If you're considering Trustco Bank (NASDAQ:TRST) as an investment, you're probably intrigued by the dividend income. That's what drew me in. Last year, I took a look at Trustco myself, but I came away thinking that even though the dividend payment was robust, there wasn't enough value in the shares to warrant a purchase. Now, about 10 months after I first looked at Trustco, things haven't changed much, although there are signs of change coming.
The most intriguing aspect of Trustco is still the dividend, which now yields a nice, plump 5.1%. The lingering issue is that the dividend hasn't been increased since late 2001, and with anemic growth over the past few years, there hasn't been much else to get excited about. Pretty much the only good news on the dividend front is that the payout ratio is down to 78% of net income, vs. the 88% of a few years ago.
The rest of the business is sound. Typical measures of bank health, such as return on equity, return on assets, and the efficiency ratio, are all top-tier at 26.7%, 2%, and 38.8%, respectively. The problem is that the numbers that go into calculating those metrics are relatively stagnant.
Trustco's largest market is the Albany, N.Y., area, and even it's filled with many smaller competitors as well as larger banks, like Bank of America (NYSE:BAC), Keycorp (NYSE:KEY), and HSBC Holdings (NYSE:HBC) for deposits. For loans, the area includes national players such as Wells Fargo (NYSE:WFC).
An important metric to keep an eye on at Trustco is growth in deposits and loans via new branch openings. In the past year, Trustco added five branches in Florida and New York and will add more next year in both states plus New Jersey.
Thus far, though, the expansion hasn't shown clear benefits, and none of these markets lacks competitors. But Trustco still merits attention because if the new markets show some responsiveness to the company's low mortgage closing costs, then there's some value in the shares. Until then, I'm watching and waiting for a lower price that justifies the current state of the business.
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Fool contributor Nathan Parmelee does not own shares in any of the companies mentioned.
