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TrustCo Announces Third Quarter 2019 Results; Net Income of $14.7 Million and 5.3% Average Residential Loan Growth Year over Year

GLENVILLE, N.Y., Oct. 21, 2019 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo, NASDAQ: TRST) · TrustCo Bank Corp NY today announced third quarter 2019 net income of $14.7 million or $0.152 diluted earnings per share compared to $15.2 million or $0.157 diluted earnings per share in the third quarter of 2018 despite an increase of $4.7 million in interest expense during the same time period. Similar results were noted during the nine month period wherein net income was $43.9 million for the nine months ended September 30, 2019 versus $45.4 million for the same period in 2018 while total interest expense increased by $12.9 million.          

Summary

Robert J. McCormick, Chairman, President and Chief Executive Officer noted, “We are pleased to be able to report an increase in average residential loan growth of 5.3% or $175.6 million in the third quarter 2019 compared to the third quarter 2018.  Our focus on traditional lending criteria, conservative balance sheet management and expense control has enabled us to produce consistent earnings, maintain strong liquidity and capital, and allowed us to continue to grow our business and take advantage of changes in market and competitive conditions.  Our strong financial condition is evidenced by our continued recognition as a BauerFinancial, Inc. 5-Star Superior Bank Rating.”  Average deposits increased 5.6% for the third quarter of 2019 compared to the third quarter 2018.  Mr. McCormick further added “We continue to add core customer relationships, which ultimately drive future growth.  Loan growth and stabilizing cost of funds as a result of federal rate cuts have put us in a good position as we move forward.”

TrustCo saw solid loan growth in the third quarter of 2019 compared to the prior year led by an increase in residential mortgages.  Loan portfolio expansion was funded by a combination of utilizing our strong cash balances and growth in our deposit base.  TrustCo’s strong liquidity position continues to allow it to take advantage of opportunities when interest rate conditions change.

Details

Average loans were up $158.4 million or 4.2% in the third quarter 2019 over the same period in 2018.  Average residential loans, our primary lending focus, were up $175.6 million or 5.3% in the third quarter 2019, over the same period in 2018.  Average deposits are up $236.4 million or 5.6% for the third quarter 2019 over the same period a year earlier.  The increase in deposits was the result of a $301.1 million or 26.0% increase in average time deposits over the same period last year.  Excluding time deposits, total average core deposit accounts, which consist of checking, savings and money market deposits accounts, were down $64.7 million or 2.1% for the third quarter 2019 compared to the third quarter 2018. 

The cost of interest bearing liabilities increased to 0.94% in the third quarter 2019 from 0.52% in the third quarter 2018.  The cost of savings and interest bearing checking decreased slightly by 2 basis points and 3 basis points, respectively, from the third quarter 2018.  Money market deposits increased 41 basis points to 0.83% versus 0.42% from the third quarter 2018. A significant portion of our CD portfolio is expected to reprice during the fourth quarter which at current lower market rates will have a positive impact on net interest margin.  The net interest spread for the third quarter 2019 was 2.88%, down 38 basis points from 3.26% in the third quarter of 2018.  Net interest income (TE) decreased by 4.6% or $1.9 million over the same period last year.  Because we offered competitive shorter term rates, we expect margin to stabilize in the fourth quarter of 2019 as our shorter term time deposits could reprice lower and provide opportunity for increased margin expansion.

The Bank continued to demonstrate its ability to grow shareholders’ equity as average equity was up $46.5 million or 9.8% in the third quarter of 2019 compared to the same period in 2018.  On this expanded equity, return on average assets and return on average equity for the third quarter 2019 were 1.12% and 11.19%, respectively, compared to 1.24% and 12.84% for the third quarter 2018.  Improving efficiencies to reduce costs continues to remain a key area of focus.  Total operating expenses decreased by $474 thousand or 1.9% in the third quarter 2019 as compared to the third quarter 2018, driven by decreases in advertising expense, FDIC and other insurance expense, and other real estate expense, partially offset by an increase in salaries and employee benefits. The growth in salaries and benefit expense was the result of our targeted effort to hire and retain talent.

Asset quality and the resulting loan loss reserve measures continued to improve.  Nonperforming loans (NPLs) were $21.0 million at September 30, 2019, compared to $23.8 million at September 30, 2018.  NPLs were 0.53% of total loans at September 30, 2019, compared to 0.62% at September 30, 2018.  The coverage ratio, or allowance for loan losses to NPLs, was 210.9% at September 30, 2019, compared to 188.0% at September 30, 2018.  Nonperforming assets (NPAs) were $23.4 million at September 30, 2019 compared to $26.1 million at September 30, 2018.  The ratio of allowance for loan losses to total loans was 1.11% as of September 30, 2019, compared to 1.17% at September 30, 2018 which reflects both an improvement in asset quality and economic conditions in our lending areas.  The allowance for loan losses was $44.3 million at September 30, 2019 compared to $44.7 million at September 30, 2018.  Net chargeoffs for the third quarter 2019 were $36 thousand versus $67 thousand in the third quarter 2018.  As a result of the aforementioned loan growth and improvement in asset quality trends, the Company did not record a provision for loan losses during the third quarter 2019.

At September 30, 2019 the tangible equity to tangible asset ratio was 10.07%, compared to 9.76% at September 30, 2018.  As mentioned earlier, the Company is proud of its ability to grow shareholders’ equity.  Tangible book value per share at September 30, 2019 was $5.42, up 9.94% compared to $4.93 a year earlier.

TrustCo Bank Corp NY is a $5.2 billion savings and loan holding company and through its subsidiary, Trustco Bank, operated 148 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at September 30, 2019.

In addition, the Bank’s Financial Services Department offers a full range of investment services, retirement planning and trust and estate administration services.  The common shares of TrustCo are traded on the NASDAQ Global Select Market under the symbol TRST.

A conference call to discuss third quarter 2019 results will be held at 9:00 a.m. Eastern Time on October 22, 2019.  Those wishing to participate in the call may dial toll-free 1-888-339-0764.  International callers must dial 1-412-902-4195.  Please ask to be joined into the TrustCo Bank Corp NY / TRST call.  A replay of the call will be available for thirty days by dialing 1-877-344-7529 (1-412-317-0088 for international callers), Conference Number 10135926.  The call will also be audio webcast at: https://services.choruscall.com/links/trst191022.html, and will be available for one year. 

Safe Harbor Statement 
All statements in this news release that are not historical are forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended.  Forward-looking statements can be identified by words such as "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding our expectations for our performance during 2019, the impact of Federal Reserve actions regarding interest rates and the growth of loans and deposits throughout our branch network, our ability to capitalize on economic changes in the areas in which we operate and the extent to which higher expenses to fulfill operating and regulatory requirements recur or diminish over time.  Such forward-looking statements are subject to factors that could cause actual results to differ materially for TrustCo from those discussed. TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect TrustCo’s actual results and could cause TrustCo’s actual financial performance to differ materially from that expressed in any forward-looking statement:  our ability to continue to originate a significant volume of one-to-four family mortgage loans in our market areas; our ability to continue to maintain noninterest expense and other overhead costs at reasonable levels relative to income; our ability to make accurate assumptions and judgments regarding the credit risks associated with lending and investing activities; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board, inflation, interest rates, market and monetary fluctuations; restrictions or conditions imposed by our regulators on our operations that may make it more difficult for us to achieve our goals; the future earnings and capital levels of us and Trustco Bank and the continued receipt of approvals from our primary federal banking regulators under regulatory rules to distribute capital to TrustCo, which could affect our ability to pay dividends; results of supervisory monitoring or examinations of Trustco Bank and TrustCo by our respective regulators; adverse conditions in the securities markets that lead to impairment in the value of securities in our investment portfolio; unanticipated effects from the Tax Cut and Jobs Act that may limit its benefits or adversely impact our business;  the perceived overall value of our products and services by users, including in comparison to competitors’ products and services and the willingness of current and prospective customers to substitute competitors’ products and services for our products and services; changes in consumer spending, borrowing and saving habits; the effect of changes in financial services laws and regulations and the impact of other governmental initiatives affecting the financial services industry; changes in management personnel; real estate and collateral values; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB or PCAOB; disruptions, security breaches, or other adverse events affecting the third-party vendors who perform several of our critical processing functions; technological changes and electronic, cyber and physical security breaches; changes in local market areas and general business and economic trends, as well as changes in consumer spending and saving habits; our success at managing the risks involved in the foregoing and managing our business; and other risks and uncertainties under the heading “Risk Factors” in our most recent annual report on Form 10-K and, if any, in our subsequent quarterly reports on Form 10-Q or other securities filings.

 

 
TRUSTCO BANK CORP NY
GLENVILLE, NY
 
FINANCIAL HIGHLIGHTS
 
(dollars in thousands, except per share data)
(Unaudited)
    Three months ended
    9/30/2019   6/30/2019   9/30/2018  
Summary of operations            
  Net interest income (TE) $   38,644     39,192     40,526  
  (Credit) Provision for loan losses     -     (341 )   300  
  Noninterest income     4,925     4,914     4,455  
  Noninterest expense     24,070     24,902     24,544  
  Net income     14,708     14,667     15,199  
             
Per common share            
  Net income per share:            
  - Basic $   0.152     0.152     0.157  
  - Diluted     0.152     0.151     0.157  
  Cash dividends     0.068     0.068     0.068  
  Tangible Book value at period end     5.42     5.32     4.93  
  Market price at period end     8.15     7.92     8.50  
             
At period end            
  Full time equivalent employees     823     858     807  
  Full service banking offices     148     148     148  
             
Performance ratios            
  Return on average assets     1.12 %   1.14     1.24  
  Return on average equity     11.19     11.60     12.84  
  Efficiency (1)     55.17     55.98     53.39  
  Net interest spread (TE)     2.88     2.95     3.26  
  Net interest margin (TE)     3.04     3.11     3.35  
  Dividend payout ratio     44.85     44.94     43.29  
             
Capital ratios at period end            
  Consolidated tangible equity to tangible assets (2)     10.07 %   9.85     9.76  
  Consolidated equity to assets     10.07 %   9.86     9.77  
             
Asset quality analysis at period end            
  Nonperforming loans to total loans     0.53     0.57     0.62  
  Nonperforming assets to total assets     0.45     0.47     0.53  
  Allowance for loan losses to total loans     1.11     1.14     1.17  
  Coverage ratio (3)   2.1 x 2.0 x 1.9 x
             
(1)  Non-GAAP measure; calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income.              
(2)  Non-GAAP measure; calculated as total equity less $553 of intangible assets divided by total assets less $553 of intangible assets.              
(3)  Calculated as allowance for loan losses divided by total nonperforming loans.              
 
TE = Taxable equivalent
 


FINANCIAL HIGHLIGHTS, Continued
 
(dollars in thousands, except per share data)
(Unaudited)
    Nine months ended
    09/30/19   09/30/18  
Summary of operations        
  Net interest income (TE) $   117,569     119,957  
  (Credit) Provision for loan losses     (41 )   900  
  Noninterest income     14,476     13,629  
  Noninterest expense     73,839     72,794  
  Net income     43,933     45,412  
         
Per common share        
  Net income per share:        
  - Basic $   0.454     0.471  
  - Diluted     0.453     0.470  
  Cash dividends     0.204     0.199  
  Tangible Book value at period end     5.42     4.93  
  Market price at period end     8.15     8.50  
         
Performance ratios        
  Return on average assets   1.14   1.24  
  Return on average equity   11.56   13.00  
  Efficiency (1)   55.75   53.60  
  Net interest spread (TE)   2.98   3.24  
  Net interest margin (TE)   3.13   3.32  
  Dividend payout ratio   45.00   42.35  
         
(1)  Calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income (excluding net securities transactions and gain on sale of building and nonperforming loans).          
 
TE = Taxable equivalent.
         


CONSOLIDATED STATEMENTS OF INCOME
 
(dollars in thousands, except per share data) 
(Unaudited) 
    Three months ended
    9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018  
Interest and dividend income:                   
  Interest and fees on loans $   41,923     41,432     41,253     41,184     40,073  
  Interest and dividends on securities available for sale:                   
  U. S. government sponsored enterprises     996     821     783     788     787  
  State and political subdivisions      2     3     1     2     7  
  Mortgage-backed securities and collateralized mortgage                  
   obligations - residential     2,178     2,152     1,555     1,554     1,601  
  Corporate bonds     321     272     208     202     202  
  Small Business Administration - guaranteed                  
  participation securities     282     289     297     329     325  
  Mortgage-backed securities and collateralized mortgage                  
   obligations - commercial     -     -     -     -     -  
  Other securities     6     5     5     5     4  
  Total interest and dividends on securities available for sale     3,785     3,542     2,849     2,880     2,926  
                   
Interest on held to maturity securities:                   
  Mortgage-backed securities and collateralized mortgage                  
   obligations - residential     187     209     217     226     232  
  Total interest on held to maturity securities     187     209     217     226     232  
                   
Federal Reserve Bank and Federal Home Loan Bank stock     81     199     85     207     82  
                   
Interest on federal funds sold and other short-term investments     2,552     3,282     3,009     2,367     2,425  
  Total interest income     48,528     48,664     47,413     46,864     45,738  
                   
Interest expense:                   
  Interest on deposits:                   
  Interest-bearing checking     52     94     121     111     113  
  Savings     323     367     377     401     417  
  Money market deposit accounts     1,177     1,119     826     618     544  
  Time deposits     7,974     7,512     5,976     4,643     3,864  
  Interest on short-term borrowings     359     381     381     352     277  
  Total interest expense     9,885     9,473     7,681     6,125     5,215  
                   
  Net interest income     38,643     39,191     39,732     40,739     40,523  
                   
  Less: (Credit) Provision for loan losses     -     (341 )   300     500     300  
  Net interest income after provision for loan losses      38,643     39,532     39,432     40,239     40,223  
                   
Noninterest income:                  
  Trustco Financial Services income     1,517     1,683     1,733     1,356     1,516  
  Fees for services to customers     2,602     2,611     2,520     2,897     2,693  
  Other     806     620     384     199     246  
  Total noninterest income     4,925     4,914     4,637     4,452     4,455  
                   
Noninterest expenses:                   
  Salaries and employee benefits     11,725     11,711     11,451     10,183     10,761  
  Net occupancy expense     4,094     4,006     4,167     4,800     3,997  
  Equipment expense     1,689     1,709     1,902     1,741     1,783  
  Professional services     1,507     1,568     1,650     1,733     1,578  
  Outsourced services     1,875     1,875     1,925     1,875     1,875  
  Advertising expense     494     778     785     876     844  
  FDIC and other insurance     282     598     648     522     682  
  Other real estate (income) expense, net     33     210     (24 )   37     528  
  Other     2,371     2,447     2,363     3,152     2,496  
  Total noninterest expenses     24,070     24,902     24,867     24,919     24,544  
                   
Income before taxes     19,498     19,544     19,202     19,772     20,134  
Income taxes     4,790     4,877     4,644     3,739     4,935  
                   
Net income $   14,708     14,667     14,558     16,033     15,199  
                   
Net income per common share:                   
  - Basic $   0.152     0.152     0.150     0.166     0.157  
                   
  - Diluted     0.152     0.151     0.150     0.166     0.157  
                   
Average basic shares (in thousands)     96,907     96,822     96,744     96,555     96,555  
Average diluted shares (in thousands)     96,977     96,891     96,822     96,689     96,689  
                   
Note:  Taxable equivalent net interest income $   38,644     39,192     39,733     40,740     40,526  
                   


CONSOLIDATED STATEMENTS OF INCOME, Continued
 
(dollars in thousands, except per share data)
(Unaudited)
    Nine months ended  
    09/30/19     09/30/18  
Interest and dividend income:           
  Interest and fees on loans $   124,608       117,120  
  Interest and dividends on securities available for sale:           
  U. S. government sponsored enterprises     2,600       2,324  
  State and political subdivisions      6       20  
  Mortgage-backed securities and collateralized mortgage          
   obligations - residential     5,885       5,039  
  Corporate bonds     801       485  
  Small Business Administration - guaranteed          
   participation securities     868       1,010  
  Mortgage-backed securities and collateralized mortgage          
   obligations - commercial     -       37  
  Other securities     16       13  
  Total interest and dividends on securities available for sale     10,176       8,928  
           
Interest on held to maturity securities:           
  Mortgage-backed securities-residential     613       736  
  Total interest on held to maturity securities     613       736  
           
Federal Reserve Bank and Federal Home Loan Bank stock     365       357  
           
Interest on federal funds sold and other short-term investments     8,843       6,909  
  Total interest income     144,605       134,050  
           
Interest expense:           
  Interest on deposits:           
  Interest-bearing checking     267       331  
  Savings     1,067       1,256  
  Money market deposit accounts     3,122       1,435  
  Time deposits     21,462       10,163  
  Interest on short-term borrowings     1,121       918  
  Total interest expense     27,039       14,103  
           
  Net interest income     117,566       119,947  
           
  Less: (Credit) Provision for loan losses     (41 )     900  
  Net interest income after provision for loan losses      117,607       119,047  
           
Noninterest income:          
  Trustco Financial Services income     4,933       4,927  
  Fees for services to customers     7,733       8,015  
  Other     1,810       687  
  Total noninterest income     14,476       13,629  
           
Noninterest expenses:           
  Salaries and employee benefits     34,887       31,924  
  Net occupancy expense     12,267       12,413  
  Equipment expense     5,300       5,327  
  Professional services     4,725       4,822  
  Outsourced services     5,675       5,625  
  Advertising expense     2,057       2,144  
  FDIC and other insurance     1,528       2,219  
  Other real estate expense, net     219       1,194  
  Other     7,181       7,126  
  Total noninterest expenses     73,839       72,794  
           
Income before taxes     58,244       59,882  
Income taxes     14,311       14,470  
           
Net income $   43,933       45,412  
           
Net income per common share:           
  - Basic $   0.454       0.471  
           
  - Diluted     0.453       0.470  
           
Average basic shares (in thousands)     96,825       96,453  
Average diluted shares (in thousands)     96,897       96,587  
           
Note:  Taxable equivalent net interest income $   117,569       119,957  
           


CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 
(dollars in thousands)
(Unaudited)
    9/30/2019 6/30/2019   3/31/2019   12/31/2018   9/30/2018  
ASSETS:                      
                       
Cash and due from banks $   49,526     42,471     43,064     49,260     42,195  
Federal funds sold and other short term investments     401,151     517,684     576,123     454,449     423,254  
  Total cash and cash equivalents     450,677     560,155     619,187     503,709     465,449  
             
Securities available for sale:            
  U. S. government sponsored enterprises     164,490     184,448     148,292     152,160     150,053  
  States and political subdivisions     169     170     172     173     180  
  Mortgage-backed securities and collateralized mortgage            
   obligations - residential     406,166     354,679     312,946     262,032     269,093  
  Small Business Administration - guaranteed            
   participation securities     50,970     53,091     54,113     56,475     57,894  
  Corporate bonds     40,281     40,467     30,258     29,938     29,977  
  Other securities     683     685     685     685     685  
  Total securities available for sale     662,759     633,540     546,466     501,463     507,882  
             
Held to maturity securities:            
  Mortgage-backed securities and collateralized mortgage            
   obligations-residential     19,705     20,667     21,609     22,501     23,462  
  Total held to maturity securities     19,705     20,667     21,609     22,501     23,462  
             
Federal Reserve Bank and Federal Home Loan Bank stock     9,183     9,183     8,953     8,953     8,953  
             
Loans:            
  Commercial     192,443     190,507     190,347     196,146     190,987  
  Residential mortgage loans     3,508,647     3,428,829     3,376,193     3,376,708     3,331,212  
  Home equity line of credit     273,526     277,559     282,034     289,540     293,750  
  Installment loans     10,703     9,514     12,579     11,702     9,967  
Loans, net of deferred net costs     3,985,319     3,906,409     3,861,153     3,874,096     3,825,916  
             
Less: Allowance for loan losses     44,329     44,365     44,671     44,766     44,736  
  Net loans     3,940,990     3,862,044     3,816,482     3,829,330     3,781,180  
             
Bank premises and equipment, net     34,168     34,058     34,428     34,694     35,214  
Operating lease right-of-use assets     49,618     51,097     51,559     -     -  
Other assets     55,369     56,926     57,637     58,263     63,211  
             
  Total assets $   5,222,469     5,227,670     5,156,321     4,958,913     4,885,351  
             
LIABILITIES:            
Deposits:            
  Demand $   453,439     432,780     408,417     405,069     403,047  
  Interest-bearing checking     869,101     888,433     895,099     904,678     918,486  
  Savings accounts     1,110,947     1,132,308     1,150,329     1,182,683     1,221,127  
  Money market deposit accounts     570,457     562,318     538,043     507,311     501,270  
  Time deposits     1,457,223     1,446,428     1,421,181     1,274,506     1,155,994  
  Total deposits     4,461,167     4,462,267     4,413,069     4,274,247     4,199,924  
             
Short-term borrowings     151,095     166,746     159,778     161,893     176,377  
Operating lease liabilities     54,731     56,237     56,723     -     -  
Accrued expenses and other liabilities     29,313     26,790     25,033     32,902     31,932  
             
  Total liabilities     4,696,306     4,712,040     4,654,603     4,469,042     4,408,233  
             
SHAREHOLDERS' EQUITY:            
Capital stock     100,200     100,180     100,180     100,175     100,175  
Surplus     176,395     176,396     176,510     176,710     176,764  
Undivided profits     280,542     272,433     264,364     256,397     246,965  
Accumulated other comprehensive loss, net of tax     (71 )   (1,774 )   (7,011 )   (10,309 )   (13,000 )
Treasury stock at cost     (30,903 )   (31,605 )   (32,325 )   (33,102 )   (33,786 )
             
  Total shareholders' equity     526,163     515,630     501,718     489,871     477,118  
             
  Total liabilities and shareholders' equity $   5,222,469     5,227,670     5,156,321     4,958,913     4,885,351  
             
Outstanding shares (in thousands)     96,917     96,822     96,746     96,659     96,586  
             


...
NONPERFORMING ASSETS
                       
(dollars in thousands)
(Unaudited)
    9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018  
Nonperforming Assets                      
                       
  New York and other states*                      
  Loans in nonaccrual status:                      
  Commercial $   888     905     701     645     928  
  Real estate mortgage - 1 to 4 family     18,275     19,633     22,343     22,373     20,750  
  Installment     13     1     26     4     13  
  Total non-accrual loans     19,176     20,539     23,070     23,022     21,691  
  Other nonperforming real estate mortgages - 1 to 4 family     30     31     33     34     35  
  Total nonperforming loans     19,206     20,570     23,103     23,056     21,726  
  Other real estate owned     2,409     2,625     1,262     1,675     2,306  
  Total nonperforming assets $   21,615     23,195     24,365     24,731     24,032  
             
  Florida            
  Loans in nonaccrual status:            
  Commercial $   -     -     -     -     -  
  Real estate mortgage - 1 to 4 family     1,809     1,564     1,644     1,915     2,054  
  Installment     -     -     -     15     13