TrustCo Bank Corp NY

Good day and welcome to the Trusco Bancorp Earnings Call and Webcast. All participants will be in a listen-only mode. Should you need any assistance, please signal a conference specialist by pressing 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 and then one. To withdraw the question, you may press star and then two. Before proceeding, I would like to mention that this presentation may contain forward-looking information about Trust Code 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 risks, uncertainties, and other factors. More detailed information about this and other risk factors can be found in our press release that preceded this call and in the risk factor and forward-looking statements section of our annual report on Form 10-K and as updated by our QWERTY 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 the US GAAP. The reconciliations of such non-GAAP financial measures to most comparable GAAP figures are included in our earnings press release. which is available under the Investor Relations tab of our website at truscobank.com. Please 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 press release. At this time, I would like to turn the conference call over to Mr. Robert J. McCormick, Chairman, President, CEO. Please go ahead.

Thank you, and good morning, everyone. As the host said, I'm Rob McCormick, president of the bank. Joining me on the call today are Mike Ozemek, our CFO, and Scott Salvador. We appreciate you taking time to hear more about our company. At a time of many changes in the banking industry, we have had a very solid first quarter of 2023. Our numbers are strong and demonstrate great stability in the face of some difficult conditions. Our net income is 17.7 million and 7% loan growth. We're both up year over year. Deposits were also up almost $20 million to about $5.2 billion from year end. No surprise, we have seen a lot of shift to time deposits as rates have risen. These accounts are up over $250 million since year end. Our loan portfolio was up about $312 million year over year. We also set another all-time high for loans. Asset quality remains strong with a drop in non-performing loans to 0.4% of total loans. compared to 0.43 last year. We remain in a net recovery position regarding charge-offs. Our investment portfolio remains in decent shape with relatively short maturities. Net income of 17.7 million was up under just 4% from last year. Our net interest income was up significantly to 47 million for the quarter. Our ROA and ROE were 1.2 and 11.84% for the first quarter of 23, both up from 22. We also had an increase in book value from $32.31 to $30.85 last year. We continued a strong capital position at 10.17% up from 9.44% last year. Overall, a solid quarter, and we approached the balance of the year with cautious optimism. Now, Mike will detail the numbers. Scott will talk loans, leaving time for questions. Mike?

Thank you, Rob, and good morning, everyone. I will now review Trustco's financial results for the first quarter of 2023. As you noted in the press release, the company saw first quarter net income of $17.7 million, an increase of 3.8% over the prior year quarter, which yielded a return on average assets and average equity of 1.2% and 11.84% respectively. Capital remained strong. Consolidated equity to assets ratio was 10.17% for the first quarter of 2023 compared to 9.44% the first quarter of 2022. Book value per share at March 31, 23 was $32.31, up 4.7% compared to $30.85 a year earlier. Average loans for the first quarter of 23 grew 7%, or $312 million to $4.8 billion for the first quarter of 2022. As expected, the growth continues to be concentrated within our primary lending focus. the residential real estate portfolio, which increased $205 million, or 5.1%, in the first quarter of 2023 over the same period in 2022. Average commercial loans and home equity lines of credit also increased $43.9 million, or 22.5%, and $58.8 million, or 25.3%, respectively, over the same period in 2022. For the first quarter of 2023, provision for credit losses was $300,000. We are now actively retaining deposits, which is evident in the quarter-over-quarter results. Total deposits as of March 31-23 increased $19.6 million to $5.2 billion from December 31-22. 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. We understood the big inflows of deposits during the pandemic were temporary, and that is why we did not invest the liquidity into securities or loans, but retain that liquidity on balance sheet for when the depositors would start to absorb the funds. This gave us flexibility to strategically price deposits while retaining core customers. That interest income was $47 million for the first quarter of 23, an increase of $6.9 million for 17.1% compared to the same period in 22. driven by solid liquidity, loan growth, and the recent increases in the Fed Fund's target rate. The net interest larger for the first quarter of 23 was 3.21%, up 55 basis points from 2.66% in the first quarter of 22. The yield on interest earnings assets increased to 3.69%, up 95 basis points from 2.74% in the first quarter of 22. At the same time, the cost of interest-bearing liabilities only increased to 63 basis points in the first quarter of 23 from 10 basis points in the first quarter of 22. The increase in net interest income of $6.9 million is primarily a result of our ability to maintain a $576.9 million average cash balance at the Federal Reserve Bank during the first quarter of 23 and being able to retain low-cost deposit balances at competitive market rates. Our financial services division continues to be a significant recurring source of non-interest income. They had approximately $922 million of assets under management as of March 31, 23. Now on to non-interest expense. Total non-interest expense, net of ORE expense, came in at $27.4 million. The increase from the prior quarter is primarily a result of an increase in salaries and employee benefit expense, which is typical in Q1-Q2. annually as some of the payroll tax and benefit expenses reset and adjust. Orrery expense came in at an expense of $225,000 for the quarter as compared to $101,000 in the prior quarter. Given the continued low level of orrery expenses, we're going to continue to hold and anticipate a level of expense to not exceed $250,000 per quarter. All the other categories of non-interest expense were in line with our expectations for the first quarter. We would expect 23's total recurring non-interest expense, net of orary expense, to be in the range of $26.9 to $27.3 million per quarter. Now Scott will review the loan portfolio and non-performing loans.