Q2 2024 TrustCo Bank Corp NY Earnings Call
Operator: Good day, and welcome to the TrustCo Bank Corp earnings call webcast. All participants will be in listen-only mode.
Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one. To withdraw your question, you may press star and two.
Speaker Change: Good day and welcome to the TrustCo Bank Corp earnings call webcast. All participants will be in listen-only mode.
Speaker Change: Should you need assistance, please signal a conference specialist by pressing star key followed by zero on your telephone keypad.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one. To withdraw your questions, you may press star and two.
Operator: Before proceeding, we would like to mention that this presentation may contain forward-looking information about TrustCo Bank Corp., New York, and this is intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. However, actual results, performance, or achievements could differ materially from those expressed or implied by such statements due to various risks, uncertainties, and other factors. More detailed information about these and other risk factors can be found in our press release that precedes this call and in the risk factors and forward-looking statements section of our annual reports on form 10-K, as updated by our quarterly reports on form 10-Q.
Speaker Change: Before proceeding, we would like to mention that this presentation may contain forward-looking information about TrustCo Bank Corp NY and that this is intended to be covered by the Safe Harbor for Forward-Looking Statements provided by the Private Securities Litigation Reform Act of 1995.
Speaker Change: Actual results, performance, or achievements could differ materially from those expressed or implied by such statements due to various risks, uncertainties, and other factors.
Speaker Change: More detailed information about these and other risk factors can be found in our press release that precedes this call and in the risk factors and forward looking statements section of our annual reports Form 10-K as updated by our quarterly reports on Form 10-Q .
Operator: The forward-looking statements made on this call are only valid as of the day you hear about them, and the company disclaims any obligation to update the 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 US GAAP. 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 on our website at TrustCobank.com. Please also note that today's event is being recorded.
Speaker Change: The forward-looking statements made on this call are only valid as of the day you hear of and the company disclaims any obligation to update the information to reflect events or developments after the date of this call except as may be required by applicable law.
Speaker Change: During today's call we will discuss certain financial measures derived from our financial statements that are not determined in accordance to the US GAAP.
Speaker Change: The reconciliations of such non-GAAP financial measures to the most comparable GAAP figures are included in our owning press release, which is available under the Investors Relations tab on our website at TrustCoBank.com
Operator: A replay of today's call will be available for 30 days, and audio webcasts will be available for one year, as described in our earnings press release. At this time, I would like to turn over the conference call to Mr. Robert J. McCormick, Chairman, President, and CEO.
Speaker Change: Please also note that today's event is being recorded. A replay of today's call will be available for 30 days and audio webcasts will be available for one year as described in our earnings press release.
Operator: Please go ahead.
Speaker Change: At this time I would like to turn over the conference call to Mr Robert J McCormick, Chairman, President and CEO . Please go ahead.
Robert Joseph McCormick: Morning, everyone. Thank you for joining the call. I'm Rob McCormick, the president of the bank, joined today as usual by Mike Ozimek, our CFO. Also joining me today is Kevin Curley. Kevin is an Executive Vice President and the newly promoted Chief Banking Officer. Kevin has been with the bank for over 30 years and brings a wealth of experience to his new position. He will give color on lending, and Mike will give detail on the numbers.
Robert Joseph McCormick: Morning everyone and thank you for joining the call. I'm Rob McCormick, the President of the Bank. I'm joined today as usual by Mike Ozimek, our CFO . Also joining me today is Kevin Curley. Kevin is an Executive Vice President, newly promoted Chief Banking Officer.
Speaker Change: Kevin has been with the bank for over 30 years and brings a wealth of experience to his new position. He will give color on lending and Mike will give detail on the numbers.
Robert Joseph McCormick: I believe we are seeing early signs of a return to normalcy in the housing markets. In our experience, Florida is leading the way on this, with new construction seeming to catch up with demand. Inventory is still tight in the Northeast. In New York, we are seeing some loosening in the downstate market, with median days on the market declining over the last year and the number of new listings increasing, suggesting that sellers are coming off the sidelines, and buyers are active again. Upstate is essentially flat year over year.
Speaker Change: I believe we are seeing early signs of a return to normalcy in the housing markets. In our experience, Florida is leading the way.
Speaker Change: on this, with new construction seeming to catch up with demand. Inventory is still tight in the Northeast. In New York, we are seeing some loosening in the downstate market, with median days in the market declining over the last year and the number of new listings increasing.
Speaker Change: suggesting that sellers are coming off the sidelines and buyers are active again.
Robert Joseph McCormick: Indicators suggest that heckle volume and sales volume will trend down while purchase volume trends up. Overall, we believe the trend is positive. Kevin will detail how average loans are up, and this has contributed positively to net income and net interest margin, which improved 4% and 3.7%, respectively. We also have retained competitively priced time deposits. Our strategy with respect to pricing, both in terms of loans and deposits, is showing signs of success in what we have seen margin improve, some expected contraction.
Speaker Change: Upstate is essentially flat year-over-year.
Speaker Change: will trend down while purchase volume trends up. Overall, we believe the trend is positive.
Speaker Change: As Kevin will detail, average loans are up, and this has contributed positively to net income and net interest margin, which improved 4% and 3.7% respectively.
Kevin: We also have retained competitively priced time deposits. Our strategy with respect to pricing, both in terms of loans and deposits, is showing signs of success in what we have seen margin improvement.
Robert Joseph McCormick: Good strategy, well-executed, yields favorable outcomes. Several of the measures also were very favorable this quarter. Earnings per share grew, and book value was up almost $2 over this time last year. We also saw improvements in return metrics; ROA and ROE both grew over the quarter. The Strong Results Increased Income and Value Differentiates from Any Institutions in Our Sector. TrustCo's thoughtful and conservative strategy has proven successful over the long haul. Although it is something we mentioned quarter after quarter, the recurring themes of excellent liquidity, strong capital, and superior credit quality weren't repeating.
Kevin: or some expected contraction. Good strategy, well-executed, yields favorable outcomes.
Kevin: Several of the measures also were very favorable this quarter. Earnings per share grew and book value was up almost $2 over this time last year. We also saw improvements in return metrics. ROA and ROE both grew over the quarter.
Kevin: These strong results increase income and value differentiates from any institutions in our sector. TrustCo's thoughtful and conservative strategy has proven successful over the long haul.
Kevin: Although it is something we mentioned quarter after quarter, the recurring themes of excellent liquidity, strong capital, and superior credit quality weren't repeating.
Robert Joseph McCormick: TrustCo consistently performs well with regard to these measures. We are proud to report on them, and our shareholders realize the value they generate. It also bears emphasis that all of these results were achieved without resorting to brokerage deposits or borrowing. We have no debt on our books at a time when some banks struggle to turn a profit.
Kevin: TrustCo consistently performs well with regard to these measures.
Kevin: We are proud to report about them and our shareholders realize the value they generate.
Kevin: It also bears emphasis that all of these results were achieved without resorting to brokered deposits or borrowing. We have no debt on our books at a time when some banks struggle to turn a profit. We believe that the skies are beginning to clear as we look forward to the balance of the year might bring.
Robert Joseph McCormick: We believe that the skies are beginning to clear, and as we look forward to the balance of the year, Mike Brink. Now Mike will give us detail on the numbers, and Kevin will give us color on the loan portfolio. Then we will take your questions, if you have any. Mike. Thank you.
Mike: Now Mike will detail, give us detail on the numbers. Kevin will give us color on the loan portfolio. Then we will take your questions if you have any. Mike. Thank you, Robin. Good morning, everyone. I'll now review TrustCo's financial results for the second quarter of 2024.
Michael M. Ozimek: Thank you, Rob. And good morning, everyone.
Michael M. Ozimek: I'll now review TrustCo's financial results for the second quarter of 2020. As we noted in the press release, the company saw a second quarter net income of $12.6 million, an increase of 3.5% over the prior quarter, which yielded a return on average assets and average equity of $3.5 million,.82% and 7.76%, respectively.
Mike: As we noted in the press release, the company saw a second quarter net income of $12.6 million, an increase of 3.5% over the prior quarter, which yielded a return on average assets and average equity of 0.82% and 7.76% respectively.
Michael M. Ozimek: Capital remains strong The consolidated equity assets ratio was 10.73% for the second quarter, compared to 10.23% for the second quarter of 2023. Book value per share June 30 24 was $34.46, up 5.5% compared to $32. $0.06 a year earlier.
Speaker Change: Capital remains strong. Consolidated equity to assets ratio was 10.73% for the second quarter of 2020.
Speaker Change: [inaudible]
Speaker Change: Book value per share of June 30th, 2004 was $34.46, up 5.5% compared to $32.00 in 2010.
Michael M. Ozimek: Average loans for the second quarter of 24 grew 3.8% or $182.2 million to $5 billion from the second quarter of 23. Consequently, overall loan growth has continued to increase, and leading the charge was the residential real estate portfolio, as usual, which increased by $89.9 million, or 2.1% in the second quarter of 2004, over the same period in 2014. Average commercial loans increased $31.5 million or 12.7%, home equity lines of credit increased $61.1 million or 20.1%, and installment loans decreased $339,000 or 2.2% over the same period of this money break. For the second quarter of 24, the provision for credit losses was $500,000.
Speaker Change: $0.56 cents a year earlier
Speaker Change: Average loans for the second quarter of 24 grew 3.8% or $182.2M to $5B from the second quarter of 23 hit all time high.
Speaker Change: Consequently, overall loan growth has continued to increase, and leading the charge was the residential real estate portfolio as usual, which increased by $89.9 million, or 2.1 percent in the second quarter of 2004, over the same period in 2003.
Speaker Change: Average commercial loans increased $31.5 million or 12.7%, home equity lines of credit increased $61.1 million or 20.1%, and installment loans decreased $339,000 or 2.2% over the same period of 23.
Speaker Change: For the second quarter of 24, the provision for credit losses was $500,000.
Michael M. Ozimek: Retaining deposits continues to be a focus in 2020. Total Deposits ended the quarter at $5.3 billion and were up $18.5 million compared to the prior year. As we move forward, our objective is to continue to offer competitive value.
Speaker Change: Retaining deposits continues to be a focus in 2024. Total deposits ended the quarter at $5.3 billion and were up $18.5 million compared to the prior year. As we move forward, our objective is to continue to offer competitive value
Michael M. Ozimek: Product Offerings of the Bank through Aggressive Marketing and Product Differentiation, and income was $37.8 million for the second quarter of 2024, an increase of $1.2 million or 3.3% compared to the prior quarter, and the net interest margin for the second quarter of 2024 was 2.53%, up nine basis points from the first quarter. Yield on earning assets increased to 4.06%, up 7 basis points from 3.99% in the first quarter of 2014. Cost of interest-bearing liabilities increased to 1.97% in the second quarter of 2024 from 1.99% in the first quarter.
Speaker Change: product offerings of the bank through aggressive marketing and product differentiation.
Speaker Change: That income was $37.8 million for the second quarter of 2024, an increase of $1.2 million or 3.3% compared to the prior quarter.
Speaker Change: And income net interest margin for the second quarter of 2024 was 2.53%, up nine basis points from the first quarter of 2024.
Speaker Change: Yield on earning assets increased to 4.06%, up 7 basis points from 3.99% in the first quarter of 2014.
Speaker Change: The cost of interest bearing liabilities increased to 1.97% in the second quarter of 2024 from 1.99% in the first quarter of 2024.
Michael M. Ozimek: Our Wealth Management Division continues to be a significant recurring source of non-recurring revenue and had approximately 1.1 billion of assets under management as of June 30, additionally. As mentioned in the press release, the company marked its Visa Class C common stock to fair value and recorded a gain of $1.4 million based on the conversion privilege of the Visa Class C common stock.
Speaker Change: Our Wealth Management Division continues to be a significant recurring source of non-interest income.
Speaker Change: They had approximately 1.1 billion of assets under management as of June 30th, 2024.
Speaker Change: additionally
Speaker Change: As mentioned in the press release, the company marked its Visa Class C common stock to fair value and recorded a gain of $1.4 million based on the conversion privilege of the Visa Class C common stock.
Michael M. Ozimek: Now on to non-issues expense. Total non-issues expense, net of ORE expense, came in at $26.4 million, up $1.4 million from the prior quarter. The increase is primarily the result of higher employee benefit costs in the current quarter. Ordering expense net came in at $16,000 for the quarter as compared to $74,000 in the prior quarter. Given the continued low level of orrery expenses, we're going to continue to hold the anticipated level of expenses to not exceed $250,000 per quarter. All the other categories of non-interest expense were in line with our expectations for the second quarter. Now, Kevin will review the loan portfolio and non-performing loans.
Speaker Change: Now on to non-issues expense. Total non-issues expense net of ORE expense came in at twenty six point four million dollars up 1.4 million from the prior quarter. The increase is primarily the result of higher employee benefit costs in the current quarter.
Speaker Change: Our expense net came in at $16,000 for the quarter as compared to $74,000 in the prior quarter. Given the continued low level of our expenses we're going to continue to hold anticipated level of expenses not exceed $250,000 per quarter.
Speaker Change: All the other categories of non-interest expense were in line with our expectations for the second quarter.
Kevin Curley: Thanks, Mike, and good morning to everyone. Our average loans grew by $182 million, or 3.8% year-over-year. Our growth centered on residential mortgages, which increased by $89.9 million over last year. Our home equity loans also increased by $61 million, or 20.1%, and our commercial loans grew by $31.5 million, or 12.7% over last year. In the second quarter, actual loans increased by $33 million. Residential loans increased by $31 million, with both first mortgages and home equity products closely increasing. In addition, our commercial loans increased by $3.3 million.
Speaker Change: Now Kevin will review the loan portfolio and non-performing loans.
Kevin: Thanks, Mike, and good morning to everyone. Our average loans grew by $182 million, or 3.8% year-over-year.
Kevin: The growth centered on residential mortgages, which increased by $89.9 million over last year. Our home equity loans also increased by $61 million, or 20.1%, and our commercial loans grew by $31.5 million, or 12.7% over last year.
Kevin: The second quarter, actual loans increased by $33 million, residential loans increased by $31 million with both first mortgages and home equity products posting increases.
Kevin Curley: We remain well positioned in the market and seek to capitalize as market activity develops, our portfolio of products combined with the flexibility to utilize various promotions. And the control we have on pricing allows us to be in a great position. Rates in the market have decreased in recent weeks, and we currently stand at 6.375% for our base 30 year fixed rate loan. We have been keeping our rates very competitive with the goal of increasing volume. More recent market activity on the purchase side has seen steady progress. We continue to focus our efforts on capturing a larger piece of the current market.
Kevin: In addition, our commercial loans increased by $3.3 million.
Kevin: We remain well positioned in the market and seek to capitalize as market activity develops.
Speaker Change: portfolio product combined with the flexibility to utilize various promotions and the control we have on pricing allows us to be in a great position.
Kevin: Rates in the market have decreased in recent weeks and we currently stand at 6.375% for our base 30 year fixed rate loan.
Kevin: We have been keeping our rates very competitive with the goal of increasing volumes.
Kevin: More recent market activity on the purchase side has seen steady progress, and we continue to focus our efforts on capturing a larger piece of the current market.
Kevin Curley: Overall, we are pleased with our loan growth in the quarter and year over. Now, I'm moving to asset quality. Asset quality, the bank remains remains strong. Operating loans decreased to $19.2 million versus $19.4 million last year. Notifying loans now stand at point three percent of total loans versus point four zero percent a year ago. Nonperforming assets sold $21.5 million as of June 30, versus $20.8 million a year ago. Our early stage delinquencies also continue to be steady, and charge-offs for the quarter amounted to a net recovery of $52,000. At quarter end, the allowance for credit losses was $49.8 million with a coverage ratio of 259.4%, compared to $46.9 million at a coverage ratio of 241.6% in 2022. That's our story, and we're happy.
Kevin: Overall, we are pleased with our loan growth in the quarter and year-over-year.
Speaker Change: Moving to asset quality, asset quality at the bank remains strong. Operating loans decreased to $19.2 million versus $19.4 million last year.
Kevin: Non-performing loans now stand at 0.38% of total loans versus 0.40% a year ago.
Kevin: Non-performing assets totaled $21.5 million as of June 30th, versus $20.8 million a year ago.
Kevin: Our early stage delinquencies also continue to be steady, and charge-offs for the quarter amounted to a net recovery of $52,000.
Kevin: At quarter end, the allowance for credit losses was $49.8 million, with a coverage ratio of 259.4 percent.
Kevin: compared to $46.9 million at a coverage ratio of 241.6% in 2023.
Kevin Curley: That's our story, and we're happy to answer any questions you might have.
Kevin: That's our story and we're happy to answer any questions you might have.
Operator: We will now begin the Q&A segment of the conference. Just as a reminder, if you'd like to ask a question, please press star followed by 1 on your telephone keypad. To remove yourself from that line of questioning, please press star followed by 2. Our first question comes from Ian Lapey of Gabelli Funds.
Speaker Change: We will now begin the Q&A segment of the conference.
Speaker Change: Just as a reminder, if you'd like to ask a question, please press star followed by 1 on your telephone keypad. To remove yourself from that line of questioning, please press star followed by 2.
Speaker Change: Our first question comes from Ian Lapey of Gabelli Funds.
John Dundee Lapey: Hi, good morning, Rob and team. Congratulations on a good quarter. I guess first of all, on the great to see the NIM expanding after obviously dropping several quarters in a row. Just curious, you benefited from a lower Cost of Deposits. Assuming no Fed rate decreases this quarter, do you think you can... We still drive that cost of deposits down this quarter based on sort of what repricing trends you're seeing.
Speaker Change: And your line is now open.
John Dundee Lapey: Hi, good morning Rob and team, congrats on a good quarter. I guess first of all on the
John Dundee Lapey: Great to see the NIM expanding after obviously dropping several quarters in a row.
Speaker Change: I'm just curious, you benefited from a lower
Speaker Change: Assuming no Fed rate decreases this quarter, do you think you can
Speaker Change: You know still drive that cost of deposits down this quarter based on sort of what repricing trends you're seeing
Robert Joseph McCormick: That's the goalie, and we're watching that very, very closely, and we're maintaining the balance between what we have to do to keep our liquidity at an acceptable level. [inaudible] positive borrowing market, funding our loans and requirements in cash as we need it, so that would be the goal to continue to try and drag that number down.
Speaker Change: That's the goal, Ian. We're watching that very, very closely and we're maintaining the balance between what we have to do to keep our liquidity at an acceptable level without going into the roof.
Speaker Change: for positive borrowing markets.
Speaker Change: in funding our loans and requirements in cash as we need it. So, that would be the goal to continue to try.
Speaker Change: Drag that number down.
Speaker Change: [inaudible]
John Dundee Lapey: Um, I think you knew that Ian, I don't know. Yeah, I know. The fees for services to customers were down sequentially and year-over-year, you know, fairly significantly, double-digit. And anything unusual going on there?
Speaker Change: Yeah
Speaker Change: [inaudible]
Speaker Change: I figured you knew that, Ian. I don't know.
John Dundee Lapey: Yeah, I know.
Speaker Change: The fees for services to customers was down sequentially and year-over-year, you know, fairly significantly, double-digit, and anything unusual going on there?
Robert Joseph McCormick: The only outlier, I think, would be NSF fees. Ian, you recall that we were caught in that trap with NSF fees. We have to calculate NSF fees and how we collect NSF fees. Some of the other fees, though, you know; our wealth management has been on a great tear of growth and a couple of other areas, kind of making up for that. Some months, believe it or not, NSF fees are still a little bit higher or higher. FireMonths, but it's, uh... I would say that's really the only impact we've had directly on
Speaker Change: The only outlier, I think, would be NSF fees. Ian, you recall that we were caught in that trap with the NSF fees, so we have to use the way we calculate NSF fees and how we collect NSF fees.
Speaker Change: Some of the other fees, though, you know, our wealth management has been on a great tear, our growth, and a couple of other areas have been...
John Dundee Lapey: Kind of making up for that.
Speaker Change: Some months, believe it or not, NSF fees are still a little bit higher or higher than before.
Speaker Change: prior months, but it's uh
Speaker Change: I would say that's really the only impact we've had directly on fees.
John Dundee Lapey: Okay. And then great growth in the HELOC portfolio. Just curious, what percent roughly is going to exist?
Speaker Change: for the period.
Speaker Change: Okay, and then great growth in the HELOC portfolio. Just curious, what percent roughly is going to existing customers?
Speaker Change: And then what is the loan-to-value if you include, obviously, the first lien that's ahead of you?
Kevin Curley: If you have your first mortgage with TrustCo, you can get up to a 90% loan-to-value, and I think it's about a 60-40 split between... (inaudible)
Speaker Change: If you have your first mortgage with TrustCo, you can get up to a 90% loan-to-value, and I think it's about 60-40 split between
Speaker Change: Existing TrustCo customers and new customers. I'm looking at Kevin Carlin.
Kevin Carlin: So I think that's about the split, Ian. We've been known for a very long time to be strong.
Kevin Curley: Where you lend her. You were an early adopter, years and years and years.
Kevin Carlin: at Home Equity Lender.
Kevin Curley: And with some of the bigger banks not offering home equity credit lending, it kind of drives people to us. We do get non-customers.
John Dundee Lapey: And then last question, Rob, you mentioned the housing market is starting to show some signs of life. Are you seeing any increase? Payoffs or refis of your Existing Residential Mortgage Book? No, I would say stable to down. We're still experiencing work. Not huge percentages, but it's very stable and trending a little bit down. Okay, great, and congratulations.
Kevin Carlin: Now, why are you...
John Dundee Lapey: Okay, great. And then, last question, Rob, you mentioned the housing market is important.
Speaker Change: It's starting to show some signs of life. Um, are you seeing any increase in...
Speaker Change: in payoffs or refis of your
Operator: No, I would say stable-to-downly, but still experiencing work. Not huge percentages, but it's very stable and trending a little bit down.
Rob: Existing Residential Mortgage Book
Rob: No, I would say stable to down. We're still experiencing work.
Rob: Not huge percentages, but it's very stable and trending a little bit down.
Operator: Okay, great.
Operator: Congratulations again.
Speaker Change: Okay, great. And congratulations again. Thank you.
Operator: We currently have no further questions.
Operator: We currently have no further questions, and therefore, I will hand it back to our speaker, Robert McCormick, for closing remarks.
Robert McCormick: Therefore, I will hand back to our speaker, Robert McCormick, for closing remarks.
Speaker Change: We currently have no further questions and therefore I will hand back to our speaker, Robert McCormick, for closing remarks.
Robert McCormick: Thanks for joining us this morning.
Robert Joseph McCormick: Thanks for joining us this morning. A special shout out to Troy Heidenberg, by the way, on the call. Have a great day.
Robert McCormick: Special shout out to Troy Heidenberg, by the way, on the call.
Robert Joseph McCormick: Thanks for joining us this morning. Special shout out to Troy Heidenberg, by the way, on the call. Have a great day.
Robert McCormick: I'm a great day.
Robert McCormick: This concludes today's call. Thank you to everyone for joining. You may now disconnect your lines.
Operator: This concludes today's call. Thank you to everyone for joining us. You may now disconnect your lines.
Speaker Change: This concludes today's call. Thank you to everyone for joining. You may now disconnect your lines.
unknown: That's old when you're the son of a...
Speaker Change: That's old when you're a son.