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spk00: And welcome to the Tresco Bancorp Earnings Comment Podcast. All participants will be in listen-only mode. 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 followed by one. To withdraw a question, you may press star followed by two. Before proceeding, we would like to mention that this presentation may contain forward-looking information about Tresco Bancorp 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 risk 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 statement sections of our annual report on Form 10-K and as updated by our quarterly report on Form 10-Q. The forward-looking statement made this call are valid only as of the date hereof, and the company disclaims any obligations 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 Determine it in accordance with U.S. GAAP. The reconciliation or 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 or on 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 an 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.
spk04: Thank you. Good morning, everyone, and thank you for joining the call. I'm Robert McCormick, the President of Trustful Bank. joined today, as I usually am, by Scott Salvador and Mike Ozemek. Scott 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 continued 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 244, but generally held steady throughout the quarter. We saw 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 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 are rigorous and yield favorable outcomes. Non-performing loans and non-performing assets remain essentially flat and charge us again, resulting 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, Scott will give color on the loan portfolio, and then we will take your questions. Mike.
spk03: Thank you, Rob, and good morning, everyone. I will now review Trustco's financial results for the first quarter of 2024. As we 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 remained strong, consolidated equity to assets ratio was 10.51% for the first quarter of 2024, compared to 10.17% the first quarter of 23. Book value per share at March 31st, 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 was 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 61.7 million or 21.2% and its installment loans increased $2.8 million, or 21.1%, over the same period in 2023. For the first quarter of 2024, the provision for credit losses was $600,000. Retaining deposits has been a key focus during 2023 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 2023 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 2024, a decrease of $10.4 million compared to the same period in 2023. Net interest margin for the first quarter of 2024 was 2.44%, down 77 basis points for the first quarter of 2023. Yield and interest earning assets increased to 3.99%, up 30 basis points from 3.69 percent first quarter of 2023 the cost of interest granted liabilities increased to 1.99 percent first quarter of 24 from 0.63 percent the first quarter of 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 it should bring down the cost of time deposits over time the bank has seen the erosion of margin begin to slow when comparing the 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 an employee benefit cost 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 of non-interest expense were aligned with our expectations for the quarter. We would expect 2024's total recurring non-interest expense net of already expense to be in the range of $26.9 to $27.4 million per point. Now, Scott will review the loan portfolio and non-performing loans.
spk02: 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 mortgages. 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 boast overall growth. The purchase money market continues with nationwide themes as interest rates and other market conditions restrain volume versus prior years. However, we remain well positioned in the markets. seek to not only capitalize on the increased market activity that develops, but are also looking to take increased market share from our competitors. Our advantageous portfolio product, combined with our ability to create varied promotions, control our own pricing versus the market, puts us in a unique position to do so. Rates in the market have moved back up a bit 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 a goal of increasing market share and driving more buy-in 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 measurements remain good. Non-performing loans were $18.3 million as of quarter end versus $19.10 million at $331.23. Non-performing assets totaled $20.6 million versus $21 million a year ago. Net charge to us in the quarter amounted to a $42,000 net recovery. This follows upon three consecutive years stretching back to 2021 when net charge to us for the year went to a complete recovery position. Our allowance for credit losses to total loans remains essentially flat on the quarter at 0.98%. The coverage ratio or allowance credit losses to non-performing loans stand at 269% as of March, up from 244% a year ago.
spk04: Bob? That's our story, and we're happy to take any questions anyone might have.
spk00: We will now begin the question and answer session. To ask a question, you may press star followed by one on your touchtone phone. If you're using a speakerphone, please pick up your headset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star followed by two. At this time, we will pause momentarily to assemble our hotspots. Our first question is from Alex from Piper Sandler.
spk01: Hey, good morning, guys. Morning, Alex. First, Scott, you mentioned the backlog at the end of the quarter was similar to the end of the year. However, it seems that the second quarter is usually the strongest quarter for loan growth. We've seen that the last couple of years. Obviously, the spring home buying season is a real thing.
spk02: um i mean based on what you're seeing in the market you know despite the backlog being kind of similar would you expect the second quarter to again you know show similar growth trends to what we've seen in the in the last couple years yeah i mean the second quarter just said normally builds upon the first quarter uh first quarter is normally our slowest quarter of the year for net growth and uh you know it's all relative action obviously to what's going on overall but we have seen some activity pick up recently uh which will translate to increased backlog. And there's always a delay, obviously, between when the applications come in and when they hit the bottom line. But we have seen the activity start to pick up, which is positive. And we should see the benefit of that as we start to move forward.
spk01: Okay, great. And then do you happen to have handy just the amount of normal amortization that you would see in the mortgage portfolio in a given quarter?
spk02: You know, it depends, but roughly 15 to 20 million, probably 17, 18 million. If you want to throw out a number, that's probably not a bad number to throw out.
spk03: Right, Alex, that's about per month, about 18 million per month. Yeah, per month. I'm sorry, I said per quarter, not per month.
spk01: 18 million per month. Okay, that's great. And then, you know, if we do see, you know, loan growth pick up a little bit in the second quarter, a couple percent, you know, would the expectation be to fund that with
spk04: uh you know deposit promotions or would you fund it with cash on hand obviously you guys have a lot of liquidity to you know to deploy it um you know it whenever you decide to yeah that would be a good problem to have a good decision that we would have to make we could certainly step up and do more promotions and grow the deposits that way or chop up the excess cash we have on the balance sheet now okay
spk01: And then can you just give us a little more color? You know, you mentioned that you're lowering the rate on time deposits. Is that, I mean, just, you know, would that be time deposits as they mature, you're able to actually lower the rate on them, or is it a lower rate is necessary to maintain that deposit, you know, as it goes into time deposits? I guess, you know, is another way of saying it that we're close to the peak on time deposit rates, or is there still a little bit more, you know, sort of push up there as rates obviously remain potentially higher for longer?
spk04: Not being as smart, Alec, but yes, the answer to the question is yes, because we're attempting to price to retain those accounts and maturity, have them roll over, and we're actively working those accounts and working with our customers to hopefully retain them. I would say, based on current rate environment, we probably are close to the peak of time deposits. people are even okay even throwing out your terms alex say that one more time people are actually throwing out longer terms on cds and customers are beginning to look at them for probably the past six to nine months or maybe even a year even looked at anything more than five months five six months but now customers are asking about longer rates
spk01: And so is that something that you have been willing to offer the longer term stuff? I know that, you know, in the past, you've kind of highlighted the short nature of that portfolio as being something that potentially could really benefit when rates get cut.
spk04: Yeah, priced appropriately, we do offer a longer term rate.
spk01: Okay. And then can you just give us a little bit more color? Maybe I'm missing the prepared remarks, but salaries and benefits dropped pretty dramatically, you know, caused you to, you know, to beat that expense guide pretty meaningfully in the first quarter. Can you just talk about sort of how you found that additional savings and what really drove that?
spk03: Yeah, sure. So we had about a million dollars there and about $600,000 of it was related to being able to take down some of the incentive copper pools that we had. because of some of the lower production from the prior year. And then also some of the liability-based awards get revalued at the end of every quarter, and that was about $300,000 or $400,000. So that was also another downward adjustment. So we picked up about $1 million in the first quarter there. That could turn around if the stock price goes up, but that's what drove that.
spk01: Okay. So those are kind of things that you would expect not to recur into that 26th. point nine to twenty seven point four. That's where you expect to be in the second, third and fourth quarter.
spk03: Right. And that's a conservative number. I mean, that could be a little high, but correct. I mean, you know, that million dollars will load back into the second quarter. Correct.
spk01: Okay. That's all my questions for now. Thanks for taking them.
spk03: Correct. Yeah. Right. I mean, you mentioned the liability based wars can go wherever. And then also the performance does drive.
spk01: Yeah. Got it. All right, I appreciate you taking my questions.
spk02: Thank you. Thanks, Alex.
spk00: We currently have no further questions. This concludes our question and answer session. I would like now to turn the conference back over to Robert J. McCormick for any final remarks.
spk04: Thank you for your interest in our company and have a great day.
spk00: The conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.
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