TrustCo is Pleased to Report First Quarter 2019 Results; Net Income of $14.6 Million and 6.0% Average Loan Growth Year over Year

GLENVILLE, N.Y., April 22, 2019 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo, NASDAQ: TRST) today announced first quarter 2019 net income of $14.6 million or $0.150 diluted earnings per share compared to $14.8 million or $0.153 diluted earnings per share in the first quarter of 2018.   

Summary

Robert J. McCormick, Chairman, President and Chief Executive Officer noted, “We are pleased to start 2019 off with continued strong net income for the first quarter 2019 as compared to the first quarter 2018.  Our focus on traditional lending criteria and conservative balance sheet management has enabled us to produce consistent earnings, maintain strong liquidity and capital.  This approach has allowed us to continue to grow our business to a new total asset record surpassing the $5 billion milestone and take advantage of changes in market and competitive conditions.  The increased earnings during 2018 has provided TrustCo the opportunity in early 2019 to invest in future earning assets and build additional liquidity.  As we enter our busiest season for residential lending the Bank is well positioned to take advantage of our cash position and deploy this existing liquidity into our residential loan portfolio.  Using this approach we will continue to seize opportunities as they arise during the coming year and beyond.” 

TrustCo saw average loans grow 6.0% in the first quarter of 2019 compared to the first quarter of 2018.  Year over year, loan portfolio expansion was funded by a combination of utilizing a portion of our strong cash balances, cash flow from investments, and the  growth in funding from customer deposits.  The continued shift in earning assets toward higher yielding loans has helped to manage margin compression driven by the higher cost of funds.  Total average deposits are up $156.6 million or 3.8% in the first quarter 2019 compared to the prior year.  Nationally, including the markets we serve, customers have looked to move funds to higher yielding time deposits.  We chose to offer competitive shorter term rates which allowed the Bank to gain market share as well as retain our existing time deposits.  This strategy drove growth at a relatively low cost that will sustain TrustCo’s strong liquidity position and continue to allow us to cross sell new relationships and take advantage of opportunities as they arise.

Details

Average loans were up $217.8 million or 6.0% in the first quarter 2019 over the same period in 2018.  Average residential loans, our primary lending focus, were up $226.3 million or 7.2% in the first quarter 2019, over the same period in 2018.  Average deposits are up $156.6 million or 3.8% for the first quarter 2019 over the same period a year earlier.  The increase in deposits was the result of a $272.3 million or 25.2% increase in average time deposits versus prior year.  Excluding time deposits, total average core deposit accounts, which consist of checking, savings and money market deposits, were down $115.7 million or 3.8% for the first quarter 2019 compared to the first quarter 2018.  Within core, checking balances were up $13.7 million (including interest bearing and non‑interest bearing balances). 

The Federal Open Market Committee (FOMC) increased short term rates 100 basis points from March 2018 to March 2019 while the cost of our interest bearing liabilities increased only 35 basis points over the same period.  The cost of interest bearing liabilities increased to 0.77% in the first quarter 2019 from 0.42% in the first quarter 2018.  The cost of core deposits remained relatively flat over the same time frame. A significant portion of our CD portfolio repriced during the first quarter of 2019 with some additional still to reprice in second quarter.  The net interest margin for the first quarter 2019 was 3.24%, down only 5 basis points from 3.29% in the first quarter of 2018.  However, net interest income (TE) still increased by 1.05% or $414 thousand versus the same period last year.  Our growth in deposits came at a comparably low cost and continue to be offset by higher earnings on cash reserves, increased loan yields and returns in the investment portfolio.  Because we offered competitive shorter term rates, we would expect margin to begin to stabilize in the later part of 2019 particularly in third and fourth quarter as our shorter term time deposits could reprice lower and provide opportunity for increased margin expansion.

The Bank continued to demonstrate its ability to grow shareholders’ equity as average equity was up $35.4 million or 7.7% in the first quarter of 2019 compared to the same period in 2018. On this expanded equity, return on average assets and return on average equity for the first quarter 2019 were 1.17% and 11.93%, respectively, compared to 1.23% and 13.07% for the first quarter 2018.  Overall expense control remains a key area of focus.  Total operating expenses increased by $712 thousand or 2.9% in the first quarter 2019 as compared to the first quarter 2018, driven by salaries and employee benefits, largely offset by declines in FDIC Insurance and ORE Expenses, net.  The growth in salaries and benefit expense was the result of our targeted effort to hire and expand certain functions which has now been largely completed.

Asset quality and loan loss reserve measures continued to improve.  Nonperforming loans (NPLs) were $24.7 million at March 31, 2019, compared to $24.9 million at March 31, 2018.  NPLs were equal to 0.64% of total loans at March 31, 2019, compared to 0.68% at March 31, 2018.  The coverage ratio, or allowance for loan losses to NPLs, was 180.5% at March 31, 2019, compared to 178.6% at March 31, 2018.  Nonperforming assets (NPAs) were $26.0 million at March 31, 2019 compared to $27.0 million at March 31, 2018.  The ratio of allowance for loan losses to total loans was 1.16% as of March 31, 2019, compared to 1.21% at March 31, 2018 which reflects both the improvement in asset quality and economic conditions in our lending areas.  The allowance for loan losses was $44.7 million at March 31, 2019 compared to $44.4 million at March 31, 2018.  The provision for loan losses remained nominal which continued to reflect the strong credit performance within the loan portfolio.   Net chargeoffs for the first quarter 2019 increased versus the first quarter 2018, at $395 thousand from $90 thousand in the year earlier period driven by a non performing loan sale.  The annualized net chargeoff ratio was 0.04% for the first quarter 2019, compared to 0.01% in the first quarter 2018. 

At March 31, 2019 the equity to asset ratio was 9.73%, compared to 9.37% at March 31, 2018. As mentioned earlier the Bank is proud of its ability to grow shareholder value. Book value per share at March 31, 2019 was $5.18 up 7.92% compared to $4.80 a year earlier.

TrustCo Bank Corp NY is a $5.2 billion savings and loan holding company and through its subsidiary, TrustCo Bank, operated 148 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at March 31, 2019.

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.

A conference call to discuss first quarter 2019 results will be held at 9:00 a.m. Eastern Time on April 23, 2019.  Those wishing to participate in the call may dial toll-free 1-888-339-0764.  International callers must dial 1-412-902-4195.  Please ask to be joined into the TrustCo Bank Corp NY / TRST call.  A replay of the call will be available for thirty days by dialing 1-877-344-7529 (1-412-317-0088 for international callers), Conference Number 10130170.  The call will also be audio webcast at: https://services.choruscall.com/links/trst190429.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 2018, the impact of Federal Reserve actions regarding interest rates and the growth of loans and deposits throughout our branch network, our ability to capitalize on economic changes in the areas in which we operate and the extent to which higher expenses to fulfill operating and regulatory requirements recur or diminish over time.  Such forward-looking statements are subject to factors that could cause actual results to differ materially for TrustCo from those discussed. 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:  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 comply with the supervisory agreement entered into with Trustco Bank’s regulator and potential regulatory actions if we fail to comply; 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 Trustco Bank and the continued ability of Trustco Bank under regulatory rules and the supervisory agreement 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; our ability to make accurate assumptions and judgments regarding the credit risks associated with lending and investing activities; the effect of changes in financial services laws and regulations and the impact of other governmental initiatives affecting the financial services industry; 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; adverse conditions on the securities markets that lead to impairment in the value of securities in our investment portfolio; changes in law and policy accompanying the new presidential administration and uncertainty or speculation pending the enactment of such changes; 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; technological changes and electronic, cyber, and physical security breaches; real estate and collateral values; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB or PCAOB; 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.

Non-GAAP Financial Measures Reconciliation

Tangible equity as a percentage of tangible assets at period end is anon-GAAP financial measure derived from GAAP-based amounts. We calculate tangible equity and tangible assets by excluding the balance of intangible assets from shareholders’ equity and total assets, respectively. We calculate tangible equity as a percentage of tangible assets at period end by dividing tangible equity by tangible assets at period end. We believe that this is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of risk-based capital ratios. 

The efficiency ratio is a non-GAAP measure of expense control relative to revenue from net interest income and fee income.  We calculate the efficiency ratio by dividing total noninterest expenses as determined under GAAP, but excluding other real estate expense, net, by net interest income (fully taxable equivalent) and total noninterest income as determined under GAAP, but excluding net gains on the sale of nonperforming loans and securities and other non-routine items from this calculation.  We believe that this provides a reasonable measure of primary banking expenses relative to primary banking revenue. 

We believe that these non-GAAP financial measures provide information that is important to investors and that is useful in understanding our financial results. Our management internally assesses our performance based, in part, on these measures.  However, these non-GAAP financial measures are supplemental and not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for these measures, this presentation may not be comparable to other similarly titled measures reported by other companies. A reconciliation of the non-GAAP measures of tangible common equity, tangible book value per share, efficiency ratio, net income and net income per share to the underlying GAAP numbers is set forth below.

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