TrustCo Bank Corp NY Fourth Quarter 2025 Earnings Call - Net income jumps 38% as margin widens and buyback accelerates

Conference Operator: Good day. Welcome to the TrustCo Bank Corp NY fourth quarter earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero on your keypad. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your telephone keypad. To withdraw your question, you may press star followed by two. Before proceeding, we would like to mention that this presentation may contain forward-looking information about TrustCo Bank Corp NY. That is intended to be covered by the safe harbor for forward-looking 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 and other risk factors can be found in our press release that preceded this call and in the risk factors and forward-looking statements section of our annual report on Form 10-K and as updated by our quarterly reports on Form 10-Q. The forward-looking statements made on this call are only valid as of the date hereof, and the company disclaims any obligation to update the information to reflect events or developments after the date of this call, except as may be required by applicable law. During today’s call, we will discuss certain financial measures derived from our financial statements that are not determined in accordance with US GAAP. The reconciliations of such non-GAAP measures to the most comparable GAAP figures are included in our earnings release, which is available under the Investor Relations tab of our website at trustcobank.com.

Please also note that today’s event is being recorded. A replay of the 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, and CEO, to begin. Please go ahead, Robert.

Robert J. McCormick, Chairman, President, and CEO, TrustCo Bank: Good morning, everyone, and thank you for joining the call. I’m Rob McCormick, the Chairman of TrustCo Bank. I’m joined today, as usual, by Mike Ozimek, our CFO, who will go through the numbers, and Kevin Curley, our Chief Banking Officer, who will talk about lending. The results announced yesterday are the culmination of years of strategic long-term planning and nimble near-term execution. We resisted risky lending concentrations, borrowing, and other gimmicks in favor of building solid customer relationships through the delivery of top-notch loan and deposit products and services. This enabled us to keep our cost of funds low and grow loans, leading to a healthy margin expansion. We deployed capital through the continuation of our century-long dividend payout, a robust stock repurchase program, and our bedrock practice of lending gathered deposits right back in the communities we serve.

All of these factors together contributed to a 38% increase in net income and a return on average assets of almost 33% for the quarter. Total shareholder value returned three times that of our proxy peers year over year. Stellar performance by any measure. Now, Mike will go through the details, and Kevin will provide some color on lending.

Mike Ozimek, CFO, TrustCo Bank: Thank you, Rob, and good morning, everyone. I will now review TrustCo’s financial results for the fourth quarter of 2025. As we noted in the press release, the company continued to see strong financial results for the fourth quarter of 2025, marked by increases in both net income and net interest income of TrustCo Bank during the fourth quarter of 2025 compared to the fourth quarter of 2024. This performance is underscored by rising net interest income, continued margin expansion, and sustained loan and deposit growth across key portfolios. This resulted in a fourth quarter net income of $15.6 million and an increase of 38% over the prior year quarter, which yielded a return on average assets and average equity of 0.97% and 8.99%, respectively. Capital remained strong. Consolidated equity to assets ratio was 10.66% for the fourth quarter of 2025 compared to 10.84% in the fourth quarter of 2024.

Book value per share on December 31st, 2025, was $38.08, up 7.1% compared to $35.56 a year earlier. During the fourth quarter of 2025, TrustCo repurchased 533,000 shares of common stock under the previously announced stock repurchase program, resulting in 1 million shares or 5.3% of common stock repurchase year to date, the maximum allowable under the stock repurchase program. And we have also renewed the stock repurchase program, which now allows for the repurchase of up to 2 million shares or another 11.1% during 2026. 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 be consistent as we saw non-performing loans modestly increase to 20.7 million in the fourth quarter of 2025 from 18.8 million in the fourth quarter of 2024.

Non-performing loans to total loans increased to 0.39% in the fourth quarter of 2025 from 0.37% in the fourth quarter of 2024. Non-performing assets to total assets was 0.34% for both the fourth quarter of 2025 and 2024. 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 fourth quarter of 2025 grew 2.5%, or $126.8 million to $5.2 billion for the fourth quarter of 2024, an all-time high. Consequently, overall loan growth has continued to increase, and leading the charge was home equity lines of credit, which increased by $54.1 million, or 13.5% in the fourth quarter of 2025 over the same period in 2024. The residential real estate portfolio increased $50.6 million, or 1.2%.

Average commercial loans increased $24.5 million, or 8.6%, and installment loans decreased $2.4 million, or 17.3% over the same period in 2024. This uptick continues to reflect a strong local economy and increased demand for credit. For the fourth quarter of 2025, the provision for credit losses was $400,000. Retaining deposits has been a key focus as we navigated through 2025. Total deposits ended the quarter at $5.6 billion, was up $166 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 a stable deposit base that supports ongoing loan growth and expansion.

Net interest income was $43.7 million for the fourth quarter of 2025, an increase of $4.8 million, or 12.4%, compared to the prior year quarter. Net interest margin for the fourth quarter of 2025 was 2.82%, up 22 basis points from the prior year quarter. The yield on interest-earning assets increased to 4.24%, up 12 basis points from the prior year quarter, and the cost of interest-earning liabilities decreased to 1.84% from the fourth quarter of 2025, from 1.97%. The bank is well-positioned to continue delivering strong net interest income performance even as the Federal Reserve contemplates rate changes in the months ahead. The bank remains committed to maintaining competitive deposit offerings while ensuring financial stability and continued support for our community’s banking needs. Our wealth management division continues to be a significant recurring source of non-interest income.

They had approximately $1.27 billion of assets under management as of December 31. Non-interest income attributable to wealth management and financial services fees represents 44% 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 $26.5 million, down $1.5 million from the prior year quarter. ORE expense net came in at an expense of $161,000 for the quarter as compared to $476,000 in the prior year quarter. We’re going to continue to hold the anticipated level of expense not to exceed $250,000 per quarter. All of the other categories of non-interest expense were in line with our expectations for the fourth quarter.

We would expect 2026 total recurring non-interest expense, net of ORE expense, to be in the range of $27.7-$28.2 million per quarter. Now, Kevin will review the loan portfolio and non-performing loans.

Kevin Curley, Chief Banking Officer, TrustCo Bank: Thanks, Mike, and good morning to everyone. Our average loans grew by $126.8 million, or 2.5% year over year. The growth was centered in our residential loan portfolio, with our first mortgage segment growing by $50.6 million, or 1.2%, and our home equity loans growing $54.1 million, or 13.5%, over last year. In addition, our commercial loans grew by $24.5 million, or 8.6%, over last year. For the fourth quarter, actual loans increased by $60.7 million compared to the third quarter. Purchase mortgage loans, including refinances, grew by $42.4 million. Home equity loans increased by $17 million, and commercial loans were up by $two million for the quarter. Overall, residential activity improved during the quarter. For purchase and refinances, we did see a slight uptick in activity, and we were able to close more loans during the quarter.

As we have said in the past, we are well-situated in the market and will capture more growth as these segments pick up. Also, as a portfolio lender, we’re uniquely positioned to manage pricing and offer promotions to increase lending value. Our home equity products continue to see consistent demand as customers continue to use their equity in their home for home improvements or paying off loans with high rates, such as credit cards. In all our markets, rates continue to be moving in an approximately 25 basis point range. Our current rate is 5.875% for our base 30-year fixed-rate loan. We also offer a low-rate, 5/1 ARM, and a very competitive home equity credit line products. Overall, we are positive about our low growth in the quarter and remain focused on driving stronger results this year. Now, moving to asset quality.

At TrustCo, we work hard to maintain strong credit quality in our loan portfolio. As a portfolio lender, we have consistently used prudent underwriting standards to build our loan portfolios. Our residential loans are originated in-house, focused on key underwriting factors that have proven to lead to sound credit decisions. These loans are originated with the intent to be held by us for the full term rather than originated for sale. In addition, we have no foreign or subprime loans in our residential loan portfolio. In our commercial loan portfolio, which makes up about 6% of our total loans, we focus on relationship-based loans secured mostly by real estate within our primary market areas. We also avoid concentrations of any credit to any single borrower or business and continue to require personal guarantees on all of our loans. Now, for our numbers, asset quality for the bank remains very strong.

Early-stage delinquencies for our portfolio continue to be steady. Charge-offs for the quarter amount to a net recovery of $14,000, which follows a net recovery of $176,000 in the third quarter and $457,000 over the past year. Non-performing loans were $20.7 million at this quarter end, $18.5 million last quarter, and $18.8 million a year ago. Non-performing loans to total loans was 0.39% at this quarter end compared to 0.36% last quarter and 0.37% a year ago. Non-performing assets were $22.1 million at quarter end versus $19.7 million last quarter and $21 million a year ago. At quarter end, our allowance for credit losses remained solid at $52.2 million with a coverage ratio of 253% compared to $51.9 million with a coverage ratio of 281% last quarter and $50.2 million at a coverage ratio of 267% a year ago. Rob?

Mike Ozimek, CFO, TrustCo Bank: Thanks, Kevin. We’re happy to answer any questions. That’s our story.

Conference Operator: Thank you very much. To ask a question, please press Star followed by 1 on your telephone keypad. To change your mind, please press Star followed by 2. I’ll pause for any questions to come through. Our first question comes from Ian Lapey from Gabelli Funds. Your line is open, Ian. Please go ahead.

Ian Lapey, Analyst, Gabelli Funds: Good morning, gentlemen. Congratulations on a great quarter, great quarter and year.

Mike Ozimek, CFO, TrustCo Bank: Thank you.

Ian Lapey, Analyst, Gabelli Funds: Maybe start with asset quality. Obviously, it’s great to see another quarter of net recoveries. But I did notice an increase in the New York commercial NPLs of about $1.7 million. Was that one relationship or a couple? Maybe you could just expand a little bit what happened there.

Mike Ozimek, CFO, TrustCo Bank: I think it’s two relationships, Ian. And they’re multi-families. One is in the City of Schenectady and one is in the City of Albany.

Ian Lapey, Analyst, Gabelli Funds: Are those typical where you have good collateral and personal guarantees?

Mike Ozimek, CFO, TrustCo Bank: Oh, yeah. We don’t have an unguaranteed loan in our portfolio, Ian.

Ian Lapey, Analyst, Gabelli Funds: Okay. Good.

Mike Ozimek, CFO, TrustCo Bank: These particular cases, they’re both retirees who are knowledgeable with regard to this, and I think they’ve relocated to Florida. At least one of them has.

Ian Lapey, Analyst, Gabelli Funds: Okay. And then a couple on expenses. First, the other expense was up a little bit, 2.55 versus 1.7 in 3Q. Anything in particular driving that?

Mike Ozimek, CFO, TrustCo Bank: No. I mean, just at the end of the year, there’s some of the benefit plans that we look at. We also took the opportunity for tax purposes to fund the TrustCo Foundation for about $500,000 just to be able to take that tax benefit of that. So just a few larger expenses that we put through in the fourth quarter, but nothing really notable.

Ian Lapey, Analyst, Gabelli Funds: Okay. And then I thought I heard for the guidance for 2026 expenses, you said 27.7-28.2 excluding other real estate. Is that right?

Mike Ozimek, CFO, TrustCo Bank: Yeah. Yeah. It just gives us a little breathing room going into next year, but there’s nothing really that’s driving us up.

Ian Lapey, Analyst, Gabelli Funds: Okay. So because that is a decent uptick from the run rate this year, is that anything in particular, or is that sort of across the board?

Mike Ozimek, CFO, TrustCo Bank: That’s really just across the board. There’s nothing really that’s standing out there. Like I said, just to kind of give us a little bit of room for next year.

Ian Lapey, Analyst, Gabelli Funds: Okay.

Mike Ozimek, CFO, TrustCo Bank: I would expect this to probably be on the lower end range of that.

Ian Lapey, Analyst, Gabelli Funds: Okay, and then lastly, for me, for the branches, they declined by two. What’s the outlook? I know you mentioned last call, Rob, you were looking at Pasco County in Florida. What’s sort of your expectation for branch growth or declines for 2026?

Mike Ozimek, CFO, TrustCo Bank: You touched on the expenses earlier, Ian, and we are pretty cheap people when it comes to that, so we want to get in at the right price, and who knew Pasco would be as difficult as it would be to find a location as it is, but we are still actively looking in Pasco. There’s a lot of mortgage business there. As the market changes down there, they’re pushing people further north, and as Tampa becomes less affordable and some of the other West Coast cities become unaffordable, they move into Pasco, so we are still looking for a location there, but we want to do it the right way.

Ian Lapey, Analyst, Gabelli Funds: Okay. Great. And again, congratulations. Great, great year.

Mike Ozimek, CFO, TrustCo Bank: Thanks for your interest, Ian.

Ian Lapey, Analyst, Gabelli Funds: Thank you.

Conference Operator: As a reminder, to ask a question, please press Star followed by 1. This concludes our question and answer session. I’d like to turn the conference back over to Robert J. McCormick for any closing remarks.

Mike Ozimek, CFO, TrustCo Bank: Thank you for your interest in our company, and we hope you have a great day. Thank you.

Conference Operator: The conference call is now concluded. Thank you for everyone attending. You may now disconnect your lines.