of some or all of those funds back into your investment funds as a result of an oversubscription, you will bear the risk of price changes in the investment funds. It is possible that during this period some or all of the investment funds may have increased in value more than the amount of any interest you may have earned on the reinvested funds before reinvestment. See “The Offering – Purchases in the Stock Offering and Oversubscriptions” in this prospectus supplement.

 

THE OFFERING
 
Securities Offered

Generations Bancorp NY, Inc. is offering participants of the 401(k) Plan the opportunity to purchase participation interests in shares of Generations Bancorp NY, Inc. common stock through the 401(k) Plan. A “participation interest” represents your indirect ownership of stock units that are acquired by the 401(k) Plan pursuant to your election, and is the equivalent to one share of Generations Bancorp NY, Inc. common stock. In this prospectus supplement, “participation interests” are referred to as shares of Generations Bancorp NY, Inc. common stock. At the purchase price of $10.00 per share, the 401(k) Plan may acquire up to 224,815 shares of Generations Bancorp NY, Inc. common stock in the stock offering, based on the approximate fair market value of the 401(k) Plan’s assets as of June 30, 2020.

 

Only employees of Generations Bank may become participants in the 401(k) Plan and only participants may purchase shares of Generations Bancorp NY, Inc. common stock through the 401(k) Plan. Your investment in shares of Generations Bancorp NY, Inc. common stock in connection with the stock offering is subject to the purchase priorities listed below.

 

Information regarding the 401(k) Plan is contained in this prospectus supplement and information with respect to the financial condition, results of operations and business of Seneca-Cayuga Bancorp, Inc. and Generations Bank is contained in the accompanying prospectus. The address of the corporate/main office of Generations Bancorp NY, Inc. and Generations Bank is 20 East Bayard Street, Seneca Falls, New York 13148 and the telephone number at this address is (315) 568-5855.

 

 

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 Address all questions about this prospectus supplement to Lori M. Parish, Assistant Vice President and Corporate Secretary, at Generations Bank; telephone: (315) 568-1110; email: lori.parish@mygenbank.com. 
  
 

Direct all questions about the stock offering, the prospectus, or obtaining a stock order form to purchase stock in the offering outside the 401(k) Plan to the Stock Information Center at 1-(877) [_______] (toll-free), Monday through Friday, 10:00 a.m. through 4:00 p.m., Eastern time. The Stock Information Center will be closed on bank holidays.

 

Election to Purchase Generations Bancorp NY, Inc. Common Stock In connection with the stock offering, you may elect to designate a percentage of your 401(k) Plan (other than the existing Seneca-Cayuga Bancorp, Inc. Stock Fund) account balance (up to 100%) to be used to purchase shares of Generations Bancorp NY, Inc. common stock in the stock offering. The trustee of the 401(k) Plan will purchase Generations Bancorp NY, Inc. common stock at $10.00 per share to be held as stock units, in accordance with your directions. However, your directions are subject to purchase priorities and purchase limitations described below.
   
Purchase Priorities

All 401(k) Plan participants are eligible to elect to order Generations Bancorp NY, Inc. common stock in the stock offering. However, the elections are subject to the purchase priorities in the Plan of Conversion and Reorganization, which provides for a subscription offering and a community offering. In the stock offering, purchase priorities are as follows and apply in case more shares of Generations Bancorp NY, Inc. common stock are ordered than are available for sale (i.e., an “oversubscription”):

 

Subscription Offering:

 

(1)               Each depositor of Generations Bank or Generations Commercial Bank with aggregate account balances of at least $50 at the close of business on July 31, 2019, get first priority.

 

(2)               Generations Bank’s tax-qualified plans, including the employee stock ownership plan and the 401(k) Plan, get second priority.

 

(3)               Each depositor of Generations Bank or Generations Commercial Bank with aggregate account balances of at least $50 at the close of business on [___________], get third priority.

 

(4)               Each depositor of Generations Bank at the close of business on [__________],get fourth priority.

 

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Community Offering:

 

Shares of Generations Bancorp NY, Inc. common stock not purchased in the subscription offering may be offered for sale to the general public in a “community offering,” with a preference given to (i) natural persons (including trusts of natural persons) in the New York counties of Cayuga, Seneca, Ontario and Orleans counties, (ii) Seneca-Cayuga Bancorp, Inc.’s public stockholders at the close of business on [_________]; and (iii) other members of the general public.

 

If you fall into purchase priority (1), (3) or (4), you have subscription rights to purchase Generations Bancorp NY, Inc. common stock in the subscription offering. You may use up to 100% of your 401(k) Plan account balance (other the existing Seneca-Cayuga Bancorp, Inc. Stock Fund) to pay for the shares of Generations Bancorp NY, Inc. common stock.

 

If you do not fall into purchase priority (1), (3) or (4), you may place an order for the purchase of Generations Bancorp NY, Inc. common stock through the 401(k) Plan in the Community Offering, if any, using the enclosed Special Investment Election Form, to be completed and submitted in the manner described below under “How to Order Common Stock Through the 401(k) Plan During the Offering.”

 

If you fall into purchase priority (1), (3) or (4), you will separately receive a stock offering materials package in the mail, including a stock order form. You may use the stock order form to order shares of Generations Bancorp NY, Inc. common stock outside the 401(k) Plan. Refer to the prospectus for information on how to submit such orders.

 

Additionally, or instead of placing an order outside of the 401(k) Plan using a stock order form, you may place an order for the purchase of Generations Bancorp NY, Inc. common stock through the 401(k) Plan, using the enclosed Special Investment Election Form, to be completed and submitted in the manner described below under “How to Order Common Stock Through the 401(k) Plan During the Offering.”

 

Purchases in the Stock Offering and Oversubscriptions

The trustee of the 401(k) Plan will order shares of Generations Bancorp NY, Inc. common stock in the stock offering based on the designated percentage set forth on your Special Investment Election Form. Specifically, on or about the second business day following the conclusion of the 401(k) Plan Offering Period (as defined below), each of your current investments funds within your 401(k) Plan account (other than the existing Seneca-Cayuga Bancorp, Inc. Stock Fund) will be liquidated based on your designated percentage, and the proceeds (rounded down to the nearest $10.00 increment) will be transferred to an interest-bearing account held by the 401(k) Plan pending the formal closing of the stock offering several weeks later. We will determine whether all, or any portion of, your order will be filled (if the offering is oversubscribed, you may not receive any, or all, of your order, depending on your purchase priority, as described above). The amount that can be used toward your order will be applied to the purchase of shares of Generations Bancorp NY, Inc. common stock. Following the formal closing of the stock offering, your purchased shares of Generations Bancorp NY, Inc. common stock will be reflected in the new Generations Bancorp NY, Inc. Stock Fund, which will also then include converted shares of common stock of Seneca-Cayuga Bancorp, Inc. Your ownership interest in the Generations Bancorp NY, Inc. Stock Fund will initially be based on the number of shares of Generations Bancorp NY, Inc. common stock that you purchased through the 401(k) Plan in the stock offering, plus the converted shares of common stock of Seneca-Cayuga Bancorp, Inc. and any cash from the existing Seneca-Cayuga Bancorp, Inc. Stock Fund. See “Composition of the Generations Bancorp NY, Inc. Stock Fund” for further details.

 

 

3

 

 

 

If the stock offering is oversubscribed (i.e., there are more orders for Generations Bancorp NY, Inc. common stock than shares available for sale in the stock offering) and the trustee is unable to use the full amount allocated by you to purchase Generations Bancorp NY, Inc. common stock in the stock offering, the amount that cannot be invested in Generations Bancorp NY, Inc. common stock, and any interest earned on that amount, will be reinvested in the existing investment funds of the 401(k) Plan (other than the existing Seneca-Cayuga Bancorp, Inc. Stock Fund), in accordance with your then existing investment election (in proportion to your investment direction for future contributions). The prospectus describes the allocation procedures in the event of an oversubscription.

 

If you choose not to direct the investment of your 401(k) Plan account balance towards the purchase of Generations Bancorp NY, Inc. common stock in the stock offering, your account balance will remain invested in the investment funds of the 401(k) Plan as you previously directed.

 

Composition of the Generations Bancorp NY, Inc. Stock Fund Shares purchased by the 401(k) Plan in the stock offering will be transferred to the 401(k) Plan and held by the Generations Bancorp NY, Inc. Stock Fund. The Generations Bancorp NY, Inc. Stock Fund is neither a mutual fund nor a diversified or managed investment option. Rather, it is merely a recordkeeping mechanism established by the 401(k) Plan custodian to track the shares purchased by the participants in the stock offering through the 401(k) Plan. The Generations Bancorp NY, Inc. Stock Fund will initially consist of shares of Generations Bancorp NY, Inc. common stock purchased by participants in the 401(k) Plan, which will be initially valued at $10.00 per share (i.e., the purchase price), plus any converted shares and cash from the existing Seneca-Cayuga Bancorp, Inc. Stock Fund. Following the stock offering, the Generations Bancorp NY, Inc. Stock Fund will maintain a cash component for liquidity purposes in order to facilitate daily transactions, such as investment transfers or distributions from the Generations Bancorp NY, Inc. Stock Fund. Your ownership interest in the Generations Bancorp NY, Inc. Stock Fund will be denominated in stock units.

 

4

 

 

 

After the stock offering, a stock unit will consist of a percentage interest in both Generations Bancorp NY, Inc. common stock and cash held in the Generations Bancorp NY, Inc. Stock Fund. Stock unit values (similar to the stock’s share price) and the number of stock units (similar to number of shares) are used to designate the dollar value of the participant’s interest in the Generations Bancorp NY, Inc. Stock Fund. Each day the stock unit value of the Generations Bancorp NY, Inc. Stock Fund will be determined by dividing the total market value of the fund at the end of the day by the total number of stock units held in the fund by all participants as of the previous day’s end. The change in stock unit value reflects the day’s change in stock price of Generations Bancorp NY, Inc. common stock, any cash dividends accrued and the interest earned on the cash component of the Generations Bancorp NY, Inc. Stock Fund, less any investment management fees (if applicable). Investment in Generations Bancorp NY, Inc. common stock involves special risks related to investments in shares of Generations Bancorp NY, Inc. common stock. For a discussion of material risks you should consider, see the “Risk Factors Section” of this prospectus supplement, the “Risk Factors” section of the accompanying prospectus, and the section of this prospectus supplement called “Notice of Your Rights Concerning Employer Securities” (see below).

 

The market value and stock unit holdings of your 401(k) Plan account in the Generations Bancorp NY, Inc. Stock Fund will be reported to you on your quarterly statements, which may be accessed through your participant website.

 

Minimum and Maximum Investment In connection with the stock offering, the 401(k) Plan will permit you to use up to 100% of your 401(k) Plan account balance (other than your account balance in the existing Seneca-Cayuga Bancorp, Inc. Stock Fund) for the purchase of Generations Bancorp NY, Inc. common stock.

 

5

 

 

 

The trustee of the 401(k) Plan will then subscribe for shares of the Generations Bancorp NY, Inc. common stock offered for sale in the stock offering, in accordance with each participant’s direction. The trustee will pay $10.00 per share, which will be the same price paid by all other persons who purchase shares in the subscription and community offerings. In order to purchase Generations Bancorp NY, Inc. common stock through the 401(k) Plan, the minimum investment will be the purchase of 25 shares of Generations Bancorp NY, Inc. common stock, which equals $250. The prospectus describes maximum purchase limits for investors in the stock offering.

 

Value of 401(k) Plan Assets

The market value of the assets of the 401(k) Plan is approximately $2,584,756 as of June 30, 2020.

 

How to Order Common Stock Through the 401(k) Plan During the Offering

Enclosed is a Special Investment Election Form on which you can make a special election to purchase Generations Bancorp NY, Inc. common stock in the stock offering through the Generations Bancorp NY, Inc. Stock Fund. This is done by following the procedures described below. Note the following stipulations concerning this election: 

 

·     Using your Special Investment Election Form, you can designate a percentage (up to 100%) of your total 401(k) Plan account balance (other than your account balance in the existing Seneca-Cayuga Bancorp, Inc. Stock Fund) to be used to order Generations Bancorp NY, Inc. common stock.

 

·     Your election is subject to a minimum purchase of 25 shares of Generations Bancorp NY, Inc. common stock at the purchase price of $10.00 per share.

 

·     Your election, plus any order you placed outside the 401(k) Plan using a stock order form, are together subject to a maximum purchase limit. The maximum number of shares of Generations Bancorp NY, Inc. common stock that can be ordered by any person in the offering, or persons exercising subscription rights through a single account held jointly, is 30,000 shares, or $300,000, and no person together with an associate or group of persons acting in concert may purchase more than 60,000 shares or $600,000.

 

 

·     The election period for the 401(k) Plan ends at 2:00 p.m., Eastern time, on [_______], 2020 (the “401(k) Plan Offering Period”).

 

·     During the stock offering period, you will continue to be able to transfer amounts that are not directed to be used to purchase Generations Bancorp NY, Inc. common stock among all other investment funds. However, you will not be permitted to change the investment amounts that you designated to be used to purchase Generations Bancorp NY, Inc. common stock on your Special Investment Election Form.

 

 

6

 

 

 

·      As soon as practicable following the 401(k) Plan Offering Period (most likely on or about the second day), the 401(k) Plan trustee will sell a percentage of each of your investment funds within your 401(k) Plan account based on the percentage designated in your Special Investment Election Form. Thereafter, the proceeds (rounded down to the nearest $10.00 increment) will be transferred to an interest bearing account held by the 401(k) Plan pending the formal closing of the stock offering several weeks after the 401(k) Plan Offering Period.

 

·     Following the formal closing of the stock offering, your purchased shares of Generations Bancorp NY, Inc. common stock will be reflected in the Generations Bancorp NY, Inc. Stock Fund, which will be denominated in stock units. Any remaining dollar amounts remaining in the interest bearing account because the amounts could not be used by the trustee to purchase Generations Bancorp NY, Inc. common stock in the stock offering will be reinvested in the existing investment funds of the 401(k) Plan, in accordance with your then existing investment election (in proportion to your investment direction for future contributions).

 

Special Investment Election Form Delivery Deadline

If you wish to elect to order Generations Bancorp NY, Inc. common stock through the 401(k) Plan, you must return your Special Investment Election Form to Lori M. Parish, Assistant Vice President and Corporate Secretary, at Generations Bank, 20 East Bayard Street, Seneca Falls, New York 13148, no later than the [__________] deadline.

 

Address all questions about this prospectus supplement to Lori M. Parish, Assistant Vice President and Corporate Secretary, at Generations Bank; telephone: (315) 568-1110;

email: lori.parish@mygenbank.com.

 

Irrevocability of Transfer Direction

Once you make an election to purchase shares of Generations Bancorp NY, Inc. common stock in the stock offering through the 401(k) Plan, you may not change your election. Your election is irrevocable. You will, however, continue to be able to transfer amounts not directed towards the purchase of shares of Generations Bancorp NY, Inc. common stock among all of the other investment funds in the 401(k) Plan on a daily basis.

 

7

 

 

Future Direction to Purchase and Sell Common Stock

You will be able to purchase Generations Bancorp NY, Inc. common stock after the stock offering through the 401(k) Plan. You will also be able to sell your interest in the Generations Bancorp NY, Inc. Stock Fund (subject to the restrictions below).

 

After the stock offering, you will again have complete access to any amounts you directed towards the purchase of shares in the stock offering. For example, after the stock offering closes, you may sell any units you purchased in the offering. Special restrictions may apply to purchasing or selling shares of Generations Bancorp NY, Inc. common stock by the participants who are subject to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, relating to the purchase and sale of securities by officers, directors and principal stockholders of Generations Bancorp NY, Inc. Note that if you are an officer of Generations Bank that is restricted by federal or state regulations from selling shares of Generations Bancorp NY, Inc. common stock acquired in the stock offering for one year, the Generations Bancorp NY, Inc. common stock that you purchased in the stock offering through the 401(k) Plan (and held by the Generations Bancorp NY, Inc. Stock Fund) will not be tradable until the one-year trading restriction has lapsed.

 

Voting Rights of Common Stock The 401(k) Plan provides that you may direct the trustee as to how to vote your interest in the shares of Generations Bancorp NY, Inc. common stock held by Generations Bancorp NY, Inc. Stock Fund.  If the trustee does not receive your voting instructions, the administrator of the 401(k) Plan will direct the trustee to vote your shares in the same proportion as the voting instructions received from other participants related to their shares of Generations Bancorp NY, Inc. common stock held by the Generations Bancorp NY, Inc. Stock Fund, provided that such vote is made in accordance with the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  All voting instructions will be kept confidential.

 

 

DESCRIPTION OF THE 401(k) PLAN

 

Introduction

 

Generations Bank originally adopted the predecessor plan to the 401(k) Plan effective as of May 1, 2006, and amended and restated the 401(k) Plan effective as of January 1, 2016. The 401(k) Plan is a single-employer, tax-qualified plan with a cash or deferred compensation feature established in accordance with the requirements under Section 401(a) and Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”).

 

Generations Bank intends that the 401(k) Plan, in operation, will comply with the requirements under Section 401(a) and Section 401(k) of the Code. Generations Bank will adopt any amendments to the 401(k) Plan that may be necessary to ensure the continuing qualified status of the 401(k) Plan under the Code and applicable Treasury Regulations.

 

8

 

 

Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The 401(k) Plan is an “individual account plan” other than a “money purchase pension plan” within the meaning of ERISA. As such, the 401(k) Plan is subject to all of the provisions of Title I (Protection of Employee Benefit Rights) and Title II (Amendments to the Code Relating to Retirement Plans) of ERISA, except to the funding requirements contained in Part 3 of Title I of ERISA, which by their terms do not apply to an individual account plan (other than a money purchase plan). The Plan is not subject to Title IV (Plan Termination Insurance) of ERISA. The funding requirements contained in Title IV of ERISA are not applicable to participants or beneficiaries under the 401(k) Plan.

 

Reference to Full Text of 401(k) Plan. The following portions of this prospectus supplement summarize certain provisions of the 401(k) Plan. They are not complete and are qualified in their entirety by the full text of the 401(k) Plan. Copies of the 401(k) Plan are available to all employees by filing a request with the 401(k) Plan Administrator c/o Generations Bank, Attn: Lori M. Parish. You are urged to read carefully the full text of the 401(k) Plan.

 

Eligibility and Participation

 

As an employee of Generations Bank, you are eligible to become a participant in the 401(k) Plan on the entry date coinciding with or immediately following completion of the earlier of 500 hours of service within six consecutive months of employment or one year of service and attainment of age 18. The entry dates under the 401(k) Plan are the first day of each calendar month following satisfaction of the eligibility requirements.

 

As of June 30, 2020, there were approximately ninety-nine (99) active and former employees in the 401(k) Plan.

 

Contributions under the 401(k) Plan

 

Elective Deferrals. Participants are permitted to defer on a pre-tax basis any whole percentage of Compensation, from 1% up to 100%, subject to certain restrictions imposed by the Code, and to have that amount contributed to the 401(k) Plan on your behalf. You are also permitted to make Roth (i.e., after-tax) elective deferrals to the 401(k) Plan. Both your pre-tax and Roth deferrals are subject to certain restrictions imposed by the Code. For purposes of the 401(k) Plan, “Compensation” means your Section 3401(a) wages. In addition, any pre-tax contributions that you make to a 401(k) plan and pre-tax contributions to a Section 125 cafeteria plan and qualified transportation fringe benefits are included in Compensation. In 2020, the Compensation of each participant taken into account under the 401(k) Plan is limited to $285,000. (Limits established by the Internal Revenue Service are subject to increase pursuant to an annual cost-of-living adjustment, as permitted by the Code). Canceling or changing your contribution percentage can be accomplished either over the telephone or over the internet at any time.

 

Catch-up Contributions. If you have made the maximum amount of elective deferrals allowed by the 401(k) Plan or other legal limits and you have attained at least age 50 (or will reach age 50 before the end of the Plan Year, which is December 31), you are also eligible to make an additional catch-up contribution. In 2020, the maximum catch-up contribution is $6,500. You may authorize your employer to withhold a specified dollar amount of your compensation for this purpose.

 

Employer Matching Contributions. Generations Bank will make an employer matching contribution to your account in an amount equal to 25% of your salary deferrals to the 401(k) Plan, but not exceeding 15% of your compensation.

 

9

 

 

Limitations on Contributions

 

Contribution Limits. For the Plan Year beginning January 1, 2020, the amount of your before-tax contributions may not exceed $19,500 per calendar year, or $26,000, if you are eligible to make catch-up contributions. Contributions in excess of this limit are known as excess deferrals. If you defer amounts in excess of this limitation, your gross income for federal income tax purposes will include the excess in the year of the deferral. In addition, unless the excess deferral is distributed before April 15 of the following year, it will be taxed again in the year distributed. Income on the excess deferral distributed by April 15 of the immediately succeeding year will be treated, for federal income tax purposes, as earned and received by you in the tax year in which the contribution is made.

 

The total amount of contributions that you make and any contribution your employer makes on your behalf to your account in one year is limited to the lesser of 100% of your compensation or $57,000, or if applicable, $63,500 including catch-up contributions.

 

Catch-up Contributions. For 2020, the maximum catch-up contribution is $6,500.

 

Rollovers. You may make a rollover contribution of an eligible rollover distribution from any other qualified retirement plan or an individual retirement arrangement (“IRA”). These funds will be maintained in a separate rollover account in which you will have a nonforfeitable vested interest.

 

Benefits Under the 401(k) Plan

 

Vesting. At all times, you have a fully vested, nonforfeitable interest in your elective deferral contributions and rollover contributions. You will become vested in employer contributions at the rate of 25% per year, commencing upon completion of one year of service, and will become 100% vested upon completion of four years of service. You will also become 100% vested in your entire account in the event you attain normal retirement age (age 65), you die or you are disabled. If you terminate employment before you are 100% vested in your account, the non-vested portion of your account will be forfeited after the earlier of the date you incur five consecutive one-year breaks in service or the date you receive a distribution of the vested portion of your account. However, if you are reemployed by Generations Bank before incurring five consecutive one-year breaks in service and you pay back to the Plan within five years of reemployment in a cash lump sum the full amount distributed to you from your account, your forfeited employer contributions will be restored to you.

 

Distribution at Termination of Employment. You (or your beneficiary, in the event of your death) will be entitled to receive a distribution of the vested amounts in your account when your employment terminates for any reason. Your benefit will be equal to the vested balance of your account. You will receive payment of your benefit in a lump sum. You may request a partial distribution of the vested portion of your account; the minimum amount will be $1,000. You may be eligible to elect a direct rollover of your distribution to an IRA or another qualified plan to avoid current taxation of your benefit. The Plan will make involuntary cash-out distributions of vested account balances of $1,000 or less. In determining the value of your vested account balance, the Plan will include rollover contributions. If the value of your vested account balance exceeds $1,000, you must consent to any distribution of such account balance. If you are not a 5% or more owner of your employer, your required benefit commencement date is the April 1st following the close of the year in which the later occurs: you attain age 70-½ or you terminate employment.

 

Distribution after Death of Participant. In the event of your death, the value of your entire account will be payable to your beneficiary. If your spouse is your beneficiary, distribution must begin by December 31 of the calendar year immediately following the calendar year in which you died, or by December 31 of the calendar year in which you would have attained age 70-½, if later.

 

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Investment of Contributions and Account Balances

 

All amounts credited to your accounts under the 401(k) Plan are held in the 401(k) Plan trust (the “Trust”), which is administered by the trustee appointed by Generations Bank’s Board of Directors. Before the effective date of the stock offering, you are currently given the opportunity to direct the investment of your account into one or more of the following investment options:

 

Qualified Default Investment Alternative. For participants who are automatically enrolled in the 401(k) Plan, or otherwise fail to direct how their 401(k) Plan contributions are to be invested, contribution amounts will be invested in the 401(k) Plan’s “qualified default investment alternative” until such time as the participant provides investment direction. The 401(k) Plan’s qualified default investment alternative is a Vanguard Target Retirement fund. The specific fund selected for a given participant will be the fund which approximately coincides with or next follows the year in which the participant will attain certain ages.

 

In connection with the stock offering, the 401(k) Plan provides that, in addition to the investment options specified above, you may direct the trustee, or its representative, to invest all or a portion of your account in the Generations Bancorp NY, Inc. Stock Fund.

 

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Performance History

 

The following table provides performance data with respect to the above investment funds as of June 30, 2020:

 

    Symbol  Market Value  Morningstar Category  3 Mo  YTD  1 Yr  3 Yr  5 Yr  10 Yr  Morningstar
Rating
Overall
 

Morningstar
Rating 3

Yr

 

Morningstar
Rating 5

Yr

  Morningstar
Rating 10
Yr
  Manager
Tenure
  Prospectus
Net
Expense
Ratio
 
Vanguard Target Retirement 2015 Inv  VTXVX  525,630.5  US Fund Target-Date 2015  8.90  0.79  5.45  5.78  5.47  7.55  ****  ****  ****  ****  7.5  0.13  
Seneca-Cayuga Bancorp Unitized Stock  MAT339596  336,626.6  -  -4.08  -28.37  -31.05  -12.27  -10.45  -  -  -  -  -  -  -  
Vanguard Target Retirement 2020 Inv  VTWNX  267,201.6  US Fund Target-Date 2020  11.40  -0.58  5.09  6.09  5.96  8.31  ****  ****  ****  ****  7.5  0.13  
Wells Fargo Stable Value Fund J (85)  -  259,036.7  US SA Stable Value  0.39  0.78  1.66  1.48  1.27  1.22  -  -  -  -  34.8  -  
Vanguard US Growth Investor  VWUSX  163,527.6  US Fund Large Growth  35.69  19.39  29.74  22.08  16.46  17.72  ****  *****  ****  ****  9.8  0.39  
Vanguard Total Stock Mkt Idx Adm  VTSAX  150,213.8  US Fund Large Blend  22.08  -3.40  6.45  10.03  10.02  13.73  ****  ***  ***  ****  25.7  0.04  
Vanguard Mid Cap Growth Inv  VMGRX  143,756.3  US Fund Mid-Cap Growth  30.65  3.37  6.93  13.40  8.76  13.81  ***  ***  **  ***  3.7  0.36  
Vanguard Target Retirement 2030 Inv  VTHRX  125,715.5  US Fund Target-Date 2030  14.58  -2.33  4.40  6.42  6.47  9.37  ****  ****  ****  ****  7.5  0.14  
Vanguard Small Cap Index Adm  VSMAX  96,995.5  US Fund Small Blend  26.66  -11.42  -5.60  3.99  5.40  11.59  *****  *****  *****  *****  4.3  0.05  
American Funds Washington Mutual R6  RWMGX  89,367.3  US Fund Large Blend  16.57  -8.45  0.24  8.09  9.20  12.87  ***  ***  ***  ***  23.1  0.27  
Vanguard Target Retirement 2035 Inv  VTTHX  84,168.0  US Fund Target-Date 2035  15.90  -3.24  3.94  6.45  6.62  9.84  ****  ****  ****  ****  7.5  0.14  
Loan  LOAN  76,302.8  -  0.00  0.00  0.00  0.00  0.00  -  -  -  -  -  -  -  
Vanguard Target Retirement 2025 Inv  VTTVX  68,408.4  US Fund Target-Date 2025  13.20  -1.46  4.82  6.33  6.29  8.88  ****  ****  ****  ****  7.5  0.13  
Vanguard Target Retirement 2055 Inv  VFFVX  44,290.4  US Fund Target-Date 2055  18.64  -4.95  2.95  6.40  6.77  -  ****  ****  ****  -  7.5  0.15  
Dodge & Cox Income  DODIX  42,068.9  US Fund Intermediate Core-Plus Bond  5.98  5.24  8.35  5.37  4.74  4.52  ****  ****  *****  ****  31.6  0.42  
Vanguard Target Retirement 2045 Inv  VTIVX  34,045.0  US Fund Target-Date 2045  18.70  -4.90  2.97  6.41  6.79  10.10  ****  ****  ****  ****  7.5  0.15  
American Funds Europacific Growth R6  RERGX  32,686.0  US Fund Foreign Large Growth  22.77  -4.77  3.17  4.76  4.90  7.48  ***  ***  ***  ***  19.2  0.46  
T. Rowe Price Government Money  PRRXX  13,412.5  US Fund Money Market - Taxable  0.01  0.27  1.12  1.33  0.83  0.42  -  -  -  -  11.6  0.38  
T. Rowe Price International Stock  PRITX  13,203.7  US Fund Foreign Large Growth  19.43  -6.33  2.66  3.82  4.51  7.24  **  **  ***  **  5.3  0.80  
Vanguard Inflation-Protected Secs Inv  VIPSX  8,837.5  US Fund Inflation-Protected Bond  4.18  6.01  8.00  4.77  3.56  3.32  ****  ***  ****  ****  9.0  0.20  
Northern Emerging Markets Equity Index  NOEMX  5,831.0  US Fund Diversified Emerging Mkts  18.70  -9.85  -3.75  1.57  2.57  2.95  ***  ***  ***  ***  1.1  0.30  
Vanguard Selected Value Inv  VASVX  1,121.1  US Fund Mid-Cap Value  25.22  -21.93  -14.47  -3.54  1.17  8.85  ***  **  **  ***  15.5  0.33  
Harbor Bond Institutional  HABDX  1,117.7  US Fund Intermediate Core-Plus Bond  4.20  6.20  8.45  5.32  4.42  4.06  ***  ****  ***  ***  5.9  1.04  
Baron Small Cap Retail  BSCFX  555.1  US Fund Small Growth  35.64  3.95  8.32  12.46  10.48  13.41  ***  ***  ****  ***  22.9  1.31  
American Funds Intl Gr and Inc R6  RIGGX  380.1  US Fund Foreign Large Blend  15.63  -14.08  -5.20  1.23  1.91  5.84  ****  ****  ***  ****  11.8  0.55  
American Funds Dvlpg Wld Gr&Inc R6  RDWGX  256.6  US Fund Diversified Emerging Mkts  19.35  -11.47  -3.19  1.20  2.08  -  ***  ***  ***  -  6.5  0.87  
AB Government Money Market A  AEAXX  0.0  US Fund Money Market - Taxable  0.06  0.37  1.32  -  -  -  -  -  -  -  13.7  0.50  
T. Rowe Price International Bond  RPIBX  0.0  US Fund World Bond  5.87  0.32  1.27  2.61  3.05  2.07  ***  ***  ***  ***  6.6  0.70  
Total Portfolio  -  2,584,756.1  -  12.08  -3.71  0.52  4.87  4.51  8.31  -  -  -  -  -  0.19  

 

12

 

 

 

Description of the Investment Funds

 

Ticker: VWUSX

Fund Name: Vanguard U.S. Growth Fund Investor Shares Category: Large Growth

Morningstar Rating: ****

 

Vanguard U.S. Growth Fund Investor Shares (VWUSX) seeks to provide long-term capital appreciation. The fund uses multiple investment advisors and invests mainly in large-capitalization stocks of U.S. companies considered to have above-average earnings growth potential and reasonable stock prices in comparison with expected earnings

 

Ticker: RWMGX

Fund Name: American Funds Washington Mutual Investors Fund Class R-6 Category: Large Blend

Morningstar Rating: ***

 

American Funds Washington Mutual Investors Fund Class R-6 (RWMGX) seeks to produce income and to provide an opportunity for growth of principal consistent with sound common stock investing. The fund invests primarily in common stocks of established companies that are listed on, or meet the financial listing requirements of, the New York Stock Exchange and have a strong record of earnings and dividends. Its advisor strives to maintain a fully invested, diversified portfolio, consisting primarily of high-quality common stocks.

 

Ticker: VTSAX

Fund Name: Vanguard Total Stock Market Index Fund Admiral Shares Category: Large Blend

Morningstar Rating: ****

 

Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) seeks to track the performance of a benchmark index that measures the investment return of the overall stock market. The fund employs an indexing investment approach designed to track the performance of the CRSP US Total Market Index, which represents approximately 100% of the investable U.S. stock market and includes large-, mid-, small-, and micro-cap stocks regularly traded on the New York Stock Exchange and Nasdaq. It invests by sampling the index, meaning that it holds a broadly diversified collection of securities that, in the aggregate, approximates the full index in terms of key characteristics.

 

Ticker: VMGRX

Fund Name: Vanguard Mid-Cap Growth Fund Investor Shares Category: Mid-Cap Growth

Morningstar Rating: ***

 

Vanguard Mid-Cap Growth Fund Investor Shares (VMGRX) uses multiple investment advisors. The investment seeks to provide long-term capital appreciation. The fund invests at least 80% of its assets in common stocks of mid-size companies. In selecting investments, each advisor invests in those mid-size companies that the adviser believes have the best prospects for future growth.

 

13

 

 

Ticker: VASVX

Fund Name: Vanguard Selected Value Fund Investor Shares Category: Mid-Cap Value

Morningstar Rating: ***

 

Vanguard Selected Value Fund Investor Shares (VASVX) uses multiple investment advisors. The investment seeks long-term capital appreciation and income. The fund invests mainly in the stocks of mid-size U.S. companies, choosing stocks considered by an advisor to be undervalued. Undervalued stocks are generally those that are out of favor with investors and are trading at prices that the advisor believes are below average in relation to measures such as earnings and book value. These stocks often have above-average dividend yields.

 

Ticker: BSCFX

Fund Name: Baron Small Cap Fund Retail Class Category: Small Growth

Morningstar Rating: ***

 

Baron Small Cap Fund Retail Class (BSCFX) seeks capital appreciation through investments primarily in securities of small-sized growth companies. The fund invests 80% of its net assets in equity securities in the form of common stock of U.S. small-sized growth companies. BAMCO, Inc. ("BAMCO" or the "Adviser") defines small-sized companies as those, at the time of purchase, with market capitalizations up to the largest market cap stock in the Russell 2000 Growth Index at reconstitution, or companies with market capitalizations up to $2.5 billion, whichever is larger.

 

Ticker: VSMAX

Fund Name: Vanguard Small-Cap Index Fund Admiral Shares Category: Small Blend

Morningstar Rating: *****

 

Vanguard Small-Cap Index Fund Admiral Shares (VSMAX) seeks to track the performance of a benchmark index that measures the investment return of small-capitalization stocks. The fund employs an indexing investment approach designed to track the performance of the CRSP US Small Cap Index, a broadly diversified index of stocks of small U.S. companies. The advisor attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index.

 

Ticker: PRITX

Fund Name: T. Rowe Price International Stock Fund Category: Foreign Large Growth

Morningstar Rating: **

 

T. Rowe Price International Stock Fund (PRITX) seeks long-term growth of capital through investments primarily in the common stocks of established, non-U.S. companies, broadly among developed and emerging countries throughout the world. It normally invests in at least five countries and may purchase the stocks of companies of any size, but its focus will typically be on large companies. Normally, at least 80% of the fund's net assets (including any borrowings for investment purposes) will be invested in stocks.

 

Ticker: RERGX

Fund Name: American Funds EuroPacific Growth Fund® Class R-6

Category: Foreign Large Growth Morningstar Rating: ***

 

American Funds EuroPacific Growth Fund® Class R-6 (RERGX) seeks long-term growth of capital. The fund invests primarily in common stocks of issuers in Europe and the Pacific Basin that the investment adviser believes have the potential for growth (above average capital appreciation). It normally will invest at least 80% of its net assets in securities of issuers in Europe and the Pacific Basin. The fund may invest a portion of its assets in common stocks and other securities of companies in emerging markets.

 

14

 

 

Ticker: RIGGX

Fund Name: American Funds International Growth and Income Fund Class R-6 Category: Foreign Large Blend

Morningstar Rating: ****

 

American Funds International Growth and Income Fund Class R-6 (RIGGX) seeks long-term growth of capital while providing current income. The fund invests primarily in stocks of larger, well-established companies domiciled outside the United States, including in emerging markets and developing countries, that the investment adviser believes have the potential for growth and/or to pay dividends.

 

Ticker: RDWGX

Fund Name: American Funds Developing World Growth and Income Fund Class R-6 Category: Diversified Emerging Mkts

Morningstar Rating: ***

 

American Funds Developing World Growth and Income Fund Class R-6 (RDWGX) seeks long-term growth of capital while providing current income. Under normal market conditions, the fund will invest at least 80% of its assets in securities that are (1) issued by companies in developing countries; (2) principally traded in the securities markets of developing countries; (3) denominated in developing country currencies; or (4) issued by companies deemed to be suitable for investment by the fund because they have significant economic exposure to developing countries.

 

Ticker: NOEMX

Fund Name: Northern Emerging Markets Equity Index Fund Category: Diversified Emerging Mkts

Morningstar Rating: ***

 

Northern Emerging Markets Equity Index Fund (NOEMX) seeks to provide investment results approximating the overall performance of the MSCI Emerging Markets® Index. The fund will invest substantially all (and at least 80%) of its net assets in equity securities, in weightings that approximate the relative composition of the securities included in the MSCI Emerging Markets® Index, in American Depository Receipts, European Depository Receipts, and Global Depository Receipts representing such securities, and in MSCI Emerging Markets Index futures approved by the Commodity Futures Trading Commission.

 

Ticker: DODIX

Fund Name: Dodge & Cox Income Fund Category: Intermediate Core-Plus Bond

Morningstar Rating: ****

 

Dodge & Cox Income Fund (DODIX) seeks a high and stable rate of current income, consistent with long-term preservation of capital. The fund invests in a diversified portfolio of bonds and other debt securities. Under normal circumstances, the fund will invest at least 80% of its total assets in (1) investment-grade debt securities and (2) cash equivalents. "Investment grade" means securities rated Baa3 or higher by Moody's Investors Service, or BBB- or higher by Standard & Poor's Ratings Group or Fitch Ratings, or equivalently rated by any nationally recognized statistical rating organization, or, if unrated, deemed to be of similar quality by Dodge & Cox.

 

15

 

 

Ticker: HABDX

Fund Name: Harbor Bond Fund Institutional Class Category: Intermediate Core-Plus Bond

Morningstar Rating: ***

 

Harbor Bond Fund Institutional Class (HABDX) seeks total return. The fund invests at least 80% of its net assets, plus borrowings for investment purposes, in a diversified portfolio of fixed income instruments, which may be represented by forwards or derivatives such as options, futures contracts or swap agreements. Its average duration, as calculated by the Subadviser, is normally equal to that of its benchmark, plus or minus two years. The fund may invest up to 30% of its total assets in non-U.S. dollar-denominated securities and may invest without limit in U.S. dollar- denominated securities of foreign issuers.

 

Ticker: VIPSX

Fund Name: Vanguard Inflation-Protected Securities Fund Investor Shares Category: Inflation-Protected Bond

Morningstar Rating: ****

 

Vanguard Inflation-Protected Securities Fund Investor Shares (VIPSX) seeks to provide inflation protection and income consistent with investment in inflation-indexed securities. The fund invests at least 80% of its assets in inflation-indexed bonds issued by the U.S. government, its agencies and instrumentalities, and corporations. It may invest in bonds of any maturity; however, its dollar-weighted average maturity is expected to be in the range of 7 to 20 years. At a minimum, all bonds purchased by the fund will be rated investment-grade or, if unrated, will be considered by the advisor to be investment-grade.

 

Ticker: RPIBX

Fund Name: T. Rowe Price International Bond Fund Category: World Bond

Morningstar Rating: ***

 

T. Rowe Price International Bond Fund (RPIBX) seeks to provide current income and capital appreciation. Normally, the fund will invest at least 80% of its net assets (including any borrowings for investment purposes) in foreign bonds. It may invest up to 25% of its total assets in "junk" bonds that have received a below investment-grade rating (i.e., BB or equivalent, or lower) from each of the rating agencies that has assigned a rating to the bond (or, if unrated, deemed by T. Rowe Price to be below investment-grade quality), including those in default or with the lowest rating. The fund is non-diversified.

 

Ticker: VTXVX

Fund Name: Vanguard Target Retirement 2015 Fund Investor Shares Category: Target-Date 2015

Morningstar Rating: ****

 

Vanguard Target Retirement 2015 Fund Investor Shares (VTXVX) seeks to provide capital appreciation and current income consistent with its current asset allocation. The fund invests in other Vanguard mutual funds according to an asset allocation strategy designed for investors planning to retire and leave the workforce in or within a few years of 2015 (the target year). The fund's asset allocation will become more conservative over time, meaning that the percentage of assets allocated to stocks will decrease while the percentage of assets allocated to bonds and other fixed income investments will increase.

 

16

 

 

Ticker: VTWNX

Fund Name: Vanguard Target Retirement 2020 Fund Investor Shares Category: Target-Date 2020

Morningstar Rating: ****

 

Vanguard Target Retirement 2020 Fund Investor Shares (VTWNX) seeks to provide capital appreciation and current income consistent with its current asset allocation. The fund invests in other Vanguard mutual funds according to an asset allocation strategy designed for investors planning to retire and leave the workforce in or within a few years of 2020 (the target year). The fund's asset allocation will become more conservative over time, meaning that the percentage of assets allocated to stocks will decrease while the percentage of assets allocated to bonds and other fixed income investments will increase.

 

Ticker: VTTVX

Fund Name: Vanguard Target Retirement 2025 Fund Investor Shares Category: Target-Date 2025

Morningstar Rating: ****

 

Vanguard Target Retirement 2025 Fund Investor Shares (VTTVX) seeks to provide capital appreciation and current income consistent with its current asset allocation. The fund invests in other Vanguard mutual funds according to an asset allocation strategy designed for investors planning to retire and leave the workforce in or within a few years of 2025 (the target year). The fund's asset allocation will become more conservative over time, meaning that the percentage of assets allocated to stocks will decrease while the percentage of assets allocated to bonds and other fixed income investments will increase.

 

Ticker: VTHRX

Fund Name: Vanguard Target Retirement 2030 Fund Investor Shares Category: Target-Date 2030

Morningstar Rating: ****

 

Vanguard Target Retirement 2030 Fund Investor Shares (VTHRX) seeks to provide capital appreciation and current income consistent with its current asset allocation. The fund invests in other Vanguard mutual funds according to an asset allocation strategy designed for investors planning to retire and leave the workforce in or within a few years of 2030 (the target year). The fund's asset allocation will become more conservative over time, meaning that the percentage of assets allocated to stocks will decrease while the percentage of assets allocated to bonds and other fixed income investments will increase.

 

Ticker: VTTHX

Fund Name: Vanguard Target Retirement 2035 Fund Investor Shares Category: Target-Date 2035

Morningstar Rating: ****

 

Vanguard Target Retirement 2035 Fund Investor Shares (VTTHX) seeks to provide capital appreciation and current income consistent with its current asset allocation. The fund invests in other Vanguard mutual funds according to an asset allocation strategy designed for investors planning to retire and leave the workforce in or within a few years of 2035 (the target year). The fund's asset allocation will become more conservative over time, meaning that the percentage of assets allocated to stocks will decrease while the percentage of assets allocated to bonds and other fixed income investments will increase.

 

17

 

 

Ticker: VTIVX

Fund Name: Vanguard Target Retirement 2045 Fund Investor Shares Category: Target-Date 2045

Morningstar Rating: ****

 

Vanguard Target Retirement 2045 Fund Investor Shares (VTIVX) seeks to provide capital appreciation and current income consistent with its current asset allocation. The fund invests in other Vanguard mutual funds according to an asset allocation strategy designed for investors planning to retire and leave the workforce in or within a few years of 2045 (the target year). The fund's asset allocation will become more conservative over time, meaning that the percentage of assets allocated to stocks will decrease while the percentage of assets allocated to bonds and other fixed income investments will increase.

 

Ticker: VFFVX

Fund Name: Vanguard Target Retirement 2055 Fund Investor Shares Category: Target-Date 2055

Morningstar Rating: ****

 

Vanguard Target Retirement 2055 Fund Investor Shares (VFFVX) seeks to provide capital appreciation and current income consistent with its current asset allocation. The fund invests in other Vanguard mutual funds according to an asset allocation strategy designed for investors planning to retire and leave the workforce in or within a few years of 2055 (the target year). The fund's asset allocation will become more conservative over time, meaning that the percentage of assets allocated to stocks will decrease while the percentage of assets allocated to bonds and other fixed income investments will increase.

 

Ticker: WELLS2 (9499078775)

Fund Name: Wells Fargo Stable Value Fund J (85) Category: Stable Value

 

Wells Fargo Stable Value Fund J (85) (WELLS2) seeks safety of principal and consistency of returns while attempting to maintain minimal volatility. The Fund is designed for investors seeking more income than money market funds without the price fluctuation of stock or bond funds.

 

Ticker: PRRXX

Fund Name: T. Rowe Price Government Money Fund Category: Money Market – Taxable

 

T. Rowe Price Government Money Fund (PRRXX) seeks preservation of capital, liquidity, and, consistent with these, the highest possible current income. The fund is managed to provide a stable share price of $1.00 by investing in only U.S. dollar-denominated money market securities. Its weighted average maturity will not exceed 60 days, the fund's weighted average life will not exceed 120 days, and it will not purchase any security with a remaining maturity longer than 397 calendar days. It will normally invest at least 80% of its net assets (including any borrowings for investment purposes) in government securities and repurchase agreements that are collateralized by government securities.

 

Ticker: AEAXX

Fund Name: AB Government Money Market Portfolio Class A Category: Money Market – Taxable

 

AB Government Money Market Portfolio Class A (AEAXX) seeks maximum current income to the extent consistent with safety of principal and liquidity. The fund invests at least 99.5% of its total assets in cash, marketable obligations (which may bear adjustable rates of interest) issued or guaranteed by the U.S. government, its agencies or instrumentalities and repurchase agreements that are collateralized fully. It also invests at least 80%, and normally substantially all, of its net assets in U.S. government securities and repurchase agreements that are collateralized by U.S. government securities.

 

18

 

 

Seneca-Cayuga Bancorp, Inc. Stock Fund (Current Employer Stock Fund) – The Seneca-Cayuga Bancorp, Inc. Stock Fund consists primarily of common stock of Seneca-Cayuga Bancorp, Inc.. Following the offering, Seneca-Cayuga Bancorp, Inc. will cease to exist, but will be succeeded by a new Maryland corporation, Generations Bancorp NY, Inc., which will be 100% owned by its public shareholders. Shares of Seneca-Cayuga Bancorp, Inc. which were held in the Seneca-Cayuga Bancorp, Inc. Stock Fund before the conversion and offering will be converted into new shares of common stock of Generations Bancorp NY, Inc., in accordance with the exchange ratio. As soon as practicable after the closing of the stock offering, the Seneca-Cayuga Bancorp, Inc. Stock Fund will be merged into the Generations Bancorp NY, Inc. Stock Fund.

 

An investment in any of the funds listed above is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. As with any mutual fund investment, there is always a risk that you may lose money on your investment in any of the funds listed above.

 

For a discussion of material risks you should consider, see “Risk Factors” of this prospectus supplement, “Risk Factors” beginning on page [1] of the attached prospectus, and the section of this prospectus supplement called “Notice of Your Rights Concerning Employer Securities” below.

 

Investors should carefully consider a mutual fund's investment objectives, risks, charges, and expenses before investing. A prospectus, or summary prospectus if available, containing this and other information can be obtained by contacting the 401(k) Plan administrator. Read the prospectus carefully before investing.

 

Before directing retirement funds to a separate account, investors should carefully consider the investment objectives, risks, charges, and expenses of the separate account as well as their individual risk tolerance, time horizon and goals. For additional information, contact the 401(k) Plan administrator.

 

Generations Bancorp NY, Inc. Stock Fund

 

In connection with the stock offering, you may, in the manner described earlier, elect to direct the trustee to invest all or a portion of your 401(k) Plan account in Generations Bancorp NY, Inc. common stock. Your purchased shares will be held within the 401(k) Plan by the Generations Bancorp NY, Inc. Stock Fund. The Generations Bancorp NY, Inc. Stock Fund is neither a mutual fund nor a diversified or managed investment option. Rather, it is merely a recordkeeping mechanism established by the 401(k) Plan custodian to track the shares purchased by the participants in the stock offering through the 401(k) Plan.

 

Performance of Generations Bancorp NY, Inc. Stock Fund depends on a number of factors, including the financial condition and profitability of Generations Bancorp NY, Inc. and Generations Bank and market conditions for shares of Generations Bancorp NY, Inc. common stock generally.

 

Investments in Generations Bancorp NY, Inc. Stock Fund involve special risks related to investments in the shares of common stock of Generations Bancorp NY, Inc. In making a decision to invest all or a part of your account balance in the Generations Bancorp NY, Inc. Stock Fund, you should carefully consider the information set forth in this prospectus supplement under “Notice of Your Rights Concerning Employer Securities – The Importance of Diversifying Your Retirement Savings.”

 

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For a discussion of material risks you should consider, see “Risk Factors” of this prospectus supplement, “Risk Factors” beginning on page [1] of the attached prospectus, and the section of this prospectus supplement called “Notice of Your Rights Concerning Employer Securities” below.

 

An investment in any of the investment options listed above under “Description of the 401(k) Plan – Description of the Investment Funds” is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. As with any investment option, there is always a risk that you may lose money on your investment in any of the investment options listed above.

 

Administration of the 401(k) Plan

 

The Trustee and Custodian. The trustees of the 401(k) Plan are Menzo Case, Lori Parish and Shelley Tafel. MidAtlantic Trust Company is appointed Custodian for all investment funds under the 401(k) Plan.

 

401(k) Plan Administrator. Pursuant to the terms of the 401(k) Plan, the 401(k) Plan is administered by the 401(k) Plan administrator. The address of the 401(k) Plan administrator is Generations Bank, 20 East Bayard Street, Seneca Falls, New York 13148. The 401(k) Plan administrator is responsible for the administration of the 401(k) Plan, interpretation of the provisions of the 401(k) Plan, prescribing procedures for filing applications for benefits, preparation and distribution of information explaining the 401(k) Plan, maintenance of 401(k) Plan records, books of account and all other data necessary for the proper administration of the 401(k) Plan, preparation and filing of all returns and reports relating to the 401(k) Plan which are required to be filed with the U.S. Department of Labor and the Internal Revenue Service, and for all disclosures required to be made to participants, beneficiaries and others under Sections 104 and 105 of ERISA.

 

Reports to Plan Participants. The 401(k) Plan administrator will furnish you a statement at least quarterly showing the balance in your account as of the end of that period, the amount of contributions allocated to your account for that period, and any adjustments to your account to reflect earnings or losses (if any). In addition, you may go online to www.pentegra.com at any time to review your account balances.

 

Amendment and Termination

 

Generations Bank intends to continue the 401(k) Plan indefinitely. Nevertheless, Generations Bank may terminate the 401(k) Plan at any time. If the 401(k) Plan is terminated in whole or in part, then regardless of other provisions in the 401(k) Plan, you will have a fully vested interest in your 401(k) Plan account. Generations Bank reserves the right to make any amendment or amendments to the 401(k) Plan which do not cause any part of the trust to be used for, or diverted to, any purpose other than the exclusive benefit of participants or their beneficiaries; provided, however, that Generations Bank may make any amendment it determines necessary or desirable, with or without retroactive effect, to comply with ERISA.

 

Merger, Consolidation or Transfer

 

In the event of the merger or consolidation of the 401(k) Plan with another plan, or the transfer of the plan assets to another plan, the 401(k) Plan requires that you would, if either the 401(k) Plan or the other plan terminates, receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit you would have been entitled to receive immediately before the merger, consolidation or transfer, if the 401(k) Plan had then terminated.

 

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Federal Income Tax Consequences

 

The following is a brief summary of the material federal income tax aspects of the 401(k) Plan. You should not rely on this summary as a complete or definitive description of the material federal income tax consequences relating to the 401(k) Plan. Statutory provisions change, as do their interpretations, and their application may vary in individual circumstances. Finally, the consequences under applicable state and local income tax laws may not be the same as under the federal income tax laws. Consult your tax advisor with respect to any distribution from the 401(k) Plan and transactions involving the 401(k) Plan.

 

As a “tax-qualified retirement plan,” the Code affords the 401(k) Plan special tax treatment, including:

 

(1)the sponsoring employer is allowed an immediate tax deduction for the amount contributed to the 401(k) Plan each year;

 

(2)participants pay no current income tax on amounts contributed by the employer on their behalf; and

 

(3)earnings of the 401(k) Plan are tax-deferred, thereby permitting the tax-free accumulation of income and gains on investments.

 

Generations Bank will administer the 401(k) Plan to comply with the requirements of the Code as of the applicable effective date of any change in the law.

 

Lump-Sum Distribution. A distribution from the 401(k) Plan to a participant or the beneficiary of a participant will qualify as a lump-sum distribution if it is made within one taxable year, on account of the participant’s death, disability or separation from service, or after the participant attains age 59½, and consists of the balance credited to participants under the 401(k) Plan and all other profit sharing plans, if any, maintained by Generations Bank. The portion of any lump-sum distribution required to be included in your taxable income for federal income tax purposes consists of the entire amount of the lump-sum distribution, less the amount of after-tax contributions, if any, you have made to this 401(k) Plan and any other profit sharing plans maintained by Generations Bank, which is included in the distribution.

 

Generations Bancorp NY, Inc. Common Stock Included in Lump-Sum Distribution. If a lump-sum distribution includes Generations Bancorp NY, Inc. common stock, the distribution generally will be taxed in the manner described above, except that the total taxable amount may be reduced by the amount of any net unrealized appreciation with respect to Generations Bancorp NY, Inc. common stock; that is, the excess of the value of Generations Bancorp NY, Inc.at the time of the distribution over its cost or other basis of the securities to the trust. The tax basis of Generations Bancorp NY, Inc. common stock, for purposes of computing gain or loss on its subsequent sale, equals the value of Generations Bancorp NY, Inc. common stock at the time of distribution, less the amount of net unrealized appreciation. Any gain on a subsequent sale or other taxable disposition of Generations Bancorp NY, Inc. common stock, to the extent of the amount of net unrealized appreciation at the time of distribution, will constitute long-term capital gain, regardless of the holding period of Generations Bancorp NY, Inc. common stock. Any gain on a subsequent sale or other taxable disposition of Generations Bancorp NY, Inc. common stock, in excess of the amount of net unrealized appreciation at the time of distribution, will be considered long-term capital gain. The recipient of a distribution may elect to include the amount of any net unrealized appreciation in the total taxable amount of the distribution, to the extent allowed by regulations to be issued by the Internal Revenue Service.

 

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Distributions: Rollovers and Direct Transfers to Another Qualified Plan or to an IRA. You may roll over virtually all distributions from the 401(k) Plan to another qualified plan or to an individual retirement account in accordance with the terms of the other plan or account.

 

Notice of Your Rights Concerning Employer Securities

 

Federal law provides specific rights concerning investments in employer securities. Because you may in the future have investments in Generations Bancorp NY, Inc. common stock under the 401(k) Plan, you should take the time to read the following information carefully.

 

Your Rights Concerning Employer Securities. The 401(k) Plan must allow you to elect to move any portion of your account that is invested in Generations Bancorp NY, Inc. common stock from that investment into other investment alternatives under the 401(k) Plan. You may contact the 401(k) Plan administrator shown above for specific information regarding this right, including how to make this election. In deciding whether to exercise this right, you will want to give careful consideration to the information below that describes the importance of diversification. All of the investment options under the 401(k) Plan are available to you if you decide to diversify out of your investment in Generations Bancorp NY, Inc. common stock.

 

The Importance of Diversifying Your Retirement Savings. To help achieve long-term retirement security, you should give careful consideration to the benefits of a well-balanced and diversified investment portfolio. Spreading your assets among different types of investments can help you achieve a favorable rate of return, while minimizing your overall risk of losing money. This is because market or other economic conditions that cause one category of assets, or one particular security, to perform very well often cause another asset category, or another particular security, to perform poorly. If you invest more than 20% of your retirement savings in any one company or industry, your savings may not be properly diversified. Although diversification is not a guarantee against loss, it is an effective strategy to help you manage investment risk.

 

In deciding how to invest your retirement savings, you should take into account all of your assets, including any retirement savings outside of the 401(k) Plan. No single approach is right for everyone because, among other factors, individuals have different financial goals, different time horizons for meeting their goals, and different tolerance for risk. Therefore, you should carefully consider the rights described here and how these rights affect the amount of money that you invest in Generations Bancorp NY, Inc. common stock through the 401(k) Plan.

 

It is also important to periodically review your investment portfolio, your investment objectives, and the investment options under the 401(k) Plan to help ensure that your retirement savings will meet your retirement goals.

 

Additional Employee Retirement Income Security Act Considerations

 

As noted above, the 401(k) Plan is subject to certain provisions of ERISA, including special provisions relating to control over the 401(k) Plan’s assets by participants and beneficiaries. The 401(k) Plan’s feature that allows you to direct the investment of your account balances is intended to satisfy the requirements of Section 404(c) of ERISA relating to control over plan assets by a participant or beneficiary. The effect of this is two-fold. First, you will not be deemed a “fiduciary” because of your exercise of investment discretion. Second, no person who otherwise is a fiduciary, such as Generations Bank, the 401(k) Plan administrator, or the 401(k) Plan’s trustee is liable under the fiduciary responsibility provision of ERISA for any loss which results from your exercise of control over the assets in your 401(k) Plan account.

 

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Because you will be entitled to invest all or a portion of your account balance in the 401(k) Plan in Generations Bancorp NY, Inc. common stock, the regulations under Section 404(c) of the ERISA require that the 401(k) Plan establish procedures that ensure the confidentiality of your decision to purchase, hold, or sell employer securities, except to the extent that disclosure of such information is necessary to comply with federal or state laws not preempted by ERISA. These regulations also require that your exercise of voting and similar rights with respect to Generations Bancorp NY, Inc. common stock be conducted in a way that ensures the confidentiality of your exercise of these rights.

 

Securities and Exchange Commission Reporting and Short-Swing Profit Liability

 

Section 16 of the Securities Exchange Act of 1934 imposes reporting and liability requirements on officers, directors, and persons beneficially owning more than 10% of public companies, such as Generations Bancorp NY, Inc. Section 16(a) of the Securities Exchange Act of 1934 requires the filing of reports of beneficial ownership. Within 10 days of becoming an officer, director or person beneficially owning more than 10% of the shares of Generations Bancorp NY, Inc., a Form 3 reporting initial beneficial ownership must be filed with the Securities and Exchange Commission. Changes in beneficial ownership, such as purchases, sales and gifts generally must be reported periodically, either on a Form 4 within two business days after the change occurs, or annually on a Form 5 within 45 days after the close of fiscal year of Generations Bancorp NY, Inc. Discretionary transactions in and beneficial ownership of Generations Bancorp NY, Inc. common stock by officers, directors and persons beneficially owning more than 10% of Generations Bancorp NY, Inc. common stock generally must be reported to the Securities and Exchange Commission by such individuals.

 

In addition to the reporting requirements described above, Section 16(b) of the Securities Exchange Act of 1934 provides for the recovery by Generations Bancorp NY, Inc. of profits realized by an officer, director or any person beneficially owning more than 10% of Generations Bancorp NY, Inc. common stock resulting from non-exempt purchases and sales of Generations Bancorp NY, Inc. common stock within any six (6)-month period.

 

The Securities and Exchange Commission has adopted rules that provide exemptions from the profit recovery provisions of Section 16(b) for all transactions in employer securities within an employee benefit plan, provided certain requirements are met. These requirements generally involve restrictions upon the timing of elections to acquire or dispose of employer securities for the accounts of Section 16(b) persons.

 

Except for distributions of Generations Bancorp NY, Inc. common stock due to death, disability, retirement, termination of employment or under a qualified domestic relations order, persons affected by Section 16(b) are required to hold shares of Generations Bancorp NY, Inc. common stock distributed from the 401(k) Plan for six (6) months following such distribution and are prohibited from directing additional purchases of Generations Bancorp NY, Inc. common stock for six (6) months after receiving such a distribution.

 

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Financial Information Regarding Plan Assets

 

Financial information representing the net assets available for 401(k) Plan benefits and the change in net assets available for 401(k) Plan benefits is available upon written request to the 401(k) Plan administrator at the address shown above.

 

LEGAL OPINION

 

The validity of the issuance of Generations Bancorp NY, Inc. common stock has been passed upon by Luse Gorman, PC, Washington, D.C., which the firm has acted as special counsel to Generations Bancorp NY, Inc. in connection with the stock offering of Generations Bancorp NY, Inc.

 

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PROSPECTUS

 

GENERATIONS BANCORP NY, INC.

(Proposed Holding Company for Generations Bank)

Up to 1,727,875 Shares of Common Stock

 

Generations Bancorp NY, Inc. a Maryland corporation (“Generations Bancorp”) is offering shares of common stock for sale on a best efforts basis in connection with the conversion of The Seneca Falls Savings Bank, MHC from the mutual holding company to the stock holding company form of organization. The shares we are offering represent the ownership interest in Seneca-Cayuga Bancorp, Inc. currently owned by The Seneca Falls Savings Bank, MHC. Seneca-Cayuga Bancorp’s common stock currently is quoted on the OTC Pink Marketplace (OTCPK) operated by OTC Markets Group under the symbol “SCAY.” We have applied to list Generations Bancorp’s common stock on the Nasdaq Capital Market under the symbol “GBNY.” We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012.

 

The shares of common stock are first being offered for sale in a subscription offering to eligible depositors of Generations Bank and Generations Commercial Bank as of specified eligibility dates and to tax-qualified employee benefit plans of Generations Bank. Shares not purchased in the subscription offering may be offered for sale to the general public in a community offering, with a preference given first to residents of the communities served by Generations Bank and then to existing stockholders of Seneca-Cayuga Bancorp. Any shares of common stock not purchased in the subscription or community offerings may be offered for sale to the public through a syndicate of broker-dealers, referred to in this prospectus as the syndicated community offering. The syndicated community offering may commence before the subscription and community offerings (including any extensions) have expired. However, no shares purchased in the subscription offering or the community offering will be issued until the completion of any syndicated community offering. We must sell a minimum of 1,277,125 shares to complete the offering.

 

In addition to the shares we are selling in the offering, the shares of common stock of Seneca-Cayuga Bancorp currently owned by the public will be exchanged for shares of common stock of Generations Bancorp based on an exchange ratio that will result in existing public stockholders of Seneca-Cayuga Bancorp owning approximately the same percentage of common stock of Generations Bancorp as they owned in the common stock of Seneca-Cayuga Bancorp immediately before the completion of the conversion. We expect to issue up to 1,147,125 shares in the exchange.

 

The minimum purchase order is 25 shares. Generally, no individual, or individuals acting through a single qualifying account held jointly, may purchase more than 30,000 shares ($300,000) of common stock, and no person or entity, together with associates or persons acting in concert with such person or entity, may purchase more than 60,000 shares ($600,000) of common stock in all categories of the offering combined.

 

The subscription offering will expire at 2:00 p.m., Eastern time, on [expiration date]. We expect that the community offering, if held, will expire at the same time. We may extend the expiration date of the subscription and/or community offerings without notice to you until [extension date], or longer if the Federal Reserve Board approves a later date. No single extension may exceed 90 days and the offering must be completed by [final date]. Once submitted, orders are irrevocable unless the subscription and community offerings are terminated or extended, with regulatory approval, beyond [extension date], or the number of shares of common stock to be sold is increased to more than 1,727,875 shares or decreased to less than 1,277,125 shares. If the subscription and community offerings are extended past [extension date], all subscribers will be notified and given the opportunity to confirm, change or cancel their orders. If you do not respond to the notice of extension, we will promptly return your funds with interest or cancel your deposit account withdrawal authorization. If the number of shares to be sold in the offering is increased to more than 1,727,875 shares or decreased to less than 1,277,125 shares, we will resolicit subscribers, and all funds delivered to us to purchase shares of common stock in the subscription and community offerings will be returned promptly with interest. Funds received in the subscription and the community offerings will be held in a segregated account at Generations Bank and will earn interest at 0.10% per annum until completion or termination of the offering.

 

Keefe, Bruyette & Woods, Inc. will assist us in selling the shares on a best efforts basis in the subscription and community offerings, and will serve as sole manager for any syndicated community offering. Keefe, Bruyette & Woods, Inc. is not required to purchase any shares of common stock that are sold in the offering.

 

OFFERING SUMMARY

Price: $10.00 per Share

 

   Minimum   Midpoint   Maximum 
Number of shares    1,277,125    1,502,500    1,727,875 
Gross offering proceeds   $12,771,250   $15,025,000   $17,278,750 
Estimated offering expenses, excluding selling agent fees and expenses (1) (2)  $900,000   $900,000   $900,000 
Selling agent fees and expenses (1)   $400,000   $400,000   $400,000 
Estimated net proceeds   $11,471,250   $13,725,000   $15,978,750 
Estimated net proceeds per share (1)   $8.98   $9.13   $9.25 

 

(1)See “The Conversion and Offering – Plan of Distribution; Selling Agent and Underwriter Compensation” for a discussion of Keefe, Bruyette & Woods, Inc.’s compensation for this offering and the compensation to be received by Keefe, Bruyette & Woods, Inc. and the other broker-dealers that may participate in the syndicated community offering.

(2)Excludes records agent fees and expenses payable to Keefe, Bruyette & Woods, Inc., which are included in estimated offering expenses. See “The Conversion and Offering – Records Management.”

 

This investment involves a degree of risk, including the possible loss of principal.

See “Risk Factors” beginning on page 18.

 

These securities are not deposits or savings accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. None of the Securities and Exchange Commission, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, nor any state securities regulator has approved or disapproved of these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

 

Keefe, Bruyette & Woods

A Stifel Company

For assistance, contact the Stock Information Center at [phone number].

The date of this prospectus is [__________].

 

 

 

 

[MAP TO BE INSERTED ON INSIDE FRONT COVER]

 

 

 

 

TABLE OF CONTENTS

Page

 

SUMMARY 1
RISK FACTORS 18
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA 37
FORWARD-LOOKING STATEMENTS 40
HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING 42
OUR DIVIDEND POLICY 43
MARKET FOR THE COMMON STOCK 44
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE 46
CAPITALIZATION 47
PRO FORMA DATA 49
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 55
BUSINESS OF GENERATIONS BANCORP AND SENECA-CAYUGA BANCORP 77
SUPERVISION AND REGULATION 115
TAXATION 127
MANAGEMENT 129
BENEFICIAL OWNERSHIP OF COMMON STOCK 139
SUBSCRIPTIONS BY DIRECTORS AND EXECUTIVE OFFICERS 140
THE CONVERSION AND OFFERING 141
COMPARISON OF STOCKHOLDERS’ RIGHTS FOR STOCKHOLDERS OF SENECA-CAYUGA BANCORP 167
RESTRICTIONS ON ACQUISITION OF GENERATIONS BANCORP 175
DESCRIPTION OF CAPITAL STOCK OF GENERATIONS BANCORP 179
TRANSFER AGENT 180
CHANGE IN ACCOUNTANTS 180
EXPERTS 181
LEGAL MATTERS 181
WHERE YOU CAN FIND ADDITIONAL INFORMATION 182
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF SENECA-CAYUGA BANCORP F-1

 

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SUMMARY

 

The following summary explains the significant aspects of the conversion, the offering and the exchange of existing shares of Seneca-Cayuga Bancorp common stock for shares of Generations Bancorp common stock. It may not contain all of the information that is important to you. Before making an investment decision, you should read this entire document carefully, including the consolidated financial statements and the notes thereto, and the section entitled “Risk Factors.”

 

Our Organizational Structure and the Proposed Conversion

 

Seneca-Cayuga Bancorp is a federal corporation that owns all of the outstanding shares of common stock of Generations Bank. At June 30, 2020, Seneca-Cayuga Bancorp had consolidated total assets of $372.3 million, deposits of $304.6 million and stockholders’ equity of $29.3 million. At that date, Seneca-Cayuga Bancorp had 2,463,507 shares of common stock outstanding, of which 1,480,715 shares, or 60.1%, were owned by The Seneca Falls Savings Bank, MHC, and the remaining 982,792 shares were held by the public.

 

Pursuant to the terms of the plan of conversion and reorganization, which we refer to as the plan of conversion, we are converting from the mutual holding company corporate structure to the fully public stock holding company corporate structure. Upon completion of the conversion, The Seneca Falls Savings Bank, MHC and Seneca-Cayuga Bancorp will cease to exist and Generations Bancorp will become the successor corporation to Seneca-Cayuga Bancorp. The conversion will be accomplished by the merger of The Seneca Falls Savings Bank, MHC with and into Seneca-Cayuga Bancorp, followed by the merger of Seneca-Cayuga Bancorp with and into Generations Bancorp. The shares of Generations Bancorp common stock being offered for sale represent the majority ownership interest in Seneca-Cayuga Bancorp currently owned by The Seneca Falls Savings Bank, MHC. Public stockholders of Seneca-Cayuga Bancorp will receive shares of common stock of Generations Bancorp in exchange for their shares of Seneca-Cayuga Bancorp at an exchange ratio intended to preserve the same aggregate ownership interest in Generations Bancorp as they had in Seneca-Cayuga Bancorp, adjusted downward to reflect certain assets held by The Seneca Falls Savings Bank, MHC, without giving effect to new shares purchased in the offering or cash paid in lieu of any fractional shares. The shares of Seneca-Cayuga Bancorp common stock owned by The Seneca Falls Savings Bank, MHC will be cancelled.

 

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The following diagram shows our current organizational structure, reflecting ownership percentages at June 30, 2020:

 

 

After the conversion and offering are completed, we will be organized as a fully public stock holding company, as follows:

 

 

In the future we may consider converting Generations Bank to a commercial bank charter. In such event, we may also consider the merger of Generations Commercial Bank into Generations Bank.

 

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Our Business

 

Our business consists primarily of taking deposits from the general public and, through our commercial bank subsidiary, Generations Commercial Bank, from New York State and County municipalities and agencies, and investing those deposits, together with borrowings and funds generated from operations, in the origination and purchase of one- to four-family residential real estate loans, including home equity loans and lines of credit. We also purchase and originate a substantial amount of consumer loans, including automobile loans, recreational vehicle loans and manufactured home loans. To a lesser extent, we originate commercial real estate and multifamily loans, commercial business loans and residential and commercial construction loans. Most of our one- to four-family residential real estate loans are originated to borrowers in our market area. To diversify our loan portfolio more geographically, we purchase loans that have been originated outside of the region, including automobile loans, recreational vehicle loans and manufactured home loans originated in throughout the United States. We also invest in securities, which currently consist primarily of municipal bonds issued by states, local municipalities and schools in the northeastern United States, and to a far lesser extent mortgage-backed securities issued by U.S. government sponsored entities and Federal Home Loan Bank of New York (“Federal Home Loan Bank”) stock. Additionally, through our subsidiary Generations Agency, Inc., we provide insurance as well as certain other financial products.

 

We offer a variety of deposit accounts, including demand accounts, NOW accounts, money market accounts, savings accounts and certificates of deposit accounts. We also utilize advances from the Federal Home Loan Bank for liquidity and for asset/liability management purposes.

 

On September 29, 2018, Generations Bank completed its acquisition of Medina Savings and Loan Association, a mutual savings association headquartered in Medina, New York.

 

Generations Bank is subject to comprehensive regulation and examination by the Office of the Comptroller of the Currency.

 

Generations Bancorp is a newly formed Maryland corporation. Following the completion of the conversion and offering, Generations Bancorp will be the holding company for Generations Bank and will succeed Seneca-Cayuga Bancorp as the publicly traded holding company of Generations Bank. Our executive offices are located at 20 East Bayard Street, Seneca Falls, New York 13148 and our telephone number is (315) 568-5855. Generations Bank’s website address is www.mygenbank.com. Information on this website is not and should not be considered a part of this prospectus.

 

Business Strategy

 

Our current business strategy is to operate as a well-capitalized and profitable community bank dedicated to serving the needs of our consumer and business customers, and offering personalized and efficient customer service. Our goals are to increase interest income through loan portfolio growth, including expected material growth in our purchases of automobile, recreational vehicle and manufactured home loans, as well as increased originations and purchases of one-to four-family residential real estate loans, decrease interest expense by increasing core deposits, and achieve economies of scale through managed balance sheet growth. Highlights of our current business strategy include:

 

·Increasing our purchases and originations of automobile, recreational vehicle and manufactured home loans. In recent years we have increased our emphasis on the purchase and origination of automobile, recreational vehicle and manufactured home loans. At June 30, 2020, these loans totaled $61.0 million, or 21.9% of our total loan portfolio. For the six months ended June 30, 2020 and the year ended December 31, 2019, we purchased $22.4 million and $22.9 million of automobile, recreational vehicle and manufactured home loans. We intend to continue to increase our purchases and origination of these types of loans following completion of the conversion.

 

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Automobile, recreational vehicle and manufactured home lending can increase loan yields with shorter repricing terms than one- to four-family residential real estate loans. At June 30, 2020, the weighted average rate on our automobile, recreational vehicle and manufactured home loans was 6.85%.

 

We believe that we have the experience and policies and procedures in place to increase loan purchases without undue risk. We began purchasing manufactured home loans in 2006. In part based on this experience, in 2016 we began purchasing automobile loans from one vendor and began purchasing automobile and recreational vehicle loans from a second vendor in February 2020, and additionally began purchasing manufactured home loans from a second vendor in 2019. To date, our credit experience on these loans has been satisfactory. See “Business of Generations Bank – Lending Activities – Manufactured Home Lending and “– Automobile Lending” and “– Other Consumer Lending.”

 

·Continuing to emphasize one- to four-family residential real estate lending. We will continue to focus on originating one- to four-family residential real estate loans for retention in our portfolio. At June 30, 2020, $135.9 million, or 49.0%, of our total loans consisted of one- to four-family residential real estate loans. We recently contracted with a third party to assist with one- to four-family residential real estate loan generation, and expect to increase our purchases of one- to four-family residential real estate loans.

 

·Increasing our “core” deposit base. We seek to increase our core deposit base, particularly checking accounts. Core deposits include all deposit account types except certificates of deposit. Core deposits are our least costly source of funds, which improves our interest rate spread, and represent our best opportunity to develop customer relationships that enable us to cross-sell our full complement of products and services. Core deposits also contribute non-interest income from account-related fees and services and are generally less sensitive to withdrawal when interest rates fluctuate. We have continued our marketing efforts for checking accounts through digital, print and outdoor advertising channels. Core deposits at June 30, 2020 increased $29.3 million, or 16.8%, from December 31, 2019 as customers have increased their balances in these accounts, we believe, due to the economic uncertainty caused by the Covid-19 pandemic. In recent years, we have significantly expanded and improved the products and services we offer our retail and business deposit customers who maintain core deposit accounts and have improved our infrastructure for electronic banking services, including online banking, mobile banking, bill pay, and e-statements. We believe that the deposit infrastructure we have established can accommodate significant increases in retail and business deposit accounts without additional capital expenditure. Primarily for municipal deposits we have accepted in Generations Commercial Bank, we participate in reciprocal deposit services for our customers through the Certificate Deposit Account Registry Service (CDARS) and Insured Cash Sweep networks, which are currently considered by the bank regulators, to be brokered deposits, as a source of funds, in accordance with our asset/liability policies and funding strategies.

 

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·Implementing a managed growth strategy without undue risk. We intend to pursue a growth strategy for the foreseeable future, with the goal of improving the profitability of our business through increased net interest income and retail deposit growth. Subject to market conditions, we intend to grow our one- to four-family residential fixed-rate, automobile, recreational vehicle and manufactured home loan portfolios. To a lesser extent we intend to grow our commercial real estate and multifamily home loan portfolios.

 

·Remaining a community-oriented institution and relying on high quality service to maintain and build a loyal local customer base. We were established in 1870 and have been operating 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. Through the goodwill we have developed over years of providing timely, efficient banking services, we believe that we have been able to attract a solid base of local retail customers on which we hope to continue to build our banking business.

 

Reasons for the Conversion and Offering

 

Our primary reasons for converting to the fully public stock form of ownership and undertaking the stock offering are to:

 

·Support our planned growth and strengthen our regulatory capital position with the additional capital we will raise in the stock offering. While Generations Bank exceeds all regulatory capital requirements, the proceeds from the offering will significantly augment our capital position and enable us to support our planned growth by increasing our regulatory loans-to-one borrower limit and by reducing our loan concentrations as a percent of capital. The augmented capital will be essential to the continued implementation of our business strategy.

 

·Transition our organization to a stock holding company structure, which gives us greater flexibility to access the capital markets compared to our existing mutual holding company structure. The stock holding company structure is a more flexible form of organization that will give us greater flexibility to access the capital markets through possible future equity and debt offerings, although we have no current plans, agreements or understandings regarding any additional securities offerings.

 

·Improve the liquidity of our shares of common stock. The larger number of shares that will be outstanding after completion of the conversion and offering is expected to result in a more liquid and active market for Generations Bancorp common stock. A more liquid and active market will make it easier for our stockholders to buy and sell our common stock and will give us greater flexibility in implementing capital management strategies.

 

·Maximize shareholder value. Although we intend to remain an independent financial institution, the stock holding company structure may make us a more attractive merger and acquisition candidate for other institutions. Applicable regulations prohibit the merger and acquisition of Generations Bancorp for three years following completion of the conversion, and also prohibit anyone from acquiring or offering to acquire more than 10% of our stock without regulatory approval.

 

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Terms of the Offering

 

We are offering for sale between 1,277,125 and 1,727,875 shares of common stock to eligible depositors of Generations Bank and Generations Commercial Bank, to our tax-qualified employee benefit plans and, to the extent shares remain available, in a community offering to the general public, with a preference given first to natural persons (including trusts of natural persons) residing in the New York counties of Cayuga, Seneca, Ontario and Orleans, and then to existing public stockholders of Seneca-Cayuga Bancorp as of the close of business on [other member date]. If necessary, we will also offer for sale shares to the general public in a syndicated community offering. Unless the number of shares of common stock to be offered is increased to more than 1,727,875 shares or decreased to fewer than 1,277,125 shares, or the subscription and community offerings are extended beyond [extension date], subscribers will not have the opportunity to change or cancel their stock orders once submitted. If the subscription and community offerings are extended past [extension date], all subscribers will be notified and given an opportunity to confirm, change or cancel their orders. All subscribers will be notified by mail sent to the address the subscriber provides on the stock order form they have submitted. If you do not respond to the notice of extension, your order will be cancelled and we will promptly return your funds with interest at 0.10% per annum or cancel your deposit account withdrawal authorization. If the number of shares to be sold is increased to more than 1,727,875 shares or decreased to less than 1,277,125 shares, all subscribers’ stock orders will be canceled, their withdrawal authorizations will be canceled and funds delivered to us to purchase shares of common stock in the subscription and community offerings will be returned promptly with interest at 0.10% per annum. We will then resolicit subscribers, giving them an opportunity to place new orders for a period of time. No shares purchased in the subscription offering and community offering will be issued until the completion of any syndicated community offering.

 

The purchase price of each share of common stock offered for sale in the offering is $10.00. All investors will pay the same purchase price per share, regardless of whether the shares are purchased in the subscription offering, the community offering or a syndicated community offering. Investors will not be charged a commission to purchase shares of common stock in the offering. Keefe, Bruyette & Woods, Inc. (“KBW”), our marketing agent in the offering, will use its best efforts to assist us in selling shares of our common stock in the offering but is not obligated to purchase any shares of common stock in the offering.

 

How We Determined the Offering Range, the Exchange Ratio and the $10.00 Per Share Purchase Price

 

The amount of common stock we are offering for sale and the exchange ratio for the exchange of shares of Seneca-Cayuga Bancorp for shares of Generations Bancorp are based on an independent appraisal of the estimated market value of Generations Bancorp, assuming the offering has been completed. Keller & Company, Inc., our independent appraiser, has estimated that, as of August 21, 2020 this market value was $25.0 million. Based on federal regulations, this market value forms the midpoint of a valuation range with a minimum of $21.3 million and a maximum of $28.8 million. Based on this valuation range, the 60.1% ownership interest of The Seneca Falls Savings Bank, MHC in Seneca-Cayuga Bancorp as of June 30, 2020 being sold in the offering, certain assets held by The Seneca Falls Savings Bank, MHC and the $10.00 per share price, the number of shares of common stock being offered for sale by Generations Bancorp ranges from 1,277,125 shares to 1,727,875 shares. The purchase price of $10.00 per share was selected primarily because it is the price most commonly used in mutual-to-stock conversions of financial institutions. The exchange ratio ranges from 0.8627 shares at the minimum of the offering range to 1.1672 shares at the maximum of the offering range, and will generally preserve in Generations Bancorp the percentage ownership of public stockholders in Seneca-Cayuga Bancorp immediately before the completion of the conversion. Keller & Company, Inc. will update its appraisal before we complete the conversion and offering. If our pro forma market value at that time is either below $21.3 million or above $28.8 million, then, after consulting with the Federal Reserve Board, we may: terminate the offering and promptly return all funds with interest; set a new offering range and give all subscribers the opportunity to place a new order; or take such other actions as may be permitted by the Federal Reserve Board and the Securities and Exchange Commission.

 

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The appraisal is based in part on Seneca-Cayuga Bancorp’s financial condition and results of operations, the pro forma effect of the additional capital raised by the sale of shares of common stock in the offering, and an analysis of a peer group of 10 publicly traded savings and loan and holding companies that Keller & Company, Inc. considers comparable to Seneca-Cayuga Bancorp. The appraisal peer group consists of the following companies, all of which are traded on the Nasdaq Stock Market.

 

Company Name   Ticker
Symbol
  Headquarters   Total Assets (1)  
            ($ in millions)  
Eagle Financial Bancorp, Inc.   EFBI   Cincinnati, OH   $ 154.4  
Equitable Financial Corp.   EQFN   Grand Island, NE   $ 395.3  
First Savings Financial Group   FSFG   Jeffersonville, IN   $ 1,658.4  
HMN Financial, Inc.   HMNF   Rochester, MN   $ 862.0  
Home Fed Bancorp of Louisiana   HFBL   Shreveport, LA   $ 518.9  
IF Bancorp, Inc.   IROQ   Watseka, IL   $ 735.4  
Mid-Southern Bancorp, Inc.   MSVB   Salem, IN   $ 217.5  
Prudential Bancorp, Inc.   PBIP   Philadelphia, PA   $ 1,187.8  
Severn Bancorp, Inc.   SVBI   Annapolis, MD   $ 913.4  
WVS Financial Corp.   WVFC   Pittsburgh, PA   $ 355.0  

 

 

(1)Asset size for all companies is as of June 30, 2020.

 

The following table presents a summary of selected pricing ratios for Generations Bancorp (on a pro forma basis) as of and for the twelve months ended June 30, 2020, and for the peer group companies based on earnings and other information as of and for the twelve months ended March 31, 2020, with stock prices as of June 30, 2020, as reflected in the appraisal report. Compared to the average pricing of the peer group, and based upon the information in the following table, our pro forma pricing ratios at the midpoint of the offering range indicated a discount of 32.21% on a price-to-book value basis, a discount of 31.72% on a price-to-tangible book value basis, and a premium of 72.40% on a price-to-earnings basis.

 

   Price-to-earnings multiple (1)  Price-to-book value ratio  Price-to-tangible book
value ratio
Generations Bancorp (on a pro forma basis, assuming completion of the conversion)         
Maximum   30.26x  66.45%  69.11%
Midpoint   26.48x  60.53%  63.09%
Minimum   22.64x  54.05%  56.47%
          
Valuation of peer group companies, all of which are fully converted (on an historical basis)         
Averages   16.26x  89.29%  92.40%
Medians   12.08x  84.55%  88.79%

 

 

(1)Price-to-earnings multiples calculated by Keller & Company, Inc. in the independent appraisal are based on an estimate of “core” or recurring earnings. These ratios are different than those presented in “Pro Forma Data.”

 

The independent appraisal does not indicate trading market value. Do not assume or expect that our valuation as indicated in the appraisal means that after the conversion and offering the shares of our common stock will trade at or above the $10.00 per share purchase price. Furthermore, the pricing ratios presented in the appraisal were used by Keller & Company, Inc. to estimate our pro forma appraised value for regulatory purposes and not to compare the relative value of shares of our common stock with the value of the capital stock of the peer group. The value of the capital stock of a particular company may be affected by a number of factors such as financial performance, asset size and market location.

 

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For a more complete discussion of the amount of common stock we are offering for sale and the independent appraisal, see “The Conversion and Offering − Stock Pricing and Number of Shares to be Issued.”

 

Effect of The Seneca Falls Savings Bank, MHC’s Assets on Minority Stock Ownership

 

Public stockholders of Seneca-Cayuga Bancorp will receive shares of common stock of Generations Bancorp in exchange for their shares of common stock of Seneca-Cayuga Bancorp pursuant to an exchange ratio that is designed to provide, subject to adjustment, public stockholders with the same ownership percentage of the common stock of Generations Bancorp after the conversion as their ownership percentage in Seneca-Cayuga Bancorp immediately before the conversion, without giving effect to new shares purchased in the offering or cash paid in lieu of any fractional shares. The exchange ratio will be adjusted downward to reflect assets held by The Seneca Falls Savings Bank, MHC (other than shares of common stock of Seneca-Cayuga Bancorp) at the completion of the conversion, which assets consist of cash totaling $16,000 at June 30, 2020. However, this amount of assets held by The Seneca Falls Savings Bank, MHC would not change the exchange ratio, which is rounded to four decimal places.

 

The Exchange of Existing Shares of Seneca-Cayuga Bancorp Common Stock

 

If you are a stockholder of Seneca-Cayuga Bancorp immediately before the completion of the conversion, your shares will be exchanged for shares of common stock of Generations Bancorp. The number of shares of common stock you will receive will be based on the exchange ratio, which will depend upon our final appraised value and the percentage of outstanding shares of Seneca-Cayuga Bancorp common stock owned by public stockholders immediately before the completion of the conversion. The following table shows how the exchange ratio will adjust, based on the appraised value of Generations Bancorp as of August 21, 2020, assuming public stockholders of Seneca-Cayuga Bancorp own 60.1% of Seneca-Cayuga Bancorp common stock and The Seneca Falls Savings Bank, MHC had assets (excluding its shares of Seneca-Cayuga Bancorp common stock) of $16,000 immediately before the completion of the conversion. The table also shows the number of shares of Generations Bancorp common stock a hypothetical owner of Seneca-Cayuga Bancorp common stock would receive in exchange for 100 shares of Seneca-Cayuga Bancorp common stock owned at the completion of the conversion, depending on the number of shares of common stock issued in the offering.

 

   Shares to be Sold in
This Offering
   Shares of Generations
Bancorp to be Issued for
Shares of Seneca-Cayuga
Bancorp
   Total Shares
of Common
Stock to be
Issued in
Exchange and
   Exchange   Equivalent
Value of
Shares
Based
Upon
Offering
   Equivalent
Pro Forma
Tangible
Book Value
Per
Exchanged
   Whole
Shares to
be
Received
for 100
Existing
 
   Amount   Percent   Amount   Percent   Offering   Ratio   Price (1)   Share (2)   Shares (3) 
Minimum    1,277,125    60.1    847,875    39.9    2,125,000    0.8627   $8.63   $17.71    86 
Midpoint    1,502,500    60.1    997,500    39.9    2,500,000    1.0150    10.15    15.85    101 
Maximum    1,727,875    60.1    1,147,125    39.9    2,875,000    1.1672    11.67    14.47    116 

 

 

(1)Represents the value of shares of Generations Bancorp common stock to be received in the conversion by a holder of one share of Seneca-Cayuga Bancorp, pursuant to the exchange ratio, based upon the $10.00 per share offering price.
(2)Represents the pro forma tangible book value per share at each level of the offering range multiplied by the respective exchange ratio.
(3)Cash will be paid in lieu of fractional shares.

 

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No fractional shares of Generations Bancorp common stock will be issued to any public stockholder of Seneca-Cayuga Bancorp. For each fractional share that otherwise would be issued, Generations Bancorp will pay in cash an amount equal to the product obtained by multiplying the fractional share interest to which the holder otherwise would be entitled by the $10.00 per share offering price.

 

Intended Use of the Proceeds From the Offering

 

To the extent we have sufficient net proceeds, we intend to invest up to $10.0 million into Generations Bank, provided however that Generations Bancorp will retain sufficient funds in order to fund the following: (i) a loan to our employee stock ownership plan to finance its purchase of shares of common stock in the stock offering, (ii) repayment of a $500,000 borrowing that will come due in February 2021, (iii) repayment of a $735,000 subordinated note that will come due in June 2021, (iv) repayment of litigation fees and expense equal to $119,000, and (v) $125,000. At the minimum of the offering range, the amount to be infused into the Bank will equal approximately $9.0 million. Therefore, assuming we sell 1,502,500 shares of common stock in the stock offering at the midpoint of the offering range, and we have net proceeds of $13.7 million, we intend to invest $10.0 million in Generations Bank, loan $1.2 million to our employee stock ownership plan to fund its purchase of shares of common stock, repay $1.235 million of borrowings and subordinated notes, repay $119,000 of litigation fees and expenses and retain the remaining $1.15 million of the net proceeds at Generations Bancorp.

 

To the extent that net proceed funds remain at Generations Bancorp, Generations Bancorp may use the funds it retains for investment in securities, to repurchase shares of common stock, to acquire other financial institutions or financial services companies, to pay cash dividends and for other general corporate purposes. However, we do not currently anticipate paying cash dividends. Additionally, we will consider share repurchases on an ongoing basis, but we would not expect to engage in share repurchases in the years immediately following consummation of the conversion unless we are able to retain a substantial amount of the net offering proceeds at the holding company level.

 

Generations Bank may use the proceeds it receives to support increased lending, enhance existing, or support growth and the development of, new products and services, or expand its branch network by establishing or acquiring new branches or by acquiring other financial institutions or financial services companies. We do not currently have any agreements or understandings regarding any acquisition transactions.

 

See “How We Intend to Use the Proceeds from the Offering” for additional information.

 

Persons Who May Order Shares of Common Stock in the Offering

 

We are offering the shares of common stock for sale in a subscription offering in the following descending order of priority:

 

(i)To depositors with accounts at Generations Bank or Generations Commercial Bank with aggregate balances of at least $50.00 at the close of business on July 31, 2019.

 

(ii)To our tax-qualified employee benefit plans (including Generations Bank’s employee stock ownership plan), which may subscribe for, in the aggregate, up to 10% of the shares of common stock sold in the offering. We expect our employee stock ownership plan to purchase 8% of the shares of common stock sold in the stock offering.

 

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(iii)To depositors with accounts at Generations Bank or Generations Commercial Bank with aggregate balances of at least $50.00 at the close of business on [supplemental eligibility record date].

 

(iv)To depositors of Generations Bank at the close of business on [other member date].

 

Shares of common stock not purchased in the subscription offering may be offered for sale to the general public in a community offering, with a preference given first to natural persons (including trusts of natural persons) residing in the New York counties of Cayuga, Seneca, Ontario and Orleans, and then to Seneca-Cayuga Bancorp’s public stockholders as of the close of business on [other member date]. The community offering is expected to begin concurrently with the subscription offering, but may begin concurrently with, during or promptly after the subscription offering. We also may offer for sale shares of common stock not purchased in the subscription offering and the community offering in a syndicated community offering. KBW will act as sole manager for the syndicated community offering. We have the right to accept or reject, in our sole discretion, orders received in the community offering or syndicated community offering, and our interpretation of the terms and conditions of the plan of conversion will be final. Any determination to accept or reject stock orders in the community offering or syndicated community offering will be based on the facts and circumstances available to management at the time of the determination.

 

If we receive orders for more shares than we are offering for sale, we may not be able to fully or partially fill your order. A detailed description of the subscription offering, the community offering and the syndicated community offering, as well as a discussion regarding allocation procedures, can be found in the section of this prospectus entitled “The Conversion and Offering.”

 

Limits on How Much Common Stock You May Purchase

 

The minimum number of shares of common stock that may be purchased is 25 shares.

 

Generally, no individual, or individuals acting through a single qualifying account held jointly, may purchase more than 30,000 shares ($300,000) of common stock. If any of the following persons purchase shares of common stock, their purchases, in all categories of the offering, when combined with your purchases, cannot exceed 60,000 shares ($600,000) of common stock:

 

·your spouse or relatives of you or your spouse living in your house;

 

·most companies, trusts or other entities in which you are a senior officer, partner, trustee or have a substantial beneficial interest; or

 

·other persons who may be your associates or persons acting in concert with you.

 

Unless we determine otherwise, persons having the same address and persons exercising subscription rights through qualifying accounts registered to the same address will be subject to the overall purchase limitation of 60,000 shares ($600,000).

 

In addition to the above purchase limitations, there is an ownership limitation for current stockholders of Seneca-Cayuga Bancorp other than our employee stock ownership plan. Shares of common stock that you purchase in the offering individually and together with persons described above, plus any shares you and they receive in exchange for existing shares of Seneca-Cayuga Bancorp common stock, may not exceed 9.9% of the total shares of common stock to be issued and outstanding after the completion of the conversion and offering. However, if, based on your current ownership level, you will own more than 9.9% of the total shares of common stock of Generations Bancorp to be issued and outstanding after the completion of the conversion and offering following the exchange of your shares of Seneca-Cayuga Bancorp common stock, you will be ineligible to purchase any new shares in the offering. You will be required to obtain regulatory approval or non-objection before acquiring 10% or more of Generations Bancorp’s common stock.

 

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Subject to regulatory approval, we may increase or decrease the purchase and ownership limitations at any time. See the detailed description of the purchase limitations in “The Conversion and Offering – Additional Limitations on Common Stock Purchases.”

 

How You May Purchase Shares of Common Stock in the Subscription Offering and the Community Offering

 

In the subscription offering and community offering, you may pay for your shares only by:

 

(i)personal check, bank check or money order made payable directly to Generations Bancorp; or

 

(ii)authorizing us to withdraw available funds (without any early withdrawal penalty) from your Generations Bank or Generations Commercial Bank deposit account(s), other than checking accounts or individual retirement accounts (IRAs).

 

Generations Bank or Generations Commercial Bank is not permitted to lend funds to anyone to purchase shares of common stock in the offering. Additionally, you may not use any type of third-party check to pay for shares of common stock. Do not submit cash. Wire transfers will not be accepted. Applicable regulations prohibit Generations Bank or Generations Commercial Bank from lending funds or extending credit to any person to purchase shares of common stock in the offering. You may not submit a Generations Bank line of credit check. You may not designate withdrawal from Generations Bank or Generations Commercial Bank accounts with check-writing privileges; rather, submit a check. If you request a direct withdrawal, we reserve the right to interpret that as your authorization to treat those funds as if we had received a check for the designated amount, and will immediately withdraw the amount from your checking account(s). You may not authorize direct withdrawal from a Generations Bank individual retirement account, or IRA. See “ − Using Individual Retirement Account Funds to Purchase Shares of Common Stock.”

 

You may subscribe for shares of common stock in the subscription and community offerings by delivering a signed and completed original stock order form, together with full payment payable to Generations Bancorp or authorization to withdraw funds from one or more of your Generations Bank or Generations Commercial Bank deposit accounts, provided that the stock order form is received before 2:00 p.m., Eastern time, on [expiration date], which is the expiration of the subscription offering period. You may submit your stock order form and payment by mail using the stock order reply envelope provided or by overnight delivery to the address listed on the stock order form. We will use our best effort to allow hand-delivery of stock order forms to our executive office, located at 20 East Bayard Street, Seneca Falls, New York, which is open between 9:00 a.m. and 5:00 p.m., Eastern time, Monday through Friday. However, due to the Covid-19 pandemic and possible closures of public spaces, we ask that you call the stock information center at [phone number] to confirm the availability of hand-delivery. We will not accept stock order forms at our other offices. Do not mail stock order forms to Generations Bank’s offices.

 

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See “The Conversion and Offering – Procedure for Purchasing Shares in the Subscription and Community Offerings – Payment for Shares” for a complete description of how to purchase shares in the subscription and community offerings.

 

Using Individual Retirement Account Funds to Purchase Shares of Common Stock

 

You may be able to subscribe for shares of common stock using funds in your IRA or other retirement account. If you wish to use some or all of the funds in your Generations Bank IRA or other retirement account, the applicable funds must be transferred to a self-directed account maintained by an independent custodian or trustee, such as a brokerage firm, and the purchase must be made through that account. If you do not have such an account, you will need to establish one before placing your stock order. An annual administrative fee may be payable to the independent custodian or trustee. Because individual circumstances differ and the processing of retirement fund orders takes additional time, we recommend that you contact our Stock Information Center promptly, preferably at least two weeks before the [expiration date] offering deadline, for assistance with purchases using funds in your IRA or other retirement account you may have at Generations Bank or elsewhere. Whether you may use such funds to purchase shares in the stock offering may depend on timing constraints and, possibly, limitations imposed by the institution where the funds are held.

 

See “The Conversion and Offering – Procedure for Purchasing Shares in the Subscription and Community Offerings – Payment for Shares” and “ – Using Individual Retirement Account Funds” for a complete description of how to use IRA funds to purchase shares of common stock in the stock offering.

 

Market for Common Stock

 

Existing publicly held shares of Seneca-Cayuga Bancorp’s common stock are quoted on the OTC Pink Marketplace (OTCPK) operated by OTC Markets Group under the symbol “SCAY.” Upon completion of the conversion, the shares of common stock of Generations Bancorp will be issued in exchange for the existing shares of Seneca-Cayuga Bancorp. We have applied to list the shares of Generations Bancorp common stock on the Nasdaq Capital Market under the symbol “GBNY.” To list our stock on the Nasdaq Capital Market, we must have at least three broker-dealers who will make a market in our common stock and at least 300 round-lot holders (i.e., a holder of at least 100 shares). We cannot assure you that we will satisfy these requirements. At June 30, 2020, Seneca-Cayuga Bancorp had approximately nine registered market makers in its common stock. KBW has advised us that it intends to make a market in our common stock following the offering, but is under no obligation to do so.

 

Our Dividend Policy

 

Historically and in recent years Seneca Cayuga Bancorp has not paid dividends to its shareholders and we do not currently intend to pay dividends on our common stock following completion of the stock offering. In the unlikely event that we do determine to pay dividends in the future, the payment and amount of any dividend payments will depend upon a number of factors, including the following: regulatory capital requirements; our financial condition and results of operations; our other uses of funds for the long-term value of stockholders; tax considerations; statutory and regulatory limitations; and general economic conditions. See “Our Dividend Policy” in this prospectus for additional information regarding our dividend policy.

 

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Purchases by Directors and Executive Officers

 

We expect our directors and executive officers, together with their associates, to subscribe for 45,700 shares of common stock in the offering, representing 3.6% of the shares to be sold at the minimum of the offering range. The purchase price paid by them will be the same $10.00 per share price paid by all other persons who purchase shares of common stock in the offering. Following the conversion, our directors and executive officers, together with their associates, are expected to beneficially own 145,552 shares of common stock, or 6.8% of our total outstanding shares of common stock at the minimum of the offering range, which includes shares they currently own in Seneca-Cayuga Bancorp that will be exchanged for shares of Generations Bancorp.

 

See “Subscriptions by Directors and Executive Officers” for more information on the proposed purchases of shares of common stock by our directors and executive officers.

 

Deadline for Orders of Shares of Common Stock in the Subscription and Community Offerings

 

The deadline for submitting orders to purchase shares of common stock in the subscription and community offerings is 2:00 p.m., Eastern time, on [expiration date], unless we extend this deadline. If you wish to purchase shares of common stock, a properly completed and signed original stock order form, together with full payment, must be received (not postmarked) by this time.

 

Although we will make reasonable attempts to provide this prospectus and offering materials to holders of subscription rights, the subscription offering and all subscription rights will expire at 2:00 p.m., Eastern time, on [expiration date], whether or not we have been able to locate each person entitled to subscription rights.

 

See “The Conversion and Offering – Procedure for Purchasing Shares in the Subscription and Community Offerings – Expiration Date” for a complete description of the deadline for purchasing shares in the stock offering.

 

You May Not Sell or Transfer Your Subscription Rights

 

Applicable regulations prohibit you from transferring your subscription rights. If you order shares of common stock in the subscription offering, you will be required to certify that you are purchasing the common stock for yourself and that you have no agreement or understanding to sell or transfer your subscription rights or the shares that you are purchasing. We intend to take legal action, including reporting persons to federal or state agencies, against anyone who we believe has sold or transferred his or her subscription rights. We will not accept your order if we have reason to believe you have sold or transferred your subscription rights. On the stock order form, you cannot add the names of others for joint stock registration who do not have subscription rights or who qualify only in a lower subscription offering priority than you do. Doing so may jeopardize your subscription rights. You may only add those who were eligible to purchase shares of common stock in the subscription offering at your date of eligibility. In addition, the stock order form requires that you list all deposit and loan accounts, giving all names on each account and the account number at the applicable eligibility date. Failure to provide this information, or providing incomplete or incorrect information, may result in a loss of part or all of your share allocation.

 

Delivery of Shares of Common Stock

 

All shares of common stock sold will be issued in book entry form. Stock certificates will not be issued. A statement reflecting ownership of shares of common stock issued in the subscription and community offerings will be mailed by our transfer agent to the persons entitled thereto at the registration address noted by them on their stock order forms as soon as practicable following consummation of the conversion and offering. We expect trading in the stock to begin on the day of completion of the conversion and offering or the next business day. The conversion and offering are expected to be completed as soon as practicable following satisfaction of the conditions described below in “ − Conditions to Completion of the Conversion.” Until a statement reflecting your ownership of shares of common stock is available and delivered to you, you may not be able to sell the shares of common stock that you purchased in the offering, even though the common stock will have begun trading. Your ability to sell your shares of common stock before receiving your statement will depend on arrangements you may make with a brokerage firm.

 

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Conditions to Completion of the Conversion

 

We cannot complete the conversion and offering unless:

 

·The plan of conversion is approved by a majority of votes eligible to be cast by members of The Seneca Falls Savings Bank, MHC (i.e., depositors of Generations Bank) as of the close of business on [other member date];

 

·The plan of conversion is approved by Seneca-Cayuga Bancorp stockholders holding at least two-thirds of the outstanding shares of common stock of Seneca-Cayuga Bancorp as of the close of business on [other member date], including shares held by The Seneca Falls Savings Bank, MHC;

 

·The plan of conversion is approved by Seneca-Cayuga Bancorp stockholders holding a majority of the outstanding shares of common stock of Seneca-Cayuga Bancorp as of the close of business on [other member date], excluding shares held by The Seneca Falls Savings Bank, MHC;

 

·We sell at least the minimum number of shares of common stock offered in the offering;

 

·We receive approval from the Federal Reserve Board; and

 

·The Office of the Comptroller of the Currency approves an amendment to Generations Bank’s charter to provide for a liquidation account.

 

The Seneca Falls Savings Bank, MHC intends to vote its shares in favor of the plan of conversion. At the close of business on June 30, 2020, The Seneca Falls Savings Bank, MHC owned 1,480,715 shares, or approximately 60.1%, of the outstanding shares of common stock of Seneca-Cayuga Bancorp. At the close of business on June 30, 2020, the directors and executive officers of Seneca-Cayuga Bancorp and their affiliates owned 115,744 shares of Seneca-Cayuga Bancorp, or 4.7% of the outstanding shares of common stock and 11.4% of the outstanding shares of common stock excluding shares held by The Seneca Falls Savings Bank, MHC. They intend to vote those shares in favor of the plan of conversion.

 

Steps We May Take if We Do Not Receive Orders for the Minimum Number of Shares

 

If we do not receive orders for at least 1,277,125 shares of common stock, we may take one or more steps to sell the minimum number of shares of common stock in the offering range. Specifically, we may:

 

(i)increase the purchase and ownership limitations; and/or

 

(ii)seek regulatory approval to extend the offering beyond [extension date], so long as we resolicit subscribers who previously submitted subscriptions in the offering; and/or

 

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(iii)increase the shares purchased by the employee stock ownership plan.

 

If we extend the offering past [extension date], all subscribers will be notified and given an opportunity to confirm, change or cancel their orders. If you do not respond to the notice of extension, we will cancel your stock order and promptly return your funds with interest for funds received in the subscription and community offering or cancel your deposit account withdrawal authorization. If one or more purchase limitations are increased, subscribers in the subscription offering who ordered the maximum amount will be, and, in our sole discretion, some other large purchasers may be, given the opportunity to increase their subscriptions up to the then-applicable limit.

 

Possible Change in the Offering Range

 

Keller & Company, Inc. will update its appraisal before we complete the conversion and offering. If our pro forma market value at that time is either below $21.3 million or above $28.8 million, then, after consulting with the Federal Reserve Board, we may:

 

·terminate the stock offering and promptly return all funds (with interest paid on funds received in the subscription and community offerings);

 

·set a new offering range; or

 

·take such other actions as may be permitted by the Federal Reserve Board and the Securities and Exchange Commission.

 

If we set a new offering range, we will promptly return funds, with interest at 0.10% per annum, for funds received for purchases in the subscription and community offerings, and cancel any authorization to withdraw funds from deposit accounts for the purchase of shares of common stock. We will then resolicit subscribers, allowing them to place a new stock order for a period of time.

 

Possible Termination of the Offering

 

We may terminate the offering at any time before the special meeting of members of The Seneca Falls Savings Bank, MHC and the special meeting of stockholders of Seneca-Cayuga Bancorp that have been called to vote on the conversion, and at any time after these approvals with regulatory approval. If we terminate the offering, we will promptly return your funds with interest at 0.10% per annum, and we will cancel deposit account withdrawal authorizations.

 

Benefits to Management and Potential Dilution to Stockholders Resulting from the Conversion

 

We expect our employee stock ownership plan, which is a tax-qualified retirement plan for the benefit of Generations Bank’s employees, to purchase up to 8% of the shares of common stock we sell in the offering. If market conditions warrant, in the judgment of its trustees, the employee stock ownership plan’s subscription order will not be filled and the employee stock ownership plan may elect to purchase shares in the open market following the completion of the conversion, subject to the approval of the Federal Reserve Board.

 

We intend to implement one or more new stock-based benefit plans no earlier than six months after completion of the conversion. Stockholder approval of these plans would be required. We have not determined whether we would adopt the plans within or after 12 months following the completion of the conversion. If we implement stock-based benefit plans within 12 months following the completion of the conversion, the stock-based benefit plans would be limited to reserving a number of shares (i) up to 4% of the shares of common stock sold in the offering for awards of restricted stock to key employees and directors, at no cost to the recipients, and (ii) up to 10% of the shares of common stock sold in the offering for issuance pursuant to the exercise of stock options by key employees and directors. If the stock-based benefit plan is adopted more than 12 months after the completion of the conversion, it would not be subject to the percentage limitations set forth above. We have not yet determined the definitive number of shares that would be reserved for issuance under these plans. For a description of our current stock-based benefit plan, see “Management – Benefits to be Considered Following Completion of the Conversion – Stock-Based Benefit Plans.”

 

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The following table summarizes the number of shares of common stock and the aggregate dollar value of grants that will be available under one or more stock-based benefit plans if such plans reserve a number of shares of common stock equal to 4% and 10% of the shares sold in the stock offering for restricted stock awards and stock options, respectively. The table shows the dilution to stockholders if all such shares are issued from authorized but unissued shares, instead of shares purchased in the open market. A portion of the stock grants shown in the table below may be made to non-management employees. The table also sets forth the number of shares of common stock to be acquired by the employee stock ownership plan for allocation to all qualifying employees.

 

   Number of Shares to be Granted or Purchased   Dilution     
           As a   Resulting   Value of Grants (1) 
   At
Minimum
of Offering
Range
   At
Maximum
of Offering
Range
   Percentage
of Common
Stock to be
Sold in the
Offering
   From
Issuance of
Shares for
Stock-Based
Benefit Plans
   At
Minimum
of Offering
Range
   At
Maximum
of Offering
Range
 
Employee stock ownership plan    102,000    138,000    8.0%    n/a (2)  $1,020,000   $1,380,000 
Restricted stock awards    51,000    69,000    4.0    3.85%   510,000    690,000 
Stock options    127,500    173,000    10.0    9.09%   225,675    306,210 
Total    280,500    380,000    22.0%   12.94%  $1,755,675   $2,376,210 

 

 

(1)The actual value of restricted stock awards will be determined based on their fair value as of the date grants are made. For purposes of this table, fair value for restricted stock awards is assumed to be the same as the offering price of $10.00 per share. The fair value of stock options has been estimated at $1.77 per option using the Black-Scholes option pricing model with the following assumptions: a grant-date share price and option exercise price of $10.00; an expected option term of 10 years; no dividend yield; a risk-free rate of return of 0.65%; and expected volatility of 11.80%. The actual value of stock options granted will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used and the option pricing model ultimately adopted.
(2)No dilution is reflected for the employee stock ownership plan because such shares are assumed to be purchased in the stock offering.

 

We may fund our stock-based benefit plans through open market purchases, as opposed to new issuances of stock. However, to the extent we have sufficient net proceeds, we intend to invest up to $10.0 million of the net proceeds in Generations Bank, and accordingly, we may not have sufficient funds to conduct share repurchases in the future.

 

Tax Consequences

 

The Seneca Falls Savings Bank, MHC, Seneca-Cayuga Bancorp, Generations Bank and Generations Bancorp have received an opinion of counsel, Luse Gorman, PC, regarding the material federal income tax consequences of the conversion, and have received an opinion of Bonadio & Co., LLP regarding the material New York tax consequences of the conversion. As a general matter, the conversion will not be a taxable transaction for purposes of federal or state income taxes to The Seneca Falls Savings Bank, MHC, Seneca-Cayuga Bancorp, Generations Bank, Generations Bancorp, persons eligible to subscribe in the subscription offering, or existing stockholders of Seneca-Cayuga Bancorp (except as to cash paid for fractional shares). Existing stockholders of Seneca-Cayuga Bancorp who receive cash in lieu of fractional shares of Generations Bancorp will recognize a gain or loss equal to the difference between the cash received and the tax basis of the fractional share.

 

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Emerging Growth Company Status

 

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as we are an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies. See “Risk Factors – Risks Related to Our Business – We are an emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors” and “Supervision and Regulation – Emerging Growth Company Status.”

 

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. Such an election is irrevocable during the period a company is an emerging growth company. We have elected 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. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

 

Risk Factors

 

An investment in Generations Bancorp’s common stock is subject to risk, including risks related to our business and this offering.

 

Specific risks related to our business include those related to our consumer loan portfolio; economic or regulatory changes due to the Covid-19 pandemic; the ongoing historically low interest rate environment; our allowance for loan losses; changes in local and general economic conditions; competition; dependence on technology; changes in management’s estimate and assumptions underlying our consolidated financial statements; reliance on our management team; reliance on our reputation; changes in and compliance with laws and regulations; and environmental risks with our lending activities and properties we own.

 

Specific risks related to this offering include those related to the future trading price of the common stock of Generations Bancorp; use of the net offering proceeds, including the possibility that depending on the amount of the net proceeds from the offering, we will not retain a significant amount of funds at the holding company level; return on equity after the completion of the offering; intended new stock-based benefit plans; anti-takeover factors; forum selection provision for certain litigation; trading market for the common stock of Generations Bancorp; and the irrevocability of your investment decision.

 

Before making an investment decision, you should read this entire document carefully, including the section entitled “Risk Factors” that immediately follows and that discusses the above risks in further detail.

 

How You Can Obtain Additional Information – Stock Information Center

 

Our banking personnel may not, by law, assist with investment-related questions about the offering. If you have any questions regarding the conversion or offering, call our Stock Information Center at [phone number] (toll-free). The Stock Information Center is open Monday through Friday between 10:00 a.m. and 4:00 p.m., Eastern time, and will be closed on bank holidays.

 

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RISK FACTORS

 

You should consider carefully the following risk factors in evaluating an investment in the shares of common stock. In addition to these risks and the other risks and uncertainties described elsewhere in this prospectus, there may be additional risks and uncertainties that are not currently known to us or that we currently deem to be immaterial that could materially and adversely affect our business, financial condition or results of operations.

 

Risks Related to Our Business

 

Our loan portfolio has greater risk than those of many other savings institutions due to the substantial amount of automobile, recreational vehicle, manufactured homes and other consumer loans in our portfolio.

 

Our loan portfolio includes a substantial amount of consumer loans, including automobile, recreational vehicle and manufactured home loans, most of which we purchase from third parties. At June 30, 2020, our consumer loans totaled $67.0 million, or 24.1% of our total loan portfolio, of which indirect automobile loans totaled $21.2 million, or 7.6% of total loans, recreational vehicle loans totaled $7.9 million, or 2.8% of our total loan portfolio and manufactured home loans totaled $30.0 million, or 10.8% of our total loan portfolio. At June 30, 2020, $760,000, or 1.1% of our consumer loans, consisted of automobile, recreational vehicle or manufactured home loans which, based on our internal analysis and credit scoring system, we believe may be considered subprime.

 

As of June 30, 2020, we had $662,000 of consumer loans (consisting of automobile, manufactured homes, student and other loans) delinquent 60 days or more, which was 9.7% of total delinquent loans 60 days or more past due. Of this amount, $52,000 were non-performing consumer loans, which includes non-accrual loans. For the six months ended June 30, 2020 and the year ended December 31, 2019, we had net recoveries and charge-offs of $1,000 and $172,000, respectively, in our consumer loan portfolio.

 

Consumer loans generally have a greater risk of loss or default than one- to four-family residential real estate loans, particularly in the case of loans that are secured by rapidly depreciable assets, such as automobiles and recreational vehicles, or loans that are unsecured.  In these cases, we face the risk that any collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance. Thus, the recovery and sale of such property could be insufficient to compensate us for the principal outstanding on these loans.  Furthermore, the application of various federal and state laws and executive orders imposed by the New York governor, including bankruptcy and insolvency laws, may limit our ability to recover on such loans. Finally, because indirect automobile and recreational vehicle loan applications are originated by dealerships, although we underwrite the loans, we assume the risks associated with unsatisfactory origination procedures, including compliance with federal, state and local laws. As a result of our relatively large portfolio of consumer loans, it may become necessary to increase our provision for loan losses in the event our losses on these loans increase, which would reduce our profits.

 

We believe that indirect automobile, recreational vehicle and manufactured home loans will provide growth opportunities in the future and we intend to continue to emphasize the purchases of these types of loans consistent with market conditions and risk management considerations.

 

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We use third-party vendors to originate most of our automobile, recreational vehicle and manufactured home loans and expect to use a third-party to originate a portion of our one-to four-family residential real estate loans. Some of these relationships are new to Generations Bank.

 

Since 2006, we have used a third-party vendor to underwrite, process and close most of our manufactured home loans. In 2019, we began purchasing manufactured home loans from a second vendor, and in 2016 and in 2020, we began utilizing third-party vendors to underwrite, process and close most of our automobile and recreational vehicle loans. We have used these companies to grow our loan portfolio and diversify our loan portfolio away from primarily from one-to four-family residential real estate loans collateralized by properties in our market area. At June 30, 2020, purchased automobile, recreational vehicle and manufactured home loans totaled $59.2 million, or 21.2% of our loan portfolio. Additionally, beginning in the 2020 we expect to use a third-party to originate one-to four-family residential real estate loans in an effort to grow this segment of our portfolio. Should we be unable to use these vendors in the future, our ability to acquire automobile, recreational vehicle, manufactured home or one-to four-family residential real estate loans that meet our guidelines may be disrupted. Moreover, because these loans are originated by third-parties which are not our employees, we assume the risks associated with unsatisfactory origination procedures, including compliance with federal, state and local laws. Finally, although we believe that we have procedures in place to review and assess the risks of any third-party vendor relationship, three of our existing relationships, and the relationship we expect to begin in the fourth quarter of 2020, have not been in existence for a sufficient period of time to demonstrate fully performance and indicate the potential risks in the loan portfolio.

 

We are in a slow growth market area, and adverse economic conditions, especially those affecting our market area, could adversely affect our financial condition and results of operations.

 

In recent years, we have added geographic diversity to our loan portfolio through an increase of consumer loans, much of which is collateralized by automobiles, recreational vehicles and manufactured homes outside of our market area. However, our success still largely depends primarily on the general economic conditions in our market area, which is the Finger Lakes region of New York consisting primarily of Monroe, Cayuga, Seneca, Ontario and Orleans counties, New York. Unlike larger banks that are more geographically diversified, we provide banking and financial services to customers primarily in this area. The local economic conditions in our market area, therefore, have a significant impact on our lending, the ability of the borrowers to repay their loans and the value of the collateral securing loans.

 

Our market area is largely rural and has experienced a population decline. It also has limited industrial development compared to more urban and suburban areas. Other than Monroe County which includes Rochester, New York and is more heavily populated, according to the United States Census Bureau, the total populations in July 2019 for Cayuga, Seneca, Ontario and Orleans counties, New York were approximately 76,000, 34,000, 110,000 and 40,000, respectively. Additionally, each of these counties, other than Ontario County (which increased by 1.6%) experienced a population decrease from 2010 through July 2019.

 

A deterioration in economic conditions could result in the following consequences, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations:

 

·demand for our products and services may decline;

 

·loan delinquencies, problem assets and foreclosures may increase;

 

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·collateral for loans, especially real estate, may decline in value, in turn reducing customers’ future borrowing power, and reducing the value of assets and collateral associated with existing loans; and

 

·the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us.

 

Moreover, a significant decline in general economic conditions caused by the Covid-19 pandemic, inflation, recession, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, unemployment or other factors beyond our control could further impact our local economy, which would negatively affect the financial results of our banking operations. In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of underlying collateral securing loans, which could negatively affect our financial performance.

 

The economic impact of the Covid-19 outbreak could adversely affect our financial condition and results of operations.

 

In March 2020, the World Health Organization declared Covid-19 a pandemic. The Covid-19 pandemic has caused significant economic dislocation in the United States as many state and local governments have ordered non-essential businesses to close and residents to shelter in place at home. This has resulted in an unprecedented slow-down in economic activity and a related increase in unemployment. Since the Covid-19 outbreak, millions of individuals have filed claims for unemployment, and bank stocks have significantly declined in value. In response to the Covid-19 outbreak, the Federal Reserve has reduced the benchmark fed funds rate to a target range of 0% to 0.25%, and the yields on 10 and 30-year treasury notes have declined to historic lows. Various state governments and federal agencies are requiring lenders to provide forbearance and other relief to borrowers (e.g., waiving late payment and other fees). The federal banking agencies have encouraged financial institutions to prudently work with affected borrowers, and recently passed legislation has provided relief from reporting loan classifications due to modifications related to the Covid-19 outbreak. Certain industries have been particularly hard-hit, including the travel and hospitality industry, the restaurant industry and the retail industry. Finally, the spread of Covid-19 has caused us to modify our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences. We have many employees working remotely and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners.

 

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the Covid-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened. As the result of the Covid-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

 

·demand for our products and services may decline, making it difficult to grow assets and income;

 

·if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

 

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·collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

 

·limitations may be placed on our ability to foreclose on properties during the pandemic;

 

·our allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income;

 

·the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;

 

·as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income;

 

·our cyber security risks are increased as the result of an increase in the number of employees working remotely;

 

·a worsening of business and economic conditions or in the financial markets could result in an impairment of certain intangible assets, such as goodwill;

 

·litigation, regulatory enforcement risk and reputation risk regarding our participation in the Paycheck Protection Program (“PPP”) and the risk that the SBA may not fund some or all PPP loan guaranties;

 

·the unanticipated loss or unavailability of key employees due to the outbreak, which could harm our ability to operate our business or execute our business strategy, especially as we may not be successful in finding and integrating suitable successors.

 

·we rely on third party vendors for certain services and the unavailability of a critical service due to the Covid-19 outbreak could have an adverse effect on us; and

 

·Federal Deposit Insurance Corporation premiums may increase if the agency experience additional resolution costs.

 

Moreover, our future success and profitability substantially depends on the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years. The unanticipated loss or unavailability of key employees due to the outbreak could harm our ability to operate our business or execute our business strategy. We may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability.

 

Any one or a combination of the factors identified above could negatively impact our business, financial condition and results of operations and prospects.

 

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Customary means to collect nonperforming assets may be prohibited or impractical during the Covid-19 pandemic, and there is a risk that collateral securing a nonperforming asset may deteriorate if we choose not to, or are unable to, foreclose on collateral on a timely basis.

 

Pursuant to an executive order of the New York Governor and additional legislation to protect residential renters and homeowners from foreclosure or eviction due to financial hardship related to the Covid-19 pandemic, we suspended all foreclosures and repossessions beginning in March 2020. Repossession forbearance was lifted in June 2020 but foreclosure forbearance was extended until September 2020. We may be subjected to additional extensions or future regulations or executive orders that restrict or limit our ability to take certain actions with respect to delinquent borrowers that we would otherwise take in the ordinary course, such as customary collection and foreclosure procedures. These law may prohibit landlords and lenders from initiating or completing evictions and foreclosures during the current state of emergency. The laws also may require lenders to provide forbearance to mortgage borrowers who submit a request affirming that they have experienced a financial impact from Covid-19. There is a risk that the collateral securing a nonaccrual loan may deteriorate if we choose not to, or are unable to, foreclose on the collateral on a timely basis during restrictions in place due to the Covid-19 pandemic.

 

As a result of the decline in cash flow that some of our borrowers have experienced as a result of Covid-19, some of those borrowers have been and may continue to seek payment deferments on their indebtedness and we may experience an increase in credit costs in 2020.

 

The effects on the economy from Covid-19 in our market area have significantly reduced the cash flow for some of our borrowers. As a consequence, some of those borrowers have sought payment deferments on their indebtedness.

 

In March 2020, we began communicating with business customers to ascertain whether the pandemic and economic shutdown had or was expected to have a significant adverse effect on their respective businesses. We also provided all loan customers an opportunity to defer payments for up to five months. A total of 234 customers with loan balances of $29.5 million at June 30, 2020 deferred loan payments. All of these loans return to their regular payments cycles by September 2020. When the loans come off deferment, the maturity will be extended such that the monthly payment remains the same, except for those loans with escrow. For loans with escrow, an escrow analysis was performed and the escrow portion of the payment was adjusted to make up any shortage. At June 30, 2020, 227 customers remain on the deferral program with a balance of $28.9 million. We are monitoring these loans and we have identified customers with loans totaling $10.4 million that we believe may experience significant adverse impact to their finances or related businesses due to the Covid-19 pandemic.

 

Our loan loss provision for the six months ended June 30, 2020 was $180,000, as compared to our loan loss provision of $360,000 and $175,000 for the years ended December 31, 2019 and 2018, respectively. The increase in our provision was driven primarily by our perception of the economic distress being experienced by many of our borrowers due to the Covid-19 recession.

 

Our nonperforming loans may increase significantly later in 2020 as loan modifications expire and the impact of current government stimulus programs wanes, and therefore we anticipate that our loan loss provision will be greater in the remainder of the year ending December 31, 2020, as compared to comparable periods in 2019, when our provision was relatively low by historical standards due to the positive economic conditions at that time.

 

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Our commercial real estate and multifamily loans carry greater credit risk than loans secured by one- to four-family, owner-occupied real estate loans.

 

At June 30, 2020, commercial real estate loans totaled $34.9 million, or 12.6% of our loan portfolio and multifamily loans totaled $5.2 million, or 1.9% of our loan portfolio. Commercial real estate and multifamily loans, which generally have larger principal balances than one- to four-family residential real estate loans, generally have greater credit risk than owner-occupied residential real estate loans. Repayment of commercial real estate and multifamily loans depends primarily on the income generated by the property being sufficient to cover operating expenses, property maintenance and debt service.

 

In addition, commercial real estate and multifamily loans, particularly those secured by non-owner occupied properties, expose us to greater risk of non-payment and loss than loans secured by owner occupied one- to four-family properties because repayment of such loans depend primarily on the tenant’s continuing ability to pay rent to the property owner, who is our borrower, or, if the property owner is unable to find a tenant, the property owner’s ability to repay the loan without the benefit of a rental income stream. Due to significant economic slowdown resulting from the Covid-19 pandemic, we believe that these repayment risks have increased in 2020 compared to our historical experiences in these portfolios. In addition, the physical condition of non-owner occupied properties is often below that of owner occupied properties due to lax property maintenance standards, which has a negative impact on the value of the collateral properties.

 

The Federal Open Market Committee’s reduction in the target range for the federal funds rate to between 0.0% and 0.25% in March 2020 to help mitigate the effects of the Covid-19 recession will likely have an adverse effect on our 2020 operating results.

 

Anticipating the Covid-19 recession, the Federal Open Market Committee (“FOMC”) of the Federal Reserve in March 2020 reduced the target range for the federal funds rate to between 0.0% and 0.25%, compared to the previous target of between 1.00% and 1.25%. The FOMC has provided guidance that it expects these historically low rates to continue through at least 2021.

 

Changes in interest rates can have a material effect on many areas of our business, including our net interest and net interest margin. When interest rates on our interest-earning assets decline at a faster pace than interest rates on our interest-bearing liabilities, our net interest income is adversely affected. Although we have increased and intend to continue to increase the purchase and origination of consumer loans in order to reduce the average maturities of our loans and increase yield, we expect that our net interest and net interest margin will remain low due to the current market interest rate environment. To the extent that our operating expenses increase, including additional expenses which we may incur as a result of outside policies imposed on financial institutions due to the Covid-19, our net interest would be further impacted and will make it more difficult for us to operate profitably.

 

To the extent we have sufficient net proceeds, we intend to invest up to $10.0 million of the net proceeds from the stock offering in Generations Bank and as a result, on an unconsolidated basis, Generations Bancorp may have very limited funds in the years immediately after the conversion to pay dividends or conduct share repurchases.

 

To the extent we have sufficient net proceeds, we intend to invest up to $10.0 million of the net proceeds from the offering into Generations Bank. Additionally, we intend to use portions of the net proceeds to fund a loan to our employee stock ownership plan, to repay holding company borrowings and subordinated debt notes as well as litigation costs and expenses. See, “How We Intend to Use the Proceeds from the Offering.” As a result of these planned uses of proceeds, following completion of the conversion, on an unconsolidated basis, we do not expect Generations Bancorp to have significant capital, and therefore, we do not intend to pay cash dividends on our common stock. Additionally, it is unlikely that we will have the capital available to engage in share repurchases. However, on an ongoing basis as capital management tools, we will review the propriety of the payment of cash dividends and/or share repurchases, and any future declaration and payment of cash dividends or share repurchase programs will be subject to, among other things, our then current and projected consolidated operating results, financial condition, tax considerations, future growth plans, general economic conditions, and other factors our board of directors deems relevant.

 

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A continuation of the historically low interest rate environment may adversely affect our net interest income and profitability.

 

In recent years the Federal Reserve Board’s policy has been to maintain interest rates at historically low levels through its targeted federal funds rate and the purchase of mortgage-backed securities. Most recently, in response to the disruption of global economic activity due to actions taken to mitigate the spread of Covid-19, on March 3, 2020, the Federal Open Market Committee (“FOMC”) reduced the target range for the federal funds rate by 50 basis points, to 1.00% to 1.25%, and on March 15, 2020, the FOMC further reduced the target range for the federal funds rate to 0.00% to 0.25%.

 

Our ability to reduce our interest expense is limited at current interest rate levels while the average yield on our interest-earning assets may continue to decrease, and our interest expense may be adversely affected if we access non-core funding sources or increase deposit rates to fund our operations.

 

The Covid-19 recession may have other adverse effects on our operating results for the year ending December 31, 2020 and possibly beyond.

 

Factors due to the Covid-19 pandemic and recession may have an adverse effect on our operating results, including:

 

·reduced fees as we waive certain fees for our customers impacted by the Covid-19 pandemic;

 

·possible constraints on liquidity and capital, due to supporting client activities or regulatory actions;

 

·potential losses in our investment securities portfolio due to volatility in the financial markets; and

 

·higher operating costs, increased cybersecurity risks and a potential loss of productivity while we work remotely and must address a higher level of loan modifications, distressed credit management and PPP loan originations.

 

In addition, because both the Covid-19 pandemic and the associated recession are unprecedented, it may be challenging for management to make certain judgments and estimates that are material to our consolidated financial statements while the Covid-19 pandemic continues, given the inherently uncertain operating environment.

 

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We may experience additional expense and reputational risk arising out of our origination of PPP loans if one or more companies, individuals or public officials allege that we acted unfairly in connection with PPP lending, including by choosing not to process certain PPP applications or in favoring our customers over other eligible PPP borrowers.

 

Through June 30, 2020, we originated 305 loans to PPP borrowers, representing in the aggregate $10.0 million of PPP loans. The vast majority of our PPP borrowers are existing commercial and small business borrowers, non-profit customers, retail banking customers and clients of Generations Agency, Inc.

 

As of the date of this prospectus, federal and state officials are investigating how participating PPP lenders process applications and whether certain PPP lenders may have inappropriately or unfairly prioritized certain customers to the detriment of other eligible borrowers. Similarly, there are pending lawsuits against other banks brought by eligible PPP borrowers alleging that various PPP lenders improperly prioritized existing customers when those lenders approved PPP loans. In addition, there are pending lawsuits against other banks alleging that various PPP lenders failed to pay required agency fees to third parties who allegedly assisted businesses with PPP loan applications. We are proud of our efforts to provide PPP funding to small businesses and non-profits in our community, but there can be no assurance that we will not be the target of government scrutiny or that private parties will not bring claims similar to those brought against other banks.

 

Changes in interest rates may have an adverse effect on our profitability.

 

Net interest income historically has been, and we expect that it will remain, a significant component of our total revenue. This is due to the fact that a high percentage of our assets and liabilities have been and will continue to be in the form of interest-bearing or interest-related instruments. Changes in interest rates can have a material effect on many areas of our business, including net interest income, deposit costs, and loan volume and delinquency. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Open Market Committee. Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and securities and the amount of interest we pay on deposits and borrowings, but such changes could also affect our ability to originate loans and obtain deposits and the fair value of our financial assets and liabilities. If the interest rates on our interest-bearing liabilities increase at a faster pace than the interest rates on our interest-earning assets, our net interest income may decrease and, with it, a decrease in our earnings may occur. Our net interest income and our earnings would be similarly affected if the interest rates on our interest-earning assets decreased at a faster pace than the interest rates on our interest-bearing liabilities.

 

The current historically low interest rate environment may impact our ability to generate attractive earnings through our lending and investment portfolios, and we are unable to control or predict with certainty changes in market interest rates. Global, national, regional and local economic conditions, the effects of a widespread outbreak of disease pandemics such as Covid-19, competitive pressures and the policies of regulatory authorities, including monetary policies of the Federal Reserve Board, affect interest income and interest expense. Although we have policies and procedures designed to manage the risks associated with changes in market interest rates, changes in interest rates still may have an adverse effect on our profitability.

 

We monitor interest rate risk through the use of a simulation model that estimates the net present value of cash flows from our assets, liabilities and off-balance sheet items, which is referred to as our net portfolio value, or NPV, under a range of assumed changes in market interest rates. At June 30, 2020, assuming an instantaneous 300 basis point increase in market interest rates, we estimate that our NPV would decline by 34.5%. For further discussion of how changes in market interest rates could impact us, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Management of Market Risk.”

 

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If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings could decrease.

 

We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. In determining the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience, and we evaluate economic conditions. If our assumptions or the results of our analyses are incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to our allowance. In addition, our emphasis on loan growth and on increasing our portfolios of automobile, recreational vehicle and manufactured home loans, as well as any future credit deterioration, could require us to increase our allowance for loan losses in the future. At June 30, 2020, our allowance for loan losses was 0.72% of total loans and 42.4% of nonperforming loans. Material additions to our allowance would materially decrease our net income.

 

The Financial Accounting Standards Board has delayed the effective date of the Current Expected Credit Loss, or CECL, standard. CECL will be effective for Generations Bancorp and Generations Bank on January 1, 2023. CECL will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for loan losses. This will change the current method of providing allowances for loan losses that are incurred or probable, which would likely require us to increase our allowance for loan losses, and to greatly increase the types of data we would need to collect and review to determine the appropriate level of the allowance for loan losses.

 

In addition, bank regulators periodically review our allowance for loan losses and, based on judgments different than management’s, we may determine to increase our provision for loan losses or recognize further loan charge-offs. Any increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities or otherwise may have a material adverse effect on our financial condition and results of operations.

 

A worsening of economic conditions could reduce demand for our products and services and/or increase our level of non-performing loans, which could adversely affect our financial condition and results of operations.

 

Unlike larger financial institutions that are more geographically diversified, our profitability depends primarily on the general economic conditions in our primary market area. In addition to local economic conditions, which could have a significant impact on ability of our borrowers to repay their loans and on the value of the collateral securing their loans, deterioration in general economic conditions could result in the following consequences, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations:

 

·demand for our products and services may decline;

 

·loan delinquencies, problem assets and foreclosures may increase;

 

·collateral for loans, especially real estate, may decline in value, in turn reducing customers’ future borrowing power, and reducing the value of assets and collateral associated with existing loans;

 

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·the value of our securities portfolio may decline; and

 

·the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us.

 

Moreover, a significant decline in general economic conditions, caused by inflation, recession, tariffs and international trade disputes, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, unemployment or other factors beyond our control could further impact these local economic conditions and could further negatively affect the financial results of our banking operations. In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of underlying collateral securing loans, which could negatively affect our financial performance.

 

Our cost of operations is high relative to our revenues.

 

Our noninterest expense totaled $6.0 million, $12.9 million and $12.3 million for six months ended June 30, 2020 and the years ended December 31, 2019 and 2018, respectively. We continue to analyze our expenses and seek to achieve efficiencies where available, however, our efficiency ratio remains high as compared to most of our peer institutions. Our efficiency ratio (the ratio of noninterest expense to the sum of net interest income and noninterest income) totaled 90.2%, 97.8% and 101.5% (representing a net loss for 2018) for the six months ended June 30, 2020 and the years ended December 31, 2019 and 2018, respectively.

 

Municipal deposits are price sensitive and could result in an increase in interest expense or funding fluctuations.

 

Since we established Generations Commercial Bank on January 2, 2019, we have relied on municipal deposits as a source of funds for our lending and investment activities. At June 30, 2020, $43.0 million, or 14.1% of our total deposits, consisted of municipal deposits from local government entities such as towns, cities, school districts and other municipalities, which are collateralized by letters of credit from the Federal Home Loan Bank and investment securities. Given our dependence on high-average balance municipal funds deposits as a source of funds, our inability to retain such funds could significantly and adversely affect our liquidity. If we are forced to pay higher rates on our municipal accounts to retain those funds, or if we are unable to retain such funds and we are forced to resort to other sources of funds for our lending and investment activities, the interest expense associated with these other funding sources may be higher than the rates we are currently paying on our municipal deposits, which would adversely affect our net income. Finally, in light of the current historically low interest rate environment, in October 2020 we may allow a significant amount of municipal deposits to roll off at maturity without bidding for these ongoing relationships. In the future it may be difficult to regain these deposit relationships if we wish to utilize them as a funding source.

 

Strong competition within our market area may limit our growth and profitability.

 

Competition in the banking and financial services industry is intense. In all of our market areas, we compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, brokerage and investment banking firms and unregulated or less regulated non-banking entities, operating locally and elsewhere. Many of these competitors are substantially larger than us and have substantially greater resources and higher lending limits than we have and offer certain services that we do not or cannot provide. In addition, some of our competitors offer loans with lower interest rates on more attractive terms than loans we offer. Competition also makes it increasingly difficult and costly to attract and retain qualified employees. We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. Our profitability depends upon our continued ability to successfully compete for business and qualified employees in our market areas. The greater resources and deposit and loan products offered by some of our competitors may limit our ability to increase our interest earning assets. For additional information see “Business of Generations Bank – Competition.”

 

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We face significant operational risks because of our reliance on technology. Our information technology systems may be subject to failure, interruption or security breaches.

 

Information technology systems are critical to our business. Our business requires us to collect, process, transmit and store significant amounts of confidential information regarding our customers, employees and our own business, operations, plans and business strategies. We use various technology systems to manage our customer relationships, general ledger, securities investments, deposits, and loans. Our computer systems, data management and internal processes, as well as those of third parties, are integral to our performance. Our operational risks include the risk of malfeasance by employees or persons outside our company, errors relating to transaction processing and technology, systems failures or interruptions, breaches of our internal control systems and compliance requirements, and business continuation and disaster recovery. There have been increasing efforts by third parties to breach data security at financial institutions. Such attacks include computer viruses, malicious or destructive code, phishing attacks, denial of service or information or other security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information, damages to systems, or other material disruptions to network access or business operations. Although we take protective measures and have not experienced any of the data breaches described above, the security of our computer systems, software, and networks may be vulnerable to breaches, unauthorized access, misuse, computer viruses, or other malicious code and cyber-attacks that could have an impact on information security. Because the techniques used to cause security breaches change frequently, we may be unable to proactively address these techniques or to implement adequate preventative measures.

 

In the event of a breakdown in our internal control systems, improper operation of systems or improper employee actions, or a breach of our security systems, including if confidential or proprietary information were to be mishandled, misused or lost, we could suffer financial loss, loss of customers and damage to our reputation, and face regulatory action or civil litigation. Any of these events could have a material adverse effect on our financial condition and results of operations. Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits.

 

In addition, we outsource a majority of our data processing requirements to certain third-party providers. Accordingly, our operations are exposed to risk that these vendors will not perform in accordance with the contracted arrangements under service level agreements, or we also could be adversely affected if such an agreement is not renewed by the third party vendor or is renewed on terms less favorable to us. If our third-party providers encounter difficulties, or if we have difficulty communicating with those service providers, our ability to adequately process and account for transactions could be affected, and our business operations could be adversely affected, which could have a material adverse effect on our financial condition and results of operations. Threats to information security also exist in the processing of customer information through various other vendors and their personnel. To our knowledge, the services and programs provided to us by third parties have not suffered any security breaches. However, the existence of cyber-attacks or security breaches at third parties with access to our data, such as vendors, may not be disclosed to us in a timely manner.

 

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Changes in management’s estimates and assumptions may have a material impact on our consolidated financial statements and our financial condition or operating results.

 

When preparing our consolidated financial statements, our management is and will be required under applicable rules and regulations to make estimates and assumptions as of a specified date. These estimates and assumptions are based on management’s best estimates and experience as of that date and are subject to substantial risk and uncertainty. Materially different results may occur as circumstances change and additional information becomes known. Areas requiring significant estimates and assumptions by management include our evaluation of the adequacy of our allowance for loan losses, our valuation of investment securities, and our determination of fair value measurements.

 

We depend on our management team to implement our business strategy and execute successful operations and we could be harmed by the loss of their services.

 

We depend upon the services of the members of our senior management team who direct our strategy and operations. Our executive officers and lending personnel possess expertise in our markets and key business relationships, and have been integral in the restructuring of our operations, including the implementation of a more aggressive sales culture within our institution. Any one of them could be difficult to replace. Our loss of these persons, or our inability to hire additional qualified personnel, could impact our ability to implement our business strategy and could have a material adverse effect on our results of operations and our ability to compete in our markets. See “Management.”

 

We are a community bank and our ability to maintain our reputation is critical to the success of our business. The failure to do so may materially adversely affect our performance.

 

We are a community bank, and our reputation is one of the most valuable components of our business. A key component of our business strategy is to rely on our reputation for customer service and knowledge of local markets to expand our presence by capturing new business opportunities from existing and prospective customers in our market area and contiguous areas. Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, cybersecurity incidents and questionable or fraudulent activities of our customers. Negative publicity regarding our business, employees, or customers, with or without merit, may result in the loss of customers and employees, costly litigation and increased governmental regulation, all of which could adversely affect our business and operating results.

 

Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and/or increase our costs of operations.

 

Generations Bank is subject to extensive regulation, supervision and examination by the Office of the Comptroller of the Currency, Generations Commercial Bank is subject to extensive regulation, supervision and examination by the New York State Department of Financial Institutions and the FDIC, and The Seneca Falls Savings Bank, MHC and Seneca-Cayuga Bancorp are, and Generations Bancorp will be, subject to extensive regulation, supervision and examination by the Federal Reserve Board. Such regulation and supervision governs the activities in which an institution and its holding company may engage and are intended primarily for the protection of the federal deposit insurance fund and the depositors of Generations Bank, rather than for our stockholders. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses. These regulations, along with existing tax, accounting, securities, insurance and monetary laws, rules, standards, policies, and interpretations, control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations. Further, changes in accounting standards can be both difficult to predict and involve judgment and discretion in their interpretation by us and our independent accounting firm. These changes could materially impact, potentially even retroactively, how we report our financial condition and results of operations.

 

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Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.

 

The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are suspected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions, including restrictions on pursuing acquisitions or establishing new branches. The policies and procedures we have adopted that are designed to assist in compliance with these laws and regulations may not be effective in preventing violations of these laws and regulations. Furthermore, these rules and regulations continue to evolve and expand. We have not been subject to fines or other penalties, or have suffered business or reputational harm, as a result of money laundering activities in the past.

 

We are subject to stringent capital requirements, which may adversely impact our return on equity, require us to raise additional capital, or limit our ability to pay dividends or repurchase shares.

 

Federal regulations establish minimum capital requirements for insured depository institutions, including minimum risk-based capital and leverage ratios, and defines “capital” for calculating these ratios. The minimum capital requirements are: (i) a common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 to risk-based assets capital ratio of 6%; (iii) a total capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4%. The regulations also establish a “capital conservation buffer” of 2.5%, and the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0%; (ii) a Tier 1 to risk-based assets capital ratio of 8.5%; and (iii) a total capital ratio of 10.5%. An institution will be subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if its capital level falls below the capital conservation buffer amount.

 

The application of these capital requirements could, among other things, result in lower returns on equity, and result in regulatory actions if we are unable to comply with such requirements. Specifically, following the completion of the offering, Generations Bank’s ability to pay dividends to Generations Bancorp will be limited if it does not have the capital conservation buffer required by the new capital rules, which may further limit Generations Bancorp’s ability to pay dividends to its stockholders. See “Supervision and Regulation – Federal Banking Regulation – Capital Requirements.”

 

We are subject to environmental liability risk associated with lending activities or properties we own.

 

A significant portion of our loan portfolio is secured by real estate, and we could become subject to environmental liabilities with respect to one or more of these properties, or with respect to properties that we own in operating our business. During the ordinary course of business, we may foreclose on and take title to properties securing defaulted loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous conditions or toxic substances are found on these properties, we may be liable for remediation costs, as well as for personal injury and property damage, civil fines and criminal penalties regardless of when the hazardous conditions or toxic substances first affected any particular property. Environmental laws may require us to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. Our policies, which require us to perform an environmental review before initiating any foreclosure action on non-residential real property, may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on us.

 

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We are an emerging growth company within the meaning of the Securities Act, and if we decide to take advantage of certain exemptions from various reporting requirements applicable to emerging growth companies, our common stock could be less attractive to investors.

 

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933 (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). We are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, reduced disclosure about our executive compensation and omission of compensation discussion and analysis, and an exemption from the requirement of holding a non-binding advisory vote on executive compensation. In addition, we will not be subject to certain requirements of Section 404 of the Sarbanes-Oxley Act of 2002, including the additional level of review of our internal control over financial reporting as may occur when outside auditors attest as to our internal control over financial reporting. As a result, our stockholders may not have access to certain information they may deem important. Taking advantage of any of these exemptions may adversely affect the value and trading price of our common stock.

 

We could remain an “emerging growth company” for up to five years, or until the earliest of (a) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (b) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (c) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period.

 

Risks Related to the Offering

 

The future price of our shares of common stock may be less than the $10.00 purchase price per share in the offering.

 

If you purchase shares of common stock in the offering, you may not be able to sell them later at or above the $10.00 purchase price. In many cases, shares of common stock issued by newly converted savings institutions or mutual holding companies have traded below the initial offering price. The aggregate purchase price of the shares of common stock sold in the offering will be based on an independent appraisal. The independent appraisal is not intended, and should not be construed, as a recommendation of any kind as to the advisability of purchasing shares of common stock. The independent appraisal is based on certain estimates, assumptions and projections, all of which are subject to change from time to time. After the shares begin trading, the trading price of our common stock will be determined by the marketplace, and may be influenced by many factors, including prevailing interest rates, the overall performance of the economy, changes in federal tax laws, new regulations, investor perceptions of Generations Bancorp and the outlook for the financial services industry in general. Price fluctuations in our common stock may be unrelated to our operating performance.

 

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Our failure to effectively deploy the net proceeds may have an adverse effect on our financial performance.

 

To the extent we have sufficient net proceeds, we intend to invest up to $10.0 million of the net proceeds from the offering in Generations Bank. Additionally, we intend to use portions of the net proceeds to fund a loan to our employee stock ownership plan, to repay holding company borrowings and subordinated debt notes as well as litigation costs and expenses. As a result of these planned uses of proceeds, following completion of the conversion, on an unconsolidated basis, we do not expect Generations Bancorp to have significant capital. Generations Bank may use the net proceeds it receives to fund new loans, expand its retail banking franchise by establishing or acquiring new branches or by acquiring other financial institutions or other financial services companies, or for other general corporate purposes. However, except for the funding the loan to the employee stock ownership plan, the repayment of holding company borrowings and subordinated debt and the repayment of litigation fees and expenses, on a consolidated basis, we have not allocated specific amounts of the net proceeds for any of these purposes, and we will have broad discretion in determining the amount of the net proceeds we apply to different uses and when we apply or reinvest such proceeds. We have not established a timetable for investing the net proceeds, and we cannot predict how long we will require to invest the net proceeds. Our failure to reinvest these funds effectively would reduce our profitability and may adversely affect the value of our common stock.

 

We do not intend to pay dividends on our common stock and we might not have the requisite amount of capital to engage in share repurchases.

 

Following completion of the conversion, we do not intend to pay dividends on our common stock. However, any future declaration and payment of cash dividends will be subject to, among other things, our then current and projected consolidated operating results, financial condition, tax considerations, future growth plans, general economic conditions, and other factors our board of directors deems relevant. Additionally, depending on the amount of net proceeds we are able to retain at the holding company as well as our capital resources and needs, we may not have the requisite capital to engage in share repurchases. However, on an ongoing basis, we will assess the propriety of a share repurchase program in consideration of our then current and projected consolidated operating results, financial condition, tax considerations, future growth plans, general economic conditions, and other factors our board of directors deems relevant.

 

Our return on equity will be low following the stock offering. This could negatively affect the trading price of our shares of common stock.

 

Net income divided by average stockholders’ equity, known as “return on equity,” is a ratio many investors use to compare the performance of financial institutions. Our return on equity will be low until we are able to leverage the additional capital we receive from the stock offering. Our return on equity also will be negatively affected by added expenses associated with our employee stock ownership plan and the stock-based benefit plans we intend to adopt. Until we can increase our net interest income and noninterest income and leverage the capital raised in the stock offering, we expect our return on equity to be low, which may reduce the market price of our shares of common stock.

 

Our stock-based benefit plans will increase our expenses and reduce our income.

 

We intend to adopt one or more new stock-based benefit plans after the conversion, subject to stockholder approval, which will increase our annual compensation and benefit expenses related to the stock options and stock awards granted to participants under the new stock-based benefit plans. The actual amount of these new stock-related compensation and benefit expenses will depend on the number of options and stock awards granted under the plans, the fair market value of our stock or options on the date of grant, the vesting period, and other factors which we cannot predict at this time. If we adopt stock-based benefit plans within 12 months following the conversion, the shares of common stock reserved for issuance pursuant to awards of restricted stock and grants of options under such plans would be limited to 4% and 10%, respectively, of the total shares of our common stock sold in the offering. If we adopt stock-based benefit plans more than 12 months after the completion of the conversion, we may award restricted shares of common stock or grant options in excess of these amounts, which would further increase costs.

 

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In addition, we will recognize expense for our employee stock ownership plan when shares are committed to be released to participants’ accounts, and we will recognize expense for restricted stock awards and stock options over the vesting period of awards made to recipients. The expense in the first year following the offering for our employee stock ownership plan and for our new stock-based benefit plans, assuming such plans had been implemented at the beginning of the year, is estimated to be approximately $212,000 ($167,000 after tax) at the maximum of the offering range as set forth in the pro forma financial information under “Pro Forma Data,” assuming the $10.00 per share purchase price as fair market value. Actual expenses, however, may be higher or lower, depending on the price of our common stock. For further discussion of our proposed stock-based plans, see “Management – Benefits to be Considered Following Completion of the Conversion.”

 

The implementation of stock-based benefit plans may dilute your ownership interest. Historically, stockholders have approved these stock-based benefit plans.

 

We intend to adopt one or more new stock-based benefit plans following the stock offering. These plans may be funded either through open market purchases of our common stock or from the issuance of authorized but unissued shares of common stock. Our ability to repurchase shares of our common stock to fund these plans will be subject to many factors, including applicable regulatory restrictions on stock repurchases, the availability of stock in the market, the trading price of our stock, our capital levels, alternative uses for our capital and our financial performance. Depending on the amount of net proceeds we are able to retain at the holding company as well as our capital resources and needs, Generations Bancorp may not have the requisite capital to engage in share repurchases. If we are not able to fund the new stock-based benefit plans through open market purchases, stockholders would experience a 9.09% dilution in ownership interest if newly issued shares of our common stock are used to fund stock options in an amount equal to 10% of the shares sold in the offering, and all such stock options are exercised, and a 3.85% dilution in ownership interest if newly issued shares of our common stock are used to fund shares of restricted common stock in an amount equal to 4% of the shares sold in the offering. Such dilution would also reduce earnings per share. If we adopt the plans more than 12 months following the conversion, new stock-based benefit plans would not be subject to these limitations and stockholders could experience greater dilution.

 

Although the implementation of new stock-based benefit plans would be subject to stockholder approval, historically, the overwhelming majority of stock-based benefit plans adopted by savings institutions and their holding companies following mutual-to-stock conversions have been approved by stockholders.

 

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We have not determined when we will adopt one or more new stock-based benefit plans. Stock-based benefit plans adopted more than 12 months following the completion of the conversion may exceed regulatory restrictions on the size of stock-based benefit plans adopted within 12 months, which would further increase our costs.

 

If we adopt stock-based benefit plans more than 12 months following the completion of the conversion, then grants of shares of common stock or stock options under our proposed stock-based benefit plans may exceed 4% and 10%, respectively, of shares of common stock sold in the stock offering. Stock-based benefit plans that provide for awards in excess of these amounts would increase our costs beyond the amounts estimated in “ − Our stock-based benefit plans will increase our expenses and reduce our income.” Stock-based benefit plans that provide for awards in excess of these amounts could also result in dilution to stockholders in excess of that described in “ − The implementation of stock-based benefit plans may dilute your ownership interest. Historically, stockholders have approved these stock-based benefit plans.” Although the implementation of stock-based benefit plans would be subject to stockholder approval, the timing of the implementation of such plans will be at the discretion of our board of directors.

 

Various factors may make takeover attempts more difficult to achieve.

 

Certain provisions of our articles of incorporation and bylaws and federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire control of Generations Bancorp without our board of directors’ approval. Under regulations applicable to the conversion, for a period of three years following completion of the conversion, no person may offer to acquire or acquire beneficial ownership of more than 10% of our common stock without prior approval of the Federal Reserve Board. Under federal law, subject to certain exemptions, a person, entity or group must notify the Federal Reserve Board and receive the Federal Reserve Board’s non-objection before acquiring control of a savings and loan holding company. There also are provisions in our articles of incorporation and bylaws that we may use to delay or block a takeover attempt, including a provision that prohibits any person from voting more than 10% of our outstanding shares of common stock. Generations Bank’s charter will contain a similar restriction on acquisitions of 10% or more of its common stock, directly or indirectly, for five years following the conversion. Furthermore, shares of restricted stock and stock options that we may grant to employees and directors, stock ownership by our management and directors and other factors may make it more difficult for companies or persons to acquire control of Generations Bancorp without the consent of our board of directors. Taken as a whole, these statutory or regulatory provisions and provisions in our articles of incorporation and bylaws could result in our being less attractive to a potential acquirer and therefore could adversely affect the market price of our common stock. For additional information, see “Restrictions on Acquisition of Generations Bancorp” and “Management − Benefits to be Considered Following Completion of the Conversion.”

 

Our articles of incorporation provide that, subject to limited exception, state and federal courts in the State of Maryland are the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, and other employees.

 

The Articles of Incorporation of Generations Bancorp provide that, unless Generations Bancorp consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of Generations Bancorp, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of Generations Bancorp to Generations Bancorp or Generations Bancorp’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Maryland General Corporation Law, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be a state or federal court located within the State of Maryland, in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants. This exclusive forum provision does not apply to claims arising under the federal securities laws. This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum it finds favorable for disputes with Generations Bancorp and its directors, officers, and other employees or may cause a stockholder to incur additional expense by having to bring a claim in a judicial forum that is distant from where the stockholder resides, or both. In addition, if a court were to find this exclusive forum provision to be inapplicable or unenforceable in a particular action, we may incur additional costs associated with resolving the action in another jurisdiction, which could have a material adverse effect on our financial condition and results of operations.

 

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There may be a limited trading market in our shares of common stock, which would hinder your ability to sell our common stock and may lower the market price of our common stock.

 

Before the conversion and offering, transactions in shares of Seneca-Cayuga Bancorp common stock have been quoted on the OTC Pink Marketplace operated by OTC Markets Group Inc., but the shares have not been actively traded. We have applied to list the shares of Generations Bancorp common stock on the Nasdaq Capital Market following the conversion and offering. In order to list on the Nasdaq Capital Market, we must have at least three broker-dealers who will make a market in our common stock and at least 300 round-lot holders. We cannot assure you that we will satisfy these requirements. KBW has advised us that it intends to make a market in our common stock following the offering, but is under no obligation to do so.  The development of a public market having the desirable characteristics of depth, liquidity and orderliness depends on the existence of willing buyers and sellers, the presence of which is not within our control or that of any market maker. The number of active buyers and sellers of our common stock at any particular time may be limited, which may have an adverse effect on the price at which our common stock can be sold.  Persons purchasing the common stock may not be able to sell their shares at or above the $10.00 price per share in the offering. Purchasers of our common stock should recognize that there are risks involved in their investment and that there may be a limited trading market in the common stock.

 

You may not revoke your decision to purchase Generations Bancorp common stock in the subscription or community offerings after you send us your order.

 

Funds submitted or automatic withdrawals authorized in connection with the purchase of shares of common stock in the subscription and community offerings will be held by us until the completion or termination of the conversion and offering, including any extension of the expiration date and consummation of a syndicated community offering. Because completion of the conversion and offering will be subject to regulatory approvals and an update of the independent appraisal prepared by Keller & Company, Inc., among other factors, there may be one or more delays in completing the conversion and offering. Orders submitted in the subscription and community offerings are irrevocable, and purchasers will have no access to their funds unless the offering is terminated, or extended beyond [extension date], or the number of shares to be sold in the offering is increased to more than 1,727,875 shares or decreased to fewer than 1,277,125 shares.

 

Our stock value may be negatively affected by applicable regulations that restrict stock repurchases.

 

Applicable regulations generally restrict us from repurchasing our shares of common stock during the first year following the stock offering. Stock repurchases are a capital management tool that can enhance the value of a company’s stock, and our inability to repurchase our shares of common stock during the first year following the stock offering may negatively affect our stock price. Additionally, depending on the amount of net proceeds we are able to retain at the holding company as well as our capital resources and needs, Generations Bancorp may not have the requisite capital to engage in share repurchases. Finally, any share repurchase will require the non-objection of the Federal Reserve Board which, in the current uncertain economic environment resulting from the Covid-19 pandemic, has provided guidance that it may not provide its non-objection to share repurchases.

 

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The distribution of subscription rights could have adverse income tax consequences.

 

If the subscription rights granted in connection with the stock offering are deemed to have an ascertainable value, receipt of such rights may be taxable in an amount equal to such value. Whether subscription rights are considered to have ascertainable value is an inherently factual determination. We have received an opinion of counsel, Luse Gorman, PC, that it is more likely than not that such rights have no value; however, such opinion is not binding on the Internal Revenue Service.

 

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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

 

The summary information presented below at each date or for each of the periods presented is derived in part from the consolidated financial statements of Seneca-Cayuga Bancorp. The information at and for the years ended December 31, 2019 and 2018 was derived from the audited consolidated financial statements of Seneca-Cayuga Bancorp included elsewhere in this prospectus. The information at and for the years ended December 31, 2017, 2016 and 2015 was derived in part from the audited consolidated financial statements of Seneca-Cayuga Bancorp that are not included in this prospectus. The information at June 30, 2020 and for the six months ended June 30, 2020 and 2019 is unaudited and 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. Such adjustments are the only adjustments included in the interim data. The results of operations for the six months ended June 30, 2020 are not necessarily indicative of the results of operations for the entire year or any other interim period. The following information is only a summary, and should be read in conjunction with the consolidated financial statements and notes thereto of Seneca-Cayuga Bancorp beginning on page F-1 of this prospectus.

 

   At June 30,   At December 31, 
   2020   2019   2018   2017   2016   2015 
   (In thousands) 
Selected Financial Condition Data:                              
                               
Total assets   $372,320   $347,549   $318,162   $290,512   $272,684   $281,804 
Cash and cash equivalents    13,531    13,448    9,135    6,276    5,253    9,028 
Available-for-sale securities    32,556    30,627    11,726    24,814    20,772    30,573 
Securities held to maturity    1,819    2,078    2,764    4,530    5,447    6,604 
Equity securities    1,081    2,579    10,902             
Loans, net    283,451    259,620    244,100    219,238    204,236    201,613 
Premises and equipment, net    17,187    17,588    18,489    17,917    18,856    18,006 
Bank-owned life insurance    6,960    6,893    6,762    6,635    6,506    6,365 
Pension plan asset    8,256    7,605    6,362    4,800    4,606    1,968 
Federal Home Loan Bank stock, at cost    2,271    2,267    2,087    2,554    3,018    3,479 
Accrued interest receivable    1,547    1,215    1,046    1,127    881    801 
Goodwill and intangible assets, net    1,673    1,705    1,760    796    797    327 
Other assets    1,963    1,854    2,979    1,687    2,138    2,308 
Foreclosed real estate and repossessed assets    25    70    50    138    174    732 
Total liabilities    342,982    319,318    290,793    264,740    247,806    252,477 
Deposits    304,649    283,338    260,443    225,680    200,297    197,709 
Borrowings    32,603    31,448    25,569    34,780    42,667    50,492 
Holding company borrowings and subordinated debt    735    735    735    735    735    735 
Other liabilities    4,995    3,797    4,046    3,545    4,107    3,541 
Total equity    29,338    28,231    27,369    25,772    24,878    29,327 

 

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For the Six Months Ended

June 30,

   For the Years Ended December 31, 
   2020   2019   2019   2018   2017   2016   2015 
   (In thousands) 
Selected Data:                                   
                                    
Interest and dividend income   $6,665   $6,267   $12,768   $11,614   $11,465   $10,931   $11,824 
Interest expense    1,581    1,510    3,167    2,628    2,375    2,374    2,469 
Net interest income    5,084    4,757    9,601    8,986    9,090    8,557    9,355 
Provision for loan losses    180    180    360    175    420    2,315    950 
Net interest income after provision for loan losses   4,904    4,577    9,241    8,811    8,670    6,242    8,405 
Noninterest income    1,514    1,735    3,548    3,114    2,712    2,727    3,268 
Noninterest expense    5,951    6,401    12,857    12,284    10,667    10,921    10,136 
Income (expense) before income tax provision (credit)   467    (89)   (68)   (359)   715    (1,952)   1,537 
Provision (credit) for income tax    (224)       (155)   (146)       (756)   445 
Net income (loss)   $691   $(89)  $87   $(213)  $715   $(1,196)  $1,092 

 

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   At or For the Six Months Ended
June 30,
   At or For the Years Ended December 31, 
   2020   2019   2019   2018   2017   2016   2015 
Selected Financial Ratios and Other Data:                                   
                                    
Performance Ratios: (1)                                   
Return on average assets    0.39%   (0.06)%   0.03%   (0.07)%   0.25%   (0.43)%   0.38%
Return on average equity    4.84%   (0.64)%   0.32%   (0.81)%   2.79%   (4.60)%   3.57%
Interest rate spread (2)    3.30%   3.52%   3.46%   3.59%   3.71%   3.57%   3.77%
Net interest margin (3)    3.25%   3.47%   3.40%   3.54%   3.67%   3.54%   3.76%
Efficiency ratio (4)    90.19%   98.60%   97.78%   101.52%   90.38%   96.78%   80.30%
Non-interest expense to average total assets    3.34%   4.03%   3.97%   4.20%   3.75%   3.94%   3.57%
Average interest-earning assets to average
interest-bearing liabilities
   96.33%   95.86%   96.14%   95.73%   95.82%   119.77%   122.19%
Average equity to average total assets    8.10%   8.71%   8.51%   9.00%   9.00%   9.40%   10.79%
                                    
Asset Quality Ratios:                                   
Non-performing assets to total assets    1.27%   1.27%   1.80%   0.95%   1.48%   1.59%   1.62%
Non-performing loans to total loans    1.70%   1.70%   2.40%   1.22%   1.91%   2.04%   1.91%
Allowance for loan losses to non-performing loans    42.40%   33.97%   26.90%   52.28%   59.53%   75.78%   57.88%
Allowance for loan losses to total loans    0.72%   0.68%   0.65%   0.64%   1.14%   1.54%   1.11%
                                    
Capital Ratios:                                   
Common equity Tier 1 capital to risk-weighted assets    11.39%   11.75%   11.23%   10.94%   12.42%   12.35%   12.43%
Total capital (to risk-weighted assets)    13.09%   13.55%   12.82%   12.57%   13.57%   13.60%   13.47%
Tier 1 capital (to risk-weighted assets)    12.28%   12.82%   12.13%   11.94%   12.42%   12.35%   12.43%
Tier 1 capital (to total assets)    8.30%   9.34%   8.37%   9.08%   9.28%   9.44%   9.40%
                                    
Other Data:                                   
Number of full-service offices    11    11    12    12    10    10    10 
Number of full-time equivalent employees    102    103    104    119    102    98    95 

 

 

(1)Annualized for the six-month periods ended June 30, 2020 and 2019.
(2)Represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities.
(3)Represents net interest income as a percent of average interest-earning assets.
(4)Represents noninterest expense divided by the sum of net interest income and noninterest income.

 

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FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “will,” “would,” “should,” “could” or “may,” 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 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 and both residential and commercial real estate market conditions;

 

·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 other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. See “Risk Factors” beginning on page 18. Except as required by applicable law or regulation, we do not undertake, and we specifically disclaim any obligation, to release publicly the results of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

 

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HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING

 

Although we cannot determine what the actual net proceeds from the sale of the shares of common stock in the offering will be until the offering is completed, we anticipate that the net proceeds will be between $11.5 million and $16.0 million.

 

We intend to use the net proceeds as follows:

 

   Based Upon the Sale at $10.00 Per Share of: 
   1,277,125 Shares   1,502,500 Shares   1,727,875 Shares 
   Amount   Percent of
Net
Proceeds
   Amount   Percent of
Net
Proceeds
   Amount   Percent of
Net
Proceeds
 
   (Dollars in thousands) 
Gross offering proceeds   $12,771    111.33%  $15,025    109.47%  $17,279    108.14%
Less: offering expenses    (1,300)   (11.33)%   (1,300)   (9.47)%   (1,300)   (8.14)%
Net offering proceeds   $11,471    100.0%  $13,725    100.0%  $15,979    100.0%
                               
Distribution of net proceeds:                              
To Generations Bank   $(9,000)   (78.46)%  $(10,000)   (72.86)%  $(10,000)   (62.58)%
To repay holding company borrowings and subordinated debt    (1,235)   (10.77)%   (1,235)   (9.00)%   (1,235)   (7.73)%
To repay litigation costs and expenses (1)    (119)   (1.03)%   (119)   (0.86)%   (119)   (0.74)%
To fund loan to employee stock ownership plan   $(1,022)   (8.91)%  $(1,202)   (8.76)%  $(1,382)   (8.65)%
Retained by Generations Bancorp   $95    0.83%  $1,169    8.52%  $3,243    20.30%

 

 

(1)Reimbursement of litigation fees and expenses to Stilwell Group pursuant to a Settlement Agreement dated May 4, 2020.

 

Payments for shares of common stock made through withdrawals from existing deposit accounts will not result in the receipt of new funds for investment but will reduce Generations Bank’s or Generation Commercial Bank’s deposits. The net proceeds may vary because total expenses relating to the offering may be more or less than our estimates. For example, our expenses would increase if all shares were not sold in the subscription and community offerings and a portion of the shares were sold in a syndicated community offering.

 

Depending on the amount of net proceeds from the offering, Generations Bancorp may retain a very limited amount funds, and therefore, we do not intend to pay cash dividends to shareholders. Additionally, depending on the amount of net proceeds we retain at the holding company level as well as our capital resources and needs, we may not have the requisite capital to engage in share repurchases. However, subject to funds available, Generations Bancorp may use the proceeds it retains from the offering:

 

·to invest in securities;

 

·to repurchase shares of its common stock;

 

·to finance the potential acquisition of financial institutions or financial services companies, although we do not currently have any agreements or understandings regarding any specific acquisition transaction;

 

·to pay cash dividends to stockholders; and

 

·for other general corporate purposes.

 

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See “Our Dividend Policy” for a discussion of our expected dividend policy following the completion of the conversion. Under current federal regulations, we may not repurchase shares of our common stock during the first year following the completion of the conversion, except when extraordinary circumstances exist and with prior regulatory approval, or except to fund the granting of restricted stock awards (which would require notification to the Federal Reserve Board) or tax-qualified employee stock benefit plans. See “Risk Factors – Risks Related to Our Business – To the extent we have sufficient net proceeds, we intend to invest up to $10.0 million of the net proceeds from the stock offering in Generations Bank and as a result, on an unconsolidated basis, Generations Bancorp may have very limited funds in the years immediately after the conversion to pay dividends or conduct share repurchases.”

 

Generations Bank may use the net proceeds it receives from the offering:

 

·to fund new loans;

 

·to enhance existing products and services, hire additional employees and support growth and the development of new products and services;

 

·to expand its banking franchise by establishing or acquiring new branches or by acquiring other financial institutions or other financial services companies as opportunities arise, although we do not currently have any understandings or agreements to acquire a financial institution or other entity;

 

·to invest in securities; and

 

·for other general corporate purposes.

 

Initially, a substantial portion of the net proceeds will be invested in short-term investments, investment-grade debt obligations and mortgage-backed securities. We have not determined specific amounts of the net proceeds that would be used for the purposes described above. The use of the proceeds outlined above may change based on many factors, including, but not limited to, changes in interest rates, equity markets, laws and regulations affecting the financial services industry, the attractiveness of potential acquisitions to expand our operations, and overall market conditions.

 

We expect our return on equity to be low until we are able to reinvest effectively the additional capital raised in the offering. Until we can increase our net interest income and noninterest income, we expect our return on equity to be below the industry average, which may negatively affect the value of our common stock. See “Risk Factors – Risks Related to the Offering – Our failure to effectively deploy the net proceeds may have an adverse effect on our financial performance.”

 

OUR DIVIDEND POLICY

 

We do not intend to pay dividends following completion of the offering. However, our board of directors will have the authority to declare dividends on our shares of common stock, subject to statutory and regulatory requirements. In determining whether to pay a cash dividend and the amount of such cash dividend, the board of directors would take into account a number of factors, including capital requirements, our financial condition and results of operations, other uses of funds for the long-term value of stockholders, tax considerations, statutory and regulatory limitations and general economic conditions. Special cash dividends, stock dividends or returns of capital, to the extent permitted by regulations and policies of the Federal Reserve Board and the OCC, may be paid in addition to, or in lieu of, regular cash dividends.

 

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We will not be permitted to pay dividends on our common stock if our stockholders’ equity would be reduced below the amount of the liquidation account we establish in connection with the conversion. The source of dividends will depend on the net proceeds we retain and earnings thereon, and dividends we receive from Generations Bank. In addition, we will be subject to state law limitations and federal bank regulatory policy on the payment of dividends. Maryland law generally limits dividends if the corporation would not be able to pay its debts in the usual course of business after giving effect to the dividend or if the corporation’s total assets would be less than the corporation’s total liabilities plus the amount needed to satisfy the preferential rights upon dissolution of stockholders whose preferential rights on dissolution are superior to those receiving the distribution.

 

After the completion of the conversion, Generations Bank will not be permitted to pay dividends on its capital stock owned by Generations Bancorp, its sole stockholder, if Generations Bank’s stockholder’s equity would be reduced below the amount of the liquidation account established in connection with the conversion. In addition, Generations Bank will not be permitted to make a capital distribution if, after making such distribution, it would be undercapitalized. Generations Bank must file an application with the Federal Reserve Board for approval of a capital distribution if the total capital distributions for the applicable calendar year exceed the sum of its net income for that year to date plus its retained net income for the preceding two years, or it would not be at least adequately capitalized following the distribution.

 

Any payment of dividends by Generations Bank to Generations Bancorp that would be deemed to be drawn from Generations Bank’s bad debt reserves established before 1988, if any, would require a payment of taxes at the then-current tax rate by Generations Bank on the amount of earnings deemed to be removed from the pre-1988 bad debt reserves for such distribution. Generations Bank does not intend to make any distribution that would create such a federal tax liability. See “The Conversion and Offering – Liquidation Rights.” For further information concerning additional federal law and regulations regarding the ability of Generations Bank to make capital distributions, including the payment of dividends to Generations Bancorp, see “Taxation – Federal Taxation.”

 

We intend to file a consolidated federal tax return with Generations Bank. Accordingly, it is anticipated that any cash distributions made by us to our stockholders would be treated as cash dividends and not as a non-taxable return of capital for federal tax purposes. Additionally, during the three-year period following the conversion, we will not be permitted to make any capital distribution to stockholders that would be treated by recipients as a tax-free return of capital for federal income tax purposes.

 

MARKET FOR THE COMMON STOCK

 

Publicly held shares of Seneca-Cayuga Bancorp’s common stock are quoted on the OTC Pink Marketplace (OTCPK) operated by OTC Markets Group under the symbol “SCAY.” Upon completion of the conversion, the shares of common stock of Generations Bancorp will be issued in exchange for the existing shares of Seneca-Cayuga Bancorp. Following completion of the conversion, if we meet the Nasdaq listing requirements, we will use our best efforts to seek approval to list our common stock on the Nasdaq Capital Market. We have applied to list the shares of Generations Bancorp common stock on the Nasdaq Capital Market under the symbol “GBNY.” To list our stock on the Nasdaq Capital Market, we must have at least three broker-dealers who will make a market in our common stock and at least 300 round-lot holders (i.e., a holder of at least 100 shares). We cannot assure you that we will satisfy these requirements. At June 30, 2020, Seneca-Cayuga Bancorp had approximately nine registered market makers in its common stock. KBW has advised us that it intends to make a market in our common stock following the offering, but is under no obligation to do so.

 

44

 

 

The following tables set forth the high and low closing bid prices per share of common stock of Seneca-Cayuga Bancorp for the periods indicated as reported on the OTC Pink Market. The indicated prices do not include retail markups or markdowns or any commissions and do not necessarily reflect prices in actual transactions. During the time periods presented there were no dividends paid on the common stock.

 

Fiscal Year Ending December 31, 2020:        
Quarter Ended:  Low   High 
December 31, 2020 (through [other member date])  $   $ 
September 30, 2020          
June 30, 2020   5.85    9.45 
March 31, 2020   7.26    11.25 

 

Fiscal Year Ended December 31, 2019        
Quarter Ended:  Low   High 
December 31, 2019  $10.32   $10.76 
September 30, 2019   10.37    10.90 
June 30, 2019   10.14    11.10 
March 31, 2019   10.05    11.70 

 

Fiscal Year Ended December 31, 2018:        
Quarter Ended:  Low   High 
December 31, 2018  $9.01   $12.50 
September 30, 2018   12.00    13.00 
June 30, 2018   10.60    12.30 
March 31, 2018   9.70    12.10 

 

At the close of business on June 30, 2020, there were 2,463,507 shares of common stock outstanding, including 982,792 publicly held shares (shares held by stockholders other than The Seneca Falls Savings Bank, MHC), and approximately 239 stockholders of record (excluding stockholders who hold shares in street name through a broker).

 

On May 5, 2020, the business day immediately preceding the public announcement of the conversion, and on [other member date], the most recent practicable date before the printing of this prospectus, the closing prices of Seneca-Cayuga Bancorp common stock as reported on the OTC Pink Marketplace were $7.75 per share and $[____] per share, respectively. On the effective date of the conversion, all publicly held shares of Seneca-Cayuga Bancorp common stock, including shares of common stock held by our officers and directors, will be converted automatically into and become the right to receive a number of shares of Generations Bancorp common stock determined pursuant to the exchange ratio. The above table reflects actual prices and has not been adjusted to reflect the exchange ratio. See “Beneficial Ownership of Common Stock” and “The Conversion and Offering – Share Exchange Ratio for Current Stockholders.”

 

45

 

 

HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE

 

At June 30, 2020, Generations Bank exceeded all of the applicable regulatory capital requirements and was considered “well capitalized.” The table below sets forth the historical equity capital and regulatory capital of Generations Bank at June 30, 2020, and the pro forma equity capital and regulatory capital of Generations Bank after giving effect to the sale of shares of common stock at $10.00 per share. The table also compares historical and pro forma capital levels to those required to be considered “well capitalized.” The table assumes that Generations Bank receives $9.0 million of the net offering proceeds at the minimum of the offering range and $10.0 million of the net proceeds at the midpoint and maximum of the offering range. See “How We Intend to Use the Proceeds from the Offering.”

 

   Generations Bank   Generations Bank Pro Forma at June 30, 2020 Based Upon the Sale in the Offering of: 
   Historical at June 30, 2020   1,277,125 Shares   1,502,500 Shares   1,727,875 Shares 
   Amount   Percent of
Assets
   Amount   Percent of
Assets
   Amount   Percent of
Assets
   Amount   Percent of
Assets
 
   (Dollars in thousands) 
Equity   $30,443    8.2%  $37,910    9.9%  $38,640    10.1%  $38,370    10.0%
                                         
Tier 1 leverage capital (1)(2)   $30,394    8.3%  $37,177    9.9%  $37,907    10.1%  $37,637    10.0%
Tier 1 leverage requirement    18,301    5.0    18,718    5.0    18,768    5.0    18,768    5.0 
Excess   $12,093    3.3%  $18,460    4.9%  $19,139    5.1%  $18,869    5.0%
                                         
Tier 1 risk-based
capital (1)(2)
  $28,178    12.3%  $37,177    14.6%  $37,907    14.9%  $37,637    14.8 
Tier 1 risk-based requirement    19,796    8.0    20,304    8.0    20,320    8.0    20,320    8.0 
Excess   $8,382    4.3%  $16,873    6.6%  $17,587    6.9%  $17,316    6.8%
                                         
Total risk-based
capital (1)(2)
  $32,390    13.1%  $39,857    15.7%  $40,587    16.0%  $40,317    15.9%
Total risk-based
requirement
   24,745    10.0    25,380    10.0    25,400    10.0    25,400    10.0 
Excess   $7,645    3.1%  $14,477    5.7%  $15,187    6.0%  $14,916    5.9%
                                         
Common equity tier 1 risk-based
capital (1)(2)
  $28,178    11.4%  $35,645    14.6%  $36,375    14.3%  $36,105    14.2%
Common equity tier 1  
risk-based requirement
   16,084    6.5    16,497    6.5    16,510    6.5    16,510    6.5 
Excess   $12,094    4.9%  $19,148    8.1%  $19,865    7.8%  $19,594    7.7%
                                         
Reconciliation of capital infused into Generations Bank:(3)                              
Net proceeds   $11,471        $13,725        $15,979      
Proceeds to Bank    9,000         10,000         10,000      
Less:  Common stock acquired by stock-based benefit plan    511         601         691      
Less:  Common stock acquired by employee stock ownership plan    1,022         1,202         1,382      
                               
Pro forma increase             $7,467        $8,197        $7,927      

 

 

(1)Tier 1 leverage capital levels are shown as a percentage of total average assets. Risk-based capital levels are shown as a percentage of risk-weighted assets.
(2)Pro forma amounts and percentages assume net proceeds are invested in assets that carry a 20% risk weighting.
(3)Generations Bancorp will retain $95,000, $1.2 million and $3.2 million at the minimum, midpoint and maximum of the offering range.

 

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CAPITALIZATION

 

The following table presents the historical consolidated capitalization of Seneca-Cayuga Bancorp at June 30, 2020 and the pro forma consolidated capitalization of Generations Bancorp after giving effect to the conversion and offering based upon the assumptions set forth in the “Pro Forma Data” section.

 

    Seneca-Cayuga
Bancorp
    Generations Bancorp Pro Forma at June 30, 2020 Based
upon the Sale in the Offering at $10.00 per share of:
 
    Historical at
June 30, 2020
    1,277,125
Shares
    1,502,500
Shares
    1,727,875
Shares
 
    (Dollars in thousands)  
Deposits (1)   $ 304,649     $ 304,649     $ 304,649     $ 304,649  
Borrowed funds     33,338       33,338       33,338       33,338  
Total deposits and borrowed funds   $ 337,987     $ 337,987     $ 337,987     $ 337,987  
                                 
Stockholders’ equity:                                
Preferred stock, $0.01 par value, 1,000,000 shares authorized (post-conversion) (2)                        
Common stock, $0.01 par value, 14,000,000 shares authorized (post-conversion); shares to be issued as reflected (2) (3)   $ 26     $ 21     $ 25     $ 29  
Additional paid-in capital (2)     11,958       22,530       24,780       27,030  
Retained earnings (4)     19,262       19,262       19,262       19,262  
Unrealized gain (loss)     1,327       1,363       1,363       1,363  
MHC consolidation             16       16       16  
Less:                                
Treasury stock     (905 )     0       0       0  
Unearned employee stock ownership plan shares     (62 )     (62 )     (62 )     (62 )
Other comprehensive loss     (2,268 )     (2,305 )     (2,305 )     (2,305 )
Common stock to be acquired by employee stock ownership plan (5)           (1,022 )     (1,202 )     (1,382 )
Common stock to be acquired by stock-based benefit plan (6)           (511 )     (601 )     (691 )
Total stockholders’ equity   $ 29,338     $ 39,292     $ 41,276     $ 43,260  
                                 
Pro Forma Shares Outstanding                                
Shares offered for sale           1,277,125       1,502,500       1,727,875  
Exchange shares issued           847,875       997,500       1,147,125  
Total shares outstanding     2,463,507       2,125,000       2,500,000       2,875,000  
                                 
Assets   $ 372,321     $ 382,275     $ 384,258     $ 386,242  
Total stockholders’ equity as a percentage of total assets     7.88 %     10.28 %     10.74 %     11.20 %
Tangible equity as a percentage of total assets     7.43 %     9.84 %     10.31 %     10.77 %

 

 

(1)Does not reflect withdrawals from deposit accounts to purchase shares of common stock in the conversion and offering. These withdrawals would reduce pro forma deposits and assets by the amount of the withdrawals.
(2)Seneca-Cayuga Bancorp currently has 9,000,000 authorized shares of common stock, $0.01 par value per share, and 1,000,000 authorized shares of preferred stock, par value $0.01 per share. On a pro forma basis, common stock and additional paid-in capital have been revised to reflect the number of shares of Generations Bancorp common stock to be outstanding.
(3)No effect has been given to the issuance of additional shares of Generations Bancorp common stock pursuant to the exercise of options under one or more stock-based benefit plans. If the plans are implemented within the first year after the closing of the offering, an amount up to 10% of the shares of Generations Bancorp common stock sold in the offering will be reserved for issuance upon the exercise of options under the plans.
(4)The retained earnings of Generations Bank will be substantially restricted after the conversion. See “The Conversion and Offering – Liquidation Rights” and “Supervision and Regulation – Federal Banking Regulation – Capital Distributions.”

 

(footnotes continue on following page)

 

47

 

 

(continued from previous page)

 

(5)Assumes that 8% of the shares sold in the offering will be acquired by the employee stock ownership plan financed by a loan from Generations Bancorp. The loan will be repaid principally from Generations Bancorp’s contributions to the employee stock ownership plan. Since Generations Bancorp will finance the employee stock ownership plan debt, this debt will be eliminated through consolidation and no liability will be reflected on Generations Bancorp’s consolidated financial statements. Accordingly, the number of shares of common stock acquired by the employee stock ownership plan is shown in this table as a reduction of total stockholders’ equity.
(6)Assumes a number of shares of common stock equal to 4% of the shares of common stock to be sold in the offering will be purchased for grant by one or more stock-based benefit plans. The funds to be used by such plans to purchase the shares will be provided by Generations Bancorp. The dollar amount of common stock to be purchased is based on the $10.00 per share purchase price in the offering and represents unearned compensation. This amount does not reflect possible increases or decreases in the value of common stock relative to the purchase price in the offering. Generations Bancorp will accrue compensation expense to reflect the vesting of shares pursuant to such stock-based benefit plans and will credit capital in an amount equal to the charge to operations. Implementation of such plans will require stockholder approval.

 

48

 

 

PRO FORMA DATA

 

The following tables summarize historical data of Seneca-Cayuga Bancorp and pro forma data of Generations Bancorp at and for the six months ended June 30, 2020 and at and for the year ended December 31, 2019. This information is based on assumptions set forth below and in the tables and related footnotes, and should not be used as a basis for projections of market value of the shares of common stock following the conversion.

 

The net proceeds disclosed in the tables are based upon the following assumptions:

 

(i)all of the shares of common stock will be sold in the subscription and community offerings;

 

(ii)our employee stock ownership plan will purchase 8% of the shares of common stock sold in the offering with a loan from Generations Bancorp. The existing loan obligation of our employee stock ownership plan, equal to $120,000 at June 30, 2020, will be combined with the new loan. The combined loan will be repaid in substantially equal payments of principal and interest (at the prime rate of interest, as may be adjusted annually) over 25 years. Interest income that we earn on the loan will offset the interest paid by Generations Bank. The effect on earnings for the employee stock ownership plan is the cost of amortizing the combined loan over 25 years, net of historical expense for the period;

 

(iii)we will pay KBW a success fee of $300,000; and

 

(iv)total expenses of the offering, including fees and expenses to be paid to KBW, will be $1.3 million.

 

We calculated pro forma consolidated net income for each period as if the estimated net proceeds we received had been invested at the beginning of the period at an assumed interest rate of 0.31% (0.24% on an after-tax basis). This represents the yield on the five-year U.S. Treasury Note at December 31, 2019, which, in light of current market interest rates, we consider to more accurately reflect the pro forma reinvestment rate than the arithmetic average of the weighted average yield earned on our interest earning assets and the weighted average rate paid on our deposits, which is the reinvestment rate federal regulations require that we assume in presenting pro forma data.

 

We further believe that the reinvestment rate is factually supportable because:

 

·the yield on the U.S. Treasury Note can be determined and/or estimated from third-party sources; and

 

·we believe that U.S. Treasury securities are not subject to credit losses due to a U.S. Government guarantee of payment of principal and interest.

 

We calculated historical and pro forma per share amounts by dividing historical and pro forma amounts of consolidated net income and stockholders’ equity by the indicated number of shares of common stock. For pro forma earnings per share calculations, we adjusted these figures to give effect to the shares of common stock purchased by the employee stock ownership plan. We computed per share amounts as if the shares of common stock were outstanding at the beginning of the period, but we did not adjust per share historical or pro forma stockholders’ equity to reflect the earnings on the estimated net proceeds.

 

49

 

 

The pro forma data gives effect to the implementation of one or more stock-based benefit plans. We have assumed that stock-based benefit plans will acquire for restricted stock awards a number of shares of common stock equal to 4% of the shares of common stock sold in the stock offering at the same price for which they were sold in the stock offering. We have assumed that awards of common stock granted under such plans vest over a five-year period.

 

We also have assumed that options will be granted under stock-based benefit plans to acquire shares of common stock equal to 10% of the shares of common stock sold in the stock offering. In preparing the tables below, we assumed that stockholder approval was obtained, that the exercise price of the stock options and the market price of the stock at the date of grant were $10.00 per share and that the stock options had a term of ten years and vested over five years. We applied the Black-Scholes option pricing model to estimate a grant-date fair value of $1.77 for each option.

 

We may grant options and award shares of common stock under one or more stock-based benefit plans in excess of 10% and 4%, respectively, of the shares of common stock sold in the stock offering and that vest sooner than over a five-year period if the stock-based benefit plans are adopted more than one year following the completion of the stock offering.

 

As discussed under “How We Intend to Use the Proceeds from the Offering,” to the extent we have sufficient net proceeds, we intend to invest up to $10.0 million of the net proceeds from the stock offering to Generations Bank, and use portions of the proceeds to fund a loan to the employee stock ownership plan, to repay holding company borrowings and subordinated debt and reimburse litigation fees and expenses. We willretain the rest of the proceeds for future use.

 

The pro forma data does not give effect to:

 

·withdrawals from deposit accounts to purchase shares of common stock in the stock offering;

 

·our results of operations after the stock offering; or

 

·changes in the market price of the shares of common stock after the stock offering.

 

The following pro forma data may not be representative of the financial effects of the offering at the dates on which the offering actually occurs, and should not be taken as indicative of future results of operations. Pro forma consolidated stockholders’ equity represents the difference between the stated amounts of our assets and liabilities. The pro forma stockholders’ equity is not intended to represent the fair market value of the shares of common stock and may be different than the amounts that would be available for distribution to stockholders if we liquidated. Moreover, pro forma stockholders’ equity per share does not give effect to the liquidation accounts to be established in the conversion or, in the unlikely event of a liquidation of Generations Bank, to the tax effect of the recapture of the bad debt reserve. See “The Conversion and Offering – Liquidation Rights.”

 

50

 

 

  

At or for the Six Months Ended June 30, 2020
Based upon the Sale at $10.00 Per Share of:

 
   1,277,125 Shares   1,502,500 Shares   1,727,875 Shares 
   (Dollars in thousands, except per share amounts) 
Gross proceeds of offering   $12,771   $15,025   $17,279 
Market value of shares issued in the exchange    8,479    9,975    11,471 
Pro forma market capitalization   $21,250   $25,000   $28,750 
                
Gross proceeds of offering   $12,771   $15,025   $17,279 
Expenses    (1,300)   (1,300)   (1,300)
Estimated net proceeds    11,471    13,725    15,979 
Assets received from The Seneca Falls Savings Bank, MHC    16    16    16 
Common stock purchased by employee stock ownership plan    (1,022)   (1,202)   (1,382)
Common stock purchased by stock-based benefit plans    (511)   (601)   (691)
Estimated net proceeds, as adjusted   $9,954   $11,938   $13,922 
                
For the Six Months Ended June 30, 2020               
Consolidated net earnings:               
Historical   $691   $691   $691 
Income on adjusted net proceeds    12    15    17 
Employee stock ownership plan (1)    (16)   (19)   (22)
Stock awards (2)    (40)   (47)   (55)
Stock options (3)    (21)   (25)   (29)
Pro forma net income   $626   $615   $602 
                
Earnings per share (4):               
Historical   $0.34   $0.29   $0.25 
Income on adjusted net proceeds    0.01    0.01    0.01 
Employee stock ownership plan (1)    (0.01)   (0.01)   (0.01)
Stock awards (2)    (0.02)   (0.02)   (0.02)
Stock options (3)    (0.01)   (0.01)   (0.01)
Pro forma earnings per share (4)   $0.31   $0.26   $0.22 
                
Offering price to pro forma net earnings per share    32.35x   38.74x   45.51x
Number of shares used in earnings per share calculations    2,024,873    2,382,204    2,739,535 
                
At June 30, 2020               
Stockholders’ equity:               
Historical   $29,338   $29,338   $29,338 
Estimated net proceeds    11,471    13,725    15,979 
Equity increase from The Seneca Falls Savings Bank, MHC    16    16    16 
Common stock acquired by employee stock ownership plan (1)    (1,022)   (1,202)   (1,382)
Common stock acquired by stock-based benefit plans (2)    (511)   (601)   (691)
Pro forma stockholders’ equity (5)   $39,292   $41,276   $43,260 
Intangible assets   $(1,673)  $(1,673)  $(1,673)
Pro forma tangible stockholders’ equity (5)   $37,619   $39,603   $41,587 
                
Stockholders’ equity per share (6):               
Historical   $13.81   $11.74   $10.20 
Estimated net proceeds    5.40    5.49    5.56 
Equity increase from the mutual holding company    0.01    0.01    0.01 
Common stock acquired by employee stock ownership plan (1)    (0.48)   (0.48)   (0.48)
Common stock acquired by stock-based benefit plans (2)    (0.24)   (0.24)   (0.24)
Pro forma stockholders’ equity per share (5) (6)   $18.50   $16.52   $15.05 
Intangible assets   $(0.79)  $(0.67)  $(0.58)
Pro forma tangible stockholders’ equity per share (5) (6)   $17.71   $15.85   $14.47 
                
Offering price as percentage of pro forma stockholders’ equity per share    54.05%   60.53%   66.45%
Offering price as percentage of pro forma tangible stockholders’ equity per share    56.47%   63.09%   69.11%
Public Shares Outstanding    982,792    982,792    982,792 
Exchange Ratio    0.8627    1.0150    1.1672 
Number of shares outstanding for pro forma book value per share calculations    2,125,000    2,500,000    2,875,000 

 

(footnotes begin on second following page)

 

51

 

 

   At or for the Year Ended December 31, 2019
Based upon the Sale at $10.00 Per Share of:
 
   1,277,125 Shares   1,502,500 Shares   1,727,875 Shares 
   (Dollars in thousands, except per share amounts) 
Gross proceeds of offering   $12,771   $15,025   $17,279 
Market value of shares issued in the exchange    8,479    9,975    11,471 
Pro forma market capitalization   $21,250   $25,000   $28,750 
                
Gross proceeds of offering   $12,771   $15,025   $17,279 
Expenses    (1,300)   (1,300)   (1,300)
Estimated net proceeds    11,471    13,725    15,579 
Assets received from mutual holding company    16    16    16 
Common stock purchased by employee stock ownership plan    (1,022)   (1,202)   (1,382)
Common stock purchased by stock-based benefit plans    (511)   (601)   (691)
Estimated net proceeds, as adjusted   $9,954   $11,938   $13,922 
                
For the Year Ended December 31, 2019               
Consolidated net earnings:               
Historical