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spk00: in a listen-only mode. Should you need any assistance, please signal a conference specialist by pressing 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, 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 TrustScope Bank Corp. New York that is intended to be covered by the safe harbor for forward-looking statements provided by the Private Security Litigation Reform Act of 1995. Actual results, performance, or achievements could differ materially from those expressed in or implied by such achievements, statements, 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. Forward-looking statements made on this call are valid only as of the date year of, 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 U.S. GAAP. The reconciliations of such non-GAAP financial measures to the most comparable GAAP figures are included in our earnings press release, which is available under the Investors Relations tab of our website, trustcobank.com. Please also note that today's event is being recorded. A replay of the call will be available for 30 days, and the 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 call over to Mr. Robert J. McCormick, Chairman, President, CEO. Please go ahead.
spk01: Good morning, everyone, and thank you for joining the call. As the host said, I'm Robert McCormick, the President of Trustco Bank. With me, as usual, are Mike Ozemek and Scott Salvador. We'll follow a regular format for the call. I'll provide highlights. Mike, our CFO, will provide a detailed review of the numbers. And Scott will cover the loan portfolio, leaving time for questions at the end. Our second quarter results here at the bank are very strong. What differentiates us from others is something we are really proud of. We have not wavered from our business model, maintaining our tried and true lending practices and careful balance sheet management. While others may be feeling pressure to keep up with competitors' rates, or be borrowing to fund their growth, we remained focused on our own blueprint. We don't plan for just three months, three years ago, and maybe longer. We knew the tide would turn, and we kept our powder dry. That planning has enabled us to stay well capitalized, debt free, and is now supporting organic loan growth. Our portfolio reached an all-time high over the quarter, hitting a milestone of $5 billion, with our industry-leading first mortgage product making up the lion's share. We strategically grew all aspects of our loan portfolio through responsible and choice lending. We have not sacrificed quality for quantity. In Q3, we saw non-performing loans to total loans of just 0.36%, the best in at least 15 years, as well as our seventh consecutive quarter for net recoveries. We continue to build upon our granular and diversified deposit foundation and have seen all categories of the portfolio rebound the beginning of the year our average deposit relationship is $15,000 which is proof of the success of our relationship building focus our customers know that they can rely on our strength and stability through market ups and downs also during the quarter we rolled out a new split the difference loan product which enables us to reprice lower interest rate loans while retaining those critical customer relationships in addition to the benefits of repricing it works out great for customers who have felt trapped by We have received great feedback on the initiative, and it is making Trusco Bank a topic of conversation where we might not have been before. Overall, we expect that if the product takes off, it will further contribute to the upward trend of our loan portfolio yield. As always, we are very proud of our substantial dividend, which we have paid every quarter since 1904. Our shareholders have been able to count on us through all economic conditions,
spk03: take your questions Mike thank you Rob and good morning everyone I will now review Trusco's financial results for the third quarter of 2023 as we noted in the press release the company saw a third quarter net income of fourteen point seven million dollars which yielded a return on average assets and average equity of point nine six percent and nine point three two percent respectively capital remains strong consolidated equity to assets ratio was ten point three one percent for the third quarter of 2023 and compared to 9.69% in the third quarter of 2022. Book value per share at September 30th, 23 was $32.80 up 6.2% compared to $30.89 a year earlier. Average loans for the third quarter grew 7.4% or 337.6 million to $4.9 billion for the third quarter of 22. Loan growth has continued to increase and occurred in all of our loan categories, and leading the charge was a residential real estate portfolio, as always, which increased by $219.4 million, or 5.3% in the third quarter of 2023, over the same period in 2022. Average commercial loans increased $53.6 million, home equity lines of credit increased $58.9 million, and installment loans increased $5.7 million over the same period in 2022. For the third quarter of 2023, the provision for credit losses was $100,000. Retaining deposits has been a key focus during 2023. Although deposits were down compared to prior quarter, total deposits as of September 30th, 2023, increased $41.6 billion or 5.23 billion from the end of 2022. As we move forward, our objective is to continue to offer competitive product offerings the bank through aggressive marketing and product differentiation that interest income was 42.2 million for the third quarter of 2023 a decrease of 5.6 million or 11.7 percent compared to the same period in 2022. that interest margin from the third quarter of 23 was 2.85 percent down 31 basis points from the third quarter of 22. the yield on interest-bearing assets increased to 3.88 percent up 64 basis points from 3.24% in the third quarter of 2022. Our financial services division continues to be a significant recurring source of non-interest income. They had approximately $902 million of assets under management as of September 30, 2023. Now on to non-interest expense. Total non-interest expense, net of orderly expense came in at $27.3 million, which is consistent with prior quarters. ORE expense net came in at an expense of $163,000 for the quarter as compared to an expense of $148,000 in the prior quarter. Given the continued low level of ORE expenses, we're going to continue to hold the anticipated level of expenses not to exceed $250,000 per quarter. Salary expense is down due to a decrease in overall salary expense and a decrease in the liability-based equity worth due to a lower stock price. All the other categories in non-interest expense were in line with our expectations for the third quarter. We would expect 2023's total recurring non-interest expense net of or re-expense to be in the range of $26.9 to $27.4 million per quarter. Now, Scott will review the loan portfolio and non-performing loans.
spk02: Good morning, and thanks, Mike. For the third quarter, total loans increased by $73 million, and actual numbers are 1.5%. Year-over-year, the increase was $331 million, or 7.2%. This quarter marked a continuation of strong loan growth to the bank, coming on the heels of an $87 million increase in the second quarter. The loan increases were spread among all loan categories. Residential loans increased by a combined $56 million, with first mortgages increasing by $33 million and our home equity products climbing by $23 million. Commercial loans increased by $17 million on the quarter. As previously stated, the combination of increased interest rates and some new personnel in our commercial loan area has allowed us to be a bit more active versus prior years. Overall purchase activity in our residential markets has slowed, reflecting nationwide trends. Increased interest rates have obviously played the largest role in this, although other factors such as the time of year also begin to come into play. To help offset this, we are putting a lot of focus into capturing a bigger piece of the existing pie in all our regions. Our status as a portfolio lender is an advantage in this regard. One example, as Rob mentioned, is a current promotion whereby existing Trusco mortgage customers who sell and purchase a new home can obtain a reduction off of current rates by maintaining their financing with Trusco. Interest rates continue to rise, and we currently stand at 7 to 5 eighths for our 30-year base rate. The higher rates have continued to drive growth in our home equity products as people elect to stay and improve their existing homes. rather than purchase a new one or refinance a first mortgage. The loan backlog has come down somewhat from last quarter and year over year. This reflects both the current marketplace and time of year. It does contain a good amount of new money, however, given almost a complete lack of refis, and we expect to post continued growth on the quarter. The news on asset quality remains good. Not only loans stand at $17.9 million as of September, down from $19.4 million in June and also down year-over-year. Non-performing assets declined to $19.1 million from $20.8 last quarter. A year ago, they stood at $19.4 million. Charge-offs posted another small net recovery on the quarter and now total a combined 294,000 net recovery year-to-date. Early-stage delinquencies remain solid. The allowance for credit losses stands at 0.95% of total loans and 264% of non-performing loans. This is up from a coverage ratio of 244% a year ago. Rob? That's our story.
spk01: We're happy to answer any questions you might have.
spk00: Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star 1 on the telephone keypad. That's star 1 on the telephone keypad. To withdraw your question, press star followed by two. And please do also remember to unmute the microphone, which is your turn to speak. We'll now wait a couple of seconds to see if we gather any questions. OK, we have no questions registered, so I would like to hand back to Mr. McCormick for closing remarks.
spk01: Thank you for your interest in our company and joining us today, and have a great day.
spk00: Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines. Thank you. Thank you for your interest in our company and joining us today, and have a great day.
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