Note: This is an earnings call transcript. Content may contain errors.

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DATE

Wednesday, Oct. 22, 2025, at 9 a.m. ET

CALL PARTICIPANTS

  • Chairman, President, and Chief Executive Officer — Robert J. McCormick
  • Chief Financial Officer — Michael M. Ozimek
  • Chief Banking Officer — Kevin M. Curley
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TAKEAWAYS

  • Net Income -- $16.3 million in net income, up 26.3% year over year, reflecting continued profitability growth.
  • Return on Average Assets -- 1.02%, a 21.4% year-over-year increase, indicating higher earnings efficiency.
  • Return on Average Equity -- 9.29%, up 20% year over year, demonstrating improved shareholder returns.
  • Efficiency Ratio -- Decreased nearly 9% year over year.
  • Book Value Per Share -- $37.30, an increase of 6% from $35.19 in 2024's Q3.
  • Nonperforming Loans -- Declined to $18.5 million from $19.4 million a year ago, underscoring asset quality improvements.
  • Nonperforming Loans to Total Loans -- 0.36% versus 0.38% compared to Q3 2024, a positive movement in credit quality.
  • Coverage Ratio -- Over 280%, a 9% rise compared to Q3 2024, supporting the allowance for credit losses.
  • Loan Growth -- Average loans rose 2.5% ($125.9 million) to $5.2 billion, reaching a record level.
  • Home Equity Loans -- Increased by 15.7% year over year to $59.9 million, marking the strongest segment expansion.
  • Residential Mortgage Loans -- Up $34 million in the residential real estate portfolio, contributing to overall portfolio growth.
  • Commercial Loans -- Increased $34.6 million, a 12.4% gain year over year, highlighting commercial loan momentum.
  • Total Deposits -- Ended at $5.5 billion, up $217 million compared to Q3 2024, pointing to solid deposit attraction.
  • Net Interest Income -- $43.1 million in net interest income, an 11.5% increase ($4.4 million) driven by margin expansion.
  • Net Interest Margin -- 2.79%, up 18 basis points, reflecting improved asset-liability management.
  • Yield on Interest-Earning Assets -- 4.25%, an increase of 14 basis points.
  • Cost of Interest-Bearing Liabilities -- 1.9%, down from 1.94%
  • Share Repurchase Program -- 467,000 shares bought year to date (298,000 in the quarter); capacity for 533,000 more shares.
  • Wealth Management Division -- $1.25 billion in assets under management; division accounted for 41.9% of non-interest income.
  • Non-Interest Expense -- $26.2 million, down $42,000 from the prior year quarter.
  • ORE (Other Real Estate) Expense -- $8,000 for the quarter, significantly reduced from $204,000 compared to Q3 2024.
  • Shareholder Return Philosophy -- McCormick said, "It is our view that the stock is significantly undervalued and presents an outstanding investment opportunity without exposing us to the risks inherent with another investment."
  • CD Portfolio Repricing -- McCormick said, "The highest rate we're offering right now, Ian, is 4%," with about $1 billion in CDs coming due at an average rate of 3.75% over the next four to six months.
  • Charge-Offs -- Net recovery of $176,000, showing continued credit strength.
  • Branch Network -- Flat at 136 branches sequentially; expansion focus on Pasco County, Florida, and Downstate New York.
  • Allowance for Credit Losses -- $51.9 million with a 281% coverage; up from $49.95 million and an increase of 157% compared to a year ago.

SUMMARY

TrustCo Bank (TRST +1.96%) reported substantial gains in both net income and net interest income, supported by strong asset quality metrics and steady growth across residential and commercial lending segments. Management completed nearly half of a 1-million-share repurchase plan, citing perceived undervaluation. Margin and efficiency improvements coincided with disciplined cost management and broad deposit growth.

  • The wealth management division's non-interest income, representing nearly 42% of the total, was fueled by $1.25 billion in assets under management.
  • Management anticipates additional share buybacks upon exhausting the current authorization, describing an ongoing focus on long-term shareholder value.
  • CD repricing is expected in the upcoming quarters as $1 billion at a 3.75% average rate matures over the next four to six months, with new issues offered up to 4%.
  • Loan growth was achieved without increasing credit risk, as evidenced by net charge-off recoveries and rising coverage ratios.

INDUSTRY GLOSSARY

  • ORE (Other Real Estate): Real estate owned by the bank, typically acquired through foreclosure, pending resale or resolution.

Full Conference Call Transcript

At this time, I'd like to turn the conference call over to Mr. Robert J. McCormick, Chairman, President, and CEO. Please go ahead.

Robert J. McCormick: Morning, everyone, and thank you for joining the call. I'm Robert J. McCormick, President of TrustCo Bank Corp NY. I'm joined today as usual by Michael M. Ozimek, our CFO, who will go through the numbers, and Kevin M. Curley, our Chief Banking Officer, who will talk about lending. It is often said that actions speak louder than words. TrustCo Bank Corp NY's performance this quarter and year to date speaks volumes about the tactical effective application of our corporate strategic vision. TrustCo Bank Corp NY's mission is to deliver the best possible loan and deposit products, making the dream of home ownership come true for customers who we treat with respect.

It is a fundamental principle of our company that loans are underwritten with professionalism and care to ensure fair lending outcomes and solid credit quality. This is true both in our residential and commercial lending areas. Looking back just five years, we have never exceeded annualized net charge-offs of more than 0.02% compared to our average loan portfolio. Throughout this year, our strong customer relationships have enabled us to grow deposits and loans while holding the line on cost of funds as the loan portfolio repriced. All of these elements have combined to generate these stellar financial results we proudly announced today. Both our profitability and efficiencies improved greatly over the quarter, compared to this time last year.

Our return on average assets increased 21.4%, return on average equity grew 20%, and our efficiency ratio decreased by almost 9%. This is all done while staying focused on high-quality underwriting standards and loan processing functions, sticking to our lending philosophy by never sacrificing credit quality. We improved our nonperforming loans to total loans by 5% over the quarter, and our coverage ratio increased to over 280%, up 9% from the third quarter last year. Also, part of our longstanding TrustCo tradition, we do not rest upon our successes. Throughout this year, our management team has demonstrated we are not satisfied with simply delivering outstanding corporate performance in the present term.

We always have an eye on building long-term shareholder value. Toward that end, we sought and received approval to repurchase 1,000,000 shares of our company's stock. So far, we have repurchased nearly half of that number. Further, we anticipate that the company will complete the currently authorized buyback and expect to seek approval for further substantial repurchase. It is our view that the stock is significantly undervalued and presents an outstanding investment opportunity without exposing us to the risks inherent with another investment. Could not be more pleased with the driving corporate value in the safe, sound, and strategically purposeful manner. Now Michael will go over the details with the numbers, and some impressive numbers. Michael?

Michael M. Ozimek: Thank you, Robert, and good morning, everyone. I will now review TrustCo Bank Corp NY's financial results for the 2025Q3. As we noted in the press release, once again, the company saw strong financial results for the 2025Q3, marked by increases in both net income and net interest income of TrustCo Bank Corp NY during the 2025Q3 compared to the 2024Q3. This performance is underscored by rising net interest income, continued margin expansion, and sustained loan and deposit growth across key portfolios. This resulted in third-quarter net income of $16.3 million, an increase of 26.3% over the prior year quarter, which yielded a return on average assets and average equity of 1.02% and 9.29%, respectively. Capital remains strong.

Consolidated equity to assets ratio was 10.9% for the 2025Q3, compared to 10.95% in the 2024Q3. Book value per share at 09/30/2025 was $37.30, up 6% compared to $35.19 a year earlier. During the 2025Q3, TrustCo Bank Corp NY repurchased 298,000 shares of common stock under the previously announced stock repurchase program, resulting in 467,000 shares repurchased year to date, and we have the ability to repurchase another 533,000 shares under the repurchase program. And as always, we remain committed to returning value to shareholders through a disciplined share repurchase program, which reflects our confidence in the long-term strength of the franchise and our focus on capital optimization. Credit quality continues to improve.

As we saw nonperforming loans decline to $18.5 million in the 2025Q3 from $19.4 million in the 2024Q3. Additionally, nonperforming loans to total loans also decreased to 0.36% in the 2025Q3, from 0.38% in the 2024Q3. Nonperforming assets to total assets also reduced to 0.31% in the 2025Q3 compared to 0.36% in the 2024Q3. Our continued focus on solid underwriting within our loan portfolio and conservative lending standards positions us to manage credit risk effectively in the current environment. Average loans for the 2025Q3 grew 2.5% or $125.9 million to $5.2 billion from the 2024Q3, an all-time high.

Consequently, overall loan growth has continued to increase, and leading the charge was the home equity credit lines portfolio, which increased by $59.9 million or 15.7% in the 2025Q3 over the same period in 2024. The residential real estate portfolio increased $34 million or 0.8% of average commercial loans, which also increased $34.6 million or 12.4% over the same period in 2024. This uptick continues to reflect a strong local economy and increased demand for credit. For the 2025Q3, the provision for credit losses was $250,000. Retaining deposits has been a key focus as we navigate through 2025Q3. Total deposits ended the quarter at $5.5 billion and was up $217 million compared to the prior year quarter.

We believe the increase in these deposits compared to the same period in 2024 continues to indicate strong customer confidence in the bank's competitive deposit offerings. The bank's continued emphasis on relationship banking combined with competitive product offerings and digital capabilities has continued to stable deposit base that supports ongoing loan growth and expansion. Net interest income was $43.1 million for the 2025Q3, an increase of $4.4 million or 11.5% compared to the prior year quarter. Net interest margin for the 2025Q3 was 2.79%, up 18 basis points from the prior year quarter.

The yield on interest-earning assets increased to 4.25%, up 14 basis points from the prior year quarter, and the cost of interest-bearing liabilities decreased to 1.9% in the 2025Q3 from 1.94% in the 2024Q3. The bank is well-positioned to continue delivering strong net interest income performance even as the Federal Reserve signals a continued potential easing cycle in the months ahead. The bank remains committed to maintaining competitive deposit offerings while ensuring financial stability and continued support for our communities' banking needs. Our wealth management division continues to be a significant recurring source of non-interest income. They had approximately $1.25 billion of assets under management as of September 30, 2025.

Non-interest income attributable to wealth management and financial services fees represent 41.9% of non-interest income. The majority of this fee income is recurring, supported by long-term advisory relationships and a growing base of managed assets. Now on to non-interest expense. Total non-interest expense net of ORE expense came in at $26.2 million, down $42,000 from the prior year quarter. ORE expense net came in at an expense of $8,000 for the quarter as compared to $204,000 in the prior year quarter. We are going to continue to hold the anticipated level of ORE expense to not exceed $250,000 per quarter. All of the other categories of non-interest expense were in line with our expectations for the third quarter.

Now Kevin will review the loan portfolio and non-performing loans.

Kevin M. Curley: Mike, good morning to everyone. Our loans grew by $125.9 million or 2.5% year over year. The growth was centered on our home equity loans, which increased by $59.9 million or 15.7% over last year, and residential mortgages, which increased by $34 million. In addition, our commercial loans grew by $34.6 million or 12.4% over last year. For the second quarter, actual loans increased by $35.1 million as total residential loans grew by $38.5 million, and commercial loans were slightly lower for the quarter. Overall, residential activity is picking up. We are seeing additional refinance volume as mortgage rates remain in the 6% range.

Our home equity lending also continues to grow steadily as customers continue to use their equity for home improvements, education expenses, or paying off higher-cost loans such as credit cards. In all our markets, rates have fluctuated within a 25 basis point range, with our current thirty-year fixed rate mortgage at 6.125%. In addition, our home equity products are very competitive, with rates starting below 6.75%. Our products are well situated across our markets, as we are ready to capture more growth as activity picks up. As a portfolio lender, we have the flexibility to manage pricing and implement targeted promotions to increase loan volume.

Overall, we are encouraged by the loan growth in the quarter and remain focused on driving stronger results moving forward. Moving to asset quality. Asset quality of the bank remains very strong. At TrustCo Bank Corp NY, we work hard to meet strong credit quality throughout our loan portfolio. As a portfolio lender, we have consistently used prudent underwriting standards to build our loan portfolio. Our residential loans originated in-house, focusing on key underwriting factors that have proven to lead to sound credit decisions. These loans are originated with the intent to be held in our portfolio for the full term rather than originated for sale. In addition, we have no foreign or subprime loans in our residential portfolio.

In our commercial loan portfolio, which makes up just about 6% of our total loans, we focus on relationship-based loans secured mostly by real estate within our primary market area. We also avoid concentrations of credit to any single borrower or business and continue to require personal guarantees on all our loans. Overall, our disciplined underwriting approach has produced strong credit quality across our entire loan portfolio. Here are the key metrics. Our early-stage delinquencies for our portfolio continue to be steady. Charge-offs for the quarter amounted to a net recovery of $176,000, which follows a net recovery of $9,000 in the second quarter and $258,000 in recovery in the first quarter, totaling a year-to-date net recovery of $443,000.

Non-performing loans were $18.5 million at this quarter-end, compared to $17.9 million last quarter and $19.4 million a year ago. Non-performing loans to total loans was 0.36% this quarter-end, compared to 0.35% last quarter and 0.38% a year ago. Non-performing assets were $19.7 million at quarter-end versus $19 million last quarter and $21.9 million a year ago. At quarter-end, the allowance for credit losses remained solid at $51.9 million with a coverage ratio of 281%, compared to $51.3 million with a coverage ratio of 286% at year-end and $49.95 million with a coverage ratio of 157% a year ago. That's our story. We're happy to answer any questions you might have.

Operator: Thanks very much. We will now begin the question and answer session. Before pressing the keys, our first question comes from Ian Lapey from Gabelli Funds. Your line is open, Ian. Please go ahead.

Ian Lapey: Good morning, Robert and team. Congratulations on the great financial results. I was hoping maybe you could quantify a little bit. The release mentions that you expect meaningful net interest income upside for quarters to come. You mentioned the rates on the fixed rate and home equity. What about the CDs that are going to be maturing over the next quarter? What's sort of the average rate for that compared to what you're paying on new CDs that you're issuing?

Robert J. McCormick: The highest rate we're offering right now, Ian, is 4%, and that's a three-month rate. And there's about a billion dollars in CDs that are coming due over the next four to six months. So we expect, based on what happens with the Fed and some competition, there should be opportunity in that CD portfolio to reprice.

Ian Lapey: What's roughly the average, so for the billion coming due, what is the average roughly rate on those?

Robert J. McCormick: The average rate on the billion coming due is about 3.75%. Okay. And then on the recoveries, obviously, very impressive. I was just hoping you could unpack that a little bit. For example, for the quarter, in New York, you had $194,000 in recoveries. Just curious, like how many homes typically would that relate to? Is this just a function of borrowers defaulting with significant equity still in the home? Maybe you can just explain a little bit.

Robert J. McCormick: A lot of that, as you can imagine, Ian, in the real estate market, Upstate is still very, very strong, and there's still great demand with relatively limited inventory. So a lot of the transactions happened before we even end up taking the property back, which is the best possible scenario. But the $194,000 is probably around five properties we've taken back, and I think there was one commercial property in there and four residentials.

Ian Lapey: Okay, great. And then I guess my only follow-up, my only remaining question. So it looked like branches were flat at 136 sequentially. What are you thinking about in terms of expansion, if at all, and would Florida still be sort of your targeted range for growth?

Robert J. McCormick: We're looking at, well, Pasco County is something that we're very interested in, Ian. I'm sure you're tracking this, but on the West Coast of Florida, because of development and prices and things like that, people are being pushed further and further out from Tampa. We're seeing opportunity in loan demand in Pasco County. And then there are a couple of other infill locations that we would like to find something in Florida. But, you know, we are pretty cheap people, so we want the right transaction if we can in the right location. So and then there's always opportunity throughout Downstate New York as things open up there as well.

So those would be the two opportunities we're seeing right now.

Ian Lapey: Okay. Terrific. Thank you.

Operator: Thank you. We currently have no further questions at this time. Now I'd like to turn the conference back to Robert J. McCormick for any closing remarks.

Robert J. McCormick: Thank you for your interest in our company, and we hope you have a great day. Thank you.

Operator: The conference call has now concluded. Thank you very much for attending. You may now disconnect your lines.