TrustCo Caps Off 120th Anniversary Year, Reports Record Performance; Net Income of $75.2 Million up 22.3% over the prior year

TrustCo Bank Corp NY

GLENVILLE, N.Y., Jan. 23, 2023 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo, NASDAQ: TRST) today announced full year 2022 net income of $75.2 million or $3.93 diluted earnings per share, compared to net income of $61.5 million or $3.19 diluted earnings per share for the full year 2021; and net income of $20.9 million or $1.10 diluted earnings per share for the three months ended December 31, 2022 which is another record quarter, compared to net income of $16.2 million or $0.85 diluted earnings per share for the three months ended December 31, 2021.

Overview

Chairman, President, and CEO, Robert J. McCormick said, “For Trustco Bank, 2022 was a banner year marked by celebrations surrounding our 120^th Anniversary. There also is cause for celebration as the year ends and the Company’s performance is evaluated. A record fourth quarter caps off a year during which each successive quarter saw record earnings. As these records were set, the Company maintained strong liquidity and saw extraordinary loan growth. Throughout the year, we executed upon a strategy long in development that supported not only the completion of our stock buy-back program, but also a dividend increase – the third since 2018. As we look expectantly toward 2023, our team is ready to make the most of the expansion of the Bank’s areas of operation and opportunities as they develop.”

TrustCo saw continued loan growth in the fourth quarter of 2022 compared to the prior year, led by an increase in residential mortgages. Loan portfolio expansion was funded by a combination of utilizing a portion of our strong cash balances and by cash flow from investments, as well as growth in funding from expansion of earnings. The Federal Reserve decision to raise the target Federal Funds rate has contributed to our results during 2022, as our cash position and other variable rate products repriced upward, and is likely to continue to do so to the extent there are additional rate increases. We also note that current mortgage rates significantly exceed the yield on our existing portfolio of mortgages, which, if sustained, should be positive to net interest margin going forward. TrustCo’s strong liquidity position continues to allow us to take advantage of opportunities as they arise.

Details

Average loans were up $253.2 million or 5.7% in the fourth quarter 2022 over the same period in 2021. Average residential loans, our primary lending focus, were up $181.8 million, or 4.6%, in the fourth quarter 2022 over the same period in 2021. Average deposits were down $25.4 million or 0.5% for the fourth quarter 2022 over the same period a year earlier. The decrease in deposits over the same period in 2021 was the result of a $72.2 million or 6.8% decrease in average time deposits, offset by an increase in total average core deposits of $46.8 million or 1.1%, which consist of interest bearing and non-interest bearing checking, savings and money market deposits. Within the core deposits, checking balances were up $62.7 million or 3.2% (including interest bearing and non-interest bearing checking balances), money market balances were down $94.5 million or 12.4%, and savings balances were up $78.6 million or 5.4%. As we move forward, our objective is to continue to encourage customers to retain these funds in the expanded product offerings of the Bank through aggressive marketing and product differentiation.    

Net interest income and Net interest income on a tax equivalent basis, were both $49.2 million for the fourth quarter of 2022, an increase of $8.9 million or 22.1% compared to the same period in 2021, driven by solid liquidity and the recent increases in the Federal Funds target rate. The net interest margin for the fourth quarter 2022 was 3.34%, up 65 basis points from 2.69% in the fourth quarter of 2021. The cost of interest bearing liabilities increased to 0.26% in the fourth quarter 2022 from 0.13% in the fourth quarter 2021. As expected our CD portfolio (time deposits) repriced throughout the year at higher rates as the Bank continues to remain competitive due to the recent Federal Funds target rate increases. Continued repricing of the CD portfolio and increases in rates by the Federal Reserve Board will more than likely cause further increases in rates on interest bearing liabilities.   

For the fourth quarter of 2022, return on average assets and return on average equity were 1.38% and 13.91%, respectively, compared to 1.05% and 10.92% for the fourth quarter of 2021. As previously discussed, improving efficiencies to reduce costs continues to remain a key area of focus. The efficiency ratio was 48.75% for the fourth quarter of 2022, a decrease compared to 58.50% for the fourth quarter of 2021. Total operating expenses increased by $215 thousand in the fourth quarter of 2022 as compared to the fourth quarter of 2021, with increases in salary and employee benefits, outsourced services and the other real estate expense (income), partly offset by declines in the occupancy, equipment, professional services, advertising, and other expense categories.
  
Asset quality remains strong and loan loss reserve measures are consistent over the past twelve months. The Company recorded a provision for credit losses of $50 thousand in the fourth quarter of 2022, which includes a provision for credit losses on loans of $500 thousand and a benefit for credit losses on unfunded commitments of $450 thousand as a result of a corresponding decrease in unfunded loan commitments. The ratio of allowance for credit losses on loans to total loans was 0.97% and 1.00% as of December 31, 2022 and 2021, respectively. The allowance for credit losses on loans was $46.0 million at December 31, 2022, compared to $44.3 million at December 31, 2021. Nonperforming loans (NPLs) were $17.5 million at December 31, 2022, compared to $18.8 million at December 31, 2021. NPLs were 0.37% and 0.42% of total loans at December 31, 2022 and 2021, respectively. The coverage ratio, or allowance for credit losses on loans to NPLs, was 263.1% at December 31, 2022, compared to 236.0% at December 31, 2021. Nonperforming assets (NPAs) were $19.6 million at December 31, 2022, compared to $19.1 million at December 31, 2021. As mentioned in the prior quarters, the Company adopted Accounting Standards Update 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”) effective January 1, 2022. TrustCo recorded a net decrease to retained earnings of $3.5 million upon adoption of the new accounting standard. The transition adjustment at January 1, 2022 included a $2.4 million increase in the allowance for credit losses on loans, a $2.3 million increase in the allowance for estimated credit losses on unfunded off-balance sheet credit exposures, and a corresponding increase in deferred tax assets of $1.2 million.

At December 31, 2022 our equity to asset ratio was 10.00%, compared to 9.70% at December 31, 2021. Book value per share at December 31, 2022 was $31.54, up 0.8% compared to $31.28 a year earlier.

TrustCo Bank Corp NY is a $6.0 billion savings and loan holding company and through its subsidiary, Trustco Bank, operated 143 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at December 31, 2022.

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 fourth quarter 2022 results will be held at 9:00 a.m. Eastern Time on January 24, 2023. Those wishing to participate in the call may dial for the United States at 1-844-200-6205, for Canada at 1-833-950-0062, and all other locations at 1-929-526-1599, Access code 485191.   A replay of the call will be available for thirty days by dialing toll-free for the United States at 1-866-813-9403, for Canada at 1-226-828-7578, and all other locations at +44-204-525-0658, Access code 756689. The call will also be audio webcast at https://events.q4inc.com/attendee/840065868, and will be available for one year.

Forward-Looking Statements
All statements in this news release that are not historical are forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. 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 development, results or periods. Examples of forward-looking statements include, among others, statements we make regarding our expectations for our performance during 2023, including our expectations regarding the effects of the economic environment on our financial results, our ability to retain customers and the amount of customers’ business, including deposit balances, with us, the impact of the Federal Reserve’s actions regarding interest rates, the growth of loans and deposits throughout our branch network, the increase in residential mortgage rates, and our ability to capitalize on economic changes in the areas in which we operate. Forward-looking statements are based on management’s current expectations as well as certain assumptions and estimates made by, and information available to, management at the time the statements are made. Such forward-looking statements are subject to factors and uncertainties that could cause actual results to differ materially for TrustCo from the views, beliefs and projections expressed in such statements, and many of the risks and uncertainties are heightened by or may, in the future, be heightened by the effects of the COVID-19 pandemic and macroeconomic or geopolitical concerns related to inflation, rising interest rates and the war in Ukraine. 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: the effects of inflation and inflationary pressures and changes in monetary and fiscal policies and laws, including increases in the Federal Funds target rate by, and interest rate policies of, the Federal Reserve Board; the geopolitical and macroeconomic impact of the war in Ukraine; the effects of the COVID-19 pandemic, including the impact of the actions taken by governmental authorities to contain the COVID-19 pandemic or address the impact of the pandemic on the economy, and the effect of all of such items on our operations, liquidity and capital position, and on the financial condition of our borrowers and other customers; changes in and uncertainty related to benchmark interest rates used to price loans and deposits; future business strategies related to the implementation of CECL; changes in and uncertainty related to benchmark interest rates used to price loans and deposits; credit risks and risks from concentrations (by geographic area and by loan product) within our loan portfolio; changes in local market areas and general business and economic trends, as well as changes in consumer spending, borrowing and savings habits; our ability to assess and react effectively to such changes; 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; 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; 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; 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; the effects of changes in tax laws; 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; our success at managing the risks involved in the foregoing and managing our business; the impact of severe weather events and climate change on us and the communities we serve; 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. The forward-looking statements contained in this news release represent TrustCo management’s judgment as of the date of this news release. TrustCo disclaims, however, any intent or obligation to update forward-looking statements, either as a result of future developments, new information or otherwise, except as may be required by law.

TRUSTCO BANK CORP NY
GLENVILLE, NY
FINANCIAL HIGHLIGHTS
(dollars in thousands, except per share data)
(Unaudited)
		Three months ended
		12/31/2022		9/30/2022		12/31/2021
Summary of operations
Net interest income (TE) (1)	$	49,187		47,793		40,292
Provision (Credit) for credit losses		50		300		(3,000	)
Noninterest income		4,775		4,386		4,526
Noninterest expense		26,405		26,144		26,190
Net income		20,910		19,364		16,241
Per share
Net income per share:
- Basic	$	1.10		1.01		0.85
- Diluted		1.10		1.01		0.85
Cash dividends		0.360		0.350		0.350
Book value at period end		31.54		30.89		31.28
Market price at period end		37.59		31.42		33.31
At period end
Full time equivalent employees		750		753		759
Full service banking offices		143		144		147
Performance ratios
Return on average assets		1.38%		1.24		1.05
Return on average equity		13.91		12.78		10.92
Efficiency ratio (2)		48.75		49.87		58.50
Net interest spread (TE)		3.28		3.13		2.67
Net interest margin (TE)		3.34		3.16		2.69
Dividend payout ratio		32.81		34.57		41.42
Capital ratios at period end
Consolidated tangible equity to tangible assets (3)		9.99%		9.68		9.69
Consolidated equity to assets		10.00%		9.69		9.70
Asset quality analysis at period end
Nonperforming loans to total loans		0.37		0.40		0.42
Nonperforming assets to total assets		0.33		0.32		0.31
Allowance for credit losses on loans to total loans		0.97		0.98		1.00
Coverage ratio (4)		2.6x		2.4x		2.4x
(1) Non-GAAP measure; calculated as net interest income plus a taxable equivalent interest income adjustment.
(2) Non-GAAP measure; calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income. See Non-GAAP Financial Measures Reconciliation.
(3) Non-GAAP measure; calculated as total shareholders' equity less $553 of intangible assets divided by total assets less $553 of intangible assets. See Non-GAAP Financial Measures Reconciliation.
(4) Calculated as allowance for credit losses on loans divided by total nonperforming loans.
TE = Taxable equivalent

FINANCIAL HIGHLIGHTS, Continued
(dollars in thousands, except per share data)
(Unaudited)
		Year ended
		12/31/22			12/31/21
Summary of operations
Net interest income (TE) (1)	$	180,136			160,409
(Credit) Provision for credit losses		(341	)		(5,450	)
Noninterest income		19,260			17,937
Noninterest expense		100,319			101,662
Net income		75,234			61,519
Per share
Net income per share:
- Basic	$	3.93			3.19
- Diluted		3.93			3.19
Cash dividends		1.410			1.372
Book value at period end		31.54			31.28
Market price at period end		37.59			33.31
Performance ratios
Return on average assets		1.22	%		1.01
Return on average equity		12.60			10.61
Efficiency ratio (2)		50.22			56.90
Net interest spread (TE)		2.96			2.67
Net interest margin (TE)		2.99			2.71
Dividend payout ratio		35.86			42.95
(1) Non-GAAP measure; calculated as net interest income plus a taxable equivalent interest income adjustment.
(2) Non-GAAP measure; calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income. See Non-GAAP Financial Measures Reconciliation.
TE = Taxable equivalent.

CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(Unaudited)
		Three months ended
		12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
Interest and dividend income:
Interest and fees on loans	$	42,711			40,896			39,604			39,003			39,655
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises		693			479			147			86			76
State and political subdivisions		-			1			-			1			-
Mortgage-backed securities and collateralized mortgage
obligations - residential		1,606			1,617			1,367			1,087			1,073
Corporate bonds		523			526			522			233			206
Small Business Administration - guaranteed
participation securities		124			133			140			154			165
Other securities		2			3			2			2			4
Total interest and dividends on securities available for sale		2,948			2,759			2,178			1,563			1,524
Interest on held to maturity securities:
Mortgage-backed securities and collateralized mortgage
obligations - residential		81			85			87			90			97
Total interest on held to maturity securities		81			85			87			90			97
Federal Home Loan Bank stock		98			80			65			62			62
Interest on federal funds sold and other short-term investments		6,246			5,221			2,253			572			432
Total interest income		52,084			49,041			44,187			41,290			41,770
Interest expense:
Interest on deposits:
Interest-bearing checking		61			43			42			44			42
Savings		401			200			163			156			149
Money market deposit accounts		389			237			210			214			201
Time deposits		1,839			646			536			546			865
Interest on short-term borrowings		208			122			176			234			221
Total interest expense		2,898			1,248			1,127			1,194			1,478
Net interest income		49,186			47,793			43,060			40,096			40,292
Less: Provision (Credit) for credit losses		50			300			(491	)		(200	)		(3,000	)
Net interest income after provision for loan losses		49,136			47,493			43,551			40,296			43,292
Noninterest income:
Trustco Financial Services income		1,773			1,435			1,996			1,833			1,766
Fees for services to customers		2,783			2,705			2,658			2,801			2,578
Other		219			246			262			549			182
Total noninterest income		4,775			4,386			4,916			5,183			4,526
Noninterest expenses:
Salaries and employee benefits		13,067			12,134			11,464			9,239			11,984
Net occupancy expense		4,261			4,483			4,254			4,529			4,569
Equipment expense		1,700			1,532			1,667			1,588			1,758
Professional services		1,251			1,375			1,484			1,467			1,579
Outsourced services		2,102			2,328			2,500			2,280			1,950
Advertising expense		532			508			389			617			762
FDIC and other insurance		770			773			804			812			780
Other real estate expense (income), net		101			124			74			11			(28	)
Other		2,621			2,887			2,369			2,222			2,836
Total noninterest expenses		26,405			26,144			25,005			22,765			26,190
Income before taxes		27,506			25,735			23,462			22,714			21,628
Income taxes		6,596			6,371			5,591			5,625			5,387
Net income	$	20,910			19,364			17,871			17,089			16,241
Net income per common share:
- Basic	$	1.10			1.01			0.93			0.89			0.85
- Diluted		1.10			1.01			0.93			0.89			0.85
Average basic shares (in thousands)		19,045			19,111			19,153			19,209			19,216
Average diluted shares (in thousands)		19,050			19,112			19,153			19,210			19,218
Note: Taxable equivalent net interest income	$	49,187			47,793			43,060			40,096			40,292
CONSOLIDATED STATEMENTS OF INCOME, Continued
(dollars in thousands, except per share data)
(Unaudited)
		Year ended
		12/31/22			12/31/21
Interest and dividend income:
Interest and fees on loans	$	162,214			159,168
Interest and dividends on securities available for sale:
U. S. government sponsored enterprises		1,405			314
State and political subdivisions		2			2
Mortgage-backed securities and collateralized mortgage
obligations - residential		5,677			4,515
Corporate bonds		1,804			1,065
Small Business Administration - guaranteed
participation securities		551			745
Other securities		9			20
Total interest and dividends on securities available for sale		9,448			6,661
Interest on held to maturity securities:
Mortgage-backed securities-residential		343			435
Total interest on held to maturity securities		343			435
Federal Home Loan Bank stock		305			260
Interest on federal funds sold and other short-term investments		14,292			1,458
Total interest income		186,602			167,982
Interest expense:
Interest on deposits:
Interest-bearing checking		190			178
Savings		920			624
Money market deposit accounts		1,050			922
Time deposits		3,567			4,941
Interest on short-term borrowings		740			909
Total interest expense		6,467			7,574
Net interest income		180,135			160,408
Less: (Credit) Provision for credit losses		(341	)		(5,450	)
Net interest income after provision for loan losses		180,476			165,858
Noninterest income:
Trustco Financial Services income		7,037			7,358
Fees for services to customers		10,947			9,799
Other		1,276			780
Total noninterest income		19,260			17,937
Noninterest expenses:
Salaries and employee benefits		45,904			48,721
Net occupancy expense		17,527			17,742
Equipment expense		6,487			6,617
Professional services		5,577			6,108
Outsourced services		9,210			8,384
Advertising expense		2,046			1,975
FDIC and other insurance		3,159			3,010
Other real estate expense, net		310			183
Other		10,099			8,922
Total noninterest expenses		100,319			101,662
Income before taxes		99,417			82,133
Income taxes		24,183			20,614
Net income	$	75,234			61,519
Net income per common share:
- Basic	$	3.93			3.19
- Diluted		3.93			3.19
Average basic shares (in thousands)		19,131			19,259
Average diluted shares (in thousands)		19,133			19,263
Note: Taxable equivalent net interest income	$	180,136			160,409
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
(Unaudited)
		12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
ASSETS:
Cash and due from banks	$	43,429			46,236			46,611			47,526			48,357
Federal funds sold and other short term investments		607,170			795,028			999,573			1,225,022			1,171,113
Total cash and cash equivalents		650,599			841,264			1,046,184			1,272,548			1,219,470
Securities available for sale:
U. S. government sponsored enterprises		118,187			102,779			101,100			62,059			59,179
States and political subdivisions		34			41			41			41			41
Mortgage-backed securities and collateralized mortgage
obligations - residential		260,316			261,242			287,450			244,045			270,798
Small Business Administration - guaranteed
participation securities		20,977			22,498			25,428			28,086			31,674
Corporate bonds		81,346			81,002			87,740			74,089			45,337
Other securities		653			657			656			671			684
Total securities available for sale		481,513			468,219			502,415			408,991			407,713
Held to maturity securities:
Mortgage-backed securities and collateralized mortgage
obligations-residential		7,707			8,091			8,544			9,183			9,923
Total held to maturity securities		7,707			8,091			8,544			9,183			9,923
Federal Reserve Bank and Federal Home Loan Bank stock		5,797			5,797			5,797			5,604			5,604
Loans:
Commercial		231,011			217,120			199,886			192,408			200,200
Residential mortgage loans		4,203,451			4,132,365			4,076,657			4,026,434			3,998,187
Home equity line of credit		286,432			269,341			253,758			236,117			230,976
Installment loans		12,307			10,665			10,258			9,395			9,416
Loans, net of deferred net costs		4,733,201			4,629,491			4,540,559			4,464,354			4,438,779
Less: Allowance for credit losses on loans		46,032			45,517			45,285			46,178			44,267
Net loans		4,687,169			4,583,974			4,495,274			4,418,176			4,394,512
Bank premises and equipment, net		32,556			31,931			32,381			32,644			33,027
Operating lease right-of-use assets		44,727			45,733			47,343			48,569			48,090
Other assets		89,984			94,485			88,853			86,158			78,207
Total assets	$	6,000,052			6,079,494			6,226,791			6,281,873			6,196,546
LIABILITIES:
Deposits:
Demand	$	838,147			859,829			851,573			835,281			794,878
Interest-bearing checking		1,183,321			1,188,790			1,208,159			1,225,093			1,191,304
Savings accounts		1,521,473			1,562,564			1,577,034			1,553,152			1,504,554
Money market deposit accounts		621,106			716,319			760,338			796,275			782,079
Time deposits		1,028,763			954,352			999,737			940,215			995,314
Total deposits		5,192,810			5,281,854			5,396,841			5,350,016			5,268,129
Short-term borrowings		122,700			124,932			147,282			248,371			244,686
Operating lease liabilities		48,980			50,077			51,777			53,094			52,720
Accrued expenses and other liabilities		35,575			33,625			36,259			37,497			29,883
Total liabilities		5,400,065			5,490,488			5,632,159			5,688,978			5,595,418
SHAREHOLDERS' EQUITY:
Capital stock		20,058			20,046			20,046			20,046			20,046
Surplus		257,078			256,661			256,661			256,661			256,661
Undivided profits		393,831			379,769			367,100			355,948			349,056
Accumulated other comprehensive (loss) income, net of tax		(27,194	)		(25,209	)		(9,422	)		(2,369	)		12,147
Treas...