TrustCo Bank Corp NY Q1 2026 Earnings Call - Loan Repricing and Aggressive Buybacks Drive Net Income Growth

Operator: Good day, and welcome to the TrustCo Bank Corp NY earnings call and webcast. All participants are in listen-only mode. Should you need assistance, please signal a conference specialist by pressing 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, then one. To withdraw your question, you may press star and two. Before proceeding, we would like to mention that this presentation may contain forward-looking information about the 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 or implied by such statements due to various risks, uncertainties, and other factors.

More detailed information about these and other 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, as updated by our quarterly reports on Form 10-Q. The forward-looking statements made on this call are valid only as of the date hereof, and the company disclaims any obligation to update this 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 U.S. GAAP. A reconciliation of such non-GAAP financial measures to the most comparable GAAP figures are included in our earnings press 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 this 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, CEO. Please go ahead.

Robert J. McCormick, Chairman, President, and Chief Executive Officer, TrustCo Bank Corp NY: Morning, everyone, and thank you for joining the call. I’m Rob McCormick, the President of TrustCo Bancorp. 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. We’re pleased to report that 2026 is off to a great start with net income of over $16 million, improving margin, positive return metrics, and building momentum in our share buyback program. Net income improved in part because of strategic pricing of our time deposit products, which had the effect of reducing our cost of funds. Also contributing to this growth was non-interest income generated by our wealth management department, which increased 9% quarter-over-quarter.

The most meaningful part of the story and a matter of significant shareholder interest is that the loan portfolio is, as expected, repricing as loans booked at lower rates over the past few years are replaced by higher-earning loans. As the loan portfolio reaches another all-time high this quarter, the positive effect of repricing is becoming more pronounced and is having a meaningful impact on our financials. The great results announced yesterday are further bolstered by our stock buyback program. As investors will recall, we repurchased 1 million shares during 2025 and have received authorization to buy another 2 million shares this year. In the first quarter of 2026, we purchased over 500,000 shares, putting us on pace to fully execute. We continue to believe that the best acquisition we can make is Trustco Bank, and we expect that share repurchases will remain the centerpiece of our capital deployment strategy.

Each of these pieces of our company strategy over the quarter generated significant improvement in our return metrics, highlighting our profitability, efficiency, and capital leverage. Year-over-year, we saw return on average assets increase 10% to 1.02. Return on average equity grew 14% to 9.66. Our efficiency ratio was lower by 6% to 54%. Now Mike will get into the details. Mike?

Mike Ozimek, Chief Financial Officer, TrustCo Bank Corp NY: Thank you, Rob, and good morning, everyone. I’ll now review TrustCo’s financial results for the first quarter of 2026. As we noted in the press release, the company continued to see strong financial results for the first quarter of 2026, marked by increases in both net income and net interest income of the bank during the first quarter compared to the first quarter of 2025. This performance is underscored by rising net interest income, continued margin expansion, and sustained loan and deposit growth across key portfolios. This resulted in first quarter net income of $16.3 million, an increase of 14.1% over the prior year quarter, which yielded a return on average assets and average equity of 1.02% and 9.66%, respectively. Capital remains strong. Consolidated equity-to-assets ratio was 10.31% for the first quarter of 2026 compared to 10.85% in the first quarter of 2025.

Book value per share on March 31, 2026 was $38.32, up 6% compared to $36.16 a year earlier. During the first quarter of 2026, TrustCo repurchased 522,000 shares of common stock, or 2.9% of TrustCo’s outstanding common stock, under its previously announced repurchase program. It allows the company to repurchase up to 2 million shares, or 11.1% of TrustCo common stock in 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 $21.5 million in the first quarter of 2026 from $18.8 million in the first quarter of 2025. Non-performing loans to total loans increased to 41 basis points in the first quarter of 2026 from 37 basis points in the first quarter of 2025.

Non-performing assets to total assets was 35 basis points up from 33 basis points in the first quarter of 2025. 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 first quarter of 2026 grew 3.1%, or $158.9 million to $5.3 billion from the first quarter of 2025, an all-time high. Consequently, overall loan growth has continued to increase, and leading the charge was the home equity lines of credit portfolio, which increased to $50.8 million, or 12.3% in the first quarter of 2026 over the same period in 2025. The residential real estate portfolio, which increased $93.2 million, or 2.1%. Average commercial loans also increased $17.1 million, or 5.8%. This uptick continues to reflect a very strong local economy and increased demand for debt.

For the first quarter of 2026, the provision for credit losses was $950,000. Retaining deposits has also been a key focus as we begin 2026. Total deposits ended the quarter at $5.7 billion and was up $156 million compared to the prior year quarter. We believe the increase in these deposits compared to the same period in 2025 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 contributed to a stable deposit base that supports ongoing loan growth and expansion. Net interest income was $44.7 million for the first quarter of 2026, an increase of $4.3 million or 10.7% compared to the prior year quarter. The net interest margin for the first quarter of 2025 was 2.84%, up 20 basis points from the prior year quarter.

Yield on interest-earning assets increased to 4.23%, up 10 basis points from the prior year quarter, and the cost of interest-earning liability decreased to 1.79% in the first quarter of 2026 from 1.92% in the first quarter of 2025. The bank is well positioned to continue delivering strong net interest income performance, even as the Federal Reserve contemplates whether or not to make 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. It had approximately $1.26 billion of assets under management as of March 31st, 2026. Non-interest income attributable to wealth management and financial services fees represent 44.1% 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 $26.9 million, up $631,000 from the prior year quarter. ORE expense net came in an expense of $50,000 for the quarter as compared to $28,000 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 the other categories of non-interest expense were in line with our expectations for the first quarter. We would expect 2026’s total recurring non-interest expense, net of ORE expense, to be in the range of $26.7-$27.3 million. Now Kevin will review the loan portfolio and non-performing loans.

Kevin Curley, Chief Banking Officer, TrustCo Bank Corp NY: Thanks, Mike, and good morning to everyone. Our average loans grew by $158.9 million or 3.1% year-over-year. This is an improvement over last quarter’s report of year-over-year growth of $126.8 million. The growth was centered in our residential loan portfolio with our first mortgage segment growing by $93.2 million or 2.1%, and our home equity loans growing $50.8 million or 12.3% over last year. In addition, our commercial loans grew by $17.1 million or 5.8% over last year. For the first quarter, actual loans increased by $37.7 million compared to the fourth quarter. Purchased mortgage loans, including refinances and home equity loans, grew by $35.3 million, and commercial loans were up by $3.3 million for the quarter. Our mortgage origination activity showed solid improvement during the quarter and year-over-year. Purchased loan volume was steady throughout the quarter.

Refinance activity picked up earlier in the period with lower rates, then eased as market rates moved higher during the second half of the quarter. In all of our markets, rates were lower in the beginning of the quarter, increased closer to 6.75%, and have recently receded to 6%-6.25% range. We continue to offer highly competitive mortgage rates with our 30-year fixed rate at 5.99%. In addition, our home equity products continue to offer customers lower cost alternatives to other forms of credit. Overall, we are positive about our loan growth in the quarter and remain focused on driving stronger results moving forward. Now on to asset quality. As a portfolio lender, we originate loans to hold for the full term, reinforcing our disciplined underwriting standards. Asset quality at the bank remains very strong. Our early-stage delinquencies for our portfolio remain stable.

Charge-offs for the quarter amounts to a net recovery of $39,000, which follows a net recovery of $14,000 in the fourth quarter and a total of $238,000 in recoveries over the past year. Non-performing loans were $21.5 million at this quarter end, $20.7 million last quarter, and $18.8 million a year ago. Non-performing loans to total loans was 0.41% at this quarter end, compared to 0.39% last quarter and 0.37% a year ago. Non-performing assets were $22.8 million at quarter end versus $22.1 million last quarter and $20.9 million a year ago. At quarter end, our allowance for credit losses remained solid at $53 million, with a coverage ratio of 247%. Compared to $52.2 million, with a coverage ratio of 253% at year-end, and $50.6 million with a coverage ratio of 270% a year ago. Rob?

Robert J. McCormick, Chairman, President, and Chief Executive Officer, TrustCo Bank Corp NY: That’s our story. We’re happy to answer any questions you may have.

Operator: We’ll now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, press star then two. Our first question comes from the line of Ian Lapey with Gabelli Funds. Ian, please go ahead.

Ian Lapey, Analyst, Gabelli Funds: Hi, good morning, Rob and team. Great

Robert J. McCormick, Chairman, President, and Chief Executive Officer, TrustCo Bank Corp NY: Morning, Ian.

Ian Lapey, Analyst, Gabelli Funds: Again.

Robert J. McCormick, Chairman, President, and Chief Executive Officer, TrustCo Bank Corp NY: Good morning. Thank you.

Ian Lapey, Analyst, Gabelli Funds: Yeah, congratulations.

Robert J. McCormick, Chairman, President, and Chief Executive Officer, TrustCo Bank Corp NY: Thanks.

Ian Lapey, Analyst, Gabelli Funds: Just a couple. The provision more than tripled compared to a year ago, despite really solid metrics in terms of your portfolio. You mentioned stable early-stage delinquencies. You mentioned in the release a more cautious economic outlook. Are you still using the baseline Moody’s forecast, or are you doing something else?

Mike Ozimek, Chief Financial Officer, TrustCo Bank Corp NY: Yeah. No. We are still using the baseline Moody’s forecast. What’s really driving that increase in the provision, about half of it is loan growth and about half of it is that forward-looking component of the Moody’s forecast that does have some of the economic factors looking slightly negative on the go forward. That’s what drives that calculation.

Ian Lapey, Analyst, Gabelli Funds: Okay. The release mentions competitive pressure on deposit pricing. Can you just talk about, is anything new, any new entrants or anything changing there? It seems like you’re doing quite well in-

Robert J. McCormick, Chairman, President, and Chief Executive Officer, TrustCo Bank Corp NY: I don’t think there’s anything new, Ian, but it’s the same old, same old. A lot of the consumers are pushing for, obviously, higher CD rates. I think more than I’ve ever seen before, in my career anyway, consumers have a magic number in their mind that they’re pushing for. You also have the natural competitors from the credit unions that we compete against. They’re tough competitors from a rate perspective. They don’t have the same motivation, same issues that we have. Nothing really new, just those two popping up.

Ian Lapey, Analyst, Gabelli Funds: Okay. Lastly, on capital, what was the Common Equity Tier 1 ratio? As you continue to repurchase shares, what’s your comfort level in terms of where you’d be comfortable with that settling out? I know it was 18.4% at year-end.

Robert J. McCormick, Chairman, President, and Chief Executive Officer, TrustCo Bank Corp NY: Yeah. The share repurchase, we’re taking it kind of one bite at a time and slower. Mike can comment on this if he wants, but we’re taking it as we possibly can. We are fully committed and believe in the share repurchase. But we’re certainly not going to jeopardize our capital position or our liquidity position to repurchase shares. You know the scene and the way we run the place. We’ve always been known as well-capitalized and very liquid by all measures, and we certainly wouldn’t want to do anything to disrupt that.

Ian Lapey, Analyst, Gabelli Funds: Okay, good. Do you have the CET1 ratio? I know it’ll be in the queue.

Robert J. McCormick, Chairman, President, and Chief Executive Officer, TrustCo Bank Corp NY: Yeah, we haven’t disclosed it yet, but it’s trending down the same way that the leverage ratio is trending down.

Ian Lapey, Analyst, Gabelli Funds: Right.

Robert J. McCormick, Chairman, President, and Chief Executive Officer, TrustCo Bank Corp NY: We’re putting that capital to work.

Ian Lapey, Analyst, Gabelli Funds: Okay. Okay, great. Congrats again. Thanks.

Robert J. McCormick, Chairman, President, and Chief Executive Officer, TrustCo Bank Corp NY: Thanks, Ian.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Robert J. McCormick for any closing remarks.

Robert J. McCormick, Chairman, President, and Chief Executive Officer, TrustCo Bank Corp NY: Thank you for your interest in our company, and have a great day.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.