Generations Bancorp NY, Inc. (GBNY) is a community-oriented savings institution headquartered in Seneca Falls, New York, serving the Finger Lakes Region and Orleans County. The company provides a range of financial services, including accepting deposits, originating loans, and offering mortgage banking and other traditional banking services.

Financials

In the latest fiscal year, Generations Bancorp reported annual net income of -$1,567,000 on annual revenue of $19,247,000. The company generated annual operating cash flow of $2,037,000 and annual free cash flow of $1,670,000.

For the first quarter of 2024, the company reported a net loss of $545,000, compared to a net loss of $152,000 in the same period of the prior year. Revenue for the quarter decreased 23.4% year-over-year to $441,000, primarily due to a $129,000 decrease in insurance commissions and a $44,000 decrease in banking fees and service charges.

The decrease in revenue was partially offset by a $703,000, or 18.6%, increase in interest and dividend income, driven by a $643,000 increase in interest on loans receivable and a $66,000 increase in interest on interest-earning deposits. However, this was more than offset by a $1.3 million, or 106.7%, increase in total interest expense, primarily due to higher costs on deposits and borrowings.

As a result, net interest income decreased $628,000, or 24.9%, to $1.9 million for the first quarter of 2024, compared to $2.5 million in the same period of the prior year. The company's net interest rate spread decreased 106 basis points to 1.57%, and its net interest margin decreased 87 basis points to 2.03%.

The provision for credit losses increased $60,000, or 36.4%, to $225,000 for the first quarter of 2024, compared to $165,000 in the same period of the prior year, primarily due to higher loss rates in the auto and recreational vehicle portfolios.

Noninterest expense decreased $301,000, or 9.6%, to $2.8 million for the first quarter of 2024, compared to $3.1 million in the same period of the prior year, primarily due to a $310,000, or 22.0%, decrease in compensation and benefits.

The company's total assets decreased $13.7 million, or 3.2%, to $410.8 million as of March 31, 2024, compared to $424.5 million as of December 31, 2023. This decrease was primarily due to decreases in cash and cash equivalents of $8.7 million, net loans of $4.2 million, and investment securities available-for-sale of $3.4 million, partially offset by an increase in interest-earning time deposits in banks of $2.5 million.

Deposits decreased $13.8 million, or 3.9%, to $343.8 million as of March 31, 2024, compared to $357.6 million as of December 31, 2023. The largest decrease was in certificates of deposit, which decreased $12.3 million, or 7.2%, to $158.9 million.

The company's capital ratios remain strong, with Generations Bank exceeding all regulatory required minimum capital ratios and meeting the regulatory definition of a "well-capitalized" institution as of March 31, 2024. The bank's Tier 1 Capital (to Total Adjusted Assets) ratio was 9.38% at the end of the first quarter of 2024, compared to 9.37% at the end of 2023.

In terms of asset quality, non-performing assets decreased to $3.3 million, or 0.80% of total assets, as of March 31, 2024, compared to $3.7 million, or 0.88% of total assets, as of December 31, 2023. The allowance for credit losses was $3.1 million, or 0.96% of total loans, at the end of the first quarter of 2024, compared to $3.0 million, or 0.93% of total loans, at the end of 2023.

Liquidity

The company's liquidity position remains satisfactory, with the bank having $25.5 million in outstanding advances from the Federal Home Loan Bank and the ability to borrow an additional $41.8 million based on its collateral capacity as of March 31, 2024. Additionally, the bank had $20.5 million in available lines of credit with other financial institutions and the capacity for an additional $82.9 million in brokered deposits.

Business Overview

In terms of geographic breakdown, the majority of the company's operations and loan portfolio are concentrated in the Finger Lakes Region and Orleans County of New York State. The company has also been expanding its loan portfolio through the purchase of residential mortgage and automobile loans originated outside of its primary market area.

Generations Bancorp operates through two primary segments: its community banking franchise and its limited-purpose commercial bank subsidiary. The community banking segment provides financial services to consumers and businesses in the Finger Lakes Region and Orleans County, while the commercial bank segment enables local municipalities to deposit public funds.

Risks and Challenges

In terms of risks, the company's loan portfolio is subject to various risks, including general economic conditions, declines in the local economy, and changes in interest rates. Additionally, the company's reliance on deposits and wholesale funding sources, as well as its exposure to the residential and commercial real estate markets, could pose challenges.

Outlook

The company has not provided any specific guidance or outlook for the remainder of 2024. However, management has emphasized its focus on maintaining a strong capital position, diversifying its loan portfolio, and managing its interest rate and credit risks.

Conclusion

Overall, Generations Bancorp's performance in the first quarter of 2024 was mixed, with decreases in revenue and net interest income, partially offset by lower noninterest expense. The company's asset quality and capital ratios remain strong, but the challenging interest rate environment and competitive pressures in its market area continue to pose challenges. Investors should closely monitor the company's ability to navigate these headwinds and execute on its strategic initiatives.