TrustCo Announces Record Earnings for Third Quarter 2021; Net Income of $16.8 million up 19.1% over the prior year quarter, Expands Lending Areas in Key Markets, Adds New Director

·22 min read

GLENVILLE, N.Y., Oct. 21, 2021 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo, NASDAQ: TRST) today announced third quarter 2021 net income of $16.8 million or $0.871 diluted earnings per share, compared to net income of $14.1 million or $0.730 diluted earnings per share for the third quarter 2020; and net income of $45.3 million or $2.349 diluted earnings per share for the nine months ended September 30, 2021, compared to net income of $38.6 million or $2.001 diluted earnings per share for the nine months ended September 30, 2020. For all periods presented, share and per share information has been adjusted for the 1 for 5 reverse stock split which occurred on May 28, 2021.

Overview

Robert J. McCormick, Chairman, President and Chief Executive Officer noted, “Our continued strong financial results announced today are the foundation upon which we continue to build. With an always-sharp focus on new business opportunities, we have identified increasing demand for our hallmark mortgage products and have expanded our lending areas in Northern New Jersey and on both coasts of Florida. As part of these initiatives, we deployed a new mortgage loan originator in New Jersey, opened a new full-service branch location in Palm Coast, Florida, and are launching a new channel for the delivery of our core lending products by opening a loan origination office in Naples, Florida.”

In September, the Company announced the addition of Curtis N. Powell to the boards of directors of TrustCo and its subsidiary, Trustco Bank. Mr. Powell is Vice President for Human Resources and Environmental Health, Safety, and Risk Management at Rensselaer Polytechnic Institute in Troy, New York. Mr. Powell adds depth to our board talent pool in the areas of human capital and risk management. Chairman McCormick said “Our success-oriented approach extends from our business lines to our boardroom. Curtis Powell shares our commitment to excellence, and we have every confidence that he will be a tremendous asset as the Company navigates the highly dynamic labor market that we now see across our entire business footprint.”

Mr. McCormick also congratulated the employees of Trustco Bank on receiving well-deserved recognition. He said “Our management team knows that our people are the best in the business, but recently Trustco Bank has been rated ‘Best Of’ in several categories by local media outlets. Our team members can be justifiably proud of this recognition.” Trustco Bank also celebrated 65 years of success at its Mayfair Branch in Glenville, New York and, for the 15th straight year, turned out a formidable team for the Workforce Team Challenge with 75 entrants in the annual 3.5 mile race, held this year in Altamont, New York.

Details

Average loans were up $176.4 million or 4.2% in the third quarter 2021 over the same period in 2020. Average residential loans, our primary lending focus, were up $218.2 million, or 5.9%, in the third quarter 2021 over the same period in 2020. As of September 30, 2021, loans in deferral were not material. Additionally, the Bank had funded 663 Paycheck Protection Program (“PPP”) loans totaling $46 million in 2020, and an additional 344 loans totaling $23 million in 2021. As of September 30, 2021, 349 PPP loans totaling $21 million remain outstanding. Average deposits were up $348.2 million or 7.1% for the third quarter 2021 over the same period a year earlier. The increase in deposits was the result of a $551.2 million or 15.5% increase in total average core deposit accounts, which consist of interest bearing and non-interest bearing checking, savings and money market deposits, offset by a decrease in average time deposits of $202.9 million or 15.0%, for the third quarter 2021 over the same period in 2020. Within the core deposits, checking balances were up $287.2 million or 17.4% (including interest bearing and non-interest bearing checking balances), money market balances were up $56.3 million or 8.3%, and savings balances were up $207.6 million or 17.0%. We believe the increase in core deposits continues to reflect the desire of customers to have additional funds in the safety and security offered by TrustCo’s long history of conservative banking. As we move forward, the objective is to encourage customers to retain these additional funds in the expanded product offerings of the Bank through aggressive marketing and product differentiation.

The cost of interest bearing liabilities decreased to 0.15% in the third quarter 2021 from 0.52% in the third quarter 2020. A significant portion of our CD portfolio (time deposits) repriced during the last year, which resulted in lower rates as a result of the ongoing market conditions. The net interest margin for the third quarter 2021 was 2.65%, down 8 basis points from 2.73% in the third quarter of 2020. Net interest income (TE) increased by 4.5% or $1.7 million over the same period last year.

The Bank continued to demonstrate its ability to grow shareholders’ equity as average equity was up $25.8 million or 4.6% in the third quarter of 2021 compared to the same period in 2020. Return on average assets and return on average equity for the third quarter 2021 were 1.08% and 11.40%, respectively, compared to 0.98% and 10.04% for the third quarter 2020. Improving efficiencies to reduce costs continues to remain a key area of focus. As a result, full time equivalent employees decreased from the prior year and quarter partially due to a strategic realignment and the impact of COVID-19 on the labor market. The Bank also purchased 50 thousand shares of stock in the third quarter of 2021 under the previously announced stock repurchase plan. Additionally, on May 28, 2021, the reverse split of the Company’s Common Stock at a ratio of 1 for 5 was implemented on the Nasdaq Global Select Market. All prior period share and per share information, and common stock and surplus amounts have been split adjusted. The board of directors believes that the Reverse Stock Split will likely result in a higher per share trading price, which is intended to generate greater investor interest in TrustCo and improve the marketability of the shares to a broader range of investors. The board of directors also believes that the Reverse Stock Split will result in a number of our shares of outstanding common stock that is similar to the number of outstanding shares of common stock of comparable financial institutions.

Asset quality and loan loss reserve measures have continued to improve as a result of low levels of nonperforming assets and chargeoffs. Nonperforming loans (NPLs) were $20.2 million at September 30, 2021, compared to $21.8 million at September 30, 2020. NPLs were 0.46% and 0.52% of total loans at September 30, 2021 and 2020, respectively. The coverage ratio, or allowance for loan losses to NPLs, was 234.7% at September 30, 2021, compared to 225.4% at September 30, 2020. Nonperforming assets (NPAs) were $20.7 million at September 30, 2021, compared to $22.2 million at September 30, 2020. The ratio of allowance for loan losses to total loans was 1.08% as of September 30, 2021 compared to 1.17% as of September 30, 2020. The allowance for loan losses was $47.4 million at September 30, 2021, compared to $49.1 million at September 30, 2020. During 2020, management increased certain allowance qualitative factors based on its assessment of the impact of the current pandemic on local, national, and global economic conditions as well as the perceived risks inherent in specific industries and credit characteristics. Based on this approach, the Company adjusted the pandemic specific provision for the third quarter of 2021. Provision for loan losses for the third quarter of 2021 was a credit of $2.8 million compared to a provision for loan losses for the third quarter of 2020 of $1.0 million. The decrease from the prior year is due to the sustained improvement in asset quality trends and economic conditions during the third quarter. The Company had previously elected to delay its adoption of Accounting Standards Update 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“CECL”), as provided by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) until the date on which the National Emergency concerning COVID-19 was terminated or December 31, 2020, whichever occurred first. The December 31, 2020 adoption date under the CARES Act was extended to January 1, 2022 as a part of the COVID-19 relief legislation, which became law in December 2020, and therefore the Company intends to adopt CECL on January 1, 2022.

Net chargeoffs for the third quarter 2021 were $5 thousand versus net chargeoffs in the third quarter 2020 of $21 thousand. The annualized net chargeoffs ratio was 0.00% for the third quarter 2021 and 2020.

At September 30, 2021 the equity to asset ratio was 9.56%, compared to 9.77% at September 30, 2020. Book value per share at September 30, 2021 was $30.50, up 5.1% compared to $29.03 a year earlier.

TrustCo Bank Corp NY is a $6.1 billion savings and loan holding company and through its subsidiary, Trustco Bank, operated 147 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at September 30, 2021.

In addition, the Bank’s Financial Services Department offers a full range of investment services, retirement planning and trust and estate administration services. The common shares of TrustCo are traded on the NASDAQ Global Select Market under the symbol TRST.

Those wishing to participate in the call may dial toll-free for the United States at 1-844-200-6205, for Canada at 1-833-950-0062, and all other locations at 1-929-526-1599, Access code 817092. A replay of the call will be available for thirty days by dialing toll-free for the United States at 1-866-813-9403, for Canada at 1-226-828-7578, and all other locations at +44-204-525-0658, Access code 539783. The call will also be audio webcast at https://services.choruscall.com/links/trst211022.html, and will be available for one year.

Safe Harbor Statement
All statements in this news release that are not historical are forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended. Forward-looking statements can be identified by words such as "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding our expectations for our performance during 2021, including our expectations regarding the effects of COVID-19 on our financial results and our ability to assist our customers in addressing the effects of COVID-19, our expectations with respect to our expansion initiatives in New Jersey and Florida, our ability to retain customers, the impact of Federal Reserve actions regarding interest rates and the growth of loans and deposits throughout our branch network and our ability to capitalize on economic changes in the areas in which we operate. Such forward-looking statements are subject to factors that could cause actual results to differ materially for TrustCo from those discussed, and many of the risks and uncertainties are heightened by or may, in the future, be heightened by the effects of the COVID-19 pandemic. TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect TrustCo’s actual results and could cause TrustCo’s actual financial performance to differ materially from that expressed in any forward-looking statement: the effect of the COVID-19 pandemic on our business, financial condition, liquidity and results of operations; the impact of the actions taken by governmental authorities to contain COVID-19 or address the impact of COVID-19 on the economy, and the effect of all of such items on our operations, liquidity and capital position, and on the financial condition of our borrowers and other customers; future business strategies related to the implementation of CECL; our ability to continue to originate a significant volume of one-to-four family mortgage loans in our market areas; our ability to continue to maintain noninterest expense and other overhead costs at reasonable levels relative to income; our ability to make accurate assumptions and judgments regarding the credit risks associated with lending and investing activities; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board, inflation, interest rates, market and monetary fluctuations; restrictions or conditions imposed by our regulators on our operations that may make it more difficult for us to achieve our goals; the future earnings and capital levels of us and Trustco Bank and the continued receipt of approvals from our primary federal banking regulators under regulatory rules to distribute capital to TrustCo, which could affect our ability to pay dividends; results of supervisory monitoring or examinations of Trustco Bank and TrustCo by our respective regulators; adverse conditions in the securities markets that lead to impairment in the value of securities in our investment portfolio; unanticipated effects from the Tax Cut and Jobs Act that may limit its benefits or adversely impact our business; the perceived overall value of our products and services by users, including in comparison to competitors’ products and services and the willingness of current and prospective customers to substitute competitors’ products and services for our products and services; changes in consumer spending, borrowing and saving habits; the effect of changes in financial services laws and regulations and the impact of other governmental initiatives affecting the financial services industry; changes in management personnel; real estate and collateral values; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB or PCAOB; disruptions, security breaches, or other adverse events affecting the third-party vendors who perform several of our critical processing functions; technological changes and electronic, cyber and physical security breaches; changes in local market areas and general business and economic trends, as well as changes in consumer spending and saving habits; our success at managing the risks involved in the foregoing and managing our business; and other risks and uncertainties under the heading “Risk Factors” in our most recent annual report on Form 10-K and, if any, in our subsequent quarterly reports on Form 10-Q or other securities filings.

Subsidiary:

Trustco Bank

Contact:

Robert Leonard
Executive Vice President and
Chief Risk Officer
(518) 381-3693


TRUSTCO BANK CORP NY

GLENVILLE, NY

FINANCIAL HIGHLIGHTS

(dollars in thousands, except per share data)

(Unaudited)

Three months ended

9/30/2021

6/30/2021

9/30/2020

Summary of operations

Net interest income (TE)

$

39,888

40,122

38,166

(Credit) Provision for loan losses

(2,800

)

-

1,000

Noninterest income

4,295

4,688

4,341

Noninterest expense

24,697

25,440

22,674

Net income

16,762

14,433

14,071

Per share (4)

Net income per share:

- Basic

$

0.871

0.749

0.730

- Diluted

0.871

0.748

0.730

Cash dividends

0.341

0.341

0.341

Book value at period end

30.50

30.00

29.03

Market price at period end

31.97

34.38

26.10

At period end

Full time equivalent employees

743

769

771

Full service banking offices

147

147

148

Performance ratios

Return on average assets

1.08

%

0.95

0.98

Return on average equity

11.40

10.05

10.04

Efficiency (1)

55.82

56.91

53.61

Net interest spread (TE)

2.62

2.66

2.63

Net interest margin (TE)

2.65

2.70

2.73

Dividend payout ratio

39.13

45.51

46.68

Capital ratios at period end

Consolidated tangible equity to tangible assets (2)

9.55

%

9.44

9.76

Consolidated equity to assets

9.56

%

9.45

9.77

Asset quality analysis at period end

Nonperforming loans to total loans

0.46

0.48

0.52

Nonperforming assets to total assets

0.34

0.34

0.39

Allowance for loan losses to total loans

1.08

1.15

1.17

Coverage ratio (3)

2.3x

2.4x

2.3x

(1) Non-GAAP measure; calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income. See Non-GAAP Financial Measures Reconciliation.

(2) Non-GAAP measure; calculated as total equity less $553 of intangible assets divided by total assets less $553 of intangible assets. See Non-GAAP Financial Measures Reconciliation.

(3) Calculated as allowance for loan losses divided by total nonperforming loans.

(4) All periods presented have been adjusted for the 1 for 5 reverse stock split which occurred on May 28, 2021.

TE = Taxable equivalent

FINANCIAL HIGHLIGHTS, Continued

(dollars in thousands, except per share data)

(Unaudited)

Nine months ended

09/30/21

09/30/20

Summary of operations

Net interest income (TE)

$

120,117

114,401

(Credit) Provision for loan losses

(2,450

)

5,000

Net gain on securities transactions

-

1,155

Noninterest income, excluding net gain on securities transactions

13,411

11,946

Noninterest expense

75,472

70,874

Net income

45,278

38,638

Per share (2)

Net income per share:

- Basic

$

2.349

2.002

- Diluted

2.349

2.001

Cash dividends

1.022

1.022

Book value at period end

30.50

29.03

Market price at period end

31.97

26.10

Performance ratios

Return on average assets

1.00

0.94

Return on average equity

10.50

9.38

Efficiency (1)

56.36

56.06

Net interest spread (TE)

2.67

2.74

Net interest margin (TE)

2.71

2.86

Dividend payout ratio

43.50

51.03

(1) Calculated as noninterest expense (excluding ORE income/expense) divided by taxable equivalent net interest income plus noninterest income. See Non-GAAP Financial Measures Reconciliation.

(2) All periods presented have been adjusted for the 1 for 5 reverse stock split which occurred on May 28, 2021.

TE = Taxable equivalent.

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)

(Unaudited)

Three months ended

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

Interest and dividend income:

Interest and fees on loans

$

39,488

39,808

40,217

40,906

41,330

Interest and dividends on securities available for sale:

U. S. government sponsored enterprises

91

97

50

27

14

State and political subdivisions

1

-

1

2

1

Mortgage-backed securities and collateralized mortgage obligations - residential

1,038

1,167

1,237

1,172

1,319

Corporate bonds

220

323

316

349

646

Small Business Administration - guaranteed participation securities

181

193

206

212

216

Other securities

5

5

6

7

5

Total interest and dividends on securities available for sale

1,536

1,785

1,816

1,769

2,201

Interest on held to maturity securities:

Mortgage-backed securities and collateralized mortgage obligations - residential

104

111

123

129

138

Total interest on held to maturity securities

104

111

123

129

138

Federal Reserve Bank and Federal Home Loan Bank stock

64

65

69

70

77

Interest on federal funds sold and other short-term investments

470

286

270

246

242

Total interest income

41,662

42,055

42,495

43,120

43,988

Interest expense:

Interest on deposits:

Interest-bearing checking

38

46

52

51

55

Savings

154

162

159

156

161

Money market deposit accounts

202

236

283

447

637

Time deposits

1,149

1,261

1,666

3,053

4,749

Interest on short-term borrowings

232

228

228

232

221

Total interest expense

1,775

1,933

2,388

3,939

5,823

Net interest income

39,887

40,122

40,107

39,181

38,165

Less: (Credit) Provision for loan losses

(2,800

)

-

350

600

1,000

Net interest income after provision for loan losses

42,687

40,122

39,757

38,581

37,165

Noninterest income:

Trustco Financial Services income

1,558

1,999

2,035

1,527

1,784

Fees for services to customers

2,531

2,486

2,204

2,365

2,292

Other

206

203

189

177

265

Total noninterest income

4,295

4,688

4,428

4,069

4,341

Noninterest expenses:

Salaries and employee benefits

11,909

12,403

12,425

11,727

10,899

Net occupancy expense

4,259

4,328

4,586

4,551

4,277

Equipment expense

1,628

1,600

1,631

1,621

1,607

Professional services

1,483

1,614

1,432

1,644

1,311

Outsourced services

2,015

2,169

2,250

1,925

1,875

Advertising expense

310

549

354

527

305

FDIC and other insurance

746

777

707

657

660

Other real estate (income) expense, net

32

(60

)

239

45

(115

)

Other

2,315

2,060

1,711

2,133

1,855

Total noninterest expenses

24,697

25,440

25,335

24,830

22,674

Income before taxes

22,285

19,370

18,850

17,820

18,832

Income taxes

5,523

4,937

4,767

4,006

4,761

Net income

$

16,762

14,433

14,083

13,814

14,071

Net income per common share (1):

- Basic

$

0.871

0.749

0.730

0.716

0.730

- Diluted

0.871

0.748

0.730

0.716

0.730

Average basic shares (in thousands) (1)

19,249

19,281

19,287

19,287

19,287

Average diluted shares (in thousands) (1)

19,252

19,290

19,293

19,288

19,288

Note: Taxable equivalent net interest income

$

39,888

40,122

40,107

39,182

38,166

(1) All periods presented have been adjusted for the 1 for 5 reverse stock split which occurred on May 28, 2021.

CONSOLIDATED STATEMENTS OF INCOME, Continued

(dollars in thousands, except per share data)

(Unaudited)

Nine months ended

09/30/21

09/30/20

Interest and dividend income:

Interest and fees on loans

$

119,513

125,058

Interest and dividends on securities available for sale:

U. S. government sponsored enterprises

238

541

State and political subdivisions

2

4

Mortgage-backed securities and collateralized mortgage obligations - residential

3,442

4,959

Corporate bonds

859

1,372

Small Business Administration - guaranteed participation securities

580

690

Other securities

16

16

Total interest and dividends on securities available for sale

5,137

7,582

Interest on held to maturity securities:

Mortgage-backed securities-residential

338

475

Total interest on held to maturity securities

338

475

Federal Reserve Bank and Federal Home Loan Bank stock

198

351

Interest on federal funds sold and other short-term investments

1,026

1,702

Total interest income

126,212

135,168

Interest expense:

Interest on deposits:

Interest-bearing checking

136

97

Savings

475

560

Money market deposit accounts

721

2,595

Time deposits

4,076

16,739

Interest on short-term borrowings

688

778

Total interest expense

6,096

20,769

Net interest income

120,116

114,399

Less: (Credit) Provision for loan losses

(2,450

)

5,000

Net interest income after provision for loan losses

122,566

109,399

Noninterest income:

Trustco Financial Services income

5,592

4,752

Fees for services to customers

7,221

6,414

Net gain on securities transactions

-

1,155

Other

598

780

Total noninterest income

13,411

13,101

Noninterest expenses:

Salaries and employee benefits

36,737

33,920

Net occupancy expense

13,173

12,968

Equipment expense

4,859

5,015

Professional services

4,529

3,974

Outsourced services

6,434

5,825

Advertising expense

1,213

1,394

FDIC and other insurance

2,230

1,563

Other real estate expense, net

211

47

Other

6,086

6,168

Total noninterest expenses

75,472

70,874

Income before taxes

60,505

51,626

Income taxes

15,227

12,988

Net income

$

45,278

38,638

Net income per common share (1):

- Basic

$

2.349

2.002

- Diluted

2.349

2.001

Average basic shares (in thousands) (1)

19,272

19,306

Average diluted shares (in thousands) (1)

19,278

19,308

Note: Taxable equivalent net interest income

$

120,117

114,401

(1) All periods presented have been adjusted for the 1 for 5 reverse stock split which occurred on May 28, 2021.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(dollars in thousands)

(Unaudited)

9/30/21

6/30/21

3/31/21

12/31/20

9/30/20

ASSETS:

Cash and due from banks

$

45,486

47,766

45,493

47,196

47,703

Federal funds sold and other short term investments

1,147,853

1,134,622

1,094,880

1,059,903

908,616

Total cash and cash equivalents

1,193,339

1,182,388

1,140,373

1,107,099

956,319

Securities available for sale:

U. S. government sponsored enterprises

59,749

74,579

74,465

19,968

29,996

States and political subdivisions

48

48

48

103

111

Mortgage-backed securities and collateralized mortgage obligations - residential

293,585

315,656

348,317

316,158

309,768

Small Business Administration - guaranteed participation securities

34,569

37,199

39,232

42,217

44,070

Corporate bonds

45,915

54,647

64,839

59,939

70,113

Other securities

686

686

686

686

685

Total securities available for sale

434,552

482,815

527,587

439,071

454,743

Held to maturity securities:

Mortgage-backed securities and collateralized mortgage obligations-residential

10,701

11,665

12,729

13,824

15,094

Total held to maturity securities

10,701

11,665

12,729

13,824

15,094

Federal Reserve Bank and Federal Home Loan Bank stock

5,604

5,604

5,506

5,506

5,506

Loans:

Commercial

204,679

214,164

217,021

212,492

231,663

Residential mortgage loans

3,951,285

3,892,351

3,807,837

3,780,167

3,724,746

Home equity line of credit

231,314

234,214

235,644

242,194

248,320

Installment loans

9,451

8,638

8,670

9,617

9,826

Loans, net of deferred net costs

4,396,729

4,349,367

4,269,172

4,244,470

4,214,555

Less: Allowance for loan losses

47,350

50,155

49,991

49,595

49,123

Net loans

4,349,379

4,299,212

4,219,181

4,194,875

4,165,432

Bank premises and equipment, net

33,233

33,691

34,012

34,412

34,417

Operating lease right-of-use assets

45,836

45,825

46,614

47,885

47,174

Other assets

62,191

61,378

60,455

59,124

57,244

Total assets

$

6,134,835

6,122,578

6,046,457

5,901,796

5,735,929

LIABILITIES:

Deposits:

Demand

$

790,663

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