TrustCo Bank Corp NY Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
October 22, 2024

There are 5 speakers on the call.

Operator

Ladies and gentlemen, the TrustCo Bank New York Third Quarter 20 24 Earnings Call will begin shortly with your host, Robert McCormick. We appreciate your patience whilst we prepare your session today. During the call, we encourage participants to raise a question. You can raise a question by pressing star followed by 1 on your telephone keypad. Good day, and welcome to the Trosco Bancorp Earnings Call and Webcast.

Operator

All participants will be in 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 include forward looking information about TrustCo Bancorp New York that is intended to be covered by our Safe Harbor for looking forward 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 statements due to various risks, uncertainties and other factors. More detailed information about these other risks and factors can be found in our press release that precedes this call and in our Risk and Forward Looking Statements section of our Annual Report on Form 10 ks as updated on our quarterly reports Form 10 Q.

Operator

The forward looking statements made in this call are valid only if they hear of and the company disclaims any obligation to update this information to reflect events or developments after the date of this call, except as may be applicable by law. During today's call, we will discuss certain financial measures derived by our financial statements that are not determined in accordance with the U. S. GAAP. The reconciliations to such non GAAP financial measures to the most comparable GAAP figures are included in our earnings press release, which is available under the Investor Relations tab of our website at trustcobank.com.

Operator

Please note also that today's event is being recorded, and a replay of this call will be available for 30 days and 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. McCormick, Chairman, President and CEO. Please go ahead.

Speaker 1

Thank you, and good morning, everyone, and thank you for joining the call. As the host said, I'm Rob McCormick, President of Choscol Bank. I'm joined today as usual by Mike Olzenek, our CFO, who will give detail on the numbers and Kevin Curley, who will give color on lending. On behalf of the entire TrustCo Bank family, I'd like to express thanks for the many expressions of concern and well wishes as Hurricane Milton tore its way across our geographic footprint in Florida. We are happy to report that our people came through the storm in good shape, although a little worse for the wear.

Speaker 1

Likewise, our facilities withstood the battering, with many opening within a day or so of the storm in all locations open now. Our results this quarter are like those of a baseball team that reliably hit singles and doubles. There's no grand slam or even a home run, but at the end of the day, we scored runs and posted a win. The solid plays that we executed consisted of holding the line on the cost of deposits, originating new loans at better interest rates and controlling expenses over the year. We grew our deposits from the Q3 of last year.

Speaker 1

This was done in part by capitalizing on our strong customer relationships that enable us to direct some core deposit outflow to favorably price CDs, and we mostly grew demand deposits. With that said, we're happy to report an increase in our net interest margin over the quarter. Market conditions continued to drive customers to home equity products and we realized a 6% increase to that portfolio over the quarter, adding to growth of 18% over the year. The new volume was booked at slightly higher rates. These factors all combined to increase our margin over the quarter.

Speaker 1

We also saw total loans reach another all time high and nearly $5,100,000,000 which is a win in itself and also highlights the symmetry that we are so proud of between our deposit portfolio and our loan portfolio. We gathered deposits in our areas of operation and lend those same funds right back into those communities. Credit quality is on the minds of a lot of investors and analysts. Ours remains stellar.

Speaker 2

As it has been over a long period of time,

Speaker 1

non performing loans total loans held steady at 0.38% over the quarter. This speaks to our high underwriting standards and the diligent and effective efforts of our loan processing operation. The most important one we posted was a very respectable $12,900,000 in net income. Now Mike will dive into the numbers, Kevin will provide an update on the loan portfolio, and then we can take your questions if you have any. Mike?

Speaker 3

Thank you, Rob, and good morning, everyone. I'll now review TrustCo's financial results for the Q3 of 2024. As we noted in the press release, the company saw 3rd quarter net income of $12,900,000 an increase of 2.6% over the prior quarter, which yielded a return on average assets and average equity of 0.84% and 7.74 percent respectively. Capital remains strong. Consolidated equity to assets ratio was 10.95 percent for the Q3 of 2024 compared to 10.31% in the Q3 of 2023.

Speaker 3

Book value per share at September 30, 2024 was $35.19 up 7.3% compared to $32.80 a year earlier. Average loans for the Q3 of 2024 grew 2.6 percent or $127,000,000 to $5,000,000,000 from the Q3 of 2023, an all time high. Overall loan growth has continued to increase and leading the charge was the residential real estate portfolio as usual, which increased by $50,400,000 or 1.2 percent in the Q3 of 2024 over the same period in 2023. Home equity lines of credit increased $60,000,000 or 18.7 percent. Average commercial loans increased $18,100,000 or 6.9 percent and installment loans decreased $1,500,000 or 9.5 percent over the same period in 2023.

Speaker 3

For the Q3 of 2024, the provision for credit losses was $500,000 Retaining deposits has been a key focus throughout 2024. Total deposits ended the quarter at $5,300,000,000 And 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 $38,700,000 for the Q3 of 2024, an increase of $883,000 or 2.3 percent compared to the prior quarter. The net interest margin for the Q3 of 2024 was 2.61%, up 8 basis points from the Q2 of 2024, resulting in 2 consecutive quarters of an increase in net interest margin. Yield on interest earning assets increased to 4.11%, up 5 basis points from 4.06% in the Q2 of 2024.

Speaker 3

The cost of interest bearing liabilities decreased to 1.94% in the Q3 of 2024 from 1.97% in the Q2 of 2024. Throughout 2024, we have been able to lower the rates offered on time deposits, while continuing to retain a significant portion of the product quarter over quarter, which should continue to bring down the cost of time deposits. Bank has seen erosion of margins begin to turn around last quarter and we are optimistic going forward. Our Wealth Management division continues to be a significant recurring source of non interest income. They had approximately $1,300,000,000 of assets under management as of September 30, 24.

Speaker 3

Now on to non interest expense. Total non interest expense, net of OREA expense came in at $26,000,000 down $447,000 from the prior quarter. The decrease is the result of lower cost of salaries and benefits, net occupancy equipment expense, outsourced service and advertising expense, partially offset by the increase in professional services and FDIC and other insurance during the quarter. ORE expense net came in at an expense of $204,000 for the quarter as compared to $16,000 in the prior quarter. Given the continued low level of ORE expenses, we are going to continue to hold anticipated level of expenses to not exceed $250,000 per quarter.

Speaker 3

All the other categories of non interest expense were in line with our expectations for the Q3. We'd expect 24's total recurring non interest expense, net of OREA expense, to be in the range of $26,900,000 to $27,400,000 per quarter. Now Kevin will review the loan portfolio and non performing loans.

Speaker 2

Thanks Mike and good morning to everyone. Average loans grew by $127,000,000 or 2.6 percent year over year. The growth center on residential mortgages, which increased by $40,000,000 over last year and our home equity loans also increased by $61,000,000 or 18.4 percent. In addition, our commercial loans grew by $12,000,000 year over year. For the Q3, actual loans increased by 33,000,000 dollars Residential loans increased by $35,000,000 with both first mortgages and home equity credit lines posting increases.

Speaker 2

Commercial loans and installment loans were slightly lower for the quarter. We remain well positioned in the market and seek to capitalize as market activity develops. Our portfolio products combined with the flexibility to utilize our control on pricing and our ability to offer various promotions put us in a great position. We have been keeping our rates very competitive with the goal of increasing volume. Rates in the market have increased in recent weeks and our current rate is 6.25% for our base 30 year fixed rate loan.

Speaker 2

In addition, we have very competitive adjustable rate mortgages with rates below 6%. Our home equity products continue to see steady demand as they remain attractive to many borrowers that may have low rate mortgages, but may also want to use their home's equity for various projects or large purchases. Overall, we are pleased with the loan growth in the quarter and remain focused on driving stronger results. Now moving to asset quality. Asset quality at the bank remains strong.

Speaker 2

Non performing loans were $19,400,000 atquarterend, dollars 19,200,000 last quarter and just under $18,000,000 a year ago. Outperforming loans now stand at 0.38 percent of total loans compared to 0.38% last quarter and 0.36 percent a year ago. Non performing assets totaled $21,900,000 as of September 30 versus $21,500,000 last quarter and $19,100,000 a year ago. Our early stage delinquencies also continue to be steady and charge offs for the quarter amounted to $222,000 and a year to date total of only $128,000 At quarter end, our allowance for loan losses was a solid $50,000,000 with a coverage ratio of 2 57 percent compared to $47,200,000 and a coverage ratio of 2 64% in September of 2023. Rob?

Speaker 1

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

Operator

Thank you very much. We'd now like to open the lines for Q and A.

Speaker 3

Our

Operator

Our first question comes from Ian Lappe of Gabelli Funds. Ian, your line is now open.

Speaker 4

Hi, good morning, Rob and team. Congrats on a good quarter. Yes, a few questions. I guess first on the hurricanes, good to hear the people in your properties are okay. Any thoughts about credit issues that might result from damage to maybe some of the homes that you have?

Speaker 1

We've been through quite a few of these storms unfortunately at this point, Ian, but and we've never had those types of issues before. We do establish as so people who have had losses in one way or another that we have the mortgages on their homes. We do establish reserve accounts at the bank and disperse those funds as they complete the work to restore their home. But we're not even seeing a lot of that this time around Ian. So it seems like it's not going to be a big impact overall.

Speaker 4

Okay, good. On the CDs, can you just review sort of what the pricing is for maturing CDs compared to new CDs that you're issuing now?

Speaker 1

Most of our customers like the 3 months, believe it or not, right now, Ian. So most of the customers are at maturity are going into a 3 month rate. We are offering a pretty attractive 12 month rate too, but it's about a sixty-forty split right now between people taking the 3 month and the 12 month.

Speaker 4

And how much are you saving when versus when you have one maturing and versus issuing a new one?

Speaker 1

The rate for 3 months is in the 4.5% range and the rate for 12 months is in the 4% range.

Speaker 3

Okay.

Speaker 4

And then on the Financial Services, really strong quarter and you mentioned $1,300,000,000 in AUM. Was the increase in revenues from financial services, was that driven by higher AUM or was there anything unusual in the quarter?

Speaker 1

Assets under management are up year over year, and we are proactive with regard to our fees. So the combination of the 2 have been a very positive effect in our Financial Services or in Trust. And I got to tell you, Ian, he has assembled a very Pat Laporte runs that unit for us. And Pat and Kevin have assembled a very strong team in the Trust department or the Financial Services area. So they're doing a lot of seminars and a lot of customer contact and I hope it continues, I really do because they're on a very good trend right now.

Speaker 4

Okay. Great. And then last question. So obviously, the capital position is, I think the strongest of any bank I follow. As you sort of have maybe reached an inflection point with your NIM now starting to improve, What are you thinking about in terms of capital?

Speaker 4

How do you prioritize growth? I see your branches are down year over year. Is it something you want to add branches or increase dividend or share repurchases with the stock below tangible book? Just sort of maybe you can talk about how you're thinking about those options?

Speaker 1

As we see that light at the end of the tunnel and it gets brighter over time, we're certainly going to look at all of those things. We're we are an advocate and a fan of a share buyback program, and there are a couple of areas generally that we're looking at for possible new branch expansion. So those would be probably the 2 biggest priorities that we would have.

Speaker 4

Okay.

Speaker 1

Just trying to keep our powder dry through this period of time. Okay. That's great.

Speaker 4

Okay. Congrats.

Speaker 1

All right, Ian.

Operator

Thank you very much, Ian. We currently have no further questions. So I'd like to hand back to Robert J. McCormick for any closing remarks.

Speaker 2

Thank you for your interest in

Speaker 1

our company. Hope you have a great day.

Powered by Quartr
Earnings Conference Call
TrustCo Bank Corp NY Q3 2024
00:00 / 00:00