TrustCo Bank Corp NY

Good day and welcome to the Trustco Bank Co-op 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 and then one. To withdraw your question, you may press star and two. Before proceeding, we would like to mention that this presentation may contain forward-looking information about Trusco Bank Corp New York that is intended to be covered by the safe harbour 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 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 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 US 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 Investor Relations tab of our website at chascobank.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.

Morning, everyone, and thank you for joining the call. As the host said, I'm Robert McCormick, President of the Trusco Bank. I'm joined today, as usual, with 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. In 2023, we crossed an important milestone. Our loan portfolio surpassed $5 billion. During the year, we grew residential loans over $192 million and grew our commercial portfolio by over $50 million. We are very happy to report that our loan growth was accomplished without borrowing or broker time deposits. While many see merit in these devices, we think the better practice is funding loan growth from our deposits. That's the Trusco way. On the subject of deposits, it is noteworthy that our team managed a difficult year very well. Because they had already done the hard work of establishing customer relationships, our bankers were able to grow our total deposits. While some funds shifted from core to time, the important thing is that we kept the customer, retained the deposits, and created the opportunity for funds to flow back into core. Of course, the resulting increase in cost of funds affected our margin. The effect was less than it would have been had we borrowed or purchased deposits. In other words, in classic Trusco fashion, our team turned a potential negative into a positive. Also in 2023, we cleaned up some things that could have hampered us in the future. Like many banks across the country, we were faced with litigation involving overdraft fees. We chose to resolve these matters in the way that best benefits our customers and shareholders. Although final court approval is pending, we consider it all resolved and that matter behind us. We also took a hard look at our branch network and made the decision to close three locations that did not meet our expectations. We are leaner and more efficient coming into 2024. Also worthy of comment is the fact that our credit quality remains extraordinary. Non-performing assets to total assets were 0.29% at year end. That is the lowest this metric has been in over 17 years. Again, quite an accomplishment by our team in a challenging environment. Finally, as noted in the press release, all of this good work springs from our rock-solid capital position. We took advantage of investment opportunities that were in line with our strategy, preserving capital and maintaining maximum flexibility. Because of this, we had cash on hand to fund our loan growth and did not need to chase higher price deposits. No one knows exactly where rates will go or what other factors might come up this year, but we are confident in our position and ready to capitalize on opportunities that arise. Now Mike will give us detail on the numbers, Scott will cover lending, and then we'll take your questions. Mike?

Thank you, Rob, and good morning, everyone. I will now review Trusco's financial results for the fourth quarter of 2023. As we noted in the press release, the company saw a year-to-date net income of $58.6 million, which yielded a return on average assets and average equity of 0.97% and 9.46% respectively. Capital remained strong. Consolidated equity to assets ratio was 10.46 for the fourth quarter of 2023, thread to 10% for the fourth quarter of 2022. Book value per share at December 31st, 23 was 3392, up 7.5% compared to 3154 a year earlier. Average loans for the fourth quarter of 23 grew 6.6% or $309.9 million to 5 billion from the fourth quarter of 2022, an all time high. Consequently, 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 always, which increased by 192.2 million or 4.6% in the fourth quarter of 2023 over the same period in 2022. Average commercial loans increased 50.5 million or 22.6%. Home equity lines or credit increased 61.8 million or 22.2% and installment loans increased 5.5 million or 50.3% over the same period in 2023. For the fourth quarter of 2023, the provision for credit losses was $1.35 million. The additional provision this quarter is a reflection of the current economic environment and not an indication of existing credit issues at the bank. Retaining deposits has been a key focus for 2023. Although core deposits were down compared to prior year, total deposits as of December 31, 2023 increased $158 million to $5.35 billion from the end of 2022. As we move forward, our objective is to continue to offer competitive product offerings of the bank through aggressive marketing and product differentiation. As we have mentioned, we understood the big inflows of deposits during the pandemic were temporary, and that is why we did not invest that liquidity into securities or loans or retain that liquidity on balance sheet for when the depositors would absorb those funds. This gave us the flexibility to strategically price core deposits while retaining core customers. Net interest income was $38.6 million for the fourth quarter of 23, a decrease of $10.6 million at 21.5% compared to the same period in 22. Net interest margin for the fourth quarter of 2023 was 2.6% compared to the fourth quarter of 22. Yield on interest earnings and assets increased to 3.93%, up 39 basis points from 3.54%. optimistic as we enter 2024. The majority of our CD portfolio has a three to nine month maturity and will give us opportunity to reprice these CDs in the near term as rates potentially fall. Our wealth management division continues to be a significant recurring source of non-interest income. They had approximately $967 million of assets under management as of December 31, 2023. Now on to non-interest expense. Total non-interest expense, net of orderly expense, came in at $28.8 million, up $1.5 million from the prior quarter. As mentioned in the earnings release, this increase is primarily the result of non-recurring expenses for a litigation settlement and also for branch closures. This was offset by decreases in various other categories of expenses. ORE expense net came in at an income of $12,000 for the quarter as compared to the expense of $163,000 in the prior quarter. Given the continued low level of ORE expenses, we are going to continue to hold anticipated level of expense not to exceed $250,000 per quarter. All the other categories of non-interest expense were in line with our expectations for the fourth quarter. We would expect 24's total recurring non-interest expense, net of ORE expense to remain in the range of $26.9 to $27.4 million. We are optimistic of expenses in 2024. Now, Scott will review the loan portfolio and non-performing loans. Good morning, everyone.