Yahoo Finance TrustCo Bank Corp NY (NASDAQ:TRST) Q1 2024 Earnings Call Transcript
TrustCo Bank Corp NY (NASDAQ:TRST) Q1 2024 Earnings Call Transcript April 23, 2024
TrustCo Bank Corp NY isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, and welcome to the TrustCo Bank Corp Earnings Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Before proceeding, we would like to mention that this presentation may contain forward-looking information about TrustCo Bank Corp 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 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 preceded this call and in the Risk Factors and forward-looking statements section of our annual report on Form 10-K and as updated by our quarterly reports on Form 10-Q.
The forward-looking statements made on this call are valid only as of the date hereof, 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 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. 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 Investor Relations tab of our website at trustcobank.com. Please also note that today's event is being recorded. A replay of the call will be available for 30 days and audio webcast will be available for one year, as described in our earnings press release.
At this time, I would like to turn the conference over to Mr. Robert J. McCormick, Chairman, President, CEO. Please go ahead.
Robert McCormick: Thank you. Good morning, everyone, and thank you for joining the call. I'm Rob McCormick, the President of TrustCo Bank. I'm joined today, as I usually am, by Scot Salvador, and Mike Ozimek. Scot will provide color on lending and credit quality and Mike will follow my comments with detail on the numbers. We ended 2023 in good shape. Our loan portfolio surpassed the $5 billion mark, reaching another all-time high. Our team worked together to retain and grow our customer base, allowing us to lag on some of the deposit rates. We improved our efficiencies by consolidating a few branch locations, and we maintained our rock-solid credit quality during that -- year that challenged our industry. 2024 is off to a good start.
Positive trend on total loans continue to reach yet another all-time high. Income was also positive with net income of $12 million and non-interest income up. Net interest margin was slightly down at 2.44, but generally held steady throughout the quarter. We saw a solid improvement in our return metrics with return on average assets and return on average equity both up from the previous quarter. Earnings per share increased significantly from the end of 2023 and our book value per share also improved. Efficiency ratio has trended favorably down at quarter end. Exceptional credit quality remains a hallmark of TrustCo lending. As those who follow us know, we are a portfolio lender, and the quality of loans we originate supports the stability of the company over the life of the loans, both residential and commercial underwriting standards of rigorous and yield favorable outcomes.
Non-performing loans and non-performing assets remain essentially flat, and charge-offs again resulted in a net recovery. We are pleased to report that our stock repurchase program has been reauthorized. We anticipate taking advantage of strategic purchase opportunities as they present themselves. Now Mike will give us detail on the numbers. Scot will give color on the loan portfolio, and then we will take your questions. Mike?
Michael Ozimek: Thank you, Rob, and good morning, everyone. I will now review TrustCo's financial results for the first quarter of 2024. As you noted in the press release, the company saw first quarter net income of $12.1 million, an increase of 23.13% over the prior quarter, which yielded a return on average assets and average equity of 0.80% and 7.54%, respectively. Capital remains strong. Consolidated equity to assets ratio was 10.51% for the first quarter of 2024, compared to 10.17% in the first quarter of '23. Book value per share at March 31, '24 was $34.12, up 5.6% compared to $32.31 a year earlier. Average loans for the first quarter of 2024 grew 5.2% or $249.4 million to $5 billion from the first quarter of '23, an all-time high.
Loan growth has continued to increase and occurred in all of our loan categories and leading the charge with the residential real estate portfolio as usual, which increased $146.6 million or 3.5% in the first quarter of 2024 over the same period in 2023. Average commercial loans increased $38.3 million or 16%. Home equity lines of credit increased to $61.7 million or 21.2%, and installment loans increased $2.8 million or 21.1% over the same period of '23. For the first quarter of '24, the provision for credit losses was $600,000. Retaining deposits has been a key focus during '23 and into 2024. Although, core deposits were down compared to the prior quarter, total deposits, as of March 31, 2024 increased $4.4 million from the end of '23 and remain at $5.4 billion.
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 $36.6 million for the first quarter of '24, a decrease of $10.4 million compared to the same period in '23. Net interest margin for the first quarter of 2024 was 2.44%, down 77 basis points for the first quarter of '23. Yield on interest-earning assets increased to 3.99%, up 30 basis points from 3.69% in the first quarter of 2023. The cost of interest rate at liabilities increased to 1.99% in first quarter of ‘24 from 0.63% in the first quarter 2023. During the first quarter of 2024, we have been able to lower the rates offered on time deposits while continuing to retain and grow that product.
This should bring down the cost of time deposits over time. The bank has seen the erosion of margin beginning to slow when comparing to decrease to prior quarters, and we are optimistic that we are nearing the bottom of this rate cycle. Our Wealth Management division continues to be a significant recurring source of non-interest income. They had approximately $1 billion of assets under management as of March 31, 2024. Now on to non-interest expense. Total non-interest expense net of ORE expense came in at $24.8 million, down $4 million from the prior quarter. As mentioned in the earnings release, the decrease is primarily a result of lower salaries and employee benefit costs in the first -- in the current quarter and a litigation settlement in the prior quarter.
ORE expense net came in at $74,000 for the first quarter as compared to $12,000 in the prior quarter. Given the continued low level of ORE expenses, we're going to continue to hold anticipated level of expenses not to exceed $250,000 per quarter. All of the other categories in non-interest expense were in line with our expectations for the quarter. We would expect 2024's total recurring non-interest expense, net of ORE expense, to be in the range of $26.9 million to $27.4 million per quarter. Now Scot will review the loan portfolio and non-performing loans.
Scot Salvador: Good morning, everyone. Thanks, Mike. Total loans grew $206 million or 4.3% year-over-year in actual numbers, ending the first quarter just over $5 billion. The growth was centered on residential mortgages, which increased by $172 million with an additional increase of $33 million coming from commercial. On the quarter, loans grew by approximately $2.5 million as residential loans decreased slightly and commercial loans increased by $5.5 million. We're pleased to have grown the loan portfolio by over $200 million over the past year in what has been a challenging environment. First quarter's activity reflects recent trends with home equity products continuing to post overall growth. Purchase money market continues with nationwide themes as interest rates and other market conditions, restrained volume versus prior years.
However, we remain well positioned in the market and seek to not only capitalize on the increased market activity as it develops, but we're also looking to take increased market share from our competitors. Our advantageous portfolio product, combined with our ability to trade varied promotions control our own pricing versus the market, puts us in a unique position to do so. Rates in the market moved back up in recent weeks, and we currently stand at 6.99% for our base 30 year fixed rate. As stated, we have been keeping our rates sharp with the goal of increasing market share and driving more volume as we enter the main selling season. Our committed loan backlog stands roughly equivalent to the end of last quarter. More recent activity has picked up, however, and we have a good amount of loans in the earlier stages of the processing cycle.
This should translate to increased committed backlog numbers and net portfolio growth as we move forward. Asset quality measures remained good. Non-performing loans were $18.3 million as of quarter end versus $19.2 million at 3/31/23. Non-performing assets totaled $20.6 million versus $21 million a year ago. Net charge-offs in the quarter amounted to a $42,000 net recovery. This follows upon three consecutive years stretching back to 2021 when net charge-offs for the year when a cumulative recovery position. Our allowance for credit losses to total loans remained essentially flat in the quarter at 0.98%. The coverage ratio or allowance for credit losses to non-performing loans stands at 269%, as of March, up from 244% a year ago. Bob?
Robert McCormick: That's our story, and we're happy to take any questions anyone might have.
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