TrustCo is Pleased to Report Second Quarter 2020 Results; Net Income of $11.3 Million and 7.6% Average Residential Loan Growth Year over Year

GLENVILLE, N.Y., July 21, 2020 (GLOBE NEWSWIRE) -- TrustCo Bank Corp NY (TrustCo, NASDAQ: TRST) · TrustCo Bank Corp NY today announced second quarter 2020 net income of $11.3 million or $0.117 diluted earnings per share, and $24.6 million or $0.254 diluted earnings per share for the six months ended June 30, 2020.

Summary

Robert J. McCormick, Chairman, President and Chief Executive Officer noted, “As we continue to navigate COVID-19 and its effects on our families and neighbors, I’d like to reaffirm Trustco Bank’s commitment to serving our communities through careful financial management and high-quality service. This enduring mission guides us as we respond to this situation by providing you with the information, support, and advice you need to manage your finances in this market and plan for your future. We continue to remain thankful to those on the front lines from medical centers to food banks that are providing the essential services for those affected physically, emotionally, and financially by COVID-19.”

TrustCo’s designated Coronavirus (“COVID-19”) Fund, donating time and financial support to front line organizations across the communities, and the COVID-19 Financial Relief Program, providing support to our borrowers experiencing economic hardships by offering loan deferrals, continues to be an asset for our customers experiencing financial challenges during this time.

TrustCo is taking every precaution possible to keep our employees and customers safe during this time.  The bank continues to implement important policies, including minimizing contact between employees and customers by requiring face masks, installing clear barriers, and separating banking departments from one another. As recommended by the CDC, cleaning procedures continue to be augmented and protective sanitation items are always available.

We also continue to closely monitor the impact of the pandemic on our business and results of operations.    As of June 30, 2020, we had 668 residential loans in deferral totaling $145 million, and 90 commercial loans in deferral totaling $45 million.  This represents 4.5% of total outstanding loans.  We are encouraged to see that a number of residential and commercial loans had already re-started making regular loan payments prior to the end of the quarter.  Additionally, the bank has funded 663 Paycheck Protection Program (“PPP”) loans totaling $46 million.

The second quarter of 2020 saw continued loan and deposit growth. Our focus on traditional lending criteria and conservative balance sheet management has produced consistent earnings while maintaining strong liquidity and growing capital. This approach allowed us to continue to expand our business and take advantage of changes in market and competitive conditions.  As mentioned last quarter, the pandemic has created an uncertain future, and we believe we continue to be well-positioned to help our customers through this economic disruption and turmoil.  We also continue to hire across our locations for all levels of staff.  As we enter the second half of 2020 and beyond, management views the Bank as well-positioned to deploy its existing liquidity into our residential loan portfolio and we will continue to closely monitor how the current market conditions change.  

TrustCo saw average loans grow 7.0% in the second quarter of 2020 compared to the second quarter of 2019.  Year over year, loan portfolio expansion was funded by a combination of utilizing a portion of our strong cash balances, cash flow from investments, and the  growth in funding from customer deposits.  Total average deposits are up $276.2 million or 6.2% in the second quarter 2020 compared to the prior year.

Details

Average loans were up $270.5 million or 7.0% in the second quarter 2020 over the same period in 2019.  Average residential loans, our primary lending focus, were up $257.2 million or 7.6% in the second quarter 2020, over the same period in 2019.  Average deposits are up $276.2 million or 6.2% for the second quarter 2020 over the same period a year earlier.  The increase in deposits was the result of a $321.2 million or 10.7% increase total average core deposit accounts, which consist of interest bearing and non-interest bearing checking, savings and money market deposits, for the second quarter 2020 compared to the second quarter 2019.  Within core, checking balances were up $203.5 million or 15.7% (including interest bearing checking and non-interest bearing balances).  Average time deposits decreased $45.0 million or 3.1% for the second quarter 2020 compared to the second quarter 2019.

The cost of interest bearing liabilities decreased to 0.64% in the second quarter 2020 from 0.91% in the second quarter 2019.  A significant portion of our CD portfolio repriced during the last half of 2019 and the first half of 2020, which resulted in lower rates due to market conditions. The net interest margin for the second quarter 2020 was 2.81%, down 30 basis points from 3.11% in the second quarter of 2019 primarily due to federal interest rate cuts over the same period resulting in less interest earned on our short-term funds and variable rate loans.  Additionally, because we offered competitive shorter term rates on our time deposits in the past, we expect cost of interest bearing liabilities to continue to decrease as these reprice at lower rates.

The Bank continued to demonstrate its ability to grow shareholders’ equity as average equity was up $44.1 million or 8.7% in the second quarter of 2020 compared to the same period in 2019.  Return on average assets and return on average equity for the second quarter 2020 were .82% and 8.21%, respectively, compared to 1.14% and 11.60% for the second quarter 2019.  Improving efficiencies to reduce costs continues to remain a key area of focus.  Total operating expenses decreased by $970 thousand or 3.9% in the second quarter 2020 as compared to the second quarter 2019, driven by decreases in almost all expense categories, with the exception of an increase in occupancy expense.

Asset quality and loan loss reserve measures continued to improve.  Nonperforming loans (NPLs) were $21.9 million at June 30, 2020, compared to $22.1 million at June 30, 2019.  NPLs were 0.52% of total loans at June 30, 2020, compared to 0.57% at June 30, 2019.  The coverage ratio, or allowance for loan losses to NPLs, was 219.5% at June 30, 2020, compared to 200.4% at June 30, 2019.  Nonperforming assets (NPAs) were $22.8 million at June 30, 2020 compared to $24.8 million at June 30, 2019.  The ratio of allowance for loan losses to total loans was 1.15% as of June 30, 2020, compared to 1.14% at June 30, 2019.  The allowance for loan losses was $48.1 million at June 30, 2020 compared to $44.4 million at June 30, 2019.  The provision for loan losses increased to $2.0 million for the second quarter 2020 compared to a credit of $341 thousand in the same period in the prior year, primarily driven by the uncertainty in the current economic environment resulting from COVID-19.  Additionally, in the second quarter of 2019 there was a credit to the provision of loan losses of $541 thousand related to the sale of our credit card portfolio.  The Bank did not adopt “FASB Accounting Standards Update 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“CECL”) as of January 1, 2020 as allowed by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).  The Bank will adopt CECL as required by the CARES Act at the earlier of the termination of the National Emergency concerning COVID-19 or December 31, 2020.  Net chargeoffs for the second quarter 2020 were $11 thousand versus net recoveries in the second quarter 2019 of $35 thousand.  The annualized net chargeoffs ratio was 0.00% for the second quarter 2020 and 2019.

At June 30, 2020 the tangible equity to tangible asset ratio was 9.74%, compared to 9.85% at June 30, 2019.  Book value per share at June 30, 2020 was $5.73, up 7.7% compared to $5.32 a year earlier.

TrustCo Bank Corp NY is a $5.7 billion savings and loan holding company and through its subsidiary, Trustco Bank, operated 148 offices in New York, New Jersey, Vermont, Massachusetts, and Florida at June 30, 2020.

In addition, the Bank’s Financial Services Department offers a full range of investment services, retirement planning and trust and estate administration services.  The common shares of TrustCo are traded on the NASDAQ Global Select Market under the symbol TRST.

A conference call to discuss second quarter 2020 results will be held at 9:00 a.m. Eastern Time on July 22, 2020.  Those wishing to participate in the call may dial toll-free 1-888-339-0764.  International callers must dial 1-412-902-4195.  Please ask to be joined into the TrustCo Bank Corp NY / TRST call.  A replay of the call will be available for thirty days by dialing 1-877-344-7529 (1-412-317-0088 for international callers), Conference Number 10146338.  The call will also be audio webcast at: https://services.choruscall.com/links/trst200722.html, and will be available for one year. 

Safe Harbor Statement 
All statements in this news release that are not historical are forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended.  Forward-looking statements can be identified by words such as "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding our expectations for our performance during 2020, including our expectations regarding the effects of COVID-19 on our financial results and our ability to assist our customers in addressing the effects of COVID-19, our expectations for the repricing of our CD portfolio and the stabilizing of our net interest margin, the impact of Federal Reserve actions regarding interest rates and the growth of loans and deposits throughout our branch network, our ability to capitalize on economic changes in the areas in which we operate and the extent to which higher expenses to fulfill operating and regulatory requirements recur or diminish over time.  Such forward-looking statements are subject to factors that could cause actual results to differ materially for TrustCo from those discussed, and many of the risks and uncertainties are heightened by or may, in the future, be heightened by the effects of the COVID-19 pandemic. TrustCo wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect TrustCo’s actual results and could cause TrustCo’s actual financial performance to differ materially from that expressed in any forward-looking statement:  the effect of the COVID-19 pandemic on our business, financial condition, liquidity and results of operations; the impact of the actions taken by governmental authorities to contain COVID-19 or address the impact of COVID-19 on the economy, and the effect of all of such items on our operations, liquidity and capital position, and on the financial condition of our borrowers and other customers; our ability to continue to originate a significant volume of one-to-four family mortgage loans in our market areas; our ability to continue to maintain noninterest expense and other overhead costs at reasonable levels relative to income; our ability to make accurate assumptions and judgments regarding the credit risks associated with lending and investing activities; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board, inflation, interest rates, market and monetary fluctuations; restrictions or conditions imposed by our regulators on our operations that may make it more difficult for us to achieve our goals; the future earnings and capital levels of us and Trustco Bank and the continued receipt of approvals from our primary federal banking regulators under regulatory rules to distribute capital to TrustCo, which could affect our ability to pay dividends; results of supervisory monitoring or examinations of Trustco Bank and TrustCo by our respective regulators; adverse conditions in the securities markets that lead to impairment in the value of securities in our investment portfolio; unanticipated effects from the Tax Cut and Jobs Act that may limit its benefits or adversely impact our business;  the perceived overall value of our products and services by users, including in comparison to competitors’ products and services and the willingness of current and prospective customers to substitute competitors’ products and services for our products and services; changes in consumer spending, borrowing and saving habits; the effect of changes in financial services laws and regulations and the impact of other governmental initiatives affecting the financial services industry; changes in management personnel; real estate and collateral values; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB or PCAOB; disruptions, security breaches, or other adverse events affecting the third-party vendors who perform several of our critical processing functions; technological changes and electronic, cyber and physical security breaches; changes in local market areas and general business and economic trends, as well as changes in consumer spending and saving habits; our success at managing the risks involved in the foregoing and managing our business; and other risks and uncertainties under the heading “Risk Factors” in our most recent annual report on Form 10-K and, if any, in our subsequent quarterly reports on Form 10-Q or other securities filings.

Non-GAAP Financial Measures Reconciliation

Tangible equity as a percentage of tangible assets at period end is a non-GAAP financial measure derived from GAAP-based amounts. We calculate tangible equity and tangible assets by excluding the balance of intangible assets from shareholders’ equity and total assets, respectively. We calculate tangible equity as a percentage of tangible assets at period end by dividing tangible equity by tangible assets at period end. We believe that this is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of risk-based capital ratios. 

The efficiency ratio is a non-GAAP measure of expense control relative to revenue from net interest income and fee income.  We calculate the efficiency ratio by dividing total noninterest expenses as determined under GAAP, but excluding other real estate expense, net, by net interest income (fully taxable equivalent) and total noninterest income as determined under GAAP, but excluding net gains on the sale of nonperforming loans and securities and other non-routine items from this calculation.  We believe that this provides a reasonable measure of primary banking expenses relative to primary banking revenue. 

We believe that these non-GAAP financial measures provide information that is important to investors and that is useful in understanding our financial results. Our management internally assesses our performance based, in part, on these measures.  However, these non-GAAP financial measures are supplemental and not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for these measures, this presentation may not be comparable to other similarly titled measures reported by other companies. A reconciliation of the non-GAAP measures of tangible common equity, tangible book value per share, efficiency ratio, net income and net income per share to the underlying GAAP numbers is set forth below.

Contact:
Robert Leonard
Executive Vice President and
Chief Risk Officer
(518) 381-3693