TrustCo (TRST): Mortgage Repricing, Big Buyback — A Mid-Term Long Setup

Hook / Thesis

TrustCo Bank (TRST) just gave investors two things they value: improving core economics and aggressive capital return. Management reported Q4 2025 net income of $15.6 million - up 38% year-over-year - driven by a 12.4% increase in net interest income and a 22 basis-point margin expansion. At the same time, the board authorized a 2 million-share repurchase program (roughly 11% of outstanding shares) after completing a prior 1 million-share program in 2025.

Those two items create a palpable tactical opportunity. Mortgage repricing and higher asset yields are supporting earnings growth; buybacks and a 3.3% yield (roughly) are tightening per-share metrics. The play is to buy TRST on strength and ride expected EPS uplift and buyback-driven supply reduction over a mid-term holding period.

Why the market should care

TrustCo is a $890.6 million market-cap savings-and-loan holding company that operates 134 offices across five states and manages mortgage assets alongside retail banking franchises. The bank reported record-high average loans of $5.2 billion with 2.5% loan growth and deposits of $5.6 billion. Those are not small numbers for a regional thrift and they matter because higher loan balances plus margin expansion directly translate to higher net interest income and therefore higher net income and free cash flow.

Concrete finance details: Q4 net income was $15.6 million, net interest income increased 12.4%, margins widened by 22 basis points, and management expects non-interest expenses of $27.7 - $28.2 million per quarter in 2026. Earnings per share in the trailing data sits around $3.15, giving a P/E in the mid-teens (roughly 14 based on available price metrics). That combination - earnings growth, capital return via buybacks, and a 3.2% dividend yield - is the fundamental driver supporting the bullish thesis.

Valuation framing

At roughly $46.26 today, TrustCo carries a market capitalization near $890.6 million and a price-to-book around 1.19. Trailing EPS near $3.15 implies a P/E in the low-to-mid teens, which is reasonable for a well-capitalized thrift with an 8.2% return on equity and low leverage (debt-to-equity about 0.14). Enterprise value is roughly $873.3 million with an EV/EBITDA near 11.7 and EV/sales near 3.19.

Contextually, you are paying modest multiples for a bank that is posting double-digit net income growth year-over-year, generating free cash flow (~$44.3 million trailing), and returning capital via a new 2 million-share repurchase that could meaningfully reduce float (about 11% of outstanding shares). The valuation looks neither stretched nor deeply discounted - it’s fair-to-favorable given current fundamentals and capital returns.

Catalysts

• Buyback execution - Board authorized 2 million shares to be repurchased over the next 12 months; active repurchases should boost EPS and reduce float.
• Mortgage repricing and NIM tailwind - Q4 showed a 22 bp margin increase and 12.4% growth in net interest income; continued repricing lifts earnings.
• Dividend stability and yield - quarterly dividend of $0.38 per share, supporting income-focused investors and setting a floor under the stock.
• Geographic expansion - continued push into Florida (Pasco County) provides incremental loan growth opportunities.
• Operational discipline - management guided 2026 non-interest expense to $27.7 - $28.2 million per quarter, suggesting controlled expense growth and higher operating leverage.

Trade plan (actionable)

Time frame explanation: I expect the trade to last mid term (45 trading days). That window gives time for the company to publicly disclose buyback activity, for one or two weeks of continued post-earnings momentum, and for repricing of mortgage assets and margin improvements to show up in the market’s valuation. If buybacks or additional positive disclosures accelerate, I will re-evaluate for a longer hold.

Position sizing & risk control

Use the $43.50 stop to limit downside; that stop sits below recent intra-day lows and should catch meaningful weakness in loan repricing or a headline-driven bank-run scenario. For a typical retail portfolio, a position sized to risk no more than 1-2% of portfolio capital on the stop-to-entry distance is appropriate. If the stock breaks below $43.50 on volume, that signals the thesis is under pressure and the trade should be closed.

Supporting technicals and market structure

Technically, TRST trades above its 10/20/50-day SMAs and EMAs (10-day SMA ~ $43.84, 20-day ~ $43.29, 50-day ~ $42.99; EMA(9) ~ $44.28), with an RSI around 66 and a bullish MACD histogram. Short interest has been elevated historically but shows signs of retreat from peaks; recent short-volume data indicates meaningful short activity on several days, which can amplify moves on positive news. The stock is also only a few dollars below its 52-week high ($48.45), leaving room for upside but also reminding us that some positive moves may already be priced in.

Key points (quick)

• Q4 net income $15.6M, +38% YoY; net interest income +12.4%; margin +22 bps.
• Record average loans $5.2B; deposits $5.6B.
• 2 million-share buyback authorized (~11% of outstanding shares), following completion of a 1 million-share program.
• Market cap ~ $890.6M; P/E in the low-to-mid teens; dividend ~$0.38 quarterly (~3.2% yield).

Risks and counterarguments

Every trade has risks. Below are the primary downside scenarios and a counterargument to my thesis.

• Margin reversal - If market interest rates fall or the yield curve compresses, net interest margins could contract and reverse recent gains, pressuring earnings.
• Buyback timing/price - Management can authorize buybacks but execution timing matters. If repurchases occur at higher prices, EPS accretion will be smaller and the stock may not rerate.
• Regional bank sentiment - Negative headlines or a broad risk-off in regional banking could push TRST lower irrespective of fundamentals; deposits can be volatile in stressed markets.
• Valuation complacency - The stock trades near its 52-week high; some upside is already priced in. If market participants were expecting even larger buybacks or faster loan growth, disappointment could trigger a pullback.
• Execution risk on expansion - Florida expansion into Pasco County could take longer to generate attractive returns, adding near-term costs without immediate revenue offset.

Counterargument: One could reasonably argue that buybacks and dividends are already discounted in the current price and that margin gains are cyclical. If rate dynamics shift unfavorably, the upside from buybacks will not offset margin compression and the stock may trade sideways or down. This is why the stop at $43.50 is critical and why position sizing ought to be conservative.

What would change my mind

I would change my bullish stance if management reports sustained margin compression (more than 25-30 bps downward), if buyback execution stalls or is suspended, or if deposits begin to shrink meaningfully relative to loans. Conversely, I'd become more aggressive if management accelerates repurchases beyond the 2 million authorization, reports stronger-than-expected loan growth (meaningfully above the recent 2.5% pace), or posts another quarter of >30% YoY net income growth.

Conclusion

TrustCo offers a balanced risk/reward: steady earnings growth, clear capital return via buybacks and dividends, reasonable valuation, and improving margins. The mid-term trade at $46.26 with a $51.00 target and a $43.50 stop captures upside from buyback-driven EPS improvement and margin tailwinds while limiting downside. Position size and the stop are the linchpins; respect both and treat the trade as a tactical mid-term allocation rather than a long-only buy-and-forget position.

Trade plan recap: Buy TRST at $46.26; target $51.00; stop $43.50; horizon mid term (45 trading days).