TrustCo Bank Corp NY

Good day and welcome to the Trustco Bancorp earnings call and webcast. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero on your 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, then two. Before proceeding, we would like to mention that this presentation may contain forward-looking information about TrustCo Bancorp New York that is intended to be covered by the safe harbor and forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Actual results and trends could differ materially from those set forth in 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 statements are valid only as of the date hereof and the company disclaims any obligation to update this information except as may be required by applicable law. Today's presentation contains non-GAAP financial measures. The reconciliations of such 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, today's event is being recorded. At this time, I would like to turn the conference call over to Mr. Robert J. McCormick, Chairman, President, CEO. Please go ahead.

Good morning, everyone, and thank you for joining us today to hear more about our bank and As is usual, Mike Ozemek, our CFO, and Scott Salvador join me on the call today. After a brief summary, hitting the highlights, Mike will give a lot of detail on the numbers. Then Scott will give some color on loans. Then we can wrap up with any questions you may have. We ended a good quarter at the bank, the $19.4 million earned was another record, driven mostly by our net interest income. We were able to grow our loan portfolio by about $80 million and put some of our cash balances to work. while maintaining pricing discipline on deposits. Good news on the loan front is that all categories participated in the growth. We saw some opportunity in commercial loans reverse the downtrend in home equity lending and even saw installment loans grow. Most of the growth did take place in the residential category. Deposit dropped quarter over quarter back to about the level it was a year ago. Most of the deposit runoff took place in the time category. we took the opportunity to lose some of the CD dollars focusing on more relationship-driven products. The effort had a positive result, and our margin increased from 265 to 316 year over year. Loans continued strong performance. Non-performing loans to total loans was 0.4% at month end, and non-performing assets to total assets was 0.32%. Our allowance was just under 1% at 0.98%. after a $300,000 contribution. The allowance covers non-performing loans 2.4 times. Our return on average assets was 1.24%, greater than last quarter and last year. Same is true for return on average equity, which was 12.78% quarter end. Our efficiency ratio was well under 50% at quarter end, better than prior periods. We still have a large investment portfolio with a strong Fed funds position, We expect we will have to raise our deposit rates to stay competitive, but we are taking a cautious approach. Good news is loan pricing is up. While not setting any records, volume has been decent with a strong backlog, mostly new construction loans waiting to close. I'd also like to send kind words out to our employee base in the state of Florida. They performed admirably through Hurricane Ian, and we're very pleased how both our customers, shareholders, and Rob Frasca, Employees handle that storm. Rob Frasca, We are pleased with our results and look forward to a strong end of year now Michael to tell the numbers, Scott will talk loans leaving time for questions Mike.

Mike Wilberg, Thank you rob and good morning everyone, I will now review trust goes financial results for the third quarter of 2022. As we noted in the press release, the company saw net income of $19.4 million in the third quarter of 22, an increase of 15.5% over the prior year quarter, which yielded a return on average assets and average equity of 1.24% and 12.78% respectively. Average loans for the third quarter of 2022 grew 4.9% or $213.5 million to $4.6 billion from the third quarter of 21. As expected, the growth continues to be concentrated within our primary lending focus, the residential real estate portfolio, which increased 185 or 4.7% in the third quarter of 22 over the same period in 21. The average commercial loan portfolio decreased 3.3 million or 1.6% over the same period in 21. In response to Hurricane Ian in Florida, the bank continues to assess the impact on the counties that we do business in. We are currently monitoring all customer contact in the affected counties and to date have not identified circumstances that would have a material adverse impact on the performance of our loan portfolio. Total average investment securities, which include the AFS and HCM portfolios, increased 50.2 million or 10.5% during the third quarter of 22 over the second quarter of 22. During the same period, the bank had approximately $14.8 million of pooled securities that paid down, one maturity of 5 million and purchased approximately 6.6 million of securities. For the third quarter of 22, the provision for credit losses was $300,000. This includes a provision for credit losses on loans of $100,000 and also a provision for credit losses on unfunded commitments of $200,000 as a result of increases in unfunded loans. The ratio of allowance for loan losses to total loans was 0.98% at September 30, 2022, compared to 1.08% at the same period in 21. As discussed in prior calls, our focus continues to be on traditional lending and conservative balance sheet management, which has continued to enable us to produce consistent, high-quality recurring earnings. Our investment portfolio is and always has been a source of liquidity to fund loan growth and provide flexibility for balance sheet management. As a result, we held an average of $919 million in overnight investments during the third quarter of 2022, a decrease of $248 million compared to the same period in 2021. On the funding side of our balance sheet, total average deposits increased 105.1 million or 2% for the third quarter of 22 over the same period a year earlier. The increase in deposits was a result of 6.2 million or a 0.8% increase in average money market deposits, a 149 million or 10.4% increase in average savings deposits, a $41.6 million or 3.6% increase in interest-bearing check averages, and a $79 million or 10.1% increase in non-interest-bearing checking balances. These are partially offset by the decrease in average time deposits of $170.6 million or 14.8% over the same period last year. During the same period, our total cost of interest-bearing deposits decreased 10 basis points from 14 basis points. This is primarily driven by a decrease in time deposits to 26 basis points from 40 basis points over the same period last year. As we move into the fourth quarter of 22, the bank has approximately $302 million in CDs that will mature at an average rate of 19 basis points. In the first quarter of 2023, approximately $226 million in CDs will mature at an average rate of 22 basis points. And in the first half of 2023, approximately $392 million in CDs will mature at an average rate of 26 basis points. Our financial services division continues to be a significant recurring source of non-interest income. They had approximately 865 million of assets under management as of September 30th, 22. Now onto non-interest expense. Total non-interest expense net of orderly expense came in at 26 million, up 1.1 million compared to the second quarter of 22, at the high end of our estimated range. The increase in the prior quarter is primarily a result of an increase in salaries and employee benefit expense. The occupancy and other expenses partially offset by decreases in equipment, professional services, and outsourcers. As mentioned in the press release, The modest increase in expenses was more than offset by an $8 million increase in revenue, which consists of net interest income plus non-interest income, and resulted in a notable improvement in the bottom line. ORE expense net came in at an expense of $124,000 for the quarter, as compared to an expense of $74,000 for the prior quarter. Given the continued low level of ORE expenses, we're going to continue to hold anticipated level expenses not to exceed $250,000 per quarter. All the other categories of non-interest expense were in line with our expectations for the third quarter. We would expect the fourth quarter of 2022's total recurring non-interest expense net of orderly expense to be in the range of $25.5 to $26 million per quarter. Efficiency ratio in the third quarter of 22 came in at 49.9% compared to 56.4% in the third quarter of 2021. Finally, capital ratios. Consolidated equity to asset ratio was 9.69% for the third quarter of 22 compared to 9.56% in the third quarter of 21. The bank continues to be proud of its ability to maintain shareholder value during these challenging economic times. Book value per share at September 30th was up to $30.89, up 1.3% compared to $30.50 a year earlier. Now, Scott will review the loan portfolio and non-performing loans.