TrustCo Bank Corp NY

Good day and welcome to the Trosco Bank Corp earnings call webcast. All participants will be on listen-only mode. Should you need assistance, please signal a conference specialist by pressing star followed by zero on your telephone keypad. As to 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 include forward-looking information about Trust Code Bancorp New York that is intended to be covered by our Safe Harbor for Looking Forward 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 other risks and factors can be found in our press release that precedes this call and in our Risk and Forward-Looking Statements section of our annual report on Form 10-K as updated on our quarterly reports, Form 10-Q. The forward-looking statements made in this call are valid only if they hear 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 applicable by law. During today's call, we will discuss certain financial measures derived by financial statements that are not determined in accordance with the 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 Investor Relations tab of our website at trustcobank.com. Please note also that today's event is being recorded, and a replay of this 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 call over to Mr. Robert J. McCormick, Chairman, President, CEO. Please go ahead.

Thank you and good morning, everyone, and thank you for joining the call. As the host said, I'm Rob McCormick, the president of Trustco Bank. I'm joined today, as usual, by Mike Olzemek, our CFO, who will give detail on the numbers, and Kevin Curley, who will give color on lending. On behalf of the entire Trustco Bank family, I'd like to express thanks for the many expressions of concern and well wishes as Hurricane Milton tore its way across our geographic footprint in Florida. We are happy to report that our people came through the storm in good shape, although a little worse for the wear. Likewise, our facilities withstood the battering, with many opening within a day or so of the storm, and all locations open now. Our results this quarter are like those of a baseball team that reliably hit singles and doubles. There was no grand slam or even a home run, but at the end of the day, we scored runs and posted a win. The solid plays that we executed consisted of holding the line on the cost of deposits, originating new loans at better interest rates and controlling expenses over the year. We grew our deposits from the third quarter of last year. This was done in part by capitalizing on our strong customer relationships that enabled us to direct some core deposit outflow that favorably priced CDs, and we mostly grew demand deposits. With that said, we're happy to report an increase in our net interest margin over the quarter. Market conditions continue to drive customers to home equity products, And we realized a 6% increase to that portfolio over the quarter, adding to growth of 18% over the year. The new volume was booked at slightly higher rates. These factors all combined to increase our margin over the quarter. We also saw total loans reach another all-time high at nearly $5.1 billion, which is a win in itself and also highlights the symmetry that we are so proud of between our deposit portfolio and our loan portfolio. We gather deposits in our areas of operation and lend those same funds right back into those communities. Credit quality is on the mind of a lot of investors and analysts. Ours remains stellar, as it has been over a long period of time. Non-performing loans, total loans held steady at 0.38% over the quarter. This speaks to our high underwriting standards and the diligent and effective efforts of our loan processing operation. The most important one we posted was a very respectful $12.9 million in net income. Now Mike will dive into the numbers, Kevin will provide an update on the loan portfolio, and then we can take your questions if you have any.

Mike? Thank you, Rob, and good morning, everyone. I'll now review TrustCo's financial results for the third quarter of 2024. As we noted in the press release, the company saw third quarter net income of $12.9 million, an increase of 2.6% over the prior quarter, which yielded a return on average assets and average equity of 0.84% and 7.74% respectively. Capital remained strong. Consolidated equity to assets ratio was 10.95% for the third quarter of 2024, compared to 10.31% in the third quarter of 2023. Book value per share at September 30, 2024, was $35.19, up 7.3% compared to $32.80 a year earlier. Average loans for the third quarter of 2024 grew 2.6%, or $127 million to $5 billion from the third quarter of 2023, an all-time high. Overall, loan growth has continued to increase, and leading the charge was the residential real estate portfolio as usual. which increased by $50.4 million or 1.2% in the third quarter of 24 over the same period in 23. On equity lines, the credit increased $60 million or 18.7%. Average commercial loans increased 18.1 million or 6.9% and installment loans decreased 1.5 million or 9.5% over the same period in 23. For the third quarter of 24, the provision for credit losses was $500,000. Retaining deposits has been a key focus throughout 2024. Total deposits ended the quarter at $5.3 billion. And as we move forward, our objective is to continue to offer competitive product offerings of the bank through aggressive marketing and product differentiation. That interest income was $38.7 million for the third quarter of 24, an increase of $883,000 or 2.3% compared to the prior quarter. The net interest margin for the third quarter of 24 was 2.61%, up eight basis points from the second quarter of 24, resulting in two consecutive quarters of an increase in net interest margin. Yield on interest earning assets increased to 4.11%, up five basis points from 4.06% in the second quarter of 24. The cost of interest-bearing liabilities decreased. to 1.94% in the third quarter of 24, from 1.97% in the second quarter of 24. Throughout 2024, we have been able to lower the rates offered on time deposits while continuing to retain a significant portion of the product quarter over quarter, which should continue to bring down the cost of time deposits. Bank has seen erosion of margins begin to turn around last quarter, and we are optimistic going forward. Our wealth management division continues to be a significant recurring source of non-interest income. They had approximately $1.3 billion of assets under management as of September 30, 2024. Now on to non-interest expense. Total non-interest expense, net of orderly expense came in at $26 million, down $447,000 from the prior quarter. The decrease is the result of lower costs and salaries and benefits, net occupancy, equipment expense, outsource service, and advertising expense, partially offset by the increase in professional services and FDIC and other insurance during the quarter. Orrery expense net came in at expense of $204,000 for the quarter, as compared to $16,000 in the prior quarter. Given the continued low level of orrery expenses, we are going to continue to hold and anticipate a level of expenses to not 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 24's total recurring non-interest expense net of orrery expense to be in the range of $26.9 to $27.4 million per quarter. Now, Kevin will review the loan portfolio and non-performing loans.