Although the Bank may sometimes purchase or fund loan participation interests outside of its primary market areas, the Bank generally originates residential mortgage, commercial, and consumer loans largely to customers throughout Oswego and Onondaga counties. Although the Bank has a diversified loan portfolio, a substantial portion of its borrowers’ abilities to honor their loan contracts is dependent upon the counties’ employment and economic conditions.

From time to time, the Bank acquires diversified pools of loans, originated by unrelated third parties, as part of the Company’s overall balance sheet management strategies. These acquisitions took place with nine separate transactions, that occurred between 2017 and 2019, with an additional six transactions occurring in 2021. The following tables detail the purchased loan pool positions held by the Bank at September 30, 2024 and December 31, 2023 (the month/year of the earliest acquisition date is depicted in parentheses):


(In thousands, except number of loans)	September 30, 2024
	Original Balance		Current Balance		Unamortized Premium/ (Discount)			Number of Loans		Maturity Range		Cumulative net charge-offs
Commercial and industrial loans (6/2019)	$	6,800	$	1,300	$	-			19	2-5 years		$	-
Home equity lines of credit (8/2019)		21,900		3,600		24			101	4-25 years			51
Unsecured consumer loan pool 2 (11/2019)		26,600		40		-			71	0-2 years			-
Residential real estate loans (12/2019)		4,300		4,200		280			54	16-25 years			-
Unsecured consumer loan pool 1 (12/2019)		5,400		600		-			41	1-3 years			-
Unsecured consumer installment loans pool 3 (12/2019)(2)		10,300		200		6			92	0-9 years			37
Secured consumer installment loans pool 4 (12/2020)		14,500		9,500		(1,308	)		480	21-25 years			5
Unsecured consumer loans pool 5 (1/2021)(1)		24,400		13,300		(357	)		610	6-21 years			1,001
Revolving commercial line of credit 1 (3/2021)		11,600		8,600		-			1	0-1 year			-
Secured consumer installment loans (11/2021)		21,300		16,800		(2,687	)		808	17-24 years			290
Unsecured consumer loans pool 6 (11/2021)(1)		22,200		16,200		(2,125	)		512	7-24 years			1,176
Revolving commercial line of credit 1 (7/2024)		1,050		1,100		34			1	0-1 year			-
Total	$	170,350	$	75,440	$	(6,133	)		2,790			$	2,560

(In thousands, except number of loans)	December 31, 2023
	Original Balance		Current Balance		Unamortized Premium/ (Discount)			Number of Loans		Maturity Range		Cumulative net charge-offs
Commercial and industrial loans (6/2019)		6,800		1,600		-			20	2-6 years			-
Home equity lines of credit (8/2019)		21,900		4,500		108			159	1-26 years			-
Unsecured consumer loan pool 2 (11/2019)		26,600		500		2			167	0-2 years			-
Residential real estate loans (12/2019)		4,300		4,500		284			56	17-25 years			-
Unsecured consumer loan pool 1 (12/2019)		5,400		1,000		-			46	1-3 years			-
Unsecured consumer installment loans pool 3 (12/2019)		10,300		500		17			158	0-9 years			69
Secured consumer installment loans pool 4 (12/2020)		14,500		10,600		(1,252	)		499	21-25 years			-
Unsecured consumer loans pool 5 (1/2021)		24,400		15,600		(450	)		644	7-22 years			-
Revolving commercial line of credit 1 (3/2021)		11,600		12,400		2			1	0-1 year			-
Secured consumer installment loans (11/2021)		21,300		18,000		(2,923	)		821	17-24 years			-
Revolving commercial line of credit 2 (11/2021) paid in full at 12/11/23		10,500		-		-			-		-		-
Unsecured consumer loans pool 6 (11/2021)		22,200		18,200		(2,292	)		522	7-24 years			-
Total	$	179,800	$	87,400	$	(6,504	)		3,093			$	69

At September 30, 2024 and December 31, 2023, the allowance for credit losses (the "ACL") related to these pools were $4.2 million and $2.1 million, respectively. As of September 30, 2024 and December 31, 2023, residential mortgage loans with a carrying value of $116.0 million and $113.6 million, respectively, have been pledged by the Company to the Federal Home Loan Bank of New York (“FHLBNY”) under a blanket collateral agreement to secure the Company’s line of credit and term borrowings. For additional information related to these pools, please see Note 7 Allowance For Credit Losses.

The Company’s lending policies and procedures are presented in Note 5 to the audited consolidated financial statements included in the 2023 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 22, 2024 and have not changed. As part of the execution of the Company’s overall balance sheet management strategies, the Bank will acquire participating interests in loans originated by unrelated third parties on an occasional basis. The purchase of participations in loans that are originated by third parties only occurs after the completion of thorough pre-acquisition due diligence. Loans in which the Company acquires a participating interest are determined to meet, in all material respects, the Company’s internal underwriting policies, including credit and collateral suitability thresholds, prior to acquisition. In addition, the financial condition of the originating financial institutions, which are generally retained as the ongoing loan servicing provider for participations acquired by the Bank, are analyzed prior to the acquisition of the participating interests and monitored on a regular basis thereafter for the life of those interests.

To develop and document a systematic methodology for determining the allowance for credit losses, the Company has divided the loan portfolio into three portfolio segments, each with different risk characteristics but with similar methodologies for assessing risk. Each portfolio segment is broken down into loan classes where appropriate. Loan classes contain unique measurement attributes, risk characteristics, and methods for monitoring and assessing risk that are necessary to develop the allowance for credit losses. Unique characteristics such as borrower type, loan type, collateral type, and risk characteristics define each class.

The following table illustrates the portfolio segments and classes for the Company’s loan portfolio:

The following tables present the classes of the loan portfolio as of September 30, 2024, summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company's internal risk rating system as of the dates indicated:


															Revolving
	Term Loans By Origination Year												Revolving		loans converted
(In thousands)	2024		2023		2022		2021		2020		Prior		Loans		to term loans		Total
Commercial Real Estate:
Pass	$	30,826	$	49,643	$	65,662	$	53,857	$	28,022	$	125,048	$	-	$	-	$	353,058
Special Mention		-		-		13,996		-		-		472		-		-		14,468
Substandard		843		4,323		500		1,652		217		3,685		-		-		11,220
Doubtful		-		-		-		-		-		59		-		-		59
Total Commercial Real Estate		31,669		53,966		80,158		55,509		28,239		129,264		-		-		378,805
Commercial Lines of Credit:
Pass		-		-		-		-		-		-		60,113		3,133		63,246
Special Mention		-		-		-		-		-		-		605		143		748
Substandard		-		-		-		-		-		-		209		369		578
Doubtful		-		-		-		-		-		-		100		-		100
Total Commercial Lines of Credit		-		-		-		-		-		-		61,027		3,645		64,672
Other Commercial and Industrial:
Pass		12,437		22,109		14,417		4,701		4,326		18,687		5,863		-		82,540
Special Mention		-		2,072		-		216		33		-		-		-		2,321
Substandard		-		-		1,071		-		303		1,231		-		-		2,605
Doubtful		-		328		24		429		-		-		-		-		781
Total Other Commercial and Industrial		12,437		24,509		15,512		5,346		4,662		19,918		5,863		-		88,247
Paycheck Protection Program Loans
Pass		-		-		-		-		125		-		-		-		125
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total Paycheck Protection Program Loans		-		-		-		-		125		-		-		-		125
Tax Exempt Loans
Pass		32		73		-		-		151		2,402		-		-		2,658
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total Tax Exempt Loans		32		73		-		-		151		2,402		-		-		2,658


																					Revolving
	Term Loans By Origination Year																		Revolving		loans converted
(In thousands)	2024			2023			2022			2021			2020			Prior			Loans		to term loans		Total
1-4 family first-lien residential mortgages:
Pass	$	8,370		$	16,151		$	29,461		$	49,580		$	37,290		$	111,171		$	-	$	-	$	252,023
Special Mention		-			-			-			-			273			364			-		-		637
Substandard		-			-			458			91			209			840			-		-		1,598
Doubtful		-			-			-			-			152			825			-		-		977
Total 1-4 family first-lien residential mortgages		8,370			16,151			29,919			49,671			37,924			113,200			-		-		255,235
Construction:
Pass		4,077			-			-			-			-			-			-		-		4,077
Special Mention		-			-			-			-			-			-			-		-		-
Substandard		-			-			-			-			-			-			-		-		-
Doubtful		-			-			-			-			-			-			-		-		-
Total Construction		4,077			-			-			-			-			-			-		-		4,077
Home Equity and Junior Liens:
Pass		5,635			4,219			3,173			3,055			1,669			13,680			19,549		954		51,934
Special Mention		-			-			-			-			-			6			20		9		35
Substandard		-			-			-			13			-			44			677		6		740
Doubtful		-			-			-			-			-			-			-		-		-
Total Home Equity and Junior Liens		5,635			4,219			3,173			3,068			1,669			13,730			20,246		969		52,709
Other Consumer:
Pass		4,049			62,500			4,215			2,165			1,145			2,543			-		-		76,617
Special Mention		-			-			-			6			-			2			-		-		8
Substandard		-			-			-			78			-			-			-		-		78
Doubtful		-			-			-			-			-			-			-		-		-
Total Other Consumer		4,049			62,500			4,215			2,249			1,145			2,545			-		-		76,703
Net Deferred Loan Fees		(755	)		(17	)		(15	)		(135	)		(45	)		(604	)		-		-		(1,571	)
Total Loans	$	65,514		$	161,401		$	132,962		$	115,708		$	73,870		$	280,455		$	87,136	$	4,614	$	921,660

The following tables present the classes of the loan portfolio as of December 31, 2023, summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company's internal risk rating system as of the dates indicated:


															Revolving
	Term Loans By Origination Year												Revolving		loans converted
(In thousands)	2024		2023		2022		2021		2020		Prior		Loans		to term loans		Total
Commercial Real Estate:
Pass	$	43,823	$	67,743	$	55,395	$	29,222	$	51,270	$	85,218	$	-	$	-	$	332,671
Special Mention		-		14,016		-		-		-		797		-		-		14,813
Substandard		3,006		500		2,339		739		396		4,085		-		-		11,065
Doubtful		-		-		-		-		-		158		-		-		158
Total Commercial Real Estate		46,829		82,259		57,734		29,961		51,666		90,258		-		-		358,707
Commercial Lines of Credit:
Pass		-		-		-		-		-		-		62,824		7,141		69,965
Special Mention		-		-		-		-		-		-		654		162		816
Substandard		-		-		-		-		-		-		518		758		1,276
Doubtful		-		-		-		-		-		-		-		12		12
Total Commercial Lines of Credit		-		-		-		-		-		-		63,996		8,073		72,069
Other Commercial and Industrial:
Pass		27,433		16,735		6,457		5,541		7,828		11,994		4,195		-		80,183
Special Mention		2,490		-		248		67		-		-		-		-		2,805
Substandard		30		1,124		929		754		211		2,362		-		-		5,410
Doubtful		1,405		-		-		-		-		-		-		-		1,405
Total Other Commercial and Industrial		31,358		17,859		7,634		6,362		8,039		14,356		4,195		-		89,803
Paycheck Protection Program Loans
Pass		-		-		-		158		-		-		-		-		158
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total Paycheck Protection Program Loans		-		-		-		158		-		-		-		-		158
Tax Exempt Loans
Pass		105		-		-		151		6		3,168		-		-		3,430
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total Tax Exempt Loans		105		-		-		151		6		3,168		-		-		3,430


																			Revolving
	Term Loans By Origination Year																Revolving		loans converted
(In thousands)	2024			2023		2022			2021			2020		Prior			Loans		to term loans		Total
1-4 family first-lien residential mortgages:
Pass	$	17,403		$	31,591	$	51,027		$	39,454		$	18,491	$	94,594		$	-	$	-	$	252,560
Special Mention		-			-		1,601			566			176		349			-		-		2,692
Substandard		-			-		138			209			282		1,168			-		-		1,797
Doubtful		-			-		-			154			-		401			-		-		555
Total 1-4 family first-lien residential mortgages		17,403			31,591		52,766			40,383			18,949		96,512			-		-		257,604
Construction:
Pass		1,355			-		-			-			-		-			-		-		1,355
Special Mention		-			-		-			-			-		-			-		-		-
Substandard		-			-		-			-			-		-			-		-		-
Doubtful		-			-		-			-			-		-			-		-		-
Total Construction		1,355			-		-			-			-		-			-		-		1,355
Home Equity and Junior Liens:
Pass		8,317			1,880		1,404			853			559		2,228			18,177		689		34,107
Special Mention		-			-		-			-			-		6			20		9		35
Substandard		-			-		66			-			-		49			601		-		716
Doubtful		-			-		-			-			-		-			-		-		-
Total Home Equity and Junior Liens		8,317			1,880		1,470			853			559		2,283			18,798		698		34,858
Other Consumer:
Pass		68,434			3,876		3,103			1,381			1,536		1,340			-		-		79,670
Special Mention		24			34		14			9			4		15			-		-		100
Substandard		-			14		8			-			-		5			-		-		27
Doubtful		-			-		-			-			-		-			-		-		-
Total Other Consumer		68,458			3,924		3,125			1,390			1,540		1,360			-		-		79,797
Net Deferred Loan Fees		(289	)		60		(12	)		(82	)		93		(344	)		-		-		(574	)
Total loans	$	173,536		$	137,573	$	122,717		$	79,176		$	80,852	$	207,593		$	86,989	$	8,771	$	897,207

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

Loans are considered past due if the required principal and interest payments have not been received within thirty days of the payment due date. Loans are placed on nonaccrual when the contractual payment of principal and interest has become 90 days past due or when management has serious doubts about further collectability of principal or interest, even though the loan may be currently performing.

An aging analysis of past due loans, not including net deferred loan costs, segregated by portfolio segment and class of loans, as of September 30, 2024 and December 31, 2023, are detailed in the following tables:


	As of September 30, 2024

	30-59 Days		60-89 Days		90 Days		Total				Total Loans
(In thousands)	Past Due		Past Due		and Over		Past Due		Current		Receivable
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	3,010	$	778	$	1,605	$	5,393	$	249,842	$	255,235
Construction		-		-		-		-		4,077		4,077
Total residential mortgage loans		3,010		778		1,605		5,393		253,919		259,312
Commercial loans:
Real estate		6,718		5,406		5,950		18,074		360,731		378,805
Lines of credit		2,407		61		1,391		3,859		60,813		64,672
Other commercial and industrial		829		293		6,323		7,445		80,802		88,247
Paycheck Protection Program loans		-		-		-		-		125		125
Tax exempt loans		-		-		-		-		2,658		2,658
Total commercial loans		9,954		5,760		13,664		29,378		505,129		534,507
Consumer loans:
Home equity and junior liens		1,372		168		422		1,962		50,747		52,709
Other consumer		475		234		479		1,188		75,515		76,703
Total consumer loans		1,847		402		901		3,150		126,262		129,412
Total loans	$	14,811	$	6,940	$	16,170	$	37,921	$	885,310	$	923,231

	As of December 31, 2023

	30-59 Days		60-89 Days		90 Days		Total				Total Loans
(In thousands)	Past Due		Past Due		and Over		Past Due		Current		Receivable
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	1,462	$	2,269	$	1,770	$	5,501	$	252,103	$	257,604
Construction		-		-		-		-		1,355		1,355
Total residential mortgage loans		1,462		2,269		1,770		5,501		253,458		258,959
Commercial loans:
Real estate		5,385		196		5,053		10,634		348,073		358,707
Lines of credit		180		-		924		1,104		70,965		72,069
Other commercial and industrial		5,347		322		6,340		12,009		77,794		89,803
Paycheck Protection Program loans		-		-		-		-		158		158
Tax exempt loans		-		-		-		-		3,430		3,430
Total commercial loans		10,912		518		12,317		23,747		500,420		524,167
Consumer loans:
Home equity and junior liens		210		29		192		431		34,427		34,858
Other consumer		984		383		2,948		4,315		75,482		79,797
Total consumer loans		1,194		412		3,140		4,746		109,909		114,655
Total loans	$	13,568	$	3,199	$	17,227	$	33,994	$	863,787	$	897,781

As of September 30, 2024 and December 31, 2023, the amount of interest income recognized on nonaccrual loans and the cost basis of nonaccrual loans, for which there is no ACL, are detailed in the following tables. All loans greater than 90 days past due are classified as nonaccrual.


	September 30, 2024
(In thousands)	Nonaccrual Loans		Nonaccrual loans without related allowance for credit loss		Recognized interest income
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	1,605	$	1,098	$	46
Total residential mortgage loans		1,605		1,098		46
Commercial loans:
Real estate		5,950		4,247		116
Lines of credit		1,391		1,355		72
Other commercial and industrial		6,323		1,951		187
Total commercial loans		13,664		7,553		375
Consumer loans:
Home equity and junior liens		422		60		5
Other consumer		479		3		7
Total consumer loans		901		63		12
Total nonaccrual loans	$	16,170	$	8,714	$	433


	December 31, 2023
(In thousands)	Nonaccrual Loans		Nonaccrual loans without related allowance for credit loss		Recognized interest income
Residential mortgage loans:
1-4 family first-lien residential mortgages	$	1,770	$	69	$	43
Total residential mortgage loans		1,770		69		43
Commercial loans:
Real estate		5,053		3,058		109
Lines of credit		924		-		52
Other commercial and industrial		6,340		4,079		164
Total commercial loans		12,317		7,137		325
Consumer loans:
Home equity and junior liens		192		-		2
Other consumer		2,948		1,207		9
Total consumer loans		3,140		1,207		11
Total nonaccrual loans	$	17,227	$	8,413	$	379

At September 30, 2024, the Bank's 80 nonperforming loans represented 1.8% of total loans, with an aggregate outstanding balance of $16.2 million, as compared to 150 loans with an aggregate outstanding balance of $17.2 million at December 31, 2023. This decrease in nonaccrual balances of $1.0 million was primarily the result of a decrease in consumer loans related to charge-offs totaling $2.5 million for purchased loan pools, and a $200,000 decrease in residential mortgage loans, offset by an increase in commercial loans of $1.3 million. Management is closely monitoring all nonaccrual loans and has incorporated its current estimate of the ultimate collectability of these loans into the reported allowance for credit losses at September 30, 2024.

The measurement of individually evaluated loans is generally based upon the present value of future cash flows discounted at the historical effective interest rate, except that all collateral-dependent loans are measured based on the fair value of the collateral, less costs to sell. The Company utilizes the Discounted Cash Flow (“DCF”) method for its pooled segment calculation. The DCF method implements a probability of default with loss given default and loss

exposure at default estimation. The probability of default and loss given default are applied to future cash flows that are adjusted to present value and these discounted expected losses become the Allowance for Credit Losses.