TrustCo Bank Corp NY Q3 2023 Earnings Call Transcript

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October 24, 2023

There are 4 speakers on the call.

Operator

Good day, and welcome to the TrustCo Bancorp Earnings Call and Webcast. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Before proceeding, we would like to mention that this presentation may contain forward looking information about TrustCo Bancorp, New York that is intended to be covered by the safe harbor for forward looking statements provided by the Private Securities Litigation Reform Act of 1995. Actual results, performance or achievements could differ materially from those expressed in or implied by such achievements, Statements, various risks, uncertainties and other factors.

Operator

More detailed information about these And other risk factors can be found in our press release that preceded this call and in the Risk Factors and Forward Looking Statements section of our Annual Report on Form 10 ks and as updated by our quarterly reports on Form 10 Q. Forward looking statements Made on this call are valid only as of the date hereof, and the company disclaims any obligation to update its information to reflect events or developments after the date of this call, except as may be required by applicable law. During today's call, we will discuss certain financial measures derived from our financial statements that are not determined in accordance with U. S. GAAP.

Operator

The reconciliations of such non GAAP financial measures to the most comparable GAAP figures are included in our earnings press release, which is available under the Investors Relations tab of our website trustcobank.com. Please also note that today's event is being recorded. A replay of the call will be available for 30 days and the audio webcast will be available for 1 year as described in our earnings press release. At this time, I would like to turn the conference call over to Mr. Robert J.

Operator

McCormick, Chairman, President CEO, please go ahead.

Speaker 1

Good morning, everyone, and thank you for joining the call. As the Hosts said, I'm Rob McCormack, the President of TrustCo Bank. With me as usual are Mike Ozimek and Scott Salvador. We'll follow our regular format for the call. I'll Mike, our CFO, will provide a detailed review of the numbers, and Scott will cover the loan portfolio, leaving time for questions at the end.

Speaker 1

Our Q2 results here at the bank are very strong. What differentiates us from others is something we are really proud of. We have not wavered from our business model, maintaining our tried and true lending practices and careful balance sheet management. While others may be feeling pressure to keep up with competitors' rates or be borrowing to fund their growth, we remain focused on our own blueprint. We don't plan for just 3 months, 3 years ago and maybe longer.

Speaker 1

We knew the tide would turn and we kept our powder dry. Debt planning has enabled us to stay well capitalized, debt free and is now supporting organic loan growth. Our portfolio reached an all time high Over the quarter, hitting a milestone of $5,000,000,000 with our industry leading first mortgage product making up the lion's share. We strategically grew all aspects of our loan portfolio through responsible and choice lending. We have not sacrificed quality for quantity.

Speaker 1

In Q3, we saw non performing loans to total loans of just 0.36%, the best in at least 15 years as well as our 7th consecutive quarter for net recoveries. We continue to build upon our granular and diversified deposit foundation And have seen all categories of the portfolio rebound from the beginning of the year. Our average deposit relationship was $15,000 which is proof of the success of our relationship building focus. Our customers know that they can rely on our strength and stability through market ups and downs. Also during the quarter, we rolled out a new split the difference loan product, which enables us to reprice lower interest rate loans while retaining those critical customer relationships.

Speaker 1

In addition to the benefits of repricing, it works out great for customers who have felt trapped by their low rate mortgage. We have received great feedback on the initiative and it is making TrustCo Bank a topic of conversation where we might not have been before. Overall, we expect that if the product takes off, it will further contribute to the upward trend of our loan portfolio yield. As always, we are very proud of our substantial dividend, which we have paid every quarter since 190 4. Our shareholders have been able to count on us through all economic conditions.

Speaker 1

Whatever comes next, Trusco Bank is ready to capitalize Now Mike will give us detail on the numbers, Scott will give color on the loan portfolio, and then we will take your questions. Mike?

Speaker 2

Thank you, Rob, and good morning, everyone. I will now review TrustCo's financial results for the Q3 of 2023. As we noted in the press release, the company saw a 3rd quarter net income of $14,700,000 which yielded a return on average assets and average equity of 0.96% 9.32 percent respectively. Capital remains strong. Consolidated equity to assets ratio was 10.31 percent for the Q3 of 20 3 compared to 9.69 percent in the Q3 of 2022.

Speaker 2

Book value per share at September 30, 23 was $32.80 up 6.2% compared to $30.89 a year earlier. Average loans for the 3rd quarter grew 7.4 percent or $337,600,000 to $4,900,000,000 for the Q3 of 'twenty two. Loan growth has continued to increase and occurred in all of our loan categories and leading the charge was our residential real estate portfolio As always, which increased by $219,400,000 or 5.3 percent in the Q3 of 'twenty three over the same period in 2022. Average commercial loans increased $53,600,000 home equity lines of credit increased 58,900,000 And installment loans increased $5,700,000 over the same period in 2022. For the Q3 of 2023, the provision for credit losses $100,000 Retaining deposits has been a key focus during 2023.

Speaker 2

Although deposits were down compared to prior quarter, Total deposits as of September 30, 2023 increased $41,600,000 or $5,230,000,000 from the end of 2022. As we move forward, our objective is to continue to offer competitive product offerings of the bank through aggressive marketing and product differentiation. Net interest income was $42,200,000 for the Q3 of 2023, a decrease of $5,600,000 or 11.7 percent compared to the same period in 2022. Net interest margin for the Q3 of 'twenty three was 2.85%, down 31 basis points from the Q3 of 'twenty two. Yield on interest bearing Assets increased to 3.88 percent, up 64 basis points from 3.24% in the Q3 of 2022.

Speaker 2

Our Financial Services division continues to be a significant recurring source of non interest income. They had approximately $902,000,000 of assets under management as of September 30, 2023. Now on to non interest expense. Total non interest expense, net of ORE expense came in at 27,300,000 which is consistent with prior quarters. ORE expense net came in at an expense of $163,000 for the quarter as compared to an expense of $148,000 in the prior quarter.

Speaker 2

Given the continued low level of ORE expenses, we are going to continue to hold anticipated level of expenses not to exceed $250,000 per quarter. Salary expense is down due to a decrease in overall salary expense A decrease in our liability based equity awards due to a lower stock price. All the other categories in non interest expense We're in line with our expectations for the Q3. We would expect 2023's total recurring non interest expense, net of hoaree expense, to be in the range of $26,900,000 to $27,400,000 per quarter. Now Scott will review the loan portfolio and non performing loans.

Speaker 3

Good morning, and thanks, Mike. For the 3rd quarter, total loans increased by $73,000,000 in actual numbers or 1.5%. Year over year, the increase was $331,000,000 or 7.2 percent. This quarter marked a continuation of strong loan growth for the bank, Coming on the heels of an $87,000,000 increase in the 2nd quarter. The loan increases are spread among all loan categories.

Speaker 3

Residential loans increased by a combined $56,000,000 with first mortgages increasing by $33,000,000 and our home equity products climbing by $23,000,000 Commercial loans increased by $17,000,000 on the quarter. As previously stated, the combination of increased interest rates and some new personnel in our commercial loan area Has allowed us to be a bit more active versus prior years. Overall purchase activity in our residential markets has slowed reflecting nationwide trends. Increased interest rates have obviously played the largest role in this, although other factors such as the time of year also begin to come into play. To help offset this, we are putting a lot of focus into capturing a bigger piece of the existing pie in all our regions.

Speaker 3

Our status as a portfolio of lenders is an advantage in this regard. One example, as Rob mentioned, is a current promotion whereby existing trusthold mortgage customers who sell and purchase a new home Can obtain a reduction off of current rates by maintaining their financing with TrustCo. Interest rates continue to rise where and we currently stand at 7.5.8 percent for our 30 year base rate. The higher rates have continued to drive growth in our home equity products as people elect to stay and improve their existing home rather than purchase a new one or refinance a first mortgage. The loan backlog has come down somewhat from last quarter year over year.

Speaker 3

This reflects both the current marketplace and time of year. It does contain a good amount of new money, however, given almost a complete lack of refis, We expect to post continued growth on the quarter. The news on asset quality remains good. Nonperforming loans stand at $17,900,000 as of September, down from $19,400,000 in June and also down year over year. Nonperforming assets declined to $19,100,000 from $20,800,000 last quarter.

Speaker 3

A year ago, they stood at $19,400,000 Charge offs posted another small net recovery on the quarter and now total a combined 294,000 Net recovery year to date. Early stage delinquencies remain solid. The allowance for credit losses stands at 0.95 percent of total loans and 2 64% of non performing loans. This is up from a coverage ratio of 2 44% a year ago. Rob?

Speaker 1

That's our story. We're happy to answer any questions you might have.

Operator

Thank you. And please do also remember to unmute the microphone when it's your turn to speak. We'll now wait a couple of seconds to see if we've got any questions. Okay. We have no questions registered.

Operator

So I would like to hand back to Mr. McCormick for closing remarks.

Speaker 1

Thank you for your interest in our company and joining us today, and have a great day.

Operator

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines. Thank you.

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Earnings Conference Call
TrustCo Bank Corp NY Q3 2023
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